House of Commons
(11 years, 6 months ago)
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Prayers
(11 years, 6 months ago)
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Mr Speaker
I regret to have to report to the House the death of two Members. Malcolm Wicks, the right hon. Member for Croydon North, died on 29 September. Malcolm was a popular and well-respected Member who served as Chairman of the Education Select Committee before being appointed to Government. Malcolm’s ministerial career spanned education, pensions, science and energy.
Sir Stuart Bell, the hon. Member for Middlesbrough sadly died on 13 October. He was a Member of the House for almost 30 years and served as Second Church Estates Commissioner for a record 13 years. Sir Stuart also chaired the Finance and Services Committee and was a member of the House of Commons Commission for 10 years.
I am sure that Members in all parts of the House will join me in mourning the loss of our two valued colleagues and in extending our sympathy to their wives, families and friends.
Oral Answers to Questions
(11 years, 6 months ago)
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Paul Uppal (Wolverhampton South West) (Con)
1. What recent progress her Department has made in tackling abuses in immigration via the family route.
The Minister for Immigration (Mr Mark Harper)
Before I answer the question, Mr Speaker, on behalf of Members on both sides of the House, I would like to add to your tribute to Malcolm Wicks and Sir Stuart Bell. Your sentiments were very well aimed, and I am sure that all Members will support them. These were valued colleagues who will be sorely missed.
The Government implemented new family immigration rules on 9 July this year. These tackle the abuse of immigration based on sham marriages, ensure that family migrants do not become a burden on the taxpayer and promote the integration of family migrants in British society.
Paul Uppal
May I also support the sentiments expressed by the Minister? I know that Malcolm Wicks was a fellow Wolverhampton Wanderers fan, so he was a man who always spoke incredible common sense.
On this particular issue, many of my constituents in Wolverhampton South West express concerns about the robustness of the current entry and clearance system that operates in India. Will the Minister assure me, the House and my constituents that that system is still robust and fair and will meet the high expectations that people have of it?
Mr Harper
I can give my hon. Friend that assurance. Entry clearance decisions are unbiased, robust and meet the high expectations that we all have. The decisions are closely monitored by entry clearance managers and they are also inspected by the chief inspector who looks at UK Border Agency operations, both domestic and overseas.
Kevin Brennan (Cardiff West) (Lab)
Many of our constituents—and, indeed, many Members—have married people from overseas. As well as appropriately tackling the abuses of the system, will the Minister ensure that there are not unnecessary and bureaucratic delays to the processing of legitimate marriages?
David T. C. Davies (Monmouth) (Con)
Forced marriage has been a particular problem, especially within some communities. What consideration has the Minister given to raising the age at which one can get married as a means of trying to reduce this abuse?
Mr Harper
My hon. Friend raises an important point, and he will know that I have now taken over the lead in the Home Office on combating human trafficking and related matters. We have already tackled the issue he raised to some extent, and now that he has raised it with me, I will look to see if more can be done to tackle this important issue.
Chris Bryant (Rhondda) (Lab)
I, too, wholeheartedly support the comments you made, Mr Speaker, about Malcolm Wicks and Sir Stuart Bell. On the Opposition Benches we all feel that we have lost two great gentlemen from amongst our ranks. They were both intelligent men who brought a keen intelligence to the way in which they debated issues. As it happens, they were both ardent pro-Europeans, who might have had a word or two to put to the Home Secretary later this afternoon. We pay tribute to them both.
I understand that the main reason why the Minister has introduced these recent changes to the family route provisions on immigration is to cut net migration, as the Prime Minister promised before the general election, to the tens of thousands. Will he confirm, however, that the Office for National Statistics has said that since 2010 there has been no statistically significant difference in the number of migrants to this country?
Mr Harper
I have seen that comment, but with a fall in net migration from 252,000 to 216,000—a fall of 15%—I will leave it to other Members and the public to judge whether they view that as significant. I know that the hon. Gentleman either tweeted or said at the Labour conference that he thought having a net migration target was “ludicrous”, but was then forced to unsay it when he was told to do so by his boss. We think having a net migration target is sensible: we mean to implement it, and I think the House will support it.
Paul Maynard (Blackpool North and Cleveleys) (Con)
2. What steps she is taking to promote better recording of hate crimes against disabled, homosexual and transgender people.
The Minister of State, Home Department (Mr Jeremy Browne)
Tackling hate crime is an issue that the Government take very seriously, and we are committed to improving the recording of such crimes. Last month the Home Office published the first set of official statistics on hate crimes recorded by the police in England and Wales, which will help police forces and police and crime commissioners focus resources on where they are most needed.
Paul Maynard
Will the Minister join me in grimly welcoming the increase in reported disability hate crime, which is due not least to the efforts of the Government and individual Ministers to encourage an environment in which people feel able to report such crimes? That includes local initiatives such as the third-party reporting centre that we have opened in Blackpool.
Mr Browne
I strongly agree with my hon. Friend. One of the difficulties is giving people the confidence and the practical means to report hate crimes in the first place, but we are keen to encourage and facilitate that process. Of course, the level of recorded crime is sometimes higher although the baseline is the same or even falling because people are being encouraged to come forward, but we want them to come forward, and we are making it easier for them to do so.
Simon Danczuk (Rochdale) (Lab)
I understand that the Metropolitan police have a specific category of recorded hate crimes against Muslims. Does the Minister agree that, as part of our fight against Islamophobia, it should be rolled out in areas throughout the country, including Greater Manchester?
Mr Browne
As I said earlier, the Home Office has compiled statistics on recorded hate crimes in England and Wales for the first time. Only 4% of hate crimes were based on religion—the vast majority were race-based—but we take all hate crimes very seriously, and where we can further improve not only the compilation of data but the practical consequences and the way in which that information is used to tackle such crimes, we shall do so. I shall give serious consideration to the hon. Gentleman’s comments.
Kate Green (Stretford and Urmston) (Lab)
The Minister will be aware that later this week the Government will propose an amendment to the Equality Act 2010 which would remove the good-relations duty from the Equality and Human Rights Commission. Does the Minister share my fear that that will weaken attempts to attack hate crime and to promote harmony between different sections of the community?
Mr Browne
No, I would not draw that conclusion, but I assure the hon. Lady and every other Member that we are very serious about tackling hate crime. It takes many different forms, and we want to ensure that robust procedures are in place to ensure that the police take effective action.
Mr Rob Wilson (Reading East) (Con)
3. What assessment she has made of the effectiveness of the security operation at the London 2012 Olympic and Paralympic Games; and if she will make a statement.
The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)
I am delighted by the success of the London 2012 games security operation. We delivered what we promised: reassuringly visible and proportionate security which protected games visitors, competitors and the wider public. I am particularly grateful to the many thousands of police and armed forces personnel who did such a great job, and in such a great spirit.
Mr Wilson
Will my hon. Friend join me in praising the hard work and dedication of those in the UK Border Force and all the other agencies whose professionalism made the security and immigration operation at the Olympics not only a great success, but a great advertisement for the UK?
James Brokenshire
My hon. Friend is right to highlight the work of the UK Border Force in ensuring that the border was run efficiently and effectively during the games. I think that it is also worth highlighting the work of the Security Service, and that of the volunteers who contributed so much to the games.
Keith Vaz (Leicester East) (Lab)
The Home Affairs Committee report makes it clear that had it not been for the actions of the Home Office, the London Organising Committee of the Olympic Games and Paralympic Games and the Army, Olympic security would have been a fiasco because of the failure of G4S. Has the Minister seen the Committee’s final recommendation that a register should be established listing the private sector companies that failed to deliver, and will he look into the COMPASS contract which has just been awarded and about which concern has already been expressed?
James Brokenshire
I am grateful to the right hon. Gentleman for recognising the work that was put in, both many years in advance of the Olympics and during the games themselves. He will doubtless be aware of the work that the Cabinet Office is doing in assessing each major contractor to government. Performance will form part of that analysis.
John Penrose (Weston-super-Mare) (Con)
Further to the earlier question from my hon. Friend the Member for Reading East (Mr Wilson), one of the biggest concerns before the games was the prospect of long queues at ports of entry such as Heathrow. May I therefore congratulate the Minister and the UK Border Force on a job well done in extending a warm and trouble-free welcome, without compromising border security, as the rest of the world arrived on our shores? Will he confirm that he does not view security and welcome as alternative choices to be traded off against each other, and that we can and should expect to deliver both?
James Brokenshire
My hon. Friend has rightly, again, praised the sterling work of the UK Border Force in ensuring that Heathrow and all other ports operated efficiently and effectively, and that not only were people able to pass through the border speedily, but national security was maintained.
Stephen Timms (East Ham) (Lab)
I welcome the fact that the Minister has paid tribute to the Metropolitan police’s contribution to the success of the Olympic games—a point that was surprisingly omitted from the Prime Minister’s speech in Birmingham, presumably reflecting the poor relationship between Government Members and the Metropolitan police following the altercation with the Chief Whip. Will the Minister spell out more fully his tribute to the very important contribution that the police made to the great success of the games?
James Brokenshire
The Prime Minister has said that we have the greatest police force in the world, and I wholeheartedly endorse that. We saw some tremendous efforts by the police—the mutual aid from police forces up and down the country—to ensure that security was maintained during the Olympics and that we had a games of which we were all proud.
Nadine Dorries (Mid Bedfordshire) (Con)
4. What steps her Department is taking to tackle metal theft.
Richard Ottaway (Croydon South) (Con)
7. What steps her Department is taking to tackle metal theft.
The Minister of State, Home Department (Mr Jeremy Browne)
The Government are delivering a coherent package of measures to tackle metal theft, which includes: banning cash payments for scrap metal; enhancing law enforcement through the national metal theft taskforce; and improving the traceability of stolen metal. We are also working with my hon. Friend the Member for Croydon South (Richard Ottaway) to support his private Member’s Bill to reform the scrap metal industry.
Nadine Dorries
Scrap metal theft is a huge issue in my constituency, so what protections will there be for responsible and legal scrap metal dealers who blow the whistle on those who act in an illegal and criminal manner?
Mr Browne
I will make two brief points on that. First, we are keen to encourage people to report wrongdoing in this sector, where there has been widespread abuse, as it is important that that is addressed. Secondly, I hope that one of the main benefits of the measures that have been introduced is that legitimate scrap metal dealers, whose businesses have been hampered by having to compete with people who are breaking the law, will now be able to operate in a culture where it will be easier for their businesses to be profitable
Richard Ottaway
In the light of the Government’s laudable decision to commemorate the centenary of the first world war, does the Minister agree that my Scrap Metal Dealers Bill will do much to counter the vandalism of graveyards and war memorials? Does he also agree that to support the Bill is to recognise the significance of the first world war, a legacy that future generations should never forget?
Mr Browne
The House will not be surprised to learn that I strongly agree with my hon. Friend. Scrap metal theft is a serious crime that can have serious and expensive consequences, but Members in all parties will feel that when it involves the desecration of war memorials, particularly those relating to the two great wars of the past century, in which so many British and Commonwealth soldiers died, that is particularly offensive to our sensibilities. I very much hope that his private Member’s Bill, and other measures being taken by the Government, will help to address that appalling behaviour.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The theft of war memorials is a real problem, so what conversations is the Minister having with the taskforce chaired by the Secretary of State for Culture, Media and Sport on how the Departments can work together to tackle this problem further? I say that notwithstanding the excellent work being done by the hon. Member for Croydon South (Richard Ottaway).
Mr Browne
I am happy to have discussions with any parties that are interested in trying to ensure that we can make improvements, but I can tell the House that new measures will be introduced as early as 3 December to create a new criminal offence that prohibits cash payments in the purchase of scrap metal. We are putting a series of measures in place; we are not merely waiting for my hon. Friend’s private Member’s Bill to come into effect, which we hope will happen. We are acting more swiftly than that and I am keen to draw on support from all parties and none to try to ensure that we tackle this serious crime as effectively as possible.
Mike Crockart (Edinburgh West) (LD)
I understand the intense concentration on what is a dreadful crime, but does my hon. Friend agree with me that, as I know from my experience as a police officer, effective and robust regulation of brokers and recyclers will have a far greater effect on the prevalence of this crime than concentration on a particular payment method?
Mr Browne
I partially agree with my hon. Friend. It is important to consider payment methods, because cash payments make it easier to facilitate criminal activity than more easily recordable methods of payment. I do not for one moment believe that dealing with that will be effective in itself, however, so it is necessary to see it as part of a package of proposals, which is the approach that the Government are taking.
Andrew George (St Ives) (LD)
6. What plans she has to reduce crime levels in rural areas.
The Minister for Immigration (Mr Mark Harper)
Rural areas suffer from certain types of crime, and I am looking forward to the election of police and crime commissioners in a month’s time so that those rural communities have more of a say in policing priorities. I hope that in my own county of Gloucestershire that will include the election of Victoria Atkins, the excellent Conservative candidate.
Andrew George (St Ives) (LD)
I am sure that Brian Blake in Devon and Cornwall will have a different view on those matters. I am grateful to the Minister for his reply, but he will be aware that farm watch, neighbourhood watch and special constables provide important community and voluntary support for rural areas. In these straitened times, what reassurance can the Minister give that the beat managers who are essential in co-ordinating the police response in those areas will be available and will continue to exist?
Mr Harper
My hon. Friend makes an important point. I know from experience in my county that the difficult financial decisions that police authorities and chief constables have had to take can easily be combined with ensuring that there are more resources on the front line and that some of those excellent neighbourhood policing priorities are maintained. The election of police and crime commissioners will ensure that those neighbourhood-focused activities are not only continued but strengthened.
Fiona Mactaggart (Slough) (Lab)
Is the Minister aware of reports in the newspapers today that five mainly rural police authorities have found 26 million depraved examples of images of child abuse on the internet and elsewhere, at the same time as the budget for the Child Exploitation and Online Protection Centre, which reported two and half times as many reports of child abuse this year as it did two years ago, is due to be cut by 10%. What is he going to do about that and will he reconsider the cuts to the funding for dealing with child abuse?
Mr Harper
I have briefly seen that report in the newspapers this morning. Of course, our plans to take CEOP into the National Crime Agency will enhance the ability of our police officers and crime fighters to deal with such images and such appalling crimes, which I am sure that everyone in the House would deprecate.
Mr Julian Brazier (Canterbury) (Con)
Does my hon. Friend agree that the Government’s measures on illegal Traveller encampments are welcomed by the vast majority of rural people and are no threat at all to those who are committed to a travelling way of life and want to carry it out in a legitimate fashion?
Mr Harper
I think the way that my hon. Friend puts that is exactly right. I have experience of that in my constituency and by dealing with those people who abuse the regime and the hospitality of the settled community we will make the settled community more welcoming of those who are genuine Travellers. In that way, both parts of the community can live in harmony.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
Over the past couple of years there has been a huge increase in theft from rural premises, rural businesses, farms and domestic properties, particularly of metal, fuel and implements. The Minister cannot get away with simply saying that the police commissioners will sort it out. What initiatives has his Department been following for the past couple of years?
Mr Harper
I repeat what I said about police and crime commissioner elections meaning that the police will be more responsive to the important issues raised, because they will be able to raise them with chief constables on behalf of rural communities. We have been considering some of those important issues at a national level, for example through the plant and agricultural national intelligence unit that has been set up, to ensure that we deal more effectively with some of the crimes that are common across the country in rural areas on both a local and national level.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
8. In which police forces the largest change in front-line police officers has taken place since May 2010.
Fabian Hamilton (Leeds North East) (Lab)
15. In which police forces the largest change in front-line police officers has taken place since May 2010.
Jack Dromey (Birmingham, Erdington) (Lab)
16. What the change has been in the number of front-line police officers since May 2010.
The Minister for Policing and Criminal Justice (Damian Green)
Between March 2010 and March 2012 the total number of front-line officers fell by 6,778. West Midlands police saw the greatest reduction in the number of front-line officers. Over the past year crime there has fallen by 10%, much more than the national average, proving that what matters is not the number of officers, but how they are deployed and how effective they are at fighting crime.
Catherine McKinnell
At a recent coffee morning I held, constituents were overwhelming in their praise for and gratitude to the police for the work they do in our communities, yet with falling police numbers their job will get harder, not easier, and my constituents are worried about the knock-on effects. What does the Minister believe will be the impact, particularly on police morale, of a Cabinet member verbally abusing a police officer at a time of reckless front-line cuts up and down the country?
Damian Green
May I start by endorsing the gratitude the hon. Lady’s constituents showed to Northumbria police? I am sure that she will be pleased to hear that crime in the Northumbria police area is down by 8% from 2011 to 2012. With regard to her other remarks, my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) has apologised to the officer concerned and the officer has accepted the apology, and I think that for most people that would be the end of it.
Fabian Hamilton
Following that rather complacent and out-of-touch response, will the Minister take responsibility for the consequential increase in crime and disorder caused by the cut of more than 450 officers in west Yorkshire that will affect my constituency?
Damian Green
I am sorry that the hon. Gentleman thinks that I am out of touch, because crime in west Yorkshire is down by 3%. I am afraid that he seems to be out of touch with crime levels in his own constituency.
Jack Dromey
The police service for Birmingham and the west midlands is among the finest in England, but 814 of its front-line police officers are being cut. Does the Home Secretary understand the dismay being expressed by the people of Birmingham over the damage being done to their police service, and does she also understand that they cannot begin to understand why 814 officers are going in Birmingham and the west midlands but 257 are going in Surrey?
Damian Green
The hon. Gentleman knows perfectly well the financial state his Government left this country in, which is why there need to be cuts. I completely agree with his tribute to West Midlands police, because, as I have said, in these difficult times they have reduced crime by 10% in the west midlands, a significant improvement, making the streets of Birmingham and the rest of the west midlands safer than they were.
Sir Tony Baldry (Banbury) (Con)
Surely these are decisions for chief constables. The chief constable of Thames Valley police is managing in that area without any perceptible cut in front-line police numbers and, although one can never be complacent, I must say that crime levels in my constituency are probably as low as they have ever been in the nearly 30 years I have been a Member of this House.
Damian Green
I am glad to hear that. My hon. Friend is correct that there has been no fall in the number of officers in Thames Valley police, and that is at a time when recorded crime is down by 13%, which is a huge tribute to all involved. What has happened is that chief constables all over the country have worked effectively to ensure that our streets are safer. That is the basic job of the police and they are doing it very well.
Mr Crispin Blunt (Reigate) (Con)
Effective press and media relations are an essential tool to support front-line policing, but it is not clear to me whether or not the authorised police officers who are responsible for these matters are described as front-line. It is extremely important that, for police accountability and to prevent the abuse of power in relation to those police officers who are not authorised to speak to the media, we have full transparency about the police’s links to the media and how the media are briefed.
Damian Green
Transparency is an important issue for the police, as it is for other institutions such as this House. One of the improvements following the election of police and crime commissioners will be the existence of individuals with the job of holding individual forces to account. That, in itself, will be a major step forward in transparency for the police service across England and Wales.
Dr Julian Huppert (Cambridge) (LD)
Will the Minister join me in congratulating Cambridgeshire chief constable Simon Parr, both for reducing crime by about a fifth in two years and for announcing the recruitment of 100 new police officers? Will he suggest that other chief constables look at that model?
Damian Green
I am grateful to my hon. Friend for making that point. It shows that good chief constables can decide how to deploy their resources effectively. The vast majority of them around the country are seeing crime fall in their areas, and that is what the public want.
Mr John Spellar (Warley) (Lab)
9. What recent estimate she has made of the cost to the public purse of the elections for police and crime commissioners in November 2012.
The Minister for Policing and Criminal Justice (Damian Green)
As the Government set out to the House during the passage of the Police Reform and Social Responsibility Bill, and on a number of occasions since then, the elections will cost up to £75 million. That money will not come from funds that would otherwise have gone to police forces.
Mr Spellar
We already knew that the figure was £75 million; what the Minister did not say was how much extra, over and above that, the Government were going to spend on adverts to try desperately to get people out to vote in these unwanted elections in the middle of November. Why are the Government not holding the elections at a sensible time and spending the money on front-line police officers?
Damian Green
The elections may be unwanted by the right hon. Gentleman, although I suspect that they will be less unwanted by some of his Labour colleagues; at the last count, seven former Labour Ministers were standing in the PCC elections.
I am genuinely surprised that the right hon. Gentleman is so afraid of democracy. On the whole, during its history the Labour party has welcomed advances in democracy. It is a sad comment on the state of the modern Labour party that it should be frightened of democracy.
Margot James (Stourbridge) (Con)
The PCC elections are a great opportunity to involve the public in policing priorities for the first time. Does my right hon. Friend agree that Members on both sides should be getting behind the elections and raising awareness of them among their electors? If the Minister is near Birmingham on Saturday 27 October, I cordially invite him to join an action day that we are holding in the centre of Stourbridge, where he will be able to meet the candidate, Matt Bennett.
Damian Green
I am extremely grateful for that kind invitation. I will indeed be travelling around the country to take part in the campaign in various areas. My hon. Friend is absolutely right—this is a chance for people to have a say in the policing of their local areas. The elections are the biggest advance in the democratic control of our police in a generation.
Mr David Hanson (Delyn) (Lab)
I welcome the Minister to his new post; I am sure that he will enjoy it.
One month away from what are flagship elections for the Government, let us reflect on where we are. More than 7 million people who do not have access to the internet will find it difficult to get information from the Government because of cost savings. Election organisation has been shambolic; parliamentary orders have been laid late, including orders on the Welsh language, driving down turnout and increasing costs. The Electoral Reform Society predicts the lowest turnout ever and the former Minister, the right hon. Member for Arundel and South Downs (Nick Herbert), having stirred up apathy, has now jumped ship. What turnout does the Minister expect on 15 November and will he finally publish the cost to the taxpayer of this shambles?
Damian Green
I have answered the question about the cost to the taxpayer once, and the shadow Minister’s right hon. Friend the Member for Warley (Mr Spellar) made the point that we had answered it several times before.
On the first point about how difficult it is for those who do not have the internet to have access, I should say that one phone call will get them access. Anyone who phones the helpline can have all the information that is available on the internet—for the first time, information from every candidate—sent to them in hard copy. It is extremely easy for everyone to get hold of information about the election, and I hope that the right hon. Member for Delyn (Mr Hanson) will campaign alongside his hon. Friends, many of whom seem to take the elections a lot more seriously than he does.
Sir Bob Russell (Colchester) (LD)
If the turnout is as low as 15%, as some people predict, a winning candidate could well end up with less than 10% of the vote on the electoral roll. What mandate would such a commissioner have?
Damian Green
I am not going to predict the turnout, but I can tell my hon. Friend that the existing police authorities that the PCCs will replace have no democratic mandate at all, because not a single vote has ever been cast for a member of a police authority. The new arrangements are a significant step forward.
Katy Clark (North Ayrshire and Arran) (Lab)
10. Whether she has received legal advice on whether the proposals contained in the draft Communications Data Bill are compatible with the UK’s human rights obligations.
The Secretary of State for the Home Department (Mrs Theresa May)
The draft Communications Data Bill, which is currently undergoing pre-legislative scrutiny, is designed specifically to ensure that communications data are obtained in compliance with article 8 of the European convention on human rights. The ECHR memorandum that accompanies the Bill was approved by Ministers prior to its publication. This legislation will help to ensure that the internet does not become a safe haven for criminals and that the police and others can continue to protect the public.
Katy Clark
The Secretary of State will be aware that there is real public concern that this legislation will enable the authorities to view a person’s entire web history. Will she outline what safeguards are being considered to ensure that the right to privacy is respected?
Mrs May
That is not the case. I recognise that a number of concerns have been raised, often on the basis of a lack of information about what is actually going to happen under the Communications Data Bill. We want to take what is currently available to the police and other law enforcement agencies in terms of telephony—that is, who made a call, when and at what time—and put that into the new environment where criminals, paedophiles and terrorists are using the internet, in a variety of forms, to communicate. This is an important Bill because it means that we can continue to catch criminals and protect the public.
Stella Creasy (Walthamstow) (Lab/Co-op)
It is
“difficult to estimate costs with precision over the long term”
as regards this proposal. Those are not my words but those of the Home Office in responding to a freedom of information request about the stated £1.8 billion price tag for the legislation. What assurances can the Home Secretary provide that the Government are not writing a blank cheque to service providers? Will she say today whether they have a cap in mind for the costs of this Bill—yes or no?
Mrs May
We have been absolutely clear about the 10-year cost in terms of the £1.8 billion figure. Yes, cost recovery will be available to the service providers, but that will be done on the basis set out during discussions about the usage made of this provision. The average annual investment that will take place over 10 years equates to about 1.3% of the annual cost of policing. Let me say to right hon. and hon. Members on the Opposition Benches that this Bill is important because without it we will see criminals and others potentially going free because of their use of internet communications. It is right that we have the Bill because it will help us to catch criminals, terrorists and others.
Tim Loughton (East Worthing and Shoreham) (Con)
11. What recent assessment she has made of the use by police of orders under section 61 of the Criminal Justice and Public Order Act 1994 to disperse illegal encampments.
The Minister for Policing and Criminal Justice (Damian Green)
A range of powers are available to the police to deal with illegal encampments, including the power under section 61 of the 1994 Act to remove people who are trespassing with intent to take up residence. The Government keep these powers under review.
Tim Loughton
During the summer, a number of public places in my constituency were, yet again, the destination of choice for many illegal Traveller encampments, leaving my constituents to pick up a hefty bill for damage, dumping and abuse, with no prosecutions made as a result. Yet Sussex police were very reluctant to invoke any section 61 orders, which they have had the power to do since 1994. Will the Minister look into the police’s reluctance and investigate whether the use of the word “discretionary” in the guidance is acting as a bar to their using these orders, which can result in instant dispersal, to the great relief of my constituents and those of many other hon. Members?
Damian Green
I have every sympathy with my hon. Friend and his constituents. Many Members on both sides of the House will have experienced similar problems. I understand that Sussex police responded in September to an encampment in Lancing by issuing a direction under section 61 that required the occupants to leave within 24 hours, which they subsequently did. I am also aware that my hon. Friend is engaged in continuous discussions with Sussex police about this matter. If there is an aspect that has anything to do with changes in the law, I will of course look into it, but I also urge him to talk to the PCC candidates in his part of the world, because within a month they will be responsible for writing the policing plan for his area.
Duncan Hames (Chippenham) (LD)
Melksham Without parish councillors have told me about the trouble that they have had with illegal encampments on their land. They are frustrated that the encampments arrive at the very end of the week, often before a bank holiday weekend. Can anything be done to enable stop notices to be applied on Friday evenings or even at the weekend itself?
Damian Green
My hon. Friend’s question moves us into the planning arena and he will have heard last week’s announcement by my right hon. Friend the Secretary of State for Communities and Local Government. As I have said, the police have a range of powers that could be used. It seems clear that in some parts of the country this will be a significant matter for police and crime commissioners. If the issue is causing that much public distress, it may well need to be higher up the agenda of police forces in certain areas. That is why we are having elections to make sure that there is more local control over police planning.
Christopher Pincher (Tamworth) (Con)
12. What steps she is taking to empower police officers to tackle crime.
The Secretary of State for the Home Department (Mrs Theresa May)
We are taking a number of measures to help the police cut and tackle crime, not least sweeping away central targets and cutting red tape. We have already announced that we have cut 4.5 million hours of police bureaucracy, which will enable the police to have more time to do the job that they and the public want them to do, which is getting out there and fighting crime.
Christopher Pincher
Does my right hon. Friend agree that the innovative use of modern technology, such as that proposed by the PCC candidate for Staffordshire, Matthew Ellis, which could cut up to 3,000 hours of police administration time each week, will help forces such as mine put more officers on the beat to fight crime and reassure the public?
Mrs May
I agree with my hon. Friend. I have been in Staffordshire with our excellent Conservative candidate, Matthew Ellis, who has some very good proposals for helping the police to do their job and tackle crime, one of which is getting rid of bureaucracy by using new technology. That can have incredibly beneficial effects in allowing police officers to spend more time out there dealing with crime, rather than sitting inside a police station filling in forms.
Barbara Keeley (Worsley and Eccles South) (Lab)
In Greater Manchester we believe that it empowers the police if we show that we support them, their work and their bravery. Does the Home Secretary agree that it does not empower the police when a Cabinet Minister rants at them and swears at them?
Mrs May
That particular point was answered earlier, but I reiterate that, with regard to the incident to which the hon. Lady referred, the Chief Whip apologised to the police officer concerned and the police officer accepted that apology. The police are not taking the matter any further and that, as my right hon. Friend the Minister for Policing and Criminal Justice said earlier, is an end to it.
We value the police, which is why we are getting rid of the bureaucracy that kept them in police stations filling in forms instead of doing the job that they wanted to do, and why we are giving more discretion to the police over charging. We are returning discretion and professionalism to the police, which was, sadly, taken away from them in many areas by the previous Labour Government.
Andrew Stephenson (Pendle) (Con)
13. What steps she is taking to empower local communities to tackle alcohol-related antisocial behaviour.
Henry Smith (Crawley) (Con)
14. What steps she is taking to empower local communities to tackle alcohol-related antisocial behaviour.
Mary Macleod (Brentford and Isleworth) (Con)
17. What steps she is taking to empower local communities to tackle antisocial behaviour caused by the abuse of alcohol and drugs.
The Minister of State, Home Department (Mr Jeremy Browne)
Together, the Government’s alcohol strategy and White Paper on antisocial behaviour published earlier this year will provide communities with powerful new tools to tackle alcohol-related antisocial behaviour. The Government will also shortly give councils an opportunity to levy a charge for late-night licences and introduce an early morning alcohol restriction order programme.
Andrew Stephenson
I thank the Minister for that answer. Lancashire’s excellent Conservative PCC candidate, Tim Ashton, recently visited Colne and met the landlord of the Crown hotel to discuss the CAND—Colne against night-time disorder—scheme. Will my hon. Friend join me in praising excellent schemes such as CAND, whereby landlords work together to combat antisocial behaviour?
Mr Browne
I am delighted that there are a number of excellent PCC candidates in the hon. Gentleman’s area, although I am not necessarily sure that I would endorse the one that he has just brought to the House’s attention. I commend the scheme in his area, because it is an extremely good idea for licensed premises to work together to combat antisocial behaviour.
Henry Smith
Will the Minister join me in congratulating the Crawley and Gatwick Business Watch? It is pursuing a scheme of labelling so that it can identify where and from which stores alcohol is sold and whether there is alcohol abuse. It also has a system whereby high-strength alcohols are kept under the counter and have to be requested. Will the Minister meet the group?
Mary Macleod
Recently, I attended a meeting of the Hounslow community and police consultative group, which discussed drug and alcohol-related crime. What advice would my hon. Friend give that group on how to reduce antisocial behaviour that is linked to alcohol and drugs in west London?
Mr Browne
I strongly commend my hon. Friend for attending meetings of that sort. The police have a key role to play, as do local authorities because of their responsibility for licensing. In my experience, it is most effective when communities also take responsibility for their area and for the quality of life of the people who live there, and work closely with the police and other institutions to ensure that there is a co-ordinated and effective response to antisocial behaviour.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
May I push the Minister, as he is being complacent? Last night, the “File on 4” programme showed the high level of organised crime across our country seeking to evade duty and bring in cheap alcohol. That is costing the Exchequer billions and is bringing cheap and unreliable sources of alcohol to many people in our communities. What is he going to do about it?
Mr Browne
I will make two brief points. First, alcohol consumption has fallen in England and Wales over recent years. The second point, which goes to the heart of the hon. Gentleman’s question, is that next year we are introducing the National Crime Agency, which will provide a more coherent, joined-up approach to tackling organised crime. We think that that will be effective in dealing with precisely the problems that he has brought to the attention of the House.
Mr Denis MacShane (Rotherham) (Lab)
On Saturday morning, Rotherham was the scene of alcohol-related antisocial behaviour, when members of the English Defence League arrived in a pub, tanked themselves up and held a march to spew their anti-Muslim hate. The police handled that brilliantly and I thanked them on the spot, including all the policemen who came into the area from outside. The choice of route meant that Rotherham’s economy lost an amount of six figures or more. Will the new Minister for Policing and Criminal Justice meet me to discuss how the police can route these horrible EDL marches so that they do not cause so much economic damage to our communities?
Mr Browne
The right hon. Gentleman may wish to talk to his local police and crime commissioner when that person is elected in a month’s time. I will leave it up to the Minister for Policing and Criminal Justice to decide whether he wishes to meet the right hon. Gentleman. Where criminal activity is taking place it should be prevented, but I would not wish people’s ability to express their views to be restricted, however unpleasant those views may be for many Members of this House.
Gloria De Piero (Ashfield) (Lab)
CCTV is a crucial tool in tacking alcohol-related antisocial behaviour. Given that the coalition agreement states that the Government want to “further regulate CCTV”, does the Minister expect the number of local authority and police CCTV cameras to rise or fall by 2015?
Jackie Doyle-Price (Thurrock) (Con)
T1. If she will make a statement on her departmental responsibilities.
The Secretary of State for the Home Department (Mrs Theresa May)
If I may, I should like to take this opportunity to pay my respects formally to PC Nicola Hughes and PC Fiona Bone. The brutal murder of those two young officers shocked me and, I am sure, the whole House and the whole country. Our police officers face dangers every day, and they do so with bravery and professionalism. Nicola Hughes and Fiona Bone were dedicated public servants. For their dedication they paid the ultimate price, and we owe them the greatest of debts. I am sure I speak for the whole House when I say that our thoughts and deepest sympathies are with the families of those two dedicated officers.
Jackie Doyle-Price
I am sure the whole House will wish to associate itself with my right hon. Friend’s comments about those two police officers.
In the county of Essex, we are fortunate to be blessed with some distinguished candidates for the new role of police and crime commissioner. Will my right hon. Friend join me in urging all electors across Essex to cast their vote in that important election so that whoever is successful has a genuine democratic mandate to do the job?
Mrs May
I am grateful to my hon. Friend. I have met the Conservative PCC candidate for Essex, Nick Alston. He is an excellent candidate, and I know that he will be out there taking that message through the streets of the towns and villages of Essex. My hon. Friend is right that these are important elections that will enable people to elect directly somebody who will be their voice in local policing. I urge everybody to exercise their vote on 15 November.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
I support the Home Secretary’s statement on Nicola Hughes and Fiona Bone, and the statements that she made at the time of their death. It was a brutal act. She and I are united, and I think the whole House and the whole country are united, in our tributes to those brave police officers.
I turn to a separate issue. The Home Secretary told the Police Federation last year:
“It’s easy to sit around with friends or, dare I say it, in the House of Commons, and criticise the police. But those people aren’t the ones confronting violent thugs”.
She has also told it:
“You put up with abuse and worse, but you do so to keep us free…You do an amazing job—and it’s time we gave you all the respect you deserve.”
I agree with her, so will she join me in condemning the Chief Whip in the House for swearing at police officers?
Mrs May
I have already answered on that particular issue. I am happy to stand here and reiterate what I and others have said on a number of occasions. I believe that we have the best police officers in the world, and the Government are giving them our support. We are ensuring that we give them the tools that they need to do the job that they and the public want them to do.
Yvette Cooper
But the Home Secretary still has not condemned the Chief Whip for what he did and for the swearing—something for which people across the country are arrested. The reason why it matters that there has been no investigation and that he has not come clean is that people think it goes to the heart of the Government’s attitude towards the police and public servants. Once again, they are not listening to the police on the European arrest warrant, CCTV, DNA or the cutting of police numbers by 15,000. If the Home Secretary really wants to put an end to that and show respect for the police, why does she not change the Chief Whip and change her policies on policing too?
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
T2. The Home Secretary will be aware of the excellent scheme run by Dyfed-Powys police, which has cracked down on antisocial behaviour connected to the night-time economy in west Wales. In congratulating that force, will she consider rolling out that scheme across the whole UK, as it saves public money and police time?
The Minister of State, Home Department (Mr Jeremy Browne)
I am aware of the scheme in the hon. Gentleman’s area, which I understand is called “Behave or Be Banned”. It strikes me as an extremely good scheme that encourages licensed premises to work together to the advantage of their community.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
T4. May I declare an interest, in that I am standing to be police and crime commissioner in south Wales? Like the excellent Labour candidates across England and Wales outside London, I want to rescue police governance from the shambles that the Government are creating.Given that the Government pay for the free distribution of literature to electors in parliamentary elections, Welsh Assembly elections and even European elections, it is not odd that they are not doing so in PCC elections, and that the only communication will be a leaflet from the Electoral Commission about the process? Should not the Government, even at this late stage, include with that leaflet a page from each candidate standing in each police force area, so that the public know what choice they have to make?
Mrs May
I say to the right hon. Gentleman that the Opposition really need to get their story straight on the cost of PCC elections. On the one hand they complain about the cost, but on the other hand they ask for the cost to go up by putting in extra provisions. I note that a number of my right hon. and hon. Friends have risen to comment on the excellence of the Conservative candidates. On the Opposition Benches, however, it has taken the right hon. Gentleman to stand up and speak for himself, because nobody else has been willing to stand up for their candidates.
Neil Carmichael (Stroud) (Con)
T3. To continue with the theme of police and crime commissioners and the elections, does the Home Secretary agree that the introduction of democracy and transparency will help to achieve the right balance between rural and urban policing, as exemplified by our excellent candidate in Gloucestershire, Victoria Atkins?
The Minister for Policing and Criminal Justice (Damian Green)
My hon. Friend is precisely right. In areas such as Gloucestershire, striking the right balance between urban and rural pressures on the police will be an important task for the police and crime commissioner. One significant difference is that only 7% of the public are aware that they can go to a police authority if they are unhappy with their policing. By the end of this campaign, I am sure that a far higher proportion of people will be aware of their police and crime commissioner candidates.
Stephen Pound (Ealing North) (Lab)
T6. Today, after the police cuts, there are only 22 custody cells to serve the entire borough of Ealing. Although we are, by and large, a law-abiding bunch, we feel we are approaching the stage where there is no room at the nick. Will the Minister provide reassurance for my constituents, and those of fellow Ealing MPs, about what we can do to increase and perhaps bring back the number of custody cells in Ealing?
Damian Green
I can happily reassure the hon. Gentleman that although total funding for the Metropolitan police is down by 2%, recorded crime is also down by 1% in the Metropolitan police area, suggesting that there is less pressure on police cells than there would previously have been.
Andrew Jones (Harrogate and Knaresborough) (Con)
T5. Please will the Minister provide an update on progress on establishing the college of policing, with particular reference to the future of the National Police Improvement Agency site in the Pannal Ash area of my Harrogate and Knaresborough constituency?
Damian Green
I am happy to report that the college of policing will be up and running by December this year. The site at Pannal Ash remains open, although the majority of residential training has stopped, with staff now focusing on the development of national standards for recruitment, promotion and training. The freehold of the site transfers to the Home Office on 1 December when the college is established, and the site will then be leased to the college for its activities.
Paul Blomfield (Sheffield Central) (Lab)
T7. While working for P&O ferries, my constituent, Mark Hanson, met his partner, a foreign national with whom he is having a child. She has been refused entry clearance because Mark has been deemed unable to meet the sponsor requirements, although his parents have offered him employment and accommodation for the couple and their child. Does the Home Secretary recognise that that case highlights how the inflexibility of her new rules unfairly prevents many British citizens from bringing their partners to the UK? Will she meet me and Mark’s parents to consider their case for their family to be united?
The Minister for Immigration (Mr Mark Harper)
The point of our new proposals on the family migration route in respect of income is to ensure that if British citizens wish to bring their families to the United Kingdom, they are able to support them and do not expect the taxpayer to do it for them. That is why those rules are right, and they are based on evidence put forward by the Migration Advisory Committee. If the hon. Gentleman and his constituent wish to meet me, I would be happy to have such a meeting.
Andrew Bridgen (North West Leicestershire) (Con)
T8. What steps is my right hon. Friend taking to increase public awareness and participation in the forthcoming police and crime commissioner elections, and to ensure that the public know about the many excellent candidates who are standing across the country, such as Sir Clive Loader in my county of Leicestershire?
Damian Green
I am happy to agree with my hon. Friend. I met Sir Clive for the first time last week. He is by any standards an extremely impressive human being, and will make a formidable PCC if he wins.
Mr John Denham (Southampton, Itchen) (Lab)
Crime in Hampshire has fallen for six years in a row under the leadership of Jacqui Rayment, the Labour candidate for police and crime commissioner. Would the Minister care to say why the Conservative candidate for Hampshire still refuses to apologise for his long support for Asil Nadir, the convicted fraudster, and why the Conservative party has refused to give back the large donation it received from Asil Nadir? Is that not a case of them all being in it together?
Damian Green
I am happy to report to the right hon. Gentleman that all Conservative candidates are being encouraged to sign a clean campaigning pledge to avoid the kind of cheap slurs in which he has just indulged. I hope the Labour candidate in Hampshire signs the pledge, and that the right hon. Gentleman is acting in a freelance way, and not being subcontracted to run a dirty campaign.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
T9. More than 50% of the inmates of Swaleside prison in my constituency are foreign nationals. What assurances can my hon. Friend give that the Government will ensure that all those prisoners will be repatriated to their home countries on their release?
Mr Harper
I can reassure my hon. Friend. The statistics show that in 2011, more than 4,500 foreign national criminals were removed from the UK. We have introduced tough new rules to protect the public from foreign criminals and immigration offenders who try to hide behind family life as a reason to stay in the UK. I hope that he welcomes that.
Mr Gerry Sutcliffe (Bradford South) (Lab)
Has there been full cost recovery from G4S for its Olympic failure, including costs in respect of the other forces involved—the armed forces and the police? What penalties has G4S paid?
Mrs May
G4S was absolutely clear that it would pay for the extra costs involved in the military and police services. As the hon. Gentleman suggests, the police moved in to take over part of the venue security at a number of sites across the country. Exactly how much G4S will pay as a result of its contract is a matter of commercial negotiation with the London Organising Committee of the Olympic Games and Paralympic Games, with which G4S held the contract.
Steve Baker (Wycombe) (Con)
T10. We are shortly to have a much-needed statement on European justice and home affairs, and we know that the public are extremely frustrated with extradition arrangements generally. When will my right hon. Friend make progress towards settling these matters by responding to the Baker report?
Paul Goggins (Wythenshawe and Sale East) (Lab)
Has the Home Secretary had an opportunity to speak to the new Justice Secretary about the implications for national security of not extending to inquests the closed material procedure, which, it is proposed, will be made available in a limited number of civil cases?
Mrs May
I can reassure the right hon. Gentleman that I have had a number of discussions with the Justice Secretary on a number of issues across our briefs. The right hon. Gentleman will be aware that the Government have decided not to include CMP in inquests. A great deal of concern was expressed when the idea of including CMP was proposed and the Government have come to our decision, which is included in the Justice and Security Bill.
Greg Mulholland (Leeds North West) (LD)
We have recently seen too many cases, sadly, in which suspicion and allegations of the sexual abuse of children and young people have not been properly investigated. Clearly, there needs to be a culture change in the police and other organisations. What is my right hon. Friend doing to address that?
Mrs May
We are all shocked by the cases of child abuse and child grooming that we have seen. We need to ensure that the police pick up on such allegations when there is evidence and when there are concerns that something of that sort is happening, which is absolutely right. The Child Exploitation and Online Protection Centre will continue to look at that. There is evidence from cases that have been brought to court that one vital tool in catching child abusers is the use of communications data, which is why the draft Communications Data Bill is so important.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Last year in Bedfordshire, 22 people were arrested for swearing at a police officer and 19 were charged. Is that crime better policed in our counties than in Whitehall?
Mr Speaker
Order. I am sorry to disappoint colleagues. The level of interest is intense, but we must now move on.
Cross-border Travel (Spain/Gibraltar)
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Jim Dobbin (Heywood and Middleton) (Lab/Co-op)
(Urgent Question): To ask the Secretary of State for Foreign and Commonwealth Affairs to make a statement about the deteriorating situation of cross-border travel between Spain and Gibraltar.
The Minister for Europe (Mr David Lidington)
On Tuesday 9 October and again between Friday 12 October and Sunday 14 October, significant delays occurred at the border between Gibraltar and Spain. Travellers have been delayed by between 45 minutes and six hours as a result of more rigorous checks introduced by the Spanish Guardia Civil on vehicles leaving Gibraltar. I should say to the House that as of this afternoon, the information that I have suggests that there is a less than 20-minute wait for cars and 10-minute wait for bikes at the border.
Spain has justified the more rigorous checks as being related to anti-tobacco smuggling operations. Tobacco smuggling does occur between Gibraltar and Spain: however, the Spanish authorities have not yet provided the Government of Gibraltar with evidence to explain why, in this case, increased checks were required.
There have been delays at the border many times in the past, most recently in May 2012, and this current disruption comes at a time when tensions between Gibraltar and Spain have increased because of a dispute over Spanish fishing rights in British Gibraltar territorial waters. The view of many in Gibraltar is that the delays are an attempt to increase pressure on Gibraltar to resolve that fishing dispute. Gibraltar’s Chief Minister, Fabian Picardo, has been critical of the delays, and the criticism of Spanish action has been shared by the ASCTEG, the association of Spanish workers who commute daily into Gibraltar.
Disruption to border flows has a direct impact on the prosperity and well-being of communities on both sides of the border, in particular the 7,000 mostly Spanish people who travel every day from Spain to Gibraltar and back for work. The Government’s position is that these delays are unacceptable and have no place at a border between EU partners.
We raised this issue over this weekend at a very high level with the Spanish Government. We will also be protesting formally to the local Guardia Civil. We will continue to monitor the situation closely and take whatever action is appropriate to support the free movement of people between Gibraltar and Spain.
Jim Dobbin
I thank the Minister for his reply. Can he justify why the Spanish ambassador has not yet been summoned to the Foreign Office to explain why the border closures and incursions into Gibraltar waters are taking place? The entire policy by the Spanish is unacceptable. This is an EU border, not a third-world war zone. It is akin to the French closing the Spanish border through Andorra. The Spanish need to accept that the Gibraltar people have decided through self-determination to remain with Britain.
Mr Lidington
We have not called in the Spanish ambassador because, as I said in my earlier remarks, this was raised directly with the Spanish Government at a significantly higher level.
Mrs Eleanor Laing (Epping Forest) (Con)
Although the House will appreciate that the Minister is doing all that he can in negotiations with the Spanish Government, will he agree with most Members of the House that the situation in Gibraltar is simply unacceptable? While people in Madrid may give assurances that the Spanish Government are acting in a way that is acceptable to the UK Government, what actually happens day to day is that the Guardia Civil under local management in Algeciras and La Línea do whatever they wish, not only on the border but in making incursions by sea into British Gibraltar territorial waters whenever they wish to do so and in a way that is deliberately designed to make life difficult for the people and Government of Gibraltar. If the Minister can assure the House that he understands that and will make it clear to the Government of Spain, we will be happy.
Mr Lidington
Where there is a genuine case for increased checks at the border because of an acknowledged need to combat smuggling or other criminal activity, that might be fair. In such a case, however, we would expect the Spanish authorities to be open with the Government of Gibraltar about those circumstances, but that has not been the case hitherto in this instance.
So far as maritime incursions are concerned, we are absolutely confident of the United Kingdom’s sovereignty over British Gibraltar territorial waters, which is why the Royal Navy challenges Guardia Civil and other Spanish state vessels whenever they make unlawful maritime incursions into British Gibraltar territorial waters. We back that up through formal diplomatic protests to the Spanish Government about all unlawful incursions. Those challenges and protests make it clear that such incursions are an unacceptable violation of British sovereignty.
Emma Reynolds (Wolverhampton North East) (Lab)
I congratulate my hon. Friend the Member for Heywood and Middleton (Jim Dobbin) on securing this important urgent question. The Opposition continue to support the self-determination of the Gibraltan people and their right to remain under British sovereignty, as we did in government, so I welcome the Minister’s answer on that. We also welcome the fact that Chief Minister Fabian Picardo, who is in London today, has been in touch with the Government and that discussions have taken place between the Minister for Europe and the Gibraltan Chief Minister.
I agree that the delays of up to five or six hours at the border between Spain and Gibraltar are simply unacceptable, and I welcome the Minister’s discussions with the Gibraltan Chief Minister. I echo his observation that this is also of deep concern to the thousands of Spanish workers who cross the border every day to work in Gibraltar. What more can the Government do to ensure that these delays do not happen again, and that the reasons given in this and other instances by the Spanish Government are properly investigated and that evidence is produced for what many think are just excuses? Finally, what discussions has the Minister had with the Spanish Government about their decision to abandon the trilateral forum, and what pressure is he and the Foreign Secretary exerting on the Spanish Government to return to it?
Mr Lidington
I agree with the hon. Lady that the border delays end up penalising Spanish workers as much as the people of Gibraltar. The delays get in the way of sensible economic relations between Gibraltar and the neighbouring regions of Spain, and therefore interrupt what ought to be a mutually beneficial economic relationship. They harm jobs and hopes of prosperity. We shall continue to raise with the Spanish authorities at every appropriate level cases where we think that the border delays that have been imposed have not been adequately justified. The Government of Gibraltar regularly co-operate with Spain in tackling tobacco smuggling and other forms of criminal activity. That is the sort of sensible, constructive co-operation we want.
The British Government very much regret that the current Spanish Government refuse to take part in further meetings of the trilateral, which we believe well serves both Gibraltar and Spain, as well as the United Kingdom. We would like some kind of equivalent collaborative system established, but so far Spain has refused to return to the trilateral. I am grateful for what the hon. Lady said about her support for British sovereignty over Gibraltar and respecting the rights of its people. I particularly welcome her remarks, if they mark a break with the proposals for shared sovereignty and the betrayal of the people of Gibraltar that the Labour party supported when in office.
Simon Hughes (Bermondsey and Old Southwark) (LD)
We are grateful to Ministers for their robust view on this matter. There is a strong view in Gibraltar that since the Government changed in Madrid there has been a much less obvious willingness to collaborate with the Government of Gibraltar, as well as incursions into our waters and regular blockages of the border. Will Ministers put it on the agenda for the next meeting with Madrid that the way for a civilised Government in Spain to behave, if they want to make a joint effort on the border, is to warn Gibraltar, do it together and stop this uncivilised and tribal attitude from a country that wants to be regarded as a full and civilised member of the EU?
Mr Lidington
My right hon. Friend makes a very good point about the beneficial effect of practical co-operation between the Governments of Spain and Gibraltar, a subject that is frequently on the agenda in discussions between the British and Spanish sides. It is fair to say that although the new Spanish Government have introduced a policy towards the trilateral which we have found unwelcome—they know that that is our attitude towards their policy—the Prime Minister of Spain has also made it clear publicly that he does not want the argument about Gibraltar to get in the way of a fruitful bilateral relationship between Spain and the United Kingdom. I hope very much that we can get back to the sort of practical, local co-operation that my right hon. Friend referred to and wants to see in future.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
On Friday—the day that the EU was awarded the Nobel peace prize—there was a five-hour queue on the Gibraltar-Spain border, which is an EU border. Will the Minister call in the Spanish ambassador each and every day that there is a delay of five hours on the border between Gibraltar and Spain, and will he keep the ambassador waiting for five hours?
Mr Lidington
What I can say to the hon. Gentleman is that wherever we have evidence that border delays are being imposed without good reason, we will take that up with the Spanish authorities at the appropriate level. That may sometimes be at the local, operational level; it may sometimes, as in the most recent case, need to be at a senior level, with the Spanish Government in Madrid.
Ian Paisley (North Antrim) (DUP)
I welcome the strong statement by the Minister today and the equally strong statement from the hon. Member for Wolverhampton North East (Emma Reynolds) on the Opposition Front Bench about Gibraltar’s sovereignty. The Minister will know that tobacco smuggling regularly occurs—and to a much greater extent than between Gibraltar and Spain—across the border between Northern Ireland and the Republic of Ireland—
Ian Paisley
North and south. Yet despite that, there have never been such delays or such an overreaction by the services in Northern Ireland in relation to our trade and the impact on our trade. I hope that the Minister will send the strongest possible signal and, indeed, that he will ask our Prime Minister to represent fairly the people of Gibraltar to the Spanish Prime Minister and tell him to get his hands off this Rock. It’s not going their way.
Mr Lidington
The UK Government, from the Prime Minister down, could not have been clearer to our friends and partners in Spain that although we want a good bilateral relationship with them, we will not, and we shall never, agree to any transfer of sovereignty over Gibraltar unless that were the wish of the people of Gibraltar, nor would we enter into any process of sovereignty talks and negotiations unless the people of Gibraltar were content with that.
Mr MacShane
I wish the Minister well. I negotiated the trilateral agreement, and for a few years we had a bit of peace and quiet. I am sorry that it is all going wrong for him; Gibraltar is a nightmare for anybody in his job. However, the House does not help the Minister or the people of Gibraltar with patronising remarks about civilised behaviour and the rest of it. We need to cool things down. The queues are unacceptable, but jaw-jaw is better than queue-queue. I wish the Minister well as he tries to get this back under control.
Mr Lidington
I am always willing to welcome good wishes, particularly in my job, even if they are from the right hon. Gentleman. However, I would disagree with him profoundly in one respect: when he described Gibraltar as a “nightmare”. I do not think Gibraltar is a nightmare; I think Gibraltar is a thriving and now pretty prosperous community, with an entrepreneurial people who want good relations with their neighbours across the border in Spain, but who also want their democratic rights respected and their wish to remain British respected too.
Sir Jimmy Savile (BBC Inquiry)
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Rob Wilson (Reading East) (Con)
(Urgent Question): To ask the Secretary of State for Culture, Media and Sport if she will make a statement on the BBC inquiry into the allegations against the late Sir Jimmy Savile.
The Secretary of State for Culture, Media and Sport (Maria Miller)
The allegations emerging around Jimmy Savile are absolutely horrifying. My thoughts are with those affected and their families who have suffered in silence for decades. I believe that it is absolutely right that the BBC asked the police first and foremost to investigate these allegations, and that it has waited to act, on the advice of the police, before launching its own inquiries. It is essential that the police inquiry is not disrupted.
The BBC is a globally admired British institution and has a unique place in our cultural life. As such, it is imperative that it behaves in a manner that makes it worthy of the public’s ongoing trust and confidence. Both the Prime Minister and I said last week that we believed that the BBC should investigate these very serious allegations. The BBC Trust is there to represent the interests of licence fee payers: it must investigate these matters and rectify them, too.
Following the board meeting on Friday, I called both the director-general and the chair of the BBC Trust to underline how vital it is to have clear terms of reference in place and for there to be an announcement of who will chair the inquiries as soon as possible. From those conversations, I am now confident that both the BBC and the BBC Trust are taking these allegations very seriously indeed.
As the House will be aware, the BBC has launched three separate investigations. The first will look into the allegations with regard to the item on Savile which was inappropriately pulled from “Newsnight”. The second review, to be undertaken when the police advise it is appropriate to do so, will focus on Jimmy Savile himself. Thirdly, although the BBC’s child protection policy was overhauled in 2002, the review will also focus on whether its policy is fit for purpose and what lessons can be learned. This review will be assisted by an independent expert. An additional piece of work will look at the very troubling allegations of sexual harassment at the BBC that have come to light in recent weeks. The director-general will give further details later in the week. These are undoubtedly very serious matters, which have wide-ranging implications for a number of public institutions—not just the BBC. It is now crucial that we understand what went wrong and how it can be put right.
Mr Wilson
I thank the Secretary of State for that answer.
Other institutions besides the BBC—including hospitals, children’s homes, the Crown Prosecution Service and even the police—appear to have serious questions to answer, and I am pushing for answers on those, too, but the BBC currently faces more questions than others because many of the alleged acts of sexual abuse and paedophilia happened on BBC premises and Savile was a BBC employee. While many of these questions relate to the past, there are very serious questions about the actions of the BBC in the present. Any hint of a cover-up by the BBC of its own role in this dreadful affair will cause huge damage to public and audience trust. We do not have an explanation of why the BBC scrapped the “Newsnight” investigation entirely rather than give it more time to develop its work, or of why the BBC did not pass on to police at the time new claims it had obtained about Savile and two other living celebrities who are still at large having allegedly abused under-age girls on BBC premises?
I have a number of major concerns that the inquiries announced by the BBC will not be sufficiently independent, transparent or robust to give the public confidence. I shall write to Dame Fiona Reynolds this afternoon to set out those concerns in detail. In the light of these concerns, I ask whether my right hon. Friend is concerned that the BBC has been slow to react to the growing scandal, and that by dragging its feet on the need for a proper independent inquiry on its own conduct, it has appeared as though it does not want to get to the bottom of this matter. Does she think the BBC’s arrangements for two inquiries are sufficiently independent, transparent and comprehensive? Does she think that a separate, rapid inquiry into the cancellation of the “Newsnight” story is justified? In view of the wider questions about the role of other institutions, does she think that a wider public inquiry into the whole affair would be justified? Finally, is my right hon. Friend concerned that the BBC Trust has acted more as a cheerleader and defender of the BBC than as a critical guardian of standards? Does she think the current relationship is fit for purpose?
Maria Miller
I thank my hon. Friend for giving me the opportunity to cover some of the issues that he has raised. I spoke to both the director-general and the chairman of the BBC Trust after the board meeting on Friday, and I feel that they are taking these matters extremely seriously indeed. I would underline that point to my hon. Friend. Ultimately, it is for the BBC Trust to have the confidence of the licence fee payer and the comfort confidence of the British public. It is therefore vital for all the inquiries to be undertaken in a transparent and independent manner, and I think that the involvement of Dame Fiona Reynolds as the trust’s senior independent director designate will reassure us in that regard.
As for the role of a wider inquiry, my hon. Friend should bear in mind that a police investigation is currently taking place. I think everyone would agree that it is important for the individuals who have been victims to know that that investigation can proceed unfettered, and that that should be our priority at this stage.
Ms Harriet Harman (Camberwell and Peckham) (Lab)
I support what the Secretary of State has said. Everyone has been sickened by the vile abuse perpetrated by Jimmy Savile, and it is impossible to overstate the suffering caused to those whom he abused. What has deepened the revulsion is that this happened at the BBC, an institution so loved and trusted that it is known as “Auntie”. That has cast a stain on the BBC.
Does the Secretary of State agree that no one should be complacent and believe that sexual abuse by people in positions of power at the BBC happened then, but could not happen now? The BBC should proceed now to review all its policies and processes on the protection of children, sexual harassment and whistleblowing, in order to be sure that the right policies and processes are in place and are properly enforced. That need not wait for the police investigation. Does the Secretary of State agree that it must apply to all employees, including those at the very top—the senior executives and the top talent? Clearly it was Jimmy Savile’s exalted celebrity status that gave him a sense of impunity.
I strongly support the Secretary of State’s recognition that people will want to be confident that the inquiries that the BBC is setting up will be genuinely independent, and that they will want to know when those inquiries can be established and when reports on them will be issued. I also support the recognition by the hon. Member for Reading East (Mr Wilson) that this goes wider than just the BBC, and that there are still countless young women and men who have been abused but have never complained because they bear a great burden of shame, guilt and disgust, and fear that they will not be believed. Should not our strong and clear message to them today be “Come forward now, seek the support that you need to address the wrong that has been done to you, and, in doing so, not only secure the justice that you deserve but protect others in the future”?
Maria Miller
I thank the right hon. and learned Lady for her comments and her support. She is right: there can be no room for complacency. I know that when we have discussed this matter in Committees of the House, we have stressed the importance of vigilance as well as checking. A vigilant culture in our corporations is vital.
The BBC undertook a root-and-branch review of its child protection policies in 2002, and made significant changes. Having looked at those changes over the last few days, I can see why they are held up as an exemplar in their field, but the right hon. and learned Lady is right to say that we need to reconsider. We must leave no stone unturned in ensuring that such appalling situations cannot arise again. Child abuse can have nowhere to live at any level in an organisation.
Let me reassure the right hon. and learned Lady again that we have a shared objective, namely to ensure that the reviews are entirely independent. I have been assured by the BBC that both the chairmanship and the remit of the organisations that will conduct them will be made available to everyone in the next few days.
Mr John Whittingdale (Maldon) (Con)
I echo what has been said by my hon. Friend the Member for Reading East (Mr Wilson) and my right hon. Friend the Secretary of State. The revelations of recent weeks raise serious questions, not just about the culture that existed in the BBC some years ago—and in other organisations—but about the way in which the BBC has handled the matter, and in particular the very damaging suggestion that the “Newsnight” investigation was suppressed. The director-general of the BBC has offered to appear before the Culture, Media and Sport Committee next week, and I am sure that my colleagues will wish to take up that offer.
Maria Miller
I thank my hon. Friend for what he has said. I look forward to his Committee’s input, and the role that it will play in ensuring that these matters are handled transparently.
Diana Johnson (Kingston upon Hull North) (Lab)
Last year, the coalition scaled back criminal checks on people who have access to children, and the Home Secretary has said that organisations should instead use a “common-sense” approach when vetting individuals. After these dreadful allegations at the BBC and other organisations, does the Minister think that the “common-sense” approach will keep our children safe?
Maria Miller
I thank the hon. Lady for her question. I know that she has looked at this matter in some detail, as I, too, have done. I can reassure her that the BBC’s own child protection policy goes beyond that which is required, and it is expected that where people work with children and young people the role will be subject to a satisfactory Criminal Records Bureau check or indeed a PVG—Protecting Vulnerable Groups scheme—check. She is right always to be questioning whether we do have the right checks in place, but I say to her that the individual we are talking about today had no criminal convictions. So this is not just about looking at convictions; it is also about the culture of vigilance that I talked about when responding to the right hon. and learned Member for Camberwell and Peckham (Ms Harman).
Tim Loughton (East Worthing and Shoreham) (Con)
Does my right hon. Friend agree that these latest sickening revelations just reinforce the sobering message that child sexual exploitation is rife in every community, every organisation and every social class, whether it is hiding behind the culture of celebrity in the BBC and other institutions, behind the culture of fear within the Church or behind the culture of political correctness that prevents the police and social services from properly investigating when cultural sensitivities are involved? If one compensation is to come out of this all, it will be, as the right hon. and learned Lady has said, to embolden victims to come forward and, most importantly, for them to be taken seriously by the institutions that are there to protect them.
Maria Miller
My hon. Friend speaks with enormous passion on this subject, and I had the privilege of working with him on the Safeguarding Vulnerable Groups Bill when we were in opposition. I agree with him that the seriousness of the situation is something that all the organisations that have been implicated need to look at. I reassure him that the police investigating the Savile inquiry are working with the National Society for the Prevention of Cruelty to Children to try to ensure that people who have been affected are forthcoming with evidence and that we can get to the root of this problem.
Barry Gardiner (Brent North) (Lab)
The whistleblowing legislation gives protection to those within an organisation who seek to expose a culture of wrongdoing. Will the Secretary of State look again at that legislation to see whether it can go further and impose a duty on individuals to blow the whistle in situations such as this?
Maria Miller
I note the hon. Gentleman’s comments. All these things are issues that we can and should be looking at.
Rehman Chishti (Gillingham and Rainham) (Con)
What steps are being taken, or what recommendations are being made, by the BBC to strip Savile of his knighthood?
Maria Miller
I understand my hon. Friend’s question. I am not sure whether he is aware that knighthoods cease upon the death of an individual, so the path he suggests is not one that can be taken. However, I think that his point sought to ensure that the appalling nature of these acts is recognised, and that is a point worth making.
Barbara Keeley (Worsley and Eccles South) (Lab)
The Secretary of State has rightly said that this goes wider than the BBC. Clearly, other inquiries will need to take place, as it seems that Savile had unfettered access to children, vulnerable patients and others on wards—this access seems to have been given almost entirely because of his celebrity and fundraiser status. Will the Secretary of State tell us how there will be co-ordination across the undoubted inquiries that we need in the health service and the one for the BBC?
Maria Miller
The hon. Lady is entirely right to say that, as I said in my opening words, a number of other organisations need to undertake investigations. Those involving hospitals will be done at a local primary care trust level, although of course the Department of Health will be carefully examining the outcomes.
Sir Tony Baldry (Banbury) (Con)
One cannot indict the dead, one cannot prosecute the dead and, as a consequence, one can never properly give justice to the victims of the dead. So can my right hon. Friend assure me that one of the things the police will thoroughly investigate is why no credible complaints against Savile ever resulted in charges?
Maria Miller
I understand my hon. Friend’s frustration, which echoes that of other Members in the House today. I can absolutely assure him that the very serious allegations that have been made are being examined in great detail and that the fact that they have gone on over a number of years without receiving the recognition that they require will, of course, be at the heart of those investigations.
Fabian Hamilton (Leeds North East) (Lab)
I had the now dubious honour of being Jimmy Savile’s Member of Parliament and, in that role, I met him on several occasions. A year ago, of course, there was an outpouring of grief in the city of Leeds and in my constituency, as well as throughout the country, on his death. Does the Secretary of State understand how people now feel betrayed, angry and very concerned that it is said in the media—we do not know whether it is true or not—that many people, including senior figures not just at the BBC but in other walks of life, knew of Savile’s proclivities but were too frightened to say anything? Does she think that the BBC inquiry, and other inquiries that are to come, should find out and get to the truth of who knew what and when?
Maria Miller
The hon. Gentleman is absolutely right and that is at the heart of the inquiry. It is vital not only that we have the police investigation, which will consider the potential implications as regards any criminal wrongdoing, but that we ensure that we understand exactly what was known and when—to use his words—in any corporate organisation, particularly the BBC. I think he is absolutely right.
Mrs Anne Main (St Albans) (Con)
I am sorry to say that I do not share the Secretary of State’s confidence that the BBC has the wherewithal to clean out its own Augean stables. The culture, practice and ethics of the BBC have left much to be desired over this matter. Indeed, I wrote to Leveson on 4 October asking whether he would extend his inquiry, given that the Prime Minister had said:
“We have also made it clear that the inquiry should look not just at the press, but at other media organisations, including broadcasters and social media if there is any evidence that they have been involved in criminal activities”.—[Official Report, 20 July 2011; Vol. 531, c. 919.]
Leveson has yet to report, so would that not be the easiest way of getting an independent inquiry as quickly possible about this matter, the BBC’s role in which is under a large question mark?
Maria Miller
I understand my hon. Friend’s question and concern, but I suggest that extending the scope of Leveson at the moment might result in a delay to the inquiry that I do not think anybody would want to see. I reassure my hon. Friend that the issues about which she is concerned will be dealt with within the two inquiries that have been announced. I hope I will be able to reassure her further when the terms of reference of those inquiries come out, and she can be assured that I will continue to work to monitor these issues closely with the BBC.
Ian Paisley (North Antrim) (DUP)
Is the Secretary of State utterly convinced that the culture of the BBC has changed since the revelations about the vile actions of Jimmy Savile? Just a few weeks ago, one of its senior talent was caught in photographs in the grips of a young woman with his hand down her trousers in a public place and he got away with it with nothing more than a shrug of the shoulders and a silly excuse. Is the culture really changing? Has it really changed? Is the Secretary of State utterly convinced? She knows that the police inquiry will take years and that the BBC will get away in the smoke. Surely now is the time for the independent inquiry into the BBC.
Maria Miller
The hon. Gentleman is absolutely right to question not just past but present practices. The BBC investigations will consider that exact issue, including not only the situation with the piece on “Newsnight” but the additional work on the troubling allegations we all read about in the papers over the weekend and today. He is right to say that the BBC must consider the present as well as the past.
Alec Shelbrooke (Elmet and Rothwell) (Con)
May I welcome my right hon. Friend’s comments about the fact that the culture of child protection in the BBC will underlie any investigation? Many people have commented that things were different then, and I am afraid that that leads to the assumption that the same thing could not happen today. As well as dealing with those who are found guilty of turning a blind eye to such actions, the inquiries must also consider those who decided to drop the “Newsnight” investigation because they were worried that it was in bad taste. That was equally an assumption that such things could not go on and shows that the culture is wrong.
Maria Miller
My hon. Friend is absolutely right: we must ensure that children’s concerns and allegations of impropriety or sexual abuse are taken seriously, whether within the police, the NHS or the BBC. He is right to make that challenge and to say that it should be an ongoing concern for the Government.
Alun Cairns (Vale of Glamorgan) (Con)
The BBC has not always investigated in-house matters with the same rigour it rightly shows when looking at other organisations and individuals. Along with its 2002 child protection policy, which should have introduced a culture change, what reassurance can my right hon. Friend give that the BBC now has the leadership in place to deliver that culture change and investigate its own affairs as it does elsewhere?
Maria Miller
My hon. Friend is right that we have to ensure that there is that challenge, and ultimately that is the role of the trust, which represents the licence fee payer and must make sure it holds the executive to account. My predecessor introduced a number of changes to the trust’s role. We will continue to look at that role and, as we move towards charter renewal, it will of course be hotly in our sights.
Andrew Stephenson (Pendle) (Con)
My right hon. Friend said that Sir Jimmy Savile’s knighthood, awarded in 1996, ceased on his death, but many victims will see that as insufficient. Will she consider raising with the honours forfeiture committee the possibility of posthumously stripping Jimmy Savile of his knighthood and OBE?
Maria Miller
I understand my hon. Friend’s point. That is a matter for the honours forfeiture committee, which I am sure will have heard his comments.
Mr Robert Buckland (South Swindon) (Con)
Until the law was changed some 25 years ago it was deemed in such cases that a child complainant with unsupported or uncorroborated evidence could not be believed and prosecutions therefore could not be brought. Although the law has, thankfully, been changed, is not now the time to remind all children and young people who are victims of such despicable acts that they can come forward and be treated in confidence by professionals who are dedicated to ensuring that the truth comes out?
Maria Miller
My hon. Friend, who I know has a great deal of experience in this area, will be pleased to know that the Metropolitan police, who are undertaking the investigation, are working with the National Society for the Prevention of Cruelty to Children for precisely the reasons he gives. We must ensure that young people who have had these experiences, or adults who had them when they were young, can come forward so that their evidence can be heard, perhaps through a third party, to ensure that we know all the facts.
European Justice and Home Affairs Powers
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
I understand that there was something of a breakdown in the usual arrangement whereby statements are made available to Opposition Front Benchers some time in advance of their delivery. I should emphasise that that is a convention and not something that engages the responsibilities of the Chair, but we do attach some importance to these conventions and the principle of courtesy that underlies them.
Mr Speaker
Exceptionally, I will take a brief point of order from the right hon. Lady.
Yvette Cooper
On a point of order, Mr Speaker. Given the seriousness of this issue of European co-operation, and given that the Home Secretary’s statement has literally only just been handed to me, would it be possible for the statement to be deferred for an hour, or even three quarters of an hour, so that the official Opposition can do our duty of scrutinising it?
Mr Speaker
I am afraid that I just do not think that there is a facility for that to happen. There is a third statement to come, which will follow in due course. The timing of the statement has been announced and the Home Secretary is here to deliver it. I think that what I have said indicates my own feeling—[Interruption.] Order. It indicates my own feeling that this is a very unsatisfactory state of affairs. I sincerely hope that there is no recurrence of it. I think that, in the circumstances, we should proceed. I invite the Home Secretary, who I trust will have heard what has been said, now to make the statement.
The Secretary of State for the Home Department (Mrs Theresa May)
May I start by apologising to the shadow Secretary of State for the fact that she received a copy of my statement late? On one occasion, when I was shadowing Stephen Byers and he was due to make a statement in the House, I was in a similar position, so I know the difficulties that the situation causes.
Under the terms of the Lisbon treaty, the Government are required to decide by 2014 whether we opt out of, or remain bound by, all the EU police and criminal justice measures adopted prior to the treaty’s entry into force. Under the treaty, the Government are required to make a final decision by 31 May 2014, with that decision taking effect on 1 December that year. Although that might seem a long way off, the process of decision making, as with many EU matters, is complicated. We wish to ensure that, before that point, we give the House and the other place sufficient time to consider this important matter.
In total, more than 130 measures within the scope of the decision are to be considered at this stage. A full list of the measures was provided to the House on 21 December last year and a further update was given on 18 September this year. The Government are clear that we do not need to remain bound by all the pre-Lisbon measures. Operational experience shows that some of the pre-Lisbon measures are useful, that some are less so and that some are now, in fact, entirely defunct.
Under the terms of the treaty, however, the UK cannot pick and choose the measures from which we wish to opt out; we can opt out only en masse and then seek to rejoin individual measures. So I can announce today that the Government’s current thinking is that we will opt out of all pre-Lisbon police and criminal justice measures and then negotiate with the Commission and other member states to opt back into those individual measures that it is in our national interest to rejoin. However, discussions are ongoing within the Government and therefore no formal notification will be given to the Council until we have reached agreement on the measures that we wish to opt back into.
This Government, more than any other before them, have done their utmost to ensure that Parliament has the time to scrutinise properly our decisions relating to the European Union and that Parliament’s views are taken into account. I assure the House that the 2014 decision will be no exception. As the Minister for Europe has already told the House, the Government are committed to a vote on the matter in both this House and the other place. We are also committed to consulting the European Affairs, Home Affairs and Justice Committees, as well as the European Scrutiny Committee and the House of Lords European Union Committee, on the arrangements for the vote.
I fully expect that those Committees will want to undertake their own work on this important decision. The Government will take account of the Committees’ overall views of the package that the UK should seek to apply to rejoin. So that the Government can do that, I invite the Committees to begin work, including gathering evidence, shortly, and to provide their recommendations to the Government as soon as possible. The Government will then aim to bring forward a vote in both Houses of Parliament. The time frame for the vote will depend on progress in our discussions with the Commission and Council. An update will be provided to Parliament early in the new year on when we can expect the vote to take place.
I hope that today I have conveyed to the House not only the Government’s full commitment to holding a vote on the 2014 decision in this House and the other place, but the importance that we will accord to Parliament in the process leading up to that vote. I am sure that all parties will want to work together to ensure that the final decision is in the UK’s national interest. It is in the national interest that the Government have taken this decision, and I commend this statement to the House.
Ian Lucas (Wrexham) (Lab)
If a series of measures are opted out from, will those measures be able to be considered under the question of whether there will be a referendum on European powers?
Mr John Redwood (Wokingham) (Con)
I am grateful for the Home Secretary’s statement and I fully support opting out of the whole lot. Will she make sure that, were we to want to co-operate with our partners in certain areas in future, that will not be done by a route that prevents us from changing our minds or prevents Parliament from being sovereign?
Mrs May
As my right hon. Friend knows, this Government have done more than any other to address the issue of the balance of our relationship with the European Union. It is right that we should have the opportunity to opt out from these measures and that we should look seriously at measures that we might wish to opt into. Obviously, that will take time and involve a considerable amount of discussion and negotiation with the European Commission and other member states.
Keith Vaz (Leicester East) (Lab)
The European arrest warrant started out as a very good idea but has ended up with chaotic and unfair consequences, and the Home Secretary is quite right not to opt into those arrangements. When she considers the areas where she can opt in, which she said she would do seriously, will she look at the powers and responsibilities of Europol? It is very important that we have cross-border co-operation with our EU partners so that violent criminals who may have committed offences abroad are not allowed to enter the United Kingdom. I will put her suggestion of a Select Committee inquiry to the Home Affairs Committee tomorrow.
Mrs May
I thank the right hon. Gentleman. I said that I was sure that he and his Committee would want to look at this issue. He tempts me to identify individual measures that we might wish to opt in or out of and the terms on which we might wish to do so. I am talking not about individual measures, but simply about the Government’s proposal that we opt out of, and then negotiate on, a number of measures. I am aware of the concerns that have been raised on both the issues that he spoke about, and I will certainly take his comments on board in considering them.
Martin Horwood (Cheltenham) (LD)
The Home Secretary must welcome Gloucestershire constabulary’s success last year in breaking a major human trafficking ring, working with other European police forces and returning a suspect for trial here in the UK. Does she agree that only by using practical tools such as the European arrest warrant used in that case can we really tackle the evil of this modern slavery?
Mrs May
It is absolutely right that there are criminal offences where we want to be able to extradite people—to bring people back from other countries to face trial and justice here in the United Kingdom. We need to ensure that the arrangements that enable us to do that are the best possible and are proportionate. Proportionality is one of the issues that have been raised as regards relations with Europe. As I say, we will look at every individual measure separately when choosing whether to request to opt in.
Yvette Cooper
I have never been in this situation before whereby I have not had a copy of the statement from the Minister until I arrived in the Chamber. Thank you, Mr Speaker, for taking my point of order about this earlier. It shows the complete confusion in the Government and on the part of the Home Secretary about what the Government’s policy is. They have not told us anything at all today; they are completely confused.
We all know that with more international travel and growing cross-border crime, international co-operation is an extremely serious matter, yet the Government seem to have an utterly chaotic position. The Prime Minister told us that the Government would be opting out of all the justice and home affairs provisions; the Deputy Prime Minister said, “No, no—we are only minded to do so.” The Home Secretary said that she was simply setting out “the Government’s current thinking”. However, as she also said that “discussions are ongoing”, presumably the current thinking could change tomorrow and then it will be something else entirely. She said that she wants to opt out of some things but then might opt back into everything all over again. It is just like the Education Secretary saying that he wants out of Europe and the Prime Minister wanting in. With all this out and in, in and out, it is as though the Government are playing a giant game of hokey cokey—and yet the fight against crime is at stake.
The Home Secretary will know that former Metropolitan police commissioners and former heads of MI5 and MI6 have said that British law enforcement bodies are now constantly communicating, co-operating and collaborating with the EU in pursuing serious organised criminal and terrorist networks. The framework of co-operation that they have is crucial in order to stop criminals and prevent crime.
We have read much in the papers about the European arrest warrant, but the Home Secretary did not say whether she wants to opt out of it or plans to opt back in. This warrant made it possible to arrest Jeremy Forrest and bring him back to face British justice for the alleged kidnapping of Megan Stammers and to bring back Hussain Osman for trying to bomb the London underground, and it closed down the “Costa del Crime” when British criminals fled to Spain.
We have a right to be able to bring those criminals back to face British justice, and we owe it to their victims —and, yes, that does mean sending people back from Britain to other countries, because of the 4,000 people returned from Britain in the past eight years under the European arrest warrant, 95% were foreign citizens, who often had committed crimes in their home countries and fled here to escape the long arm of the law. I am sorry, but I think that people should be sent back to their home countries to face justice, rather than have too many people who are suspected of serious crimes in Europe wandering around Britain, unable to be sent back to face justice without years of legal wrangles. From what the Home Secretary has said today, she may well be opting out of the European arrest warrant, which prevents that from happening.
Another area is the sharing of criminal and DNA records. If a known sex offender travels to Britain from France or Spain, does the Home Secretary think that we need full access to their DNA and their criminal records or not?
What about minimum standards of counter-terror co-operation, participating in Europol and exchanging information to stop passport fraud and Europe-wide money laundering, and to trace and freeze criminal assets? The Home Secretary has not told us her position on any of those important measures. She has not said whether she thinks we should opt out, opt out and then opt back in again, whether she thinks that we should renegotiate the provisions, or what will be put in their place in the meantime.
The Home Secretary knows that there is no guarantee that the European Commission and other European countries will support our opting back in again. For example, Denmark, which has opted out from the justice and home affairs provisions, has had about 50% of its requests turned down. One of the Home Secretary’s junior Ministers has admitted that there will be a financial penalty for opting out and then opting back in. Does she have any idea what that financial penalty will be and whether it is worth the price?
I say to the Home Secretary that this is an utterly confused position. Her defence is that she wants to consult Parliament and the public but, considering she has utterly failed to consult Parliament and provide the Opposition with proper information, that is ridiculous. She is taking big risks without even working out what her views are or what the Government think. Next time they want to make a statement on important European policy, perhaps they should work out what they actually think it should be before they come to the House and make it.
Mrs May
Let us remember that it was the Labour party that wanted to sign up to the European constitution and that planned to scrap the pound and join the euro. It has no credibility on European issues in this House. Indeed, it has no credibility with the British people.
Let me address the right hon. Lady’s points. On the list of measures that we might want to opt back into, I have made it clear that we need to engage with the European Commission and other member states in order to opt back into measures where we believe it is in the national interest to do so. That negotiation can now start. We will do that in earnest and talk to them about the terms on which particular opt-ins might be possible.
The right hon. Lady seems to be concerned about where the opt-out decision might leave us with regard to public protection. I remind her that it was the previous Government who negotiated the opt-out. If they thought it was such a problem, why did they negotiate it in the first place? On costs, I remind the right hon. Lady that the financial penalty was part of that negotiation of the opt-out, so it was the Labour Government who signed up to it.
The right hon. Lady made a number of comments on the European arrest warrant. She will be aware that a number of Members have raised concerns about British nationals, some of whom are their constituents, spending a long time languishing in foreign jails before reaching trial. A number of issues have been raised in this House and elsewhere about the proportionality issue in relation to the European arrest warrant. I therefore ask the right hon. Lady: is she happy with all of that, or does she think that the situation can be changed? If she does not think that there is an issue with the European arrest warrant, why did she not force a Division and vote against last December’s motion on extradition, which included a proposal to reform and amend the European arrest warrant? She did not. She accepted the motion, which this House passed and which stated that amendments should be made to the European arrest warrant.
The right hon. Lady’s only position on the issue seems to be to disagree with what we say and what we do. The Labour party negotiated an opt-out, but now it is against enacting it. It said that we needed to reform the European arrest warrant, but now it wants to pass up on the chance of doing just that. I have set out the Government’s position this afternoon. We will give Parliament a voice on the issue. The right hon. Lady cannot spend her time saying one thing one day and another thing the next and expect to be taken credibly by this House or anybody else.
Mr Crispin Blunt (Reigate) (Con)
I thank my right hon. Friend for making clear the position on whether we will exercise the opt-out or the opt-in, which is a necessary first position to take. I also thank her for enabling Parliament to exercise its proper influence over the individual measures that we may wish to opt into. Why that is difficult for the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) to understand escapes me.
I know that the Home Secretary and the Justice Secretary will agree that it is clearly in our national interest to get European Union prisoners who are serving their sentence here transferred to their own country as early as possible to serve their sentence there. Within the remit of the proper parliamentary scrutiny that she is seeking, will she give the earliest possible indication to our European partners that we will seek to continue with those arrangements?
Mrs May
I assure my hon. Friend that I and the Justice Secretary have every bit as much interest as he has in ensuring that prisoner transfers are made as quickly as possible. He is again trying to tempt me down a road that I will not go down. We have been clear that we will start to look at the individual measures in negotiation with the Commission and member states to see what process will be required and on what terms it might be possible to opt into the measures that we want to opt into. So far, that process has not started.
Alan Johnson (Kingston upon Hull West and Hessle) (Lab)
The Home Secretary knows that she does not have to opt out of the European arrest warrant to seek its reform in areas such as proportionality. That work is already going on in Europe because many countries share our concern. She has the benefit of the report by Lord Justice Scott Baker, which she commissioned. Will she confirm that the Scott Baker report strongly recommended remaining in the European arrest warrant because it had made huge strides forward on justice and tackling crime in Europe?
Mr John Baron (Basildon and Billericay) (Con)
I welcome this opt-out, but given that any future opt-in would give UK jurisdiction to the European Court of Justice for the first time, would it not be better to rule out any opt-ins in the future?
Mrs May
It is right that we are proposing to exercise the block opt-out, which is the option that is available to us. As I said in my statement, it is not open to us to opt out of individual measures. We can opt out only en bloc and then negotiate to opt into those measures that we think it is right that we continue to be in.
Mr Denis MacShane (Rotherham) (Lab)
I have never heard a statement so heavily spun to the press, but so devoid of content when the Minister rises at the Dispatch Box. Is not the Secretary of State opting into the rampant Europhobia that consumes her party, in a competition with the Education Secretary to get us out of Europe? If she abolishes the European arrest warrant, her picture will be up on the wall of every trafficker, child abductor and international criminal as the person who took away the fundamental right of British people to be protected from international crime.
Mrs May
I assure the right hon. Gentleman that I take the protection of the British public very seriously indeed. It is the first duty of government to protect the public, but we need to ensure that any measures that are in place to protect the public are the right ones. I have not said what we will do on the European arrest warrant, but I have noted the concerns that have rightly been raised about its proportionality and in relation to the cases of some UK citizens who have been in jail elsewhere. We will now start to look at the individual measures. As I have said, we will discuss with member states and the Commission the process by which we will be able to opt into certain measures, where we choose to do so.
Sir Roger Gale (North Thanet) (Con)
My right hon. Friend is right to draw attention to the fact that in some countries, such as France, United Kingdom citizens have been held for long periods without trial, in clear breach of the convention on human rights. Is it not absolutely correct, therefore, that before we go any further down this road, the House should have the opportunity to consider carefully and vote on any extension or further joining of the European arrest warrant?
Mrs May
As I set out in my statement, we intend to discuss with various parts of Parliament, including Select Committees such as the European Scrutiny Committee, by what process the House should vote on this issue. We will come back to the House in due course with proposals on how it can express its view on this significant issue of justice and home affairs powers—namely, the package of measures that we might wish to opt into when the time comes.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
Many of the crimes considered most serious by any normal standard are international in type, including the trafficking of drugs and of people, including children, and banking and corporate fraud. Bearing that in mind, does the Home Secretary truly believe that it is in the interests of justice to opt out of scores of cross-border EU justice measures not knowing if and when future opt-ins will succeed?
Mrs May
As I have made clear, it is not open to us to opt out of individual measures. The last Government negotiated a block opt-out, with a right to opt into certain measures following negotiation with the Commission and member states. We intend to follow that process.
The right hon. Gentleman talks about cross-border crime, which is significant. The drugs that are being peddled on the streets and lead to petty crime are being brought across the border by organised crime gangs. That is why we are setting up the National Crime Agency, which will include a border policing command and will have an enhanced ability to deal with serious and organised crime.
Mr Dominic Raab (Esher and Walton) (Con)
I welcome the Home Secretary’s decision. Conservative Members want focused co-operation, not blind loss of democratic control.
Will my right hon. Friend reassure the House that as she goes through the 130 measures in question, she will examine all options for co-operation, whether they are formally opting back in or alternatives such as co-operating under a memorandum of understanding or ad hoc co-operation? That would broaden the scope and potential for practical co-operation without ceding democratic authority.
Mrs May
I assure my hon. Friend that our consideration of these matters will be wide ranging and that we will examine each measure individually and carefully. As I have said, we will consider not just opt-ins and opt-outs but the other opportunities and options that are available.
Mike Gapes (Ilford South) (Lab/Co-op)
Will the Home Secretary clarify what will happen in the period between the opt-out and the reintroduction of some, but fewer, measures? Will we have to get into bilateral negotiations with individual states, or will we have a complete impasse in the legal system while we deal with high-profile cases that are in the media but for which we cannot use extradition arrangements?
Mrs May
We expect that transitional arrangements will be available, but one point of taking the decision now and announcing what we propose is that we can work with the European Commission to ensure that the time period between the opt-out being exercised and our coming back into any measures is as short as possible. The question of how that will work will be part of the negotiations with member states.
Michael Ellis (Northampton North) (Con)
I congratulate the Home Secretary on her announcement. It is crystal clear what she wants to do, which is to protect the sovereignty of this country, unlike the Labour party. Does she agree that Labour has no credibility on this issue? It negotiated this opt-out, and it is complaining now that we are attempting to use it.
Furthermore, does my right hon. Friend agree that there is a serious proportionality problem with the European arrest warrant? It is exemplified by a case from Poland in which an individual is alleged to have stolen a wheelbarrow with a value of £30. The proceedings for extradition from this country cost £30,000.
Mrs May
My hon. Friend, with his legal experience, will be well aware of many such problems. As I have said, a number of people have commented on the issue of proportionality. I entirely agree that for the Opposition to complain now that the Government are proposing to exercise an opt-out that they themselves negotiated leaves them with no credibility whatever.
Paul Goggins (Wythenshawe and Sale East) (Lab)
The Home Secretary may have persuaded herself, and perhaps even some of her colleagues, that she has adopted a sophisticated position, but I tell her that confusion is the friend of the criminal. I, for one, am deeply concerned about this hokey-cokey approach to justice in this country and across Europe, especially on such deeply serious issues as organised crime, child abuse online and drug and people trafficking. Any sense of confusion is deeply worrying.
Although The Sunday Telegraph might have sought to trivialise some European arrest warrant cases, I remind the Home Secretary, as did my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), of Hussain Osman. He was brought back from Italy to stand trial for his part in the 21 July bombings and got a 40-year prison sentence.
Mrs May
I fully understand the cases cited by the right hon. Gentleman, and others, in relation to this matter. On the other hand, however, concerns have been raised about proportionality in relation to the European arrest warrant. That is why it is right for the Government to sit down and look carefully at this issue, and take a decision on the European arrest warrant and the terms under which it might be possible to opt in. Part of the negotiations with the European Commission and member states is precisely about those terms.
I say to the right hon. Gentleman, and to others, that his Government negotiated an opt-out, so he cannot stand there and complain when the current Government propose to exercise it.
Mark Reckless (Rochester and Strood) (Con)
Will the Home Secretary consider further the point raised by the right hon. Member for Leicester East (Keith Vaz) on Europol? On its visits, the Home Affairs Committee has found—whether in relation to the Southeast European Cooperative Initiative and people smuggling in Turkey, or the Maritime Analysis and Operations Centre-Narcotics, which is based in Lisbon and tries to intercept drugs flowing across the Atlantic—that too often Europol gets in the way of effective co-operation. It wants to try to subsume everything into itself.
Mrs May
I have noted the points raised by my hon. Friend and the right hon. Member for Leicester East (Keith Vaz). Europol currently has a very good head. He is British—Rob Wainwright—and has just been reappointed for another term, but I have, of course, heard the points raised in the House today.
Barry Gardiner (Brent North) (Lab)
The Home Secretary wants to opt out in general, but opt back in, in particular, which implies she believes that specific measures are very much to the benefit of UK crime prevention and justice. Has she made an impact assessment of what will happen in the period between those measures not being enforced, and the point at which they are reintroduced? Will that impact assessment be made available to the public so that they can participate in the consultation she has mentioned?
Mrs May
I answered in response to a point raised by the right hon. Member for Wythenshawe and Sale East (Paul Goggins) that part of the discussions with the Commission and member states will be precisely about that process and the time at which any opt-ins that we choose to exercise come into force. By that time we will be able to consider what has come out of those negotiations with the European Commission, and assess the impact of opting in or not.
Dr Julian Huppert (Cambridge) (LD)
There is clear need for improvement to the European arrest warrant, but does the Home Secretary agree with 13 former security and police chiefs that scrapping it altogether would be entirely self-defeating? It has become an essential tool in the fight against cross-border organised crime, delivering fast and effective justice across Europe. More than 700 serious criminals have been brought back to the UK to face justice, accused of robberies, murders, rapes, child sexual offences and more. Does the Home Secretary agree that those people should be brought back promptly to face justice?
Mrs May
Of course I agree that people who are guilty of such crimes should be brought back to face justice. I say to my hon. Friend, however, that part of the process we will undertake includes careful consideration of each of those 133 measures. As I have said, some of those are now defunct, we may wish to opt back into some, and there are some that we will not opt back into. There will be careful consideration by the Government about what is in the national interest.
Mr William Bain (Glasgow North East) (Lab)
Does the Home Secretary accept that since the introduction of the European arrest warrant in 2004, the amount of time taken to extradite someone who objects to extradition has fallen from 12 months to 48 days on average? What does she say to the Law Society and the Law Society of Scotland, which are deeply concerned about the impact of her announcement on the prevention and detection of terrorism and serious organised crime?
Mrs May
I remind the hon. Gentleman that I have not indicated one way or the other in relation to the European arrest warrant. I have said that we will look carefully at each individual measure, and the organisations he has cited will provide the Government with their views on this matter.
Ben Gummer (Ipswich) (Con)
I thank the Home Secretary for her comments. In July 2010, my constituent, Sarah Shields, was murdered. Her boyfriend was accused of the murder and extradited under a European arrest warrant within two months. In her review, I hope that the Home Secretary will bear in mind those beneficial aspects of the European arrest warrant. It has caused a speedy return which, as she knows full well, would not have been so quick 10 or 20 years ago.
Mr Peter Bone (Wellingborough) (Con)
What a star we have in the Home Secretary—terrorists are sent home, powers are brought back from Europe and Parliament is given a year’s notice on something. What more can she do? Will she consider the views of the all-party group on human trafficking, which recognises that most of the successful operations against traffickers have been bilateral and not undertaken through the European regulation? Will she bear that in mind?
Mrs May
I shall certainly bear that in mind, particularly given my hon. Friend’s work against human trafficking. It would be wrong to assume that there is only one way of doing things—we can co-operate in a variety of ways to ensure that we get the best results in the national interest.
Mr Robin Walker (Worcester) (Con)
I congratulate the Home Secretary on at last starting the process of bringing powers back from Europe. My constituents in Worcester want British justice to be finally decided in the British Parliament. Will she therefore assure the House that any decisions to opt back in will be given plenty of time for hon. Members to debate them individually and in detail on the Floor of the House?
Mrs May
There will be a proper opportunity for Parliament to consider these matters. As I have said, the Minister for Europe set out some time ago the Government’s desire for Parliament to have a say. Precisely what form that takes has yet to be discussed with various parliamentary groups, but I shall certainly take my hon. Friend’s point into account.
Henry Smith (Crawley) (Con)
I welcome the Government’s intention to come out en bloc of the European justice and home affairs provisions. However, given that the Government might be minded to opt back in to certain provisions, as my hon. Friend the Member for Worcester (Mr Walker) says, we should have not only parliamentary scrutiny, but Divisions. Will she confirm that that option will be part of the mix?
Nick de Bois (Enfield North) (Con)
The Home Secretary will enjoy the full support of my constituent, Andrew Symeou, who languished in a Greek jail, denied his basic human rights. Much of that was facilitated as a result of the European arrest warrant. When she considers any future arrangements, may I urge her to examine in detail cases such as that of my constituent, which Lord Justice Scott Baker unfortunately did not consider when preparing his report?
Mrs May
My hon. Friend has highlighted precisely the issue that many hon. Members raise in relation to the European arrest warrant. On the one hand, my hon. Friend the Member for Ipswich (Ben Gummer) cited a case in which the EAW was beneficial, but on the other hand, my hon. Friend the Member for Enfield North (Nick de Bois) cites a case in which an individual feels that they suffered as a result of it. We will certainly look at that balance.
Andrew Stephenson (Pendle) (Con)
I fully support our opting out of those 130 EU measures, especially the European arrest warrant, but we should tread carefully. Opinion in the House is clearly divided on the measure, so does my right hon. Friend agree that it is essential that our Parliament looks at the issue in detail and votes on it in our national interest?
Stephen Lloyd (Eastbourne) (LD)
Last month, the 15-year-old schoolgirl Megan Stammers, a constituent, was abducted by her teacher, Jeremy Forrest. Much to my relief and that of her family and friends, Megan returned to the UK eight days after she was reported missing. Jeremy Forrest, the teacher, was returned to the UK less than two weeks later to face trial. They were found in Bordeaux by police acting on a European arrest warrant issued three days previously. Without the EAW, it is likely that it would have taken longer to find Megan, and Jeremy Forrest would probably still be in France. What reassurance can the Secretary of State give to my constituent and her family, and thousands of other victims of serious cross-border crime, that the Government will always ensure that British police can work effectively with their European partners to catch criminals abroad and bring them back quickly to face British justice in our courts?
Mrs May
The hon. Gentleman raises a particular case in relation to his constituents. On the general point, I would merely say, as I said earlier, that the Government believe that it is one of the first duties of the Government to protect the public. We recognise the importance of co-operating with other police forces in other jurisdictions in other countries so that we can ensure that people face justice appropriately. These issues, in cases such as the one that he raises, will of course be considered by the Government in looking at the whole question of the European arrest warrant.
West Coast Main Line
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Transport (Mr Patrick McLoughlin)
With permission, I would like to make a statement on the west coast main line. On Wednesday 3 October, I announced the cancellation of the inter-city west coast franchise procurement. This decision was taken as the result of significant flaws found within the procurement process undertaken by my Department. These made the continuation of the competition and the award of the franchise untenable.
I know how important the west coast main line is to the economy of this country and to the constituents of Members. This franchise operates more than 300 train services a day, carries more than 26 million passengers a year and employs more than 3,000 staff. This is a regrettable outcome caused by unacceptable mistakes made in my Department during a complex procurement process. It has also meant that I have paused the ongoing franchising programme, including live competitions on Essex Thameside, Great Western, and Thameslink.
I would like to reiterate that there is no suggestion that FirstGroup or any of the other bidders, including Virgin Trains, acted in anything other than good faith during the bidding process. FirstGroup is a great British company and a leading transport operator both here and in the United States. It provides jobs for 13,000 people across the UK and operates four railway franchises, which together carry more than 300 million passengers a year. I want to make it clear today that the cancellation of the west coast competition should not be seen as a comment on FirstGroup, its bid, or its approach to running rail franchises now or in the future. Furthermore, as I have said to the Select Committee on Transport, Virgin has also made a fantastic contribution to both the railways and aviation in this country.
It would be premature at this stage to speculate on where and how the errors in the process emerged. That is why, when I announced the cancellation of the procurement, I also asked for two urgent investigations to be carried out. Both reviews are now well under way. The first of these is an inquiry led by Sam Laidlaw, the chief executive of Centrica. He is the lead non-executive director on procurement across Government and the lead non-executive director of the departmental board. His review is examining what happened during the west coast procurement and why. It will establish the lessons to be learned. I have asked for the initial findings of the review by the end of October and expect the full report by the end of November.
The second review is looking at the implications of the flaws on the west coast procurement for the rest of the franchising programme. This review is being led by Richard Brown, a highly respected industry figure and the chairman of Eurostar. My expectation is that the Brown review will report no later than the end of the year on lessons for the future franchising programme, so that it can be resumed as soon as possible.
I am today publishing the terms of reference for both reviews, and these have already been laid in the Library of the House. Before these reviews have been completed, and particularly before the findings of the Laidlaw review have been published, any speculation as to the nature of the flaws is just that—speculation. I will of course report to the House on the findings of these reviews at the earliest opportunity.
I would like to take this opportunity, however, to restate the Government’s commitment to ensuring that we continue to have private sector innovation and investment in the railways. Since privatisation, the number of passenger miles travelled has nearly doubled. This growth brings significant benefits to the country’s economy and to the environment, relieving congestion and improving connectivity for businesses, commuters and leisure travellers. Passenger satisfaction is up, and so is punctuality. I want to see these benefits continue, which is why I want this pause, while the reviews are carried out, to be as short as possible. We will restart our refranchising programme, including the competitions on Essex Thameside, Great Western, and Thameslink, as soon as possible.
I now turn to the future operation of the west coast main line. I am committed to ensuring that passengers will see no impact as a result of these mistakes. Passengers will be able to make the journeys they have planned, with the tickets that they have bought. Clearly, we will need to learn lessons from the two reviews, and we will need to run a new competition for the west coast franchise. I want this to happen as quickly as possible, but we want to get it right, which will take time. It is also important that in the intervening period we secure a deal that secures best value for taxpayers, including the continual improvement of service quality.
For that reason, I am today announcing that we are commencing negotiations with Virgin Rail Group with a view to it remaining as operator of passenger services on the west coast main line. Subject to ensuring value for money for the taxpayer, I expect this to last for a short period of about nine to 13 months. In this period, we will run a competition for an interim agreement. This interim agreement, which will be open to any bidders, will then run until the new long-term west coast franchise is ready to commence. I will keep this approach under review so that it can be informed by the Brown findings and recommendations and so that it will ensure value for money.
I am grateful to the team at Directly Operated Railways for all their preparations so far. DOR will continue to stand ready should it be required. Britain’s railways are a great success, and I am determined that this incident will not get in the way of the Government’s record. We have launched the biggest programme of investment since the Victorian era and have just announced reductions in regulated fare rises over the next two years, recognising the importance of access to the railways for millions of commuters. I commend this statement to the House.
Maria Eagle (Garston and Halewood) (Lab)
I thank the right hon. Gentleman for advanced view of the statement. I well understand why, when he announced this embarrassing debacle earlier this month, he did so at one minute past midnight, when he hoped everybody would be asleep, because this is yet another staggering example of the monumental incompetence of this shambles of a Government. It is a failure of policy, a failure of process, a failure of ministerial oversight and a failure of ministerial leadership.
The Government’s new franchising policy, which requires risks to be calculated 15 years into the future, was designed by the current Secretary of State for Northern Ireland, announced by the current Secretary of State for Defence and implemented by the current Secretary of State for International Development; and it has shamefully been left to the former Chief Whip to try and deflect the blame for it on to three officials in the Department for Transport. It is just as well it has not been left to the current Chief Whip to deal with, or he would probably have blamed it on the police at the gates of Downing street.
The reality is that Ministers are responsible. It was Ministers who redesigned franchising policy to make it much more difficult to calculate which bidder should win. It was Ministers who slashed faster than any other Department the expertise and staffing available to carry out the task, including apparently making the director of procurement, the director of rail strategy and the director of rail contracts’ posts redundant along with those of senior finance staff; and it was Ministers who reportedly cancelled an external audit that was routinely done in other competitions to check the outcome of the franchise award ahead of its announcement.
It is incredible that Minsters continue to maintain that these problems only came to light late in the day, just before they made that midnight announcement less than two weeks ago. We know that Ministers were sent a report warning of precisely the problems that led to the competition being cancelled five days before the contract was awarded. Today was the opportunity for the new Secretary of State to begin to put things right, yet he has failed his first test and announced a way forward that adds to the chaos and confusion and risks even greater costs to taxpayers, replacing one franchise competition with three, opening up the prospect of three owners in three years, increasing the risk of further legal action and further costs to taxpayers, and adding to the uncertainty for passengers and staff.
Can the Secretary of State update the House on the likely final cost to taxpayers of the Government’s failure on franchising? If reimbursing bidders for the west coast will cost £40 million, what will be the costs of the stalled Great Western, Essex Thameside and Thameslink franchises? What legal advice did he receive on his decision to extend Virgin’s contract? Specifically, what advice has he received on EU competition law, procurement law and the impact on the fairness of future competitions for the franchise? In the light of this debacle, does he agree that it makes sense to maintain a public sector rail company that is equipped to step in at short notice in future, as well as providing a useful comparator? Will he therefore abandon the planned privatisation of the east coast service, which is delivering nearly £200 million back to taxpayers every year, which is profit that in future will be shared with shareholders?
Can the Secretary of State not see that it is completely inappropriate for a member of his own Department’s board, no matter what his other qualities are, to carry out an investigation that has to look at the decisions taken or approved by other members of that board, including Ministers? Will the Secretary of State think again and make his review truly independent? What impact has the 37% turnover of senior civil servants in the restructuring of the Department in the last two years had on its capability to conduct competitions such as this? As the Secretary of State mentioned his fares U-turn, will he now agree to make the train companies apply the cap to every route, so that passengers do not find, as they did last year, that fares may still rise by up to 5% above the cap?
This was a franchise fiasco made by Ministers—a policy scribbled on the back of an envelope in opposition; cuts that go too far, too fast, implemented in government. The result is chaos across the rail industry and tens of millions of pounds of taxpayers’ money down the drain—the direct consequence of decisions taken by Ministers. Now we have a proposal for an independent review that is not independent at all, while the Secretary of State’s solution to the west coast franchise fiasco is a decision to do it all over again—that is, twice in just two years. What an appalling waste of taxpayers’ money! What a shambles from this incompetent Government!
Mr McLoughlin
I thank the hon. Lady for her reasoned response to my statement.
The last Labour Secretary of State for Transport was not a Member of this House, but he said some very interesting things. Lord Adonis said:
“Ten year franchises, with the possibility of longer contracts should bidders make sensible and affordable proposals, will allow operators to invest and suggest new innovations.”
At that point the Labour party increased the minimum for franchises to run to 10 years, with an option of 22 years. There is therefore a long-standing position that longer franchises can work, including to the benefit of passengers, which it is important they should do.
The hon. Lady mentioned a number of points. One of the things that I was keen to do, on hearing of the problems we were facing in the Department, was to get to the answers as quickly as possible. That is why I set up the inquiries as quickly as I possibly could. I believe that Mr Laidlaw is perfectly capable of bringing his expertise to bear and showing us—[Interruption.] The hon. Lady ought to wait until he has done the inquiry before prejudging it, because at least we have taken the action to get the inquiry under way. I think that is the right way to go.
The hon. Lady talks about the reduction in members of staff in the Department. There has indeed been a reduction. Bearing in mind the economic climate in which we found ourselves, that was absolutely necessary and I make no apologies whatever for that. I am determined to see that the provision of services to the customers who use the west coast main line—of which there are many, with many constituencies involved—is carried out continuously, and that is why I believe Virgin are the best people to carry that forward.
Sir George Young (North West Hampshire) (Con)
The House is grateful to my right hon. Friend for coming here at the earliest opportunity to explain what has gone wrong and to describe the action that he proposes to take. I welcome that. Does he recall that, at the beginning, franchising was done not by his Department but by an independent, arm’s-length body? Twenty-four franchises were issued in some 18 months, none of which was subject to a legal challenge, and this led to the major investment in the railways to which he has referred. Franchising was subsequently brought in-house to the Department. Can he confirm that the Brown review will consider whether franchising should continue to be the job of his Department or whether we should revert to the initial model?
Mr McLoughlin
Given that my right hon. Friend was closely involved in setting up the original model, I should naturally defer to his great expertise in this matter. I do not want to prejudge the findings of any of the reviews that I have set up, but I am sure that Mr Brown will have heard my right hon. Friend’s comments and that he may well want to investigate that solution further.
Frank Dobson (Holborn and St Pancras) (Lab)
May I express my sympathy for the new Secretary of State’s having to deal with this mess? However, in view of the fact that the Department could not come up with figures that would be valid 10 years hence, how can he believe that the same Department, the same officials and the same advisers can come up with accurate predictions on passenger levels, and on inflation generally, in relation to High Speed 2, which does not exist and for which there is no evidence to draw on? I think he needs to look at that matter again. I will not say that he needs to go back to the drawing board; in the case of HS2, it is more a matter of going back to the ouija board.
Mr McLoughlin
I am interested to hear what the right hon. Gentleman says. A number of points have been raised since I made the announcement. The HS2 business case has undergone an extensive quality assurance process, and we are confident that it is accurate. The August 2012 update on the economic case was supported by a 400-person day of independent quality assurance, and HS2 Ltd has appointed independent auditors to undertake a line-by-line check of the analysis being prepared for the deposit of the hybrid Bill. This is all in addition to the existing quality assurance arrangements. I am glad to say that there was a commitment to these proposals in the right hon. Gentleman’s party manifesto to the country as well as in our own.
Mrs Cheryl Gillan (Chesham and Amersham) (Con)
My right hon. Friend has come into the Department for Transport like a breath of fresh air. However, like the right hon. Member for Holborn and St Pancras (Frank Dobson), he must know that the failure of the west coast main line franchise process has really shaken people’s faith in the facts and figures that are being used by the Department. Notwithstanding the answer that he gave to the right hon. Gentleman, while he is in the mood for ordering investigations, will he now order a full review of the facts and figures that were used to justify HS2, in order to prevent the Department from making a serious mistake?
Mr McLoughlin
As I do not want to incur your wrath, Mr Speaker, perhaps I should refer my right hon. Friend to the answer that I gave to the right hon. Member for Holborn and St Pancras (Frank Dobson) a few moments ago. I also addressed this issue in one of my first major speeches, in which I outlined the importance of this particular piece of infrastructure to the United Kingdom.
Mr Speaker
I am always very interested to hear what the Secretary of State has to say on this subject, as he will readily appreciate.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
The Secretary of State emphasised in his statement that he would seek “best value for taxpayers” in the interim arrangements. He will understand that there is a degree of scepticism in the House about his ability to deliver that. Will he please tell us how he intends to achieve that best value and what comparators he will use? How can he believe that a short-term, nine-to-13-month deal followed by an interim arrangement before the tendering process begins can possibly deliver best value for the taxpayer?
Mr McLoughlin
When we conduct negotiations with Virgin, that will obviously be one of the things that we will want to discuss. The right hon. Gentleman will have plenty of time to check whether we have done that.
Tim Farron (Westmorland and Lonsdale) (LD)
The short-term fix of asking Virgin to continue operating the west coast service will come as some relief and will provide some certainty in the short term, but how will the Secretary of State convince this House and, more importantly, passengers using the west coast main line, that the two-year interim franchise deal will not lead to a complete lack of investment, given that the new franchise holder will not have the confidence of a long-term deal?
Mr McLoughlin
I would say that the position in which we find ourselves is not the position I would have wanted to be in. What I am trying to do is to move forward with some certainty so that when we learn the lessons from the Brown review, they can be implemented and acted on. There is considerable interest in this particular line—it is very important—and I think we will see the sort of developments we want, with companies putting forward proposals, with respect to both the two-year contract that we are proposing to let and the longer-term one in due course.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I welcome the Secretary of State to his position. I listened intently to what he said in his statement, but he made no mention of any contingency funding that will need to be put in place as a result of this debacle. Is it proper to suggest that it is possible for this amount to be as much as half a billion pounds—half a billion pounds that taxpayers will have to pay?
Mr McLoughlin
I have read many figures, but I have not previously read that one. No doubt I am going to read a lot more in due course. I have already said that the estimated cost of refunding the franchises, which is the right thing to do, will be in the region of £40 million.
David Mowat (Warrington South) (Con)
This decision was one of the two or three major pieces of work done in the Department for Transport this year. If the permanent secretary will not hold himself accountable for this, what is he accountable for?
Mr McLoughlin
As I have said, I have announced two major inquiries. The permanent secretary took a decision to suspend certain members of staff. This is a suspension—not any prejudging—while these inquiries continue.
Derek Twigg (Halton) (Lab)
I would like to quote what the Under-Secretary of State for Transport, the hon. Member for Wimbledon (Stephen Hammond) said on behalf of the Government in a debate on 17 September, just a few weeks ago. He said:
“The Department is confident that we have taken the right decision in the interests of taxpayers and passengers. We expect to sign the contract soon, but we intend to defend the judicial process robustly.”—[Official Report, 17 September 2012; Vol. 550, c. 236WH.]
Given that the Secretary of State has been in the job for only a few weeks, is he confident that the financial information that he is getting throughout the Department for any major projects—including the Mersey gateway project—is robust and can stand up to scrutiny in the future?
Bill Wiggin (North Herefordshire) (Con)
I congratulate my right hon. Friend on his decision and on his statement. In it, he said that he has paused the ongoing franchise programme. Will he use that pause to ensure higher minimum standards and that the Great Western franchise is not given to FirstGroup as a sop?
Mr McLoughlin
I can assure my hon. Friend that the pause is while we wait to see what the Richard Brown inquiry says and whether there are things that we need to put right in these live competitions. Obviously, there will be no sops to any organisations. These are very competitive bids and a lot of work and effort goes into them. Overall, we are seeing far better services for this country’s passengers as a result of franchising and of the very brave decisions taken by my right hon. Friend the Member for North West Hampshire (Sir George Young) some years ago.
Albert Owen (Ynys Môn) (Lab)
I genuinely welcome the Secretary of State to his position. The performance of his two predecessors has not set a very high bar when it comes to competence in this matter. [Interruption.] The Minister of State, the right hon. Member for Chelmsford (Mr Burns) is growling at me from a sedentary position, but it was his colleague who said that this was robust. The Secretary of State said that Directly Operated Railways is on standby. What does that mean, and will it be used for the three other franchises that he has suspended?
Mr McLoughlin
I have not suspended the three other franchises; I have put them on hold, which is quite an important differential. I thank the hon. Gentleman for his compliments. I am always cautious about compliments coming from the Opposition Benches, but who knows?
As I have said, the three franchises have not been stopped. They have been put on hold, and I hope very much that we can return to operate and lease them once we have learnt the lessons of the Brown report. I do not think that there is any need to contemplate using DOR on those services.
James Duddridge (Rochford and Southend East) (Con)
When the Essex Thameside franchise comes off hold, will the Secretary of State look again at the possibility of mandating the quality of the rolling stock that will be used to ensure that it is as good as the quality of the rolling stock that is used now, or, indeed, even better?
Mr McLoughlin
I well understand my hon. Friend’s wish to procure better services for his constituents, and I know that a number of other Members will be pushing me for the same thing. I will of course consider his suggestions and see whether we can adopt some of them.
Sir Gerald Kaufman (Manchester, Gorton) (Lab)
Now that the right hon. Gentleman has rightly put an end to the shambles that he inherited, will he bear in mind the watchword “If you are in a hole, stop digging”? Rather than engaging in an interim process that prolongs uncertainty, will he be fair to the marvellous train crews of Virgin Trains, who give extraordinarily good service, and tell them that their future is assured? Will he simply award the franchise to Virgin, which has carried it out brilliantly?
Mr McLoughlin
I am very pleased to hear the right hon. Gentleman give such a strong endorsement of the service that he already receives. However, what we are trying to do with franchising is improve that service, not just for his constituents in Manchester but throughout the line, and I do not think that it would be appropriate—in fact, it would not be possible—for me to do as he wishes. I think that what I have set out today is the best course for the next three years on that particular line.
Andrea Leadsom (South Northamptonshire) (Con)
I do not want to give my right hon. Friend cause to roll his eyes, so I shall not mention HS2. He can clap if he wants to.
I congratulate my right hon. Friend thoroughly on his decision to call a halt to the west coast main line franchise problem, but does he agree that now is the right time to start looking creatively at how to get fares right down and capacity right up? Perhaps he could consider introducing “standing room only” tickets for short journeys. That would both increase capacity and make journeys far cheaper for passengers who need to travel on a low budget.
Mr McLoughlin
I am not sure how popular that would be, but, as I have said in the House on other occasions, I am looking at the whole issue of fares and the way in which they are calculated.
Mr Dennis Skinner (Bolsover) (Lab)
What a way to run a railway! Now that we have seen this shambles, why do we not take the opportunity to stop the practice of lining the pockets of the railway bosses, and use the money to lower fares? We could do it through a “one nation” system of public ownership. Let’s start that: we have had enough of this business.
Mr McLoughlin
The hon. Gentleman obviously speaks from a past era when nationalisation was the apple of his eye. We have seen substantial changes and improvements in the whole railway system since we introduced the private sector to it. The right hon. Member for Manchester, Gorton (Sir Gerald Kaufman) has just told us that he gets a fantastic service from a privatised railway, and I think that most people feel that they get a fantastic service too.
Andrew Stunell (Hazel Grove) (LD)
I thank the Secretary of State for his statement. May I remind him that when that train gets to Manchester, many people transfer to Northern Rail trains, and that the Northern Rail franchise will come up in 2014? There are some innovative proposals for work to be done on that with Greater Manchester and others. Can the Secretary of State assure us that the delay, the pause, or whatever the word is will not interfere with the development of those innovative and constructive ideas for the Northern Rail franchise?
Mr McLoughlin
One of the interesting things that I have seen since franchising began, and in how these franchises are being worked on, is the engagement with local stakeholders in local communities. They have all come forward with suggestions and ideas, a number of which can be incorporated in the franchise agreements.
David Wright (Telford) (Lab)
There is real concern in Shropshire that the interim arrangements that the Secretary of State has put in place will mean that we will not get back a direct service to London. Will he confirm that when he looks again at the franchise process at the end of his interim arrangement—however long that may last—he will write in services to Shropshire?
Mr McLoughlin
I will certainly listen to representations. I know that I will get many.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)
I welcome my right hon. Friend’s statement, and the candid and honest way in which he has handled this whole issue. I also welcome his comments about Virgin and FirstGroup. Will he confirm that Virgin, FirstGroup and the other bidders all acted with total propriety during the bidding process?
Mr McLoughlin
I can certainly confirm that, and I am grateful to my hon. Friend for asking me the question. That is wholly the case, and the mistakes we found were mistakes made in the Department.
Mr Iain McKenzie (Inverclyde) (Lab)
We have now witnessed two procurement fiascos from this Government in quick succession. We have seen that contracts are not being monitored and we are seeing tendering processes that are clearly flawed. One would think that the Minister would be well aware of these and that if he had been alerted to them, he would not have awarded this contract. The question therefore arises: why did he award this contract when he knew that it was flawed?
John Stevenson (Carlisle) (Con)
May I extend my support to the Secretary of State for taking prompt action once he was aware of the problems with the west coast rail franchise? My concern now is about the length of the term of any new franchise, once it is finally in place, as that can affect the investment decisions of a rail company, particularly as regards stations such as Carlisle. Will the length of the new franchise be the same as that initially proposed?
Mr McLoughlin
I understand my hon. Friend’s point. What I do not want to do at this stage is prejudge what the Brown report may eventually say, but I will say that it was commonly accepted that longer franchises would lead to more investment and a better return for the taxpayer. We will need to look at this properly and to investigate what went wrong with this particular process before we come to long-term decisions. A number of people in the industry, including the former Secretary of State who sat in another place and not in the House of Commons, have also made that point.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
I want HS2 to happen, because it would be good for Birmingham, but I also want to ensure that it is based on accurate and reliable figures. Will the Secretary of State ensure that his review will identify any errors and miscalculations, and whether or not they relate to HS2, and will he ensure that this is a sound calculation?
Mr McLoughlin
I am grateful for the hon. Lady’s support for HS2. As I said a few moments ago, that is a separate process and a lot of work is going into the preparation for the HS2 Bill that will come before the House. There will be a lot of opportunities to debate that over the coming months.
Michael Fabricant (Lichfield) (Con)
Can my right hon. Friend, who is sorely missed as Chief Whip, assure my constituents that services will not be damaged by these changes and that stations such as Lichfield Trent Valley, which are badly in need of improvements for disabled access, will not have new works delayed as a consequence?
Mr McLoughlin
I hope we see no delays in investments as a result, and I am always grateful to my hon. Friend, who is always trying to be helpful.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
FirstGroup’s bid included a £190 million guarantee, which would in no way have been large enough to compensate the Government if its optimistic bid had failed to deliver the goods—in fact, it gave a strong financial incentive to walk away. Has the Secretary of State yet understood why that basic feature did not set alarm bells ringing before the bid was announced? Will he ensure that future contracts contain no financial incentives for bidders to walk away?
Mr McLoughlin
The time that bidders walked away was under the previous Government, when the operators on the east coast main line did so. There are lessons to be learned. I shall not prejudge what the inquiries might tell us, but I am looking forward to their results and hope that we can then move on based on a safer footing.
Charlotte Leslie (Bristol North West) (Con)
I welcome the Secretary of State’s announcement about the Brown review. Will he assure me that this pause will be an opportunity to ensure that on other franchises, such as the Great Western franchise, we seize opportunities when they exist? In my area, that would include a full Bristol metro with a full Henbury loop line to complete the circle line around Bristol.
Mr McLoughlin
I am not sure whether the second part of my hon. Friend’s question was a bid, but on the first part I can assure her that the reviews will inform us and that we will take note of them. I would not have set them up if we were not going to do so.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
I came here today on the west coast main line; the train was late. May I ask the Secretary of State—[Interruption.] May I be the first to ask him to resign?
Let me say what I would like the Secretary of State to do. We will have the short period negotiation, the interim agreement and the long-term franchise. To ensure value for money, will he guarantee a public sector comparator for each of them?
Mr McLoughlin
I heard one colleague shout out, “Not late enough.” Obviously, we have set up the two reviews and we will look at what they produce. When we have put such things out to franchise, we have seen huge competition and interest, and it is a matter of getting the best deal for the taxpayer in the longer term.
David Tredinnick (Bosworth) (Con)
I congratulate my right hon. Friend on his common-sense decision to keep Virgin running the west coast main line, particularly in the run-up to Christmas. There are concerns, however, about an interim agreement, which will surely prolong the process. Would it not be better to go to a final agreement and not make things more complicated?
Mr McLoughlin
I can understand my hon. Friend’s frustration, but there has been a huge amount of investment in the west coast main line and it is right and proper that after the initial nine months, during which we will set up the two-year interim contract, we should seek to get the best return for the taxpayer. I think that an open competition is the best way to do that.
Gloria De Piero (Ashfield) (Lab)
The Campaign for Better Transport has been quoted today as saying that operational changes in the Department have not been focused on passengers but have been all about the bottom line. Does it not have a point?
Alun Cairns (Vale of Glamorgan) (Con)
I pay tribute to the Secretary of State for the way in which he has handled a very difficult situation, not only accepting responsibility for an error made by an officer in his Department but moving forward swiftly with the review. Will he reassure me that renationalisation is off the cards for a range of reasons, including financial ones?
Mr McLoughlin
I thank my hon. Friend for his kind words. The truth is that both parties have agreed in the past that franchising is the proper way to go and gets better returns for the taxpayer. This particular episode is not acceptable and we need to learn the lessons from it. I am determined to do that.
Tony Lloyd (Manchester Central) (Lab)
Does the Secretary of State not agree with the many people who use the line that a public sector interim arrangement would have been preferable as it would have given him control over pricing and quality? Will he explain how he will guarantee those things in the interim period?
Mr McLoughlin
Obviously, there is a difference in view between the hon. Gentleman and the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman), who praised the current operators of the west coast main line. Indeed, a number of people have praised the operators so I am rather surprised that when I have made a decision to keep the service with them, some people have found a way to attack that decision. The short period involved means that the best way to ensure continuity of service is to do a deal with Virgin, and we are about to embark on that.
Jeremy Lefroy (Stafford) (Con)
Those bidding for the franchise offered a number of improvements that were welcome to my Stafford constituents, including fare reductions. Will my right hon. Friend see whether it is possible to introduce some of those improvements in the interim period, along with his welcome cap on rail fares?
Mr McLoughlin
I thank my hon. Friend. As I have pointed out, there will be a two-year franchise that will be negotiated some time next year, and I hope that some of the benefits that were initially to come from a longer-term franchise agreement can be replicated in it.
Mr Jim Cunningham (Coventry South) (Lab)
In an age of high food prices, high oil prices and high fares, will the Secretary of State, when he negotiates the west coast main line franchise both in the interim and in the longer term, put a special emphasis on fares, because they are far too high?
Mr McLoughlin
I am glad that we have been able to reduce the proposed increases from RPI plus 3 to RPI plus 1. I hear what the hon. Gentleman says about fares. Of course, some pre-booked fares can cost a reasonable amount, but others are very high, and that is something I think we should all look at.
Jason McCartney (Colne Valley) (Con)
What time scale implications will this all have for the east coast main line franchise? Will my right hon. Friend take note of the fiasco that occurred under the previous Government when two train operating companies on the east coast main line collapsed in only two and a half years?
Mr McLoughlin
I thought that it was a utopia under the previous Government and that nothing ever went wrong, but my hon. Friend is right to say that the only time a rail franchise collapsed was under the previous Government. The Opposition seem to have forgotten that today in their attacks on me. I hope that we can learn the lessons and move on and that this will not lead to too long a delay in any of the other franchises.
Richard Burden (Birmingham, Northfield) (Lab)
The west coast main line is obviously important to my constituents in Birmingham, but I am worried about the knock-on effects of this fiasco on other franchises coming up for renewal. I draw the Secretary of State’s attention to London Midland and the countless delays there have already been in the west midlands because of driver shortages. There is no long-term thinking on planning for new stations and ticket office hours are being cut, and that is because it is not looking at the long term. What impact will this fiasco have on trying to give passengers in the west midlands the kind of service they deserve?
Mr McLoughlin
I want all taxpayers and passengers to get the kind of service they deserve. There have been some specific cases of cancellations on the line, as the hon. Gentleman has just mentioned. I hope that the company will put that right and train more drivers, which I think it is in the process of doing.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
I echo what the hon. Member for Telford (David Wright) said. Shrewsbury is the only county town in England without a direct rail service. All the Shropshire MPs have campaigned very hard over the past year to ensure that that comes about, and both Virgin and FirstGroup have committed to it. Will the Secretary of State do everything possible to ensure that that vital service for our constituents is not delayed more than it needs to be?
Mr William Bain (Glasgow North East) (Lab)
The west coast main line matters hugely to the Glasgow and Scottish economies, but so does value for money for the taxpayer. Can the Secretary of State identify any previous franchising process that was not subject to external audit, and is it not the case that a decision made by his Department to save hundreds of thousands of pounds has ended up costing the taxpayer tens of millions of pounds?
Mr McLoughlin
The hon. Gentleman is seeking to prejudge the two inquiries I have set up, which is something I am not prepared to do.
Rehman Chishti (Gillingham and Rainham) (Con)
On train franchising, will the Secretary of State clarify when Southeastern’s franchise is likely to be concluded, because it is currently undergoing a process of renewal?
Mr McLoughlin
I have announced a pause on three franchises, and there are others that have not yet been concluded in the final bidding process. We will obviously learn lessons from the Brown inquiry and the Laidlaw inquiry, but I hope that this will not have a long-term impact that will delay any of the other franchises that are going to be negotiated.
Joan Walley (Stoke-on-Trent North) (Lab)
Is not the most shocking part of this the fact that had Richard Branson not made the legal challenge, we would not even have known about this fiasco? Given the importance of the train services through Stoke-on-Trent, the lifeblood of our local economy rests on the future of the west coast main line. Will the Secretary of State give an assurance that he will give Parliament the true costs of the fiasco, because it is likely to be far more than the £40 million he talks about? We need to ensure that those funds are safeguarded for transport.
Mr McLoughlin
The hon. Lady should just wait and see, because some of the things the reviews might lead to could provide a greater return for the taxpayer in the longer term. I am not for one moment dismissing the fact that this has been very expensive and unacceptable—it is and it has been—but the most important thing is that we learn the lessons in the longer term.
Sir Tony Baldry (Banbury) (Con)
Most of my constituents just want to ensure that the trains run on time and are affordable. Will the Secretary of State confirm that he has managed to cap rail fares for the next two years? I am not sure that that point has been fully understood.
Mr McLoughlin
I am grateful to my hon. Friend for that question. I can confirm that the Prime Minister announced a cap of RPI plus 1 for not only this year, but next year and the year after.
Mr David Anderson (Blaydon) (Lab)
In this House, we have become used to the Government’s incompetence. They could not privatise the forests properly and they made a mess of the NHS; with this, they have shown that they cannot even privatise what is already out there. The job is too big for them. Why do they not just give up—and give up now?
Mr McLoughlin
I am not sure, Mr Speaker, whether that was a question or a statement.
Mr Brian Binley (Northampton South) (Con)
Will the Secretary of State give a firm undertaking that none of the costs involved in this incident will be passed on to hard-pressed consumers on the west coast main line? Furthermore, will he reassure the siren voices calling for the scrapping of HS2 that that line is absolutely necessary because the west coast main line is under such pressure that it reaches capacity in a very short period?
Emma Reynolds (Wolverhampton North East) (Lab)
The Secretary of State is right to make this decision on the west coast main line, but it is unclear to me why his predecessor—who, after all, is an accountant by trade—did not hear the alarm bells ringing for quite some time. Will he reassure me that the review that he has announced today will consider that significant and unacceptable risks were being taken by allowing one of the bidders to backload most of the premium to the end of the franchise? Will he put in place measures to ensure that franchisees cannot simply walk away from a franchise before they make substantial payments?
Mr McLoughlin
My predecessor, like me, was given firm assurances at the Department that the competition was sound. That proved not to be the case. Once I knew and had the full facts, I made the statement that I made.
Paul Maynard (Blackpool North and Cleveleys) (Con)
I used the west coast main line today and my train was early, for which I thank the Secretary of State. Can he assure me that when making decisions about the new franchises, he will take every opportunity to incorporate both quality metrics and performance satisfaction ratings from customers?
Mr McLoughlin
I am grateful to my hon. Friend, who is also a user of the west coast main line. The answer to his question is “definitely”.
Graeme Morrice (Livingston) (Lab)
In view of this fiasco and other potential franchise debacles, will the Government now realise that the game is up and take the west coast main line back fully into public ownership, as is the case with the east coast service?
Mr Robert Buckland (South Swindon) (Con)
In respect of the review of the process relating to the Great Western franchise, will my right hon. Friend ensure that the fundamental mistakes about capacity in the previous franchising round under the last Government will not be repeated?
Mr McLoughlin
I hope that the two inquiries that I have set up will help us through the unfortunate position in which we find ourselves and, in the longer term, lead to a much more robust franchising system.
Rosie Cooper (West Lancashire) (Lab)
I appreciate that assurances from the Transport Secretary, and Ministers previously, that the process was rigorous, detailed and fair were given in good faith. However, serious concerns remain that the incident was not isolated.
Bearing in mind some of the comments made about loading and how the contract was done, anyone with common sense knew that something was wrong. Will the Secretary of State categorically confirm that mistakes were not made by the Department when awarding franchises on the other routes, before the west coast main line franchise process? When did that analysis take place?
Mr McLoughlin
I am not sure that I am responsible for the franchising that took place under the previous Government, and this franchise was the first that would have taken place under the new system.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
I thank my right hon. Friend for coming to the House to make this statement. What impact will the reviews have on the Great Western railway? Is he willing to meet me and my fellow Plymouth Members of Parliament to discuss how we can improve connectivity to make sure that we have more three-hour train journeys coming into Plymouth and trains that get there before 11.17 am, as is the case at the moment?
Mr McLoughlin
Franchising gives hon. Members from all constituencies an ideal opportunity to feed into the process to say how they want services to improve; and where that can be done, it should be done. I am certainly willing to meet a delegation led by my hon. Friend.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Does the Secretary of State agree that the inquiry we really want is to have, say, the Public Accounts Committee look at all this, because it is far more important than just the chaos surrounding this particular contract? Right across Government, we see this incompetence in procurement time and again. Whether it is about the churn of Ministers or the churn of civil servants that we are all familiar with, there is something deeply rotten in the way that we run government in this country.
Mr McLoughlin
I think I need to pause before I respond to that question. The hon. Gentleman talks about the churn of Ministers under this Government, but he should look at the churn of Ministers in this Department under the previous Government, which was fairly substantial; I think that the former right hon. Member for Ashfield lasted eight months. As for what the Public Accounts Committee might look into, I have been in this House long enough to know not to tell any Select Committee what it might or might not look into.
Neil Carmichael (Stroud) (Con)
I welcome the Secretary of State’s obvious commitment to investing in infrastructure —whether new, like HS2, or old, like the Stroud and Swindon line. May I turn his attention back to tickets and urge that we have a ticketing system that is characterised by simplicity and transparency and produces more competition within it?
Mr McLoughlin
We are currently undertaking a ticketing review which I hope will address some of the points that my hon. Friend has made.
Mr David Hanson (Delyn) (Lab)
My constituents in Flintshire who use the west coast main line daily will be horrified by the potential £40 million-plus cost resulting from mistakes by the Secretary of State’s Department. This is now what is called in the civil service an unfunded pressure. Will he tell the House how he plans to fund it?
Stephen Mosley (City of Chester) (Con)
Those of us who use the west coast main line will appreciate that massive improvements have occurred since privatisation and welcome the improvements that were promised in the new franchise, including lower fares and more frequent services to Chester. Will my right hon. Friend ensure in the interim that those promised improvements are still delivered and not forgotten about?
Mr McLoughlin
My hon. Friend, like many colleagues, is calling for better services for his constituents, and I cannot think of a finer place than Chester that people want to go—
Mr McLoughlin
I had better be a bit careful, or we might get into a bidding auction. There are a number of places to which people want extra services. That shows that the railways are now held in high esteem by all, and it is very much my intention to try to provide the services that people wish for.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
It will be some years before we know the identity of the long-term operator of the west coast main line. How can anyone have any confidence in the bids for the east coast main line franchise when we have no idea of the long-term plans of the long-term operator of its main competitor on the west coast? Is not that why we should keep the east coast main line directly operated for a good few years—preferably indefinitely?
Mr McLoughlin
That is not what the last Secretary of State who sat in the Cabinet for the Labour party said, and it is not what I want to happen.
Ben Gummer (Ipswich) (Con)
May I say how pleased I am by the candour and assured manner with which the Secretary of State has dealt with this matter? He will be aware of the enormous importance that travellers, commuters and businesses in the eastern region attach to the letting of the new 15-year franchise. He received a delegation from me and my hon. Friends the Member for Norwich North (Miss Smith) and for Witham (Priti Patel) with great enthusiasm. Can he give any assurances that the programme and timetable for that franchise will not slip as a result of the decision that he has notified to the House?
Mr McLoughlin
It certainly should not slip. I can say to my hon. Friend that the recommendations that he and a number of colleagues have made to me have been fed into the process, and will I hope be reflected in the franchise when it is finally awarded.
Helen Jones (Warrington North) (Lab)
My constituents will be horrified at the shambles that this Secretary of State has presided over. Warrington relies on its transport links to promote economic development. What action was taken by his Department on the Europa Partners report, which highlighted flaws in the franchise process five days before the announcement? Was that drawn to the attention of any Minister in the Department?
Mr McLoughlin
What I can say is that the flaws were found as a result of the Department preparing for a judicial review. When they were found and I saw the report and other information, I took the decisions that I announced on 3 October.
David Rutley (Macclesfield) (Con)
Like many other Government Members, I welcome the decisive action taken by my right hon. Friend in the face of unacceptable mistakes in the Department for Transport. Will he confirm that, during the interim period and the intervening period before that, passengers in Macclesfield will continue to experience the same high levels of service that they have come to expect in recent years?
Mr McLoughlin
I realise how very important the service on the west coast main line is to my hon. Friend’s constituency. That is why I am keen that, for the sake of continuity, we carry on with the present service operators until such time that we can re-tender for a short, interim franchise. I know he will insist that the service that his constituents get now will continue.
Ian Lucas (Wrexham) (Lab)
Will the Secretary of State ask his independent inquiries to consider a mutual model for the railways? Welsh Water in Wales has delivered a 6% reduction in charges since 2001, billions of pounds’ worth of investment, and stability for business. That is what we want on our railways. Why is he so wedded to a broken system?
Mr McLoughlin
I am not wedded to a broken system; I just look at the reassurances that previous Ministers gave on improvements to the railways since the present franchise system came into operation.
Ann Coffey (Stockport) (Lab)
I am very concerned that there will now be a long hiatus in investment in the west coast main line. Will the Secretary of State talk to Virgin about making some money available for long overdue improvements to Stockport station, which were offered by FirstGroup? Alternatively, perhaps he could find some cash from his departmental budget? It seems unlikely that those improvements will happen any time soon.
Mr McLoughlin
I understand that the hon. Lady wants improvements made to her station and I will consider carefully what she has said, but I am not sure that there is any spare money in the Department.
Sheila Gilmore (Edinburgh East) (Lab)
Will the Secretary of State ensure that the Brown inquiry does not just tinker with franchising but considers other options? We have heard about the recent option on the east coast main line, but another is the concession process that was used for London Overground. Will the inquiry be able to consider that?
Mr McLoughlin
I will not tell the inquiry what to do. I have published the terms of reference and put them in the Library earlier today. They are comprehensive.
Referendum (Scotland)
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
I want to make a statement about the referendum on independence for Scotland. The House will appreciate that my right hon. Friend the Secretary of State for Scotland is unable to deliver the statement because he attended the meeting between the Prime Minister and the First Minister in Edinburgh to secure agreement on an independence referendum for Scotland.
In January this year, my right hon. Friend the Secretary of State for Scotland delivered to the House a statement about the referendum. At that time, we acknowledged the Scottish National Party’s victory in the May 2012 Scottish parliamentary election and its manifesto pledge to hold an independence referendum. The Government also made clear their view that the Scottish Parliament did not have the legal power to legislate for an independence referendum. My right hon. Friend the Secretary of State made an offer that the UK Government would bring forward an order to give the Scottish Parliament that legal power.
Since January, the UK and Scottish Governments have held consultations, there has been considerable public debate, and numerous discussions between Ministers have taken place. Many of those discussions took place between me and Bruce Crawford MSP, the Minister for Parliamentary Business and Government Strategy in the Scottish Government, and I acknowledge his contribution to today’s agreement. Following 10 months of deliberation and four weeks of direct negotiations between the Scottish Government’s Deputy First Minister and my right hon. Friend the Secretary of State, I am pleased to report to the House that today in Edinburgh the Prime Minister and the First Minister have made an agreement that will allow a legal, fair and decisive referendum to take place.
This is a significant agreement. The two Governments have agreed that there should be a referendum. We have agreed that the referendum will consist of a single question. It will offer a choice between remaining within the United Kingdom and independence. We have agreed that it must be held before the end of 2014. The referendum will be based on the normal legal framework for UK referendums, with oversight from the Electoral Commission. That includes the key issues of how the referendum question will be determined, and how the rules governing spending and campaigning will be established.
Following today’s agreement, the Government will bring forward an Order in Council under section 30 of the Scotland Act 1998. I have today placed a copy of the agreement and the draft order in the Library of the House. The agreement and draft order are also available to Members from the Vote Office. The order will be laid before Parliament on 22 October and will be debated by both Houses of this Parliament and by the Scottish Parliament. All Members of this House will have the opportunity to consider and vote on the order. If both Parliaments approve the order, and after it is approved by Her Majesty in Council, the Scottish Parliament will have the legal competence to legislate for the referendum. We hope that the order will be passed by February 2013. Once that has happened, the Scottish Government will introduce a referendum Bill, setting out the wording of the question, the date of the referendum and the rules for the campaign for the Scottish Parliament to consider.
As part of today’s agreement, the two Governments have agreed that the rules for the referendum will be based on the rules set out in the Political Parties, Elections and Referendums Act 2000. Those rules were used successfully in the two referendums that took place last year. The two Governments have also confirmed that the Electoral Commission will review the proposed referendum question and that its report will be laid before the Scottish Parliament. That is the same process as applies to other UK referendums. Interested parties will be able to submit their views on the question to the Electoral Commission in the usual way. The Scottish Government will then respond to the Electoral Commission’s report.
Both Governments agree on the need for maximum transparency in this process and for a level playing field. Therefore, as part of today’s agreement, the Scottish Government will consult the two campaign organisations that have been established for their views before proposing spending limits for the referendum campaign to the Scottish Parliament. The Electoral Commission will also provide the Scottish Government with advice on the appropriate spending limits for the two campaigns in the referendum, as has happened in previous referendums, such as the 2011 referendum in Wales on further powers for the Welsh Assembly. In that referendum, the Electoral Commission recommended that the spending limit for designated campaign organisations should be set by reference to the expenditure limits that apply to elections to the relevant legislature. In its response to both Governments’ consultation documents, the Electoral Commission provided its view that that model remains appropriate for the Scottish independence referendum.
Both Governments agree that all those who were entitled to vote in the Scottish Parliament elections in May 2011 should be able to vote in the referendum. As with all referendums held in any part of the UK, it will be the legislation that establishes the referendum that sets the franchise. It will therefore be for the Scottish Parliament to define the franchise in the referendum Bill, as would be the case for any other referendum—or indeed election—on matters within its devolved competence.
Although both Governments agree that the basis of the franchise will be that for the Scottish Parliament elections, the Scottish Government have proposed to extend the franchise to allow 16 and 17-year-olds to vote. It will be for them to make the case for that change and to deal with the technical issues that may arise. There is, of course, a range of opinions in this House about changes to the voting age. However, having agreed the principle that the Scottish Parliament should have the legal power to legislate for the referendum—that it should be a referendum “made in Scotland”—the Government accept that it should be for the Scottish Parliament to determine the franchise. I fully expect that the Scottish Government’s proposals will be debated robustly in the Scottish Parliament. Any decision taken by the Scottish Parliament for the referendum will not affect the voting age for parliamentary and local government elections anywhere in the United Kingdom.
Today’s agreement is important, as will be the consideration of the agreement and the order by this House. However, I would also like us to reflect on what will come after. Now that the Governments have agreed the process for the referendum, it is vital that we get on with the debate about the most important political decision that people in Scotland will ever take. The UK Government have started to prepare the analysis and evidence for which people in Scotland are calling. Over the next year, the Government will publish thorough, evidence-based information that will set out the key issues in the independence debate. That analysis will be comprehensive, robust and open to external scrutiny. I fully expect it to show that Scotland is better off within the United Kingdom and that the rest of the United Kingdom is better with Scotland in it.
The Government believe passionately in the United Kingdom. We will work tirelessly over the next two years to show the Scottish people and everyone else in this country that together we are stronger, that together we can overcome the challenges confronting us, and that together we can build a better future for Scotland as an integral part of the United Kingdom. The debates ahead will no doubt be long, challenging and, at times, heated. However, I fervently believe that, with the support of colleagues across the House, across Scotland and across the whole of the United Kingdom, in the autumn of 2014, fellow Scots will join me in choosing to stay as part of the United Kingdom. We are indeed better together. I commend this statement to the House.
Margaret Curran (Glasgow East) (Lab)
I thank the Minister for providing me in advance with a copy of the statement.
This is, without doubt, an historic day for Scotland and the Scottish people. Now is the time for the debate on Scotland’s future to move out of the corridors of power and on to the streets of Scotland. I join the Minister in welcoming the fact that an agreement has been reached. It brings all Scots, me included, one step closer to deciding the future of our country.
The Opposition welcome the fact that the deal has been reached, but will seek guarantees that both parties will adhere to the agreement in spirit and in practice. We also have a number of questions to raise. Our position has always been that the referendum must be fair, legal and decisive. We welcome the fact that there will be a legal referendum with a single question and a regulatory role for the Electoral Commission.
Labour has always been, and will continue to be, the party of devolution. Labour brought devolution to Scotland, Wales and Northern Ireland, and we will continue to make the case for our devolution settlement to develop and evolve. We are, and have always been, a party of constitutional renewal, and we know that the best interests of our people are served by binding together, not breaking apart. In the debate about our future over the next two years, we will therefore promote devolution within the Union against those who seek to bring it to an end.
The agreement sets out a framework for how we will move forward to the referendum, but I would welcome clarity on a number of a points, which I hope the Minister will address. First, the Electoral Commission should clearly play a significant role in the process, particularly with regard to the referendum question and the funding of campaigns. Can he assure the House that the memorandum of agreement ensures that the Scottish Government must comply with, not turn their back on, the Electoral Commission’s advice? If they do turn their back on that advice, or seek to do so, what action will be taken? Given that no other Government have ever done that, it would be exceptionally damaging to the conduct and process of the referendum.
Secondly, the terms of the agreement leave significant ambiguity regarding the funding of each campaign and the opportunity for financing or related activity by interested third parties. Does the agreement ensure that the limits set by the Electoral Commission will be binding? Will organisations such as trade unions and businesses be able to participate in the referendum in a way comparable to that in which they participated in the Welsh and alternative vote referendums? Does the Minister agree that it is troubling that even before the agreement was signed stating that the Electoral Commission would have a regulatory role, the First Minister’s aides were briefing the press that they would be willing to ignore the Electoral Commission?
Finally, we must ensure that there is adequate scrutiny of the agreement and the subsequent process in this House. Will the Minister therefore explain what opportunity there will be to debate the detail of the section 30 order on the Floor of the House? Will he assure me that either he or the Secretary of State will provide regular updates to the House as the process continues over the next two years?
David Mundell
I welcome the hon. Lady’s welcome for the agreement and her contribution to the debate that has led to it. It is important that the agreement sets out a clear role for the Electoral Commission in relation to both the question and the funding of the campaigns. It is difficult to envisage circumstances in which the Scottish Government would want to ignore the Electoral Commission’s recommendations. As she said, no Government have ever done so, and there would be not just a procedural problem but a significant political price to pay for any party that sought to do so.
We should never underestimate the Scottish people. It is wrong to suggest that they could somehow be duped into supporting independence by any form of chicanery or trickery that might come from either side of the debate. They are much too sensible for that, and I have every confidence that when the referendum comes, whatever the form of the question and however the campaign has been funded, they will make the right decision.
Sir Gerald Howarth (Aldershot) (Con)
As an Anglo-Scot, like my right hon. Friend the Minister and the Prime Minister, I believe passionately in the Union and believe that the campaign to remove Scotland must fail.
The Electoral Commission’s involvement is much to be commended, and I commend my right hon. Friend for what he said about it. However, the proposal to extend the franchise to 16-year-olds, who cannot lawfully buy alcohol, drive a motor car or be called to fight on the front line, but who will now be invited to opine on one of the greatest constitutional issues of our time, is surely a nonsense that will create a dangerous precedent.
David Mundell
I can assure my hon. Friend that it will not create a precedent. The franchise for parliamentary and local government elections throughout the United Kingdom will be determined by opinions in this House. At the moment, the Government have no proposals to change the voting age, and I do not believe there is a majority in the House to do so.
I say to my hon. Friend and others who share his views that they must now take their arguments to Scotland and the Scottish Parliament, so that the Scottish Government can be held to account when they bring forward their proposals. This is a moment for the Scottish Parliament to demonstrate its own robust ability to scrutinise legislation. When it identifies complexities with enfranchising 16 and 17-year-olds, of which there are many, it can hold the Scottish Government to account and argue against the proposal.
Stewart Hosie (Dundee East) (SNP)
I thank the Minister for his statement, although he will forgive me if I do not welcome the final two or three paragraphs. However, I thank him for very early sight of it.
This decision is historic, and I agree with the Minister that it is the most important that we will ever take. It also has the potential to be exciting and transformative for Scotland when the Scottish people vote yes. I very much welcome the 2014 timeline, which was of course the Scottish Government’s favoured position, and the extension of the franchise to 16 and 17-year-olds—also a Scottish Government position.
Does the Minister agree that the most exciting part of this is that, as he said, the Scottish Parliament will be the final determiner of the question? It has the only mandate of any Parliament in the UK to set a question on independence for Scotland.
David Mundell
I am surprised that the hon. Gentleman did not tell us that the Scottish National party wanted only one question, as well.
I do not agree with the hon. Gentleman, because his question reveals his party’s obsession with process. What is important, ultimately, is not who legislates on the referendum but the decision that the people of Scotland take. They will have the opportunity to end the uncertainty and vote to remain part of the United Kingdom.
Sir Menzies Campbell (North East Fife) (LD)
May I offer my unqualified endorsement of the statement made so eloquently, if I may say so, by my right hon. Friend?
Does my right hon. Friend hope, like me, that the shadow boxing will now come to an end, along with the Scottish National party’s uncharacteristic reticence, demonstrated again this afternoon, to tell the people of Scotland precisely what its proposals for independence are? May I offer him a crumb or two of comfort? If he will forgive a second sporting metaphor, the Scottish Liberal Democrats will be first off their marks on Wednesday, when we publish our proposals for home rule for Scotland within the United Kingdom.
David Mundell
I had understood that the Liberals brought forward proposals for home rule for Scotland 100 years ago, but I am sure that we look forward to the right hon. and learned Gentleman’s contribution to the debate. He has made a distinguished contribution to the discussion of Scotland’s constitutional future over the years. I think the people of Scotland will indeed be pleased that we can move on from a debate and discussion that have been purely about process to ones on the real issues. The Prime Minister and those campaigning in the Better Together organisation have committed to setting out a positive vision for the United Kingdom, with Scotland playing a part in it. It is incumbent on those arguing for independence for Scotland finally to answer the questions and set out what independence would really mean.
Mr Jack Straw (Blackburn) (Lab)
The last time the Electoral Commission considered whether 16 and 17-year-olds should vote, it found that 78% of the British public, including the Scots, were against the change. Whatever opinion Members and the public may hold on the issue, why does not the Minister acknowledge that the question of the franchise, for referendums as well as for elections, is plainly a matter reserved by law to the United Kingdom Parliament, not to any devolved Administration? Given the questions that my hon. Friend the Member for Glasgow East (Margaret Curran) asked about the need for further scrutiny in the House, how will the House be able to have a prior vote on whether there can be votes at 16 or 17 in any type of poll across the whole Union?
David Mundell
I assure the right hon. Gentleman that previous legislation setting out referendums has set the franchise, and that the procedure will be no different in the Scottish Parliament setting out the terms of this referendum and the franchise. All Members of the House will have an opportunity to vote on the section 30 order that will pass powers for holding the referendum to the Scottish Parliament, and the opportunity for a robust debate. All those who are concerned about 16 and 17-year-olds being give the vote in Scotland should make that argument now, and demonstrate the complexities and difficulties of the proposals brought forward by the SNP.
Mr John Redwood (Wokingham) (Con)
Who in the Government speaks for England on these matters, and when will English MPs be able to settle English issues without outside help in this Parliament?
David Mundell
As I am sure my right hon. Friend is aware, the Government have established a commission that is looking at the so-called West Lothian question and will deal with the issue he raises about the governance of England within a range of devolved settlements for the other nations of the United Kingdom.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
Has anyone the responsibility—if so, who?—of ensuring that when this debate is reported over two years, people in Scotland can expect impartiality, particularly in broadcasting? That has not always been the case.
David Mundell
I am aware from contributions to debates about television in Scotland that people feel strongly about bias in some elements of the media. I assure the right hon. Gentleman that the normal rules he would expect to apply within an election period will apply during the referendum process.
Mrs Eleanor Laing (Epping Forest) (Con)
Does the Minister appreciate that although most Members of this House have grave reservations about the peculiarities of the proposed franchise, there is also wide agreement that the most important thing about the compromise reached by the Prime Minister is for there to be one decisive question on the ballot paper? The future of Scotland as part of the United Kingdom—to the benefit of everyone in every part of the United Kingdom—should be decided once and for all.
David Mundell
I absolutely agree with my hon. Friend. Throughout these discussions, the Government’s position has been that there should be a single question—in or out of the United Kingdom—and that in the course of that debate, independence and devolution should not be conflated.
Anas Sarwar (Glasgow Central) (Lab)
I welcome the Minister’s statement. On the coming debate, and particularly the scope of the Electoral Commission, we have seen in the First Minister’s press conference and televised statements from his Ministers, that they are already rowing back from the role of the Electoral Commission. Let us not be naive about the role of the Scottish Parliament. We are talking about a man who thinks he is Scotland and speaks for everyone in Scotland. What processes will ensure that the recommendations of the Electoral Commission are put into force?
David Mundell
I certainly agree with the hon. Gentleman that Mr Salmond does not speak for Scotland, no matter how much he seeks to hold himself out as doing so. I do not, however, agree that Mr Salmond or the Scottish Parliament can blithely ignore the recommendations of the Electoral Commission. The commission’s recommendations have never previously been ignored by a Government, and it would be a serious political matter were that to happen. I am sure that the hon. Gentleman, and others on his side of the House, would waste no time in drawing that to the attention of the Scottish people.
Sir Malcolm Bruce (Gordon) (LD)
I welcome the Minister’s statement. The exchanges we have already heard demonstrate that Members of this House and the Scottish Parliament have a responsibility to ensure that the outcome of the referendum commands the full confidence of the people of Scotland, and that involves responsibility on both sides. Does the Minister agree that all parts of the United Kingdom have a distinctive contribution to make, that the whole is greater than the sum of its parts, and that we would all be diminished were we to break up this 300-year Union?
David Mundell
I absolutely agree with my right hon. Friend that we are better together and that the whole is greater than the sum of its parts, and that will be a significant part of the debate as we proceed. I expect people from all parts of the United Kingdom—not just within Scotland although the campaign will be led by Scots within Scotland—to make the case for the continuance of the United Kingdom.
Ann McKechin (Glasgow North) (Lab)
Although there are obviously differing views about extending the franchise to 16 and 17-year-olds, I hope the Minister will agree that, as this matter proceeds, it is important that young people in Scotland are treated with respect and not cynically. What assurances does he have that those 16 and 17-year-olds will be equally as able to register as any other adult, and to vote in this important poll that will determine their future?
David Mundell
As the hon. Lady knows, that is one of the significant complexities that the Scottish Government will face if they bring forward their proposals to allow 16 and 17-year-olds to vote. If they use the current electoral register, they will essentially allow only those who are16 years and 10 months old to vote. If they wish all 16 and 17-year-olds to vote, they will have to create their own register, and that carries with it significant complexities.
Mary Macleod (Brentford and Isleworth) (Con)
May I congratulate my right hon. Friend the Minister, as well as the Prime Minister, on reaching this agreement with the First Minister in Scotland? Does the Minister agree that we are far better together as the United Kingdom, and that it is now time to determine the real debate in full and look at the dubious suggestions from the SNP about defence, EU membership and currency?
David Mundell
My hon. Friend does the SNP extra credit by suggesting that its members have views on the issues she has set out. In recent weeks and months it has become apparent that despite campaigning for independence over many years—indeed decades—the SNP has no clear idea what an independent Scotland would look like. Now that the process issues are out of the way, it will be incumbent on the SNP to come forward with specific proposals for what an independent Scotland would look like.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
Will the Minister ensure that Scottish members of the armed forces and their families who find themselves based outwith Scotland during the referendum will be entitled to vote?
David Mundell
Scottish members of the armed forces and their families will be entitled to vote under the normal rules that apply to members of the armed forces.
Mrs Anne Main (St Albans) (Con)
I wholeheartedly concur with comments made by the right hon. Member for Blackburn (Mr Straw). By yoking together two issues, we are causing ourselves a huge difficulty. Some of us may feel that voting for a section 30 order means that we are endorsing the vote for 16 to 17-year-olds. Should we ever vote on a referendum about the EU, for example, it would be impossible to imagine that we could deny the vote to 16 and 17-year-olds in the UK. We must insist that 16 and 17-year-olds either have the vote wholeheartedly, or—as I believe—that they should not have the vote on this major constitutional issue.
David Mundell
I am afraid I cannot agree with how my hon. Friend has brought those two issues together. The UK Parliament will determine the franchise for any referendum determined by it; the Scottish Parliament will determine the franchise for a referendum devolved to it. The Scottish Parliament already has the power to set the age for any election for which it has devolved responsibility, and has used it for health board and crofting commission elections. The precedent for 16 and 17-year-olds voting has been set.
Natascha Engel (North East Derbyshire) (Lab)
As a supporter of votes at 16, I welcome the Scottish Parliament extending the franchise to 16-year-olds. Far from seeing that as a dangerous precedent, why will the Government not seize the opportunity to consult, debate and vote on widening the franchise to 16-year-olds in all UK elections, including referendums and local and national elections?
David Mundell
In simple terms, the Government will not do that because we do not support 16 and 17-year-olds voting in such elections.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I welcome the agreement, which gives us a single, legally based question that can settle the future for Scotland once and for all. However, will the Minister reinforce the message that any Parliament or Government that chooses to ignore the advice of the Electoral Commission will be judged by the public for what it has done?
David Mundell
I absolutely agree with my hon. Friend. I have absolute faith that the people of Scotland will not be duped by chicanery or trickery by the Scottish Government or anybody else in making this most important decision on the future of Scotland. If any Member of Parliament believes that any party in the referendum is guilty of such a charge, it is their job to hold it to account in debate, whether in the UK Parliament or the Scottish Parliament. We can be confident, because I can see no reason why the Scottish Government, whatever their spin doctors say, would ignore the Electoral Commission’s recommendations, given that no other Government have done so before.
Mr Jamie Reed (Copeland) (Lab)
I welcome the Minister’s statement. In fetching forward a detailed analysis of what the proposal means for the people of Scotland and England, will the Government commit themselves to an analysis of the volumes of radioactive materials from Scotland that are stored in England? How much it will cost to remove them to Scotland, where in Scotland will they be buried, and who will be responsible for them in the long term? He will be aware that foreign waste cannot be disposed of in Britain.
David Mundell
The hon. Gentleman makes a good point, but it is for those proposing change to say how they would deal with it. The Government do not wish to break up Britain or want a change to the existing arrangements for the storage of nuclear waste. Those who want to break up Britain must set out clearly how that would be done and what it would cost.
Bob Stewart (Beckenham) (Con)
Sadly, I am not 16 or 17—I am a little bit older—but as an Anglo-Scot, I feel slightly disfranchised, because the decision on my father’s homeland will be made without me having one bit of say in the matter. I request, please, that we, the Scots of the dispersion, have a say in what happens to our ancient homeland.
David Mundell
I am sure my hon. Friend will have the opportunity to have a say—he can go to Scotland and set forth his passionate views on Scotland remaining in the UK. The issue he raises has been raised legitimately by many Scots in other parts of the UK, who ask why they should not have a vote. The Government’s position has always been that those in the part of the UK that wishes to leave the UK should have a say in determining whether it leaves or not. That is in accordance with international protocol on the separation of nations and was also the franchise that determined devolution to Scotland in 1997.
Pete Wishart (Perth and North Perthshire) (SNP)
Today has been an utterly fantastic day. The Edinburgh agreement is the next stage in our nation’s story. I cannot wait to get out and put a compelling and positive case for my nation’s independence. The Minister says he wants a real choice and different visions. In November next year, the Scottish Government will release a full and comprehensive prospectus on what an independent Scotland will look like. The no parties agree on so much now—on anti-universality, means-testing and an austerity programme—but when will they get together and let us know what the no proposition for the referendum will be?
David Mundell
For one moment, I thought the hon. Gentleman said the Scottish Government would announce their proposals this November, but in fact he said that they will do so in November next year. For a party that has campaigned for decades for independence, the fact that you have no proposals on the table on what an independent Scotland would look like reflects the lack of thought you have given to the issue. That is unbecoming of you and unworthy of the people of Scotland.
Mr Speaker
Order. As far as I am aware, I have done nothing unbecoming or unworthy, but it is true that I have given no particular thought to this matter, and that I have no proposals to make on it.
Sarah Newton (Truro and Falmouth) (Con)
Does my right hon. Friend agree that home rule for Scotland is available now within the Union, as it is for any part of this country, as a result of a range of Government measures, most notably the Localism Act 2011?
David Mundell
First, may I say that I have always found you most becoming, Mr Speaker? I apologise for suggesting otherwise.
My hon. Friend makes an important point. Very significant additional powers are about to come to Scotland and the Scottish Parliament through the Scotland Act 2012, which will involve the most significant transfer of financial powers since the Acts of Union 300 years ago. The Scottish Government and Parliament focus should be on the implementation of those powers to the benefit of the people of Scotland.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
No sooner was the ink on the agreement than Scottish Government Ministers were out dismissing the role of the Electoral Commission in the process. May I urge the Minister against complacency? Anyone involved in Scottish politics knows it is perfectly plausible that President Alex will ignore the Electoral Commission and set his own biased question. Will the Minister therefore look very carefully at the issue of the question?
David Mundell
The Scottish Government will propose the wording of a question in its referendum Bill. It will then be open to anyone, including the leaders of other political parties in Scotland, who have engaged in an extensive exercise, to allow the Electoral Commission to conduct the sort of scrutiny it has conducted in the past in relation to, for example, the alternative vote UK referendum. I remain confident that the people of Scotland will not simply be duped into breaking Britain up because of trickery or other such behaviour by any party in the debate. It is for anybody who suspects such behaviour or who is dissatisfied with a Scottish Parliament rejection of the Electoral Commission report, which I still consider unlikely, to make that case within the political arena.
David Rutley (Macclesfield) (Con)
I welcome a fair referendum and share my right hon. Friend’s view that the continuation of the Union is an important priority. Does he agree that the Union should continue on a basis that is fair to all the parties involved in it?
David Mundell
I absolutely agree, but I think that the first and overriding consideration is to resolve whether Scotland wishes to remain part of the United Kingdom and put that issue to bed. No doubt in future years there will continue to be a debate about the governance of the whole of the United Kingdom, in which we in this Parliament and those in the Scottish Parliament will be able to play a part.
Mrs Anne McGuire (Stirling) (Lab)
Harking back to the question from my hon. Friend the Member for Glasgow North (Ann McKechin) and the Minister’s answer, surely the UK Government would bear some responsibility if the Scottish Parliament and Government want all 16 and 17-year-olds to have the vote? It frankly is not good enough for the Minister just to say that it is a complex issue. He should be looking at ways of encouraging the registration of all of those 16-year-olds so that we have registration not by voluntary activity but in the same way as every other voter is registered.
David Mundell
I would encourage everyone to register for this most important vote. The point that I made to the hon. Member for Glasgow North (Ann McKechin) is that the Scottish Government will have two options: to use the existing register on which those people who are to be 18 within the electoral cycle covered by that register may vote, or to create a new register. Whichever option the Scottish Parliament chooses, we will urge all those eligible to vote to register to do so.
Mr Alan Reid (Argyll and Bute) (LD)
I congratulate the Prime Minister, the Secretary of State and the Minister on reaching this important agreement. Before people come to vote in the referendum, it is important that they know what they are voting for. When the SNP eventually, in another 13 months, gets round to working out its proposals for an independent Scotland, will the Government put the proposals to independent scrutiny so that people can vote knowing what the proposals would mean?
David Mundell
As I indicated in my statement, the Government are already objectively carrying out extensive analysis that will clearly set out the benefits of the United Kingdom, and of Scotland playing a part in it. The people of Scotland will be able to contrast that with the lack of clarity and of any substantive proposals, and the uncertainty, coming from the SNP.
Ian Murray (Edinburgh South) (Lab)
I welcome the statement, but may I press the Minister yet again on what mechanism is in place for this House to have a view if the Scottish Government do not take the advice of the Electoral Commission—as they have already indicated will be the case?
David Mundell
The opportunity for Members in relation to the issue as a whole will be in the debate on the Order, and all hon. Members will have a vote on it. If the Electoral Commission’s proposals were to be rejected—and there has been no formal statement from the Scottish Government to that effect—the Scottish Government would have to be held to account for that by the people of Scotland, by politicians in this House and by the hon. Gentleman’s counterparts in the Scottish Parliament. I have faith in the people of Scotland. If they see the Scottish Government flagrantly rejecting proposals from the Electoral Commission, or any suggestion of trickery in the question, they will not look well on the perpetrators.
David Mowat (Warrington South) (Con)
We seem to have used the piecemeal extension of the franchise as part of a negotiating process. What concerns me is that 16-year-olds will vote on the sovereignty of their country, but six months later they will be unable to vote in council elections. How can that be right or coherent?
David Mundell
The Government do not support the extension of the franchise to 16 and 17-year-olds, and indeed our Conservative colleagues will argue against that proposal when it comes before the Scottish Parliament. It will be for the Scottish Government to make the case for 16 and 17-year-olds voting in the referendum. That debate needs now to go to Scotland, to the people of Scotland and parliamentarians in the Scottish Parliament, so that there can be a full and proper debate. I remain hopeful that the Scottish Parliament will fully scrutinise any such proposals and, if they are defective, reject them.
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
The suffragettes did not campaign for the vote on a one-off basis or for a particular part of the United Kingdom. This proposal does a disservice to young people throughout the United Kingdom. Is it not irresponsible of the Government to pass responsibility for the franchise on, when they are clearly aware of major technical difficulties? Should not these be sorted out at a UK level? What would the costs be to the Scottish taxpayer if a separate register were set up?
David Mundell
The hon. Lady’s final question is one for the Scottish Government and to be asked within the Scottish Parliament. Her colleagues there must hold the Scottish Government to account in relation to any proposals that they make on this referendum. I happen to agree with her that it is not right that there should be different franchises for different elections, but that is a point to be made in the debate in Scotland.
John Stevenson (Carlisle) (Con)
Will the Minister confirm that the Electoral Commission will be involved in the setting of the date of the referendum? For example, I would not like to see it held during the autumn school holidays in Scotland.
David Mundell
The decision on the date for the referendum will be one for the Scottish Parliament.
Pamela Nash (Airdrie and Shotts) (Lab)
The Minister has made it clear today that it would be unacceptable for the Scottish Government to ignore the advice of the Electoral Commission on the wording of the question. Why then are there no clear consequences for this eventuality in the agreement?
David Mundell
We are following exactly the same process and procedures that were followed in relation to the alternative vote referendum that took place across the United Kingdom, in which the Electoral Commission reported to this Parliament, which then decided whether it would follow that advice.
Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Member for Perth and North Perthshire (Pete Wishart) said that he could not wait to get out there and debate this issue. Of course, SNP Members have waited and waited. I congratulate my hon. Friend the Minister and the Prime Minister on the patience and quiet diplomacy that has flushed these people out. Now they can wriggle on the franchise, they can wriggle on the question, and they can even wriggle on the date they hold it, but the Scottish people will finally have a chance to examine their arguments and put them where they belong—in the bin—when they reject this outrageous attempt to split up this country.
David Mundell
I thank my hon. Friend for that robust contribution. He is right. The people of Scotland will see through the lack of detailed policy from the Scottish National party on what an independent Scotland would be like. As I have said in response to other questions, they will also see through any trickery or chicanery attempted in the setting of the question, the franchise or the spending limits.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
On the question of 16 and 17-year-olds, if—as is possible—not every single person of that age gets the opportunity to vote, there could be a legal challenge against that decision. What would happen to the referendum in those circumstances?
David Mundell
I am sure that the Scottish Government will want to ensure that whatever proposals they make to allow 16 and 17-year-olds to vote in the referendum are legally watertight.
Mike Crockart (Edinburgh West) (LD)
This is indeed a welcome settling of process issues, and it is very welcome that we can now move back to the real debate. As has already been said, next year marks 100 years since the passing of the Second Reading of the Home Rule Bill in this very place. We on these Benches have been honing our alternative for 100 years: will the Minister join me in urging the other Unionist and independence parties to do the same?
David Mundell
I respect the long record of the Liberal Democrats and their predecessors in pursuing these issues, and no doubt, as we approach the 2015 general election, they will set out a range of proposals for the people of Scotland. It is important now, however, that we settle the question of whether Scotland remains part of the United Kingdom or becomes a separate nation state, and we can achieve that with a single-question referendum.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
The Minister referred to a legal, fair and decisive referendum. From what we have heard today, it might well be legal, but does he not accept that the question of fairness and, therefore, of decisiveness rests on the question? His inability this evening to explain what the consequences would be if the Scottish Government decided, as they indicated today they might, to ignore the advice of the Electoral Commission leaves the whole process in question.
David Mundell
I do not agree with the hon. Gentleman. The consequences for the Scottish Government of ignoring the Electoral Commission with the people of Scotland would be significant, and would diminish their argument in the process. I have confidence in the ability of the people of Scotland to see through it.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
My daughter, Erin, turned 18 last week, so she will definitely have the vote—and she has already assured me that she will vote to remain in the United Kingdom, because she knows that we are better together. I remind the Minister that the SNP had the opportunity to extend the franchise in the 2012 local government elections, but chose not to do so. Is the Government’s confidence in ceding this territory in the negotiations based on the fact that it will be impossible to implement in the time scale envisaged?
David Mundell
I welcome the hon. Gentleman’s daughter’s support for Scotland remaining part of the United Kingdom. She reflects the views of many 16, 17 and, indeed, 18-year-olds, as demonstrated by the polls in Scotland. As the process continues, it will be important that we take forward the issues and debates in the Scottish Parliament and that the people of Scotland are engaged.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
I welcome the fact that an agreement has been reached and that I will have the opportunity finally to vote against separation, but why do we have to wait so long? Why the delay, why the dither? Is it not because the coalition Ministers on the one hand and the SNP on the other have been meeting in secret and not taking account of the views of the vast majority of the Scottish people? Our consultation here at Westminster said that we wanted the referendum to be soon, and the Scottish Government’s consultation said—well, we do not know what it said, because they have not published it. The deal has been reached before the consultation has been published. What scrutiny will there be of the detail of the arrangement? For example, will tax exiles have the right to vote? Are we going to have foreign money coming in? Will there be an opportunity to amend not the broad sweep but the detail of these proposals? And what sanctions will there be if somebody breaks an agreement that was reached in good faith?
Mr Speaker
The Chairman of the Scottish Affairs Committee has posed at least four questions, but I know that the ingenuity of the Minister will enable him to reply with a single response.
David Mundell
I expect that both I and the Secretary of State will appear before the hon. Gentleman’s Committee to answer those questions in detail.
John Robertson (Glasgow North West) (Lab)
I have great faith in the Scottish people and in 16 and 17-year-olds—we underestimate them at our peril—but I have absolutely no faith in this coalition or the Executive north of the border. These 16 and 17-year-olds will be allowed to vote on Scottish separation, yet, six or seven months later, they will not be allowed to vote in a general election. How would the Minister vote if he was one of these 16 or 17-year-olds? Answer that!
David Mundell
First, I refer the hon. Gentleman to polling in Scotland, which indicates that 16 and 17-year-olds do not support independence, and secondly I urge him to take his argument to Scotland—to the Scottish Parliament and his MSP colleagues there—to make that robust case.
Mr Russell Brown (Dumfries and Galloway) (Lab)
The Minister has heard from my hon. Friend the Member for Glasgow North (Ann McKechin), my right hon. Friend the Member for Stirling (Mrs McGuire) and my hon. Friends the Members for Central Ayrshire (Mr Donohoe) and for Ayr, Carrick and Cumnock (Sandra Osborne) about the issue of some 16 and 17-year-olds being disfranchised as a result of not being on the register. I am positive that, during the discussions that he and his colleagues have had, someone somewhere might have raised the issue of a legal challenge. Does he have any idea how much of a delay there might be, if there is a legal challenge?
David Mundell
First, my experience of the Labour party in Dumfries and Galloway is that it is very good at getting people on to the electoral register—and I am sure it will be so again in getting 16 and 17-year-olds registered. The Scottish Government will have to come forward with legally watertight proposals; otherwise, they will be subject to challenge. As we have heard, they could conduct the referendum on the basis of so-called attainers, by which is meant people who will turn 18 within the cycle of the electoral register. It is clear that that could be done legally, but the downside, from the Scottish Government’s point of view, is that not all 16 and 17-year-olds would be able to vote as not all of them would be on the register, because of that age limitation. The other option for them is to create their own register. But were they to do that they would have to be sure that it was legally watertight.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Trust is good, but verification is always much better, so will the Minister not accept that the only way to ensure that the Electoral Commission’s recommendations will be complied with is to bring the referendum question back to the House for a vote?
David Mundell
I do not agree with the hon. Lady’s proposition. The Government’s position approaching the discussions on the agreement was that the referendum should be made in Scotland and that the necessary powers should be devolved to the Scottish Parliament. The Scottish Government would encounter significant political difficulties, were they to become the first Government in the history of the UK to ignore the views of the Electoral Commission.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Why would it not be possible for the voter registration form in 2013 to ask for the details of anyone who would be over 16 on the date of the referendum? Is that too obvious, or is it a simple solution?
David Mundell
That power has not been devolved to the Scottish Parliament in terms of the order agreed today.
Katy Clark (North Ayrshire and Arran) (Lab)
One of the complexities regarding 16 and 17-year-olds concerns young people not put on the register owing to child protection issues. If the Government think that the question or any other aspect of the referendum is unfair, will they take action?
David Mundell
The hon. Lady’s colleagues in the Scottish Parliament will have the opportunity to highlight that point, and of course if any proposals are not in accordance with the legislative framework for other issues, they cannot stand.
Jim McGovern (Dundee West) (Lab)
Given the responses to at least three of my hon. Friends’ questions about the question, it would appear that the measures outlined in the memorandum of understanding lead the UK Government to believe that a fair and clear question will be presented to the people of Scotland, but obviously some of us on the Opposition Benches have our doubts. If a dubious question is put, will it be open to legal challenge?
David Mundell
Clearly, all Acts of the Scottish Parliament can be subjected to legal challenge. It is quite clear, however, that were the Scottish Government to reject the views of the Electoral Commission concerning the question—the latter having carried out the thorough scrutiny it has done for previous referendum questions—they would pay a high political price, and the hon. Gentleman and others, in this House and the Scottish Parliament, would waste no time in pointing that out to the Scottish people.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I wish briefly to return to the issue of the franchise. In the detailed discussions that have taken place, was any account taken of the experience in Scotland of the health board elections in relation to under-18s? Does the Minister agree that it is incumbent on the Scottish Government to say exactly what the franchise would be—whether it would include all 16 and 17-year-olds or be done on the basis of the current electoral register?
David Mundell
I absolutely agree with the hon. Lady: it is now incumbent on the Scottish Government to come forward with their proposals. It is also incumbent on those who have a view on the matter to take the debate to Scotland and the Scottish Parliament. I hope that this issue will show the Scottish Parliament at its best, scrutinising in great detail the proposals that are brought forward and giving a fair and objective assessment of them.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
The Electoral Commission is a respected United Kingdom institution. The difficulty is that the Scottish National party does not have a great track record of respecting UK institutions—we think most recently of the attempt to brand our Olympic athletes as “Scolympians”, which I am delighted to say failed dismally. Can the Minister give an example of where the Scottish Government have respected a fully UK institution?
David Mundell
The Scottish Government respect UK institutions in their day-to-day working with the UK Government. They do not always want to acknowledge that publicly, but on a day-to-day basis the Scottish and UK Governments work closely on many aspects of devolved and reserved issues. However, the hon. Gentleman makes an excellent point. When the First Minister of Scotland tried to designate part of Team GB as “Scolympians”, he was laughed at by the people of Scotland. If he tries in any way to gerrymander the referendum, the people of Scotland will see through it. I trust them to do that.
Infrastructure (Financial Assistance) Bill
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
20:32 - The Committee divided: - Ayes: 211 / Noes: 290 - Question accordingly negatived.
21:00 - The Committee divided: - Ayes: 219 / Noes: 282 - Question accordingly negatived.
Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move amendment 11, page 1, line 6, after ‘infrastructure’, insert ‘within the United Kingdom’.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to discuss the following:
Amendment 1, page 1, line 7, leave out ‘includes’ and insert ‘means’.
Amendment 9, page 1, line 11, after ‘health’, insert ‘childcare’.
Amendment 4, page 1, line 13, leave out paragraph (e).
Amendment 2, page 1, line 13, after ‘housing’, insert ‘, the function of which has a national significance.’.
Amendment 10, in clause 1, page 1, line 13, at end insert—
‘(2A) “Infrastructure” excludes the expansion of Heathrow airport before May 2015.’.
Chris Leslie
At near enough to 7 o’clock, I am glad that we finally turn our attention to the Infrastructure (Financial Assistance) Bill. Anybody following these proceedings might be astonished that we have been allowed just over two hours for the Committee stage. In our view it is unsatisfactory to leave the rules governing £50 billion of public expenditure to such scant and inadequate scrutiny. Although we do not necessarily disagree with the broad principles behind the Bill, that does not mean that we should fall short in our duty as parliamentarians to analyse, consider and improve the details of the legislation. Ministers cannot point to the House of Lords as the place where the Bill can be improved and amended if we run out of time for consideration in Committee. I think the last time the Lords sat in Committee on a money Bill was in 1995, when it considered the European Communities (Finance) Bill. This two-hour period is therefore the only opportunity we will get to scrutinise the particulars of the legislation; hence the amendments that are before us.
I want to talk to amendments 11 and 9 in this first group. Amendment 11 would make it clear that the substantive powers in the Bill, which give Ministers the ability to grant financial assistance to any persons, should be used for infrastructure in the United Kingdom, for essentially this reason: we believe that we should focus all our efforts on the domestic infrastructure needs of our country. That is why we think the Bill, if it can bring benefits, needs to focus very much on the benefits of infrastructure and bringing forward capital schemes here at home. Hon. Members will be aware that the UK has been falling behind quite considerably in the past couple of years in terms of infrastructure and capital investment schemes. Only today in the Financial Times we read about the Construction Products Association warning that
“infrastructure is in free-fall,”
and that it expects spending to fall by 13% in 2012 compared with the last calendar year, despite the hollow words of the Chancellor of the Exchequer. Noble Francis, economics director at the CPA, said:
“We are getting to the stage where the government just can’t make more announcements with nothing happening. At some stage they are going to have to launch some capital investment that sees work happening on the ground. This can be done quickly, easily and cheaply speeding up work on the repair and maintenance of roads, schools, hospitals and housing.”
The article points out that road construction, to take one example of infrastructure investment,
“is suffering in particular, with the CPA projecting a decline of 40 per cent this year and 5 per cent next year.”
Stephen Timms (East Ham) (Lab)
I am listening to my hon. Friend’s speech with a lot of interest. I wonder whether he saw the recent CBI survey and the comments by its director general, John Cridland, who described it as
“a wake-up call that businesses in Britain are looking for action”—
on infrastructure—
“and we haven’t seen any yet.”
Chris Leslie
Alarm bells are ringing from a number of eminent institutions across the country, and they are not those that one might necessarily feel were natural allies of Her Majesty’s loyal Opposition. Nevertheless, they are saying exactly the same thing as us: when will the Treasury wake up and realise that the Government’s strategy on infrastructure—this laissez-faire approach—is singularly failing? Rather than driving new schemes forward, with their Bill and the rest of their strategy, the Government seem to be waiting for others to come forward with various schemes; they seem to be saying, “Please will you dream up some ideas?” They are hoping that something will turn up, but that is an approach characterised by drift rather than leadership when it comes to capital investment.
Mr David Anderson (Blaydon) (Lab)
Is the situation not worse than that? In the early days of this Government, one of the first things they did was stop the Building Schools for the Future programme, which had been clarified and was seen as the way forward to develop new schools. There were projects involving five schools in my constituency, which would have put £80 million into the local economy, with the money spent on the private sector and building schools for those children. Those projects were frozen—the same thing happened across the country—but if they had gone ahead, we would now be in a much better position.
Chris Leslie
It is the long-term cost to public service quality and communities up and down the country that is the most frustrating thing about the Government’s approach. They have scrapped Building Schools for the Future. Who knows? Perhaps in a couple of years’ time they will realise the error of their ways and devise a “Funding building for schools” scheme, or cobble together some other name. It is no wonder that we are in this prolonged double-dip recession, with the Government pulling the rug from underneath the economy in the way that they have, chopping capital infrastructure investment away at its knees. It is no wonder that, for example, the construction sector has shrunk by, I think, 10% in the past 12 months. Nor is it any wonder that the “State of Trade” survey published by the Federation of Master Builders today—apparently it is the only survey of its kind looking at SME construction activity—says that 39% of respondents reported a decline in private new house building workloads in the third quarter of this year or that 40% predicted a further decline in the next quarter.
The Government’s record on capital investment and their approach to infrastructure are lamentable. It has never been clearer that they should be focusing squarely on the needs of infrastructure within the United Kingdom; hence amendment 11. Contrary to the claims of the Government—we will probably hear this from the Minister—figures from the Office for Budget Responsibility show that the Government will have spent £6.6 billion less over the three-year period from the spending review than Labour had planned, with budgets for schools, such as BSF, and affordable housing hit especially hard.
Stephen Timms
My hon. Friend has talked about organisations that are not necessarily natural supporters of Her Majesty’s loyal Opposition. Has he seen the recent comments from the Country Land and Business Association, which described the superfast broadband situation as “lamentable”—precisely the same word that he has just used? The association stated:
“It is becoming clear that the Government’s strategy will not meet the target date of 2015…There is no clear mechanism to put in place the universal service commitment.”
Is not this another example of the economy crying out for investment that is simply not being delivered?
Chris Leslie
My right hon. Friend makes an important point that emphasises the argument that we are making. This is not simply a question of the levels of capital investment; it is also a question of competence. It is also about the relentless need to focus on delivery, and on the detail behind the delivery. I just do not see the Treasury, as currently comprised, being capable of getting to grips with the granularity of some of the obstacles that face capital schemes. It is no wonder that we are falling further and further behind. The Treasury seems to see an obstacle and be deterred by it, rather than trying to tackle it and move past it.
Mr John Redwood (Wokingham) (Con)
We are being invited to agree to a potential £50 billion commitment. Do the Opposition have any thoughts on the pace of that kind of expenditure? What levels would they recommend for this year, next year and the following year?
Chris Leslie
It is difficult to say, when looking at a guarantee scheme or underwriting scheme, because certain things are not wholly in the control of Ministers. They are putting the guarantee out there and waiting for organisations in the private sector or elsewhere to come forward and bid for the resource. It is a bit like pushing against a piece of string; it is impossible to know what the demand will be. We do not rule out the possibility of the proposal being of benefit—of course it could be—but it is impossible to know at this stage. We are holding up a finger to test the direction of the wind. There are no time scales in the Bill, and the explanatory notes do not add any information in that regard. We want to know the judgment of the studied intellects in the Treasury.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
My hon. Friend mentioned the downturn in the house building industry. In my constituency, the total number of new house builds in the last quarter was just 10, and that is in a city whose population is growing. Does he accept that, in addition to the immediate difficulties that the construction industry is experiencing, companies that go bust and firms that close down cannot suddenly spring back into action when the economy changes? This is another reason why we need the measures that he is outlining, and that the Government have not yet put into operation.
Chris Leslie
That loss of productive capacity is another example of the permanent damage caused by recession, resulting in an inability to take advantage of the opportunities that present themselves when a recovery occurs. The International Monetary Fund released figures only last week to illustrate the damage being done by the recession to our ability to fulfil such expectations. In my city of Nottingham, not a single new affordable social house has been constructed in the past 12 months. Is that because there is no demand? Absolutely not. We have more than 12,000 people on waiting lists for decent homes. That applies in many other areas of the country as well, including Greenwich.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
My hon. Friend makes an extremely valid point about housing, but he understates the case. Infrastructure was the one sector of the construction industry that survived the early period of the recession relatively well. Indeed, by 2009, expenditure on infrastructure stood at £11.6 billion, which was the highest real-terms level for about two decades. That has now slipped away badly, because of the failure of the current Government to maintain infrastructure investment. That is the charge against them: they have allowed activity that was helping to counter the recession to be lost, and the sectors of the industry that are concerned with infrastructure are now as alarmed as the housing sector and all the others that have suffered so badly in the recession.
Chris Leslie
That is a pertinent point. The Government seem oblivious to the thoughtful concerns being expressed by industry practitioners about the damage that is being done. Their ideological fixation with austerity has led them to a position in which they have completely pulled the rug out from underneath the economy, and we are still only at an early stage of being able to calculate the damage.
Barry Gardiner (Brent North) (Lab)
Will my hon. Friend answer a question on amendment 11, which proposes to add the words “within the United Kingdom” to clause 1(1)? One of the most important areas of infrastructure over the next decade will be energy, and the infrastructure required to meet our energy need will include interconnectors for electricity and gas pipelines that will come across Europe from the Caucasus. I presume that the Bill, as it stands, could incentivise investment in interconnectors and gas pipelines, but would it still be able to do so if the amendment were agreed to, even though parts of the pipelines would obviously be within the United Kingdom?
Chris Leslie
It is important to recognise that we want the benefits of any financial assistance to be felt in the UK economy. I shall deal with the details of the amendments in a moment. We believe that the scheme should focus on stimulating growth within these shores, and prioritising resources for infrastructure within the United Kingdom is the right approach. The Minister will undoubtedly point out that, as part of the guarantees under the scheme that the Government announced in July, a £5 billion export refinancing facility was introduced to underwrite the lending commitments of foreign buyers of UK exports. Of course we believe that export credit guarantees can be legitimate and helpful to construction exports, but in times of UK recession, our priorities should lie squarely here at home.
Incidentally, if there is such a great demand for the services of the Export Credits Guarantee Department—which is part of the Department for Business, Innovation and Skills—why does it appear to have underspent its existing budget in the past year? That does not suggest that there is a need to divert resources from domestic infrastructure into bankrolling foreign firms any more than is currently the case. The latest research shows that infrastructure spending within the UK will be of far greater benefit to our economy.
Indeed, the IMF had discussions last week about the multipliers. I do not want to go into too much technical detail, but the Office for Budget Responsibility used a fiscal multiplier of 0.5, which meant that Ministers thought that each pound they cut from public expenditure and capital investment would reduce economic output by only 50p. However, after examining the records of many countries that have embraced austerity since the financial crisis, the IMF reckons that the true multiplier is between 0.9 and 1.7. That has led the TUC to reveal that if the real multiplier is 1.3—somewhere in the middle of the IMF’s range—the OBR has underestimated the impact of the cuts by a cumulative £76 billion, more than 8% of gross domestic product, over five years. Instead of shaving less than 1% off economic growth during this financial year, austerity has potentially depressed it by more than 2%, which helps to explain why the economy has plunged into this double-dip recession. It is self-evident that providing financial assistance to infrastructure projects in the UK will provide a much greater stimulus to the British economy than giving financial assistance to projects abroad. Projects in the UK will boost employment in Britain; providing assistance to overseas projects will not.
Conservative Governments have a dubious record when it comes to underwriting foreign construction schemes. I am referring not only to the most recent, and much vaunted, export enterprise finance guarantee scheme, which assisted only five firms and has now folded because it was such a flop. I am also thinking of historic occasions such as that relating to the Pergau dam in Malaysia, which involved a too-close relationship between the aid being given to a foreign country and the trade that was taking place, particularly in relation to arms exports. It is very important that we learn the lessons from past failures when it comes to finance for foreign infrastructure schemes, and we particularly need to start prioritising schemes here in the UK.
Mark Reckless (Rochester and Strood) (Con)
It is important for the hon. Gentleman to follow through the logic of his comments when it comes to funding for the European Investment Bank, for instance, or substantial increases in funds flowing to support projects elsewhere in the EU. Is that something that he and his hon. Friends would like to do something about?
Chris Leslie
We definitely need more scrutiny of the resources committed through the European Union to some of the schemes abroad, but as I understand it, this Bill will not substitute for the investment that the UK taxpayer makes to the European Investment Bank and elsewhere. This is about underwriting private projects that will, hopefully, bring benefit to our economy more broadly. Our view is that we should focus our prime attention on the economic needs here within the UK.
Mark Durkan (Foyle) (SDLP)
Does my hon. Friend accept that some of us have a concern with the wording of his amendment, which specifically refers to “within the United Kingdom”? In Northern Ireland, for instance, many of the infrastructure projects are likely to have a cross-border character. Infrastructure projects both large and small sometimes have commitments of money from the Irish Government as they serve hinterlands that cross the borders. With renewable energy, of course it makes sense for significant projects to have a cross-border character. They will serve not only Northern Ireland’s but Great Britain’s future energy needs. Might not my hon. Friend’s amendment preclude sensible investment support for such projects?
Chris Leslie
I would not want the amendment to have that particular effect, and I do not think it need have it, especially if the Government were in a position to frame the legislation in such a way as to see this potential £50 billion focused very much on the needs of our own people in our own country. I hear what my hon. Friend says, but I do not think this is the be-all-and-end-all of Treasury expenditure, as there are other ways and means of dealing with those few projects that might have a cross-border character. When it comes to the underwriting capacity of this particular Bill, we think it important to prioritise investment here at home.
Barry Gardiner
My hon. Friend will be aware that the perimeter of Northern Ireland is defined as the six counties, and that the continental shelf offshore was never included in the original agreement drawn up by the Foreign Office. [Interruption.] I realise that my hon. Friend the Member for Foyle (Mark Durkan) knows this only too well. What that means is that we need clarity in respect not only of amendment 11, but of the “Short title, commencement and extent” provisions. At the moment, the Bill would preclude offshore wind development from the Northern Ireland coast. These matters may seem abstruse, but as constituted, the Bill does not make it clear that such infrastructure development would qualify for support. That question is as much one for the Minister as for my hon. Friend the Member for Nottingham East (Chris Leslie), but it seems to me that the question needs to be answered.
Chris Leslie
I am not sure I agree with my hon. Friend on the particular example he provided. It is quite clear that there would be benefit for the economy within the UK if those offshore schemes proceeded. The frustration I have is with the rather hasty drafting. Yes, we accept that it is necessary to frame a scheme that has sufficient flexibility, but there are dangers in enacting legislation that does not focus sufficiently on significant financial schemes, employment and jobs here in the UK. That is the purpose of the amendment.
Mark Lazarowicz
I am sure that when my hon. Friend’s amendment is successful, he will arrange for his noble Friends in the other place to deal with any clarifications required as a result of our debate. Earlier today we heard a statement on the west coast main line franchise, and we saw how the whole franchising system is in a state of shambles. Is that not going to have an effect on private sector investment, making it important to get even quicker investment in rail projects across the UK, through Directly Operated Railways, through Network Rail and other means to ensure that we gain the benefit—to the rail industry, to passengers and to the economy—now and not four, five, six or seven years down the line?
Chris Leslie
My hon. Friend is entirely right. This sends a message that the Government are incapable of running some of these bidding arrangements, incapable of awarding schemes in a competent and straightforward way and have no transparent or available methodology for scrutiny. That is my wider point. If we compare the laudable statements in the national infrastructure plan back in November 2011 with the actual progress made on many of those schemes to date, we see that the Government have fallen short in many different respects.
Gloria De Piero (Ashfield) (Lab)
The Prime Minister said just under a year ago that the plan for job creation made it critical to get construction projects off the ground. My hon. Friend referred earlier to the Construction Products Association, which predicts a 13% decline in spending. Is it any wonder that the director general of the CBI says that Government plans for infrastructure are hot air—a complete fiction?
Chris Leslie
Looking through the detail of that national infrastructure plan helps us to realise how far the Government are falling short. Let us start looking at some of the particular schemes that are of great concern to our constituents here in the United Kingdom. The A14 road link between Felixstowe and the midlands, for example, was promised immediate investment in the national infrastructure plan in 2011, but the Department for Transport has now said that the construction will not begin for six years, subject to agreement with various local authorities on funding packages and so forth. There is already much concern about that particular scheme.
The Mersey Gateway bridge is another example. Many Cabinet Ministers described it as incredibly important. I think the Chancellor and the Transport Secretary at the time said that it could be implemented quickly, but although the Department for Transport wanted construction to begin in 2010, there will not be a preferred bidder until late 2013. Construction will not start until the end of that year and it is not due to open until 2016, or potentially even later.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
My hon. Friend makes some important points about the consistency of Government leadership in seeing through some of the projects in the infrastructure plan. Comparison between the original plan for construction of November 2011 and the update in April this year suggests that 182 new projects have been added, but 63 disappeared without explanation. Does my hon. Friend agree that for any measures to have effect, leadership is necessary to see the projects through and to gain clarity on the outcomes we want to be delivered?
Chris Leslie
My hon. Friend is totally correct. Ministers seem to think they can come to the Dispatch Box and make a set of announcements, which will then magically happen as they busy themselves in their part-time political advisory roles or whatever they happen to be doing. If we start to walk through the projects one by one, we realise that Ministers are not gripping the issue.
Graham Stringer (Blackley and Broughton) (Lab)
My hon. Friend must have noticed during the Conservative party conference that the chaos and shambles goes right to the top. The Prime Minister claimed that work on the A11 was already under way, but any check on the Highways Agency website will show that the first spade will not be put into the ground until January. The Government simply do not know what they are doing, do they?
Chris Leslie
A pattern is emerging, but I shall not use the word “omnishambles”, which is probably past its best. There is great concern about these schemes. Thameslink, for example, is a project that is slipping considerably. The contracts for rolling stock were due to be awarded by early 2012; then it was by the summer, and now the Department says that the contract with the preferred bidder will be signed in the autumn. The Transport Select Committee is on top of that issue. It is writing to Secretaries of State asking why there is a delay with the rolling stock procurement, and I am sure that the Minister will be able to reply to that question when he responds to the debate. However, many other significant questions about delay need to be answered.
We need to know about the ongoing programme of work on the north Doncaster chord, a rail link that is greatly needed in that part of Yorkshire. The national infrastructure plan of 2011 promised that a business case would be provided by April 2012, but the proposed development is still awaiting a decision from the Secretary of State, which must be delivered before production can continue and construction can start.
The preferred bidder for the extension of the Northern line to Battersea was announced in June. A Treasury source then told the Evening Standard:
“The entire weight of the Government is being thrown behind the extension of the Northern Line”,
but nearly a year after the Chancellor’s autumn statement, the extension is still subject to the existence of funds. Despite backing from the
“entire weight of the Government”,
Transport for London can only say:
“Subject to funding being in place and permission from the Secretary of State for Transport, the new stations could be open by 2019.”
The construction of the Green Port Hull was due to begin this year, but Siemens now says that it will not sign a contract for the wind turbine factory until 2013. As for carbon capture and storage, the Department for Energy and Climate Change was supposedly
“developing a streamlined selection process”,
and £1 billion of capital was supposedly available to support the project, but construction is not due to begin until 2014.
Planning permission was granted in March for biomass electricity generation at Royal Portbury dock, but E.ON is currently taking time to
“review the prospects for the project in light of the UK Government’s current banding review”.
Again, a Government decision is awaited.
I am sure that I do not need to mention the issue of the 4G mobile spectrum auction and roll-out. Many Members may be checking their not necessarily 4G-compatible handsets as I speak. However, I will say that a very messy approach was taken to the auction of that particular regulatory arrangement, and that anyone who may be thinking of buying an iPhone 5 should be careful, because it will not necessarily be compatible with many possible providers. This is an example of our falling many years behind the United States, Germany, Sweden and parts of Asia. Unlike this country, they already have 4G services which are giving businesses opportunities to benefit customers.
We need only compare the much-vaunted promises of the 2011 national infrastructure plan with the actuality of the infrastructure pipeline that was announced in April. Although 182 new projects had been added, 63 had disappeared without explanation. Of the 357 projects announced in November that were updated in April, nearly two thirds were still in pre-procurement stages, and just 38 had proceeded to procurement or construction. Of the 229 that were still at the pre-procurement stage, three quarters were still at the same stage as had been reported in November 2011, and 36 had moved backwards.
Members may recall the regional growth fund, the supposed successor of the regional development agencies and, supposedly, the Government’s flagship alternative for regional economic development. Although the winners were announced in, I believe, April 2011, fewer than half the final offer agreements in rounds 1 and 2 of the fund have been put in place. Only £60 million of the £1.4 billion fund to spur growth has been released to businesses, and, according to a report by the Public Accounts Committee, the £364 million spent by the fund so far has been held up in intermediaries such as banks and local authorities.
Stephen Timms
My hon. Friend is making a powerful case, and I hope that we shall hear a response to it shortly. Has he seen the assessment by the British Chambers of Commerce which—before the election, I believe—identified 13 critical infrastructure projects, and said that although three were going ahead, there had been little or no progress on eight of them? That is a lamentable situation. Businesses across the country are desperate for those projects to go ahead.
Chris Leslie
It is very difficult to find an explanation for this Keystone Cops approach to infrastructure schemes, other than that the Government are incapable of getting to grips with the detail. I welcome the Minister to his position—he may be a new broom who will sweep everything clean, deal with the issues firmly and move many of these infrastructure projects forward—but I want to hear about his strategy for improving infrastructure on these shores, in the United Kingdom.
Hugh Bayley (York Central) (Lab)
May I intervene on my hon. Friend before he leaves the subject of the regional spread of investment? He will recall that on Second Reading I informed the House of changes in the level of infrastructure investment region by region. Some regions experienced an increase in investment between 2009 and 2011—most notably London, whose 18% increase was probably fuelled by the Olympics—but all the rest of the country, apart from three regions, experienced a reduction. Investment fell by 31% in Yorkshire and the Humber and the north-west, and by 32% in Wales. Does my hon. Friend think that the Bill, and the fund that it will establish, will provide an opportunity for some of those regional imbalances to be redressed?
Chris Leslie
I would like to hope so, but I do not advise my hon. Friend to hold his breath. We are not even talking about a fund; we are talking about promises to under-run funds in order to guarantee other schemes as they come forward. Where is the confidence? Where is the demand in the economy? Where are the private sector schemes whose organisers want to come forward? Far greater efforts must be made, and the Government must take the economic climate more seriously. We should be bringing forward schemes, prioritising UK infrastructure, and kick-starting construction here at home. We have suggested that revenue from the 4G spectrum auction should be used to fund the building of 100,000 new homes, and we are more than happy for the Chancellor to steal our thunder in the autumn—or should I say Christmas—statement on 5 December. Our amendment would ensure that the Bill focused on the British economy, and that should surely be the starting point.
Mr Redwood
I think we should be a bit careful. I thought that the Bill to which we are being invited to consent would provide solely, or primarily, for guarantees and loans, but in fact it allows expenditure and
“any… kind of financial assistance”,
which could include direct purchase. It certainly includes court or prison facilities and roads, which, in many cases, will involve no revenue, so presumably that means direct spending.
Chris Leslie
I think that the right hon. Gentleman is technically correct. The wording of the Bill is very loosely framed. We know that accounting officers in the Treasury had put a big question mark over exactly what Ministers were proposing. They wanted one line to cover them in circumstances in which things might go wrong, and they would be challenged and hauled before the Public Accounts Committee. That dates back to the 1932 concordat on public accounts, and it is being radically changed by the Bill. We do not necessarily think that that is the wrong thing to do, but it is noticeable that legislation has been presented to the House of Commons by Ministers who cannot say what it will be used for. We need information on the specifics of the schemes and the dates on which they will be supported. That is the level of detail that we require.
Amendment 9 relates to the definition of “infrastructure” in clause 1. I am sorry that the amendment tabled by my hon. Friend the Member for York Central (Hugh Bayley) was not selected; he noticed that flood defence schemes were not included in the list of items covered by infrastructure expenditure.
Our amendment seeks to insert the word “childcare”. Education is included in the set of infrastructure projects that might benefit from the scheme, but child care is quite different. We consider that to be an obvious anomaly which the Government should correct. We know that the costs of child care are afflicting many families throughout the country, a number of whom are not necessarily choosing to enter employment because the child care options are too limited or too expensive. One of the reasons why child care is so expensive is that the facilities are expensive. We do not have enough of them, and we need more investment in them.
Chris Leslie
I am happy to give way to my hon. Friend, who I know has campaigned strongly on these matters.
Kate Green
Does my hon. Friend agree that many of the infrastructure projects the Government have talked about have been in typically masculine industries? Does he also agree that one of the huge advantages of investment in child care is that it also helps to redress the high level of female unemployment—it is the highest in a quarter of a century—because it offers the opportunity for more mothers to go out to work and because that sector remains largely dominated by female employees?
Chris Leslie
My hon. Friend’s point is borne out by the statistics. Only 67% of mothers in the UK are in employment, which compares with figures of 84% in Denmark, 79% in the Netherlands and 74% in France. That reflects on the characteristics of our national output and our economy. More could be done to help those parents to gain access to employment. Families in the UK with pre-school-age children spend more on child care than is spent by this group in any other OECD country, except Switzerland. More nursery places and more not-for-profit providers of child care would help to drive down that cost. According to the OECD, the cost of child care in the UK is more than 26% of the average family income in those circumstances, whereas the OECD average is just under 12%, so this is a very significant drag on family budgets and it is holding back our economy.
The Daycare Trust has called for Government assistance to enable children’s centres, smaller private providers and not-for-profit early years providers to expand. It has pointed out that some 28,000 extra nursery places for two-year-olds need to be found in London alone, so we can clearly see that child care issues need to be considered in the definition of “infrastructure” that could obtain support under this legislation. Those are the amendments that I wish to discuss for the time being, but other hon. Members will doubtless have noticed omissions in the legislation.
Mr Redwood
My concern about this Bill is with the definitions and the amount of money involved. I am obviously very much in favour of more productive infrastructure projects going ahead as quickly as possible. There may well be utility in facilitating the Government to make guarantees, support or indemnities available at a time when the banking system is still not functioning well and it is difficult getting these things financed privately in the way we normally like. However, I start from the proposition that what we really need to be doing is generating a lot more freestanding private sector investment projects. It would be better if we took stronger and faster action to remedy the banking problems that lie underneath the problems we face in getting these things financed.
I am concerned that the wide-ranging powers in clause 1 may lead to a big increase in public spending, which would damage the Government’s fiscal targets. A lot of time and energy has been expended by Governments on reducing capital programmes to try to get public spending down to levels thought to be more compatible with reality and markets. We want to avoid this Bill becoming a way of undoing all the hard work that has been done to try to get the deficit down, at a time when this Government strongly believe that deficit reduction is crucial. The outgoing Government actually enacted legislation committing themselves to halving the deficit over the lifetime of this Parliament.
The definition of “infrastructure” in clause 1(2) is wide ranging. I thought that the type of infrastructure we had in mind for this Bill was that in subsection 2(a), which states that infrastructure is about “water, electricity, gas, telecommunications”. Those services are all provided by the private sector with charges to customers, so there is a flow of revenue that can remunerate the capital. If those projects are held up because of banking difficulties, I have every wish to encourage the Minister, newly in his job—I give him my congratulations—to expedite them. One hopes that the Government would be properly rewarded for the indemnities and the guarantees, or that they would not be necessary in the fullness of time, and so the taxpayer would not lose by this process. I am happy with that provision, which I thought was the thrust of the Bill.
However, subsection (2) also provides for mixed projects and entirely public sector projects. It includes mixed projects in the form of railway facilities. Railways are extremely heavily subsidised, and any new project is likely to require many years of future subsidy, because such projects do not normally reward the railway operator or the taxpayer sufficiently from the fare revenue. We therefore need to consider, for any one of these projects, the medium-term and long-term implications of cash outflows from the public sector, as well as the private sector revenues. Those things cause difficulty in the evaluation, as we have found recently through one of the franchise problems.
Subsection (2) also makes provision in respect of areas where spending must entirely be an expense for the public sector—I assume that we are not envisaging court or prison facilities having paying guests who would contribute towards the costs, so this money will be entirely expended by the public sector.
Mr Crispin Blunt (Reigate) (Con)
I return to an argument about prisons that I made on Second Reading. New prisons cost substantially less to run per place than old prisons and can better develop wider policy objectives—for example, on rehabilitation and work in prisons. When debating the Bill, reference should be made to the spending on prisons that would come from the Ministry of Justice’s delegated expenditure limit. This approach would enable the capital expenditure to happen now, in order to take the savings later.
Mr Redwood
That is a helpful contribution, but it shows the dangers of this clause, because it demonstrates that if these projects are not properly evaluated they could be more expensive overall. My hon. Friend has recent experience as Minister with responsibility for prisons and he is saying that in the short term they will definitely be dearer, because the state will have a big cash outflow in order to buy the new prison. It will take time to close down the old one and find some alternative use for it, and that process might not produce anything like the amount of money that the new prison costs. He is arguing, with his former brief in mind, that this may still represent a good bargain for the taxpayer, but when we come to account for it, we will have to account for the fact that a lot more has been spent in the first couple of years; there may be benefits for Governments to come if, as he hopes, the thing is cheaper and better in the longer term.
In debating this clause, we need to unpack the three types of project we are talking about. The first is a genuine private sector project, where we hope that there will be no ultimate call on the taxpayer and it may just involve a facilitation guarantee that will be properly rewarded. The second is a mixed project, where a lot of accounting has to be done—as the Department for Transport is discovering, such projects are difficult to evaluate. The third is the pure public sector project, where we need to go into the departmental budget. So I hope that the Minister will give me some reassurances about this.
Hugh Bayley
I follow the argument that the right hon. Gentleman is making, although I do not necessarily share his conclusion. Health facilities are defined as one of the fields of infrastructure that this fund could be used to support. The recent health Bill showed that the Government favour more NHS services being provided by private contractors and private hospitals. Is he telling the Committee that he would be happy for this fund to be used to finance a private clinic or a private hospital, but not happy for it to be used to fund an NHS hospital trust?
Mr Redwood
I am not trying to say anything that contentious. I am trying to unpack what is going on in this clause, because we are in Committee. I was not going to presume to give my views on total public spending, because that is a matter for another day and another debate. I am trying to get the Committee to understand that we are dealing with three different types of project, and the health one is closer to the pure public sector project. Even if it is carried out in a private sector facility with some so-called “private sector risk”, all the patients will be paid for by the NHS if it is for the NHS and so it is a flow of public revenue. We have to account for it in the proper way and be realistic about that.
Kate Green
The right hon. Gentleman is making an interesting argument. Does he not also accept that one of the difficulties with long-term infrastructure projects is that they have different phases, some of which may be susceptible to public intervention and some of which, later on, will require private investment. Let me give the example of a large site in my constituency that is currently in private ownership and has large redevelopment potential. The initial investment will have to be public investment to decontaminate the land and prepare the planning requirements, but down the line one would hope to see private investment. Does that not create a further accounting conundrum?
Mr Redwood
Yes, indeed. My point, which is not hostile to the Minister and is merely an attempt to inform the debate, is that we are discussing a set of very different projects and we are not sure what we are talking about because the Bill is very generic and general. We can probably all come to the conclusion that for this to work we will need precise control over what is being proposed—of how much of it is public, how much is private, how much involves a direct charge on the taxpayer and how much involves a guarantee or indemnity.
If a guarantee or indemnity is involved, I am sure that the Minister, with his forensic financial backgrounds and skills, will be able to keep control of it and to reassure the Committee that it is unlikely to be called on unless it was absolutely essential and a very important project would not go ahead without it, which would mean that it was a reasonable risk to run. I am happy at that end of the spectrum, as we will have to trust the Minister’s judgment and this is a good Minister with the skills and ability to do such things. We need to probe when such projects are proposed, however, as we are the custodians of public money and do not want to end up with white elephant projects with huge guarantees and indemnities that will in due course have to be met by some Government.
I am also concerned about the projects in which there is more of a mixture or a muddle, because they must be fitted in to the public expenditure plans. That does not prejudge whether the expenditure should be higher or lower, and there will be different views on that in the Committee, but they will need to be fitted into the plans. A large sum is involved—£50 billion—and we do not know the time scale. The Government might want to come back and ask for more money, and a provision allows them to do so by order, so I want a little more information from the Minister about how such projects will fit into the public expenditure plans and how Ministers collectively will evaluate the mixed projects that receive a big flow of public subsidy and, more particularly, those that really are public sector projects. They might be dressed up as private sector projects, but as far as I am concerned if all the money for the provision on behalf of customers or users of the service comes from the state, that is a public sector project and the private sector is merely a franchisee or agent of the state. If all the money comes from the state, I expect the state to have a grip of the project and to satisfy us that it represents value for money that is being organised in the best way.
I am not ideologically driven as regards the provision of state services. I think that should be done in the cheapest possible way, provided that they offer good quality, and that always causes problems, but I hope that the Minister will give us some guidance about how he will differentiate and seek reassurances about the granting of those indemnities and guarantees and about what proportion of the projects will involve pure public spending, as the Bill entitles him to spend as well as offer guarantees.
Mark Field (Cities of London and Westminster) (Con)
Although I accept much of the thrust of what my right hon. Friend has to say, does he not accept that if too much time and Treasury orthodoxy are spent on evaluating schemes at this stage, many of the infrastructure projects will simply not be built? We need to move ahead with getting them under way at the earliest opportunity if there is to be economic growth and some of the evaluation process to which he refers might be better placed at a later date.
Mr Redwood
I normally agree with my hon. Friend, but I am afraid that I do not on this occasion. There is not now an excuse to go in for projects that do not make any economic sense just because we all want some more growth and jobs. Indeed, that would be a very good way of setting us all back further as it would damage the public finances without giving us the benefit of a good project that people wanted to use and that produced plenty of user revenue. When one is in a financial hole, as our country is, one needs to be very careful. We look to the Treasury, in particular, to evaluate such matters carefully and I want a little more guidance because £50 billion is a huge sum. I am not surprised that so few MPs want to discuss it—if we were debating £500 million, the place would probably be packed, but because we are discussing £50 billion everyone has gone off for a tea or a coffee—but to me it is a serious sum of money and I want some reassurance that we will get something worth having for it.
John McDonnell (Hayes and Harlington) (Lab)
The right hon. Member for Wokingham (Mr Redwood) roamed over many of the issues covered on Second Reading and over the scepticism on both sides of the Committee. I say to the hon. Member for Cities of London and Westminster (Mark Field) that I think evaluation is critical, as we have seen with the west coast main line, and undertaking projects on a wing and prayer at this stage is dangerous, to say the least.
The Bill, as we said on Second Reading, seems to be the reverse of the private finance initiative. PFI was meant to shift the risk on to the private sector, yet the Bill seems to shifting it back on to the public sector. I share the concerns. Clause 1(4) defines financial assistance in the broadest terms possible, so it could involve revenue assistance, and clause 1(3) refers to the operation of a project. In addition to a capital project, we could be subsidising in revenue terms the operation undertaken by a capital project. That leaves open the issue of hospitals being built by the private sector and then revenue supported under the Bill.
Mr Blunt
The thrust of my speech will reinforce the remarks made by the hon. Member for Hayes and Harlington (John McDonnell) and my right hon. Friend the Member for Wokingham (Mr Redwood) about the reassurance we should receive about the possibilities opened up by the Bill. The mechanism I have chosen to secure that reassurance is to table an amendment that would delete the reference to housing. I have no intention of pressing it to a Division; I am merely seeking clarity on what we want to achieve with the Bill.
On Second Reading, the Opposition spokesman said he thought that housing was infrastructure, but I am afraid that I do not—neither does the “Oxford Dictionary of Economics”, nor do The Economist or the Government in their 2011 national infrastructure plan. That does not mean, however, that I do not think that investment in housing is essential or necessary, which was the conclusion slightly unfairly drawn by the hon. Member for Hayes and Harlington on Second Reading. Given his interest in criminal justice, I was somewhat surprised that he then juxtaposed the need for decent prison facilities—
Mr Blunt
I am extremely grateful to the hon. Gentleman for his customary self-criticism and generosity.
The Minister must give us the necessary clarity. I note that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) has tabled an amendment on housing schemes that would add the words “of national significance”—or words to that effect. It is at that point that alarm bells start ringing for me, as the Member for Reigate, a constituency wholly within the metropolitan green belt. We have had a significant increase in housing, particularly through infill but also through new housing schemes that were agreed and supported by the local authority, and there has been development in parts of Redhill, but that has actually led to a shortage of infrastructure to support the people in that housing.
We desperately need two new primary schools locally, and then there is the small matter of the M23 never being finished. In these circumstances, when we are looking for capital schemes, it might be rather nice if the M23, several decades later, was finally finished properly where it joins the A23. In addition to the schemes that the Government will come forward with, which I anticipate will be announced in the expenditure statement, I hope that we can begin to look at some of the schemes that have been around for a long time and that these funding mechanisms will help to enable expenditure on them to take place.
I am seeking the same level of reassurance that my right hon. Friend the Member for Wokingham seeks. I have the same implicit trust that he has in the ability of the Economic Secretary and the team of Treasury Ministers to manage these things satisfactorily, but Parliament is owed proper accountability on this.
I am concerned that we will find housing schemes, particularly those of national significance, being imposed in the way they were under previous regional development strategies, with housing numbers simply being cascaded down from Whitehall to the regions, to the counties and then to local authorities, such as mine, in a way that leaves the borough councillors, as owners of the planning policy, completely unable to do anything other than mitigate the consequences. They have never been in the position that we, as a localist Government, want them to be in, in which they can judge between the economic and social need for housing locally and the environmental consequences of such development. Those are the balances that local authorities are there to draw.
The Bill will suddenly enable a substantially greater amount of new expenditure to take place, but where is the link with the rhetoric about planning policy? I just want to raise that concern, as I did on Second Reading. I do not want the financial provisions set out in the Bill to be combined with planning policy debates that take place elsewhere, and then suddenly find that in constituencies such as mine the powers of local representatives are being overridden in some rush to develop housing, which by no stretch of the imagination is infrastructure in the proper sense of the word.
Mark Field
Does my hon. Friend agree that the experience of the past 15 years is that there has been very little cascading down, despite all the intentions to build new housing? Is he perhaps becoming over-concerned that the inclusion of housing as one of the infrastructure heads might mean that only a number of housing schemes—relatively small ones; not necessarily national housing schemes—become the shovel-ready schemes that the Treasury is looking to encourage given that some of the other heads might mean that considerably more time is required before anything is built?
Mr Blunt
That is fine, but the borough councillors of Reigate of Banstead, as the planning authority, have a mandate from their local electors and they are perfectly capable of making decisions about the requirements for housing in the area and to weigh up the competing factors. That is the mandate they enjoy from local people and, as far as I am concerned, there is no need for the view that the gentleman in Whitehall knows best. If there is going to be a wider economic case for building, it needs to be made with great clarity. If that needs to be done with infrastructure of major national significance, there are bound to be occasions when local interests will have to be overridden in the wider national interest. As far as housing is concerned, the arguments are certainly significantly weaker in that regard than they are for actual national infrastructure, the benefits of which we will enjoy for decades to come. If we have too much jerry-built housing, we will then have to live with the environmental consequences for generations.
Mr Raynsford
I draw attention to the interests declared in my entry in the register.
I disagree with the hon. Member for Reigate (Mr Blunt), but I do not intend to engage in a debate with him. I will simply say that I think he is in for a big disappointment and that he clearly did not listen to the statement that the Secretary of State for Communities and Local Government made about changes to the planning system that will allow him to refer a whole series of matters to the Planning Inspectorate when he does not agree with a local council’s decision. I am afraid that that is where the Government have got to in relation to localism. However, I do not intend to enter into that debate.
I entirely understand why the hon. Member for Reigate misinterpreted the effect of amendment 2, because the amendment paper gives the impression that it was designed to refer only to housing of “national significance”. It was not. It is simply that housing is the last item prior to the next clause. My reference to “national significance” applies to all the items, including roads, sewers and all the rest, as well as housing. The purpose of the amendment, which is what I will focus on, is to limit the impact of the definition of the Bill to schemes of national significance.
Mr Blunt
I am extremely grateful to the right hon. Gentleman for that clarification following my inability to read his amendment properly. On the planning point, and with respect to his long-established expertise and experience in this area, if he thinks that green-belt constituencies such as mine are liable to be affected under the changes he has identified, I am in the market for his advice.
Mr Raynsford
I said that I did not intend to engage in a debate on that subject. I believe that we need a great deal more housing in this country, but I will not engage with the hon. Gentleman in a debate about his constituency, which he knows much better than I do, and I certainly would not advocate extensive building on the green belt, which would be entirely inappropriate. I was simply drawing attention to the fact that the Secretary of State’s recent decision on planning, which came a mere three or four months after the national planning policy framework was put in place, withdrew many of the original localist hopes about allowing decisions to rest with the local authority and made it clear that he would refer items over the local authority’s head to the Planning Inspectorate. To me, that is not localism, but let us leave it there.
I tabled the amendments simply to try to get clarity and focus on the uses and application of the Bill. As drafted, it is incredibly broad. I do not object to the definition set out in clause 1(2), but the definition in clause 1(3) states:
‘“Provision” includes acquisition, design, construction, conversion, improvement, operation and repair.’
As the right hon. Member for Wokingham (Mr Redwood) pointed out, subsection (4) defines financial assistance as covering a whole range of activities, including
“loans, guarantees or indemnities, or any other kind of financial assistance”.
In theory at least, that definition would allow the Government to offer a guarantee literally on the repair of a door in a school or prison. Although that work might be entirely necessary and desirable, it is clearly nonsense for the provisions in this Bill, which are designed to allow major infrastructure schemes that are stalled for financial reasons to proceed. That is the purpose of the Bill.
Hugh Bayley
I am following my right hon. Friend’s argument. I am slightly concerned about how he would define “national significance”. I can think of a number of important infrastructure projects in my region that could be described as being of national or regional significance. For instance, would dualling the A-road that goes around York be seen as nationally significant? Flood defences, a matter that I hope to raise later if I catch the Chairman’s eye, need to be designed on a region-wide basis. Would my right hon. Friend regard flood defences as being of national significance—if they affected the Thames, perhaps?
Mr Raynsford
I think it very likely that any definition of “national significance” would include flood defence schemes, which are defined as infrastructure in the national infrastructure plan. My hon. Friend should not be troubled about their absence from the list, although he wishes to move an amendment to clarify the matter. There is no question but that flood defences are infrastructure, and if they protect from flooding areas of the country at risk of flooding, which is clearly catastrophic, the likely interpretation would be that they were of national significance.
However, I do not propose to add a precise definition; I simply want to give an overall, overarching legislative obligation for the Bill to be used for the provision of financial assistance to schemes of genuinely national significance.
Mr Redwood
I remind the right hon. Gentleman that the Government could not merely offer a loan for the new school door; they could pay for it—they can pay for operating expenditure. So the issue is very wide-ranging.
Mr Raynsford
The right hon. Gentleman makes a perfectly fair point, and I concur.
The Institution of Civil Engineers, the professional body for engineers and those involved in the provision of infrastructure, makes a telling point in its submission to us about the Bill. It says that the approval criteria that the Government have set out for considering schemes state clearly that
“any project must be nationally significant before it can receive financial support.”
It would clearly be a total waste of time if people read the fine print of the Bill and believed that it was appropriate for the kind of project to which the right hon. Gentleman and I were referring and submitted one, simply for it to be rejected because it did not have national significance. That is why the amendment has been tabled—to help the Government by bringing a degree of clarity and focus to the Bill.
I entirely concur with the objective of helping schemes that are stalled and ought to be able to proceed, but they should only be schemes of national significance. That is the purpose of my amendments, to which I hope the Government will be sympathetic.
Ian Swales (Redcar) (LD)
I shall speak briefly against amendment 1, which would have the effect of limiting the definition of infrastructure to the items listed. That could mean that key elements of economic infrastructure would be omitted. We have already heard reference to broadband and flood defences, but I am thinking in particular of the installation of carbon capture and storage networks, such as the one proposed for Teesside, which already has strong private sector support.
Those networks will be vital for future economic growth and that type of investment must be included in the scope of the Bill. I would welcome clarity on that from the Minister and I ask him to consider adding such schemes to the list. Having said that, I accept the excellent inputs from my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Reigate (Mr Blunt) on the need to limit how the Bill is implemented.
As a member of the Public Accounts Committee, I certainly do not want any suspension of proper process, judgment or value-for-money assessment of any project that comes through under the Bill.
Hugh Bayley
When we discussed the Bill on Second Reading on 17 September, I had no idea that just one week later the River Ouse was going to rise 5 metres higher than its normal summer level and put York once again in the national and international news as a flood-prone city. I am glad to say that the emergency was well managed by the local authority, the Environment Agency, Yorkshire Water and the police, who led the silver and gold command, of course.
The consequence was far less dramatic than 12 years ago, when the Ouse rose just 10 cm higher—about 4 inches, for those who are metrically challenged. On that occasion, some 230 homes were inundated. Some homes were affected this time, but the damage was much lower, in part as a consequence of investment in flood defences and other flood alleviation schemes.
Hard flood defences have been built in the city of York to provide better protection for houses flooded during the previous high flood 12 years ago. Other alleviation measures have also been taken upstream. There has been funding to encourage farmers to build ponds—in one case, a major dam that stores millions of gallons of water during a high-flood event—and to plant more trees to slow the run-off so that the peak height is a few inches lower than it would otherwise be. I have asked the Environment Agency to calculate whether those measures made the 4 inches of difference between this occasion and 12 years ago, so preventing hundreds of thousands of pounds’ worth of damage to hundreds of houses and commercial businesses, as happened then.
I should stress that throughout the flood, 99.9% of York was open for business. It gets a bad press whenever there is a flood because journalists are lazy and know that a pub called the King’s Arms in York floods four or five times a year, and it is as easy as pie to get a picture of somebody in waders pulling pints behind a bar. When people see such photos, they need to realise that York is up and running and not closed for business.
On Second Reading, I posed the question of whether the list of types of infrastructure in the Bill would include funding, or support through loan guarantees, for flood defence schemes. The Economic Secretary took advice between hearing my remarks and replying to the debate. He said:
“I am advised that there is no reason for them”—
that is, flood defences—
“to be excluded, and we envisage their being part of the infrastructure that is being considered.”—[Official Report, 17 September 2012; Vol. 550, c. 747.]
Since the Economic Secretary has had an opportunity to consider the matter a little further in the weeks since Second Reading and was notified by an amendment that I tabled, which has not been selected, that I would raise this issue, will he go slightly further and reassure me and other hon. Members representing constituencies with considerable flood risk that it is not that there is no reason for such schemes to be excluded, but that they will be open for consideration if it is deemed appropriate?
I say to my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), whose knowledge about these matters is enormous and whose judgment I respect—I normally consult him about matters of housing, planning or infrastructure—that I would be concerned if we limited the schemes to those of national significance. Some of the infrastructure that badly needs investment is important and will help to generate economic growth. Flood alleviation schemes, for instance, can support economic output by keeping businesses open and avoiding diverting expenditure to repairs when the funding could instead go to a future profitable investment that would generate a return.
I caution against limiting investment to matters of national significance. My right hon. Friend makes a telling point about the school door, but many schemes of local or regional, rather than national, significance ought to be candidates for consideration for the funds provided in the Bill. When the Minister responds, I hope that he will say something further about flooding and give an assurance that although we ought to be supporting schemes of national significance with this fund, we should not limit it to supporting such schemes and it should be open for the support of other schemes of local or regional importance.
The Economic Secretary to the Treasury (Sajid Javid)
We have heard excellent contributions from Members on both sides of the House. The shadow Minister rightly noted that the time for the debate has been restricted. That is not unusual when we first come back after a recess, but he made a fair point. However, I was taken aback when he then went on about many different issues that did not much focus on the nature of his amendments, as he could have saved some time for hon. Members to continue with a proper debate.
On the Opposition amendments, amendment 11 is designed to limit the Bill’s geographical ambit. My response is that it is clear that the scheme relies on the spending cover provided by the Bill and is designed to facilitate and accelerate infrastructure investment throughout the United Kingdom economy. The eligibility criteria have been published. For example, the guarantee scheme contains provisions requiring the infrastructure to be of national significance to the UK. Such conditions will be sufficient to achieve protection against the UK supporting other economies. If I understood the hon. Gentleman correctly, he was concerned about the potential effect on economies outside the UK.
Mark Lazarowicz
Since Second Reading, have the Government been able to develop any further their ideas on how the spending under the Bill will be allocated within areas where there are devolved legislatures? In Scotland, for instance, how much will be allocated by the Scottish Government and how much will come directly from the UK Government? Can the Minister elucidate and illuminate us on that point?
Sajid Javid
Yes. There is no geographical division within the United Kingdom as regards the total amount of £50 billion that is being allocated in the Bill. Applications will be dealt with and assessed on a case-by-case basis as they come in from different areas of the UK, including the devolved authorities.
Sajid Javid
If the hon. Gentleman will allow me to continue, there may be time for him to contribute later.
Any Government expenditure will need to satisfy the standard requirements relating to value for money, and the accounting officer will need to be satisfied about that expenditure. It is also worth noting that, as the hon. Member for Brent North (Barry Gardiner) said, making a very fair point, there may be instances where infrastructure that receives a guarantee is cross-border in nature. In those cases, we would not want to be prevented from providing financial assistance to the UK aspect of the project because of a technical limitation. I therefore beg the hon. Member for Nottingham East (Chris Leslie) to withdraw the amendment.
Amendment 9 would insert the word “childcare” after the word “health”. The amendment is unnecessary because social infrastructure, including child care, is already captured under the Bill, and so any child care facilities will be accommodated within the current definition. However, even including child care within the definition would not ensure that a provider of child care facilities was able to obtain financial assistance under the current scheme because the application will need to fall within the ambit of one of the schemes being operated which relies on spending cover provided by the Bill.
At this point, I would like to deal with the comments of the hon. Member for York Central (Hugh Bayley). I well remember that he raised the issue of flood defences on Second Reading, and he is right to do so again. It shows just how deeply he is concerned about the issue on behalf of his constituents, and I respect that. I can say again that his local flood defences are not excluded within the definition in the Bill. In the case of projects of that nature, applications should be made under the process and they will be considered like all others.
I thank my right hon. Friend the Member for Wokingham (Mr Redwood) for his kind words regarding my new position. He made two broad points. First, he rightly raised issues about overall deficit targets for the Government and their overall plan to deal with the reckless deficit inherited from the previous Government. Let me assure him that the reason we can have this programme of guarantees is the credibility that this Government have built up. Long-term interest rates and Government debt are less than half what they were when this Government came to power. That credibility is recognised by the financial markets. Sadly, the financial markets are not open for all borrowers as they were in the past. Some very viable commercial infrastructure projects cannot tap into lending in the financial markets, whether through bonds or other types of debt mechanism. The Government are using the credibility that they have built up to offer and provide these guarantees.
John Healey (Wentworth and Dearne) (Lab)
What will be next year’s budget for consultants to support the work of Infrastructure UK in carrying out that due diligence and giving advice to Ministers?
Sajid Javid
I cannot tell the right hon. Gentleman exactly what the budget will be because that depends on the amount of work that the Infrastructure UK team is asked to do. In other words, it depends on the nature of the applications and the complexity of the projects. However, I can say that the income generated from the guarantee, and other sources of income, will be used to pay those expenses. The Government therefore do not believe that there will be a net cost in terms of the management costs of the team.
Graham Stringer
With respect to the hon. Gentleman, the term “commercially viable” covers a multitude of sins; it could mean almost anything. One of the reasons that businesses may not be able to raise the cash from banks or in the money market is the length of the payback on the scheme. Will there be any limit on the length of payback on these commercially viable schemes, given that infrastructure investment often does not pay back for decades?
Sajid Javid
That is a good point. There will be no limit on the length of the guarantees that the Government can issue to support the schemes because, as the hon. Gentleman rightly points out, many infrastructure projects typically require very long-dated debt which could involve a period of 20 to 30 years. There is a limit on the application time frame whereby all applications under the Bill have to come in by 31 December 2014, but there is no limit on the debt profile that can be guaranteed.
Nic Dakin (Scunthorpe) (Lab)
The Minister has clearly scoped this issue thoroughly. How many projects does he expect to have come forward by the date that he mentioned and what is their value likely to be?
Sajid Javid
I think that the hon. Gentleman will know that there is no way I can tell him that. I cannot predict the future; he may be able to do so, but I am not. I can tell him that there have already been expressions of interest from more than 50 project sponsors and that the Government have entered into negotiations with a number of them, but no final decisions have yet been made. He will also know that, in the national infrastructure plan published last year, the Government identified numerous key projects worth more than £200 billion, so there could be a substantial number of projects.
John Healey
I am grateful to the Minister for giving way on the point that he was good enough to respond to earlier. He said that there would be charges as part of the project costs and that, therefore, there would be no net cost for consultants to advise the Treasury’s Infrastructure UK team. Does that also apply to consultants who may be required to advise other Departments as part of this due diligence process? Will there be a net cost to those Departments for such advice?
Sajid Javid
Because of the charges that the Government will make for the guarantees, we anticipate that there will be no net cost. Of course, that cannot be absolutely guaranteed, because our current projected cost profile may change, but it is anticipated that the income will cover most of the costs.
Mark Lazarowicz
I want to pursue an important point. Will any of the £50 billion of loans, guarantees and financing be allocated directly to the Scottish Government, the Welsh Assembly Government and the Northern Ireland Government to allocate themselves, or will every project in Scotland and the other devolved regions have to go directly to the Treasury, or will there be an intermediary mechanism to ensure that the funds will be allocated throughout the UK? An answer from the Minister would be genuinely helpful.
Sajid Javid
That is a good question. It reminds me that I cannot remember any Member from Scotland or Northern Ireland being present during our lengthy debate on Second Reading. The recess was about to start, so perhaps they though it was a good opportunity to take a longer break. Let me be clear: this is a United Kingdom Government Bill. It is based on macro-economic policy, which is a reserved power for the United Kingdom Government, and takes advantage of the credit-worthiness of the United Kingdom Government. Members discussed the referendum on Scottish independence earlier, and this scheme is a great example of the strength of the United Kingdom when it works together. If we asked project sponsors in Scotland whether they would prefer a United Kingdom Government guarantee or a Scottish Government guarantee, I know which one they would pick. On deciding how those guarantees are used in devolved areas such as Scotland, the United Kingdom Government would work closely with their counterparts in the Scottish Executive, but the final decision would be for the United Kingdom Government.
I do not want to say too much about amendment 10, tabled by the hon. Member for Hayes and Harlington (John McDonnell), because the issue has come up a number of times, but I will point out that international connectivity is an important issue for overall economic growth. This Government believe that maintaining the UK’s status as a leading global aviation hub is fundamental to our long-term international competitiveness, but we are also mindful of the need to take full account of the social, environmental and other impacts of any expansion in airport capacity. That is why we set up the independent commission under Sir Howard Davies, which will issue its final report in the summer of 2015. Any decision on whether to support any of that report’s recommendations will be taken by the next Government. In any case, the coalition agreement is clear on this issue. That represents the Government’s position clearly, so I do not think there is any need for the amendment and ask the hon. Gentleman not to press it..
Amendment 4 was tabled by my hon. Friend the Member for Reigate (Mr Blunt), who said that he raised the issue on Second Reading. I remember discussing it with him at the time and afterwards. The Government believe that the definition of “infrastructure” should be broad enough to include housing, because housing and rented homes are a fundamental part of supporting a young dynamic work force and millions of other people, as well as of increasing the overall supply of housing. Including housing in the Bill’s non-exhaustive, illustrative list makes clear our intention to introduce major investment in the UK and increase the number of houses being built and occupied.
I reassure my hon. Friend, however, on one of his key points. In no way does this deal with planning issues or take away planning authority from local authorities. He should be reassured that the Localism Act 2011 is unaffected —there is no change to that—and the Government have no plans under this Bill to impose housing on any local authority with different views. This is about providing financial support for housing projects that meet the Bill’s criteria.
Sajid Javid
I hope that I have reassured my hon. Friend on his key point. He talked about his constituency and how green it is.
Sajid Javid
If I have not been clear enough, I apologise to my hon. Friend. Perhaps I could write to him later in order to be clearer, or even have a meeting with him on this particular issue.
I will respond to amendments 1 and 2 together. The right hon. Member for Greenwich and Woolwich (Mr Raynsford) was right to point out that many Members seem to have misunderstood his proposal to add the words “national significance”, by linking them to a definition of housing. I get his point. It is fair to take both amendments together, because he is considering the overall definition of infrastructure and trying to make it more inclusive. The amendments are, however, unnecessary and I will explain why. The Bill’s purpose is to allow the Treasury, or the Secretary of State with the Treasury’s consent, to incur expenditure in support of the various infrastructure projects. Members will be aware that “infrastructure” has a plain English meaning, namely the physical facilities and installations needed for the functioning of a community or a society, such as transportation and communication systems, water and energy facilities, and public institutions, including housing, hospitals, schools and universities.
Ian Swales
The Minister has already confirmed that flood defences would fall under the auspices of the Bill. Will he confirm that that would also be true of a carbon capture and storage infrastructure network?
Sajid Javid
I can confirm that CCS facilities are not excluded from the definition of infrastructure. If a project sponsor wanted to suggest such a project, it would be duly considered by the team under the scheme’s terms.
Finally, it would be difficult to define “national significance” and that may take away from the overall intention of the Bill. Perhaps I do not need to make that point because it was made very well by the hon. Member for York Central. I therefore ask the right hon. Member for Greenwich and Woolwich not to press his two amendments.
Barry Gardiner
I welcome the speech by the right hon. Member for Wokingham (Mr Redwood), who sought to tease out the Minister. Unfortunately, I am not sure that the Minister has provided the clarification that was sought. In clause 1, subsection (1), which provides that money may be provided by Parliament, is negated by subsection (5), which states that it would be provided on the say- so of the Treasury. This is a Government Bill that avoids real scrutiny by Parliament. I suspect that that is the objection of the right hon. Member for Wokingham, as well as my own.
I am grateful to the Minister for his clarification on interconnectors and gas pipelines. That is an important point.
Chris Leslie
I am not satisfied by the Minister’s answer on amendment 11. Nothing in the Bill precludes the £50 billion from being used largely—never mind in part—to bankroll foreign infrastructure schemes. He did not address that point carefully enough. We believe that the focus has to be on economic recovery here at home in the United Kingdom. The Minister may well believe that he would not sanction schemes that strayed beyond that, but reshuffles come and go—we could even end up with a Liberal Democrat Minister in his position. Who knows what would happen in those circumstances?
For those reasons, as well as those that I enunciated earlier, I would like to press amendment 11 to a vote.
Question put, That the amendment be made.
Chris Leslie
I beg to move amendment 7, in page 2, line 3, at end insert—
‘(6A) In any agreement to give financial assistance in this section the Treasury or Secretary of State shall give reasonable consideration to clawback provisions which safeguard best value for the taxpayer.’.
The Temporary Chair (Sir Roger Gale)
With this it will be convenient to discuss the following:
Amendment 12, in clause 4, page 3, line 8, at end insert—
‘(f) the beneficial owners of any debt issued by a company receiving infrastructure assistance or one of their subsidiary companies,
(g) the beneficial owners of any company which has entered into an agreement to receive infrastructure assistance,
(h) for the purposes of this Act beneficial owner has the same meaning as that conferred by the Money Laundering Regulations 2007.’.
New clause 3—Customer due diligence measures
‘(1) Before any infrastructure assistance is given the Treasury must apply customer due diligence measures on any business requesting infrastructure assistance.
(2) For the purposes of this Act customer due diligence measures will have the same meaning as that conferred by the Money Laundering Regulations 2007.’.
Chris Leslie
Amendment 7, which stands in my name and those of my hon. Friends, seeks to ensure that the Bill provides a safeguard for taxpayers’ money. After all, £50 billion of guarantees could be underwritten for the private sector on pretty much any kind of scheme, and we heard fuzzy logic from the Minister earlier, when he said that infrastructure is not quite as defined as it appears in the Bill, and that some projects could be national and some foreign.
In some circumstances, underwriting can be beneficial and welcome—it can make schemes viable that were not viable previously and unlock infrastructure developments that might not otherwise take place, but in other circumstances there are disadvantages to underwriting. Underwriting means that gains from a private endeavour are privatised, but that any losses are socialised. The entrepreneur, the shareholder and the owner of a private company or project that benefits from the safety net provided by the taxpayer could profit well for many years if a scheme bears fruit, but if the scheme goes wrong and if there are failures in it, the losses fall on you, Mr Gale, on me, on hon. Members and, most importantly, on our constituents.
I make no apologies for standing up for the taxpayer’s best interests. It is important that we ensure that Ministers consider introducing clawback provisions that safeguard best value for taxpayers. The amendment is so unobjectionable that I cannot understand why the Government would object to it. The Opposition are simply saying that, in any agreement to give financial assistance, the Chancellor or Secretary of State
“shall give reasonable consideration to clawback provisions which safeguard the taxpayer.”
What do I mean by “clawback provisions”? Hon. Members who have served on the Public Accounts Committee will know that from time to time Governments have entered into contracts and sold privatised parts of the public sector. The purchasers have then gone on to make millions of pounds when they have sold on some of those assets. In this case, the guarantor has ended up facilitating a project, but the beneficiary of the guarantee went on to make significant sums.
We are simply saying that the Treasury needs to make sure that there are clauses in the underwriting contracts—the offers—that ensure that if significant gains are made in the long term, the taxpayer can have a share in some of the future profits. It is a basic principle—if the taxpayer helps to create profitability for a person and bears the risk of loss, that person can reasonably be expected to share some of the excess profits with the taxpayer. It is a basic principle of prudent stewardship of taxpayers’ money. It would also ensure that we deal with the question of moral hazard. We know that in some circumstances underwriting can cause difficulties if a scheme that might be shaky goes ahead as a result, which is of course a distortion of the market environment.
If schemes go ahead and make significant gains and provide future returns that are in excess of what might be expected, the taxpayer could have some rights to those. For example, in a prime executive housing site in central London developed thanks in part to the Government underwriting property market risks, the units may sell at multiples of expected initial prices, with vast profits for the developer. In the current situation, what would the taxpayer get? Foreign-owned energy companies want a pipeline stretching from our shores across the continent, which could well be underwritten by the provisions in the Bill. If we fund part of that as taxpayers, but the company makes significant long-term returns on the oil and gas, what should be the taxpayers’ share in that?
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
Do not the Government appear to be privatising the profits, but socialising the losses? How can that be fair?
Chris Leslie
That is indeed the approach taken in some of the underwriting provisions. Of course there can be circumstances in which that makes sense, perhaps to tip a project that is viable and in the national interest from something that might not happen to something that moves ahead in a way that benefits everyone.
The amendment does not even say that every contract should have a clawback provision: we are simply saying that the Treasury should be under a statutory obligation to give reasonable consideration to the insertion of clawback clauses in the contracts. That is the be all and end all of amendment 7 and I hope that the arguments are fairly straightforward. I look forward to hearing the Minister’s view.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I wish to speak briefly to amendment 12 and new clause 3, which are both in my name. Both relate to the reports that the Government propose in clause 3 should be annually produced, and to the transparency of the companies involved in this support for infrastructure, which I welcome.
Both the amendment and the new clause follow discussions that I have had with my right hon. Friend the Chief Secretary, who is now in his place on the Front Bench with his new ministerial colleague, whom I also welcome. The amendment and new clause are prompted by the fact that we often do not know the identities of the beneficial owners of the companies with which the Government do business. Companies often have shares owned by trusts or other companies based in countries that do not require disclosure of ownership, and I shall give a few examples.
The M6 toll road is owned by Midland Expressway Ltd, which is owned in turn by the Macquarie Motorways Group Ltd, which is in turn owned by Macquarie Atlas Roads International Ltd of Bermuda. It is controlled by Macquarie Infrastructure Group, but the identity of its investors and therefore of the owners of MEL remains unknown and undisclosed. In 2006, however, they paid themselves a £392 million exceptional dividend, and over six years made a return on their investment of more than 150% a year. This sort of profit at the public’s expense by we know not whom is not an acceptable arrangement, and I want the Government to be warned against it and to ensure that all owners are in the public domain.
Arqiva, as a private sector monopoly, is regulated by Ofcom. It runs all the transmission services for all UK terrestrial television broadcasters and for BBC Radio and most commercial radio services, owns two of the four digital multiplexes, supplies the Government with mobile and wireless communications and supplies three quarters of all police forces. It receives annual revenues of about £1 billion and makes annual losses of about £250 million. The ultimate owners of the company appear to be based in Bermuda, although we do not know who they are, and Arqiva has paid no corporation tax for four years.
Thames Water, the UK’s largest water supplier and a monopoly private sector company providing a public service with which the public therefore has no option but to deal was bought by Macquarie European Infrastructure Fund in 2006. The long-term debt held by the company was £3.4 billion and is now £7.7 billion. When the company was bought, Thames Water took on all the debt taken out by its owners to buy the company, which was more than £3 billion. To do that, it set up a company in the Cayman islands, Thames Water Utilities Cayman Finance Ltd, which is registered at an address at which are registered 18,000 other companies.
Over the past four years, Thames Water has made profits after tax of £314 million, £331 million, £225 million and £247 million, and has paid dividends of £398 million, £291 million, £271 million and £480 million, but in the last tax year paid no tax. In the previous year, it paid £500,000 in tax, and the year before that £16 million, yet it has a stable operating profit of about £600 million a year. I could go on. There are health care companies, and the company currently negotiating with the London fire brigade over the water to buy the old fire brigade headquarters looks as if it is based in the British Virgin Islands and the Isle of Man.
Simon Hughes
I shall make one short point and then give way.
The other really important thing—this is the purpose of new clause 3—is that we should require due diligence to be carried out in the same way as we require it for money-laundering prevention. The trouble is that it is not done properly and is not effective.
Hugh Bayley
On a point of order, Mr Gale. I apologise for interrupting the hon. Gentleman. Surely, the point of a Committee stage is to allow a Bill to be considered at greater length and in greater detail than is possible on Second Reading. Owing to reasons beyond your control, Mr Gale, we have less than half the time for debate in Committee that we had on Second Reading. We have not yet finished clause 1. All the other clauses will go unconsidered in Committee. Would it be in order, Mr Gale, for you to make a report to the Chairman of Ways and Means about how this Committee stage went, so that he and the Panel of Chairs can consider whether it is appropriate for us to have such short Committee stages on the Floor of the whole House?
Temporary Chair (Sir Roger Gale)
The Chairman of Ways and Means will undoubtedly read what the hon. Gentleman has said, but the proceedings are in order according to the programme motion agreed by the House.
Simon Hughes
I give way to the right hon. Member for Wentworth and Dearne (John Healey)
John Healey
The right hon. Gentleman is making a powerful case against predatory capitalism and tax avoidance that ought to commend itself to the Treasury Front-Bench team. If they will not accept his argument and amendments, will he press them to a vote?
Simon Hughes
I am conscious that the first of my amendments is technically deficient—which was my fault, not anybody else’s—but I hope that Ministers will accept the point and amend the Bill in the other place. I will press them hard—I know that I have support from colleagues in both other parties in this place—to try to get the change made. I am hopeful that the Chief Secretary to the Treasury, who is in his place, has heard the proposition and will be able to respond.
Sajid Javid
I beg to move, That the Bill be now read the Third time.
We have had an excellent and informative debate. I am grateful to everyone who has taken part in scrutiny of this important Bill and to members of all parties who have contributed as it has passed through the House, and I am grateful for the constructive, thoughtful and considered approach that has been adopted by most Members.
When the global crisis hit, the United Kingdom was among the hardest hit. Our recession was among the deepest, our deficit was among the largest, and our challenge to deliver sustainable recovery was among the greatest. The Government have set out a comprehensive strategy to deal with the challenges that we face. Fiscal, monetary, tax and structural reform are all playing their role to deliver our objective of lasting recovery and sustainable public finances. That strategy has reduced the deficit and helped to deliver near-record low interest rates.
As a result of the tough decisions that the Government have made and the responsibility and credibility of our long-term fiscal plans, the UK is a safe haven in a global debt storm. Ten-year gilt interest rates are now 1.9%, less than half what they were when we came to power. We are in a position to help unlock private sector infrastructure investment because of the strength and credibility of the UK Government’s balance sheet.
Mark Lazarowicz
May I briefly develop a point that I raised earlier? The Minister confirmed then that the Bill was a UK-wide measure, and that funding from the scheme would be provided for all parts of the UK from the Treasury. Will he now confirm that it will be possible for a private sector project in my constituency in Edinburgh to apply directly to the Treasury for support, without needing to go through the Scottish Government?
Sajid Javid
Yes, I can confirm that any application will go directly to the UK Treasury. If an application were made by one of the devolved areas, the Treasury would consider working with its counterparts in that area, but the decision would be made by the Treasury itself.
Simon Hughes
As my hon. Friend knows, my colleagues and I support the Bill strongly. May I give him a chance to deal with a point that he did not have a chance to deal with earlier? Will any investment made through the arrangements in the Bill allow the Government to track down the beneficial owners of any companies with which we do business, and to find out where they are based? May I also ask whether the due diligence rules that are set out in the Money Laundering Regulations 2007 will be applied, so that there will be a check on the interest rates, the creditworthiness and the ethics of the companies in question?
Sajid Javid
My right hon. Friend began to make his point in the earlier debate, but was unfortunately cut short. The Government are keen to ensure that when they analyse each application that will benefit from these guarantees, they establish the identities of the true beneficial owners of every scheme. Although that process is not included in what was deliberately designed to be a short Bill, much of the detail is included in the individual schemes. It will be in the UK guarantees scheme, and also in the programme that will cover the housing element of the guarantees, which will be published shortly.
My right hon. Friend also raised a point, in relation to one of his amendments, about the beneficiaries of the debt guarantees. He may have been alluding to the actual holders of the debt instruments. Although I understand and sympathise with his principle, this approach would not be very practical because debt instruments, particularly bonds, are tradeable and so, as with gilts, it would be hard to track the owners of those instruments.
Chris Leslie
I am glad that the Minister was addressing the important amendments tabled by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), but I wish to focus on transparency in respect of not only the beneficiaries, but the person receiving financial assistance. The Minister will know that, because of the knife, we did not get to my amendment asking for the details of the persons receiving some of this funding to be placed in the public domain. Will he give a commitment that that information—the details of those beneficiaries—will be made public?
Sajid Javid
The process of analysing each of the applications under the Bill will include a thorough due diligence process, which will examine the beneficiaries in each case. The Government will not issue a guarantee if they are not satisfied with the outcome of that due diligence process. It is not the standard procedure for the Government to publish all the information they look at when making decisions on guarantees, but the hon. Gentleman should be assured that this will be a very thorough process, which will have the assistance of outside sources if required.
Simon Hughes
It may be helpful if, at a date in the near future, friends from all parties might have an opportunity to talk through these things with the Minister when the other scheme on housing is published. May I alert him to the fact that the due diligence tests under the Money Laundering Regulations 2007 are, by objective assessment, not always effectively applied by the banks? So it is all very well having the tests in theory, but we need to ensure that the tests for this Bill are carried out in practice and that we can all see that they are effective and as stringent as they were meant to be.
Sajid Javid
My right hon. Friend makes a fair point, and I am more than happy to discuss this in further detail with him at a later stage.
John Healey
The Minister was boasting before the last interventions about near-record-low interest rates of 1.9%. What does he think about the judgment of that by the hon. Member for Wyre Forest (Mark Garnier), who was trusted and appointed by the Chancellor to be his party’s member of the LIBOR investigation committee? He said:
“The reason we have a low interest rate is because the economy is absolutely screwed.”
Sajid Javid
We have low interest rates because, for once, we have a Government who actually understand public finances. Less than an hour ago, the shadow Financial Secretary, in introducing his latest amendment, said that he was concerned about the use of taxpayers’ money—I had to have a little chuckle to myself, because what happened to that during 13 years of Labour government? Our national debt tripled. He also talked about clawbacks, and there is one clawback I would be interested to learn about. When the previous Government sold off our precious gold reserves, did they negotiate a clawback at that point? I do not think so.
Sajid Javid
I will plough on.
The Government are committed to delivering a sustainable, private sector-led recovery that is balanced across industrial sectors and across geographical regions. To achieve that ambition, the Government are committed to delivering world-class infrastructure. Firms will have access to the communications and transport networks that they need, wherever in the UK they happen to be, thus enabling Britain to compete on the world stage. Our national infrastructure plan sets out an ambitious but credible road map to deliver on that vision—a £200 billion pipeline of upcoming investment in key, large-scale projects, of which more than two thirds will, typically, be financed and delivered by the private sector.
A number of key infrastructure projects are close to starting construction but are being delayed because of the difficulties they face in securing the finance and investment that they require, and the housing market continues to suffer from an under-supply of homes in key areas. Even under favourable credit conditions, raising the amount of private finance required to deliver these projects and to meet these goals would be a challenge. However, the disruption caused by the instability of international financial markets and its adverse effect on long-term debt provision makes it clear that proactive, decisive action is needed now. The Bill will allow us to take that action and bring forward the investment that is needed.
As hon. Members will know, the principal aim of the Bill is to facilitate headline schemes for infrastructure and housing investment, to accelerate and bring forward significant investment in major UK infrastructure projects and to increase the number of homes being built and occupied. Through the Bill, guarantees provided by Government will help to ensure that when projects are struggling to access private finance due to adverse credit conditions they can now go ahead.
Mr Raynsford
What will be the success measures for the Bill? The Government have presumably set some measures by which its performance will be assessed. How many schemes and what type of schemes will go forward as a result of the Bill and how many will be required for it to be seen as successful?
Sajid Javid
That is a good question from a former Housing Minister—I am sure that he has all types of structures in mind, including housing. The Government cannot predict the applications we will receive under the schemes. As we said in Committee, how success is measured ultimately depends on how many projects the Government can help to finance. I am confident that many projects will come forward—they have already started to do so—and the requirement on the Government to report back annually will allow the right hon. Gentleman to judge the Bill’s success for himself.
Stephen Phillips (Sleaford and North Hykeham) (Con)
Is not the real point that the Government are taking action? Does my hon. Friend agree that it is that action that is important? We do not necessarily need to consider what the measures of success might be in the future, as the real point is that the Government are actually doing something, unlike the previous Government.
Sajid Javid
As always, my hon. and learned Friend makes a fantastic point and I agree wholeheartedly.
The Government have agreed in principle, and subject to strict approvals criteria, to make financial support available to infrastructure projects, using the strength and credibility of our balance sheet to support the investment we need. The Treasury and the Secretary of State already have common law power to issue guarantees, make loans, and give other financial assistance. In addition, in some cases, Secretaries of State have express statutory powers to support infrastructure. However, the Treasury does not have authority to incur expenditure in relation to guarantees on the scale that I have outlined. Moreover, Members will know that there is a long-standing convention dating back to 1932 that Government should not rest significant and regular expenditure under common law powers on the sole authority of general supply legislation. So, to achieve the crucial level of financial support required for key infrastructure projects, we need new primary legislation.
The legislation authorises the Treasury and, where appropriate, the Secretary of State, to incur expenditure for providing financial assistance. The Bill will allow the Government to support crucial investment in key areas of economic and public service infrastructure. That will include utilities, such as energy and telecommunications; transport, such as railways and roads; infrastructure to provide public services, such as hospitals and schools; and housing development to deliver much-needed homes. We estimate that up to £40 billion of investment in infrastructure and an additional £10 billion in housing investment could be accelerated under the UK guarantee scheme using the powers in the Bill. Importantly, we will put in place strict guidelines and eligibility criteria for the schemes to protect the taxpayer and ensure the Exchequer does not take on unacceptable fiscal risks.
In Committee, I was asked about application time frames. Let me clarify that the time frames are detailed in the scheme rules, not in the Bill. Any proposal that receives an infrastructure guarantee will, as a minimum, have satisfied the requirements to be nationally or economically significant; financially credible; good value for money for the taxpayer; not solely dependent on a guarantee to proceed; and ready to start construction within 12 months.
The projects we expect to back will be structured to minimise potential losses to the Exchequer, so there will be a minimal impact on public sector net borrowing as a result. The exception is under the extreme circumstances that a guarantee is called upon or other forms of financial assistance are provided. Furthermore, we will levy a commercial charge for the services received by infrastructure providers, ensuring that companies pay a fair price for the benefits they receive and taxpayers receive a fair price for any risk being taken.
We have designed the UK guarantee scheme to ensure that critical infrastructure projects receive the investment they urgently require.
Mark Durkan
Further to the Minister’s earlier clarification, will he assure us that any moneys committed or guaranteed to support an infrastructure project in a devolved area will be truly and fully additional to allocations under the Barnett formula, or will some subsequent adjustments be sought?
Sajid Javid
I assure the hon. Gentleman that the commitments for guarantees or other moneys used under the Bill will have nothing to do with the Barnett formula and that it will be true and genuine assistance from the United Kingdom Government for any area of the United Kingdom, including the devolved areas.
In conclusion, I believe that this is an important and much-needed Bill. It will allow critical infrastructure projects that are being held back by adverse credit conditions to proceed. It contains measures that will support growth, jobs and families, all at a minimal cost to the taxpayer. It will support the UK’s construction sector by providing access to finance for financially credible and high-value-for-money projects. It will help unlock the investment that the UK requires, it will help make the UK one of the predominant places in the world to do business, and it will support sustainable growth that is balanced across sectors and regions. I commend the Bill to the House.
Chris Leslie
Although the Opposition will not oppose the Bill on Third Reading, we do not think that the matter should rest there. It is not the most impressive Bill ever placed before this august Chamber. The Minister said that he was grateful for the excellent and informative debate we have had so far, but we had a pretty farcical two hours of scrutiny in Committee; we managed to debate only clause 1 and had no debate on a third of the amendments that were tabled. I think the Government showed a large measure of disrespect to the process of parliamentary scrutiny in the way they misallocated time for today’s discussions.
This legislation is very much in the frame of mind of the “wait and see” game we are used to seeing from the Chancellor and the Treasury team. They hope that something will crop up but are not exactly sure what. The Minister said that he hoped there would be some expressions of interest in something or other but that, ultimately, he cannot predict the future. My right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) asked the killer question: what will be the measure of success for the Bill? What answer did the Minister give? Essentially he said, “We cannot not really predict that, but we are confident that projects will come forward, so judge for yourself.” That is a totally embarrassing and appalling way of managing and advocating what should be a far more sophisticated approach to making public and economic policy.
The country deserves far better than the “wait and see” approach from Ministers. Surely there should be some semblance of projections for how the Bill will be deployed and some way of gauging what that interest is, rather than just putting it out there and hoping that something will happen. But of course we must not forget that the Bill is in large part a device to make it look as though the Government are actually busy. There is one effective sentence in clause 1 that covers the blushes of the accounting officers so that underwriting arrangements can span various financial years, but essentially this is makey-uppy, make-work legislation to make the Government look determined and busy in the Chamber.
Do not forget that we will have a growth Bill in due course, although we are still not clear what will be in it. The Prime Minister famously said that we cannot legislate for growth, so we will see what becomes of that Bill.
Stephen Phillips
The hon. Gentleman criticises the Minister for not laying out what the hon. Gentleman regards as the criteria by which the Bill’s success is to be measured. What are the criteria by which the Opposition will measure the success of the Bill, given that they are not going to divide the House on Third Reading?
Chris Leslie
We did not have time to discuss some of our amendments. We wanted far more information about the nature of the loans, underwriting and even grants being given to the private sector. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) tabled some important amendments that we did not get the chance to discuss in any great detail.
My amendment 5 simply talked about making sure that the public can know to whom the financial assistance is being given—a pretty basic tenet of transparency and accountability for public resources. The Minister could not say that that information would be in the public domain. We are not even necessarily allowed to know to whom the financial assistance is being given.
The Minister says that due diligence will be thorough as far as the Treasury is concerned, but what about the rest of us? Our constituents send us here to keep an eye on what the Executive are doing with public money. Without that basic information, how are we to judge the success of the legislation?
Simon Hughes
The hon. Gentleman knows that I share his frustration that we did not have more time to look at the issues in Committee. I suggest that that is not the Government’s fault. I remember many occasions when we had exactly the same problem under the Labour Government. Rather than blaming the Government, will he and his colleagues work with us to make sure that we have a system across Parliament—just a change in the rules that gives injury time if urgent questions or statements take up time for principal legislation? That is a way of solving the problem, and we would all be much happier as a result.
Chris Leslie
Of course we can have arrangements. There are perfectly available arrangements for making sure that there is time for legislation, but the Opposition do not control the timetabling of debates. I do not want to bang on about the procedure, but suffice it to say that it was inadequate.
We did not get a chance to debate the reporting mechanisms for what happens in terms of the financial assistance given to unknown persons. The hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) asked what measure we would have of the Bill’s success. I think that there should be reports not every 12 months, but every six months. If the issue is so urgent and there is a national emergency—if it is a case of, “Let’s get infrastructure going and press ahead with capital investment”—let us have far more frequent reports.
We do not know how much taxpayers’ money is on the line, how much is being committed per project, what form the financial assistance will commonly take, what type of companies will receive the financial assistance and even what type of infrastructure projects will receive such assistance. There are a lot of unknown unknowns in the legislation.
I hoped that we would have the chance to cover other key points. For example, I am particularly concerned about the availability of social housing. I mentioned earlier that in my city of Nottingham, not a single extra affordable social house was built in the last financial year. That is unacceptable.
Perhaps the situation will be made worse by the fact that the housing stock of certain local authorities has been transferred to housing associations, but quite a number of authorities either retain their council housing stock or have arm’s length management organisations —ALMOs—doing that. As I read the legislation, if someone’s local authority has not moved to housing associations, they will not be able to benefit from the underwriting as much as people whose local authorities have, because ALMOs and local authority-retained stock areas cannot be underwritten because of the borrowing constraints. There is a perfectly legitimate question—not a partisan question—about how we ensure fairness from one city to another and one area to another, but we did not get an opportunity to debate those issues.
Sajid Javid
I am pleased that the shadow Minister is now concerned about social housing for his constituents, because perhaps he can explain to them why, during his party’s 13 years in government, the number of social houses fell by a net 421,000 and the number of people on the social housing waiting list went up from 1 million to 1.8 million.
Chris Leslie
If the Minister were talking on the basis of having made some progress or having reached some level of achievement as regards housing policy, perhaps he would have the right to start throwing accusations about. Of course, far more could and should have been done in the past, but after two and a half years under his party’s Administration, where are we going on housing construction? According to the Construction Products Association, it is going through the floor; “free-fall” is the phrase linked to the CPA in this morning’s Financial Times.
John Healey
My hon. Friend is absolutely right. In particular, social housing construction, which was the subject of the Minister’s intervention, has plummeted by 25% in the past year. That is the direction it is going in under this Government.
Chris Leslie
Exactly; my right hon. Friend is right. Official data show that construction output is down by 11.6% on the year before, and the Construction Products Association predicts a 13% fall in infrastructure investment this year. When one starts to look at what is actually happening in the real economy and the real world today, it is clearly not about the announcements that Ministers bring to the Chamber as though they represent reality. The Bill may well go on to the statute book after this debate, but if the Government are relying on it alone, we remain concerned that the infrastructure schemes for housing, schools, child care, transport and so forth which should be proceeding will not move forward as effectively as they should.
There are other concerns that the Minister has not addressed, perhaps because the Government do not have an implementation plan that they can allude to. For example, they have not talked about state aid clearance. The Bill says that financial assistance can be given to particular industries and private sector ventures in operations, in maintenance and in repairs, but perhaps to the exclusion of other companies. What is the Government’s approach to state aid clearance from the European Union? If they hit such a barrier in the EU, will they simply say, “Well, another month, another quarter, another year has gone by and we didn’t get state aid clearance”? How are they approaching those barriers, and when will they report to Parliament about how they are going to tackle these issues? Those are more obstacles that they do not appear to have addressed in any way.
Mark Durkan
Does my hon. Friend perceive that under the Bill there is a risk of the UK Government granting guarantees to companies in a way that would mean that those companies could gazump other projects that had been developed, perhaps in devolved areas, and come in on a pretty anti-competitive basis, not only constraining the choices of devolved Administrations but ruining the chances and prospects of companies that were working on projects and making good offers in those areas?
Chris Leslie
That is the sort of point that should have arisen if we had had the opportunity properly to scrutinise the Bill.
Most people observing the Government and the workings of Parliament from outside assume that there is a level of sophistication in the Treasury and that the people there must have a level of intellect and capability that is somehow superior to the rest of us. They do not realise that when one looks inside the Treasury it is clear that those people are crossing their fingers, holding their breath, and making it up as they go along. This back-of-a-fag-packet approach to legislation simply will not do. This country’s growth prospects have been worsened by this Administration’s policies. As the former US Treasury Secretary, Larry Summers, wrote in the Financial Times this morning, economies that become stuck in a vicious circle of austerity and stagnation will find it ever harder to deal with their deficits and stabilise public finances.
The Office for Budget Responsibility’s out-turn figures show that the Government are cutting capital expenditure by more than £6 billion more than the previous Government planned. Combined with other austerity measures, this has resulted in a collapse in infrastructure investment. More than 119,000 construction sector jobs have been lost so far, and according to the Construction Industry Training Board the Government are spending £8 billion more in benefits for the 188,000 unemployed construction workers.
Borrowing is not falling, but rising this year—it is up 22% in the first five months of this financial year compared with last year. This Government are borrowing not to pay for investment and positive development, but to pay for the failures of their economic plan and to cover the costs of considerable increases in welfare in particular.
We need an alternative that focuses on action today and that understands that we need to introduce—really introduce—some of the capital schemes, roll up our sleeves and get on with them. The 4G mobile spectrum auction will take place soon and we hope that it will yield at least £3 billion. Let us put that money towards 100,000 new homes and put some serious investment into infrastructure. Let us build on some of the successes that we know Britain can deliver on infrastructure.
There is a complete mismatch between the Government’s words and their actions: our infrastructure is deteriorating, not improving; construction work is down, not up; and hundreds of thousands of young people are languishing on benefits while businesses delay the investment needed to maintain their competitiveness and market share. That is just not good enough and much more is needed than the vagaries of this Bill.
Mr Raynsford
The Minister opened his Third Reading speech by claiming that we had had an excellent debate. If only! He must have had his tongue in his cheek when he said that. We have had a shockingly truncated debate in which only one group of amendments has been properly debated. The second group received only a perfunctory opportunity for debate, and that was cut short by the timetable at 9 pm. That left no time for any debate on three of the Bill’s four clauses. Frankly, that is not an adequate performance and I hope that conclusions will be drawn in the other place.
When I intervened on the Minister to ask what success criteria had been set to assess the Bill’s effectiveness, after a rather telling pause in which he had difficulty identifying success criteria, he referred me to the provision for annual reports, thereby neatly highlighting the fact that we had not had a debate about the frequency of the reports. I tabled an amendment to have those reports at six-monthly intervals, in order to make the point that the urgency for action to stimulate investment in infrastructure required a more accelerated timetable than the leisurely one proposed by the Government. Of course, we had no chance to debate that amendment, because it related to clause 3, which we never reached.
As my hon. Friend the Member for Nottingham East (Chris Leslie) rightly emphasised, the Minister’s response to our request for a definition of the success measures was essentially one of “Wait and see”. Frankly, this country cannot afford to wait and see. We are facing a serious economic crisis, which is more acute in the construction sector than in almost any other sector of our economy, and the serious problems affecting the construction industry are impacting more widely on the whole economy.
Urgent action to stimulate construction investment is absolutely vital. In theory, the Government are aware of that, because the Bill’s explanatory notes start with reference to the need for fast-track legislation. The notes ask:
“Why is fast-tracking necessary?”
They go on to say:
“The financial assistance is designed to assist infrastructure projects that may find it difficult to obtain private finance…The Government understand that there are currently commercially and economically viable infrastructure projects that are stalled because they cannot secure private finance. The timing of the UK’s proposed financial assistance is currently unclear, but the evidence indicates that there are projects that might be waiting only for finance before they can proceed to the construction phase.”
That may well be correct. We share the Government’s stated objective of bringing forward and accelerating the necessary investment. However, if that is the case, why can the Government not name a single project that stands ready and waiting to receive the benefit of the financial guarantees offered by the Bill?
In July, Lord Sassoon, speaking for the Government, referred to £40 billion-worth of projects that were ready to go by the autumn. I put it to the Minister that we are now in the autumn. If we are to see a significant proportion of that £40 billion of investment reasonably soon, we need to know very soon what those projects are. I put it to the Minister and to all Government Members from both coalition parties that it is not good enough to talk about good intentions but fail to come forward with concrete, practical proposals, particularly when they have said that the projects are shovel-ready and that it is only the lack of financial support from the private sector that is holding them back. They have said that the Bill is here to unlock that potential.
I repeat my question to the Minister: what are the success criteria? We believe that one measure of success would be a considerable increase in the investment in infrastructure. Back in 2009, in the depths of recession, investment in infrastructure was running at about £11.5 billion. That was the highest level for 20 years and was an indication of the previous Government’s commitment to infrastructure investment as one of the measures to deal with recession. Investment in infrastructure is now down to £8.6 billion and further falls are forecast. That is the record of the present Government. They have presided over a catastrophic fall in construction activity. Infrastructure, which was one of the few parts of the construction sector to survive the worst of the recession in the early years, is also falling. The industry is desperate for assistance.
Stephen Phillips
The right hon. Gentleman refers to the record of the present Government, but it was under the previous Government that house building fell to its lowest level since 1923 and 1924. Why does he not welcome the action that this Government are taking in the way that it should be welcomed?
Mr Raynsford
The hon. and learned Gentleman clearly did not listen to the contribution of my right hon. Friend the Member for Wentworth and Dearne (John Healey), who pointed out that house building levels have gone down further under this Government. The levels are now at their lowest since the 1920s and are lower than when the Government came to office.
The sad thing is that when the Government came to office, the housing sector was recovering. [Interruption.] It was recovering. If Government Members look at the statistics, they will see that in—[Interruption.] They clearly do not want to listen to the statistics. In the second quarter of 2010, there were more than 30,000 new starts in the housing sector. That was a recovery from the depths of recession. Since then, that level has never been matched. In the latest quarter, the number of starts was down to 23,000—a level that is consistent with an output of less than 100,000 in any one year. That is a shameful record, for which this Government are responsible. I say to Government Members that, for all their bravado and posture, their record is a shameful one and will hang around their necks as the British electorate come to see just what a mess their failed policies have left.
In conclusion, this is a Bill that we cannot object to in principle, because investment in infrastructure and housing is vital. Sadly, it is a Bill that, on the evidence that we have heard tonight, will not deliver what the Government say they would like to see and what Opposition Members would dearly love to see: increased investment in infrastructure and housing. The country needs it and the industry needs it. Sadly, I fear that the Bill promises it, but will not deliver it. Only time will tell, but the Government’s failure to respond adequately on the question of the success criteria speaks volumes about how this is a triumph of spin over substance.
John Healey
I had not planned to speak on Third Reading, but I have been moved to do so by how seriously the Committee stage was curtailed this afternoon. For the entire Committee stage on the Floor of the House, we have had less time than a single sitting of a Public Bill Committee. I put it to the Economic Secretary that proper scrutiny would have done a great service to the objectives of a Bill as important as this, on which the Government are rightly looking to build a consensus in the House and beyond. I say that not least because those with an interest, who will have to finance, plan, deliver and make decisions about the big infrastructure projects that our country needs, could have had the chance to give evidence to the Public Bill Committee. That would not have held the Government up for long, but it would have made the Bill and the debate on it a great deal better.
We did not reach some amendments and new clauses today, but I hope that the Economic Secretary and his colleagues in another place will seriously consider amendment 3, tabled by my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), about the frequency of reports; amendment 12 and new clause 3, tabled by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), on transparency, due diligence and the tracing of beneficial owners; and new clause 1, tabled by my right hon. Friend the shadow Chancellor, on social and affordable housing. The Economic Secretary gave the House the impression that he cared about that matter, so I hope he will take that suggested provision seriously.
I do not just say, as my right hon. Friend the Member for Greenwich and Woolwich did, that I can find little to object to in the Bill; I positively welcome the aims behind it, and I will welcome action should it follow from the Bill’s provisions. It makes sound sense to make the private sector balance sheet support the public sector balance sheet and bring the two together, especially at a time when public finances are limited and normal lending is constrained.
The principles and aims of the Bill are sound, but the question remains whether the Government can put schemes in place in a way that is simple enough and speedy enough to ensure that the necessary action follows. The Economic Secretary will have to forgive me if I have a certain amount of scepticism about that. After all, it is almost a year since the Prime Minister promised
“an all-out mission to unblock the system and get projects under way”,
and almost two years since the Government published their first national infrastructure plan. It is almost two and a half years since they set up the Infrastructure UK unit in the Treasury, which the Economic Secretary has mentioned today, with its remit to
“provide a stronger focus on the UK’s long-term infrastructure priorities and meet the challenge of facilitating significant private sector investment”.
It has been so long, and there has been so little action, that business, investors and industry are all understandably losing confidence in the Government’s ability to act. That was reflected in the CBI’s annual infrastructure survey published recently, which concluded:
“The message to Government is a wake-up call that businesses in Britain are looking for action and we haven’t seen any yet.”
It found that business and industry were less confident about the Government’s ability to drive investment into crucial transport, energy, water and waste projects than they were a year ago.
I hope that the Bill will be part of a proper rebalancing of the British economy, and that the Economic Secretary will recognise that investment is currently heavily skewed towards London and the south-east. I hope he will take seriously his own interest in seeing a cross-party consensus because, in the end, long-term infrastructure projects do not correspond to our political cycle—they require cross-party consistency, confidence and consensus. If the Bill can contribute to that, it will build a sound basis for that consensus for the future.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Business without Debate
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text
Her Majesty’s Revenue and Customs (Nurseries)
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
I applied for this debate before Parliament adjourned for the conference recess, and my application was triggered by the decision by Her Majesty’s Revenue and Customs to close eight in-house nurseries on its estate, without any debate, consultation or negotiation. Things have moved on significantly during the intervening period, but many old and new questions remain unanswered so this debate remains pertinent and necessary.
I know that the Minister is committed to child care. On 17 October 2011, he told the House that the Government’s strategy on child care and work involved
“encouraging parents into work by promoting safe, good quality child care and providing incentives and wider options to encourage more employers to support child care provisions for their staff.”—[Official Report, 17 October 2011; Vol. 533, c. 686W.]
I fear, however, that the Government’s commitment has not cascaded down to senior civil servants in HMRC, and I will explain why by providing a whistle-stop tour of events.
In late August, HMRC advised that it had unilaterally decided to close eight nurseries that were part of a relationship between HMRC, Mapeley Estates Ltd, which owns some of the HMRC estate, and Bright Horizons, the actual nursery provider. As hon. Members will understand, my immediate concern was for the welfare of the 86 families whose children attended the custom-built nursery inside HMRC East Kilbride in my constituency. In my mind’s eye, I imagined that HMRC would have done its homework, and that I would be presented with incontrovertible evidence that the nursery was grossly inefficient, or that the number of children using the facility was too low to sustain in-house provision.
It was, therefore, with some trepidation that I wrote to HMRC to find out its reasons for the proposed closures. I received a response from Mr Mike Falvey, the chief people officer at HMRC, who—for reasons that will become obvious—probably holds the most inappropriate job title in the civil service. In his letter dated 5 September, Mr Falvey explained that the current contract between Bright Horizons and Mapeley originally ran for five years, but had been extended twice and could not be extended again. He advised that a further contract needed to be retendered, which HMRC had chosen not to do.
Jonathan Evans (Cardiff North) (Con)
I congratulate the hon. Gentleman on securing this debate. Early in the process he describes, he and I discussed this matter, primarily because my constituents were also affected and were involved in some of the changes. Does the hon. Gentleman think that the period of notice given was truly appalling—three months to locate young children elsewhere—and that inadequate thought was given by HMRC about how it should try to help a commercial solution?
Mr McCann
I agree entirely with the hon. Gentleman, and I think he will be even more appalled as I continue with my remarks. Not only did Mr Falvey advise that a future contract needed to be re-tendered—something HMRC had chosen not to do—he further advised that there were only eight nurseries for more than 300 HMRC offices, and that HMRC did not provide the same child care service for all staff. Finally, he advised that the number of parents using the nurseries was declining and, most importantly, that only a third of spaces were taken by children of HMRC staff.
There was only one problem: none of that information—provided by a civil servant who is paid more than the Prime Minister—was accurate. I found out several weeks later that the deal between Mapeley and Bright Horizons—the hon. Gentleman might want to listen carefully to this point—contained a provision for an extension of an additional year, to November 2013, which was never disclosed to me by civil servants. I also found out that, even if the eight in-house nurseries run by Bright Horizons were closed by HMRC, it would still have in-house nurseries, including a large one in the constituency of my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown). Finally—I consider this to be the pièce de résistance—I found out that 63 of the 86 children at the nursery in my constituency were the children of HMRC staff.
Lilian Greenwood (Nottingham South) (Lab)
My hon. Friend sets out a powerful case. I understand that the nursery at Castle Meadow in my constituency currently has a 76% occupancy rate, that more than half of its users are HMRC staff, and that its outdoor play area has only recently been upgraded. Does he agree that that calls into question the account hon. Members have been given of a service in decline?
Mr McCann
My hon. Friend is absolutely correct. It also calls into question the decision taken—the account I was given was riddled with similar inaccuracies.
Armed with the knowledge that the HMRC rationale for the closure in my constituency was fallacious, I called Mr Falvey and explained that the arguments he had presented were plain wrong. I asked whether, in the light of reality, he would agree to my modest request to review the decision in full or in part. The chief people officer refused point blank to do so. To digress ever so slightly, it is not difficult to see why HMRC came 36th out of 37 Government Departments last year in the industrial relations league table. Perhaps it is going for 37th place this year.
After that setback, I contacted the Minister’s office to arrange to discuss the matter, feeling strongly that senior civil servants could not dismiss the concerns of elected Members of Parliament in such a shoddy manner, particularly as their decision to shut the nurseries was obviously based in full or in part on erroneous information. Alas, the Minister refused to meet me, claiming that the issue I wanted to discuss was operational. No further explanation was provided by his private office.
When hon. Members are running out of cards to play, politics can be frustrating. However, if you do not mind an “It’s a Knockout” analogy, Mr Speaker, I played my joker and applied for an Adjournment debate just before hon. Members packed up and left for the recess. Whatever gods exist, be they mortal or otherwise, my debate topic was picked for this evening. However, I did not want to wait until this evening—I wanted a resolution—and had a duty to look after my constituents and their children, so I once again pressed HMRC and set up a call with Lin Homer, chief executive of HMRC. Miss Homer was previously chief executive of the UK Border Agency and permanent secretary at the Department for Transport, where she worked on the west coast main line contract.
I spent 45 minutes on the telephone with Miss Homer on 21 September, only to find that the reason HMRC wanted to close nurseries had nothing to do with the reasons set out in Mr Falvey’s 5 September letter. I was advised for the first time that the decision was being made to rationalise the HMRC estate to save money on rent.
Greg Mulholland (Leeds North West) (LD)
I thank the hon. Gentleman for giving way, for co-ordinating the letter and for showing leadership. Does he agree that one strange thing with regard to the estate is that the buildings will remain empty? That is another reason why the closures need to be looked at again, and why there should be a moratorium on them until we get the real facts so we can make a proper decision.
Mr McCann
I agree entirely with the hon. Gentleman— I shall expand on that in a moment.
I was advised for the first time that the decision to rationalise the HMRC estate was based on saving money on rent. Despite my reasonable request for a review and my suggestion on how to keep the nurseries open under new arrangements, Miss Homer confirmed that the closures would go ahead regardless.
The new information did not make any difference to the nursery in my constituency and others, as hon. Members have said. I shall suspend disbelief to explain why. The nursery contract is between Mapeley Estates and Bright Horizons. HMRC provides the space for free as part of its now-defunct commitment to family-friendly policies. It planned to shut the nursery in my constituency and leave 86 families—63 of them HMRC families—searching for new child care provision. What was to happen to the vacant space in East Kilbride, on which the taxpayer would continue to pay rent? Absolutely nothing. HMRC would continue to pay the full rent to Mapeley until at least 2015, the only difference being that a wonderful, fully equipped, custom-built nursery would lie empty, gathering cobwebs. Mr Speaker, you could not make it up.
In view of the new information, I made a further request to meet the Minister, and this time my request was granted. Lo and behold, a decision has now been made to keep the nursery in my constituency, and another in Cardiff, open.
Jonathan Ashworth (Leicester South) (Lab)
I pay tribute to my hon. Friend’s tenacity in pursuing this issue and I am, of course, delighted that the nurseries in East Kilbride and Cardiff will remain open. But the one in Leicester’s Saxon house will not remain open, even though it is oversubscribed and there are 15 staff on maternity leave who will want to use the nursery when they return to work. Does he agree with the hon. Member for Leeds North West (Greg Mulholland) that the Minister should announce a moratorium on these closures, otherwise children will face upheaval and staff will be made redundant?
Mr McCann
I agree entirely, and the rest of my contribution will explain why that is something that the Minister should actively consider.
The decision to keep two nurseries open was confirmed to me when I met the Minister and chief executive on 3 October. I have some remaining issues that I wish the Minister to address. The first is the package offered by HMRC to keep East Kilbride and Cardiff open. It is based on my original proposition to Lin Homer, offered on 21 September, that the accommodation could and should be utilised as a nursery until at least 2015, under new arrangements. However, that offer was made in ignorance of the knowledge that a clause already existed that would enable the eight nurseries to remain open for a further year, to November 2013. I therefore make a formal request to the Minister this evening to review the package offered on the grounds that his civil servants apparently did not know that the clause to extend the lease existed. This new information should allow all the nurseries to operate for a further year on the current terms and conditions.
My second request to the Minister relates to the behaviour of his senior civil servants. On 5 September, for different reasons, I asked the Minister of State in the Cabinet Office, at Cabinet Office questions, for a review of the civil service code. The Minister of State advised that the Minister for the Cabinet Office and Paymaster General had recently issued the first steps in the civil service reform programme, which sought to enlarge the area of accountability for senior civil servants. Mike Falvey, HMRC’s chief people officer, provided me with false information about why HMRC proposed to shut the eight nurseries. HMRC has denied that it had knowledge of the clause between Mapeley and Bright Horizons to extend the life of all eight nurseries for a further year, although that denial fits uneasily with the chronological order of events, which would have us believe that Bright Horizons attended a meeting in May 2012, was told that the nurseries would be shut in November 2012, and nobody mentioned the extension clause. I find that difficult to believe.
In any event, the chief executive presided over this debacle until 3 October, when there was a damascene-like change of heart, curiously coinciding with my meeting that day with the Minister. Does the Minister deem the actions of his civil servants to be incompetence or an attempt to mislead a Member or Members of Parliament? If it is incompetence, what is the Minister going to do about it? If it was an attempt to mislead, what is he going to do about it? I represented civil servants of all ranks as a full-time trade union official for most of my working life. Had a junior civil servant shown the same degree of incompetence or provided false information to a senior civil servant, they could have expected the sharp end of a capability or disciplinary process and, more often than not in my experience, that would have led to dismissal. Senior civil servants cannot be insulated or protected from the consequences of their behaviour. People expect their parliamentarians, acting on their behalf, to be given accurate information by Departments when it is requested, especially about decisions that have been made.
This debacle was presided over by two of the Minister’s most senior civil servants, and I have concluded that had it not been for the backing of the Public and Commercial Services Union, which represents HMRC staff, and the campaign in my area led by the families and children to keep their nursery open, and—I am utterly convinced—had this Adjournment debate not taken place, given its ability to shed light on the fundamentally flawed process that HMRC has followed, the nurseries thus far reprieved would not have been reprieved.
It is necessary that all the nurseries involved now be given the same reprieve. I am most grateful, therefore, that the procedures of the House of Commons have come to the rescue, and so too are the 86 families in my constituency. That said, those same 86 families, and countless others, were left in limbo, worried and put under tremendous stress over their children’s future child care arrangements. That matter cannot be swept under the carpet, so I hope and expect that the Minister will answer the direct questions that I have put to him.
The Exchequer Secretary to the Treasury (Mr David Gauke)
I start by congratulating the hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) on securing this debate and acknowledging his efforts to pursue this issue on behalf of his constituents. I know of the equally determined efforts of my hon. Friend the Member for Cardiff North (Jonathan Evans) to represent his constituents, and I also acknowledge the other hon. Members who contributed this evening.
As we are all aware, HMRC’s core purpose is to collect tax and distribute benefits. That is what it was set up to do and where its efforts and resources need to go. Of course, it also has a duty to be a responsible employer to its staff, and I appreciate that the decision to close eight on-site nurseries has been controversial, but this provides an example of the difficult balance that public services often need to strike between their public obligations and their responsibilities to their own staff.
As alluded to by the hon. Member for East Kilbride, Strathaven and Lesmahagow, I am not responsible for the day-to-day management decisions of HMRC, which is a non-ministerial Department, but I am the Minister to whom it is accountable for its core duties, which is why I am responding tonight. For the record, I think that HMRC’s management decision was broadly the right one, although I agree that its execution of that decision could have been better handled and has caused regrettable upset and uncertainty among the parents of the children in the eight nurseries.
The hon. Member for East Kilbride, Strathaven and Lesmahagow, my hon. Friend the Member for Cardiff North and other hon. Members have made several important points, and I will deal with them, but it is important to understand why HMRC made the decision it made. As I understand it, the on-site nurseries were originally set up in a small number of locations where Her Majesty’s Customs and Excise and the Inland Revenue were experiencing recruitment difficulties among younger workers. The nurseries helped them to attract and retain parents of young children, at a time when there was no other provision for child care in HMRC’s legacy organisations.
Over the years, the number of these nurseries has declined, and across the eight nurseries that we are discussing, which are run by the private nursery provider, Bright Horizons, there has been a decline in both the take-up of places overall and in the proportion of places used by HMRC staff—I shall return to that point later. In fact, across all eight nurseries, only just over one third of places are currently taken up by HMRC employees. I recognise, however, that this was not the case in East Kilbride and Cardiff, where more than half the spaces were taken up by the children of HMRC staff, as was also the case with the Nottingham site.
HMRC made an operational decision, however, to end and not re-tender the contract for these nurseries, for perfectly understandable reasons. First, in line with Government objectives, HMRC’s estates strategy is to reduce the size of its footprint and either to hand back unwanted space to its landlord or to make more productive use of the estate that it retains.
Mr Gauke
The hon. Gentleman rightly said that we had a meeting about this matter; indeed, Lin Homer was present for that meeting. He should therefore be aware that Lin Homer repeatedly said that it was possible that the site in East Kilbride could be used for other purposes before 2015.
Mr McCann
I will be absolutely clear: I have given the Minister evidence that I have been given completely misleading information by civil servants in HMRC that was not true from day one. I am further saying to him that the space in East Kilbride will be empty until 2015. That was confirmed to me in a telephone conversation by the chief executive, Lin Homer, on 21 September.
Mr Gauke
We are talking about a somewhat hypothetical situation because, as the hon. Gentleman well knows, the site will remain used as a nursery. However, I have to tell him that Lin Homer corrected him on a number of occasions in the meeting we had. She did not say that the site was not going to be used until 2015; what she said was that there were no immediate plans for reuse, although she was not ruling out reuse of the site before 2015, which is a fairly substantial distinction. That is what the hon. Gentleman was told. If he did not understand it, that is regrettable, but that is what he was told repeatedly in that meeting.
To continue, in the 18 months to October 2012, HMRC closed 140 buildings and rationalised a further 44. That has resulted in nearly £47 million of savings annually and reduced HMRC’s estate by around 193,000 square metres—about 16% of its total estate over that period. The spaces left when the nurseries close will be used for HMRC’s core purpose. Retaining space for on-site nurseries simply does not fit into that strategy.
Secondly, given the low nursery occupancy by HMRC staff, the justification for HMRC retaining the eight nurseries is no longer as strong as it was. That is particularly true now that HMRC, like other public sector employers, provides child care vouchers to all eligible staff, which they can use to pay for child care in any nursery they choose. The vouchers cover staff in more than 300 HMRC offices, which is far more than the eight affected by the closure of the nurseries. In making the decision not to re-tender the contract with Bright Horizons, HMRC researched the local areas and was confident that other nurseries had spaces at prices comparable to, and often lower than, those for the places in the Bright Horizons nurseries.
Thirdly, and most importantly in my view, HMRC was providing space to the private sector nursery provider free of both rent and utility bills. I do not believe it is sustainable for a Department, in effect, to provide a direct subsidy to a profitable private company. During these times of austerity, public bodies have a duty to make more productive use of the resources that they are paying for. I believe that HMRC’s decision was the right and responsible one, but I also think it could have gone about it better.
We have heard the criticism that HMRC did not provide sufficient notice to parents. I agree that more notice would have been preferable, but HMRC was honouring the contract between the estates provider and Bright Horizons, and the contracts between Bright Horizons and the parents, which were for three months’ notice. HMRC, in effect, gave Bright Horizons six months’ warning that the contract would end in November 2012, but Bright Horizons chose not to tell parents earlier than the three months’ notice provided for in their contracts. HMRC could have told its own parents earlier, but it might then have been liable for compensation claims from Bright Horizons.
The hon. Member for East Kilbride, Strathaven and Lesmahagow has made public statements to the effect that HMRC deliberately gave short notice in order to curtail debate. That allegation is inaccurate and unfair. HMRC was, as hon. Members would expect of a public body, seeking to honour the terms of legal contracts. It is also important to observe that Bright Horizons was given time to seek alternative accommodation for its nurseries, but that it made a commercial decision not to relocate and instead to close these eight nurseries. That was not HMRC’s decision: it was down to Bright Horizons. However, it is perfectly understandable, bearing in mind that it would have needed to pay market rent for other properties and that the take-up of places was, I understand, declining.
We have heard questions about why HMRC did not extend the contracts for another year or two, or at least extend contracts in the nurseries with high HMRC occupancy. This was a single contract for all eight nurseries, so it was not possible, within the contract, to extend any individual nursery alone. It was a question of all or none. Also, at the time that the decision was taken, HMRC honestly believed that the contract could not be extended. This was not a contract directly with HMRC, but one between Bright Horizons and HMRC’s landlord, Mapeley. HMRC was not party to all the details. In fact, it later transpired that HMRC’s original belief was incorrect, and that the contract could have been extended by another year for all eight nurseries. But, in any event, at no point did Bright Horizons ask for an extension to the contract, when HMRC opened discussions with it in May 2012.
It is highly regrettable that HMRC did not have all the correct information, but that does not alter the reasons for it wanting to end the on-site nursery provision. Nor does it mean, as the hon. Member for East Kilbride, Strathaven and Lesmahagow has alleged, that a senior HMRC official deliberately misled him. I simply do not see any evidence to support that allegation.
Mr McCann
Time is evaporating fast, and I do not want the Minister to finish without having time to answer my direct questions. However, on the point that he has just made, I was provided with reasons on 5 September by Mike Falvey, the chief people officer, yet when I spoke to Lin Homer on 21 September, a completely different reason was given. Can the Minister explain that? Will he also answer the two questions that I put to him in my speech?
Mr Gauke
Let me make as much progress as possible. I believe that the letter that the hon. Gentleman received in early September was based on a genuine understanding by HMRC of what the situation was. It related to a contract between Mapeley and Bright Horizons. In his subsequent conversation with the chief executive of HMRC, however, she set out more fully the context and the reasons for making the decision.
I want to turn to the hon. Gentleman’s suggestion that HMRC cannot reuse the nursery space for any other purpose. That is simply not correct. What HMRC cannot and should not do is commit, long term, to giving part of its estate over to nursery provision when it needs the flexibility to use that estate for its core purpose, and when it cannot do that, to negotiate giving it back to its landlord.
Things have moved on since this Adjournment debate was granted, and I think that HMRC has reached a better outcome. It has shown itself to be responsive to staff concerns and to the representations from the hon. Member for East Kilbride, Strathaven and Lesmahagow and my hon. Friend the Member for Cardiff North. When staff asked HMRC to consider transitional support, it swiftly put a package of such support in place, including some short-term financial relief for parents facing higher nursery costs and flexible working arrangements to allow parents to search for and settle their children into a new nursery.
HMRC also reopened discussions with Bright Horizons and asked it to consider whether it would enter into a different commercial arrangement at the three nurseries at which HMRC staff accounted for at least half of nursery places, under new contracts. I am pleased that Bright Horizons has agreed to a new and separate temporary lease in East Kilbride and in Cardiff, but it has made it clear that it does not see a commercial case for the third site, in Nottingham. The new lease for East Kilbride and Cardiff will run until August 2015, at which point Bright Horizons would need to relocate the nurseries if it wished to continue. HMRC will not end the lease before that time, although Bright Horizons will be able to close or relocate the nurseries at any point before August 2015, provided that it gives HMRC four months’ notice. That is more than the customary three months’ notice.
I know that this arrangement does not cover all the sites affected, but I believe that it is a sensible outcome. It provides a reasonable package of support for parents affected at all eight nursery sites, and two and a half years’ more nursery provision at Cardiff and East Kilbride. The long-term outcome is the same—
Petitions
Wheel Clamping
VAT on fuel for the Air Ambulance Service
Written Ministerial Statements
(11 years, 6 months ago)
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Ireland Loan (Revised Agreement)
(11 years, 6 months ago)
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The Financial Secretary to the Treasury (Greg Clark)
I have today placed in the Libraries of both Houses revised copies of the agreement providing a credit facility to Ireland of £3,226,960,000.
This agreement was negotiated between HM Treasury and Ireland and originally signed on the 22 December 2010 following enactment of the Loans to Ireland Act, which received Royal Assent on 21 December 2010.
Parliament will be aware that in July 2011, following the euro area’s commitment to lower the interest rate on their loans to Ireland, the Chancellor committed in principle to lower the interest rate on the UK’s bilateral loan to Ireland. The Chancellor took the view that the UK had been unable to lower the interest rate on its loan to Ireland before that point without effectively subsidising the higher interest rates applicable to the European financial stability facility (EFSF). Changing the rate now ensures that all of the benefit goes to Ireland and not to higher interest rates paid to euro area Governments.
The UK’s loan agreement has now been revised to reflect this change in the interest rate, in which the UK has more than covered its costs of funds. The new rate that will apply to each tranche of the loan represents the UK’s cost of funds plus a service fee of 0.18 percentage points per annum. The UK’s cost of funding is defined as the weighted average yield on gilt issuance in the six months prior to the disbursement of a tranche.
The new interest rate will apply retrospectively to those tranches of the loan already disbursed, to ensure Ireland receives the full benefit of the lower rate. The rates, which apply to the tranches already disbursed on 14 October 2011, 30 January 2012, 28 March 2012 and 1 August 2012, are 3.373%, 2.559%, 2.546%, and 2.534% respectively.
The revised loan agreement also contains further minor amendments, which include taking account of changes made to Ireland’s agreements with other financial support facilities. These amendments maintain the effect of the provisions in clause 7 of the original bilateral loan agreement, on prepayment and cancellation of the loan.
HM Treasury has provided a further report to Parliament in relation to Irish loans as required under the Loans to Ireland Act 2010 alongside this statement.
DCLG (Conference Recess Work)
(11 years, 6 months ago)
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The Secretary of State for Communities and Local Government (Mr Eric Pickles)
I would like to update hon. Members on the main items of business undertaken by my Department since the House rose on 18 September.
Freezing council tax for hard-working families and pensioners
On 8 October, the Government announced new support to local authorities to enable them to freeze council tax and keep taxpayers bills down for the third year running. Freezing bills again will really help hard-working families and those on fixed incomes, such as pensioners with their cost of living.
The Government will set aside an extra £450 million to help freeze council tax bills in England. The support for local authorities means that taxpayers living in an average band D home in England could save up to £72 compared to a 5% rise in council tax.
The £450 million will be made available, through a new grant scheme, to local authorities which decide to freeze or reduce their council tax next year. If they do, councils, police and fire authorities in England will stand to receive £225 million of funding in both financial years 2013-14 and 2014-15, equivalent to raising their 2012-13 council tax by 1%. Funding will also be provided to devolved Administrations as a Barnett consequential.
Over the last two years the Government have provided grants of around £2 billion to help freeze council tax. A freeze in council tax in 2013-14 would represent a real terms cut of around 2% and a fall of 9% in real terms over the past three years.
For 2013-14, the Government will propose to lower the local authority tax referendum threshold to 2%, to protect against excessive council tax rises. My Department will set out further detail on the excessiveness principles in due course; the final principles are subject to the approval of the House of Commons.
Handing power back to local communities
We are determined to put people back at the centre of local decision making and give them the opportunity and power to shape the future of their area.
On 21 September, the community right to bid, created by the historic Localism Act, came into force, allowing communities to “stop the clock” on the sale of valuable local assets, giving them time to put in a takeover bid and preserve assets for the benefit of the community.
This new right gives voluntary and community organisations and parish councils the opportunity to nominate an asset to be included on a list of “assets of community value”, pausing the sale of a successfully listed asset for six months. On 4 October, my Department published advice for local councils to ensure they have all of the information they need to support local communities in their right to bid.
On 5 October, my Department launched a new community shares unit to help local people claim a stake, and become part-owners of, treasured local assets and services. The new unit aims to grow the community shares market with the ambition of launching over 200 share issues over the next three years.
Helping troubled families turn round their lives
On 8 October, my Department confirmed that the troubled families programme is on schedule to meet the Prime Minister’s pledge to turn around the lives of 120,000 troubled families by 2015. Over 40,000 claims have been made for up-front “attachment fees” worth over £100 million as part of the groundbreaking payment-by-results programme, meaning councils are committed to working with one third of families in the first year of the three-year programme.
Under the deal with local authorities, Government will pay councils up to £4,000 per eligible family if they reduce truancy, youth crime and antisocial behaviour or put parents back into work. The Government’s £448 million three-year budget is drawn from across seven Departments in a bid to join up local services dealing with these families on the front line.
Tackling unauthorised development
On 10 October, my Department announced proposals to give councils greater freedom to stop unauthorised traveller sites being set up and prevent long, drawn-out stalemates like Dale Farm.
The proposals will allow councils greater freedom to choose when to use “Temporary Stop Notices” in relation to caravans which are used as main residences and are in breach of planning control and any person guilty of this offence is liable to a fine of up to £20,000 (or unlimited on conviction on indictment).
Under the current system councils are constrained as to when they can use these powers against caravans which are main residences. A small minority have sought to abuse the planning system, this proposal will assist local councils in taking immediate effective action and enable them to safeguard their local area from the emergence of unauthorised sites. A technical consultation on these proposals will be published in due course.
Improving homes and getting empty homes back into use
On 27 September, my Department published statistics that show bringing thousands of empty properties back into use has unlocked over £63 million of additional funding that is directly benefiting local communities through the successful new homes bonus scheme.
In total, local authorities have brought nearly 38,000 long-term empty homes back into use over the past two years—helping to tackle the housing shortage and providing a roof over the heads of hard-working families across the country.
On 28 September, my Department confirmed nearly £1 billion to 41 councils over the next two years to bring over 86,000 homes up to a decent living standard while at the same time offering a boost to local businesses up and down the country. The investment secures the continuation of the decent homes programme until the end of this Parliament.
Helping first time buyers
We are determined to help people meet their aspirations for a home of their own and to help first time buyers take their first step on to the property ladder. The Firstbuy scheme has proved a huge success, with developers reporting more than 8,000 reservations by the end of August this year.
On 11 October, my Department announced that £40 million will go to 41 developers to help 2,500 first-time buyers this year. This is the first allocation from a £280 million pot to extend the Firstbuy scheme, which is set to help a total of 27,000 first time buyers.
The £280 million boost to Firstbuy forms part of the housing and growth package announced in September, and is one of a range of measures designed to get Britain building and kick start the economy.
Delivering locally-led regeneration
Since its designation as a new town in 1967, Milton Keynes has been subject to central Government involvement. On 2 October my Department announced proposals to transfer planning functions, currently undertaken by the Homes and Communities Agency, back to Milton Keynes council. This will enable the council to plan more strategically in the area and allow local residents to have a greater say in how that land is developed.
The Department has made a major contribution to the redevelopment of the Olympic park and surrounding areas in east London. On 1 October, the London Legacy Development Corporation was given powers to become the local planning authority for this area, with the planning decisions team of the Olympic Delivery Authority and two planning staff from the London Thames Gateway Development Corporation. The London Legacy Development Corporation is now fully equipped to secure the regeneration of its area—its mandate under the Government’s Localism Act 2011.
Preserving Ironbridge Gorge
On 4 October, my Department announced £12 million to preserve and protect the world heritage site at Ironbridge Gorge. My Department will pay a total of £2.2 million during 2012-14 for the stabilisation of Ironbridge Gorge and provide a further fund of up to £9.8 million in 2014-15, subject to approvals.
Each year the Ironbridge Gorge draws in over half a million tourists from near and far to the area and pumps £20 million into the economies of Telford and Wrekin and the wider Shropshire area. Funding will be used to preserve the site which is under threat from landslides and slippage that could damage and even destroy the historic site and tourist industry it supports.
Commemorating the first world war
To commemorate the 100th anniversary of world war I, on 11 October, the Prime Minister announced that my Department, alongside the Department for Education, would invest £5.3 million to give pupils and teachers from every maintained secondary school in England the chance to go on a tour of the great battlefields and take part in remembrance ceremonies on the western front.
This flagship scheme, part of the centenary education programme, will allow pupils to learn at first hand about the sacrifices made by troops and help ensure that this significant aspect of our history and the impact it had on our nation’s culture and heritage is passed on for generations to come. A procurement process will be run to decide on a single tour operator before the visits start in spring 2014, running until spring 2019.
Copies of the associated press notices and documents have been placed in the Library of the House.
HMS Caroline
(11 years, 6 months ago)
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The Minister of State, Ministry of Defence (Mr Mark Francois)
I am pleased to inform the House that I am today laying a departmental minute, which proposes the transfer of HMS Caroline and its fixtures and fittings to the National Museum of the Royal Navy (NMRN).
HMS Caroline is considered to be the second most important ship in the UK National Maritime collection after HMS Victory; she is the only surviving veteran afloat of the Battle of Jutland (1916). The ship is a significant example of early 20th century engineering and shipbuilding, constructed of riveted steel plate with three-inch belt armour reducing to one inch at the keel. Laid down on 28 January 1914 at Camel Lairds yard in Birkenhead, she was commissioned into active service on 17 December of that year making her the fastest built major warship to date. She was propelled by two Parson’s steam turbine engines which remain onboard as the world’s only “in situ” example of the engines which revolutionized maritime propulsion. HMS Caroline has been moored in Belfast since January 1924, just over two years after the state of Northern Ireland was established and she has built a considerable social history as a witness to the province’s story. As a depot ship and Royal Naval reserve training ship she has benefited from continual occupation and some 85% of the vessel is in its original form.
The ship, currently berthed in Belfast, is in an increasingly fragile state and was decommissioned on 31 March 2011.
The contents of the ship known as the “Caroline Collection” were the subject of a separate gift (valued at less than £250,000) made in July 2011. The National Museum has already assumed responsibility for ongoing running costs of the ship. Following the gift, the NMRN intend to apply for Heritage Lottery funding in order to restore the ship as a heritage attraction in Belfast.
The proposed transfer would enable the NMRN to access external funding sources in order to restore and preserve this historically significant ship as a heritage attraction in its current location in Belfast following an agreement between the Department of Enterprise, Trade and Investment in Northern Ireland and the National Museum of the Royal Navy.
The detailed arrangements proposed envisage that the NMRN would assume responsibility for the restoration and preservation of the ship. I expect the new arrangements to be in place by 1 April 2013.
First Minister of Wales (Functions as Privy Counsellor)
(11 years, 6 months ago)
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The Deputy Prime Minister (Mr Nick Clegg)
In a number of situations advice is by convention given by a Minister of the Crown to Her Majesty in respect of the exercise of her functions.
The majority of Her Majesty’s functions in respect of which she receives advice from a Minister of the Crown relate to the making of appointments and the use of the royal prerogative. Her Majesty receives advice from the Secretary of State for Wales in respect of the exercise of her functions in relation to Wales. By convention, the Secretary of State for Wales has taken the advice of the Welsh Ministers in areas which are devolved in Wales before advising Her Majesty.
Following a formal request from the First Minister of Wales, the Secretary of State for Wales and I (as Lord President of the Council) have agreed that the First Minister of Wales will henceforth advise Her Majesty in respect of the exercise of her functions which are within devolved areas of competence.
These are:
The appointment of the chief inspector and inspectors of education and training in Wales under section 19 of the Education Act 2005;
Functions in relation to further and higher education in Wales under the Education Reform Act 1988; and
The appointment of fire inspectors in Wales under section 28 of the Fire and Rescue Services Act 2004
The First Minister of Wales will advise Her Majesty so long as the office holder is a member of the Privy Council. The Secretary of State for Wales will continue to advise Her Majesty in respect of her other functions in relation to Wales.
No formal order is required to give effect to the new arrangements. However, an amendment to section 19(6) of the Education Act 2005 will be required to allow the First Minister to advise Her Majesty on the appointment of the chief inspector and inspectors of education and training in Wales. The UK Government will work with the Welsh Government to effect this change.
Immigration Rules (Temporary Concessions)
(11 years, 6 months ago)
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The Minister for Immigration (Mr Mark Harper)
I am today announcing the introduction of concessions to the immigration rules for Syrian nationals lawfully in the UK.
In the light of the ongoing violent conflict occurring in Syria I have decided that the UK Border Agency should operate some discretion to enable Syrians legally in the UK to extend their stay here.
Syrians in the UK with valid leave (or leave which has expired within the last 28 days) will be able to apply to extend their stay, or switch into a different category from within the UK (with some restrictions) rather than being required to return home first. Those applying would need to meet the requirements of the relevant visa category, pay the appropriate fee, and adhere to the normal conditions of that category—no access to public funds, for example. If a required document is not accessible due to the civil unrest in Syria UKBA may apply its discretion and the requirement to provide that document may be waived where appropriate.
These concessions will remain in force for five months from today. The Government continue to monitor the situation in Syria closely in order to ensure our response is appropriate and that any emerging risks are addressed.
West Coast Main Line
(11 years, 6 months ago)
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The Secretary of State for Transport (Mr Patrick McLoughlin)
On Wednesday 3 October 2012, I announced the cancellation of the inter-city west coast franchise procurement following the discovery of significant technical flaws in the way the franchise process was conducted by the Department for Transport.
I immediately ordered two independent investigations to be undertaken urgently. The first, led by Sam Laidlaw, who is the chief executive of Centrica, lead non-executive on procurement across the Government, and lead non-executive member of the departmental board is examining what happened during the west coast procurement and why, with the aim of establishing the lessons to be learned. The second review, led by Richard Brown, chairman of Eurostar, is focusing on any lessons to be learned for the upcoming franchising programme.
I also announced, that the ongoing franchising programme should be paused, pending the outcome of the two investigations. This included pausing the live competitions on Essex Thameside, Great Western and Thameslink.
This morning at 7 am, I have made a further announcement to the London stock exchange, that the Department for Transport is commencing negotiations with Virgin Rail Group with a view to them remaining as operator of passenger services for the west coast main line for a short period, of around nine to 13 months while we run a competition for an interim franchise agreement. This interim agreement, which would be open to any bidders, will then run until a new long-term west coast franchise is ready to commence.
I shall update the House further, later today.
Grand Committee
(11 years, 6 months ago)
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Arrangement of Business
(11 years, 6 months ago)
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The Deputy Chairman of Committees (Baroness Gibson of Market Rasen)
My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.
Housing Benefit (Amendment) Regulations 2012
(11 years, 6 months ago)
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Lord Freud
That the Committee do report to the House that it has considered the Housing Benefit (Amendment) Regulations 2012.
Relevant documents: 6th Report from the Joint Committee on Statutory Instruments, 7th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, these regulations introduce the underoccupancy reductions for working-age social sector tenants. They also support the implementation of the annual CPI uprating of local housing allowance. The regulations are regarded as being compatible with rights under the European Convention on Human Rights. This policy was debated at length during the passage of the Welfare Reform Act. On top of that, many noble Lords came to the briefing session that I ran for MPs and Peers before the summer Recess. I am grateful for their input. I do not intend to go over old ground. There is nothing new in the regulations that we did not debate during the passage of the Act. The purpose of today is to look in detail at the working of the regulations.
As I have said, there are two main purposes to the regulations. First, they make two changes to support implementation of the measure to uprate the local housing allowance by CPI from April 2013. The current provision to review existing LHA cases on the anniversary date of the claim will be abolished from January 2013. Instead, all claims will be reviewed annually on 1 April when the new LHA rates are set. This brings LHA in line with annual changes to other benefits. There will also be provision to review a case if the rent changes throughout the year, so that tenants will not have to wait until the annual review date.
Secondly, the regulations introduce restrictions to housing benefit for working-age claimants who are living in the social rented sector and occupying accommodation larger than their household size requires. The same size criteria that are applied to claimants living in the private rented sector will be used to determine whether accommodation is being underoccupied. These changes will result in a 14% reduction to housing benefit for those underoccupying by one bedroom and a 25% reduction for those underoccupying by two bedrooms or more. The average reduction in housing benefit will be £14 per week for those affected.
The reasons for reform are clear. As noble Lords are aware, this is part of a package to contain housing benefit expenditure. Importantly, there are more than 250,000 households living in overcrowded accommodation in the social rented sector in England—they need more space. We cannot justify paying housing benefit to cover the cost of extra bedrooms while others struggle in cramped accommodation. People who rent from a registered social landlord or local authority have in large part had their rent paid in full through housing benefit. This is not the case for those who receive housing benefit for a privately rented property. They have to make hard decisions about what is affordable to them and where to live, as do people who pay their own rent in full. It is time for those in the social rented sector to make similar choices. Some tenants may look to meet any shortfall in housing benefit by increasing their hours of work or taking in a lodger.
Crucially, this change will provide an impetus for landlords to manage their stock more effectively and help us address the real shortage of homes. There are approaching 1 million extra bedrooms in the social sector that are being paid for by housing benefit for working-age customers. This is indefensible. It is a waste of valuable housing stock. Interestingly, there is already evidence within the industry of a change in management of stock since the policy was announced. Seven local authorities and 11 housing associations in the West Midlands have come together as the West Midlands Making Best Use of Stock partnership and agreed to pool at least 150,000 homes to allow tenants easy access to properties across the region. The partnership hopes that this will enable people to find a house with the exact number of bedrooms that they need in order to avoid underoccupation.
Landlords across Merseyside have also developed a region-wide home swap scheme in response to the size criteria. Twenty housing associations and five councils are taking part; they own a total of 107,000 homes between them. Of these homes, 2,000 have been identified as underoccupied and they believe that another 5,200 could be underoccupied.
We expect to see positive behavioural changes among housing benefit tenants in the private rented sector, following our earlier reforms. Some claimants have said that they will look for a job to make up any difference between their rent and housing benefit and others will look for more affordable tenancies. This supports our view that the changes are both proportionate and measured.
During the debates on the Welfare Reform Act, I made a number of commitments to noble Lords and I will take a moment to update you on these issues. I know that some are concerned because the regulations do not define what constitutes a bedroom, including the room size. However, in practice, others take a different view. After discussions with the National Housing Federation, the Riverside Housing Association and others, we have concluded that most welcome the flexibility that comes with not including in the regulations a definition of what constitutes a bedroom. Some landlords made it clear that defining this in legislation would introduce a system that might involve them having to measure every room. So we are leaving it to landlords to specify the size of property, as they are best placed to do that. We expect the information that they provide to be reflected in the level of rent charged and to match what is agreed in the tenancy agreement.
In previous debates I said that we would think about costs to landlords as part of our engagement with other departments. We are working through the financial impacts on local authorities with the Department for Communities and Local Government as part of the new burdens protocol. That department has also funded the Chartered Institute of Housing to produce guidance for landlords. Making it Fit was published in May and included information on how to model and assess any risk to rental income. My department has met local authorities and advice organisations during the development of this policy. We have also produced comprehensive guidance to help them prepare for the changes in April next year. This includes a toolkit with model letters, leaflets and posters designed to heighten awareness among claimants.
On the next issue, we are adding £30 million to the discretionary housing payments fund from 2013-14. This is aimed at helping claimants living in significantly adapted accommodation and foster carers. I said that I would keep a watchful eye on this. We are currently talking to local authorities and are considering carefully how best to allocate this money. A decision will be made later in the year. I will also keep the discretionary housing payments funding under review.
There has been much debate over whether there should be specific exemptions from the underoccupation reductions for different groups. A presiding principle in the development of this policy has been simplification. For a policy to be administered easily and simply there must be few exceptions.
I have heard concerns that we are relying too heavily on the DHP fund and that there is not enough in the fund to help all those who will be affected. But we do not expect DHPs to be available to everyone who sees a reduction in their housing benefit due to underoccupation. The additional £30 million is targeted at those in adapted accommodation and foster carers. We have added a realistic sum based on what we can afford.
Finally, I should like to confirm that as far as the research timescales are concerned, the monitoring and evaluation will be for two years from April 2013 to March 2015. Initial findings will be available in 2014 and the final report in late 2015. We hope to start the formal commissioning process in the next month or so. We currently envisage that the evaluation will include small-scale primary research with a range of social landlords in local authorities across England, Scotland and Wales. Different types of authority, including a range of urban, rural, county and district local authorities, will be included. These will be selected to cover a range of different housing market demands so that we can explore the effects of the size criteria effectively.
Lord McKenzie of Luton
My Lords, I thank the Minister for his introduction to these regulations, which as he has explained cover two main areas: the introduction of size criteria into the social rented sector and the process for uprating the local housing allowance by CPI. I should say at the start that we oppose the regulations, particularly those related to underoccupation. The introduction of the size criteria— I think that we should adopt the Lord Best terminology and call them the bedroom tax—via the Welfare Reform Bill was hotly contested and rightly the subject of government defeats in your Lordships’ House. As noble Lords will recall, the hammer of financial privilege was ultimately deployed by the Government to get their way on the bedroom tax, and a £13 million top-up to the discretionary housing budget paid for by increased pain on the bedroom tax does not adequately address the strong reservations that are being expressed. Nor does it compensate for the misery that these regulations will bring to potentially hundreds of thousands of households. As the Minister has explained, the impact assessments make it clear that the regulations could affect 660,000 housing benefit claimants living in the social rented sector. They could mean an average loss of housing benefit of £14 per week, which is £700 a year.
Of course underoccupation in the social rented sector should be tackled, and many councils have a variety of schemes to do this. We would certainly support the arrangements and partnerships referred to by the noble Lord in presenting the regulations, but seeking to tackle it by curtailing housing benefit, as these regulations provide, is simply not acceptable. Indeed, it does not address the situation where under-occupation as defined is most prevalent—among older tenants. One of our objections to this policy is the lack of practical alternatives that tenants face. The uprated impact assessments make it clear that there is generally a surplus of three-bedroom properties and a lack of one-bedroom accommodation, so in many areas there are simply insufficient smaller properties for tenants to move into. I would also ask the Minister how far the Government think it reasonable for someone to move and thus uproot their family from existing networks of support—100 miles, 200 miles or perhaps 300 miles. If someone has to leave a job to move to a smaller property, will that be treated as good reason for the purposes of a claim for JSA, and does the Minister have any data on the average cost of moving home?
How practical does the Minister consider some of the various options that are laid out for tenants to consider, such as making up a shortfall from income? What other income does the Minister have in mind which is not taken into account in a housing benefit calculation in the first place, and which would of course gradually have a 65% taper in any event? Does the Minister specifically include disability benefits in this consideration? If it is savings, perhaps the Minister can tell us what the average working-age household savings are and how many weeks’ shortfall in housing benefit at £14 a week they would cover? It is suggested that moving into work or increasing working hours would be a solution. So far as moving into work is concerned, what happens if there is no work, and why does the Minister consider that the incentives to come in with universal credit are insufficient of themselves to encourage people into work? For how many households does the application of the WCA determine that somebody is not fit for work?
Lord Kirkwood of Kirkhope
My Lords, perhaps I may make a brief intervention at this stage. It is right not to dredge back over the painful territory of the policy intent, because we discussed it at great length in another context earlier in the year. We should use our time this afternoon to look at some of the detailed implementation questions that arise from the policy. Actually, we should be thinking about getting a housing policy for the United Kingdom that is worthy of the name when trying to sort some of this out.
People have been asking me some of the practical questions about this and I just do not know the answers. I am nervous that we are getting towards a single implementation date, 1 April 2013, when there will remain a great deal of uncertainty on the back of the substantial change. If people get substantial change and are not prepared for it, they are even more badly affected by it. We must avoid that at all stages, if we can.
Has the department any confidence in working with local authorities and local housing associations? I was interested to hear the Minister talk about the work done in Liverpool and the Midlands on the home swap direct scheme. That is entirely healthy and welcome. However, if we had taken this at a slower pace and worked with local authorities and local housing associations across the length and breadth of the United Kingdom, a lot of that would have been in place before 1 April. I have no confidence, even if everyone works hard—and I am sure that they are working hard—that we will get proper home swap direct-type arrangements in place across the United Kingdom.
Are there sufficient co-ordination mechanisms in place between the DWP and the other constituent nations of the United Kingdom—Scotland, Wales and Northern Ireland? Presumably, they are making their own arrangements in their own ways. Is the department confident that there is a proper exchange of information and swap of best practice, and that the circumstances north of the border, and in Wales and Northern Ireland, will be as fit for purpose as they can be, come 1 April next year? That is a very important question.
Discretionary housing payment distribution is an important element of that. I understand the Minister to have just said that decisions will be taken later about how it is to be rolled out. However, I say to him that only last week someone in a local authority tenancy came to me. He is in a two-bedroom property, had some adaptations made to the premises and signed a letter of undertaking to the local authority to say that he would stay in that property for a one-year or two-year period. Therefore, he is locked into that tenancy and cannot move. He was prepared in principle to consider moving but he is now caught both ways.
That is just one example of, I am sure, many detailed questions that are arising which would have been better addressed if we had had a more measured transitional phase in the policy’s implementation. Following our important debates on the Bill earlier in the year—it is now an Act—does the department have any further research on the availability of single and two-bedroom properties? Is the map any clearer as regards where the accessibility lies so that people can make a decision about whether there are appropriate smaller properties into which to downsize? It would be reassuring to know that some work had been done and that people were being helped to understand where to start looking for some of these properties.
I concur with what the noble Lord, Lord McKenzie, said about the disability issue. When looking at the impact assessment and the briefing that we received last week, I missed the significance of that. I am not a disability expert; a lot of people know a lot more than I do about this technical and politically very important problem. I was taken aback by the extent to which the client group will be affected by this policy change. I did not know that. I wish that I had known it during the passage of the Bill.
Lord Kirkwood of Kirkhope
Yes, it is two-thirds. I would not have guessed that. That is new and it is deeply concerning. I hope that the Minister will help us to understand what is being done about that.
During the passage of the Bill, the noble Baroness, Lady Hollis, kept referring to rurality. Another point that was driven home to me over the summer, coming from south-east Scotland, is that people are panicking about where they should begin to look for appropriately sized accommodation if they are to avoid the penalties that these policy changes introduce. There are no real alternatives in many cases, which is a problem.
A lot of us are relying heavily on the review. I was reassured that the Minister committed himself to conduct a proper review working with the noble Lord, Lord Best. I think that he made that commitment on his own initiative. Therefore, we are entitled to be confident about the review. However, if the review shows that the policy intent has not been delivered in some of these important areas, which I am sure are causing concern to other Members of the Committee as well as to the noble Lord, Lord McKenzie, and me, I would like him to reassure me that action will follow as a result of the review, so that this is not an academic piece of work that says, “On the one hand or on the other hand”, but will say, “Actually, we did not think that would happen. The culture has not changed in the way that we expected it would and therefore we are going to do something different and perhaps even change the policy”.
Of course, housing benefit needs to be constrained; it is a very big number and it is getting bigger. However, I think that we are grabbing at this policy. Irrespective of whether you think that the policy is right or wrong, the process is being carried out far too fast. Doing it all on one day—1 April next year—is a very unsafe thing to do in my view. I hope that we get this right and that the review will lead to some amelioration of some of the problems that are bound to come out of the woodwork when these policy changes are implemented.
Baroness Turner of Camden
My Lords, I support my noble friend’s analysis of these regulations. As the Minister said, we have already debated this issue in detail when we discussed the Welfare Reform Bill and many of us voiced our objections at that time. Nevertheless, I still oppose what is proposed in the regulations because it seems to me that, when they are implemented, very vulnerable people may be placed at an enormous disadvantage.
There are particular problems in certain areas. I am particularly concerned about the area of London in which I live. At one time there was a fair amount of reasonably priced property available in that area. However, that is no longer the case. As soon as a large house becomes available, developers move in and turn it into flats. Houses that once housed two or three families are now filled with masses of people living in the same block. It is all enormously charged for. A number of people are making an enormous amount of money. I am told that a small two-bedroom flat in the area in which I now live would cost £500 a week. When you remember that the median rate for employment in London is £26,000 a year, how do people on those rates afford that kind of rent?
I know that the regulations will not take account of the local rents only. On the other hand, the fact that these kinds of development are going on in large parts of London and people are making quite a lot of money out of them means that the amount of housing available at reasonable rents has decreased because the developers move in and make a lot of money. As a result, there is a shortage of the kind of housing that would normally be available for people on much lower incomes.
The problem is that people now in receipt of benefit may find that they are underoccupying—that they do not need two bedrooms and so on—and they may have to move. If people have to move, that is a great disadvantage for them. In particular, it is a disadvantage for disabled people, who usually have some support mechanisms in the area in which they live—they may belong to groups that look after their needs and so on. To have to move is a great disadvantage to them. It is a great disadvantage to them if they want to work, and some of them do want to work. The Government are already closing the Remploy factories in which some of them could work. If they have to move, there is nowhere for them to obtain suitable employment. That is a great disadvantage.
For all these reasons, I believe that the regulations before us this afternoon are to the disadvantage of numbers of people whom we ought to protect. My noble friend has already indicated that in some detail and I do not want to repeat it, but I emphasise that I am not at all happy about these regulations. I am not the only one—so are many people and so are the organisations particularly concerned with disabled people, which have already made representations to us on these grounds.
Lord Best
My Lords, the Minister is well aware of my disquiet, and I am unlikely to be satisfied in relation, in particular, to underoccupancy—the bedroom tax. I know that he has made some important efforts and I think that he is going to be able to be reassuring on one or two points that noble Lords have raised. I am sure that we will hear that full-time students will not have to lose their bedroom and regain it by a convoluted process while they are away at university. Also, I think that we now have a date when it will be the case that taking in a lodger will not mean that benefit will be cut by the amount received in rent, which will be helpful to some people. These measures are not going to change the world, but they are good things to do and I am grateful to the Minister for putting them in place. There may be more.
I want to talk about discretionary housing payments, which are the way out when you can see that a situation is quite untenable and any reasonable person would say, “Of course, in that particular case, this whole business is a complete nonsense and we must allow those people to stay where they are”. I am now getting the kind of letters that hundreds of MPs are going to get when this really big change gradually dawns on the world outside. I shall read to the Committee from a letter and will give the kind of reply that I would like to be able to give and explain the difficulties I have in giving it.
There is a woman in a relatively rural area of Norfolk who lives with her husband. They are not of pension age. He is a bit disabled. She looks after him, and she also looks after her elderly mother in the village. She sees her mother in the morning, at lunchtime and in the evening. She does a great job with her 81 year-old mother. She is in a three-bedroom council house. They have been there for 23 years and have brought up their children, who have gone. She uses two bedrooms because she and her husband do not sleep in the same bedroom. She will be paying another £25 a week because she is deemed to have two empty bedrooms.
The council has said that it has some one-bedroom flats in the nearest town, which is 16 miles away, that it may be able to move her into, but not now because the one-bedroom flats in the town are rather precious. Later, it might be able to move her in, but in the mean time, she will have to stay where she is. She says, “I can’t afford the extra £25 a week bedroom tax. What am I to do?”. In my letter back to her, I should like to say that there are things called discretionary housing payments. I am hinting at it but what hope can one give to people in such circumstances? It would clearly be completely foolish to move her out, although she cannot afford to stay; she cannot afford the extra £25 a week. However, moving her 16 miles away would mean that her mother had to be looked after by social services at considerable cost and her husband will not be properly housed—it is a nonsense. I should like to be able to say that the local authority should have the opportunity, where anyone can see that it would be sensible, to fill that gap and pay the bedroom tax, enabling her to stay where she is.
We know about discretionary housing payments that take care of some of the local housing allowance and the private rented sector. We know about the sums that relate to the total benefit that people can get from the universal credit—the £500 limit. We know about these other aspects of using discretionary housing payments. However, I cannot find anywhere any money for discretionary housing payments to pay the bedroom tax, except in respect of two special categories. These are thoroughly commendable, although I was startled to hear that the money was taken from the rest of the bedroom tax payers.
There are two kinds of special case. One covers adapted properties that have been physically changed for the people who live there. It would be a nonsense to move them out because there is a spare bedroom. It would cost everyone an arm and a leg. The other exception is a case where there are foster children. They do not count as part of the family but, obviously, they must have a bedroom. There is £30 million a year, which will continue indefinitely, for those two exceptions. That is great but they are very restricted categories. My middle-aged couple in Norfolk would not fall into either group.
I am afraid that noble Lords and, in particular, Members of the other place will all get such e-mails and letters, so they should be prepared. I had another letter from someone with two daughters, one aged 11 and one aged 13. One daughter is severely disabled. She needs a very large bed and, therefore, her own bedroom. However, the two girls are expected to share because they are aged under 15 and are therefore underoccupying by having two bedrooms. That will cost the family £14 a week from their disability allowance. They do not have £14 a week; they have great difficulty in getting by on what they do have. Everyone says that they must stay where they are. This is where a discretionary housing payment could come in. However, as I read the numbers I can see nothing. What does the Member of Parliament say in replying to his constituent?
I hope that the Minister has up his sleeve the opportunity to put in place more discretionary housing payments to get us through what I suspect will be rather a large number of cases in which anyone would agree that it would be best to let people stay put. I do not think it requires more legislation. We will not get the results of the very important, thoroughgoing research—I have congratulated the Minister on it—until some way down the line. Then we will see how things are working out. If it is not already the case, I advise the Minister to talk to his Treasury colleagues and provide a bit more discretion for local authorities to pick up cases that otherwise will just be hopeless. I have no idea how we and the people concerned will be able to cope.
Baroness Hollis of Heigham
My Lords, I declare an interest as chair of Broadland Housing Association, which spans Norfolk as a major traditional housing association. I also congratulate the Minister. We appreciate the reviews that he is seeing through and respect his respect for the evidence. It is welcome to be working with a Minister who is evidence-based. We appreciate that and it should be recorded.
Despite what the Minister said, these regulations are not about overcrowding. The people who are overcrowded and the people who are underoccupying are two different populations and in two different sets of places—they do not match. If the Minister were really serious about the issue of overcrowding, he would actually be looking, as some of us have tried to do, at the underoccupation among pensioners who, of course, are the biggest source of underoccupation. Although I am not suggesting that we should do that, if the Minister were serious about this, he would not confine his efforts to families, many of whom have children.
Secondly, the regulations are not about treating social housing in the same way as private rented housing. This is the second line that the Minister has offered us. What we have learnt over the last six months is that, far from the local housing allowance pressing down private sector rents, which was the mythology offered to us throughout the past year, the reverse is happening. Private rents have soared because, as my noble friend said, no new housing is being built. Private renting is not becoming a transitional tenure but a longer-term tenure. Demand is going up as a result, as are rents, as will the housing benefit bill. So, far from this exercise pressing down housing benefit, I am confident that we will see housing benefit in the private sector rise, because there are not three housing markets in this country, there is one. As new building has stopped in the owner-occupation sector and the social rented sector, the pressure on the private rented sector will increase, rents will go up and, as a result, the housing benefit bill will rise.
So neither of these two things are at issue. This is not about matching underoccupation and overcrowding— it does not fit. The Minister knows the statistics— they do not fit. It is not about following the example of the private rented sector, where rents are soaring and HB bills are likely to go up.
Like others, I do not want to repeat the arguments aired at great length in Committee. I have not been persuaded by anything since that the Minister was correct in his analysis. As a chair of a housing association whose tenants will lose the best part of £1 million in forfeited benefit, I have some questions for the Minister. What advice will he give me, given that his colleagues in DCLG have ensured that, instead of having £42,000 on average for a grant for a new house, it is now down to £16,000? As we cannot build without a grant of a minimum of £26,000, we cannot build. For the first time in 40 years my housing association is not building any new property. Given that, we have no possibility at all of “balancing our stock” to build the new single-bedroom properties that are pivotal to this scheme. As a result, our tenants know that they are faced with only our existing stock and occasional re-lets.
Occasional re-lets, when they come up, if they are attractive and in the right places, are for the most part pursued by pensioners. However, in future, pensioners who would like to leave a three-bedroom house and move into a one-bedroom flat or bungalow, will not be able to access any re-lets in our villages. This is because people currently in two-bedroom properties who are in the client group affected by the benefit cuts will now have to move to any available one-bedroom property against their will. I have yet to discover how that in any way adds to the sum of human happiness.
Many of our tenants have functional illiteracy and may therefore be re-classed as vulnerable, with the result that we will enjoy their housing benefit direct. However others, such as couples with children, will find it hard to manage; they will have debts, the banks will lean on them, and although I am trying to get them into credit unions, that may not be possible as they do not operate throughout Norfolk. They may well run into arrears. What would he have us do? If we let the arrears run, that will affect the estate, other people will stop paying their rent, we will go into the red, our books will not balance and we will go into special measures. The alternative is to evict, but the local authority will hope that we do not, because those families will go into bed and breakfast accommodation. This may be 10 miles away, the children will have to leave their schools, the younger ones may be bed-wetting, they will all be crammed into one room, and the cost to the public purse will actually increase because the cost of a bed and breakfast will be something like £300 per week, as opposed to the rent for their current accommodation at about £70 or £80 per week. So we have made that family deeply unhappy, broken up the pattern of managing their lives and very fragile incomes, and put them into accommodation at greater cost to the public. However, as they are a family they are entitled to be rehoused, so the local authority will ask us whether we can help. We will reply that the only property we have available is the same three-bedroom accommodation from which they were evicted because they could not afford to pay for it.
Baroness Lister of Burtersett
I do not think that either the noble Lord, Lord Shipley, or I want to follow the very powerful case made by my noble friend Lady Hollis. We have rightly focused on the bedroom tax but first I want to refer to the CPI uprating, following a point that was raised with us by Crisis. During the passage of the Welfare Reform Bill the noble Lord, Lord Freud, said that,
“if local housing allowance rates are clearly out of step with rents, they can be reconsidered”.—[Official Report, 14/12/2011; col. 1323.]
That was a welcome statement. I understand that there have been discussions between the department and Crisis, and perhaps other groups, in which it has been suggested that in 2014-15 the Government intend to review the method of uprating used. It would be helpful if the Minister could tell us how this review will take place. Will it be a formal review? Will it be part of the more general review of what is happening to housing benefit? What sort of discrepancy between local housing allowance rates and local rent would be deemed out of step? It would be helpful if the Minister could give us that information.
I turn to the bedroom tax, about which much has already been said by noble Lords. Like the noble Lord, Lord Kirkwood, I had not quite taken on board the extent to which disabled people are disproportionately hit by this measure. In our general discussion, we perhaps lost sight of that at the time. My noble friend Lord McKenzie asked the question, which I hope the Minister can answer: are disabled people expected to use their disability benefits to meet any rent that will not be covered? The briefing we were sent talked about a judgment, Burnip, which I admit I had not heard of before. One of the judges made clear that we should not expect tenants to use disability benefits to meet part of their rent.
The Minister started by saying that the regulations are compatible with convention rights but, as a member of the Joint Committee on Human Rights—I am now but was not then—I refer back to its report on the Welfare Reform Bill in which the committee raised concerns about whether there was a problem here for disabled people. The report said that if such tenants were forced to move into properties unsuited to their needs, this might risk breaching their Article 8 rights—respect for privacy or family life—and potentially be discriminatory. Since then, we have had the announcement, welcome as far as it went, of the discretionary housing payment. However, the noble Lord, Lord Best, has already raised major questions about that payment. During consideration of the Bill, I dubbed it the “loaves and fishes of income maintenance”. It feels as though these loaves and fishes are being stretched ever further, even if there is an extra £30 million there.
As the Secondary Legislation Scrutiny Committee points out, the money is not ring-fenced, and once again we cannot be absolutely sure that it is to be used for the purposes intended. The noble Lord, Lord Best, talked about how the money will be stretched and will help only those whose houses have been adapted, but there may be other disabled people for whom there may be good reasons for why they should not have to move, use other income, take a lodger or go into paid work. The situation is not terribly satisfactory.
The noble Lord, Lord Best, said that this money would last indefinitely. I had not realised that that was the case. It would be helpful if the Minister could confirm that this is an indefinite payment. Can he give a government commitment that that money will definitely be there for the current spending review period and that it will be at the very least inflation-proof, or go up in line with rents? Can he give that kind of assurance? I will be delighted if he can but there is a big question mark over the long-term viability of a policy based on a discretionary payment. Will the individual be able to receive it forever, or will they have to keep re-proving their deservingness in order to continue to receive it? All these questions remain unclear.
I do not think that the Minister will be able to put our minds at rest because of our strong case. We are all very unhappy about the regulations themselves but perhaps he can at least give some assurances that the discretionary housing payment will genuinely go some way to meeting the real problems raised by other noble Lords.
Lord Shipley
My Lords, I refer to the Secondary Legislation Scrutiny Committee’s comments at paragraph 13, in which it is pointed out, rightly, that the reduction will apply to,
“the total eligible rent for the dwelling, including any eligible service charges”.
Can the Minister confirm which service charge items will be eligible for universal credit? In consultation, these were different from those covered by the current housing benefit regulations, which provide a list of items that are not eligible. Will the revised regulations prescribe the range of eligible service charges and, in practice, reduce the numbers that may previously have existed? In particular, will the Minister clarify which service charges will be included in the definition of,
“services necessary to maintain the fabric of the accommodation”?
Specifically, will the maintenance of fire safety equipment, lifts, door entry schemes and other communal services be deemed necessary to maintain the fabric of the building and therefore be eligible?
Further, will the service charge currently associated with a furnished tenancy be eligible for housing benefit, as it is now? Finally, on concierge services, which include portering, security, caretaking, CCTV coverage and the cleaning of communal areas, will the service charges for these continue to be eligible? I hope they will because, if they become optional, many tenants will not be able to afford to pay and there will be reduced standards, impacting negatively on communal facilities and health and safety.
Baroness Grey-Thompson
My Lords, like other noble Lords, I am concerned about the potentially disproportionate effect these regulations could have on disabled people. It is my understanding that all disabled tenants other than those who need constant overnight care will lose a percentage of their rent if they have more bedrooms than they need. The DWP equality impact assessment, which was updated last June, clearly shows the disproportionate effect that the size criterion measure will have on disabled tenants. Based on the Equality Act 2010 definitions of disability, some 420,000 of the total 660,000 households affected contain a family member with a disability, which makes the housing benefit regulations very much a disability issue, and one that is of great concern to a huge number of people. There is the discretionary housing payments fund for 35,000 tenants with homes adapted for wheelchair access, but that is a small mitigation in terms of the 420,000 tenants who are potentially affected. I feel strongly that long-established definitions of disability do not depend merely on the presence of adaptations or on the outward appearance of a functional disability. I am very concerned that disabled people will struggle with these measures.
Lord Freud
My Lords, an enormous number of issues have been raised and I will do my best to deal with them. I know that this is an area of great concern to noble Lords. That was made clear during the process of what is now the Welfare Reform Act 2012, and I remind noble Lords that there were some government defeats on underoccupancy, which were reversed in the Commons. That is where we stand as the second Chamber when considering these regulations. However, as I say, I will do my best to answer the questions put to me as rapidly as I possibly can—in a fairly random order, if noble Lords will allow me.
I shall pick up some of the issues raised by the noble Lord, Lord McKenzie. Under the Localism Act 2011 there will be fewer tenancies for life, so both private sector and social sector tenants are less likely to have absolute security. On the assessment of the impact of the overall changes, noble Lords will be aware that we have produced impact assessments for each of them. It has been extraordinarily difficult to combine them because one is not sure on which basis assessments should be made, given all the other changes that are going on. However, people affected by more than one change have the DHP fund available to them. I should point out that when the fund is taken in its entirety, we are now looking at a very substantial amount of money. Next year, for instance, the full DHP pot will be running at £165 million, plus the localised social welfare fund will move over, which I think will be another £178 million. So a lot of money that is not ring-fenced for particular things is going to local authorities, so that they can look at the problems in their area to try to provide the appropriate support.
Lord Freud
I could go on for longer about this. Rural areas will need to look hard at the options of adaptations to property, lodging, moving or paying for the extra room. One issue raised by the noble Baroness, Lady Hollis, is that this is not directed at pensioners who want to move down. The reason for that is the concern that it is pretty stressful for very old people to have these kinds of pressures on them. If we are to have this decision that we cannot afford to support people with extra bedrooms—they can of course have them, if they can find a way of paying for them—and have that mechanism happen to people who are still of working age and capable of making the adjustment, rather than to pensioners, then as time moves on you will move the cohort up into the pensioner group. That is what is happening with that particular issue. It is a timing issue.
On the sums and my noble friend’s question about what will be available, I will try to give a few figures for context. We expect probably around 400,000 underoccupiers to need the one-bedroom properties according to these size criteria. If we look at surveys that have been done—I am thinking particularly of the Housing Futures Network survey—around 25% of those people are likely to look for an actual move. In the previous financial year, there were about 100,000 new lettings of one-bedroom properties in the social rented sector in England and around 25,000 new dwellings completed.
Lord Freud
There is an implication in that: who takes priority for those new houses and then who do you take off the waiting list for the larger properties? There is then a kind of order of position that becomes somewhat more manageable. Do not forget some of the examples given, such as that there would be children in these rooms. The reality is that for the bulk of people affected by this, their children have left home. That is why they have too many bedrooms. I think the figure is—I am plucking a number from my memory—70% of the people affected by this. I will be hit hard by someone if I have the wrong figure and I will get the right one in a second but, from memory, 70% of these people do not have their children at home. That is obvious because of the underoccupancy effect.
I responded to the question on DHP use from the noble Lord, Lord Best. We are not talking about a ring-fence system with the DHPs. When you have very hard cases, of the kind discussed this afternoon, local authorities can move in and help.
As to the total figure, I have already given that as £165 million for next year. That is made up of the baseline funding of £20 million, £40 million from the LHA reforms, £30 million from the social sector—under the size criteria that we are talking about—and £75 million from the benefit cap. These are the kind of figures for people who have multiple effects.
I must correct my earlier figure of 70%. My memory was just slightly faulty; the figure is actually 66%, not 70%. I apologise.
This is a good time to answer the question of the noble Lord, Lord Best, about making an assurance. Actually, it was not Lord Best. Who wanted that assurance?
Lord Freud
It was the noble Baroness, Lady Lister, who wanted that assurance on the indefinite lasting of DHPs. I clearly cannot make any assurances through into the next spending review. To commit into the next spending review is, I suspect, the shortest way to get yourself fired that I know of, in any political party. However, when it comes to adaptations and foster children, the structure of this is not an eroding factor. It might erode, but only very slowly. Clearly, any Government would have to look very closely at how they maintained that type of support when they looked at the next spending review. So if that is some small reassurance, I leave it with the noble Baroness. I do not think I have got myself fired by saying that.
Baroness Lister of Burtersett
I certainly do not want to get the noble Lord fired, but will the department be doing all it can to ensure that that money is maintained into the next spending review period?
Lord Freud
We are doing a serious review, as the noble Lords, Lord Best and Lord McKenzie, and others have pointed out. We take reviews very seriously. They are public and they provide information to look at as we consider how we go forward. I certainly can say that the department and I take the information from these reviews very seriously. That is as far as I can go at the moment. The noble Baroness perhaps understands better now than when we were going through the Bill when I am making a move and when I am not.
Perhaps I may pick up on a point made by the noble Baroness, Lady Hollis, about overcrowding. Clearly the primary reason for these regulations, and we have made it absolutely clear, is that this is a huge Bill and we have to look at where we want to spend the money and how we make the half a billion pounds in savings. In other words, if we do not make savings here, where else do we make them?
Baroness Hollis of Heigham
I understand the noble Lord’s dilemma about housing benefit, but the problem is caused because there is no capacity of demand to buy property and to fuel new building. As a result, the pressure is going on private rents, which as a result means the housing benefits bill will continue to go up, without even considering what is happening in the social housing sector. He will not succeed—he cannot succeed—in part because of the policies of his neighbouring government department.
Lord Freud
I do not want to get into a huge debate about housing policy because it is a huge and complicated area. Clearly, we are dealing with counterfactuals. There are some signs of bearing down on rents. During the middle part of this year, rents were below the CPI increase. As the noble Baroness argues, we are probably fighting supply and demand pressure going the other way. Within that, there are some signs that we are bearing down. Clearly, the Government’s strategies on getting more housing, particularly build-to-let, in the private sector as well as social housing are important initiatives. We have 146 providers delivering 80,000 new homes for affordable rent with government funding of just under £1.8 billion. Over the 12 months to August, private rents went up by 2.9% on the LSL rental measure for England and Wales, which is not hugely out of line with the CPI.
Arrears are clearly a primary concern for housing associations. I am aware of that. It is about managing the different proportions. When you look at the pie chart of the number of tenants who are affected, housing associations will have to watch closely how a proportion of tenants are supported. From going around talking to housing associations, I know they are ramping up their support for those groups. One of the interesting things about the housing demonstration projects is how housing associations are saying, “We thought we knew our tenants and we are finding with these demonstration projects that we did not, but we are now establishing completely different relationships with them”. I am sure that the noble Baroness’s housing association knew its tenants much better than the average, but that is what I am hearing from the demonstration projects.
On the point made by the noble Baroness, Lady Lister, the scheme already recognises the need for an extra room where there is a need for an overnight carer in the private rented sector, and we have carried that over into this scheme.
On the point made by the noble Lord, Lord Shipley, the legislation sets out the types of eligible charges, and guidance will provide more detail. We expect the costs to be met broadly as now.
The noble Baroness, Lady Lister, made a point about human rights. We have DHPs to assist people to move, and local authorities must consider human rights and obligations when making decisions about these kinds of cases.
The noble Lord, Lord McKenzie, asked about households not fit for work, and I think I have dealt with that. The two-thirds figure has not changed, and 56% report a disability that leads to a significant difficulty with one or more areas of daily life. That does not necessarily mean that the daily lives of the two-thirds are affected by their disabilities. I have touched on the question put by the noble Lords about what people can do; there are four or five things that can be done.
One or two noble Lords asked about income from lodgers. The first £20 of weekly income is disregarded entirely, which will usually cover the amount of money in the reduction, and half of the remainder is taken into account. I have made sure that under universal credit, the entire amount is disregarded. That is to be introduced from next year. I was asked by the noble Lord, Lord McKenzie, about the average cost of moving home. DCLG estimates that it is about £500 per move. On questions about the CPI, again that is to keep the pressure on. We froze it a year ago so that we can make the standardised changes with regard to CPI in April 2013. I was asked how long that pressure is likely to last. We have made it absolutely clear that we need to keep it under review. People have made projections up to 2030, but we are in unusual times since earnings normally rise faster than inflation and thus drag up other factoring events. Usually one would expect to have to review the figures as those factors come through. I am not sure yet how we will do the review, so I cannot spell it out. However, as we get closer to the right period, we will look at exactly how it will be done. I repeat, we will take it seriously.
Baroness Lister of Burtersett
I am sorry to hold the noble Lord up. I understand if he is not yet able to say how the review is to be carried out, but when the department does know that, could he perhaps tell noble Lords?
Lord Freud
I have pleasure in giving a commitment that I will tell noble Lords exactly how we plan to do it when we know. I think I have covered all the issues that were raised—
Lord Kirkwood of Kirkhope
I apologise for interrupting the Minister’s progress. Is there a communications strategy that will roll out with the policy? Obviously, this will have to be delivered by housing associations and local authorities. Is the noble Lord confident that proper notice will be given to those who are affected so that a letter will not arrive in the letter box a fortnight before the policy crystallises?
Lord Freud
We are holding a big exercise with local authorities and housing associations and, indeed, the institute is doing a lot of work on this. All the materials are currently going to the relevant bodies and it is up to them to deliver it. They have DWP-branded material in the form of leaflets and so on, so the information is available and ready to go out. Clearly, a lot of effort is going into working out who will be affected and making sure that they get support. There are model letters and leaflets that make up a full toolkit.
I hope I have dealt with the issues. Again, I know full well that noble Lords do not like this policy. That view has been expressed in the Chamber twice and I remember that absolutely, as I suppose noble Lords do, too. There is history here. Our votes were overturned by the Commons, this came back and noble Lords tried again. In the end, after one iteration of it was stopped, I said that I would take following that up in terms of research very seriously, and I set that in train. I hope noble Lords will accept that, unpalatable as these measures are, we have found the best balanced way of reducing the housing bill, which is simply enormous now. No one has said to me, “There is another, easy half a billion to find in the housing bill this way”. This is the fairest way of doing it. It requires a response from local authorities, housing associations and tenants but one that, in the majority of cases, those groups will be able to make. There will be hard cases. Let us hope that we have put enough resource into looking after various hard cases. With that, I hope that on balance noble Lords can support these regulations—with reluctance. I commend them to the Committee.
Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) (No. 3) Regulations 2012
(11 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) (No. 3) Regulations 2012.
Relevant document: 6th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I am pleased to introduce this instrument which was laid before the House on 2 July. I am satisfied that it is compatible with the European Convention on Human Rights.
Two weeks ago we celebrated a major milestone: the start of the rollout of the workplace pension reforms. These reforms are critical to allow people to start planning for their retirement. Your Lordships will no doubt have seen the, “I’m in!” campaign in the media to raise awareness about the reforms. By the time all employers are included, millions more people will be able to join the bosses by saying, “I’m in”, with more than 500,000 new savers in workplace pensions by Christmas. For many it will be the first time they have had the opportunity to save in a pension.
The instrument that we are to debate today is very technical and might seem to be a relatively insignificant part of the landscape. But for some of the largest employers in the country, who are at the front of the queue, these amendments will play a vital role so that they can use their existing high quality, career average pension schemes to meet their duties. Without this amendment, an oversight in the original regulation would prevent them doing so.
The issue emerged earlier this year during the department’s engagement with employers as they prepared for the onset of the new duties. The problem lies in the way that the quality requirements for career average schemes interact with the scheme rules for some career average schemes. A key part of the quality requirement for career average schemes is that accrued benefits must be revalued. The policy intent is to ensure that individuals are given a measure of protection against the effect of inflation. It is important that benefits accruing in a career average scheme are revalued in service as well as in deferral.
The minimum level of revaluation required by Regulation 36 of the 2010 automatic enrolment regulations is a guaranteed annual increase by reference to the increase in the general level of prices. If the benefits are to be revalued only on the exercise of a discretionary power, the scheme may still qualify if the funding of the scheme assumes the minimum increase is to be made, and the funding is provided for in the scheme’s funding plan. This easement was made available only to schemes that revalue purely on a discretionary basis. Those that feature an element of guaranteed revaluation below the minimum, but which also have a discretionary power to revalue at the minimum rate, would not qualify.
This is the problem which puts the regulation at odds with the original policy intention of allowing schemes to qualify if they revalue on a discretionary basis provided the increase is properly funded. We consulted earlier this year on proposals to allow schemes which provide for a mix of guaranteed and discretionary increases to qualify. We also asked whether there were other aspects of this regulation that might inadvertently prevent perfectly good quality schemes qualifying. The objective is to give an appropriate degree of protection to members’ benefits against the effects of inflation and to ensure that the quality requirements are applied consistently across scheme types. At the same time, we want to allow flexibility on how these requirements are actually met. This will ensure that we do not impose any unnecessary and costly burdens.
We received a number of suggestions in this area, some of which we are considering further. One was very simple to agree to. Regulation 36 currently allows a scheme that revalues by reference to the increase in RPI to qualify only if it was in existence on 1 July 2012. We agreed with respondents who saw no reason to prevent a scheme that is set up after that date also qualifying if it chose to revalue by reference to RPI without the need for a CPI underpin in years when the CPI is higher than the RPI. So the draft before the Committee today also allows for revaluation by CPI or RPI, subject to the cap on required revaluation at 2.5%.
As I said earlier, this amendment is not the most attention-grabbing piece of legislation that we will make this year, but for some major employers getting ready for the workplace pension reform it may be one of the most important. I commend this instrument to the Committee.
Lord McKenzie of Luton
My Lords, I thank the Minister for introducing this order. I doubt whether it will take us quite as long as the business we have just dealt with. Like the Minister, I am happy to celebrate the start of auto-enrolment, which is a very important development in the pension landscape. In that context, we accept and support the need for this change to the regulations. I am sorry that my noble friend Lady Drake is not able to be with us today. She is not well, but she lumbered me with some questions.
What happens if as a result of current considerations of CPI and RPI, the construction of CPI is amended to include housing costs, which could cause it to be higher, and the formula for calculating RPI, using geometric rather than the current arithmetic mean, could cause it to be lower? Is the Minister confident that revaluation by RPI is likely to be more generous in most years?
On my noble friend’s behalf I want to ask about the schemes that apply discretionary revaluation increases. Does this mean that under their statutory funding objective to secure sufficient and appropriate assets to cover their technical provisions, those provisions must include revaluation at a rate no less than the minimum set out in regulations? Further, what happens when such a scheme is in deficit? Must its schedule of contributions and recovery plan be based on assumptions that include the minimum revaluation rate?
My noble friend has asked a further series of questions. For those schemes which apply discretionary revaluation increases, who under this SI can continue to do so and remain qualifying schemes provided that the revaluation is funded for and included in the statement of funding principles? Will the provision for revaluation be required to be at least that necessary to meet the minimum rate for the revaluation requirement of CPI or 2.5%, whichever is the lower? Further, in the event of an employer ceasing to participate in a scheme that applies discretionary revaluation increases, will any Section 75 debt be calculated on the assumption that the minimum rate for revaluation will apply? Finally, will those schemes which revalue by reference to the increase in average earnings continue to be required to meet the minimum rate for the revaluation requirement of CPI or 2.5%, whichever is the lower?
If the noble Lord would prefer to write on any or all of these questions, that may help us all. Having said that, we are happy to support these regulations.
Lord Kirkwood of Kirkhope
My Lords, I want to add my support for these regulations. I have myself had one of the four or five questions from the noble Baroness, Lady Drake. It concerns the consultation that the Office for National Statistics is engaged in at the moment in terms of RPI versus CPI. That needs to be thought about quite carefully because it could have a dramatic impact on some of the scheme rules we are talking about and which these regulations cover. I want to put in a request that the department ensures that the ONS is careful about this issue and that people are made aware of the consultation it is currently engaged in.
There is one point I do not understand. I imagine that an average salary scheme must be a defined benefit scheme and therefore it will have a statement of funding principles and trustees. Given that, I do not understand why the easier fix for this was not to change the scheme rules in order to make them compliant. I cannot believe that trustees would want to do anything other than that. They may have a contest for the sponsor of the scheme in terms of getting the resources, but I cannot see how that would be a problem. My question is this: although I am in favour of them, why are these regulations necessary? Why can the trustees of the scheme not deal with it by making a small amendment to the funding rules in the statement of principles for their own individual salary schemes?
If it is easier to give answers to these rather more simple questions by letter, I am quite happy to receive one as well.
Lord Freud
My Lords, I think I will end up writing a letter, but I ought to try to answer the questions in general terms, thus saving a little effort in terms of letter writing. The first point made by the noble Lord, Lord McKenzie, concerned the potential changes to CPI and RPI. About a year ago we had the most glorious debate on this matter, for which I enjoyed researching probably more than any other topic. I think I am pretty comfortable in saying that the authorities are looking at these two measures and that there are likely to be some changes. RPI has had a very bad press lately, as some noble Lords who are aficionados will have noticed. If and when that change happens, we will have to take a decision, but it is pretty premature to take two hypotheticals and jump to a conclusion ahead of time. We will engage closely with the ONS to ensure that the potential impact on pension re-evaluation is fully considered.
On relying on trustees, my noble friend is absolutely right that there will be trustees here. This is just a technical change. The way it was drafted would have excluded these particular schemes, so that is the way that that has been addressed. This is moving into where schemes go into deficit and the question from the noble Lord, Lord McKenzie. They will be required to find funds for the minimum revaluation rate. Section 75 debt will continue to be calculated on the basis that the minimum revaluation rate will apply. The sums go on, even though the scheme has a problem which needs to catch up.
On the schemes that revalue benefits by reference to earnings, we are committed to considering further how that kind of revaluation could be allowed for. Historically, earnings have gone up faster than inflation so it is a lower risk, although that has not necessarily happened in recent years. On the question of whether the provision for discretionary revaluation would be required to be at least that necessary to meet the minimum rate—CPI, RPI or whatever is lower—the answer is yes. Regulation 36(3)(a) stipulates that a scheme with benefits to be revalued on the exercise of the discretionary power can be a qualifying scheme if,
“the funding of the scheme takes account of the exercise of the discretionary power and does so on the assumption that accrued benefits would be revalued at or above the minimum rate”.
That figure is CPI or RPI, whichever is the lower.
I may have answered all the questions without the need for a letter. That would be one of the miracles of our time. I will make sure and, to the extent that we have not absolutely locked this down, I will send a letter over because it is a very technical area.
Baroness Turner of Camden
I have a question. There has been a report in the newspapers recently that a number of small employers have no idea how to operate the new scheme. Of course, the problem is that if it is not operated, a lot of people will not get the choice of whether to go in, opt out or whatever. I am interested to know whether the Government are taking on board the problems with smaller employers who really do not understand what is actually involved in getting people into the automatic scheme.
Lord Freud
Yes, I can pick that up. Clearly, there is a staging going on. Smaller employers are towards the end of that, and are two or three years out from now. It would clearly be hugely counterproductive to send them an early letter which tells them that in two years’ time this or that will happen because they will tend not to look at it. It is really important in a communication exercise that we time it right. It is somewhat encouraging that quite a few knew that this was coming. A communication exercise is integral to us launching this properly. That is a key point.
To sum up, the point of this measure is to make sure that good-quality career-average pension schemes can be used for automatic enrolment. It allows flexibility without compromising individual protection and closes a particular gap in the legislation that we would not have wanted to see. On that basis, I commend the instrument to the Committee.
Motion agreed.
Child Support Maintenance Calculation Regulations 2012
(11 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Child Support Maintenance Calculation Regulations 2012.
Relevant document: 6th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I will also speak to the draft Child Support Maintenance (Changes to Basic Rate Calculation and Minimum Amount of Liability) Regulations 2012. These two sets of regulations were laid before both Houses on 2 July 2012 under the powers contained in the Child Support Act 1991, as amended by the Child Maintenance and Other Payments Act 2008. It is a requirement that I confirm to the Grand Committee that these provisions contained in the two sets of regulations are compatible with the European Convention on Human Rights, and I am happy to do so.
Getting the child maintenance system right is one of the most important matters that we face as parliamentarians, as parents and as a society. This House has always played a crucial role in national debates on the issue, and the considered views of Members of this House have consistently both informed government thinking and improved the legislation that underpins this area.
The two sets of regulations before us today are a key part of the Government’s child maintenance reform programme, outlined in our Command Paper entitled Supporting Separated Families; Securing Children’s Futures, which we published in July 2012. I know that noble Lords are well aware that the performance of the child maintenance system has fallen a long way short of the expectations of this House and, more importantly, of the people that the system is designed to help. The starting point for our reforms is that the current child maintenance system is broken. Only half of all children benefit from an effective arrangement, despite the Government spending almost £0.5 billion each year on the child maintenance system.
The system places far too much emphasis on the state determining financial support and not enough on supporting separated and separating families to reach their own arrangements. Too many parents feel trapped in the system, which can entrench conflict and encourage hostility between parents, reducing the likelihood of continued co-parenting. Our surveys tell us that half the parents in the existing child maintenance statutory schemes administered by the Child Support Agency would, with the right help and support, be likely to make their own arrangements. This all needs to change.
Noble Lords will know that the Government are committed to rebalancing the child maintenance system to support families to make collaborative, family-based arrangements. Children benefit where parents work together. We are investing £20 million over the next three years in help and support for separated families in order to help co-ordinate existing support services to make it easier for parents to know where to turn when they separate. However, we recognise that not all parents can make family-based arrangements, so we will introduce a new, fairer and more efficient but still heavily subsidised statutory scheme for those who most need it. No doubt noble Lords will have views on our proposals for charging for using the new scheme, which I do not propose to dwell on today. Noble Lords will know that the Government are presently consulting on the charging regulations. After the consultation, Parliament will have an opportunity to debate the charging regulations package. As noble Lords will remember, I made a commitment to involve them fully in that process outside the formal part of it.
I shall move on to the detail of the two sets of regulations themselves in a moment, but first I will briefly touch on the benefits of the new scheme. It will benefit from better links with other parts of government and clients will therefore receive an improved service. We will be able to process applications more quickly and tackle those parents who miss a payment much more rapidly. The scheme will be introduced using a pathfinder approach in the coming weeks. As we have always said, our priority is to go live first time with a system that works for clients. We are currently undertaking our final round of testing and training to enable us to go live by the end of the year. Initially, we will accept new applications on to the scheme where four or more qualifying children with the same parents are named in the application. When the new scheme is seen to be working well, we will open it to new applications where there are two or more qualifying children with the same parents, and thereafter to all new applicants.
The draft Child Support Maintenance Calculation Regulations 2012 set out the new rules relating to how child maintenance will be calculated, including how income is determined and the circumstances in which the calculation may be varied. They will apply to applications for child maintenance under the new scheme. The regulations will also tackle some problems that have been identified with the existing regulations. They will introduce the following main changes.
Maintenance calculations will be based where possible on the non-resident parent’s latest tax-year gross income as reported by HMRC. Assessments will depend less on what parents choose to disclose about their income, ensuring a fairer and faster child maintenance service. For the first time, maintenance calculations will be reviewed annually using the most recent income information provided by HMRC to ensure that they remain fair, accurate and up to date. At the moment, cases are reviewed only when either parent contacts the agency to report a change in circumstances, which means that some cases have not been reviewed for many years. In-year income changes to the calculation will not be made unless the non-resident parent’s income changes by at least 25%. This will make it easier for parents to budget, giving them greater financial security and promoting financial responsibility.
Students with a significant gross weekly income will no longer be exempt from paying child maintenance. An assumption of shared care equivalent to one night per week will be made where parents agree in principle that there is shared care but cannot agree on the number of nights. Parents who share the care of their children exactly equally will no longer be required to pay maintenance through the statutory scheme, resulting in both parents being treated fairly. Parents with care will no longer be required to provide evidence to support an application for a variation of the maintenance calculation as income information will be available through HMRC.
These regulations do not include assets and lifestyle- inconsistent variations. They replace these with expanded “unearned income” variations that capture a non-resident parent’s taxable income from property, savings and investments including dividends, and other miscellaneous income declared to HMRC. The intention is to base maintenance calculations on income details available through HMRC, thus reducing the burden on parents with care to provide supporting evidence when they apply for a variation. I believe that this will allow more parents and their children to benefit from maintenance valuations that genuinely reflect the income of the paying parent in the case.
To encourage parents to make their own maintenance arrangements, children supported outside of the statutory scheme through a family-based arrangement, court order or under child maintenance schemes abroad will be acknowledged in the same way as qualifying children within the maintenance calculation. The non-resident parent will be required to provide evidence of a formal or informal agreement that ensures they are paying for a child before this change is applied in a particular case.
The Child Support Maintenance (Changes to Basic Rate Calculation and Minimum Amount of Liability) Regulations 2012 lower the percentages by which a non-resident parent’s gross income is reduced to take account of relevant other children living in his or her household. This will ensure that the maintenance calculation makes a more equal allowance between the children who are the subject of the maintenance calculation and any relevant other children who live with the non-resident parent. They also set out the minimum amount of liability where the non-resident parent is party to another maintenance arrangement which they wish to have taken account of in the maintenance calculation.
These regulations will, first, reduce the percentages applied to relevant other children to better equalise the treatment between first and second families. Let us take an example of a non-resident parent with a gross weekly income of £300, one relevant child and one qualifying child. Without these changes, the non-resident parent’s income would be reduced by 12% to make allowance for the relevant child—a reduction of £36. The reduced gross weekly figure of £264 is then carried forward; 12% is then applied to £264 to calculate the maintenance for the qualifying child, resulting in a liability of £32, so there is a £4 difference between the amount notionally allowed for the relevant other child and the amount calculated as payable for the qualifying child. Using the same example but with the 11% reduction for the relevant child proposed in these regulations leads to a difference of only £1 between the amounts allocated for each child, so, as far as possible, the same financial provision will be made for all children within the maintenance calculation.
These regulations will, secondly, make the minimum liability for a non-resident parent subject to other maintenance arrangements for other children at £5 per week, keeping it in line, as intended, with the flat rate of child maintenance which is payable by a non-resident parent whose gross weekly income is more than £5 but less than £100 per week, or who is in receipt of certain prescribed benefits.
The Government consulted stakeholders publicly on proposed measures between 1 December 2011 and 23 February 2012. As part of the consultation process, the previous Minister for Disabled People also met with key stakeholders together with officials at a stakeholder meeting held in January to get their views. We received 36 responses to the consultation. Respondents to the consultation were generally supportive of the draft regulations and the points raised were considered when finalising the regulations. I beg to move.
Lord McKenzie of Luton
My Lords, I thank the Minister for introducing these regulations. We should start by making it clear that we support the thrust of the approach reflected in them. Indeed, why wouldn’t we? It stems from our work on legislation when in government. We support the objective of maximising the number of effective maintenance arrangements for children and of encouraging voluntary or family-based arrangements as well as use of the statutory system. I am not sure that we necessarily agree with the emphasis that the noble Lord places on one rather than another but that is probably a point of detail.
We do not need to dwell on the complex history of CMEC/CSA—I will call it the CSA from now on—and the misery that it inflicted on many families, not to mention more than a few Ministers. However, much of the difficulty derived from the system requiring a lot of information, latterly just from the NRP, many of whom had no interest in complying; indeed, quite the reverse. This was compounded by failures of IT systems and inadequate enforcement powers. So the move to a system which is based on gross income of the NRP, which is accessible from HMRC and does not rely on information from the non-resident parent, is, we believe, the correct way forward. It is also right, in our view, to give some emphasis to what is practical rather than in every respect to make a calculation of intellectual purity, which can, I think, sometimes frustrate delivery.
Lord Kirkwood of Kirkhope
My Lords, perhaps I may make a brief intervention in this important debate. I am opposed to charging, and I hope that we will be able to get rid of it. I understand that there are deficit reduction problems, but an important state-run service should be available to single parents who are struggling to raise children, sometimes with little or no help from non-resident parents. That is what we should be aiming for in the long run and as a matter of principle.
The current plans underestimate the extent to which winners and losers will become a big issue when the plans are eventually rolled out in full. The extent of this change has not properly been taken into account, and there will be big swings in both money in and money out of the hands of non-resident parents and parents with care.
However, I want to concentrate on the National Audit Office’s concerns expressed in February 2012 after it started to look at whether implementation of phase one and phase two of the plans may or may not be delayed. I remind colleagues that at that stage the commission planned to introduce the new scheme in two phases. In phase one, the commission would be able to enter applications to the new scheme from new clients from October 2012. That was the plan in February, and we are now into October. Phase two was to be started six months later, with an indicative start date of July 2013. That would involve the launch of the whole statutory gateway service, introduce charges and transfer the caseload.
I read the NAO report with great interest, and I read page 37 with particular interest. It was headed,
“Figure 17 … Commission risks repeating past mistakes”.
Some of us have been following this saga since 1991. The NAO rightly said that if this policy is to have any chance of success, the new maintenance system needs to be properly worked through and, importantly, it needs a new IT system that works. I understand, although I may be corrected if I am wrong, that the new IT system commissioned from Tata Consultancy Services—TCS—is a mixture of agile computing, which is an iterative way of developing programmes, and more conventional ways of delivering government IT systems.
The February NAO report is concerning as, among other things, it says at page 38:
“The Commission reported to the audit committee in October 2011 on the high risk that the change programme may not deliver phase two functionality within agreed timescales, to realise the benefits outlined in the business case”.
Therefore, there was an early risk. People understood that this was a challenge and that the system might not be delivered on time. The next paragraph of the report—paragraph 3.27—expresses the worry that:
“The Commission has not built any contingency into delivering the new scheme”.
This worrying NAO report was produced in February. The NAO was right to mention both those points about the functionality of the computer and the lack of contingency plans.
The next iteration of the development of the IT issue and the possibility of delay in the IT system occurred when the Permanent Secretary and the then chief executive of the Child Maintenance and Enforcement Commission, Mr Shanahan, appeared before the Public Accounts Committee. At that stage, the Permanent Secretary and the CEO of CMEC were bullish about the fact that the NAO report was out of date. They said that phase one on its own merits had,
“a delivery confidence assessment of amber/green”,
from the Office of Government Commerce, and that that office’s review described the whole project, including phase one and phase two, as,
“having substantial risks, which the programme is taking sensible steps to manage, meaning that the delivery confidence overall is amber”.
Therefore, the NAO report, which adverted to real concerns, was batted back by the Permanent Secretary and Mr Shanahan when they made those remarks in March 2012.
The last annual report of the Child Maintenance and Enforcement Commission, which was produced just before it was taken back into the department in July 2012, revealed that,
“over the last 6 months of the financial year, slippage occurred around testing”.
It went on to refer to,
“a number of required actions to improve delivery confidence”.
We were also told that a pathfinder would be used to introduce the new scheme. Therefore, phase one was no longer where it was supposed to be; it is now a pathfinder. The annual report goes on to say:
“This, and improved testing velocity, mean that the Executive Team has strong confidence in a successful October introduction”.
However, I do not know what “testing velocity” means. That report was issued in July 2012. The Minister tells us today that the pathfinder seems to have changed. Before I continue with that point, I should say that my good friend, Professor Steve Webb, said on 11 September that the pathfinder group would be extremely small and would consist of parents with main care who had four or more children, where at least four of the children had the same non-resident parent. That is hundreds or it might be thousands—these are new applicants—so this pathfinder for phase one is nearly invisible as far as I can see. It has not started yet. If that was not bad enough, my good friend, Professor Webb, when answering questions about this in the other place on 11 September, said that,
“we are now in the final stage of testing, with new system staff training to start in a few weeks”.
That was the position on 11 September. We have been here before. We deserve some assurances about the implementation schedule for all this.
Obviously, the delay is of great concern to the NAO because the business case means that savings of £117 million need to be made between now and 2014-15. In this delay in implementation, the full phase one/phase two configuration costs the taxpayer £3 million a month. These are big sums of money.
Baroness Sherlock
My Lords, I should like to pick up where the noble Lord left off. I am grateful for the opportunity to discuss this rather large package of regulations. In doing so, I should remind the Committee of my declared interests, which include having been a non-executive director of CMEC and, in the dim and distant past, a deeply historic interest in having once been the chief executive of the National Council for One Parent Families, which is now part of Gingerbread—to whom I am very grateful for their briefing, as with other organisations.
I will focus on three specific issues. One has just been picked up, about the readiness of the new statutory maintenance system. Secondly, perhaps the Minister could help us better understand the decisions behind what income to include or exclude. Finally, I will pick up another issue raised by my noble friend Lord McKenzie of Luton about the readiness of parents for the introduction of the new system.
First, on the readiness of the system, I was very glad that the noble Lord picked up the issue of the pilot group. I was going to ask the Minister to give the names of the members of the pilot group because frankly I cannot believe that it is so big that he could not, with his legendary skills, memorise their names very easily. The question is whether he is confident that a pilot group of that size and peculiarity, statistically speaking, will provide all the evidence the department needs to assess whether the system will work once it is rolled out properly.
The second question raised by the noble Lord, Lord Kirkwood, is much more worrying. It is the idea that we will end up seeing the critical testing of phase two performed in parallel with the programmed delivery of phase one. What will that tell us down the line? I read the report from the Public Accounts Committee, which I am sure is acid-etched on the Minister’s heart. He may recall the questioning by Mr Bacon, who was teasing out whether, when simultaneous testing and development had been tried in the past, it had led to problems. He mentioned tax credits, the Criminal Records Bureau and the Rural Payments Agency. He said:
“The testing was done in parallel in all of them. In some, they hit the go-live button when they knew it didn’t work properly, so we are right to be concerned about this, aren’t we?
The committee was taking evidence from the Permanent Secretary, Mr Robert Devereux. Mr Bacon went on to say:
“So you are not going to hit the live button until you are sure it works, even if it means a delay?”
Robert Devereux replied by saying:
“Absolutely not, and you can assume that that is exactly where Ministers are too. We are perfectly aware of the history”.
I should like to give the Minister the opportunity to go on the record himself on this. Can he assure us that this will not happen? Does he personally have confidence in the amount of testing that it will be possible to carry out before the system goes live?
What assurances can the Minister give about the consequences of the potential losses that have just been mentioned? If delay is going to cost the department £3 million or £4 million a month, will that money come from anywhere else in child maintenance? If so, will we have an opportunity to scrutinise the effect of that? I am also interested in what potentially could happen. My noble friend Lord McKenzie said that a series of different systems could all be running at the same time. Could there be a period, and how long would it be, when delivery staff might be running four systems in parallel? These would be CSR, the pre-2003 old-rules system; CS2, the 2003 current-rules system; the offline clerical system; and the new IT system. What is the maximum period during which the four systems might run in parallel? Given the cuts in staffing levels under the resource constraints the department is facing, can he give an assurance that the department can manage this so that existing CSA clients do not suffer as a consequence?
The next area that I want to address is the effect of the decisions that the Government have taken in relation to the amounts that will be payable. I am particularly exercised, as my noble friend Lord McKenzie flagged up, about the decision that the new system will ignore tax credits when considering the income of a non-resident parent. According to the Government’s own estimates, around 100,000 existing CSA clients could lose an average of £6 per week in child maintenance as a result of changes to the way it will be calculated. Tax credits will no longer be counted as part of gross income. That is significant because at present just under a third of non-resident parents within the CSA are entitled to tax credits, and therefore a significant financial blow to many single-parent households will be coming at a time when they are already suffering in other areas. They will end up having to pay fees for charging out of their current income, and they are facing cuts to benefits in other areas. There are all kinds of problems for this category, and they could be quite significant. I will not go into any more detail until the Minister has had a chance to respond, but I reserve the right to come back on it. Can the Minister explain quite carefully what alternatives were considered? Given that tax credit information rests with HMRC and is therefore available to the department, why can that information not be considered?
Secondly, as others have mentioned, the Government have confirmed that for non-resident parents within the statutory scheme, they intend to raise the minimum flat rate of child maintenance from £5 per week in current-rules cases to £10 per week. That rise is far above inflation, which would probably have been to around £7, but it amounts to 14% of a single person’s weekly jobseeker’s allowance of £71 per week. That is a significant amount of money and is even more than the 12% of earnings that a working non-resident parent in the £200 to £800 band will be expected to pay. Two things have happened here. The parent with care may be getting less money while the non-resident parent in the poorest income bracket will have to pay a higher proportion of his income than those who earn more. On top of that will come the 20% collection charge, should that become necessary.
At the same time, the scheme will be more generous to self-employed parents. The Public Accounts Committee recently criticised the fact that the maintenance calculation will be based on taxable earned income for PAYE taxpayers and total taxable profits for the self-employed. Unearned income such as dividend income or rental income will not be counted. The onus shifts to the parent with care to find that out and apply for a variation. It is only at that point that HMRC will be asked to provide details of taxable unearned income, which it presumably must have anyway. I accept that that will not be the case below the threshold, but I am interested in how that will happen in practice.
The PAC report states:
“The Commission should plan to access all information on income when assessing how much maintenance non-resident parents should pay”.
The report explains how in the new system’s maintenance calculations will happen, and continues:
“Relying solely on parents with care to identify such practices by the non-residential parent to ensure all significant taxable income is taken into account is unreasonable when taxpayer data are available to the Commission. The Commission should access all data on all taxable income sources, such as capital gains and dividends, to calculate the maintenance due, not just PAYE information. Where self-assessment data is not filed until later, the Commission should reassess the maintenance due as part of the next annual review”.
This is particularly especially important because—if I have understood correctly, and I may well not have done as I am rather out of date—HMRC data on income will in future be treated as final so there will not be an opportunity for the parent with care to seek a variation on the grounds of lifestyle, which is what I think the Minister was saying at the outset. This means that there will not be an opportunity for a child maintenance assessment to take account of significant non-taxable income, as my noble friend mentioned, such as substantial ISA and savings certificate holdings or a failure to declare income. I am interested in how the Government respond to the PAC’s concern. Will the Minister explain to the Committee how that combination of the fact that this income does not have to be taken into account and the greater difficulty for the parent with care in being able to persuade the authorities to take it into account, should she be aware of it, will be dealt with? What steps will the Government take to make sure that any potential deliberate evasion of maintenance due will be tackled?
Finally, I want to explore what steps will be taken to prepare parents for the impact of the changes. The new calculations seem to be creating considerable losers and gainers among existing CSA clients who move into the new system. Of course, some gain and others lose, but each time that that happens, there are two parties to that transaction, so it is not always a zero-sum game. The department has managed to make it worse than a zero-sum game by taking charging out on top so everyone is potentially worse off. At the very best, it will be a zero-sum game.
When the new historic gross-income method of calculating comes in, around 9% of existing non-resident parents—just over 100,000 cases—could see a rise in liability of £40 or more per week. Around 3% of existing parents with care—some 33,000—could get £40 per week less. These are very significant sums. Given that, what information and advice will be given to parents regarding the impact of the new rules to prepare them for the translation to the new system? Have the Government given consideration to any kind of transitional help? In other changes in benefits or tax credits, or even in the replacement of council tax benefit, the Government have been able to be persuaded that some sort of transitional help should be available because the jumps in the amount people have to pay or the reduction of the amount they receive are simply too great. Why have the Government not been able to come forward with some means of helping parents in this system?
I shall not say any more at this stage, but I should like the opportunity, if necessary, to come back at the end. I hope the Minister will be able to give us a detailed account of these very significant regulations with enormous consequences. I look forward to hearing his response.
Baroness Howe of Idlicote
My Lords, because the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Sherlock, have covered almost all the points I was going to make, I shall be very brief. It is estimated that the new system will lose between £3 million and £4 million a month, which is very concerning. Where is that going to be taken from if it continues? We would be very grateful for some reassurances. Although the plan is behind in its full implementation and in the benefit savings that we expected, a little more reassurance on that point would be extremely welcome.
The other point I wanted to stress was this business of the non-resident parent receiving unearned income that was not part of the calculations on which his contribution was being assessed. I have to say that I found it slightly odd that it was now going to be left to the caring parent, the one doing the work, to go out and do the research for themselves—I should have thought that that was a little over the top—and then come back and have the situation looked at again by HMRC to see whether it could make any adjustments. Nevertheless, it would be useful to hear from the Minister that a rather more caring approach should be given to the people who are doing the real job of bringing up the children, and that these sorts of responsibilities should not in future be left to those people to justify action that the Government should be taking on their own account.
Lord Freud
My Lords, the debate has strayed somewhat from these regulations, most substantially into the readiness of IT. I shall try to deal with that issue full on, because it is a fair question.
The concern is that the new system is late and will not work, and the normal things that people get concerned about with IT were raised. There is clearly a balance here to be struck as regards making sure that you deliver what you are intending to deliver in terms of savings and product, and making sure that it works. You fine-tune that as you get closer and closer and you know more. Regarding the timing, as my noble friend said, we were planning to start in October. It will be a few weeks after that when we will really go in on phase one, but in the scheme of things, it is a few weeks late but will come in safely because we are currently testing to make sure that when we start the system is working. The general point I was asked was: will we go ahead before we are confident that the system works? I can give an absolute assurance, and repeat what the Permanent Secretary said, that we will not go ahead until we are confident that the system will deliver for both the client base and the taxpayer.
The first phase will go ahead in a matter of weeks. As regards the numbers that my noble friend was interested in, we will begin incrementally. In the first phase, we will start off with literally 100 or 200 cases a month for the first, say, four months. We then move up rapidly in the next couple of months to 3,000 or 4,000 cases a month. After six months, when we take over all the new intakes, we will be dealing with 10,000 cases a month. That is the planned progression. Again, as regards the question of the noble Baroness, Lady Sherlock, on when we will press the button, I should make it absolutely clear that we will not do so unless we are confident that this works. Everyone here knows the history, and we are as conscious of that as anyone.
I take the question of personal assurance very seriously. For a lot of the computer systems that we are introducing, and universal credit in particular, I will give personal assurance. This system is not actually part of my personal portfolio. Although I am dealing with it for the House, the reality is that I am not sitting on this particular computer system with quite the same ferocity—
Lord Kirkwood of Kirkhope
My Lord, that is what worries me. Is it still the case that the target date for the introduction of phase two is July 2013, with a few weeks’ slippage?
Lord Freud
We are still on that timetable, absolutely. But we will be flexible as a department. The one piece of advice that the Public Accounts Committee has given to us as a Government, and to the last Government, is to feel our way into these things, to be flexible, pathfind the way and build from there. So we are taking that advice. We cannot have it both ways. This means that there is not a date on which we must press the button, and if we do not press the button on that day we are late, it is a delay and a fiasco. I believe it is wrong of us as politicians to play with computer systems in that way. It is not the right way to do it. We must go in steadily and introduce these systems in a smart, incremental way. That is the lesson that we have learnt from some superhumungous tragedies. When it comes to computer systems, the Government get a lot of the stick for bad computer system introduction. This is because Government computer systems are publically known. The private sector has just as many snafus with computers as the public sector, it is just that they do not make them public.
This ties in neatly to the point about four schemes in parallel, from the noble Baroness, Lady Sherlock. We already have three systems running in parallel, and this new system will be more automated and more efficient than those. By using the pathfinder approach that I have described, the new system will be working well before we introduce it full tilt. If the new system is working and sustainable with the kind of volumes that I described, then we will be able to manage the four systems that we will have under our hand at any one time.
Baroness Sherlock
I am grateful to the Minister. As I understand it, one of the arguments for the new system was that, as it would be more efficient, there would be fewer staff needed to run it and it would be cheaper et cetera. I know that that may all be up for grabs, but is the Minister confident that the kind of cuts in resource that CMEC had before its transition will leave enough staff to be able to run this? I understand the point he makes about agile development and wanting to take time to run the system in before shedding its predecessor systems. However there is a danger, as seen both here and with housing benefit. As each new system has come in, everybody has been assured that the new system will be the thing that will render all previous systems unnecessary, but all that has happened is an accretion of systems. I just want to be confident that he feels that he has the resource to manage all these systems for as long as it takes, because otherwise people stuck on the earlier systems could suffer and find their situation getting worse, not better.
Lord Freud
Yes, my Lords. The approach is to bring in a new system, which is efficient and automated, at a level that does not consume a lot of resource to start with. You are running your existing systems with the resource that they require. As you ramp up the new system, it starts to establish itself, because you are doing it on a careful pathfinder basis that maintains that automation and efficiency. Then you can start, in practice, reducing the load on the other three systems. That is how you get the gains by doing it, and that is why it is so important to ramp up the new system so that it does not throw a huge amount of clerical work back into the system to compound the clerical overload. We are still running 100,000 cases clerically in one way or another. It may appear a bit smoother to the outside world now, but every £100 transferred is costing the state £35, and that is not something that any Government can tolerate. That is the process: get something efficient; roll it out when you know that it works; build it up; and then start to work down your existing portfolio. That is the process.
The noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, asked about assets and lifestyles. The reality is that that provision was very difficult to use, as everyone involved knows. It was not a successful mechanism for the parent with care to use. Capturing actual income is far more meaningful for parents and far more administratively achievable, which is why we switched over to that approach.
The minimum flat rate of £5 has not increased since 2003 and will remain until the new scheme is fully open to all new applicants. I fully accept the point made by the noble Baroness, Lady Sherlock, about whether it is compatible with UC. At some stage in the future, it may be possible to look at tapers and matching it up, but it is too soon to do that. I accept the general point, but I do not think we are there yet.
The noble Lord, Lord McKenzie, asked about ignoring unearned income in the calculation. We are making the main calculation on taxable employment income, trading income or pension income because HMRC holds that information for the vast majority of taxpayers. Taxpayers who are not liable for self-assessment are not required to declare income of less than £10,000 per year from savings and investments. It would be unfair to take account of unearned income details sourced from HMRC and not pursue parents who had that income but were not required to declare it. Asking non-resident parents to supply that information would be to repeat the delays of the current schemes where non-resident parents are often unco-operative. A parent with care can apply for a variation to take account of unearned income. It is the same with shared care. The noble Lord was right that where it was agreed that there was shared care and the disagreement was about how much it was, the one-seventh assumption would come in. Where there was no agreement that there was sharing, it would have to be done by way of variation.
On taking account of pension schemes, the new scheme will, as now, allow contributions to an occupational pension scheme to be deducted from income, with the resulting figure used to calculate child maintenance. There is no limit on the amount of contributions that can be deducted. That is not a change in the existing system.
Lord McKenzie of Luton
I apologise for interrupting the Minister. The question I asked there was: if it is a net pay arrangement, does it get dealt with automatically via HMRC? If it is not, then it requires the non-resident parent to do something, to say, “I am making these contributions and want that reflected”. My question was whether there would be any prompt to the non-resident parent because many would not necessarily know that that was available to them.
While I am on my feet, perhaps I can go back a bit to this issue of variations, lifestyle and all that. We accept the difficulty in identifying unearned income, particularly that which does not have to be reported to HMRC. Why would it not be in every parent with care’s interest automatically to seek a variation on the basis that the non-resident parent may well have some unearned income, simply to see what comes out of the pot? Effectively, HMRC will automatically have to look at that.
Lord Freud
May I offer to write on that issue? We are layers down. Rather than dealing with that impromptu I will aim to write, as I will on how the prompts might work for the non-resident parent on their pensions. Again, that is getting to a level of technicality that I do not have at my fingertips. On tax credits, ignoring that loses 100,000 families about £6 a week in maintenance. Both noble Lords made that point. Again, that is an attempt to get rid of a level of complexity and drive through simplicity. We have set the percentages and thresholds to ensure that changes in liability are minimised except where, as a flat rate, we deliberately intended to raise them. We expect more than half of non-resident parents to pay more than under the current scheme.
Baroness Sherlock
Does the Minister accept that those who will pay more and the lone parents with care who are getting less may not be the same pairs of people? Obviously one cannot assume that the poorest parents with care are necessarily partnered to the poorest non-resident parents, but actually research shows that broadly speaking it is not uncommon for partnerships to be among people of very similar socioeconomic backgrounds and demographics. Is the Minister conscious that, even if overall many non-resident parents are paying more, the poorest parents with care may end up getting less as a result of the fact that the poorer among the non-resident parents are having this income ignored?
Lord Freud
I am not sure I have a precise breakdown within the socioeconomic groups to do that analysis. I will look later to see if I can send the noble Baroness some information on that. I am not sure off the top of my head that I know how that balances out but I will see what I have and include it to the extent that I do.
Baroness Sherlock
I am very grateful for that. Also, if that is not the case, I would settle for an alternative justification of the decision.
Lord Freud
I will either produce information or a justification.
On the war pension point made by the noble Lord, Lord McKenzie, a war disablement pension is considered a prescribed benefit, in which case the flat rate of maintenance will apply. A parent with care can apply for a variation to take account of any additional income received by the non-resident parent.
On the 12-month rule and the position with the Scottish minutes of agreement, we are in discussion with the Ministry of Justice and colleagues in the Scottish Government to ensure that the statutory maintenance system and the family justice system both north and south of the border work together as effectively as possible in the interests of parents and children. We are hoping to meet family lawyers’ representatives in England and Wales and Scotland to discuss this soon. However, I should say that at this point we are yet to be convinced that there is a compelling case for legislative change.
In reply to the question from the noble Baroness, Lady Sherlock, on the level of information and evidence required from a parent with care to make an application for variation, the link with HMRC means that the department has immediate access to a non-resident parent’s income information, which removes the requirement for the parent with care to supply substantial evidence of the non-resident parent’s financial circumstances. That means that fewer applications will be rejected at the preliminary stage and makes it easier for the parent with care to apply for variations. I believe that I have dealt with all the questions.
Lord McKenzie of Luton
Perhaps I may briefly revert to the issue of shared care when it is equal shared care. Obviously if both parties agree that there is equal shared care, they would not be in the system anyway because no maintenance would flow from it. Clearly it is potentially in the interest of the non-resident parent to claim equal shared care because then there would be no maintenance liability. What will the process be for determination of that and whether any form of appeal is attached to it?
Baroness Sherlock
One of the questions I asked was in relation to preparing parents in the current system for moving across to the new system, in particular transitional protection. I apologise if I missed the Minister’s answer.
Lord Freud
On transitional protection, the basic approach is that these rules have been very difficult to operate and our intention is to have very simple rules that are capable of being applied to the majority of parents. While there may be winners and losers, we expect there to be relatively few large losers. Many of them are likely in any case to go into a family-based arrangement, which may be a better option. That is the reason for not planning transitional protection. We will be providing an expanded service of information and advice to customers before the launch of the new system, to be called “Help and support for separated families”.
The way it will work is that if there is equal shared care and there are no payments either way, both parents have to agree that. If there is no agreement, we will go to the one-seventh proportion; that is, one night of shared care. We will accept verbal information about shared care, but both parents must agree. If they do not do so, we then move into the more formal process.
I am down to a very few issues on which I can now write to noble Lords, otherwise we will be here all night. There will be plenty of opportunities to debate these issues since further debates on the child maintenance system are coming up, and I know that many of us are looking forward to those. However, these regulations are narrow in scope and focus on simplifying the statutory child support scheme, improving the service to clients, reducing the costs to the taxpayer and increasing the flow of maintenance payments to children. I am heartened by the fact that there is support in principle, albeit that I will provide some more detail. On that basis, I commend this instrument to the Committee.
Child Support Maintenance (Changes to Basic Rate Calculation and Minimum Amount of Liability) Regulations 2012
(11 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Child Support Maintenance (Changes to Basic Rate Calculation and Minimum Amount of Liability) Regulations 2012.
Relevant document: 6th Report from the Joint Committee on Statutory Instruments.
House of Lords
Northern Ireland: Corporation Tax
(11 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Lexden
To ask Her Majesty’s Government whether, following their recent review, they propose to devolve responsibility for corporation tax in Northern Ireland to the Northern Ireland Executive.
Lord Newby
My Lords, a joint ministerial working group on rebalancing the Northern Ireland economy is currently examining the issues associated with the potential devolution of corporation tax. This group has made good progress but there remain some crucial areas where differences of opinion between the Northern Ireland Executive and Her Majesty’s Government still exist. The group is due to meet again later this week to continue the discussions.
Lord Lexden
I thank my noble friend for his Answer. As this prolonged review finally draws to a close, will he confirm that the Government remain wholly committed to rebalancing the Northern Ireland economy in order to enlarge private sector wealth creation? Will he tell us the last issues that still remain to be resolved by the ministerial group? If the Government decide not to transfer corporation tax to the Northern Ireland Executive, what contingency plans do they have to stimulate the private sector in other ways?
Lord Newby
My Lords, I can confirm that the Government are committed to rebalancing the Northern Ireland economy. The remaining issues, not surprisingly, are financial, and essentially there are two. The first relates to the initial reduction of the block grant, which follows from any devolution of corporation tax to Northern Ireland. There is something called the Azores criteria, which means that if a devolved Administration take full fiscal responsibility for a tax change, they must face a reduction in their block grant equivalent to the current corporation tax take from firms based in Northern Ireland. The second point is about how you deal with the ongoing adjustment over time to take account of inflation. At this point, it is far too early to say what will happen if the working group does not reach a positive conclusion.
Lord Empey
My Lords, first, will the Minister confirm that in the event of the devolution of corporation tax-setting powers to Northern Ireland, the Assembly could set different rates of tax for larger and smaller businesses? Secondly, will the Minister agree that the case for the devolution of these powers is stronger than equivalent demands from the Scottish Government and that Her Majesty’s Government will not be influenced by the campaign for Scottish independence when reaching their decision?
Lord Newby
My Lords, I can confirm that, as the current UK corporation tax system has different rates for smaller and larger businesses, it would be possible in principle if corporation tax were devolved to the Northern Ireland Assembly for two rates to obtain in Northern Ireland. I agree that the argument in favour of the devolution of corporation tax to Northern Ireland is of a different nature to the devolution of corporation tax to Scotland because of the proximity of the Republic of Ireland, which of course has a significantly lower corporation tax rate.
Lord Roberts of Conwy
Will my noble friend take on board the fact that Wales, too, would like to have the power to give variable rates of corporation tax?
Lord Newby
My Lords, of course, considerations of consequentials to Wales are always uppermost in the Government’s mind.
Lord Kinnock
In view of the Government’s ambition to withdraw from certain obligations of membership of the European Union, are they contemplating the possibility that the devolved Administration in Northern Ireland could cut corporation tax to the much lower level that is customary in the Republic of Ireland?
Lord Newby
My Lords, that is exactly what this whole process is about. The complication, as I said earlier, is that if you devolve Northern Ireland corporation tax rate-setting to the Northern Ireland Assembly, you face a significant financial cost to the Northern Ireland budget, which, when last estimated by the Treasury, was thought to be in the region of £300 million.
Lord Alderdice
My Lords, as I listen to the somewhat siren voices on all Benches, I seek reassurance from my noble friend that the interests of the people and of the economy of Northern Ireland will not be set aside because of excessive rigidities in Her Majesty’s Treasury on the one hand, and inappropriate comparisons with other parts of the United Kingdom that do not have, and I trust will continue not to have, an international frontier, on the other.
Lord Newby
Absolutely, my Lords. The key question, as I was just explaining, is financial and is about the consequences for the Northern Ireland Executive’s budget if the tax is devolved. I think that is recognised within Northern Ireland. A recent poll by the Belfast Telegraph showed that, although 30% of those questioned were in favour of this move, a higher number—some 34%—were against it, and an even higher number did not have a view. That just demonstrates that this is a very complicated issue. On the second half of my noble friend’s question, Northern Ireland is clearly in a different position from that of the other nations and regions of the UK, simply because it does not have a land frontier with them but has a land frontier with the Republic of Ireland.
Lord Reid of Cardowan
My Lords, of course this is an extremely complex question, not least because of the implications, as the Minister pointed out, of the Azores judgment and the potential burden on the Exchequer of Northern Ireland. In all these deliberations, will the Government bear in mind that Northern Ireland truly is a unique case, not only because of its border with another sovereign state—it is the only nation in the United Kingdom to have one—but because of the decades of very difficult and dangerous circumstances through which its people have come and because of the economy’s and employment’s ultra-high dependency on public expenditure in Northern Ireland? Will the Government at least look for some additional spark to move the dynamism of the private sector in Northern Ireland for the benefit of all the people there?
Lord Newby
The Government absolutely acknowledge that Northern Ireland is a unique case. That is why, while the whole issue of regional aid in the EU is being looked at at the moment, the Government are working very closely with Northern Ireland officials to consider how best to make the case for Northern Ireland receiving assisted-area coverage over and above that which would normally be provided for the rest of the UK.
Lord Trimble
My Lords, will the Minister tell me whether the Government have obtained assurances from the European Commission that it will not regard this as unlawful state aid? If they take that view, there is absolutely no point in taking it. In view of this issue, can he also say whether it would not be better to accelerate the Government’s programme for reducing corporation tax generally?
Lord Newby
My Lords, the Government are reducing corporation tax and in a relatively short period it will be down to 22%, which makes the differential between Northern Ireland and the Republic that much less than it was in the past. I can assure the noble Lord that, as long as the Azores principles are followed, this will not constitute a call on state aid.
NHS: Professional Qualifications Directive
(11 years, 6 months ago)
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Lord Kakkar
To ask Her Majesty’s Government what progress they have made in negotiations at European level on the working time and recognition of professional qualifications directives in the light of their impact on the delivery of care in the NHS.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, negotiations on both directives are ongoing. The Government remain of the view that both measures should support labour-market flexibility without imposing significant extra costs on member states to ensure that any negative impacts that we have seen are ameliorated and, most importantly, to ensure that patient safety is maintained.
Lord Kakkar
My Lords, I declare an interest as professor of surgery and consultant surgeon at University College London Hospitals. In today’s Daily Telegraph the presidents of the Royal College of Surgeons and the Royal College of Physicians make an urgent plea for action on these two elements of legislation to halt a devastating deterioration in clinical training and patient safety. Do Her Majesty’s Government collect data on the number of patients harmed as a result of the implementation of these two directives, for instance from coroners’ inquests where they have been implicated in patient deaths, and on the financial consequences in terms of the employment of locum doctors in the NHS to ensure that hospitals are 48-hour-week compliant? If these data are not collected will the Minister commit to organising for their collection in the future to better inform this Parliament and to add impetus to the Government’s negotiations with their European partners?
Earl Howe
My Lords, it is the responsibility of individual NHS trusts to ensure that service rotas are compliant with the working time directive. In line with the Government’s coalition agreement to reduce duplication and resources spent on administration, the department reduced bureaucracy for the service by removing the burden of central monitoring of compliance and we are leaving this role to organisations at local level. The last assessment of the working time directive was undertaken in January 2010 and reported that nearly 99% of doctors’ rotas were compliant with the directive but we are in no doubt about the concerns that exist within the medical professions about the inflexibilities within the rules of the directive. As regards the mutual recognition directive, the department does not plan to collect directly any data relating to it. The professional regulators. who are the competent authorities, collect data in respect of the number of people applying for recognition under the directive.
Lord Ryder of Wensum
My Lords, is my noble friend aware of the fact that the clinicians at the Institute of Cancer Research where I am the chairman regard the working time directive as being of no benefit at all to their patients? In view of this fact, can he please tell me now—or if not now, in a letter with a copy placed in your Lordships’ Library—the details of the meetings that have taken place between Ministers and senior officials and their opposite numbers in Brussels? The Government have long believed that they are able to revoke or to revise this directive but so far, after two and a half years, I see no progress at all.
Earl Howe
My Lords, it is important to understand that the EU social partner process, which is driving the discussions at the moment and has been extended to 31 December, is autonomous. It operates independently of both the Commission and the Council and the Government have no formal role in any social partner negotiations. Having said that, we have made it clear to the Commission and to partners in Europe that securing long-term sustainable growth has to be the EU’s key priority. We will continue to work with our partners to ensure that EU measures support labour-market flexibility and do not impose significant costs on member states or burdens on business. The Government would welcome proposals coming forward that would preserve the right for all workers, including those in the NHS, to choose the hours that they work, including in particular flexibility in the areas of on-call time and compensatory rest as well as the preservation of the individual opt-out.
Lord Turnberg
Does the noble Earl agree that the working time directive as it now operates is detrimental both to patient care and doctor training? Is it not time that we stopped at least the nonsense of counting time in the 48 hours as time when one is on call, even though one may never be called? Will the noble Earl make sure that the case is made to the EU that at least this part of the directive is rescinded?
Earl Howe
The SiMAP and Jaeger judgments are very much the focus of our representations to the EU Commission. The disquiet about those judgements and the inflexibility that they have brought is shared by other member states. It is also important to recognise that none of us wants to go back to the past, with tired doctors working excessive hours. Tired doctors make mistakes; there is substantial evidence to support that. No one wants or deserves to be treated by tired doctors. There is a balance to be struck. The inflexibilities in the directive need to be addressed, but we should not go back to the bad old days when doctors became too tired to do their work.
Baroness Jolly
My Lords, if a clinician fails to understand a patient or to make themselves understood, their clinical competence is undermined. Will the noble Earl tell the House the current situation regarding the required level of English language competence of a doctor or other clinician from an EU state who wishes to practise in England?
Earl Howe
My Lords, we are now talking about the mutual recognition of professional qualifications directive. We have made it clear that we want to stop foreign healthcare professionals working in the NHS unless they have passed robust language and competence tests. As a result, we have explored the idea of strengthening language testing for doctors through the use of responsible officers; and explored also the GMC’s ability to take action where concerns arise. The directive review is a key priority for the Government, and the Commission’s proposals include greater flexibility on language. It is helpful that the proposal from the Commission makes it clear that controls on language checks are permissible and may be undertaken before a professional is able to practise.
Energy: Self-sufficiency
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, I begin by paying tribute to my noble friend for his contributions and consistency in bringing this and similar Questions to our attention. The Government are committed to maximising all UK energy resources, including from the UK continental shelf and from UK-based renewables. However, all plausible scenarios of future energy use up to 2050, such as those set out in the Government’s carbon plan, require some fossil fuels. The amounts of oil and gas produced from the UK continental shelf are declining year on year. This means that it is unlikely that the UK could become completely self-sufficient in energy. However, import dependence is not new to the UK. We were heavily dependent on imports until the 1980s. We work closely with international partners such as Norway.
Lord Ezra
My Lords, as the House knows, historically this country was self-sufficient in energy supplies thanks to coal, natural gas and oil from the North Sea. However, as my noble friend mentioned, we had to import no less than one-third of our requirements in 2011. Does my noble friend agree that it will remain a major plank of the Government’s energy policy to reverse this trend as soon as possible? Secondly, will she confirm that there will be adequate electricity supplies and generating capacity, in view of the recent report of Ofgem that stated that there might be a reduction in capacity in the next four years?
Baroness Verma
My noble friend is absolutely right that we need to try to maximise the economic recovery of oil and gas from the UK continental shelf, and our most recent licensing round has been the most successful ever. We are committed to working with industry to create a new world-leading, cost-effective UK carbon capture and storage industry, and policies such as the Green Deal and the introduction of smart meters will reduce our energy demand and ensure more efficient use of the fuel that we use. Our ongoing work is to achieve renewable targets which significantly increase the proportion of clean domestic energy in the mix. Ofgem’s recent report provides a comprehensive analysis of the security of supply. We are looking at it very carefully and will respond formally by the end of the year.
Lord Teverson
My Lords, does my noble friend agree that, by making the most of the wide variety of renewables that our islands are blessed with, we will move further towards self-sufficiency in energy and will effectively then disconnect ourselves from the threat of ever-accelerating fossil fuel prices?
Baroness Verma
My noble friend raises a very important point. We are trying to make sure that we have greater self-sufficiency through our renewables but this means only that we reduce our reliance on fossil fuels and, although it is helpful to say that that is what we want to do, we are not currently at that stage. However plausible our scenarios of future energy, I think that there will still be a place for some fossil fuels.
Lord Tomlinson
My Lords, does the Minister agree that it is an illusion to pretend that we can ever attain self-sufficiency in energy without showing a rather more robust and urgent approach to the nuclear industry than the present Government are doing?
Baroness Verma
My Lords, I refute the noble Lord’s point that we are not taking a robust approach. We are, but we also need to make sure that we are able to decommission safely and dispose of the decommissioning waste that we have.
Lord St John of Bletso
My Lords, can the Minister elaborate on the potential for the commercialisation of shale gas in the United Kingdom?
Baroness Verma
My Lords, we need to make the most of all our domestic energy resources, and exploitation of shale gas reserves is just one way we can do this. We must also ensure that any development is sensitive to community concerns and consistent with our carbon objectives.
Lord Naseby
My Lords, if we are to continue with the aim of trying to achieve self-sufficiency, has not the time come to have another look at the Stern review, not because there is anything wrong with renewables but because the cost platform has so escalated in that area that it is highly questionable that we can now afford the proposals in that review?
Baroness Verma
My Lords, the Government are very mindful of the points that my noble friend raises but, as I said earlier, we are looking at all forms of energy, including renewables. We may well revisit previous reports but the most important thing is that we look at how, in the future, we are going to have a sustainable energy system which ensures that all our homes constantly have light.
Lord Broers
My Lords, in light of the fact that the Minister has admitted that it is inevitable that we use fossil fuels, how are we doing in our sequestration projects, which are designed to demonstrate the financial feasibility of the sequestration of CO2?
Baroness Verma
My Lords, the noble Lord’s question is a very technical one, which will require a very technical answer. I think it would be more helpful to the House if I were to write to him with an in-depth response to his very in-depth question.
Baroness Worthington
My Lords, does the Minister agree that renewables are the way to reduce our dependence on foreign imports of fossil fuels, and would she care to comment on the Crown Estate’s recent report into our tidal energy capacity, which is estimated to be the best in Europe?
Baroness Verma
My Lords, I welcome the Crown Estate report, which helps to refine our understanding of the wave and tidal energy resource in the UK. We have always known that we have an outstanding marine energy resource around our coastline and that is why the Government are fully committed to the development of wave and tidal energy. We have put in place the world’s most comprehensive support of the sector’s development, including innovation funding.
Economy: Deficit Reduction
(11 years, 6 months ago)
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Lord Barnett
To ask Her Majesty’s Government what is their latest estimate of the debt to gross domestic product ratio in 2015 under the current deficit reduction plan.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Office for Budget Responsibility produces the official fiscal forecasts. The OBR’s March 2012 forecast shows public sector net debt peaking at 76.3 per cent of gross domestic product in 2014-15 and subsequently falling in 2015-16 consistent with the Government’s supplementary target for debt. The OBR will publish updated forecasts alongside the Autumn Statement on 5 December.
Lord Barnett
My Lords, I thank the noble Lord for his Answer. Is he aware that there has been a later report from a more independent source—namely, the IMF—which states that in 2015 the net debt as a percentage of GDP will be about £50 billion more than the Chancellor previously expected? In those circumstances, does he not accept that the OBR is less independent for the very good reason, as was set out in the beginning, that its forecasts are influenced considerably by the general and regular meetings that it has with the Chancellor and Treasury officials? How many have there been in the past 12 months?
Lord Sassoon
No, my Lords, I do not accept for one minute any questioning of the independence of the OBR. It was set up on a statutory basis through a Bill to which the noble Lord, Lord Barnett, contributed. It is set up totally independently under a respected head, Robert Chote, and his team and I refute absolutely any question that it is not independent. All of its meetings with the Chancellor and the dates on which data are transferred over are transparently set out on the Treasury website.
Baroness Kramer
My Lords, does the Minister agree that lack of access to reasonably priced credit by small businesses is holding back both those businesses and general economic growth? Does he further agree that with funding for lending now in place there is no excuse for the banks not to make that credit available, especially as they no longer have to put capital on their books to support those loans?
Lord Sassoon
My Lords, I certainly agree with my noble friend that the question of funding, particularly for SMEs, continues to be of considerable concern to the Government. That is why we have been able to use the strength of the national government balance sheet which derives from our deficit reduction plans to put in place the funding for lending scheme, to which my noble friend referred, and the UK guarantee scheme of up to £50 billion for infrastructure projects so that we can ensure that credit continues to flow.
Lord Peston
My Lords, I take it that the noble Lord’s answer implies that the Government intend to pursue continuously their ludicrous economic policy, the effect of which is that the Government engage in cuts, those cuts lower aggregate demand, the tax revenue goes down and some benefits go up so that the budget deficit increases, whereupon they engage in more cuts, and this process goes on until the economy implodes. That is the danger before us. What is required is a change in economic policy that leads to some expansion of the real economy.
Lord Sassoon
My Lords, I do not know whether the noble Lord, Lord Peston, and his noble friend Lord Barnett have been comparing notes, but the noble Lord, Lord Barnett, was quoting the IMF approvingly at me only a minute or two ago. On this point, only a week ago, on 9 October, a senior official of the IMF said that at this stage:
“The policy mix in the UK, which consists of adjusting fiscal policy, reducing deficits, at the same time supporting the economy with a very accommodative monetary policy is the right way to go”.
Lord Ryder of Wensum
My Lords, can my noble friend please tell the House about the last time that the IMF forecasts for the British economy were accurate?
Lord Sassoon
My Lords, I am not going to give a commentary on the IMF’s forecasts, or anybody else’s. We should wait until 5 December to see what the Office for Budget Responsibility has to say in its renewed forecasts.
Lord Davies of Oldham
My Lords, are we not experiencing a double-dip recession that is longer than any since the war, and is it not the case that forecasts are belied by the facts? The Government are borrowing £9.3 billion more in the first four months of this year than in the same period last year. How on earth can the Minister pretend that the present policy is working?
Lord Sassoon
My Lords, we have only to wait until 25 October to learn the third-quarter growth number; then we will know the latest state of play in the economy. As to the question about levels of debt, I find it extraordinary that a Front-Bench opposition spokesman should give us a lecture on debt plans. Does the noble Lord, Lord Davies of Oldham, recognise the recent IFS analysis of Labour’s plans, which said that under the so-called Darling plan, total accumulated debt would be £201 billion higher than under the present Government’s plans? That level of debt would see the AAA rating gone for a very long time and would see almost £4,000 of debt per man, woman and child in this country added to the debt load we inherited. Is that what the noble Lord is advocating?
Trusts (Capital and Income) Bill [HL]
Financial Services Bill
(11 years, 6 months ago)
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Lord Sassoon
“(ba) Part 2A makes provision relating to the winding up, administration or insolvency of UK clearing houses;”
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, this is the first of a number of amendments that will extend the powers under the Banking Act to investment firms and central counterparties to enable their orderly resolution. The financial crisis of 2008-09 highlighted many deficiencies in the regulation of the global financial system. Most importantly, we found that the disorderly failure of systemically important banks could have a catastrophic effect on the stability of the UK and on international financial markets.
To give the Treasury and other authorities the powers necessary to minimise the impact of bank failure on depositors and the system as a whole, the Banking (Special Provisions) Act was introduced in 2008, swiftly followed by the special resolution regime established under the Banking Act 2009. Both Acts enjoyed cross-party support, although of course they benefited from the scrutiny of both Houses. I trust that noble Lords will take a similarly constructive approach to these important amendments.
Establishing the special resolution regime for deposit-takers was an important step towards ensuring that systemic institutions would not fail in a disorderly manner. However, deposit-takers are only part of the financial system. There are other types of financial institution, such as investment firms and central counterparties, whose disorderly failure could also severely disrupt both financial markets and the normal functioning of the wider economy.
Reform is also taking place at a European and global level, and the UK is playing a leading role in these discussions. The UK’s approach is consistent with those set out by the European Commission, the Committee on Payment and Settlement Systems, and the International Organisation of Security Commissions. However, implementation of these reforms in Europe is some way off. Our financial services industry is of huge importance to the UK economy and we believe that any gaps in such resolution powers should be addressed as soon as possible. The Treasury therefore consulted on a number of proposals over the summer, including draft legislation. My officials met with a wide range of industry stakeholders, from investment firms and central counterparties to mixed holding companies and industry representatives. As a result of that consultation, we are now able to proceed with the legislation set out in this group of amendments.
The first group of amendments that I am speaking to today covers the new insolvency regime and arrangements that apply to UK clearing houses and recognised investment exchanges. UK clearing houses form part of the financial market infrastructure that underpins the operations of domestic and international markets. They act as the buyer to every seller and the seller to every buyer in order to protect trading parties from the risk of counterparty default. The role performed by UK clearing houses means that they are particularly exposed to wider market risks, such as the failure of large clearing members.
Recognised investment exchanges, in their capacity as market operators, can operate regulated markets and multilateral trading facilities. These exchanges provide a number of crucial services for the trading of shares, bonds and other securities. Amendment 183ZZA introduces a new subset of recognised clearing houses—UK clearing houses—into the regulatory framework. The reason for this is that it is not appropriate for the Bank of England to exercise the new powers contained in these amendments in respect of foreign clearing houses that are not established in the UK, nor in respect of clearing houses that do not offer central counterparty services. This amendment provides clarity on these points.
Amendments 176A and 176C introduce provisions in relation to the Bank of England’s role in winding-up, administration or insolvency proceedings relating to a UK clearing house. These amendments will ensure that the Bank of England and the Treasury are put on notice of the application for the winding up of a clearing house and have the opportunity to consider whether to exercise a resolution power in order to minimise the impact of failure on financial stability. Amendment 176C allows the Bank of England to direct insolvency practitioners appointed in connection with the insolvency of a UK clearing house. Such directions will build on current provisions governing company insolvency but will allow the Bank of England to direct the insolvency practitioner to take steps to minimise the impact of the insolvency on financial stability. In doing so, the Bank must be satisfied that it is desirable, having regard to the public interest in the maintenance of financial stability.
Amendment 176B allows for the Bank to apply to the court for administration of the clearing house and participate in court proceedings. It also requires that the Bank gives its consent before an administrator is appointed to act for a failed UK clearing house. These powers will enable the Bank of England to respond quickly and decisively when a clearing house is in financial difficulty, managing the safe winding up in a manner that minimises any risk to financial stability and the wider economy.
Finally, Amendments 189BD to 189BL relate to insolvency arrangements for recognised investment exchanges. They expand the scope of Part 24 of FiSMA so that it applies to the insolvency of a recognised investment exchange, as it applies to the insolvency of an authorised person. This means that the regulator will be able to apply to a court for an order placing an investment exchange into an appropriate insolvency procedure. These amendments also ensure that the regulator would be put on notice of an application for an order placing an investment exchange into an insolvency procedure and could participate in these proceedings if it considered it necessary in the public interest. I beg to move.
Lord Tunnicliffe
My Lords, I thank the Minister for his introduction to the total package of measures to which the amendments relate and for his explanation of specific amendments. The way in which the amendments have been grouped means that a substantial part of the detail of the overall package will be debated in two working days. Accordingly, we will look at the detail during that period and respond then. The results of the consultation are being published today. Only when we have carefully looked at those will we make a detailed response. At a general level, we welcome the bringing of these financial institutions into the resolution regime.
Lord Peston
My Lords, will the Minister clarify one or two aspects of what he said? Am I right in thinking that the amendments, in so far as one can follow them at all, are relevant when something has already gone wrong; that is, when the institution in question is in trouble and something has to be done to cope with that?
Lord Peston
Am I then also right that other aspects of the Bill are really to stop the problem arising in the first place? Would that be a valid interpretation of the whole legislation?
Lord Sassoon
My Lords, at the risk of oversimplifying matters, yes, indeed. We want a judgment-based system of regulation and supervision that makes it less likely that things will go wrong in the first place. That is entirely correct.
Lord Peston
The Minister must be aware by now that there is no way that he can oversimplify when he is dealing with me. Has a study been done of the costs and benefits of the effects of the amendments? In particular, if a crisis appears that is connected with insolvency et cetera, will costs be involved and who will bear them? I cannot find an answer to that anywhere in the amendments. Is it a responsibility of whoever is administering all this? Further, am I right in thinking that clearing houses will not be saved but essentially go out of business?
Lord Sassoon
My Lords, I can confirm that, as with just about everything that this Government and the previous Government have brought forward, an impact assessment of the measures was done as part of the consultation process. The noble Lord took us back to first principles. What we are trying to achieve in the broad sweep of the construct is for the costs to fall on the industry. The shareholders would be likely to be the first to be wiped out if an investment exchange or clearing house went out of business. That is where the costs would fall. At all times, our principal concern is to make sure that taxpayers are not exposed to material costs such as they were, very severely, in the financial crisis of 2007-08. I hope that that helps the noble Lord.
Lord Flight
My Lords, the Minister referred to EU regulations relevant to the territory. I and colleagues returned the week before last from a visit to Brussels to look at the banking union proposals. The long and short of it appeared to be that ECB supervision proposals might just be achieved, and that the arrangements for a common approach to deposit insurance was unlikely to get anywhere in the foreseeable future, and likewise the arrangements for common resolution systems. What is the Government’s stance? I think it is understood that, as we are outside the eurozone, we will not be part of these arrangements, but there was insistence that the EBA, as a sort of advisory body on top of the ECB, would have the last word over central banks and national regulators with regard to issues in all these territories.
Lord Sassoon
I am grateful to my noble friend for bringing us a summary of the latest intelligence from Brussels. If he will permit me, I shall restrict my comments—because he raises some big questions—to this particular group of amendments. He may want to raise European questions as we go through other topics. On this particular topic, and regardless of whatever areas of the evolving European structure the UK is part of or not part of as the banking union goes ahead, work is already going on at EU level to introduce a resolution regime for institutions such as the ones we are talking about. They recognise, as we do, that central counterparties are critically important. The question, therefore, becomes one of timing—should we sit back and wait for Europe to do it?
I hasten to say that there is absolutely no reason to believe that there is any problem with any of the clearing houses or the recognised investment exchanges, but I would not wish to come here as a Minister in, say, six or nine months’ time and say, “Well, we had identified and Europe had identified this issue; we had a vehicle for legislation but we did not actually take the opportunity”. I recognise the point made by the noble Lord, Lord Tunnicliffe, that we are putting a lot more things in here, but we have a one-off opportunity. It is an important point, and Europe has identified it, but goodness only knows when Europe will get round to implementing it. We believe that we have a solution—it has been consulted on—and if in due course it is not compliant with the way that the EU subsequently does it, we will obviously have to amend things. There is no suggestion, however, that that will be the case because we have been consulting the UK authorities as we go through the design of this.
Baroness Kramer
My Lords, I have not been sure whether to speak to this group of amendments or the following group, or how to organise comments on the clearing houses. I therefore apologise, but given the conversation that has just taken place, I would like to raise a couple of issues. As this process is going forward in terms of supervision, has attention also been paid to Dodd-Frank? Obviously some of the extraterritorial powers that are being sought by the United States on these issues have a very significant impact on the matters that he is dealing with in this and the next group of amendments.
The Minister also said that Europe was being very slow to come to conclusions on how to apply resolution for the clearing houses, but he did not mention that they are also very slow—and appear to have done nothing—to recognise or mitigate the procyclicality impact of the changes he is describing in this move towards centralised clearing houses. We all recognise that the changes stamp down on counterparty risk, but they amplify market risk. Procyclicality is a significant part of that. I think that we have to understand that context if we are to understand the particular measures.
The noble Lord, Lord Flight, raised the issue of co-ordination with other supervisors, but none of these measures seems to address in any way the issue of access to euros for the CCPs, should they require it in another crisis such as the one we saw in 2008. Where are we in the process of negotiating a mechanism that ensures that offshore euro CCPs, such as those in the UK, will be able to access euro liquidity should they need it?
One last issue—and I will try to hold things for the next round of amendments—is that I am unclear as to how these resolutions tie in with banking resolutions or living wills for banks, because the two obviously tie together. If CCPs are placing large amounts of cash and non-cash collateral in banks in the UK as a result of their margin positions, what happens if the bank holding such collateral fails? Is the CCP just one more unsecured creditor? It would be helpful to have some sense of on what side of the ring-fence such accounts would fall for us to understand whether there is a significant risk or a relatively minor one. As I said, I shall hold all comments on the actual resolution mechanism until the next round of amendments.
Lord Sassoon
My Lords, my noble friend asks a lot of important questions but there is a danger of overinterpreting what the clauses achieve. They are to cover circumstances that we do not envisage—although we did not envisage any of the circumstances that occurred in 2007-08, but there is no reason to believe that there is a problem here. As my noble friend says, the clearing houses already have a critical role in the financial architecture; that role is getting even more important as more trading is done on exchange and securities are cleared through the clearing houses.
We are trying here to put in place some mechanisms by which the authorities can step in where voluntary arrangements or insolvency are live. I do not believe that in drawing up the proposals or in consultation on them any difficulty has been identified in relation to the Dodd-Frank rules. Of course the question of procyclicality must be dealt with, but the provisions enabling the authorities to intervene in winding-up, administration or insolvency recognise the importance of clearing houses as they are now. As clearing houses are asked to do more, of course other provisions may be needed, but the provisions are not intended to anticipate some future development of the clearing houses’ role, merely to reflect the situation that we are in already and their structural importance.
Baroness Kramer
Is the Minister saying that the provisions are completely apart from EMIR and the ESMA rules derived from EMIR and that we will have another round, as it were, at some point encompassing those rules?
Lord Sassoon
Yes, I am essentially saying that. This is about clearing houses and recognised investment exchanges that get into trouble, whatever the cause of the trouble. EMIR and related issues raise a whole separate series of questions—including, for example, the question of access to euro liquidity, on which, as I am sure my noble friend knows, we last year started an action against the European Central Bank, which, we believe, is attempting to draw lines across the single market in financial services depending on whether a country is in or out of the eurozone around where clearing houses can operate in the euro. We as a Government firmly believe that the single market requirements are such that a clearing house can operate in the euro wherever it is located in the European Union and that access to euro liquidity and everything else should flow from that.
As to the relationship with the banks, that is not directly relevant to these clauses. An exception to this is where a bank has an important relationship with a clearing house. These new powers mean that the authorities can step in if there are questions of financial stability. We have additional tools in the authority’s kit-bag to deal with a situation which might include the knock-on effect on the banks of their relationship with the clearing houses or vice versa. So it does increase the toolkit.
Lord Barnett
My Lords, this group of amendments seems, at least to me, to emphasise ever more the huge powers that are being given to the Bank of England under this Bill. I am grateful to the Minister for all his clarifications so far, and I take it from what has been said about the European situation that this is not one of those areas where the Government are looking to transfer power away from Brussels. However, my main question is this: given the huge powers that are being given to the Bank of England under the Bill—this might explain why there are so few applicants for the post of governor; it is such a complex job that no one wants it, even with a salary of £300,000 a year and going up all the time—will the Government give new thinking to the whole idea of the extra powers that are being given?
Lord Sassoon
First, my Lords, there is no question in this of anything being transferred to or from the EU. This is just a regime around the winding-up administration for the insolvency of UK clearing houses, so I assure the noble Lord that that issue does not arise. It was his Government—the previous Labour Government—who identified this general area as one that needed to be dealt with, particularly in the context of deposit takers, where the need was identified to put additional provisions in place for resolution regimes. We built on the work initiated by the previous Government and have identified other systemically important parts of the system.
We are talking about clearing houses and recognised investment exchanges this afternoon, and we will go on in a future session to talk about investment banks. We are merely saying that we have identified other areas where the authorities need to have powers similar to the ones that came out of the legislation initiated by the previous Government, and are putting that in place.
As to the cumulative amount of responsibility that we are giving to the Bank of England, we have already in the course of the very useful scrutiny of this Bill made some important changes, including putting the oversight committee in place to respond to the sort of challenge that the ever-nimble-on-his-feet noble Lord, Lord Barnett, raises. I therefore think that we have covered that issue up front in this Bill and that the Government have made some big concessions.
Lord Peston
My Lords, I will not pursue the question of more powers to the Bank of England. After its performance over the last few years, it is the last thing I would do, and I do not think this is the occasion to debate that yet again. However, I am puzzled by two things. I thought that in his reply to the noble Lord, Lord Flight, he said we should not be discussing the European angle and that that would come at some other stage. Is that right? I do not think I misheard him.
Lord Sassoon
No, I said in my reply to my noble friend this afternoon that I would concentrate purely on the European angle of these amendments, which I dealt with. I was not going to be drawn into discussing a whole range of other European matters which my noble friend’s remarks address. It is as simple as that.
Lord Peston
I take it that we are not discussing—because if we were, I would make a speech—the fact that we believe strongly in a single market for financial services but that many of the European countries go to enormous lengths to prevent our highly efficient financial services firms getting into their markets. I would not mind having a debate on that some time during proceedings on this Bill. However, I gather that in the Minister’s view this is not the moment.
Baroness Cohen of Pimlico
Might I ask the Minister for a little guidance? If we are discussing all these amendments together, I have a set of problems that I would like to discuss on Amendment 176D. Is this the moment or are we going to do all the amendments separately?
Lord Sassoon
If the noble Baroness will allow me, we will come to Amendment 176D—I would say in a moment, but it might be a prolonged moment.
Lord Sassoon
“Insolvency23A (1) The following provisions of Part 24 of this Act are to apply in relation to the Bank—
(a) section 356 (powers to participate in proceedings: company voluntary arrangements);(b) section 358 (powers to participate in proceedings: trust deeds for creditors in Scotland);(c) section 359 (administration order);(d) section 362 (powers to participate in administration proceedings);(e) section 362A (consent to appointment of administrator);(f) section 363 (powers to participate in proceedings: receivership);(g) section 365 (powers to participate in proceedings: voluntary winding-up);(h) section 367 (winding-up petitions);(i) section 371 (powers to participate in proceedings: winding-up).(2) Those provisions are to apply as if any reference to an authorised person or recognised UK investment exchange were a reference to a recognised clearing house.
23B In the case of any regulated activity which is carried on for the purposes of, or in connection with, the provision of clearing services, the reference to the FCA in section 375(1) is to be read as including a reference to the Bank.”
“PART 2AWinding up, administration or insolvency of UK clearing housesNotice to Bank of England of preliminary steps31A (1) An application for an administration order in respect of a UK clearing house may not be determined unless the conditions below are satisfied.
(2) A petition for a winding up order in respect of a UK clearing house may not be determined unless the conditions below are satisfied.
(3) A resolution for voluntary winding up of a UK clearing house may not be made unless the conditions below are satisfied.
(4) An administrator of a UK clearing house may not be appointed unless the conditions below are satisfied.
(5) Condition 1 is that the Bank of England has been notified—
(a) by the applicant for an administration order, that the application has been made, (b) by the petitioner for a winding up order, that the petition has been presented,(c) by the UK clearing house, that a resolution for voluntary winding up may be made, or(d) by the person proposing to appoint an administrator, of the proposed appointment.(6) Condition 2 is that a copy of the notice complying with Condition 1 has been filed (in Scotland, lodged) with the court (and made available for public inspection by the court).
(7) Condition 3 is that—
(a) the period of 2 weeks, beginning with the day on which the notice is received, has ended, or(b) the Bank of England has informed the person who gave the notice that—(i) it has no objection to the order, resolution or appointment being made, and(ii) it does not intend to exercise a stabilisation power under Part 1 of the Banking Act 2009. (8) Arranging for the giving of notice in order to satisfy Condition 1 can be a step with a view to minimising the potential loss to a UK clearing house’s creditors for the purpose of section 214 of the Insolvency Act 1986 (wrongful trading).
(9) In this paragraph “the court” means—
(a) in England and Wales, the High Court,(b) in Scotland, the Court of Session, and(c) in Northern Ireland, the High Court.Power to give directions to insolvency practitioner31B (1) This paragraph applies where a person has been appointed to act as an insolvency practitioner (within the meaning of section 388 of the Insolvency Act 1986 or article 3 of the Insolvency (Northern Ireland) Order 1989) in relation to company which is, or has been, a UK clearing house.
(2) The Bank of England may give directions to the person if satisfied that it is desirable to give the directions, having regard to the public interest in—
(a) protecting and enhancing the stability of the UK financial system,(b) protecting and enhancing public confidence in the stability of the UK financial system, and(c) maintaining the continuity of central counterparty clearing services.(3) Before giving directions the Bank of England must consult—
(a) the Treasury,(b) (if the clearing house is a PRA-authorised person) the PRA, and(c) the FCA.(4) Directions are enforceable, on an application by the Bank of England, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
(5) A person is not liable for damages in respect of action or inaction in accordance with directions.
(6) The immunity does not extend to action or inaction—
(a) in bad faith, or(b) in contravention of section 6(1) of the Human Rights Act 1998.(7) In this paragraph “central counterparty clearing services” has the same meaning as in section 155 of the Companies Act 1989 (see subsection (3A) of that section).”
Lord Sassoon
“Additional power to direct UK clearing houses
After section 296 of FSMA 2000 insert—“296A Additional power to direct UK clearing houses
(1) The Bank of England may direct a UK clearing house to take, or refrain from taking, specified action if the Bank is satisfied that it is desirable to give the direction, having regard to the public interest in—
(a) protecting and enhancing the stability of the UK financial system,(b) maintaining public confidence in the stability of the UK financial system,(c) maintaining the continuity of the central counterparty clearing services provided by the clearing house, and(d) maintaining and enhancing the financial resilience of the clearing house. (2) The direction may, in particular—
(a) specify the time for compliance with the direction,(b) require the rules of the clearing house to be amended, and(c) override such rules (whether generally or in their application to a particular case).(3) The direction is enforceable, on the application of the Bank, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
(4) The Bank may revoke a direction given under this section.
(5) In this section “central counterparty clearing services” has the same meaning as in section 155 of the Companies Act 1989 (see subsection (3A) of that section).”
Lord Peston
My Lords, before the Minister moves this amendment, can I ask him one other thing that intrigues me? On the bit of paper that we get every day when we meet on this, it says:
“Target for the day: to complete the group beginning amendment 190ZZA”.
Are we to take that seriously? At the rate we are going, we will be going for a very early supper.
Lord Sassoon
My Lords, as ever, these things are discussed and agreed through the usual channels. I certainly take my side of the usual channels extremely seriously. The noble Lord can discuss it with his side, but I believe that is where we are headed. I thought we might have got through the previous group of amendments rather more quickly, so I do not know what time we will finish, but in only a moment I have been able to move on to Amendment 176D.
Amendments 176D and 182ZA build on the existing powers of direction that the Financial Services Authority has under the Financial Services and Markets Act 2000, or FiSMA. This group of amendments gives the Bank of England additional powers to direct UK clearing houses to address risks to their solvency, or indeed any other matter. Specifically, the direction could require a clearing house to make changes to its rules or introduce emergency rules, or require rules to be activated. The existing powers of direction provided for in FiSMA can be used only to direct a clearing house to ensure that it complies with the recognition requirements or its obligations under FiSMA. Here, in answer to a point that the noble Lord, Lord Peston, raised, we are talking about powers that go with the previous group of amendments, which were all to do with clearing up a mess when we got there. We are now talking about additional powers to make sure, specifically, that we minimise the chances of getting into trouble.
Providing the Bank with additional powers of direction over UK clearing houses is essential to allow the Bank to manage the considerable risks that may be posed by actions of a clearing house that is nevertheless not in breach of its recognition requirements or obligations under FiSMA. Put simply, the powers will enable the Bank to intervene as required to help to ensure that clearing houses act in a way that is consistent with the maintenance of financial stability and wider market confidence. For example, these provisions allow the Bank to issue a direction requiring a UK clearing house to refuse to accept certain investments as collateral, or to require all collateral in relation to specified types of financial transaction to be provided in cash. They also allow the Bank to require a UK clearing house to alter the rules concerning its operation in order to ensure that certain matters do not constitute events on which specified rights become available—for example, early termination rights—or to require a UK clearing house to take action or to refrain from taking action under its default rules.
Although these powers are wide-ranging, building in essential flexibility to manage new and unusual risks, they may be exercised only where the Bank is satisfied that it is desirable to do so, having regard to various clearly defined public interest tests. With one exception, the Bank of England cannot use this power to require shareholders, members or clients to recapitalise or otherwise fund a failing recognised clearing house. The power of direction relates only to the recognised clearing house itself. The exception is where the UK clearing house already has recapitalisation arrangements and agreements in place with its shareholders. In this instance, the Bank of England could use this power to direct the UK clearing house to enforce those arrangements, provided that the necessary conditions and safeguards are met. This is to ensure that the clearing house acts in a way that is consistent with the maintenance of financial stability and wider market confidence. I beg to move.
Baroness Kramer
My Lords, I hope that these amendments will be consistent with EMIR and ESMA rules. It is not as though those are not available to the Treasury, and the last thing the industry needs is continual revision. Can the Minister clarify whether the amendments give the Bank of England a fairly free hand in resolution procedures? As he said earlier, the steps to resolution are, first, to use the collateral margin; and, secondly, to go into, presumably, the clearing house default fund and exhaust that. I am not clear what the next step and fallback is at the end of that process.
To what extent is there the capacity to go back to members or, as implied by EMIR, for the Bank of England to direct or permit clearing houses in effect to tear up their trades where a financial stability issue has been raised? If those are the kinds of powers that are being transferred to the Bank of England as a consequence of this, when will we get some clarity on exactly what the rules are—by whom, how and when those steps might be applied? Will they be comprehensive when we see them, as well as clear? Will they be credible, in the sense that they are the kind of rules that could be implemented in a crisis? There is a lot of concern about all that, because EMIR creates a possibility but has not created the rules. Can the Minister tell us when we will get those rules and be able to look at all this again? I understand that EMIR is to be implemented by the middle of next year. That does not give us much time if we are going to use this legislation, so I remain very confused.
Baroness Cohen of Pimlico
I draw attention to some difficulties raised by Amendment 176D. In doing so, I need to declare my interest as a non-executive director of the London Stock Exchange, and in that respect as the owner of a clearing house in Italy, and, I hope, subject to all the regulatory requirements, the owner of a majority share in the London Clearing House, and therefore very directly concerned.
These new powers extend the existing powers of direction over clearing houses that the Bank will already have under Section 296 of FiSMA. The amendments are being brought forward following many consultations with the Treasury this summer. I have two problems with the new clauses; I am not certain that the Minister has not just solved the first one, but I will say all this in order to make quite sure that we have got the answer right.
Will the Minister please confirm that the new powers under Amendment 176D cannot and will not be used to direct owners and members of a clearing house to recapitalise or re-fund the default arrangements? I hope that I am pushing at an open door here. I think the Minister said that the direction would not compel unless the default or refunding arrangements were already agreed and an already agreed arrangement were simply being activated. If so, that is splendid, and I would be grateful if he could kindly confirm it again. It is obviously important for owners and members of a clearing house to understand their maximum possible liabilities and to finance accordingly.
Lord Hodgson of Astley Abbotts
Before the Minister replies, I add my request to him to explain the issue of the level playing field. We have a very complicated piece of legislation here. In Amendment 176D we are looking at an additional power to direct UK clearing houses, and in Amendment 193G there is an application to UK clearing houses. I would like the Minister’s reassurance that this is not going to lead to differential treatment, because it will be extremely confusing if that is the case, and that the basic conditions, as the noble Baroness said, are going to be the same and that we are not going to find ourselves at sixes and sevens because it depends on which part of the Banking Act or FiSMA is applicable in a particular case. I realise that this is a technical point, but it is important that we try to get as much clarity and as much of a level playing field as possible.
Lord Barnett
My Lords, I would like some clarification. New Clause 296A in Amendment 176D says that the Bank of England “may” direct, not “must”, even though it has regard to the public interest, while new Clause 296A(2) says that the direction “may” specify various things. The direction is then enforceable only on the application by the Bank by an injunction or by other complicated means. Why should it not be “must” if it is in the national public interest? I do not understand why the word “may” is there rather than “must”.
Lord Sassoon
My Lords, I shall try to deal with a number of those points. First, on the general question of “may” and “must”, I have quite a lot of sympathy with the noble Lord, Lord Barnett. I thought that we were going to have a more extensive discussion about “may”s and “must”s in our previous session, but unfortunately and regrettably the noble Lord was not able to be here, so we did not spend as much time discussing it as we could have done. There were some instances last week where I thought that on a first reading he and the noble Lord, Lord Peston, had spotted some rather good examples where those terms should be reversed, although they had spotted one or two others where I did not agree with them. However, it provoked quite a long discussion with the Treasury lawyers and drafting experts. As a general matter, I have asked them to reassure me on all the “may”s and “must”s in the Bill, as I am a bit confused sometimes. However, a general defence of this is that, even though some of us as laymen may think that a “may” should be a “must”, it gives rise to all sorts of difficult potential legal challenges. As noble Lords will know, this is a common feature of a lot of legislation that we discuss. I have asked the draftsmen to reassure me that there are no instances where we could change the language in the Bill. I am grateful to the noble Lord, Lord Barnett, for that.
In answer to my noble friend Lady Kramer, as the Committee will know, EMIR will, in the main, force mandatory clearing of OTC derivatives. That will increase the role of, and risk concentrated in, clearing houses and is part of the driver behind introducing these new powers now. I reassure my noble friend that these provisions are entirely consistent with and complementary to EMIR. The intention is that the EMIR regime will be agreed in full by 1 January 2013, with 12 months thereafter to comply. I believe that that gives enough time to explain to all concerned how these various powers are going to be operated. However, I will take back my noble friend’s specific concern that all relevant guidance, particularly in the area that we are discussing this afternoon, goes out in good time. I will discuss that with the authorities.
On the specific questions that arise from the London Stock Exchange, I confirm to the noble Baroness, Lady Cohen of Pimlico, that I answered the question on the first point directly. On the second point, we need to recognise that there are two rather different sets of trigger conditions. The power of direction is designed to avert situations where resolution is necessary. The special resolution regime itself is to be implemented where there is no realistic prospect of the clearing house continuing to function. While I am happy to debate and take away the noble Baroness’s point—I will read carefully what she said on the record—I believe that there is a fundamental mis-read-across between the appropriate trigger conditions for a power of direction as opposed to a special resolution regime. Of course, if there is anything more I can add on that, I will write to all those on the copy list.
Baroness Kramer
For clarification, I had understood the statement of the noble Baroness, Lady Cohen, to be that she was reassured because, under these rules, there was no expectation that the members of a clearing house could be required to top up a default fund unless there were some pre-agreed arrangement or mechanism in place; they would presumably be able to scope out their liabilities. What are the consequences of that for those who are trading and clearing through for the counterparties on the various transactions where the clearing house then has no resource to margin or to a default fund because it is exhausted and whose trades remain open with the clearing platform as the counterparty that should have fulfilled that side of the trade? What are the implications for people who initiate the various derivatives contracts? As my noble friend knows, these contracts often can be open for quite a few years. Are they at risk or is there some other mechanism that provides them with protection, or will they have to very carefully evaluate what they consider to be the financial safety of the clearing houses? If that is the case, will we have credit-rated clearing houses? What mechanism will be used to have some sort of assurance that this is an appropriate platform for them to use to clear trades?
Lord Sassoon
My Lords, these are professional markets. We are putting in place additional protections and provisions, which does not mean that you could not put in place in a theoretical world all sorts of other protections. We are going further than the current situation. Currently, all sorts of rules and oversights are in place. We are going further but we do not believe it is appropriate—that is the point on which I was able to reassure the noble Baroness—that the Bank of England should be in a position to order shareholders of these businesses any more than it can order shareholders of banks that fail to put more money in, save only in the prescribed circumstances where there is a pre-existing agreement and where the clearing house itself can trigger it.
I am sure we can all think of all sorts of provisions that we could put in place to make the world a lot safer, but rather sterile, place. We are going further than the current protections. Of course, theoretically, various things could be put in place but we do not intend to do that.
Lord Peston
My Lords, I hate to abandon a “may” and “must” debate, because it is my favourite activity. However, in this case, since we are discussing additional powers, I hate to say it but I think that “may” is simply the word that corresponds grammatically to giving the additional powers. Given the circumstances in which the amendment lists when those powers can be used, it is perfectly obvious that “must” is then implicit. Why else would these criteria be taken into account? I do not want the Minister to stop annoying the parliamentary draftsmen but perhaps for once they have got it right.
Lord Sassoon
I am very grateful to the noble Lord, as I am sure the officials will be.
Amendment 176D agreed.
Lord Sassoon
“(a) in subsections (1), (6) and (7), after “section 296” insert “or 296A”, and(b) ”
“(1) Section 313 (interpretation) is amended as follows.
(2) In subsection (1), at the end insert—
“UK clearing house” means a clearing house—
(a) which has its head office or its registered office (or both) in the United Kingdom,(b) which provides central counterparty clearing services, and(c) in relation to which a recognition order is in force.”(3) ”
Lord Sassoon
Lord Flight
Lord Flight
My Lords, Amendments 183A and 187A seek to restore the existing 28-day period for representations for principal parties and third parties. I hope that the Government will not have a problem with accepting that as a small step towards ensuring that justice is done. Amendments 185A and 186 are rather more fundamental as they seek to limit the very wide powers that the Bill presently gives with regard to the publication of warning notices.
I am not sure why it has not been included in this group of amendments but subsequently we shall come to Amendment 187AA in the name of the noble Baroness, Lady Hayter, which potentially has the whole solution to the issue that I raise by providing for an independent judicial body and process for each regulator. At present, the amendment in the Bill to Section 391 will enable the PRA and FCA to publish details of their allegations immediately they are issued to individuals or firms, which seems to me to be unfair for two fundamental reasons. First, the allegations could be mistaken in fact and, if not mistaken, they could be one-sided. I think it is unfair for a regulator to publish such allegations when the individual or firm has no equally authoritative platform from which to respond. Secondly, there is the position of a senior manager; a business could become completely untenable where such a notice is issued.
Under FiSMA at present, the FSA is not able to publish its allegations against a firm or individual until they have had an opportunity to challenge them by meeting the FSA’s enforcement division. Effectively, that means appearing before the Regulatory Decisions Committee, which acts as a relatively independent judicial body. It seems wrong in principle for an individual or organisation to be publicly labelled guilty before there has been some form of independent judicial process to assess the matter. Stakeholders can also be unfairly affected. I cite the fall of 25% in Standard Chartered’s share price when something similar happened in the USA and the New York regulator gave advance notice of publicly alleged wrongdoings by Standard Chartered. It is not just the individuals or organisations that are affected but the pension funds and others who are shareholders.
The Treasury’s justification that:
“The new warning notices power is a good idea because it will increase transparency. This will mean that consumers will know at an earlier stage where things are going wrong with a firm or individual and the FCA is taking action”,
seems to me to ignore or to override the principles of natural justice and the wider interests of other stakeholders. It was particularly ironic that both the Chancellor of the Exchequer and the Governor of the Bank of England should have complained about the Standard Chartered case when the FSB contains very similar provisions which will enable the same sort of thing to happen in the UK. I grant that the positions are not absolutely analogous but they are pretty similar.
The protections in the Bill are also unlikely to be effective. While the regulator is obliged to consult with the person or organisation to whom a warning notice is given and not to publish such notices if they are deemed to be unfair or prejudicial to the interests of consumers or detrimental to the stability of the UK’s financial system, the Bill is not clear as to what are the requirements to consult and it is implicit that in the event of disagreement between the regulator and the recipient as to publication, the regulator will have the power to go ahead and publish. It would be analogous to introduce a power to publicise the stage in the process which otherwise remains private until after the regulatory decisions committee has decided whether or not to issue a decision notice. Also, unlike the USA regulators in the UK have statutory immunity and cannot be sued if they have wrongly caused a damaging impact on a business as a result of their actions.
The position of the regulatory decisions committee is crucial. It is not a creature of statute but rather the system which the FSA has evolved and adopted. There is no obligation under the Bill for the FSA or PRA to adopt the regulatory decisions committee model. The Government’s proposed amendment erodes the independence of the decision-making body. While the actual decision to publish must be taken by at least one person not directly involved in establishing the evidence on which a decision is based, other decision-makers can participate who have been directly involved in the underlying investigation. I fear that is not very far from the investigators taking the decision where the Government’s proposed amendments to the existing law appear to allow the existing safeguards to be substantially bypassed. This in turn throws up the risk that a decision made by a body which includes individuals who have been involved in gathering the evidence on which it is based could be challenged by an affected party as being contrary to the principles of natural justice that no man may be a judge in his own case. Parallels have also been made with bringing charges in criminal proceedings which are public, but the code for crown prosecutors imposes a far higher standard of proof that there is sufficient evidence to provide a realistic prospect of conviction than the much lower standard of proof for a regulator issuing a warning notice.
It seems that in focusing on the value of transparency, the Treasury has ignored the equally important issues both of natural justice and of third-party stakeholder interests in business. I hope the Standard Chartered case will serve to highlight the dangers of this approach and to change the Treasury’s mind here.
Lord Deben
My Lords, I declare an interest as a board member of a company which might be affected by this and also as chairman of the Association of Independent Financial Advisers. It means I know a bit about what is happening here and it concerns me very considerably. The proposal is that the public will know more but I do not think that they will. It has been shown that the public will assume that if no reference has been made, then everything must be all right. Recent examples have shown that the regulator has failed to know what is going on inside organisations. If a regulator says that there may be something wrong, the public will know that there may be, but the public will assume that if the regulator does not say that, everything is all right. So I am not at all sure that there is an extension of transparency.
There is a big problem for the Government. This Bill was introduced at the same time as the Civil Aviation Bill. I listened carefully to everything that the Minister said on the Civil Aviation Bill. Very simply, he said that they were introducing all kinds of ways in which people who were affected by the regulators would be able to appeal. They would be able to make sure that they were heard, and certainly they would not be criticised before evidence had been laid. All the arguments that my noble friend made were stated in defence of the changes in the Civil Aviation Bill—yet at precisely the same time we produce this Bill, which removes all the things that we put into the Civil Aviation Bill. The Government cannot have it both ways. Either it is right for the Civil Aviation Bill and for this Bill, or it is not right for either. This is why the House of Commons has asked us to be so careful about this. It is very concerned.
There is also a question of parallels in criminal proceedings. This is a very odd argument. The reason that the police announce publicly that they are proceeding to prosecution or considering prosecution is to protect the person who is being prosecuted, so that they do not suddenly disappear. It is done as a protection of the individual against whom an allegation is made. In many other systems it has been shown that if you do not do that, people get themselves into circumstances that no one else knows about. The police in this country have to be transparent not for the general public but for the individual concerned. The situation is wholly different for financial institutions with which we are dealing. If it is said in advance that the regulator is considering action, in the world in which we live people will make immediate assumptions; the pinks will be out immediately with all the comments that one would expect. Is this fair? I think not.
Certainly there are too many examples of regulators getting it wrong—as well as too many examples the other way round when they did not intervene and got it wrong. It is much better to have a system in which the regulator goes as far as he can to establish the truth before he makes public an allegation, particularly in a country where the regulator is protected by law. If we were in a country where the regulator could be sued, that would be different—but we are not. We have a system—I agree with it—in which the regulator is able to make such allegations without any fear. I do not think that that is acceptable. It is not acceptable in terms of natural law. Therefore, it is crucial that this House defends and protects people.
This argument comes from someone who has been more critical than most of the financial services industry, and who has been critical of regulators for not intervening rather than for intervening. Therefore I am on the right side, in terms of the Government, but one should not win these battles by shortcuts—and this is a shortcut. It does not achieve anything because if it is right that an investigation should take place and that somebody should be put on notice that they are to be investigated, that is done just as well in private hands as in public—and if the charge is true it will become public. If it turns out to be something that it is necessary for the world to know, it will be known. The idea that it should be known before one knows whether it is necessary or not is not an acceptable position.
Although I have declared an interest in this, my real interest is that I have fought in this House—as I did in the other House—for the rule of law. Part of the rule of law is that nobody shall be judged guilty until they are proved guilty. The problem with this change is that it is unparalleled and not applied in any other industry, and it ends up with people being assumed to be guilty until they can prove their innocence. The length of time that the regulator takes to work means that many people will never be able to prove their innocence because they will already have gone bust. We have not recognised how serious this measure would be for companies. It is not a fair way of proceeding and it is not justified. Frankly, the regulator has not given a single example of when having this power would have improved regulation. I asked but no answer came—all I got was a statement that it will be useful. That is not a satisfactory answer for the removal of a human right.
I very much hope that the Minister will understand there is very considerable unhappiness about this; it is unnecessary and it is to act here in a way that I have not seen in any—any—legislation brought before this House since this Government took office. I would therefore like to know why what is sauce for the goose is not sauce for this particular gander. Could we please have an absolute example—even one—of a case in recent years in which this power would have helped the cause of justice? If we cannot, it seems to me likely that the cause of justice will not be helped at all.
Lord Hodgson of Astley Abbotts
My Lords, I rise to support the amendments of my noble friend. In Committee, I said I believe that the regulatory philosophy, culture and approach has shifted and that far from it being an attempt by both sides to achieve the best and right way forward it has become an entirely aggressive, uncontrolled approach by the regulator without any thought to the consequences of how his actions will impact on the firm in question or the City as a whole.
I have also spoken about the increasing use of Section 166; the way that the significant influence function committee has used its powers to damage people’s careers and leave them absolutely no redress at all. They are left in limbo. My noble friend says that people can go for judicial review, but if he believes an individual is going to take on a regulator in this way, he cannot be doing anything other than reading the Treasury briefing note. I cannot believe, with his experience of the City, that he really believes an individual is going to be able to take on an organisation like the FCA, or the FSA as it now is, with its limitless resources, limitless amount of time and limitless access to legal expertise. I believe my noble friend raises a very serious point.
I understand the argument about transparency and it is an attractive one but the fact of the matter is we may be having transparency about inaccurate or wrong information. That cannot be sensible. We owe it to all sides for transparency to be about things that are correct in every sense. When a regulator, with all its authority, is able to put out its view it means that the person about whom the allegations are made never has a chance to obtain proper redress. In the eyes of the public there is no smoke without fire, people will say there must be something or the regulator would not have put the information out there. Even if it is proven in the end to be absolutely wrong, and even if it has not gone bust in the meantime, the firm will be immensely damaged. People will say that there must have been a case to answer because such a great authority, which has all the power of the state behind it, would not put out a notice without a reason.
I really feel that we have to be much clearer about who makes the final call about whether to publish. Judging from the Bill, it seems to me that it is far too cosy and far too easy for the regulator to be making these decisions to publish. There are not nearly enough outside checks and balances to ensure that a proper assessment of the information and evidence is made available and assessed before a very precipitous, potentially exceptionally damaging disclosure is made. I hope the Minister will be able to go a long way to meet my noble friend’s amendments.
Baroness Hayter of Kentish Town
My Lords, the starting point for my intervention on this group of amendments is our belief that consumers will benefit from transparency, contrary to the suggestions made by the noble Lords, Lord Deben and Lord Hodgson of Astley Abbotts, to help them make—
Lord Hodgson of Astley Abbotts
I do not think my noble friend Lord Deben and I said that we were against transparency. We said—or, at least, I said and I think my noble friend Lord Deben said—that we wanted to make sure that what was made transparent was accurate. Inaccurate transparency does not help anyone.
Baroness Hayter of Kentish Town
The assumption is—it has been said a number of times—“What if it is proved wrong?”. However, many, if not most, of these will be proved right, and that transparency surely will be of enormous benefit to consumers and investors in a way that I hope to demonstrate.
Lord Deben
Every time it is proved wrong it will undermine the proving of right. Since when have we had a system whereby one says, “Because many people are guilty but have not yet been proved guilty, we shall assume that they are guilty”? That is what will happen if you say it only on the word of the investigator and there is no concept even of a CPS.
Baroness Hayter of Kentish Town
Perhaps the noble Lords will let me make my case and explain that. As was suggested by the noble Lord, Lord Flight, the purpose of my amendment in the next group is to address this issue and I hope that it will get support from across the House. It is about a different way of dealing with this and bringing to that independence a much higher hurdle for exactly the reasons that noble Lords have been talking about. I hope that when we come to that amendment it will receive wide support because I share the view about a greater degree of independence and separateness being needed. Nevertheless, transparency is a particularly important issue which we, as consumer representatives, feel was very restricted by Section 348 of FiSMA and the FSA’s interpretation of this. I shall in a moment explain why we do not support the amendments of the noble Lord, Lord Flight, in the present group.
Amendment 185B concerns warning notices in respect of procedures and referrals to tribunals and other issues. It would remove the requirement to consult with those about to be named before any warning notice is published. I find it hard to see why this requirement is in the Bill. It does not affect other walks of life. In criminal cases, ordinary people do not get consulted before they are arrested or charged but their names will be released. “Consultation”, I fear, is code for, “Let the lawyers loose”—I apologise to noble Lords who are lawyers—and risks injunctions, stalling and long legal arguments. Why should the person who is to be named be given special rights? If it is right to publish, why should there be a block on publication? I hope the Minister will be able to justify that, given that tremendous consultation goes on already with the firm involved before one is even at the stage of a warning notice.
On the amendments in the name of the noble Lord, Lord Flight, as I say, we have sympathy with bits of them because of the lack of a second eye, independence and separateness, if you like, from the investigators within the regulation. The Bill empowers the regulators to publish the fact that a warning notice has been issued. This is of particular interest to the issue of misleading financial promotions. For consumers, it is a significant increase in transparency to know which ads have not only been looked at by the regulator but have been seen to be sufficiently misleading for consumers to know that an ad—which they may still have; they may have cut it out of a magazine or remember it from the television and it may still influence their purchase of a product—is under review. There could be considerable consumer detriment if the ad is still in their minds and they have not had a signal that the regulator is worried by it. That is one of the most important things to consumers.
At an earlier stage of the Bill, the Government were not motivated to accept our worries about reliance on “buyer beware”—caveat emptor—but how can consumers shop around if the ads on which they are basing their choice of products are perhaps going through what can be quite a lengthy procedure? It can take very many months, and an advertising campaign can be quite short, and all that time consumers do not know that procedures are taking place that might affect their choice of product.
In other areas, we know fairly quickly. If action is taken against a food factory suspected of contaminating food, we as consumers want to know immediately, and the Food Standards Agency lets us know straightaway when it is taking action. Similarly, if a garage had fixed a coach’s brakes and was accused of doing it less than satisfactorily—some of us are grandparents—I would not want my grandchild to be on a coach where the garage was already up before the Health and Safety Executive for not having done repair work properly. Similarly, as a shareholder, I would want to know whether BP did have some liability for pollution in the Gulf of Mexico before I parted with money to invest in that company.
There can be ongoing detriment if serious accusations are made and the people involved in parting with their money, as consumers or investors, do not know about it. I am not sure it was right that we heard nothing about LIBOR and the behaviour of banks until that first case was settled. Was it right that Equitable Life went on selling products even when there was a case pending? Many of the difficulties that arose were consequences of that ongoing sale. The first time these names came out there would be a lot of coverage in the press, but once we got over that hurdle—once we had got used to it and grown up—consumers are quite able to know the difference between an accusation and a finding. Keeping those hearings in the dark is quite against consumer interest.
We hope that the Government will not accept these amendments, but that in the next group they will be rather more sympathetic to a different approach to dealing with how these decisions are taken. For the moment, I hope that they can support my amendment but hold fire on the others.
Lord Sassoon
My Lords, this has been a particularly interesting debate. These are very important matters because we are talking about important new powers that the Bill gives to the regulators.
Of course I have some sympathy with what my noble friends are saying, but we have to recognise that the starting point is that there has been a huge amount of detriment over the years caused by the mis-selling of financial services. To talk in dramatic terms about human rights and people being proved guilty before they had had a chance to go through natural justice and so on is painting the picture from a completely wrong starting point. To be fair to my noble friend Lord Flight, who kicked off this group of amendments, those are not remotely the terms in which he came at this, so I do not bracket him in this. However, we have people who are quite properly setting out their interests but talking as if somehow everything was fine. It was not fine before.
Certainly the regulators equally fell down on the piece, and we may be giving them a power that is difficult for them to handle. I recognise that, and I will deal with that as I go through the argument. However, I think that we must start from a recognition that things need to change and that we have to think whether we can do better than trying to sweep things up after people have lost very significant amounts of money. We need to tilt the balance slightly in these matters, but I completely agree that there need to be safeguards in place and that whenever you create a new power for a regulator, there are dangers if that power is not properly exercised.
Lord Deben
I hope the Minister remarked in my comments that my major criticism of regulators was that they did not intervene in a whole series of areas where they should have. My argument was that if it is in the public arena when they do intervene, the public will be even more convinced, as the history shows, that everything else is going okay. In fact, the regulator has fallen down again and again. Many of the worst examples—the ones that he and I would be most cross about—are those where the regulator has not intervened.
Lord Sassoon
Perhaps my noble friend could listen to the argument. He said that he has asked for examples on a number of occasions but there has not been a single case where the FSA could say, “This would have been a useful power”. I have a long list of examples that the FSA could no doubt have given him. It includes the Winterflood market abuse case, where it tackled an illegal share ramping scheme, with warning notices issued in April 2007 but decision notices not issued until June 2008; the case of Gary Lester, a fraudulent mortgage broker, in 2008 to 2010; the Swift Trade market abuse case; and Atlantic Law and Greystoke. I could go on. I am sorry if my noble friend has been led to believe that there are no examples. The FSA can certainly give me examples. Of course it is important that there should be examples.
I have made one or two remarks about the general situation—which is that the Government believe that a new power is merited and that we need to recognise that we are trying to deal with detriment to the users of financial services here while affording proper protections to market participants. However, before I come back to some broader points, let me address the amendments themselves.
The first two amendments, Amendments 183A and 187A, seek to reverse a very specific change that the Bill makes to FiSMA, namely shortening the period for making representations after a warning notice has been issued from 28 to 14 days. We made this change in close consultation with the regulator, which noted that in many cases the 28-day window is not required at all. This may be because a case is straightforward and does not require such a long time for representations to be put together, because a person admits to the contravention or because that person does not respond at all. In such cases, having a mandatory 28-day period has the effect of unnecessarily slowing down the overall enforcement process, which is not in the interest of credible deterrence and the regulator’s efficient use of its time and resource. That is why we have moved to a starting point of 14 days.
I fully agree that firms should have adequate time to make representations. Although 14 days is the new minimum, it is important to note that it remains at the regulator’s discretion to specify a longer period—for example where it knows a case is particularly complex. The regulator may decide to extend the period from the outset. The decision whether to extend the period will of course be governed by the principles of natural justice and Article 6 of the European Convention on Human Rights concerning the right to a fair trial. I hope that that gives some reassurance to my noble friend on the narrow point; that is, it is not a blanket 14 days.
I am conscious that, in moving to the wider issue, we risk straying into the areas covered by the amendment of the noble Baroness, Lady Hayter of Kentish Town, which we are going to debate next, but I repeat that my starting point is very much the same as that of the noble Baroness; namely, we need to provide the regulators with this new power but to make sure that it operates proportionately.
Amendments 185A, 185B and 186 are all concerned with the new power for the regulators to disclose the fact that they have issued a warning notice in respect of disciplinary action to a firm or individual. Amendment 186 probes an important issue relating to the disclosure of warning notices; namely, whether the new power should apply in respect of individuals or approved persons. There are two reasons why we included warning notices issued under Section 67 in the list in new subsection (1ZB). First, the warning notices concern what are very clearly disciplinary matters, relating as they do to contraventions or knowing involvement in rule breaches or contraventions of EU requirements, so it is consistent that they should be included here. Secondly, it is important to remember that this is a power, not a duty, and that the regulators will be required to consider whether disclosure would be unfair to the person concerned.
Amendment 185B seeks to remove the requirement to consult from the power. I recognise that allowing warning notices to be disclosed is a major step change in regulation. It must be underpinned by proper procedures and safeguards. Consultation with the firm or individual concerned is key, because it is an important way in which the regulator can assess whether disclosure would be unfair and consider the possible impact of its actions. But I want to be clear that a requirement to consult the person affected does not mean that the FCA needs to seek their consent. That is clear and there is no getting away from it.
Amendment 185A seeks to delete the entire new power and revert to the current arrangements in FiSMA. I restate that the power to disclose warning notices is a key part of our vision for the FCA. It enables the FCA to regulate in a more proactive and preventative way. I have given a number of examples where, in its judgment, these powers would have made a difference in the past. They make transparency and disclosure a key pillar of its regulatory approach and enable it to have a credible enforcement function and deterrence strategy.
I do not agree with my noble friend Lord Flight about the read-across from the Standard Chartered case. I certainly agree with him and my noble friend Lord Deben—my noble friend Lord Hodgson of Astley Abbotts also touched on this—that there are real dangers in terms of the knock-on consequences which the FSA and the FCA will have to take into account, but that general proposition, which of course the regulators in the UK will have to take account of, does not make valid a direct comparison with the Standard Chartered case in the US. The power proposed in this Bill is substantially different in scope, safeguards and proposed application from the power used by the New York DFS in respect of Standard Chartered. I think that my noble friend recognises some differences, but our analysis is that the safeguards are materially different. So, yes, the FCA will have to take into consideration the impact of its notices, but I do not agree that we should pray in aid the specific details of the Standard Chartered case. It is important to be reminded and have on the record what my noble friends say—which is correct. For listed companies in particular, the share prices can and will react very negatively in these circumstances. If subsequently it happens with tax announcements that are somehow back-tracked and have been over the years by HMRC or the Treasury, the first effect on a share price is often much more negative than subsequently, when some decision or tax policy announcement is reversed. I take that point and I am sure that the FCA will be very mindful of it as it makes those decisions in the future.
A number of other points have been made by noble Lords. As to the more specific challenge of my noble friend Lord Deben about what would happen if the regulator got it wrong, there is a general danger which the regulator needs to bear in mind before putting out a notice. Where the regulator decides to take no further action after it has made public the fact that it has published a warning notice, it has discretion to publish the fact that it has issued a notice of discontinuance if the person to whom the warning notice relates consents to that issue. Where the regulator has made public the fact that it has issued a warning notice but then decides that a case will not proceed to a decision notice, it will also make public the fact that a notice of discontinuance has been issued.
There are various other questions about delay and injunctions. I do not agree that the power as drafted will cause overall delays to the enforcement process. The Bill does not require publication of the warning notice or of a decision whether or not to be published to be taken, challenged or appealed et cetera in order for the enforcement process to keep going. The only delay will be to the publication rather than to the action itself. That may not have been the point that the noble Baroness, Lady Hayter of Kentish Town, was making, but just to be clear: if it was, the underlying enforcement process keeps on going.
Of course, the FCA might face injunctions to prevent publication and that is part of the protection in the injunction process. We also stress that, without a requirement to consult the firm or individual in question, it is more likely that that firm would seek emergency injunctions preventing publication as a knee-jerk reaction. Therefore, we have the consultation duty and the final decision is taken by the FCA. There could be an injunction process, but we think that the right balance has been struck.
I could go on for a long time on this, but let me conclude. I hope that my noble friends will listen to the next bit, because I hear that, although we believe this is an important power, the question is whether it will be exercised properly and whether any further protection is needed. We are taking a bold new step in an untested direction and it has to be used responsibly. For that reason—and listening to this debate—I can say that we intend to return to this issue on Report in this one very specific way: that is, to make provision for a power for the Government to repeal the new warning notices power if at some point in the future the Treasury considers that the power or use of it by the regulators is, or may be, contrary to the public interest. This does not weaken in any way our commitment to this policy, or our belief that if used responsibly, which we expect it to be, the new power will form a vital part of the FCA’s regulatory toolkit.
I hope that what I have just said provides my noble friend with some reassurance that we will be mindful that the power is used in a responsible way which is in the interests of the greater good. Should that not be the case, we will act under a power which we intend to bring forward on Report.
Lord Peston
I admonish the Minister in a trifling way. It seems to me that the issuing of warning notices is enormously beneficial to those being regulated. That is one bit of a Bill that I do not like which I am totally in favour of. I am surprised that the Minister would even consider any backtracking on that. It is immensely beneficial to people to be told, “We are concerned about what you are doing and would like you to modify your behaviour so that it does not create a loss to the public interest”. That is one of the really good bits of the Bill.
Lord Sassoon
My Lords, let me stress again that we are not backtracking at all. Our commitment to the new policy instrument remains extremely firm. It may be that the industry will come to take the view expressed by the noble Lord, Lord Peston. We will see. I have been struck by not only our debate this afternoon but our conversations in the run-up to it that because we are taking such a bold step, which I believe to be the right one and which I believe that the FCA will exercise properly, we should have the reserve power, which we do not have in the Bill, should things not turn out as I and the noble Lord, Lord Peston, expect.
I hope, on the basis of that explanation of our intention, that my noble friend will feel able to withdraw his amendment.
Baroness Hayter of Kentish Town
My Lords, would that happen by an order that would come back to this House, or would it just be by Treasury decision? That is a big power to take away without parliamentary scrutiny.
Lord Sassoon
My Lords, I said that we intend to come back to the House on Report with a power to reflect the concerns that have been expressed. As to how the power will operate, noble Lords will see a draft of what we are considering in good time before our debate. For a power of this importance, I would expect it to be in secondary legislation subject to the affirmative procedure, so there will be an opportunity to discuss the repeal in this House, but let us see it when it is drafted.
Lord Flight
I am not entirely clear where the Government are. As I understand it, the present situation is very satisfactory. If the FSA thought that the noble Lord, Lord Peston, had been a naughty boy, it would have a word with him and tell him so. It might make that notice public but, first, there would be a fair judicial inquiry into whether what was alleged by the FSA was correct and accurate. That is handled by the Regulatory Decisions Committee.
I cannot understand why the Government want to sideline the RDC, because it seems to me to be the check on accuracy and fairness. The issue about warning notices being public is that, in today’s world, if it is made public that the FSA has warned the noble Lord, Lord Peston, that it thinks he is conducting his business dishonestly, his career and reputation are dead. He is a guilty man: strike his head off, basically. We are living in that sort of world, which is why it is a serious matter.
If the Government are saying that they are very happy to have an independent judicial process before warning notices are published and as I understand the amendment that the noble Baroness, Lady Hayter, has tabled, which we are coming on to debate, then I have no problem, but I am extremely uncomfortable at the officers of the FSA being able to gang up and publish warning notices themselves.
I have experienced indirectly a number of examples where, to be candid, the accuracy and research of the FSA has been questionable. I know one business that was raided and accused of insider dealing. Eventually the alleged insider news was shown to have been in the newspapers three weeks previously. The situation was that someone on the wrong side of a takeover battle wanted to get at somebody because they thought that they would vote their shares the other way, so they phoned the FSA and said, “We think so-and-so has been insider dealing”, and the FSA went roaring ahead without checking at all. I am afraid I have encountered other situations where the FSA has not been professional in putting together its case and checking it before taking action.
Therefore, I am concerned that, if it is just left to an individual and their chums in the FSA to go ahead and publish warning notices without any sort of fair judicial review, there is scope for injustice. It is not helpful to the consumer either because, if the FSA is subsequently proven to have got it wrong and to have been unfair, it damages its own reputation.
I am not quite clear where the Government are coming from because of this unfortunate division of the amendment of the noble Baroness, Lady Hayter, which is yet to come, and this group of amendments. If the Government are to support some form of alternative fair judicial process, I think that everyone in the Committee will be happy. If they are not, I think that quite a lot of people will be less than happy.
I merely ask the Minister whether there is an intent to have some form of judicial review, as we are about to debate. Without some knowledge of that, it is not possible to know how to react to the comments.
Lord Sassoon
All I can say to my noble friend—which I hope he would expect me to say—is that I am not going to pre-empt what I hear in the next debate. I want to listen to the next debate and hear what the Committee has to say. I am not responsible for the groupings here.
Lord Flight
In anticipation thereof, I shall withdraw my amendment but, if it is not dealt with satisfactorily, I intend to put it to a vote at Third Reading.
Lord Sassoon
(c) for “a final notice” substitute “the notice required by subsection (2A)”.( ) After that subsection insert—
“(2A) The notice required by this subsection is—
(a) in a case where the regulator is acting in accordance with a direction given by the Tribunal under section 133(6)(b), or by the court on an appeal from a decision by the Tribunal under section 133(6), a further decision notice, and(b) in any other case, a final notice.”.”
Lord Sassoon
“( ) In subsection (7A), for “the Authority” substitute “a regulator”.”
“(1) Each regulator will establish and maintain a committee (referred to as the “Determinations Panel”).
(2) Each regulator must appoint a chairman of the Determinations Panel.
(3) The chairman of each Panel must—
(a) decide the number of persons to be appointed as the other members of the Panel; and(b) nominate a person for each of those appointments.(4) Each regulator must then appoint as the other members of the Panel the persons nominated by the chairman of the Panel.
(5) The following are ineligible for appointment as members of the Panel—
(a) any member of the relevant regulator;(b) any member of staff of the regulator;(c) any employee of Her Majesty’s Treasury.(6) Each Panel may establish sub-committees consisting of members of the Panel.
(7) Each Panel will be responsible for the following—”
Baroness Hayter of Kentish Town
My Lords, in addition to the reasons that we debated in the last group, there are two main reasons behind this amendment. I hope the Government will consider this amendment seriously, as I believe it will have widespread support across the Committee, as well as from the industry and the wider public.
One reason is to give some certainty that regulatory issues, or discipline, will be dealt with in an open and transparent way and not simply according to procedures chosen and operated within and by the regulators who are themselves bringing cases to a body for determination.
The second reason is to bring some independence to these hearings to give confidence to those against whom regulatory measures are to be taken that they will have a chance for a fair, objective second hearing—a hearing by people who are apart from, and indeed independent of, the regulator’s staff. We know from the FSA’s history that such independence was not always there. Although there is now the Regulatory Decisions Committee, it is not guaranteed in statute. Indeed, I know that, partly thanks to some ideas floated on the FSA website, there has been much concern that the RDC may not even continue under the new architecture. However, surely the existence of such a body should be clearly set out in the Bill so that it cannot simply be abolished or amended by the regulators.
I should add, reflecting what happened in the previous debate, that the fairness of the new power of the FCA to publish its warning notices—a power which, as the Committee will have heard, I strongly support—has been made explicitly contingent on the continuing existence of the RDC’s involvement in decision-making; hence the concern that such a committee might be abolished without parliamentary agreement. In defending the proposal to allow it to publish warning notices before the formal enforcement process had taken place, the FSA noted that all proposals to exercise regulatory powers are currently taken to the RDC to determine whether there is a case to answer. That is just the first stage—having a case to answer. Furthermore, the FSA’s then head of enforcement, Margaret Cole, said that a warning notice is,
“quite some significant way down our process for holding people accountable. It is a moment when we have looked at the case in detail, taken it to an internal committee and reached a conclusion that there is a case to answer”.
That is the process on which I am focusing.
The central role of the Regulatory Decisions Committee in providing an independent source of challenge to the FSA’s executive was regularly cited in evidence to the pre-legislative Joint Committee and to the Treasury Select Committee. The FSA’s current arrangements are, I believe, robust and effective, having been refined by experience and as a result of the Strachan review of its enforcement processes. However, we cannot assume that the protections afforded by the current framework will simply be transposed into the new regulator’s governance arrangements. The current FSA proxies for the new regulators have shown a keen appetite for exercising their judgment and discretion to intervene swiftly and decisively. I welcome that but I am aware that within the industry there are serious concerns that the FSA has, in anticipation of its new powers, begun to exploit the absence of a specific statutory requirement for the RDC.
Any erosion of these profoundly important checks and balances will not benefit consumers and will risk eroding confidence in our regulatory system. Given the explicit significance that has been attached to delivering fairness in respect of the new powers, they should not be left to the discretion of the regulators to carry forward but be embedded in statute and endorsed by Parliament. It is for this reason that I propose that the essence of the FSA’s regulatory decision-making processes should be captured and embodied in legislation.
The proposal in Amendment 187AA, as the observant among the Committee will notice, follows the model of the Pensions Regulator set out in the Pensions Act 2004. Although I was not in the House at the time, I believe that drew partly on the lessons of the slightly less than satisfactory FSA model. I have to declare a past interest as a former member of the Pensions Regulator’s determination panel. However, I know from discussions with present and past RDC members and from one who has served both on that determination panel and the FSA body that the pensions model is seen to offer greater independence and scrutiny of cases brought by the respective regulators. That is partly because it cannot be abolished, partly because its members have to be independent of the regulator and partly because it is in primary legislation.
The exact formulation of the equivalent formats for two such bodies as the PRA and the FCA may need a trifle more perfect drafting than I have managed in this amendment. However, for today, will the Minister consider carefully the principle that these big decisions, which can have great impact on individuals or financial firms, should be taken by a specialist independent panel, albeit appointed by the relevant regulator, to ensure a highly knowledgeable and expert group of decision-makers? I beg to move.
Lord Sharkey
Will the Minister clarify a point in sub-paragraph (3)(b) of paragraph 28 in Schedule 9, which would survive whether or not the amendments of the noble Baroness, Lady Hayter, were accepted? The sub-paragraph adds to the sentence in FiSMA the words,
“, or by 2 or more persons who include a person not directly involved in establishing that evidence”.
The whole paragraph now reads:
“That procedure must be designed to secure, among other things, that the decision which gives rise to the obligation to give any such notice is taken by a person not directly involved in establishing the evidence on which that decision is based, or by 2 or more persons who include a person not directly involved in establishing that evidence”.
FiSMA already permits a procedure that allows, in certain circumstances, the decision to issue a notice to be made solely by a person directly involved in establishing the evidence on which that decision is based. Why has the Minister felt it necessary to change this? Why, in particular, regularly allow the decision to issue a notice to be made by a person directly involved in establishing the evidence for the notice if he or she can persuade just one other person to agree? Does he have a particular type of case or set of circumstances in mind that would make this desirable or necessary, or is there some now apparent defect in the current regime as exemplified within the FSA by the Regulatory Decisions Committee?
Lord Deben
I hesitate to return to the previous discussion, but I just remark to the Minister that his whole list of examples of what this might have prevented of course misses the point. My point was that we could have done all those things with the RDC. The real question is: who makes that decision? I have never had an explanation of why it is necessary to have a power that is never referred to any independent group. That is all I am interested in and I feel very strongly about it. We have recently been trying to complete a very valuable thing called “treating customers fairly”. I want all customers to be treated fairly, and I entirely agree with the speech of the noble Baroness, Lady Hayter, who is absolutely right.
I say to the Minister very personally and directly that when one of those most likely to be a senior regulator tells the industry that he intends to shoot first and ask questions later, he should understand why the industry has some concerns. That is all I say. All I am asking is that before such a decision is made, there should be reference to an independent body, and I think that the proposals put forward—albeit, as the noble Baroness rightly said, that they might need a little tweaking here and there—would seem to everyone to be fair.
We have the same situation—parallels have often been drawn—in police prosecution when someone outside asks whether this is a proper circumstance and whether it is likely to stand up. That is all that is necessary. Do that and most of us, I think, would be perfectly happy. Our issue is that, without making things more difficult in these debates, there are too many examples of decisions made that appeared to be hasty and when people have not looked too carefully at the details. This would make sure that they do.
All I say to the Minister is that he would have pretty overwhelming support for the changes that he wants if he were prepared to do what the noble Baroness has put forward. I would certainly be happy to argue that. If he does not do that, this will be difficult to support, and I am interested in the point that my noble friend has just made that there seems to have been an attempt to move even further away from what we should have.
I have one other point. The key thing is that the murmurings that somehow the RDC will disappear would be overcome by having this measure in the Bill. It is not unreasonable to have the concerns that people have, and I have not yet seen why introducing this measure would make things more difficult or less transparent. I would be happy to take the risk of people being warned and turning out to be guiltless, if it were done with this degree of protection. Then the Minister would have us all on his side.
Lord Hodgson of Astley Abbotts
My Lords, the noble Baroness’s amendment has much to commend it. I picked up two points in her comments. On the question of, to use her words, eroding confidence in the regulator, that confidence is already being eroded at present because of the way in which the regulator is behaving, and her proposal would go some way towards ensuring that that was put right. She and I can agree, because we have already agreed on the importance of transparency, that this would achieve not only transparency but, particularly, accurate transparency, and that someone would not be condemned without having had a proper chance to put their side of the case. Like my noble friend Lord Deben, I think that there are some tweaks to be made to the terms of office and so on, but as a concept this has much to commend it.
Lord Flight
My Lords, all that I was really calling for previously was for the RDC to be embodied in statute to provide this role. The amendment proposed by the noble Baroness, Lady Hayter, offers something rather better because it is a duly organised and independent body that would provide the safeguard of justice. That, it seems to me, is what we all want.
Lord Peston
My Lords, I support my noble friend’s amendment, but I would like to place it in context. I start from the position that the Minister started from when he reminded us that the Bill and these regulators have not been picked like a rabbit out of a hat. There was a problem to be solved and this, even though I do not like aspects of it, is the Government’s best attempt to solve it. There was a problem in this sector of the economy, the public demanded that something be done to prevent it from happening again and the solution is regulation. Since the only alternative solution that I know about would be to nationalise the whole of the financial sector, which I would not favour, the Government are clearly doing the right thing in broad terms—even though, I repeat, there is a lot of this Bill that I do not like.
The second aspect of the context is the old adage, “Quis custodiet ipsos custodes?”. The trouble is that once you go down that path, you get an infinite regress; whoever you set up to regulate the regulators, you then ask, “Who’s going to regulate them?”, and it goes on for ever. We ought to bear that in mind.
My general point is that, while I hope that the Government will either agree precisely to my noble friend’s amendment or come up with a suitably tweaked amendment of their own, we should not be naive about this. The moment the regulator starts looking at any particular organisation—and certainly when it starts considering, suggesting or indeed issuing a warning notice—the idea that this will not leak out is a bit on the naive side, to put it bluntly.
Although I support my noble friend’s amendment, I think she will agree that it does not protect us from the world in which we live, a world in which there is, in a sense, money to be made by leaking secrets. I believe that the Government ought to go down the line suggested by my noble friend and respond sympathetically, but whether or not I live long enough to see the first case that arises, I would not be in the least surprised if the first warning notice gets leaked within minutes of being sent. That should not stop my noble friend from going ahead with this, but it illustrates that some of us are rather cynical when it comes to what happens in the world in which we live.
Lord Turnbull
Can the noble Baroness clarify for me what right the accused has to make representations to this committee? Does it simply take the presentation of a case from the FCA and examine that for its strengths and weaknesses, or is representation from those accused of the regulatory breach built in? To answer the noble Lord, Lord Peston, it is a criminal offence to leak the existence of a decision notice before its appropriate time.
Lord Sassoon
My Lords, I go back to the overall picture on this and to the previous group of amendments. This is a necessary area of additional powers that must be in the authority’s armoury. We will take a power to look at the whole thing again if it does not operate properly. However, on this specific amendment, we are probably all agreed—this is where I can be sympathetic if not positive in response to the challenge by the noble Lord, Lord Peston—that it is necessary for there to be appropriate checks and balances. The question is whether we can rely on the judgment and good sense of the successor regulators to do appropriate things without having the stick of legislation on them. In this specific area, everyone seems to have plenty of criticisms of the FCA, many of them justified. However, the Regulatory Decisions Committee was established by the FSA, although it is not required in statute.
I understand why people are nervous about what the successor bodies will be putting in place, but it is important to recognise that the RDC structure—which everyone this afternoon seems to love and wants to hard-wire into the legislation in some form—was put in place by a regulatory body that was given a broader remit, used its judgment as to how best to have this independent challenge and scrutiny of decisions, and put that in place. Now we are saying, which I do not agree with, “Well, the FSA did such a good job in putting it in place that we are not going to trust it to exercise appropriate judgment on your successor’s shape, so we need to hard-wire that in”.
My starting point is that the authorities will establish appropriate procedures. This afternoon we are very much talking about the FCA side of it. What is appropriate for one authority is not necessarily appropriate for the other successor authority. While I am of course sympathetic to the end objective here, the question is what it is necessary to put in place that goes beyond the current framework within which the FSA established the RDC, which people like. I believe that it is appropriate to leave the successor authorities to make their own decisions on this point.
Lord Barnett
I suppose that I should not be surprised. The noble Lord has heard a very serious case made from all sides of the House and he cannot even bring himself to say that the Government will at least consider a possible amendment which may not be exactly the same as that which my noble friend suggests. I suppose that the regulators, the new FCA, may be perfect and will never make a mistake. But as regards this modest little amendment, he could at least say, before my noble friend perhaps seeks to withdraw, that the Government would be willing to consider it. Can he not even say that?
Lord Sassoon
With all due respect to the noble Lord, this slightly misses the point. As I have explained, within much the same remit under FiSMA, to which we have added one additional piece of protection, the FSA exercises the judgment and comes up with the structure that this Committee seems broadly happy with. It is entirely fair and proper to allow the successor body the space to come up with a decision which finds approval in decisions that were previously taken about this structure. Therefore, based on our approval of how it has done up to now, we should have confidence that it will do it again. It has heard loudly and clearly the support that your Lordships will give it if it takes that approach.
Lord Peston
I am really lost as to what the Minister is saying. Apart from the fact that he was made a very good offer—I would have thought that the Minister, in his right mind, would never reject a good offer—is he saying that this amendment is not needed because the regulators could set up committees of this sort themselves with no statutory powers behind them and that they can do exactly what is in this amendment already? Can he guarantee that it is right that each regulator can set up a committee so the only difference is that we are saying that they must and he is saying that they can? For the record, is that what he is saying?
Lord Sassoon
I am sorry that I have not been sufficiently clear. Yes, that is exactly what I am saying. In fact, I am saying more than that. Within the very similar provision for FiSMA, that is exactly what the FSA did. Not only can it do it but it has a track record of having done that. I think we should trust it to do whatever is appropriate again.
Baroness Hayter of Kentish Town
My Lords, I am extremely disappointed. We come back to “may” and “must”, which my noble friend mentioned. He has just had a birthday and he is still talking about “may” and “must”. If the FSA had not put on its website that it would not continue with this, perhaps our trust that it would continue with the RDC would be greater.
I confess that I have some form on this. In 1981, I worked on a Royal Commission on criminal procedure which tried to persuade the police that they should take their cases to an independent prosecutor. The Committee will not be surprised to hear that they did not want that to happen. In the Labour Party, it used to be the NEC that took cases against individuals. We were taken to court and told that we could not do that, so I ended up on the disciplinary committee to ensure that that was separate and independent of the National Executive Committee of the Labour Party. The barristers did not get it right and for a time the Bar Council used to use the same body to discipline its members and was taken to court. It had to set up the BSB complaints committee—that is another declaration of interest as my partner was vice chair or something of that—to ensure that there was that independence among the people who were presenting the cases and those hearing them. Whether there are two panels—one to see whether there is a case to answer and one to hold a hearing—is an issue of detail which I did not go into. I think that is for regulator. To trust the regulator, who is, if you like, the prosecutor—I do not like using the word “prosecutor” but perhaps we can bear it for the moment—to decide what sort of committee will challenge its evidence, seems to me not quite the correct way to approach this.
Lord Deben
One might go as far as that had it not been for two facts: one, to which the noble Baroness refers, is the website; and the other is the fact that a senior person, who is likely to be a regulator, said that his policy was to shoot first and ask questions later. That severely worries people. Whatever happened in the past, we need to remove doubt. As the Minister suggested that it does not really make any difference because he expects that to happen, I cannot see why it would make any difference if you were sure that would happen.
Baroness Hayter of Kentish Town
I could not have put it better, although I quite like to shoot first and ask questions after, but that is just a personal preference. As my noble friend Lord Barnett has said, there is clear support for this around the House. We are obviously going to bring it back at the next stage. If it is easier for the Minister, perhaps someone not from this side but from his side could put his or her name to the amendment. But for confidence in this type of independence it seems clear that the decision cannot be in the hands of the regulator who is also the presenter. There should be some guarantee that it is an independent body. I am extremely worried that someone who has been investigating could also be the decision-maker. That seems to go quite differently from other groups. So I am afraid we will return to this but for the moment I beg leave to withdraw the amendment.
“( ) Within 30 days of the coming into force of this Act, Her Majesty’s Government shall inform the governments of the European Union of the United Kingdom’s desire that the EU limits on financial compensation for charities affected by the loss of retail banking deposits should be reviewed.”
Baroness Hayter of Kentish Town
Let us hope I have a little more success with this one, which is completely different. Amendment 187AB concerns the limits—currently £85,000—for compensation which can be awarded by the Financial Services Compensation Fund. As the Committee will know, this is not a complaints-type award for mis-service but compensation following the insolvency or similar of a financial service company. While £85,000 may be suitable as a limit for individuals, since not many of us have that much in our bank accounts, it is clearly insufficient for charities. Charities are greatly at risk but normally being only the holders of cash rather than other sorts of fixed assets they are unable to protect themselves against the risk of losing all their money. Under the Government’s proposed banking reforms in the draft Financial Services (Banking Reform) Bill published on Friday one change would put a significant number of charities at financial disadvantage. The depositor preference principle would ensure that all deposits which are eligible for compensation under the FSCS would be made preferential debts—although most charities will not fall into that category—so that if there was an insolvency of a bank these smaller ones would rank ahead of the claims of other unsecured creditors. This means that charity deposits will rank further down the creditor hierarchy. Thus charities would risk losing a higher proportion of their deposits should a bank go under so, clearly, alternative ways are needed of granting fairer protection for charities.
The NCVO and the Charity Finance Group have considered the matter carefully. Ideally, they would like charities to be preferred creditors—which I recognise would not be an issue for this Bill—or else for there to be a different limit for charities. However, the advice of Her Majesty’s Treasury is that that would break EU fiscal rules—hence the particular wording of Amendment 187AB to ascertain whether that objective could actually be achieved. One way would be to introduce a higher compensation limit for charities. The current £85,000 may be suitable for small charities but clearly it is pretty meaningless for ones such as Oxfam or Save the Children which have millions of pounds in the bank. It is really not big enough. The sector as a whole probably has about £18 billion in cash deposits, so the consequences and impact on beneficiaries would be extremely serious if even a small proportion was lost.
Earlier this year in response to the White Paper on banking reform the voluntary and charity sectors called on Government to grant registered charities preferred creditor status so that charities’ liabilities are prioritised alongside those of the Financial Services Compensation Scheme in the event of a bank failure, but the Government felt unable to accept that proposal. Perhaps there should be no cap at all for charities, although we also understand the effect on levies that that option would have.
Any losses to charities would have a devastating impact on those they support, who are usually the most vulnerable in society. The Icelandic bank experience caused ongoing concern to charities and their trustees. In tabling this amendment we seek to ask the Government to find a way forward to protect this vital part of the big society and the third sector. I beg to move.
Lord Peston
My Lords, in supporting my noble friend’s amendment, I say that I am a strong supporter of the European Union, and that I hope one day to live in a country where the Government is also a strong supporter of our membership of the European Union—something that has not been the case for many years. I refer not just to the present Government but to the previous one. However, although I regard myself as a supporter of the European Union, I am well aware that often it drips into areas that are none of its business. When I first saw the amendment, I thought: what possible grounds are there for the European Union to consider supporting charities, let alone setting limits on how they can be supported? I assume that this is a probing amendment, although my noble friend has not told me so. Really the European Union has no business to be in this field; that is the message we would like to get over.
Lord Hodgson of Astley Abbotts
My Lords, my Amendment 187CA in this group relates to another aspect of the operation of the Financial Services Compensation Scheme. The current wording by which the scheme operates gives it a lot of discretion in the way that the costs of the scheme are allocated. Section 213(5) of FiSMA states:
“In making any provision of the scheme … the Authority must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised persons reflects, so far as practicable, the amount of the claims made, or likely to be made, in respect of that class of person”.
There are two get-outs.
I make it clear that this is not about restricting the rights of consumers to obtain compensation. It is a critical and essential part of maintaining proper confidence in our financial system that there are proper and appropriate ways for people to claim and get compensation for mis-selling or other malfeasance. However, the amendment is about ensuring that the polluter pays. It has become more difficult in recent years to trace the allocations and levies made by the Financial Services Compensation Scheme to the particular class of persons and businesses to which they have been applied. Often, there appears to be a shifting of the pea around the plate, with a disproportionate share landing on those perhaps least able to complain. I hope that my noble friend will listen to the amendment with sympathy. The funding system must reflect the differences in risk and instability posed to the public and to the wider economy by firms and the financial products they offer.
I make it absolutely clear that my amendment does not enforce an unacceptable level of correlation. The words “as far as practicable” will remain, and will therefore provide the scheme with a degree of flexibility—a get-out, if you like. However, the additional words, “take account of the desirability of ensuring”, are too woolly. They lead to situations where people feel that the scheme is not operating fairly. Therefore, I would like to see those words replaced by the single word, “ensure”, as a means of ensuring that the Financial Services Compensation Scheme penalises the polluter and not the wider financial community.
Lord Newby
My Lords, Amendment 187AB, moved by the noble Baroness, Lady Hayter, would require the Government to notify other EU member states that the limits on compensation payments to charities in the event of a loss of their bank deposits should be reviewed. The noble Lord, Lord Peston, asked what on earth this had to do with the EU. I suspect that he, like me, had not heard of the deposit guarantee scheme directive, which is an extremely valuable piece of legislation. It means that across the EU there is a maximum harmonised limit of compensation per depositor in the case of banks or other financial institutions going bust. It makes sure that across the EU there is a common framework for paying out when organisations get into financial difficulties.
Lord Peston
The Minister said that that was a very good idea. I cannot imagine why it is such a good idea. What business is it of the European Union what the taxpayers of an individual country decide they will spend on compensating people who have lost money because of the misbehaviour of banks? Why is it a European issue? I do not want to pursue this because it is a European question that is broader than what the Bill is about. I merely made the rather tart remark that occasionally the overpaid officials in Brussels have to justify their overpaid existence by finding things to do. Otherwise, they might eventually be asked to retire—although I might say that then they get incredibly good compensation arrangements. I was just being my normal tart, nasty self.
Lord Harrison
My Lords, I came to listen to the Statement. However, it may be of interest to some of my colleagues that we on Sub-Committee A of your Lordships’ European Union economic and finance committee are studying the banking union proposals and the recovery and resolution directive. The deposit guarantee scheme is an integral part of Herman Van Rompuy’s proposals, and of the response that we have got from the four presidents. That is the reason I am here today. I was slightly taken aback when my noble friend Lord Peston mentioned charities. As I understand it, the deposit guarantee scheme is a separate matter. The proposal has yet to mature. This will be done in Brussels over the coming weeks and months. I do not know whether that helps.
Lord Newby
My Lords, it is extremely helpful—and it will be done over the coming months. First, it is a single-market measure, not a eurozone measure. The aim is to establish a level playing field for consumers across the EU that is funded not by the state but by the financial services sector wherever the scheme is in operation. This means that as people move around the EU, as they increasingly do, they will know that they will get broadly the same degree of consumer protection wherever they are. That is a good idea, not a bad one. However, whether it is a good or a bad idea, this is the framework within which the deposit protection level operates in the EU, and therefore in the UK. Within the discussions about the directive that are going on at the moment, the level of compensation and the bodies that are eligible for it are being considered.
I say to the noble Baroness that we have listened very carefully to her concerns, and that the Government will consider whether it is appropriate to review the eligible limit to charities in the context of our overall negotiating priorities on this proposal. This is just one of a number of issues that we are considering in the round and as part of the negotiating posture we will take up. I assure her that we will give careful consideration to whether this is the way of achieving what she wants to achieve.
I move on to Amendment 187CA in the name of the noble Lord, Lord Hodgson of Astley Abbotts. This amendment would amend FiSMA to require the regulators to ensure that levies imposed on a particular class of firm reflect the claims made, or likely to be made, on that class. Before I address this amendment directly I would like to use this opportunity to draw noble Lords’ attention to the fact that a draft of the statutory instrument allocating rule-making responsibility for the FSCS between the two regulators will be published on the Treasury’s website this week as part of a broader consultation on draft secondary legislation required by the Bill. I will place copies of this paper in the Library of the House.
I am not entirely convinced by the case for Amendment 187CA. FiSMA already requires the regulators, as the noble Lord, Lord Hodgson, said, to take account of the desirability of ensuring that the amount of levies imposed on a particular class reflects, so far as practicable, the amount of claims made, or likely to be made, in respect of that class. Ensuring that classes are levied in a way that fully reflects claims, or likely claims, as proposed in the amendment is likely to be an impractical and disproportionate approach to evaluating how the fund should be funded. The current drafting in FiSMA reflects my noble friend’s concern but also leaves sufficient flexibility for the expert regulators to use their judgment.
The FSA’s recent consultation document on its funding model in the new regulatory system gives a good indication of the complexity involved in determining the funding model of the FSCS. I have it here, and its 100-odd pages demonstrate that this issue is somewhat more complex than might immediately be apparent. It demonstrates, among other things, how difficult it would be to ensure, in any strict sense, that levies fully reflect claims, or likely claims, on a particular class while delivering a fair and equitable scheme.
I suggest to the noble Baroness that the correct way to address her concerns is to contribute to the consultation on this document, which is open until 25 October. On that basis I would ask her to withdraw her amendment.
Baroness Hayter of Kentish Town
I thank the Minister rather more positively than I did his colleague on the previous amendment. It appears clear that he and the Government have understood the problem and I thank him for agreeing to look at this again. Charities of course, unlike people, do not move around; British charities are only in this country. I thank the Minister for saying that they will look at that. If it is not possible by that method, perhaps he could ask others in the Government if there is another way to assist. That would be extremely helpful. On the basis of that offer I beg leave to withdraw this amendment.
Lord Sassoon
“( ) In subsection (7), omit “board members,”.”
Lord Teverson
“(5A) In making any provision of the scheme under subsection (3), the relevant regulator must so far as practicable establish classes of authorised person on which levies may be imposed such that the claims that are likely to be made in respect of that class of person share a close affinity.
(5B) For these purposes, a claim shares a close affinity with another claim if both the nature of the services or activities and the type of financial instruments in relation to which the claims arise exhibit a high degree of similarity.”
Lord Teverson
I can see that everybody wants to discuss the Statements on Europe and the potential independence of Scotland, so I will try to be brief. However, I say to the noble Lord, Lord Peston, that I have heard of the deposit guarantee schemes directive as well as the investor compensation schemes directive, both of which the Commission published in 2010 but neither of which has got anywhere very much since last year. The two directives have held up much thought around the financial services compensation service.
In this amendment I am trying to put into primary legislation a key principle regarding the close affinity of organisations which must help to compensate when other organisations have gone into liquidation or cannot meet their obligations to their customers. I am also putting down two tests: the first concerns the similarity of the service and the second the similarity of the financial instrument. Many Members will be aware of the history of this in that the Financial Services Compensation Scheme does make levies. In fact, in the fund management area it can ask for up to £270 million with 30 days’ notice, and indeed last year £233 million was called up, which is estimated to be 4% of the turnover of the total sector. Those of us who have worked in business will know that if you suddenly take 4% of your turnover out of the business, through a statutory note or the equivalent of a tax or a notice, it can hugely affect your business. The largest problem was Keydata resulting in a quarter of a billion pounds’ compensation having to be found, and it was a major problem. There have been a dozen smaller cases, and in the past five years there has been £600 million compensation involving investment intermediaries. In those cases of failure the overwhelming burden fell on the fund managers and independent financial advisers, who paid for the damage of what often were issues from spread betting, unquoted shares and life settlement portfolios. In practice there was a lack of affinity. There is also a question of what happens when regulators themselves have not been as good as they should be in ensuring regulated and authorised persons have worked responsibly in the past.
Lord Flight
My Lords, I speak briefly in support of this amendment. Keydata did actually expose a great deal of feeling of unfairness among different parts of the industry. The point was made about the heavy burden on fund managers but SIPP administrators, who are purely administrators and not involved in managing money, are for some reason lumped into the same category as fund managers. There is a very substantial burden on their resources. The whole area wants looking at, particularly if we are increasingly to become a compensation culture and if the sorts of amounts expected from the scheme are going to grow and grow. There is quite a problem and quite an issue to address in deciding how to cut the cake in deciding who, in fairness, should pay what.
Lord Newby
My Lords, this amendment seeks to remove the possibility of any element of cross-subsidy between different classes of authorised firms. We do not feel that it is either necessary or helpful. We do not consider that the practice of allowing some cross-subsidies between classes is inherently wrong, and nor should it be prohibited in every case. Not only does the potential for cross-subsidy help ensure a sustainable scheme with lower levy thresholds, but it helps to ensure that the compensation supports consumer confidence in the financial services sector as a whole, by limiting the risk that compensation claims cannot be met. If the scheme has insufficient funds to pay out claims to policyholders of a failed insurer, bank customers are unlikely to have confidence that the scheme will be able to pay out if their bank fails.
As I have already stated, the decision on how the FSCS is funded is best made by the regulators and implemented through their rules. In particular, it is the regulators who understand what is appropriate and affordable by different classes of firms and so are best placed to determine when, or indeed if, cross-subsidisation is appropriate. I equally accept, however, that there is a need for proportionality in the different classes of firms that are expected to contribute. I am well aware, for example, that in the past the building society sector has felt that it has had to pay a disproportionate burden.
However, as I have mentioned, the FSA is consulting on how the FSCS will be funded, although in broad terms, as the noble Lord, Lord Teverson, said, both the PRA and the FCA will have rule-making responsibility for the scheme. The PRA will make rules for deposit takers and insurance providers and the FCA will make compensation rules for all other types of financial activity covered by the scheme.
The best way to deal with the specific issue raised by my noble friend is via the FSA’s consultation on the draft scheme, which I mentioned earlier. It is ongoing—it has several weeks left to go—and it is the best way now of ensuring that the scheme we end up with is the best possible scheme for all the different classes of firms which will be covered by it. On that basis, I ask my noble friend to withdraw his amendment.
Lord Teverson
My Lords, I thank the Minister for his reply. Obviously I am somewhat disappointed. Clearly the consultation is an area in which the sector and I will participate but there is a real issue around justice and equity in this sector and how the scheme will work. I shall perhaps take the opportunity to speak to him further between now and Report, but, in the mean time, I beg leave to withdraw the amendment.
Lord Sassoon
“In section 221 (powers of court), in subsection (2), after “director or” insert “other”.
In section 222 (statutory immunity), in subsection (1), omit “board member,”.”
EU: European Justice and Home Affairs Powers
(11 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, with the leave of the House, I shall now repeat a Statement made in the other place by my right honourable friend the Home Secretary. The Statement is as follows.
“With permission, Mr Speaker, I would like to make a Statement on European Justice and Home Affairs powers.
Under the terms of the Lisbon treaty, the Government are required to decide by 2014 whether we opt out of, or remain bound by, all those EU police and criminal justice measures adopted prior to the entry into force of the treaty.
The Government are required under the treaty to reach a final decision by 31 May 2014, with that decision taking effect on 1 December. While this may seem a long way off, as with many EU matters the process of decision-making is a complicated one. We wish to ensure that before that point we give this House and the other place sufficient time to consider this important matter.
In total, there are more than 130 measures within the scope of the decision to be considered at this stage. A full list of the measures concerned was provided to the House on 21 December last year, and a further update was given on 18 September this year.
The Government are clear that we do not need to remain bound by all the pre-Lisbon measures. Operational experience shows that some of the pre-Lisbon measures are useful, some are less so and some are now, in fact, entirely defunct. But under the terms of the treaty, the UK cannot pick and choose the measures from which to opt out. We can only opt out en masse and then seek to rejoin the individual measures.
So I can announce today that the Government’s current thinking is that we will opt out of all pre-Lisbon police and criminal justice measures and then negotiate with the Commission and other member states to opt back into those individual measures which it is in our national interest to rejoin. However, discussions are ongoing within government and therefore no formal notification will be given to the Council until we have reached agreement on the measures that we wish to opt back into.
This Government, more than any other before them, have done their utmost to ensure that Parliament has the time to properly scrutinise our decisions relating to the European Union and that its views are taken into account. I can assure the House that the 2014 decision will be no exception. As the Minister for Europe has already told the House, the Government are committed to a vote on this matter in both this House and the other place. We are also committed to consulting the European Affairs, Home Affairs and Justice Select Committees, as well as the European Scrutiny Committee and the European Union Committee, as to the arrangements for this vote.
I fully expect that these committees will want to undertake their own work on this important decision. The Government will take account of the committees’ overall views of the package that the UK should seek to apply to rejoin. So that the Government can do that, I invite the committees to begin work, including gathering evidence, shortly and to provide their recommendations to the Government as soon as possible.
The Government will then aim to bring forward a vote in both Houses of Parliament. The timeframe for this vote will depend on the progress in our discussions with the Commission and Council. An update will be provided to Parliament early in the new year on when we can expect the vote to take place.
I hope that today I have conveyed to the House the Government’s full commitment not only to holding a vote in this House and the other place on the 2014 decision but on the importance we will be according to Parliament in the process leading up to that vote. I am sure that all parties will want to work together to ensure that the final decision is in the UK’s national interests.
It is in the national interest that the Government have taken this decision, and I commend this Statement to the House”.
My Lords, that concludes the Statement.
Baroness Smith of Basildon
My Lords, when I read reports in the press and heard about this Statement this morning, I had hoped that we would get some clarity from the Statement about exactly what the Government’s plans involve. Having listened to the Home Secretary and the noble Lord, I am not much wiser. Rarely can a Statement have been so devoid of detail.
I have expressed my concerns before that Home Office Bills, specifically in relation to crime and courts, have come before this House before the detail has been worked out. The community sentencing clauses, for example, used a procedure of recommitting a Bill that I have never seen before in 15 years in both Houses.
I suspect that I know why. It is not often that we get Conservative Party policy from the Dispatch Box, particularly from a Lib Dem Minister, and that probably explains why there is a lack of clarity. If the press reports are to be believed, Liberal Democrat sources have played down the significance of today’s Statement. If I have understood the report correctly, the Home Secretary and the Minister today have “limited authority” in what they can say, because government policy has not yet been agreed. The Minister cannot go as far as the Prime Minister—I doubt that he would want to—when he said that the Government would opt out of all police and criminal justice measures.
I cannot recall any other Statement of such significance where a Secretary of State has announced that the Statement represents the Government’s “current thinking” and has added that “discussions are ongoing within government”. We all know what that means: it is the pro/anti EU tension at the heart of this Government that makes this announcement confused and shambolic and seem like yet another example of policy being drafted on the back of an envelope.
Several questions about the detail need to be answered. I apologise to the noble Lord for referring to detail, but the House deserves to have some. If the European arrest warrant had not been in place, what action would have been available to UK police in co-operating with their French counterparts to ensure that the French police were able to arrest Jeremy Forrest and ensure that he and Megan Stammers were returned to the UK in the same timescale? No one is suggesting that the European arrest warrant is perfect, but the independent Scott Baker report commissioned by the current Home Secretary strongly recommended keeping it. Yes, it could be improved and updated, and that very process is taking place now; it is being reformed. As a further example of this Statement being premature, the Government do not even know at this stage what they would be opting out of.
The European arrest warrant is responsible for nearly 600 criminals being returned to the UK to face trial. It has allowed 4,000 citizens from other European countries to be sent back to their home country or another European country to face justice. In light of some of the Government’s briefing on this issue, your Lordships’ House might like to be aware that 94% of those sent back to other European countries to face trial under the European arrest warrant are foreign citizens.
The Home Secretary has said that the Government may want to opt out—because no one is sure yet—and then may consider opting back in again. There is a process for opting back in, but can the Minister say what happens in the mean time—in that gap between opting out and trying to opt back in? What processes will be in place, and what happens if the opt back in is refused? My understanding is that Denmark has had around 50% of its applications to opt back in refused.
If the UK opts out of policing and criminal justice measures, what process do the Government envisage putting in place to deal with some hugely significant issues? These include: counterterrorism; the sharing of criminal records, including those of sex offenders; conventions to protect member states’ financial interests in the event of major international economic crime; minimum standards of collection of customs and police information to tackle cross-border crime; co-operation on the identification of laundered money; co-operation between member states in tracing and freezing criminal assets; and the setting up of Europol. That list is not exhaustive.
It would have been far more satisfactory if the Minister had been able to give us some clarity today, if he had been able to say which of those areas he would want the Government to opt back in to, and if he had been able to say why the Government think the position is so unsatisfactory that they are considering opting out of the entire police and criminal justice powers. Which of these are so offensive that the Government are prepared to put at risk European co-operation on some of the most serious and abhorrent crimes that damage British citizens? The Statement gives no reasons for the Government taking this view. There is no justification for this view, and there is no information on which provisions the Government think are valuable and would want to opt back into.
We have a process from the Government but we do not have a policy. The reason is that this is still only the Government’s current thinking, as the Minister stated, and discussions are still ongoing within the Government. Will anything ever change? It seems an absolute shambles. On issues as serious as this, this House and the public deserve better. This sounds too much like a political gimmick drummed up on the back of an envelope.
Lord McNally
I thank the noble Baroness for her response. I suppose I should also thank the Opposition for leaving this measure in the negotiations that they carried out on the Lisbon treaty.
First, on clarity, I do not think there could be a better and clearer declaration of pre-legislative scrutiny—something that I think the House wholly approves of. If I had come here today with a definitive list of measures to be opted into or out of, the House would quite rightly have said, “How can you pre-empt the decision in this way?”. I will borrow the noble Baroness’s phrase: we have put in place a process, not a policy. The process will allow this House, the other place and their committees to look at this matter in a proper, considered way, and to bring forward recommendations that will in turn form the Government’s final decision. That does not sound to me anything like policy on the back of an envelope. It seems a very measured way of looking at matters, and one reason why we are starting early is to make as much progress as possible on these matters so that there is not the gap to which the noble Baroness referred in relation to the opt-out and implementation.
The European arrest warrant is a perfectly good example. No final decision has been taken. The European arrest warrant has had some successes, but there have also been problems, including the disproportionate use of the EAW for trivial offences. As with all the other measures, the point is that it will now be open to scrutiny and consideration by those who have experience of how these things have worked, so that we can make that final decision on these measures in the national interest. As I say, this is one of the clearer Statements I have come across about how a Government intend to develop policy, and one that sets forth for both Houses a process that will give them maximum influence on policy.
Lord Lloyd of Berwick
My Lords, I start by welcoming the fact that the Government are consulting so soon on whether or not to opt out. That seems an entirely good thing. I also welcome the fact that they are consulting the various committees listed in the Statement.
I suggest that those committees, and indeed the Government, could do no better than to start by reading—and, if I may say so, inwardly digesting—a working paper very recently produced by a group of very distinguished academics under the leadership of Professor John Spencer of Cambridge University, entitled Opting Out of EU Criminal Law: What is Actually Involved?. It was the result of much work over the summer and was published only last month. The report starts by disposing of various myths that have surrounded this subject since first it raised its head: in particular, the myth that one can pick and choose what one is going to opt out of. Happily, the Government accept that we simply cannot do that.
However, the Government believe that we can opt out of the whole and then try to negotiate our way back in where it suits us—the so-called Danish solution. But what if we do not succeed? It is quite wrong to suppose that all 130 pre-Lisbon police and criminal justice measures are bad. On the contrary, they are not. We will in any event be bound by all post-Lisbon police and criminal justice measures—that is another myth that is widely believed. So it will be partly one and partly the other. If we opt out, we may in the end get the worst of all possible worlds in deference to the pressure that I think we all understand.
The noble Baroness, Lady Smith, has already referred to the “current thinking” of the Government on this matter being to opt out. I implore the Government to keep their current thinking on this matter under review.
Lord McNally
My Lords, the whole point of the exercise is that the Government can keep their thinking under review and can take on board the kind of evidence and study that the noble and learned Lord referred to. He puts his finger on it entirely. We were faced with the position, as the Lisbon treaty stands, that we could not pick and choose what we opt out of; we can simply opt out and then negotiate on the basis of opting back in. Is that a high-risk strategy? We will take the evidence of the debate that unfolds in both Houses, from the committees of both Houses and from academic, judicial and other advice that we receive. However, I do not think that the Government can be accused of taking an irrational way forward. It seems a very measured way forward that gives us time—the noble and learned Lord welcomed how soon this decision had been made. It is because we are taking this early decision that we are going to be able to make the kind of measured decision in the national interest that I think both Houses will welcome in the end.
Lord Reid of Cardowan
I thank the Minister for repeating the Statement, although I confess that I am not much better informed than I was before it. Will he clarify three things to take us a little bit further in detail, something with which the Statement was not replete? First, during this period when the Government are “minded” to do something—one of those useful words that civil servants taught me—will the present provisions continue to operate until such time as the Government become “minded” to stop things? Secondly, given that law and order is both now an international and transnational phenomenon and among the highest priorities of people in this country, can the Minister tell us whether any impact assessment has been done of the effect of abandoning these regulations on law and order in this country during the interim, between when he becomes minded to do something and the negotiations finish? In particular, has any consultation taken place with the police and the intelligence communities about it? Thirdly, if either has taken place, can he give us a little more detail on the anticipated effects, were such regulations to be abandoned, in particular or wholesale?
Lord McNally
I thank the noble Lord for those questions. I am sure we are going to get this continually. I make the point that the whole merit of this Statement is that it does not present either House with a fait accompli. On the contrary, it offers the House involvement in making these important decisions, which I think would be welcome to the House concerned. That is why this word “minded” is used, because the Government are awaiting advice and having discussions. I cannot imagine that decisions of this importance and magnitude would be taken without the input of those who have responsibility for policing and security matters. They will certainly be involved in giving evidence and advice. However, I am not sure that the process would be helped if Ministers or anybody else dribbled this advice out a little bit at a time. We will get a big picture and all the committees of both Houses will have the opportunity to take advice from a wide range of bodies. We will see that advice emerging when they have had the opportunity to give it.
Lord Ahmad of Wimbledon
My Lords, I know many noble Lords wish to speak on this. Perhaps we can take the noble Baroness, Lady Hamwee, and then come across proportionately to the other Benches.
Baroness Hamwee
My Lords, does my noble friend agree that it is fundamental to the EU that there is freedom of movement and, that being so, that we need the tools to deal with negative consequences, when there are negative consequences? If that is so, will he give the House an assurance that the Government’s decisions will be based on evidence and informed opinion—of which there is quite a lot—because the Statement is not neutral? Does my noble friend further agree that playing hard to get is not always the best way to progress a relationship?
Lord McNally
I shall not go there. Instead, I assure my noble friend that the invitation before the House, and indeed the country, is to let us make these very important decisions on the basis of evidence and informed opinion. I am very confident that if we approach this on the basis of evidence and informed opinion we will make the right decisions for the country.
Lord Baker of Dorking
My Lords, I was the Home Secretary at the time of the Maastricht arrangements. Let me remind your Lordships of what Maastricht did. It said that matters of criminal justice and police powers should remain matters for independent states within Europe. In fact, John Major described it on coming back from Maastricht as one of the great independent pillars of that settlement. That independence has been eroded over the years by the natural effluxion of powers to the centre, which is remorseless in the case of Europe. Therefore, I very much welcome the statement that we will resile from undertakings and then pick and choose which we think are advantageous to our country. This seems to be an excellent exercise in subsidiarity and may well be the shape of things to come.
Lord McNally
I thank the noble Lord, Lord Baker, for that intervention. I think he would agree that things have moved on from Maastricht, not least in a matter that I think the noble Lord, Lord Reid, referred to—that many of the challenges that we face in these areas are transnational and international. That is why, while looking at the issues with an eye to subsidiarity and the responsibilities of the nation states, we also have to look at them from the realities of the much more international, transnational and global operation of many of the criminal forces that we are trying to counteract. That is why I rely on proper evidence-based examination of the decisions that we are taking forward.
Lord Hannay of Chiswick
My Lords, does the Minister recognise that the thanks for the Statement today would be a great deal more sincere if it was not such a sham? It is a sham because the Prime Minister has stated categorically that he will opt out—no ifs and buts and nothing about reinserting those measures we choose. He has ridden roughshod over the undertakings that were given in this House by the noble Lord, Lord Henley, and in the other place by the Minister for Europe that before the Government came to any conclusions at all on this matter they would consult very fully. The warm words he said about consultation today are, frankly, not very comforting. I can only repeat the words of the chairman of the EU Select Committee of this House, the noble Lord, Lord Boswell, when he wrote to the Home Secretary after the Prime Minister’s statement expressing his dismay. Does the noble Lord agree that it would be completely unthinkable to put the matter for decision to the two Houses until we are absolutely clear what the whole of the reinsertion or reapplication package is? We will not be able to judge what the consequences of the Government’s actions are unless we know not only that they are going to opt but what they are going to opt back into.
Lord McNally
The noble Lord is being unduly cynical about the approach being taken—or let us say pessimistic. When the Home Secretary of the day makes a considered Statement of government policy and I repeat it from this Dispatch Box in this House, we are asking noble Lords and Members in the other place to believe that the Government have not made a final decision on this matter. They have adopted a process which will enable us properly to look at the issues before us. I take note of the noble Lord’s point that the opt-out/opt-in decision is part of a single picture, and I shall certainly draw my colleagues’ attention to the fact that somebody with his long experience of negotiations of this kind is giving what I consider to be wise advice.
Lord Ahmad of Wimbledon
My Lords, if we take the Labour Benches and then we will move back to the Cross Benches and the government Benches.
Lord Wood of Anfield
My Lords, in the event that we opt out and then persuade 26 other EU countries of the importance of us opting back in on an individual item, would the act of opting back in trigger a referendum under the Government’s own legislation?
Baroness Williams of Crosby
My Lords, can my noble friend assure the House that, in the event that the United Kingdom Government decide to pursue certain elements to opt back into, we would know in advance that the other 26 countries would be willing to negotiate on that basis? It is crucial, if we are going to opt back in, that we have reason to believe that we will be heard and that those issues will be negotiated. Does my noble friend agree that it was under the European arrest warrant that, among other people, one of those who perpetrated the 7 July atrocities was arrested? Will he also assure and remind the House that Europol was at a very advanced position in breaking the dangerous international paedophile ring that until last year operated throughout the whole of Europe?
Lord McNally
My Lords, the European arrest warrant and other measures of European co-operation stand very clearly as benefits to us—my noble friend cited two examples. That will be part of the debate that is unfolding. One of the reasons for our wanting to make the Statement today, which, as I have said, it would have been possible to delay by another year, was to start engaging in exactly the kind of discussions that my noble friend referred to. On both a bilateral basis and with the Council and the Commission, we will explore the very areas that will give us and both Houses a clear indication of prospects for success.
Lord Williamson of Horton
My Lords, I do not think that this is a high-risk strategy as has been suggested by others. We negotiated in the Lisbon treaty the right, if we so decided before the end of May 2014, to opt out en masse of the EU police and criminal justice measures adopted before the entry into force of the treaty. As for the treaty, it is a case of all in or all out. That is what the treaty says. It is the consequences that we are talking about now. The Government have, as I understand it, now decided to opt out. Of course, it is possible to opt in for other individual measures, but does not the Minister agree that one problem there is that the practical consequences of some of these measures are still rather difficult to foresee, because we are talking about a moving target? That is a serious point, but I welcome the Government’s intention to scrutinise the possibilities very carefully, to give Parliament the time to carry out the scrutiny, particularly in this House, and to require a vote in both Houses of Parliament. That is the right way to go and the British public deserve no less.
Lord McNally
My Lords, I welcome from such an experienced source the opinion that this is not a high-risk strategy. As I have acknowledged, there is a danger in taking the opt-out route, but the treaty left us no option other than to stay in en bloc or to adopt this strategy of opting out and then negotiating back in. By adopting a good timescale and involving committees of both Houses, we will have the opportunity to take both external advice and the political opinion of both Houses to keep track of the individual measures and look at the exactly the kind of consequences and movements that the noble Lord referred to. It is certainly not a political ploy, as has been suggested; rather, it is a political opportunity. It may be seen as a political opportunity for Eurosceptics. I urge those who have a belief in the European process and the benefits of European co-operation to use this exercise to argue their case strongly in both Houses and with the intention of a getting a final decision which is truly in the national interest.
Scotland: Referendum
(11 years, 6 months ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, with permission, I shall now repeat a Statement made by the Parliamentary Under-Secretary of State for Scotland in the House of Commons a few minutes ago. The Statement is as follows:
“You will appreciate that my right honourable friend the Secretary of State for Scotland is unable to deliver the Statement to the House today, as he has attended the meeting between the Prime Minister and the First Minister in Edinburgh to secure agreement on the independence referendum for Scotland.
In January of this year, my right honourable friend the Secretary of State for Scotland delivered a Statement to this House about the referendum. At that time, we acknowledged the Scottish National Party’s victory in the May 2011 Scottish parliamentary election and its manifesto pledge to hold an independence referendum. The Government also made clear their view that the Scottish Parliament did not have the legal power to legislate for an independence referendum. My right honourable friend the Secretary of State made an offer then that the UK Government would bring forward an order to give the Scottish Parliament that legal power. Since January, the UK and Scottish Governments have held consultations. There has been considerable public debate and numerous discussions between Ministers. Many of those discussions took place between me and Bruce Crawford MSP, Minister for Parliamentary Business and Government Strategy in the Scottish Government, and I would like to acknowledge his contribution.
Following 10 months of deliberation and four weeks of direct negotiations between the Scottish Government’s Deputy First Minister and my right honourable friend the Secretary of State, I am pleased to report to the House that, today in Edinburgh, the Prime Minister and the First Minister have made an agreement that will allow a legal, fair and decisive referendum to take place. This is a significant agreement. The two Governments have agreed that there should be a referendum. We have agreed that the referendum will consist of a single question. It will offer a choice between independence and remaining within the United Kingdom. We have agreed that it must be held before the end of 2014. The referendum will be based on the normal legal framework for UK referendums, with oversight from the Electoral Commission. This includes the key issues of how the referendum question will be determined and how the rules governing spending and campaigning will be established.
Following today’s agreement, the Government will bring forward an Order in Council under Section 30 of the Scotland Act. I have today placed a copy of the agreement and the draft order in the Library of the House. The agreement and draft order are also available to Members from the Printed Paper Office. This order will be laid before Parliament on 22 October and will be debated by both Houses of this Parliament and by the Scottish Parliament. All Members of this House will have the opportunity to consider and vote on the order. If both Parliaments approve the order, and after it is approved by Her Majesty in Council, the Scottish Parliament will have the legal competence to legislate for the referendum. We hope that the order will be passed by February 2013; once that has happened, the Scottish Government will introduce a referendum Bill setting out the wording of the question, the date of the referendum and the rules for the campaign for the Scottish Parliament to consider.
As part of today’s agreement, the two Governments have agreed that the rules for the referendum will be based on the rules set out in the Political Parties, Elections and Referendums Act 2000. Those rules were used successfully in the two referendums that took place last year. The two Governments have also confirmed that the Electoral Commission will review the proposed referendum question and that its report will be laid before the Scottish Parliament. This is the same process as applies to other UK referendums. Interested parties will be able to submit their views on the question to the Electoral Commission in the usual way. The Scottish Government will then respond to the Electoral Commission’s report.
Both Governments are agreed on the need for maximum transparency in this process and for a level playing field. Therefore, as part of today’s agreement, the Scottish Government will consult the two campaign organisations that have been established for their views before proposing spending limits for the referendum campaign to the Scottish Parliament. The Electoral Commission will also provide the Scottish Government with advice on the appropriate spending limits for the two campaigns in the referendum, as has happened in previous referendums, such as the 2011 referendum in Wales on further powers for the Welsh Assembly. In that referendum, the Electoral Commission recommended that the spending limit for designated campaign organisations should be set by reference to the expenditure limits applying to elections to the relevant legislature. In its response to both Governments’ consultation documents, the Electoral Commission provided its view that this model remains appropriate for the Scottish independence referendum.
Both Governments agree that all those who were entitled to vote in the Scottish Parliament elections in May 2011 should be able to vote in the referendum. As for all other referendums held in any part of the UK, it will be the legislation that establishes the referendum that will set the franchise. It will therefore be for the Scottish Parliament to define the franchise in the referendum Bill, as it would do for any other referendum or, indeed, election on matters within its devolved competence.
Although both Governments are agreed that the basis of that franchise will be the franchise for the Scottish Parliament elections, the Scottish Government have previously set out their proposals for extending the franchise to allow 16 and 17 year-olds to vote. It will now be for them to make the case for that change and to deal with the technical issues that may arise. There are, of course, a range of opinions in this House about changes to the voting age. However, having agreed the principle that the Scottish Parliament should have the legal power to legislate for the referendum—that it should be a referendum “made in Scotland”—the Government accept that it should be for the Scottish Parliament to determine the franchise. I fully expect that the Scottish Government’s proposals will be robustly debated in that Parliament. Any decisions taken by the Scottish Parliament for the referendum will not affect the voting age for parliamentary and local government elections anywhere in the United Kingdom.
Today’s agreement is important, as will be the consideration of the agreement and the order by this House, but I would also like us to reflect on what will come after. Now that the Governments have agreed the process for the referendum, it is vital that we get on with the real debate about the most important political decision that people in Scotland will ever take. The UK Government have already started to prepare the analysis and evidence that people in Scotland are calling for. Over the next year, this Government will publish thorough, evidence-based information that will set out the key issues in the independence debate. That analysis will be comprehensive, robust and open to external scrutiny. I fully expect it to show that Scotland is better off within the United Kingdom and that the rest of the United Kingdom is better with Scotland as part of it.
This Government believe passionately in the United Kingdom. We will work tirelessly over the next two years to show the Scottish people—and everyone else in this country—that together we are stronger, that together we can overcome the challenges confronting us and that together we can build a better future for Scotland as an integral part of the United Kingdom. The debates ahead will no doubt be long; they will no doubt be challenging and, at times, heated. But I fervently believe that, with the support of colleagues across this House, across Scotland and across the whole of the United Kingdom, in autumn 2014 fellow Scots will join me in choosing to stay part of the United Kingdom. We are indeed better together”.
My Lords, that concludes the Statement.
Lord McAvoy
My Lords, I thank the noble Lord for repeating the Statement made in the House of Commons. As my honourable friend Margaret Curran has stated in that place, this is indeed an historic day for Scotland. We—the Labour Party—welcome the fact that an agreement has been reached and we can now start to get beyond the process. Nevertheless, there are a number of matters on which this House would like more information. These relate particularly to the franchise, the campaign finance and the wording of the question.
If votes at 16 and 17 are to be introduced, legislation should be introduced across the UK for every election so that proper scrutiny can be given to such a process, not just a one-off referendum. There are awful practical difficulties in this. Scottish Labour has estimated that as many as 54,000 16 year-olds could miss out on being able to vote, so we need clarification on how these arrangements will be made to ensure that those qualified to vote actually get the chance to vote. Has any advice been sought from the Electoral Commission on the fairness and practicality of allowing this change to be made?
On campaign finance, the Scottish Government cannot be the referee and the player. The deal is clear: the Electoral Commission will act as an independent overseer of the process, including finance and the wording of the question. No Government have overruled the Electoral Commission; the First Minister should not start. We need independent, external oversight of campaign finance from the Electoral Commission to ensure fair play. It should also be borne in mind that the Scottish Government are retaining the £1 million paid-for army of spin doctors throughout the campaign. What guarantees have the UK Government received from the Scottish Government that Electoral Commission limits and the fair rules of the UK Political Parties, Elections and Referendums Act will be followed?
It is right and proper that Scotland’s trade unions and businesses should be able to have a say on an issue of this importance to our nation’s future. How does the agreement ensure that they will be given a fair chance to have their say and support the campaigns? There is another question on which many of us have been approached. Will Scots living in the rest of the UK, who will not have a vote, be able to support the campaign?
On the referendum question, we want a clear and unambiguous question that provides a fair choice for the Scottish people. Any questions should be thoroughly tested by the Electoral Commission. The agreement that has been reached by the Scottish and UK Governments allows for the Scottish Parliament to set the question in consultation with the Electoral Commission. As we all know, how a question is put can play a great part in how people respond to it, so we are looking for the UK Government, in these discussions with the Scottish Government, to seek and get these guarantees. There is a lot of discussion about detail to be entered into from the UK Government’s point of view.
Having experience in Scottish politics—as has the noble Lord, who at the very least has been an observer—I believe that we need to ensure that what is actually said on behalf of the First Minister or by the First Minister is thoroughly scrutinised and checked to make sure that what he says is what he actually means. This is clearly the most important issue facing the Scottish people. We in the Labour Party believe that our place in Scotland is within the United Kingdom, as the Minister has said, both for Scotland’s sake and for the United Kingdom’s sake. We in the Labour Party hope that the Government are competent enough to handle these negotiations and we will play our part in trying to convince the Scottish people that their future and the UK’s future are better with Scotland as part of the United Kingdom.
Lord Strathclyde
My Lords, I very much welcome what the noble Lord said in his closing remarks. He is right to say that all of us, across the political divide, should work together to get a result whereby Scotland feels part of the United Kingdom and wants to continue in what has been one of the most successful, if not the most successful, partnership that the world has ever seen.
The noble Lord asked a variety of detailed questions and I shall try to answer them. He started by saying that this was an historic day. It is; it is the most extraordinarily historic day and one that I never wished to see. I, for one, never thought that the Scottish nationalists would be able to achieve the majority that they did under the electoral system used for the Scottish Parliament, but in May 2011 the SNP won an outright majority; it won 69 of the 129 seats and part of its commitment was that there should be a referendum, even though it knew that it did not have the legislative ability to achieve that.
The noble Lord asked about the franchise. I expect that we will come back to that in the course of this debate. The first and most important thing to say is that the franchise is up to the Scottish Parliament to decide; it is not up to this House to decide.
Lord Strathclyde
My Lords, I hear some “noes” around the place, but that happens to be the position. Noble Lords may not agree with it, but that is the purpose of the Section 30 order: to allow the Scottish Parliament to decide the franchise. The Scottish Government have said that they intend to try to include 16 and 17 year-olds, or certain 16 and 17 year-olds, in the franchise. We believe that there are some difficulties in doing so. I cannot speak for any other political parties, but Conservatives in the Scottish Parliament will campaign and vote against that provision. I, for one, as a parent of teenagers, would rather that my children were learning a bit more maths and physics in school than working on whether they should be voting in the referendum.
Of course, advice from the Electoral Commission is not statutorily binding on the Scottish Government or the Scottish Parliament, but when it comes to the question I think that there would be a political price to pay not to take the advice of the Electoral Commission, which has been specifically set up to offer such advice. It has given advice to the Scottish Government in the consultation process on the franchise and will no doubt do so on the question. The same goes for the financing of the referendum and the referendum campaigns.
As for Scots living in the rest of United Kingdom, I see no reason why they should not be part of the debate on policy and funding, but that will ultimately be a matter for the Scottish Parliament.
The noble Lord’s penultimate remark was about scrutiny of the First Minister. That will depend on the quality of the scrutiny carried out in the Scottish Parliament. I hope that a great deal of scrutiny of these measures is given in the Scottish Parliament.
Lord Forsyth of Drumlean
My Lords, has my noble friend had the opportunity to look at the Scottish Government’s website this afternoon? It states quite clearly that after the Section 30 order has been agreed, the Scottish Government will bring forward legislation that will set out the date, the franchise, the wording of the question, the rules on campaign finance and other rules governing the conduct of the campaign. It states:
“A final decision on these aspects will be taken by the Scottish Parliament, taking full account of the responses to the Scottish Government’s referendum consultation”.
If a final decision has not been taken, and will be taken by the Scottish Parliament, what exactly have my right honourable friends the Secretary of State for Scotland and the Prime Minister been negotiating about? If we are being asked to buy a pig in a poke and to pass a Section 30 order before we know the contents of the Bill, is that not marginalising the House of Commons? Would it not be better, at the very least, given that we cannot amend a Section 30 order, that we do not pass that order until we have seen the draft Bill that is to be put before the Scottish Parliament?
Lord Strathclyde
My Lords, I always like it when my noble friend agrees with me and when I am in agreement with him. Sadly, that is not the case on this occasion. The key question is: what does this agreement today mean for the people of Scotland? It means, first of all, that there will be a single question on the ballot paper—no more than that. We understand that many in the Scottish Government wanted a two-question referendum. Secondly, there is a time limit. We now have certainty that the referendum must take place before the end of 2014. That is a tremendous advantage to clear the air, to remove the poison at the heart of Scottish politics and to give real certainty to politics throughout the United Kingdom.
I cannot disagree with the list that my noble friend read out. These will be matters for the Scottish Parliament. We are today announcing a Section 30 order that will devolve to the Scottish Parliament the ability to run the referendum and, naturally, it will have to answer those questions.
Lord O'Neill of Clackmannan
Will the Leader of the House confirm that a Section 30 order is required to be passed by both Houses of this Parliament? That may be a tall order to achieve. From what he said today, and the manner in which he answered the points made by the noble Lord, Lord Forsyth, one gets the impression that the Scottish Tory Party has learnt nothing and forgotten nothing.
Lord Strathclyde
My Lords, on the first question, it will be up to both Houses of the Parliament to agree the Section 30 order. I did not understand the second question at all. To coin a phrase, we are all in this together. Across this Dispatch Box—I do not know where the noble Lord stands on these great matters; I thought that he was rather in favour of the United Kingdom—we will be working together to ensure the desired result in the referendum.
Lord Steel of Aikwood
My Lords, we have already had a year and a half of debate about Scottish independence and I must admit that the thought that we are to have another two years of debate fills me with gloom. We have the consolation of knowing that, through that period, public opinion has moved in favour of retaining our position in the United Kingdom and we must hope that that continues.
I was encouraged by what the noble Lord said a moment ago about the Electoral Commission, because the Statement itself was weak on that question. If the Electoral Commission takes the view that any question beginning with the words, “Do you agree that”, is a leading question, surely it will not be possible for the Scottish Parliament to ignore that. Would it not be better than having a yes/no question simply to have two conflicting statements against which the electorate put a cross: either, “I am in favour of Scottish independence”, or, “I am in favour of retaining the United Kingdom”?
Lord Strathclyde
My Lords, under this legislation, the referendum must take place by the end of 2014—I think that essentially it is understood that it should be in the autumn of 2014—so there is plenty of time to go. Some people will find that hard to put up with; some people will find it reasonable that we should have plenty of time to discuss these important issues. As for the question, the Electoral Commission is not binding on the Scottish Parliament. The Scottish Parliament must ultimately approve the question. The point that I was trying to make is that if there was a leading question with which the Electoral Commission disagreed—its report will be made available to the Scottish Parliament—I suspect that there would be a political price to pay for that.
Lord McConnell of Glenscorrodale
I welcomed the intervention of the Prime Minister earlier this year because I felt that many outstanding questions had to be addressed. One was the proposed date of the referendum. On that, to secure this agreement, the Government have capitulated. The two years that is now proposed for debate on this referendum could do untold damage, and not only to the Scottish economy—it could affect the British recovery as well. That has been a mistake. On the other side, it is positive that we have now secured agreement that there will be a legally binding referendum. The Scottish Government did not want a legally binding referendum; they wanted a softer option of an advisory referendum and we have stopped that. That is to be welcomed.
On the rules of that referendum, there are serious questions to be answered. Frankly, I am astonished that we have in front of us today the Section 30 order that could be passed by this House and the other House but not the draft referendum Bill that that Section 30 order will enable. In the months since the Prime Minister’s statement in January, I always expected that there would be the Section 30 order at the end of this process and that at the same time the draft referendum Bill on which that Section 30 order was based and on which the agreement had been reached would be published. I am disappointed that that is not in front of us today and I urge the Government to think seriously about pressing the Scottish Government to publish that referendum Bill in advance of the deliberations of this House rather than afterwards.
Lord Strathclyde
My Lords, the referendum process is now legally watertight. The draft Section 30 order will provide the Scottish Parliament with the confidence to legislate for an independence referendum if it is passed by both Houses of Parliament.
As to the question of the Bill, there is no Bill before us. We have not seen a draft Bill. We wait to see what the Scottish Government publish. They have not yet published the answers to their consultation process. We would hope to see that soon. The noble Lord started by saying that two years is a long time to wait. We cannot force the Scottish Parliament to publish their draft Bill. We have had this negotiation, we have a time limit and I think that the months will pass by very quickly.
Lord Martin of Springburn
My Lords, I put on the record that I welcome the fact that there is one question and one question alone. That is right and fitting and it saves confusion. However, in the Statement a lot has been made of faith being put in the Electoral Commission. It should be borne in mind that only five years ago, in 2007, at the parliamentary elections the Electoral Commission had to step aside and the taxpayers of this country had to invite a Canadian expert, Mr Ron Gould, to investigate why 85,000 electors had their ballot paper rejected. That is the equivalent of one and a half constituencies in the Scottish Parliament. Because the Electoral Commission had played a part in preparing the electronic machines and making up the ballot paper, it could not get involved. That was a big mistake. I ask the Minister to pay close attention to the internal workings of the Electoral Commission to make sure that no one in this election has their ballot paper rejected.
Lord Strathclyde
My Lords, I join with the noble Lord in saying that we have come to the right conclusion that there should be only one question. The most important thing in this debate is that we have absolute clarity of result and the only way of doing that is by having a single question with a yes/no answer.
I very much welcome what the noble Lord has said about the Electoral Commission. It is true, as he knows very well, that there was a problem in 2007 and I am sure that the Electoral Commission has learnt many lessons as a result of it. However, his main point was that Ministers should pay close attention to the workings of the Electoral Commission to make sure that this does not happen in this all-important referendum, and on that I completely agree with him.
Lord Cormack
My Lords, unless and until any constituent country in the United Kingdom becomes independent, it should surely be bound by the rules of the franchise which apply in the United Kingdom. Does my noble friend not accept that it is wrong to alter the franchise by the back door? That will be the consequence of our kow-towing—that is what it is—to the demands of the First Minister of Scotland. Can we please have the opportunity at the very least to see this draft Bill before we approve the order? If we do not, some of us may not feel inclined to approve it.
Lord Strathclyde
My Lords, I cannot give my noble friend the comfort that he wants. There is nothing that we can do to oblige the Scottish Parliament to publish a draft Bill, and this very much depends on the process of the passage of that Bill in the Scottish Parliament.
On the second point on the franchise, such voting already takes place in Scotland. The Scottish Parliament decided that 16 and 17 year-olds who turned 18 during the lifetime of the register would be able to vote in the health board elections. It may be a small example but it is an example of where devolution on the franchise has already taken place. I reiterate that I am not in favour of a change in the franchise but it will be a matter for the Scottish Parliament to decide.
Lord Reid of Cardowan
My Lords, everyone in this House accepts that in these discussions compromise is necessary. But that compromise has to be informed by the need and the criteria for clarity, fairness and legitimacy. Let us accept that having one question certainly meets those criteria. However, there are two areas which fail to meet those criteria.
First, the idea of having the Scottish Parliament and the SNP effectively decide the question is not liable to assist in either legitimacy in the long run or fairness in the short term. There may be inadequacies, as has been pointed out, about the Electoral Commission, but I am sure that if anyone in Scotland was asked who was likely to be more objective in choosing a question between the SNP and the Electoral Commission, I would not bet against the Electoral Commission winning that judgment.
Secondly, as my noble friend Lord McConnell pointed out, to ask people to vote for a Section 30 before they know what they are voting for is similar to asking people to vote on devo-max before they know what they are voting on. Since we argued successfully against that—that people should not be asked to vote for a “pig in a poke”—if that applies in the Scottish referendum surely it applies in this House and the other Chamber.
Lord Strathclyde
My Lords, the noble Lord said that compromise was necessary and I think that all those who have followed this process would agree with him. He also mentioned clarity and we do have clarity in the single question. I am one of those who have never entirely understood what is meant by devo-max, and if you ask three people what they think it is you always get four different answers. Therefore, it is entirely right that we remove the opportunity for that question to be asked.
The question on the paper will be a question on independence. The precise wording will be for the Scottish Parliament to determine and will be set out in the referendum Bill to be introduced by the Scottish Government. However, the Scottish Government have agreed to refer the proposed referendum question and any preceding statement to the Electoral Commission for review of its intelligibility. It is important that interested parties will be able to submit their views on the proposed wording to the Electoral Commission as part of the commission’s review process in the normal way.
We have had experience of this already, although admittedly perhaps not on something this important or involving the Scottish Parliament. The Scottish Government will respond to the report, indicating their response to any recommendations that the Electoral Commission may make. The point is that this will be a very public process. Equally, constitutionally it is right that it must be up to a parliament to decide what question should be on the paper. That is what this Parliament would demand and I can understand why we have concluded that it is right for the Scottish Parliament to do the same thing.
Baroness Liddell of Coatdyke
My Lords, I am grateful for the opportunity to add to this debate. There has been a startling degree of naiveté on the part of the Government in the negotiations that have taken place so far. I noted that the noble Lord the Leader of the House talked about the need for transparency and a level playing field, and he discussed the fact that a body of work is to be undertaken to ensure that the facts are properly put before the people of Scotland. I say to him that that is not enough. We have already had a degree of sophistry and confusion over whether Scotland would automatically be a member of the European Union and would have to adopt the euro. I have no doubt that, as a Scotsman, the noble Lord the Leader of the House has used the old toast, “Here’s tae us. Wha’s like us? Damn few, and they’re a’ deid”. That means that anyone who suggests that after independence Scotland will not be a land of milk and honey will be rubbished. It is not enough to say that a body of work will be undertaken. There will be a requirement for rebuttal and I ask the Minister to look hard at establishing a panel of neutral experts who will be available for that process of rebuttal.
Lord Strathclyde
My Lords, I slightly object to the accusation of naiveté. Many of us warned the Labour Party many years ago that this is exactly what would happen, and it was senior members of the Labour Party who continually told us that this was the thing that would stop the nationalists in their tracks. However, the years go by and now here we are, all working together to try to stop this process. I do not think there is any naiveté anywhere in this Government about the role that the First Minister of Scotland takes or the verbal gymnastics and occasional distortions that take place. The Government are utterly committed to providing evidence-based information to the people of Scotland so that they can very clearly see what the impact of breaking up the United Kingdom would be and what the separatist cause would lead us to.
Lord Selkirk of Douglas
My Lords, will the Leader of the House accept that, while some tactical advantages may have been gained by the Scottish Administration during the formation of this agreement, these are outweighed by the fact that there will be one single question? Will he also accept that the large increase of powers for the Scottish Parliament in the Scotland Act have been consistently underestimated and that further issues relating to devolution should be set aside until the result of the referendum is made entirely clear?
Lord Strathclyde
Yes, my Lords, I agree with my noble friend that there is no need to discuss any further devolution settlement until the referendum has taken place and that there is also a pipeline of provisions in the Scotland Act. I am not sure that the nationalists have received a tactical advantage, but it is now right that the decision should be brought to the Scottish people.
Lord Foulkes of Cumnock
My Lords, there is a paragraph in the agreement which says that,
“the referendum should meet the highest standards of fairness, transparency and propriety”.
I have one simple little question. If, after we pass the Section 30 order, the UK Government think that the proposals do not meet the highest standards of fairness, transparency and propriety, what recourse do they have?
Lord Strathclyde
My Lords, I have tried to explain that the Scottish people—who, as the noble Lord knows well, are a fair-minded and educated people—will see through anything that is not fair-minded and responsible. The time has come to trust the people of Scotland. As my noble friend Lord Steel pointed out a few minutes ago, it is true that as this debate has raged in the past couple of years the opinion polls have swung in favour of maintaining the United Kingdom.
Financial Services Bill
(11 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Flight
“After section 225 insert—
“225A General obligations
(1) In discharging its functions, the scheme operator must comply with the requirements of this section.
(2) The scheme operator must, so far as is reasonably practicable, act in a way which is compatible with the FCA’s strategic and operational objectives and regulatory principles.””
Lord Flight
My Lords, the series of amendments in my name are among those from Amendments 187E to 187T, and are all concerned with the interaction between the Financial Ombudsman Service and the new regulatory bodies under the new order set out in the Bill. I start by saying that I have been extremely impressed with the success of the Financial Ombudsman Service and the work that it has done. When it was set up, I was slightly concerned that its brief went beyond the law, but it has established a very successful record.
I shall go through these amendments. Amendment 187E seeks to require the Financial Ombudsman Service to exercise its functions in a way that is consistent with the FCA’s strategic and operational objectives, and with its regulatory principles—on the same sort of basis on which the Legal Services Ombudsman is subject to a high-level requirement to operate within the regulatory framework for legal services.
Amendments 187F through to 187L reflect some reservations about the new requirement on the FOS to publish reports of all its determinations. While supporting transparency in key FOS decisions, these amendments are designed to focus on more purposeful disclosures, which would be more beneficial for consumers and firms than the necessity to publish all decisions. A more balanced and focused approach to the legislation should give the FOS the statutory option, rather than the statutory obligation, to publish its determinations. This option should be balanced by safeguards for a firm to challenge publications which it considers inappropriate.
Amendment 187N seeks to make the FCA responsible for responding to regulatory issues with wider implications arising from complaints, while Amendment 187P seeks to require the FCA to conduct strategic high-level oversight of the Financial Ombudsman Service to ensure that it operates in a way that is consistent with the FCA’s objectives. In particular, to strengthen the accountability of the FOS the FCA should conduct regular reviews of its overall operations, policies and procedures. This would not and should not compromise the operational independence of the ombudsman when adjudicating on individual cases.
Amendment 187Q seeks to set out that the FCA should set out a clear process for decision-making on cases requiring regulatory or legal clarification. Amendment 187S intends that the FCA, not the FOS, should make the scheme rules. The legislation should more clearly define a fair and reasonable test, and the ombudsman should be required to take into account the FCA’s objectives, laws and regulations in force at the time of the complaint. Finally, Amendment 187T would require the FOS to be obliged to consult stakeholders before it issues guidance or technical notes about its procedures and its approach to handling common categories of cases.
Baroness Sherlock
In addressing this group of amendments, I remind the House of my declared interest as the senior independent director of the Financial Ombudsman Service. I hope that the House will bear with me while I go through the many amendments of the noble Lord, Lord Flight, beginning with Amendment 187E. I am concerned that this amendment would begin to compromise the independence of the ombudsman service. The ombudsman’s responsibility is to resolve complaints informally and promptly by considering what is fair and reasonable in respect of each individual complaint. That role is very different and distinct from that of the regulator and it feels important to all concerned that the two are kept distinct.
In making decisions, the ombudsman is already required by the rules to take into account a series of things: the law and regulations, the regulator’s rules, the guidance and standards, the codes of practice, and good industry practice at the time. In that way it is for the regulator to interpret its objectives and for the ombudsman to reflect this interpretation by taking into account the rules and guidance which the regulator publishes. I therefore do not think that this change is necessary, but I will go further and say that it potentially risks the unintended consequence of requiring the ombudsman to interpret the regulatory objectives of the FCA directly. Given that the nature of those proposed regulatory objectives is very wide—going, for example, up to the competition objective—it does not seem to me desirable that the ombudsman service should be put into the position of having to interpret them.
Those comments relate also to Amendment 187P, which seeks to change the relationship between the ombudsman service and the FCA in a way that again risks undermining the model of an independent ombudsman service. The ombudsman should clearly be accountable, and I welcome the provisions already in the Bill to strengthen that accountability: for example, by making formal requirements which the ombudsman has already undertaken voluntarily. The ombudsman will, for example, become subject to audit by the National Audit Office—something that it has embraced by going ahead early and voluntarily asking the NAO to come in and do an audit. However, to move to a compulsory annual review on top would involve significant diversion of effort, both by the FCA and the ombudsman service.
Related issues emerge in Amendment 187S, which would give the regulator the power to decide not just which complaints the ombudsman should decide, as now, but how the ombudsman should go about doing this, which would undermine the operational independence of the ombudsman service as an alternative to the courts. The regulator already determines the jurisdiction of the ombudsman—that is, which complaints can be considered—but the ombudsman service makes its own rules, which set out how it will deal with cases. Those are its own internal procedures, covering, for example, criteria for dismissing cases, evidential requirements, delegation by ombudsmen, rules about case fees and any costs rules. The ombudsman service is required by FiSMA to consult those likely to be affected and to have regard to any representations made by them. The rules are, of course, already subject to approval by the FSA and will be by the FCA, but deciding how to resolve cases is a crucial feature of the ombudsman’s independence, and that must be retained.
A slew of amendments, Amendments 187F to 187L—the noble Lord, Lord Flight, has been prolific—relate to the publication of ombudsman decisions. I am concerned that their effect would be to undermine the main advantage of the publication of decisions, which, it seems to me, is to share a fuller picture—a complete picture, indeed—of the cases the ombudsman deals with and his approach to resolving them. As drafted, the Bill provides a very clear obligation on the ombudsman to publish decisions unless there are very good reasons not to do so. That clarity is very welcome. The ombudsman has talked to stakeholders about how he might go about doing something such as this should Parliament decide to go down that road. Many stakeholders were very supportive of the proposed approach to publish all decisions. In my view, transparency has benefits for all involved; it can help to increase the accountability of the ombudsman, but it can also mean that cases that could be wasteful may be diverted right at the outset.
Amendment 187N also causes me concern for a different reason; it might risk challenging the work of the ombudsman to provide a prompt as well as an informal resolution of complaints, which is an important safety net for consumers. If the aim of the amendment—perhaps the noble Lord, Lord Flight, could clarify this—is to enable the regulator to deal with issues that have wider implications, it is unnecessary because the regulator is already able to do this by using Section 404 powers under FiSMA to impose a redress scheme which the ombudsman is required to follow. Of course, all the FiSMA organisations work well together anyway. The ombudsman regularly meets the FSA, the OFT and the compensation service to discuss emerging issues that could develop into risks, and wider implications can thereby be tackled. Actually, many cases could have wider implications, so if the legislation says that any case with wider implications means that all similar cases should be put on hold, that could be of significant detriment to consumers by introducing potentially massive delays into the system.
Baroness Hayter of Kentish Town
I shall deal with our own amendment in this group, Amendment 187RZA, which is virtually the same as Amendment 187T. We should clarify that our idea is not to cover everything that the FOS produces. The Financial Ombudsman Newsletter is one of the best publications I have seen; it beautifully describes the cases and gives a lot of guidance, with a small “g”. The intention of our amendment is that any guidance is fully consulted upon where such guidance could lead to a “safe harbour”, and should therefore take account of all relevant interests, including those of the industry and consumer groups.
I turn to some of the other amendments tabled by the noble Lord, Lord Flight. Two major changes are suggested that worry us. One would virtually make non-publication the default option, with the Financial Ombudsman Service having to justify in each “particular case” when it wants to publish, having given the respondent—but not, interestingly, the complainant—the right to argue for non-publication. In our view this is not in line with the Hunt report and would not amount to the transparency and openness to which consumers have a right.
The second issue is the one that my noble friend Lady Sherlock has just been talking about—cases that have wider implications, such as PPI, where it soon became evident to the ombudsman that the mischief went far wider than a particular provider. While we welcome an early alert from the Financial Ombudsman Service to the FCA that something is going amiss and that regulatory action or new guidance might be required, it seems to us quite wrong to put on hold an individual’s claim for compensation when they have clearly been mis-sold a product and might be out of pocket. We do not agree that the individual consumer’s justified complaint should be suspended while a large bureaucracy—I am afraid that that is what the FCA will be, with its need to consult and so on—gets its act together.
As we have heard, the ombudsman’s role is to resolve complaints—speedily, we hope—that have not been satisfactorily dealt with by the service provider, which is of course always the first and best option. If PPI is anything to go by, though, the banks could and should have refunded the money themselves pretty speedily and stopped selling the product unwisely. It is this that would have stopped the consumer detriment, and incidentally saved the banks a lot of money further down the track.
Other amendments from the noble Lord, Lord Flight, in this group seek to include the rationale for each published decision to be explained. However, our fear is that this would add considerably to the process for handling cases and undoubtedly to the costs, and we would be surprised if the industry were in favour of that since it funds all this.
By including “operations, policies and procedures”, Amendment 189P would appear to us, as my noble friend Lady Sherlock said, to risk undermining the independence of the ombudsman service. We hope that that was not the intent, but we have a similar concern about Amendment 187S, which would appear to give the regulator the power to decide not only which complaints the ombudsman can decide on but, worryingly, how the ombudsman should do so. That would undermine the very independence of the ombudsman, which is of course meant to serve as an informal alternative to the courts.
With regard to Amendment 187Q, as my noble friend Lady Sherlock also reminded us, the FSA—or, as it will be, the FCA—is already able to make a redress scheme under Section 4 of FiSMA, the effect of which is to bind the ombudsman, so there is probably no need for it.
Lord Newby
My Lords, I am very tempted to say that I agree with the noble Baroness, Lady Sherlock, and sit down.
Lord Newby
Sadly, however, I ought to explain the Government’s view of these amendments. Amendment 187E would require the FOS to exercise its functions in a manner consistent with the FCA’s strategic and operational objectives and the regulatory principles. Obviously the FCA will have an important role making and approving the rules of the ombudsman scheme, and must comply with its regulatory objectives and principles in doing so, but I do not believe that the regulator and the FOS should share the same objectives or be held to the same regulatory principles.
The FOS is not a regulator and should not be expected to act like one. Its role is to provide an impartial alternative dispute resolution service for consumers and firms. It is not a consumer protection body, and I would be concerned that by giving the ombudsman consumer protection objectives we would put that impartiality at risk. Moreover, in practice such a duty would be burdensome and difficult to interpret.
Amendment 187P is similar to Amendment 187, in that it seeks to hold the FOS to the FCA’s objectives and principles. However, it goes further by giving the FCA a role in ensuring that the FOS complies with those objectives and principles, and in carrying out an annual review of the FOS operations, policies, and procedures. The FSA already has a role in overseeing the FOS, which the FCA will retain—appointing and removing the board of the scheme operator, for example. However, the FOS’s claim to impartiality, and hence its legitimacy in making determinations that are binding on firms, is credible only if it is operationally independent of the regulator. This does not mean that it should be unaccountable or free from scrutiny—this is why we have brought in provisions requiring the FOS to be audited by the NAO. Associated with these new powers, the NAO will be able to launch value-for-money studies of the FOS. However, to require the FCA to ensure that the FOS complies with its objectives would require detailed oversight and control of the FOS’s day-to-day operations, which in our view would not be compatible with the FOS’s independence.
Amendments 187F to 187L relate to the new transparency requirements for FOS, under which the ombudsman scheme operator will have a duty to publish a report of determinations unless, in the opinion of the ombudsman, it would be inappropriate to do so. Amendments 187F, 187G and 187H seek to reverse the proposed new provisions, leaving the scheme operator merely with a power to publish determinations if it decides that it is appropriate, and a duty to explain the rationale for publication in that case.
Previously, ombudsman decisions have been published by one or other of the parties involved, leading to a partial and sometimes misleading picture of the way in which the FOS made decisions. Now that the FOS is subject to the Freedom of Information Act, ombudsman decisions may also be published in response to requests for information under that Act, so there is clearly a need for change.
Amendment 187J seeks to modify the transparency arrangements to provide anonymity for the respondents except where they agree to be identified. However, in many cases it will not be possible to redact all the information by which a firm could be identified without thereby withholding key elements of the substance of the decision—for example, the content of a firm’s advertising material, policy wordings, and product names—and there is no reason to think a firm’s reputation should be unfairly tarnished by the publication of a decision. However, I entirely agree with my noble friend that there is a case for withholding genuinely commercially sensitive information. The FOS will have the power to do that, and has made it clear in its consultation on transparency earlier in the year that it intends to protect commercially sensitive information.
Amendments 187K and 187L would provide for a minimum period of 28 days between the scheme operator considering a determination for publication and its taking the decision to publish, during which the respondent may make representations. It is of course important that firms get a fair hearing but, as I have said, by the time a decision is published, firms have had many opportunities to explain their side of the case already, and the ombudsman scheme rules already provide for firms to be able to provide sensitive information to the ombudsman in confidence. Given that this route already exists for the firm to identify information that it would be inappropriate to make public, I would be concerned that firms may see a process to make further references, as the amendments propose, as an opportunity to appeal the substance of the decision itself. However, I reassure my noble friend that the FOS would be very open to listening to proposals from firms about how best to ensure that it does not publish sensitive material.
Amendment 187N would require the FOS to suspend cases and refer the matter to the FCA when it encounters an issue with wider implications. Obviously the FOS will encounter issues that demand a response from the regulator, and there need to be clear duties and routes for the FOS to raise these issues with the FCA. I draw my noble friend’s attention to the measures in the Bill that provide for this. In future the FOS will be required to share information with the FCA that it considers relevant to the FCA’s objectives. The FCA is in turn required to take account of this information. In addition, the Bill introduces a mechanism whereby the FOS and the firms concerned can refer issues of mass detriment to the FCA, and the FCA will have to publish a response within 90 days, which is a very much improved procedure over what has obtained in the past. The response from the FCA might set out a timetable for regulatory action that would allow the FOS to consider whether or not to place a hold, or stay, on complaints. I reassure my noble friend that the Government share his concerns, and we think that we have taken measures in the Bill to address them.
Amendment 187Q seeks to require a clarification procedure for regulatory matters arising from complaints to be resolved by the FCA or for the FCA to provide guidance. While supporting the spirit of these amendments, my concern about the clarification procedure proposed is that it would be overly bureaucratic and could blur the distinct remits of the regulator and the ombudsman. The FOS’s role is to provide swift and low-cost dispute resolution. In doing so it must of course take into account, among other things, the relevant law and the regulators’ rules and guidance. It cannot, in practical terms, be expected to refer an issue to the regulator every time it encounters regulatory matters, any more than it could be expected to refer a matter to the courts every time it encountered a legal matter. We have included a package of measures in the Bill to improve co-ordination and co-operation between the FCA and the FOS. These include the new information-sharing and co-ordination provisions, as well as a new mechanism for the FOS and firms concerned to refer issues of mass detriment to the FCA.
Amendment 187S would require the FCA to make the detailed procedural rules for the ombudsman scheme rather than approve rules made by the FOS itself as at present; and to define the factors the FOS must take into account in its “fair and reasonable” test in legislation. On the first part of the amendment, the FSA already makes rules concerning key elements of the FOS’s compulsory jurisdiction. The more detailed rules of the ombudsman’s procedures are made by the FOS itself with the FSA’s consent. This strikes the right balance. As part of its operational independence, the FOS is responsible for preparing the detailed procedural rules which the regulator must approve. The alternative would be for the regulator to be directly responsible for running the ombudsman.
Lord Flight
My Lords, I started off by paying tribute to the success of the ombudsman’s service. There is a clear argument here for saying that if it ain’t broke, don’t fix it. A number of the points underlying these amendments have been raised with me by the insurance industry, to a large extent in a probing fashion. I am pleased to note that quite a lot of the underlying points have already been dealt with; if there is anything ongoing which the ombudsman’s service and the FSA want to pick up between them, they can have a word with the insurance industry. On that basis, I beg leave to withdraw the amendment.
Lord Sassoon
“In section 232 (powers of court), in subsection (2), after “director or” insert “other”.”
Lord Sassoon
“In paragraph 6 (status), in sub-paragraph (2), omit “board members,”.”
Lord Kennedy of Southwark
“29 After paragraph 22 insert—
“Part 5Complainant representativesIntroduction23 This Part of this Schedule applies to a complaint under the compulsory jurisdiction, the consumer credit jurisdiction or the voluntary jurisdiction in respect of which the complainant has entered into an agreement with a complainant representative.
24 A “complainant representative” is a person who has entered into an agreement with a complainant with respect to a complaint pursuant to which any fee has been, will be or may be paid by the complainant.
Complainant representative rules25 The scheme operator must make rules, to be known as “complainant representative rules”, which are to set out requirements applicable to complainant representatives and to complaints falling within paragraph 1.
26 Complainant representative rules may, among other things—
(a) require that a complainant representative disclose to the scheme operator the agreement referred to in paragraph 2 when a complaint within paragraph 1 is made;(b) require a complainant representative to take reasonable steps to obtain from the complainant, and as appropriate to supply to the ombudsman, such information as an ombudsman might reasonably require to determine a complaint;(c) provide for the consequences if a complainant representative does not comply with complainant representative rules or other applicable legal or regulatory requirements, including requiring or enabling the ombudsman not to consider any complaint or to consider a complaint only if conditions specified by the ombudsman have been satisfied;(d) enable the ombudsman to dismiss a complaint without consideration of its merits where the complainant representative has not cooperated with reasonable requests made by the respondent, including not providing adequate information as to the true nature of the complaint.27 Complainant representative rules shall not require the disclosure to the ombudsman scheme of any material which is legally privileged.
Consultation28 If the scheme operator proposes to make any complainant representative rules it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of persons appearing as likely to be affected.
29 The draft must be accompanied by a statement that representations about the proposals may be made to the scheme operator within a time specified in the statement.
30 Before making the proposed complainant representative rules, the scheme operator must have regard to any representations made to it under paragraph 7.
31 The consent of the Authority is required before any complainant representative rules may be made.””
Lord Kennedy of Southwark
My Lords, in moving this amendment I am seeking to get a proportionate framework in place that is good for consumers, but which is also good for the financial institutions complained about and the responsible claims management companies that take up complaints on behalf of consumers. That will move us all on from the unsatisfactory situation we find ourselves in at the moment.
A number of CMCs do not adhere to best practice and the consumer has little redress. My amendment would improve that situation for them with the drawing up of claimant representative rules, which are long overdue. Between April 2011 and March 2012, CMCs operating in the PPI sector generated 74% of consumer complaints overall. Of these, the majority related to some 15-20 CMCs. The source for these figures is the Ministry of Justice claims management regulation unit, so they are government figures.
I am very clear that in the mis-selling of PPI, the banks and other financial institutions behaved very badly. It is right that consumers have proper redress and compensation for their loss. I agree with my noble friend Lady Hayter that the banks could have done much more much sooner to deal with these issues.
However, the bombarding of financial institutions with claims from people who have never had any sort of relationship with the financial institution is bad practice. It is a fishing expedition that wastes the time and the money of the institution, and it clogs up the system for people who have a legitimate claim, making them wait even longer for redress.
Why is this done? Because there are huge sums of money to be made in fees. Who has not had an unwanted text message or phone call? While there are regulations already in place and mechanisms to deal with these breaches, we all know that they are not enforced and it is the consumer that suffers. An example of this is the Hinckley and Rugby Building Society, which revealed that 97% of the PPI-related complaints it has received in the three months to September 2012 were from people who are not members of, or have any relationship whatever with, the society. While that figure is lower for banks, there is still a huge number of pointless vexatious claims. Last year 69% of all PPI cases went to the ombudsman via CMCs. A small number of CMCs which are not playing by the rules are making an unfortunate situation even worse. They are not acting in the consumers’ interests. My amendment is an attempt to find a positive way forward, good for consumers, good for the financial institutions and good for the responsible claims management companies.
I hope that the noble Lord can give us a full response so that we can understand where the Government are on this matter. While I have no intention of pressing this to a vote, I hope that the noble Lord will agree to my meeting the relevant Minister outside the Chamber as I want to use this process to improve the lot for consumers, and the time has come for the Government to act.
Lord McFall of Alcluith
My Lords, I support my noble friend Lord Kennedy in his proposal, not least because, on my way down on the train today, I received a call from 0843 5600827. They wished to talk to me about my PPI claim of £3,350. Notwithstanding that, I received a text message saying that “time is running out”. I have never taken out a PPI policy.
This is an example of the instability which the industry is suffering at the moment because of this situation. I did chair a committee with consumer and industry representatives two months ago, in order for them to approach the MoJ to try to sort this issue out. Given these demands that have been made on the industry, the £8 billion that has been put aside for PPI mis-selling will surely increase. Let us not forget that we have interest rate swaps. On one of the sub-committees of the Parliamentary Commission on Banking Standards, of which I am a member along with the noble Lord, Lord Lawson, I asked an expert on interest rate swaps about the £8 billion. He said that that mis-selling could dwarf the £8 billion for PPI.
So this issue is current and will have a destabilising effect on the industry for the next few years, and also on consumers’ confidence. I do not think that the Government can escape their responsibilities on that by saying that this is not really a financial services matter, but for the MoJ. It is most certainly having an impact on financial services at the moment. Therefore, as a matter of urgency, the Government should take note of my noble friend Lord Kennedy’s amendment so that they can look at this issue in the cold light of day, outwith this Chamber, and get an adequate and decent solution, both for the industry and for the consumers who are suffering.
Baroness Kramer
My Lords, I suspect that everyone in this House has been plagued by the various attempts by the claims industry to get us to pass over all kinds of personal details. That worries me. Anecdotally, I have heard reports of people who responded positively to one of these messages and handed over their credit card details. They then found themselves being charged without realising that they were getting themselves into that situation. We have talked to various institutions, many of which say that half the claims presented to them are from people who have never had any relationship with them whatever. It was entirely a fishing expedition. At a time when we want our banks to focus on appropriate lending to individuals and small businesses, which they are all struggling to do effectively, to have the complete distraction and cost associated with keeping this abusive industry afloat is surely unacceptable to all of us.
Baroness Sherlock
I support in particular the comment made by my noble friend Lord Kennedy at the end of his contribution. He asked the Minister whether he would meet with my noble friend and other interested Members to consider if not this then what other action can and should be taken. I think that the House would be particularly interested to hear the Minister’s response on that.
It seems quite obvious that as a market the CMC sector simply is not working. Not only are significant numbers of people being pressured essentially into doing things which they do not want to do, but there appears to be no price competition in the market at all. All the evidence shows that consumers are just as likely to use a claims management company which charges 40% as one that charges 15% of any money that they might get back. Many simply are not aware that they could do it for themselves for free by going directly to the ombudsman.
If the Minister is not minded to go in that direction, will he tell the House two things? First, what would the Government be able to do very soon that would have a significant impact on targeting in particular the minority of claims management companies that are behaving very badly? Secondly, will he at least agree to meet interested Peers to discuss that matter very soon?
Lord Newby
My Lords, I share the concerns behind the amendment about the activities of CMCs in relation to financial services products. Like all noble Lords, I have been approached by them with the most spurious and ridiculous arguments about why I should give them details about my financial affairs in return for some often unspecified benefit. We start off by sharing that concern.
I would be more sympathetic to the amendment if I did not think that the Government were already doing something about it. I am very happy to meet noble Lords who would like to discuss the matter, along with colleagues from MoJ, to see what might be done to expedite effective action. But I do not think that it is necessary or appropriate to expect the FOS to step in as a quasi-regulator and make its own conduct rules. The role of the FOS should be to act as an independent dispute resolution service and not to act as a quasi-regulator of CMCs. It is just the wrong organisation to do that.
As I have said, I am sympathetic to what the noble Lord is seeking to achieve and I give an undertaking to set up a meeting to discuss it further. On that basis, I hope that the noble Lord can withdraw his amendment.
Lord Kennedy of Southwark
I thank the noble Lord for his response. I certainly think that we need to work on something. I know he says that things are in place but it is fair to say that they are not working well at the moment and that we need to do much better. On that basis, I beg leave to withdraw the amendment.
Lord Newby
“(ii) in paragraph (b), for “section 315” substitute “provision made by or under this Act”, and”
“(ii) in paragraph (c), for “section 315” substitute “provision made by or under this Act”.”
“( ) In section 317 (the core provisions), in subsection (1), for “X” substitute “9A”.”
Lord Tunnicliffe
“(c) after subsection (10) insert—“(11) The PRA should require the submission of reports from any PRA-authorised person for the purpose of assessing the extent to which a financial activity or financial market in which the PRA-authorised person participates may pose a threat to financial stability in accordance with the PRA’s general objective. (12) The PRA shall collect, in a manner determined by the PRA and in consultation with the FPC, financial transaction data and position data from the PRA-authorised person companies.(13) For the purposes of subsection (12)—(a) “financial transaction data” shall mean data pertaining to the structure and legal description of a financial contract, with sufficient detail to describe the rights and obligations between counterparties and make possible an independent valuation; and(b) “position data” shall mean data pertaining to data on financial assets or liabilities held on the balance sheet of a financial company, where positions are created or changed by the execution of a financial transaction and which includes information that identifies counterparties, the valuation by the financial company of the position, and information that makes possible an independent valuation of the position.(14) The FCA shall assist the PRA in accordance with section 3D to ensure that the PRA is able to exercise its function as described in subsections (11) and (12).(15) To facilitate the effective collection of data, the PRA should prepare and publish, in a manner that is easily accessible to the public and in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person—(a) a database detailing relevant counterparties;(b) a financial instrument reference database; and(c) formats and standards for PRA data, including standards for reporting financial transaction and position data to the PRA.(16) Where possible, the PRA shall co-operate with foreign regulators to the extent required to collect relevant information on PRA-authorised persons already collected by those foreign regulators.(17) The PRA shall develop and maintain sufficient resources to review the collection of data referred to in subsections (11) and (12) in order to—(a) develop and maintain metrics and reporting systems for risks to the financial stability of the United Kingdom;(b) evaluate stress tests or other stability-related evaluations of financial entities overseen;(c) investigate disruptions and failures in the financial markets;(d) conduct studies on the impact of policies relating to systemic risk;(e) promote best practices for financial risk management to PRA-authorised persons.(18) The PRA shall publish a report which compiles the data collected in accordance with subsections (11) and (12) on a periodic basis as determined by the PRA, which shall be—(a) made available to the public in an easily accessible medium; and(b) in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person.””
Lord Tunnicliffe
My Lords, Amendment 187TE, in the name of my noble friend Lady Hayter of Kentish Town, is essentially about the quality of information and its provision. To put it in context, I should like to go back to the purpose of the Bill. I put to the House that its purpose is to prevent or mitigate a crisis in the financial services industry. The crisis from 2007 to 2009 came from the selling of subprime mortgages principally in the US. As we know, these mortgages were repackaged and moved down the line. Eventually, they ended up on the balance sheet of what one would have thought at the time were highly sensible banks of great stature and stability.
How did that happen? It happened because of the malicious intent of the original designers of these products and the people who designed the various packages to disguise the essential weakness that they contained. But when you read the various reports about the crisis, there is no question that a fundamental part of this crisis was caused by the poor knowledge and information that passed through the system. In a sense, the poor knowledge was in two places. It was within the firms, and between the firm and the regulator. In particular, the FSA’s report on the RBS brings this out well. Essentially, parts of RBS simply were not effectively communicating with each other.
Lord Flight
Perhaps I may add that in my estimate the US also wiped off about $1,000 billion of its overseas debt as a result of the failure of subprime mortgages.
Lord Tunnicliffe
As a great admirer of the US, I would never underestimate its ingenuity but I did not realise that that had been a principal objective. I thank the noble Lord for my improved education. Returning to my speech, the failure in RBS in particular was once again an internal management problem. The refreshingly honest report of the FSA brings that out but it goes on to criticise its own performance as a regulator. It criticises various ways in which it behaved and its allocation of resources but it also criticises the information that it was able to get during the crisis. That was because firms were unable to provide information that was sufficiently accurate, comprehensible and timely.
The Joint Committee on this Bill took a considerable interest in the whole matter of information and pointed out that in the US the,
“Dodd-Frank Act created the Office for Financial Research which was given responsibility for monitoring of systemic financial risks and, in order to undertake this task, has been given powers for the setting of data standards for the industry. In order to allow effective monitoring of systemic financial risk, the Dodd-Frank Act also requires that OTC derivative contracts are recorded in trade repositories, a step that requires standardisation of reporting across the industry”.
The recommendation from the Joint Committee, which the Government effectively rejected, was:
“The Bill should be amended to place a duty on the Bank of England (or its subsidiary the PRA) to develop information standards for the UK financial services industry and to report regularly on progress in improving these information standards in order to support financial stability”.
This amendment does its best to give effect to that recommendation.
In researching the background to this amendment, I looked over a number of areas but perhaps the most inspirational thing I came across was a speech by Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Securities Industry and Financial Markets Association, “Building a Global Legal Entity Identifier Framework” symposium in New York on 14 March. That is a long introduction but it was called simply “Towards a common financial language”. He contended that a common financial language would improve risk management in firms because of better flows and understanding of information; improve risk management across firms; map the network of financial transactions; and, shock-horror, lower barriers to entry. He pointed out that the information standards and information systems within the industry are probably 10 or 20 years behind those in other industries, and particularly the major distribution industries.
We put forward this amendment and it will no doubt be countered by the noble Lord saying, “Well, they can do this anyway”. We are trying to say something different. We are trying to say that this is not just an enabler but a doer. It is a requirement not just that the PRA has the ability to take a positive role in the matter of information and information standards, but requires it to take a role. It is quite long so I will not go through it in any detail but it requires the PRA to require firms to report; it requires them to set standards in the manner in which they report; it requires that they should have sufficient resources to be able to use that information; and it requires them to publish reports.
The Bill has a purpose. It is about institutions, it is about governance and it is about enabling. The amendment is designed to give it some teeth. It is designed to make a requirement in the Bill. This is a “must” amendment, not a “may” amendment. I beg to move.
Lord Newby
My Lords, as the noble Lord has explained, Amendment 187TE would require the PRA to collect and publish financial transaction data, and require it to maintain the necessary resources to collect and review data from firms. In doing so, it mirrors exactly the provisions of the Dodd-Frank Act and in particular the provision in that Act for the powers within the Office of Financial Research.
We do not think that such a power is necessary because the regulators here have their own powers to gather information, including all the information referred to in the amendment. Indeed in some cases the FSA already requires firms to hold information in particular ways; for example, through rules requiring firms to be able to present a single customer view. The fact that there is now the concept and the practice of a single customer view shows how the system has been able to develop in the light of the stresses and strains that it has found itself under in recent years. Firms already report transaction data and will continue to do so. Specifically mandating the regulator to develop data standards and to publish collected data, as the noble Lord suggests, is not in our view the answer. The legislation will set the regulators clear and deliverable objectives and the regulators already have powers that could be used to require them to hold their data in specific formats if they judge that to be an appropriate and proportionate way of meeting their objectives.
If the FPC requires particular information in a particular format, whether about counterparty exposures or about anything else, this will be provided by the PRA. If for some reason the PRA is not providing the necessary information, the bank has a backstop power to direct the PRA to gather it and provide it. There is a belt-and-braces provision in the Bill.
The regulators will require a whole range of information from firms. It would not be possible or desirable to specify them all in legislation. The legislation gives clear and deliverable objectives and it is up to the regulators to maintain sufficient resources and to gather sufficient information to meet those objectives. They will be held to account for doing so. With that explanation, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Tunnicliffe
My Lords, I have received an unsurprising response. The essence of it is that those powers exist anyway. Perhaps the noble Lord can help me—I am not asking him to do so now—by writing to me setting out where these powers are in the new Bill. I have followed up the invitation of the Treasury and downloaded its very helpful Bill as amended. When you download it, you are told that it is 624 pages long and, therefore, it is not entirely easy to find things. I would be very grateful if I could be told where in FiSMA, as revised, these powers are and which of those powers is new because of the Bill. If there are not new powers because of the Bill, we have had regulators with these powers for a considerable time and as far as I can see we do not have the level of standardisation of data, the matching priority or the counterparty exposure. We do not have anything like the ability to see into the systems that the new American provisions envisage. It is incumbent on us in this country, with our dependence on this important industry and the fact that the real economy depends on it as well, to have provisions which are not only wide in theoretical terms but provide actual knowledge of what is being done to make this industry safer, particularly as regards what this Bill does about making the industry safer. If the noble Lord leaps up now and reads his piece of paper I would not mind.
Lord Newby
Section 165 of FiSMA enables the regulators to require information or documents which may reasonably be required in connection with the discharge of their functions. Section 165A enables the regulators to gather information from certain categories of unregulated firms for financial stability purposes. Section 166 enables the regulators to appoint a skilled person to provide a report into any relevant matter that the authority may specify. The regulators can also make rules requiring firms to hold their data in specific formats, if the regulators judge that to be an appropriate and proportionate way of meeting their objectives. As I have already said, the FSA did so when it introduced the single customer view requirements.
In terms of the system as a whole and what is new about the Bill as regards ensuring that the regulators get the information that they require in order to prevent some of the problems that we have seen in recent years, the whole purpose of the Bill is to put in place an architecture that enables a clearer focus by splitting the regulators into two halves so that they will concentrate on those parts of the industry for which they have now been given specific responsibility. I am sure that having those powers in the legislation, coupled with a new, more laser-like focus on ensuring that the system is safe and secure, will ensure that the concerns of the noble Lord about the information that is collected are not realised.
Lord Tunnicliffe
My Lords, I do not want this to go on, but there is a world of difference between having powers and knowing what people are doing with them. It is absolutely clear where the Americans are coming from; they want something done and they want something changed. I can now try to find these quotes in FiSMA and see how they impact but really I want to know what the regulators are doing. We are not opposing the Bill in general, certainly not in this House, and we wish the Government luck in its implementation, but at the end of the day it only moves people about and has a lot of interconnecting clauses. It does not specifically mandate a requirement to improve the quality of information. Any reasonable observer of the recent crisis has to say that one of the key issues in that crisis was the quality of information moving around within firms, between firms, and between firms and the regulator. The Government have to make a persuasive case that they are doing something about this deficit. Having said all that, I beg leave to withdraw the amendment.
Lord Newby
“( ) at the end of paragraph (i), omit “or”,”
“(i) officers of, or members of the staff of, the regulator, or”
Baroness Wheatcroft
“( ) In section 340 of FSMA 2000 (appointment of auditors and actuaries) after subsection (2) insert—
“(2A) Rules must require auditors of deposit taking institutions to provide a narrative report on the institution’s risk management policies and its exposure to risk as part of the audited accounts of the institution.””
Baroness Wheatcroft
This is a simple amendment which I believe could have significant effect. Your Lordships will recall that just before our major banks admitted catastrophic losses resulting in multibillion-pound bailouts and the Government becoming a major shareholder in Lloyds and Royal Bank of Scotland those banks were each given clean audit reports. The annual reports which the auditors signed off were packed full of numbers and told us nothing. The auditors received huge rewards for their efforts, yet within months of them signing off those accounts without any qualification the taxpayer was having to fork out £65 billion—that is £1,000 for every citizen in the country.
In February 2007 Northern Rock, which had a hugely risky business model, was given a clean audit report for its 2006 accounts. Within months it was clamouring at the door of the Bank of England for support as the queues mounted outside its branches. In February 2008 Lloyds and RBS each produced accounts for the preceding year. To judge from the unqualified audit reports each received, these were businesses which would happily carry on trading, yet just months later the Government were having to orchestrate a massive rescue package. Audit fees for those accounts were more than £13 million at Lloyds and £17 million at RBS. For what?
Audit is a profession in which the UK has played a dominant role but the profession’s role in the financial crisis does it no credit. The Economic Affairs Committee of this House has done some admirable work looking at the role of auditors but now we need action.
I do not believe that the auditors who signed off those bank accounts could have been entirely sanguine about what they were doing. They must have been aware of the perilous exposures that were building up, not just in derivatives but in loan books which were loaded with extraordinarily generous loans made against a ragbag of properties and businesses. Some of those still sit on the books at valuations which might be deemed “optimistic” at the very least. Yet such is the narrow interpretation placed on the duty of auditors that they were able to give those banks what is seen as a clean bill of health just as disaster was about to fall. Shareholders took comfort from those audit reports, only to see their investments shattered. The Economic Affairs Committee concluded that while the auditors may have carried out their duties properly in the strict legal sense, they had not in the wider sense, and that wider sense is surely crucial.
This amendment would change the requirement of an audit report for banks. It may be that other sectors would benefit from such a change but this is the Financial Services Bill and, as we have learnt, banks are not as other businesses. The amendment would require auditors to provide a narrative report on the risks they perceive in the bank they have audited. How different might those Lloyds and RBS reports have looked had this been the case then?
The Minister may feel that the content of annual reports is a matter for the Financial Reporting Council but this need not always be the case. This month the FRC has launched a consultation on guidance for the audit of financial instruments. I commend it to your Lordships as an exercise in overdosing on acronyms. Whether or not it would improve the audit of financial instruments, I do not feel qualified to judge, but it will certainly take a long time to wend its way through the FRC process. The Government can and regularly have intervened through the Companies Act to determine the shape of annual reports. Only recently the Business Secretary has decided to change the way in which remuneration is reported in annual reports. If there is a belief that the demands made on auditors and banks need to be strengthened, then the Government can use this legislation and provide the change that is required.
I have no illusions that asking auditors to report on perceived risks will go down well with everyone in the profession but some would welcome the wider remit. They would have to exercise judgment over what constituted genuine risks and they would be doing a service to shareholders as well as the wider community. Those familiar with company prospectuses will know that the list of risk factors can be comprehensive, bordering on the ludicrous, but it is not beyond the auditing profession, perhaps working with the Financial Reporting Council, to come up with ground rules that would make this a useful exercise. If all banks had to have such a narrative report, it would give auditors the opportunity to do their job properly. It would stop them being prone to any bullying tactics from executives. It would give shareholders and the community a better picture of what is truly going on in their financial institutions. I beg to move.
Lord Lawson of Blaby
My Lords, I would like to support very strongly the amendment moved by my noble friend Lady Wheatcroft. I shall speak briefly but my brevity does not indicate that this is not an important issue. It is a very important issue indeed. We are debating in the shadow of the worst banking crisis of our lifetimes and possibly the worst banking crisis there has ever been. As my noble friend pointed out, the Economic Affairs Committee of this House produced a report called Auditors: Market Concentration and Their Role which was published in March 2011. It was extremely critical and rightly critical of auditors in the context of the banking collapse that we have seen. This was, as is common with reports of Select Committees of this House, a unanimous report, but unanimity can be got in various different ways. This was unanimity where everybody of all parties who sat on that committee and heard the evidence was totally committed to what the report said. My noble friend Lady Wheatcroft mentioned one thing from the report. Let me quote one other thing from paragraph 204. It states:
“There was no single cause of the banking meltdown of 2008-09. First and foremost, the banks have themselves to blame. … But we conclude that the complacency of bank auditors was a significant contributory factor”.
This has to be addressed. How will we prevent—as far as we can—this sort of thing happening again?
In discussion of an earlier amendment, the noble Lord, Lord McFall, referred to the banking commission of which I, too, am a member. It is quite possible, such is the importance of this, that the banking commission will decide to look into the question of bank audits and auditors, and indeed auditing standards and IFRS, which leave a lot to be desired and are probably a step in the wrong direction. However, we must do what we can in the Bill to rectify the position.
I say en passant that what concerned me a great deal when the big four auditors gave evidence to us was the extent to which they seemed to think that they had simply to satisfy the management of the banks at the time, when under law their duty was to the shareholders. Furthermore, the putting in place of a proper system of audit for business and industry as a whole, but particularly for the banks, is a public duty; auditors had a duty to the wider public to do a good job, quite apart from their duty to shareholders of the banks—and they failed lamentably.
What can we do about this? I do not think that my noble friend Lady Wheatcroft would say that her amendment is the complete answer. Of course it is not: a lot more has to be done. However, it is very important that the Bill addresses this question, and I believe very firmly that the amendment before the House tonight is an important part of the answer, even though it is not the whole answer. I strongly support my noble friend’s amendment.
Lord Oakeshott of Seagrove Bay
My Lords, I, too, am delighted to support the amendment moved by my noble friend Lady Wheatcroft. With her characteristic delicacy and discretion, she did not mention the name of the auditors in question—but I will. I believe that Deloitte has very serious questions still to answer about its audit of RBS, particularly towards the end. There were some unhealthily close relationships between Deloitte’s auditors and the senior management of RBS. I also believe that PWC has very serious questions to answer about its final audit of Northern Rock before it went bust. I am sure that the Minister will remember that in this House, I moved an amendment calling for a special audit of Northern Rock, organised by the Bank of England. The amendment was agreed, but not approved in the other place. My noble friend has put her finger on a very important question and I very much hope that the Government will take it seriously.
Lord Flight
My Lords, I, too, strongly support the amendment moved by my noble friend Lady Wheatcroft. The first point I will stress concerns IFRS, which hugely exaggerated bank profits and hence capital in good times, and has done the reverse in bad times. IFRS has contributed substantially to the destruction of our pension schemes by discounting liabilities at inappropriate interest rates. There have been complaints about IFRS from many quarters. Accounts have been rendered almost impenetrable. Fund managers frequently have to rewrite the accounts of companies they examine in order to make an assessment of the trading state of the business.
I have consistently complained about this subject, but nothing has happened. Who is responsible? When I was shadow Chief Secretary, the point was made to me that it was the job not of Parliament but of the profession to dictate standards. That is entirely wrong. In the USA the political representative bodies have rightly taken up such issues, and it is the duty of both Houses of Parliament to do the same.
Lord Marlesford
My Lords, I will add my voice to support very strongly the amendment of my noble friend Lady Wheatcroft. I will do it in a short and simple way, by giving a reason and an example. The reason is that a very important function of auditors concerns hazards, and it falls into three parts. First, they must identify hazards; secondly, assess them; and thirdly, expose them.
My example comes from something that I have agitated about for a long while: namely, the level of credit card debt in this country. This is not the credit card debt that noble Lords may have, and which they pay off monthly, but that part of the debt that overruns and is therefore subject to very high interest rates, which very often the people with the debt have no hope of paying back. That level of credit card debt for the British banks is currently still more than £50 billion. The figures are from the British Bankers’ Association and the Bank of England, which both publish a series of monthly figures.
I have mentioned this over a long while in your Lordships’ House. When the previous Government were in power, at my instigation the noble Lord, Lord Myners, who as Treasury Minister fulfilled the role that my noble friend Lord Sassoon now fulfils, wrote to the chief executives or chairmen of the major banks, asking them for details of their credit card debt. The crucial question is: at what value do the banks hold this credit card debt on their balance sheets? Unless they have written it down hugely, the debt is unlikely to be paid and could be a serious hazard to the sustainability, liquidity and indeed continuing existence of those banks. This is the sort of thing that a narrative account by auditors would identify and reveal. I ask the Minister to refer to this example when he replies to my noble friend’s amendment.
Lord Tunnicliffe
My Lords, I will not take up the time of the House with detailed comments on the amendment. We have listened to the debate, and all noble Lords who spoke were most persuasive. I hope that the Minister will give careful consideration to their points. We will certainly listen with great care as we decide on the extent to which we may support the noble Baroness, Lady Wheatcroft, if she plans to take the matter further.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the question of the audit of banks is indeed an important one, and one which has recurred in policy debates over the past 20 years. I looked back to see what the Banking Act 1987 had to say on the topic and what Lord Justice Bingham had to say when he looked into the BCCI collapse. Various changes were made at that time and since in FiSMA but it is important that we learn lessons from the recent banking disasters, and I address the particularities of this amendment from a position of agreeing with the considerable concern around this issue. However, I do not believe that the amendment before us completely achieves what we are trying to do.
Clearly auditors are uniquely placed to identify and flag to the PRA current and potential risks in a firm. We would also expect the PRA to share relevant information with auditors, for example where it views a firm’s approach to asset valuation or provisioning to be significantly out of line with its peers. It is worth pointing out that there are areas in which the present regulator, the FSA, believes that auditors should be looking at particular issues and reporting on them and it can require that to be done in rules under Part 22 of FiSMA. So, for example, under the client asset rules, auditors are required to report on whether investment firms have properly segregated their client assets.
I do however have some difficulty with this particular amendment. My noble friend Lady Wheatcroft says that if only provision like this had been in place before or at the time of the crisis the auditors might have given a lot more help which might have prevented some of the disasters. On the other hand my noble friend Lord Lawson of Blaby quotes from your Lordships’ committee’s report which talks of the complacency of bank auditors at the time. Taking as read for the moment that the complacency thesis is the right one, I wonder if that complacency would have run through what was required to be done under a particular provision like this one in the amendment. I think that we are on to something important here but I am not convinced that this quite hits the sweet spot that the Committee is aiming for and that requiring auditors to provide this general narrative report will achieve what we want. Risk assessment is a highly-specialised process and it goes to the heart of the job of the prudential regulator. What I think we want of auditors is to see if there is something more that they can do which supports the prudential judgment rather than cuts across it.
Lord Lawson of Blaby
I am most grateful to my noble friend. Of course this is not the whole answer; I made that clear in my remarks. However, does he not think that this amendment would have been helpful and that it is therefore worthy of support from the Government?
Lord Sassoon
For the reasons that I have given, I am not absolutely convinced that it would have been helpful against the background of complacency of the bank auditors at the time of the crisis. Having said that, I agree with the Committee that there is something here that we need to look at further, so I want to see whether the Bill can and should go further to require the regulator to make the most of the expertise that auditors can undoubtedly offer. I am happy to take this issue away and consider whether there is an amendment that I can bring back at Report that recognises the important role of auditors without cutting across the role of the regulator in the way that I believe this particular amendment may do. I will look at it and come back to the House with something that addresses this area. On that basis I hope—
Lord Oakeshott of Seagrove Bay
It sounds as though the Minister is encouraging the regulator to ask the auditors more questions. If we have complacent auditors, surely it is even more important that they sign something, that their complacency is questioned and that they take more responsibility for their work.
Lord Sassoon
I certainly agree that if we can get more value out of the auditors we should do so. It should be on the basis of something that helps people—I am not sure whether that is the regulator or directly the public—towards a better understanding of the risks embedded in bank accounts. On that basis, as I say, I will take the issue away. I ask my noble friend to withdraw her amendment, which would, of course—I should say for the benefit of my noble friend Lord Marlesford, who asked me to mention credit card debt—wrap up credit card debt and many other things if we can get this right.
Baroness Wheatcroft
I thank the Minister for his reply and for his willingness to at least consider this issue. Like my noble friend Lord Lawson, I do not see this as a total answer to the huge problem. However, I ask the Minister to consider whether the complacency of auditors might have been due to the fact that so little was required of them, and thus requiring rather more might be a step in the right direction. I look forward to hearing what he comes forward with and, if it is not very much, reserve the right to push this a little further. I beg leave to withdraw the amendment.
“( ) A designated consumer body may make a complaint to the PRA that a feature, or combination of features, of the market for with-profits insurance policies is, or appears to be, significantly damaging the interests of consumers.”
Baroness Hayter of Kentish Town
My Lords, in previous debates on the Bill we strongly welcomed the super-complaints process included in Clause 40. Particularly in a market such as this, it is important that independent consumer bodies, expert in intelligence-gathering and in touch with clients, can bring a complaint about something which is causing general consumer detriment.
However, it is not only the FCA which will regulate issues with the potential to cause consumer detriment. The PRA, via its role over with-profits policies and bank-lending ratios, might also be the regulator to intervene in particular cases of market failure. We are therefore asking that in such cases the super-complaint can be made to the PRA where appropriate. There are 25 million customers in this market, with some £330 billion of with-profits policies, so we are talking about significant consumer questions. The Bill transfers responsibility for these to the Prudential Regulatory Authority but without giving consumer bodies the ability to call conduct issues to account via a super- complaint. Why should the voices of consumers not be properly heard given the size of the market and the chequered history of some of those policies and, indeed, regulatory failures?
In the other place, the then Minister, Mark Hoban, agreed that,
“the super-complaints power should be wide enough to cover complaints about with-profit policies”,
although he did not agree that,
“the PRA should be designated as a recipient of the super-complaints”.—[Official Report, Commons, Financial Services Bill Committee, 15/3/12; col. 519.]
He seemed to think that such super-complaints should be taken to the FCA, even though it had no responsibility in this area. Despite reading that exchange and what he said very carefully, I do not understand how a complaint to one body could affect the regulatory actions of another, no matter how good the dialogue or the MoU between the two. Therefore, we again ask that, for with-profits insurance policies, the super-complaint should be made to the PRA.
On the amendment in the name of the noble Lord, Lord Flight, in this group, we would not want to see the FCA lose this power and are content with the way it is set out in the Bill. I beg to move.
Lord Flight
My Lords, I shall not move Amendment 189A. I am now satisfied that the powers here do not contradict or are not repeated by powers under Section 404 and that the potential arrangements of the ombudsman’s power to refer to the FCA are quite helpful. Similarly, I shall not move Amendment 189B.
Lord Newby
My Lords, this group is now slightly confusing in that more amendments will not be moved than have been moved. However, I shall do my best to speak to the one that has been moved, but if I find myself speaking to one which will not be moved, no doubt someone will tell me.
On Amendment 188A, which would enable super-complaints to be made to the PRA about the with-profits market, the Government recognise the thrust of the argument that the Bill is drafted so as to give the sole responsibility to the PRA at the moment. However, in the light of our earlier debate about “with profits”—in particular, the points raised by the noble Baroness, Lady Drake—the Government committed to giving further consideration to this matter. I can confirm that the Government intend to amend the Bill on Report to enhance the role of the FCA in “with profits” regulation, in a way that I hope will meet the noble Baroness’s concerns. We will write shortly to the noble Baroness, Lady Drake, on this point and I will of course copy the letter to interested Peers. This may be the first absolutely firm concession that we have made this evening, and I am delighted to be able to do it.
Baroness Hayter of Kentish Town
Perhaps we can suggest that the noble Lord, Lord Newby, answers all the amendments. We seem to have slightly more success with him than with his colleague on the Front Bench. Obviously, I am delighted by that assurance and we look forward to seeing exactly how the Bill will do that, but it sounds as though it will meet our aim. With that in mind, I beg leave to withdraw the amendment.
“234H Power of FCA to make request to Competition Commission
The FCA may, subject to subsection (4) of section 131 of the Enterprise Act 2002, make a reference to the Commission if the FCA has reasonable grounds for suspecting that any feature, or combination of features, of a market for financial services in the United Kingdom prevents, restricts or distorts competition in connection with the supply or acquisition of any financial services in the United Kingdom or a part of the United Kingdom.”
Baroness Hayter of Kentish Town
My Lords, I should like to know which Minister is going to respond to this—it may help.
We are pleased that the FCA now has a new competition objective and wider competition powers. However, these powers do not go far enough to enable the FCA to deliver its objectives. As the Bill stands, the FCA will still have to refer cases to the OFT, or its successor body, which will then conduct a market analysis before being able to take further action. This looks like a slow and rather unfair regulatory process, even after the merger of organisations that will take place under another Bill.
We therefore support the view of the Joint Committee that the FCA should have concurrent competition powers in respect of a market investigation reference, together with the OFT. That would empower the FCA to conduct its own economic analysis and deal with distortions in the market without the need for any delay.
We have heard a lot about the lessons learned from PPI, which highlight the need for the FCA to have the market investigation reference powers. In 2005, the FSA signalled its concerns about the PPI market and began an investigation. After the investigation, the FSA took its concerns to the OFT, which had to look at the issues before passing the case on to the Competition Commission. Eventually the Competition Commission passed the issue back to the FSA. The process took far longer than necessary and allowed the banks and other credit providers to continue selling PPI to their unsuspecting customers.
Giving the FCA concurrent MIR powers would allow the FCA to escalate concerns about competition failures quickly and efficiently, with any failures addressed before consumer detriment crystallised. By giving the FCA powers equivalent to the OFT under Section 131 of the Enterprise Act 2002, a single organisation would be able to tackle significant market issues such as PPI without the substantial delay through referral to another body. We therefore seek to amend the Bill accordingly and I beg to move.
Lord Whitty
My Lords, since my noble friend is a bit lonely on the Front Bench just now, I intervene very briefly to support her on this. Quite often in regulatory structures the sector regulator is very nervous of referring anything to the competition authorities because it regards that as part of its failure. Under the terms of this amendment, it would be part of the process that was available—I will not say normally, but if necessary—to the FCA to refer things to the competition authority, having itself examined the structure of the market with its concurrent powers.
I am very mindful of an equivalent sector—namely, energy—where one of the problems has been that Ofgem has always refused in effect to refer the structure of the energy market to the competition authorities, even though, I happen to know, at the time the competition authorities or the members of the Competition Commission were very anxious to look at it. We might have to change the form of words slightly but I think this is the better formulation—that the FCA has concurrent powers but that it is not seen as a complete departure for a case to be referred to the competition authorities themselves and that the process is not prolonged.
Lord Sassoon
My Lords, I can see that the noble Baroness is delighted that I am on my feet. I listened to the very clear and detailed arguments that the noble Baroness, Lady Drake, gave in an earlier session, to which we have come back today. I may not always respond there and then but I listen very carefully to everything that is said. However, I do not want to raise the expectations of the noble Baroness on this one.
This amendment seeks, as we have heard, to give the FCA a power to make a market investigation reference to the Competition Commission. I am sure that the Committee is aware that the Joint Committee that scrutinised the draft Bill recommended that the FCA should be given concurrent market investigation reference powers. However, noble Lords will also be aware that the Treasury Select Committee, in its report on the FCA, concluded that the case for the FCA to have market investigation reference powers has not yet been made, and that the issue should be reviewed when the FCA has bedded into its new role.
Having considered the matter very carefully, the Government have adopted the proposal of the Treasury Select Committee. The FCA’s competition objective will require it to keep the markets it regulates under review and it may of course perform its own competition analyses as part of that. The evidence-gathering and analysis carried out by the FCA will support any subsequent intervention by the OFT. For example, on a referral from the FCA, the OFT may have sufficient evidence to launch a market investigation reference almost immediately. There is precedent for this in the OFT’s response to the report of the House of Lords Economic Affairs Committee on the audit market. In the light of the evidence collected by the committee, the OFT felt able to consult on a reference to the Competition Commission without conducting its own market study.
As the Government have made clear in their response to the Treasury Select Committee, we will review the question of the FCA competition powers when it has bedded in to its new role, five years after it comes into being. I hope that with that reassurance, and confirmation that we are following the Treasury Select Committee’s recommendation, the noble Baroness will feel able to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I thank my noble friend Lord Whitty for his support for the amendment. His experience in this field is much greater than mine. I am surprised by the Government’s lack of interest in the relationship between the OFT and the FCA, given its new competition powers. In an earlier debate, the Government would not even agree to an MoU between the FCA and the OFT. I am pleased that the Government will keep the matter under review and therefore accept that there are some issues here. Part of the concern is that, with the merger under the other Bill of the OFT with the Competition Commission, those organisations, as all organisations are when they get together, will be tied up with working that out just at a moment when the FCA has these new competition powers and perhaps would like to use them in the way described. I beg leave to withdraw the amendment.
Lord Whitty
“Collective proceedings234J Collective proceedings and collective redress
(1) In respect of claims to the courts covering a significant number of consumers with equivalent or near equivalent interests or complaints, the following procedures will apply.
(2) The court may, on the application of a person (“the representative”), by order authorise the representative to bring collective proceedings before the court in respect of financial services claims of a kind specified in the order.
(3) “Collective proceedings” means proceedings brought by the representative on behalf of persons who are entitled to bring (or have brought) proceedings in respect of the specified kind of claim.
(4) “Collective proceedings order” means an order under subsection (2).
(5) A collective proceedings order may be made only if it appears to the court that the specified kind of claims raise the same, similar or related issues of fact or law.
(6) A person may be authorised under subsection (2) to bring proceedings even if the person would not otherwise be regarded as having any interest, or any sufficient interest, in the proceedings.
(7) Proceedings may be authorised under subsection (2) even if each represented person does not have a claim of the specified kind against all of the defendants to the proceedings.”
Lord Whitty
My Lords, I shall also refer to Amendment 189BB. Both amendments make up two pages of amendment to an already massive Bill, but the text should be familiar to some of the Minister’s officials in the Treasury, for reasons that I shall explain in a moment.
The Bill, by way of a pretty radical restructuring of the regulation of the financial services, greatly enhances the power of the Bank of England. One hopes that it will greatly enhance the consumer protection power of an FCA replacing a relatively feeble FSA. It enhances some consumer powers, and it arguably also enhances the role of the consumer panel and the financial services ombudsman, but it does nothing to enhance the position and powers of consumers.
The amendments suggest that we should move to a system of collective redress when the misdemeanour, or illegality sometimes, of the financial institutions involves a large number of people. The amendments would provide for the Secretary of State for the Treasury to come forward with regulations allowing for collective redress procedures.
We have had a number of such issues over the years, from mis-selling through to PPI, which has been debated substantially today and during other consideration of this Bill. Those issues involve a range of problems and a very large number of people. We know that the inability of individual consumers to get redress is difficult. We know that it also creates the kind of confusion to which my noble friend Lord Kennedy of Southwark referred just now, with intervening bodies and claims management companies confusing rather than enhancing the position for the individual consumer. Whether tens or thousands of people are involved, a more collective approach would sometimes be desirable. The PPI scandal, for example, could probably have been largely resolved by now for the vast majority of potential claimants. Instead, we are getting a “fishing trip” from the CMCs, and a huge number of claims will take years to settle and involve the banks, the intermediary companies and the courts in time, effort and cost.
The issue of collective redress in consumer matters has a considerable history. It is true that all consumer bodies have agitated under successive Governments to provide for a general system. The last Government and previous Governments were resistant to a general power. However, in the wake of the financial collapse and financial scandals, it was recognised by the last Government and many around this issue that some provision was necessary on the financial side. Indeed, the Bill that was produced in 2009-10, which became the Financial Services Act, included in its original form whole sections on collective redress—Clauses 20 and onwards of that Bill. They were considered in part very briefly by the House of Commons. They were not rejected by that House; there was actually support for those provisions at Second Reading from those on all Benches. Of course, they ended up being dropped by the advent of the general election in 2010 and the rather peculiar Byzantine proceedings that we call in constitutional jargon “wash-up”, and disappeared. I particularly objected to them disappearing, but by then it was too late.
Baroness Hayter of Kentish Town
My Lords, in addition to all the comments made by my noble friend Lord Whitty, which we obviously support, I would like to speak for a few moments to Amendment 189BC, which stands in my name. Had that been in place, it would also have provided a route for small firms that were sold totally unsuitable interest rate swaps to have reached a speedy cross-industry solution.
The committee will know that many SMEs took out loan agreements, having been told that they also needed to take out an interest rate swap. Those SMEs, usually with no professional legal or accountancy staff, are sitting targets for financial services companies out to make a fast buck. They need the protection that this amendment could provide. I hope that the Minister will accept it, or a suitable alternative, to ensure that small and medium-sized companies, on whom we all depend to kick start our economy, get easy access to complaint resolution where their interests are damaged.
The amendment would give small firms the ability to complain and bring proceedings—court proceedings if necessary—to ensure that they could get proper adjudication on whether they were indeed mis-sold a particular product. As we have heard, the amendment would require the Government to introduce proposals within three months of Royal Assent to make it easier for groups of small firms to bring collective proceedings before the courts in respect of financial services claims, with the right to opt out for companies not wanting to be party to the outcome of the cases.
The amendment would also empower SMEs to complain to the regulators and to give their representative bodies the right to complain about market failures to the FCA, in the same way in which individual consumers can.
There is a gap in the legislation for small firms wanting to make complaints in their role as consumers of financial products. A case can be made for the representative bodies of small firms being able to take civil complaints. On 22 May this year, the Minister in the Commons, Mr Hoban, said that,
“the provisions in the Bill will not prevent bodies representing small and medium-sized enterprises which fit the relevant definition of consumers from making super-complaints”.
We therefore seek clarity in the Bill to that effect through the amendment.
Mr Hoban also said that:
“what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill.”—[Official Report, Commons, 15/10/12; col. 1031.]
He announced that the Treasury would publish draft criteria “later in the year”.
I might have missed it, but it is now later in the year and I think it is yet to appear. Perhaps the Minister could provide those further details.
Lord Newby
The Government believe that collective proceedings, in the appropriate circumstances, can deliver access to redress and a potential deterrent effect. That is why the Government have been consulting on a range of proposals to make it easier for consumers and small businesses to bring private actions in competition law—including whether to extend to businesses the current right of consumers to bring a collective action following a breach of competition law, and whether to make it easier to bring such actions. The Government are considering the consultation responses and hope to publish their response before the end of the year. We want to take the opportunity to learn from the outcome of that consultation and reflect on the implications for the financial services sector before proceeding to legislation.
The noble Baroness may say that her amendment would provide adequate time for consultation. However, her amendment specifies that small businesses should be able to bring collective proceedings on an opt-out basis. The type of persons who might bring collective actions, whether on an opt-in or opt-out basis, are substantive questions on which BIS has been consulting. We think that it is a lot better to await the outcome of the BIS consultation and reflect on the implications for financial services than to seek to pre-empt that process and require a particular model now. If the Government were to conclude from this exercise that it would be appropriate to bring forward legislation on collective proceedings for the financial services sector, any proposals should then be subject to proper consultation.
As an addendum to the second part of Amendment 189BC, I note that the Bill would not prevent bodies representing small and medium-sized enterprises that fit the relevant definition of “consumers” from making super-complaints. As was explained in another place, the issue of what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill.
We have considered this matter carefully, and I can inform the House that the consultation document that the Government will shortly publish covering this issue will include the proposal that the Treasury should be able to designate bodies that primarily represent the interests of small to medium-sized enterprises as super-complainants and that this will be reflected in the draft criteria.
I hope that, with the reassurance that the Government will consider proposals on collective proceedings carefully and that they will shortly consult on allowing SME representatives to make super-complaints, the noble Lord and the noble Baroness will feel able to withdraw their amendments.
Lord Whitty
My Lords, I was aware and was of course pleased that BIS is once again consulting on this issue. Given the way in which these amendments are framed, the Bill would simply say that the Treasury had the power to bring forward regulations for collective procedures and collective redress on an opt-in or opt-out basis. They do not specify more than that. They do not, unlike my noble friend’s amendment, actually specify a timescale. Having this in this Act would therefore allow the considerations arising from the more general consultation to be tailored to the financial services arrangements without any new primary legislation. I would therefore have thought the Minister would welcome that.
In the discussions in the run-up to the Financial Services Bill in 2010—noble Lords do not often hear me say this—the Treasury was much more progressive on these issues than was BIS. Of course, we are under new management now and maybe that has changed. There are some very special situations in the financial services sector, and we do not want to wait for another PPI, another pension mis-selling, another sub-prime mortgage crisis or whatever where we have to construct from scratch a new system to protect consumers, both business and individual.
These amendments would allow the Minister to do that, after the general consultation if necessary, so I do not accept the argument that we have to wait for that consultation before they are included here. It is clear to me and, I think, to a lot of people that the financial sector needs such provisions, and I would not like to be in a position 18 months down the line where we had to go back to a new form of primary legislation in order to provide them. I therefore advise the Minister to have another look at these amendments, but for the moment I shall withdraw my amendment.
Lord Sassoon
“(1A) In subsections (1), (2) and (6), after “authorised person” insert “or recognised investment exchange”.”
(b) in paragraph (a), after “authorised person” insert “or recognised investment exchange”.”
(b) in paragraph (a), after “authorised person” insert “or recognised investment exchange”.”
“(1A) In subsection (1)(a), after “authorised person” insert “or recognised investment exchange”.”
“(1A) In subsection (1)(b), after “authorised person” insert “or recognised investment exchange”.”
(b) in paragraph (a), after “authorised person” insert “or recognised investment exchange”.”
(b) in paragraph (a), after “authorised person” insert “or recognised investment exchange”.”
Lord Sassoon
“In paragraph 3 (status), in sub-paragraph (2), omit “board members,”.”
Baroness Noakes
“Omit paragraph 5.”
Baroness Noakes
Like the noble Lord, Lord Whitty, I, too, am fighting one of the battles left over from the Financial Services Act of 2010. As the Committee will find out, mine is a very much more modest affair.
I shall move Amendment 190, which is a probing amendment to Schedule 15 to this Bill. This schedule makes a number of amendments to the law governing the consumer financial education body which likes to go by the name of Money Advice Service. This body was created by the 2010 Act. As noble Lords who were involved in that Bill will be aware, it received little detailed scrutiny in your Lordships’ House and was eventually passed into law, as the noble Lord, Lord Whitty, said, under the wash-up procedure and the Bill ended up in somewhat truncated form. The provisions relating to Money Advice Service received no scrutiny whatever in your Lordships’ House. My noble friends and I had tabled 40 amendments at the time, all of which went undebated. I said when we did the final wash-up procedure that I hoped that if we formed the Government after the general election, we would revisit these remaining unsatisfactory aspects of Money Advice Service. Of course, other more pressing issues faced the Government in 2010 and going back over legislation creating minor public bodies was clearly never going to be a priority. However, as we have the opportunity of this Bill before us, I have decided to raise just one of the 40 issues that I wished to explore in April 2010.
Lord Newby
My Lords, I hope that I can reassure my noble friend. As she says, this amendment removes the provision that specifically aims to allow organisations that wish to act on Money Advice Service’s behalf to do so, even if there is otherwise a limitation on their ability to do this. This is to enable bodies such as charities, credit unions or friendly societies to work with MAS without constraints imposed by, for example, tightly specified charitable objectives. This provision, as my noble friend pointed out, was inserted into FiSMA by the Financial Services Act 2010. I vaguely remember her tabling amendments on that point when the Bill that became that Act was being considered by this House but, as she said, there was insufficient time to debate them during the wash-up.
I think that I can put my noble friend’s mind at rest relatively straightforwardly: there is a direct precedent for what is being proposed here in relation to the National Lottery. National Lottery distributors encountered similar difficulties working with particular bodies whose constitution was narrowly drawn. Accordingly, amendment was made to the National Lottery Act 1993, in Section 25A, to permit charities and similar bodies to act on behalf of the distributor. A similar provision was included in paragraph 7 of Schedule 3 to the Dormant Bank and Building Society Accounts Act 2008. An example of the circumstances in which such a power might be used is where a charity’s objects may be wholly in sympathy with Money Advice Service’s objectives, but when read narrowly the objects are narrower than a particular project on which Money Advice Service wishes to work with the body. This provision lifts that constraint and, given the active interest of a large number of charities in the financial capability agenda, I hope that the noble Baroness would not wish such organisations to be prevented from working with Money Advice Service in future. Having received this explanation, I hope that my noble friend will feel able to withdraw the amendment.
Baroness Noakes
My Lords, that explanation has left me as concerned as I was to begin with. While his examples seek some sort of plausible minor extension of a body’s activities, paragraph 5 is not confined to minor changes to a body’s constitution and it is not confined even to charities whose objectives are related to those of Money Advice Service. It is very broad indeed and would apply under a very much broader basis, including to a large number of bodies set up by statute. I shall consider carefully what my noble friend has said and look at the precedents that he has offered as justification for this, but I have to say that I am not entirely happy with his explanation. I beg leave to withdraw.
“( ) making provision for the increased diversity of the financial services sector and promotion of mutual societies, including arrangements to measure the number of members of mutual societies, and the market share for mutual societies as a proportion of the UK financial services sector.”
Lord Stevenson of Balmacara
My Lords, I shall speak also to Amendments 190ZZB, 190ZZC and 190ZCA. Mutual and building societies and the friendly society sector have played an important part in the organisation of savings and investments and the provision of credit in this country for centuries. Their existence, against all the odds on some occasions, has sometimes been a close-run thing and their constitutions and management structures are redolent of an earlier age of prudence and sobriety in financial matters. Many people regret that we do not do more to support this sector. There have been reports and initiatives aplenty in recent years, but not too much action. I am sure that all noble Lords will share our concern that the Bill should not disadvantage these important organisations.
Our amendments therefore have three purposes. The first is to invite the Minister to update us on the question raised in another place about the need to modernise the register of these bodies. As was indicated during the Committee stage debates, credit must be given to the FSA for bringing the registry out of the 19th century and into its present form, but unlike Companies House, where all filings can be done online, at the Registry of Friendly Societies, located at the FSA, it still takes 48 hours to get a search of certain records of a mutual society. In comparison, a search at Companies House is a simple process which takes minutes, if not seconds. Mutual societies deserve a modern registry which can support and promote the mutual society model. The amendments would provide for any function of the FSA in respect of the Registry of Friendly Societies to be transferred to a register established at Companies House, though, of course, we would be happy if the location of the registry could be unchanged. If the Minister could confirm that a modern registry can be established within the FCA, that would satisfy us.
Secondly, this part of the Bill empowers the Treasury to amend by order legislation on mutual societies for a number of different purposes. When this was raised in the other place the issue seemed to be whether the FCA and PRA responsibilities for the functions that we are discussing are broadly the same as those for the plc sector and that there are no anomalies for the mutual sector as opposed to the non-mutual sector. Unfortunately, it is not clear from Hansard whether the Minister was able to clarify whether or not this was the case, so it might be useful if the Minister could outline how the clause affects the mutual sector and confirm that it is simply a technical matter with no new provisions.
Thirdly, Clause 47 introduces provisions for credit unions in Northern Ireland. Credit unions play a very important part in the organisation of savings and the provision of credit in the Province. As I am sure the Minister is aware, some attention was paid to this issue when the matter was debated in Committee in the other place. Subsection (2)(g) lists the Credits Unions (Northern Ireland) Order 1985 as legislation that the Treasury may amend by order. As was raised in the other place, the 1985 order is specifically included in the Northern Ireland Act 1998, established by the Good Friday agreement. Again, therefore, it would be helpful if the Minister could clarify the general position, particularly that subsection (4) is purely an enabling provision that will allow the transfer of functions on an agreed and acceptable basis and will not automatically dictate such.
I take this opportunity to invite the Minister to update us on the outcome of the consultation on the draft mutuals order, and particularly on whether it has now been agreed which matters will go to which body. The Minister will recall that the draft mutuals order talked about transfers to the FCA or the PRA as though the question of which regulator will actually step in at which moment had been left as a rather grey area. As was said when this issue was discussed in another place, surely that ambivalence suggests uncertainty as to what will happen in future, at a time when we should be encouraging the sector to have confidence and to grow. It also seems to run contrary to the commitment on page 9 of the coalition agreement, which states that the Government,
“will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry”.
Given that we are talking about transferring responsibilities between regulators, which regulator will be the champion for the mutuals model; who will actively encourage the benefits that can flow from a non-plc corporate form; and will either of the regulators have any responsibilities for such matters or none? I beg to move.
Lord Sassoon
My Lords, the draft mutuals order has been published this evening. My officials will send the noble Lord a link to it in the morning so he can be completely up to date. That cuts through that point: the draft order confirms that the Government are moving steadily ahead with lots of action, and I will briefly remind the Committee of some of it. The order is the next thing that is due to make progress in the Government’s important objective of promoting diversity. As we have discussed before, the important thing, as the noble Lord said, is that we want a level playing field. The Government do not see this Bill as the vehicle through which to promote particular sectors of the financial services industry—I think that the noble Lord understands that—but I will sketch out some of the other things that we are doing.
To reassure the Committee why in my view Amendment 190ZZA is not necessary, the Government have demonstrated a clear commitment to promote mutuality and to diversify and strengthen the mutual sector. We are taking action to give concrete effect to this commitment, including the new requirement in the Bill for the regulators to analyse the impact of proposed rules on mutuals and building societies, so helping with the local level playing field; the protection given to members of Northern Ireland’s credit unions; and legislation to reduce restrictions on the growth of credit unions. The Government are committed to ensuring that building societies continue to operate on a level playing field with banks while maintaining their unique identity—for example, in the draft Banking Reform Bill published last week, we proposed to exempt building societies entirely from the definition of a ring-fenced bank, although changes will be made to the Building Societies Act 1986 to bring it into line with the ring-fencing provisions of the draft Bill, which was the proposal supported by most respondents.
Lord Stevenson of Balmacara
I thank the Minister very much for his detailed explanation, particularly of the government amendments. I should like to make two points about level playing fields since that was the recurring theme. If there is a level playing field in terms of the generality of the mutual sector—I include in that the provident societies and friendly societies—there is still a problem which the Government have caused. An aspiration of the coalition agreement is that more support should be given to mutuals, yet we are saying that there must be a level playing field. I think that we would also accept that it is not the job of the regulator to pick and choose between them. I just leave on the table the thought that perhaps the Government might think again about how they proselytize for a sector in which they clearly believe. We all think that it does a good job, yet we are going to leave it to suffer the scourges of competition from whomever it is and from every quarter of the globe, which seems a little unfair. Perhaps that can be thought about again.
On upgrading the many years of records of friendly societies going back many centuries, many of them are probably on velum and therefore very difficult to transfer, which I understand. Again, it seems a little unfair that this cannot be given a little bit of priority. The Committee debates in the other place were redolent of support for this idea. Clearly, progress is being made, which we welcome. New listings and registrations will be online and therefore available. On those bases, I think that the level playing field is sufficient and we will just have to wait for that to come through. With that, I beg leave to withdraw the amendment.
Lord Sassoon
Lord Sassoon
“Power to apply or disapply provision made by or under FSMA 2000
(1) The Treasury may by order provide—
(a) for any relevant provision that would not otherwise apply in relation to transferred functions to apply in relation to those functions with such modifications as may be specified;(b) for any relevant provision that would otherwise apply in relation to transferred functions not to apply in relation to them or to apply with such modifications as may be specified.(2) “Relevant provision” means a provision of, or made under, FSMA 2000.
(3) “Transferred function” means a function that has been or is being transferred by an order under section 47; and section 48(4) applies for the purpose of this subsection.”