House of Commons

Wednesday 24th October 2012 Commons Chamber

Wednesday 24 October 2012

The House met at half-past Eleven o’clock

Prayers

Wednesday 24th October 2012 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 24th October 2012 Commons Chamber

The Secretary of State was asked—

[Pat Glass (North West Durham) (Lab)]

1. What recent assessment she has made of the security situation in Northern Ireland; and if she will make a statement.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The threat level in Northern Ireland remains at “severe”. Excellent work and co-operation between the Police Service of Northern Ireland and its partners has put those involved in terrorism under huge pressure. We continue to be vigilant in our efforts to counter the threat posed by those groupings, whose activities are condemned by the vast majority of the people of Northern Ireland.

[Pat Glass]

I welcome the Secretary of State to her position. Security sources tell us that paramilitary involvement was evident in the public disorder around the disputed parades this summer. What is her assessment of loyalist paramilitary involvement in the riots seen in Belfast in July and August?

[Mrs Villiers]

I thank the hon. Lady for her question and for her congratulations. I pay tribute to my predecessor, the Secretary of State for Environment, Food and Rural Affairs, the right hon. Member for North Shropshire (Mr Paterson), for all the work that he did for Northern Ireland. I also take this opportunity to reflect on the contribution that Sir Stuart Bell made to Northern Ireland as a Front-Bench spokesman. He was a great Member of this House and will be much missed.

In response to the hon. Lady’s question on public disorder, it was deeply regrettable that we saw scenes on our television screens a few weeks ago that many had started to associate with Northern Ireland’s past. The Police Service of Northern Ireland is determined to ensure that those scenes are dealt with, and we are doing everything that we can to support its efforts to crack down on paramilitaries and on rioting of the disgraceful sort that we saw in September.

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

Will my right hon. Friend assure the House that every measure will be taken to prevent the so-called new IRA from destabilising the political process?

[Mrs Villiers]

I can give my hon. Friend the assurance that he wants. A huge amount of effort is being put in by the Police Service of Northern Ireland and its partners. I also commend the contribution of the Garda Siochana in the efforts to counter terrorism. We are determined to defeat the threat of people who continue to have lethal intent and will do everything that we can to prevent them from achieving their aims.

[Mr Nigel Dodds (Belfast North) (DUP)]

I, too, welcome the Secretary of State to her position, and indeed the Minister of State. I wish them well in their new responsibilities.

The Secretary of State will know that the Home Secretary announced this morning that the threat level from dissident republicans on the mainland has been reduced from “substantial” to “moderate”. Does she share the concern of many people that such an announcement may be premature and somewhat counter-productive? Will she assure the House, given the recent experience of intelligence-level reports, that there will be no reduction in security and no complacency on the part of the security forces?

[Mrs Villiers]

I can give the right hon. Gentleman that assurance. We will continue to be vigilant in the face of the continuing threat of Northern Ireland-related terrorism. He will appreciate that the change announced today relates to Great Britain, as he said. The threat level in Northern Ireland remains at “severe”. In both Great Britain and Northern Ireland, the Government are focused on defeating terrorism and we will use all the means at our disposal to do that.

[Mr Dodds]

I thank the Secretary of State. She referred to the situation in Northern Ireland and said that the threat level remains at “severe”. In the light of that, has she had discussions with the Chief Constable about the threat level from dissident republicans? Will she look positively on any request from the Chief Constable to extend the Treasury reserve funding of £200 million, which was announced in 2010, to help the PSNI deal with the terrorist threat in Northern Ireland?

[Mrs Villiers]

I had the opportunity to discuss those matters with the Chief Constable in some detail yesterday. The right hon. Gentleman is right to refer to the importance of the £200 million of additional funding, which is devoted to countering the terrorist threat in Northern Ireland. We will certainly have discussions with the Chief Constable and the Treasury on what might occur after the cessation of that £200 million of funding.

[Lady Hermon (North Down) (Ind)]

I, too, welcome the right hon. Lady and her colleague to the Northern Ireland Office. I am quite sure that they will enjoy their posting to the mainland in Northern Ireland. Now on to my question—and it is a serious one.

Given that two very brave, young British soldiers were murdered by dissident republicans at Massereene barracks in March 2009 and that, since then, we have lost several of our soldiers in Afghanistan who grew up in Northern Ireland, will the right hon. Lady confirm exactly when her colleague, the Secretary of State for Defence, will visit Northern Ireland, not to tell the troops that they are to be made redundant, but to boost their morale, beginning with Palace barracks in my constituency of North Down?

[Mrs Villiers]

I am grateful for the hon. Lady’s question, and I will certainly pass on her request to the Secretary of State for Defence. I understand that a Minister of State at the Ministry of Defence is due to visit Northern Ireland fairly soon.

[Vernon Coaker (Gedling) (Lab)]

May I begin by paying tribute to my colleague Sir Stuart Bell? He served as a Front-Bench Northern Ireland spokesman and retained a deep affection and concern for the place throughout his time in the House.

I wish the previous Secretary of State well in his new post and welcome the new Secretary of State to her place. I want to work with her constructively and in a bipartisan way, particularly on issues relating to security.

This morning, the Home Office reduced the threat to Great Britain from Northern Ireland-related terrorism, but the threat in Northern Ireland itself remains “severe”. Will the Secretary of State assure the House and the people of Northern Ireland that there will be no downgrading of the Government’s commitment to combat terrorism anywhere in the United Kingdom?

[Mrs Villiers]

Yes, I can give the hon. Gentleman that assurance. The change to the threat level does not affect our commitment to bearing down hard on the small minority of people who still seek to use violence and terrorism as a means to achieve political ends.

[Vernon Coaker]

I thank the Secretary of State for her reply. Does she agree that we need to confront those who want to destroy peace at both the security and a community level, and that we should not take for granted the progress that has been made?

Young people in socially and economically deprived areas are vulnerable to exploitation by paramilitaries. With one in four out of work, what is the Secretary of State doing to tackle unemployment and ensure that Northern Ireland’s young people get the better future that they were promised and deserve?

[Mrs Villiers]

I welcome the bipartisan approach that the hon. Gentleman wishes to pursue. It is of course vital that we bear down on terrorism using a range of strategies. We have already discussed the £200 million of additional funding that the Government have devoted to countering the security threat and keeping people in Northern Ireland safe and secure. We are doing all we can to boost the economy with our programme to repair the public finances and reduce the deficit. We are reducing corporation tax across the United Kingdom to enhance the attractiveness of the UK as a destination for inward investment, and we are providing tax reliefs for the creative industries, including high-end television. We are determined that Northern Ireland will remain a great place in which to do business.

[David Rutley (Macclesfield) (Con)]

2. What recent discussions she has had with Ministers in the Northern Ireland Executive on economic development.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

My hon. Friend the Minister of State and I have met the First Minister and Deputy First Minister and a number of their colleagues, and we have renewed the Government’s commitment to supporting their efforts to promote economic development and help rebuild and rebalance the economy.

[David Rutley]

My right hon. Friend will be aware that the Financial Times recently described Belfast as the top destination globally for investing in financial services technology. Does she agree that when it comes to attracting and encouraging foreign direct investment, Northern Ireland has a great deal to offer potential investors?

[Mrs Villiers]

It has indeed, and I had the honour of discussing these matters in a meeting in the city only recently. Northern Ireland has seen some striking success stories, such as the investment by Citigroup and the New York Stock Exchange. I praise the role of the universities in Northern Ireland, which have engaged with business, particularly in the financial services technology sector. That is an incredibly important industry for the UK as a whole, and it is a matter of real credit to Northern Ireland that it has successfully obtained so many inward investment jobs in the financial sector.

[Ms Margaret Ritchie (South Down) (SDLP)]

I welcome the Secretary of State and her ministerial colleague to their positions.

I understand that in the negotiations on corporation tax, the point at issue is not one of principle but one of cost, with one side estimating the cost to the Northern Ireland block at £300 million and the other estimating it as being in the region of £420 million. What is the Secretary of State’s understanding of that? If the latter is the case, how does she intend to suggest that the gap be met in discussions with the Treasury, and what will her advice to the Prime Minister be?

[Mrs Villiers]

Real progress has been made on the issue. The working group on corporation tax concluded on Thursday, and we are now proceeding to write up our findings and will report them to the Prime Minister in due course. We have an idea of how devolved corporation tax might work in a way that would not impose unnecessary administrative burdens on business. The hon. Lady is right that there are still important practical issues to resolve and alternatives to consider, and we will continue to work on those matters.

[Stephen Lloyd (Eastbourne) (LD)]

I, too, welcome the Secretary of State and her ministerial colleague to their new positions.

When it comes to economic development, the Secretary of State will know that about 70% of employment in Northern Ireland is in the public sector. What will she do to grow the private sector? I hope she will work closely with bodies such as the Northern Ireland Federation of Small Businesses.

[Mrs Villiers]

I am very happy to work with all business bodies in Northern Ireland, and they do a great job in representing Northern Ireland. Much has already been done to enhance the competitiveness of Northern Ireland—in particular with the boost for superfast broadband—and Belfast is due to become one of the UK’s first 10 super-connected cities. The United Kingdom Government took the decision to devolve long-haul air passenger duty to conserve vital transatlantic flights, and we are working hard to attract inward investment. It is important to use the UK’s network of embassies around the world to promote the whole of the United Kingdom, including Northern Ireland, as a great place in which to do business.

[David Simpson (Upper Bann) (DUP)]

What support will the Secretary of State give to Northern Ireland when it comes to negotiations with the EU on regional aid?

[Mrs Villiers]

I had the privilege of meeting Arlene Foster to discuss that matter last week. We decided that we would work together to make representations to Brussels on assisted-area status in Northern Ireland, and together we will make the case for Northern Ireland.

[Rosie Cooper (West Lancashire) (Lab)]

3. What progress she has made on implementing the recommendations of the Northern Ireland Affairs Committee’s third report of session 2010-12 on Fuel Laundering and Smuggling in Northern Ireland, HC 1504.

[The Minister of State, Northern Ireland Office (Mike Penning)]

May I, too, pay tribute to Sir Stuart Bell? He served as shadow Northern Ireland Minister and served his country in many different roles. He will be a sad loss to us all.

Fuel fraud is primarily an excise offence and a matter for Her Majesty’s Revenue and Customs, which works closely with the Northern Ireland Department of Justice and its counterparts, including the Northern Ireland Office. I welcome the report by the Northern Ireland Affairs Committee. It was very useful, and many of the issues and recommendations it contains will be taken forward. Fuel fraud is taken very seriously and remains a high priority.

[Rosie Cooper]

Following the memorandum of understanding signed by HMRC and Irish revenue commissioners, will the Minister say what progress has been made on putting in place a single tender procedure for the marker for rebated diesel, and will he assure the House that there will be no slippage on the agreed timetable?

[Mike Penning]

Work continues on that agreement, and there is no doubt that dealing with fuel fraud, as well as with tobacco smuggling, is a top priority for the Government in the Province. We know that money from things such as fuel smuggling gets into the wrong hands and jeopardises the peace that we are all looking for.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I welcome the Secretary of State and the Minister to their positions.

One recommendation in the report by the Northern Ireland Affairs Committee was that sentences for such crimes in Northern Ireland should be strengthened because they are far weaker than those in Great Britain. Will the Minister do all he can to help bring about those stronger sentences recommended by the Committee?

[Mike Penning]

I met the Minister for Justice in the Northern Ireland Assembly, and we will work together to ensure that the punishment fits the crime. As I said earlier, money made from such crimes often goes to the wrong areas, and we are looking forward to ensuring that it does not.

[Ian Paisley (North Antrim) (DUP)]

I add my voice of congratulation to the Secretary of State; I know that the people of Northern Ireland wish her and her colleague well in their new roles.

A recent HMRC report on measuring tax gaps revealed that fuel smuggling over the past year has increased from involving 12% of all diesel sold in Northern Ireland to 25%—a staggering increase. Does the Minister agree that HMRC must be encouraged to find a measure that will allow it to mark properly fuel in Northern Ireland, so that it cannot be stripped of its mark and sold as counterfeit?

[Mike Penning]

This sort of technical work is being looked at carefully, and one element that will help enormously is the lorry road user charging legislation that the Government started to bring forward yesterday. That will create a more level playing field for all hauliers—those who are hit hardest by this problem—across the entire United Kingdom including, quite rightly, in Northern Ireland.

[Ian Lucas (Wrexham) (Lab)]

4. What assessment she has made of the effect of the Government’s economic policies in Northern Ireland.

[Chris Ruane (Vale of Clwyd) (Lab)]

6. What assessment she has made of the effect of the Government’s economic policies in Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The Government’s priority is to return the UK economy to sustainable, balanced growth. To achieve that we are tackling the deficit and creating the conditions for private sector investment and growth. Such investment and growth is critically needed to rebalance the Northern Ireland economy, and we shall work in close partnership with the Northern Ireland Executive to achieve it.

[Ian Lucas]

I welcome the Secretary of State to her position. Will she reassure the people of Northern Ireland that none of the £40 million that the Government have admitted they wasted on the west coast main line franchise fiasco will come out of the budget of her new Department?

[Mrs Villiers]

I assure the hon. Gentleman that the Government are determined to rebalance the economy in Northern Ireland. I noticed that, under Labour, the Northern Ireland economy became more dependent on public spending. The west coast incident has no impact on Northern Ireland—I am happy to assure him of that.

[Chris Ruane]

I welcome the right hon. Lady to her new position as Secretary of State for Northern Ireland and thank her for her contribution to the British-Irish Parliamentary Assembly, which she visited on Monday.

Less consensually, the chief economist of the Northern Bank last week said:

“Ed Balls and Vernon Coaker were correct this week in asserting that Northern Ireland requires strong growth initiatives now, not later. As well as government investment on infrastructure, Northern Ireland needs demand stimulating policies such a VAT reduction and tax breaks for local companies taking on more workers. These are the initiatives that are needed to create jobs”.

Does the Secretary of State agree?

[Mrs Villiers]

When the shadow Chancellor finally got round to visiting Northern Ireland, all he came up with was more tax, more borrowing and more spending. The reality is that that is all Labour has to offer in its economic policy. All hon. Members know that we cannot borrow our way out of a debt crisis. The problems in Northern Ireland and across the UK are to a large extent caused by the significant deficit left to this country by the Labour party.

[Jim Shannon (Strangford) (DUP)]

Last year, Facebook paid £280,000 on tax on UK earnings of £20.4 million, because most of the moneys were transferred and paid through its base in Dublin. Does the Secretary of State agree that Facebook would have paid a substantial amount to the Treasury if it had paid corporation tax in Northern Ireland, and, more importantly, that that would have boosted the Northern Ireland economy?

[Mrs Villiers]

It is important that all companies pay their fair share of tax. HMRC has devoted very significant resources to cracking down on tax evasion and artificial tax avoidance. The Government are devoting more effort and energy to that task than any previous Government, and we will continue to do so.

[Mr James Gray (North Wiltshire) (Con)]

Does the Secretary of State agree that one of the great drawbacks in Northern Ireland, as elsewhere, on job-producing economic initiatives is the dead hand of the planning system? What steps will she take to seek to encourage the Northern Ireland Executive to hasten the planning system, particularly with regard to large-scale projects?

[Mrs Villiers]

I agree with my hon. Friend that reforming the planning system is vital to ensuring that a country is a good place in which to do business. He will appreciate that planning is a devolved matter for the Northern Ireland Executive. I very much welcome the Executive’s work on seeing whether the planning system can be reformed to make it more effective and efficient.

[Mark Durkan (Foyle) (SDLP)]

May I join the compliments of the occasion to the ministerial team and add to the tributes to Sir Stuart Bell?

The Secretary of State seized on concerns about current banking and business in Northern Ireland, but is she focusing on the future business of banking in Northern Ireland and the implications that arise from UK legislation, such as financial services and banking reform measures, and the shake-up in the Irish banks and moves towards banking union, which has severe implications for our economy?

[Mrs Villiers]

The hon. Gentleman is absolutely right. Clearly, Northern Ireland was perhaps more impacted by the property crash and banking crash than many other parts of the UK because of its links with the Republic of Ireland economy. The hangover of negative equity is a serious problem, which is why it is essential that we work to ensure that Northern Ireland gets the most it can out of the recently announced funding for lending scheme to get much-needed business credit flowing back to business.

[Mr Speaker]

I feel sure we will have a textbook example of brevity from the right hon. Member for Neath (Mr Hain).

[Mr Peter Hain (Neath) (Lab)]

I congratulate the Secretary of State on assuming her post. May I probe her on the link between security and her economic policies? It was no coincidence that Labour achieved the 2007 settlement with record jobs and record levels of growth. Now we have the very reverse, with young loyalists and republicans involved in all sorts of civil disturbances. There is a link.

[Mrs Villiers]

One reason we need to boost the Northern Ireland economy is that we must do all we can to choke off potential support for terrorism. It is also important that the UK Government, the community across Northern Ireland and the Northern Ireland Executive work on generating a genuinely shared future and on bringing down sectarian barriers. That, too, is an important part of our strategy to choke off support for terrorism.

[Stephen Pound (Ealing North) (Lab)]

Belfast’s glorious maritime history is an essential component of economic growth. In welcoming the Minister of State to his position, may I thank him for the work he has undertaken to ensure that HMS Caroline will for ever nestle within the slightly chilly bosom of Belfast lough? When he draws up the guest list for the re-launch, will he not forget Chief Petty Officer Yeoman William Perkiss, the last instructor on HMS Caroline and now a Doorkeeper in this very House?

[Mrs Villiers]

I happily praise the efforts of my hon. Friend the Minister and, indeed, the shadow Minister, who I know has had a long-standing interest in HMS Caroline. I also thank the National Heritage Memorial Fund for providing £1 million to secure the future of HMS Caroline in Belfast. [Interruption.] I hope that that will be welcomed by Chief Petty Officer Yeoman William Perkiss, who is part of our House of Commons.

[Mr Speaker]

I am immensely grateful to the Secretary of State, but we need a bit of order in the House so that we can hear both question and answer alike.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

5. What assessment she has made of the effect of the level of air passenger duty for short-haul flights on the regional economy in Northern Ireland.

[The Minister of State, Northern Ireland Office (Mike Penning)]

The impact of air passenger duty on Northern Ireland was carefully considered last year, and, in recognition of Northern Ireland’s unique circumstances, my right hon. Friend the Chancellor agreed to the Northern Ireland Executive’s request for the devolution of APD for all direct long-haul flights departing from Northern Ireland airports.

[Dr McDonnell]

I welcome the Secretary of State and the Minister to their first Northern Ireland questions, and associate myself with the kind comments about Sir Stuart Bell.

Is the Minister aware that the business community in Northern Ireland is unanimous in its view that the high level of passenger duty is helping to strangle potential economic recovery? Will he tell us more about the unique circumstances that he mentioned?

[Mike Penning]

I just about heard what the hon. Gentleman said. I think he asked about future APD. Interestingly, when I looked into the matter, the Executive did not ask for short-haul powers. If they had, we would have considered it. If they want short-haul powers, therefore, we will consider the matter, although there would, of course, be a cost to their own Exchequer.

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

Does my hon. Friend agree that the cut in APD in Northern Ireland will allow airlines to develop further long-haul services and significantly stimulate the Northern Ireland economy, and would that not be true across the whole of the UK?

[Mike Penning]

My hon. Friend draws me into territory that my right hon. Friend the Chancellor, who is sitting to my left, will probably ensure I do not dwell on. There was a sustainable argument for the exceptional circumstances in Northern Ireland. The Executive requested long-haul APD, and the Chancellor gave it to them. Should they request something more, we would consider it.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Does the Minister agree that the reduction in APD is a key driver in attracting inward investment? Will he agree to negotiate with the Department for Enterprise, Trade and Investment, should it propose that short-haul APD—in other words, at Belfast City and Londonderry airports, as well as for international flights—also be reduced?

[Mike Penning]

I will continue to work as closely as I can with all parts of Northern Ireland, particularly the Department of Finance and Personnel and businesses, but there would be a cost to the Minister for Finance and Personnel, which I know he is aware of, but as yet we have not had a request for short haul. If we do, we will look at it.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

7. What discussions she has had with the Irish Government on extending the deadline for the completion of the Smithwick tribunal.

[The Minister of State, Northern Ireland Office (Mike Penning)]

As yet, I have not had the opportunity to have introductory discussions with the Irish Government, although I have had discussions with the Irish ambassador in London. Although the sponsorship of the Smithwick tribunal is a matter for the Irish Government, I am aware of the recent intention to extend the deadline for the tribunal to complete its work.

[Mr Donaldson]

It is absolutely crucial that the tribunal is extended because of the revelations in recent times. We need to get to the truth of the matter. These were the two most senior RUC officers to be murdered by the IRA and there is strong evidence of collusion on the part of Irish state forces, so we need to know precisely what happened.

[Mike Penning]

I think we would all agree that what we require is the truth. The Republic of Ireland Government have been asked for an extension, that is true, and we will give all the assistance we can. In recent weeks we have given more help in the form of the evidence we have discovered in the north and we will continue to do so.

[Naomi Long (Belfast East) (Alliance)]

8. What further steps she plans to take following the initial round of talks with Northern Ireland party leaders aimed at finding consensus on dealing with the past and its legacy.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

It is important to find a way to deal with the legacy of the past in an inclusive way that recognises the pain caused to victims and survivors while helping everyone in Northern Ireland move forward towards a genuinely shared future. A way forward can be delivered only if a wide range of people and political parties in Northern Ireland work together to build consensus.

[Naomi Long]

I, too, welcome the Secretary of State and her ministerial colleague to their new roles. Does she agree that finding an agreed and comprehensive way of addressing the legacy of the past is critical and should be a priority not only because of the current generation, who were impacted on directly by the troubles, but as a means of tackling the deep-seated sectarianism that still exists in Northern Ireland and prevents us from achieving our objectives financially, economically and socially?

[Mrs Villiers]

I agree that that is an important priority and pay tribute to the work of the hon. Lady and her party on this matter. It is important for us all to work together to see whether we can build consensus and foster mutual understanding of the past, reconciling the different perspectives of the past in the different traditions in Northern Ireland. As she says, our goals should be to bring people together and try to eliminate the sectarian divides that still exist.

The Prime Minister was asked—

[Bob Stewart (Beckenham) (Con)]

Q1. If he will list his official engagements for Wednesday 24 October.

[The Prime Minister (Mr David Cameron)]

This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House I shall have further such meetings later today.

[Bob Stewart]

Will my right hon. Friend ensure that the full panoply of Government powers is used to investigate the predatory activities of the late Mr Jimmy Savile?

[The Prime Minister]

My hon. Friend makes a very important point. The allegations and what seems to have happened are completely appalling, and they are shocking the entire country. The allegations leave many institutions, perhaps particularly the BBC, with serious questions to answer. Above all the question is, “How did he get away with this for so long?” The most important thing is that the police investigation is properly resourced and allowed to continue. I do not rule out further steps, but we now have independent investigations by the BBC and into the NHS, and today I can confirm that the Director of Public Prosecutions has confirmed that his principal legal adviser will again review the papers from the time when a case was put to the Crown Prosecution Service for prosecution. The Director of Public Prosecutions will specifically consider what more can be done to alert relevant authorities when there are concerns but a prosecution is not taken forward. The Government will do everything we can, and other institutions must do what they can, to ensure that we learn the lessons from this and that it can never happen again.

[Edward Miliband (Doncaster North) (Lab)]

Last week, the Prime Minister told this House that

“we will be legislating so that energy companies have to give the lowest tariff to their customers”.—[Official Report, 17 October 2012; Vol. 551, c. 316.]

Will he now explain—including to his Energy Secretary—how he will guarantee everybody in the country the lowest tariff?

[The Prime Minister]

As I said last week, we are going to use the Energy Bill to ensure that customers get the lowest tariffs. That is what we want to do. There is a real problem here that is worth looking at: last year, there were more than 400 tariffs. That is completely baffling for customers and although encouraging people to switch can help make a difference, we need to go further and we need to use the law. I am in no doubt that we are on the side of people who work hard, pay their bills and want a better deal.

[Edward Miliband]

The only people who were baffled last week were all the Prime Minister’s Ministers, who did not know anything about his announcement. Last week, it was a gilt-edged guarantee from the Prime Minister. Of course, now we have read the small print it has totally unravelled—another dodgy offer from this Prime Minister. Why cannot he admit the truth just for once? He does not do the detail, he made up the policy and he got caught out.

[The Prime Minister]

We are going to use the Energy Bill to ensure that people get the lowest tariff. The Deputy Prime Minister said exactly the same thing. The right hon. Gentleman wants to look at the detail; let me ask him about this detail—yes, we have his entire energy policy laid out for us. Perhaps he can tell us something. Now he says he wants to scrap Ofgem; in government, he kept Ofgem. Now he says he wants to pool energy supplies; in government Labour scrapped pooling energy supplies. Now he says he wants to refer the big six to the Competition Commission; then he said he would not do it because it would be wrong. I am all in favour of switching, but this is ridiculous.

[Edward Miliband]

Let us talk about my record as Energy Secretary. I want to thank the Prime Minister for the Conservative party briefing document issued last Thursday—after the chaos at PMQs. It reveals something very interesting. While I was the Energy Secretary, the average dual fuel bill fell by £110; under him, it has risen by £200, so I will compare my record with his any day. [Interruption.] Look, the part-time Chancellor is giving advice again. I am actually coming on to one of his favourite subjects—the west coast main line.

The former railways Minister, now the Northern Ireland Secretary, told us in August about the franchise process, saying:

“We’ve tested it very robustly”.

The former Secretary of State for Transport, now the Secretary of State for International Development—she does not really want the job, but she is down the Bench over there—said:

“The process is incredibly robust”.

Yet we learn today that concerns about flaws in the process were raised by the bidders as long ago as May 2011. Can the Prime Minister tell us whether any Minister knew about the bidders’ concerns?

[The Prime Minister]

First of all, the right hon. Gentleman says he wants to talk about his record as Energy Secretary, so I think we should spend a little bit of time on that. The fact is, under Labour, gas bills doubled and electricity bills were up more than 50%. When he became Energy Secretary, the companies were making a £25 loss per bill; when he left government, they were making £55 profit per bill. He did not stand up to the vested interests; he stuffed their pockets with cash. Right, we have dealt with that—oh, by the way, while we are on his energy record, he put in place in his low-carbon transition plan a policy that would have added £179 to every single person’s bill in the country. Perhaps when he gets up, he can apologise for that.

[Edward Miliband]

rose—[Interruption.]

[Mr Speaker]

Order. Perhaps Members on both sides could calm down. Let us now hear from the Leader of the Opposition.

[Edward Miliband]

Even the Prime Minister is taking his habit of not answering questions to a new level. I asked him a question—[Interruption.] If he wants to swap places, I am very happy to do so. I asked him a question about the railways. [Interruption.] The Chancellor is shouting from a sedentary position, but it is not the ticket that needs upgrading; in my view, it is the Chancellor of the Exchequer. The mishandling of this process has cost taxpayers up to £100 million, so which of the Prime Minister’s former Transport Ministers who oversaw the bidding is responsible for this multi-million pound fiasco?

[The Prime Minister]

There is a proper independent investigation into what happened with the west coast main line. The Secretary of State for Transport has made a full statement to this House and has explained what will be done so that commuters continue to receive a good service and we get to the bottom of what went wrong. What is interesting—and what the country will notice—is that the right hon. Gentleman wants to talk about the Chancellor because he cannot talk about the economy because he has got no plans to increase the private sector. He cannot talk about the deficit because he has got no plans to cut it. He cannot talk about welfare because he opposes our plans to cap it. He cannot talk about all the issues that matter to this country—and that is why he stands up and just tells a whole lot of rubbish jokes.

[Edward Miliband]

I think we can take it from that answer that no one is taking responsibility for what happened on the railways. Ministers did not know the detail, they did not do the work, and they got caught out—but who can blame them? They are just playing follow my leader, after all.

This is what the right hon. Gentleman said before he became Prime Minister:

“We must provide the modern Conservative alternative. Clear. Competent. Inspiring.”

Mr. Speaker, where did it all go wrong?

[The Prime Minister]

I will tell you what has happened under this Government in the last week. Inflation: down. Unemployment: down. Crime: down. Waiting lists: down. Borrowing: down. That is what is happening, but the right hon. Gentleman cannot talk about the real issues, because he is not up to the job.

[Edward Miliband]

It is good to see the crimson tide back. This is the reality: the Prime Minister is living in a parallel universe. It has been another disastrous week for his Government. Last week he defended the Chief Whip; now the Chief Whip has gone; he made up an energy policy; that has gone too; and he has lost millions of pounds on the railways. Is not the truth that there is no one else left to blame for the shambles of his Government? It goes right to the top.

[The Prime Minister]

It is only a bad week if you think it is bad that unemployment is coming down. We think it is good. It is only a bad week if you regret the fact that inflation is coming down. We think it is a good thing for our country. It is only a bad week if you do not think it is a good thing that a million more people are in work. That is what is happening in our country. Every bit of good news sends that team into a complete decline, but I can tell the right hon. Gentleman that the good news will keep coming.

[Chris Kelly (Dudley South) (Con)]

Q2. Will my right hon. Friend join me in welcoming the good news that there has been a 13% fall in recorded crime in the west midlands over the past 12 months, and congratulating West Midlands police and the Dudley local policing unit on their performance? Robbery is down by 31% and house burglaries are down by 29% in my area. Does not that fall in crime show that police reform is working?

[The Prime Minister]

My hon. Friend has made an important point. Not only has recorded crime fallen by 6%, but the crime survey showed that it had fallen by 6%. This is a time when we are making difficult decisions about police funding, but owing to the combination of that police reform—the changes that we are making—and a tougher approach to criminal justice, crime is falling and public satisfaction with the police is going up.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

Q3. Last year the Prime Minister told the House that there was no reason why front-line police officer numbers needed to fall, but my constituents in Harrow tell me that they are seeing fewer police on our streets. Is not the real truth that there are 6,800 fewer police officers since he came to power?

[The Prime Minister]

What is actually happening is that the number of neighbourhood police officers has gone up by 2,360 since 2010.

[Mr Peter Bone (Wellingborough) (Con)]

Q4. Last week planning permission was granted for a large retail leisure park on derelict land at Skew Bridge, between my constituency and the Corby constituency. It will create 2,000 new jobs, and will provide a large branch of Marks and Spencer and a stunning nature reserve. Labour opposes that development. Will the Prime Minister tell the House whom the people of Corby should support—Christine Emmett and the Conservatives, who are campaigning for 2,000 new jobs, or Labour’s Corby luddites?

[The Prime Minister]

My hon. Friend has made the excellent point that it is this party and this Government who are getting behind economic development. As I have just said, every piece of good news is a disaster for Labour Members. They wake up every morning wanting more unemployment, but unemployment is coming down. They wake up wanting inflation to rise, but inflation is coming down. As we can see in Corby, it is the Conservatives who are getting behind growth and jobs in the future.

[Mr Nigel Dodds (Belfast North) (DUP)]

During the last election, the Prime Minister made many pledges to the electorate. One of those pledges was that he would help to rebalance the Northern Ireland economy. Given that our economy lags behind the United Kingdom average and, indeed, behind the position in Scotland in terms of key economic indicators, when can we expect an announcement from the Prime Minister on the steps that he will take to help to rebalance our economy?

[The Prime Minister]

I do want to see the Northern Irish economy rebalance; it badly needs to, because the size of the state sector is so big and accounts for so much of Northern Ireland GDP. We are continuing to pursue the policy of looking at a lower corporation tax rate for Northern Ireland, because of the land border with the Republic. I do not believe that is the only thing we should look at. We also need to see how we can boost manufacturing and small businesses, increase the rate of business start-up and also do all the things we can to encourage inward investment into Northern Ireland, which I have been doing, including on the trips I have been making to other parts of the globe.

[Mr Crispin Blunt (Reigate) (Con)]

Q5. On Monday I was delighted when the Prime Minister put his personal rocket boosters under payment by results for rehabilitation. Will he, as First Lord of the Treasury, ensure that the Treasury stands four-square behind the Ministry of Justice as it designs and delivers the first generation of payment-by-results programmes, which are radical, globally new and underwrite unquantifiable cash consequences of success for the next spending review period?

[The Prime Minister]

My hon. Friend makes a very important point. We should be bringing payment by results to all of the criminal justice system. Currently, we spend over £1 billion on probation. I want to see payment by results being the norm rather than the exception. To be fair to the Treasury, when it designed payment by results in the welfare system, it allowed the Department for Work and Pensions to spend the future receipts of lower benefit claims. I am sure the Treasury will be equally inventive and creative when it comes to making sure we get better value for money and better results in our criminal justice system.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Q6. Last week from the Dispatch Box the Prime Minister said that services at Kettering hospital were safe. This week we have learned that the official review’s so-called best option is to get rid of many vital services in our hospital and to reduce the number of beds by 80%. Is it not the truth that you cannot trust the Tories on the NHS?

[The Prime Minister]

What is true is that you can always guarantee that Labour Members of Parliament will get up in Parliament and scaremonger about our NHS. What I said last week is absolutely right.

[Jackie Doyle-Price (Thurrock) (Con)]

Q7. With 170,000 fewer people on benefits and 1 million new jobs created, should it not be perfectly clear that this Government’s plan is working?

[The Prime Minister]

My hon. Friend makes an important point. The figures showed last week that there are more people in work than at any time in our history. There are more women in work than at any time in our history, and since the election the number of full-time jobs has increased faster than the number of part-time jobs. There is absolutely no complacency on the Government Benches, but we have got to do everything we can to continue the progress—getting people into work, getting the long-term unemployed into work and cracking down on youth unemployment as well.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Q8. Can the Prime Minister explain the relationship between Virgin Care donations to the Tory party, the number of Virgin Care shareholders on clinical commissioning group boards and the number of NHS contracts that have been awarded to Virgin Care?

[The Prime Minister]

All donations to political parties are properly disclosed and properly announced, but the difference, I have to say, between the donations that the Conservative party gets from individuals and businesses, and the trade unions’ donations to the Labour party is that they effectively buy votes at the Labour party’s conference and policies in its manifesto, and they vote for the Labour leader as well. The trade unions pay the money, they get the votes. That is the scandal in funding parties.

[Henry Smith (Crawley) (Con)]

Q9. Under the previous Labour Government the national health service lost hundreds of millions of pounds because the cost of treating foreign patients was not properly recovered. Can I get an assurance from my right hon. Friend that both the Department of Health and the Home Office will now work together to resolve this issue?

[The Prime Minister]

I can certainly give my hon. Friend that assurance. This area—who should pay, how much and when—has become much too complicated, so I have asked that Ministers get together to simplify it. My hon. Friend the Minister for Immigration is going to be leading this process, and I hope we can come up with a simplified system in which the public will have real trust.

[Margaret Hodge (Barking) (Lab)]

Q10. Jimmy Carr avoided £3.3 million of tax last year, and the Prime Minister said that was morally wrong. Apple, Google, Facebook, eBay and Starbucks have between them avoided nearly £900 million of tax. Will the Prime Minister now take this opportunity to condemn their behaviour as morally wrong?

[The Prime Minister]

The right hon. Lady makes an important point. This is an international problem that all countries are struggling with: how to make sure that companies pay tax in an appropriate way. I am not happy with the current situation; Her Majesty’s Revenue and Customs needs to look at it very carefully. We need to make sure that we are encouraging these businesses to invest in our country—as they are doing—but they should be paying fair taxes as well.

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

May I ask my right hon. Friend why, as he told me on Monday, he thinks that the single currency needs a banking union, as the crisis in the euro has been caused not by the absence of a banking union, but by the absence of a single fiscal policy? Yet, if a fiscal union were introduced, it would certainly be dominated by Germany, and that would lead to the death of democracy throughout most of Europe. So is not the least painful solution the abolition of the euro and the return to national currencies?

[The Prime Minister]

What I would say to my right hon. Friend is that I believe that the insecurity in the eurozone is caused in part by both those issues: the lack of a fiscal union, but also the lack of a banking union. One of the problems in the eurozone at the moment is the different level of interest rates in Spain, Italy and Portugal, which is in part because of concerns about the link between weak banks and sovereign Governments. Only when we have a banking union will there be greater security about those weak banks. We have a single currency in the United Kingdom, and we also have a banking union in the United Kingdom; we would not treat banks differently because they are in Scotland, Wales or Northern Ireland, rather than in England. I believe a working single currency will need a working banking union; I think that is logically consistent and sensible.

[Mr Kevin Barron (Rother Valley) (Lab)]

Q11. Last week we had a Government Chief Whip who was educated at Rugby public school, and this week we have one who was educated at Eton. I wonder whether the Prime Minister can give us an update on his campaign to spread privilege.

[The Prime Minister]

I would argue that Members across this House would recognise that the record of my right hon. Friend the Member for North West Hampshire (Sir George Young) stands for itself. [Interruption.]

[Mr Speaker]

Order. The House must calm down.

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

After the BBC director-general’s appearance before the Culture, Media and Sport Committee yesterday, I hope the whole House will agree that it is essential that the two independent inquiries get to the truth. Full details of those inquiries are still sketchy, despite my having sent two letters to the BBC asking for full disclosure. Will the Prime Minister join me in calling for full details to be published today, so that both inquiries can have the full confidence of the public and Jimmy Savile’s victims can hear the truth?

[The Prime Minister]

First, may I commend my hon. Friend on the good, valuable and dedicated work he has done on this issue of making sure that all these institutions get to the truth? To be fair to the BBC, I believe that the two inquiries it has set up qualify as independent inquiries. The inquiry into the “Newsnight” programme is being carried out by the former head of Sky News, Nick Pollard, and the second—and more important, in many ways—review into the culture and practices of the BBC going back many years is being led by a former Appeal Court judge, Dame Janet Smith. As my hon. Friend says, it is very important that the BBC makes it clear that these inquiries can go where the evidence leads, have access to all the paperwork and be able to be truly independent and get to the truth on behalf of all the victims of Jimmy Savile.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Q12. Caught out, the Prime Minister refused to answer a question last week, so will he now tell us why he will not publish the e-mails, texts and other correspondence between himself, Rebekah Brooks, News International and Andy Coulson, so that we can judge for ourselves? What is he frightened of: scandal, embarrassment—or is there something more damning that he is frightened of?

[The Prime Minister]

I hate to disappoint the hon. Gentleman but it was this Government who set up the Leveson inquiry, and have co-operated with it and given it all the information it has asked for.

[David Mowat (Warrington South) (Con)]

Q13. In March, my constituent Emma Hickman was informed that her fiancé, Private Daniel Wade of 3rd Battalion the Yorkshire Regiment, had died in Afghanistan. Three months later, she gave birth to Daniel’s baby, Lexie-Mai. The Army will not accept paternity without evidence; nor will it release the DNA without a court order. As a consequence, Lexie-Mai receives nothing. Will the Prime Minister help to expedite this case? Will he also require that the Army routinely holds DNA, as happens in other countries, such as the United States?

[Hon. Members]

Hear, hear.

[The Prime Minister]

On the latter part of my hon. Friend’s question, I will certainly look at that. I was as shocked as he was when I found out about this case. I will do everything I can to try to expedite—as he says—a conclusion to it. I am sure that the sincere condolences of everyone in this House go to Private Wade’s family. This is an absolutely dreadful situation and it cannot be allowed to continue. The Ministry of Defence is aware of it, and it raises some complicated legal issues, but the reaction from colleagues around the House when my hon. Friend said what he said shows that we have to move quickly and get this sorted.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Q14. Does the Prime Minister recall telling the House last year that the UK would lead the world in eradicating modern-day slavery? Could he explain to the House why his Whips organised, last Friday, to talk out my Bill that would eradicate that problem in the supply chains of British companies? Will he meet me and the people who support the Bill so that we can move this campaign forward?

[The Prime Minister]

This Government have an excellent record in combating modern-day slavery, not least because we continue to commit, through our international aid programme, to tackle those countries where it still, so regrettably, exists. I will look very carefully at the Bill that the hon. Gentleman mentions and perhaps write to him about the issue.

[Simon Wright (Norwich South) (LD)]

A number of major employers in my constituency are calling for greater certainty for investors in one of the fastest-growing sectors of the economy, low-carbon energy. Will the Prime Minister respond to their calls—specifically for a 2030 carbon intensity target for the power sector?

[The Prime Minister]

I am looking very carefully at these issues, but I have to say that we have already taken the most important step, which is to set the renewables obligation certificates—the ROCs—out into the future, so that investors know that they can invest, for instance in offshore wind, knowing what the return is going to be. There will be more detail, of course, when we produce the Energy Bill later in this year.

[Derek Twigg (Halton) (Lab)]

Q15. May I refer the Prime Minister to the Hansard record from 23 May 2012? The right hon. Member for Belfast North (Mr Dodds) asked him the following:“Will the Prime Minister give an undertaking that he will not succumb to the diktat from the European Court of Human Rights in relation to prisoners voting”.His reply was:“The short answer to that is yes.”—[Official Report, 23 May 2012; Vol. 545, c. 1127.]Will he confirm that that is still his position? I hope that it is. Will he tell us how he is going to get around breaking European law?

[The Prime Minister]

I can absolutely give the hon. Gentleman that assurance. The House of Commons has voted against prisoners having the vote. I do not want prisoners to have the vote, and they should not get the vote—I am very clear about that. If it helps to have another vote in Parliament on another resolution to make it absolutely clear and help put the legal position beyond doubt, I am happy to do that. But no one should be in any doubt: prisoners are not getting the vote under this Government.

[Mr Henry Bellingham (North West Norfolk) (Con)]

Is the Prime Minister aware that last year there was a borough council-run referendum in my constituency about whether to locate an energy-from-waste incinerator on the edge of King’s Lynn? Is he aware that on a 61% turnout, 65,516 of my constituents and those of my hon. Friend the Member for South West Norfolk (Elizabeth Truss) voted no? That amounted to a staggering 92.7% voting no. Does the Prime Minister agree that it is essential for local democracy and for localism that my constituents and these people are listened to?

[The Prime Minister]

I think it is very important that the planning system listens to local people and that proper processes are followed. I am sure that my hon. Friend will work very hard in this case to make sure that that happens.

[Mr Tom Watson (West Bromwich East) (Lab)]

The evidence file used to convict paedophile Peter Righton, if it still exists, contains clear intelligence of a widespread paedophile ring. One of its members boasts of his links to a senior aide of a former Prime Minister, who says he could smuggle indecent images of children from abroad. The leads were not followed up, but if the file still exists I want to ensure that the Metropolitan police secure the evidence, re-examine it and investigate clear intelligence suggesting a powerful paedophile network linked to Parliament and No. 10.

[The Prime Minister]

The hon. Gentleman raises a very difficult and complex case, and I am not entirely sure which former Prime Minister he is referring to. What I would like to do is look carefully in Hansard at the allegations he has made and the case he has raised, and look carefully at what the Government can do to help give him the assurances he seeks.

[Jacob Rees-Mogg (North East Somerset) (Con)]

In principle, does my right hon. Friend think that statutory regulation can ever be compatible with a free press?

[The Prime Minister]

My hon. Friend is tempting me into commenting on what Lord Leveson might or might not recommend in his report, but having set up the inquiry on an all-party basis, it is important that we allow him to produce his report. What I would say is that I think one can obsess too much about how exactly such things are done, when what matters most of all is whether we have a regulatory system in which the public have confidence that, if mistakes are made, there are proper corrections; that if newspapers do the wrong thing, they can be fined; and that when things go wrong, there is proper investigation. That seems to me to be the most important question for us all: are we going to put in place a system in which we have confidence and the public will support, but in which we are seen to have a free, independent and very vigorous press?

[Mr Dave Watts (St Helens North) (Lab)]

Is the Prime Minister aware that young people’s unemployment in my constituency has gone up by 1,000%? What is he going to do about this scandal?

[The Prime Minister]

What we are doing is putting in place, through the Work programme and the Youth Contract, the biggest ever scheme to help people to get back into work. We have seen success in recent weeks and months, with more people in work than at any time in our history and recent figures showing a decline in the claimant count, a decline in unemployment and a decline in youth unemployment. There is far more to do, but we are at least heading in the right direction.

[Mike Crockart (Edinburgh West) (LD)]

Will the Prime Minister promise today, that unlike other leaders in other Parliaments in the UK, he will never spend £100,000 fighting the release of legal advice that he does not hold and never asked for?

[The Prime Minister]

The hon. Gentleman asks a baffling question about a truly baffling situation. We were told, I believe, by the First Minister in Scotland that he had legal advice on Scotland’s place in the European Union in the event of independence, but it turns out that he did not have any legal advice at all. What that shows is that when the spotlight is shone on the Scottish National party’s case for separation, it completely falls apart.

[Meg Munn (Sheffield, Heeley) (Lab/Co-op)]

The Prime Minister has rightly expressed concern about child abuse in our institutions, but last year the Government reduced child protection measures in schools, and changes made to Ofsted will result in some schools never being inspected on their child protection procedures. Will the Prime Minister now meet me and cross-party MPs from the all-party child protection group to protect our children now and in the future?

[The Prime Minister]

I am very happy to arrange a meeting between the hon. Lady and the new Minister, who has huge experience in this area and who I know will be delighted to discuss it with her. What we have tried to do is simplify a set of rules and regulations that involved 9 million or 10 million more parents in this sort of thing and concentrate on where the focus is needed, but I am happy to arrange that meeting.

[Several hon. Members]

rose—

[Mr Speaker]

Order.

Petition

Wednesday 24th October 2012 Commons Chamber

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)

- Hansard - - Excerpts

This is a petition on the 2nd Battalion, the Yorkshire Regiment, the Green Howards. The petition states:

The Petition of residents of Teesside and North Yorkshire,

Declares that the 2nd Battalion, The Yorkshire Regiment (Green Howards), who served this country loyally since 1688, is both a symbol of and major employer in both Teesside and North Yorkshire.

The Petitioners therefore request that the House of Commons urges the Secretary of State for Defence to safeguard the jobs of the battalion’s soldiers, and that it further urges the Secretary of State to protect the battalion’s name, badge and proud heritage.

And the Petitioners remain, etc.

[P001126]

Points of Order

Wednesday 24th October 2012 Commons Chamber

12:33

[Ian Lucas (Wrexham) (Lab)]

On a point of order, Mr Speaker. Before the Prime Minister leaves, on Monday he said that payment by results for probation was such a good idea that he was going to put rocket boosters under it. I am sorry that he is running away, because on Tuesday, Wales Probation wrote to me saying that the Ministry of Justice had—

[Mr Speaker]

Order. It is always a delight to hear the hon. Gentleman’s mellifluous tones, but on this occasion I will deny myself that pleasure, on the grounds that the hon. Gentleman is pursuing a matter of earnest interest to him and of considerable debate, no doubt, but there is no matter for the Chair here. If he strongly disagrees, he can come and have a cup of tea with me and I will talk to him about it. If I am wrong, I shall concede it, but I do not think I am.

[Chris Williamson (Derby North) (Lab)]

On a point of order, Mr Speaker. I would be grateful for your guidance on whether it is appropriate for the hon. Member for Crawley (Henry Smith) to book a meeting room on the parliamentary estate for a meeting with a company, Siemens, involved in bidding for a major rail procurement contract—

[Mr Speaker]

Order. If the hon. Gentleman has a complaint about the conduct of a Member, there are established methods by which to pursue such complaints, including reference to the commissioner. If he is not convinced of that, he can pursue it at a lower level, but it should not be pursued on the Floor of the House via the device of a point of order. I know his intentions are good, but so are mine in trying to advise him on how to proceed.

[John McDonnell (Hayes and Harlington) (Lab)]

On a point of order, Mr Speaker. Some weeks ago the Prime Minister announced that there would be an inquiry into airport capacity in London and the south-east under Howard Davies, and that there would be recommendations from that inquiry in due course, most probably after the next general election. Last week, in reply to a question from the journalist Andrew Neil, the Minister with responsibility for aviation said that the recommendations of that inquiry would be accepted and implemented by the Government. That changes the status of that inquiry from an advisory body to one that will automatically implement policy. Have you received any notice that there will be a ministerial statement about the terms of reference of the inquiry, its status or its revised timetable?

[Mr Speaker]

The hon. Gentleman has made an important point, I accept. It is not, however, a matter for the Chair. If the hon. Gentleman is discontented by the change that he has noted, and he feels that he wishes to give further, fuller expression to his concerns, there are ways that will occur to him which might secure him the debating opportunities that I think he seeks.

Unpaid Work Orders (Pilot Scheme)

Wednesday 24th October 2012 Commons Chamber

Motion for leave to introduce a Bill (Standing Order No. 23)

12:36

[John Glen (Salisbury) (Con)]

I beg to move,

That leave be given to bring in a Bill to give effect to schedule 6 to the Courts Act 2003; to provide thereby for the imposition of unpaid work orders to pay financial penalties; and for connected purposes.

I have sat as a magistrate for six years, and I and my colleagues frequently wonder whether, when fines are levied by the court, they will be fully paid off. There are currently 1,680,000 outstanding fines, as of March 2012. They are worth a total of £593 million. Last year a full £106 million was left unpaid and £54 million was spent trying to collect fines. Of course, the courts will always try to secure a full, up-front payment in court, but owing to an inability or unwillingness to pay in full, this does not always happen.

Various legislation over the past few years has provided several additional ways in which fines can currently be paid off by defendants. For example, the value of the fine can be deducted from any benefits received by the defendant or from any earnings in the same way as PAYE, by the order of a court. But for a number of individuals these conventional options just do not work. This is not so much an issue of lost moneys, but more about how to deliver justice to society. Our constituents reasonably expect that justice will be done—that when the courts give out fines and financial penalties, they will be paid promptly by defendants.

Section 97 and schedule 6 of the Courts Act 2003 provide for the imposition of unpaid work orders, so that fines can be paid off at a designated hourly rate, either in full or in part, though of course court costs and compensation will still be paid to victims. A pilot scheme for unpaid work orders was run between September 2004 and March 2009 in a number of local justice areas across England and Wales, but was not brought in on a permanent basis at the end of that trial. The report on the scheme issued by the Ministry of Justice in September 2010 said that unpaid work orders had “wide support” and could be considered relatively successful, but it warned that the number of defendants that they could apply to would be small, and that there would be “major barriers” to overcome. It recommended that any implementation should be cautious and gradual.

The political agenda in 2009 and 2010 was very crowded, but the principle underlying the scheme still stands. I think it is time to look again at unpaid work orders as an additional means of compliance with sentences. The number and total of unpaid fines is so large, and the cost of enforcement so significant, that we should try a new means of ensuring that justice is served and fines really are paid, whether through straightforward monetary payment or, when it becomes clear that that is unlikely to happen, through unpaid work that benefits a local community.

The Bill would provide for another pilot scheme to take place, but with some differences from the first. One problem with the first pilot scheme was that the supervisory role was given solely to the probation service, a stretched organisation that has a heavy burden. The Bill would therefore allow local authorities and charities to share the supervisory role. Many charities would be willing to supervise an individual if that meant they could benefit from a number of hours of work that are of real benefit to a local community.

A second consideration is that the Ministry of Justice’s report suggested that the number of eligible individuals and their commitment levels could vary widely. Surely the emphasis should be on looking at who would be eligible to undertake unpaid work in lieu of a fine, rather than who would not be suitable. The pilot scheme would therefore also take place with an explicit view to the issuing of clear guidance and positive eligibility criteria that would allow unpaid work orders to become a regular option used by the courts to collect financial penalties, especially when magistrates have reason to believe that non-payment is very likely. In practice, that would mean that the time and money spent chasing fines by ordinary means could be turned into productive work in the local community, a principle that the courts already recognise as valuable through the existence of unpaid work as a sentence in itself.

There are some efficient existing options for fine collection if an individual is unable to pay up front, but magistrates frequently do not have the confidence in means assessments to make realistic predictions about a payment schedule. To my mind, there are two clear cases where unpaid work orders could be a preferable means of payment: first, where the deduction of a fine from benefits would risk serious implications for the well-being of the defendant or their household, or where a deduction from a benefits order request is refused because the benefit cannot statutorily be reduced; and secondly, the small number of cases where the defendants wish to accelerate the payment to preserve their income, especially if they are relying on benefits. That would be a compassionate measure to allow the poorest to pay back their community in kind, rather than by financial payment. It would also safeguard fine defaulters from imprisonment if they were genuinely unable to pay. The measure would align with the Government’s stated commitment in “Swift and Sure Justice” to have a greater focus on community-based, restorative justice.

There will inevitably be objections to these proposals, which I will now seek to deal with briefly. For those concerned about health and safety or how defendants will be supervised, these practical issues can be worked out and overcome in the pilot scheme, with ministerial direction given to draw up guidance and ensure practicality in the long term. The report on the pilot scheme expressed concerns about the level of commitment and the number of defendants that would be suitable for unpaid work orders. I want to be clear that I am not suggesting that unpaid work will be a useful solution for individuals who are difficult to trace, but at a time when courts are willing to spend a large amount on enforcement and other costs, such as for translation in court, surely we should be looking for ways to ensure that justice is delivered. The Bill also requires that the pilot scheme would take place specifically with a view to issuing guidance on eligibility, which should give magistrates the confidence and clarity when issuing these orders that they might not have had before.

These proposals represent a practical, restorative and compassionate means of paying fines. The public—our constituents—expect justice to be done and that fines levied by the courts will be paid by the individuals concerned, either financially or in kind. In my view, £593 million of unpaid fines is too much, and the situation should not be allowed to continue. I commend this Bill to the House.

Question put and agreed to.

Ordered,

That John Glen, Mr Gary Streeter, Charlie Elphicke, Jeremy Lefroy, Priti Patel, Ms Gisela Stuart, Mr Robert Buckland, Mr Aidan Burley, Fiona Bruce, Nick de Bois and Nicola Blackwood present the Bill.

John Glen accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 16 November and to be printed (Bill 80).

Opposition Day

Wednesday 24th October 2012 Commons Chamber

[7th Allotted Day]

Energy Market Reform

Wednesday 24th October 2012 Commons Chamber

[Mr Speaker]

I inform the House that I have not selected the amendment.

12:46

[Caroline Flint (Don Valley) (Lab)]

I beg to move,

That this House notes that annual energy bills have risen by more than £200 since May 2010, with further price rises on the way; calls on the Government to help families and pensioners with their energy bills this winter by requiring energy companies to put all people aged over 75 on their cheapest tariff; and further calls for it to reform the energy market to break the dominance of the Big Six by requiring them to sell power into a pool, and allowing new businesses to enter the market, thereby increasing competition and driving down energy bills for all, and to replace Ofgem with a tough new energy regulator with the power to force energy companies to pass on price cuts when wholesale costs fall.

Since this Government came to power, energy bills have gone up by more than £200, and last week three of the big energy companies announced another round of price hikes, adding a further £100 to people’s energy bills this winter. People worried about how they will afford to keep the lights on, heat their homes or have a hot meal deserve a Government who understand their challenges and have the ideas to provide the change that Britain needs and the strength to see them through, but all we get from this Government is another shambles from an out-of-touch Prime Minister who seems to make it up as he goes along. From the disgraceful conduct of the former Chief Whip to the incompetence on the west coast main line that has cost taxpayers millions, this is a Government who promised change but instead are delivering chaos.

[Lorely Burt (Solihull) (LD)]

I am grateful to the right hon. Lady for giving way so early on in her remarks. Labour was in government for 13 years and, indeed, the Leader of the Opposition was Energy Secretary for almost two years. Does she agree that if her party truly thought that Ofgem was ineffective, it should perhaps have done something about it in those 13 years?

[Caroline Flint]

Of course, my right hon. Friend the Leader of the Opposition did make some changes to Ofgem, but we have given more consideration to this over the past two years and, as I will explain later, we now feel that we need to take a more radical look at it.

On Tuesday last week, in response to a question from my noble Friend Lord Kennedy, Baroness Verma, a Minister in the Department for Energy and Climate Change, told the other place:

“What we cannot do, of course, is tell big energy companies what prices they should set.”—[Official Report, House of Lords, 16 October 2012; Vol. 739, c. 1368.]

On Wednesday, though, the Prime Minister directly contradicted her when he said:

“we will be legislating so that energy companies have to give the lowest tariff to their customers”.—[Official Report, 17 October 2012; Vol. 551, c. 316.]

By Wednesday evening, a spokesman for the Department had told the Financial Times that energy companies would not in fact be forced automatically to put all customers on cheaper tariffs. By Thursday morning, the Minister of State, the hon. Member for South Holland and The Deepings (Mr Hayes), was reduced to taking the ridiculous line that the Government did still want to use legislation to get people lower tariffs but could not explain how they were going to do it.

All the while, the Secretary of State, the man responsible for this country’s energy policy, had gone AWOL, leaving an empty chair on “Newsnight”, refusing to answer questions from the media, and sending his deputy to answer my urgent question. The Minister put in a valiant performance of which he should be proud; those of us who were there could say that it was parliamentary comedy gold. However, what did we actually learn from last week’s urgent question? We learned, in the words of the Minister, that

“DECC has a wonderful relationship with…the Treasury and No. 10”

which

“has improved since my arrival.”—[Official Report, 18 October 2012; Vol. 551, c. 493.]

Despite that wonderful relationship, we also learned that the Department of Energy and Climate Change is not told about announcements on energy policy until after they are made. We learned that one of the options being considered is a change to the law to require the energy companies to write to people to tell them what the cheapest deal is, even though the Government already announced that back in April and the Energy Act 2011 already gives the Secretary of State the power to force energy companies to provide information about the lowest tariff.

[John Robertson (Glasgow North West) (Lab)]

What kind of relationship does my right hon. Friend think that DECC has with the Treasury? When the Treasury was asked to give evidence to the Energy and Climate Change Committee, it refused to do so. Not only did it not give evidence; it did not inform DECC of the information required.

[Caroline Flint]

It was a very bad decision by the Treasury to refuse to attend the Committee. We know how important energy policy is for DECC, but it is also a cross-cutting issue for Government. Decisions and influence from the Treasury, and also the Department for Business, Innovation and Skills, for that matter, are essential to the perception of how our energy policy is being developed. That decision was a great shame, but I am afraid that it is just another example of a lack of joined-up government, which is to the detriment of such an important policy area.

We also learned that the Government have been working on the proposals for months and that we should expect them to feature prominently in the forthcoming Energy Bill, but there is no mention of them at all in the draft Bill, the White Paper, the technical updates or the impact assessments. Perhaps the only real thing that we learned last week was that when it comes to energy bills this Government are not just out of touch, but completely clueless.

[Mr Marcus Jones (Nuneaton) (Con)]

Will the right hon. Lady give way?

[Caroline Flint]

I will give way shortly; I have taken two interventions already.

Such is the complete and utter confusion in Government, the Energy Bill has now attained near mythical status. Ministers talk as though it is the answer to every problem and the solution to every ill in Britain’s dysfunctional energy market. The Minister told the House last week that

“we will use the Energy Bill to get people lower tariffs.”—[Official Report, 18 October 2012; Vol. 551, c. 489.]

Why is it that the draft Bill, which has been in preparation for two years, contains nothing to reform the way in which energy is bought and sold, or to make the energy market more competitive; nothing to open up the market or open up the books of the energy giants so that we can work out the true cost of energy; nothing on demand reduction to help families and businesses cut their energy use; nothing to protect vulnerable customers or stop everyone else being ripped off; and, whatever the Prime Minister claims, nothing to simplify tariffs or make it easier for people to switch, or anything remotely close to what he promised last week? If the Government are as concerned about energy bills as they claim to be, why does their flagship Energy Bill do absolutely nothing to help people struggling to make ends meet?

Over the past two years, we have had countless White Papers, consultations, updates and even a draft Bill, but not once have we seen anything that recognises the need for urgent reform, that challenges the prices and practices of the big companies, or that lives up to its name and genuinely reforms the energy market. The House will forgive me if I am a little sceptical of this Government’s sudden conversion to the cause of reforming this market, to make it more competitive, more transparent and fairer for consumers. I am afraid that, on the evidence so far, this is a Government who back business as usual in an energy market that is not working.

[Mr Marcus Jones]

I thank the right hon. Lady for giving way. A back to the future-type approach to energy pooling has already been proven to have failed. Will she explain why her party is now pursuing energy pooling so vigorously when the Blair Government with whom she served were opposed to the policy on the basis of the cost to the consumer?

[Caroline Flint]

We went into the last general election with a manifesto commitment to introduce a pool. That put our cards on the table. According to the Government’s own statistics, 1.7 million people were brought out of poverty during our time in government.

[Mark Tami (Alyn and Deeside) (Lab)]

Does my right hon. Friend agree that, while it is all very well for the Government to have a mythical lowest-tariff policy, until they have a coherent energy policy that ensures security of supply, prices will continue to go up and uncertainty will remain?

[Caroline Flint]

Security of supply is key, and the Energy Bill has to address that with regard to where we source our energy from and for how much. That is part of the Energy Bill, but what is so disappointing is that none of the matters that the Prime Minister gave such prominence to last week has featured in any of the discussions about the draft Bill.

People are worried about how they are going to pay their bills this winter and are sick and tired of this ridiculous soap opera in Government. This time last year the Government promised action at their infamous energy summit. What was the result? It was a campaign telling people to click, switch and insulate to save. It is fair to say that, one year on, the time has come to review that. When it comes to clicking and switching, the Government’s campaign has been an abject failure. Information that I have obtained through parliamentary questions reveals that the number of people switching energy supplier has fallen to the lowest level on record. In the quarter before the energy summit, nearly 1.2 million people switched electricity supplier and nearly 1 million more switched gas supplier, but in the quarter after the energy summit, fewer than 750,000 people switched electricity supplier and only half a million switched gas supplier.

How have the Government got on in the other area that they are keen to promote: insulating to save? Labour’s Warm Front grants helped more than 2 million households, which means that, on average, more than 200,000 people were helped each and every year. Last year, however, according to more information obtained through parliamentary questions, just 43,585 households received help from the Warm Front scheme. That is down 80% compared with our last year in government. To add insult to injury, nearly 30,000 applications for help were turned down by the Government, even though the Warm Front budget underspent by more than £50 million.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Does my right hon. Friend not feel that this is a bit like groundhog day? When prices went up a year ago, the Secretary of State had meetings with energy companies and there was a lot of sound and fury promising action, but nothing happened, because this Government do not care about the pound in the pocket of constituents in my constituency and elsewhere, and are fiddling while the energy companies keep putting their prices up.

[Caroline Flint]

My hon. Friend is absolutely right. She was the shadow Secretary of State before me and I pay credit to her and to my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), who was part of her team. Ever since the general election, the shadow DECC team has been pointing out concerns about rising prices. This is not new and each year there is some stunt telling us that things will get better, but I am afraid that they are not getting better at all.

[Several hon. Members]

rose—

[Caroline Flint]

I want to make more progress.

When this House last debated energy efficiency in May, I used information that I had once again obtained through parliamentary questions to warn that the energy companies were on course to miss their targets. The Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), complacently told the House that

“we fully expect them to deliver their obligations and we will make sure that they do.”—[Official Report, 16 May 2012; Vol. 545, c. 554.]

Now, with the schemes due to end in less than 10 weeks, Ofgem is warning that the companies will not meet their targets, and families across the country will miss out and be left facing a cold winter with poorly insulated homes. Why have the Government failed to get a grip on this situation? Why have they failed to tackle the energy companies’ lack of activity and joined-up activity with local people to deliver? We have 10 weeks left and it looks like we are not going to meet the targets that the Minister said we would in May.

We should not worry, however, because we are told that everything will be okay as a result of the green deal. The Government originally said that this scheme would reach 14 million households by 2020, so why is it that when the scheme was launched earlier this month there were just two registered providers? Why would anyone want to take up the green deal when they will end up paying more in interest rates and charges than for the actual energy efficiency measures? Support on energy company obligations for the fuel poor and low-income households will be cut by half next year, and the end of the Warm Front scheme means that this will be the first Administration since the 1970s not to have a Government-funded energy efficiency programme.

[Guy Opperman (Hexham) (Con)]

The hon. Member for Wansbeck (Ian Lavery) and I inherited in excess of 20% fuel poverty in the north-east when we were elected in Northumberland in May 2010—but I will leave aside the past. Does the right hon. Lady not accept that these plans for, to use her own words, more competitiveness, more transparency and a fairer way forward are, at the very least, a step in the right direction?

[Caroline Flint]

We are going to make three propositions today that we think will help boost the market and make it more competitive, and I look forward to receiving support from the Government’s Front-Bench representatives. I know that the hon. Gentleman has raised on many occasions the issues faced by his constituents who are off-grid. Part of our proposals for a new energy watchdog is to bring those who are off-grid back under the arrangements that everybody else benefits from by being under one regulator. That is one of the ways in which we would reform Ofgem.

We want to help people do the right thing. We believe that, even in opposition, we can help people make their homes more efficient and find the cheapest deal, which is why we have launched our own collective switching campaign, “Switch Together”. When it comes to it, that is the big difference between us and the Government. They think that the public are to blame, because when they tell people to shop around, what they are actually saying is, “It’s down to you. You’re on your own.” We do not think that the public are to blame for rocketing energy prices. The problem is the way in which our energy market works.

Let us look, therefore, at the dominance of the big six energy companies, which between them supply about 99% of the homes in Britain. By itself, that does not necessarily mean that competition in the market is ineffective. However, the fact that no new entrant has achieved anything like the scale of operations that would challenge the big six shows that there are barriers to newcomers trying to break in.

Secondly, let us look at the market shares of the big six energy companies in their former monopoly areas, which The Independent on Sunday exposed using information that I obtained through parliamentary questions. Privatisation was meant to lead to greater competition and a better deal for consumers, but in every part of the country, the company that used to run the regional electricity board still has a stranglehold over the market.

Thirdly, energy companies like to tell us that electricity and gas prices in the UK are among the lowest in Europe. However, when tax is taken out of the equation, which is an instrument of Government policy, not an indication of market efficiency, electricity and gas prices in the UK are among the highest in Europe, not the lowest. Tax on energy is lower than that on most goods only because Labour defeated the last Tory Government’s plans to increase the VAT on domestic fuel in 1994.

Fourthly—this is perhaps the most damning point of all—whenever the energy companies announce their latest round of price hikes, they tell us that they are only passing on their costs. However, if pricing is competitive and the market is functioning properly, falls in the wholesale cost should be passed on as quickly as increases. So why is it that when prices rise, bills go up like a rocket, but when prices come down, they fall like a feather, if at all? The only reason for that is that the market is not functioning in a proper, competitive way.

Of course the energy companies dispute that, but in 2011, Ofgem found evidence that energy suppliers were slower in passing on reductions in wholesale energy costs than in passing on increases. Its report stated:

“We have found some evidence that customer energy bills respond more rapidly to rising supplier costs compared with falling costs.”

That is what Consumer Focus thinks too. It found a gap between the price at which energy companies buy electricity and gas, and what they sell them to the public for. Its research shows that even though the wholesale prices for both electricity and gas have fallen since 2008, retail prices for both are significantly higher today than four years ago.

[David Mowat (Warrington South) (Con)]

I was particularly interested in the point that the shadow Secretary of State made about the relative prices here and in Europe. I have in front of me information from the EU website which shows that we have the 26th lowest gas prices in Europe. I take her point that that is to do with tax, but our gas is 60% cheaper than gas in France or Germany. If our companies are operating a cartel, it would seem that they are not very good at it.

[Caroline Flint]

I am just presenting the facts as they have been presented to me. The energy companies and parliamentary colleagues often say that our prices are among the cheapest in Europe, but the truth is that when tax is taken off, we are not among the cheapest in Europe. In fact, in some areas, our prices are considerably higher.

[Alex Cunningham (Stockton North) (Lab)]

GoWarm, a community interest company, and Stockton-on-Tees borough council have developed an innovative and effective programme to insulate externally hundreds of homes, which gives people in the poorest households in my constituency a better deal from their energy bills. That could be done for even more homes if it was not for the fact that BT would charge them an absolute fortune to refix bolts to the sides of their properties. Does my right hon. Friend agree that that is another large utility that needs to be brought to book?

[Caroline Flint]

That is another bit of casework to look into. The obstructions to energy plans are numerous. At our party conference, we launched the “Power Book”, which is a collection of ideas and articles on ways to decentralise energy through energy generation and energy efficiency. It looks at ways in which community groups can be supported, rather than hindered, in doing the right thing. In many ways, that could be far more cost-effective.

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

When I did the right hon. Lady’s job at the end of the last Parliament and shadowed the current leader of the Labour party, who was then the Secretary of State for Energy and Climate Change, I tried to get Labour and Ofgem to reduce the number of tariffs from a ridiculous number to a small number. That was not done. Secondly, I tried to get them to legislate to persuade Ofgem that there should be an obligation to reduce the price to the consumer when the wholesale price went down, and not to leave it for six, nine or twelve months. None of those things was delivered. I welcome the conversion, but does the right hon. Lady not recognise that it has come several years later than it could have done?

[Caroline Flint]

On the basis of the right hon. Gentleman’s contribution, I look forward to our being in the same Lobby for the vote. Our proposals would tackle some of the issues that gradual reform has not tackled. The energy market has changed a lot since it has been privatised. Efforts were made to enable Ofgem to be stronger, but on the evidence of the past few years, it has not been. That is why we believe that our proposals, which are now on the stocks, are the best ones to take us towards a market that is more competitive and more use to consumers.

[Several hon. Members]

rose—

[Caroline Flint]

I will come to Ofgem a little later in my speech, and I will give way to the Secretary of State.

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

The right hon. Lady has said quite a few times that the energy market has changed. Will she confirm that in 1998 there were 14 of the original 15 incumbent energy suppliers, but that by the time Labour had finished, that had gone down to six? That is a consolidation in the energy market, does she not agree?

[Caroline Flint]

That is exactly why this needs to be tackled. [Laughter.] No, this is being grown-up. I will repeat what I said earlier. I hope that the Secretary of State heard me. I do not know what commitments the Liberal Democrats made in their manifesto, but the manifesto that was written by the current leader of the Labour party before the last election said that we needed to reform the energy market more radically. That is why we have said that we need to have a pool into which all the energy would be put to open up the market. We were very clear about that.

When Ofgem, as the independent authority, took away some of the price caps, it was meant to be on the basis that the market was mature and competitive enough to be able to deliver the consumer choice and competition that were needed. That did not happen and the number of companies reduced. As I said earlier, when we look at the situation regionally, rather than just nationally, we see that it is not only about the big six—in some areas, there is just the big one.

As I said, it was our manifesto commitment radically to reform the market and we have been saying every single day since that we need to do more. Unfortunately, the Government have not been open to that discussion. I hope that that will change when we debate the Energy Bill in a few weeks’ time. We have propositions in today’s motion that, having listened to the comments today, I hope will get support from a number of quarters, and not only from our own Back Benchers.

[Several hon. Members]

rose—

[Caroline Flint]

I have allowed a lot of interventions. The Secretary of State is asking me to give way, and I think that I should give way to him.

[Mr Davey]

The right hon. Lady is right to say that there has not been enough competition in the generating side of the market. I will speak at length about competition in both the retail and wholesale markets. The real issue between us is whether we should get extra competition in the generating side of the market through pooling, as she proposes, or by addressing the lack of liquidity in forward markets, which we believe to be the real problem. Does she want to compare and contrast her approach with ours?

[Caroline Flint]

There are a number of measures that we should be taking to tackle liquidity. Pooling is just one of them. No doubt there will be more detail on this matter and amendments when we have the Energy Bill before us. The issue is that there has so far been nothing in the draft Bill that has opened up that debate. After the Prime Minister’s intervention last week, it seems that we will now have a debate that he did not realise would be forthcoming.

I will make some progress, because we only have a half day on this issue and colleagues from across the House want to speak. We had a shambles last week. We can only imagine that civil servants in the Department of Energy and Climate Change are now busily rewriting the Energy Bill. If they are, we would like to put forward three clear proposals that could help people now and reform the energy market for the long term.

First, there is a proposal on which we think there could be action for this winter if there were unity, but on which we might need to legislate somewhere down the road. It is about targeting help where it is needed most this winter, not next year once the Energy Bill is passed, and not when Ofgem finishes the consultation on its retail market review in 2013. We all know that something like 75% to 80% of people are not on the cheapest tariff. Ministers say that it is possible for households to save up to £200 on an annual dual fuel bill by shopping around for the lowest online rate, but elderly customers, who are most vulnerable to the cold weather and most at risk of fuel poverty, are among the least likely to be able to access the cheapest online deals or switch supplier.

In January, we proposed putting all over-75s on the cheapest gas and electricity tariff, which would save as many as 4 million pensioners, including 8,000 in the Secretary of State’s constituency, as much as £200 a year. The Government rejected our proposals, but given what the Prime Minister said last week, their position now appears to have changed somewhat. If it genuinely has, can we come together today and send this clear message to the energy companies: “If you don’t put the over-75s on the cheapest tariff, we will legislate to make you”? That is our first proposal—getting help to those who need it most.

We also want everyone to benefit from a more competitive and responsible energy market, which means wholesale reform to how energy is bought and sold, so here is our second proposal. At the moment, no one really knows what the true cost of energy is. The way the market is structured means that the big energy companies are allowed to generate power, buy it from themselves and sell it on to the public. We believe that has to end. The time has come to open up the energy giants’ books, stop the backroom deals and end the secret contracts. If the energy companies were forced to sell the power that they generate into an open and transparent pool, anyone could bid to retail energy. That would encourage new entrants, increase competition and ease the upward pressure on prices.

[Barry Gardiner (Brent North) (Lab)]

Does my right hon. Friend recall that when the Select Committee on Energy and Climate Change discussed vertical integration, one energy company chief executive was asked why a company such as EDF, which generates most of its electricity from nuclear power, should benefit from the high price of gas, which sets the market rate for the sale of the wholesale supply into the retail market. The answer, of course, was that Ofgem would not allow cross-subsidising from one side of that barrier to the other. Is that not why the tough new regulatory powers that we have called for are exactly what the Secretary of State should introduce?

[Caroline Flint]

I absolutely agree, and I commend the Select Committee for its fantastic work over the past year. Since I have been in my post, it has been most useful to my discussions and thoughts about how policy should develop.

Thirdly—this takes me on to Ofgem’s role—I am afraid that too often in the past, Ofgem has ducked the opportunity to get tough with the energy giants. I believe that we therefore need to create a tough new regulator that people can trust. I can tell the House that we seriously considered whether it would be better to reform Ofgem or start again from scratch. In the end, I do not believe that just giving Ofgem new powers is the answer, because it is not using the powers that it already has. It has failed to enforce its own rules, and time after time it has let the energy companies get away with ripping off hard-pressed families and pensioners.

As I said earlier, when Ofgem removed price controls a decade ago, it did so in the belief that competition had developed sufficiently, and that privatisation had delivered a functioning competitive market. It is now clear that that was a mistake. Almost every indicator, such as consumer engagement and market share pricing, gives us cause for concern. The answer is not to go back to nationalisation but to reform the energy market to make it more open, transparent and competitive. Until that happens, we must ensure that the regulator has the power and authority that it needs to protect consumers.

That was why, at the Labour party conference, I announced that the next Labour Government would abolish Ofgem and create a tough new regulator with a statutory duty to monitor the relationship between the prices that energy companies pay for their energy and the bills that the public pay. It would have the power to force companies to pass on price cuts when wholesale costs fall. It would be a new watchdog with new powers, new responsibilities—including for small businesses and off-grid customers—a new focus and new leadership.

[Simon Hughes]

Will the right hon. Lady give way?

[Caroline Flint]

I have given way to the right hon. Gentleman already. I am sure he will want to make a speech, and I will be very interested to hear any other policy ideas.

The Government promised change, but nothing is changing. Energy bills are up by more than £200 on their watch and fewer people than ever are engaging with the energy market, which is untransparent, uncompetitive and unfair. People need real help now and a more responsible energy market for the future, which is simpler, works in the public interest and protects the most vulnerable. Real action, not warm words—that is Labour’s promise, as shown in today’s motion, which I really do commend to Members of all parties.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Given the intense interest in participating in this debate, I have imposed an eight-minute limit on each Back-Bench contribution.

13:15

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

There is, I hope, at least one thing that unites the House today: we all want to help people struggling with high gas and electricity bills. When times are tough, as they are now, and when salaries are not going up yet prices of many essential things are, the last thing that people need is higher energy bills. We have heard the same worry in debates on the cost of petrol and diesel, for very similar reasons. When the price of oil and gas on world markets goes up, that pressure can feed through, and not just in the UK. The challenge to many Governments around the world is how to react to that and how they can insulate their people and their economy from fossil fuel price hikes. I therefore welcome the debate, which enables the House to test out the Government’s policies and the Opposition’s ideas.

I will set out the Government’s policies on how we believe we can best help people and businesses facing higher bills. Our position is based on a combination of ever-tougher competition and ever-more ambitious efforts to save energy. I wish to spend some time talking about that competition today.

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

I thank the Secretary of State for giving way so early in his contribution. We face the start of a cold snap at the end of this week, and it seems that we are getting into the cold spell of the year. Will he consider, if not legislating immediately, at least calling in the big six and the other energy providers to encourage them, instruct them and demand that they provide the lowest-cost tariff to the over-75s? We know that the older someone is, the more vulnerable they will be to cold snaps this winter, not just next winter.

[Mr Davey]

The hon. Gentleman may or may not be aware that two or three months into my time as Secretary of State, I secured a voluntary agreement with the big six. I negotiated it and the Deputy Prime Minister announced it in April. The agreement was clear, and the big six are delivering on the promise that they made to us, namely that they will inform people of the lowest tariff available to them. That was part of a range of policies that we have agreed with them. For example, there is the warm home discount, which is often forgotten in this debate. We legislated for that discount to ensure that £130 will go straight off the bills of the poorest pensioners and the poorest people in our society next year. That will get money to the people who really need it and help them with their energy bills.

[Caroline Flint]

The Secretary of State may not be aware of this, but I understand that research by Which? indicated that there was some confusion about whether energy companies were informing customers of the cheapest deal when they wrote to them.

The point about the over-75s is that a lot of them are not online. If they ring up their energy company and say, “I would like to go on to that online deal”, the company will say that they cannot do it in that way. We say that not being online should not be a barrier to that group of people getting access to the cheapest deal.

[Mr Davey]

I could not agree more. We want to ensure that all people can access the best deal, whether or not they are online. That is why we have made the voluntary agreement and why we will take powers in the forthcoming Energy Bill to ensure that the energy companies have to inform people of the best deal. As I will set out in my speech, we want to enable the poorest people in our society to get the help they need, whether about switching, competition or energy insulation.

[Mr Frank Field (Birkenhead) (Lab)]

Every poorer person will be pleased with the subsidy that other consumers are paying for, but probably 75% of them are paying way beyond what they need to pay. It is great for people to have a subsidy, but that subsidy may, and probably will, be wiped out by the price that those companies charge. There is a redistribution—quite rightly—from those of us who are better off to those who are less well off, but the money goes not towards extra fuel for our poorest constituents, but into the coffers of the companies. Surely there needs to be a combination with the current subsidy. I would go slightly further than my right hon. and hon. Friends on the Opposition Front Bench and ask why the scheme should not be extended to the 4 million people who are eligible for cold weather payments, which we know is the most vulnerable group.

[Mr Davey]

One thing I agreed during my negotiations with the big six earlier this year, ahead of this winter, was that those who receive a reduction in their bill through the warm home discount should also receive the most attention from energy suppliers to help them get the best available tariff. Those people were the priority then and they are the priority now.

What I find slightly odd about Labour’s position, is that they seem to be worried only about the over-75s. What about everyone else facing high energy bills? What about families who are struggling with those bills? The Government’s policies will address everybody.

[Mr Alan Reid (Argyll and Bute) (LD)]

rose—

[Mr Davey]

I want to make some progress and I will come to my hon. Friend in a moment.

The Government’s policies combine competition and energy saving, and are designed to drive a wedge between rising world energy prices and the actual energy bills that people in Britain end up paying—decoupling bills from prices. If tougher competition in the UK energy market can take the sting out of rising global prices, and if we can help people to use less energy, we can cushion families and firms.

In many ways, the right hon. Member for Don Valley (Caroline Flint) said similar things. She talked about competition and markets, and it was music to my ears. Where we differ, however, is in the detail, and in particular on how to generate the extra competition that she spoke eloquently about.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Will the Minister give way?

[Mr Davey]

No, I will make some progress and give way later.

When we consider competition in energy markets we must first separate the retail side from the wholesale side—or, in English, competition between firms that sell us energy and firms that generate it. There are, of course, many firms that are on both sides of that equation, just as there are policies to help on both sides.

Let me start with the suppliers, the retailers, the people to whom we pay our bills. We can drive competition in that area in two ways: by making the existing bigger players compete harder to keep their customers, and by enabling more firms to enter the market and grow—something on which the right hon. for Don Valley is rightly keen. Switching has, of course, been the principal way to do both those things, which is what happened by letting customers choose their supplier and forcing energy firms to offer better deals to hold on to customers. As the right hon. Lady rightly said, however, that system has not been working well, and switching has not helped the vast majority of people. In fact, it seems that switching rates have been falling just as prices have been rising. That bizarre finding seems to be the result of the virtual end of door-to-door selling which, as many of us know from our constituencies, was fraught with problems. Switching rates appear to have fallen in recent years, and those who continue to switch tend to be the internet savvy and often the more well-heeled, leaving the less well-heeled and less internet savvy out in the cold when it comes to getting the best deals. In essence, it is a very unsatisfactory situation.

The policy question is about whether we can promote competition through switching in other ways, or whether switching is simply not the way to go. I am delighted because it seems from the right hon. Lady’s speech that the Opposition have not given up on switching, and in fact they seem to be copying some of the policies that I first articulated. Since imitation is the sincerest form of flattery, I take that as a vote of confidence. For Members who may have missed that neat trick from the Labour Front Benches let me explain. The right hon. Lady talked about her commitment to collective switching, and she mentioned Labour’s “Switch Together” scheme. The Government support collective switching because we talked about it first. The right hon. Lady knows that the Labour party could have pushed that idea when in government, but it did not, and it was this coalition Government who got it.

When I was the Minister responsible for consumer affairs in the Department for Business, Innovation and Skills, I pushed the general notion of rekindling the spirit of co-operatives into different retail markets, and, in league with Co-operatives UK, I set up a competition to stimulate new ways for communities to buy things together. From that work, energy co-operatives emerged as among the most promising. That is because gas and electricity are pretty similar commodities, wherever and however people buy them, and because people are increasingly worried about their bills. However—this is crucial—many people find it too difficult to switch by themselves, and I have been addressing that problem. I have talked to a range of people about the barriers to collective switching, and I have got people—including Ofgem, the large energy companies or firms, and organisations capable of managing a collective switch—round the table where we have made real progress.

Regulatory barriers are coming down. Last week, we announced a nationwide competition, in which the winners, whether councils, community groups or others, will get seedcorn cash to help them get going. That national competition—not a Labour party competition—is called Cheaper Energy Together and should provide a boost to awareness and learning that could transform switching in the UK, not least because winning bids must show how they would involve the fuel poor in their schemes. If we are to see a revolution in switching, with collective switching, I will insist that the most vulnerable are part of that.

It must be slightly embarrassing for Labour Members to know that when they were in government, they did not use the collective principle to help people. It must be embarrassing because, although the current Government are using the collective principle to tackle fuel poverty, the Labour party did not. I am, however, genuinely delighted that the Opposition have overcome their embarrassment, and taken up our idea.

[Caroline Flint]

rose—

[Mr Davey]

I will give way to the right hon. Lady who can tell the House about the Labour party’s scheme, following that of the Government.

[Caroline Flint]

The Labour party was the first political party in British history to organise a collective switch, and we are proud of that. I am not sure what the Liberal Democrats might do—it might be switch apart rather than switch together.

Switching is important, but in truth, even if people are on the cheapest deal, it does not mean they are getting value for money and a fair price. That is why we must reform the way the energy market works, and tackle the dominance by certain companies that both generate and retail energy, and do not let others get a look in.

[Mr Davey]

I will come to that point, but I remind the right hon. Lady of what I said earlier. Under her party’s watch, the number of companies went down from 14 to six, so we will not listen to her too much.

Let me finish my point about switching and say why it is so important. Collective switching got going in Belgium just a few years ago, and we have now seen live, successful switches in the UK. The Consumers Association, Which?, led the way with its big switch earlier this year. It helped around 37,000 people to switch and get an average saving of £223. We have also seen smaller collective switches. Last month, South Lakeland district council was the first local authority to run a switch. Nearly 1,700 residents signed up, and early indications suggest savings that range between £60 and more than £200.

Yesterday, Oldham borough council launched its collective switch, which I attended. I did not see the right hon. Lady; perhaps she was there at a different time. That collective switch is called “Power to the people”—Citizen Smith would be proud. A wide variety of schemes are coming forward. I am already aware of eight, perhaps the most ambitious of which is Cornwall Together, in which the council, the NHS, the trade union Unison, the third sector, and St Austell brewery have come together to organise a collective switch.

Collective switching is not a silver bullet or panacea, but people are seeing how it can be part of the answer and reform the way switching works. Switching does not just force existing firms to compete more vigorously to keep customers, it enables smaller suppliers to grow their customer base faster. We know that customer inertia can be a barrier to competition, preventing new companies from getting market share, and collective switching reduces that barrier for small companies. Co-operative Energy won the big switch organised by Which?, and doubled its customer base overnight. Collective switching has the potential to be part of the way that we reshape the market.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

I welcome the Secretary of State’s comments on community involvement and the role of local councils. Many years ago, I wrote to all six energy companies to seek their support. Some were aggressive in their replies, not least Scottish Power. Only one—Scottish and Southern—wished to participate in such a scheme. What is the Secretary of State’s experience of energy companies’ reactions to the important role he mentioned?

[Mr Davey]

I am disappointed that the companies did not respond more positively when the right hon. Gentleman wrote to them. I do not know whether he wrote to them under the Labour Government. The voluntary agreement that we managed to secure after two months in office included a commitment from the energy companies to take part in collective switching proposals. A number of the big six took part in the Which? big switch, so we have moved them and we are changing things.

A key barrier to collective switching and ordinary switching is individual bill payers getting their details to the third party organising the switch, the switching website or the new supplier. In principle, that should not be too difficult, but the evidence we have found is that it is. We have therefore started to tackle the problem. In the voluntary agreement I negotiated, the companies agreed to put quick response codes on their bills. “What,” hon. Members may ask, “is a QR code?” It is a bit like a bar code, but smarter. The QR code should make it much easier for people to provide the energy bill details needed for switching, reducing the effort people must make. I can announce to the House that we will be consulting on that and a number of other measures when we introduce our consultation on consumer bills.

The Government have gone further to reduce the hassle of switching. In another consumer project I worked on at the Department for Business, Innovation and Skills—it was called midata—we looked at other ways in which an energy company could provide the customer with the customer’s data, for example, in easy-to-use or easy-to-pass-on electronic formats. BIS is now consulting on making the midata ideas a statutory requirement. Coupled with the work of Ofgem on simpler bills, that could be a huge catalyst for helping many more people to switch.

[Caroline Flint]

An Energy Bill is imminent. We have had pre-legislative scrutiny, white papers and impact assessment. Has it only just occurred to Department of Energy and Climate Change Ministers, including the Secretary of State, who took over at the beginning of this year, that they should consult in the run-up to a Bill that will be before the House in the next few weeks? Labour did a lot in government: 1.7 million fewer people were in fuel poverty when it left government.

[Mr Davey]

Unlike the right hon. Lady, this Government respect an independent regulator. Ofgem has been conducting its retail market review. It would have been completely inappropriate for the Government to publish a consultation before the independent regulator completed its work. She ought to know that. We have been waiting for the report and got it just last week. As a result of receiving that work, we will take forward our consultation, which will enable us to introduce new legislation in the Energy Bill.

[Simon Hughes]

My right hon. Friend is right to say that it would have been nonsense not to wait for the review to finish before considering what to do, but given that it is also absolute nonsense to propose abolishing a regulator, only to create a new regulator to do a similar sort of job—namely, regulating the energy industry—will he take the much more sensible option of being open to suggestions from wherever they might come as to ways in which we might toughen the role of the current regulator to make it much more responsive to the needs of our constituents?

[Mr Davey]

My right hon. Friend is absolutely right, and the Government will do just that.

I pay tribute to Ofgem’s work on simpler bills—the retail market review it published last week is an excellent piece of work. I was disappointed that the right hon. Lady did not welcome it. That might be something to do with her policy of abolishing Ofgem, which I should like briefly to turn to as my right hon. Friend has raised the matter. We want to understand why the right hon. Lady believes that abolishing one regulator and replacing it with another will make any difference whatever. That is a recipe for delay and chaos and for letting the energy companies get away with it while the Opposition mess around moving the deckchairs on the Titanic.

The right hon. Lady said that the previous Government looked at whether reforming the regulator would be better than creating a new one. She gave no good reason why we could not reform Ofgem, which is what this Government will do. It is interesting that she wants to spend time rebranding public bodies. I do not know whether she believes that is a good use of taxpayers’ money, but, interestingly, her proposal is rather disloyal to the Leader of the Opposition. I am sure she is aware that he legislated on Ofgem when he was Secretary of State for Energy and Climate Change. Just two and a half years ago, he told the House that the purpose of his Energy Act 2010 was

“precisely to strengthen Ofgem's powers in a number of respects and to make it a more proactive regulator”—[Official Report, 7 January 2010; Vol. 503, c. 254.]

Will the right hon. Lady come to the Dispatch Box to suggest that the Leader of the Opposition got it wrong just two and a half years ago?

[Caroline Flint]

The truth is that despite the powers extended to Ofgem, it is just not delivering. Four years ago, it found that some customers were charged different prices for using the same amount of energy, but energy companies are still using predatory pricing tactics. In 2008, Ofgem launched reforms aimed at supporting consumers, but according to its own evaluation in 2011, the reforms failed. In August 2011, Ofgem commissioned BDO to undertake a forensic investigation of how to improve transparency in the market, but by May 2012, Ofgem had quietly dropped six of the eight BDO recommendations and varied the remaining two. It is not delivering; it is not doing its job.

[Mr Davey]

I am extremely disappointed that that is the position the right hon. Lady has arrived at. The retail market review last week proposed to reduce and limit the number of tariffs from the massive number that exist at the moment to just four core tariffs. As my right hon. Friend reminded us, he asked the Labour Government to do that just a few years ago, but they did not. Ofgem has acted where the Labour Government did not. It will help to tackle the complexity of multiple tariffs, which have not helped transparency or competition. I am delighted that its plans allow collective switch tariffs to emerge in addition to the core tariffs. I am surprised that she wants to abolish a body that, under this Government, is taking the action that the previous Government failed to take.

[Gloria De Piero (Ashfield) (Lab)]

I have a very simple question for the right hon. Gentleman. Will the Government require energy companies to put all over-75s on the cheapest tariff, which is important in the run-up to Christmas?

[Mr Davey]

I am grateful for the hon. Lady’s question, not least because I was born in her constituency. The Government want to help everybody. I am surprised that she is focusing simply on over-75s. We are acting on over-75s and on all poorer pensioners, because the warm home discount will get £130 off their bills this year. We are taking action.

[Barry Gardiner]

Will the Secretary of State give way?

[Mr Davey]

No, I will not.

I have spent some time on competition in the retail energy markets, but the right hon. Lady spoke a lot about competition in the generating markets, to which I should like to turn. She made a great deal of wanting to reintroduce a pool to the UK and said it was in the Labour party’s manifesto. She did not really explain why, having abolished the pool in the UK in 2001, Labour wanted to re-introduce it. The Labour Energy and Competitiveness in Europe Minister at the time of pool abolition—she is now the noble Baroness Liddell—told the House:

“There is no question but that the electricity pool has distorted the market”.—[Official Report, 15 June 2000; Vol. 351, c. 1102.]

When the NAO reported on the old pool in 2003, it said that the

“the centralised arrangements of the pool carried with them a risk that some generators could manipulate the market and Ofgem consider that this risk materialised through much of the period of the Pool’s operation to the detriment of consumer interests.”

Indeed, many at the time believed that the pool was leading to higher and not lower energy bills. That is why the Government are not convinced by the Opposition’s policy.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

rose—

[Mr Davey]

I will give way to the hon. Gentleman, who is a member of the Select Committee on Energy and Climate Change.

[Dr Whitehead]

Is the Secretary of State aware of how many generators there were at the time of the abolition of the pool compared with the number of retailers, and does he think those circumstances have been replicated today? It would help the debate, if he could provide some numbers.

[Mr Davey]

I have already. I explained how the number of companies fell under Labour. [Hon. Members: “How many?”] There were two: PowerGen and National Power. Yes, I do know. And there are more generators now, so going back to the pool, when there were fewer generators, would be a bit odd.

[Ian Swales (Redcar) (LD)]

Does the Secretary of State think that the previous Government’s abolition of the public interest test on takeovers was one reason for the consolidation of the energy market?

[Mr Davey]

As a former competition Minister, I know that commenting on such things is extremely tricky, so I will leave that to my right hon. Friend the Secretary of State for Business, Innovation and Skills.

I want to focus on how we can tackle the real problems in the energy market. I think we all agree that there is a problem with competition. When we compare the UK market with overseas markets, a key observation is that our markets are less liquid, especially the forward market. To get a good, competitive energy market, firms should be buying and selling electricity three, six, 12 or more months in advance. If they were, and if we had greater market liquidity, it would be much easier for independent generators to enter the market and invest in generating plant confident that they can buy and sell electricity and manage their risks.

Faced with the might of large, vertically integrated energy companies supplying their own power, independent generators find it difficult to enter the market. I think we agree on that. The question is: how do we deal with that? The problem is with liquidity, not the pool. The right hon. Member for Don Valley, who clearly dislikes Ofgem, has not noticed that by threatening to take action Ofgem has, to some extent, already made progress on liquidity. As we have seen, large volumes are now being traded in the day-ahead market, which has improved price transparency. That is a good start.

[Caroline Flint]

One company.

[Mr Davey]

No, there is more than one company, as I think the right hon. Lady will find when she checks.

Ofgem and my Department agree that Ofgem’s voluntary measures do not go far enough, so the latter has been working on a mandatory auction, and it might well be that some sort of trading obligation is the way forward. I can confirm that I have been considering this matter intensively for some time, and that I will bring forward measures in the Bill to address it. At the very least, these will be back-stop powers in case the efforts of industry and the regulator prove insufficient. If we are to drive competition in the generating side of the electricity market to help people and firms struggling with bills, we must address the liquidity problem. The right hon. Lady’s policy does not do that, but ours does.

[Barry Gardiner]

I agree that it is important to free up liquidity in the forward market—I do not think there is any dispute about that—and, in so far as that goes, it is welcome. However, it will not address the problem of a generator such as Centrica making a £1.5 billion profit while the retail prices of British Gas rise, because it will not be possible to see that integration—it can show its profits where it likes. The Secretary of State talked about integration of the retail and wholesale market. He has to address that, otherwise we will not resolve this problem.

[Mr Davey]

The only way to ensure greater transparency is to have more liquid markets. That is the whole point of liquid markets. Without them, people cannot compete or buy and sell their electricity forward, and we cannot ensure price transparency. That ought to be welcomed by the Labour party. I would be worried if it set its face against greater liquidity in the forward market. It would be a very odd position to take.

I have spent some time explaining how our various policies will promote fiercer competition and help cut bills, and I have set out why I think the Opposition’s proposals are fundamentally flawed.

[Gavin Shuker]

What social obligations does the Secretary of State feel would be appropriate to place on energy companies?

[Mr Davey]

We put quite a lot of social obligations on them now. As the hon. Gentleman knows, the carbon emissions reduction target scheme is being replaced by the energy company obligation, which will include the affordable warmth target to help people in fuel poverty, and the carbon saving community obligation to help areas in fuel poverty. There will also be measures promoting solid wall insulation and other things needed to take energy efficiency policies forward.

[Andrew George (St Ives) (LD)]

I strongly support all the initiatives that my right hon. Friend is describing, but the energy companies are not addressing all the issues of fuel poverty. Those on the margins of credit still cannot take advantage of direct debit deals, while the falling block tariff also works against their interests, and there are a number of other measures where those companies are not addressing fuel poverty. Does he agree that they could do much more to help those in fuel poverty?

[Mr Davey]

That is one reason why I welcome the retail market review, and we will be consulting on measures and introducing them in the Energy Bill to address those and other matters.

I want to talk briefly about energy efficiency, although I am conscious of the time. On the social tariffs that the hon. Member for Luton South (Gavin Shuker) talked about, and on energy policy across the board, it is important to see both sides of the equation and understand what we are trying to do with clean energy. By 2020, all the energy and renewable subsidies combined will add £95 to bills, yet those same bills will fall by about £220, thanks to the energy efficiency improvements that our policies are bringing forward. Our green policies are about lower bills, not higher, and we are delivering on that.

As part of our policy, energy efficiency is a top priority for me, because reducing demand saves consumers money now and reduces future pressure on supply. I will give just two examples, although I am sure that Members across the House could give many more. Installing solid wall insulation saves about £270 a year on the average energy bill, while upgrading an old, G-rated boiler to a modern, A-rated one can save £200 a year. Our flagship green deal scheme will make it easier for home owners and tenants to improve the energy efficiency of their homes, paying for those improvements through savings on their fuel bills. I hope that we will continue to have the Opposition’s support, but I am not always clear where they stand on the green deal.

[Caroline Flint]

The Deputy Prime Minister suggested in a speech last year that he would tackle the concern about the high interest rate associated with the green deal. It will be about 7%. What progress has been made on bringing it down?

[Mr Davey]

The right hon. Lady ought to know that the interest rate will be set by the market, and that this—I say this as a former consumer credit Minister—is actually a great deal. People would not get an unsecured loan of this nature at the interest rates in the green deal. This will be a good deal for people on low incomes, in particular.

Through the energy company obligation, which will be introduced with the green deal, we will be requiring energy companies to provide an estimated £1.3 billion a year of support for energy efficiency in our homes, including £540 million to fund energy saving improvements to around 230,000 low-income, vulnerable households every year. Whether through reform of the energy market, our proposals on competition or our proposals on energy efficiency, the Government are taking action that will help people with their bills. The right hon. Lady’s motion would do the reverse—her proposals are fundamentally flawed—so I invite my colleagues to join me in the Division Lobby and defeat her motion.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I remind hon. Members that an eight-minute limit on speeches has been imposed.

13:48

[John Robertson (Glasgow North West) (Lab)]

The Secretary of State is very good with a brief in front of him but very poor when he comes before the Select Committee, where he has to answer questions. He beats around the bush and never answers a question, and I congratulate him once again on doing the same thing.

I congratulate my right hon. Friend the Member for Don Valley (Caroline Flint) on her motion, although we would probably disagree on a couple of things.

A month or so ago I introduced a ten-minute rule Bill on prepayment meters that would change the amount of debt that customers build up from £200 to £350 and give 200,000 people the opportunity to reduce their debt. Since then, Ofgem has announced that it wants the limit to be increased to £500, taking 400,000 people out of debt. I congratulate Ofgem on not only listening to me but going further than even I had suggested—I cannot have a go at it about that. I also worry about the 68 people it employs in Glasgow and, of course, the 722 staff in London who do the best they can with the rules they are given.

Ofgem and many other regulators such as Ofcom were introduced at a time when we wanted light regulation. That was a particular request shouted by those on the Opposition Benches while we were in government and we gave them that, but unfortunately times change. We are in a double-dip recession and things are harder. Many people in my constituency worry about whether they will be able to pay their bills this winter. The Secretary of State talked about helping people with energy efficiency, but how can we offer someone who lives in a multi-storey concrete block energy efficiency when they spend the summer cooling down the concrete walls and the winter heating them up? How can they have energy efficiency? They cannot. Those people do not have computers; they cannot switch providers.

I wrote to the energy companies three weeks ago and asked them to outline how they identify vulnerable people and what they do to try to help them. I have had three replies and three companies—E.ON, EDF and SSE—have not bothered to reply. They might not have quite got round to it or they might have been too busy counting money, but I want to know how they identify vulnerable people and, more importantly, how we can reach those people. No energy company has ever come to me to ask where I think the vulnerable people are in my constituency. I think I probably know better than those companies what happens in my constituency, given that I have lived there nearly all my life, yet they will not talk to me about these matters.

I asked about the cheapest tariffs—perhaps the Secretary of State could try this for his own house. People wanted to talk to me about that—not because I was a member of the public but because I was an MP, so they thought that the companies would give me some attention—but even they could not tell me the cheapest tariff. If they cannot tell me what the cheapest tariff is, what are they telling people outside this place?

The Secretary of State talked about four tariffs. If I pay by direct debit, will I get a lower bill? Yes. We have now doubled the four tariffs to eight. If I pay by cheque, will it be cheaper than a payment by standing order? Before we know it, there will be 20 or 30 tariffs rather than four. It is ridiculous, however, that we have 400 tariffs, and I raised that question in my Select Committee when the previous Government were in power.

[Mr Mike Weir (Angus) (SNP)]

Is it not also a problem when we try to compare different tariffs from different companies, as they are not always trying to sell the same thing? We need identical tariffs—perhaps four of them—across the companies because otherwise it is meaningless.

[John Robertson]

The hon. Gentleman is absolutely right, but I would go even further. I met Which? this morning and its representatives said that they wanted energy to be like petrol and diesel. We are given a price for petrol and diesel and we know how much we are paying per litre; Which? wants to do the same for units of energy. Different companies can charge different prices. I do not have a problem with companies making a profit, but if they make an obscene profit I expect the next Labour Government to consider a windfall tax. We let these companies run as businesses and we want them to act responsibly, but if they make obscene profits on the backs of people, particularly poor people, I would expect my Government to consider that and to tax them accordingly.

I have to agree with the Secretary of State on the question of the over-75s. I would bring the minimum age down to the retirement age. As the retirement age is going up, 75 might not be off the mark in a few years’ time, but at the moment it is 67. If I retire, I will be 65, fortunately, so it would be nice if that age limit was 65.

That takes us back to vulnerable people. There are many single parents and disabled people, and we forget about them at our peril because they sometimes need more help than the elderly. As we move towards becoming the next Labour Government and proposing our own energy Bill, we need to consider these matters as they are very important.

In Prime Minister’s questions today, the Prime Minister was asked about his previous statement on tariffs. As I said earlier, no one really knows what those tariffs are. The Department of Energy and Climate Change told our Select Committee that it could not intervene and that it was down to the companies, but now it says it can intervene.

The regulator is, unfortunately, very poor at delivering. It is not that it does not want to do the right thing—it does—but the Government set the agenda for Ofgem. If the direction is poor and the regulator is not given the power to impose fines—[Interruption.] If the Secretary of State listened for a second, he might learn something.

There is an imbalance in how the generating companies spread energy about the country and it seems to be a bit of a rip-off. We pay the companies to shift electricity from one side of the country to another and it costs the taxpayer more than £340 million. It used to cost only £35 million, but it is now closer to £350 million, so why have the Government and Ofgem, who know that that fiddle goes on, not taken any of those companies to court to try to get the money back? I am told that one of the worst areas for that double dealing is the Cheviot hills, which are only about 20 miles from my house.

If wind farms are part of the problem and are being paid to close down, there is something wrong with our energy policy in this country. We need to look at that. I believe that Ofgem does a reasonable job but could do better and a reorganisation would be the best way forward, as we cannot reinvent the wheel once we have it. The Secretary of State also needs to get on top of his job and portfolio so that he can help people as he is supposed to, rather than engaging in stupid political point scoring from the Dispatch Box.

13:58

[Mr Marcus Jones (Nuneaton) (Con)]

I welcome today’s debate, because energy is one of the most important issues for my constituents. The pressure on the cost of living over the past four or five years has been relentless, with petrol and diesel prices going up almost weekly, food prices going up in the same fashion and energy bills soaring. Over that time, people’s incomes have not increased anywhere near in line with those increased costs and salaries in both the public and private sectors have been pretty much static.

Despite the rhetoric we have started to hear from the Opposition, the Government have made moves to try to help with the cost of living. We all know that had the Opposition been in power, petrol and diesel would have been 10p a litre dearer at the pumps. We all know that the Government have frozen council tax for the third year in succession, in stark contrast to Labour, which doubled council tax during its 13 years in government. My constituents who commute using Nuneaton station will also be heartened that regulated rail fares are to be capped this year.

Much of the problem with energy prices stems from energy generation issues and the energy market. We all know that the wholesale cost of oil and gas accounts for half the cost of energy. Given Labour’s inertia, inactivity and lack of enthusiasm about energy generation during its 13 years in government, it seems opportunistic for Labour Members to put forward this motion.

I welcome the fact that the Government are working hard to incentivise low-carbon energy, and I hope that the Minister will provide some reassurance about the energy mix and confirm that clean coal will be a firm part of that mix. Many of my constituents work at Daw Mill colliery—one of the largest deep producing coal mines in the country. I am sure that my constituents will be very interested to hear the Minister’s comments.

[Barry Gardiner]

The hon. Gentleman quite rightly said that wholesale electricity prices are based on the wholesale price of gas, but will he explain why a company such as EDF, which supplies electricity to its customers yet generates from nuclear, should benefit in exactly the same way from the higher price of gas, which of course it does not pay?

[Mr Jones]

The hon. Gentleman’s comments are interesting. I am a firm supporter of nuclear energy—he might not be, but it is absolutely necessary. This Government are trying to incentivise companies to make sure that nuclear is a firm part of the energy mix and that we are not switching off the lights.

[Ian Lavery (Wansbeck) (Lab)]

The hon. Gentleman mentions Daw Mill colliery in his constituency. It faces closure, yet it has thousands of tonnes of reserves—it has one of the biggest reserves in the country. What do the Government intend to do to save those jobs and exploit those reserves?

[Mr Jones]

I thank the hon. Gentleman for raising that point, as this Government have been helpful and have followed the situation at Daw Mill very carefully to try to help it have a future. I am aware that positive negotiations are going on between the work force, the unions and the company to try to secure its future after many years of poor management, which left the colliery without the necessary work being done on the coal faces to help the company sustain an operation employing 800 workers. There are challenges there, but I am confident that the interested parties can come to a deal. I assure the hon. Gentleman that my hon. Friend the Member for North Warwickshire (Dan Byles) and me, as constituency MPs, and the Minister responsible for energy have spent a lot of time trying to help.

Let me move on to discuss another important part of our future energy policy—shale gas. Notwithstanding the environmental impacts and assessments that need to be done, I very much feel that shale gas has a real future. In coming years, it will help to create sufficient energy supplies and contribute to energy security, as well as helping to bring people’s bills down, as it has in the United States.

The energy market itself is an important matter. The right hon. Member for Don Valley (Caroline Flint) came up with a gem—or probably what I would call an “off-gem”—when she admitted that Labour had created the problem by reducing the number of energy providers from 15 to six. She now expects the current Government to sort it out, which is quite interesting and seems to be a recurring theme: this Government having to sort out the inadequacies and the mess left by Labour.

I went on to a price comparison website this morning to find out the position if I chose to move energy suppliers. Under the dual fuel section, I clicked on to E-ON and noticed that I could change to any one of 52 tariffs. For example, there was the E-ON fixed price 5, E-ON fixed two-year Tesco clubcard points, Age UK one-year fixed, not to mention the other 49 different tariffs of different descriptions. There is a real issue of transparency; people need to know what they are signing up to and what else is available to them. I welcome the Prime Minister’s announcement that the Energy Bill, or part of it, will be used to encourage energy suppliers to take responsibility for letting people know the lowest tariff and for trying to move people on to it.

The cost of living is another important point, and I shall particularly mention the mortgage market. People finish a fixed deal with a mortgage lender and are put on to a standard variable rate, which might not be the best rate, or are not told that a better rate could be achieved. People who do not always look at these things are paying more than they need to. We definitely need to consider this issue across the piece.

We need to ensure more consumer choice for energy. We have more competition and more transparency in the market. I am heartened by Ofgem’s proposals to pare down all complex, multi-tier tariffs and limit energy companies to a smaller number of core tariffs. I think that will help people better to understand what they are signing up to and what they can go on to. We must also ensure that people know that they are getting value for money. We know all the trouble and hassle that swapping providers can cause; we know that it puts people off, so we need to make it as simple as possible to swap providers.

In my remaining minutes, I want to highlight consumption as a major issue. We must keep working hard, and I know that the Government are trying to reduce people’s energy consumption. I am sure that the green deal will make it easier for people to make home improvements that reduce their energy consumption. Many people who have worked and are working hard might not have the necessary capital sum available, might not qualify for benefits and might not be able to get other incentives, payments or grants to improve their property, but the green deal will give them the opportunity to help themselves to reduce their bills.

We need a balanced, open and honest debate on this issue. We need to make sure we do all we can to reduce the cost of living across the piece for all our constituents in these hard-pressed times. What we certainly need to do through this debate—and, I hope, through the Energy Bill—is to put in place a framework that will ensure that we have long-term energy security, enabling our constituents to reduce their bills in the coming years.

14:08

[Mr Mike Weir (Angus) (SNP)]

I have no great problem with the motion moved by the right hon. Member for Don Valley (Caroline Flint). I might even vote for it—despite the fact that she would not take any of my interventions. I would, however, like to comment on one aspect. The motion is headed “Energy Market Reform”. In fact, both Front-Bench spokesmen entirely concentrated—apart from one brief mention from the right hon. Lady—on the big six in the electricity and the gas markets. As often happens in these debates, they totally failed to address the problem of those who are off the gas grid. To their credit, this Government brought forward the Office of Fair Trading review of the energy market. To almost universal disbelief, however, it was decided that the market was working fairly.

The Secretary of State spent a good deal of time talking about competition and how he was going to introduce it; again, this seemed to be focused on the electricity and gas markets. However, those who are off the grid have faced some of the highest price rises over the past year. The OFT said that that market was working okay because there were plenty of suppliers in it. I should like to think that that there are plenty of suppliers, because many of them are connected with each other, but does that not illustrate the difficulty of dealing with the issue if we rely on competition? Competition has failed in that market, and, indeed, in the bigger market as well.

There has been much talk about switching. There are several problems with that. For instance, when one of the energy companies puts up its prices, there is a follow-my-leader process: over the next month or two, the rest start to follow suit. People who have switched have found themselves in a worse position, because although the company to which they switched was giving a better deal at first, suddenly it is not a better deal any more.

The Secretary of State spoke said that the community base must include the fuel-poor. That is true, because they are the only people who will really benefit from switching. When I joined the Which? campaign, I looked into whether it was worth my while switching. However, I am still using the former monopoly supplier in my area, which was much derided earlier in the debate. When I received the figures from Which?, I concluded that switching would not be worth my while because the savings would be so low, and in view of the hassle that would be involved in switching, I did not bother.

The hon. Member for Glasgow North West (John Robertson) mentioned his private Member’s Bill, which deals with pre payment meters. People with pre payment meters will make significant savings only if they are on a very high tariff. Those of us who have made the effort to reduce consumption and become more energy-efficient also find that it is not worth switching, because we are not using enough energy for it to be worth while. The real problem is that energy bills continue to rise, and that hits everyone.

[John Robertson]

The hon. Gentleman was an excellent member of the previous Energy and Climate Change Committee, although we did not always agree, particularly when nuclear matters were being discussed. Does he agree that those who would save the most money by switching are the ones who do not receive the necessary information, or even have an opportunity to switch?

[Mr Weir]

The hon. Gentleman is right. There are many reasons for that, but one of the most basic is the digital divide. Many people who might otherwise benefit have no access to these deals, because many are online. They find it very difficult to obtain information. Furthermore, they tend not to have bank accounts.

Let us be honest: the energy companies are not interested in those people. They are the customers who may run up debt, and the energy companies do not generally want to take them on. They make sympathetic noises now and again, but the customers they want are people such as the hon. Gentleman and me, who are relatively well off and can pay by direct debt. I presume that the hon. Gentleman pays his bills on time; I would certainly expect him to. Those are the people whom the energy companies are after, and those are the people who are being targeted for the purposes of switching.

The Secretary of State is right—it will make a great difference if we can get community switching on the go and target the fuel poor—but he will have to change the energy companies’ thinking, and ensure that not just the well-off but the fuel-poor are taken on board. Unless that happens, community switching will make no difference. However, I do not oppose what the Secretary of State said. It interested me, and I should like to see how it works out.

Let me return to the issue of off-grid gas, which affects my constituency and, indeed, much of rural Scotland. While 15% of the households that are on the gas grid are in fuel poverty, the figure rises to 32% for those that are off grid. The Government should think about ways of getting into that market and doing something about it. In my own private Member’s Bill, I suggested that one way of helping everyone quickly, particularly pensioners, was to bring forward the payment of the winter fuel allowance. My suggestion was never debated, because the Tory Whips objected to it for their own reasons, and the previous Bill was talked out. I have raised the matter time and again in the last Parliament and in this one, and I am still waiting for a member of the past or the present Government to explain why my suggestion cannot be considered or even debated.

It is not always the huge changes that make a difference; we can make a difference by means of small, incremental changes. They may not be revolutionary, but they will help, and any help during the coming winter will be very welcome to pensioners and those in fuel poverty. Although the great schemes all sound grand, it may be years before any of them actually makes a difference, and people are suffering from fuel poverty now. As a Labour Member pointed out earlier, a cold snap is predicted for the end of this week. Winter is approaching, energy bills are creeping up, and people are worrying about how they will pay them.

Rather than talk of, for instance, getting rid of Ofgem, we need action. As I have said, small incremental steps can make a difference, but the Secretary of State—the Government—should tell the energy companies that unless they address the problem, there will be stronger action. The Prime Minister promised legislation to put people on to the lowest tariffs, but that seemed to unravel in hours rather than days, and we are still none the wiser about what will be in the Energy Bill. Ofgem’s proposals at least had the benefit of being better thought out, but they too rely on switching and making tariffs simpler. Unless we reach the people who are suffering from fuel poverty and who are at the bottom of the heap as far as the companies are concerned, those changes will make no difference.

I urge the Secretary of State to speak to his colleagues in the Treasury and the Department for Work and Pensions, and to consider measures such as bringing forward the winter fuel payments for pensioners off grid. Such small steps will make a difference, and they will make a difference now.

14:17

[Gordon Birtwistle (Burnley) (LD)]

The problem is that electricity suppliers buy the fuel that produces the electricity from the world markets. Gas, oil and other fuel supplies are bought on the open market: the gas supplied in Russia, for example, can be sold to the United Kingdom, or indeed to any country, at a price. When the price of gas rises, the end result is that the price of electricity also rises, and the same applies to oil.

[Caroline Flint]

The price can go down as well.

[Gordon Birtwistle]

That is true, but my point is that fuel is bought and sold on the open market. We need to ensure that the supply of both gas and nuclear fuel in this country is secure for the long term. We do not want to rely on foreign suppliers, because that could bring about a situation similar to that in Chechnya when the Russians turned the gas off.

[Barry Gardiner]

The hon. Gentleman is right to focus on security of supply, which is an essential part of the future of the market. He said that the price of gas would go up and down in accordance with the cost of procuring it on the open market. Can he explain why the wholesalers who generate the electricity by means of that gas do not drop their retail prices when wholesale prices have dropped in the international markets?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. May I remind those who continue to intervene that they will be placed at the bottom of the list rather than the top, because they have already spoken? I am sure that they will want to save something for their speeches.

[Gordon Birtwistle]

I take the hon. Gentleman’s point, and I agree with him. Maybe it takes a while for the price of gas to go down. Gas is bought in advance, and gas bought six months hence could be a lot cheaper than that bought now, but the expensive gas might have to be used up before the cheaper gas can be used. I do not know the gas market; I am only trying to make the point that we are in a world market and we buy in those markets.

As for the idea of pooling—a suggestion made by the Opposition Front-Bench team—who will be the suppliers? We do not know who they are. That is an issue, but the main issue is that we have to be able to understand the tariffs. I do not understand the tariffs. I have been with the same supplier since I signed up many, many years ago. I buy my gas and electricity from British Gas, because it tells me that I am getting the best deal. Every time British Gas changes the tariff, it tells me what the tariff is and assures me that, because I am a loyal customer, I am on the bottom deal. I have never checked: I believe British Gas and I accept what it says, because basically I cannot be bothered to have a look. However, at the end of the day, we have to resolve the issue by ensuring that the people who can be bothered have a chance to do that, if they are able. The collective switching arrangement that has been suggested by the Secretary of State is an extremely good idea—certainly the arrangement is extremely good for Cornwall, where everybody can take advice from a switching consortium, as is the arrangement taken up in Oldham only yesterday. Indeed, the same thing can take place right across the country.

If I remember rightly, many years ago we had things called co-ops. We used to buy from the co-operative, which had itself made purchases, with discounts given through the system. I remember that my mother’s divvy number was No. 50, and we got a divvy every year from the savings that the co-op had achieved by buying in bulk and selling to the general public.

In the time I have left, I would like to talk about the real way to save money on electricity: by using less. If people use less, they obviously pay less. I would like to mention a scheme from my constituency of Burnley, where well over 15,000 properties got solid-wall insulation from outside cladding. It was done in co-operation with the Government, British Gas and the registered social landlord that owned the properties, a company called Calico. I took great notice of what happened—it was the biggest scheme in the UK, I was told—and I have since followed it up and visited quite a number of people who had their properties done. I said to them, “Apart from the house looking a lot better than before—you’ve had the outside cladding done, your roof spaces all clad and all the new boilers fitted—can you tell me whether you have had a substantial change in your electricity bill?” The first gentleman I spoke to said to me, “The house is now so warm that I’ve persuaded my wife to turn the thermostat down, which in itself is a major achievement. I had my loft space insulated and my wife volunteered to turn down the thermostat, because it was now too warm to wear the extra jumper that she was wearing.”

When I asked people, “So have you found that by turning your thermostat down you have seen a major saving?” the answer every time was “Yes, and a substantial saving.” In one case, the gentleman had taken a note of the savings he had made, which were approaching 30%. No matter what tariff someone is on, no matter where they look for discounts and no matter what allowances are made for certain people, they will never, ever be able to get a 30% discount. The Government could not fund a 30% discount, the companies supplying the electricity could not give a discount of 30% and the tariff changes will never give a 30% discount. I believe that the way forward and the way to save money is to spend money on cavity-wall insulation—the outside stuff: I am not keen on filling the cavity with insulation, because that creates damp—plus everything that goes inside, plus the new high-efficiency boilers. That is why I welcome what happened in Burnley and why I welcome the new green deal, which will enable RSLs to provide such insulation on the properties they rent out, particularly in my constituency. I do not really accept that what is in today’s motion will change things.

Finally, on Ofgem, I have to say that I am definitely anti-quango. We have far too many quangos. The day we get rid of 90% of the quangos will be the day I can leave this place and say that I have really done something. However, we do not replace a quango that is inefficient with another quango. The way to do it is to get the existing quango to do its job. I hope that the Secretary of State will lean on Ofgem and make it do what it is paid to do and make it deliver to the general public what it is supposed to deliver. If Ofgem is not doing that, we should not change it, but get rid of the people in it who are not performing and replace them with people who will deliver what Ofgem is supposed to deliver.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am going to have to drop the limit to six minutes to get everybody in. [Interruption.] It is no use sighing with great disdain. If Members were a bit more careful and took up less time with interventions, this would not have happened. Let me remind Members: if you want to speak, try not to intervene; and if you do intervene, understand that you will end up at the bottom of the list.

14:25

[Dr Alan Whitehead (Southampton, Test) (Lab)]

When the Government announced that they were going to introduce electricity market reform and publish a White Paper and a Bill, I was pretty excited, because I thought it would be an opportunity to reform the way the electricity market works—or rather does not work—in delivering choice and providing for entry to the market and price stability, as a result of competition, and how it might do that in future on a low-carbon basis. In truth, however, we see from the electricity market reform Bill that is coming forward that there will be no reform of the electricity market. In fact, the Bill that is coming our way ought to be called the “Additions and wheezes to try to make the existing market work rather better, particularly as it refers to lower-carbon energy” Bill, because that is in practice what is happening—that is what is before us at the moment. The Secretary of State appears to be happy to go along with that, not only in not reforming the electricity market at all, but by relying on a wonky grasp of history to reject alternatives ways in which the market might work to secure better competition, a better level of entry and an end to the vertical integration that has plagued the market over recent years.

The pool has been mentioned this afternoon, but the pool as was—up to 2000, when it was abolished—was in fact never a full pool. Something like 90% of bilateral trades were allowed to escape the consequences of the pool, and for most of its time it had only two generators—and sometimes three—for the wholesale end of the market. Circumstances are fundamentally different today, inasmuch as one thing has remained constant. Most trades escape the day-ahead market and are done bilaterally—and completely non-transparently, in defiance, essentially, of what the market was supposed to do—and those who generate the power have an overwhelming stranglehold on the retail market. The market is vertically integrated to the extent that an awful lot of deals take place not between people, but within a company.

Consequently, the market simply does not work; it does not keep bills down, get new entrants in and work properly for consumers. The idea of a modern pool therefore seems essential to moving the market forward. A pooling arrangement would separate who sells into the market from who buys out of it. Such a system, as put forward by the Opposition as part of their proposals for real electricity market reform, can on the basis of a low-carbon and a high-carbon pool ensure a proper market for those low-carbon generators that are independent of the vertical integration that goes on elsewhere.

What I find truly dispiriting is that the electricity market reforms proposals as they stand will end any obligation to purchase any power from low-carbon and renewable generators in 2017. As a result, vertical integration is likely to proceed apace into the areas of some independent entry among low-carbon generation providers. With the ending of the renewable obligation in 2017 goes the ending of any power purchase agreements, which have given people certainty that they might be able to sell the power they generate on a low-carbon basis into the market. Surprise, surprise, the only people who will be likely to offer anything like a power purchase agreement once the renewable obligation has gone will be the very companies that are integrated into the market at the moment. Therefore, the prospect before us is of further vertical integration of the market as so-called electricity market reform proceeds.

We have to break that cycle. Over and above the half-hour settlements, the only way we can do so within the central trading arrangements in the market is to ensure that all trades are conducted within a pool system and are completely transparent and completely contestable both ways—low carbon or high carbon. That system would make eminent and straightforward common sense given the current failure of the electricity market.

If we do not address this problem in our reforms, we will live to regret it, because we will not have given ourselves the opportunity to introduce a key instrument that can bring about price discovery and stability and competition in the market. If that is what we want, we will be sorely disappointed as the market will subsequently fail to protect both the consumer and routes for new entrants to make their way into the market and to provide greater choice for the future. I urge Members to take careful note of the proposals both for that reason and because we want a stable market for the future which provides low-carbon energy.

14:31

[Guy Opperman (Hexham) (Con)]

I would suggest that fuel poverty and energy prices are apolitical, cross-party issues. These matters greatly affect the residents of Northumberland whom I and my colleague on the Opposition Benches, the hon. Member for Wansbeck (Ian Lavery), represent. Successive Governments have, to their credit, tried to address the problems. I do not come here to criticise the previous Government. As I have made clear to the shadow Secretary of State, the right hon. Member for Don Valley (Caroline Flint), there is much that could be said on that, but I am more interested in how we should proceed.

I wholeheartedly welcome the current Government’s decision to address the issues we face robustly and properly. It is good that we are seeking greater transparency and competition, and greater opportunity for people to have cheaper energy. Much of this debate has focused on electricity, of course, as it is the primary source of power, but I want to talk, too, about heating oil, liquefied petroleum gas, biomass and shale gas.

I support this Government’s efforts to explore shale gas provision through the Department for Environment, Food and Rural Affairs as well as the Department of Energy and Climate Change, and to try to make the most of the fact that we have so much potential shale gas power. It has transformed the energy market in the United States of America. If we do not push forward with this, we will have to face up to the consequences. We must proceed in an environmentally sound way, of course, but we should be pursuing the shale gas option.

I listened very carefully to the shadow Secretary of State’s weighty and lengthy speech. I must point out, however, that it is undoubtedly the case that the reduction in tariffs now being sought was most certainly not sought by the Leader of the Opposition when he was Labour Energy Secretary. He could have legislated for Ofgem to act, as the current Government are now doing.

The motion talks about those aged 75 and over, which I welcome, but we are addressing these issues as they impact on everybody, not just the over-75s. In the main energy market, it is true that there used to be 14 major competitor companies and there are now just six. The heating oil market is important in Northumberland, and there used to be 17 different providers in the Northumberland area, but due to the way the market was—supposedly—being run by the previous Labour Secretary of State, they were amalgamated and the amount of competition rapidly reduced. Similarly, there is now a single provider of LPG in my area and to the west of the region; there is no competition whatever. This market is manifestly broken, therefore, and I welcome the action that has been taken.

The hon. Member for Southampton, Test (Dr Whitehead) is clearly very learned in respect of the issues under discussion. He talked about a modern version of the pool—that sounds like something somebody would propose for planning permission—but that was scrapped in 2000, and neither was it in the 2010 Labour party manifesto. [Interruption.] I am not going to get into this topic now; I look forward to hearing evidence to the contrary in the winding-up speeches—when it will, perhaps, be pointed out to me exactly where in Labour’s 2010 manifesto is the proposal to establish the brave, modern pool features.

I have one particular criticism of the policy of the current Government, however. It is to do with the provision of biomass, whether by way of companies or households. I should declare an interest in that there is a company called EGGER in my constituency, which employs more than 400 people, and it is materially affected—as are vast numbers of other people—by the fact that the state continues to subsidise domestic purchase of biomass so that those who wish to purchase timber and other core products are priced out of the market. This is a cross-party issue which I and others have raised with the relevant Ministers and Secretaries of State, but we must address the fact that energy is currently costing more because we are subsidising it, and that subsidy could be got rid of. Renewables obligation certificates could be reformed so that imported timber is subject to a subsidy, but domestic timber is not. That would save taxpayers’ money. It would allow a level playing field for the use of the core product and it would allow businesses to prosper and move forward in the right way.

I will reject the motion, therefore, as it is manifestly wrong, and I will support the Government.

14:37

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

In order to save time, and to help those on the Government Members who might be tempted to intervene on me, let me say that I will be making the same kind of speech that I have made for the past six or seven years, although progress has been nothing like I would have liked. However, I support the motion, of course, as its proposals are radical, relevant and realistic.

I urge the House to look at the situation we now face. I found it chilling to read in this morning’s Order Paper an early-day motion entitled, “Excess Winter Deaths.” It points out that there are

“30,000 excess winter deaths each year in the UK”.

That alone is a powerful argument for saying we should address the real problems. The early-day motion also says that the cost

“has been estimated by the Chief Medical Officer at £890 million per year in England alone”.

That is another price we are paying for the current situation.

This is a real problem for my constituents. Of course we can make great statements about the markets and talk about who did and did not intervene, but the reality is that we find ourselves in the current situation because we have left so much to the markets over the years and because the regulators either do not have the power to act or do not seek to use the power. I want, as I did when we had a Labour Government, to change that.

What is the reality of the situation? In a recent poll, 90% of people surveyed claim that they are concerned about their energy bills, and continued rocketing prices mean that this is now the top household worry. Even worse is to come, as it is predicted that half the population will be in fuel poverty by the end of this year. That is a very sobering figure. About 2 million more people are experiencing fuel poverty than when I first secured a debate in Westminster Hall about six years ago. Eight years ago, the average household spent £522 a year on electricity and gas, but the figure has now risen to a staggering £1,232. That is an average increase of 140%, whereas average household income increased by a mere 20% during the same period.

People on low incomes, single parents, people with disabilities and many others are terribly worried about what is going to happen this winter. I had hoped that, arising from our debate, we might have been able to offer more hope than I have been convinced has been offered so far. The price of no other commodity has risen so steeply as that of energy. Consumers have been hit with huge energy price increases and they are powerless to do anything other than suffer in fuel poverty in increasing numbers, which is wholly unacceptable. New research has shown that half the population will be in fuel poverty by the end of this year. I know that I am citing statistics, but I plead with the House to remember that this is all about individuals and families; it is about ordinary households in our constituencies. On average, 37% of consumers are spending more than 10% of their income on gas and electricity bills, and the figure will rise by a further 13% by the end of 2012, leaving 30 million people falling into the defined category.

So there is a problem, and it does call for transparency, for improving competition and for driving down energy bills. The average energy bill doubled in the past seven years, and 2 million more people are experiencing fuel poverty. I support, profoundly, everything the Labour Government did to give heating grants and so on, particularly given the problems faced by pensioners. However, I do not believe that it is the role of government to look at the profits that the energy companies are making and say, “We should be subsidising them.”

That is the reality of the situation. What can we do about it? We have to act and we must have real regulation. In the limited time left available, I have to say that I do not believe that Ofgem has the confidence of consumers to the extent that I would want to trust it with the role that it has. There ought to be a new role for people who are given real teeth to deal with an absolutely scandalous problem, which is predictable and predicted. People should not be suffering this winter. We can avoid that and we can do so through a rational approach to energy policy.

14:43

[Ian Swales (Redcar) (LD)]

I want to discuss the part of the motion that talks about

“allowing new businesses to enter the market”.

I would have used the word “encouraging” rather than “allowing”, but I support that section and the Government’s efforts in that direction. Last week, in Seoul, South Korea, a deal was signed by the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for East Devon (Mr Swire), the British ambassador to South Korea, and the chief executives of Korean South-East Power, Daewoo Securities and Eco-Frontier. The deal was signed with the UK company MGT Power to build a new 300 MW biomass power station at Teesport in my constituency, at an estimated cost of £500 million. The deal is being announced today, and the whole House should welcome the investment by ambitious Korean companies in the UK energy sector.

Last week, the House debated the Infrastructure (Financial Assistance) Bill. The support it provides will, no doubt, aid investment by new players, and it represents another move by this Government to encourage new projects. The measures were rightly supported by the whole House.

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

May I just tell the House that I returned last night from Korea, having been there for the PRECOP—pre-conference of the parties—talks? I wish to pay tribute to my hon. Friend’s role, as the constituency Member of Parliament, in helping to attract some substantial and welcome investment.

[Ian Swales]

I thank the Minister for that approbation. Such investment is all good news, but to encourage new investors, especially green investors, we need clarity of policy, simplicity of policy and, above all, certainty of policy over the long term. Any arrangements made must be grandfathered over the period of a project. I wish to say a bit more about green investment, because one of the key features for investors is political risk. Gyrations in policy have seriously damaged the nascent biofuels industry in the past decade, and we must remember that policy can emerge independently in both Westminster and Brussels. Without giving too much encouragement to hon. Members sitting behind me, I believe that we must sometimes stop the change and the conflicting policies emerging from over the water—we are dealing with one such policy on biofuels right now.

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

The hon. Gentleman mentions Brussels, and he, like me, is a strong supporter of carbon capture and storage technology; I not sure whether he was about to make some remarks about it. Given what he has just said, does he share my concern about today’s suggestion by his Lib Dem MEP colleague Chris Davies that the NER300 money that was supposed to be available for potential UK CCS projects is now not going to be available? Chris Davies said:

“Carbon capture and storage blocked. UK to lose out on €600 million”

and that this

“is a major defeat for Lib Dems”.

Does the hon. Gentleman share my concern about that? Does he want the Minister to respond to it?

[Ian Swales]

The shadow Minister is raising an issue that I knew nothing about. If he is right, that does sound disappointing. However, I need to go away and look at the details.

Not dealing with long-term political risk will make potential investors simply go away. Alternatively, they will charge a huge risk premium, which may in turn make many schemes not viable. The recent whispering campaign against this Government’s green policies from some quarters has been particularly unhelpful.

I agree with what has been said about the problem of the market between generators and suppliers, and between the sellers and the customers. I spent the first five years of my career in the Yorkshire Electricity Board, which was a monopoly supplier to that part of the world and was buying from a monopoly producer, the Central Electricity Generating Board. So I am well aware of how inefficient such markets are. Despite our criticisms today, I think that we are in a lot better place now than we were at that time.

Encouraging new investment in energy is good for UK business and good for growth. I know that because I see it in my constituency, where, as well as the project that has been mentioned, Ensus runs the largest bioethanol plant in Europe, which has recently restarted; Northumbrian Water has invested £60 million in an anaerobic digestion power generation unit; and EDF is, right now, building 27 giant wind turbines just off Redcar beach.

One part of the Teesside carbon capture and storage project is for International Power to bring its mothballed 1.8 GW gas-fired power station at Wilton back online, and I hope that the current bid in the UK will be successful. The recent Ensus 12-month shutdown was salutary. I made a ten-minute rule Bill speech on bioethanol in this House some time ago, highlighting four different areas of Government policy that were causing problems for that industry. I am delighted that the plant has restarted, but as I said, the recent news from Brussels about indirect land use legislation and proposed new tariffs is extremely unhelpful when people have put £300 million into a long-term investment.

All such projects are for the long term; nobody makes a fast buck on these investments. So the Government must be focused on the long term—far longer than a single Parliament. I am confident that Ministers understand that, that they will put long-term legal, financial and regulatory measures in place, and that they know how important energy investment is to economic growth. So I will be supporting those Ministers in the Lobby today.

14:49

[Gavin Shuker (Luton South) (Lab/Co-op)]

I am extremely grateful to be called to speak in the debate, Mr Deputy Speaker.

I do not take my energy from one of the big six, so in a sense, for the first time in my life, I am not one of the 99% but one of the 1%, but I recognise that most of us do not even know which of the big six we are with, because someone else in the household deals with that, and many of us do not look regularly to switch. It was interesting to hear the Minister so keen to talk about switching, as though it were the be-all and end-all of energy reform, but we all know that a range of measures is needed.

I intend to make three brief but, I hope, helpful points. We need a short, a medium and a long-term approach. Looking at the short term, where do we stand today? Many of our constituents face a real cost of living crisis: their bills are going up and their wages are stagnant—if they have a job, that is. Despite the recent changes in the economy, unemployment continues to be persistently high. Young people have to pay for energy, but youth unemployment is high. Times are tough for everyone, whatever their economic position—commuters’ rail fares are going up, water bills are increasing, and the cost of living generally is quite high—and energy must be viewed in that context. There is a specific reason why the current energy price increases are so egregious: it is a matter not just of the figures, but of the economic backdrop.

Growth is flatlining. Since the review two years ago, the economy has shrunk by 0.4%. One of the best ways to deal with the problem is, of course, to get economic growth going and get a rise in real-terms living wages for people, but that is not happening at the moment. Against that backdrop, it becomes all the more important that we, this House, convince the energy companies that we are serious when we say we want change and we want consumers—our constituents—to benefit in the same way as the companies have benefited. That is why the botched announcement by the Prime Minister last week was so serious: it was an example not just of the shambles and U-turns that seem to be happening, but of the Prime Minister not understanding his power to put pressure on the energy companies.

A year ago, when the state of the market was similar—prices were going up but not coming down sharply enough—the Government clearly believed that by putting indirect pressure on the energy companies, they could get change. The former Secretary of State for Energy and Climate Change, the right hon. Member for Eastleigh (Chris Huhne), gathered the big six together for a Downing street gaggle. That resulted in a series of announcements, but a year down the line, the problems have only got worse. The short term is important.

In the medium term, we need market reform. Energy is an incredibly powerful resource. I do not mean only the energy that allows us to manufacture or to heat our homes. I mean the word in the purest political sense, which includes big and powerful entities. It is not for no reason that in recent times we have fought and drawn ideological lines about where energy companies should sit and where the means of manufacture should reside politically.

We need to get suppliers to pool power generation. We need Ofgem—or its successor body, if my party wins the next general election—to achieve real change in the industry. It must carry a stick as well as a carrot and be able to say, “We need proper market reform.” We also need a debate about the social expectations we have of energy companies. I feel uncomfortable about the Government directly subsidising the fulfilment of many of the social responsibilities to which the energy companies, which have had a very good run over the past 20 to 25 years, should be responding themselves. It cannot be all about switching, although I welcome the Labour party’s “Switch Together” initiative. Fair markets are the key to customer buy-in, which is essential if the energy companies are to have a sustainable business model. Doing the right thing is therefore good business sense.

Right hon. and hon. Members know the long-term challenges. Often we do not get caught up in talking about them and instead focus on the short-term politics, but there is a clear and consistent direction of travel: climate change and our domestic energy security require us to make significant changes to our markets. Building on the previous Government’s success, this Government have introduced a range of initiatives, including energy efficiency measures and the green deal. Although we have expressed our concerns about the green deal, we welcome the Government’s direction of travel.

Most important of all, though, is how we achieve our aims while also achieving affordability. There is only one answer: to make sure that energy markets and energy reform are such that there is customer buy-in and confidence, measured by the bottom line on their bills. Switching alone is not sufficient to achieve that. That is why I believe radical action is needed and why I welcome the radical action being taken by those on my party’s Front Bench.

14:55

[Justin Tomlinson (North Swindon) (Con)]

It is a pleasure to follow the hon. Member for Luton South (Gavin Shuker), who spoke from the perspective of the consumer. I, too, will focus on that viewpoint. I welcome the fact that the Government are to use the Energy Bill to get consumers the best deal on their energy. Today, I want to discuss some of the specific measures.

Many hon. Members have talked about simpler tariffs. In 2011, Ofgem proposed that each supplier be required to offer one standard tariff for each payment type. Martin Lewis of MoneySavingExpert.com conducted a survey of 3,500 people on what they wanted. They were given three choices: lots of choice—there are already hundreds of different tariffs and unravelling them is an extremely complicated process—a few simple tariffs, or one flat rate per company. In the responses, 18% voted for lots of choice, 37% for a few simple tariffs and 46% for one flat rate per company. That shows clearly that the Prime Minister was on to something. Consumers do not want to be diddled—[Interruption.] The shadow Secretary of State, the right hon. Member for Don Valley (Caroline Flint), claims that we are out of touch, but I think the evidence shows that that is nonsense.

A number of people have asked why fewer people are looking to switch. One of the answers is welcome—it is a result of reducing the use of the aggressive and misleading door-to-door sales techniques that used to go on. We are thankful for that. I have been championing the cause, which is supported by 234 cross-party MPs, of financial education. Working out which is the best deal is a complicated process, so if we can equip the next generation of consumers and make them savvy, financially educated people, more of them will take advantage of the ability to do that.

Another reason is that people have had their fingers burnt. What tends to happen is that a customer is sat on one tariff; then, their supplier hikes up the price, which makes them proactive in looking to change supplier. Suppliers that have not already hiked up their prices increase their sales activity, tempting the customer to switch, but a few days later the customer discovers that the new supplier is raising its prices, probably by far more than the old supplier had.

There were welcome moves to put annual energy usage on customers’ bills, giving the information they needed to make comparisons more easily, but now we are all being encouraged to take e-bills. A lot of customers simply cannot remember their password or choose not to access their account, so fewer are getting the information now that it no longer comes on the traditional paper bills sent through the post. Which? carried out a survey—I think the shadow Secretary of State mentioned it—on whether consumers were given accurate information and found that 44% were not. People cannot rely on suppliers to give them the promised price. With Martin Lewis, I have been calling for measures to ensure that people who transfer get that tariff for at least six months, so that they avoid that “sudden price hike three days later” problem. In the current market conditions, people would be sensible to seek a fixed tariff.

There have been some welcome moves. Last December, 4 million of the most vulnerable energy consumers were written to so that they could be given advice. Savvy financial consumers and those who have internet access can find the information, but not all people can do that. The big energy saving week highlighted the issue in the media, and the home heat helpline has helped a considerable number of people by providing independent advice.

I am keen to extend the use of smart meters, so that people can see the tangible cost of their energy usage. One of my colleagues has just moved into a new flat, where there is a pay-as-you-go meter. Since she has had to physically charge up her key with £20 each time, she has made an effort to turn off any electrical appliance that is not needed. That is a good thing, but it also highlights a problem, because a lot of the most vulnerable consumers are on that extremely expensive tariff. We must ensure that vulnerable consumers have access to the cheapest tariffs.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Vulnerable consumers on a payment meter can self-disconnect, without anyone knowing that they are in trouble.

[Justin Tomlinson]

An apt point.

Businesses that go into administration are in a similar position to vulnerable consumers. Although the law says that businesses that have gone into administration should continue to be supplied, the suppliers will crank up the tariff to the highest level available, further endangering the prospects of that company in financial distress. That is something that I have been working on with R3, the insolvency practitioner representatives.

There is confusion about what is the lowest tariff. We all understand the standard rate charge and unit price, but all consumers are different. Some may opt to pay a premium for a green tariff, for example, or for the different forms of payment. We will need to take that into consideration, but there are examples of how the policy could work. With my mobile phone contract, for example, I regularly get texts from my mobile phone company mid-contract, advising me that I could be on a better tariff. By a simple telephone call I am able to change to a better deal without having to extend my contract.

Many speakers have mentioned breaking up the dominance of the big six. I welcome moves to allow more liquidity for independent suppliers and potential new entrants. The hon. Member for Luton South will then not be one of the 1%; he will become part of the majority. We must accept that over the next decade higher global oil and gas prices are to be expected, so we need to get tariffs right not only now, but in the medium and long term. We do not necessarily control our own destiny. We need to control more of our energy supply and have greater energy security. We as a nation should be exporting energy to other countries, the profits of which we can use to subsidise our own consumers.

In conclusion, I echo the words of my hon. Friend the Member for Hexham (Guy Opperman) who said that energy market reform is a step in the right direction. We must show collectively that we are on the side of the consumer. The market is complex and there are vulnerable people who have a vested interest in our getting it right. We must press on and do so.

15:01

[Ian Lavery (Wansbeck) (Lab)]

This debate provides a great opportunity to discuss the Government’s energy policy, which is in a state of total disarray. The Secretary of State says one thing, the Minister says another, the Department says another, and they are all trumped by an out-of-touch Prime Minister.

Let us be honest. The statement made by the Prime Minister last week at Question Time was ridiculous. It probably was not a statement, but it could be described as a reactionary outburst. I enjoyed the urgent question, which was replied to by the Minister of State, Department of Energy and Climate Change, the hon. Member for South Holland and The Deepings (Mr Hayes), a man for whom I have tremendous respect. He valiantly and gallantly supported the Prime Minister, defending the indefensible. It was something that every Member of Parliament would have been pleased to experience. That was a very difficult task.

We are determined to decarbonise our energy sector. We set target after target. We do not have a cohesive energy policy, we do not have a cohesive strategy, yet we set targets in line with commitments that we are not sure we can keep. The Department of Energy and Climate Change is at its lowest point in my time here. There is uncertainty out there among large and small businesses, leading to investment unrest. They are not sure whether the energy plans proposed by the Government will change from one day to the next. There is no evidence-based financial structure to the policies being pursued by the Government. That creates mayhem for businesses that wish to invest in all types of energy in this country, mainly renewables and nuclear. DECC is in meltdown. It has some grand ideas, but the problem is that those seem to be hugely curtailed by the Treasury.

As has been suggested today, there is a huge problem for the coalition partners, who seem to be at odds about all sorts of policies. They are at each other’s throats about energy policy, whether on wind turbines, nuclear or subsidies. We live in a perverse world, with tax cuts for the rich and fuel poverty for the poor. This winter people will have to choose whether to eat or to heat, because they cannot afford to keep themselves warm and to keep themselves fed. There are 6.6 million people who cannot afford to heat their homes this year, which will put them at severe risk of health problems.

At the same time as energy companies are inflicting massive hikes on their customers, they are recording massive profits for their shareholders. British Gas increased its prices by 18%, EDF by 15.4%, E.ON by 18.1%, SSE by 18%, Scottish Power by 19% and npower by 15.7%. That is modern-day Britain, divided into those who have and those who have not.

In the time available, I shall focus on the problems of poverty. Research shows that a quarter of all households in England and Wales—5.7 million households—are now in fuel poverty. The proportion of homes in fuel poverty has increased from 18% to 25%. The Hills fuel poverty review warned that unless Ministers change course, 200,000 more people are set to be in fuel poverty in the next four years, and millions of families will be pushed deeper into fuel poverty. There are more frightening statistics. The typical dual fuel bill is up by £200 since the last election to £1,310. More people—up by 25% to 850,000—are in debt to their electricity suppliers. The figure for gas is in the region of 700,000, a rise of 20%. People cannot afford to pay for their energy and are in debt to both the gas and the electricity companies.

I had planned to say much more, but the time allocated to us has been cut substantially, as is normally the case when I get up to speak. There are many topics that we could have discussed. The green deal was touched on. Some of the comments from the Government Benches were wholly incorrect and should be put right on the record. We could have discussed the success of Warm Front, the carbon price floor and the emissions performance standard. Another critical issue is the strike price of the contracts for difference. All these are important, but I wanted to focus on fuel poverty versus the excessive profits being made by the energy companies. We are living in a multi-tier Britain, which we need to highlight.

15:07

[Neil Parish (Tiverton and Honiton) (Con)]

Thank you, Mr Deputy Speaker, for allowing me to speak in the debate. I endorse many of the comments of my hon. Friend the Member for North Swindon (Justin Tomlinson) about the tariffs, the need for competition and the need for people to understand those tariffs. The only way the market will work is by ensuring that there is proper competition and that people are able to switch easily from one company to another, without those companies having tied the consumer in.

The policies of successive Governments, both the Labour Government and this coalition Government, are driving up the price of energy. There must be competition between the companies to keep the overall level down, but in the end consumers will pay more for their gas and electricity. Our green policies are good, but they cost money and they will cost the consumer money. We must be realistic about how we deal with that. I have every sympathy for the fuel poor but the addition of a green tariff is bound to push up energy prices. We need greater competition and we must look after the poorest in society.

I will now make some specific points. Those who can access pipeline gas to heat their homes, however much the price might have gone up, are actually—dare I say it?—the most fortunate, because those who have oil heating are paying even more. Not only are they paying £1,400 for 2,000 litres of oil, which it does not take the average household long to get through, but they might live in a house that is listed or has traditional windows, which they cannot replace with double glazing, or solid walls, which are very difficult to insulate.

I congratulate the Minister on the money he has put forward to help insulate such properties in rural areas, but I do not believe it is enough. As I said at the start of my remarks, the whole idea is that the green deal is essential because energy prices will continue to rise, but the trouble is that many of my constituents cannot necessarily get the green deal because the figures do not work with the cost of insulating solid walls, for example. Ultimately, those consumers in my constituency and across the country will end up paying more for the insulation than they will save on their energy bills, and that is something we need to deal with.

We talk about competition in the gas and electricity markets, but where is the competition in the heating oil industry? There is virtually none. It is almost a cartel—I can say that in the House—so there is no competition. Two years ago we saw prices almost double when there was snow on the ground. Some of the worst snow in the United Kingdom was in Northern Ireland, but the prices there did not rise as much as they did on most of the rest of the mainland for the simple reason that there is greater competition there because more people have oil-type heating.

The previous Minister referred the oil companies to the Office of Fair Trading. I want that to be pursued, because consumers who cannot get gas must get either liquefied petroleum gas or oil, and LPG is usually dearer than oil and covers the same spectrum of prices. That is absolutely key. I want to see exactly what we will do to help those consumers in my constituency and many other rural constituencies. It is not just rural constituencies; there are old cottages in many town centres across the country and they have to be dealt with. I want to see real progress in that regard.

My final points are on energy security and what we will do in future. It is no good simply saying that we have shale gas; let us actually try to exploit it. Look at what has happened to the gas market in America—I am not suggesting for one moment that we have the same amounts of shale gas—where the price has been reduced by about two thirds. We also have a lot of coal, believe it or not. It is not fashionable to burn coal, but clean coal could be quite effective, and gasification could be another great use of that resource.

Meanwhile, will we rely on gas from the Russians? I spent 10 years in the European Parliament and know that various European countries, especially Poland, do not like the idea of the Russians being able to turn off the gas and hold Europe to ransom. We have the whole mix of energy, but we must face up to the fact that—it is no good the Labour party saying otherwise, because they pursued the same type of policy, which is to drive up energy prices—if we are going to drive up prices, we have to make sure that the poorest in society can get help and that those who are not on mains grid gas have particular help because of the high cost of their bills.

15:13

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

With the economy and real wages having shrunk over the past two years, no issue is more important for the living standards of my constituents, and indeed those of all right hon. and hon. Members, than electricity and gas prices. As my hon. Friend the Member for Wansbeck (Ian Lavery) points out, average fuel bills have risen as high as £1,310 a year over the past five years. Prices over the past two years alone have risen by £200, high gas prices could, without adequate action, add £175 to bills by 2020, and wholesale gas costs added £290 to average energy bills between 2004 and 2010. Under the Government’s present policies, the number of tariffs stands at 430; it has risen by 70 in the past year. We have soaring fuel poverty; as many as 3 million elderly people across the country are now affected by it. There are 6,400 over-75s in my constituency alone who would benefit right now from a change of Government and a change of policy to ensure that they are on the lowest possible tariff and have a £200 saving on their electricity and gas bills this year.

The Government have shown in the debate that they simply do not get that a more comprehensive reform of the electricity market is required. They simply do not understand that 54% of the average electricity bill is affected by wholesale energy costs. Our constituents ask, “Why is it that when wholesale energy costs fall our bills do not fall, but when they rise our bills immediately go up?” There is something broken in the electricity supply market. The Government, in their remarks today, simply show no inclination to tackle it.

Sadly, the Government’s policy is marked by shambles and confusion. It seems that the Government are now suffering from the reverse Midas touch; they cannot produce a Budget that stands scrutiny for 24 hours, they cannot run our trains properly and they have made U-turns on forests and on badgers. The joke is that the ghost of John Major is now stalking the Government, and I do not mean the amiable, spectral presence of the Chief Whip, which graced the Chamber a few moments ago. This policy, and the way the Prime Minister mishandled it last week, shows that this is a Government in a state of shambles and breakdown.

Sadly, I must also strike a discordant note with the hon. Member for Angus (Mr Weir), because the Scottish Government are unfortunately letting down my constituents on the issue of fuel poverty. Dr Brenda Boardman, who did so much to coin and develop the concept of fuel poverty, described the Scottish Government’s policies as

“feeble, inadequate and namby-pamby”

and said that they are now putting 800,000 Scots in record fuel poverty. That is at the same time as they are cutting the budget for fuel poverty, which is an area devolved to Holyrood. It is small wonder that Dr Boardman accused the Scottish Government of failing to back up their weasel words with proper actions—something we have seen a lot of in the past few days from the First Minister and Deputy First Minister.

We are also seeing confusion in this Government’s policy. The industry is losing confidence in the Government’s ability to commit to green investment. It is small wonder that we have seen little improvement in our energy mix, as the Chancellor wages an ideological crusade against green investment and make outrageous references to the green Taliban. He refuses to capitalise the green investment bank properly and his failure on growth and debt means that the bank will not have proper borrowing powers by 2015. We see shambles, confusion and a disjointed Government.

At the same time, our market is not being reformed. The Institute for Public Policy Research recently produced evidence showing that the least efficient company spends twice as much per customer on its operations as the most efficient company. Some people pay £330 a year more for their electricity and gas than their next-door neighbours, as many as 5 million people across the country are being overcharged and the number of switchers is at an historic low of 15% a year, the lowest since records began in 2003. If the market worked at the moment, competition would ensure convergence on operational costs, but that is not happening at all. In fact, those costs have risen, not fallen, in the past three years, as the IPPR has shown.

We need a radical change of course. We need an arrangement that brings in proper pooling, a new regulator and a much stronger link between the wholesale gas and electricity market and the prices paid by domestic consumers.

15:20

[David Mowat (Warrington South) (Con)]

I want to draw attention to a couple of areas where I agree with Opposition Front Benchers. First, it is clear that the best way of making progress is better insulation. The green deal is fundamental to energy policy, and Ministers need to be accountable for making progress with it. It is also true that we need more transparency in the energy market. The hon. Member for Glasgow North East (Mr Bain) noted that there are 430 separate tariffs; that is unacceptable and it needs to be fixed. I understand that it will be fixed by next summer, but I am disappointed that it is taking so long. I also agree with Opposition Members that the market needs new entrants and that the process of new businesses coming in has been too slow.

Where I disagree with Opposition Members is on their lazy assumption that there is a cartel in operation—leaving aside the fact that that is a criminal offence, and that if they have evidence of it they should take it to the police. I intervened on the Secretary of State to point out that in the gas market we are 26th cheapest out of 27 in the European Union. If that is a cartel, it is not a very effective one. The reason we are so cheap has nothing to do with tax. In France and Germany, gas prices are 60% more expensive than ours, but that is a market effect difference not a tax difference. It would be good if we addressed some of that. On electricity, the position is less clear; our prices are not so cheap. Frankly, that has a lot to do with the decisions that we make in this House and the tariffs we impose on the market.

The gas market and the electricity market are two separate markets. We sometimes talk about them as though they are the same, but they are not. There is an issue with off-grid gas, as we have heard from several Members on both sides of the House. In the case of on-grid gas—Members can, by all means, intervene on me if they disagree, but we have had a three-hour debate that has been broadly fact-free—the evidence is that our prices are not more expensive than anywhere else. Other Members have talked about shale gas, and I will not go any further on that, other than to say that this morning, on the Henry hub, US gas prices were one quarter of our gas prices in the European balancing point. That will make a massive difference to the competitiveness of the US economy in a variety of ways. Even if we do not, or cannot, exploit our shale gas to that extent, we need to start to think about the differences in economics that will arise with America.

The three main policy areas in the electricity market are carbon and decarbonisation, which we must achieve, cost, and security. Interestingly, we sometimes assume that we are behind as regards carbon. It is true that we are behind France—with massive amounts of cheap nuclear energy, we use more carbon per head than the French by a long way—but we use a lot less per head than Germany, despite the fact that Germany has four times as much renewable energy as we have, because it continues to burn coal to a massive degree. That is what we need to address in terms of our decarbonisation agenda. The previous Government signed us up for renewables targets that were extremely onerous and will have only a minor impact on the amount of carbon that we use. The country that has reduced its carbon by the most over the past year or so is the United States as it has replaced coal with shale gas.

The big issue is security. Ofgem, which we are giving one of its routine kickings, has said that we will have about 4% surplus electricity capacity by 2015-16. We seem to be in a slow-motion car crash with electricity supply. The likelihood of there not being power cuts by the end of this decade is getting increasingly low. When the House starts to debate that issue, we will begin to make progress on what will really be important. One of the mechanisms by which we can avert this situation is imports. I gently say to the Minister that imports now represent about 10% of electricity in this country. That is a massive policy failure. French nuclear electricity and Dutch electricity is coming to this country, and there are no jobs in that.

I do not have much time to talk about costs. My hon. Friend the Member for Tiverton and Honiton (Neil Parish) made several good points about the somewhat hypocritical tone that this House can have in imposing costs that create fuel poverty and then beating up the people we perceive as being responsible for not somehow wishing those costs away. It is right that we—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We have 15 minutes left and three more speakers. I call Jamie Reed.

15:25

[Mr Jamie Reed (Copeland) (Lab)]

Thank you, Mr Deputy Speaker.

Energy costs are soaring and fuel poverty is on the rise. Energy bills are now one of the single largest bills faced by any family. Away from the numbers, what does this mean? It means that in constituencies such as mine across this country, people are choosing to sit in the dark, to sit in the cold, and to fear the winter. It is no exaggeration to state that the choice between heating and eating is a now a reality. At one time, we would have dismissed such a claim as hyperbole, but Members in all parts of the House know that it is true. The consequence of higher energy bills, and the across-the-board inflation that they bring to other goods and services such as food prices, is, frankly, that people will die. That is the stark reality of the scale of the challenge facing us as a country as we set about reforming electricity markets.

I cannot speak in this House about energy policy without mentioning the enormous contribution of the late and much missed Malcolm Wicks. He was a tireless campaigner on fuel poverty and a superb Energy Minister, foolishly removed. In 2005, Malcolm brought me, as a new Member of Parliament, into the No. 10 policy unit to help to create the new nuclear policy for this country, and I will always be grateful to him for that. As a national politician, he made a huge difference to the lives of my constituents.

From the outset, and squarely within the national interest, but also in the best interests of my constituents, I offer the new Energy Minister, who is in his place, all the support he could possibly ask for, should he make the right decisions—but, more importantly, should he make them in a timely manner. The truth is that we are running out of time if we are serious about tackling fuel poverty, tackling security of supply—a looming crisis of incredible proportions that this House too readily ignores—and reducing our greenhouse gas emissions.

Wherever energy market reform ends up—I commend the motion in the name of the Leader of the Opposition—the truth that many of us in this House dare not whisper is that the days of cheap energy may well be over. For years, a deregulated market ensured moderately low prices that the consumer could ordinarily accept. Generating companies, which not only sweated their assets but failed to invest during the fat years, now face massive public policy concerns and—let us be clear—massive public policy responsibilities, and in many cases the market wants to reach for the easy options and the quick fixes. It is in this context that we should view fracking for shale gas. The hon. Member for Wealden (Charles Hendry) was right this weekend to warn the Government against betting the farm on shale—it is short-sighted and idiotic to do so. There are no easy ways out of the situation we now find ourselves in, but there are solutions and I will focus on the nuclear industry and nuclear power production in general.

Unlike fossil fuels, nuclear energy is not subject to major price fluctuations. I could say an awful lot more about the benefits of the nuclear industry and nuclear power. Electricity market reform must deliver long-term price stability for consumers and businesses, and it must also ensure long-term revenue stability and predictable returns for investors. Only in this way will we ensure the investment that we need in our nuclear fleet and the investment necessary, in whatever generating form, for the ultimate benefit of our consumers and our society.

The Minister knows that we need new nuclear and that we need it quickly. He knows that over the next 15 years, barring lifetime extensions, we will be down to one operating nuclear station. The heavy lifting on support for nuclear generation has been done already over many years. The public support it, the need is clear and the demand is great, but we must accelerate delivery or else invite collapse. I urge the Government to pay close attention to the evidence given by Vincent de Rivas, the EDF chief executive officer, to the Energy and Climate Change Committee yesterday. He said:

“With investment going in and demand rising we must expect the unit price of electricity to increase over the coming decades.”

Given that we need that investment, and given that, without question, we need new nuclear, surely the question for Government is: how do we protect the most vulnerable from these rises? This requires a policy response from the Government; it cannot simply be left to the market.

The final investment decision in the first new nuclear reactor at Hinkley will be taken at the end of the year and it is now imperative that the Government do everything they can to assist EDF in making the right investment decision in our national interest. Mr de Rivas said yesterday:

“We are shovel ready. We are on the brink of delivering an infrastructure project similar in scale to the London Olympics. We are poised to deliver immense benefits in terms of jobs, skills and economic growth—locally and nationally.

But like all investors in capital intensive infrastructure projects we need to have a compelling business case. In this respect our final investment decision requires more progress to be made.”

We must please both the consumer and the industries and investors that are ready to help us.

On the vexed issue of subsidy for nuclear, I say to the Minister: do it. I am explicitly pro-subsidy for new nuclear generation, because the reality is that not a single electricity generation source is not subsidised in this country in one way or another. We can call it whatever we like, but the nuclear renaissance in the United Kingdom needs direct Government assistance and I will support any moves to provide it.

Finally, will the Minister say how he will help me to progress new nuclear developments in my own constituency; how we can resolve the mineral rights issues that are affecting them; how we can speedily progress grid connection issues and plutonium re-use; and how we can effectively, assuredly and credibly take forward deep geological disposal with the right, credible partners? Time is of the essence and we have no time to lose.

15:31

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

I declare an interest as a Co-operative Member of Parliament. A year ago we stood here, had the same debate and heard the same stories. We heard that energy companies were always putting their prices up. This year we are back, but what has changed? I read this morning that, last year, 13 pensioners died every hour of cold-related diseases and illnesses. There are about 20 hon. Members present—the equivalent number of pensioners die every two hours.

I am fed up of hearing those on the Government Benches blame the Labour Government for everything. They play the blame game over and over again, yet tonight, in my constituency of Islwyn and in constituencies represented by Government Members, somebody will be wearing their coat to watch television, thinking about going to bed early and not putting an extra bar on their fire because they cannot afford it. That is the reality that they face. They look to this House—to us—to stand up to the energy companies.

I have received e-mails all week as a result of what the Prime Minister said last week. I am afraid that, again, he is offering false hope to all those people who are struggling. It is a crying shame that, when privatisation of the energy markets was first mooted, Members of this House, including Baroness Thatcher, talked grandly about rolling back the frontiers of the state. When she did so, I do not think she expected that one company—a monopoly—would be replaced by an oligopoly of six companies, or that the Government would stand back, without teeth.

I have heard Government Members say, “Oh, but we had the energy companies round to 10 Downing street and we told them in no uncertain terms that they have to help the most vulnerable in society.” After 18 individual investigations—by Ofgem, Committees of this House and the European Parliament—does anybody actually believe that the energy companies will listen? Their attitude will be just like that of the boy called into the headmaster’s study at the public school I never went to, who says, “Yes, sir, I promise I’ll never do it again,” and then, when he walks out the door, says, “Don’t worry about him; what’s he going to do to me? Absolutely nothing.”

[Caroline Flint]

Sounds like the former Chief Whip.

[Chris Evans]

Yes, that does sound like him.

There has to be a radical reform of our energy market. It is no good going on with only six companies buying in and selling energy. I have talked before about having a central energy supplier to buy energy at a fixed rate and then to sell it to whichever companies want to buy it, so that we can bring more people into the market.

We must talk in the here and now, and we have the draft Energy Bill. Co-operative and community energy programmes have raised massive concerns about the Bill, and I hope that the Government will listen to them. Which? has said that the big switch campaign was the best of its type, but there is still more that we need to do.

A constituent came to see me last Friday and produced a bill from SWALEC. I looked at it and could not understand it. A member of my staff who worked for SWALEC for a number of years looked at it, and he said he could not understand it. Other people looked at it, and they could not understand it. I have read in Which? that a chartered accountant has looked at his own energy bill and not been able to understand it. What chance do elderly people and the most vulnerable in our society have of switching when they cannot understand their bills? I spoke to my member of staff who had worked for SWALEC and said that I would have just offered it a £50 ex gratia payment to go away. That seems to be the way forward for the energy companies. When I looked at that bill, the most amazing thing that I saw was a £15 charge for being a low user. SWALEC was charging my constituent for using less energy. It is crazy.

We have heard that there are 400 tariffs, and the most basic economic argument that anybody could put to the energy companies is that people cannot buy luxury energy. If I go to Currys wanting to buy a television, I might buy one with an LCD, LED or plasma screen, or I might even want an old-fashioned box in my living room. The thing is, I have a choice, because some of them are better-quality products. There is no luxury gas or other energy. We can only use one type to heat our homes, and we have to remember that. People are being ripped off, and it is up to the Government to stand up for them.

15:36

[Barry Gardiner (Brent North) (Lab)]

If one is going to reform the energy market, it seems to make sense to configure that market according to one’s objectives. When the Secretary of State spoke earlier, it was extraordinary that he did not set out the clear objectives of the reconfigured energy market. I will set out mine.

The first objective is on carbon targets. We have our 2020 targets and our 2030 targets, and the Committee on Climate Change has been clear that we should look to set a target of 40 grams to 60 grams of carbon dioxide per kWh and move towards achieving our renewables targets. If we are to reconfigure the market, let us do it to achieve that objective.

The second objective is on fuel poverty. The price per unit of energy will rise, but fuel poverty must come down. That means that energy efficiency has to be an integral part of the reconfiguration of the market.

Security of supply is the third objective that I wish to put forward. We require a mix of energy from both within and outside the UK. We need both base load sources such as coal and nuclear and intermittent sources such as wind and hydro, as well as dual-purpose sources such as gas.

How do we go about configuring the market in that way? First, I want to hear the Government talking about standards—building standards and product standards. Why is the percentage of excess winter deaths lower in Finland than in the UK? That seems like madness when we compare the climates, unless we understand the importance of the role of building standards. That has to be part of a sensible reconfiguration of energy policy in this country, which cannot be achieved through encouragement and incentivisation alone. We need compulsion to ensure that those standards are driven throughout the market, which the Government have refused to address.

We need honesty. Unit prices for energy will rise, because world demand is rising with increased wealth in Asia, which is a good thing, and with increased global population, which is not such a good thing. That means that we have to structure the market to ensure that it is maximally efficient. Vertical integration allows a company such as Centrica to show obscene profits for its wholesale side, while making what the regulator considers to be “normal” profits in its retail arm of British Gas. Yes, increased liquidity in the forward supply market will help promote competition on the retail side, but it will not solve the abuse that vertical integration is allowing. By tackling that issue, retail unit prices will not rise by as much as they otherwise will—although if we are honest, we should say that they will still rise on a per unit basis.

Security of supply includes the investment of £200 billion over the next decade in our energy network and of £110 billion in our electricity infrastructure. That is to replace the 30% of generation that will go off stream by 2024. We need base load, yet today’s rumour is that the EU new entrants reserve carbon capture and storage project in the constituency of my right hon. Friend the Member for Don Valley (Caroline Flint) will not now proceed because of the Government’s failure either to match fund or to submit the appropriate information to secure the bid. CCS is vital because coal is vital—vital to India and to China—and whatever we do with renewables in this country, unless we come up with a CCS solution for coal-fired generation around the world, any paltry reduction in emissions achieved by the UK will not stop climate change. That is why we need a global perspective on our own energy policy. The CCS technology that we can put in place could drive the entire green economy to which both sides of the House claim to have signed up, but of which we see very little evidence.

Nuclear base load is an essential part of the mix, but the Government are set to negotiate a strike price for the nuclear feed-in tariff in the region of £100 per megawatt-hour. The cost of the two EDF reactors at Hinkley Point has risen by £14 billion and is tied in with the strike price. That is madness for a 40-year lifecycle project when onshore wind is already performing at as low as £94 per megawatt-hour, and figures from the Department of Energy and Climate Change suggest that offshore wind will achieve £100 per megawatt-hour by 2020.

15:42

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

It is one week since the Prime Minister sent the Government’s energy policy spinning into chaos, yet after this afternoon’s debate, I am not sure that we are any closer to knowing what actually is their policy. One thing, however, is clear: the soap opera of the past week has shown that the Prime Minister’s shambolic, “make it up as you go along” approach to energy policy has failed, and will do nothing to help hard-pressed consumers struggling with rising bills this winter.

As my hon. Friend the Member for Wansbeck (Ian Lavery) said, the Government are in disarray over energy. Even the Liberal Democrats did not know what the coalition’s policy was, and during last Thursday’s urgent question, the hon. Member for St Ives (Andrew George) was reduced to asking the Energy Minister:

“Do I understand from his reply…that this is not a firm policy proposal, but merely an item that is currently under consideration?”—[Official Report, 18 October 2012; Vol. 551, c. 490.]

Since that urgent question, neither the Secretary of State nor any Back-Bench Member of the coalition has defended the Prime Minister’s policy announcement that he made last week during Prime Minister’s questions.

Despite the confusion on the Government Benches, we have heard a number of excellent speeches this afternoon. In his response, will the Minister address the serious points raised by a number of Members about the circulating rumours that the UK is set to lose out on up to €600 million for CCS because the Chancellor has blocked the match funding?

Members have rightly highlighted the public’s concern about increased energy prices and the urgent need for Government action to curb those prices. As my hon. Friends the Members for Luton South (Gavin Shuker) and for Islwyn (Chris Evans) said, it is a whole year since the Government’s infamous energy summit. The situation for all our constituents has got worse not better, and it is set to get even worse.

As the hon. Member for Nuneaton (Mr Jones) said, we have a cost-of-living crisis. My hon. Friend the Member for Wansbeck reminded the House that in the two years since the Government were elected, energy bills have risen by £200, with the average household now paying more than £1,300 for their dual fuel bill. That was before we heard last week that three of the big energy companies are imposing another round of price hikes, adding a further £100 to people’s bills this winter.

Some 850,000 people are already in debt to their energy companies. My hon. Friends the Members for Glasgow North West (John Robertson) and for Islwyn highlighted in their contributions the shocking prices and conditions that many of their constituents will face this winter. A constituent has e-mailed to tell me that their energy company wrote to them last week to say that their bills will rise by 14.1% for gas and 16.1% for electricity this winter. Faced with those huge increases, it is no wonder the public cannot understand why the Government are not doing anything to help them.

Millions are suffering in fuel poverty, as my hon. Friend the Member for Brent North (Barry Gardiner) and my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr Clarke) said. On this Government’s watch, the number of households spending 10% or more of their disposable income on electricity and gas has increased to one in four—a staggering figure. As my hon. Friend the Member for Wansbeck exposed, that is 5.7 million people. As my hon. Friend the Member for Glasgow North East (Mr Bain) said, 3 million pensioners are in fuel poverty.

What about when people try to switch? The hon. Member for North Swindon (Justin Tomlinson) rightly drew the House’s attention to a recent investigation by Which? showing that a staggering 44% of consumers who called their energy supplier to find out the best deal were not offered it.

In his opening remarks, the Secretary of State mentioned the record of the Labour Government—I am delighted he wanted to talk about the Labour Government, because I am proud of our record. We lifted 1.75 million people out of fuel poverty; an average of 200,000 every year were helped under Warm Front; and 6 million homes were insulated thanks to obligations placed on energy companies. We had the decent homes standard, winter fuel payments and the world’s first climate change legislation.

What have we had from this Government? We have had an energy summit that was nothing more than a photo-op, and a check, switch and insulate campaign that led to fewer people switching suppliers. The number of people getting help through Warm Front, which the Government are scrapping, is down by 80%. We have had an energy efficiency scheme—the green deal—but the Secretary of State’s Department predicts that it will lead to an 83% reduction in the number of people getting loft and cavity wall insulation.

A number of hon. Members, including the hon. Member for Tiverton and Honiton (Neil Parish), made representations on how the golden rule does not stack up. From next year, support for fuel-poor, low-income vulnerable households will halve, with no Treasury-funded scheme to help the fuel-poor for the first time since the 1970s. I do not know about the Secretary of State, but I would rather have Labour’s record than his. Every day the public are paying the price of his incompetence through higher and higher energy bills. It simply is not good enough.

In her opening speech, my right hon. Friend the Member for Don Valley (Caroline Flint) laid out very clearly the problems of how our energy market works. There is a lack of competition, with six companies supplying 99% of homes, squeezing out new entrants. We have some of the highest pre-tax energy prices in Europe. The Secretary of State went to great lengths to talk about switching, but on his Government’s watch, the number of people switching supplier is the lowest on record. Bills shoot up when wholesale costs rise, but they never seem to come down when energy prices fall.

No one is saying that the energy market is not complicated, or that changing it is easy. Difficult questions need answering. How do we move from a high-carbon, high-cost economy to a low-carbon, low-cost one? How can we meet our climate change obligations while keeping the lights on? How can we help those who are off-grid as much as those who are on-grid? A number of hon. Members made representations to that effect.

Those are fundamental challenges for the future of our country, but because of the scale of the challenges, we need to raise our ambitions and not lower them. It is not good enough for the Government to stand aside and tell people, “You’re on your own.” The public need a Government who will face these problems head on, not simply accept business as usual, yet all they offer is more of the same.

Despite the Government’s claims to the contrary, the Energy Bill contains nothing fundamentally to change our energy market, nothing to help people who cannot afford to stay warm this winter, nothing to change how power is bought and sold, nothing to support co-operatives or community energy schemes and nothing to make the market more competitive or more transparent. What is needed is proper market reform, not an acceptance of the status quo. Our motion offers real change.

Today’s debate has shown a clear choice between a shambolic, out-of-touch Government making policy on the hoof and lurching from one disaster to the next, a Government whose only answer to rising bills is to tell people they are on their own, and a Labour party that would provide help now for people struggling to keep warm and have the determination to take on the big energy companies and make the market simpler and more responsible. That is the choice hon. Members face when they vote today. I commend the motion to the House.

15:50

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

A long, long time ago, cavemen discovered that flint made fire, but the opening speech by the right hon. Member for Don Valley (Caroline Flint) barely raised a flicker, let alone a flame. I grant that there was a good deal of heat, and she certainly generated plenty of friction, but there was not a gleam of illumination as to why, in power, Labour did so little to deliver the kind of market reform that the hon. Member for Liverpool, Wavertree (Luciana Berger) just claimed was so necessary. Is it any wonder that the right hon. Lady finds herself in the dark shadows of opposition, not the bright light of power?

I say that not in anger but in sorrow—sorrow not only because I know that the right hon. Lady is a great deal more than window dressing, and because she made some strong points about market entry and creating a more plural marketplace to create downward pressure on prices, but because, more profoundly, she knows, and I know she knows, that the debate on energy policy deserves better than a half-hearted advocacy of a half-baked motion, and because she also knows that the country’s future should be characterised by a cross-party approach and a bound commitment to plotting a path to a future where energy supply is secure; a future where we build an energy infrastructure that is fit for purpose; a future where the vulnerable are protected from unaffordable energy bills; and a future where the needs of the many, not the interests of the few, drive an energy policy that is for the people, not, as was sadly the case under the previous Government, coloured by the demands of the powerful.

Yes, absolutely that means market reform in order to foster clarity and sow certainty so that businesses can make their business plans and invest in the way I described. Yes, it does mean a generation mix sufficient to guarantee resilience and bring security, as my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and the hon. Member for Wansbeck (Ian Lavery) said. It means, too, moving to a market that is more responsive and competitive, as my hon. Friend the Member for Hexham (Guy Opperman) advocated. It also means more nuclear, by the way, as Members who are as great fans of nuclear power as I am will be relieved to hear. And it means communities benefiting, guiding and owning the energy infrastructure, not having infrastructure, such as onshore wind turbines, scattered across our precious land like an atavistic echo of dark satanic mills.

I am reluctant to be too hard on the Opposition, however, because I never seek contumely, as you know, Madam Deputy Speaker, and because I know that they are handicapped by two things, among many. First, they know that tariffs are an important way of driving down the price people pay for heat and light and that the Prime Minister’s intervention and the subsequent discussions have opened up that debate in a new and helpful way. Secondly, they also know that in the 13 years for which they were in control there was none of the landmark legislation necessary to secure our energy future—they dithered, they delayed, they deferred.

Who was the ditherer in chief who presided over this spectacular inaction? It was none other than Disraeli’s new best mate, the Leader of the Opposition. Just a couple of years ago, as Secretary of State for Energy and Climate Change, he told the House that the purpose of his own energy Bill was

“to strengthen Ofgem’s powers in a number of respects and to make it a more proactive regulator”.—[Official Report, 7 January 2010; Vol. 503, c. 254.]

Yet now, when asked what they would do by a hard-pressed pensioner living in fuel poverty, by a hard-pressed farmer facing a cold winter or by a hard-pressed family anticipating Christmas with fear because of energy bills, Labour’s answer is clear as crystal: reform Ofgem and yet again rearrange the regulatory framework to invent a new quango. If they were running Byzantium, they would want it to be more bureaucratic.

In contrast, we will take direct action with a Bill published in weeks, not months, to help people get lower tariffs, using all in our power to address the issues of fuel poverty and bills that are too high for the vulnerable groups that have been supported by so many speakers in the debate. We are also providing immediate assistance to those who need help with their energy bills through our four-year warm home discount. The previous Government’s voluntary scheme meant that vulnerable people were offered different tariffs simply because they happened to have different energy suppliers, but our mandatory scheme helped 600,000 vulnerable pensioners last year alone through a £120 rebate on their energy bills.

The hon. Member for Liverpool, Wavertree (Luciana Berger) said that she would rather have Labour’s record than ours. Let me tell her that the number of fuel-poor households rose year on year from 2004 to 2009 from 2 million to 5.5 million. That is Labour’s sorry record in defence of the poor.

[Neil Parish]

DCC plc owned between 40% and 50% of the heating oil market and also trade as BoilerJuice and GB Oils. Will the Minister ask his officials to investigate the dominance in the heating oil market of one particular company?

[Mr Hayes]

I have to say that in my hon. Friend’s constituency there are really only two principal heating oil suppliers. He is right that that does not create necessary competitive pressure. I shall certainly ask my officials to consider such issues. Indeed, my hon. Friend made a powerful and persuasive speech on the subject during the debate.

We are providing support through the winter fuel payments and cold weather payments, which this Government have increased from £8.50 to £24. I accept that, as the hon. Member for Glasgow North West (John Robertson) and the right hon. Member for Birkenhead (Mr Field) have said, we need to target the support in the most effective way. Through a new obligation from 2013 we will require energy companies to deliver support for heating and insulation for the most vulnerable. This is about demand. As the hon. Member for Burnley (Gordon Birtwistle) said, we have too often debated energy only in terms of production and insufficiently in terms of consumption.

How curious it is that, bedazzled by the glitz and glamour of wealth, the Labour party pandered to corporate power over those 13 years. Keir Hardie must have looked down, wringing his hands in horror. They pander and ponder, bourgeois left minds honed to wander.

As an admirer of Joseph Chamberlain, only in my dreams did I believe that one day I would be the first Tory Minister in decades to advocate tariff reform at this Dispatch Box. Although these are different tariffs and different reform, I am delighted to do so today. I repeat that we will use all in our power to ensure through the Energy Bill that people get the best deal.

That is the difference between my party and the Labour party. We act; they meander, pander and ponder. They want to change the regulations; we want to change the policies. They want a different Ofgem; we want to make a difference to people’s bills.

[Mr Reed]

I would very much like to sit down with the Minister and discuss the concept of bourgeois left minds. Will he also meet me and the Sellafield workers campaign to talk about the energy policies he is discussing and to expedite new nuclear development in my constituency?

[Mr Hayes]

I can think of nothing that would give me more delight. I will certainly come to the hon. Gentleman’s constituency.

What gives me the most sorrow about this motion and the Labour party is the fact that with real pathos they have made the worst mistake of all for an Opposition: they have confused opposition with opportunism. They have put party interest above national interest and short-term instincts above long-term interests. They are about fiction, not facts—and for fans of shale gas, friction, not fracts——[Hon. Members: “Oh!”] That one might have been too clever for them. While they face years of hard labour on the Opposition Benches, and—to reference Dylan Thomas, while, rather than raging against the dying of the light, they go gently into that good night—and languish in the darkness, we will bring heat to homes and light to lives through energy policy for the many, not the few.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

The House divided: Ayes 223, Noes 297.Division No. 85][3.59 pmAYESAbbott, Ms DianeAbrahams, DebbieAinsworth, rh Mr BobAlexander, HeidiAli, RushanaraAnderson, Mr DavidAshworth, JonathanBailey, Mr AdrianBain, Mr WilliamBanks, GordonBarron, rh Mr KevinBayley, HughBeckett, rh MargaretBegg, Dame AnneBenn, rh HilaryBenton, Mr JoeBerger, LucianaBetts, Mr CliveBlackman-Woods, RobertaBlears, rh HazelBlomfield, PaulBlunkett, rh Mr DavidBradshaw, rh Mr BenBrennan, KevinBrown, LynBrown, rh Mr NicholasBrown, Mr RussellBryant, ChrisBuck, Ms KarenBurden, RichardByrne, rh Mr LiamCampbell, Mr AlanCampbell, Mr RonnieCaton, MartinChapman, JennyClark, KatyClarke, rh Mr TomCoaker, VernonCoffey, AnnConnarty, MichaelCooper, RosieCooper, rh YvetteCrausby, Mr DavidCreagh, MaryCreasy, StellaCruddas, JonCryer, JohnCunningham, AlexCunningham, Mr JimCunningham, Sir TonyCurran, MargaretDanczuk, SimonDavid, WayneDavidson, Mr IanDe Piero, GloriaDenham, rh Mr JohnDobbin, JimDobson, rh FrankDodds, rh Mr NigelDonaldson, rh Mr Jeffrey M.Donohoe, Mr Brian H.Dowd, JimDoyle, GemmaDromey, JackDugher, MichaelDurkan, MarkEagle, Ms AngelaEagle, MariaEfford, CliveElliott, JulieEllman, Mrs LouiseEngel, NataschaEsterson, BillEvans, ChrisFarrelly, PaulField, rh Mr FrankFitzpatrick, JimFlello, RobertFlint, rh CarolineFlynn, PaulFovargue, YvonneFrancis, Dr HywelGardiner, BarryGilmore, SheilaGlass, PatGlindon, Mrs MaryGodsiff, Mr Roger Goggins, rh PaulGoodman, HelenGreatrex, TomGreen, KateGreenwood, LilianGwynne, AndrewHain, rh Mr PeterHamilton, Mr DavidHamilton, FabianHanson, rh Mr DavidHarman, rh Ms HarrietHarris, Mr TomHealey, rh JohnHepburn, Mr StephenHermon, LadyHeyes, DavidHilling, JulieHodge, rh MargaretHodgson, Mrs SharonHoey, KateHosie, StewartHowarth, rh Mr GeorgeHunt, TristramIrranca-Davies, HuwJackson, GlendaJamieson, CathyJarvis, DanJohnson, rh AlanJohnson, DianaJones, GrahamJones, HelenJones, Mr KevanJones, Susan ElanJowell, rh Dame TessaKaufman, rh Sir GeraldKeeley, BarbaraKhan, rh SadiqLammy, rh Mr DavidLavery, IanLazarowicz, MarkLeslie, ChrisLewis, Mr IvanLong, NaomiLove, Mr AndrewLucas, CarolineLucas, IanMacShane, rh Mr DenisMactaggart, FionaMahmood, Mr KhalidMahmood, ShabanaMalhotra, SeemaMann, JohnMarsden, Mr GordonMcCabe, SteveMcCann, Mr MichaelMcCarthy, KerryMcClymont, GreggMcDonagh, SiobhainMcDonnell, Dr AlasdairMcDonnell, JohnMcFadden, rh Mr PatMcGovern, JimMcGuire, rh Mrs AnneMcKechin, AnnMcKenzie, Mr IainMcKinnell, CatherineMeacher, rh Mr MichaelMeale, Sir AlanMearns, IanMiliband, rh DavidMiller, AndrewMitchell, AustinMorrice, Graeme (Livingston)Morris, Grahame M. (Easington)Mudie, Mr GeorgeMunn, MegMurphy, rh Mr JimMurray, IanNandy, LisaNash, PamelaOnwurah, ChiOwen, AlbertPaisley, IanPearce, TeresaPhillipson, BridgetPound, StephenRaynsford, rh Mr NickReed, Mr JamieReeves, RachelReynolds, EmmaRitchie, Ms MargaretRobertson, AngusRobertson, JohnRobinson, Mr GeoffreyRotheram, SteveRoy, LindsayRuane, ChrisSarwar, AnasSeabeck, AlisonShannon, JimSharma, Mr VirendraSheerman, Mr BarrySheridan, JimShuker, GavinSkinner, Mr DennisSlaughter, Mr AndySmith, rh Mr AndrewSmith, AngelaSmith, NickSpellar, rh Mr JohnStringer, GrahamSutcliffe, Mr GerryTami, MarkThomas, Mr GarethThornberry, EmilyTimms, rh StephenTrickett, JonTurner, KarlTwigg, DerekUmunna, Mr ChukaVaz, ValerieWalley, JoanWatts, Mr DaveWeir, Mr MikeWhiteford, Dr EilidhWhitehead, Dr AlanWilliams, HywelWilliamson, ChrisWilson, PhilWilson, SammyWinnick, Mr DavidWinterton, rh Ms RosieWishart, PeteWoodward, rh Mr ShaunWright, DavidWright, Mr IainTellers for the Ayes:Tom Blenkinsop andNic Dakin NOESAdams, NigelAldous, PeterAmess, Mr DavidAndrew, StuartBacon, Mr RichardBaker, SteveBaldry, Sir TonyBaldwin, HarriettBarclay, StephenBarker, rh GregoryBeith, rh Sir AlanBellingham, Mr HenryBeresford, Sir PaulBerry, JakeBingham, AndrewBinley, Mr BrianBirtwistle, GordonBlackman, BobBlunt, Mr CrispinBone, Mr PeterBottomley, Sir PeterBrady, Mr GrahamBrake, rh TomBray, AngieBridgen, AndrewBrine, SteveBrooke, AnnetteBrowne, Mr JeremyBruce, FionaBruce, rh Sir MalcolmBuckland, Mr RobertBurley, Mr AidanBurns, ConorBurns, rh Mr SimonBurrowes, Mr DavidBurt, AlistairBurt, LorelyCairns, AlunCampbell, rh Sir MenziesCarmichael, rh Mr AlistairCarmichael, NeilCarswell, Mr DouglasCash, Mr WilliamChishti, RehmanClappison, Mr JamesClark, rh GregClarke, rh Mr KennethClifton-Brown, GeoffreyCoffey, Dr ThérèseCollins, DamianColvile, OliverCox, Mr GeoffreyCrabb, StephenCrockart, MikeCrouch, TraceyDavey, rh Mr EdwardDavies, GlynDavies, PhilipDavis, rh Mr Davidde Bois, NickDinenage, CarolineDjanogly, Mr JonathanDorrell, rh Mr StephenDorries, NadineDoyle-Price, JackieDrax, RichardDuddridge, JamesDuncan, rh Mr AlanDuncan Smith, rh Mr IainDunne, Mr PhilipEllis, MichaelEllison, JaneEllwood, Mr TobiasElphicke, CharlieEustice, GeorgeEvans, GrahamEvans, JonathanEvennett, Mr DavidFallon, rh MichaelFarron, TimField, MarkFoster, rh Mr DonFox, rh Dr LiamFrancois, rh Mr MarkFreeman, GeorgeFreer, MikeFuller, RichardGale, Sir RogerGarnier, Sir EdwardGarnier, MarkGauke, Mr DavidGeorge, AndrewGibb, Mr NickGilbert, StephenGillan, rh Mrs CherylGlen, JohnGoldsmith, ZacGraham, RichardGrant, Mrs HelenGray, Mr JamesGreen, rh DamianGreening, rh JustineGrieve, rh Mr DominicGriffiths, AndrewGummer, BenHames, DuncanHammond, StephenHands, GregHarper, Mr MarkHarrington, RichardHarris, RebeccaHart, SimonHarvey, Sir NickHaselhurst, rh Sir AlanHayes, Mr JohnHeald, OliverHeath, Mr DavidHemming, JohnHenderson, GordonHerbert, rh NickHinds, DamianHoban, Mr MarkHollingbery, GeorgeHollobone, Mr PhilipHolloway, Mr AdamHopkins, KrisHorwood, MartinHowarth, Sir GeraldHowell, JohnHughes, rh SimonHuhne, rh ChrisHunt, rh Mr JeremyHuppert, Dr JulianHurd, Mr NickJackson, Mr StewartJames, MargotJavid, SajidJenkin, Mr BernardJohnson, GarethJohnson, Joseph Jones, Andrew Jones, rh Mr DavidJones, Mr MarcusKawczynski, DanielKelly, ChrisKennedy, rh Mr CharlesKirby, SimonKnight, rh Mr GregKwarteng, KwasiLaing, Mrs EleanorLancaster, MarkLansley, rh Mr AndrewLatham, PaulineLaws, rh Mr DavidLeadsom, AndreaLee, JessicaLee, Dr PhillipLeech, Mr JohnLefroy, JeremyLeigh, Mr EdwardLeslie, CharlotteLetwin, rh Mr OliverLloyd, StephenLopresti, JackLord, JonathanLoughton, TimLuff, PeterMacleod, MaryMain, Mrs AnneMaude, rh Mr FrancisMaynard, PaulMcCartney, JasonMcCartney, KarlMcIntosh, Miss AnneMcLoughlin, rh Mr PatrickMcPartland, StephenMcVey, EstherMenzies, MarkMiller, rh MariaMills, NigelMilton, AnneMitchell, rh Mr AndrewMoore, rh MichaelMorgan, NickyMorris, Anne MarieMorris, DavidMosley, StephenMowat, DavidMulholland, GregMunt, TessaMurray, SheryllMurrison, Dr AndrewNeill, RobertNewmark, Mr BrooksNewton, SarahNokes, CarolineNorman, JesseNuttall, Mr DavidOfford, Dr MatthewOllerenshaw, EricOpperman, GuyPaice, rh Sir JamesParish, NeilPatel, PritiPaterson, rh Mr OwenPawsey, MarkPenning, MikePenrose, JohnPercy, AndrewPhillips, StephenPickles, rh Mr EricPincher, ChristopherPoulter, Dr DanielPrisk, Mr MarkPritchard, MarkPugh, JohnRaab, Mr DominicRandall, rh Mr JohnRedwood, rh Mr JohnRees-Mogg, JacobReevell, SimonReid, Mr AlanRobathan, rh Mr AndrewRobertson, rh HughRobertson, Mr LaurenceRogerson, DanRudd, AmberRuffley, Mr DavidRussell, Sir BobRutley, DavidSanders, Mr AdrianSandys, LauraScott, Mr LeeSelous, AndrewSharma, AlokShelbrooke, AlecShepherd, Mr RichardSimpson, Mr KeithSkidmore, ChrisSmith, Miss ChloeSmith, HenrySmith, JulianSmith, Sir RobertSoames, rh NicholasSoubry, AnnaSpencer, Mr MarkStevenson, JohnStewart, IainStewart, RoryStreeter, Mr GaryStride, MelStuart, Mr GrahamStunell, rh AndrewSturdy, JulianSwales, IanSwayne, rh Mr DesmondSwinson, JoSwire, rh Mr HugoSyms, Mr RobertTapsell, rh Sir PeterTeather, SarahThurso, JohnTimpson, Mr EdwardTomlinson, JustinTredinnick, DavidTruss, ElizabethTurner, Mr AndrewTyrie, Mr AndrewUppal, PaulVaizey, Mr EdwardVara, Mr ShaileshVickers, MartinWalker, Mr CharlesWalker, Mr RobinWard, Mr DavidWatkinson, AngelaWeatherley, MikeWebb, SteveWharton, JamesWheeler, HeatherWhite, ChrisWhittaker, CraigWhittingdale, Mr JohnWiggin, Bill Willetts, rh Mr David Williams, RogerWilliams, StephenWilliamson, GavinWillott, JennyWilson, Mr RobWollaston, Dr SarahWright, JeremyWright, SimonYeo, Mr TimYoung, rh Sir GeorgeTellers for the Noes:Karen Bradley andMark HunterQuestion accordingly negatived.

[Madam Deputy Speaker (Dawn Primarolo)]

Before we proceed to the next debate, I have to announce the results of the deferred Division on the Question relating to the draft Housing Benefit (Amendment) Regulations 2012. The Ayes were 260 and the Noes were 206, so the Ayes have it.

[The Division list is published at the end of today’s debates.]

Policing

Wednesday 24th October 2012 Commons Chamber

16:13

[Mr David Hanson (Delyn) (Lab)]

I beg to move,

That this House notes with serious concern the Electoral Reform Society’s warning that the police and crime commissioner elections ‘threaten to result in the lowest turnout of any nationwide election in British history’ following the Government’s decision to hold the elections on 15 November 2012; further notes that the Electoral Reform Society is predicting that turnout will be significantly lower than at the local elections, held in May; believes the Government’s cuts to 15,000 police officers demonstrates its wrong-headed attitude to policing; is concerned about the effect this has on police morale; further notes that Ministers have confirmed that the Government has broken its promise not to cut frontline police officers by taking 6,800 police officers off the front line; is concerned that Government policy is removing crucial tools for the police to catch offenders and tackle crime in the future, such as restricting the use of CCTV and DNA evidence and the abolition of ASBOs; and believes that the Government’s decision to hold elections in November rather than in May wastes public money that should be spent on front line police.

First, may I pay tribute to the work of our police officers, and the police staff who support them and work with them? In keeping our communities safe, it is their job to respond to the calls, investigate crimes and keep our confidence in policing high. In the week that we have debated Hillsborough and the failings associated with it, let us not forget the daily work police officers do, with professionalism and commitment, on our behalf.

I had the privilege of attending last week’s police bravery awards, as did the Minister for Policing and Criminal Justice, whom I congratulate on his appointment to the Privy Council. We listened to tales of outstanding bravery in the face of immense challenges, and the shadow Home Secretary, my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), and I were astounded by the accounts of police who entered burning buildings, dived into docks and struggled with armed assailants—every day doing the ordinary, but on occasion doing the extraordinary, on our behalf. It was a real honour for us to be there.

It is also important to pay tribute, as we did at York Minster only two or three weeks ago, to those police officers who have died in the line of duty. I must pay tribute to the latest officers killed on duty, Police Constables Nicola Hughes and Fiona Bone. They were two bright young officers, whose promising careers were cut short in a most cowardly and reprehensible way. I hope I speak for the whole House in saying we will never forget them or their service.

We are just three weeks away from the elections for police and crime commissioners in England and Wales on 15 November, and it is worth setting out the situation in regard to them. We are three weeks away from an election few people know about and even fewer understand. We are three weeks away from an election that, in my view, has been handled incompetently by the Government—I do not blame the Minister personally as he has only just been appointed to his post.

The election did not need to be held in November. The Tories are holding it then for the sake of a political fix with their political friends, the Liberal Democrats—who, at the last count, had candidates standing in only 24 of the 41 police areas. Perhaps they were embarrassed by the fact that at the general election they promised 3,000 extra police officers, yet they have presided over a cut of 15,000 police officers to date.

[Chris Bryant (Rhondda) (Lab)]

And only one Liberal Democrat MP is present.

[Mr Hanson]

Indeed, only one Liberal Democrat is present: the hon. Member for Burnley (Gordon Birtwistle). [Interruption.] Yes, one other Liberal Democrat is, in fact, present: the hon. Member for Edinburgh West (Mike Crockart).

I make these points because I am worried about the turnout in these elections. I worry for the Minister in having this flagship policy of elections for PCCs on which the Government have done an abysmal job in generating interest and turnout and getting people engaged.

[Mr Henry Bellingham (North West Norfolk) (Con)]

On the question of turnout, does the right hon. Gentleman agree that the comments of Lord Blair of Boughton were deeply unhelpful and extremely negative, and that someone with his experience should have known better?

[Mr Hanson]

I say to the hon. Gentleman that I will be voting on 15 November, and I urge everybody else to vote, too, to ensure that these elections have as high a turnout as possible.

[Chris Bryant]

And vote Labour.

[Mr Hanson]

Yes, I agree with my hon. Friend that people should vote Labour on 15 November, and I shall establish why they should do so in due course.

These elections matter. The PCCs have big roles to play in setting budgets, in setting priorities and in engaging the public.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

In fairness to Lord Blair, it should be said that he has in effect been the victim of a Tory police and crime commissioner and was sacked for political reasons. Is it not therefore understandable that he is a bit sceptical about this Tory policy?

[Mr Hanson]

Lord Blair certainly knows about the role of PCCs, but I think people should vote in this election.

[Julian Smith (Skipton and Ripon) (Con)]

Does the right hon. Gentleman welcome all the fantastic Conservative prospective PCCs, and in particular the Conservative women who are standing on 15 November?

[Mr Hanson]

I certainly welcome the fact that the Conservatives have a candidate standing in every area, unlike the Liberal Democrats, who voted for the policy but are not seeing it through and therefore are not committed to it. We in the Labour party have put a lot of effort into selecting candidates, and more than a third of them are women, which is very promising.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

Further to the intervention from my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe), is not what has happened in London particularly instructive in terms of the context for this debate? Mayor Boris Johnson has presided over almost 1,500 police officers being cut and almost 2,000 police community support officers being lost. Is that not part of the Conservative record and to be regretted?

[Mr Hanson]

I am grateful to my hon. Friend for that intervention, as that is part of the Conservatives’ record. One of the things that we will be campaigning on outside London in these elections is their appalling record on cutting police throughout England and Wales.

Today’s debate is a chance for us to try to engage the public in these elections to ensure—if this is possible—a good turnout. The Government’s record, to date, has been appalling. Hon. Members should listen not only to me, but to the former chief constable of Thames Valley police and head of the soon-to-be-dissolved National Policing Improvement Agency. He said:

“If you could have constructed a manual on how not to conduct an election, the Home Office have managed to tick off just about every element of it, including holding it in November, which is almost guaranteed to be dark and poor weather.”

He continued:

“So there are significant problems with getting a decent turnout…If they get elected on a 15% turnout it’s going to be pretty shocking.”

On 13 December 2010, the Home Secretary said at the Dispatch Box:

“With a strong democratic mandate from the ballot box, police and crime commissioners will hold their chief constable to account for cutting crime.”—[Official Report, 13 December 2010; Vol. 520, c. 708.]

However, only last month, research commissioned by Victim Support showed that 90% of people questioned had no idea what this role entailed or what it did. On Monday, a survey by the Association of Police and Crime Commissioners suggested that 85% of people either knew “not very much” or “nothing at all” about this election—nearly two in five knew nothing about it whatsoever. The same survey, only this week, showed that the number of people asked who were certain to vote was 15%. The Minister of State, Home Department, the hon. Member for Taunton Deane (Mr Browne), whom I believe is to wind up today’s debate, even though he cannot be bothered to come to hear the opening speeches—

[The Minister for Policing and Criminal Justice (Damian Green)]

I should say, in defence of my hon. Friend the Member for Taunton Deane, that he is, as we speak, disengaging himself from the Select Committee on Environment, Food and Rural Affairs, which had summoned him to appear before it. So he is fulfilling a parliamentary obligation at the moment.

[Mr Hanson]

The Ministers need to establish the facts on these matters. If the relevant Minister cannot reply to the debate, perhaps another Minister, such as the Under-Secretary of State for the Home Department, the hon. Member for Old Bexley and Sidcup (James Brokenshire) could wind up instead.

Let us put that aside, because the key issue is that the Home Office Minister responsible for crime reduction, the hon. Member for Taunton Deane, said at his party conference, only two weeks ago, that a turnout of under 20% would not be acceptable. We face these November elections with awareness still at a very poor level, and we also have a new electoral system, one not normally used for these elections. The Electoral Commission has summed up the situation in its most recent briefing in September, where it said:

“It is important that voters have sufficient information about the voting system, the issues and the candidates that are standing in elections…This will be particularly important for the PCC elections because these are completely new elections, for a new role. In addition they are happening at an unusual time of year, using a voting system (the Supplementary Vote) that most people will be unfamiliar with.”

It went on to say that although it will be carrying out its functions in highlighting the elections, its

“preferred option—a booklet with information about the candidates to be sent to voters in each police authority area – is not going to happen.”

The Government have ignored the Electoral Commission’s advice on turnout for these elections, so I would be interested to know from the Minister what sort of modelling the Home Office has done on turnout and what it feels it might be. When we examine every local election since 2006, which were held in May, we find that there was an average turnout of 37%—that is twice what the Electoral Reform Society suggests turnout will be on 15 November. Its modelling suggests that the turnout will be as low as 18.5%, and it has said that these elections

“threaten to result in the lowest turnout of any nationwide election in British history.”

If that is the case, the fault will lie with the Minister.

[Julian Smith]

Does the right hon. Gentleman not welcome the fact that the PCC elections will allow local communities finally to have control over the strategy for policing decisions in their areas?

[Mr Hanson]

I do not know where the hon. Gentleman has been for the past 100 years, but police authorities did have elected members chairing those committees.

I will talk about the Labour party’s approach to police and crime commissioner elections, but first let me finish looking at where we are in relation to the election on 15 November. Today is 24 October, yet Parliament has not yet approved the Police and Crime Commissioner Elections (Welsh Forms) Order 2012, item 21 on today’s Order Paper. That election is to take place three weeks tomorrow. This very day, the answer from the Minister for Policing and Criminal Justice to a question that I tabled has been published in which it is revealed that his decision not to lay that order has cost you, Madam Deputy Speaker, me and every other Member of this House as taxpayers an extra £350,000. That is the cost of this Government’s failure to lay an order which should have been laid by law—not by choice; by law. It is a legal requirement to have election ballot papers in English and Welsh in Wales, but this Government have not yet laid the relevant order, even though the election is happening three weeks tomorrow. Returning officers in my constituency and throughout Wales have had to print two sets of ballot papers, at a cost of £350,000.

[Wayne David (Caerphilly) (Lab)]

What my right hon. Friend is describing is truly shocking—a huge waste of public money through Government incompetence. Does he agree that this is the first time in electoral history that a Government have had to destroy ballot papers before an election?

[Mr Hanson]

The Home Secretary said that she delayed the elections not because of the political fix with the Liberal Democrats, but because more time was needed to plan the elections, yet the order for the elections was only laid on 15 October and has not yet been passed by the House, returning officers are having to print two sets of ballot papers, and we as taxpayers are picking up a bill of £350,000. It is a shambles.

If £350,000 were the only cost, we should be worried but not overly concerned, but the cost of these elections is £100 million. Cancelling the May elections and putting them on 15 November instead has cost an extra £25 million.

[Robert Flello (Stoke-on-Trent South) (Lab)]

My right hon. Friend may be interested to know that the Ministry of Justice is having to spend more resources and put more staff on its team looking at support for victims, what will be passed down to PCCs and what will not, and what the budget will be. That work has only just started. What a ridiculous waste of money that is, too.

[Mr Hanson]

I thank my hon. Friend for that intervention, which shows what a shambles this is—a shambles that is costing money and that could have been avoided by choosing a different election date.

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

My right hon. Friend will remember from his time campaigning for Tony Lloyd in Denton and Reddish over the summer my constituents’ concern about the 3,000 police jobs that will be lost in Greater Manchester. Would not the money have been better spent securing those jobs?

[Mr Hanson]

Indeed it would. The former Policing Minister, the right hon. Member for Arundel and South Downs (Nick Herbert), writing in The Daily Telegraph only yesterday, made it clear that the Liberal Democrats tried to sabotage the poll, which is why it is now to be held in November. I think we should send the bill to the constituency office of the Minister of State, Home Department, the hon. Member for Taunton Deane, and ask him to pay the £100 million cost on behalf of the Liberal Democrats who, I remind the House, are standing in only 24 of the 41 areas.

The Electoral Commission has also said that the central website provided by the Government will not be sufficient because it requires people to access the internet. It is estimated that 7 million adults outside London have not used the internet in the past 12 months, but how do the Government decide to promote their campaign? By putting it only on the website. Which groups are least able to access the internet? People who live in the north, people on low incomes, people over 65, and women. There is disproportionality built in to these elections which the Government should be careful of.

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

What makes the shambles worse is that we had a referendum in this country on the voting system, yet now we find that the Government intend to use the supplementary vote. Who authorised that?

[Mr Hanson]

Indeed. Most people do not know how to use the supplementary vote. That will add to the confusion on 15 November, which will not be helped by the lack of information on the selection. The Minister has authorised taxpayer-funded adverts, which are generating fear of crime more than knowledge of the elections. They promote police and crime commissioners as an answer to the awful mess, but they do not mention some of the real challenges that people will have to face. If turnout is low, as I fear it will be but hope it will not be, the only people who have to answer for those mistakes are the Government.

It is no secret that Labour voted against the Police Reform and Social Responsibility Bill. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, we would have spent the £100 million on 3,000 new police officers instead. But Parliament has spoken and we intend to fight the election hard. In answer to the hon. Member for Skipton and Ripon (Julian Smith), we have decided to stand 41 candidates in 41 police areas. We are more in favour of the policy than the Liberal Democrats who voted for it, but we will not stand aside and allow Liberal Democrat and Conservative candidates to be elected and to act as cheerleaders for the Government. We have an excellent set of candidates and a proud record, as crime fell by 43% in the years of the Labour Government.

We will fight the elections supporting neighbourhood policing, tackling antisocial behaviour, supporting victims, protecting the operational independence of police, forming local partnerships and opposing the Government’s reckless 20% cuts in policing, which have seen 6,800 officers gone from our front line already. I would be grateful if, in his contribution, the Minister confirmed that 6,800 officers have gone from the front line. If he does, he will be directly contradicting the Prime Minister’s claim that front-line services will not be hit.

[Ms Karen Buck (Westminster North) (Lab)]

Does my right hon. Friend agree that one way to increase interest in the elections in November might be to encourage local discussions about the closure of police stations? It is an open secret in the Met and I suspect elsewhere that we are expecting to see a number of police station closures. This parallels the Mayor of London being forced to release the list of fire station closures last week. Does my right hon. Friend expect the list of putative police station closures to be out before those elections?

[Mr Hanson]

As it happens, I was in Gloucester yesterday supporting the Labour candidate in Gloucestershire, and one of the main aspects of her campaigning was to keep policing in touch with local people by maintaining police stations in areas where there are high levels of crime. The same will be true in London. That is because Government Members have forced through 20% cuts in the policing budget. That means the loss of 15,000 officers by 2015, which is a conservative estimate. Ultimately, the number of front-line officers lost in the past two years—6,778—is already more than the police inspector intended to date.

[Andrew Percy (Brigg and Goole) (Con)]

The right hon. Gentleman is bandying a lot of numbers about. We have a candidate standing in the county formerly known as Humberside who spent £500 million trying to close down our regional fire control centres. That would pay for a large number of police officers. What does he think about that candidate, Lord Prescott?

[Mr Hanson]

I have known Lord Prescott for 37 years, since I went to Hull university. I would trust Lord Prescott with any public service provided in Humberside. He is one of the finest members of the Labour party.

If the Minister does not believe me, perhaps he will believe the former chief constables of Dyfed Powys and of Gloucestershire, who have been extremely critical of the policing cuts. We proposed 12% cuts in funding. As the Policing Minister, I took that budget through with my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), but our proposals would have saved £1 billion for policing, which would have been invested in policing, instead of the present cuts.

[Kate Green (Stretford and Urmston) (Lab)]

Right across the political spectrum in Trafford there is concern about the disproportionate impact of police cuts, as we are facing the largest percentage cut in Greater Manchester. Does my right hon. Friend agree that one of the concerns about the way these job losses are falling is that more experienced officers, disillusioned, for example, by what has been decided about their pensions and their pay, are choosing to leave the force, so we are seeing not only a numbers problem, but an experience problem?

[Mr Hanson]

My hon. Friend is absolutely correct. Many superintendents at senior management level, who bring a great deal of experience to policing in this country, are being squeezed and losing their posts. This level of cuts is pushing forward a privatisation agenda, and I feel that we need to say clearly—let us be blunt—that we do not want private companies patrolling the public streets of Britain. We want police officers and police community support officers doing that job. The Government should have learned the lessons of G4S during the Olympics rather than rushing forward with plans for large-scale contracting out. Although public-private partnerships are valuable, we must ensure that new contracts pass tough key tests on value for money, resilience and security, transparency and accountability, and policing by consent.

[Mr Andy Slaughter (Hammersmith) (Lab)]

My right hon. Friend mentions superintendents. In London we are likely to lose seven borough commanders, with large boroughs, including my own, having to merge and having no accountability at the top in local policing. We have already lost neighbourhood team sergeants. If that is the example being set in London by a cutting Tory regime—that is what we have under the Mayor of London and his new deputy mayor for policing, who has already cut services in my borough—then the rest of the country should take note, because they are simply cuts from the top to the bottom of the police service.

[Mr Hanson]

Now that the Boris bung has worn off and the election is over, the people of London face real policing cuts, and my hon. Friend is right to point out the real concerns there will be. It is not just a question of policing cuts, because on top of all that the Government, despite their rhetoric, are actually making it harder for police officers to do their job. They are not only cutting budgets, but removing crucial tools the police use to catch offenders and tackle crime, including reducing CCTV and DNA evidence and abolishing antisocial behaviour orders.

[Mr John Spellar (Warley) (Lab)]

My right hon. Friend touches on the important question of police morale and how this will impact on police effectiveness. Does he think that police morale and effectiveness will be improved by the ludicrous suspension of Detective Superintendent Fulcher in Swindon for trying to solve a kidnapping while the victim could still have been alive and for solving two murders? Should he not receive an award for that, rather than being criticised by an out-of-touch judge and hide-bound bureaucrats?

[Mr Hanson]

I was also in Swindon yesterday, while campaigning for Clare Moody, Labour’s candidate there, and know that that was a live issue in many discussions. The matter has now been referred to the Independent Police Complaints Commission, which will have to look at it, but I recognise my right hon. Friend’s strength of feeling.

On the question of CCTV, the code of practice we expect next year will certainly reduce the number of CCTV cameras and increase the bureaucracy, which in my view will have an impact on fighting crime. If we look at the DNA database and changes that my right hon. Friend the Member for Kingston upon Hull West and Hessle looked at hard, we see that the Government’s changes will make the database weaker, go against the Home Office’s own evidence and ensure that people who would have been caught and prevented from committing murders or serious sexual offences will now be able to commit them. Our own evidence in July 2010 showed that, under the system proposed by my right hon. Friend, 23,000 people each year would have been on the database who, under the Government’s plans, will not be and so will go on to commit further offences. What has it come to when the so-called party of law and order cuts policing, reduces CCTV, stops people—23,000 of them—being caught as a result of DNA evidence and, lastly, removes ASBOs, which are there to help protect communities against antisocial behaviour?

[Margot James (Stourbridge) (Con)]

Last year the chief constable of West Midlands police, Chris Sims, appeared before the Home Affairs Committee and made a commitment that his force would be able to deliver continuous improvement in crime reduction at the same time as reducing its budget. The results have borne out his early confidence. We have seen a 13% fall in crime to the year ending June 2012, and at the same time the chief constable has been able to reduce officer numbers by 4% and police staff by 6.2%. I think that is a good result for our taxpayers, who themselves are having to do more for less in the private sector.

[Mr Hanson]

rose—

[Mr Speaker]

Before calling the right hon. Gentleman, I say to the hon. Lady that, first, interventions must be brief and, secondly, I am keen that everyone should get in and so the time limit will have to be reduced later on, fairly soon afterwards, so we really need economy.

[Mr Hanson]

I take it from that that the hon. Lady is in favour of 800 police officers being lost from the west midlands police force. I suggest that she go back to Stourbridge and say, “I am very happy to support 800 fewer officers in the west midlands.” Crime fell by 43% during the course of the Labour Government because we had record numbers of police officers catching record numbers of criminals, giving them sentences, ensuring that they served them, and reducing reoffending. She will not find much joy in Stourbridge about what has happened in terms of those policies.

Labour Members believe that the policing settlements for this year, last year and the year before have caused great damage to the communities that we represent, and that next year’s settlement, through the comprehensive spending review, is likely to be much worse. [Interruption.] Let me say to the Minister of State, the hon. Member for Taunton Deane, who is heckling from a sedentary position, that, yes, crime has gone down, and we welcome that. Crime went down by 43% during the time of the Labour Government, and today’s crime figures are reaching the stage whereby the Labour Government’s policies are still having an impact. If he cuts 16,000 police officers, reduces DNA testing, reduces CCTV and scraps ASBOs, he will find crime levelling and possibly increasing in future. He will know about that by the time of the next election and will be judged on it in due course.

[Sir Tony Baldry (Banbury) (Con)]

Before the right hon. Gentleman winds up, will he tell the House where the Labour party now stands on the various Winsor reforms?

[Mr Hanson]

Absolutely. We support some aspects of the Winsor reforms, as I have said publicly. [Interruption.] I am trying to wind up now; I will happily tell the hon. Gentleman outside the Chamber what we will support. We support the fitness test, among other things. We have not supported regional pay. There is a whole range of things; it is a mixed package, and we are happy to discuss it. The key point that he should know is that the 12% reduction in funding that we supported and the 20% reduction that he will have voted for is the real difference between us in this debate on policing, and that is the issue we need to take in hand.

This Government are wrecking the police service; they are not valuing our officers and are not supporting the police. They will face some real challenges in this election. If the turnout is as we have so far anticipated, which I hope it will not be, the Government will have to give answers about why they have reorganised policing in such a flimsy, disorganised and shambolic way.

16:39

[The Minister for Policing and Criminal Justice (Damian Green)]

I thank the right hon. Member for Delyn (Mr Hanson) for his kind words at the start of his speech, and I agree with him about the police. This Government recognise the vital job that the police do to protect the public. The courage and dedication of the thousands of men and women who work in police forces across the country make them outstanding. Police officers risk their lives in the line of duty every single day, and this year, more than ever, we have been reminded of the dangers they face. The tragic deaths of PC Ian Dibell, PC Fiona Bone and PC Nicola Hughes show just how brave our officers can be and the debt of gratitude we owe them all.

This year, with the Olympic and Paralympic games, we have seen the best of policing, but in the response to phone hacking and Hillsborough real questions have been raised about integrity and accountability, and we are determined to get to grips with both.

Before I talk about this Government’s positive agenda for policing to introduce reforms to deliver a more professional service responsive to the public and accountable for their actions, I want to address some of the points made by the right hon. Member for Delyn. He reminded us that his party opposed the introduction of police and crime commissioners—the introduction of democracy into police accountability. This is a fascinating conversion, because when Labour was in power the hon. Member for Gedling (Vernon Coaker), who was then police Minister, said that

“only direct election, based on geographic constituencies, will deliver the strong connection to the public which is critical”.

He was absolutely right then and the Labour party is absolutely wrong now.

The right hon. Member for Delyn also had the cheek to complain about privatisation, on which I do not need to quote his Labour predecessors on policing, because I can quote him. In 2009 he said that he was “very relaxed” about police collaboration with the private sector and that the police had Labour’s “blessing to do so”. His remarks should be put in that context; he thought something completely different three years ago.

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

Will the Minister confirm that the previous Government’s consultation was on whether the whole police authority, not just one person, should be elected? Will he also confirm that it was a proper consultation and that because of the outright opposition of parties of all persuasions in local government the proposals were dropped?

[Damian Green]

The Opposition, who were then in government, expressed a view, changed their mind and have now changed their mind again. I am fascinated that the right hon. Gentleman did not address the issue of privatisation, which started under his tenure as Home Secretary but which I assume he is now prepared to attack as a loyal supporter of his party’s Front-Bench representatives.

What we have heard so far is the Labour party’s central obsession with spending more money. The right hon. Member for Delyn has made no admission that the Opposition are, in fact, committed to the same level of cuts as this Government, or to any level of cuts at all. There was no honest admission that police numbers would have gone down under their plans, and no expression of regret for the 25,000 police officers stuck in back-room functions under Labour’s top-down management of the police service. Most of all, there was no apology for causing the financial mess that led to these cuts in the first place. We have had no transparency or apology from the Labour party, and just one solution—spend more money. It is as clear as ever that Labour is not learning and is not capable of learning.

We cannot even credit the Opposition with being consistent on that point. As we have heard, the police and crime commissioner elections will deliver accountable policing that responds to public demands. Labour Front Benchers are arguing for both more and less spending at the same time. They complain about what they describe as the waste of money on holding elections, which is an interesting attitude for a democratic party, at the same time as they argue that we should spend £30 million more on publicising the elections. I suppose that they could, with intellectual coherence, hold one or other of those views, but they cannot hold both of them at once, as they appear to want to do.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

What is the Minister’s prediction for the election turnout on 15 November and what does he regard as necessary to give the candidates a mandate?

[Damian Green]

I will address the PCC elections in a moment. Unlike the right hon. Member for Delyn, I want to start my speech by talking about policing, which is what this debate is supposed to be about.

At the start of the spending review, the service was spending more than £14 billion a year. It is only right that the police make their contribution to the savings that are needed, while ensuring that the quality of service that the public receive is maintained and, where possible, improved. This can be done and it is being done. By changing the way in which police forces work, getting officers out of the back office and on to the front line and stripping out bureaucratic processes, officers can be freed up to do the job they joined to do—to fight crime and protect the public. This is what forces up and down the country are doing. The House does not need to take my word for it; the independent inspectorate of constabulary has said so.

[Jonathan Ashworth (Leicester South) (Lab)]

Not only is the Minister cutting more than 300 police officers from the Leicestershire force by 2015; he is also cutting back-room staff, which will force more officers into the back room. The Minister is a reasonable man, so will he give me a prediction? By 2015, will crime go up or down in Leicester?

[Damian Green]

I do not need to give the hon. Gentleman a prediction, because I can tell him what is happening to crime in Leicestershire. Crime in Leicestershire is down 5% under this Government and I hope that he will welcome that change.

The inspectorate has confirmed what Ministers have said all along—that the front line of policing is being protected. We know that chief constables are prioritising the front line, because they plan to increase the proportion of officers on the front line from 83% in March 2010 to 89% in March 2015. Protecting the front line does not mean staying exactly the same, it is about the service that the public receive. Her Majesty’s inspectorate of constabulary says that the service is being maintained, and I hope that Opposition Members will have the politeness to listen to it.

[Andrew Percy]

May I take the Minister back to policing numbers? My dearly valued colleagues from the Labour party in Humberside will be able to confirm that police numbers there fell in 2007, for the very same reasons that he has outlined here today, and there was zero opposition among local Labour politicians.

[Damian Green]

As ever, my hon. Friend points out the inadequacy of Labour arguments in Humberside and elsewhere. Since he brings up the subject of numbers, I am happy to tell him that in this Government’s time in office, crime in Humberside has fallen by 12%—a particularly good performance, I think he will agree.

[Lisa Nandy (Wigan) (Lab)]

That is all very well, but will the Minister actually answer the question that my hon. Friend the Member for Leicester South (Jonathan Ashworth) put to him? How are front line police officers expected to be able to get out on to the streets and be visible to the public if the back-office functions upon which they rely so deeply are being cut?

[Damian Green]

I would guess from all I know of the hon. Lady that she opposes any use of the private sector in back-office functions, but that is the way to release warranted police officers, who are trained to be on the streets. Her party goes back and forth; in government it was in favour of the use of the private sector, but in opposition it has retreated to its comfort zone and opposed it. Under both the previous Government and the current one, many police forces have shown—

[Steve McCabe]

Will the Minister give way?

[Damian Green]

May I finish answering the previous intervention before I come to the hon. Gentleman?

Many police forces have shown that one way to get more officers on to the front line is through more flexible and better use of back-office and middle-office staff. Now I have pleasure in giving way to the hon. Gentleman.

[Steve McCabe]

I am extremely grateful to the Minister and apologise for interrupting.

Given the importance that the Minister attaches to the democratisation that comes with commissioners, does he accept that where commissioners have a mandate from the public to oppose certain types of privatisation, whether in the back office or the front office, the Government should respect that?

[Damian Green]

Yes, I do. We are in favour of democracy, and I accept that it is possible that police and crime commissioners will be elected who will do things with which I disagree. They will be democratically elected and have the mandate to do what they do, and if they get it wrong they will answer to their electorate in four years’ time. That is the point of democracy.

[Andrew Gwynne]

Will the Minister give way?

[Damian Green]

May I make some progress? I am conscious of your warning about going on too long, Mr Speaker.

The Opposition said that because of the cuts, emergency response times would increase, but they have held up. They said that neighbourhood policing would suffer, but there are more neighbourhood officers now than there were in May 2010. Most importantly of all—it is at the heart of the debate—they said that crime would go up, and they were wrong. Crime has gone down by 10% under this Government. That is the situation across key crime types, with recorded violence down 13%, burglary down 7%, criminal damage down 22%, vehicle crime down 15%, robbery down 5% and knife crime down 9%.

Much has been made of the situation in the west midlands. I know that the hon. Member for Birmingham, Selly Oak (Steve McCabe) will wish to know that crime there is down by an impressive 13% since the election. I hope that west midlands Members of all parties will welcome that.

Labour has been proved wrong on all its key claims. Police reform is working, and crime is falling. I am grateful to the Opposition for giving me the opportunity to point that out today. They were wrong to claim that forces faced 20% cuts. No force faces cuts of that level.

[Mr Thomas]

The right hon. Gentleman referred to reports by HMIC, so he will presumably be familiar with the concerns that it made clear earlier this year about the future performance of the Metropolitan police, given the cuts that the Mayor of London is likely to push through. Does the right hon. Gentleman accept that there is even more concern, particularly in the suburbs of London, about rumours of significant closures of police stations and custody suites and mergers of borough commands?

[Damian Green]

The hon. Gentleman has not quite got with the democratic project yet. As he knows, policing in London is the responsibility of the Mayor and the Deputy Mayor. The hon. Gentleman had his chance earlier this year to put his arguments against the Mayor of London’s crime policy, but those arguments failed. The people of London voted to re-elect the current Mayor of London, and he has an excellent Deputy Mayor who is dealing with those matters.

[Alan Johnson]

Will the Minister give way?

[Damian Green]

I will give way one more time as the right hon. Gentleman is a former Home Secretary.

[Alan Johnson]

I am grateful to the Minister, but I thought I just heard him say that there are no cuts of 20%. In his speech last Monday, the Prime Minister said,

“in real terms, central police spending cuts are around 20 per cent”.

Does the Minister disagree with the Prime Minister?

[Damian Green]

No. The right hon. Gentleman should listen to what I say. The claim is, I think, that forces are facing 20% cuts, but no force is facing cuts of that level. As he knows as well as anyone in the country, the police service receives about a quarter of its income from the police precept element of council tax, the exact proportion—[Interruption.] I am glad that I am able to educate the Labour party about how the police are funded in this country. That funding is not all from the Home Office; some of it comes from the police precept. As the right hon. Gentleman and, I hope, those on the Opposition Front Bench know—although there is no evidence that they do—the exact proportion that comes from the precept varies from force to force, and the level at which it is set is, I stress, a matter for individual police and crime commissioners to decide. In short, no force has seen anything like a 20% cash reduction.

We on this side of the House have long argued that there is no simple link between police numbers and crime rates, and I am happy that that view is shared by the Home Affairs Committee. The figures I have quoted show that that view is correct and widely accepted—the one place it has not yet been accepted is inside the Labour party.

Let me turn to the elections for police and crime commissioners. On this side of the House, we are getting behind our candidates and campaigning hard to ensure that the elections are a success and that the public get the PCCs they deserve—hard-working, dedicated people who want to deliver for their communities and improve policing. Opposition Members should decide whether they support or oppose the elections. I assume that they support them, and I am delighted that the right hon. Member for Delyn has said that he does. A huge number of former Labour Ministers are standing, determined to make 15 November the night of the living retreads.

The confusion on the Opposition Benches is summed up with a pleasing touch of nostalgia by a dispute between Blair and Prescott. Prescott is having an argument with a new Blair, Lord Blair, who is arguing that people should not vote—I think that is disgraceful, and I hope the Labour party will agree that to tell people not to vote in a democratic election is deplorable. [Interruption.] I am glad that the right hon. Member for Delyn disagrees with Lord Blair. I hope that will continue and that everyone in the Labour party will condemn Lord Blair for what he said, not least because, as we have seen in recent articles, Lord Prescott is—of course—campaigning in his unique and energetic fashion around Humberside.

The introduction of PCCs is the most significant democratic reform of policing ever. It will introduce greater transparency and accountability to a service of which we are all rightly proud, but which can sometimes be too distant from the public it serves and fail to reflect adequately their concerns and priorities. As I told the House in a debate last week, only 7% of the public know what a police authority is. That figure represents a huge failure in democratic accountability, because it is the job of a police authority—as it will be of a PCC—to spend the public’s money in a way that guarantees that the police in that area are doing what the public need. It is impossible to do that when 93% of the public do not even know what police authorities are.

[Wayne David]

rose—

[Bridget Phillipson]

rose—

[Damian Green]

I am spoilt for choice but I think that the hon. Lady has had a go, so I will give way to the hon. Gentleman.

[Wayne David]

Does the Minister agree with the Minister of State in the Home Department who said at the Liberal Democrat conference that a turnout out of 20% in elections for PCCs would, “not be good”?

[Damian Green]

My hon. Friend will speak later in the debate, and can no doubt speak for himself. Up to now, and until next month, the public have been unable to do anything about the failures of police authorities. PCCs will have a clear incentive to perform better than that, because if they fail to represent their communities, engage properly and deliver on their priorities, the public will tell them what they think at the ballot box.

Policing matters to the public and people want their forces to respond to their concerns. The advertising campaign that the Home Office has been running this month will be seen by 85% of the public. It tells them how to get more information—[Interruption.] Labour Members have problems with people getting information online, but people can get information online at www.choosemypcc.org.uk, and anyone who wants a printed booklet can get one by calling the freephone number from the advert. Everyone registered to vote will also get the number on a polling card through their door, and the Electoral Commission is writing to each household with information on how to vote. Whatever the Opposition want to say, no one who wants information in the elections will be denied it.

[Mr Hanson]

Does the Minister have any indication of how many people have received a booklet, and how many people have phoned and registered an interest in receiving one?

[Damian Green]

As the website goes online only tomorrow, it will be quite difficult for people to phone now. As the right hon. Gentleman knows, nominations closed only this week, and the final day for people withdrawing from the election was today, so the candidates will have their information out only tomorrow.

Many hon. Members have asked how many people will turn out to vote. We do not know, but however many do so, every PCC will have more legitimacy to make important decisions on what the police do and how the local budget is spent than unelected, unaccountable and largely invisible police authorities.

[Julian Smith]

The number of chief constables and ex-chief constables who face criminal investigations is going into double digits—I am thinking of Grahame Maxwell in North Yorkshire and the problems in Cleveland. Will chief constables be held to account much better under the new regime?

[Damian Green]

It is extremely important that chief constables are held to account, but equally important is the transparency with which they are held to account. That will now be the job of visible, public and democratically elected figures. Among the many bodies to benefit from this advent of democracy will be senior police officers. Many institutions in this country have had to become more transparent in recent years—not least the House. In the long run, it does the institution good to be held to account more publicly.

The policy fits into wider police reform. For too long before this Government came to office, the Home Office interfered too much in local policing and cared too little about national threats. The introduction of PCCs is a step along the road to reversing that trend, and the creation of the National Crime Agency to focus on serious and organised crime nationally is another. That did not exist under the previous Government, but it should have, and it will exist under this Government. PCCs will not just focus just on their local area, but will have a duty to co-operate in dealing with national threats under the new strategic policing requirement, which this Government also introduced.

We are determined that the police will have the powers they need to tackle crime. That includes enhancing professionalism with the creation of the new college of policing. We have today announced that Chief Constable Alex Marshall of Hampshire police will be its chief executive. Key to the college’s work will be the sharing of best practice and research into what works at a local level.

We believe in local solutions to local problems and a departure from the central direction and edicts of the past. The antisocial behaviour order was typical of the previous top-down approach that too often failed communities. Fifty-seven per cent. of ASBOs issued up to the end of 2011 were breached at least once, and more than 40% were breached more than once. It simply did not work, which is why we have set out new proposals in our white paper, “Putting Victims First”, for faster, more flexible and effective powers that will provide a real deterrent to perpetrators and better protect victims and communities.

We also believe that a balance must be struck between enabling the police to use vital modern investigative techniques, such as DNA and CCTV, and protecting the rights of innocent members of the public not to be under constant and unregulated surveillance. That is why, through the Protection of Freedoms Act 2012, we have put in place a series of sensible and proportionate controls on the use of those techniques. But we are not weakening our response to crime. We are not restricting CCTV—it is an important tool but not the only one—and we will continue to take the DNA of the guilty, including, for the first time, of prisoners, rather than that of innocent people. So we are taking a balanced approach that protects the public and punishes the guilty.

Overall, our reforms add up to a realignment of policing in this country that will free the police from central targets and bureaucracy and will place power back in the hands of local people. The introduction of PCCs will make policing more accountable and responsive, while driving forces to become efficient and to improve continually. The end result will be a trusted, responsive and professional police service that will be continually improving to cut crime.

The motion is backward looking. It could have been written by the Labour party in 2005. Its approach to fighting crime amounts to spending more money, tighter control from Whitehall and ever more interference by the state in the lives of ordinary, decent people. It did not work when they were in government, and that is why this Government are working for a more accountable, more transparent and more professional police service. This is what will lead to further falls in crime, and that is why the House should reject this ill-conceived motion.

[Several hon. Members]

rose—

[Mr Speaker]

Order. An eight-minute limit will apply to each of the first two Back-Bench speeches, and thereafter, in the interests of trying to accommodate the level of interest, the time limit will fall to six minutes.

17:06

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

The Minister for Policing and Criminal Justice, whom I welcome to his new position, finished his speech by saying that Labour’s policies did not work in government. I remind him that we were the only Government in the modern era—going back to the first world war—who presided over a reduction in crime. That is to say that the amount of crime was less when we left office than when we assumed office. Indeed, my right hon. Friend the Member for Delyn (Mr Hanson), who was an excellent Policing Minister, understated the case. The Home Office statistics published in July 2010, from this Government, showed that overall crime fell by 50%, violent crime by 55% and domestic violence by 64%. The chances of being a victim of crime fell from a peak of 40% under the Tory Government to 21.5% under us. The murder rate in London was the lowest since I was wearing a tank-top and flares in the early 1970s.

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

Last week?

[Alan Johnson]

Indeed; It was a retro week.

We can now all celebrate that success. The Conservative party—I do not include the Liberal Democrats in this criticism—argued year after year that the statistics were wrong. I remember the Prime Minister standing at the Dispatch Box in opposition saying that crime was not falling but rising, and that when they came into power they would change how the statistics were correlated, but they have done absolutely nothing. They have changed the name of the British crime survey to the England and Wales crime survey, but the statistics are collected in exactly the same way.

That is why the Prime Minister was able to celebrate a 6% fall in crime this year in his tribute speech to that great woman, “Laura Norder”, on Monday. That figure was based on exactly the same formulation of statistics that he once criticised. We should recognise that the momentum of falling crime seems to have continued into this Government, whereas crime doubled under the previous Tory Government between 1979 and 1997, with violent crime increasing by 168% and burglary by 405%. The downward trend has been maintained. It is crucial that all our constituents understand why that has happened and how we can ensure that crime and disorder continue to fall.

When Tony Blair became Prime Minister, he held a meeting with civil servants in the Home Office. They told him that if the economy was successful, crime would increase, and that if the economy was unsuccessful, crime would increase. No matter which way the economy went, people believed that it would inevitably rise. That counsel of despair convinced successive Home Secretaries until Michael Howard’s appointment that rising crime was an inevitability. The economy is weak now but crime has continued to fall, just as it did in the 2008-09 recession when it went down by 9%. We can compare that with the recession in the ’90s, when it went up by 16%. There is no doubt that advances in technology have helped. Car thefts have reduced dramatically thanks to computerised security systems and CCTV has been an effective tool—it is of course not the whole answer—as has the DNA database.

Police reforms have made the biggest contribution to the dramatic reduction in crime. People trot out the tired old phrase, “The police are the last unreformed public service,” but anyone who has been a Member of this House over the past 20 years will have seen a huge change in policing. The principal change has been the move away from a reactive force, whose main preoccupation was to respond to crimes that had already been committed, to a force with a role more in keeping with Robert Peel’s original concept of a police force, whose primary objective was the prevention of crime and the maintenance of what he described as “public tranquillity”. It was the “Life on Mars” culture of the 1970s that took police away from communities and off the streets and challenged the Peel ethos, whereas the introduction of the dreadfully named crime and disorder reduction partnerships and neighbourhood policing—a huge change in how the police operated—did the most to restore it.

Over 15 years, we have moved from a police philosophy that stated that antisocial behaviour and low-level crime were nothing to do with them to a recognition that the police have an important role to play in working with other agencies to tackle such behaviour, which has a far greater impact on people’s perception of crime than some more high-profile offences. We have moved from an era in which domestic violence was considered to be nothing to do with the police and to be a matter for the adversaries to sort out to its being a major focus of attention for police forces across the country. Plenty of evidence suggests that that concentration on domestic violence has had a far wider impact on the reduction in other crimes.

In that context, I believe the Government have made a mistake in cutting the number of warranted officers. The work the police do on crime prevention in schools, in homes, as part of family intervention projects and in youth clubs and hostels will suffer as a result of those cuts and the partnerships that require the police to work together with local authorities, the NHS and the voluntary sector to tackle the underlying causes of crime will be placed in jeopardy. I predict that such cuts will eventually feed through to the crime statistics, to the detriment of our constituents across the country.

The Minister mentioned privatisation, and in the context of what is happening in Lincolnshire, the west midlands and Surrey I am bemused and amazed that the Home Office has not stated categorically that the tasks of patrolling our streets, the investigation of offences, and arrest—together with the use of firearms and the control of public disorder—must remain with police officers. Of course there can be co-operation with the private sector in other spheres, but that is what the police want to see and the reassurance has not been given.

[Julian Smith]

Does the right hon. Gentleman agree that the four Yorkshire forces could do much more to share and reduce costs? In his role as a local MP, will he call on those four forces to get their acts together?

[Alan Johnson]

Yes, I do. I completely agree and that was in our White Paper when I was Home Secretary in November 2010. I also believe that there are too many police constabularies. Charles Clarke tried and failed to reduce the number of constabularies, and we need to do it.

The late, great Conservative head of the Local Government Association, Sir Simon Milton, said that through the police and crime commissioners the Government were introducing

“a parallel and potentially conflicting system with a competing mandate”.

I believe that is true. I do not agree with Lord Blair, but I think that the public will register their disquiet by failing to turn up at the ballot box. I sincerely believe that after November’s elections, the Government will need to rethink the question and that part of the solution might be to recreate a form of machinery to run the police authorities that represents all parts of the patch. That should not be done by only one person and, if we elect anyone, we should elect the chair of that organisation. I also think that there should be closer working on prisons, probation and fire services so that there can be joined-up accountability for a wide range of these issues.

I genuinely welcome the Minister for Policing and Criminal Justice to the Dispatch Box. I think he is a good Minister. He had an unfortunate experience with the police a few years ago, which always reminds me of the Tom Wolfe quote:

“A liberal is a conservative who has been arrested.”

The right hon. Gentleman has a huge role to play in improving the relationship between the Government and the police. It is in a terrible state, and I believe that if the right hon. Gentleman works hard, with all the charm for which he is famous, he could make a great contribution to dealing with crime and disorder in this country.

17:15

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

The motion before us makes the typical Labour mistake of looking at inputs rather than outputs, and looking at the process rather than what the process is designed to achieve. It does not mention that crime is coming down or that there are fewer victims of crime. The shadow Minister gave a fulsome tribute—I think correctly—to the men and women of our police services; indeed, the Minister did, too. The motion, however, fails to give police the recognition they deserve for the way they have delivered crime reduction—by doing more for less.

Let me start with a significant police success. Crime in England and Wales has fallen by 6% compared with last year. In my area, North Yorkshire, it has fallen by 10%— a fantastic result. Of particular note is the 27% reduction in robbery. I would therefore like to put on record my praise and thanks to the members of North Yorkshire police who have delivered this reduction.

While we are on North Yorkshire matters, I would like to take the opportunity to highlight the excellent work of a police charity based in Harrogate. I refer to Police Treatment Centres, a charity with two treatment centres—one in Harrogate and the other in Auchterarder in the Ochil and South Perthshire constituency—where serving and retired police officers can recover from illness or injury by receiving care and treatment. I know we all remember that our policemen and women do brave things, which can sometimes mean getting injured and needing more care. The charity serves the forces of northern England, Wales, Scotland and Northern Ireland, plus the British Transport police, the Civil Nuclear police and the Ministry of Defence police, and looked after nearly 4,000 people last year. I have visited the Harrogate site several times so I have seen their first-class facilities; they do a fantastic job. I was very pleased to see the Government recognise the importance of the charity’s work earlier this year, with the award of a £500,000 grant for the refurbishment of part of the Harrogate site. I thank the Minister for his support.

We are, of course, in a period of significant change in our police services, and one of the changes is the arrival of police and crime commissioners. I support the arrival of police and crime commissioners. I do so because they deal with the invisibility and lack of accountability of the police authorities that they replace. Law and order is an issue that matters hugely to voters, but with police authorities voters did not get their say. The police and crime commissioners will be voices for the public, for victims and for the vulnerable; they will be strong local voices empowered to deal with important local concerns. Our PCC candidate in North Yorkshire is Julia Mulligan, and I know she has had a successful track record in business and community work, which I think makes for the right qualities for a first-class commissioner.

The motion says that the Electoral Reform Society is worried about voter turnout in the PCC elections. I would say to Opposition Members that the Electoral Reform Society is not always a source of wisdom. For example, it was strongly in favour of the yes vote in the referendum we had last year. It is fair to say that there is not yet huge, widespread awareness of these elections, but that is always a feature of new things when, by definition, people have no experience of the benefits they can bring. A TV advertising campaign will boost that awareness, and there will be candidates out on the doorstep and campaign teams out delivering leaflets. The more these elections are talked about, the better the turnout will be, so at least something good may come from this debate.

I thought that Lord Blair’s intervention over the weekend was misguided. He said that people should not vote in these elections because the areas that form the geography for the police and crime commissioners were too large. However, they are the same areas as those that are served by a single police force led by a single chief constable. I suspect that Lord Blair was really saying that he did not want the public to have much of a role in policing—that being a commissioner was too complex for people. I think that is absolute nonsense. I also think that the more he talks about the elections, the more he will boost turnout by ensuring that they are in the news.

As I said earlier, the motion is typical of the Labour party in that it refers to how much the Government spend rather than to what they achieve. In policy area after policy area, year after year, Labour defines success as spending more. We do not have a £1 trillion debt because a Government could not find ways in which to spend public money. The problem is that there is always a way of spending public money, and defining success by how much is spent leads to pressure to spend, spend, spend. The motion perpetuates that mistake.

I do not often agree with the former Home Secretary Charles Clarke—especially given his remark that he could visit Harrogate in order to spend some time on the beach—but I agree with what he said on one occasion:

“We need to look beyond police numbers alone. The debate should be about what you do and how you do it, not just how many of you there are to do it.”

The key measure of police success is falling crime. In our country the chance of being a victim of crime is the lowest for 30 years, which suggests that the Government reforms are right. Resources are being taken from back office to front line, and the proportion of officers who are involved in front-line roles has increased from 83% to 89%. We are seeing the scrapping of targets and bureaucracy. I am sure that, over the past few years, we have all spoken to police officers who have been keen to tell us about the bureaucracy that they face. It is estimated that the cuts in bureaucracy will save 3 million police hours a year.

The Government are also helping the police forces to work together. Shared procurement and IT can save millions. In my area of North Yorkshire and the Humber— which is also represented by the former Home Secretary, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson)—the police forces are working together on a shared vehicle procurement and management programme. That alone is saving £7 million.

My main point, however, concerns the way in which the links between the police and the public are being rebuilt. We see that in the arrival of the democratic accountability of police and crime commissioners, and we see it in the increase in the number of police community support officers and police delivering neighbourhood policing. The numbers have risen by 2,300 in two years. I have met almost all the PCSOs in my constituency, and I have been impressed by their work. I know that they work and communicate well with local communities, and that they are popular figures on the streets of Harrogate and Knaresborough.

I think that this is a period of change, but I also think that it is an exciting time for our police. On the key measure of success, they are performing well. They deserve our support, and they certainly have mine.

[Several hon. Members]

rose—

[Mr Speaker]

Order. The six-minute limit on Back-Bench speeches applies from now on.

17:22

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Let me begin by congratulating the men and women of West Midlands police on the great achievements that they have made despite very tough economic circumstances.

I think that the problem with the cuts argument is that neither the public nor the police believe the Government on the issue. The constant denial about numbers in the face of people’s own evidence means that the Government cannot be believed. Earlier today, we saw the Minister dance on the head of a pin when discussing the percentage scale of the cuts. People know fine well that he is wriggling.

I believe that, in fact, the public are with us on the issue. They think that the Government are going too far and too fast. They are going too far in opting for 20% cuts when the safe level, which we would have supported, was 12%, and they are going too fast in front-loading the cuts, which means that the potential for efficiency gains over a number of years has been wiped out. That has been compounded by the application of the formula under which Surrey, which has the lowest crime levels in the country, suffers a third of the cuts that we suffer in the west midlands. The position is made even worse by a funding approach which means that the funds for the West Midlands force are capped at £25 million a year below the amount provided for by the Government’s own formula, while Surrey receives £6 million a year more than the formula suggests that it needs. The previous police Minister promised to review that, with the hope of actually bringing about some change. I hope that the current Minister for Policing and Criminal Justice will take on that challenge and try to bring a bit of fairness into the application of the formula.

I was pleased to hear the Minister say that he will respect democratically elected police and crime commissioners, because in the west midlands not a single candidate who responded to the Police Federation questionnaire—in fairness, the ones who responded are the ones most likely to win—said that they would support the Government’s present privatisation agenda. Bob Jones, the Labour candidate, has made it absolutely clear that he will not support the present business partnering arrangements that West Midlands police have been looking at and that he will not give any juicy contracts to G4S.

What has gone wrong is that the Government have failed to recognise things on two fronts. First, they are sapping the morale of ordinary police officers. Let us forget about what the Police Federation is saying: ordinary rank-and-file officers are stopping me in the supermarket and at meetings—indeed, anywhere in the constituency—to tell me how fed up they are and how much they think the Government are against them. The Government are sapping morale with a constant-change agenda that looks as if they are against the police. Simultaneously, the Government are talking up the rights of what are rapidly becoming private monopolies. Companies such as G4S, Capita and Cerco are running around gobbling up public sector contracts and smaller businesses. Those companies are becoming too big. They are unregulated private monopolies. The combination of that and the constant attacks on the police is sapping police morale. I say this to the Minister: the figures might look good now, but we cannot go on like this.

I was also a bit surprised to hear the Minister trumpeting the demise of antisocial behaviour orders. He has been successful—in the west midlands there has been a 90% reduction in the first six months of this year, compared with 2010—but there is nothing being put in their place. Things are getting worse. Let us look at what the public are saying. Thousands of people responded to my survey in Selly Oak. Antisocial behaviour is their concern. They want the police and the courts to have the powers to tackle it. What the Minister has succeeded in doing is creating a vacuum.

[Robert Flello]

I am grateful to my hon. Friend for giving way, and I am enjoying his speech immensely. Yesterday Birmingham announced that it is looking at a huge number of cuts, in many ways mimicking Stoke-on-Trent and the huge cuts to our local authority. Does he agree that as local authorities lose their resources, there is a knock-on effect on the work that the police are able to do in tackling antisocial behaviour and other issues?

[Steve McCabe]

That is absolutely true. The danger is that partnerships are being weakened rather than strengthened.

I would like to finish on a slightly more generous note to the Minister. I am pleased to see that the Government have moved somewhat on the question of police and crime commissioners. It is right to broaden the brief so that we think more about victims and the delivery of justice, rather than the narrow management and control of the police, which was more prevalent during the passage of the legislation. As police and crime commissioners develop that work, I hope that they will not be constrained by unnecessary direction from the centre or the imposition of financial controls that make it impossible to do the work, because in that respect the Minister is on to something that the public probably support.

17:28

[Mr Henry Bellingham (North West Norfolk) (Con)]

It is always a pleasure to follow the hon. Member for Birmingham, Selly Oak (Steve McCabe). It was good to hear him end on a positive note as well.

If the official Opposition had had their way, this would have been a debate about my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell). Events have moved on, of course, but I would like to pay tribute to him for the work he did as Secretary of State for International Development. He was a truly outstanding and inspirational DFID Secretary. He spent five years in opposition preparing for that brief, and when he got the brief in government, he was a huge, huge success and admired throughout the world.

I want to focus briefly on Norfolk constabulary, and pay tribute to the police officers across the county. Although they are facing difficult times, they have turned themselves into an incredibly effective small police force, which is now probably better placed than most other forces in the country.

There has been a reduction in the number of officers. On 1 April 2010 there were 1,650 police officers and 275 police community support officers. On 1 April 2012, however, there were 1,530 police officers and 15 fewer PCSOs, and by 1 April 2015 the number of police officers will fall to 1,500. Although that obviously presents challenges, I want to underline the fact that there has been a quite superb improvement in the force’s performance.

Crime has fallen. In the last year—2010-11 to 2011-12 —burglary crime was down 20%, robbery was down 11.4% and vehicle theft crime was down 26%. Had serious sexual offences not gone up by 20%, overall crime would have come down by much more than 2.4%. In the year to date, 2011-12 to 2012-13, serious sexual offences have fallen 24%, theft of motor vehicles is down by a staggering 29%, robbery is down 31% and priority criminal damage is down 37%. We are therefore on target to reduce crime by almost 13%. That is an extraordinary performance.

The point that those things underscore is that it is possible to reduce the number of police officers in a time of great austerity, but they do not have to be taken out of the front line. It is not necessary to undermine in any way the integrity of the front line. Norfolk constabulary has reduced bureaucracy and the number of officers in back-up or admin jobs. It has got more officers on to the front line and it is reducing crime. I want to pay tribute to all the police officers who have contributed to this excellent record, and in particular Chief Constable Phil Gormley. He is leading a force that now has high morale, in spite of the changes that are taking place.

Another important part of our strategy is collaboration with Suffolk constabulary. The shadow Minister, the right hon. Member for Delyn (Mr Hanson), talked about the reforms during Charles Clarke’s tenure at the Home Office. They did not succeed because they were too large a step forward at that time. In Norfolk, there has been a steady, pragmatic, common-sense approach to collaboration. At regional level, there has been sensible collaboration through the eastern region special operations unit. A joint structure has been put in place with Suffolk for collaborative policing, covering protective services, justice services and business support. The total cost is now £44.5 million. To put that in context, the total amount spent by Norfolk constabulary is £120 million and Suffolk spent £92 million. Some 502 officers are now working on this collaborative project, and there are 48 civilian staff.

In protective services, there are now six major units covering serious and organised crime, forensic investigation and intelligence, as well as the major investigation team, specialist operations and the vulnerable people directorate. In justice services, Norfolk and Suffolk now have a fully collaborative unit comprising criminal justice services, custody services and a new custody investigation unit. There is also a joint Norfolk and Suffolk criminal justice board. In business support, £9.8 million has been saved across the forces. There are now joint departments covering estates, ICT, procurement and human resources.

Are the public pleased with the performance of Norfolk constabulary? Norfolk constabulary has the 17th lowest budget in the country, yet it has the fifth highest detection rate, the second highest overall value-for-money rating and is third in the country in terms of public satisfaction.

I support the changes and the election of police and crime commissioners. I wish the new PCC all the best. He or she will take over a force that is in excellent heart.

17:35

[Heidi Alexander (Lewisham East) (Lab)]

I am grateful for the opportunity to speak in this debate, as I am keen to put on the record my concern about the misguided and cavalier approach of this Government to matters of policing and public safety.

I speak as a London MP, and I want to draw attention to the significant impact that this Government’s policing policies could have on law and order in the capital. Since the coalition came to power, the number of police officers on London’s streets has fallen by 463. Many more support staff have been cut, and we know that between now and 2015 a further 1,000 officers are likely to go. London is not an easy city to police; the Metropolitan police have a tough job, and it is being made harder by the coalition Government. I believe that we are wasting money on electing police and crime commissioners when we would be better off spending it on preventing crime from happening in the first place.

In the past six months, I have met the parents of children who have died on the streets of London as a result of knife crime. So far this year, seven teenagers have been murdered in the capital, and I have met the parents of three of them. Nathaniel Brown and Kevin Ssali both tragically lost their lives in my constituency this summer—both were fatally stabbed—and earlier this year, my 17-year-old constituent Kwame Ofosu-Asare was murdered in Brixton. My corner of south-east London is, by and large, a safe place to live, and I recognise that progress is being made by the Met’s new gang crime command unit, but when I sit with parents who have just lost their child I know that there is so much more to do to tackle the challenges presented by knives and violence.

That is why I just do not understand why we are wasting nearly £100 million on elections for police and crime commissioners when that money could be used to tackle serious youth violence. Why are we spending money on elections that few people want and few people really understand? Why do we not use that money to fund police officers or, better still, to fund projects that have a track record of preventing young people from turning to violence or getting caught up in gangs in the first place? Why do we not use the money to ensure that those involved in lifestyles that can have such tragic consequences have a way out?

Between 2011 and 2013, £18 million has been committed by the Home Office to tackle knife, gun and gang crime —a fifth of what is being spent on the elections for police and crime commissioners. How does the Minister justify that to the families I have met whose lives have been devastated by knives? Sadly, I have made these arguments in this place before and the Government have refused to listen. I believe that they have got their priorities wrong, and so we find ourselves where we are today.

This is not just about what could have been done with the money being wasted on police and crime commissioners; it is also about what is happening to existing police budgets. The speed and severity of cuts to the police in London are being felt by the community I represent. These cuts have not just resulted in fewer police officers; they have meant also that budgets are being squeezed for the sort of work being carried out by community projects that can make a real difference to the problems I have been talking about.

Two weeks ago, I visited XLP, a charity based in my constituency and operating across London to tackle gangs and violent youth crime. Its people told me of budgets just drying up, both within the police and within local authorities, yet the need for their work has not reduced. When I speak with young people in my constituency, I am often struck by the seriousness of the concerns they express about their own safety. Some talk about just not going to certain parts of London because they “will get stabbed”. If I quote falling national crime statistics to them, they look at me as if I am mad—it is so far removed from the reality of their lives.

Before I conclude, I want to say something about the huge financial challenge facing the Met police. An HMIC report in the summer suggested that the Met needs to find a further £232 million-worth of savings by 2015. That is not an insignificant sum. Since this Government came to power, the number of safer neighbourhood team sergeants in my constituency has been almost halved. Those were the police officers I met out in the community—not sergeants sat behind desks, but a visible and valued presence in our neighbourhoods. I am worried that the financial challenges the Met faces will result in less visible, less accessible policing and fewer people feeling safe. We know that some police stations are threatened with closure and that some boroughs are having to share commanders. The Met wants to introduce its so-called new model of local policing which, we are told, will put police back out on to the streets, but given the halving of the number of sergeants in my neighbourhood, I am not convinced.

The Met police do an incredibly difficult job and, on the whole, they do it very well. It is wrong that this Government should make their job so much harder when so many people’s lives and livelihoods depend upon them.

17:40

[Mr Robert Buckland (South Swindon) (Con)]

It is a pleasure to take part in this afternoon’s debate and to follow the hon. Member for Lewisham East (Heidi Alexander). I acknowledge that different parts of the country face different challenges. Some of the issues she outlined have been with us for some time, and some police authorities some time ago took a more long-term view of the likelihood that resources would start to decrease, rather than continue to increase. Wiltshire police, in which police authority area my constituency sits, took some difficult decisions a few years back, and although, like the rest of the country, the force is having to bear its share of a reduction in income, it is right of me to point out, with some pride, that its commitment to neighbourhood policing remains unabashed. In fact, the number of police community support officers, who form a key part of the delivery of neighbourhood policing, has increased in the past year by 14.2%, or 19 officers, which is testament to Wiltshire police’s commitment to neighbourhoods such as the one in Swindon that I represent.

The right hon. Member for Delyn (Mr Hanson), who is no longer in his place, mentioned his visit yesterday. I am sure that he heard those encouraging statistics and would join me in paying tribute to the work of the police authority, one of whose members, Angus Macpherson, is the Conservative candidate in the police and crime commissioner election next month. I have been working hard with that candidate to get the message across about the importance of the elections and to give as much information as possible to local residents about what the new commissioners will do—not just dealing with police strategy, but commissioning services that I believe will lead to greater use of crime prevention and diversion techniques. I hope they will also lead to the extension of the principles of restorative justice further into our communities, on which much work is already being done in the Swindon area, although time does not permit me to speak at length on that subject today.

I rise primarily to raise a case that has already been mentioned—one that resulted last Friday in the conviction and life imprisonment of the murderer Christopher Halliwell. He murdered Sian O’Callaghan in Swindon last year, after picking her up in his taxi outside a nightclub. He has been dealt with properly for that heinous crime, and I pay tribute to Sian’s family for their dignity throughout the proceedings and for the way in which they coped with the awful reality confronting them after Sian’s abduction and the subsequent discovery of her body.

The case does not end there, however. During the course of the police investigation, a second murder was disclosed by the defendant, Christopher Halliwell. He has not been brought to justice for that murder because of errors made in relation to the Police and Criminal Evidence Act 1984 guidelines to be followed by all police officers during criminal investigations. That means that the family of Becky Godden, whose body was discovered by police officers during the search for Sian O’Callaghan, have not received justice or any degree of closure and are facing that awful reality day by day.

I will not comment on the conduct of the individual police officer. He is a senior officer. There is an Independent Police Complaints Commission inquiry into his conduct. Putting myself in his shoes for a moment—putting aside my legal hat, having been a criminal barrister for 20 years—I can entirely understand that in the heat of the moment, when it was thought that Sian O’Callaghan may still be alive, that officer thought he was acting in the best interests of the safety of Sian and in the interests of finding out more from Halliwell.

In the light of the grim experience of this case, it would be timely for the Police and Criminal Evidence Act, code C in particular, which applies in this case, to be looked at again by the Home Office to make sure that it is fully up to date and has taken into account developments in technology that could well have assisted the police in the conduct of the investigation of the case. The codes of practice are not tablets of stone. They are regularly updated in the light of experience, and I believe that after this particularly serious case with serious consequences not only for the family of Becky Godden, but for the wider community who are so concerned and were so traumatised by what happened, it is time that we had another look.

I pay tribute to Becky Godden’s family for their dignity, and I pledge my support to them to do whatever it takes to make sure that they can find justice for the loss and the murder of their daughter.

17:46

[Karl Turner (Kingston upon Hull East) (Lab)]

I am grateful to be called to speak in this important debate. It is always a pleasure to follow the hon. Member for South Swindon (Mr Buckland), who speaks with conviction on behalf of his constituents and with great knowledge, as a fellow criminal lawyer.

This week we have had another non-announcement from the Prime Minister—“tough but intelligent” on crime. Surely it goes without saying that we need to be tough on crime, but I have not seen anything intelligent from this Government to support their claim. Does the Prime Minister think it is intelligent to take 16,000 bobbies off the beat while crime against the person has increased, despite crime falling more generally? In Humberside, domestic violence has rocketed in recent years. I wonder whether the Prime Minister thinks it intelligent to take 440 police officers away from Humberside when levels of domestic violence are very definitely increasing. Does he think it is intelligent to sell off parts of the police force to companies such as G4S, which so monumentally failed to deliver for the Olympics?

There is nothing intelligent coming from the Government in terms of police policy. They have been terribly incompetent. The alleged “I’ll have your job” comment from the former Chief Whip now seems somewhat ironic, given recent events. I wear with pride today my new cufflinks, “Plebs” and “Toffs”—[Interruption.] I am pleased to say that I consider myself to be a proud pleb, despite what the hon. Member for Brigg and Goole (Andrew Percy) is shouting from a sedentary position.

Policing is a public service and should not be for sale. There is no place for shareholder profit-making in policing. Policing decisions should be based on reducing crime and must not be taken in the shadow of shareholder profit. The Policing Minister has been encouraging forces to consider the value of private sector partnering to save money, and the Government justify this drive because of reduced budgets, yet it is the Government who are reducing budgets to dangerous levels. G4S clearly did not cope in the summer. That smashes any false belief that the private sector is always more efficient and effective than the public sector.

[Andrew Percy]

Will the hon. Gentleman give way?

[Karl Turner]

Not at the moment.

In the time remaining, I want to concentrate on police and crime commissioners. Despite my reservations about police and crime commissioners, I am reassured that Labour has chosen so strong a candidate as my predecessor, the right hon. Lord Prescott, who I know will definitely act as a final line of defence against privatisation.

[Andrew Percy]

Will the hon. Gentleman give way?

[Karl Turner]

Not at the moment.

Lord Prescott is worried about the fundamental changes to policing and considers them to be extremely alarming. It is unacceptable to put private security officers in areas where police have responsibility. Lord Prescott was quite right to point out recently that private employees will not be accountable and will be responsible only to private employers.

In conclusion, there are serious concerns about creeping privatisation in the police service. The Peelian principles of policing with the consent of the community must be upheld. I am absolutely sure that Lord Prescott will not only do that, but raise awareness of the campaign in Humberside. I am convinced that he will be duly elected.

17:51

[Andrew Selous (South West Bedfordshire) (Con)]

It is a pleasure to follow the hon. Member for Kingston upon Hull East (Karl Turner). I start by paying tribute to our brave police officers and staff up and down the country for the work they do, and particularly the work of Bedfordshire police. I will read briefly from a letter published recently in the Dunstable Gazette describing just one example of what our police officers do day in, day out:

“My elderly parents…were the unfortunate victims of a burglary at their home in Dunstable on July 5. I live in Norfolk, some 130 miles away, so was unable to get to their home for several hours. During that time they were visited by two officers from Dunstable Police Station who not only took control of the situation by reassuring my parents and contacting me, but also called the paramedics as they were concerned that my mother was going into shock. By the time I arrived they had cleaned up as best they could, removed the broken glass and mud from the kitchen, made them tea and tidied the bedrooms. They did not leave until the premises were secure and someone was with my parents. I must say thank you for the professional and compassionate approach taken by these officers. In these difficult times it is good to know that there are people like them who are prepared to do that bit extra.”

Is not it fantastic that we have police officers up and down the country who will go to those lengths to look after our constituents?

We have a goods news story in Bedfordshire: crime has fallen by 10% in the year to June 2012, according to the independent Office for National Statistics. That is better than the 6% fall nationally, better than nearby Essex and better than neighbouring Cambridgeshire. Bedfordshire police have done extremely well, and they have had to do that with a reduction in their grant funding. There has been a 5.6% fall in the money the police authority receives, although there was a slight increase in the money it got from the council tax precept.

The Government have to save money because the previous Government continued to spend money we did not have year after year. Despite that, we are increasing money for the health service, honouring our obligations to the poorest of the poor and maintaining cash to schools. We have to save money in other circumstances to ensure that this country does not return to the financial mess we are rescuing it from.

On budgeting, I ask the Minister to look again at damping, which has already been mentioned. Bedfordshire police suffer from the use of damping as an accounting policy within the Home Office. I ask my hon. Friend the Minister to go back to the Home Office and request that this issue be reconsidered, because at the moment it is not fair.

Our excellent new chief constable in Bedfordshire, Alf Hitchcock, has, in effect, managed to add 92 officers to those involved in neighbourhood policing work by rearranging the shift patterns. Many officers used to work from 8 am to 4 pm, but that is not when the burglars and criminals were generally out and about, so he reordered the shifts to make sure that more officers were out on the streets during evenings and weekends. In addition, the Home Office’s scrapping of form filling has saved the police 4.5 million hours of police time, which is equivalent to 2,100 extra police officers being out on the streets.

Bedfordshire police went even further when they introduced a novel police station exclusion zone policy, led by excellent officers such as Inspector Frank Donnelly. This meant that any officer found in a police station, particularly during the winter evenings when most burglaries take place, would be challenged by a senior officer as to why he or she was there and not out on the streets. Such policies show that it is possible to reduce crime even with a reduced budget caused by having to deal with the deficit left to us by the previous Government—and all credit to Bedfordshire police for showing the way.

Police stations are very important and we do need them, particularly in Leighton Buzzard and Dunstable; I have been clear with the chief constable about that. I am not wedded to any particular building, and I leave to the police the decisions as to which are the most appropriate for them to use. I also pay tribute to Bedfordshire police’s pioneering use of technology. They were one of the first forces to make sure that all their officers had BlackBerrys so that they are kept out on the streets on patrol where we need them.

I pay tribute to those who have in the past served as members of police authorities up and down the country. In Bedfordshire, Peter Conniff has done an excellent job as the chair of the authority, as have long-standing members such as Councillor Peter Hollick, one of my constituents. They have done a good job. However, the election of a police and crime commissioner means that that individual will have a mandate from the people and will be accountable back to the people. That will sharpen up the oversight role of the police, and that is important. In Bedfordshire we have a candidate, Jas Parmar, who is a former police officer. He has the necessary experience and credibility with the police because he will not ask them to do anything that he has not done himself.

It is incredibly important to look forward to the work of the College of Policing as from 1 December. That will lead to improved evidence-based outcomes, it will improve cost-effectiveness, further improve police professionalism, and it will enable the new commissioners to use the work of the college to audit police practice. This is an excellent innovation that has not yet been focused on sufficiently. In tandem with the police and crime commissioners, it will greatly help policing in our country.

17:57

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

The hon. Member for Edinburgh West (Mike Crockart) is here to man the Liberal Democrat Front Bench—perhaps he has drawn the short straw—but he and I are, to a certain extent, tourists in this debate as we both represent constituencies in Scotland. It is interesting to listen to people’s concerns about police reform in England and Wales. In Scotland, we are moving towards a single police force from the early part of next year. At the last Scottish Parliament elections, the hon. Gentleman’s party was against that and my party was in favour. It is often argued that the scale of the efficiencies that can be achieved will help to make it a sensible thing to do. However, I note that today the chief constable-designate of the new Scottish police force, the current chief constable of Strathclyde, highlighted the fact that there will be a £140 million gap in his budget over the next two years as a result of establishing the new Scottish police force.

I want to make three brief points. First, in the past few weeks I have spent some time in a couple of places in England—Manchester and Corby, for obvious reasons—and I have knocked on quite a few people’s doors and spoken to them about quite a lot of things. Other Members have spoken about people’s awareness of the PCC elections, and it struck me that there is in fact a stunning lack of awareness. I am very concerned—not from my own perspective and that of my constituency but on behalf of others in this House—that there will be a big problem in getting a decent turnout in the elections. The fact that very few people seem to have heard that they are happening underlines the serious problems that exist and what is likely to transpire.

Secondly, I am in the middle of taking the police service parliamentary scheme, which I am sure other hon. Members present have either taken or will wish to take in the future. I have found it a tremendously useful experience in understanding and appreciating the variety of things that rank and file police officers do and the circumstances they deal with. That has been valuable, because the things that we in this House and policy makers talk about and how they get translated into on-the-ground reality are not always one and the same.

As well as having the delightful experience of being in the centre of Glasgow on a Friday and Saturday night and seeing what the police have to deal with, it struck me that the morale of many of the police officers was quite low. Some of the issues under discussion may not be directly related to them—policing is a devolved matter in Scotland—but I was struck by their feelings on the wider issues of how they thought the Government feel about policing and on the Government’s attitude to the police. These people have been doing the job for a number of years and are very proud of what they do, but they sensed that the Government were not always batting in their favour.

The third issue that I want to address is not a devolved matter—police pensions and police pension commutation. The Minister of State might not be able to respond in detail—the issue probably comes under the brief of his colleague, the Policing Minister—but I would be grateful if he or his colleague responded to me in writing. One of my constituents paid into the police pension scheme for 30 years, but as the result of a misunderstanding by the Government Actuary’s Department he has lost out on thousands of pounds. I am sure that the Minister will be aware that, under the Police Pensions Regulations 1987, GAD had an implied duty to undertake reviews of the commutation factors used in the police pension scheme but, because of what the previous Policing Minister described in a written answer as a mistaken understanding of this duty between the early 1990s and late 2006, those reviews did not take place. As the mistaken understanding has been described as one of a historic nature, my constituent is not entitled to a pension under the re-evaluated commutation factors introduced in 2008. Understandably, he is aggrieved by that.

I appreciate that a number of cases have been raised with the pensions ombudsman and legal avenues, but I hope that the Minister will consider the issue again, because a number of people have been disadvantaged through no fault of their own. This is important to those former police officers. If the Government are behind policing and want to demonstrate that, they would send a powerful message by considering those important issues on behalf of former, as well as current, police officers.

18:02

[Martin Vickers (Cleethorpes) (Con)]

This has been an interesting and measured debate. Some Opposition day debates can get somewhat heated, but we are discussing a serious issue that affects all our constituencies. That is worth noting. It is also worth noting that the Humberside force is particularly interested in the police and crime commissioner elections—interest in the area is considerably higher than in some other areas—which might have something to do with the Labour candidate, Lord Prescott, who has been mentioned a number of times.

In my 20-odd years as a councillor before entering the House, antisocial behaviour was guaranteed to be the one issue raised time and again on the doorstep and through calls from constituents. The hon. Member for Lewisham East (Heidi Alexander) has said that it is still a major problem in her constituency. Clearly, there are pockets in all constituencies; it is a significant problem. There is no doubt that partnership working, which is particularly strong in the south bank of the Humberside force area, has been a major factor in combating it. The hon. Member for Great Grimsby (Austin Mitchell) and I have regular meetings with our local commander. They are always very useful and balanced and we both benefit from them. We see the problems of the police, and of course we take our issues to them. There is no doubt that in both north and north-east Lincolnshire there is particularly strong liaison between the police and local authorities, which is significant.

Elections are what give our public services vitality and dynamism. Ideas are put forward, and they provide an impetus and drive that can often be missing in the public sector given its non-profit element. Elections also bring accountability. Our public sector, whether it be social landlords, local authorities or the police themselves, can often be insensitive to the needs and priorities of residents, and the police commissioner elections will give the electorate a direct route to help determine the priorities of their local force.

Of course, PCCs are about not just actual policing but fighting crime. Those of us who have served as councillors or Members of Parliament know that whenever there is a public meeting about policing—police liaison meetings and the like—people say that they want more visible policing. Of course, that is always difficult, because the professionals say, “Ah, yes, but don’t forget that a lot of investigations are carried out behind the scenes.” That is true, but the public have a right to the reassurance and safety of a police presence. It has to be said that police community support officers have made a considerable contribution in that regard.

There have been fears about low turnout in the PCC elections. It would be foolish to assume that it will be higher than at local elections, which of course is essentially what they are. However, the candidacy of John Prescott in Humberside has certainly upped the publicity, and the local press in my constituency are covering it in considerable detail. When our excellent candidate Matthew Grove was in Cleethorpes a week or two ago and we had a street stall there, I was pleasantly surprised at the level of knowledge among the residents. They are a particularly bright bunch in Cleethorpes, of course, and there is no doubt that they have taken a great interest. What they want to do is to stop the Labour candidate above all else.

We are approaching the elections with certainty that whoever is elected throughout the country will have the confidence of the electorate, unlike the unknown police authorities that have administered policing for many years. They have done so competently and diligently, but without any real accountability, which is what a body such as the police needs. I look forward to the elections, and I am confident that our candidates will be successful.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Six Members still wish to participate in the debate, so I shall reduce the time limit on speeches to five minutes, starting immediately.

18:08

[Lisa Nandy (Wigan) (Lab)]

Last year, I had the privilege of spending several days shadowing police officers and staff across Greater Manchester. In those 12 months, I spent time on the beat with front-line police and with kidnap negotiators, call handlers and firearms officers. I also managed to provoke a minor public incident when I tweeted that I was policing a football match, only to have to reassure concerned members of the public in my constituency that there were also qualified police officers available, and that the big society had not yet quite extended to the Member of Parliament for Wigan being let loose with a horse to keep order and fight crime single-handedly.

On a more serious note, I was amazed and impressed by the range and breadth of skills that the police deploy on a day-to-day basis in all those different functions. They seek to enforce the law with the consent of the community—my chief constable, Sir Peter Fahy, often talks about policing by consent—and with determination and passion. That determination and passion is set against a difficult backdrop, and in my area of Greater Manchester astonishing cuts of 30% to police budgets have meant the loss of 1,200 staff. Such cuts affect not only those front-line PCSOs and police officers who have been lost over the past year, but vital functions that are not classed as front-line services such as call handlers—the face of the police to the public—and essential back-office functions such as IT which, if not properly run, can impede the ability of the police to do their job. That is compounded by cuts to other agencies such as health care, social services, the UK Border Agency and voluntary organisations, and the police are the one organisation that simply cannot walk away when problems arise.

The impact on morale has been immense, and I am baffled—as is our candidate for police and crime commissioner in Greater Manchester, the former Member for Manchester Central—that at a time like this, the Government should see fit to spend £100 million on new police commissioners when police officers across the area are facing such enormous cuts. I have great respect for my local police force. It has reduced crime in very difficult circumstances—because of its can-do attitude and despite, not because of, the actions taken by Ministers who are supposed to represent them.

It is hard to overstate the concern felt among the public and the police at all levels, and there is a general feeling among the police that Ministers neither understand nor value the unique role that they play. When police officers walk out the door every morning and say goodbye to their families, they simply do not know whether they will be coming back, which places an enormous toll on them and their families and friends. We recently saw how great that cost can be with the tragic murders of PC Nicola Hughes and PC Fiona Bone in the Greater Manchester area, and I pay tribute to them. Those two young women exemplify the bravery and commitment to public service that the Conservative party does not understand or value.

Policing is not just a job but a vocation, and the current combination of cuts and changes to the police sends a strong message that that good will is being exploited, which could have dangerous consequences. A combination of the Winsor review, changes to pensions, pay and conditions, and concern about the raising of the retirement age for police officers who do a difficult, gruelling, physical and emotional job every day, creates the sense that Ministers are not listening to front-line police officers and their families, and do not respect that unique role. When that is coupled with the recent row over the comments made by the former Chief Whip, and the Prime Minister’s refusal to sack him, there is a sense that not only do Ministers not respect the role and work of the police, but that they do not respect police officers themselves.

Finally, if Ministers do not respect police officers who do that difficult job in communities, day in, day out, they do not respect the public and the high priority placed on law and order in this country. I urge Ministers to think hard about the changes they are making, and to listen to police officers on the front line—as I have done over the past 12 months—which I think would lead them to a different set of conclusions about where their priorities should lie.

18:13

[Andrew Percy (Brigg and Goole) (Con)]

It is a delight to follow the hon. Member for Wigan (Lisa Nandy). She made a thoughtful speech and although I did not necessarily agree with everything she said, I have an image of the hon. Lady on a horse single-handedly fighting crime in Wigan. I hope it will not come to that but, if it does, I am sure she will do a wonderful job.

The elections for police and crime commissioner are incredibly important. When the proposals were first suggested I was a little nervous about them because of the cost involved in putting the elections together. However, as the campaign developed—a very vigorous election campaign is going on in east Yorkshire and northern Lincolnshire at the moment—I became sold on the reforms for a number of reasons.

I was interested in comments by the shadow Minister, the right hon. Member for Delyn (Mr Hanson), who said, I think, that if turnout is low, we should perhaps consider revisiting the issue and look at whether we should abolish the proposals. If that is the case, I simply point to low turnouts in European parliamentary elections—I would support the right hon. Gentleman were he to propose abolishing the European Parliament on the basis of turnout alone. I do not think, however, that we should necessarily read too much into the turnout figures, and there are plenty of councillors up and down the country who were elected on a low turnout. Given the timing of the elections, I believe there will be a reasonable turnout in the former county of Humberside area. As my hon. Friend the Member for Cleethorpes (Martin Vickers) said, there is appetite for the elections in our area.

Replacing the police authority had become necessary. In 10 years serving as a local councillor, I never served as a member of the police authority, and nor did my Labour or Conservative ward colleagues. Therefore, the residents of the ward I represented never had a direct link into the Humberside police authority. Some people were fortunate enough to have a councillor who happened to be on the police authority, but the likelihood of that happening was minimal.

Similarly, police authorities could not be held to account at the ballot box, because most members were not elected members of local authorities, and independent appointees and people from the Home Office were also members. I never bought the idea that the police authority was electable. I suspect that many more of the good burghers of Brigg and Goole can name the candidates for the PCC elections than can name the last chairman of the police authority.

That is partly owing to the fact that Lord Prescott is doing what the Government want—he is ensuring a high-profile campaign in Humberside. I have found a good appetite in east Yorkshire and northern Lincolnshire for the elections. People want to know why somebody who spent £500 million trying to close our regional FiReControl should get the job. They want to know why somebody who spent £60,000 on foreign trips should get the job. They want to know why somebody wants the job when, in the Yorkshire Post in August this year, he described his current job in the following terms:

“The House of Lords is a bit like a job centre, you have to go down there to get paid expenses, and it just gets totally tiring.”

I can understand why the people of Brigg and Goole want to know why that man should have the job.

[Richard Graham (Gloucester) (Con)]

My hon. Friend raises some good points. He is absolutely right that interest in the candidates for the election is very high. Many of my constituents want to know why the wife of the former Member of Parliament for Gloucestershire, who campaigned specifically to abolish to Gloucestershire constabulary, is now standing to be the police commissioner for that very force. Does my hon. Friend agree that some curiosities are emerging?

[Andrew Percy]

All I can say in response to my hon. Friend is that you literally could not make it up. It gets more ridiculous by the day.

As my hon. Friend the Member for Cleethorpes has made clear, the Conservatives have a very good candidate. They have lit the touch paper on the campaign locally with an exciting idea to charge drunks for wasting police time—that very good proposal needs to be explored. The shadow Minister talked about raising the turnout. I do not want him to come to Brigg and Goole, but he should visit my website, where he can learn of the vigorous campaign in the area. We have had a lot of street surgeries in Brigg and Goole, and many of my constituents have received four or five communications in the past few months. We are finding that there is a lot of interest, and we have a responsibility to try to get the turnout up.

The right hon. Gentleman might find—because of the high-profile Labour candidate and the exciting ideas of the Conservative candidate—that there is an appetite for the campaign. It might not manifest itself in an 80% to 90% turnout on 15 November, and I am not pretending we will get to those figures, but people know about the election, and if they want to take part in it, they can.

As I have said, I served as a local councillor for 10 years in my area. In some ways, the previous Government’s record on crime was very good. I was a bit nervous about the introduction of PCSOs and wondered what would happen, but it was a very good idea. I pay tribute to the previous Government for their work on PCSOs. However, it is not quite as has been presented. As I pointed out in an intervention, there was a reduction in police numbers in the Humberside force area back in 2007, but we did not see a single Labour Member locally campaigning against it. Labour Members now campaign against reductions in police numbers, but in 2007 they made the case for removing police officers and replacing them with civilians.

Although good things happened on crime under the previous Government, there was a 400% to 500% increase in the local police precept. The good people of east Yorkshire and northern Lincolnshire could not hold anyone to account for that directly. When they get a police and crime commissioner, they will at least be able to hold to account the person who is charging them for their local policing.

18:19

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

It is a pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy).

I would like to pay tribute to the police officers, police community support officers and staff at Greater Manchester police, who are doing a great job in increasingly tough circumstances. Like my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex), I took part in the police service parliamentary scheme in 2007, and I found the experience invaluable. Sadly, I know how tough a job policing can be, because my home borough of Tameside recently saw the shocking murders of PC Nicola Hughes and PC Fiona Bone—two dedicated police officers merely going about their normal duties on what appeared to be an ordinary day on an ordinary street in Tameside.

My hon. Friend the Member for Wigan (Lisa Nandy) passionately outlined the difficulties facing Greater Manchester police and the impact on policing across the Greater Manchester county. That is why I am glad to be supporting Tony Lloyd, the former Member for Manchester Central, as our police and crime commissioner candidate in Greater Manchester. I wish him well in his campaign and—I hope—his successful election on November 15. This weekend, I joined a huge Labour team out on the doorsteps of Dukinfield in my constituency to campaign for Tony, and over the summer recess I was delighted to campaign in both Denton and Reddish against police cuts with both Tony and my right hon. Friend the Member for Delyn (Mr Hanson), the shadow Minister for Policing and Criminal Justice. Tony is right to focus on community policing, because he recognises that in Tameside, Stockport and across the whole of Greater Manchester, effective crime fighting has improved the quality of life for residents.

In the brief time I have, I would like to turn to a local issue that is a running sore: the closure of public police desks at police stations. That has happened at both police stations in my constituency, and I know from constituents who have contacted me that it concerns them greatly. The police desk in Denton police station closed in May, and the desk in Reddish closed in January, meaning that the nearest police desk to report crime for my constituents in Reddish is now in Stockport central police station, and in Denton my constituents must now travel to Ashton, making the service far more remote from both these communities. These are not back-office cuts; they are front-office cuts. My constituents consider the police stations in their communities front-line services.

We should take into account some of the other innovations put together by the previous Labour Government. We have excellent local crime and disorder reduction partnerships in both Tameside and Stockport taking a multi-agency approach to tackling crime. Among others, they include the local council, housing associations, the police, the NHS and third sector bodies. They have helped to reduce the rate of reoffending, especially in respect of key crimes, such as burglary, car crime and antisocial behaviour, and they have successfully utilised tools, such as antisocial behaviour orders and antisocial behaviour contracts.

Now, however, we find that community safety funding, which is allocated to every local authority in the country to tackle the causes of crime, has been cut by a massive 60% in just two years. I do not want to see all the progress undermined or even going into reverse. I fear that almost all these joint initiatives—patrollers and street wardens, CCTV, alley-gating and other projects—will be severely reduced or stopped altogether. We cannot afford to regress into a silo mentality, with the police pushing costs on to the NHS, councils and housing association, and councils pushing costs on to the police or other agencies. Total Place, an idea led by the Labour Government, ensured a holistic joint approach across agencies, and it worked.

It is clear that the Government are letting all their policies be driven by short-sighted cost considerations. As I said at the start of my contribution, the police officers and staff in Greater Manchester police and all across the country do a great job in increasingly tough circumstances. Surely it is only right that we give them the proper finance, resources and tools to do the job well. That is what our communities want, it is what they demand and it is what they deserve.

18:24

[Mark Reckless (Rochester and Strood) (Con)]

It is a pleasure to follow the hon. Member for Denton and Reddish (Andrew Gwynne) and we will all want to associate ourselves with his remarks about Greater Manchester police and, in particular, the tragic recent events in his borough.

This summer, during the Olympics, we heard very often about the armed forces and how they stepped in at short notice, but many police officers also stepped in at short notice and had their summer holidays cancelled for the second time, having been called in for the riots the previous year. We should pay tribute to the work they do with very little publicity.

I also welcome this debate. Those on the Opposition Front Bench have moved quite a way since I made my maiden speech on this subject. At that point, Labour appeared to me to be against elections full stop. The party that I had thought took its democratic instincts from the Chartists and the Levellers had become the party of the Association of Chief Police Officers and the Association of Police Authorities. That position has changed gradually and the right hon. Member for Delyn (Mr Hanson) suggested the direct election of police authority chairs, which would of course be as expensive as the direct election of police commissioners.

Initially, the line—I think this came from the APA—was that we should not have those elections because they cost money and that democracy was bad because it was expensive. The line has changed once again with this motion, however, and it seems that Labour Front Benchers object not to the principle or even to the cost of elections but to the cost of holding additional elections in November rather than May. At least some of us on the blue side of the House would have some sympathy with that view. I also congratulate the Labour party on putting up twice as many candidates in the election as our coalition partners.

In due course, these directly elected individuals will be entrenched as the figure of authority to whom members of their local community believe that they can go and through whom they can make a difference to their police. We did not have that in the past; we had anonymous police authorities and very little changed. I was delighted to hear from the hon. Member for Wigan (Lisa Nandy); the image of her policing a football match on horseback is very striking. She would be the perfect candidate for the enhanced specials that Craig Mackinlay, our candidate in Kent, is campaigning to introduce after the elections on 15 November.

We need a single figure who is accountable, who can set policy, who can reflect what the public want and who can ensure that policing, like other democratically accountable public services, delivers on the ground what the people in the area have the right to expect. We need to move on from a system under which national policing policy was set not so much by the Home Office but by an entirely unaccountable and private company, of which Sir Norman Bettison was vice-president until earlier today—that is, ACPO. I am afraid to say that ACPO is fighting something of a rearguard action against the Government’s proposed changes. We recently heard that Sir Hugh Orde believes that it needs to carry on. He thinks that it could be renamed the police leadership executive board—PLEB. That was an unfortunate suggestion by Sir Hugh.

The principle is that policy should be set by people who are elected and accountable. Each chief constable should report to their police and crime commissioner, who is elected. To the extent that there is national policy, we look to the Home Office, to Ministers and to the Home Secretary to set it, through the National Crime Agency where appropriate. We will also look to the professional body for policing—the college—that is about to be introduced. Half that body’s leadership will be civilian to ensure that it is properly accountable and reflects public desires and so that a group of senior officers do not go off on their own and try to carve up senior appointments, as recently happened—I believe—in the case of the head of the UK Border Force. I am glad that the Home Secretary has put a stop to that and that there will be a proper process.

Once we have elected police and crime commissioners, it will not be Buggins’s turn and ACPO will not be making the decisions. People with a democratic mandate will set policing policy in our country on behalf of the public. I hope and believe that that can now be welcomed on both sides of the House.

18:29

[Gavin Shuker (Luton South) (Lab/Co-op)]

I begin by paying particular tribute to the officers of Bedfordshire police force who police my Luton constituency, and to the officers who police this place, too. We see so many of them that we sometimes forget to acknowledge them. There are serving police officers putting themselves on the front line to protect us even today in this House. They should be properly respected, but also properly resourced.

I think it was Churchill who said that we shape our buildings and then our buildings shape us. I, for one, having been a Member of Parliament for the last two and a half years, have been incredibly proud to sit in this Chamber. I do not believe that it should be rebuilt in some kind of circular fashion. I believe there is something fundamentally decent and good about the way in which we do our governance in this country, whereby we sit on one Bench and the Government sit on the other, and we try to assume their roles, as they will one day assume ours. That, however, should not be our model for understanding how to do something as complex and as important as policing.

I deeply regret the politicisation of the police, and I deeply regret the fact that we were unsuccessful when we marched through the Division Lobbies to try to defeat those proposals which, in my view, represent the worst of all possible worlds. We are where we are; I acknowledge that. In a moment, I will say a few words about the context of Bedfordshire and the choices people face as they go to the polls on 15 November.

I fundamentally believe that there is something problematic about taking this route to politicise the police in this manner. Why do I say that? The other day, I met my area’s chief constable, who is called Alf Hitchcock—we had some sniggers earlier, but that is genuinely his name. He is a fantastic chief constable. I went to see him to talk about contemporary policing issues, and it was stated that the election campaign would begin to skew our view and our public statements on the quality and standard of policing. This applies not just in the run-up to the election—many of us across the House will have made the link in our own thoughts—but after the election, too, for the subsequent three and a half years. We will start to view our policing through that lens, based on who has been elected and who has not. I hope that we can aspire to a greater place than that in our political life. The reality is that the rules, like the buildings, are shaped and then they will begin to shape us. This model of doing policing will change how we approach policing locally. I deeply regret that.

I regret it, too, because of the door that is opened. Those who are ideologically committed to pushing through the reforms have now fled the scene—on foot or by plane to California. They have taken the view that by putting these reforms in place we would get good-quality independent candidates, but the reality is that with a deposit set at £5,000, that will not happen. In my Bedfordshire police authority area, we have an English Defence League candidate who was arrested this weekend, yet he will still be on the ballot paper because he is out on bail. There is something fundamentally wrong with a system that brings us to that stage, when we are dealing with the people who—day in, day out—defend us and defend the most marginalised in our communities.

To deal briefly with the Bedfordshire context, there are two clear and pressing issues. Others have talked about the impact of 20% police cuts. I believe that we should not elect someone who is a cheerleader for those cuts. I believe we should elect candidates right across the country who say that they will work collectively to put pressure on the Home Office to realise the folly of what it is doing. We should not elect candidates who are simply willing to outsource everything as a solution to those cuts. In Bedfordshire, Olly Martins is the Labour candidate, a fantastic candidate. He has pledged publicly that the option to outsource back-office functions to G4S—the same organisation that got us into such difficulty with the Olympics when the police had to be brought in to bail it out—will be off the table if he is elected. He will stand against the Tories’ 20% cuts.

[Richard Graham]

I want the House to be clear about what the hon. Gentleman is saying about police delivery and police expenditure. In the county of Gloucestershire last year, costs went down by 4% and crime went down by 4%. Would the hon. Gentleman prefer to say to my constituents, “We want to see expenditure up, crime up and your council bills going up as well”? Is that the message he would like to give out?

[Gavin Shuker]

My answer to that question is very simple. Public safety always comes first, and chief constables are having to make impossible decisions, but I think it reprehensible that the decision to put something as important as policing in the hands of private companies is being forced on chief constables.

Olly Martins is running against a Conservative candidate who has said:

“It is not the be-all and end-all if people don’t see a policeman for five years.”

He added:

“What people do not want is bobbies on the beat.”

I fear that, if a vote is cast and a Conservative candidate is elected, that is exactly what will happen.

This is a high-stakes election, and we know that there will be a low turnout for it. I want to encourage everyone in my constituency to vote, but I fear for where we will end up as a result of these reforms.

18:35

[Wayne David (Caerphilly) (Lab)]

Regardless of how we voted on the question of the introduction of police and crime commissioners, all Members on both sides of the House agree that we must do everything possible to ensure that there is a reasonable turnout on 15 November. It worries me that a range of people have expressed deep concern about the turnout. The Electoral Reform Society believes that it may be only 18.5%, which, it says, would constitute an historic low. However, as a number of Members have pointed out, that does not mean that people are not concerned about the issue of policing; in fact, they are deeply concerned about it.

In my constituency, people fear that there could well be a cut of some 20% in police funding over the next few years. They want to see more, not less, neighbourhood policing. They are also deeply worried about the lack of consultation on the closing of front desks in police stations: they want to see consultation on whether resources are being used effectively. They are also worried about the antisocial behaviour that still blights a number of our communities.

Only the other week, I attended a public meeting in a community called Graig-y-Rhacca. Those decent, hard-working people are still blighted by the activities of a relatively small number of persistent offenders, and they want to see more policing in their community, not less. Those issues have been brought to my attention because I am the local Member of Parliament, but they have also been brought to the attention of the excellent Labour PCC candidate, Hamish Sandison, who is doing a very good job in travelling around the Gwent police area as much as possible.

We all know that the Electoral Commission is sending pamphlets to every household in the country, and that is commendable. However, I fear that the Home Office website will be very limited, and that it will not be supplemented by other information disseminated directly to individual households. As we have heard, some 7 million people will be excluded from getting that information directly because they do not have access to the internet.

The Government have produced advertisements over the last few weeks. I hope that they increase awareness, but it must be said that there is concern about the way in which they depict young people, and also that they are giving some people the impression that the PCCs will have more powers than will actually be the case. We know that the PCCs will have no responsibility for operational matters, but will make the chief constables accountable for them, and will themselves engage in wider strategic and funding issues. However, the advertisements do not make that clear.

I now want to focus on the fiasco—for it is a fiasco—of the bilingual ballot forms, partly because it is important in itself but also because, I fear, it is indicative of the wider, ham-fisted approach of the Home Office to the elections. The Opposition said some 12 months ago that there was a need for a statutory instrument—a piece of secondary legislation—to come before this House to enable bilingual Welsh and English ballot papers to be provided for the elections. Our advice was ignored. The result was that a few weeks ago the Home Office suddenly woke up to the fact that it could not have English-only ballot papers in Wales and belatedly introduced a piece of secondary legislation. However, it is not absolutely certain that there will be enough time to get it through. Therefore, all the authorities in Wales have been told that there should be two sets of ballot papers—one in English and one in English and Welsh—at a cost of £350,000 extra. The cost will be paid by the Government—it will be taxpayers’ money—which is a total waste of money. It is the first time that ballot papers will be thrown in the bin before an election.

That, I fear, is indicative of how the Government have approached this whole election—a lack of planning and a lack of strategy. I very much hope, even at this belated moment, that the Government will provide more resources for the elections, so that more people are aware of them and will come out and vote.

18:40

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

We have had an interesting debate this afternoon on policing and the flagship coalition policy of police and crime commissioners in the 41 police authority areas outside London. It has been noticeable that we have heard only from Conservative and Labour Members of Parliament in this debate. No Back-Bench Liberal Democrat MP has spoken. Liberal Democrats seem to be standing in only 24 of the 41 police authority areas, despite their voting for the policy, but then perhaps they are still making up their mind on whether they support it or not.

There have been some excellent contributions to the debate, with many from the Humberside area. It is good that the Labour candidate in Humberside, Lord John Prescott, has had so much publicity this afternoon. It is noticeable that the Conservative candidate does not seem to feature very much at all.

Let me turn first to the contribution made by my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), who spoke with great authority as a former Home Secretary. He reminded us of Labour’s achievement in government. He spoke about the reduction in crime levels, including the 64% reduction in domestic violence that we saw under the Labour Government, and the focus on that particular crime, which for many years had not been seen as a matter for the police. He also talked about the important role that the police play in partnership working and how important it is to ensuring that crime continues to fall.

My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) raised the important issue of funding levels and the inequity of Surrey seemingly receiving more money than forces in areas such as the west midlands. My hon. Friend the Member for Lewisham East (Heidi Alexander) spoke about London policing, with 463 fewer officers already in the Metropolitan police. She talked about knife crime and the concerns of young people in the capital. My hon. Friend the Member for Kingston upon Hull East (Karl Turner) challenged the slogan used by the Prime Minister on Monday—“tough but intelligent”—in his speech on crime, which I think is the first he has made since becoming Prime Minister. My hon. Friend focused on the lack of intelligence in that slogan and in the policies that the Government have been pursuing over the past two and a half years. He also declared himself as a “proud pleb”.

My hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) spoke as a Scottish MP, but from the perspective of someone with fresh eyes looking at what was happening with the elections. He talked about the fact that many people do not know that the elections are happening and about his experience with the police parliamentary scheme. My hon. Friend the Member for Wigan (Lisa Nandy) said that she had been amazed and impressed during the time she spent with the police. She talked about the important concept of policing by consent and the impact of cuts in her constituency.

My hon. Friend the Member for Denton and Reddish (Andrew Gwynne) also spoke about his experience on the police parliamentary scheme and, again, the effect of cuts in his constituency. My hon. Friend the Member for Luton South (Gavin Shuker) spoke about the complexities of policing and the politicisation of the police through the policies that the Government are pursuing. My hon. Friend the Member for Caerphilly (Wayne David) talked about the shambles in Wales with the ballot papers and the cost that the taxpayer will have to pick up because of the Government’s failure to count days again, which seems to be a running theme.

Let me turn to the policy of having police and crime commissioners. As my right hon. Friend the Member for Delyn (Mr Hanson) stated, the elections will cost £100 million, plus the £350,000 that will have to be paid to put the ballot papers right in Wales. This flagship policy must be set against the backdrop of the fact that £100 million would pay for 3,000 new police officers. This is at a time when 15,000 police officers are to be cut by 2015, and when we already know that 6,800 police officers have been cut from the front line in the first two years of this Parliament, which is more than experts had predicted would be cut in the whole of the Parliament. There is real concern, too, about the headlong rush into mass privatisation, and the failure to learn the lessons from what happened this summer with G4S.

Over the past four weeks the policing story dominating the airwaves has been a senior Cabinet Minister swearing at police officers and reportedly calling them “plebs”. In the past two and a half years, the coalition has made the job of being a police officer much harder. It has restricted the use of CCTV and DNA, it is weakening antisocial behaviour orders and it has cut funding to work with communities, and young people in particular.

Labour opposed the police and crime commissioner model for very good reasons, but in the coming election we cannot leave policing to the Tory candidates alone, who we know are cheerleaders for cutting front-line police officers. The issues are far too important for us to stand aside. We are opposed, however, to these elections being held in one of the darkest and coldest months of the year. Well the Minister explain why we are having these elections in November? Is this a deal that the Liberal Democrats did because they did not want an election in May, when they were going to do so badly in the local council elections?

For the record, let us be clear: the Liberal Democrats voted in favour of setting up the PCCs, with all the associated election and salary costs. Labour voted against that. Labour would much rather spend the money on front-line policing and cutting crime further, not cutting police numbers. The Liberal Democrats promised 3,000 extra police at the 2010 general election, in full knowledge of the deficit. When does the Minister expect to deliver on that promise?

At the end of 2009, the Liberal Democrats released some research that said the Government should recruit 10,000 more police officers. Their leader, the right hon. Member for Sheffield, Hallam (Mr Clegg), said if that were done, an “extra 82,265 crimes” would be solved each year. He said:

“The Liberal Democrats are the only party who wants to catch more criminals by putting more police on the street.”

Given their record and what they have said, it is unsurprising that the Liberal Democrats have chickened out of standing in many of the PCC elections.

In an article in The Daily Telegraph, the former police Minister, the right hon. Member for Arundel and South Downs (Nick Herbert), says that having TV adverts

“cunningly placed during Downton Abbey”

and “The X Factor” will ensure that people go out to vote. How naive. When I was in Nottingham earlier this week with our excellent candidate Paddy Tipping knocking on doors and talking to individuals, nobody knew about the elections. I am very sceptical about the comment of the Minister for Policing and Criminal Justice that 85% of people will see these advertisements. I repeat the comment of senior police figure Peter Neyroud on these elections:

“If you could have constructed a manual on how not to conduct an election, the Home Office have managed to tick off just about every element of it”.

The Electoral Reform Society has warned that this threatens

“to result in the lowest turnout of any nationwide election in British history.”

We are holding the elections in November when holding elections is much more expensive than at other times of the year. Doing so will also drive down turnout, and the elections are unpopular with the public in any case. Instead of a free post or a Government-backed booklet with information about the candidates to be sent to each voter, individuals can only go on to the Government website. Some 71% of over-75s have never used the internet, and neither have almost 20% of people in Wales. At a time when we want to encourage people to vote, the Government are immediately putting electors at a disadvantage. Belatedly, we are now told that there will be a telephone number that voters can call to ask for information to be sent.

What level of turnout is the Minister looking for to make these elections a success and give legitimacy to his Government’s flagship policy? As we have heard, the Minister said at his party conference that 20% is his aim. Is that correct? Interestingly, the Minister for Policing and Criminal Justice did not give him much support when he was challenged on this during his opening speech, so it seems that the coalition are split, again, on this matter.

In conclusion, Labour wants to accelerate progress in cutting crime, not make that more difficult. Under Labour, we had more police with more powers, and we sent more criminals to prison. The streets became safer and crime fell by 43%. The coalition has been rowing back on police numbers and police powers. Worse still, the coalition is going to squander £100 million of taxpayers’ money on this shambles of a PCC election, so I ask hon. Members to support the motion.

00:00

[The Minister of State, Home Department (Mr Jeremy Browne)]

I am grateful for the opportunity to conclude this debate. You have doubtless heard, Madam Deputy Speaker, of a khaki election, and we have the green and brown of the khaki coalition looking after police interests in England and Wales. It is ideal for me to have the opportunity to respond to the points raised by hon. Members on both sides of the House during the debate and to what I see as the four main criticisms made of Government policy in the Opposition motion. They are as follows: first, that the Government are not spending enough money—a recurring theme; secondly, that we are insufficiently authoritarian when considering the right balance between the power of the state and the liberties of the individual; thirdly, that we are too hasty, as a Government, in our enthusiasm for greater transparency and public engagement in policing; and fourthly—this is an overarching theme—that we are too enthusiastic overall about reform of the police service.

I shall go through those criticisms in the short time available. The first is that the Government are not spending enough money—this is what the motion describes as the “wrong-headed” pursuit of greater efficiency and value for money. It is, of course, always relevant to remind the House that the previous Government, having promised to abolish boom and bust, ended up presiding over an economy that went bust. The new Government came to office with our country looking down the barrel of a gun—we had a bigger deficit than Greece when we took office—and we had to make some difficult decisions to get to grips with that deficit. We have reduced the deficit, but this country is still borrowing a billion pounds every three days. Against that backdrop, it is just not credible to carry on spending money—borrowed money—with reckless impunity. The Government have no choice but to deal with the deficit, and as a service spending £14 billion a year, the police can and must make their fair share of the savings needed.

Underlying Labour’s analysis is a fundamentally flawed case, and I will sum it up for hon. Members. According to Labour, “The more money you spend, the better the results you get”—never mind cutting bureaucracy or getting good value for the taxpayer; it is spend, spend, spend. The problem is that the results do not bear out Labour’s analysis. Last week, the most recent independent crime statistics were published. I am sorry to disappoint Labour Members, but crime has fallen. It has fallen by 6% over the past year and by 10% in the two years since this Government came to office. It has fallen by 12% in the last year—[Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Mr Bryant, I ask you to stop shouting across the Dispatch Box now.

[Mr Browne]

Thank you, Madam Deputy Speaker.

I was just reminding the House that the Government have presided over a 10% fall in crime in the past two years. The latest figures show that crime is lower in England and Wales than at any time since the official survey started in 1981. Chief constables are rising to the challenge of making efficiency savings and providing greater value for money. As Her Majesty’s inspectorate of constabulary has said:

“The front line is being protected”.

Police reform is working. We have swept away central targets and reduced police bureaucracy. That shows that how the police are deployed, rather than their absolute numbers, is the key to cutting crime.

[Diana Johnson]

rose—

[Mr Browne]

Before I give way, let me put it like this to Labour: the best way to measure the success of a service is not whether we have spent more and more money on it, but whether we have got better and better results.

[Diana Johnson]

So does the hon. Gentleman agree with what his leader said—that if there were an additional 10,000 police officers, 82,265 crimes would be solved each year? Does the Minister support that, or was the Deputy Prime Minister talking nonsense—again?

[Mr Browne]

I think that what matters is what one does with the police. The team that wins the premier league is not the one with the biggest squad; it is the one that gets the best results, and that is what we are trying to do in policing.

We see a hallmark of old Labour, new Labour and the exciting latest version that is somewhere in between in the second criticism in the motion: the casual authoritarianism of criticising the Government for

“restricting the use of CCTV”.

Yes, we do believe that there should be some restrictions on CCTV. We are striking the right balance between enabling the police to use modern investigative techniques such as CCTV and DNA evidence, and the police are using those techniques to great effect, but at the same time protecting the right of innocent members of the public to not be subjected to constant and unregulated surveillance.

Labour’s third criticism reveals hostility to the idea of having democratically elected commissioners to increase accountability and give the public greater say in the policing of their community. That was a recurrent theme of the debate. That hostility, it must be said, is not shared by many Labour ex-Ministers, including two recent MPs, Tony Lloyd and Alun Michael, or by the former Deputy Prime Minister, Lord Prescott. If Labour Members are concerned about the election turnout, perhaps they should start by getting those three to pull their fingers out, get campaigning and explain the rationale for their candidacy. Every Member of this House, elected as we are, should want election turnouts to be strong, and I am delighted that the profile of the elections is rising in Cleethorpes, Brigg and Goole, and Denton and Reddish. I believe that it will rise across England and Wales in the coming weeks.

Labour has to make up its own mind. During the debate, we have heard criticism of the Government on the one hand for spending too much money on PCC elections, and on the other hand, for not spending enough. Whatever the turnout, the House can be sure of this: the new PCCs will have a stronger mandate than the police authorities they are replacing. Many police authority members from all parties have done sterling work on behalf of their communities. We recognise and applaud that, but with the best will in the world, police authorities were hardly delivering public accountability and transparency: in the most recent survey, only 7% of the public were even aware that police authorities existed. We should not be fearful of giving the public a say, and parties in this House should not be discouraging people from participating in a democratic process. I hope that people will find out more and that they will vote.

[Alan Johnson]

Probably less than 7% of the public are aware that the hon. Gentleman exists. Does that mean he is doing a bad job?

[Mr Browne]

In the area where I stood for election, I got 49% of the vote, and I hope the figure will go up next time, but we will see; one can never take anything for granted. Labour got 5% in my area, which is 1% more than UKIP.

The final theme that runs through the Labour motion is deep, cautious, conservative resistance to fresh thinking and change. Beyond spraying around more and more borrowed money, we see no ideas, no imagination and a closed mind to reform. It is easy for Opposition parties to lapse into idle oppositionism—we have all been there—and in many ways Labour today reminds me of what the Liberal Democrats were like before we became a serious party of Government. The House may be interested to know that that trait is not new to Labour in opposition. Let me quote what a previous shadow Home Secretary said when his party was last out of government. I shall reveal the name: Tony Blair—

[Mr Alan Campbell (Tynemouth) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Main Question accordingly put.

The House proceeded to a Division.

[Madam Deputy Speaker (Dawn Primarolo)]

I ask the Serjeant at Arms to investigate the delay in the No Lobby.

18:59

Division 86

Ayes: 218

---

Labour: 210
Democratic Unionist Party: 3
Social Democratic & Labour Party: 3
Conservative: 1
Independent: 1
Alliance: 1
Green Party: 1
Plaid Cymru: 1

Noes: 287

---

Conservative: 241
Liberal Democrat: 45
Labour: 1

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

On a point of order, Madam Deputy Speaker. I wonder whether you could use your good offices with the maintenance department of the House. The most important lift in Portcullis House has been out of commission for more than a month, which impedes our ability to get to votes and to work and meetings on time. It should not be impossible in a modern, 21st-century Parliament to get a lift repaired in less than a month.

[Madam Deputy Speaker (Dawn Primarolo)]

I am eternally grateful that I am not responsible for maintenance in the House of Commons, so strictly speaking that is not a point of order. The Leader of the House has heard the hon. Gentleman’s comments and I am sure that he will take the matter further. I should also say to the hon. Gentleman that the last Division was not exactly unexpected in its timing. I am sure that Members bear such things in mind.

Business without Debate

Wednesday 24th October 2012 Commons Chamber

European Union Documents

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Major Accidents from Hazardous Substances

That this House takes note of European Union Document No. 18257/10 and Addenda 1 and 2, relating to a draft Directive on control of major accident hazards involving dangerous substances; and welcomes the Government’s efforts, during the negotiations on the Directive, to secure appropriate controls on sites with major accident potential while ensuring that the burdens on operators and regulators of such sites are kept to a minimum.—(Nicky Morgan.)

Question agreed to.

Delegated Legislation (Committees)

Ordered,

That the Measure passed by the General Synod of the Church of England, entitled Church of England Marriage (Amendment) Measure, which was laid before this House on 19 October, be referred to a Delegated Legislation Committee.—(Nicky Morgan.)

The Green Howards

Wednesday 24th October 2012 Commons Chamber

19:17

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

This is a petition on the 2nd Battalion, the Yorkshire Regiment, the Green Howards. The petition states:

The Petition of residents of Teesside and North Yorkshire,

Declares that the 2nd Battalion, The Yorkshire Regiment (Green Howards), who served this country loyally since 1688, is both a symbol of and major employer in both Teesside and North Yorkshire.

The Petitioners therefore request that the House of Commons urges the Secretary of State for Defence to safeguard the jobs of the battalion’s soldiers, and that it further urges the Secretary of State to protect the battalion’s name, badge and proud heritage.

And the Petitioners remain, etc.

[P001126]

Onshore Gas

Wednesday 24th October 2012 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Nicky Morgan.)

19:18

[Mark Menzies (Fylde) (Con)]

I am delighted to have secured this evening’s Adjournment debate on an extremely important issue. Many of the issues related to onshore gas exploration and extraction are, rightly, of concern to residents in my constituency and throughout the country. I am pleased to see a number of my hon. and right hon. Friends present and taking a keen interest in the debate. I pay particular tribute to my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw), who recently secured a Westminster Hall debate on wider energy interests in Lancashire. I know that he, like me, is concerned for the well-being of not only the environment in the county but the well-being of all our constituents. The issue is not just prevalent in Lancashire. Shale gas reserves have been found in the constituencies of a number of other right hon. and hon. Members, so it is right that we have this debate. It is timely, because any decision on the future of the industry is still to be made.

I pay tribute to the previous Minister, my hon. Friend the Member for Wealden (Charles Hendry), for his work on the matter. It was my privilege to work as his Parliamentary Private Secretary for two years, and I know how hard he worked on this issue and many others. I wish him well in what he does next.

I have subsequently had the opportunity to meet the new Minister of State, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), on several occasions to talk about regulations on shale gas and more widely. I know that he takes the issue as seriously as I do, and I am grateful for all that he has done to date. I am pleased that he will be responding to this evening’s debate.

The issue that we have come here to discuss is extremely important, particularly in Fylde, where, as my hon. Friend the Minister knows, two earth tremors were triggered by the actions of Cuadrilla Resources last year when the Preese Hall gas well was fracked. As a resident of St Anne’s myself, I know at first hand the concern that that has generated. It left many constituents worried about the way in which the process is regulated.

It must be said that we have come some distance since then in understanding what is required and in making improvements to the regulations surrounding the emerging industry. Notably, there is the traffic light system to ensure that tremors are unlikely to occur again, which is most welcome. I am further pleased that I have received assurances from the Minister that his Department is taking on board recommendations from the reports of both the Royal Society and the Royal Academy of Engineering on shale gas.

I was also most grateful that my calls for a shale gas strategy group to be established, encompassing the Department of Energy and Climate Change, the Department for Environment, Food and Rural Affairs, the Health and Safety Executive and the Environment Agency, were swiftly acted upon. Ensuring that there are no gaps in regulation and that there is cross-departmental understanding on shale gas is extremely important. I know that representatives of each organisation are working extremely hard.

The debate is therefore not about bringing into question the expertise or integrity of the people involved in those regulatory bodies. I was extremely pleased that representatives of the HSE, the EA, DECC and Lancashire county council were present at a public meeting that I held in Fylde. I know that they were left fully aware of my constituents’ concerns and saw at first hand the level of research and knowledge that Fylde residents have accumulated over the past year. Rather, then, the debate is about supplementing their work to ensure that we achieve a gold standard of regulation.

We still have some way to go before we have a regulatory system in place for any potential stage of development. We need a system that addresses all concerns, that can be properly enforced and that sets an example to industry across the world. That is particularly important for the UK, where population density will always be a factor.

As it stands, what is supposed to happen is that DECC assesses and licences drilling, development and production activity; the environmental regulator with jurisdiction for the geographical area in question monitors and regulates the environmental aspects of shale gas fracking; the HSE monitors shale gas operations from a safety perspective; and the relevant planning authorities have a key role in considering the acceptability of the activities in question from the viewpoint of traffic movements, visual intrusion, consistency with local plans and so on.

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

Does my hon. Friend share my concern that the plans for gas storage in salt caverns in the Wyre estuary and the possibility of fracking are a dangerous combination, given what he said earlier about the risk of earthquakes and earth tremors occurring again?

[Mark Menzies]

My hon. Friend makes a valid point, which was touched upon in the debate that my hon. Friend the Member for Lancaster and Fleetwood secured in Westminster Hall. I know that the Minister heard that point and is well aware of it.

Many of the people who have been involved in the process are experts in their field, but despite that, I do not believe that the regulatory system is robust or transparent enough to instil public confidence should permission be granted to the industry. That is why I am calling for an independent panel of experts to be set up without delay. Many questions and concerns still surround the shale gas process, and it is vital that we have a panel for three purposes: to look at each issue in detail; to fully appraise the risk; and to ensure that specific regulations are in place to deal with that. If part of the process cannot be dealt with safely through regulation, an alternative method should be found. If, however, an alternative way of carrying out that process is not possible, it must not be done.

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

I congratulate my hon. Friend the Member for Fylde (Mark Menzies) on securing this important debate. Does he agree that one key issue of regulation and safety, particularly in my constituency, is the impact on the water table? It is not yet clearly understood by all that many of my constituents draw water from their own boreholes directly from the water table, and do not receive mains water.

[Mark Menzies]

My hon. Friend’s point is exactly the type of concern that I would want the panel to consider. It is a case of, “Bring everything out; let’s examine it independently, robustly and with integrity, and then let’s answer the questions”. I believe that the establishment of a panel is of the utmost importance and must be achieved forthwith. Should the Secretary of State give the go-ahead for the resumption of fracking, I will demand on behalf of my constituents intense scrutiny of all operations on the Fylde. Fracking rightly demands careful monitoring and full transparency, and I believe that work by the current regulatory bodies will be aided and enhanced by the presence of an independent panel of experts.

The panel is designed not to create more bureaucracy but to allow questions to be independently answered and solutions developed. It is crucial that the panel is open and accessible so that all interested parties—including Fylde borough council, which is about to establish a scrutiny group to look at this issue—have a means of getting their questions answered, and a body through which submissions can be made.

I have been assured that the technical competence of the regulators is not in doubt among those working in the industry, but the perceived lack of transparency, engagement and on-the-ground presence is prompting fears among many in the local communities that the industry does not receive sufficient oversight. We must therefore ensure that the UK continues its proud record of having world-leading energy regulators. Due to the developmental nature of the process in the UK, it is vital that we support the work of current regulatory bodies. In no uncertain terms can we allow the environment or the well-being of our constituents to be compromised.

Cuadrilla Resources is still unaware of how much shale gas it will be able to recover. Although the reserves may be considerable, it is unclear what level of gas can be recovered, or even if that is commercially viable. I urge the Minister to ensure that once that information is available, the panel will look at its impact on all key aspects of the local economy.

As I have told the Minister on previous occasions, constituents have raised with me a number of concerns that I would, in future, expect to be addressed by the panel. Those concerns are wide ranging and often technical in nature, but given the time allowed for this debate, it is not possible to go into each one in detail. Some concerns, however, are particularly worthy of mention.

First, many of my constituents are concerned that there are no specific onshore exploration regulations. The offshore regulations, developed in the 1990s following the Piper Alpha disaster, are perhaps not sufficient to address all the issues that arise from moving a process onshore, especially in a relatively populated area such as Fylde.

Secondly, although I welcome the environmental assessment being undertaken by the Environment Agency, I call for environmental impact studies to be undertaken on any proposed site, regardless of size. Furthermore, does the Minister have any plans to encourage a health impact assessment in a similar vein? A number of constituents have raised that issue with me, many of whom live within a couple of miles of potential fracking sites.

Importantly, the number of shale gas pads that would be developed in Fylde has been under speculation. We must take into account the population density and beautiful countryside of Fylde, and it would be completely unacceptable for that to be compromised by the proliferation of those sites. I speculate that similar situations will arise where shale gas reserves are discovered in other areas of the country. I therefore urge the Minister to ensure that any shale gas operator is fully transparent on the location and number of production pads that they seek to develop, and that the planning process is sufficiently rigorous.

Knowing the countryside of Fylde as I do, I know it would be completely unacceptable to take many sites to extraction phase. For example, I would consider the current site at Anna’s road, where exploratory drilling is taking place, to be an unacceptable location for extraction to occur. I would vehemently oppose its development as such.

If you will forgive me, Madam Deputy Speaker, I shall list other issues worthy of mention: the storage and disposal of fracking flow-back water; cement quality and the inspection of cement bond logs; the potential for subsidence; the examination of formation integrity tests as they are executed; surface methane detection; the publication of fracking chemicals used at each well; visual impact; impacts on local animals and welfare; potential flaring; and what happens to a site when it is no longer in use. It is important to note that that is not an exhaustive list, but it goes some way to highlighting the issues that I would expect the panel to look into—and it should explain its conclusions to the public. I appreciate that such a regime would require further funding, but for the panel to work, it is important that it is adequately resourced. We should not be putting a price on environmental considerations in my constituency or wider afield.

In a letter from June this year, the Secretary of State for Energy and Climate Change assured me that, if the decision is to permit further fracking, he will respond in detail to the points directly linked to the exploration activities and on what further steps might be necessary to ensure the effectiveness of a regulatory regime throughout any future production phase. Will the Minister reiterate this pledge to the Secretary of State if such a decision is taken?

I have called for the establishment of a committee of independent experts to look at all aspects of the process. Will the Minister take personal responsibility to ensure that that is done, and will he personally oversee the work of the committee, because it must be robust and of a Rolls-Royce standard? In the event of the Secretary of State giving permission for the shale gas industry to move from the exploration phase to the extraction phase, the panel should not only continue, but ramp up its work and take on the responsibility for scrutinising the onshore gas sector. Drawing on perceptions that have been formed from this point onwards, I would expect regular and thorough on-the-ground inspections from each regulator body; regulations that are rigorously enforced; and considerable sanctions brought to bear should any breach of such regulations take place.

I have not addressed other aspects of the industry, such as how the gas, once extracted, would get to the grid, how the potentially large revenues could be shared with the local community, or how shale gas could play a part in our energy mix in future. I expect the Minister and his fellow Ministers will take those issues on board and address them in due course should we ever get to that point. Shale gas might well have a role to play in our energy future, but that can happen only if it is backed up by a robust, open and exhaustive regulatory regime.

I will continue to pay close attention to the matter and will have no fear in raising my concerns or those of my constituents should we feel that progress is not being made. I am sure the Minister would expect no less of me. I have said in the House on many occasions that Fylde is a beautiful place to represent. I will continue to do everything within my ability to ensure that neither the environment nor the economy of this precious corner of our green and pleasant land are ever compromised.

19:33

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

My hon. Friend the Member for Fylde (Mark Menzies) has secured this debate and, in doing so, has illustrated once again that he personifies both rigour and vigour in the defence of his constituents, and I congratulate him on doing so.

The arrival of shale gas exploration in the UK in 2010, with operations almost wholly concentrated in my hon. Friend’s constituency, has quite understandably raised concerns among local residents and others about its impact. It is a new industry to Britain, and it is potentially intrusive. We need to be mindful of the amenity locally and the safety of the community.

My hon. Friend is clearly well acquainted with both the mechanics and potential impacts of the operations in both the current exploration phase and what might be expected if exploration is successful and the company involved develops a larger-scale operation to extract the resource.

The House will know that shale gas production has had a huge impact in the United States of America. It has had a major impact on supply and driven the price of gas below what could reasonably have been predicted only a few years ago. It has happened very quickly—over perhaps just 20 years—with a truly remarkable increase over the last five. When it started, this rapid expansion was mainly located in relatively sparsely populated areas. It is important to understand that the difference between the United Kingdom and the United States, in these terms, concerns both geology and geography. More recently, however, there has been an expansion into more populated areas and the pace and scale of activity has given rise to concerns within communities over both the short and longer-term impact on their health, their local communities and their way of life.

It is worth describing a couple of the features of shale gas activity that differentiate it from more conventional oil or gas production: the use of boreholes that run horizontally through the shale formation, and the creation of permanent fractures in the solid rock along that borehole. Together, these enable the gas to flow more freely into the well, acting in a manner similar to tributaries draining the catchment of a river. The increased concern about these techniques, particularly the creation of fractures—fracking—in north America coincided with the commencement of activities here in the UK in Fylde. Not unreasonably, our communities looked across the Atlantic and were genuinely worried by the reports, although often shown to be exaggerated, of what the impact might be here.

Not least in that was the portrayal of a US industry without effective regulation riding roughshod over local communities. This coincided with the emergence of a clear story of the failure of regulatory and operational control that led the Macondo disaster. Those worries were compounded when early activities in Fylde initiated small earth tremors, to which my hon. Friend has drawn attention previously and of which the House will be aware. This effect had not previously been reported in connection with shale gas fracturing, although they were associated with the drilling for hydrothermal energy and with large-scale waste water disposal.

It is quite right, therefore, that my hon. Friend should seek reassurance over the strength and coverage of the UK’s regulatory regime, and that he should seek further scientific and engineering reassurance that shale gas activities can safely move to an extraction phase. As I said, I will come to his specific points shortly, but first I will address some of the most prevalent concerns.

The first concern is aquifer pollution. There have been many reports in the US that shale gas operations have caused contamination of aquifers, and consequently of drinking water drawn from the aquifers, with fracking fluids or methane, and there have been reports of explosions and dramatic footage of householders setting light to their kitchen taps.

On investigation, some of those incidents, including that of the flaming tap, have proved to be unconnected to oil or gas operations—they were caused by contamination of water supplies by methane of recent biological origin—but there were cases in which the methane did originate from gas production. This has been attributed to unsatisfactory well construction or cementing. As the Energy and Climate Change Committee and the Royal Society have both commented, this demonstrates the importance of ensuring the integrity of the well. My hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) drew attention to the concerns in his locality about the contamination of water, which might well extend beyond the immediate area, given how water travels. As for fracking fluids, one reported instance of aquifer contamination remains under investigation, but the present state of the evidence is that there are no confirmed examples of such contamination.

Concern in the US about the use of fracking chemicals in extraction is based largely on the fact that the chemicals and other substances used were not disclosed, apparently because of commercial secrecy. In that respect, the situation in the US is very different from the situation here, which is quite straightforward. Before commencing, anyone carrying out drilling operations must consult the Environment Agency, which will consider the possible impacts on the environment, including on groundwater. The agency has made it clear that it will require the disclosure of all chemicals and other substances that may be injected into the subsurface, so that it can assess whether there is any risk of harm through contamination of groundwater. It will also publish those details on its website and beyond. Operations by any operator will be assessed case by case by the relevant environment agency. The agencies have powers to prevent any activities that they consider to pose a threat to the environment, but the circumstances here are very different from those that prevail in the United States.

Concern has also been expressed about water use and it is true that fracking for shale gas uses substantial quantities of water. Cuadrilla, the organisation involved in the exploration in the north-west, used about 10,000 tonnes for the well mentioned by my hon. Friend, but as that is a one-off use rather than a continuing demand it is unlikely to be of concern in most areas. By way of a comparison, 10,000 tonnes is only about 1% of the water that United Utilities Water supplies to the north-west every day. In any case, any abstraction of water for industrial purposes requires the permission of the relevant environment agency, which will not be forthcoming if the proposed abstraction is not sustainable in that area once account has been taken of existing and foreseeable demands.

The fourth area about which concern has been expressed is subsidence. It is important to understand that that concern is partly informed by experience in the North sea, where there has been significant subsidence under a drilling platform sufficient to require a major re-engineering of the platform to raise operating decks substantially. The producing rock in that case is chalk, however, which is more compressible than shale. The structure of shale is quite different and no significant compression of shale is expected as a result of gas extraction. The empirical evidence from the US supports that analysis, as despite the drilling of tens of thousands of wells and production experience over a decade or more there has been no report of subsidence attributable to shale gas production.

Let me turn now to my hon. Friend’s specific suggestions, which he has been assiduous in drawing to my attention today and previously. I have made it very clear that we will have a dialogue with those hon. Members who are affected and will allow them to express their concerns, which will be dealt with thoroughly, courteously and effectively—at least they will while I am around, because that is how I operate. I have taken the opportunity previously—I do so again today—to provide reassurances on a number of my hon. Friend’s most prominent concerns. In doing so, I am not attempting to fill the formal role he has proposed of providing independent scientific advice on the impacts of shale gas activity, although I have been able to draw on a considerable and growing body of scientific opinion.

The Select Committee on Energy and Climate Change carried out an inquiry into shale gas in 2011. It concluded that, provided good industry practice is followed and careful regulation applied, hydraulic fracturing or fracking is unlikely to pose a risk to ground water or aquifers. In addition, and on the more specific question of the implications and mitigation of fracture-induced seismic activity, my Department commissioned and is studying the findings of a report from an independent panel of scientific and engineering experts, which has been subject to public scrutiny, and deciding whether to permit the recommencement of fracking in Lancashire.

As my hon. Friend mentioned, this summer the Royal Society and the Royal Academy of Engineering provided an authoritative and comprehensive study of the potential risks of shale gas extraction and how they can be managed. It is fair to say that their conclusion was that the risks could be managed if best practice and firm regulation were applied. A number of recommendations were made for improving the scientific understanding of key aspects of the process—for instance, on induced seismicity.

I believe that the work has provided a sound basis for a decision on whether to resume exploration activity, but, as my hon. Friend has said, the scale of an eventual extraction phase would be different and, although many of the techniques are similar, the scale and introduction of production activities would give rise to additional scientific and engineering questions. I can as a consequence see considerable merit in building on that work, particularly on the excellent work of the Royal Society and the Royal Academy of Engineering, to provide a continuing means by which public concerns over the potential impacts of shale gas extraction can be examined. I am aware that there is a strong regulatory framework in place, not least through the Health and Safety Executive and the Environment Agency, whose purpose is protect against harmful activity. In addition, there is a stringent planning process to which any extraction phase must be subjected. I emphasise—my hon. Friend raised the point in his speech—that the scale of any application for continuing development would be subject to that planning process, and would, of course, be likely to be subject to a public inquiry if it was called in, which would allow the fullest possible examination by local people and local representatives of the implications of any applications.

Great care will need to be taken not to duplicate or weaken the existing statutory safeguards, but I will undertake to explore with my Department’s chief scientific adviser, Professor David MacKay, whether it would be possible to provide a mechanism or channel by which to provide authoritative responses to specific areas of scientific or engineering concern.

Furthermore, I hear what my hon. Friend says about oversight and coherence, and the need to involve Ministers directly in that oversight. Again, I shall give that full consideration and I hope to be able to return to this matter, with my hon. Friend and other hon. Members, and make some proposals on how lines of accountability and responsibility can be confirmed in new arrangements.

My hon. Friend is aware that we have already established a strategy group at official level to ensure full co-ordination of the work of the existing regulators. This is chaired by my Department and includes all those agencies. It has met regularly and is looking at the challenges; it will obviously ramp up its work as developments take place in the north-west. In parallel, the Environment Agency is currently undertaking a detailed review to ensure that it has the right powers and resources to protect the environment during the extraction phase. Other regulators, including the Department and the Health and Safety Executive, are involved in that review.

While shale gas is new to the UK, oil and gas activities are not. Drilling and production has been conducted onshore since the 1930s, and even fracking is an established technology. Few people know that the UK hosts Europe’s largest onshore oil field in Dorset, which has been producing oil for over two decades without harm to the environment or the community.

The regulators of these activities, particularly the HSE and the EA, are long experienced and are acknowledged as world class in their field. That is not to say, however—I assure my hon. Friend again—that I would rule out any improvements to the arrangements. If my hon. Friend will permit me, I will take the observations he has made into consideration and investigate what further steps can be taken, building on what we have, in order to give my hon. Friend and his constituents some further tangible assurance that the regulation of any extraction will be comprehensive, co-ordinated and well resourced.

Shale gas provides an exciting opportunity for this country. It should not be exaggerated, but neither should it be underestimated. It is critical, as my hon. Friend has rightly said, that it is conducted safely and with appropriate regulation. Where the regulation we have in place needs to be amended, added to or altered, it is important for Ministers to deal with it quickly and effectively. I assure him that that discussion will continue to take place, and I am more than happy to take a personal active interest in this matter so that he can assure his constituents and others that the Government are doing all that is necessary to make shale gas a great success. I thank my hon. Friend once again for giving me the opportunity to be able to say that this evening.

Question put and agreed to.

19:48

House adjourned.

Division 84

Ayes: 260

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Conservative: 229
Liberal Democrat: 26
Democratic Unionist Party: 3
Independent: 1

Noes: 206

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Labour: 190
Liberal Democrat: 7
Democratic Unionist Party: 3
Social Democratic & Labour Party: 3
Scottish National Party: 3
Alliance: 1
Green Party: 1
Plaid Cymru: 1

Ministerial Correction

Wednesday 24th October 2012 Ministerial Corrections

Wednesday 24 October 2012

Transport

Wednesday 24th October 2012 Ministerial Corrections

HS2 Ltd

[Maria Eagle]

To ask the Secretary of State for Transport how many staff have been employed at HS2 Ltd in each month since its creation.

[Official Report, 17 July 2012, Vol. 548, c. 630-31W.]

Letter of correction from Simon Burns:

An error has been identified in the written answer given to the hon. Member for Garston and Halewood (Maria Eagle) on 17 July 2012.

The full answer given was as follows:

[Justine Greening]

[holding answer 24 May 2012]: From the time HS2 was established until my decision to proceed with High Speed Rail in January 2012, HS2 Ltd staff comprised a mix of direct employees, secondees from DFT and Network Rail and temporary staff. Following the announcement, a development partner, CH2M Hill, was appointed. Its staff (86) was integrated into the HS2 organisation structure between March and May and are included in the following numbers. Further recruitment has been undertaken, and is continuing, to provide HS2 Ltd with the capability to deliver its extended remit. In addition, HS2 is now moving to secure permanent appointments into roles and reduce to a minimum its need for temporary staff.

[Justine Greening]

[holding answer 24 May 2012]: From the time HS2 was established until my decision to proceed with High Speed Rail in January 2012, HS2 Ltd staff comprised a mix of direct employees, secondees from DFT and Network Rail and temporary staff. Following the announcement, a development partner, CH2M Hill, was appointed. Its staff (86) was integrated into the HS2 organisation structure between March and May and are included in the following numbers. Further recruitment has been undertaken, and is continuing, to provide HS2 Ltd with the capability to deliver its extended remit. In addition, HS2 is now moving to secure permanent appointments into roles and reduce to a minimum its need for temporary staff.

Westminster Hall

Wednesday 24th October 2012 Westminster Hall

Wednesday 24 October 2012

[Sir Alan Meale in the Chair]

Offshore Wind Generation (North Wales)

Wednesday 24th October 2012 Westminster Hall

Motion made and Question proposed, that the sitting be now adjourned.—(Mark Lancaster)

00:00

[Albert Owen (Ynys Môn) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Alan. I am pleased to sponsor this important debate, and I welcome the Minister. As I am a member of the Energy and Climate Change Committee, I am sure that he and I will be working together on many issues over the coming weeks and months. I pay tribute to his predecessor, the hon. Member for Wealden (Charles Hendry), a Minister who was respected by people right across the energy sector, from industrialists to environmentalists, and with whom I worked well. He visited north Wales, and came to see the Anglesey energy island concept, and I am sure that I will be inviting the new Minister to come along to see the progress that has been made.

I know that the new Minister will make his mark over the coming months. He has already given us a very entertaining performance, in his response to urgent questions last week, and we look forward to more of that style and, we hope, to some answers to questions. I am sure that he will have the opportunity today to answer some important questions pertaining to low-carbon energy in north Wales.

To be fair to the Minister, he has a chequered history when it comes to wind generation, and I hope that today he can clarify his position, together with that of the Government, and tell us whether wind generation now passes his two tests of economic and environmental sustainability. To be fair to him again, he sent us a letter only on Monday, outlining the Government’s support for renewables, which I presume includes wind generation. I am sure that he will be able to clarify the position on those things in his winding-up speech.

I want to make my own position absolutely crystal clear. I am pro-nuclear, pro-renewables, including wind generation, and pro-energy efficiency, and I have never seen any contradiction between those three things. We need all three if we are to reach the goals that we all want: energy security and the decarbonisation of industry.

[Mark Tami (Alyn and Deeside) (Lab)]

I agree totally with my hon. Friend. Does he agree that in the past the argument has wrongly been seen as a choice between renewables—such as wind—and nuclear, when they are part of the same package?

[Albert Owen]

Yes, I absolutely agree. I am sure the Minister will acknowledge this later too: we should not be either/or; we need all the options. We need the base load that nuclear can provide, along with clean coal and gas, but we also need the flexibility that renewables give us, and I hope to develop that argument today.

As I say, I see no contradiction here. If we are to create the vibrant low-carbon economy that the UK wants, energy security, along with food security, is probably the most important challenge that this Government and Governments around the world will face in the future. North Wales is—I will argue that it can continue to be—a major contributor to a low-carbon future. My own constituency of Ynys Môn—the Isle of Anglesey—has been in the vanguard of nuclear generation for more than 40 years, and there are plans for a new replacement station at Wylfa. The island also has early wind farms, comprising of some 77 turbines—from the 1980s and 1990s—in the north of the island. There are plans for a tidal array at the Skerries, and footprints for two biomass plants, so no one can accuse my constituency and its people of not contributing to our energy needs or to the rich energy mix that we want in the future. I support the concept of Anglesey becoming Britain’s energy island, and I hope to invite—I am sure that I will formally invite —the Minister along to see the energy island programme and meet its director, John Idris Jones, and his team, to see how we can take this forward, with local government, local businesses and the Welsh and UK Governments working together.

Given what I have just said, I do not believe that I can be accused of being an “environmental Taliban”. The Chancellor likes to joke about such things, but he should not poke fun at people who want a balanced energy mix that includes renewables, as well as coal, gas and nuclear. Indeed, I do not understand why he made his remarks, because that is his Government’s policy. It was also the policy of the previous Government, so there has been consensus and continuity. Businesses and consumers tell me that they want clarity and continuity on energy policy, so that north Wales and the United Kingdom can become the centre of excellence that we want to see.

The purpose of this debate is to highlight the pros and cons, to focus the attention of Government, at all levels, on providing certainty for investment and to create the high skills and the low-carbon energy sector that can deliver in the future.

[Ian Lucas (Wrexham) (Lab)]

I am delighted that my hon. Friend has secured this debate. He mentioned certainty, and uncertainty is the enemy of long-term investment. Does he agree that one of the problems with the present Government is the incoherence and uncertainty that is causing long-term investors such as Siemens to reconsider investment in the UK, because of the lack of clarity about Government policy?

[Albert Owen]

My hon. Friend is absolutely right. We have just come from a meeting of industrialists, and they highlighted that very point. The Aluminium Federation was present, and it said that international companies are considering pulling out of the UK because of uncertainty about the future. The Minister will be aware of that, and he will try to work with others to allay the fears and create the confidence needed for the future. It is not warm words that will heat our homes or drive industry, but action, and we need to see that.

[Jim Shannon (Strangford) (DUP)]

I am grateful for the opportunity to be involved in this debate. The hon. Gentleman referred to jobs in Wales; other parts of the United Kingdom will also gain greatly. In my Northern Ireland constituency, Harland and Wolff will benefit from jobs that come from the wind turbines in Wales. There are benefits for the whole United Kingdom: is that what the hon. Gentleman is saying?

[Albert Owen]

Certainly, and if the hon. Gentleman is patient I will lay out the benefits. I want to see a centre of excellence in north Wales, but the supply chain will involve the whole United Kingdom. There will be downstream jobs, and I want to see those jobs within the United Kingdom, rather than in continental Europe, for example. Large shipments can come into north Wales, the north of Ireland and the north of England from other parts of Europe. I want to see the skills base here in the United Kingdom developed and capable of maintaining highly skilled jobs. The hon. Gentleman need not fear. We are not being parochial; we are being very pro the United Kingdom.

North Wales has an abundance of resources. It has the natural resources that are needed for hydro and wind generation and, importantly, it has a skills base in many of its industries. The Minister is au fait with the skills agenda, and the skills in north Wales are transferable from the aerospace, car and other industries into the new exciting wind-generation and renewables agenda for the future.

[Mark Tami]

Does my hon. Friend agree that, although we have the skills base, if the certainty is not there or people do not see it, they will look for jobs in other sectors and that that will be a loss to the energy sector?

[Albert Owen]

My hon. Friend is right, and he echoes the remarks made by my hon. Friend the Member for Wrexham (Ian Lucas). We need that certainty, and we need stability and a strategy for the future, and I hope that the Minister will note that and address it in his remarks.

We have an important skills base in north Wales linked to colleges and universities. Coleg Menai in my constituency has adapted an energy centre, which is creating a skills base in construction. Many of those skills were lost over many years, so offshore wind is not only about generation, but about the construction and manufacturing jobs of the future. The colleges are linking up. The energy centre was created by the Welsh Government in conjunction with the Nuclear Decommissioning Authority and the local authority, and it works with local colleges to provide young people with those skills and to give them hope for the future.

As I am sure that the Minister knows, Anglesey was chosen by the Welsh Government as an energy enterprise zone, which is important for concentrating minds on north-west Wales and on north Wales in general. In north Wales, we have good universities at Glyndwr and Bangor and a number of good colleges, many of which are involved. Bangor university has a school of ocean science, which is a world leader in marine energy. So when I talk about wind and renewable energies, I am talking about not only manufacturing and construction, but future research and development and being world leaders in new technologies as they appear. The school of ocean science is a world leader in climate change patterns, too, and we have to merge those things to make the area a centre of excellence.

I will not duck the issue: wind energy is controversial, although offshore wind is less controversial than onshore wind. Offshore wind turbines are less obstructive than turbines on land, and their size and noise are mitigated by their distance from communities. Obviously, that brings its own challenge, but aesthetics is an issue for many people. When people talk about the technology, they are often in favour of wind generation, but when they talk about location, issues are raised and many people are opposed. The planning system—it is difficult for any Minister to tackle this—polarises people’s opinions. People have to be either for or against wind generation, and we do not have a mature dialogue on future needs and the benefits that wind generation can bring to local communities.

Wind is controversial, and I believe Anglesey has had its fair share of onshore wind development. Given the sheer size and scale of the new turbines, they are best placed out at sea. Residents on Anglesey are not nimbys in any way and want to be part of the future of wind generation, but wind turbines should be offshore because of their large scale.

I pay tribute to a group of residents on Anglesey who have campaigned against the ad hoc development of wind generation, which is a problem in many communities. The only beneficiaries of onshore wind are the landowners and/or developers, not the communities; whereas offshore wind will have a combined benefit for the larger community.

[Glyn Davies (Montgomeryshire) (Con)]

The hon. Gentleman knows that the subject is close to my heart because of the impact on my constituency. Does he accept that the real issue is scale? Whether in Anglesey or Montgomeryshire, the issue is the sheer numbers. What has been proposed for my constituency is virtually a desecration of the area, as is simply the case with onshore wind. I welcome this opportunity to associate myself with his remarks, because he is also challenging the scale, which destroys areas.

[Albert Owen]

Yes, I agree. Aesthetics and scale are big issues that we need to address. I am not only concentrating on that problem but considering solutions for the future. We have an abundance of wind, which is a proven technology, but it has to be in the right place. As the hon. Gentleman says, the scale has to be right for the area. I will develop that point.

I support microgeneration, and it is sensible in rural areas that isolated properties, farms and working communities have a source of electricity and that any surplus goes to the grid, but I oppose large-scale onshore wind generation. I hope that I am putting that in its right context.

As a member of the Select Committee on Energy and Climate Change, I visited DONG Energy in Ramsgate and saw the scale of the London array and some of the areas down in the Thames estuary, where large-scale wind development has taken place. We flew over the developments to see their scale, and we took advantage of the opportunity to fly over the Olympic village when we came in to land in central London. The sheer scale needs to be close to a working port, and those ports need the necessary infrastructure.

Following decisions by the previous Labour Government, north Wales has great potential for offshore wind. Gwynt y Môr, which I think will be the largest site in Europe, is under construction by RWE npower and its partners. On completion, Gwynt y Môr will have an output of some 576 MW. Gwynt y Môr is close to the already-developed North Hoyle and Rhyl Flats offshore wind farms, which are a major hub for wind and renewable resources.

[Jim Shannon]

I thank the hon. Gentleman for giving way again in this important debate. Will he indicate how councils and the Welsh Assembly came to terms with how offshore wind generation affects the fishing industry? Some locations in Northern Ireland are coming up shortly, and one of the great issues for us is how they will affect the fishing industry on the north coast of Antrim and in my constituency of Strangford. How did the Welsh Government address that issue to ensure that the fishing sector can continue?

[Albert Owen]

I cannot speak for the Welsh Government, but I can speak for myself. I am an ex-seafarer, so I understand some of the conditions at sea, and navigation is affected, as well as fishing. I respect that, but the consultations we have had in north Wales, and will have on future developments, contain important environmental impact studies. The marine environment is taken very seriously, and wind is sensitive. Oil is being drilled in the North sea, and I think wind generation is less intrusive than some of those projects. We have to get the balance right, but the impact has been taken seriously. If we are serious about developing renewable resources, we have to use them wisely. Wind is abundant in north-west Britain and north-east Northern Ireland, so we have to go ahead, but it is a sensitive issue.

As I was saying about Gwynt y Môr and the other already-developed offshore wind farms, the Celtic array is a round 3 Irish sea project, and I want to focus the Minister’s mind on that because of its sheer scale. As he may know, the Celtic array is a joint venture between Centrica and DONG Energy that will have the capacity to produce 2.2 GW and will service an estimated 1.7 million homes. The Celtic array will be located 19 km off the north-east coast of Anglesey, 34 km off the Isle of Man and very close to the coastlines of Northern Ireland and north-west England. Depending on the turbines that are chosen—this is important because technology is moving fast—there will be between 150 and 400 of them, and if the technology continues to develop in the same way, they might produce 6 MW each. So the turbines will be huge. The Celtic array includes array cables, export cables and substations located offshore, where they will be less intrusive. The connection to the grid, which is expected to be in Anglesey, will be made with a few cables, rather than the large amount of infrastructure that is needed for onshore in coastal areas that many people oppose.

Gwynt y Môr has already created jobs, and I want to highlight a number of them, because they represent a significant investment. Holyhead-based Turbine Transfers, which is a subsidiary of Holyhead Towing, has been awarded a £10 million contract to provide transfer vessels that will operate from the port of Mostyn in the constituency of my right hon. Friend the Member for Delyn (Mr Hanson). That is a local company with an international reputation founded by an entrepreneurial family, and it will benefit from the investment, which could bring more than £80 million and much-needed jobs to the Welsh economy.

Looking forward to the Celtic array, we need bigger infrastructure, bigger vessels and bigger port capacity. I will deal specifically with the port of Holyhead in my constituency, as it is the largest seaport on the western seaboard and, as a natural deep-water harbour, it has huge potential. I was disappointed by this Government’s decision, after the previous Chancellor’s announcement that £60 million would be set aside for essential port development so that—I stress this—United Kingdom ports could benefit. That was a missing link. We have manufacturing on land and generation offshore, but bringing them together needs port development, and the £60 million was set aside for that purpose. In October 2010, the coalition Government decided to make the moneys available to English ports only, with the Barnett consequential going to Wales and other nations of the United Kingdom. That put Wales at a serious disadvantage, because the consequential for the whole of Wales is about £3 million. Anybody who understands port development knows that that is a small drop in the ocean, so this seriously undermines Wales’s potential to develop.

The irony, reading the statement from the Department of Energy and Climate Change, is that much of the money allocated to English ports remains unspent. I ask the Minister, in his own joking manner, to pass it over to Wales as quickly as possible if he can. My serious point is that he should go back to Government, argue the case that the United Kingdom ports remain a reserved responsibility of the UK Government, get a grip on the situation and, from this Westminster Parliament, help Welsh ports. That is what we are here for: to represent the views of our Welsh constituents. We are losing out as a consequence of that decision, and it is unfair. As the new Secretary of State said in a response to me, if the Welsh Assembly Government were funding this, the money would have to be drawn from education and health budgets, which would be unfair. The money was originally intended for UK ports. UK ports are a reserved matter and this should be done fairly.

[Glyn Davies]

I have a great deal of sympathy with what the hon. Gentleman is saying, but on a point of clarity it is important to understand how the devolution settlement works and how Members such as me can help the cause by addressing the matter in the context of the constitutional position, so that we know what we can do, rather than just stating opinions.

[Albert Owen]

Constitutional issues have their place, but it is clear that ports are a reserved UK matter—I have worked with previous UK Governments on developing ports in my constituency—so the Government should take responsibility and treat all UK ports the same. We are not asking for anything extra in Wales; we are asking for a level playing field so that Welsh ports can develop and, importantly, benefit the whole United Kingdom. If the development goes ahead and north-west Wales has port infrastructure, that will help the energy needs of the whole United Kingdom.

I move briefly to tackle head-on some of the criticisms of wind energy. Intermittency is an issue. Just as we need base load electricity at peak times for industry and domestic use, we also have off-peak periods. If hon. Members can remember the long hot summers we used to have, we needed to cut off much of our electricity generation during those times. Wind is an excellent resource in that respect, because turbines can be switched off easily. It is both costly and difficult to turn off a gas-fired, coal-fired or nuclear power station. We need the flexibility that wind and other renewables give us for the future. Of course, on long, cold winter days when the wind is not blowing, we need base load at full capacity, but the other side of the coin appears when we have warm weather.

The economics of wind are also controversial. In response to the mini-inquiry by the Select Committee on Energy and Climate Change on the economics of wind power, DECC gave some interesting figures. Two large companies undertook research on DECC’s behalf, levelising the cost per megawatt-hour of the different technologies for producing electricity. Nuclear was by far the cheapest, but wind was considerably higher. I have the figures in front of me; they give costs looking forward to new technologies that may or may not develop in future. Nuclear costs £60 to £80 per MWh, compared with some £94 per MWh for onshore wind and £110 per MWh for offshore wind. Clean coal and gas using carbon capture and storage cost some £100 to £150 per MWh.

We need to develop those technologies to make them more efficient. Logically, if we can improve gas, coal and nuclear, we can improve our wind technology as well. I have seen some of the new turbines that are being developed. They run for longer, are more efficient and need less maintenance, so we can reduce costs.

Subsidy is not a dirty word to me. Most energy generation in most countries has had some form of subsidy, and emerging gas in this country was 100% subsidised by the taxpayer when it came into effect. I do not feel that we should not subsidise new technologies, although I think that the Government are right to move subsidy under the renewables obligation from onshore wind to offshore, now that onshore is established, to make offshore wind more competitive.

[Ian Lucas]

It is critical to emphasise, because it is not emphasised often enough, that the UK is in the vanguard of offshore wind technology. We must press forward with it. We need to consider the support and assistance given to companies such as Prysmian Cables in my constituency, which has created jobs as a result of the investment in offshore wind. That needs to be factored into the equation when we assess whether to invest further.

[Albert Owen]

My hon. Friend is absolutely right.

Moving on to the additional costs of renewables, one controversial point is the impact of renewable energy on household bills, and on business bills. We talk, rightly, about protecting the consumer, but a lot of British businesses are suffering from the high cost of energy. According to DECC’s estimate, as recently as 2011, public policies, including environmentally friendly subsidies to renewables, comprised about 7% of our bills. The Committee on Climate Change projects that costs might rise as much as 33% before 2020. Of that, two thirds will be contributed by the rising price of fossil fuels and one third by the cost of renewables. I want to put that in a proper context for the future. Yes, there is a cost in moving towards renewables, but there will also be a huge cost if we do not, given the rising price of fossil fuels.

As my hon. Friend the Member for Wrexham said, we must also consider the pluses of investing in wind generation and renewables. As he pointed out in his example, the socio-economic benefits to the north Wales region, and across the United Kingdom, would be huge. RenewableUK estimates that by 2022, the United Kingdom’s offshore wind industry will generate some £60 billion in gross value added, supporting some 45,000 jobs. Other estimates are even higher—as high as 0.4% of UK GDP and more than 90,000 jobs. That is the potential. This debate is about focusing attention on what has been achieved and on the potential for the future. Regions such as north Wales can benefit because of their natural resources, deep-water harbours and skills base.

The Celtic array project is not that far away, Minister, and we need to get this right. We need to get the port development right. We need to increase our skills base. We need stability, so that companies from all over the United Kingdom and beyond have the confidence to invest in our country. I support wind generation on the north Wales coast. It harnesses the benefits for the region. It will have benefits for the north of Ireland, the north-west of Britain and other parts of the United Kingdom, too. Governments at all levels need to work together. I urge the Minister, in the first few weeks in his job, to contact the Welsh Government—the First Minister is responsible for energy matters—and discuss these issues, so that Wales can have the benefits that it deserves for the future.

Wind energy is simply about turning wind into electricity, but we need to generate real jobs, too. We are on the right track—a few years of stable government has given investors what they need. There are concerns now, and I hope that the Minister will address them in his winding-up speech. I will allow other hon. Members their opportunity to discuss what I think is an exciting future, with north-west Wales playing a big part in the low-carbon economy that we all want to build, and the UK being a world leader in that economy.

10:00

[Mr David Hanson (Delyn) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Alan. I thank my hon. Friend the Member for Ynys Môn (Albert Owen) for bringing this agenda to the Chamber. It is extremely important to focus on how we grow wind energy in north Wales, and it is significant that every Labour MP representing constituencies in north Wales is here to lend their support to my hon. Friend.

Wind energy is significant for three reasons. First, it contributes to the green energy needs of our communities at a time of diminishing coal, gas and other resources. Secondly, it is an important engine of economic growth, as can be witnessed by what has happened in north Wales. Thirdly, there is a community benefit associated with economic and green developments that helps to regenerate other areas of our community in a positive way. I wish to speak briefly on all three points.

I am proud that the previous Labour Government generated, supported and encouraged the development of offshore wind farms in my part of the world. Wind farms were developed because the Department of Energy and Climate Change, and previous Departments with responsibility for energy, took an interest, campaigned strongly and worked with the Welsh Assembly Government to attract business. I seek an assurance from the Minister that there will be that level of commitment in the future.

On the contribution to green energy needs, I place on the record two particular facts. The Rhyl Flats and North Hoyle developments will generate 240 MW of electricity, which is sufficient for the energy needs of 200,000 homes. The Gwynt y Môr development will provide 576 MW of electricity, which is sufficient for the energy needs of 400,000 homes. Those are significant developments. As my hon. Friend the Member for Ynys Môn mentioned, the Gwynt y Môr development is the largest of its kind in the United Kingdom, and it is approaching the size of major European developments. Those green energy needs are being met.

No more than 15 years ago, during the time I have been a Member of Parliament, there was a colliery at Point of Ayr in my constituency that employed 1,200 people, producing coal and material that was used for energy. The colliery is no longer there, people are not employed and coal is not produced, and yet not two miles from that site there is now the potential to create alternative energy using natural resources on a renewable basis—a positive development that we should be seeking to encourage.

As my hon. Friend the Member for Ynys Môn mentioned, green energy jobs are important contributors to the economy of north Wales—not just in Holyhead in his constituency, and not just in the development of the offshore wind farms themselves. Mostyn docks is in my constituency. In the past decade, the port of Mostyn has had to face significant challenges. It had a roll-on/roll-off ferry service to Northern Ireland. It supports the development of Airbus from the major economic factory in the constituency of my hon. Friend the Member for Alyn and Deeside (Mark Tami), where wings are made, produced and then exported via the docks.

In the past 10 to 15 years, the Mostyn dock development has diversified significantly to try to attract wind energy and enable the manufacture and construction of wind turbines. In the past few years, thanks to investment in offshore wind energy, the construction of six Irish sea offshore wind farms at North Hoyle, Burbo Bank, Robin Rigg, Rhyl Flats, Walney 1 and Walney 2 has led to a real expansion in the services provided at Mostyn docks. That is good news for the green energy sector and good news for employment in my constituency.

The Gwynt y Môr offshore wind development was mentioned earlier. That will now be based at the port of Mostyn in north Wales. The 160 turbines that will be installed offshore from north Wales will be assembled at the port of Mostyn in Flintshire. Mostyn will also benefit from the construction of an operations and maintenance base for the existing wind farms in Liverpool bay, North Hoyle, Rhyl Flats and, once complete, Gwynt y Môr.

In my constituency, where jobs in the old mining industry were lost, at least 100 long-term, skilled engineering jobs will be created in the port to staff the servicing of those facilities. On top of that, the actual construction of the facilities will see approximately 120 new jobs on site during the construction phase—a big boost to the local economy.

The £50 million lease and investment into port of Mostyn is Gwynt y Môr’s highest value long-term contract awarded to a company in Wales. That reinforces the company’s commitment to the port of Mostyn and investing in north Wales. It also underpins the work that the port of Mostyn is doing in exporting wings from the Airbus manufacturing site at Broughton in the constituency of my hon. Friend the Member for Alyn and Deeside. The port has had to diversify and bring in wind energy, but green energy is providing sufficient resource and employment to ensure that we can maintain development. As my hon. Friend knows, if the wings were not exported via Mostyn docks, and if that were the sole business, that would have a severe impact on the ability of Broughton to manufacture aircraft wings.

[Mark Tami]

I was about to make that very point. If Mostyn had been unable to expand into other areas, the whole cost would effectively have fallen on to Airbus, because that is the route that the A380 wings take. There would not be a feasible alternative route, and that would impinge on whether the work was at that factory.

[Mr Hanson]

Green energy supports the manufacturing, construction and development base at port of Mostyn, and that underpins not just the energy sector in north Wales, but a wide range of other manufacturing industries, too. The 100-plus new jobs will also contribute more spending into the economy in north Wales. There will be a big impact on the economic base of our area.

The third issue I mentioned is the community benefit. I am sure my hon. Friend the Member for Vale of Clwyd (Chris Ruane)—[Interruption.] We have just had a boundary review and we are trying to work out where the boundaries are. I am sure my hon. Friend will speak about community benefits as well, but Gwynt y Môr will invest £20 million in local communities over the lifetime of the contract. The Rhyl Flats community fund is investing resources in Conwy and Rhyl. The North Hoyle partnership has funds linked to Denbighshire coastal partnership, including money for my constituency, too.

[Mark Tami]

Does my right hon. Friend agree that, while that is very welcome, we still have a long way to go to catch up with countries such as France, which has areas that try to bid for these projects, whether nuclear power, wind or whatever, because there are great incentives—cheaper electricity, or some other payback? While there is some good stuff coming, we still have some way to go to get the issue moving.

[Mr Hanson]

I agree. This is a start, but it is a contributor to community benefits, which I want to spread wider than just the boroughs of Conwy and Denbighshire; boroughs in Flintshire in our area have an impact on economic activity in a negative as well as a positive way in respect of the development of wind farms.

Wind farms in north Wales are positive for the green economy, our local economy and the community. I have three requests to make of the Minister. First, I hope that he recognises, gives credit to and celebrates the fact that the industry is developing and flourishing in our area. I say that not to cause a political row between us, but to get consensus in the Chamber and with the Assembly on these matters.

The Secretary of State for Wales wrote a blog in 2009, when the Gwynt y Môr wind farm was being developed, under the headline, “Well done, Conwy”:

“I was extremely pleased and relieved to hear that Conwy County Councillors today resolved to seek counsel’s opinion on the merits of an application for judicial review of the decision to grant consent for the development of the proposed Gwynt y Môr wind farm.”

I could quote three or four other blogs from the Secretary of State, expressing a mild cynicism about the benefits of wind farms appearing in north Wales, including for its economy. I do not wish to cause the Minister any difficulty, but I genuinely want him to give words of comfort and encouragement and to say that his Government, of whom he and the Secretary of State are part, are committed to helping develop these industries in our area.

[Albert Owen]

My right hon. Friend is right to raise the issue of the Secretary of State’s previous remarks, although I am sure that the right hon. Gentleman is now in line with Government policy. The Secretary of State mentioned the negative impact that offshore wind farms would have on tourism. However, the opposite is the case, if anything. The chair of the association for north Wales tourism has said that the new development of Gwynt y Môr, and others, would not impact on tourism at all. So people who understand the industry are saying that there would be no negative impact as a result of offshore development in north Wales.

[Mr Hanson]

I am grateful for my hon. Friend’s intervention. I represent places such as Talacre and Gronant, at the north end of my constituency, where holiday activity goes on undiminished by the wind farms in those areas. I want to get recognition from the Minister that the Government are committed to helping develop these important industries.

Secondly, we need the Minister to provide certainty about certain matters, because that is important in the context of the forthcoming Energy Bill. For the moment, there is the question of long-term contracts for difference to support renewable and low-carbon energy, guaranteed by fixed prices for output. We need clarity from the Government on the allocation process for contracts for difference. We need the Government to give certainty to the industry about timetables, including on targets for decarbonisation, so that long-term investment by wind farm developers can be considered not just in the context of the previous Government or this Government, but of any future Government, who will have to make long-term financial decisions. Cross-party consensus on the need for developing this industry, if I can get it, will help give that certainty.

Thirdly, I want to throw into the mix the fact that at Mostyn docks and in the offshore developments, we are assembling material constructed and built elsewhere. The Swedes—the Scandinavians—are masters at the production of wind-farm technology. We have probably missed the chance now, although we in the previous Government pressed to do it. The Minister should cast an eye gently on what we can do to help encourage UK-based manufacture and development skills. It is great to assemble at Mostyn docks and to have the skills offshore, but ultimately we are missing a trick if we do not consider the potential for future manufacture and technology development in our country.

I ask the Minister for confidence and certainty, to look at manufacturing and to please help support this industry, which really does create jobs in our area.

10:15

[Glyn Davies (Montgomeryshire) (Con)]

I had not planned to speak, but the issue is of such incredible interest to me that I felt that I had to. I congratulate the hon. Member for Ynys Môn (Albert Owen) on securing such an important debate and on speaking for half an hour and uttering hardly a word with which I disagreed. That is something of an achievement.

I have always thought of myself as living in mid-Wales, so I am conscious that I am contributing to a debate that is about north Wales. However, if the new boundaries go through, my house will be in Denbigh and north Montgomeryshire, so I consider myself, as of yesterday, a potential north Walian, which allows me a degree of credibility in this debate.

I have had a particular interest in onshore wind since 2005 and people from all over Britain have written to me about it, including several from Ynys Môn, although I have written back to say that I am not the Member for Ynys Môn, so, clearly, I have not followed up all the issues. Because of that, I understand that the issue is not just for my constituency and perhaps slightly more widely in mid-Wales, but affects many other parts of Britain. A lot of people are writing from Scotland now, deeply concerned. I am concerned about the same issue and I want to contribute to the debate because I want the new Minister to know the sheer strength of feeling in certain parts of Britain about onshore wind.

Before 2005, I would have thought of myself as a supporter of renewable energy in all its forms; there was no issue for me. Indeed, in Montgomeryshire we had several onshore wind farms and I had not expressed any particular opposition to those, because if they are limited in number they do not have a huge impact on the environment. However, a plan for a scheme suddenly emerged from the Welsh Assembly Government, as they were called—they are now called the Welsh Government—that identified an area of mid-Wales to be designated for a huge development of a dedicated 400 kW line that would probably be about 35 miles long. That might be fine in some parts of the country, but this would go up a narrow valley, right into the heart of mid-Wales—my constituency—and because this is a dedicated line it inevitably means that there would be, depending on the size of the turbines, perhaps 500 to 700 turbines in a relatively small, beautiful area of Britain. There are five applications now, which it was announced yesterday are going to a joint appeal later on.

We have to be careful about considering developing onshore wind in beautiful parts of Britain. Huge damage could be caused for little benefit. I am concerned about, and want the Minister to look at, the aesthetic impact of onshore wind turbines in large scale and great density, because that should be a material consideration in how we deal with such developments. We should not just look at the figures, because we know that offshore wind, for example, is more expensive to develop than onshore wind.

By taking offshore wind seriously, we will stand a much better chance of bringing its cost down to where it becomes competitive with onshore wind.

[Albert Owen]

The hon. Gentleman mentioned the problem in his area, which I understand—I have debated the matter with him several times—but will he provide some solutions and talk about how his community is developing things such as biomass, geothermal and various other sources of energy, rather than just attacking the onshore wind developments? Can he come up with some solutions, because his area will need electricity in future and will need to generate its own electricity?

[Glyn Davies]

The hon. Gentleman is absolutely right. There are various alternatives coming through, and I would give support to all of them. Developing renewable energy and moving forward to meet climate change targets often involves intrusive developments, and we have to put up with them, but I am concerned about the scale of the project. We cannot afford to be overly balanced in our comments if we are talking about making an impact at British level. One issue dominates in most constituencies, but definitely for me, and I stick at it, repeating things again and again. The Minister will become sick of it; he has been in the job only for a while, but his predecessor must have been sick of me. Every chance I get, I shall hammer home the fact that the operation of one of our policies is destined to desecrate my constituency. My duty to my constituency is to try to stop it.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Member for Ynys Môn (Albert Owen) on securing the debate and apologise for being late, as I was attending a Bill Committee early this morning. I apologise, too, on behalf of my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd), who has just had a knee operation and is out of action, and my hon. Friend the Member for Arfon (Hywel Williams), who is attending a Select Committee this morning.

I share the concerns of the hon. Member for Montgomeryshire (Glyn Davies) about technical advice note 8 and that policy needs to be revised. My biggest concern about TAN 8 and our planning process is that some developments are determined by the UK Government and some by the Welsh Government, based on the arbitrary level of 50 MW. I have two TAN 8 areas, one being area G in Brechfa, where there will be four or five different developments. They are all being determined individually, although the impact on people’s lives is cumulative. Should not all those developments be determined together, rather than individually?

[Glyn Davies]

That is a difficult intervention for me to respond to, although I will, because for several years I would have been supportive of the very point that he makes, which is about devolving responsibility for large-scale wind farms to the National Assembly. The reality, however, is that the policy and attitude in the Assembly and among the Welsh Government are such that I have said publicly that I would not support that policy now if I were to stand here for 100 years, simply because they are so determined to drive forward.

I was making a short speech, and Opposition Members have been looking at their watches, so I feel that I have contributed sufficiently. Thank you for the opportunity to speak, Sir Alan. I shall now allow others to contribute.

10:19

[Susan Elan Jones (Clwyd South) (Lab)]

It is a great pleasure to serve under your chairmanship, Sir Alan, and to speak after my right hon. Friend the Member for Delyn (Mr Hanson) and the hon. Member for Montgomeryshire (Glyn Davies), who I am delighted is an honorary north Walian for the morning—that is excellent, we always welcome tourists.

I place on record my thanks to my hon. Friend the Member for Ynys Môn (Albert Owen) for securing this important debate. He follows in the footsteps of other great Welsh radicals such as Megan Lloyd George and Cledwyn Hughes in representing north Wales’s great island constituency. He is a great expert on energy with a passion for the low-carbon economy and a deep concern for how we can best meet the energy needs of our nation.

What has been encouraging this morning is to hear that we are not nimbys, that we support green energy and that we have a passion for low carbon throughout the UK but especially in our area of north Wales. We are passionate for the introduction of further renewable energy in the UK as a whole, including north Wales, and more wind energy, on and offshore, must be part of the mix. We in the House urgently need to support moves to encourage better, cleaner energy production, and it must be our task to promote the development of low-carbon energy in whatever way possible. If we are to do that sensibly and in a long-term and sustainable way, we must be careful about how energy policies are achieved and mindful of our choices when beginning new projects.

Let me share an example from my constituency, a proposal that even the writers of the most outlandish science fiction films could not have come up with. Imagine a designated area of outstanding national beauty—the Clwydian range and Dee valley—and then imagine plans for onshore wind turbines to be placed just outside it. That is the Mynydd Mynyllod wind farm proposal: 25 turbines, each 145 metres tall, at the foot of the Berwyn mountains. They would be placed in a non-TAN 8 area, an area not specifically designated for wind farms, and would each stand one and a half times the height of Big Ben.

It is encouraging to hear in the debate and throughout the House the support and the passion of the support for wind energy, but most Members would not therefore suggest, as a logical consequence, that wind farms can be sited absolutely everywhere—not, I suggest, at the side of Westminster abbey and perhaps not on the dome of St Paul’s cathedral or even on the humble and rather unremarkable piece of grass outside that is College green. Why therefore the double standard that allows turbines to be placed right by the Clwydian range and Dee valley area of outstanding national beauty? There is a great debate about whether wind turbines are beautiful—that is probably in the eye of beholder—but just as one would never place a large mural replicating Picasso next to Big Ben, it surely cannot be appropriate to site 25 wind turbines each of 475 feet on the outskirts of one of Wales’s and, indeed, Britain’s most beautiful natural areas, as evidenced by the AONB status.

To tackle climate change effectively, the Government need to harness intelligent, renewable forms of energy, and wind farms need to be part of the overall proposals to make such positive changes. Let us be creative and innovative, and look at better places for new developments and not simply site them without reference to their surroundings. The action group STEMM—Stop the Exploitation of Mynydd Mynyllod—rightly notes that the effect of the turbines at Mynydd Mynyllod would extend far beyond local residents, affecting visitor numbers, hotels and bed and breakfasts, and the numbers at local campsites and caravan parks, putting our precious and often precarious rural economy at risk. That is why hundreds of people have spoken out against the proposals and the recently added plans for further turbines in nearby Llandrillo. That is why I am pleased to support the campaign.

[Jonathan Edwards]

The First Minister of Wales—a member of the hon. Lady’s party—recently stated that he was in favour of full devolution of all energy powers. Last spring, I introduced a Bill to achieve that aim, but the hon. Lady and her colleagues marched through the No Lobby with the Tories. Where does she stand now?

[Susan Elan Jones]

I wondered whether the hon. Gentleman might be making his intervention to support Tal Michael in the North Wales police area, which seems to be a popular thing for his colleagues to do. The whole issue of energy is complex. Many of the major decisions will involve both Governments and we have to have that discussion, so what the First Minister has to say is worthy of debate. Let us have that discussion, because we will stand up for Wales, while the hon. Gentleman’s party will sell it down the river to a poorer future.

To return to my text, the great 19th century Welsh poet Ceiriog, who lived in another beautiful part of my constituency, wrote the famous poem “Aros Mae’r Mynyddoedd Mawr”, often translated as “Still the mighty mountains stand”. Those mountains of the Clwydian range stand and wait for all those who love and appreciate our uniquely beautiful landscape in north Wales. One thing I am pretty certain about, however, is that what they do not stand for is gigantic wind turbines, which, if situated there, would destroy the natural environment and profoundly alter the character and the economy of the area. The proposal needs to go back to the drawing board, and unless it is radically altered and more sensible geographical alternatives are considered, that is where it should stay.

10:28

[Chris Ruane (Vale of Clwyd) (Lab)]

I congratulate my hon. Friend the Member for Ynys Môn (Albert Owen) on securing the debate. The six north Wales Labour Members who have been in attendance today met six weeks ago and decided to put in for the debate en bloc. My hon. Friend secured it, and we have come out in force today to support him. [Interruption.] As he correctly points out, it is his idea and his debate, so we are present to support him.

About nine years ago, I was approached by RWE npower renewables and asked to support the erection of 30 turbines off the coast of my constituency—the North Hoyle turbines. I looked at the situation, listened with care and agreed to support that. The company listened carefully. I asked it how many jobs would be created, and it said only seven in the first instance, most of which would be filled from Scotland, which has deep-water expertise. I asked it to connect with the coastal communities by putting together a fund. It was probably going to do that anyway, but it did so with style. It allocated £30,000 a year to Prestatyn and £30,000 a year to Rhyl. When the Rhyl Flats turbines were switched on just five or six miles down the coast, I again asked for funding for Rhyl and Prestatyn, but it said no. When I asked again, it said yes to Rhyl with an extra £15,000, but no to Prestatyn.

The company has connected with those coastal communities through those funds. The fund proposed for Gwynt y Môr is £19 million over 25 years, which is considerable. We live in a convergence area that was a European objective 1 area. I am asking RWE npower renewables whether that £19 million can be clean money to multiply up to perhaps £100 million as match funding for European structural funds. That could have a huge impact on the coastal communities, many of which, such as Rhyl, Prestatyn and Colwyn Bay, are suffering. The insolvency figures for last year came out on Monday, and five of the top towns for insolvency in the UK are seaside towns, two of them in my constituency. An investment of tens of millions of pounds over the next 10 or 20 years could have a big impact in those coastal communities. It has had an impact so far, and it will have an impact in future.

I turn to the politics. When I switched on the North Hoyle lights about six years ago, the Prime Minister, who was then Leader of the Opposition, was in north Wales at Llandudno for the Tory party conference. He referred to the turbines and called them giant bird blenders. We all know that he then went on to hug a husky at the north pole and said how important environmental credentials are for the Conservative party, but he was facing both ways at the same time, and that was echoed by his Tory Welsh Assembly Members. The Tory AM for Aberconwy, Janet Finch-Saunders, said that the Gwynt y Môr project will damage tourism in north Wales and is viable only with massive Government subsidies for renewables.

Political careers were built in north Wales on the back of opposition to offshore wind farms off the coast of north Wales, and it is interesting that the hon. Member for Aberconwy (Guto Bebb) and the Secretary of State for Wales, the right hon. Member for Clwyd West (Mr Jones) are not here today, because I believe that opposition to wind farms helped to build their political careers. That opposition continues at a high political level. The Chancellor referred to supporters of renewables as the “environmental Taliban”, comparing us with Taliban terrorists who shoot 14-year-old girls in the head for standing up for education. That is the level of debate, the terminology and the lexicon that is being used by leaders of the Tory party, and there is no escaping that. However, I make an honourable exception of councillors in Prestatyn in my constituency, many of whom were Conservatives, but stood up, supported wind farms, and went against the flow, and they should be commended for supporting the North Hoyle and Rhyl Flats wind farms.

I move on to a less party political point. Offshore wind farms will make a big difference in my community to tourism and job creation. If RWE npower renewables is tied in with our further education and higher education sectors in north Wales, that could make north Wales a world base for renewable energy, and we could exploit our expertise around the world. When countries are considering offshore renewables, north Wales and the north-west could be the first port of call.

The vision for the future is exciting. The finance is available from the green investment bank and 20 other independent and private sector banks and from the European Investment Bank. The future is bright for renewables in north Wales, and I ask the Minister to respond positively and to go against his leadership and support Labour MPs in north Wales; and I ask MPs generally to ensure that renewable offshore wind is a key component of the British energy market.

10:34

[Nia Griffith (Llanelli) (Lab)]

I congratulate my hon. Friend the Member for Ynys Môn (Albert Owen) on securing this important debate and, more importantly, on his unstinting efforts to develop a range of energy resources on Anglesey. He has made enormous efforts to harness its unique combination of resources and location to generate electricity and provide much-needed jobs. He recognises that it is never easy to attract new industry and jobs, but the problem is being exacerbated by the Government’s uncertainty and dithering, their lack of a clear industrial strategy, and their tendency to respond with knee-jerk reactions, instead of working with the industry.

My hon. Friend has recognised the unique potential of north Wales to provide energy for the future, whether using marine currents around the coast or the wind to generate electricity. North Wales is well provided with natural resources, which enables it to make a significant contribution to our energy needs while generating much-needed local jobs, using the skill base to which he referred.

The UK is extremely well endowed with wind resource. It certainly has the best resource in Europe, and some estimates suggest that the UK has 40% of Europe’s potential wind power. The north Wales coast certainly has its fair share. To make a success of that renewable energy potential, we need a Government who are wholeheartedly behind the industry, and what industry wants above all else is certainty, consistency and clarity. To make long-term investments, industry needs to know that the Government are not going to move the goal posts.

We understand why the Government make industry nervous. Last year, we saw the utterly disgraceful fiasco of the unilateral cuts in feed-in tariffs. People in the industry understood that the tariffs would be gradually tapered downwards, but, preposterously, the Government suddenly imposed a cut, even before the end of the consultation period, leaving businesses racing to install solar panels before deadlines; provoking difficulties in the supply chain, because manufacturers, fearful of being left with redundant stock, ran down production; and leaving out of pocket self-employed plumbers who had risen to the challenge of green energy and forked out on courses to train themselves up in installing solar panels. Housing associations across Wales were forced to abandon plans to provide solar panels that would have benefited local low-income households, and people lost confidence in what community projects would deliver That was all because the Government chose to push the industry over a series of cliff edges, instead of allowing it to progress down a gentle slope.

In the wake of the lack of consultation on feed-in tariffs, the Government, far from reassuring industry that they will consult properly with it in future, are doing the reverse. Not many people know that on the last day before we rose for the summer recess and, predictably, without any consultation, the Government sneaked out an announcement that they are abandoning the long-standing commitment that public consultations should normally last 12 weeks. It is outrageous to suggest that as little as two weeks, and sometimes no consultation at all, is appropriate for decisions that impact on industry, businesses, trade associations, unions, local government and the public.

So there it is, plain for all to see in black and white: the Government are abandoning any pretence at engagement and consultation. That really is a blow to far-sighted industrialists who want to work with the Government to deliver energy infrastructure. Will the Minister assure us that he intends to work with industry, and that he can influence his colleagues in the Department for Business, Innovation and Skills and in the Treasury to provide the certainty that we need for continued investment in offshore wind? We need to ensure not only that the huge investment that goes into offshore wind farms such as the Celtic array benefits the local work force with the work to construct and maintain the wind turbines, but that the conditions are right for the supply chain and the manufacture of components here in the UK. Unfortunately, there is a lack of clarity, and lack of a clear industrial strategy.

A fortnight ago, with other MPs and AMs from south-west Wales, I visited Port Talbot steel works, where Tata has invested £185 million to rebuild a blast furnace, and £55 million to create a gas-cooling system. During our discussion there, we were reminded that when Dr Karl-Ulrich Köhler, head of Tata Europe, had visited the plant in July, he called on the UK Government to take down obstacles to growth. Dr Köhler said that the £240 million investment in Wales showed the company’s commitment, but that Tata needs Ministers to help

“to remove obstacles that are in our way as far as competitiveness is concerned”.

One point Dr Köhler was referring to was the Government’s decision to impose an unrealistically high carbon floor price. That burden on energy-intensive industries is unique to the UK. It is bad enough ever to impose punitively high carbon floor prices on industry, but to do so when steel manufacturers are struggling to fill their order books, because many of their customers are caught up in the Government’s double-dip recession, is utterly stupid.

We all accept that it is difficult for manufacturing industry to compete with countries that have very cheap labour costs or low environmental standards, but the carbon floor price makes us uncompetitive even when compared with other European countries that have similar standards of living and similar environmental standards. The Government should be working with our fellow Europeans on reducing emissions to create a level playing field, not imposing a burden unique to the UK manufacturing sector.

It is all very well for the Department for Business, Innovation and Skills to claim that it has announced a £250 million package for energy-intensive industries, but that will be spread very thinly, and it would have been better if the Government had not imposed such a high carbon floor price in the first place. Karl-Ulrich Köhler also called on the Government to think about their supply chain more strategically—in other words, to ensure that we provide a domestic market for the steel that we produce. The challenge to the Government is what measures they can take to encourage maximum use of UK-manufactured components in the construction of offshore wind farms.

Colleagues in Tata have calculated that offshore wind turbines can use more than 1,000 tonnes of steel and typically use at least six different types of steel, but that some UK offshore wind developments have only 10% UK content, with all the major steel components being imported from outside Europe. Tata estimates that the UK market for offshore wind will be 4 million tonnes of steel by 2020, and through investments in the UK, Tata Steel has indicated a clear intention to be part of that market. All too often, however, new supply chains present a risk to developers, and they tend to prefer current suppliers in Germany and elsewhere, which means that the UK is nowhere near capturing the full economic benefit of those developments. We certainly do not want a repeat of what is happening in Scotland, where the Scottish National party Government are replacing the Forth road bridge at a cost of £790 million and the consortium building the bridge chose to use 37,000 tonnes of Chinese steel to be fabricated in China, Poland and Spain.

In 2011, the Minister’s predecessor said that in taking forward the next stage of offshore wind development we must ensure that the supply chain jobs come to the UK. Therefore, for continued investment in offshore wind and the supply chain, we really need to know that the new Energy Minister is on the side of industry. It is no secret that he has expended considerable energy campaigning against proposed wind farms in his Lincolnshire constituency, and that, back in 2009, he insisted on regional TV:

“Wind turbines are a terrible intrusion in our flat Fenland landscape. Renewable energy needs to pass the twin tests of environmental and economic sustainability and wind power fails on both counts.”

Is he opposed to all wind farms, or only those in his constituency?

How can I describe the attitude of the new Secretary of State for Wales towards wind farms? To call it lukewarm would be very generous indeed. His antipathy to Gwynt y Môr was referred to by my right hon. Friend the Member for Delyn (Mr Hanson), and the Secretary of State is well known for his scathing comments about the Welsh Government’s TAN 8. Back in 2006, he treated the Select Committee on Welsh Affairs to his views on the Rhyl Flats many times over. Now he has said that he wants to work with the Welsh Government, but he will do Wales no good at all if he greets potential investors in offshore wind with a lukewarm approach.

I hope that the new Energy Minister might now be converted to the cause and that he will go out with evangelical enthusiasm to convert our new Secretary of State for Wales. Sadly, however, with the Secretary of State for Environment, Food and Rural Affairs an advocate of shale gas fracking, and the Energy Minister and the Secretary of State for Wales both seemingly wind farm sceptics, potential low-carbon investors could be forgiven for thinking that the Government are boosting support for the oil and gas industry, throwing doubt on how much support there will be for renewables and undermining the Prime Minister’s pledge to be the greenest Government yet.

Small wonder that a fortnight ago we heard that major green businesses sent letters to Ministers. Siemens, Alstom UK, Mitsubishi Power Systems, Areva, Doosan, Gamesa and Vestas, which together employ 17,500 people in the UK energy sector, say that a lack of decision-making and threats to relax environmental targets have caused them to reassess the political risk of investing in the UK. It is serious stuff when such companies are threatening to go elsewhere and we could lose thousands of new jobs. It would be tragic if we lost new investment in renewables simply because the Government are not only dithering, but backtracking on their supposed commitment to a green agenda. In addition, more than 50 companies and non-governmental organisations, including Microsoft, Asda, EDF and Sky, released a similar letter demanding an end to uncertainty over the direction of the UK’s energy policy and the inclusion of a decarbonisation target in the upcoming energy Bill.

The Minister’s predecessor summarised what we need to do in his article for The Observer this weekend, when he said that

“our future can’t depend on gas alone… Energy security can only be delivered with a mix of technologies… Renewables harness the exceptional resources of these islands… Harnessing our low-carbon potential isn’t just right environmentally, but it is a central plank of energy security… But there isn’t much time left. Decisions on where to invest are being made now. Uncertainty and hostility would undermine the UK’s ability to secure the jobs and economic benefits from the supply chain for those new power plants. And if those companies walk away from the UK, it is a permanent loss and we all pay the price.”

To sum up, will the Minister confirm his unreserved support for the development of offshore wind in north Wales, and state whether those investments will enjoy the full support of his colleague, the new Secretary of State for Wales? Assuming that the mixed messages from his Government have not frightened companies off from investing in renewables in north Wales, will he also tell us what policies he will pursue to keep jobs in the supply chain in the UK—jobs in the steel industry and in the various components industries?

10:46

[The Minister of State, Department of Energy and Climate Change (Mr John Hayes)]

I thank the hon. Member for Ynys Môn (Albert Owen) for drawing the House’s attention to this important matter and for securing the debate. His advocacy of the interests of his constituency is a model of good representation. When I entered the Chamber today and saw the array of his Welsh colleagues, I reflected for a moment on what the collective noun for a group of Welsh people is. I thought perhaps a “choir”, a “valley”, or a “Barry John”, but then, given my experience of Wales, I decided that it would be a “charm” of Welsh Members.

I will attempt to respond to the points raised in the short time available to me. The hon. Gentleman began by highlighting four points. He talked about the need for a viable energy mix, and he is right that to maintain energy security and build resilience into the system, we need a mixed range of energy generation. Renewables are an important part of that mix. He mentioned clarity— a point reflected by the hon. Member for Llanelli (Nia Griffith)—and certainty. The Energy Bill will provide precisely that.

If I were a more partisan man, I might say that the Energy Bill should have passed through the House long ago, because we have known for a long time that we need extra resources and to replace the generating resource. Indecision has characterised policy in the past, but let us put that to one side. We now have the chance for a Bill that provides just that clarity and certainty, and just the platform for investment that produces the kind of mixed array of energy generation sought by the hon. Member for Ynys Môn. He also spoke about skills, which are critical.

[Albert Owen]

I am grateful to the Minister for trying to charm Welsh Opposition Members. He mentioned the Energy Bill. I agree that for many decades there should have been greater investment in our infrastructure and that the dash for gas in the ’80s and ’90s was wrong. We are now back to square one, because the gas has run out. Will the Minister clearly tell the House when he expects the Bill to be laid before Parliament, and when we can start debating these issues? It is already a year and a half late, as the Government first announced it 18 months ago.

[Mr Hayes]

I expect it to be laid before Parliament next month, but it would be wrong for me to pitch above my pay grade. The Leader of the House will have a view about the parliamentary timetable, which will of course be agreed through the usual channels.

None the less, we anticipate that the Bill will be laid next month. I hope that we can get on with the business of scrutinising it carefully, ensuring that it is fit for purpose and that we have a largely consensual strategy based on a shared understanding of energy needs and a determination to develop a long-term view about what our energy future should look like. I do not think that there is much difference between the parties in the Chamber today about the fundamentals, but let me highlight some of the areas that need greater clarification—the sort of clarification that the hon. Member for Ynys Môn sought in his opening remarks. Before I do so, however, I want to deal with his point about skills.

The hon. Gentleman talked about the importance of skills in this mix, and he knows—indeed, he mentioned it—that the higher education and further education sectors, in Wales and elsewhere, are playing a key role in providing the skills that are necessary, particularly in the emerging technologies, to make the aim a reality and to provide the jobs that are desirable and the competences necessary to bring about the future that I describe.

The hon. Gentleman raises those issues against a background of change in his constituency; I am thinking of the closure of Wylfa and the associated closure of Anglesey Aluminium, but also of the great success that his constituency has enjoyed in respect of offshore wind. He makes the very important point that to provide secure, affordable, low-carbon energy resources, we have to face up to some of the challenges associated with the development of the offshore wind industry.

Let me be clear: offshore wind remains an important part of Government policy in meeting the objective of providing the mix that the hon. Gentleman suggested was essential, that we certainly believe is vital and that will be underpinned by the provisions of the Energy Bill. Offshore wind is one source of affordable energy. It provides a free and limitless domestic supply of fuel. We have a great deal of resource because we have shallow seas, consistent winds and an increasingly skilled work force who have experience of working offshore.

The challenge—this point was made by a number of hon. Members—is to ensure that the whole of our kingdom gets the most benefit from the investment. That is about the supply chain, I agree; as a direct result of the contribution from the hon. Member for Llanelli, I will look again at what measures we can put in place to ensure that we get maximum benefit, through the supply chain, from these important developments.

Furthermore, we need to provide absolute certainty for those who want to invest. Investment in this sector, because it is an emerging sector, is inevitably a matter that people will consider very carefully. It is not a long-established sector, with all that that means. The technology is relatively new. The scale necessary to drive down costs is only just beginning to emerge. Therefore, the commitment that the Government make to offshore wind is important in signalling to potential investors that they can consider this option without fear of a policy lurch or change.

That is another reason, by the way, why it is important to develop an energy strategy that is consensual—because, of course, policy can change when there is a change of Government or Minister. Governments do not last for ever, and Ministers sometimes last for even less time, so it is very important that a signal is sent out from the House and through what the Government say and do.

The hon. Member for Ynys Môn talked at length about some of the specific impacts on his constituency, but of course there is a specific impact across the whole of Wales. We have heard a great deal about the Gwynt y Môr wind turbine development, which is currently under construction. It has already helped to generate significant economic opportunities and create new jobs in Wales and more widely.

The port of Mostyn will serve as the operations and maintenance base throughout the life of that development. Turbine Transfers, which is based in Anglesey, as the hon. Gentleman knows, will supply transfer vessels and crew. It has already created, I think, 20 new jobs as a result. DRB Group, which is in the constituency of the hon. Member for Alyn and Deeside (Mark Tami), who also contributed to the debate, will provide crane units. Prysmian Cables in Wrexham won an order to provide cables worth some £15 million. Jones Bros of Ruthin won a multi-million pound contract for preparatory groundworks for the building of a substation. A little further south, Mabey Bridge in Chepstow won a contract to provide drill components.

We know that there is a significant supply-chain impact and that that has a real value in terms of jobs and skills, and we should understand the offshore wind industry in that way. This is not simply about the short-term benefits that may arise from a particular development; it is about building an infrastructure, in terms of supply, jobs and skills, that can benefit the whole of Wales and the whole of the kingdom.

Let me say again that we understand that renewables are an important part of that mix and that offshore wind is part of that. However, there are questions to be asked—indeed, they have been asked in this debate by a number of hon. Members, who put their case very well.

Yes, the hon. Member for Ynys Môn is right to say—other hon. Members made this point, too—that costs should fall as scale grows. It is right that we see the support that we give this industry at its beginning as rather different from how it will compete subsequently. That is true across the energy marketplace, by the way. We need to move to a more market-responsive, more competitive energy marketplace, including in the area of renewables.

It is also right, as a number of hon. Members suggested, that community benefit needs to be at the heart of what we do. These things must not be imposed on communities, which must feel a sense of ownership and influence over where they are located. Community benefits need to be considered very seriously. I was delighted that the hon. Member for Vale of Clwyd (Chris Ruane) was able to secure such a benefit for his community. He was right to do so. We have a role to play in that as local constituency MPs. As a Government, we will also do what we can, as I have in the call for evidence on onshore wind. That obliges us to reconsider the benefits that communities attain from that kind of development.

Let me say a few words about onshore wind, because my hon. Friend the Member for Montgomeryshire (Glyn Davies) and the hon. Member for Clwyd South (Susan Elan Jones) raised that issue. I entirely agree that we must see it as being about aesthetics as well as utility. I regard it as almost extraordinary that people can stare at some monstrous concrete structure and tell me that it is beautiful. These are industrial structures. Placing them insensitively, in areas where there is large-scale and understandable opposition to them, has done immense damage to the debate about renewables. I think that we need to settle the onshore wind argument to get on the front foot and have a more positive debate about renewables—of the kind that we have had today. I think that we need a new paradigm in those terms. E. F. Schumacher, who wrote “Small is Beautiful”, a wonderful book, which I am sure you are familiar with, Sir Alan—

[Albert Owen]

Will the Minister give way?

[Mr Hayes]

I have only a minute.

[Albert Owen]

I will be brief.

[Mr Hayes]

If the hon. Gentleman is going to talk about Schumacher, fine.

[Albert Owen]

I am extremely grateful to the Minister for giving way, but I did ask the question initially about port development. Will he work with the Welsh Assembly Government and the port authority of Holyhead to maximise the potential of that port? Will he, as a Minister, come and see it—see the potential for himself?

[Mr Hayes]

How could I resist such an invitation?

[Chris Ruane]

Will the Minister call in at Rhyl on his way up there?

[Mr Hayes]

For a sumptuous Welsh lunch, which the hon. Gentleman will no doubt provide? Of course.

Schumacher said:

“Wisdom demands a new orientation of science and technology toward the organic, the gentle, the elegant and beautiful.”

I associate myself with those remarks. We need to understand the impact of industrial structures in rural communities, and to that end we need a different settlement on community ownership, community engagement and community benefit. However, let me be clear. The Government are firmly committed to the development of UK offshore wind resources. We understand their significance and value. The hon. Member for Ynys Môn has done us all a service in allowing this Chamber to consider that value and that significance in this short debate.

Rail Freight Traffic

Wednesday 24th October 2012 Westminster Hall

11:00

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

I apologise in advance, Sir Alan, because, as you can probably tell, I picked up a rotten cold over the weekend, so my accent is probably even less understandable to hon. Members than it normally is. I will do my best.

It is not possible for me to overemphasise the threat that the proposed swingeing increase in charges for access to the rail network poses to the coal industry. I appreciate that the Office of Rail Regulation is obliged to consult on track access charges ahead of the next contractual period, as has happened twice before, but the last time a rise was proposed—for 2009 to 2014—the ORR subsequently listened to responses from the coal and power industries and ended up cutting charges. It is all the more surprising then that it should now seek to raise charges to the coal industry by a massive 64%. It has proposed introducing an additional freight-specific track access charge to apply to electrical supply industry coal and spent nuclear only, which could increase the cost of Scottish coal delivered to English power stations by £4.50 a tonne.

Apart from causing a further switch from coal to gas and encouraging a modal switch from rail to road, the impact would be catastrophic for Scottish producers, who are already in a precarious position.

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

Does my hon. Friend agree that it seems bizarre when the Government are talking about energy security that the effect of the charge is that we will be more likely to import coal, rather than using coal from our shores?

[Sandra Osborne]

I certainly do agree, and I intend to raise that point later in my speech.

The charge would exclude Scottish-produced coal from the English market, resulting in a reduction in output of up to £3 million tonnes a year and, as my hon. Friend said, its replacement by imports. More than 1,000 direct jobs will be lost in an area of already high unemployment, particularly in the west of Scotland. Even the threat of the proposal is constraining investment, and it is imperative that it is withdrawn immediately.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I assure my hon. Friend that I can understand her Ayrshire accent perfectly well this morning, even though she has a cold. Does she agree that it is concerning that the ORR seems to be suggesting that the electricity coal industry can afford to pay the increases, when there are problems in the industry in Ayrshire and jobs are under threat?

[Sandra Osborne]

Yes, totally. I intend to cover that topic later in my speech.

We are only too aware that the charge is proposed in a context of revenue-raising efforts and cuts across the board. The Government seek to end what they regard as a subsidy to the power industry. I argue that the proposal is ill thought out, counter-productive, at odds with existing Government policy and amounts to a possibly fatal attack on the coal industry, especially in Scotland and my constituency.

I will provide some background to the current position of the coal industry in Scotland. It is well publicised that coal mining in the UK is struggling. Contrary to the statements in the consultation documents about high international coal prices, the reality is that coal prices have fallen by some 30% so far this year. The recent trading announcements from a number of coal industry companies, which show an industry under severe financial pressures, reflect that. Margins are wafer thin and there have already been redundancies in Scotland, including in my constituency. Scottish Coal, for example, is consulting on 100 redundancies on top of a 10% cut in wages for the whole work force—hardly a thriving industry.

An increase of £4.50 a tonne in freight charges for supplies to England will lead to an immediate reduction in output, as high-ratio coals within existing sites are abandoned, with the possibility of some sites closing altogether. The suggested track charge increase could double the cost of coal transport from east Ayrshire to customers in England. That increase will impact heavily on the viability of coal operations in Scotland, with the very real prospect of mine closures. If operations involving the three companies in my constituency close, it will have a devastating impact on employment—direct and indirect.

We, of course, have already experienced the devastation of mine closures in our communities, so we know the results only too well. The area has never really recovered from the closure of deep mining in the ’80s, but open-cast mining has thrown us a lifeline, with well-paid jobs and community benefit. History has shown that local people are prepared to tolerate inconvenience and blight on their landscape, because they know how important the jobs are for every generation.

[Cathy Jamieson]

My hon. Friend has rightly identified that people have been prepared to accept the surface mining open-cast industry in many of our communities. Does she agree that that will be put at risk if coal is transferred back to the roads, rather than transported by rail?

[Sandra Osborne]

Yes, and some of the companies are not in a position to do that, even if they wanted to.

In 2012, 1,196 people are directly employed in open-cast mining in Scotland and 704 in east Ayrshire, which has the greatest number of coal sites in Scotland and the highest number employed in the industry. It produces more coal than any other area in Scotland and that is worth some £9.4 million to the local community. Following the decline of the deep mining sector and the devastation that followed, decline has set in and has been difficult to shift. The area has had consistently higher than average unemployment rates, population decline and trends of low economic activity and a high percentage of jobs in the public and retail sectors and areas of high relative deprivation. I am sure that the Minister gets the picture, but, if not, he is welcome to come to see for himself. The bottom line is that under no circumstances can we afford to lose the relatively secure, well-paid, private sector employment and input to the local community that the open-cast mines bring.

The consultation includes a range of suggested charge increases, but an increase of £4.50 a tonne is forecast. The consultation states that coal producers could absorb that increase in track charges, but no evidence base is presented to support the assertion and it appears to be just an arbitrary statement. Furthermore, the consultation proposes that the coal and the nuclear industries be singled out to be burdened with the increased track charges. A cynical view would be that the ORR sees those industries as a captive market without the ability to revert to road transport.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my hon. Friend accept that there has been an element of price stability in rail freight charges and that organisations and companies, such as Fergusson Group—one of the major suppliers of coal—in my constituency could not have factored in the massive price hike suggested in the consultation?

[Sandra Osborne]

Yes. The regulator has a duty to ensure that companies can anticipate what the price regime will be, so that they can plan.

Figures from the Department of Energy and Climate Change show that coal production in the UK was 17.9 million tonnes in 2011, and Scotland contributed 33% of that, as a part of supplying the UK’s coal-fed electricity generation needs. There are concerns that the consultation proposals are contrary to certain Government policies and, if implemented, could pose a serious threat to not only the coal industry, but the rail freight industry and, in particular, the viability of Scottish coal mines, as I said. Only a few minutes ago, the Freight Transport Association contacted me with its concerns about the potentially devastating impact on rail freight in Scotland.

Coal is a significant and essential component to electricity generation in the UK. It regularly contributes more than 50% of the electricity produced on a winter day and, quite commonly, 40% on a summer day. Against that background, requirements are also imposed by the large plant combustion directive, the industrial emissions directive and electricity market reform. Notwithstanding that, the key electricity market reform drivers are security of supply, affordability of electricity and decarbonisation.

The proposed increase in track charges will threaten the security of indigenous coal production if we accept that the result of such charges will be to shrink the coal market by 5% to 10%, as identified in the consultation. That would damage the secure industry base of coal-generated electricity capacity, which has been consistent at 40% to 50% of the total generation. Given the much longer haul from the mines in Scotland to the English power stations, the adverse consequences of the track charges will be disproportionately felt in Scotland compared with elsewhere in the UK.

On the affordability of electricity, the consultation assumes that the Scottish coal producers will absorb the increased costs. As previously stated, there is no evidence base for such an assumption, and the coal industry is currently under financial pressure. The additional costs will threaten mine viability, given the inevitable switch to gas by generators, and that will impact on price and the security of supply.

In the conclusion to the report “The impact of changes in access charges on the demand for coal”, the ORR consultants acknowledge the threat to Scottish-produced coal by the long-term impact of increased track charges on the development of future open-cast mines in Scotland. However, those concerns do not appear to have made it to the conclusions of the main consultation report. I can only assume that they believe that the Scottish coal industry and more than 1,000 Scottish jobs are expendable. What form of consultation was carried out by NERA—the ORR consultants—to allow the suggestion that the Scottish coal producers can bear the cost of any changes? The fact is that they cannot and will not absorb those extra costs.

The ORR charging regime could detrimentally affect employment and investment in Scotland’s mining sector and typically in economically deprived areas. Have the Scottish Government and relevant local authorities engaged with ORR to assess the potential effect, and will mitigation plans be drawn up should the proposals be implemented?

Would a 10% reduction—the reduction proposed by ORR for freight traffic—in passenger traffic be considered an acceptable result of increased track charges? If not, has ORR discriminated against the coal industry on the basis that it seems to be content to see a decline in real freight traffic?

Assuming a 5% to 10% reduction in UK coal production, there will be a requirement to increase the amount of coal that is imported, which will increase the carbon footprint in transport and probably increase carbon emissions. The transfer of environmental and social impacts overseas is of concern to the UK Government. The report “Securing the future—UK Government sustainable development strategy” states that environmental policy should encompass impacts outside the UK. It says that

“there would be little value in reducing environmental impacts within the UK if the result were merely to displace those impacts overseas.”

Those impacts would include the transport of raw materials into the UK. It is important that the UK makes the most of its indigenous coal assets and recognises that, apart from the important security of supply issue, a domestic minerals industry is the most sustainable way to supply the market.

In the market analysis section of the consultation, there is an acknowledgement that there could be a substantial reduction—up to 25%—in the demand for rail-hauled coal because

“there is scope for reductions in length of haul”.

As coal can only be mined where it exists, it appears to be a clear policy of the ORR to direct electricity generators to import coal via ports to achieve the shorter haul on rail that it alludes to in its analysis, rather than take indigenous UK coal. Owing to the substantially longer haul distances for Scottish mined coal to the English power stations, the track charge proposal can only be seen as a direct attack on the Scottish coal mines.

Furthermore, generators sourcing their coal from overseas will not be able to pass on any increased track charges to international coal producers. Despite all the crocodile tears that we have heard in the past couple of weeks, the only way in which those extra costs can be recovered is through increasing the price of electricity to the consumer. If there is a need substantially to increase coal imports, there is concern over whether there is enough rail-served deep port capacity to cope with the increase.

Carbon capture and storage projects are due to start in 2014. The proposed increase in track charges could seriously damage the prospects of such projects before they start. That would threaten the ability of the UK to build up its indigenous capacity and to be self-sufficient with respect to energy supply. We all know that carbon capture and storage is the way forward for the coal industry in the longer term.

It is clear from the ORR-commissioned reports that a distance-related charge creates significant market distortion. How is that acceptable in competition terms? The Scottish industry has invested tens of millions over recent years. How could this fundamental change in charging policy by the ORR have been reasonably anticipated, and hence the risk of stranded investments avoided?

Has the ORR constructed an economic impact assessment on how the increase in charge would affect the Scottish mining industry, and how will such a charge affect the rural communities in my constitueny? We have already been thrown to the wolves once before.

The coal industry is heavily dependent on a healthy rail freight sector, and any potential threat to it is also a direct threat to the coal industry. The Rail Freight Group issued its initial response to the consultation in a letter to the chief executive of the ORR on 28 May 2012. I note the RFG’s comment about how the ORR chose to balance its duties and whether undue weight was given to the duty to have regard to the funds available to the Secretary of State, perhaps at the expense of the duty to promote the use of the railway for rail traffic, and the duty to enable companies to plan their businesses with reasonable assurance. That concern seems to be backed up with the apparent acceptance by the ORR within the consultation document that a 10% drop in coal-rail traffic as a result of increased track charges is acceptable, without any analysis of the potential impact on the rail freight industry or on the coal industry as an end user.

In a letter to me on 1 October, the Minister stated:

“the Government wishes to facilitate the continuing development of a competitive, efficient and dynamic private sector rail freight industry. We are committed to ensuring that policies and regulations should work to this end and should not create unnecessary transactional costs or other obstacles to the achievement of these objectives and future growth. In an industry where planning and operational decision-making are increasingly devolved, we would wish ORR to have regard to the importance of sustaining efficient and commercially predictable network-wide freight operations when they take decisions about access rights and charging structure.”

Although that may not have been the unequivocal response that I would have liked, it did raise my hopes that the Minister understood what the impact of these proposals would be if they were put into practice.

All my comments show that the consultation has been blinkered. It has not considered the wider strategic effect if the suggested track charges are implemented. The proposed track charge increase appears arbitrary and not supported by any evidence base, as is the comment that the coal industry would be able to absorb such costs. That leads on to the unacceptable conclusion that there will be a reduction of 5% to 10% in coal transport by rail, which is an odd position for the ORR to support, bearing in mind that it has a duty to promote rail use.

If those charges are implemented, they will affect the viability of the UK coal industry, especially in Scotland, with the resultant increase in imports and carbon footprint and loss of employment. The practical effect of the proposals is a direct attack on the coal industry in Scotland and the likely withholding of further investment in the industry. The proposal would also seem to be contrary to other Government policies of indigenous energy generation, security and affordability of supply, employment and sustainable development.

I hope that the Government will agree that the most appropriate way forward is the maintenance of the status quo in respect of the current charging regime. I look forward to the Minister’s response, and I apologise again for my slightly difficult throat.

11:19

[The Minister of State, Department for Transport (Mr Simon Burns)]

Thank you, Sir Alan, for calling me to speak. It is a pleasure to serve under your chairmanship and I congratulate the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne) on securing this debate. I think that all hon. Members taking part in it will join me in wishing her a speedy recovery from her affliction, although it did not seem to impinge in any way on her ability to make her case.

I also give the hon. Lady a commitment. I have just over 10 minutes in which to speak; if I do not deal with all the points she raised in her speech, I will write to her about them.

I will start by making two points that need to be made clear at the outset. First, the framework of charges for both freight and passenger operators is set independently of Government by the Office of Rail Regulation, which, as the hon. Lady knows, is the independent economic regulator for the railways in Great Britain. The ORR establishes the charging framework by means of a periodic review, which also establishes Network Rail’s outputs and funding.

Secondly, the proposals in the ORR’s consultation document are just that—proposals. The ORR has received a number of responses to those proposals, which it is now considering. I understand from the ORR that it intends to publish its decision on whether to introduce a freight-specific charge in its consultation conclusions document, which is to be published next month. I should reiterate that no decisions have been taken yet and that the ORR is aware of the concerns that have been raised by the hon. Lady, other hon. Members and other interested parties.

Given the fact that these are matters for the ORR, it follows that there is a limit to the extent to which it would be appropriate for me to make any comment on them. However, I can explain the steps the Government are taking to promote continuing growth in the rail freight industry.

We support the ORR’s plans to give the freight industry early assurance over the level of access charges by setting a cap on them. It is crucial to any industry’s forward planning that it has a clear indication of what its likely costs will be. The Government wish to facilitate the continuing development of a competitive, efficient and dynamic private sector rail freight industry. We are committed to ensuring that policies and regulations should work to that end and not create unnecessary transactional costs or other obstacles to the achievement of those objectives and future growth.

Although the Department for Transport cannot direct the ORR, we can and do provide guidance on the overall approach that we see as the framework for the ORR’s activities, and we expect the ORR to take that guidance into account in its decision making. For example, in an industry where planning and operational decision making are increasingly devolved, we want the ORR to have regard for the importance of sustaining efficient and commercially predictable network-wide freight operations when it takes decisions about access rights and charging structures.

Of course, as the hon. Lady will realise, it is not only the Westminster Government who provide guidance to the ORR; the Scottish Government provide guidance too. Scottish Ministers have stated that they expect the ORR, in developing the track access charges arrangements for freight operators, to use a mechanism that recognises the impact that freight operators have on the network but maintains the attractiveness of rail to freight customers and is sufficiently adaptable to prevent the outputs of businesses in Scotland from becoming uncompetitive in their key markets.

The Government’s strategy for the railways was set out in the March 2012 Command Paper.

[Sandra Osborne]

Given all that the Minister has said about the position of the Government and of the Scottish Government, is he surprised that the ORR could even think of coming up with this proposal, which is so obviously going to be damaging?

[Mr Burns]

The hon. Lady makes a pertinent point, but I think that she is trying to tempt me. What I said at the beginning of my comments—and this is perfectly valid—is that the ORR has made a number of suggestions and proposals that have been put out to consultation and it will reach conclusions on the right way forward when it makes its announcement in November.

As always in consultation documents, there is a range of options to be considered, some of which will be adopted while others will be discarded. That is part of the consultation process and it is perfectly valid, provided that the ORR considers the responses to the consultation and any guidance and advice that the British Government, the Scottish Government or others give them.

I was referring to the March 2012 Command Paper before the hon. Lady’s intervention. It set out how our passenger and freight railways support the Government’s overall transport vision: by supporting economic growth; by facilitating business, commuting and leisure journeys; by providing a greener transport option than road and aviation; and by relieving congestion on our road network. Among other things, the Command Paper states that there is a strong case for Government to continue providing support for the rail freight industry, to create a level playing field.

The rail network transports approximately 90 million tonnes of goods per year. It is of strategic importance—rail freight delivers more than a quarter of the containerised food, clothes and white goods we use and delivers nearly all the coal for the nation’s electricity generation. It also invests heavily in the provision of its services; there has been about £1.5 billion of private sector investment in rail freight since 1995.

The role of the rail network in the delivery of coal to the electricity supply industry should not be underestimated. In winter, coal-fired electricity generation regularly contributes more than half the country’s daily electricity needs, and even in summer it can commonly provide 40% of the supply.

I know that the Scottish coal producers play an important part in providing coal to power stations in England; more than 60% of their rail deliveries to the electricity supply industry are to English power stations. Clearly, the Scottish coal industry has a keen interest in the ORR consultation and in any determinations that could have an impact on its market, especially when about 78% of the UK power industry’s demand for coal burned by power stations is already met by imports rather than by domestic production—a point that the hon. Lady made very clearly in her speech.

There is a very delicate balancing act to be managed here, between trying on the one hand to ensure that Network Rail can recoup an appropriate share of the infrastructure management costs from the rail operators—the ORR’s proposals would be worth around £50 million a year in additional track access charges—and on the other hand trying to ensure that the charges on individual market sectors are not more than they can realistically absorb.

There are a number of elements to the charges that freight railway operators pay for access to the network: a capacity charge; a traction electricity charge; a fixed charge designed to recover the cost of freight-only lines; and the variable track usage charge that is the subject of this debate.

For the next funding control period starting in 2014, the ORR is proposing to replace the current freight fixed charge with a new charge designed to ensure that freight operators pay a contribution towards Network Rail’s fixed costs that are associated with rail freight. That charge would be levied on rail freight market sectors that have the ability to bear the charge.

The level of the charge, and the different sectors’ ability to pay it, is, as the hon. Lady knows, the basis for the ORR’s initial conclusions, which are at the heart of the consultation launched in May. Those initial conclusions suggest that the charges should be levied not only on electricity supply industry coal and the movement of spent nuclear fuels—as they are now—but on iron ore and other coal movements, and that these charges should be based on rail tonnage and possibly on distance travelled.

There is fierce competition in the logistics market, not only between the various freight operating companies but between the rail freight operators and the road haulage sector. It is also important to remember that whereas the rail sector is expected to pay all the external costs for its mode of transport—the cost of wear and tear on the infrastructure, and the cost of measures to mitigate environmental impacts—that is not currently the case for road transport.

That is one of the reasons why rail freight operators pay only a proportion of the track charges paid by franchised passenger operators. It is also one of the ways in which the Government have been seeking to level the playing field between road and rail. Moreover, it is worth bearing in mind that in control period 4, which covers the period from 2009 to 2014, rail freight benefited from a 29% reduction in its access charges.

As I am now running out of time, I say again that I will write to the hon. Lady on the other points that I had wished to make in response to this debate. However, in conclusion I will just come back to the point that I made at the beginning. The ORR has made its proposals as part of a consultation exercise and it has received a large number of representations. As is the case with any consultation, the ORR will now consider the arguments that have been made in the representations that it has received, in order to review its proposals before it takes further steps.

I assure the hon. Lady that the ORR will give full consideration to all the representations it receives from a wide group of people—from hon. Members, the British Government, the Scottish Government and others—before it publishes its recommendations later this year.

[Sir Alan Meale (in the Chair)]

I thank the Minister and hon. Members for their contributions to the debate. I particularly thank the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne), who secured the debate; I also wish her good health.

11:29

Sitting suspended.

School Governors

Wednesday 24th October 2012 Westminster Hall

[Mrs Anne Main in the Chair]

00:00

[Neil Carmichael (Stroud) (Con)]

It is a great pleasure and honour to serve under your chairmanship, Mrs Main. I also welcome the new Under-Secretary of State for Education, my hon. Friend the hon. Member for South West Norfolk (Elizabeth Truss). This might be her first performance as a Minister here—perhaps not. I am sure she will enjoy this one as much as she may have enjoyed the previous one. She has appeared before the Select Committee on Education and gave a fine performance. I am sure that we are in for a treat.

I asked for this debate because it concerns an important policy that should be deliberated. We need to think how we can adapt the role and recruitment of governors for the challenges ahead in the education system, which is still being reformed, quite rightly.

I want to thank all the governors who govern. We have nearly 300,000 possible governors; there are some vacancies at the moment. They meet regularly, often in relatively difficult circumstances, to deliberate on their schools and education policy. They must be thanked for all that they contribute to their communities and their schools. What I have to say about reforming governors and governance has nothing to do with the devotion of most governors to good practice and to the future of their individual schools.

Lord Hill of Oareford, one of the other Ministers in the Department for Education, said:

“The most important decision-making group in any school is the governing body… Governing bodies should set the overall strategic direction of a school, hold the head teacher to account and have a relentless focus on driving up standards but not get dragged into micromanaging the school or the minutiae of its day-to-day activities.”

[Kevin Brennan (Cardiff West) (Lab)]

I congratulate the hon. Gentleman on securing the debate, and I echo his words on the efforts of school governors. What does he think of the Secretary of State for Education’s description of school governors in his speech last July? He described them as

“Local worthies who see being a governor as a badge of status, not a job of work”.

[Neil Carmichael]

Out of a total number of several hundred thousand governors, there are bound to be some who are not as good as others and some who are there for reasons not necessarily those that we would all expect or salute. As I said, we have to congratulate and thank all governors generally speaking but note that there are bound to be some who do not rise to the challenge.

I return to Lord Hill’s quotation because I shall address the debate in that spirit. I have been a governor—whether I am a local worthy is another matter—in total for about 20 years in various organisations, such as further education colleges and primary and secondary schools, so I do have some experience. I dealt with a difficult situation quite recently where governance had been judged inadequate and the future of the head teacher became an issue. I am no stranger to controversy in school governance, as well the more reasonable activities of a governor.

I managed to persuade the Education Committee to conduct a full-scale inquiry on school governance, and I see that a member of that Committee, my hon. Friend the Member for East Hampshire (Damian Hinds), is here. He will know that I was keen to do that, and I am pleased that we have an inquiry under way and that the first evidence session will take place in January.

I have also established an all-party group on school governance and leadership. The striking thing about that is that every time we have had a meeting we have had standing room only. There clearly is an appetite and interest in governance, governors and the policy around them. We have produced two publications: “Stronger Boards, Better Education” and “Who Governs the Governors?” We draw two significant conclusions from each of them. I will refer to the direction of travel in my remarks. The question of accountability is clearly at the core of who governs the governors. The question of skills versus stakeholders is clearly at the core of the quality of boards. I will set out those issues in more detail in due course.

As I have already said, there are a number of changes in the world of education, and the academies programme is clearly one of the most significant. It has significant implications for governance in several ways. I have referred to accountability, but the fact is that, as schools become more independent from local authorities, we should ask our governing system to fill the vacuum created. That is not an unfortunate vacuum—it is quite deliberate and quite right that schools are more independent and autonomous—but we must have a proper accountability system within schools.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

Might it not have been a good idea, rather than to have had the vacuum and then work out how to fill it, to build the capacity first, so that there was no vacuum to fill? Would that not be a more consistent and sensible way to make public policy?

[Neil Carmichael]

As I have already quoted Lord Hill’s view of governance and as the Education Act 2011 included reference to governance and talked about governors and the membership of governing bodies, that is on the agenda. I am simply saying that we need to think more about it now, but it has not been ignored. That is the key point. The context is the changing role of schools in terms of autonomy and accountability with implications for local authorities.

The next thing we should talk about is the role of Ofsted, which has a significant responsibility to check what governors are up to with regard to the performance of schools. The sad fact is that the chief inspector of schools, Michael Wilshaw, has said that 40% of governing bodies are satisfactory or inadequate. Therefore, 60% are doing a good job, but too many are not doing a good-enough job and some are doing a fairly poor job. We cannot have that because it is inconsistent with our objective of ensuring that all schools are good schools and, as part of that process, that governing bodies play their part.

That brings me to the question of local authorities when schools start to fail. Are they acting quickly enough and do they take bold enough decisions? For example, do they introduce an interim executive board when necessary, or do they wait until it is too late? There is evidence that they do the latter. We need to test that out and be bold enough and courageous enough to admit it. I am pleased that the right hon. Member for Exeter (Mr Bradshaw) is nodding in agreement.

There is no defying the facts, which are that on occasion local authorities do not act swiftly enough. Interim executive boards are quite useful tools. The interesting thing is that when they are introduced they are swift at dealing with some of the problems that they encounter, largely because they have focused skills and are not stakeholder-oriented. They focus on how to make a school better. In my experience, putting in place interim executive boards has produced encouraging results. The kind of governing body that we should consider for all schools in the future should be more like an interim executive board and less like the kind of boards that we sometimes have, which are too big, too cumbersome and too focused on stakeholder situations.

[Anne Marie Morris (Newton Abbot) (Con)]

The concept of a temporary executive board underlines the question of what exactly should be the role of the head teacher—we need clarity on this—which I had always thought to be executive, and the governing body, which I had always thought to be non-executive. In a sense, if we are talking about establishing an executive body, we must question whether the non-executive piece has done the right job. However, I am not sure whether we can equate the work of an executive temporary body with that of the governing body. I am interested to hear about the clarity that we will need between executive and non-executive bodies.

[Neil Carmichael]

That is an interesting question, but what I am trying to sketch out is the nature of the board itself. A board of 20 members and stakeholders, which effectively salutes the status quo and wants the status quo to be maintained, is a different thing from a smaller, more flexible and more responsive board that is charged with the task of improving the school. That is the distinction that I am trying to draw out, and we should have that in mind when we think about future governing bodies.

[Dan Rogerson (North Cornwall) (LD)]

I congratulate the hon. Gentleman on securing this debate and on his work in the all-party group. It is encouraging that such issues are being discussed. I apologise, Mrs Main, that I will not be able to stay for the rest of the debate. We have a Minister appearing before the Environment, Food and Rural Affairs Committee, so I will have to disappear shortly.

On the potential conflict, or clash of ideas, between stakeholder and skills, does the hon. Gentleman not feel that it is possible to stick with some form of stakeholder model but look at how we can ensure that the balance of skills is there as well, so that we cover both perspectives?

[Neil Carmichael]

I thank the hon. Gentleman for his intervention. I hope that he will join the all-party parliamentary group, as we need to replace an officer who is leaving.

[Dan Rogerson]

I have been contacted by Emma Knights from the National Governors Association, who has asked me to do that, and I have replied that I would be happy to do so. I might therefore see more of the hon. Gentleman in the future.

[Neil Carmichael]

I knew that the hon. Gentleman had been approached, which is why I felt at liberty to mention it and to encourage him to participate as vigorously as he obviously will. He is absolutely right about the stakeholder versus skills matter, but I believe that we need more skills and less emphasis on stakeholders. If we have too many stakeholders with vested interests, who are thinking about the status quo and not wanting to upset the apple cart, we are going down the route of not facing up to the big decisions. Governing bodies would be wiser to focus more on skills than on stakeholders, and that is the direction of travel that we should go in. The Government have already relaxed the rules about local authority governors, and we should go further and say, “Look, there is the emphasis on skills rather than the stakeholders.”

I have been the chairman of several governing bodies and a member of many, and I have seen stakeholders represent their groups and their communities extraordinarily well, but they do not necessarily ensure that the tough decisions are made in the school, and that is the distinction that I draw. I am grateful to the hon. Gentleman for putting the spotlight on that.

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

I congratulate my hon. Friend on securing this important debate. I agree with him about ensuring that governors who come on board have those skills, which they can use to hold the head teacher and the rest of the executive to account, but at the moment there are some 30,000 governor vacancies in the country. How do we go about filling them and ensuring that the people who are chosen have the right skills?

[Neil Carmichael]

That is a really good question, to which there are two answers. If you have everything corralled off into stakeholder groups, you are—are you not?—limiting the number of people who you can recruit. By definition, the pool is necessarily smaller. If you say that you must have parent governors or local authority governors—

[Mrs Anne Main (in the Chair)]

Order. I have waited quite a while before saying anything, but may I now issue a gentle reminder to the hon. Gentleman? Quite a few hon. Members seem to be speaking directly to him rather than through the Chair. I have not had any input into this matter, so I advise the hon. Gentleman to direct his comments through the Chair.

[Neil Carmichael]

That is a really important point, Mrs Main. I am suitably chastened.

If a governing body is recruiting from a relatively small pool, it will, by definition, be harder to recruit. That is my first point. My second point is whether we need to have 20 people sitting around the table. Should we not be looking at smaller governing bodies?

Governing bodies should recruit people from outside the education field as well, because it is imperative that schools have a better relationship with businesses, thereby improving career opportunities for their pupils. Part of a governing body’s role is to provide an interface between the school and future employment and further and higher education.

Let me now focus on the role of the chairman and the need for them to be properly trained and, possibly, remunerated. If we want someone who is going to spend quality time with the head teacher and who is able and willing to challenge them and to support them when they are implementing necessary changes, we need someone who has the commitment, the appropriate professional skills and, if necessary, the reward. I want to put on the table now the idea that we should be remunerating people. This is not a new idea, and it has been advanced by others, not least the chief inspector at Ofsted, and we need to consider it very carefully.

Another element of the role of the chair is whether or not they have been formally assessed. We need to introduce a system in which assessment is rigorous. We do not want a few old friends gathering around for a cup of coffee, slapping one another on the back and saying, “Hey, you have done a really good job.”

The other key person in a governing body is the clerk, and they must be someone who is capable of taking notes, ensuring that meetings run properly and advising the governing body on its statutory responsibilities and any other legal implications of its actions. I have seen too many governing bodies struggle without such advice and make inappropriate and sometimes quite useless decisions.

An issue that I have already raised in relation to one of the reports is whether, when parents have lost confidence in the school governors, they should be able to dismiss the governors en masse. That would be a final accountability mechanism that was not necessarily used often, but which was an ultimate threat. Such a mechanism would ensure that governing bodies were mindful of the need to interface properly with the parent body.

Those issues are important with respect to the chair and other aspects. On the structure of governance, I want to focus on three areas. First, it would be sensible to think in terms of more federal structures for governing bodies. The evidence is—this certainly shows up in the academies programme—that where we have governing bodies looking after more than one school, the likelihood of outstanding schools being developed is much higher. That is a statistical fact and one that we need to note. However, it is also important that we bear it in mind that good schools can spread best practice to the schools that need to improve, and through a federal or a partnership model of governance, that might happen more often and more readily. It seems to me that that is a direction of travel that has already started with the academies programme, but it should be promoted.

[Damian Hinds (East Hampshire) (Con)]

Does my hon. Friend think that with small rural schools, including primary schools, that sometimes have particular challenges in attracting sufficient governors, the model he described—a single governing body for multiple schools—could be especially important?

[Neil Carmichael]

I thank my hon. Friend for that very astute question, and the answer is an emphatic yes. I believe that smaller schools in rural areas would benefit from one good governing body running two or three schools, and we should also look at vertical models, by which I mean secondary schools with feeder schools and not just primary schools. To some extent, it is horses for courses, but we must put this idea on the agenda as a direction of travel to ensure that we get better governance for schools, including those that he mentioned.

[Anne Marie Morris]

I assume that in all this discussion my hon. Friend still recognises that there is a real value in the governors’ relationship with and understanding of the school. The point, probably, is to look at all the players and ensure that they all play their part appropriately, because it would be unfortunate if the governance structure became so dislocated that it became a form of Ofsted. I do not think that is what even my hon. Friend wishes to see.

[Neil Carmichael]

Absolutely, my hon. Friend is right. It is not wise to say that we will go in completely the opposite direction. There is a balance to be struck, which is that where there are neighbouring schools with common interests and common issues that would benefit from a federal or partnership model of governance, that model would be good and should be welcomed. However, where there is a school that clearly does not fit that description, that type of model would not work. It is up to governing bodies to think that matter through. I am simply saying that the federal or partnership model of governance is one that we should promote where it is useful and relevant.

The second aspect of structure that I want to talk about is size, which my hon. Friend the Member for East Hampshire touched on. In many cases, a governing body of 20 or more governors is simply unnecessary. Actually, such a body quite often ends up with just a core number of governors playing the decisive role, and once one of that core number goes the rest are bereft of the necessary skill and expertise, and the governing body can fall apart. That relates to the recruitment problem. As we have heard, about 30,000 governor posts are still vacant, so it would be wise to consider relaxing the rules on the size of governing bodies and having fewer, but more focused and more skills-orientated, governors on a governing body.

I have already talked about the importance of governors challenging head teachers. It is absolutely right that head teachers should be challenged, but they should be challenged constructively. However, it is also really important that we have governing bodies that govern strategically, focusing on the long-term interests of the school and its pupils. It is necessary to think in terms of formulating a governing body that genuinely has that capacity to be strategic—to think about the school plan and what it can do to push forward the aims and objectives of that plan, and any other plan that is appropriate. Those are three areas of structure that need to be considered.

[Rehman Chishti]

On the numbers, I hear my hon. Friend say that 20 governors is too many. Are we looking at around 10 or 12 as the appropriate figure, if those 10 or 12 governors have the skills and in-depth training to hold the head teacher and others to account?

[Neil Carmichael]

In one of the publications that I referred to, the all-party group certainly came up with 12 as the ideal number. Having 12 governors means having a reasonably good chance of getting a good cross-section of skills, and there would also be a sensible way of dealing with succession planning, which also needs to be considered when we discuss governors and the future structure of governing bodies.

One thing that the all-party group has done is produce a list of 20 relevant questions for governors to ask themselves. We went through a fairly exhaustive process. We had lots of governors in one of the Committee Rooms of the House, talking about the questions that should be asked by governors. They are the questions that we want to encourage more governing bodies to ask of their head teachers and of themselves.

One of those questions is:

“Do we engage in good succession planning?”

Another is:

“Do we carry out a regular 360 review of the chair’s performance?”

Still another is:

“Does our strategic planning cycle drive the governing body’s activities and agenda setting?”

Obviously, there are loads of other questions, but formulating these questions—and, indeed, the other work of the all-party group—has been useful in sketching out ways in which governing bodies might like to consider testing themselves, because we need more rigorous self-assessment by governing bodies.

Members will be pleased to hear that I am nearly finished. I want to finish off by asking a few key questions that are relevant to this debate. The first is, how do we make school governors focus on school improvement, based on a proper understanding of data performance? That question is a combination of wanting to ensure that we have school governors who challenge the performance of the head teacher and who are able and willing to take tough and rigorous decisions, but who are also capable of understanding, analysing and drawing appropriate conclusions from the amazing amount of data and information that fly around.

I have already touched on the second question, but I will repeat it as a sort of finale: are the governing bodies that we have too unwieldy, how do we ensure that we move from a stakeholder situation towards a skills-based governing body, and can we enhance the professionalism of school governing bodies? I want to emphasise the idea of ensuring that the chairmen of governing bodies are properly trained, properly engaged by the head teacher—and vice versa—and remunerated in a way that is consistent with their responsibilities and with the skills that we need to recruit for such posts.

[Rehman Chishti]

Regarding skills and ability, local authorities such as mine set a minimum training requirement that governors have to do, linked to compulsory aspects of the overall training scheme. Does my hon. Friend agree that that type of training by certain local authorities, in partnership with governing bodies—for example, the partnership between my local authority and Medway governors—works well?

[Neil Carmichael]

Yes, I do. There are good examples of training schemes and the National Governors Association—a good organisation to which I pay tribute— also does a huge amount of good training work. However, we must ensure that governors and governing bodies recognise that there is a strong need for governors to be trained, because some governors seem to think that training is something that people do only if they are bored, not because it is necessary. We need to promote the training of governors.

We are engaged in a real set of reforms in the world of education, which is an opportunity to look at governors and governance in a way that reflects our understanding of the new autonomous and independent approach that schools should have, as well as the fact that we want to drive up standards, wherever it is necessary to do so. We want not to waste time, but to get on with things to ensure that we have the appropriate leadership, impetus and toolkits to deliver the job.

I am not being prescriptive. I am simply raising issues that should be on the agenda to inform our discussions on changes to school governance. We should at all times—this is an appeal to the Minister and her colleagues —mention governance, underline its importance, encourage people to become governors and recognise that school leadership through effective governance is what we need as part of the mechanism to ensure that our schools continue to improve.

15:00

[Mr Ben Bradshaw (Exeter) (Lab)]

Thank you, Mrs Main. May I preface my brief remarks by paying tribute to all our school governors? They do an incredible job, many of them in difficult circumstances. I can think of hardly any other role that anyone can play in our community that has more potential to help improve the life chances of our young people.

Two years ago, a friend of mine took over the chairmanship of a governing body in a difficult inner London primary school. He has spent most of his spare time in the past two years helping the head teacher to manage out under-performing staff. That school has transformed its performance in those two years, but it has not been a pleasant task. It has taken up a lot of time. He is not paid for it. He does it out of a sense of dedication and duty to the children in his community and their prospects.

I want to say a little about the importance of training for school governors, based on a recent story from my own constituency, which I have spoken to the Minister’s Secretary of State about on a number of occasions. One of my high schools in Exeter was on the brink of being given final approval for academy status, and it emerged that the head teacher at the school was paying himself more than the Prime Minister. He was employing his wife as his deputy, and some other family members were also employed at the school. What happened in the end, thanks to a freedom of information request from my local newspaper, was a call from me to the local authority to launch an inquiry. The local authority went into the school and carried out an inquiry—a thorough one. It recently reported and it was very shocking and damning.

I can summarise what went wrong at the school—I have had this experience before in schools that have gone wrong. There was a powerful—perhaps autocratic—head, who ran the school like a fiefdom and who had a rather cosy relationship with the chair of governors, who was, I think in this case, too weak. They basically made decisions together about the school—some of them against the rules, according to the report—and they froze out the rest of the governors.

I am not necessarily blaming the rest of the governors for their failure to ask more questions and to scrutinise more effectively. I think they could have done that, but one of the things that struck me when I looked into what went on at this school—I talked to not only the existing governors, but the staff, some of the new governors who have gone on to the governing body since the scandal broke, and some of the very good public servants at Devon county council who were responsible for supporting and training governors—was the lack of a requirement for governors to receive training.

I know that the Government and particularly the Minister do not like regulation. She does not want to ply schools with more responsibilities and duties. The Government are all about localism, autonomy and local decision making, but—I issue this warning in the gentlest possible way—with the Government’s policy driving towards more autonomy for schools, it is even more important that governors are properly trained because they will be assuming a much more significant role as a result of that autonomy. If a school comes under the umbrella of a local authority, at least the local authority still has a locus to intervene when something goes wrong, which is what happened in the case of the school in my constituency. If that school had already gone through the academy process and become an academy, the local authority would have had no means of intervention whatever. I am afraid it would have fallen to the Minister or her Secretary of State to intervene.

I suggest that the Minister and her Secretary of State are storing up all sorts of future potential problems for themselves by removing that level of local authority scrutiny. Given that that is the policy that they are set on and determined to implement, I urge her to at least consider the pleas from the very good public servants around the country who support governors and provide governor training. I urge her to listen to their appeals that the Government should consider making training for school governors mandatory. Since the scandal erupted, the school has invited the local authority trainers in. They are doing a great job. The governors are realising that there are lots of things they did not know about the job, but they do now.

At most schools in Devon the governors are given training, but there are others—most of them academies—that resent any interference and advice from the governor training bodies. Given that academies have no local democratic oversight, the only backstop is the Secretary of State, so it is more important than ever that governors are given the skills to do their job properly, exactly as the hon. Member for Stroud (Neil Carmichael) alluded to in his speech. If they are not given the skills, I predict that the Minister will see more scandals. There was another much worse scandal along similar lines in a school or schools in Lincoln. The Minister should seriously consider the impact of her policy and how important that makes it for governors to be properly trained.

I also urge my hon. Friend the Member for Cardiff West (Kevin Brennan), who speaks for the Labour party from the Front Bench, to consider whether we might adopt mandatory training for governors as a policy. I think it would be popular and not too burdensome. It is the least that parents expect. They expect the people who are in charge of the quality of their children’s education at a local level to be properly qualified and properly trained to be able to do a very important job effectively and well.

15:06

[Andrew Stunell (Hazel Grove) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Main. I thank the hon. Member for Stroud (Neil Carmichael) for securing this debate and also for the work that he has done through the all-party group in providing information and reports. His 20 questions for governors to ask themselves is a minor classic. I hope that that is recognised.

I should declare an interest—of a sort, at least—which is that until earlier this year my wife served on the executive of the National Governors Association, and so to some extent I get these matters in stereo from my personal experience and also from her background. I want to emphasise the point that our 300,000 school governors are the biggest individual group of volunteers that we have. They are all unpaid, or virtually all unpaid. They work in every constituency and every school across the country, with significant responsibilities that have been increased with the education changes not only in the past two and a half years, but perhaps in the past 10 years, as the various Education Acts have come to fruition.

The governing bodies are responsible for children’s welfare and education and, of course, for the quality control of the teaching and the curriculum that is delivered to them. I think there is a general rule in systems of democracy and accountability that a power cannot be created or destroyed; it can only be redistributed. In a situation in which local education authorities are losing power and in which the Government have a professed wish to localise power, that inevitably means that power and responsibility are increasingly transferred to governing bodies and to governors.

I do not necessarily agree with all the direction of travel here, but local education authorities have a reduced role in supporting and challenging their schools and in monitoring the standards and outcomes of their schools. To a much greater extent, schools are beholden to Ofsted. It is to a considerable extent now an option for schools not to participate in the services provided by local education authorities, and that increases the responsibility that comes to governing bodies. I would say, in parenthesis, it has not taken away the duty of local authorities to have regard to the well-being of all the children in their area, which of course can lead to some tensions.

The Government have what I regard as an excellent localist policy of taking power away from Whitehall and Westminster and bringing it back to local communities. That is being done in some slightly wobbly ways in the educational sphere. I put it to my hon. Friend the Minister that some of the measures do not produce extra localism, but the crucial point is accountability. If power and responsibility are taken away from elected Governments, on the one hand, and elected local authorities, on the other, that accountability has to be held firmly and solidly by school governing bodies.

[Kevin Brennan]

Now that the right hon. Gentleman is more free to speak candidly than he might have been when he was in government, will he explain his remarks about those aspects of Government policy in the sphere of education that he feels do not contribute to localism?

[Andrew Stunell]

I suspect, Mrs Main, that you would rule me out of order if I answered that question, because it is important to focus on the issues before the Chamber.

Clearly—this is where I challenge my hon. Friend the Member for Stroud—any Government, if they see the need for change and reform, would be strongly tempted. He talked about changing the balance between stakeholders and skills, and I want to challenge that proposition because it is not a dichotomy. It is not a choice between stakeholders or skilled governors, but a question of ensuring that stakeholders are skilled to retain local community accountability. We jump from the frying pan into the fire if, instead of democratic local education authorities and a democratically accountable Secretary of State, we have professionalised experts with special skills running our schools with no special links to the pupils or staff and no democratic accountability. I want to pull back on what he said, and I remind my hon. Friend the Minister that we do believe in localism and accountability to the local community—both to the local community of parents and the broader community—that every school serves.

The net effect of the changes that have been made in the past few years is that governors have more power and responsibility, which means they need more skills and focus. I agree with my hon. Friend the Member for Stroud that we need to boost and build that.

There is a significant difference in scale and professional need between a secondary school and a primary school. Here, again, I want to make a localism point. Governments have a strong tendency—I experienced this myself, both in government and out of government—to imagine that there is a solution that addresses all the problems. I urge a flexible approach. We should understand that schools come in different sizes and shapes. A secondary school may have a turnover each year of more than £1 million, while a primary school might have a turnover of just a small fraction of that. We need to ensure that we do not over-engineer what we are asking.

Several references have been made to Ofsted. Schools are, of course, required to meet the standards of Ofsted. Whether, in a democratic structure, schools should be accountable to Ofsted is a moot point, but one of the things that is happening now and will happen more in the next year or so is that, even when a school’s results and teaching standards meet Ofsted’s criteria, it may now fail because it does not meet the governance criteria. It is right that there should be such tests of governance and that those tests should be done by Ofsted, but I suspect that quite a number of school governing bodies across the country are in for a bit of a surprise when they realise that they cannot bumble on in their traditional relationship with their head teachers and school bodies and excel as far as Ofsted is concerned.

I believe hon. Members and the Government need to recognise and support the role and development of governors. They are a crucial link in the delivery of good education to our children, and they are at a crucial point in challenging the professionals on what they are doing in the classroom and how they are doing it. Governors are often hard-stretched volunteers, strong on commitment and enthusiasm, but without the range of skills they need to be fully effective. Increasingly, they are the people who not only pass judgment but are themselves being judged on the quality and effectiveness of the education that their school delivers.

What do I think should be done? We have been strong on what might be called “brave words,” but what ought to be done? We should pick up on the Government’s report of two years ago, in which the Government asserted that school governors are a vital part of the education system who are traditionally undervalued and do not have the respect and support that they deserve. We now need to turn that absolutely correct statement of intent into real action. The plea made by the right hon. Member for Exeter (Mr Bradshaw) for mandatory induction training for governors is something the Government could take on board. Additionally, imposing a training duty without considering the cost would be a mistake when schools are under pressure. Obviously, the degree to which schools are under pressure is different in different places, but all schools face real budgetary challenges over the next few years and, desirable and essential as training is, imposing that through any system without the matching resources would be a betrayal of what the Government are attempting to do to improve educational standards.

[Mr Robin Walker (Worcester) (Con)]

I am grateful to my right hon. Friend for giving way and to my hon. Friend the Member for Stroud (Neil Carmichael) for securing the debate. I apologise for missing some of the opening remarks.

My right hon. Friend points out the financial challenges that a number of authorities and schools are facing and with which governors are grappling, but does he agree that, for governors to be able to do their jobs well and to do their best for their school, transparency and clarity in education funding is absolutely vital so they know where they are heading? Will he join me, therefore, in calling on the Government to provide greater transparency on the new funding formula as soon as possible, certainly before the next general election?

[Mrs Anne Main (in the Chair)]

I am sure the right hon. Member for Hazel Grove (Andrew Stunell) will stay within the remit of the debate.

[Andrew Stunell]

Within the scope of the debate, I entirely agree with my hon. Friend the Member for Worcester (Mr Walker).

My hon. Friend the Member for Stroud mentioned the role of school clerks. School clerks, like parliamentary Clerks, are a vital link, and just as parliamentary Clerks ensure that we stay on track by giving us wise and sound advice, so it should be for school governors. I draw the attention of hon. Members to an extremely good programme run by the National Governors’ Association to find the school clerk of the year. There are regional rounds, a national round and, ultimately, a national school clerk of the year. I ask my hon. Friend the Minister whether the Department for Education will consider giving more encouragement to that process so that there are higher levels of participation, and using that to raise standards and improve the spread of best practice across the country. The Department might achieve through promoting excellence what may be much harder to achieve through a strong regulatory framework. I offer that suggestion in the spirit of helpfulness for which I am famous.

We need also to make sure that governors take a strategic view of their role. I entirely agree with my hon. Friend the Member for Stroud about them not getting too hooked up on the size of the chairs or the colour the toilet is painted, or even what days off the school should have. Instead they should be considering the important strategic issues of staffing, training, the delivery of education, and the relationship of the school to the community. There is a huge job to be done in that respect.

I urge the Government and Members of the House to work with governors, and not to impose things on them as we develop the support that they undoubtedly need for their more responsible and challenging role under our new arrangements. I want to add to the thanks that have been given for all the volunteer work that school governors do, and for the effectiveness of so many school governing bodies in raising standards and playing an active and effective part in providing good education. The debate is an opportunity to celebrate those things. I hope that the Minister will tell us that in the years ahead we shall go beyond celebration to support—and results.

15:19

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

It is a great pleasure to serve under your chairmanship, Mrs Main, and to follow the right hon. Member for Hazel Grove (Andrew Stunell). It is always a joy to discover people who realise after they have left the Government that the rhetoric about localism and decentralisation is suddenly not as true as they thought. Perhaps in time, the right hon. Gentleman will discover the same things about the Department for Communities and Local Government as he has discovered about the Department for Education.

I thank the hon. Member for Stroud (Neil Carmichael) for securing the debate, his interesting practical suggestions and his work on the question of school governors. Like him, I pay tribute to the 300,000 people who serve as school governors in communities, as well as to governors in my constituency of Stoke-on-Trent Central. We, like many cities, could do with more, and higher calibre, school governors—there is no point in hiding from the Ofsted figures on the quality and satisfactoriness of governors—but I am not sure whether the Government’s education reforms are helping to improve governor capacity. In short, the confusing morass of competing initiatives arguably undermines the capacity for local leadership and muddies the waters as to what is required of a governing body. That relates to the importance of building capacity before we establish a vacuum in local governance, rather than finding that a situation has arisen and thinking about how to resolve it.

That point is particularly relevant to academies. The speed and slapdash nature of the academy conversion process under this Government is putting at risk people’s willingness and ability to serve their schools. That is, first, because of the competing powers of academy sponsors and existing governing bodies. Governance provisions for converting to an academy set only minimum requirements and allow for a reduction in size and composition of the governing body. The laxer rules are more open to abuse. As we heard from my right hon. Friend the Member for Exeter (Mr Bradshaw), in academies a lack of governor control can be particularly worrying. Indeed, there are widespread reports of academies selecting their own governors or manipulating the process. If we are interested in proper accountability and a proper non-executive role for governors, we must sort out the relationship between sponsors and governors. Evidence shows that where such changes in governance have taken place previously, the governors nominated by parents, staff and the local authority are the casualties.

I am not ideologically opposed to the academy programme. There are some able academy sponsors in Stoke-on-Trent—notably Stoke-on-Trent college and the Church of England diocese of Lichfield—but aggressive takeovers of governors can put communities’ backs up and affect the success of the academy conversion process. Furthermore, what is happening represents a massive centralisation and accrual of power by the Secretary of State. I always thought that conservatism was about the little platoons of society. I thought that the big society was an attempt to revive the great teachings of Edmund Burke for the 21st century. Instead, we have in our Secretary of State, with his minions, a Jacobin centralist of whom the Rev. Richard Price would have been proud. The Government are intent on gutting local communities and local democracy to hand over the practice of teaching and the inculcation of citizenship often to carpet-salesman chains and car dealerships.

[Mrs Anne Main (in the Chair)]

Order. I am sure that the hon. Gentleman is going to get back to the debate on governors, rather than carpet salesmen.

[Tristram Hunt]

Absolutely, Mrs Main.

Since the Education Reform Act 1988 came into force, the Secretary of State has accrued an extra 2,000 powers, including on questions of local school governance. Indeed, the Secretary of State, not Parliament, has almost total de facto control over what schools do, even including the curriculum, thereby subverting the role and contribution of a governing body. There are now often no intermediate bodies or forms of civil society standing between the head teacher and the Secretary of State. That is a recipe for the arbitrary misuse of power—something that the Tory party was originally established to fight against in the late 17th century. Surely good school governance is about respecting local democracy and civic engagement. It is about having the right people round the table with the right composition of skills and a balance of capabilities, and providing effective strategic oversight, not day-to-day management. The comments of the hon. Member for Stroud on the role of federations in that context are particularly germane and interesting.

Good school governance is about conducting professional recruitment procedures, drawing on specialist expertise, and, where necessary, holding teachers to account in the interest of parents and pupils. Like my right hon. Friend the Member for Exeter, I have experienced in Stoke-on-Trent a situation involving a strong-willed and arguably devious headmaster and a governing body that was unable to take control. It was up to the local education authority to step in and deal with that situation. Had that happened in an academy, I would have been worried about the teaching of those children and their prospects.

To act properly in such situations, governors require the right support. They need professional induction training and professional clerking services. I take the points made about mandatory training and the costs involved, but we want that to become almost the norm, without it necessarily being mandatory. Although that requires greater professionalisation and dedication on the part of governors, it also requires wider respect for that role from the Secretary of State and the Government. We have had the Teach First campaign, which the Labour Government successfully inaugurated, but what about a “Become a Governor” campaign—not necessarily with a picture of Arnold Schwarzenegger? Instead of talking governors down and undermining their role in the school ecology, we should celebrate them as civic heroes. We need, as the right hon. Member for Hazel Grove suggested, to raise their esteem. That is what the 2010 report suggested. Instead, the Secretary of State has condemned those civic-minded individuals

“who see being a governor as a badge of status, not a job of work.”

Surely, it should be both, as I am sure it is in St. Albans, Mrs Main. It should be a mark of status and should be taken seriously and conscientiously as work. Just as with the stakeholders-versus-skills question, this is not an either/or option.

As the Government’s reforms grind on and local education authorities are stripped of their functions, the role and importance of the governor will only grow. When we think about such questions in the Labour party, we always have in our mind creating brilliant schools in local communities. The Government—a Conservative Government, of all things—seem concerned with denigrating governors’ volunteerism, undermining their capacity and transferring all power to Whitehall functionaries rather than local champions. If we want true governors creating great schools, we should focus on capacity-building, training and raising their esteem.

[Mrs Anne Main (in the Chair)]

I call the Minister— [Interruption.] Sorry, I call Kevin Brennan. The Minister has a few more minutes.

15:29

[Kevin Brennan (Cardiff West) (Lab)]

I shall give the Minister a bit more thinking time. It is not her first outing in Westminster Hall, but I welcome her as Parliamentary Under-Secretary of State for Education. She is obviously a woman of many talents: in addition to what might be regarded as the first part of her ministerial job, she does curriculum, exams and—we have found out today—school governance. It makes us wonder what the Minister for Schools is doing with his time. Perhaps he is over in the Cabinet Office, planning on behalf of the Liberal Democrats. I congratulate her; she is obviously doing a job and a half in the Department.

I also congratulate the hon. Member for Stroud (Neil Carmichael) on securing the debate and on his thoughtful remarks on governance. I thank him, too, for his work on the issue with the all-party group on education governance and leadership. He set out his view that skills should predominate over stakeholders in how governing bodies are set up—he had some interesting thoughts on that—and quoted Lord Hill a lot, as well as in the context of governor training. Lord Hill might benefit from some assertiveness training for the next time he tries to speak to the Prime Minister and resign, so that he is more successful than on the previous occasion.

My right hon. Friend the Member for Exeter (Mr Bradshaw) made a good point about mandatory training for governors, outlining brilliantly one of the big issues facing us: the unexploded ordnance that must be out there when accountability has been drawn out of the system. There is a worrying vacuum, as some Members have pointed out, in the pell-mell pace of reform set by the Secretary of State in his desire to be seen as a great reformer. My right hon. Friend is not the first to say that, but he said it effectively. I have no doubt that there is unexploded ordnance out there, and that the lack of accountability will result in scandals in the near future.

We have already seen such incidents, whereby powerful head teachers, without mechanisms in place to hold them to account, have been able to misuse public money. In some cases, criminal charges are involved, so we cannot talk much about them here, but I worry, as does my right hon. Friend, about the vacuum of accountability that is developing rapidly as the academies programme proceeds without sufficient thought having been given to the issue of governance.

I welcome the right hon. Member for Hazel Grove (Andrew Stunell) to the Back Benches following his stint in the Government. Clearly, he was a little unhappy for some of that time. He hinted to us, while rightly staying in order and not going into too much detail, about some of his unhappiness with Government policy in this area, particularly on local accountability and education. I look forward to hearing more from him in the House on that subject in the weeks and months ahead as we debate education policy more widely.

[Andrew Stunell]

I assure the hon. Gentleman that he will hear more, but it will not be in any way to undermine this Government’s bold moves on localism, including in education. I was pointing out to him—I regret that I did not convey it more accurately—that if we take power away from one institution and give it to another, we must ensure that that institution has responsibility and the skills to bear that responsibility.

[Kevin Brennan]

I interpreted the right hon. Gentleman’s remarks as meaning that he was worried that, in some cases, for “localism” read “centralisation”, but perhaps I was reading too much between the lines. Nevertheless, I look forward to hearing what he has to say on the subject in the weeks and months to come.

My hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) spoke about the need to build capacity within the system, given that a vacuum has been created by what he described as a slapdash approach to reform and its impact on governors and local accountability. I urge the Minister to reflect on hon. Members’ contributions about their concerns over the vacuum that is emerging.

I join others in praising the 300,000 volunteers—probably the country’s largest volunteer force of any kind—who give up their time freely to serve on governing bodies across the country. I suspect that almost everybody participating in the debate has served at one time or another on a school governing body, and that everybody therefore brings a degree of expertise to the debate, having seen how governing bodies work.

In government, we continued a process of giving more responsibility to governing bodies, tried to reduce local authority interference in how governing bodies operate and made changes relating to the composition of governing bodies. We also started the academy programme—a targeted intervention to try to lift the worst-performing schools in the country’s most deprived areas, which successfully raised standards. I say in passing to the Minister that that is different from simply re-badging a school as an academy and expecting school improvement to happen automatically. It will not happen without a genuine intervention to try to improve standards. However, I will not stray too far from governance while making that point.

I praise governors. We tried to enhance their role. Hon. Members have referred to some of the work done latterly by the previous Government, particularly by the former Schools Minister, Lord Knight, who is now in another place. Unfortunately, some of his initiatives ran out of time as we reached the general election. The discussions held at that time outline the difficulties of reaching consensus—I sympathise with the Minister on this—on the right balance between governing bodies’ ability to perform their strategic role in improving performance in schools and, as other hon. Members have mentioned, the need for governing bodies to have their feet on the ground and their roots in the community, and to use local information and intelligence to do a good job. This is not an easy issue to tackle, and it is appropriate that we try to build consensus on reforming governance in our schools, rather than making the issue a big divide between Government and Opposition.

However, it is important that that debate is held in a tone that shows respect for the work done by governors across the country. That is why I mentioned, in an intervention on the hon. Member for Stroud, the Secretary of State’s speech on governors earlier this year. I suspect that he was trying to make the same reasonable point that the hon. Member for Stroud made: standards vary, and governors are a mixed-ability group like any other. However, in his temptation to use figurative and colourful language, the Secretary of State deeply offended many governors across the country by using the phrase “local worthies” to describe the people who give up their time to serve on governing bodies. The full quote is:

“Local worthies who see being a governor as a badge of status, not a job of work.”

That remark deeply offended large numbers of people, whether it was intended to do so or not. When the Secretary of State wants to offend, he is usually quite deliberate about it, but I am not sure whether he did on this occasion. Libby Purves, who has sympathy with the Secretary of State’s approach to some things, wrote on 9 July in The Times:

“The expression ‘local worthies’ has no place under any government, let alone a Conservative one that claims to want a Big Society and less central nannying.”

I make a plea to the Minister at least to tell us that she will not use such derogatory language when talking about our country’s largest volunteer force, who give up their time to do the difficult and challenging job of helping our schools be the best that they can be. That would greatly help to raise the tone of the debate, so that we can get on with discussing the important, central issues.

On another recent occasion, the Government tried to recruit governors effectively as spin doctors for their policies by putting out a plea via e-mail. The Guardian reported in August that the Department for Education, having created a database of sympathetic head teachers, was trying to enlist governors. An e-mail was sent from the National College for School Leadership to approximately 40 school governors saying that the DFE’s school governance unit is planning “communication activities” around new regulations coming into force next week regarding the size of governing bodies.

School governors are volunteers who give up their time to serve their local schools. They are not there to be recruited as spin doctors for the Secretary of State and his reforms. I hope that the Minister will distance herself from that approach by the Department.

There are real challenges to be faced to get the balance right between the strategic job that governors have to do and the local input required for them to represent the local community effectively. Views differ widely. Some colleagues believe that in this new world in which most secondary schools are now academies, and where they are no longer in the orbit of the local education authority, there is a case for the professionalisation of governing bodies and for executive governing bodies to be in charge of a chain of schools, with, perhaps, more local advisory bodies for local schools. That is one end of the spectrum. At the other, there are others who think it essential to maintain that aspect of localism and ensure that every school, whatever its size, has its own governing body and chair of governors.

I want to probe the Minister on the Government’s current thinking on the governance of schools. Is it her view, and the Government’s, that governors should remain as a voluntary force in support of our schools, or that they should be professionalised and become a strategic board, with at least the chair of governors, and perhaps others, being paid for their work? What is her current position on the payment of governors? Is it Government policy to pay more governors?

Does the Minister believe that there should be fewer governing bodies? In other words, rather than having governing bodies for each school, should there be governing bodies that look after a chain of schools? Does she agree with the Secretary of State that governors are glory-seeking “local worthies”, or is she prepared to recognise the work of local governors? I look forward to hearing her answers.

15:43

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

I thank all hon. Members who have contributed to the debate. It has been very instructive and helpful, and we have heard a lot of interesting contributions. I pay special tribute to my hon. Friend the Member for Stroud (Neil Carmichael) for his tireless work as chair of the all-party parliamentary group on education governance and leadership, on which he has worked hard in the past few years. There is no doubt that his questions have been helpful to many governing bodies. He has a wealth of experience, and he has skilfully covered many of the points that I planned to make.

I thank the National Governors Association for its work, and I completely agree with hon. Members who have expressed their thanks to governors who play such an important role in helping our schools, driving up school and pupil performance and ensuring that every child receives the best possible education. As has been mentioned, hundreds of thousands of volunteers serve as school governors. One of them is my mum, who is a school governor in Leeds. I can assure hon. Members that I receive regular feedback from the front line, at all times of the day and night, about what is going on in schools in Leeds. I am not without a direct feedback loop.

Being a school governor is not only an influential role; it also demands skill, time and energy. We very much appreciate those who volunteer. Governors have four sets of responsibilities. First, they have a strategic function, which many hon. Members have mentioned. Secondly, they use their skills and experience to ensure that the school is doing the right thing, that the school and the governing body run efficiently and effectively and that the school works to continually improve itself. A theme that we have heard in the debate is that school governing bodies need to be not just satisfied with how things are, but to train up and have continuous professional development for the school to improve.

There has been rather a lot of selective quoting of the Secretary of State’s governance speech. He praised many governors and acknowledged the important role that they play. He was describing what he thinks bad governance looks like, as opposed to what he thinks good governance looks like. His comment was certainly not about all governors or in any way meant to be detrimental to the many people who serve their local schools and are an important part of the local community.

I was pleased to hear that the hon. Member for Stoke-on-Trent Central (Tristram Hunt) continues to support the academy programme, which was, of course, set up under the previous Government. I want to respond to the important points raised by him and the right hon. Member for Exeter (Mr Bradshaw) on school accountability, and explain the Government’s approach.

In September 2012, we introduced new rules for Ofsted that make governance more central to how schools are assessed. In category 3 of a school requiring improvement, Ofsted may recommend an external review of governance. It can also give schools subsidised training for the chairman of the governors—something mentioned by my hon. Friend the Member for Stroud. If a school is in unsatisfactory category 4, the Secretary of State or local authority may impose an interim executive board to replace the governing body, or it may be forced to become an academy with a sponsor, who may replace the school’s leadership, head and governors.

The essential philosophical difference between the Government and the Opposition is that we think that governing bodies need to be measured on the outcomes that they produce, rather than on inputs. Although I am a great supporter of training and professional development, it should not be a mandatory requirement, not least, as my right hon. Friend the Member for Hazel Grove (Andrew Stunell) mentioned, because it will impose costs on governing bodies. We do not know what the content will be. In my time, I have been on a fair few training courses that promised a great deal but did not deliver. That is not to say that I do not support training, but simply to say that it is a judgment that the chair of the governors and the school should exercise to ensure that its governing body has the right skills and experience. Rather than mandating the governing body to carry out things in a particular way, we should hold them accountable for the outcomes. They should take up the kind of professional development and training to ensure they have the right skills, as in the case raised by the right hon. Member for Exeter, to challenge the head teacher and understand the finances of the school. That is our broad approach.

[Mr Bradshaw]

I appreciate what the Minister says, but the performance of the school that I referred to was not bad enough for it to qualify under the new Ofsted rules that she has just outlined. The school was still improving and doing well enough. The problem was not the performance; the problem, basically, was corruption within the school. The worry that I have is that there is no local accountability in academies and that there is nothing anyone can do—except for her.

[Elizabeth Truss]

I thank the hon. Gentleman for his intervention. What I am saying, though, is that the capability of governors and the outcomes of governance will be assessed as part of the Ofsted assessment. It is not just a matter of looking at the academic performance of the school; it is also about understanding what the governors are doing and how they are carrying out their duties.

[Kevin Brennan]

The Government have legislated so that some schools that are doing well academically do not have to be inspected. My right hon. Friend the Member for Exeter (Mr Bradshaw) was making the point that that can mask corrupt practices and there will not be sufficient governance or training in place for governors to monitor that properly and nip it in the bud before it becomes a huge issue.

[Elizabeth Truss]

The Ofsted inspection will take place in due course, if the school performs below satisfactory levels. The reality is that, often—I could tell the right hon. Member for Exeter about similar cases in my constituency—poor performance on financials is related to poor overall school performance.

My colleague, Lord Hill, who leads on governors in the Department for Education, has already presented the awards for school clerk of the year, which was mentioned by my right hon. Friend the Member for Hazel Grove, who also spoke about ensuring higher take-up. I understand that Lord Hill has committed to doing so again next year, which is good news for all of us.

I was interested the suggestion that we run a “becoming a governor” campaign and will take that back to Lord Hill for further discussion. We are, of course, happy to listen to suggestions from all parties in the House about how to improve standards of governance. As right hon. and hon. Members rightly said, there is a process for ensuring that all governing bodies attain the capability that we want, so that they can carry out their functions.

My hon. Friend the Member for Stroud raised some other issues. His organisation’s work promoting skills in governing bodies is important. He is right; we need wider recruitment of governors, including business people who have financial skills that would help, as the right hon. Member for Exeter mentioned. My hon. Friend welcomed our efforts to relax the constraints on the size of governing bodies, so that we have governing bodies that are fit for purpose and offer the right scrutiny of what head teachers and schools are doing.

Being a governor can help build the individuals’ skills and experience. We have talked a lot about how the governors’ skills and experience can contribute to the schools’ performance, but we should also see it the other way round. I know a lot of people who have benefited from their time as a governor and have been able to build up their capability to understand how a school works and education policy, management and financial scrutiny.

The hon. Member for Stoke-on-Trent Central mentioned the platoons that we are seeking to support in society. In that regard, it is important that we retain governorship as a voluntary service, because it is a two-way process, with members of the community gaining experience as well as contributing to the future of a school and schools gaining from that experience of the community. The Government do not have any plans to pay governors and go away from the well-established principle of voluntary governance. There might be times—for example, if a school is in trouble and an interim executive board is needed for that failing school—when payment might be appropriate, but in the general run of things, we support a continuation of the voluntary governance principle.

[Tristram Hunt]

If the Government’s policy moves towards for-profit schools, which the former head of the No. 10 policy operation is proposing, does the Minister see paid-for governance as part of that?

[Elizabeth Truss]

The Department has no plans to have for-profit schools, so the hon. Gentleman asks a hypothetical question.

My hon. Friend the Member for Stroud mentioned rigorous self-assessment of governing bodies. That is important. We must move away from the idea that the Government can mandate what schools and governing bodies should do to the idea governing bodies are responsible for building their capability.

I thank the right hon. and hon. Members who have contributed to the debate and hope that I have answered their questions. This debate has helped highlight the importance of governors and governing bodies in schools. Often, when discussing schools policies, we end up talking about teachers, who are important in delivering an excellent education, but the structures that surround teaching and how we hold them to account are also important, as are the roles played by volunteers in our schools.

I am glad that we have had this debate. I will take up the issues raised with Lord Hill. If right hon. and hon. Members wish to write to me about further issues, I am happy to take those up, too.

15:55

Sitting suspended.

Baha’i Community (Iran)

Wednesday 24th October 2012 Westminster Hall

14:30

[Naomi Long (Belfast East) (Alliance)]

Freedom of religion and freedom of conscience are issues on which I have placed significant emphasis in my work at Westminster. I believe and the evidence shows that societies that respect those fundamental human rights also tend to fare better in their protection of other human rights. I have therefore worked with Open Doors —an organisation focused on freedom for the persecuted Christian Church. However, I recognise that freedom of religion and conscience must extend to people of all faiths and none—a point that was convincingly reinforced by the Under-Secretary during a recent meeting that I hosted looking at the experiences of Christians in the Arab world. At that meeting, members of the Baha’i community in the UK shared their concerns about the continuing persecution of Baha’is and other religious minorities in Iran. I want to focus on that issue today.

My personal contact with the Baha’i community predates my election to Parliament, extending throughout my chairmanship of Belfast city council’s good relations partnership and my term as lord mayor of the city. Although it is a relatively small religious community in Northern Ireland, many of its members play a very active and prominent role in civic society and in peace building in Northern Ireland. Through that, I became more aware of the extent to which they are a community that continues to suffer religious persecution in the faith’s country of origin.

Many hon. Members will be aware of the long-standing persecution of the Baha’is in Iran—a matter raised in a debate on 11 January 2012 by the hon. Member for Liverpool, Riverside (Mrs Ellman). Today, while focusing specifically on the persecution of Baha’is in Iran, I think that it is worth noting that the systematic and aggressive manner in which the Baha’is are persecuted is reflected in wider persecution of other religious and cultural minorities in Iranian society.

The human rights situation in Iran has worsened in recent years, and the specific treatment of religious minority communities, including Sunni Muslims, Christians and Baha’is, has deteriorated further, as exemplified by the sentence of capital punishment threatened against Pastor Youcef Nadarkhani, an Iranian Christian. That deterioration is also documented in the recent UN “Report of the Special Rapporteur on the situation of human rights in the Islamic Republic of Iran”. It details the treatment of Iranian Baha’i, Christian and Dervish communities. Members of all three religious minorities have been subjected to arbitrary arrest and detention and the curtailment of their freedom of assembly. Members of the Dervish communities have also undergone torture and prosecution, with their property being attacked and confiscated by the authorities. I therefore contend that the protection of human rights, especially the freedom of religion and of conscience sought by the Baha’is, would also benefit other minority religious traditions.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

Does the hon. Lady agree that Iran’s record on human rights generally is appalling, and does she consider that its persecution of the Baha’is is an attempt to wipe out the Baha’is as a group and their religion?

[Naomi Long]

I think that that is absolutely right. Certainly, the memorandums that have been circulated by the Government there indicate that that is their eventual aim and objective. I want to come on to that.

Two recent reports—one issued by the UN Secretary-General and the other by the UN special rapporteur on the situation of human rights in the Islamic Republic of Iran—offer the most current and in-depth analysis of Iran’s human rights record. Dr Ahmed Shaheed, the special rapporteur, expressed concern about

“inconsistencies in the country’s legal framework, capricious implementation of the rule of law, and tolerance for impunity”.

He characterises the trend with regard to religious freedom as “disturbing”, noting:

“Members of both recognized and unrecognized religions have reported various levels of intimidation, arrest, detention and interrogation that focus on their religious beliefs.”

The Secretary-General observes that since his last report on Iran to the UN Human Rights Council, “human rights violations” have

“continued, targeting in particular journalists, human rights defenders, and women’s rights activists… Discrimination against minority groups persisted, in some cases amounting to persecution.”

Both reports refer to one religious minority community in Iran—the Baha’is.

[Iain Stewart (Milton Keynes South) (Con)]

I congratulate the hon. Lady on securing the debate; my constituency in Milton Keynes is home to a significant Baha’i community, and its members are grateful for the fact that she has been able to do so. In addition to the persecution that she has already outlined, is she aware that there is particular targeting of Baha’i-owned businesses in Iran and that people are going in daily to try to strangle the livelihood of those businesses and force them out of business?

[Naomi Long]

I am aware of that. Indeed, I am very conscious of the fact that the economic exclusion of Baha’is from society in Iran is part of the Government’s approach to the persecution that they undertake, but it also affects those who are not Baha’i, who are often employed in those businesses and also lose their jobs as a result.

The persecution of Iranian Baha’is has a lengthy history going back to the inception of their religion. Many Baha’is were arrested or killed following the 1979 revolution. Denial of the right of freedom of religious belief shifted in the early 1990s to social, economic and cultural restrictions, to which we have referred and which have blocked the development of the 300,000-member community through the deprivation of livelihood, the destruction of cultural heritage and the obstruction of young people’s access to higher education. In recent years, there has been an increase in the number of Baha’is arrested and detained for religious reasons. It went from four in 2004 to 109 in April 2012. It is estimated that 116 Baha’is are in prison today for their faith.

The special rapporteur’s report speaks first of “serious discrimination” against the Baha’i community in Iran, expressing alarm about the

“systemic and systematic persecution of members of the Baha’i community, including severe socio-economic pressure, and arrests and detention.”

The entire Baha’i community is subject to identification and monitoring by agencies of the Iranian state, as mandated by a confidential directive authored by the head of the Iranian armed forces in 2005. Baha’i schoolchildren are monitored and slandered by officials in schools, and those who openly declare their religion when pressured to deny their faith may be expelled from schools and universities.

On 31 May 2012, in a joint statement, a number of human rights organisations expressed concern about the systematic deprivation of and discrimination against the Baha’i in institutes of higher education, in violation of the international covenant on economic, social and cultural rights. Hundreds of Baha’i students have reportedly been banned from entering public and private universities. That denial of access to education at primary, secondary and tertiary level actively contributes to the long-term economic and social exclusion of Baha’is in Iranian society.

The special rapporteur’s report also deplored the Government’s tolerance of an intensive defamation campaign aimed at inciting discrimination and hatred against Baha’is. That propaganda asserts that Baha’is have recruited members by irregular means or acted against national security, in collaboration with the west or with Israel. Attempts by the Iranian Government to link religious belief to subversive political views have created a hugely potent sectarian mix, highlighted in “Inciting Hatred: Iran’s media campaign to demonise Baha’is”—a report of the Baha’i International Community, published in October 2011. Contrary to the propaganda, the Baha’i community is committed to non-violence and non-partisanship.

Fears are rising among international experts on ethnic, racial and religious cleansing that wider and more violent attacks against the Baha’i community may be forthcoming. That is based on the situation that has been developing in recent years, including the emergence of Government documents that display the intention to identify and monitor all the activities of the Baha’is and all their contacts.

In March 2006, a United Nations official publicly disclosed a letter, dated October 2005, from Iranian military headquarters instructing state intelligence services, police units and the revolutionary guard to make a

“comprehensive and complete report of all activities”

of Baha’is

“for the purpose of identifying all individuals of this misguided sect”.

Since 2005, a vigorous campaign has been waged in the state-run news media against the Baha’is, and the targeting of their children for harassment and abuse by teachers and administrators in the schools system throughout the country has occurred, against the backdrop of a general upsurge in violence against Baha’is and their properties. In March and May 2008, the structure of the religion was more directly targeted with the arrest and imprisonment of the seven national-level Baha’i leaders.

Reports of the condition of one Baha’i community in the city of Semnan may offer a case study in the worsening trajectory of persecution facing Baha’is. Semnan is a town of 125,000 people, east of Tehran. It is home to a Baha’i community of several hundred people. During the past three years, reports from Semnan have demonstrated mounting evidence of an orchestrated effort to escalate significantly the persecution of Baha’is in the town. They have been subjected to arson attacks on homes and businesses and the forced closure of Baha’i-owned businesses, including the raiding and sealing of two factories in May 2012, leading to the denial of employment for 53 individuals, a significant proportion of whom were not Baha’i.

Since 2009, at least 30 Baha’is have been arrested and detained, 26 of whom have been sentenced to prison terms. The authorities have facilitated a campaign of incitement to hatred against them, which has seen the distribution of anti-Baha’i pamphlets, the use of anti-Baha’i rhetoric in Friday sermons in Semnan mosques and, perhaps most disturbingly of all, schoolchildren being targeted for insults, mistreatment and even physical violence. Fellow pupils have been encouraged by teachers to hurt their Baha’i classmates physically, and administrators have sought to segregate Baha’i students from their peers.

The Baha’i community of the UK is therefore deeply concerned that the Iranian authorities are using Semnan as a training site for refining and improving their methods of oppressing Iranian Baha’is nationwide. The goals of that campaign appear to be aligned with an infamous Government policy memorandum from 1991, which effects a policy of the extirpation of every Baha’i community in Iran. The memorandum states that the Government’s dealings with the Baha’is must be conducted in a way that blocks their progress and development. It goes on to give clear instructions for the expulsion of Baha’is from higher education and for Baha’i children to be enrolled only in schools with

“a strong and imposing ideology”.

It also instructs that individuals who identify themselves as Baha’i be denied employment.

[Mr Nigel Dodds (Belfast North) (DUP)]

I thank the hon. Lady for bringing the matter to the attention of the House. I have had frequent meetings with Peter Black from the Baha’i community in my constituency about such issues. This House and country are very good, both domestically and in their representations, on the issue of the persecution of the Baha’i in Iran. Does she believe that the EU could do more as a whole to press Iran to stop the persecution and prevent the ultimate destruction of the Baha’is there?

[Naomi Long]

The international community can do a huge amount, and the EU has to play its role in that. The Government have shown great leadership, and I am about to make specific requests based on where they can show further leadership.

The situation is clearly grave, and the treatment of the Baha’i community is an indicator of the lengths to which the Iranian authorities are willing to go in the persecution of religious and cultural minorities. It is hugely important that the Government continue to speak with a strong voice on the international stage about human rights, of which freedom of religion and conscience are key. That is why I want to raise my concerns with the Minister today.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Lady for bringing this matter to Westminster Hall today. I have a significant and strong Baha’i community in Newtownards in my constituency. Members of that community have expressed concerns to me over the medical treatment of those who have been imprisoned. Does she agree that when someone with medical conditions is living in a cramped cell, those medical conditions worsen? Can the UK Government and the Minister in particular do something on that?

[Naomi Long]

That is a valid concern, which I hope will be addressed in what I ask the Minister and the Government to do.

The debate is timely, because the UN General Assembly third committee is reviewing Iran’s human rights record this week in New York, so, as I draw my remarks to a close, I have two specific requests. First, ahead of the UK co-sponsorship of a resolution on human rights in the Islamic Republic of Iran, will the Government make every possible effort to win support for the resolution from the widest representation of UN member states and to ensure that the resolution is adopted with the largest possible majority and thus carries the maximum weight of international opinion?

Secondly, in light of the reports by the Secretary-General and the special rapporteur, to which I referred earlier, will the Foreign Secretary request, as a matter of urgency, that the United Kingdom’s mission to the UN specifically raise the situation of the Baha’is in Iran at the dialogue of the third committee, with the special rapporteur on Iran and the special rapporteur on freedom of religion or belief, on 24 and 25 October, respectively? In doing so, the Government would not only place the sustained abuse and persecution of the Baha’i community in Iran in the international spotlight, thus creating pressure for that to end, but hold out hope to many people around the world, of all faiths and of none, that religious persecution will not go unseen or unchallenged by the international community and that the cause of religious freedom and freedom of conscience will have a strong, international advocate in the UK Government.

16:44

[The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)]

It is a pleasure to serve under your chairmanship, Mrs Main. I thank the hon. Member for Belfast East (Naomi Long) for the way in which she put her points across and congratulate her on securing the debate. I recognise what she said at the beginning of her speech; she has a long record of engaging with such matters and of encouraging those of minority faiths in Northern Ireland to work with others. Her record with Open Doors, which I know very well, and other organisations is consistent in seeking religious freedom for many different faiths in often difficult contexts. For that reason in particular, it is a pleasure to thank her for what she has already done and to respond to the debate. I thank the other hon. Members, who share such concerns, for the impressive turnout from both sides of the House.

As the hon. Lady made clear, the treatment of the Baha’i community in Iran is appalling, as is the wider human rights situation. That any state can treat its religious minorities in this way is shocking, and all the more so given the religious underpinning of the current regime and its oft-stated claim to respect human rights. What the hon. Lady set out clearly today is only a small part of the daily struggle of ordinary Baha’is and the continual and serious abuses they suffer in Iran. Sadly, such experiences are all too familiar to me; I have stood before the House on many occasions to express my deep concern and have met on a number of occasions representatives of the community in the UK who display their support for those in Iran.

In a sense, the hon. Lady and others have made the point that the issue is indivisible. Today, we are talking about the Baha’i community in particular, but we know that we could be talking about other minorities in Iran. An indivisible link brings all together—a attack on one is clearly an attack on all.

To set some context on Iran: there have been more than 300 executions so far this year; more journalists and bloggers are imprisoned there than in any other country in the world; numerous human rights defenders and lawyers languish in prison; opposition leaders are kept under house arrest; and religious and ethnic minorities are systematically persecuted. It is not a job half done.

Let me give an assessment of the current situation and explain what the UK is doing and will continue to do. For many years, Baha’is in Iran have experienced harassment, discrimination and violence in a systematic attempt by the Iranian state to repress their community. Iran justifies such actions on the basis of “national security”, “maintaining public order” and other such empty claims. As the hon. Lady mentioned, the Baha’i community points us to what appears to be a secret Iranian Government memorandum from 1991 that calls for the machinery of government to block the progress and development of the community. Whatever the origins of the memo, an observation of what has happened on the ground since then demonstrates that the objective of the Iranian Government and their attitude towards the Baha’i faith amounts to systematic persecution.

Events on the ground confirm a pattern of Baha’is being systematically deprived of their rights as Iranian citizens. They have been excluded from private and public sector jobs, denying them the ability to earn a living. They have been prevented from holding positions of influence in Iranian society. Their properties and businesses are seized and their homes, businesses and cemeteries attacked. Baha’i children are harassed in schools and their right to higher education is denied. Students are banned from universities if it becomes known that they are Baha’is, and those attempting to establish an alternative, through the Baha’i Institute of Higher Education, about which I have issued statements in the past, are arrested on charges of threatening national security.

Arrest and imprisonment is, sadly, a regular feature of Baha’i life. The seven Baha’i leaders arrested in 2008 remain in prison. They are serving lengthy prison sentences of 20 years, having been subjected to unfair trials that did not comply with even Iran’s laws. Many others have been arrested and imprisoned, often on spurious charges and in defiance of the rule of law. The experience of the Baha’is in being let down by Iran’s judicial system reflects a situation that is all too common for the Iranian population as a whole. The use of violence and incitement to violence by fellow Iranians against the Baha’is sadly appears to be building. Reports received by Baha’is from followers in Semnan province in the north of Iran suggest an escalation of persecution by the Government and intensification of the existing policies of monitoring, discrimination and harassment.

There are alarming signs of a clampdown on Baha’i economic activity there, such as the raiding and closure by Intelligence Ministry officials in May of two factories that were fully or partially owned by Baha’is. On 17 October we received worrying reports of the arrest elsewhere in Iran of a further 17 followers of the Baha’i faith. As yet, it is unclear why they were arrested and whether they will be charged with any crimes.

The situation of the Baha’is in Iran is just one illustration of Iran’s many human rights failings and its lack of respect for the rule of law. This is a regime that appears unconcerned by the absence of a fair trial and that detains and mistreats people at will. Such shameful behaviour lies at the root of many of the abuses perpetrated by the regime.

Challenges to the Iranian authorities on its record have been dismissed or met with silence. The effect is a growing impunity for the perpetrators of human rights violations. That is having a further chilling effect on respect for human rights in Iran. Iran’s continual refusal to change course, or even to engage on the issue in a meaningful way, is simply deplorable.

In terms of what we have been doing and will continue to do, and our interaction with other international agencies, the British Government do not let such things pass. We will continue to monitor closely, and speak out against, persecution of religious minorities in Iran, including the Baha’is, which flies not only in the face of international law, but does not comply with Iran’s own laws or professed values.

I and my ministerial colleagues condemn all instances of violence and discrimination against individuals or groups because of their religion. We strongly support the right to freedom of religion or belief, as defined by the UN’s major human rights treaties. The promotion of human rights, including religious freedom, is central to British foreign policy. We regularly make clear to overseas Governments the importance we place on religious tolerance and eliminating all legal provisions and policies that discriminate against religious believers.

Accordingly, we remain, and will continue to remain, at the forefront of international condemnation of Iran’s behaviour against the Baha’is and other religious minorities such as Christians and Sunni Muslims.

On the wider human rights situation, the UK has played a leading role in introducing EU human rights sanctions against 77 individuals responsible for human rights abuses in Iran. We will review those again next year with EU partners.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate the hon. Member for Belfast East (Naomi Long) on securing this important debate. The Minister spells out clearly the firm actions that the UK Government have taken and they are to be commended. Does such action have any positive impacts on the treatment of Baha’is in Iran?

[Alistair Burt]

The honest answer is that it is genuinely difficult to tell. It is a closed society and it is difficult to get information, but the objective information we get is not good. However, what it does have an impact on is the population. The UK is not so daft as to believe that the Iranian regime speaks for all the Iranian people. We monitor carefully what the Iranian people say to each other, on social network sites and the like. The Iranian people are a savvy internationally based people. They are actually more aware and concerned about their human rights position than perhaps they appear to be in relation to, say, the nuclear file and the nuclear issue. They are disturbed that there is a sense that as a good Muslim nation they are put in the dock for offences committed by their own Government that they feel very keenly about. Accordingly, although there may not be an impact every day on the day-to-day life of Baha’is or other minorities, the sense of outrage of the Iranian people is building up. That is why it is so important to raise such issues, for us to talk about them in Parliament and for us to do things through the international agencies—as I shall come to—in order to ensure this is known to the Iranian people.

[Jim Shannon]

In other countries of the world where there are more democratic societies, Red Cross would be able to visit prisoners in jail and give some help. Red Crescent is the equivalent in the middle east. Has contact been made with Red Crescent, for instance, to visit those prisoners if possible to see how they are getting on and whether they need help?

[Alistair Burt]

That is a good question to which I do not have the answer at my fingertips. I know that in some cases it has not been possible for Red Crescent to visit detainees, and occasionally Red Cross as well in appropriate countries, which is an offence against human rights. However, Iran’s human rights abuses make a pretty long list. I will inquire about that and write to the hon. Gentleman and copy it to the hon. Member for Belfast East.

As I have said, in the wider human rights situation, we do believe those human rights sanctions have an international impact.

The hon. Lady mentioned the annual resolution at the UN General Assembly being tabled by Canada. I can assure her that not only do we support it but we are actively lobbying for more states to support that resolution. That is again an example of the international condemnation that takes away the floor from Iran when it tries to claim that it has international friends and that it is only a select number of western countries and Israel that tend to be against it. This international condemnation gives the lie to that. In relation to the hon. Lady’s other concern, we will refer specifically to Baha’is in our intervention at the UN. We will make sure that is specifically on our agenda.

We actively lobbied for the appointment by the UN Human Rights Council in March 2011 of a UN special rapporteur on the human rights situation in Iran, Dr Ahmed Shaheed, with whom I have spoken a number of times. We will continue to support him in his crucial role of investigating human rights violations and seeking genuine engagement from Iran to address international concerns. His latest report, being presented today, and on which we will comment, further confirms our picture of a terrible situation for Iran’s Baha’i community.

The hon. Lady quoted the UN Secretary-General. I can do no better than say again myself that he said

“systematic persecution of members of the Baha’i community, including severe socio-economic pressure and arrests and detention”

are the substance of Iranian response to the Baha’i faith.

[Mark Durkan (Foyle) (SDLP)]

I thank the Minister for giving way and acknowledge his diligence on this and other issues. I also commend the hon. Member for Belfast East (Naomi Long). Will the Minister indicate whether it would be possible, without posing any risk of reprisals on, or further suppression of, Baha’is, for diplomatic players from the EU to have any more active and direct engagement with the Baha’i community in the current context, at least as a way of mitigating the sense of isolation and helplessness that they must feel as a community suffering compound persecution?

[Alistair Burt]

I think we would take advice locally as to what would be the best form of engagement with the Baha’i community. We would not want to do anything that would make life more difficult. It is a closed society so getting in to see representatives locally can be difficult. Those who are able to come outside Iran and make contact with others in order to tell the truth about what is happening and engage are warmly welcomed. We can certainly ensure we do as much of that as possible.

While Iran has on occasion suggested dialogue with the international community on its human rights record, it repeatedly fails to follow that up, so we do not judge its efforts to be genuine. For example, Iran has yet to respond to the recommendations either of the UN Human Rights Committee, following its examination under the international covenant on civil and political rights, or of the UN special rapporteur in his report to the Human Rights Council of March 2012. Nor has it shown or reported any progress in implementing its universal periodic review before the UN Human Rights Council. I am afraid we have to judge them by what they do.

Our message to Iran is that we will not tire of asking difficult questions and highlighting human rights violations where we find them, until Iran takes real steps needed to address our concerns. The persecution of Baha’i and other religious minorities in Iran must stop, and the Iranian regime’s wider repression of minority or alternative views must end, too. Iran has a shameful record of detentions of human rights defenders, journalists and bloggers, and seems callously ready to use tools such as the death penalty with abandon in order to intimidate.

The quiet determination of the Baha’i to co-exist peacefully with fellow Iranians as part of a diverse and tolerant Iranian society should be embraced by Iran’s Government. We will continue to call on Iran to improve its appalling behaviour and we will not waiver in our support for the plight of the Baha’i.

Question put and agreed to.

16:59

Sitting adjourned.

Written Ministerial Statements

Wednesday 24th October 2012 Written Statements

Wednesday 24 October 2012

Funding Reform (Wales)

Wednesday 24th October 2012 Written Statements

[The Chief Secretary to the Treasury (Danny Alexander)]

The Secretary of State for Wales and I are pleased to publish the statement on funding reform that has been agreed jointly with the Welsh Government, copies of which have been deposited in the Libraries of both Houses. The statement follows a year-long process of talks between the two Governments and addresses Welsh devolved funding, the case for capital borrowing powers and wider fiscal reform.

Counter-Terrorist Asset Freezing Regime

Wednesday 24th October 2012 Written Statements

[The Financial Secretary to the Treasury (Greg Clark)]

Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report quarterly to Parliament on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolution (UNSCR) 1373.

This is the seventh report under TAFA 2010 and it covers the period from 1 July 2012 to 30 September 2012. This report also covers the UK implementation of the UN al-Qaeda asset-freezing regime and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the UN al-Qaeda asset-freezing regime, the UN has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under the Al-Qaeda (Asset-Freezing) Regulations 2011. Under EU regulation 2580/2001, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

Annexes 1 and 2 to this statement provide a breakdown by name of all those designated by the UK and the EU in pursuance of UN Security Council resolution 1373.

The following table sets out the key asset-freezing activity in the UK during the quarter ended 30 September 2012:

Police (Remuneration)

Wednesday 24th October 2012 Written Statements

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

On 27 March 2012 I issued a written statement to the House, Official Report, column 126WS on the Government’s response to Tom Winsor’s final report of his review of remuneration and conditions of service for police officers and staff in England and Wales.

In that statement I committed to consult with partners on proposals for implementing changes to the police officer pay machinery, including establishing a pay review body for officers.

I can confirm that the consultation on the implementation of this important reform will launch today on 24 October and close on 21 December. The consultation document and online questionnaire will be available on the Home Office website. My Department will ensure that all interested parties are aware of the launch of this consultation, including the Association of Chief Police Officers, the Police Federation and the Police Superintendents’ Association, to ensure that the views of police officers are heard. My Department will also work with the Association of Police Authorities, soon to be the Association of Police and Crime Commissioners (PCC), to ensure that PCCs have the opportunity to respond to the consultation when they take office. I would also welcome responses from other interested organisations and individuals.

The changes to the way in which police pay and conditions are determined, including establishing a pay review body, are part of a wider police reform agenda including the introduction of police and crime commissioners, the reduction in bureaucracy, developing professionalism in the service and the creation of the police professional body, and improving service to the public through collaboration between police forces. Police officers deserve to have pay and workforce arrangements that recognise the vital role they play in fighting crime and keeping the public safe, and enable them to deliver effectively for the public.

A copy of the consultation document is also available in the House Library and I will report to the House on the results of the consultation exercises early next year.

EU Readmission Agreement with Turkey

Wednesday 24th October 2012 Written Statements

[The Minister for Immigration (Mr Mark Harper)]

The Government have decided to opt in to the draft Council decision concerning the conclusion of the agreement between the European Union and Turkey on the readmission of persons residing without authorisation (European Union Document No. 11743/12, COM(12) 239).

The readmission agreement will formalise reciprocal arrangements to document and remove illegal entrants from the EU and Turkey. After three years it will also apply to third-country nationals who have passed through the territory of individual member states and Turkey, where efforts have first been made to return the migrant directly to his or her country of origin.

The Government welcome the readmission agreement, which we believe will be valuable in easing the pressures on our border and form an important part of broader co-operation with Turkey on a wide range of justice and home affairs matters.

The agreement will help tackle the flow of illegal migration to the UK by making sure that every country in the EU has good arrangements for returns, so that would-be illegal entrants are removed before they reach our border. Participating in the agreement also makes clear the Government’s intention to stay active in addressing a range of strategic interests that the EU and Turkey share. They include not just migration, but tackling terrorism and transnational organised crime, and promoting judicial co-operation in civil and criminal matters.

Schengen Information System

Wednesday 24th October 2012 Written Statements

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

The Government have decided not to exercise their right, under protocol 19 to the treaty on the functioning of the European Union (the Schengen protocol) and the treaty on European Union, to opt out of the regulation on migration from the Schengen information system (SIS 1+) to the second generation Schengen information system (SIS II).

The Government have taken this decision in accordance with the commitment in the coalition agreement, which states that we will approach legislation in the area of security and criminal justice on a case-by-case basis, with a view to maximising our country’s security, protecting Britain’s civil liberties and preserving the integrity of our criminal justice system.

Justice and Home Affairs Council

Wednesday 24th October 2012 Written Statements

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

The Justice and Home Affairs (JHA) Council is due to be held on 25 and 26 October in Luxembourg. My right hon. Friend the Secretary of State for Justice and I will attend on behalf of the United Kingdom. As the provisional agenda stands, the following items will be discussed.

The Council will begin in mixed committee with Norway, Iceland, Liechtenstein and Switzerland (non-EU Schengen states) where there will be an update on the second generation Schengen information system (SIS II). The UK will continue to reiterate its support for the continuation of the current SIS II project. The Commission has committed to deliver the central element of SIS II in early 2013.

Next the Council will note a short update from the presidency on Bulgarian and Romanian accession to the Schengen acquis.

Greece, the Commission, Frontex and the European Asylum Support Office will provide an update on progress in implementing Greece’s national action plan on asylum reform and migration management. The Council will be asked to note that the action plan will be revised ahead of December’s JHA Council and, following the recommendation of various member states including the UK, we anticipate it will incorporate benchmarks to enable sustainable progress towards Greece establishing a functional asylum and migration system. The UK welcomes this development and the recent momentum in tackling migratory pressures in Greece, but hopes that the operational expertise of member states will be fully utilised in the setting of benchmarks, and in implementing the revised action plan.

The Commission and Frontex will provide presentations on latest illegal immigration trends. This will provide an opportunity for member states to highlight current priorities on tackling illegal immigration as set out in the road map on EU action on migratory pressures. Like other member states, the UK considers it important that illegal immigration remains a Council priority, and believes the road map must continue to be a tool that drives action rather than a bureaucratic process. The UK is one of the co-drivers of action on abuse of free movement by third-country nationals, as set out in the road map, and we continue to work with other member states, the Commission and EU partners seeking further practical progress in this area.

There will be an exchange of views around the third report on the post-visa liberalisation monitoring for the western Balkan countries in accordance with the Commission statement of 8 November 2010. This concerns the decision to grant visa-free travel to citizens of the western Balkan countries. The purpose of the third report is to present the actions undertaken under the post-visa liberalisation monitoring mechanism following the first and second Commission staff working papers in May and December 2011; to assess the progress made in the relevant Western Balkan countries after the last assessment (December 2011); and to identify the next steps and the concrete actions to be taken. Although the UK will not implement any of the changes following visa liberalisation, we can support the Commission’s approach in seeking to use visa liberalisation agreements as a way of encouraging the adoption of measures laid out in the visa dialogue road maps. The UK also supports the measures being introduced to combat abuse following the introduction of visa liberalisation agreements.

Over lunch there will be a discussion on intra-EU relocation of beneficiaries of international protection. The UK will emphasise the importance of practical co-operation as the expression of “solidarity” rather than relocation, and the need to ensure any proposal for action in this area does not go ahead until it can be demonstrated that the lessons of the previous project (in Malta) have been learnt.

The main Council will start with a “state of play” discussion on the civil protection mechanism. The UK would want to restrict the role of the Commission and encourage a risk-based approach to disaster risk management while retaining primary responsibility with member states. The UK also supports the concept of a voluntary pool of assets while ensuring that any common funding is limited to areas where there is demonstrable added value.

There will be a “state of play” discussion on the common European asylum system (CEAS). The presidency are keen to make as much progress as possible on the CEAS by the end of the year. The UK has opted in to the Dublin (III) regulation and the new Eurodac proposal. The UK has not opted in to the three other directives.

There will also be a state of play discussion on the establishment of a regional protection programme in response to the Syrian crisis. The presidency remains highly concerned about the situation in Syria and is keen to ensure that the EU helps neighbouring countries build their capacity to host any resulting refugees. They will be seeking Council agreement for the establishment of a regional protection programme for Syria. The UK is supportive of this in principle, while cautious about the detail of such a proposal, particularly if a significant resettlement element is envisaged.

The presidency will be seeking to adopt the Council conclusions on the protection of soft targets from terrorist activities. While the conclusions do not identify any new areas of work which are not already under way under CONTEST (the UK’s strategy for countering terrorism), international collaboration is essential and we support the presidency’s initiative, particularly in relation to the sharing of experience and best practice in protecting soft targets.

An implementation report is also being presented to the Council for adoption on enhancing the links between internal and external aspects of counter-terrorism. This capitalises on the opportunity to bring together the aims and activities of the internal and external aspects of counter-terrorism in the EU. The UK endorses the draft implementation plan and is pleased to note that our comments have been incorporated into the revised document. In both of these initiatives the UK has stressed that national security is a member state competence.

Under any other business there will be a presentation by the Commission on the illicit trafficking of firearms. The Council will also be updated on the European border surveillance system (EUROSUR) regulation, Schengen governance proposals and the EU Visa Regulation (539).

The justice day will begin with a state of play update and an orientation debate on the proposed draft directive creating minimum standards on the freezing and confiscation of proceeds of crime. The aim of the directive is to establish minimum standards in the freezing and confiscation of the proceeds and instrumentalities of crime in the EU. The proposed directive was last discussed at Council level at the informal meeting in July. The UK has not opted in to the proposed directive but will look to engage in the negotiations with a view to considering opting in at the post-adoption stage. The Cypriot presidency are committed to making substantial progress on the directive during their presidency.

The presidency will provide a state of play update which will be followed by an orientation debate on the proposal on criminal sanctions for insider dealing and market manipulation. The aims of the proposal are to establish minimum EU rules concerning the definition of criminal offences of market abuse—namely, insider dealing and market manipulation. The directive also seeks to complement the broader framework for tackling market abuse, which is provided for in the larger accompanying market abuse regulation. A partial general approach was agreed at the April JHA Council earlier this year. The UK has not opted in to this directive.

The Commission will be making a presentation on its proposed directive on the protection of the financial interests of the EU by criminal law (“the PFI directive”) which it published in 23 July this year. The draft directive would repeal and replace the existing EU convention and protocols on protection of financial interests (PFI). It proposes measures that aim to improve the equivalence and effectiveness of protection of the EU’s financial interests by criminal law sanctions.

A state of play report will also be given on the proposed regulation on the protection of individuals with regard to the processing of personal data and on the free flow of such data. The Commission published new legislative proposals for data protection in January which consist of a regulation and a directive. The proposed regulation will set out a general EU framework for data protection which would replace the existing Data Protection Directive (95/46/EC). This was last discussed at this level at the July informal Council.

Under non-legislative items the presidency will also be discussing the recommendations on the fifth report on mutual evaluations on financial crime and financial investigations. The report forms the latest of a series of mutual evaluations of how member states have carried out their obligations in the fight against organised crime.

Also under non-legislative items there will be a presentation on the state of the drug problem in Europe by the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA).

Northern Ireland (Threat Level)

Wednesday 24th October 2012 Written Statements

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

Today the Security Service reduced the threat level to Great Britain from Northern Ireland-related terrorism from substantial to moderate. This means that a terrorist attack is possible, but not likely.

The threat level to the UK from international terrorism remains at substantial, which means that an attack is a strong possibility. The threat level to Northern Ireland from Northern Ireland-related terrorism remains at severe, meaning that an attack is highly likely. Neither of these two levels has changed.

Despite the change which has been made today, there remains a real and serious threat against the United Kingdom from terrorism and I would ask the public to remain vigilant and to report any suspicious activity to the police.

The decision to change this threat level is taken by the Security Service independently of Ministers and is based on the very latest intelligence, considering factors such as capability, intent and time scale. Threat levels are kept under constant review.

College of Policing

Wednesday 24th October 2012 Written Statements

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

In July I set out further information about the establishment of a professional body for policing, the College of Policing.

I can now update the House with progress on its establishment.

I am very pleased to announce my intention to appoint Alex Marshall as chief executive officer of the college. As chief constable of Hampshire and the Isle of Wight, Alex has overseen four consecutive years of crime reduction, rolled-out mobile data terminals to front-line officers and delivered around £40 million in savings. He has also maintained the numbers of police officers and police staff in visible local policing roles across Hampshire. Alex has also played a pivotal role in the formation of the national police air service which became operational earlier this month.

My Department has now legally incorporated a company limited by guarantee under the name “College of Policing Limited”. The college will become operational in December 2012. The college will be established on a statutory basis as soon as parliamentary time allows.

Creation of the College of Policing represents the final stage of the commitment to close the National Policing Improvement Agency by the end of 2012

Grand Committee

Wednesday 24th October 2012 Grand Committee

Wednesday, 24 October 2012.

Arrangement of Business

Wednesday 24th October 2012 Grand Committee

Announcement

15:45

[The Deputy Chairman of Committees (Baroness Fookes)]

My Lords, I give the usual reminder that if there is a Division in the Chamber, we adjourn for 10 minutes.

Welfare of Wild Animals in Travelling Circuses (England) Regulations 2012

Wednesday 24th October 2012 Grand Committee

Considered in Grand Committee

15:45

Moved by

[Lord De Mauley]

That the Grand Committee do report to the House that it has considered the Welfare of Wild Animals in Travelling Circuses (England) Regulations 2012.

Relevant document: 7th Report from the Joint Committee on Statutory Instruments

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley)]

My Lords, these regulations mark the first step in delivering the Government’s policy on the use of wild animals in travelling circuses. That policy was set out in Written Ministerial Statements by my noble friend Lord Taylor of Holbeach to the House on 1 March and 12 July. The Government are introducing regulations now to address welfare concerns surrounding wild animals in travelling circuses.

Noble Lords are aware that we are intending to ban the use of wild animals in travelling circuses on ethical grounds via primary legislation. Given the time needed for the Government to prepare and Parliament to scrutinise and debate such banning legislation, as well as any reasonable time allowed for the circuses themselves to adjust to a ban, the regulations are necessary to set clear welfare standards for any travelling circus wishing to operate in England that uses a wild animal.

The regulations will fill a gap in legislation. Whereas zoos or private collections require licences to keep certain wild species, circuses keeping the same animals are exempt. Due to the travelling nature of circuses, the regulations will be administered and enforced centrally by Defra, with inspections by appropriately qualified veterinary inspectors drawn from the existing list of zoo licensing veterinary inspectors.

All travelling circuses that include wild animals will require licences. The annual fee for a licence has been calculated to cover the administration cost to Defra. Additionally, circuses will have to pay the full cost of inspections as well as for any improvements to their facilities and procedures that may be required. The inspection fee in these regulations mirrors that of zoo licensing veterinary inspections.

The number of inspections required is not stipulated in the regulations in order to allow flexibility to ensure that standards are being met. However, we envisage that there will be at least three inspections per licence period: announced inspections at winter quarters and while on tour, plus at least one unannounced inspection.

Operators will have to supply Defra with a stock list of the wild animals to be covered by the licence. Detailed records for each licensed animal must be kept. Only wild animals on the stock list may form part of the travelling circus and circuses must notify Defra when they intend to add a wild animal. They must also inform Defra of their tour itinerary well in advance of the first performance.

Each circus must appoint a lead vet who has appropriate expertise to understand the needs of, and be able to treat, licensed animals. Quarterly checks are required of all licensed animals, conducted by a veterinary surgeon with appropriate expertise, in addition to any sporadic visits, for example, to treat animal illnesses. At least two of these quarterly visits must be conducted by the lead vet, one at winter quarters and one on tour. Detailed group and individual care plans must be prepared, agreed by the lead vet, and followed at all times. They must be reviewed regularly by a veterinary surgeon.

Unsupervised access to licensed animals will be restricted to persons with appropriate qualifications or experience. Circuses must maintain a list of the persons authorised to access and care for the licensed animals, and ensure adequate staffing levels. A list of those persons on duty looking after licensed animals must be clearly displayed to staff.

The regulations also set out welfare conditions that cover a licensed animal’s environment including diet, transportation, use during display, training and performance. These requirements are supported by guidance setting out good practice when meeting the needs of licensed animals. Supplementary guidance is provided for some species, especially those known to have been used recently in travelling circuses.

These regulations address concerns surrounding the use of wild animals in travelling circuses. For the first time there will be a set of clear welfare standards that all travelling circuses with wild animals must follow. While we are developing the promised ban on ethical grounds, we are confident that these regulations, combined with the provisions of the Animal Welfare Act 2006, will provide significant protection for wild animals in travelling circuses, and I commend them to the Committee.

[Baroness Parminter]

I thank the Minister for his comments reiterating the Government’s commitment to move towards a ban on the use of wild animals in travelling circuses. That is clearly the will of the majority of the general public, the House of Commons and, I am sure, many Members in this House. Although I do not want to make any party political points, it is also Liberal Democrat Party policy.

The best that I can say about these regulations is that I do not oppose them as a temporary measure; indeed, it is clear that they may improve the protection of the welfare of animals kept in circuses. However, it would be fair to say that the majority view among the welfare organisations and indeed the veterinary profession is that adequate regulations cannot be put in place to guarantee the welfare of wild animals used in travelling circuses.

I have three questions for the Minister. The first relates to the standards that have been put forward in relation to comparative industries. There is a debate about whether these regulations are at a lower standard than those of the comparable industry of zoos. The example used is that of elephants. According to these regulations they would have between one-sixth to one-quarter of the space that they would get in a standard zoo. Indeed, under these regulations elephants can be chained and confined every night on the road. Do we feel that these welfare standards are comparable with comparative industries?

Secondly, having been through the impact assessment very carefully, I could not find notification of any animal welfare organisations, or indeed any veterinary organisations, that are in favour of these regulations. I understand that a majority of animal welfare groups—all of the major animal welfare groups—declined to participate in the consultation. While the BVA—the British Veterinary Association—did participate, it is opposed in principle to regulation. Are there any major welfare or veterinary organisations in this country that favour going down the route of regulation rather than moving straight to a ban? Given that 95% of the respondents to the consultation were in favour of the outright ban that the Minister recommitted the Government to move towards, were there any outstanding legal concerns where a ban based on ethical grounds could be challenged if it was undertaken under Section 12 of the 2006 Act, as ethical grounds may not be deemed sufficient for its purposes?

[Lord Kirkhill]

My Lady Chairman—is that the correct form of address?

[The Deputy Chairman of Committees]

In fact, I am the Lord Chairman, but we follow the normal custom of addressing Members of the Committee as “My Lords”.

[Lord Kirkhill]

I fully accept that definitive assessment.

My view is that Defra has been playing around with this for many a long day without real purpose. It is clear that primary legislation is required to ban the use of wild animals in circuses. What we are told—and one has to accept it because it is obvious—is that primary legislation takes some time to create.

Nevertheless, while one can concede—and I do—that these regulations are an improvement on the existing situation, we have to remember that the whole concept of the circus is built on cruelty. It is built on prodding and whipping the animals. It is built on the fact that poor-quality staff are employed; and behind the scenes cruel practice exists in training. Although the committee of experts suggested that the animals were not at hazard, were well fed, watered and so on, nevertheless they are cribbed, cabined and confined. They have to travel around and they are much restricted. You only have to see behind the scenes, as I have done over the years, a trainer raising a whip and an animal immediately or very often subsiding. It is clear that much cruelty is involved.

[Lord Gilbert]

I apologise, but my name is up on the Annunciator and it is not me speaking. I would hate for my noble friend to be mistaken for me. That would be quite unfair.

[Lord Kirkhill]

My goodness me. Given my noble friend’s advanced age, he gets up on his feet rather more quickly than I do. I must admit that the noble Lord, Lord Forsyth of Drumlean, stopped me in the Corridor the other day and said, “Lord Gilbert, that is a splendid contribution you have just made”. After all, I am a good-looking chap and my noble friend is just Lord Gilbert. You have to take that into account.

At any rate, I do not wish to say more. I have expressed my views. These regulations are marginally better, but my true condemnation is of Defra. I honestly believe that it has dragged its feet on this issue for years.

[Lord Colwyn]

My Lords, I received an e-mail from the animal welfare groups, which raised a number of concerns. The RSPCA, the BVA, the Born Free Foundation and CAPS asked me to attend these discussions on the regulations because they said that they were unenforceable, unethical, ineffective and in conflict with the Government’s promises.

I listened to my noble friend’s introduction which I think made it quite clear that these concerns are significantly overplayed. The regulations will, for the first time, set in law tough but clear welfare standards for those few remaining travelling circuses in England that use wild animals. They will require these travelling circuses to be licensed, with regular inspections by Defra-appointed inspectors, as well as routine visits by vets, which will ensure that high welfare standards are maintained.

When I saw this statutory instrument down for discussion, I rang my good friends Toti and Nell Gifford. These two wonderful people own a travelling circus in the Gloucestershire area. They do not have any wild animals. In fact, last time I saw them, the wild animal act involved a goose and some ducks, and they are not at all described as domesticated. They have horses, bareback riders, clowns and acrobats. I was hoping for some help from Nell and Toti with my remarks, but they are obviously busy with the circus and have no time for paperwork. However, a short e-mail eventually arrived the day before yesterday. He told me that all he wants to happen,

“is that animals that are used in circuses should have the highest standards of husbandry and should be monitored frequently, preferably with input from professionals from outside the entertainment sector—eg wildlife conservationists. In the case of horses, it would be helpful to seek the co-operation of the BHS to create a trade standard or operational certificate”.

The regulations achieve this.

The use and welfare of any animals, domesticated or wild, in circuses is understandably a matter of public concern. These regulations respond to the welfare concerns by ensuring that circus operators will now know what is expected of them, and the public will know that these standards are being enforced.

15:59

[Lord Redesdale]

My Lords, I have not carried out the same amount of research as the noble Lord, Lord Colwyn, but I did watch “Madagascar 3” on the airplane coming back from Doha the other day. That is an interesting film as the prevailing mood is that wild animals should not be used in circuses but in that major blockbuster the zoo animals own a circus. I raise that point as it is interesting to see how trends change.

We are talking about a total of between 30 and 50 animals, with the consensus being around 39. These stopgap measures are useful as they will increase costs. Consequently, many circuses will consider whether it is economically viable to continue to keep wild animals given that the whole industry has an estimated turnover of a mere £2 million. When one considers the number of circuses in existence, that figure shows that it is not the most lucrative of professions.

My son requested me to ask the following question as we visit Zippos Circus, which comes to Hampstead Heath once a year. Last year I noticed protestors complaining about the use of horses. I was extremely impressed by the circus’s standards of animal welfare for its domesticated animals such as horses and budgerigars. I asked the Minister earlier to ensure that budgerigars are not considered to be wild animals in this context. I very much hope that he will take into account the cost of veterinary intervention. Obviously, I am against the use of wild animals in circuses but I hope that the cost of veterinary intervention for domesticated animals—that does not seem to be a massive issue at present—has been taken into account.

[Lord Knight of Weymouth]

My Lords, I welcome some movement on this issue by Defra because, like others, including the noble Lord, Lord Kirkhill, I very much agree that the use of wild animals in circuses is not appropriate. However, I am not talking about domesticated animals. I also agree that wild animals are treated cruelly in circuses. I noted the Minister’s comment right at the beginning of his speech that this measure is the first step towards introducing a ban on ethical grounds. I hope that when he winds up he will say whether the Government will stick to the commitment made by his predecessor to introduce an ethical ban in this Parliament. That would enforce the will of the other place which voted unanimously to introduce such a ban, using Section 12 of the Animal Welfare Act. The Minister’s noble friend Lady Parminter asked about Defra’s latest opinion regarding the legal position of such a ban. It would be interesting to hear the answer to that question as well.

I strongly support the principle of a ban. Some worry that bringing forward regulations that last for seven years, with a review after five years, might undermine the notion that there is any momentum behind that principle. However, I was pleased to hear the Minister say that this measure is the first step and if he can reassure us on the timeline, I would be most grateful. Clearly, we need to improve welfare standards. That is the reason why I oppose the use of wild animals in circuses. In so far as it goes there is some merit in these regulations in improving those standards. However, it is worth asking whether it would have been easier, cheaper and clearer to go for an outright ban. Those circuses that use wild animals would hear that message and a timeline set out by government and would phase them out over the intervening couple of years rather than getting used to a new set of regulations which are only temporary anyway, which may be phased out in favour of the ban on which there is all-party agreement.

Reference was made obliquely, which I wish to address head on, as to whether the enforcement mechanism in these regulations is flawed. Clearly, if we are bringing forward regulations that are not going to work and that are only temporary anyway, there is not very much point in proceeding.

I am most grateful to the RSPCA and the Born Free Foundation for forwarding me the joint briefing they have prepared and in which they go into some detail. I have copied relevant sections to the Minister so that he could have time properly to consider the argument they made. I shall summarise it. The main sanction in these regulations is to suspend the licence. If the licence is suspended, something has to happen to the animals that are then being held without a licence. Regulations state that a licence is required for any place where a wild animal associated with such a circus is kept. Therefore keeping them where the circus is is not an option unless, I guess, the circus holds an alternative licence for that location, which is extremely unlikely, given that we are talking about a travelling circus. Moving the animals is possible only if the site where the animals are held during the suspension also holds a licence. Any site that held the animals without a licence would find itself in contravention of the regulations. Given that suspensions come into effect immediately and initial granting of a licence requires prior inspection by a Defra inspector, plus the relevant fees to be paid et cetera, that clearly is not a practical solution either, unless the expectation is that the circus owner would hold an additional licence for their home site to cover this eventuality, if he is allowed to move them to that alternative site under this licensing regime, which seems a bit unlikely, given my reading of the regulations.

The only other possible option—unless the Minister tells me otherwise—is moving animals to another licensed circus during a suspension, again, if the circus is allowed to move them. However, given that we have heard from the Minister that the Secretary of State is required to have 14 days’ notice if a wild animal is introduced to any circus—I guess to add it to the stock list that the Minister referred to in his opening comments—I cannot see how that will work either. There are real questions about whether these regulations are enforceable using the sanction set out. Even if the Minister is unable to do anything else, if he can answer that question I will go away happy that I have achieved something.

There are four other points that I would like to make briefly. The first is about whether the welfare standard is good enough. I have a fundamental problem, which is one I wrestled with in my brief tenure as a Defra Minister five years ago, and I never managed to resolve it. It is that the same animal could be held under different licence regimes if it was unfortunate enough to be moved about into different settings, and each has a different standard of welfare and husbandry attached to it. Let us take the example of a small primate: a marmoset monkey would be a common one. On a Monday, the marmoset might be held in a pet shop under a pet shop licence under a particular standard of welfare and then be sold and held under a dangerous wild animal licence in someone’s home, which is a different set of standards. Then perhaps that does not work out, as keeping primates as pets often does not work out, so on the Wednesday, the animal is sold to a circus. In the circus, it is held under another set of welfare and husbandry standards. Then perhaps the circus owner finds that this marmoset is not such an attraction and is not easily forced into doing the amusing things that punters want to pay for, so on the Thursday, the animal ends up in a zoo and is under another set of welfare standards, which are the highest welfare standards.

There are those who oppose zoos altogether, and we debated that the other day. It does not seem logical or credible that, if we are starting with the principle of animal welfare in how these animals should be kept, there are four different licensing regimes, and that is before I get into the distraction of the Home Office licensing regime if they are to be used for experimentation, because that is a whole different debate that I do not think we want to get into. I would like to see the welfare standards in these regulations at the highest current licence standard, which is the standard that we have for zoos, animal parks and rescue centres. I do not think that they deliver that and there is a real question about whether the welfare standards are good enough.

My second point is around the quality of the licensing inspections and the expertise that will be deployed in Condition 6(2) of the regulations dealing with the inspectors that the circus owners themselves would use. It is notable, for example, that in a famous case in 1997 of Mary Chipperfield Promotions in Hampshire, the farm was an official MAFF quarantine facility. It carried a Dangerous Wild Animals Act licence, it was registered under the performing animals regulation and the co-owner, Roger Crawley, was at the time a government zoo inspector. It had all sorts of regulations, which should have reassured us that this was a quality establishment. Yet the evidence eventually gathered at Mary Chipperfield’s facility, including that acquired by a friend of mine, Alison Cronin, who runs a Monkey World, led to the conviction on various charges of Mary Chipperfield, her elephant keeper and Roger Crawley for cruelty to a sick elephant.

That tells me that even at the highest standard of regulation we have had problems with animal welfare. We know of other examples of premises and circuses that had been inspected where the wool has been pulled over inspectors’ eyes over the training of elephants. Local authorities have some competence in this licensing regime and I am concerned about whether they consistently have the expertise available to them to do any of the licensing.

I note what the Minister said about the regulations being enforced by Defra using vets from the existing list of veterinarians. Obviously, I have every respect for the Royal College, for its self-regulation and the standards of vets. But I would like the Minister's reassurance that vets with a vested interest in circuses are not engaged on that list. We have a fundamental problem around the level of expertise in the veterinary population in dealing with some of these species of wild animals. Not many vets are experienced in dealing with elephants, lions, some of the other wild cats and the primates that may be kept in circuses. If any of those few are making a living out of working for circuses, there is a conflict of interest and I want some reassurance that those conflicted vets would not be engaged on the list.

My penultimate point is about travel time. I note that in Condition 10 of the regulations no maximum travel time has been listed. I recall a debate we had towards the end of the summer before the Recess about the transportation of horses. There was widespread concern across your Lordships' House about travel time for horses. Noble Lords probably share the same concern about travel time for wild animals and yet no maximum limit has been set. Why not?

Finally, there is the issue of new species and the ability in these regulations for circus operators to submit new species to Defra for inclusion in the stock list. Given that these regulations are temporary, I find a facility to include new species odd because it undermines the notion that a ban is coming pretty soon in this Parliament—if the previous promises are to be kept. But if there are good reasons for including new species, we should shift the presumption from Defra having to produce individual standards for those new species to the circus operators themselves having to provide evidence that any animals that they are adding to the stock list will not suffer. That would be more manageable for Defra and we would then have the presumption the right way round.

I am sorry to have spoken a lot longer than anyone else although I guess that that is sometimes my role in this place. Beyond the principle, I am most concerned about the enforcement mechanism. But if the Minister could also give me some answers about the welfare standards, the quality of the inspection, travel time and the arrangements for new species, I would be most grateful.

16:15

[Lord De Mauley]

My Lords, I am most grateful to all noble Lords for their comments and questions. I will do my best to address the points raised.

My noble friend Lady Parminter asked whether the regulations created a two-tier framework for animal welfare, particularly in comparison with zoos. If anything, the status quo signifies a two-tier system. While the Animal Welfare Act 2006 already applies, operators of travelling circuses that have wild animals are, in animal welfare terms, otherwise unregulated. The regulations will address that.

It is right that there are some differences in the detail of welfare standards because we are talking about very different operating environments and different sources of exercise and enrichment, but I do not accept that we are somehow making things worse through these regulations. It is right to introduce targeted welfare standards, inspections and enforcement for travelling circuses, which are exempt from other regimes that would protect the animals.

My noble friend asked specifically about chaining. The new regulations should be thought of as an extension to the Animal Welfare Act and its existing provisions. It is already a criminal offence to cause a circus animal unnecessary suffering or to fail to provide for its welfare needs. If anybody—welfare groups or a member of the public—has evidence of this happening, they should contact the relevant enforcement authority. These regulations will require regular announced but, more importantly, unannounced inspections, as well as routine veterinary visits. They also limit unsupervised wild animal access to a named group of suitably trained or experienced staff and they require circuses to keep detailed records of all aspects of the animal’s day-to-day life. If our inspectors discover any of these alleged cases of abuse or neglect, enforcement action should be taken.

My noble friend asked which welfare organisations were in favour of the regulations. The British Veterinary Zoological Society supports a regulatory approach. She also asked about the issue of the grounds for a ban. The 2007 Radford report on circus animals concluded that there was insufficient scientific evidence to demonstrate that travelling circuses are unable to meet the welfare needs of wild animals presently being used in the United Kingdom. The position of lack of scientific evidence has not changed. There is insufficient evidence that a ban is required for welfare reasons and any such ban would be vulnerable to challenge. That is what we must avoid.

Consequently, we are now looking carefully at the means by which a ban can be introduced on ethical grounds. There are a number of issues to consider in developing the ethical case and the exact nature of a ban. We must not rush primary legislation on such an emotive issue. We need to get it right. The detail must be correct to ensure that it will not fall at the first challenge. Nevertheless, we are determined to pursue this and we are confident that we will get there.

The noble Lord, Lord Kirkhill, suggested that Defra had been procrastinating. The situation has not changed since my noble friend Lord Taylor’s Written Ministerial Statement on 12 July that we expect to be able to publish draft legislation for pre-legislative scrutiny this Session. We are working on a draft Bill. He specifically raised the issue of elephants suffering under licensing. There is a far greater chance of uncovering animal abuse with regular licensing inspections than without. It should be remembered that the trial of the elephant Annie’s former keeper has not yet been resolved, so I cannot comment any further on that particular case and I am sure that noble Lords will understand that.

Generally, in answer to the noble Lord’s point about cruelty, it need hardly be said that training should not involve animal suffering. These standards prescribe that animals must receive immediate and tangible rewards and positive reinforcement when they exhibit desired behaviour during training and performance. They also prohibit seeking a desired behaviour from any animal in any way that would cause pain, suffering, injury or disease.

I thank my noble friend Lord Colwyn for his supportive words. My noble friend Lord Redesdale made some interesting points, which I have taken on board. I can confirm that the definition of “wild animal” is consistent with the Zoo Licensing Act 1981—therefore, budgerigars are not considered to be wild animals. Nevertheless, the Animal Welfare Act 2006 still applies of course.

The noble Lord, Lord Knight, raised a number of issues, some of which I have already addressed in answering other points. Regarding whether the period of seven years would conflict with a ban coming into place sooner than that, the regulations include the standard sunset provision. There is no connection to or conflict with this and the timescale of a ban. Government policy is that all new domestic regulations expire seven years after they are made. That does not prevent the licensing regulations becoming redundant earlier where their provisions are superseded by the proposed ban.

The noble Lord, Lord Knight, kindly raised with me in advance the enforcement provisions and how they would work. If a circus operator chooses not to comply with the law, it will be at risk of a licence suspension and possible revocation. The simple remedy is to comply or to cease using wild animals. It is important to understand what will happen in practice and already happens for other regulations. Ongoing dialogue between inspectors and operators will mean that a suspension could not come as a surprise to the operator. Only if the operator refuses to take action to restore compliance with licensing conditions will the possibility of a suspension arise. If a suspension notice is issued, it will clarify precisely what must be done and by when. Continued failure to comply would lead to revocation of a licence and prosecution. It is not the case that an operator would be prosecuted for taking steps identified in a suspension notice.

Compliance with the licensing conditions could be restored by the removal of all the animals of the affected species from the stock list of the circus. They will then be covered by a combination of the Dangerous Wild Animals Act 1976, the Zoo Licensing Act 1981 and, of course, the Animal Welfare Act 2006. The circus licensing regulations would no longer apply to those animals, and they would have to be removed from the circus.

I should add that neither the Joint Committee on Statutory Instruments nor the Secondary Legislation Scrutiny Committee has had any adverse comments on the enforceability of the regulations.

[Lord Knight of Weymouth]

I hope that the Committee will indulge me in asking a question. If the operator disagrees with the suspension of a licence and wants to appeal under Regulation 14, what will that operator do with his or her animals while waiting for the outcome? Clearly, paragraph (4) would allow the court to permit the operator to continue operating a travelling circus, which is a way out, but if the court were not minded to, my worry is that the animals would then be kept illegally. That is what I do not understand.

[Lord De Mauley]

I am sure that I will be able to give the noble Lord an answer to that question in a moment.

The noble Lord mentioned conflict of interest. Inspectors have been vetted for conflict of interest; the process already in use for zoos will be followed. He also raised a specific point about primates, which interested me. May I ask him to accept that today we are dealing with these regulations but I am quite happy to talk to him outside about the broader issue of the welfare of animals?

The noble Lord asked about new species. Any new animals introduced will be protected by the rigorous new standards required by the licensing scheme and will be inspected regularly, along with the species that are currently used. However, we cannot use regulations made under the Animal Welfare Act 2006 to prohibit the introduction of new animals outright. Any attempt to use these licensing regulations to prohibit the use of certain species would be highly vulnerable to legal challenge. Our position is that a ban via primary legislation on ethical grounds is the most secure way of achieving the successful ban we want. We cannot prevent the use of new animals until that primary legislation has been enacted.

The noble Lord asked about the period of time that animals may travel for. There must be a stationary period of at least 12 hours in any 24-hour period when the circus moves between venues or layover sites. During transport, animals should be offered water, feed and the opportunity to rest as appropriate to their species, age, health and physiological state. Licensed animals should not be taken from the transport vehicle during transport, except at pre-planned rest stops as defined in the journey plan or under emergency conditions. Every effort must be made to make a journey as comfortable as possible for the animals being transported, including adhering to all traffic laws.

On the noble Lord’s earlier point about enforcement and his supplementary question, suspension can be delayed in taking effect. If the court refuses to suspend the suspension, a fine can result. Enforcement and prosecution will produce compliance. I am not entirely sure that that satisfies the noble Lord, and I will write to him on that specific point. I hope that I have answered the main points raised by noble Lords. If I have not, I will write to them following the debate.

Specific legislation setting down welfare standards for animals with such complex welfare needs, especially in such a constantly changing environment, is long overdue. Similar species in more static environments have been subject to their own specific licensing legislation for at least 30 years. By contrast, wild animals in circuses have not been the specific subject of any legislation since an Act in the 1920s.

The Government have promised to bring forward primary legislation to ban wild animals from travelling circuses. This ban will be on ethical grounds and will, understandably, I hope, take a little time. It would not be right to rush legislation through Parliament that sought to prohibit an activity that has long been legal and for which it has proved hard to find evidence that an animal’s welfare is irredeemably compromised. However, the Government are satisfied that there is a risk that welfare issues need to be addressed. In the interim, the welfare of these animals is, of course, paramount. The Government believe that these regulations will safeguard the welfare of wild animals in travelling circuses while a ban is introduced.

Motion agreed.

Defence Capabilities: EUC Report

Wednesday 24th October 2012 Grand Committee

Motion to Take Note

16:28

Moved by

[Lord Teverson]

That the Grand Committee takes note of the Report of the European Union Committee on European Defence Capabilities: lessons from the past, signposts for the future (31st Report, Session 2010–12, HL Paper 292).

[Lord Teverson]

My Lords, we move from the defence of circus animals to the defence of the half a billion people who reside within the European Union and perhaps those beyond as well. I shall give a brief background, although noble Lords will be aware of most of it, to give a context and then go through some of our key recommendations and move forward from there to what I, as committee chair, see as the most important issues to be addressed in this area.

We should remember that the CSDP is very recent. It is just over 10 years old. In many ways, it arose out of the brave movement of the St Malo agreement, which took a lot of people by surprise at the time, and we could perhaps objectively and critically say that it did not fulfil its potential at the time.

In a way, there was an important area in which clarity of definition was made before that, in 1992 as part of the Western European Union, namely, the Petersberg tasks. It is important to remember what those are. They are all around humanitarian assistance, conflict prevention and peacekeeping, crisis management and peacemaking, and post-conflict stabilisation. To this day, I think that describes very well the role and the expanse of European Union defence capability and vision.

One thing that the European Union is certainly not about, nor does it intend at any time soon to be about, is territorial defence of the “homeland” of Europe from external threats. In fact, that is one of the problems in the defence world, because the majority of Europe’s population—although not all of it—do not see any conventional, external territorial threat to member states of the European Union, the exception being still the nervousness of some central and eastern European states, which understandably are still very nervous about the instability—in a political sense, and certainly in a long-term sense—of the Russian Federation and perhaps its longer-term issues and challenges. However, there is no commonly agreed external territorial threat. That makes it very difficult during a time of budget cuts and restraints and all the difficulties where social programmes are being squeezed at the moment, where some European states, such as the Republic of Ireland within an EU context, are under huge pressures fiscally. Clearly defence has to take a hit out of that as well, so we have a difficult situation at the moment.

There are three current missions: Operation Althea in Bosnia, which has been there for some time now; Somali piracy, which we have discussed in Grand Committee a number of times; and the more recent Somali training operation, which takes place in Uganda. There is likely to be a future Mali mission very soon as well. In the past there have been a mission in Macedonia, two missions in the Democratic Republic of Congo and a mission in Chad. Some of those missions have not been very comfortable, if you like, not almost civilian, take-it-easy missions. They have a hard edge to them. Some of our witnesses made it very clear that if fighting had to take place it would have done. They are the same troops that are used in NATO operations in Afghanistan and operations in Iraq. They are the same people, the same military forces, and are capable of taking those sorts of actions.

Perhaps it is worth looking at some of the statistics, because we are not always aware of the importance of European defence. For instance, we were told by witnesses that one-third of global defence expenditure outside the United States is European. It has just been overtaken by China, but we are big spenders in terms of defence. In terms of military personnel, more than 1.5 million of our citizens are in uniform in the European Union, and that is greater than in the United States. On the other side of that, we are atrocious in terms of research and investment in weaponry. The rather fuzzy statistic that came out to us is that probably three-quarters of those 1.6 million personnel are non-deployable, and that is one of the themes that I want to come back to in my opening address on this area.

The other issue that noble Lords will be aware of is that European defence expenditure is dominated by two member states, France and the United Kingdom. In reality only those two member states are willing and able within a reasonable timeframe to wage rather more aggressive campaigns where necessary outside our territory. There are very few others that are able to take that strain. Again, that theme might cause difficulty in the future.

The other part of the context is, “a changing world”. I have already talked about the budgetary side, which affects not just Europe but the United States, although perhaps not so much some of the Pacific nations. However, what is clear apart from that is the change of stance of the United States in a way that has been utterly predictable since the fall of the Berlin Wall and the end of the Cold War in 1989. That is that future security priorities for the United States will be in the Pacific theatre. They will not be within Europe; and the United States—and I am sure that this will be the case whichever Administration take charge in Washington at the beginning of next year—will have to make major budgetary cuts, programmed at the moment at some $0.5 trillion over the present budget-programming period. So we have a very different scenario in that area.

There is a different philosophy, to a degree, within the United States which is the idea—denied by some of our American witnesses—of leading from behind. The US, in the Libyan operation, had to provide the resources that were necessary—there were European capability gaps—while saying, “Europe, this is on your doorstep. You have to take the operational strain of this, once we have started the operation”. Surprise, surprise, the United Kingdom, France and some of our closer allies managed to deliver, at least on that ask.

I will consider some of the main recommendations, but before I do so, I should mention that one of our final sentences and one of the things that was clearest to us as a committee as we went through this, was the obvious and fundamental discovery that member states and nation states within Europe make decisions about defence, their budgets and how they co-ordinate their forces with other nation states. Because of that, anything that is good for Europe, in terms of better and more effective defence expenditure, is good for NATO—and that is equally good for the European Union and any other bilateral or multilateral organisation or alliance that takes place. These are not alternatives but win-win situations if we get them right. So the institutional arguments can be a destructive distraction from some of the key issues.

I shall quickly go through some of the main areas in the report. As regards NATO versus the European Union, one of the areas that the External Affairs Sub-committee has been concerned about on many occasions is the inability of the EU and NATO in terms of military forces to work together at operational level because of the difficulties over Turkey, Cyprus and so on. Certainly as regards Afghanistan, we found that that actually threatened the lives of European civilian operational staff in terms of carrying out their duties. That to us is fundamentally unacceptable. We of course say that a resolution to this has to be found. We obviously have the Berlin Plus agreement under which the EU can use NATO resources, when agreed by NATO. They are currently still used in Bosnia—that was agreed some time ago—but there is no prospect of similar co-operation in the future. We need to resolve it, and both sides of the argument know that.

Another area that came out as regards NATO was that Europe has to pull its weight and contribute to NATO, otherwise America will lose interest in it. Something I had not thought about before, not being a defence expert, was that NATO is a unique organisation. There is no other similar integrated organisation, certainly not since the dissolution of the Warsaw Pact, which enables the United States to operate so closely with allies. However, we should not take it for granted and feel relaxed as a consequence.

An area that the press took up when the report was released was the role of Germany. We were critical of Germany’s 1.5% defence expenditure, but perhaps more so of its reserved position in the Security Council over Libya. We feel strongly that European defence cannot work properly without Germany playing a full part in it. However, some witnesses made it very clear that some nations within the European Union might be concerned if Germany increased defence expenditure to 2%, but we think that is well and truly a risk worth taking.

We welcome the UK-France model and the two defence treaties of 2010. We think this is a potential model for use in other areas. It shows that Europe is serious about defence and combining its defence capabilities. It is not the only example of that in Europe but it is certainly the most important one. However, there is a risk that the rest of the European Union will say, “France and the United Kingdom get on with it. You do it very well. That is your role. We are not up to that. We will retreat back out of that”. We believe that that could cause much concern in the future.

As regards the staffing of CSDP missions, we are very aware that resource targets for civilian missions are never met. This is degrading for the image of the European Union. European Union civilian or military missions are always exceedingly small compared with NATO operations and their modest resource needs must be met. It is outrageous that medical support was not obtained in the Uganda-Somali operation. That is unacceptable. In Operation Atalanta, there was very little air surveillance, but it was finally provided by Luxembourg. Large capability gaps were evident in the Libyan operation in surveillance, air-to-air refuelling, transport, medical support and smart munitions. Clearly, Europe needs to operate much better in that area. It is strange, or perhaps not, that battle groups have not been used. However, for them to have credibility they have to be audited, as they would be in NATO. When there is an opportunity to use them, as there has been, they should be used where that is appropriate.

The biggest message that came out of the report concerns deployment. The irony is that if Europe spent its financial resources and deployed people slightly more effectively, and deployed them in different places, and co-ordinated what each nation did, it could be amazingly effective even on reduced resources resulting from budget cuts. That must be the main message that comes out of this report.

Europe needs a defence capability. There are a number of models: the EU model; the NATO model; and multilateral and bilateral models. That is great; none of those opposes each other. What is good for the EU is good for NATO and is good for Europe. We must get that deployment right. Europe has to stand up for itself and be able to show that it is prepared to defend itself.

16:44

[Lord Robertson of Port Ellen]

My Lords, this is a valuable report and I congratulate the members of the committee and its chairman on presenting it here today. It is timely, wise and important and it makes a lot of significant recommendations, which we should all listen to. I feel as though I am in an echo chamber. I seem to have been making that kind of speech now for about 16 years both in opposition, then in the Ministry of Defence and in NATO—exactly the same lessons. As one of the architects of the St Malo agreement, I watched with dismay. Although it revolutionised thinking—it certainly came as a surprise to many people at the time—it has not lived up to anything like the expectations that it should have because it was trailblazing and crucially important.

The report said many of the things that I used to repeat, and that members of NATO and others in this small community who are interested in European security have been making all the time. The sad thing, in a way, looking at this Room today and looking up at Moses with the tablets of stone, is that we are speaking again to the converted. We need to get that message further afield as well. What the report says is right: Europe is not doing enough in its own security interests. That is what is so aggravating. We are not advocating something that is academic. There is a security interest and there are threats out there. We are not doing enough to recognise that.

We spent a huge amount of money during the Cold War against what happened to be a threat that never appeared. As a consequence, we saw off the adversary of the time and we stopped the dominoes that Stalin had designed for the rest of Europe. There is complacency and a lack of political will across the European continent that could be very expensive in later days as well.

The report highlights the capability gap between Europe and the United States. The chairman made the point that there are 1.5 million troops in the NATO European countries but only 2% of them are deployable outside national boundaries. The point that has been made effectively in this report and with which he just concluded his peroration, is that we spend a huge amount of money on defence and waste most of it. If that amount of money was spent effectively, Europe would be a superpower in the world. As it is, it is an economic giant but a military pygmy and taxpayers are being short-changed as well.

Of course it has to be said that Libya was a success. Winning is everything. Winning ugly is still winning and we won that one but, boy, did it not illustrate our capability gaps? If it took so much effort and with so many difficulties to overcome the like of Colonel Gaddafi, what if we are up against a bigger adversary in the future? It beggars description.

The report says that what is good for the EU is good for NATO and I am glad that the government response endorses that point. Did I not have to make that point over and over again to people in this country as well as in the United States of America? It is right. If the capabilities are increased, they are available for national purposes, European purposes and for NATO as well.

The report goes into pooling and sharing and the need for more co-ordination in Europe, and that is critically essential. Some 30 years ago, the NATO AWACS fleet was created because countries except for America, Britain and France could not afford the cost of the AWACS. An AWACS fleet commonly owned, commonly operated and successfully operated was created as well. Since then, the only real pooling arrangement has been the C17s and the SALIS formation. That was a hard-won achievement as well.

The report points to the frustration of practically all Europe's ambitions by the conflict between Turkey and Cyprus. One can only hope—and there are greater experts than me around here—that we might see a way through that. But again, it is Europe acting against its own best interests. It was an aggravation to me when I was in NATO and it continues to be an aggravation to my successors.

In the headquarters in Brussels, I had on my desk a variety of encrypted phones and one of them was specifically dedicated. There was a button you pressed for the Turkish Ministry of Foreign Affairs and another for the Greek Department of Foreign Affairs. I had occasionally to use that as well.

One of the great graphs in the report points out the amount of money that Greece, already almost bankrupt, is spending on defence, with the vast bulk of it dedicated to defending itself against a NATO ally on its boundary. That is a scandal. One of our great misconceptions is that all we need to do is mobilise the United States to persuade Turkey to stop being obstructive in this. As Xenia Dormandy of Chatham House said to the committee, we have to forget the illusion that the Americans have muscle over Turkey. We all have an obligation in that situation.

I am glad that the report talks about the Berlin Plus arrangements. I thought that the noble Lord, Lord Roper, and I were the only ones who ever knew what those arrangements were. Getting them took up a vast amount of my time at NATO, and they were a huge bargain for the Europeans by basically allowing American assets to be available to the European Union. The documents that led us to arrive at those arrangements take up almost a whole shelf in my office, but the basic principle is simple and they need to be used.

The final thing that the report highlights, if it needed highlighting, is the role of the French. France coming back into the integrated military command from which it had excluded itself for so long was a major and significant step forward for NATO. It stopped a lot of the internal aggravation that was created during my time in office there. However, I always had to explain, especially in America, that despite France’s rather peculiar and very French approach to NATO in the military context, France was there in every conflict. Every time that a military presence was required, France was there. In every decision that was taken, especially after 1996, France was deeply involved. There was the fiction that France was a country member of NATO, and now that that is resolved we have taken a major step forward.

I want finally to concentrate on a couple of areas—Afghanistan and NATO itself. As regards Afghanistan, I genuinely fear—and I say this with some passion—that we have lost the will to win. We have 9,000 troops in Afghanistan today, every day risking their lives. Some 400 UK troops and 2,000 American troops have died and countless thousands of the British, the Americans and the other NATO allies have been crippled and maimed for life. In a few weeks’ time at the remembrance parades, we will remember them. A great deal of affection will come out and a great deal of sentiment will be aroused for those individuals. Yet we are paying little or no attention to the mission that they are on. What comfort can it be to the bereaved families to know that we care so little about the mission that the troops are involved in.

Here is one statistic that I use regularly and which shocks the people I tell, and should shock everyone in the country. The last speech made by the Prime Minister of the United Kingdom on the subject of Afghanistan in the House of Commons was delivered on 4 July last year. That was the last occasion when a speech was made on that subject by our Prime Minister in the Parliament of the United Kingdom. What does that tell the people who have been bereaved, the soldiers who have come back and those from the forces who have been maimed for life about the commitment of the British Parliament and the British Government to what is going on. Actually, the previous Administration was not much better in many ways in terms of that. We do not win wars by military means alone. We do it if the enemy believes it can and must be defeated. Psychology is as important as military tools. We found that out in the Second World War, in the Cold War and in Bosnia and Kosovo—and we do not seem to have learnt the lesson in Afghanistan.

Leon Trotsky once said something very wise. I do not often quote him, but he said of another war at a different time, “You may not be interested in this war, but this war is interested in you”. That says it all about Afghanistan. As an American general recently said to me, “The closer you get to Afghanistan, the more you realise that we are winning”. Some 80% of the violence in Afghanistan is taking place in territory where only 20% of the population lives. The violence in Kabul has reduced by 20% from last year alone. The general added, “The closer you get to Brussels, Washington and London, the more you realise that we are not succeeding”. We should bear that in mind. We need to tell the enemy that we are not going to be defeated, that NATO does not do defeat; and we need to tell the people in this country that it is in their interests that troops are risking their lives and dying, because it matters to them as well.

My final point is about NATO itself. In the past couple of weeks I have been engaged in a debate in Scotland about NATO membership. It has engulfed the Scottish National Party in the debate about separation at the present moment, and I—sad person that I am—watched the whole of the SNP’s debate on NATO last Friday. I did so because I care about the subject, I care about my country and I care about what people think. It was a passionate debate that divided the SNP. It lost two members of the Scottish Parliament from its ranks yesterday as a consequence of what was ultimately a totally dishonest decision. It simply said that it would join NATO, but on its terms—terms that would be unacceptable to the alliance.

What was amazing about that debate and the wider debate around it was people’s colossal ignorance about what NATO does and its importance. If it had not been for NATO, we could not have won the Cold War. If it had not been for NATO, the transition of the Warsaw Pact countries towards civilian control of the military and to normality simply would not have happened. If it had not been for NATO, Milosevic would have won the civil war in Bosnia and would have exterminated all of the Kosovar Albanians from Kosovo. If it had not been for NATO, we would have had another civil war in Macedonia. If it had not been for NATO, the mission in Afghanistan would have collapsed immediately after the coalitions of the willing had run out of steam. Yet people do not seem to realise the unique nature, as the noble Lord said, of an organisation that brings the Americans around the table every single week of the year to discuss security issues with European allies. The Government recognise that and state in their reply to the report:

“NATO remains the cornerstone of European security and thus the principal vehicle for collective defence, although the EU and UN can play a role to compliment NATO”.

So I ask the Minister, and the country in general, why do we spend no money at all on educating the public about NATO? Why is there no information campaign to tell the country how important, how valuable and how necessary NATO is? I asked some Parliamentary Questions before the summer. Nothing is being spent. If you search the website of the Foreign Office or the Ministry of Defence for any real information about NATO it is hardly there at all. It is the cornerstone of our defence and we all agree that, but we do not bother to tell anything about that. That is, I think, a recipe for disaster. It is also a recipe for enfeebling the organisation that is so important to all of us.

This is a wise, masterful and educational report of some importance and significance. I believe that it requires further dissemination and discussion, and I hope that this is not going to be the only debate about what this report says. It goes to the very heart of this nation’s and Europe’s safety and security. Much of what it says needs to be said but, much more importantly, it needs to be heard as well.

16:58

[Lord Palmer of Childs Hill]

My Lords, I welcome this debate and congratulate my noble friend on bringing it here. I also feel rather small because many members of the EU Committee and sub-committee are here—some are down to speak and some are not—who have spent a lot of time preparing what is a very worthy document, as the noble Lord, Lord Robertson, said, and I am not anywhere near being an architect of the St Malo agreement.

The thing that worried me yesterday was a Question in the Chamber on the European Defence Agency in which I asked a supplementary question. Noble Lords know that at Question Time one looks around to see who you should give way to. One of the people I looked to give way to was a noble and gallant Peer. No noble and gallant Peer got up to speak. I said to one such person, who shall be nameless, that I was surprised that no noble and gallant Peer got up to speak because I was ready to give way. He did not see the purpose of European defence. It was not his priority. I can only say what I was told. No noble and gallant Peer got up to speak on the European Defence Agency. That is very worrying.

How effective is European defence capability? Two earlier speakers have dealt with this in great detail. The other main question is how many service personnel in uniform in Europe can be deployed? The largest concentration of service people in uniform that citizens of the UK have seen was probably at the Olympic Games because very often service personnel are in Germany or in Afghanistan. How many of them are there and how many can be deployed?

How to build on the UK/French defence treaties has been mentioned. They show how sovereignty can be managed, which is a point made in this report. When I read that, I thought of the “Yes Minister” series, which was always frighteningly correct. You can always imagine that it happened at one stage or another. One thing has changed for the better. When Jim Hacker was asked who was the enemy, he replied “Germany” and Sir Humphrey said, “No, it is the French”. As the noble Lord, Lord Robertson, said, things have changed to a degree and our main partner is the French.

The task for other EU or NATO states is to contribute to European defence. The cost of the work to maintain and enhance the range of capability needs to be shared. How far can it go and how far should it go? What would the budget of this European capability be, what equipment should it use, where should that be manufactured and what holistic approach can we have to equipment in use by European forces? The noble Lord, Lord Robertson, mentioned Afghanistan. One of the problems of equipment in Afghanistan is: how do you get it back? In fact, much of it will be destroyed. The cost of getting it back from Afghanistan is more than the cost of the equipment.

The report talks about the scale of the European defence capability. It quite rightly calls for Germany, with all its power and ability, to become a more active participant. My noble friend Lord Teverson referred to this. The report also raises the thorny issue of adequately resourcing military missions. This policy must be able to deliver when it is needed on an appropriate scale. Is this feasible or is it just an aspiration? This report raises a lot of unknowns about whether it is adequate, has the ability to do what it is asked to do and whether the countries of Europe want to do it. The report refers to battle groups, and in this context we need to look at and assess some of the initiatives of the European Defence Agency. Helicopters were deployed, and it took three weeks, 49 missions and 487 flying hours with 550 participants from four countries. When one goes forward, I wonder how one can replicate this excellent example of working and training together.

Is there doubt that Europe needs to get its act together on defence, as the USA is demanding, and as mentioned in this report? The EU must be the configuration of choice for this, and the challenge is for European forces to be capable of deployment and to close capability gaps, as was shown in the Libyan operation.

The report quite rightly asks whether some of Europe's security issues should be handled operationally by the EU rather than NATO. It is a question that has been asked for a variety of reasons. For example, should the following be handled not by NATO but the EU; humanitarian missions, mixed civilian and military operations, operations where the geographical area is not appropriate to the USA or NATO and peacekeeping forces?

The noble Lord, Lord Robertson, mentioned Afghanistan and the fact that it has fade into the background in terms of debate. There is a big argument as to whether we should ever have gone there. A lot of efforts have been made. Afghanistan swallowed up the Russian forces when they were there. We will come out of Afghanistan and will wonder a year or so after leaving what we have achieved. We have deployed a lot of our service personnel in that area.

I mention Libya again because the operation in Libya showed deficiencies in joint operation, and in some ways a lack of a holistic approach that needs to be a priority.

There is a Question on the Order Paper for next week about the use of civilian contractors—Brits abroad who are contractors. It is an important issue. These people are seen as being UK operatives but are not actually part of our Armed Forces. I will be interested to see the questions that will be raised and the Minister's reply to those questions next week.

I want to say a few words about cybersecurity because that has not yet been mentioned. It can clearly be broken into two parts. I went to a meeting with a contractor dealing with these matters. Contractors are always talking about how they have defence against cyberattacks, but I am sure pretty sure that the same companies are also dealing with cyberattacks themselves, and that is a matter for the EU.

I believe that the European Defence Agency is one of the vehicles that should be emphasised, not put aside and regarded as not important. The air-to-air refuelling, which was also done under the EDA is another excellent example. One of the ways of getting a holistic and collaborative approach is by enhancing the European Defence Agency, which was mentioned yesterday in the House.

17:07

[Lord Hannay of Chiswick]

My Lords, I begin by congratulating the noble Lord, Lord Teverson, and his sub-committee on this excellent and extraordinarily timely report. Let us face it: as others have said before me, the report paints a pretty gloomy picture. The financial crisis that we have been living through since 2008 and which has, alas, a long way to run, is wreaking havoc with the defence budgets of all our member states. Many of the early hopes of European defence co-operation have tended to wither on the vine.

The divisions over Libya are fresh in the mind, although I tend to feel that they are exaggerated. The German vote in the Security Council was a gross error: that is clear. Had the Germans merely voted with those authorising the operation but made it clear that they would not participate themselves, we would now be talking about a great European success in Libya. Perhaps we should not dwell on that too much.

You can add to that rather gloomy picture the point that the noble Lord, Lord Teverson, made—and I entirely agree with him—that whoever wins the American election, the Americans will not be back in Europe in force in the way that they were. The pivot towards Asia is there to stay. Romney or Obama will expect the Europeans to do more for themselves in their immediate region. We will see the Americans involved heavily in Asia and in the Middle East, although probably against their will, and involved heavily in the area around Pakistan. However, we will not see them coming and picking up the chestnuts for us in Europe if something goes wrong in our periphery.

Is Europe facing fewer security challenges? I do not really think so. If anything, there are a few more. It is always a bit difficult to read the mind of whoever is in the Kremlin—whether before the end of the Cold War or after it—but I do not believe that President Putin wishes us very well. I am quite sure that he will continue to probe the Europeans for weakness; that he will divide and rule between the Europeans if he can.

We know that the Middle East is going to present us with some pretty horrendous challenges. Syria is in a terrible mess and our performance is not brilliant, frankly—although I am not a supporter of military intervention there—and it is going to carry on giving a lot of problems, but other countries in the Middle East may well join it. We cannot be sure. We are probably living through a period of 20 years at least of great instability in the Middle East. In Mali, we are already seeing a kind of spillover from the totally desirable overthrow of Colonel Gaddafi, which led to a lot of weapons getting out into the Sahara area and a lot of bad things happening there now.

Of course, the Balkans are still not absolutely stabilised. A lot will depend on the way the European Union handles the requests for accession of all the Balkan countries and its own role in stabilising that area.

Confronted with this rather gloomy picture, there are two broad alternative policies. One is to turn in on ourselves—to accept, in a plaintive way, that the budget cuts are there, they are irreversible and we just have to do less. If we do that, and if other Europeans do that, we will become increasingly marginalised and discounted when the major security challenges are thrown up around the world; that will be to our detriment and Britain and other countries in Europe will be the losers.

The alternative is to draw some really quite difficult conclusions, one of which is that increased co-operation between the Europeans—and I do not want to get into the EU versus NATO versus whoever it may be—is no longer, in present and probable circumstances, a luxury; it is a necessity. I agree with the previous speaker that we ought to breathe life again into the European Defence Agency. We should be thinking about how we can broaden our co-operation with the French and perhaps see it as a way of including other European countries. That, undoubtedly, would be very welcome to the present French Government, who want to give a wider European cover to the whole thing, but I fear we will be held back by some kibitzing by people at the other end of the Corridor who probably do not know much of what they are talking about.

It is all the more important that we should take this second option—the constructive, positive option—because, I am afraid to say, our position in Europe is slipping, much though the Government deny this. The whole series of events surrounding the fiscal and banking union make this inevitable. It is going to be a hard struggle to achieve the safeguards we need for the single market. I am not suggesting that we should become a party to all these arrangements, but if we are to avoid the worst of all outcomes—which in my view would be the fossilisation of a two-tier Europe, with us on the lower tier, and not having much say in the shaping of policies—we must pursue the alternative, which is how to update and make more effective a variable-speed, variable-geometry Europe.

However, we cannot always be on the outside of every inner circle. That is where defence comes in as more European defence co-operation can be achieved only with this country being part of it; otherwise, it has no credibility whatever. Would it be good news for us if we were part of that? I believe it would be very good news because it would show that we were not permanently in a second tier and that there were some things such as defence and foreign policy where we were very much in the first tier. There are other things where we are in a second tier. That is inevitable and cannot be helped. I may bewail it but it cannot be helped. However, if we do not do this and we are always in the second tier, it will not be good. If we are always just reacting defensively, that will not be good either.

Therefore, I suggest that for defence policy and procurement considerations and for wider European considerations, we should have a more proactive, positive policy. However, following the exchange in the House yesterday, if we withdraw from the European Defence Agency, we can forget about that.

17:15

[Lord Liddle]

My Lords, this is an excellent report, and it was well introduced by the noble Lord, Lord Teverson. I do not think that I will speak for long because the noble Lord, Lord Hannay, has said what I intended to say.

I believe that, in terms of the general context of our deteriorating relationship with the European Union, we should seize with both hands the opportunity to lead in Europe on questions of European defence capabilities. The Foreign Secretary made his first speech about Britain and Europe yesterday. I think it is the first major speech he has made on the subject since he became Foreign Secretary. From my perspective as a committed pro-European, it was not as bad as I might have feared. He is right, of course, that we are moving to a variable geometry Europe. There is no prospect in the near future of Britain becoming part of the euro inner core, but there is a real opportunity here for Britain, and it is disappointing that the Foreign Secretary did not take it and emphasise it. There is a real opportunity for Britain to take a much stronger lead on European defence. I would like to hear from the Minister how he sees this key strategic question for Britain.

One of the key points that the report emphasises, which I think a lot of people in the Conservative Party get rather mixed up, is that NATO and the EU are not a choice. Seeing NATO and the EU as some kind of choice is the problem as regards a lot of people who are reluctant to go down the EU defence road. I just do not see that. What I see as a problem is that we are no longer engaged in an existential fight for freedom as we were for much of the post-war era and America’s priorities are changing. We see a shift from its willingness ultimately to rescue us in the former Yugoslavia, in both Bosnia and Kosovo, to the attitude it took towards Libya and now Syria. There is a shift in the US outlook, and Europe simply has to get its act together if it wants to be in a position to defend its values and interests. We, more than the United States, are on the front line of terrorism in Europe, and we face a more immediate threat from failing states in Africa. We stand to lose more from the Middle East conflict. Our neighbourhood is a very unstable place. We have to find a way of seizing the opportunities of the Arab spring. Europe has to get its act together. One of the strengths of the European Union is that it has potentially a lot of soft power; for example, in its trade relations, in the aid that it can give and in the cultural and diplomatic relations that it can offer. Nevertheless, it also needs that hard, military capability to intervene if necessary, which is so badly lacking, as was shown in the recent Libya campaign.

I do not think that the challenges of austerity for defence budgets are going to go away in the present decade. We have to face the fact that the pressure on defence budgets is going to get worse. I do not think that we have seen the worst of what is likely to happen to the UK defence budget. I would not say that we have reached, as it were, the bottom baseline. For Britain, it poses some very big choices. We have already, without actually saying so, abandoned the idea that we have the full range of capabilities that the US has, except on the smallest scale. Nevertheless, we face the challenge of making procurement cheaper, and common procurement through the European Union is one of the ways of doing that. In addition, we have to think about how we share roles and how we specialise in roles with our European partners. This is a very touchy subject because it goes to the heart of national sovereignty, but we have to face up to it if we are going to be honest about what we are going to be able to do efficiently within our limited budgets.

I am not saying that we have to go for the full community method on defence procurement or anything like that. I think that we need more practical co-ordination, but we should not be ruling out using EU methods where they might work and where they might lead to better value for money and enable the defence budget to be more effective. There is a real challenge for us because of the budgetary position, but also a real opportunity to lead in Europe, and I hope that the Government will take it.

17:22

[Baroness Miller of Chilthorne Domer]

My Lords, I found this report extremely interesting, and I congratulate my noble friend and his committee on it. Given that defence expenditure in the UK, as the report graphically shows, is 2.56% of GDP, this report should concern us all as parliamentarians. The fact that that percentage actually grew between 2010 and 2011, when expenditure on pretty much everything else went down due to the austerity Budget, is an enormous incentive for us to look to our friends and neighbours for areas where we can share capabilities and save an awful lot of money.

However, I was surprised to find almost no mention of the nuclear capability and no discussion of it. There are some tangential references at the beginning explaining how threats have changed from the old Cold War scenario to threats involving food security, water issues and terrorism. Noble Lords have spoken of a two-tier Europe, and almost nothing is more two-tier than the two countries that belong to the P5—the UK and France—and the rest. So I do not think that it is just about the money, although phasing out the Trident system would save something like £83 billion, according to the Trident Commission which is co-chaired by Sir Malcolm Rifkind, the noble Lord, Lord Browne, and Sir Menzies Campbell; and the French would surely make similar savings. So that is economically interesting. However, I am puzzled as to why the report does not discuss whether two of the biggest European spenders on nuclear issues—France and the UK—would have a very different commitment to the EDA if, for example, they did not have that level of spend on things nuclear. It is the psychology of having two nuclear states and then the rest.

I accept that a lot of expertise is gathered around the table and that noble Lords may well put me right on this issue and say that it is not a question. However, I believe the public will continue to question it and the debate about whether we should continue with our so-called independent nuclear deterrent is already alive here politically.

In France, the force de frappe is perhaps less discussed at the moment, although Michel Rocard, the former Prime Minister, suggested that France should abandon its independent deterrent, saying that the money spent on maintaining it serves absolutely no purpose. The traditional French view was probably more fairly put recently by Josselin de Rohan, chair of the Senate foreign affairs, defence and armed forces committee, when he laid out all the reasons why France would continue to maintain a nuclear capability: essentially the nuclearisation of the Middle East and the nuclear capability in Pakistan, India and China, so I accept that scrapping the French force de frappe is not an immediate prospect. However, we need to consider where this fits in to a commitment to a different sort of European defence force. While we are thinking about things nuclear, there is the question of whether an independent deterrent can be independent when it depends not on the European Galileo system but on the American satellite system.

Finally, there is another gap in this otherwise constructive and useful report. It is European deployment of tactical nuclear weapons. In several European countries, this deployment is seen as very undesirable. As long ago as 2004, the Science and Technology Commission of the NATO Parliamentary Assembly advised NATO to come up,

“with a proposal on a phased and verifiable withdrawal of tactical nuclear weapons from Europe”,

as they,

“do not substantially add to the security of Europe”.

States hosting such weapons need to keep their fleets of fighter bombers up to date, which is another cost that is unlikely to be borne in the present times of austerity and which the public may not see as justifiable. Indeed in a Dutch March 2011 survey, 14 NATO states supported the withdrawal of tactical nuclear weapons, 10 would accept withdrawal and only three opposed it. These issues about the future of the nuclear weapons in Europe are perhaps ones that the EU committee intends to address in a separate paper, complementary to this one. I certainly hope so.

17:27

[Lord Jay of Ewelme]

My Lords, I, too, welcome this debate for a number of reasons, not least for the chance it has given us to listen to the excellent speech by the noble Lord, Lord Robertson. It is not all that long ago that it used to be argued that to develop European defence was dangerous because it would duplicate NATO and cause the Americans to weaken their commitment to Europe. That is very clearly yesterday’s argument. NATO has changed greatly and so has America’s perception of its self-interest, which is focusing increasingly on the Asia-Pacific region and, as the noble Lord, Lord Teverson, said, it sometimes prefers to follow not lead where its own interests are not perceived to be directly engaged, as we saw in Libya.

The EU has changed too. It is larger, more diverse and more variegated, due in good part to the policies of successive British Governments over the past 20 years or so. There is now an acceptance that inner groups sometimes need to act together, even if not all the others join in. We see that in the common foreign and security policy and most notably in Iran where Britain, France, Germany and the EU High Representative in effect represent the EU in the negotiations. We saw it in Libya, where the UK, France, Italy and, importantly, some smaller EU states, although not Germany, worked with the US and under a UN Security Council resolution to prevent a pretty devastating civil war.

So the question is not whether there should be more effective European defence arrangements but how they should best be organised. Importantly, they must be consistent with NATO but recognise that there are tensions and conflicts in the world that will not attract US or NATO intervention. As the noble Lord, Lord Liddle, said, they must also recognise that the EU’s ability to combine diplomacy, economic aid and different degrees of military involvement—from training, as in Somalia; to intervention, as in Libya; or in combating piracy, as in the Indian Ocean—gives the EU a role distinct from that of NATO. There is no question of the one diminishing or replacing the other. The question is how they can reinforce each other to the advantage of both, and very much to the advantage of Britain’s interest.

I do not want to cover all the ground in the report this afternoon. I support the concept of pooling and sharing. I hope that we do not let the issue of an operational headquarters distract us from the real need for effective defence co-operation. The arrangements to support the Atalanta operation in Somalia are a good model that could be built on.

However, I want to mention two issues. The first, which some others have mentioned already, is Franco-British co-operation, which must be at the heart of any effective European defence co-operation. France and Britain share a tradition of global reach. We are both permanent members of the UN Security Council. We both face acute budgetary pressures, and France is of course back in the integrated military structure. So the logic of working more closely together seems to be unanswerable, with the aim, as the report says, of improving interoperability between Europe’s two most capable military nations.

I hope that the noble Baroness, Lady Miller, will forgive me if I do not follow her down the nuclear road, except to agree entirely with her that the chances of France giving up its nuclear deterrent are zero at best. None the less, there will be a French tendency to work more closely with Germany. If one effect of that is to prevent another division, as there was over Libya, so much the better. However, I do not see that closer Franco-German defence co-operation should in any way affect the case for strong, continuing and developing Franco-British co-operation.

At the risk of repeating what I have said in other debates in your Lordships’ House, one of the clearest examples of the need for strong Franco-British co-operation is over Mali. There may be a tendency— I have heard it said from time to time—to ask what our interest is in a part of Africa which the French know a great deal better than we do. However, the establishment in northern Mali of an al-Qaeda/Boko Haram/radical Tuareg state can have or will have a direct and destabilising effect on our interests in the region, in north Africa and, through support for terrorism, much closer to home. Perhaps the Minister can assure us that we indeed see this as a potential threat to our interests and will work with the French to try to resolve it and participate actively in an EU mission, if there is to be one.

I should say a word about defence procurement and industrial collaboration. I have to say that I regret the breakdown of negotiations between EADS and BAE Systems on a merger. This seems to be a case where the commercial logic for a merger was compelling, but the political difficulty is great and the issue, I fear, became public—for whatever reason—before the political issues had been sorted out. I do not at present clearly see BAE’s alternative strategy. I hope that the Minister was right in saying yesterday that it would continue to thrive on its own. Does he think that that is really the only option now before British Aerospace?

Finally, on defence procurement, I believe, as others have said, that the European Defence Agency has a role to play, as the report argues, in greater co-ordination and the development of capability, particularly at a time of budgetary constraint. I know that the Government are considering their position in the EDA, and I noted carefully what the Minister said yesterday. Still, towards the end of a—how shall I put it?—characteristically thoughtful speech on the European Union yesterday, the Foreign Secretary said that the British felt that,

“in too many ways the EU is something that is done to them, not something over which they have a say”.

However, it is very difficult to have a say and to make your voice heard if you are not in the room. That is an important point to bear in mind when reflecting on our role in the EDA and indeed on broader European Union issues.

17:36

[Lord Gilbert]

My Lords, I am afraid that I am going to be in a very small minority today, probably not for the first time, which gives me no tremors whatever, as I am unable to add to the fulsome welcome that this report has received.

Before I turn to the substance of the report, I wish to draw the Committee’s attention to some of the stylistic matters that caught my eye. I do not normally care to read reports, but I intended to read this one from cover to cover. However, I gave up on page 10, actually only the fifth printed page of the report, where there is a misplaced apostrophe. Noble Lords will ask, “Why am I wasting the Committee’s time on a misplaced apostrophe?”. On the previous page, page 9, there is one of many subordinate clauses without any commas at either end, so you have to read the sentence over and over again to find out what it actually means. On page 8, going backwards, there is an egregious spelling mistake that any child of 15 would be punished for making. On page 7 we have a sentence starting with a conjunction.

The real blow, though, comes on the very first page. I am now going to read out to the Committee a direct quote from the middle paragraph of the summary:

“By better coordination of forces and most of all by ensuring that forces are capable of, and willing to, deploy Europe can achieve this now”.

I will happily buy lunch for any member of this Committee if he can show me how to parse that into an English sentence; it is not capable of being made into a sentence. It really is disgraceful.

This accumulation of grammatical solecisms, misspellings and punctuation errors says to me one of three things: that the members of the committee read the report and did not notice these things, which I find unbelievable, seeing how talented they are; that they read the report and did not give a damn about them, which I do not think would be the case; or, much more likely, they never read the report. That is the most charitable explanation. The noble Lord, Lord Roper, may frown, but his name is on this report. He is chairman of the committee and is responsible for putting the report in front of us with the House of Lords imprimatur on it.

[Lord Radice]

I am loath to intervene on my noble friend’s speech because I am sure that it is going to be extremely good, but I suggest that the noble Lord reads the sentence before the one that he has criticised. He might then find that it was more intelligible. It is a good thing to read a couple of sentences rather than just taking one on its own.

[Lord Gilbert]

Of course, I read the whole page. The noble Lord is right, but that sentence is rubbish. It is not even a sentence and it should not be in a House of Lords report. I ask the noble Lord, Lord Roper, to ensure that in future any reports from any sub-committee of his committee are written in decent English. I have got that off my chest, but I stand by what I said. It seems to be perfect evidence that the people who wrote the report did not read it before it was printed.

Now we come to the substance of the report. Of course, the noble Lord, Lord Teverson, has been overwhelmed with congratulations at how wise and timely it is, but I am afraid that I am rather bored with this report. Why am I bored with it? Because it does not say anything new. Why does it not say anything new? Because I have heard the noble Lord, Lord Robertson, say it 16 times before. He told us himself that he had, over and over again. What is in this report? It is in the speeches of the noble Lord, Lord Robertson.

I hesitate to point this out to my noble friend, who was my boss at one time, but I think Albert Einstein pointed out that to say the same thing over and over again and expect a different result is a higher form of lunacy. Why has the noble Lord, Lord Robertson, had to make the same speech over and over again? For the very simple reason that everybody ignores him. They all say, “What a wonderful speech”, but the continentals do not do anything and are never going to. That is the point. All the Eurofanatics sitting on this side of the Room are in denial. They think by saying that Europe has to do this or that, Europe might do it. However, Europe has never done it. It is not going to do it and has no interest in doing it—and we all know it.

It is high time that the House comes to recognise what I have said many times: this country’s friends are not the other side of the North Sea or the English Channel but in the English-speaking world. We have talked about taking the lead in cyberdefence, but we are doing that with the Americans and the Australians. As you would expect, that is where our friends are—in the English-speaking world. I am afraid I have no great enthusiasm for this report.

Coming to a subject close to my heart, I draw your Lordships’ attention to paragraph 93, on page 42—

[Lord Radice]

The noble Lord said he did not get beyond page 10.

[Lord Gilbert]

I dipped into it. Of course I did not read through it. The noble Lord, Lord Radice, is very active on this. I am very interested. They found some idiot called Pierre Vimont—what a lunatic. This is what he is summarised as saying:

“Despite the limited success of the A400M”.

I would like to hear anybody else in your Lordships’ committee talk to me about the “limited success” of the A400M—it is a disaster, but there is not a word in this report saying why it is a “limited success”. The paragraph goes on:

“We also heard evidence that money could be saved by collaboration”.

That is a deep insight. Before that, the report notes that Pierre Vimont also suggested that,

“it was important to continue with such projects”

as the A400M.

For the benefit of noble Lords who do not keep up to speed on logistic arrangements, the Americans have found the combination of the C130 and the C17 quite capable of satisfying all their airborne logistical requirements, as have the Canadians, the Australians and the Indians—and so, up to now, have we. When we finally procure this A400M, we will be abandoning the C130 and so will lose interoperability with the Indians, the Canadians, the Americans, the Australians and, by that time, quite a lot more people.

I have been told by a former Conservative Defence Secretary that the Americans were going to close down the C130 production line. That is rubbish, and simply not true. If you read the most recent edition of Defense News, you will see that they are going to go on with more and more sophisticated C130s. The C17 has also proved itself capable of undertaking tactical missions. The A400M is a complete, absolute wanking disaster, and we should be ashamed of ourselves. I have never seen such a waste of public funds in the defence field since I have been involved in it these past 40 years.

I am sure that the noble Lord, Lord Teverson, takes this all in the spirit in which it is offered. It is not a personal criticism of him, but this report is nothing new. My noble friend Lord Robertson has said this many times before, and nothing is going to happen from it.

17:44

[Lord Roper]

My Lords, I find myself rather more in agreement with the majority of the members of the committee than I do with the noble Lord, Lord Gilbert. I congratulate my noble friend and his sub-committee on the report and on securing this debate. The noble Lord, Lord Gilbert, is of course right in one matter. Although the report is the result of the work of the sub-committee, it is the last report which, as chairman of the European Union Committee, I agreed before ceasing to be chairman of that committee, and therefore he quite rightly says that my name appears on it. I am sorry I missed the errors to which he has drawn attention. I read it at the time and I thought that it was a very good report.

Like many reports from the European Union Committee, this one will be extremely valuable for the wider discussion of ESDP issues not only in this House, but outside. Although, as the noble Lord, Lord Gilbert, has said, a number of things in it have been said before, they are put together in a context and with a relevance that, given the current situation, I believe to be particularly useful. Perhaps I may also say a word about the ministerial response from Sir Gerald Howarth as he now is, but who at the time was the Minister for International Security Strategy. It was a helpful and positive response, perhaps more positive than some would have expected him to make. But, again, it shows the value of the committee in holding the Government to account on areas of their activity. Given that ESDP and CFSP are intergovernmental matters, it is of particular importance that national Parliaments should be monitoring them and paying them proper attention. That is because these are not areas in which the European Parliament has co-decision, they are matters for which national Parliaments have primary responsibility in terms of watching the activities of their own national Governments.

Rather like the noble Lord, Lord Hannay, I have to say that the progress which has been made on defence has in many ways been disappointing. Progress since Lisbon is not as significant as one might have been expected, and the report sets out some of the reasons why that has been the case. One should perhaps look at those. It is clear that falling defence expenditure has made life more difficult. Also, as a number of noble Lords have said, there are difficulties in generating forces because of the vast numbers of non-deployable forces, and the fact that in our defence expenditure, we are not using the money. We are big spenders, but we are bad spenders, a point made particularly by the noble Lords, Lord Teverson and Lord Robertson of Port Ellen. Over the period there has been a certain UK reticence about European defence because of the historic misgivings that more European defence means in some way less NATO. That I believe has changed with the French return to the integrated military command of NATO and indeed has been reinforced in some ways by the UK/French treaties.

One of the other ways we have seen declining capabilities is that in spite of a good deal of discussion about pooling and sharing, and now in NATO of smart procurement, relatively little progress has been made. The noble Lord, Lord Robertson of Port Ellen, mentioned the AWACS and, since then, there has been the collective purchase of air transport aircraft by a number of countries. We talk about duplication, and one of the areas in which there is great duplication is in the 27 ministries of defence and structures of Armed Forces that do the same thing in many different places. We cannot get rid of them quickly, but there ought to be economies in co-ordination. However, any rationalisation of this sort would mean a loss of jobs in some parts of those ministries of defence and, indeed in the command structures of the Armed Forces. This has certainly led to considerable institutional resistance to pooling and sharing. Over here as elsewhere, turkeys do not usually vote for an early Christmas. We have to see that as one of the resistances to change in a number of areas of co-operation.

The discussion that we had on the Floor of the House yesterday following the Question of the noble Lord, Lord Anderson, on the European Defence Agency showed the continuing value of the agency, and it is important that the sub-committee has also been examining that in recent months. But, again, one can regret, as is discussed in the report, that it has not fulfilled its potential; it should have been able to do more and one should not be too complacent about it. We await the imminent decision of the Government, which we now expect in the late autumn—I am not quite sure when the autumn gets to be late. The review of the European Defence Agency being carried out by the Government may explain the extraordinary omission of defence from the list of topics in the review of the balance of competences announced by my right honourable friend the Foreign Secretary yesterday. In the Written Statement in Hansard, there is a list of all the departments that are going to be considered in the balance of competences, but, for some reason, defence is omitted. Perhaps the Minister will be able to explain the omission in his reply.

Relations between NATO and the European Union are obviously of great importance and our noble friend the High Representative has followed the example of her predecessors. One can have good relations personally between the secretaries-general of the two institutions, but while we still have the problems of Cypriot attitudes within the European Union and of Turkish attitudes within NATO, the chances of our being able to use the facilities and the Berlin Plus machinery, apart from Althea, are held back. That is another barrier to effectiveness in co-operation and it has certainly handicapped our development.

There is one point to which consideration might be given again—again, it depends on what future role the British Government play in the European Defence Agency. The Turks had certain access to one of the predecessors of the European Defence Agency, of much smaller capacity, which existed under the WEU—as did the Norwegians, even though they were not members of each. The Norwegians have been allowed to have access to and membership of the European Defence Agency. That is the sort of thing that might—I repeat, might—help a little in facilitating relations with Turkey, if that issue could be re-examined. I do not know whether it is practical, but at least it might be of some advantage.

Having said that things have gone wrong, I very much agree with the noble Lord, Lord Jay, that, on the positive side, there have been successes. There have been missions, of which I shall give three examples, where the European capacity has provided added value, which is what we are looking for. The first of those was the deployment of EUFOR in Chad in 2008-09. It was certainly very helpful in preventing the difficult situation in Chad being affected by the disruption in Darfur. It would not have been something that NATO would have undertaken and is therefore a particularly good example—Mali may well be of a similar kind.

Similarly, although at first sight the fact that we have parallel anti-piracy operations of EU NAVFOR Atalanta and of NATO might seem a bad example of duplication, they have in fact provided extra flexibilities, with countries which might not wish to be associated with an operation which was exclusively NATO having been able to come in and involve themselves because of the European Union parallel activity. The existence of the EU NAVFOR operation has provided added value there.

Finally, after a period in which NATO ceased to have an active presence in Bosnia and Herzegovina, the European Union military and police missions in that very difficult part of the west Balkans have certainly played an important, indeed critical, role in assisting the maintenance of stability. The EU was able to bring a range of competences to play.

In conclusion, I once again congratulate my noble friend and the sub-committee on producing an extremely valuable and comprehensive report. I ask my noble friend the Minister to reassure us that the omission of defence from the review of European Union competences does not mean that the Government have taken the view that the European Union has no competence in this field.

00:00

[Lord Radice]

I cannot claim to be a defence expert, but I am perhaps one of the few Members on my side of the House who was actually in the Armed Forces. I was a national service subaltern in Her Majesty’s Coldstream Guards, but I cannot be said to be an expert.

I just wanted to make a couple of remarks. First, our report is useful not only for the conclusion that it reaches but for the information and the facts that it actually contains. It is well worth reading beyond page 10 rather carefully because it is a document that will be very useful to noble Lords.

I want to say a word or two about the NATO common security and defence policy split. NATO, to which 21 out of the 28 EU members belong, must come first. As all our witnesses made clear, it is the organisation of choice in large-scale military operations. Even if the US did not wish to lead or be involved and European nations took the lead, as happened over Libya, it would still be a NATO operation because it is large scale.

Where the common security and defence policy should come into play is for smaller complex interventions where there is a mix of political weight, economic know-how and development, and sometimes military capacity might be needed. That is where you need the CSDP. My belief is that the two organisations, in most cases fit very neatly together. There should not be an ideological argument—although there sometimes has been—about their respective roles. As our witnesses made absolutely clear, they are basically complementary. Those who have worried about this in the past should not have any worry at all.

To finish, as far as NATO is concerned, the two key issues here are first to ensure that the US continues to participate, despite its increasing focus on the Pacific. Of course what that means is, secondly, that Europe takes greater responsibility for its own security and defence, as we were told in the wake-up call from Secretary Robert Gates in his retirement speech—a very good speech it was too. That is clear for NATO.

As far as the CSDP is concerned, it must not just be a talking shop. It must be able to deliver. That means first that military missions should be properly financed. Secondly, battle groups must be able to be deployed and not just a fancy set of figures and drawings on a piece of paper. Thirdly, operations must be planned efficiently and pragmatically using both national and EU resources.

We should move beyond the rather sterile argument that we have had about what kind of operational headquarters one ought to have. We can arrive at a perfectly sensible arrangement to ensure that some of these really rather effective operations are properly planned and properly deployed. That is all I have to say in the rather short time that I had to make a speech.

18:00

[Lord Rosser]

My Lords, I listened to my noble friend Lord Gilbert with interest since his contributions are always enjoyable. I have been called a fanatic before, but not, I think, a Eurofanatic. That is the first time.

[Lord Gilbert]

I assure my noble friend that I was not referring to him.

[Lord Rosser]

I think the noble Lord’s reference was to the Eurofanatics on this side, so I took it as including me. At the risk of reinforcing my noble friend in his view, I would like to express appreciation to the noble Lord, Lord Teverson, and the European Union Committee for this comprehensive and measured report. As the summary states, the shift in the economic and political balance away from the United States and western Europe towards Asia, the revision in US defence thinking and the economic crisis have created a new situation to which the European Union and its member states need to respond.

It is through our global alliances that we can remain a powerful and significant force in the world. We have a unique diplomatic reach through our membership of the European Union, the North Atlantic Treaty Organisation, the United Nations and, indeed, the Commonwealth. Maximising our role within these institutions through greater co-operation and collaboration will surely be the principal means by which we can remain a lead influence on international trends and world events. Our international partnerships are the principal source of strength in our defence posture.

The threats that we face today, from terrorism to climate change, nuclear proliferation to cyberattack, are shared, and shared operations to combat them are increasingly commonplace. European nations have worked together in the Balkans, Chad, Afghanistan and around the world in European Union, United Nations and NATO missions. We share objectives and standards, priorities and interests. We involve ourselves in joint missions and operations overseas based on mutual support and shared interests in order to protect each of our domestic borders. Our futures are linked, so the action we take to enhance and shape them should be collective.

To say that we need to deepen European defence co-operation is not a change in philosophy, but rather a logical step to ensure that European nations can each maintain a strong defence policy which allows intervention to protect and promote our interests and values. In the same way, during conflict, we must better co-operate in preparation for and prevention of such conflicts, based on a pragmatic approach which reflects the world we live in.

Greater European co-operation in defence procurement is crucial, enabling us to maximise our ability to project force and to do so cost-effectively, supporting both the front line and the bottom line. It is vital that a more efficient defence industry and better value defence products are promoted, distortions in the market are regulated out and defence companies and their supply chains are supported. That means limiting the fragmentation which arises from differing national procurement regulations, reducing the number of national equipment programmes and ironing out the delays which arise from individual export authorisations. There has been progress on this in recent years. The European Defence Agency code of conduct on procurement competition, the directive on defence procurement limiting individual export licences and the EDA’s limits placed on offsets all work in favour of a strong European industrial base.

The merger between BAE Systems and EADS has been prominent recently. We supported the proposal in principle, but we accept from a UK point of view why it could not go ahead,; however, BAE Systems needs to get into new and different markets as the UK and USA markets contract. It would be helpful if the Minister could say what the Government are doing to help BAE Systems retain a sustainable base in the UK in the light of recent developments. Yesterday, the Minister said that Ministers in the Ministry of Defence were doing their best to help BAE Systems sell its products. Is that some new initiative, or simply a continuation of what was happening prior to the possible merger between BAE Systems and EADS falling through?

Co-operation over procurement is the only way Europe can compete in a very expensive and technologically driven activity and it must learn to do this better together or have no other option than continually buy from the United States. We should look first at where we can co-operate further with those with whom we have existing successful partnerships, including, of course, France.

The economic crisis has ushered in competing sentiments. On the one hand, countries need to shrink budgets and are actively seeking savings, which can come from economies of scale but, on the other hand, their protective and protectionist instincts are stronger. We must surely fight the latter and address practices that hinder legitimate access to markets. We must protect national discretion, but strong national export markets will be bolstered, not limited, by European co-operation, and that is surely the shared challenge.

As well as co-operation on procurement, there is a need to better integrate force structures. This takes place but perhaps not to the extent that the real potential for front-line benefits is maximised. Arrangements to pool maintenance, training, education infrastructure and skills on a bilateral or multilateral basis should be explored. Research and development facilities and work streams could be pooled to develop specialisations together. The resultant economies of scale should be used to directly fund training and equipment programmes and to contribute to balancing domestic defence budgets.

The UK-France defence treaty is a very welcome development. It commits to limited interoperability, joint purchasing and sharing of expertise and facilities. It has the potential to build the trust essential for successful partnerships to work and lays the basis for further collaboration between ourselves and France in future. It is characterised by perhaps the most important trait: namely, seriousness of intent. This should not be an isolated achievement. I hope that similar agreements will emerge. Procurement, research and technology spending, maritime surveillance, energy security and combating piracy are all areas that should be looked at in this regard.

The UK-France treaty is surely a model that can lay the foundations for a landscape of European co-operation based on distinct, sometimes regional co-operations. Where countries can do so and where it is in their mutual interests, they should work together. That is certainly not about creating the basis for a “Euro army”, but pursuing gains where they can be found on a case-by-case basis, and making the pursuit of those gains the rule rather than the exception. The steps taken by Nordic countries and the Czech Republic and Slovakia in this direction are to be welcomed. This approach must be balanced, however, with protecting national operational independence and the right for countries to retain the ability to defend themselves without NATO or the European Union.

The success of greater co-operation depends on Europe’s ability and willingness to contribute to tackling international security threats. Europe must decide if it is serious. All European member-state Governments have to be open with each other and about their capacity within NATO. In aggregate, the EU member states, many of which are also members of NATO, have half a million more men and women in uniform than the Americans. However, as the noble Lord, Lord Teverson, said, they can deploy only a fraction of the capabilities of the United States. Among all the talk of coalitions of the willing, the act of creating a coalition of the capable may in the future be a bigger challenge. The present situation hardly appears to be sustainable if Europe wants to prevent the power shift eastwards, to which a number of your Lordships have already referred, from leaving it behind.

The former US Secretary for Defence, Robert Gates, was surely right when he said that Europe cannot rely on others to share the burden of our own security. We must reform or see our own influence wane. As and when the economic situation improves, other nations across Europe should at the very least meet their NATO requirements, which the majority fail to do.

The issue that is well covered in the EU Committee report is about attitude and collective resolve within Europe to retain influence. It is fine that the nations of NATO and the EU share values and goals, but to be truly meaningful, these need to be acted on when threatened. Although the benefits of our alliance are shared by all, too often the contribution to military operations when tested is, as we saw in Libya, unbalanced, as the report points out. In spending and resolve, there must be more equal contributions from within Europe. In Europe, our mutual dependence is a fact, but in too many cases, the embrace of it across Europe is yet to be. Strengthening mutual positions demands greater collaboration and co-operation financially, systematically in procurement, and militarily to boost combat capability. When Europe’s values and interests face a serious test, European countries need to ensure that they can and do act collectively to the very best of their respective abilities. Frankly, one could not say that that is always the case at present.

18:10

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)]

My Lords, I start by congratulating the noble Lord, Lord Teverson, on securing this debate to discuss the important topic of European defence capabilities. I would like to say how very pleased I am that the European Union Sub-Committee is taking such a close interest in defence capabilities. I very much welcome the analysis and recommendations provided in your report.

We have had a very well informed discussion, as one would expect from looking at the speakers’ list. I will start by saying a few words about the Government’s position on CSDP and defence capabilities before moving on to address some of the issues raised during the debate.

The need for European nations to work together to improve our defence capabilities has seldom been greater. If we are collectively to have the ability to shoulder our defence responsibilities, Europe must commit to developing, maintaining and making available those capabilities. That point has been well made by several speakers. The Government want to encourage European defence to make Europe a more effective provider of international security. The UK-France defence treaties are an instance of how we are doing our part. I am very glad that the committee approves of that, as my noble friend Lord Teverson points out. We hope that our example will encourage other partners to seek better value for money and improved capability through closer co-operation with each other. We must work together to enable Europeans to develop and maintain the range of capabilities that will allow sustained and successful operations overseas.

Let me be clear, NATO will continue to be the foundation of the UK’s defence policy, as it is for many of our European partners. As a defensive alliance, it guarantees our safety. As a political alliance, it offers a unique forum to discuss security threats with north American and European allies. As a military alliance, it enables us to fuse our defence capabilities together quickly in a crisis, as demonstrated in Libya last year.

Although NATO remains our multilateral alliance of choice for the UK, the EU’s common security and defence policy can play an important complementary role, focusing on preventing conflict, building stability and tackling crises. The EU is well placed to conduct this range of activity, through its assortment of capabilities. It has access to a wide range of tools: diplomatic, civilian, military and developmental. It can use its capabilities in places where NATO may not be able to act or chooses not to act. It can provide specialised intervention in complex environments where a more comprehensive civilian-military approach is required.

Although there are clearly improvements that can be made to CSDP effectiveness—I will touch on those in a moment—CSDP operations are delivering. For example, in the Balkans, the EU military operation in Bosnia and the civilian rule-of-law mission in Kosovo are supporting continued stability and, in so doing, ensuring that the significant progress made in recent years does not slip back to instability right on Europe’s doorstep. In the Horn of Africa, the EU is leading the efforts to tackle international piracy and training Somali national security forces to counter the al-Shabaab terrorism threats.

The real value lies not just in the individual missions but in the collective expertise and focus that the EU can place in the regions, including its EU Special Representative and development programmes, among others—the comprehensive approach. However, for CSDP tools to be truly effective, they need to be supported by real military capability and greater political will. Europe as a whole is not currently meeting its obligations to ensure self-sufficient, deployable capability.

Improving European defence capability is not just about the amount that individual countries spend. Indeed, with across-the-board cuts to defence budgets throughout Europe, it no longer can be. Our key challenge is not to spend more but spend more intelligently. The UK-France defence treaties of 2010 are a prime example of effective co-operation and collaboration. These treaties are not about weakening one country’s capability at the expense of another but about two of Europe’s most capable military forces working together to improve interoperability, allowing them to deploy together more effectively and at a lower cost. There are other good examples too, such as Nordic defence co-operation. I was very happy to go to Norway a couple of weeks ago, where I saw examples of this. These should be used by other European nations as clear examples of how nations can work together to improve capability that should and must be replicated by other member states in order to avoid overreliance on the United States.

Turning to other European nations, Germany in particular has the clear potential to be a major player in European defence. We have been working increasingly closely with it on bilateral defence issues. Our key message is that Germany must focus more on generating the political will and public support within which to deploy military resources more widely. However, this need to become a more active participant in European defence is one that applies to much of Europe. There is plenty of scope for getting more with less; the combined defence budgets of EU nations total nearly €200 billion. We can look at building on the relationships formed during the Afghanistan campaign—for example working closely with countries such as Denmark and Estonia. We wish to co-operate more closely with Italy. It is only through teamwork that we can fill the European defence investment gap.

As a case study of a UK priority, I would like to return in more detail to battle groups, which I know were a key part of the committee’s report. The battle group concept was a UK-France-led concept intended to provide the hard edge of the EU’s CSDP. Yet, despite a number of opportunities, such as in Chad and Haiti, they have never been deployed. Battle groups, as per the intention in the original concept, have the potential to be extremely useful in conjunction with other EU crisis-management tools, but this means member states need to be prepared to equip and deploy them. We are working closely with other nations to find ways to improve the utility, flexibility and cost-effectiveness of the EU battle group, including looking at potentially deploying its support capabilities in their own right, in support of other EU activity.

In the current financial crisis, we cannot simply spend more to improve European capability. We must spend better by finding improved ways of working together to get greater capacity from the resources that we have. Part of this means that member states should not unilaterally cut capability without considering the potential impact on European defence. Countries that spend less than 2% on defence need to review their levels of spending and work together more effectively and efficiently. Organisations such as the EDA may have a role to play in facilitating this, but the responsibility lies with individual nations.

European defence does not exist in a vacuum. Indeed, 21 nations are members of both the EU and NATO; if those nations improve their military capability, both organisations will benefit. It is vital that efforts are co-ordinated, complementary and not duplicative. I believe that the NATO and EU initiatives, smart defence and pooling and sharing are the key to establishing capability shortfalls and identifying ways ahead. This requires a strong defence industry within both the UK and Europe to respond to shifting demands and requirements as threats continue to evolve.

Operation Unified Protector in Libya demonstrated that there are capabilities that NATO can provide only through the United States. Difficulties generated by the Turkey-Cyprus dispute for EU-NATO must be resolved as they not only make collaboration difficult but may cause operational difficulty. It is vital that European nations work together to fill these capability gaps and overcome obstacles that prevent further collaboration.

I will do my best to address the various issues and questions raised. If I do not cover them all, I undertake to write to noble Lords. My noble friend Lord Teverson pointed out the problem that the EU and NATO cannot always work together constructively. There are some well known institutional blockages between the two organisations, but that should not stop us from looking for practical workarounds while these persist. Co-operation must be driven from the top down and the noble Baroness, Lady Ashton, and Secretary General Rasmussen have both made good inroads to promote greater transparency and co-operation.

The noble Lord, Lord Robertson, pointed out the European capability gaps and the noble Lord, Lord Liddle, said that Europe needed to get its act together. The key reasons for the lack of deployability appear to be member states resources and a lack of political will to invest in making assets fit for deployment, a lack of investment in deployment capabilities such as strategic lift, a lack of responsiveness in keeping troops at too low a state of readiness, a lack of understanding of expeditionary military doctrine and concerns about putting troops in harms way, of which we are all aware. To resolve the problem, member states need to take more advantage of the opportunities and initiatives such as pooling and sharing can provide to better support more cost-effective force generation, which is a point that the review makes very well. They need to make use of initiatives such as the temporary arrangements of funding for strategic lift from common funding. We are expecting that as a result of the recent agreement on temporary expansion of strategic lift for battle groups we can start to see more member states committing to the battle group roster.

Encouraging member states to use participation with other member states in the battle group roster is a way to share relevant knowledge and expertise. For example, as a result of Sweden's participation in EU battle groups, its armed forces are more interoperable and in a better configuration both militarily and politically to contribute to a coalition of the willing. Outside of battle groups, pooling and sharing more generally should be used as an opportunity to share knowledge through joint training.

The noble Lord, Lord Robertson, mentioned that the Prime Minister's last speech on Afghanistan was on 4 July last year. The Defence Secretary and the Foreign Secretary make quarterly Statements on Afghanistan in the other place, which are repeated in this House. I have repeated a number of those Statements. I was comforted to hear the noble Lord’s comment that an American general had told him that the closer he gets to Afghanistan the more he feels that we are being successful. That was very comforting.

My noble friend Lord Palmer asked what we have achieved in Afghanistan. Although significant challenges remain, including making sure that the Afghan Government and the Afghan security forces can deliver what is required after we leave, progress continues to be made. NATO and Afghan forces continue to squeeze the remains of the insurgency, and the majority of the population lives in areas that are progressing well through the process of transition to full Afghan control. My noble friend Lord Wallace and I went to Afghanistan in February. It was the fourth time I have been to Afghanistan, and it was completely different and so much better than it was on previous occasions.

My noble friend also asked about cyber. My department is not the government lead for this topic, but we have a considerable stake in this arena. As well as working with our key partners, the US and Australia, the MoD is working increasingly closely with key NATO allies and EU partners to address cyberthreats. This has included a recent letter of intent signed between the UK and France. The United Kingdom is fully committed to cyberexercises that involve NATO and EU partners.

My noble friend and other noble Lords mentioned our membership of the EDA, an issue that came up yesterday when I did my best to point out some of the achievements of the EDA. The noble Lord, Lord Roper, pointed out that the EDA has not yet fulfilled its full potential. The future of the EDA is being considered by my department at the moment, and I am confident that we will come up with an answer very soon—yesterday I said in the late autumn—that noble Lords will be happy with. My noble friend Lady Garden and I will take back to the department the positive comments that were made today about the EDA, and I am sure it will have noted the conclusions that the committee has come to concerning the EDA.

The noble Lord, Lord Hannay, pointed out that whoever is elected in America will expect us to take on more responsibility in Europe. This point was also very well made by the noble Lord, Lord Radice. I listened very carefully to what the noble Lord, Lord Hannay, said about President Putin’s ambitions, which are a matter of some concern.

The noble Lord, Lord Liddle, pointed out that we should be taking much more of a lead on European defence. While NATO remains a central pillar of our collective security, we welcome the clear value the EU brings through its wide range of tools. The UK plays a central role in ensuring that the CSDP delivers where it matters most in successful operations and missions and through setting an example on capability development. In CSDP operations, we are, for example, particularly strong leaders in counterpiracy through our command of Operation Atalanta, and in the field of capability development, we are supportive of the EDA-facilitated air-to-air refuelling initiative.

My noble friend Lady Miller mentioned the Trident replacement. My right honourable friend Danny Alexander is chairing the review into alternative options.

The noble Lord, Lord Jay, as one would expect from a former distinguished ambassador to Paris, mentioned the British-French initiative. The UK and France must work together to lead on defence in Europe as we are the only two nations that have the willingness and capability to engage on the world stage. Others who wish to be involved in the bilateral engagement must add value and must not be allowed to reduce the speed and effectiveness of our engagement, but we would welcome their positive input.

The noble Lord also asked about Mali. The UK supports the proposals for EU engagement in Mali. A well designed CSDP mission could strengthen the democratic institutions and help rebuild the capacity of the Malian armed forces to restore security to their country. The UK is conscious that any plan to launch a separate mission in Mali should be properly co-ordinated with the EUCAP Niger mission to ensure that there is a coherent and complementary strategy for the Sahel. The UK has appointed a Sahel special representative who took up the post on 15 October.

The noble Lord asked about BAE Systems and I rather rashly answered the question. I got a bit of a googly yesterday about BAE Systems, which does not have an awful lot to do with the EDA. I hope that the failure of merger talks will not be viewed as a lost opportunity for the European defence and aerospace industry. Balancing national interest between the three nations and the commercial interests between the two companies was always going to be difficult. The French and UK positions converged during the talks, and the Secretary of State and his French equivalent certainly were in regular contact. The noble Lord, Lord Rosser, asked about ministerial support for BAE Systems. That is just continuing what I have always done. As Defence Ministers, we will do our very best to support the British defence industry, which employs tens of thousands of people. I am sure we are continuing what the noble Lord’s Government did.

The noble Lord, Lord Gilbert, had reservations about the European appetite to get stuck in. While there are examples of this, we must give praise where praise is due and, among others, I draw attention to the incredible support that the Danes and the Estonians give our troops in Afghanistan. My noble friend saw a lot of examples of that. Our troops think the world of the Danes and the Estonians, and they have saved a lot of our lives.

I am conscious that I am running out of time but, finally, the noble Lord, Lord Roper, asked about the balance of competences review. Although the Ministry of Defence is not leading on any of the balance of competences reports, my officials are working closely with the Foreign and Commonwealth Office and other departments, such as the Cabinet Office, BIS and the Department of Health to ensure that defence interests are represented fully. We expect to feed heavily into the foreign policy report, especially with regard to the CSDP and the internal market report in the first semester.

Again, I thank the committee for the report and today’s debate. We have seen areas where European defence has been successful, and areas where we still have progress to make. There is an increasing urgency for Europeans to step up and deliver defence capabilities. The UK-French model will, I hope, encourage this. No one expects all nation states to contribute equally, but they must contribute fairly. The burden of additional investment and capability can be shared effectively and easily. Just as Europe cannot afford a fiscal deficit, neither can it afford a security deficit.

18:33

[Lord Teverson]

My Lords, first, I want to thank my noble friend for a positive and considered reply to this report, which I strongly welcome. I will be very brief. We have heard some excellent speeches and some memorable ones. It is the first time I have heard the “w” word used in a Lords debate but, as the report said, we live in changing times. So there we are.

I particularly thank the noble Lord, Lord Robertson, for participating in the debate because he provided an anchor of real experience in this whole area. I take the criticism from the noble Lord, Lord Gilbert, because some of it is correct. What we tried to achieve, and one of the things that came out in this report, was clarity. What it showed to us as a sub-committee was that where there was difficulty in understanding the whole picture, when you put all those pieces of the jigsaw together, it not only made a picture but made sense as well. Many of those arguments are repeated, but they are important. Many noble Lords mentioned the comment that taxpayers are being short-changed, and that was the strongest message that came out of today. That Britain should and can lead in this area in the European Union is for sure.

On the nuclear side, I apologise to my noble friend Lady Miller that we did not mention nuclear. Perhaps that should have been there. It is not, as such, an EU competence in terms of strike forces, but one of the UK-French defence treaties is specifically around the nuclear side, and we should deal with that.

The point on A400M was a quote from our evidence. I think everyone recognised the severe problems with A400M and all the lessons that needed to be learnt. The committee has responsibilities with the French Parliament in looking at the UK-French defence treaties. One of the core things that we are concerned about there, as the Minister said, is that we should not go from two, where we collaborate, to a point where that complexity becomes great again so that we cannot deliver programmes of the right sort on time and on budget.

Lastly, I say to the noble Lord, Lord Palmer, that he gave me great insight into Question Time in this House by saying that one should hang back to see who else speaks. Today I started to speak over my noble friend Lady Trumpington, and that was one of the biggest mistakes that I have ever made in my career in this House. I withdrew very quickly.

I thank noble Lords very much indeed for an excellent debate. I thank the clerk, Kathryn Colvin, and her small team for all the work that they did in bringing this report together. I commend the report to the Grand Committee.

Motion agreed.

Committee adjourned at 6.36 pm.

House of Lords

Wednesday 24th October 2012 Lords Chamber

Wednesday, 24 October 2012.

15:00

Prayers—read by the Lord Bishop of Leicester.

Isles of Scilly: Helicopter Services

Wednesday 24th October 2012 Lords Chamber

Question

15:06

Asked By

[Lord Berkeley]

To ask Her Majesty’s Government what steps they are taking to ensure a lifeline passenger service to the Isles of Scilly following the closure of the helicopter service on 1 November 2012.

[Earl Attlee]

My Lords, the Isles of Scilly Steamship Company, which operates the ferry and fixed-wing services, has already announced plans to increase those services to meet some of the passenger demand following the closure of the helicopter service. My honourable friend the Parliamentary Under-Secretary of State, Mr Norman Baker, has recently met, and is due to meet again, delegations including the Isles of Scilly Council to discuss transportation to and from the Isles of Scilly.

[Lord Berkeley]

I am grateful to the Minister for that reply because it marks some progress, even if the Isles of Scilly Steamship Company is now a monopoly supplier of transport services. Is he aware that during the five months between now and the beginning of next April, there will be only a small fixed-wing service of aeroplanes that are susceptible to wind and fog— for example, the service did not run yesterday? If the evidence of last winter is taken into account, the service would not run for 22 days over five months. With a population of around 2,000 people earning the fourth lowest wages in the UK and a reliance on tourism, those who use the aeroplane service have to pay £140 return. Does the noble Earl agree that in Scotland, most of the islands have both air and ferry services as lifeline services, and the fare for the equivalent distance is £25 return? Will the Government now look at a lifeline service for the Scilly Isles so as to take this forward and make the service comparable with that in Scotland?

[Earl Attlee]

My Lords, the noble Lord used the word “monopoly”, which implies that there can be only one operator. It is a free market and other operators can come in. We need to see how the market develops. The noble Lord also talked about the “lifeline”, which is a term generally used to describe vital transport connections between mainland and island communities. However, it carries no formal or legal status. The Government recognise that many people regard maritime passenger and freight services to the Isles of Scilly as a lifeline, and that is why we have said that we are committed to ensuring that these continue.

[Lord Cameron of Dillington]

My Lords, are the Government aware that the cost of transport to the Isles of Scilly is four times more expensive than that from the mainland to the Scottish islands over an equivalent distance? As a result, businesses and the tourist industry in the Scilly Isles are suffering badly and are in rapid decline when compared with those industries in the Scottish islands. The total absence of a ferry service, as already mentioned, between November and March means that running a business or even leading a normal life is becoming a pretty precarious enterprise in the Scilly Isles.

[Earl Attlee]

My Lords, I have read carefully the report produced by the Council of the Isles of Scilly comparing transport services to the islands with those of Scotland. It is a well written report, but I would point out that the situation in Scotland is different because it involves much more complicated and wide-ranging services that cannot be operated on a commercial basis. At the moment, the service to the Isles of Scilly is operated on a commercial basis.

[Baroness Trumpington]

Perhaps I might ask the Minister whether the air ambulance service will operate in that area when the ordinary air service ceases.

[Earl Attlee]

As ever, my noble friend asks a very good question. There is an air ambulance service that can deal with medical emergencies. In addition, there is the search and rescue service from the Royal Naval Air Station at Culdrose.

[Lord Teverson]

My Lords, following up the point made by my noble friend Lady Trumpington about medical services, these are very important because one of the key issues that has been identified is that fixed-wing services cannot substitute for the helicopter service in terms of speed or indeed handling individuals. I understand that the cost of RNAS Culdrose offering that service is £14,000 per return trip. What provision will be made over this winter for medical emergencies, not just for individuals but for medical supplies and blood samples, so that the islands are not isolated in this key way?

[Earl Attlee]

My Lords, the problem we face is that we have lost the helicopter service to the Isles of Scilly for the time being. I understand that the Isles of Scilly Steamship Company, which operates a fixed-wing air service, has now made arrangements with the local primary care trust to take over some of the transportation of patients and medical supplies, including blood products and samples, which were previously carried by helicopter, having secured the appropriate CAA licences. Noble Lords will recall that the noble Lord, Lord Berkeley, identified that there were only a few days in the year when helicopter services could go to the Isles of Scilly but fixed-wing aircraft could not.

[Lord Greenway]

My Lords, is it not the case that the Isles of Scilly Steamship Company also operates two cargo vessels, one of which sails three times a week during the winter, and which carries a few passengers?

[Earl Attlee]

The noble Lord is correct. However, we must also understand that the problems of transport services to the Isles of Scilly make for increased costs for the people living on the islands, so we need a solution that is not too expensive but which meets the needs of the people on the islands.

[Baroness Dean of Thornton-le-Fylde]

My Lords, I was pleased to hear that the Minister has read the comparative study produced by the Council of the Isles of Scilly, which demonstrates very clearly—and factually—just how poorly the Isles of Scilly compare with the islands of Scotland. The Minister has just said that they are different. They are different because we recognise in Scotland that these services are not commercially viable and therefore the Government pay, but the Isles of Scilly is a commercial arrangement. Will the Minister consider changing the designation for the Isles of Scilly to give them the same status as that of the islands of Scotland?

[Earl Attlee]

My Lords, we could make a public service obligation if the market failed. The market has not yet failed. In addition, there would have to be a competitive bidding process. We do not want to interfere at this point because we want to see whether there will be a commercial solution to the problem.

[Lord Davies of Oldham]

My Lords, the Minister has given some encouraging news about the increase in services, but he will appreciate that the House is still greatly exercised about communication with the Scilly Isles, particularly during winter. If we find that the Scilly Isles are effectively cut off for a number of days in winter, I hope that the Minister will return to this issue and take some action.

[Earl Attlee]

My Lords, I assure the House that my honourable friend Mr Norman Baker takes these matters very seriously and is on the case.

EU: UK Net Contributions

Wednesday 24th October 2012 Lords Chamber

Question

15:15

Asked By

[Lord Vinson]

To ask Her Majesty’s Government how the rise in the UK’s net annual contributions to the EU budget to over £10 billion per annum (as set out in the Pink Book 2012) relates to public sector cuts in other areas.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the UK’s net contributions to the European Union have indeed increased over recent years. This is mainly the result of unacceptable increases in the annual EU budget and to changes to the calculation of the UK abatement, agreed by the previous Administration. This Government’s top priority is budgetary restraint, thereby ensuring that the EU budget contributes to domestic fiscal consolidation.

[Lord Vinson]

I thank the Minister for his considered reply. Does he appreciate that while we practise austerity here in the UK, our net contribution to the EU has doubled since 2006 to over £10 billion a year? The UK has to borrow every penny of it from others, thus increasing our national indebtedness. As our Government were outvoted in their attempt to reduce the 2013 budget, will the Minister strive to get a better deal in the forthcoming negotiations, not least by withholding our £5 billion a year contribution to the structural funds? If invested here in our infrastructure, it would help to create over 250,000 badly-needed jobs.

[Lord Sassoon]

My Lords, as the House is aware, we are coming up to the negotiations of the multi-year financial perspective. That agreement requires unanimity of member states. My right honourable friend the Prime Minister has made it clear in a statement, jointly with other European colleagues, that the maximum acceptable expenditure increase through that period is a real freeze in payments. That continues to be the Government’s position. As for structural funds, we cannot just opt out of any particular area of EU expenditure, although I agree that in the area of structural and cohesion funds, it is absurd that so much money is recycled from wealthy member states back into other wealthy regions of Europe. That is one of the many issues that need to be addressed.

[Lord Pearson of Rannoch]

My Lords, to put this question into everyday perspective, do the Government accept that £10 billion per annum equates to the annual salaries of 91,320 nurses being thrown away down the Brussels drain—or policemen, soldiers, or any other public servants at £30,000 per annum? Does this Question not remind us that there is no such thing as EU aid to the United Kingdom? For every pound that Brussels sends us, we have sent them £2.20.

[Lord Sassoon]

My Lords, the UK benefits from its membership of the EU. The UK should make a proper contribution to the net EU budget, but we have to see that the completely unacceptable proposals from the European Commission for the next multi-year period are reined back. The Commission’s proposals, as opposed to a real freeze, would mean an increased UK contribution of £10 billion, or £1.4 billion a year. That is indeed many nurses, policemen and other front-line public servants.

[Lord Wigley]

My Lords, the Minister said that the UK benefited from membership of the EU, and I think that many people will be glad to hear him say that. However, will he confirm that it is not just the rich regions of Europe that benefit from the structural funds? In fact, Wales, with the lowest GVA per head of any country or region in the UK, gets considerable benefit. If there were to be changes in this direction, can he give a guarantee that those sums will still come to Wales?

[Lord Sassoon]

My Lords, I certainly accept that money should be targeted at the regions where it is most needed. I merely say that recycling money into the wealthiest regions seems like wasteful activity.

[Lord Dykes]

Can my noble friend reassure the House that there will be a friendly compromise on this matter when the full negotiations take place?

[Lord Sassoon]

I would love to see that happen. Of course, I cannot give any assurances about how it will play out.

[Lord Davies of Oldham]

My Lords, of course we agree that the European budget needs to be tightly controlled and, if possible, redirected towards jobs and growth. We are not too confident that this Government will produce the same priorities. However, can the Minister confirm that the Prime Minister will be calling on his many friends among the leaders in Europe in this negotiation?

[Lord Sassoon]

What I can confirm is that the UK’s priorities for expenditure include the following: substantial cuts to the common agricultural policy. However, I agree with the noble Lord that priorities for the UK include growth and competitiveness, climate change and external action. I am not going to speculate on how the negotiations will play out.

[Lord Hamilton of Epsom]

Will my noble friend confirm that, in the absence of any compromise, what is being asked for by the European Commission is a 6.8% increase in the budget? Is this not an extraordinarily high figure which shows an unbelievable insensitivity to the problems that Governments are facing across the EU as they try to rein back their deficits?

[Lord Sassoon]

Yes, I completely agree with my noble friend.

[Lord Tebbit]

My Lords, did my noble friend say—did I hear him correctly—that this proposal requires unanimity? If so then surely there is no need to negotiate. All one has to do is simply say no.

[Lord Sassoon]

My Lords, would that life were so simple.

Schools: Pupil Premium

Wednesday 24th October 2012 Lords Chamber

Question

15:22

Asked By

[Baroness Massey of Darwen]

To ask Her Majesty’s Government how the pupil premium will be monitored to ensure that it benefits individual children.

[The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)]

My Lords, we want to help schools to narrow attainment gaps. One way of doing that is through the pupil premium, which represents additional funding rising to £900 per pupil next year for children on free school meals. From this September, schools have to publish details of how they use their premium. My department publishes in the school performances tables information about disadvantaged pupils’ achievement. Ofsted has a closer focus on how the premium is used and on how it benefits pupils.

[Baroness Massey of Darwen]

I thank the Minister for that reply. I am sure he is aware that a recent Ofsted report states that very few teacher leaders think that the pupil premium has changed the way in which they support disadvantaged pupils. I understand from him that Ofsted will in future be asked to comment specifically on the use of the pupil premium. What effective measures will be chosen to assess those reports?

[Lord Hill of Oareford]

The principle that we are adopting generally in introducing the pupil premium is to leave discretion on how it is spent as much as possible to individual heads because they will know the circumstances of the children for whom they are responsible. However, the noble Baroness is right that those approaches that are working well—which we will discover through the publication online of details of how schools have done, through inspections by Ofsted and through spreading good practice through the education endowment fund—should be spread as widely as possible, with lessons being learnt from them.

[Lord Storey]

My Lords, the Minister will be aware that, according to an Ofsted survey of, I think, 300 schools, 50% were using the money effectively and were seeing real changes. How can we ensure that the other 50% are using the money, which we have heard is going up next year, in such an effective way?

[Lord Hill of Oareford]

My answer makes a similar point. It is important that we learn lessons from the ones that are spending it effectively. We will do that through the work of the Education Endowment Foundation, which was set up specifically to spread good practice and help other schools learn the most effective ways of tackling disadvantage. It is early days, but as more information is published, the fact that from this September schools are having to account for how they have spent their money and what they have spent it on, and demonstrate a linkage between that money and results, will help us achieve the goal of my noble friend Lord Storey.

[Lord Touhig]

My Lords—

[Baroness Whitaker]

My Lords, is the Minister aware that almost all Roma children, no matter how poor they are, do not qualify for the pupil premium because their parents may not have been here long enough. What can the Government do to remedy this manifest inequality?

[Lord Hill of Oareford]

I understand how dear a subject that is to the noble Baroness, Lady Whitaker. The reason that we have gone for a single and simple measure of eligibility, based around free school meal status, is that we think it is important to keep the pupil premium as simple as possible so that we can learn the lessons and not make it too complex. The best proxy that we felt that we could have was economic disadvantage, because we know the difference there is between how the poorest children achieve and how better-off children achieve. That is why we went for that simple measure.

[Baroness Howe of Idlicote]

My Lords, given that 50% of the schools are perhaps not using the pupil premium effectively, what role does the Minister expect school governors to play in ensuring that the money does in fact go to the right pupils?

[Lord Hill of Oareford]

I know that the noble Baroness, Lady Howe of Idlicote, agrees with me on the importance of the role of governors generally in concentrating on the performance of the school and the achievement of pupils. One of the key indicators that there will be, through Ofsted and the performance tables, is how schools are doing, particularly for children on free school meals. Governors can play an extremely important part in holding the head, and the rest of the school, to account for delivering that.

[Lord Avebury]

My Lords—

[Lord Touhig]

My Lords—

[The Chancellor of the Duchy of Lancaster (Lord Strathclyde)]

My Lords, noble Lords cannot speak at the same time. I think it is my noble friend’s turn.

[Lord Avebury]

Further to the question asked by the noble Baroness, Lady Whitaker, will my noble friend confirm that, in future, Ofsted inspections will pay specific regard to the position of GRT—Gypsy, Roma and Traveller—pupils, bearing in mind that they are the most deprived group of any section of the community in terms of educational achievement and attainment?

[Lord Hill of Oareford]

My Lords, as I think I said to the noble Baroness, Lady Whitaker, the focus of the Ofsted inspection is particularly on children suffering from economic disadvantage—those on free school meals—and those are the criteria and judgments that Ofsted will be using.

[Lord Touhig]

My Lords, three tries for a Welshman. Many parents, including those with autistic children, are told that schools do not have funding to support their child’s special educational needs. I do not think they are helped by the fact that the Government have failed to publish guidance to schools on the use of the pupil premium. Can the noble Lord tell us whether the reforms of the SEN system will ensure that the pupil premium is now better used to help children with special needs?

[Lord Hill of Oareford]

My Lords, generally the reform to the special educational needs system through the Bill that the Government will be bringing forward next year will help tackle the needs of all children with special needs more effectively than the current system. Not all those children will be suffering from economic disadvantage, so, in addition, the pupil premium will, I hope, help to tackle that issue. I agree with the noble Lord, Lord Touhig, that we need to make sure that we spread good practice. The Government have a role through things like the Education Endowment Foundation, which is an independent organisation that can spread good practice. We certainly need to make sure that best practice on how money is spent on children with special educational needs is spread through the system.

[Lord Lucas]

My Lords, is my noble friend aware that there is a lively business among private companies in helping kids who have left school with no English or Maths to get up to Level 2 standard and that they charge rather less than a pupil premium for doing it? Does he think that schools might make use of that resource as well as employers?

[Lord Hill of Oareford]

One of the important principles of the pupil premium is that schools can decide how to spend that money. If they are sensible they will go to a range of providers to help to narrow those gaps.

[Baroness Hughes of Stretford]

My Lords, it is welcome news that in the future schools will be required to report on how they spend the pupil premium but many pupils have already lost out because, according to Ofsted, the money that schools have had has been misspent. Will the Government go further now and ring-fence the pupil premium and give schools the proper guidance that my noble friend Lord Touhig referred to? That would ensure that the money really is focused on individual disadvantaged children with schools purchasing interventions that we know work.

[Lord Hill of Oareford]

Spreading good practice, yes, ring-fence, no, my Lords.

Unemployment: Young People

Wednesday 24th October 2012 Lords Chamber

Question

15:31

Asked By

[Lord Bates]

To ask Her Majesty’s Government what further steps they will take to reduce the level of unemployment, particularly among young people.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

The recent rises in employment and falls in unemployment, including among young people, are encouraging. We are committed to providing support to young people to give them the work experience and skills they need to find sustained employment. This includes the youth contract, which will provide nearly half a million new opportunities to young unemployed people over the next three years, as well as the Jobcentre Plus offer and the Work Programme.

[Lord Bates]

I am very grateful to my noble friend for a very encouraging answer. It is wonderful to see more young people getting a job, but would he agree with me that there is one thing better than getting a job, and that is creating a job? Would he therefore consider bringing in new measures to encourage more young people—be they unemployed, school leavers or graduates—to set up their own businesses and thereby unlock the vast creative capital among our young unemployed?

[Lord Freud]

Yes, my Lords, my noble friend makes a most valuable point. We are expanding the New Enterprise Allowance to encourage more people—in particular young people—to start up businesses. While this includes financial aspects such as offering loans and financial support, it is the mentoring tied up with that process that helps the youngster, or indeed anyone taking part, in actually making that business a success.

[Baroness Wall of New Barnet]

The noble Lord, Lord Bates, has referred to creating jobs, and having a job is really important. But would the Minister agree that having a career that includes an apprenticeship gives those very young people a substantial opportunity to grow? In the funding that is available there are opportunities for young people to go straight into apprenticeships, which creates an income, not only for themselves, but for UK plc going forward.

[Lord Freud]

The noble Baroness is absolutely right. Apprenticeships are a vital route for youngsters to get into the workforce. We have put a lot of extra funding into apprenticeships, and the numbers are going up pretty steeply.

[The Lord Bishop of Leicester]

My Lords, could the Minister tell us what the Government are doing to ensure that the most vulnerable young people who enter the Work Programme are not simply parked by contractors because it is not financially viable to invest the resources needed to support them into work?

[Lord Freud]

Well, my Lords, the structure of the Work Programme is designed to make sure that no one is parked in that way. There are specific measures to prevent that happening. The main way in which to get the people who are the most difficult to get into work is by pricing; we price those people more highly than people who are simpler to get into work. We have also, as noble Lords will be aware, introduced a subsidy programme to encourage employers to take youngsters who are NEET into the workforce.

[Lord Martin of Springburn]

My Lords, the Minister will readily acknowledge that because of unemployment, some young people are unable to get work until they are 19 or 20. I know that he does not have the information now, but could he place in the Library the figure for how many UK adult apprenticeships there are? That would be very helpful.

[Lord Freud]

My Lords, the figure I have on apprenticeships for 19 to 24 year-olds is 31% of the total, which is 457,000 starts. I cannot work out the 31% in my head, but I might be able to do it later.

[Lord McKenzie of Luton]

My Lords, on the matter of the youth contract, how many wage subsidies have been taken up to date? How does the Minister consider that sustainable employment opportunities for young people would be enhanced by denying the right for under-25s to access housing benefit?

[Lord Freud]

My Lords, the wage subsidy is paid after six months. It was introduced at a time when remarkably few came into the workforce, so we would expect to see the figure start to move in the months to come and will be publishing the information on that basis. As to the second question, that is not government policy, although it is a matter of debate what is the right level of support for youngsters in the housing market.

[Lord Roberts of Llandudno]

Is the Minister aware that the youth unemployment situation varies from area to area: in some places it is very severe; in other places it is more favourable? What are the Government going to do to concentrate any extra resources in those areas that are really in most desperate need?

[Lord Freud]

My Lords, we have a whole range of programmes now. All of them are much more individualised than previous programmes, so there should be a response to different regions so that the money goes where the need is. I have previously cited the figure for how many youngsters are inactive and unemployed. In the most recent set of figures, I am pleased to say that we have got that figure down to 1.36 million, which is below the level at the last election. So we are doing something about that terrible structural problem of the NEETs, which has been growing over the past decade.

Civil Aviation Bill

Wednesday 24th October 2012 Lords Chamber

Order of Consideration Motion

15:37

Moved by

[Earl Attlee]

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 13, Schedule 1, Clauses 14 to 30, Schedule 2, Clauses 31 to 47, Schedule 3, Clauses 48 and 49, Schedule 4, Clauses 50 to 55, Schedule 5, Clauses 56 to 59, Schedule 6, Clauses 60 to 72, Schedule 7, Clauses 73 to 76, Schedules 8, 9 and 10, Clauses 77 and 78, Schedule 11, Clauses 79 to 82, Schedule 12, Clauses 83 to 90, Schedule 13, Clauses 91 to 99, Schedule 14, Clauses 100 to 112.

Motion agreed.

Financial Services Bill

Wednesday 24th October 2012 Lords Chamber

Committee (9th Day)

15:38

Relevant documents: 4th and 8th Reports from the Delegated Powers Committee.

Clause 63 agreed.

Clause 64: Cases in which Treasury may arrange independent inquiries

Amendment 190AA

Moved by

[Baroness Noakes]

190AA: Clause 64, page 140, line 36, leave out subsection (4) and insert—
“(4) If subsections (2) or (3) apply, the Treasury must arrange for an enquiry to be held under section 65 unless the Treasury consider that it is not in the public interest that there should be an independent inquiry into the events and the circumstances surrounding them.”

[Baroness Noakes]

My Lords, I shall also speak to Amendments 190B and 192ZA in this group. These amendments, and others in the group, concern the inquiry and investigation provisions of Part 5. I should say at the outset that I regard the provisions of Part 5 as crucial to the Bill. The earlier parts of the Bill created new regulations with very significant powers, and it is entirely likely that the new regulators will make mistakes in the use of those new powers and that things will go wrong, so we need strong provisions in the Bill—

[Lord Newby]

My Lords, I remind your Lordships that if you are leaving the Chamber, please do so as quietly as possible.

[Baroness Noakes]

My Lords, I was saying that Part 5 of this Bill is crucial because it sets up the provisions that will deal with things when they go wrong—if the regulators make mistakes or if things do not turn out well. Part 5 ensures that there are proper investigations and proper reporting of those investigations. I remind the Committee that there have been problems in this area in the very recent past. It took the heroic efforts of the Treasury Select Committee in another place to get the FSA’s report on the failure of RBS into the public domain. We still have nothing on HBOS. The FSA’s reports on both RBS and Northern Rock were internal reports, and therefore non-independent. The Bank of England, which will be the new home for the PRA, is not itself a beacon of good practice when it comes to reviews of its own performance. So we need to be sure that we get this part of the Bill absolutely right.

I welcome the new duties in Clauses 69 and 70 on the FCA and the PRA to investigate and report on possible regulatory failures. I similarly welcome the powers in Clause 73 which allow the Treasury to direct the regulators to carry out investigations in certain circumstances. However, internal investigations will often not be good enough, which is why in principle the powers in Clause 64 are very welcome. These allow the Treasury to arrange independent inquiries where there have been certain events which, to paraphrase, threatened the stability of the financial system or risked or caused significant damage to the interests of consumers or businesses.

The first amendment that I tabled to Clause 64 was Amendment 192ZA, which is one of our familiar and much-loved may/must amendments. I could see no circumstance in which the Treasury, having satisfied itself that a public inquiry is in the public interest, should have any optionality about whether to set up an independent inquiry. Amendment 192ZA would change that “may” into a “must” so that, if the public interest test is met, the Treasury must set up an independent inquiry. Having looked at this a second time, however, I tabled Amendment 190AA, which would replace subsection (4) and turn it round. Under my proposed new subsection (4) the Treasury must arrange an inquiry unless it believes that the inquiry is not in the public interest. I believe that this more naturally represents the thought process that would go on in the Treasury; that is, the Treasury would order an inquiry unless there was a sound reason for not doing so. For good measure I have also tabled in this group Amendment 192ZA, which is another may/must amendment, this time to Clause 73, which allows but does not require the Treasury to direct the FCA or the PRA to carry out an internal investigation. My amendment would require a direction.

I am aware that the wording and structure of Clause 64 follow that of Section 14 of FiSMA. However, I do not believe that that is necessarily conclusive. The new duties set out in Clauses 69 and 70 in respect of regulatory failure positively require the PRA and the FCA to organise investigations in specified circumstances. The only let-out is if the Treasury directs them that they are not required to carry out investigations. Can the Minister explain why “must” is the correct formulation for the PRA and the FCA, but not the correct formulation for the Treasury?

I hope that the Minister will explain the relationship between Clause 64 and Section 14 of FiSMA. It seems to me that Section 14 becomes redundant when this Bill is made law, but I could not find any provision for its repeal. So I ask my noble friend whether it is to remain in force, and if so, for what purpose?

Lastly, I ask the Minister to explain in what circumstances the Government would intend to use the independent inquiry route in Clause 64, as opposed to the self-investigation route in Clauses 69, 70 and 73. I tried to research how often Section 14 of FiSMA has been used but drew a blank; in fact, I am not sure that it has ever been used. I hope that the Minister will be able to explain in what circumstances the Government would want to use the independent inquiry route, rather than relying on self-investigation. For example, given the circumstances surrounding the financial crisis, would they have thought it appropriate to have ordered an independent inquiry—that is, one not left simply to the regulator concerned—or do the Government believe that self-inquiry is the appropriate route? If there is no independent inquiry for something as grave as the financial crisis that we have recently experienced, what is Clause 64 for? I look forward to hearing my noble friend’s response. I beg to move.

15:45

[The Lord Speaker (Baroness D'Souza)]

In calling Amendment 190AA, I must advise noble Lords that if this amendment is agreed to I shall not be able to call Amendment 190B by reason of pre-emption.

[Lord Peston]

My Lords, I hope that I have heard the gist of what the noble Baroness was trying to say. She ended by asking the fundamental question, which is not only what Clause 64 is here for but what this whole section of the Bill is here for. That is not very clear. If these powers had been enshrined in statute, are we to believe that the catastrophes of the recent past would not have occurred? Is that the purpose? I cannot believe that you do investigations to prevent a catastrophe occurring; what you do is intervene and stop it. This section must therefore be there simply to say, “Look, we made a mess of things, including ourselves as policymakers and regulators, so we’re setting up this inquiry to discover what we can learn from the mess that we’ve got ourselves involved with”. I take it that that is probably the answer to the noble Baroness’s question but, like her, I look forward to hearing what the Minister has to say.

[Lord Barnett]

As I originally put down the first “may” or “must” group of amendments, together with my noble friend Lord Peston, I have some sympathy with the noble Baroness. We were told by the Minister—I forget whether it was on the sixth, seventh or eighth day—that he had asked his officials to go through the whole Bill for the mays and musts to see which were appropriate. Knowing Treasury officials, I am sure that they will have come back with something to say whether they thought a “may” should be changed to a “must”. Was this group included in that? Perhaps the Minister could tell us. It looks as though the noble Baroness is quite right and that this is one of those occasions where the word should be “must”. I would welcome the Minister’s reply. My own experience of the thinking of Treasury officials goes back too far for me to be sure, as I last took advice from Treasury officials more than 30 years ago and I may have forgotten a bit about how they operate. However, I am sure that they are still as good today as they were then, and I would welcome the Minister telling us what they came back with to his request.

[Lord Davies of Oldham]

My Lords, I hope that the noble Baroness, Lady Noakes, can stand the accolades that are coming from this side of the House after her speech. I think that she has posed the Minister some very appropriate questions, while my noble friend Lord Peston goes a little further by saying, “What’s the clause here for at all?”. So the Minister has quite a lot on his plate in responding to this debate already, and all this puts the official opposition amendments very much into the minor case. Our amendments in this group, Amendments 192ZZA, 192ZZB and 192C, call for the directions to be laid before Parliament. These are directions in respect of a direction to the FCA from the Treasury to carry out an investigation into possible regulatory failure. Of course, I am at one with my noble friend Lord Peston when he indicates that investigations are about what has gone wrong, and the lessons which can be learnt in order to prevent any reoccurrence. Intervention in time is what is needed if one wants to prevent things going badly wrong. Therefore, with these amendments, we are merely seeking for the issues to be open and transparent. Nothing could make them more transparent than that they should be laid before Parliament.

In passing, on other amendments in this group, those in the name of my noble friend Lord McFall also have some merit. He calls for the person appointed to chair any inquiry set up under these provisions to be “suitably qualified and experienced”; I hope that the Minister can give a positive response to that. He also calls for an exemption for information in respect of which a claim to legal professional privilege could be made; I am sure that the Minister will look sympathetically on that. Of course, his Amendment 193 says that any investigator appointed must be “suitably qualified and experienced”. Now, the Minister and I understand that he only has to reply to the amendment that has been moved in this group but, as we are in Committee, it might be useful if the Minister gives us as comprehensive a reply as possible to the whole group.

[Lord Desai]

My Lords, before the Minister replies, I am puzzled, given what the noble Baroness has said, when I read the clause. What are the circumstances under which the Government will not order an inquiry? Are they things like when we had the fiasco with RBS, where an inquiry was conducted, hushed up and not published until we literally marched in the streets for the FSA to do so? Can the Minister explain under what circumstances the Treasury would not order an inquiry if such events had happened?

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I will try to address a number of those points. I will stick to the amendments that have been moved or spoken to rather than those that have not.

This group of amendments, as we have heard, relates to two of the mechanisms by which the PRA and the FCA can be held to account for regulatory failures. One of the key lessons learnt from the crisis, of course, is that we need greater openness and transparency about where things go wrong and about what lessons can be learnt. In that context, I think that my noble friend has got it completely right about the circumstances in which an independent inquiry might be called for, as opposed to self-investigation. I will leave that one at that.

I would also just say to my noble friend that Section 14 of FiSMA is being repealed. That is dealt with in Clause 5(1). However, the Treasury can use the new power in Clause 64 to arrange an inquiry into action that predates the Bill.

[Baroness Kramer]

I appreciate the Minister giving way. I request some clarification. He talked about investigations into the FCA and the PRA, but surely the regulatory body referred to in subsection (3)—the clearing house—is actually the Bank of England. Can he confirm that it is included in this rubric, as it were?

[Lord Sassoon]

I believe that that is the case. If it is not, I will clarify things as I reply to my noble friend Lady Noakes.

[Lord Peston]

My Lords, I did not catch the last few words that the Minister said before the noble Baroness asked her question. I thought he said that if the Bill is enacted, this part would enable the Treasury to set up inquiries into what happened in the past few years. Did he actually say that?

[Lord Sassoon]

In so many terms, yes. In reply to my noble friend’s question about the repeal of Section 14 of FiSMA, I wanted to make it clear that a gap is not left in the Treasury’s ability to arrange inquiries into events, even though they might be ones that predate the coming into force of the Bill.

[Lord Peston]

The provision would then become much more significant. If we pass this Bill into law and it becomes an Act then the disasters of the past few years could be inquired into by a major independent committee, which might tell us who were the real architects of the disaster and where policy failed. If the Bill is to enable that to happen—and it seems to me overwhelmingly that it must happen—then we really do need the word “must” in this case.

[Lord Sassoon]

I will get there eventually. If the Committee will permit me, I will address the point. I will not necessarily give complete satisfaction but we will get there.

The Bill makes a number of provisions that are intended to deliver greater accountability and carries forward the power of the Treasury to arrange independent inquiries into regulatory failures. It also provides for new duties on the two authorities to carry out investigations of their own—if necessary, at the instigation of the Treasury—and report their findings to the Treasury where there has been regulatory failure and certain other criteria are met.

I turn first to Amendments 190B and 192ZA, which probe why, if the public interest test is met, the Bill provides that the Treasury “may” require an inquiry. By changing “may” to “must”, their intended effect—as we have heard—is that in all cases where the test is met, the Treasury should have to require an inquiry. Amendment 190AA achieves the same end by a different means, specifying that the Treasury must arrange an inquiry where the two conditions in Clause 64 are met unless there is a public interest in not doing so. I agree with my noble friend that, if there is an overwhelming public interest in having an independent inquiry or in the regulator carrying out an investigation, the Treasury should step in to ensure that that happens. As it stands, the Bill gives the Treasury a little bit of discretion here. This is not about wriggling out of the need to call for an inquiry; it simply acknowledges that in reality, circumstances may dictate that even though the test is met, an inquiry or an investigation under this Bill is not necessarily the best course of action.

For example, there may already be an alternative independent inquiry going on—perhaps a parliamentary commission or other parliamentary inquiry—or an inquiry under the Inquiries Act. In the case of the provisions relating to investigations carried on by the regulator, the regulator itself may already be carrying on an investigation under Clauses 69 or 70. However, as my noble friend is aware, and as the noble Lord, Lord Barnett, has reminded us, I have already confirmed that I am giving careful thought to the wider use of “may” and “must” throughout the Bill. This is a huge exercise, taking up some mighty brains. All I would say at this stage is that although there are certainly not many cases that deserve intense scrutiny, this is certainly one of the instances that merit serious consideration. I will leave it at that. We will come back if we find any suitable candidates for changing.

Amendment 193 to Clause 79 seeks to place an explicit duty on the regulators to ensure that when a complaint against a regulator needs to be investigated, they appoint an investigator who is suitably qualified and experienced. This amendment is not necessary; it has also not been spoken to by the noble Lord, Lord McFall of Alcluith, so I will leave it at that. I shall turn to Amendments 192ZZA, 192ZZB and 192C.

[Lord Barnett]

Perhaps I misheard the Minister on the must/may argument, which he did not seem fully to explain. He must have had a major reply from officials to his request on a Bill as huge as this, with so many musts and mays throughout. What exactly did they recommend? Did they recommend, as always, that there must be agreement with the noble Lord or was there a point at which they said that it is possible that must might be better than may? Is this one of them?

16:00

[Lord Sassoon]

My Lords, I do not want to get the Committee too excited about this matter because, as any noble Lord, including the noble Lord, Lord Barnett, will know, it is very rare for a piece of considered legislation, particularly coming from the Treasury, to get any of these matters wrong in the drafting. I really do not want to raise false expectations.

All I would say is that the exercise is carrying on and that the matter raised by my noble friend Lady Noakes is certainly one of the may/must instances that merits serious consideration. When there is any more news to report to Peers who are interested in this Bill, we have plenty of ways of communicating it. If there is anything to say, the noble Lord, Lord Barnett, will be among the first to hear.

The group of amendments on which the noble Lord, Lord Davies of Oldham, spoke rather modestly towards the end of this discussion nevertheless are ones which we need to take seriously. Amendment 192ZZA would provide that if the Treasury issues a direction to the FCA not to proceed with an investigation into possible regulatory failure, that direction must be laid before Parliament. Amendment 192ZZB makes similar provision for such investigations by the PRA.

Amendment 192C would provide that where the Treasury issues a direction specifying the parameters of an investigation into regulatory failure by the PRA or FCA, or suspending or halting such an investigation, that direction must be laid before Parliament.

The Bill is drafted to give the Treasury some discretion here and, all things being equal, we had wished to preserve this. However, in this instance I am somewhat persuaded by the case that noble Lords have made. The Government are very much committed to greater openness and transparency in our regulatory architecture. With that in mind, I am happy to confirm that I will be taking on board the insightful comments of this Committee and will return to this issue on Report, placing the Treasury under a duty to disclose any directions issued under Clause 74, unless doing so would not be in the public interest.

I know that the noble Lord, Lord Davies of Oldham, is looking a bit surprised by this turn of events. On previous occasions he has compared himself and his batting average to the late, great Sir Donald Bradman and I really did not want to disappoint this Committee by seeing his batting average going down too far. I do not think that the noble Lord does himself justice: he is a great strike bowler when it comes to this type of thing. By my reckoning, the noble Lord’s success rate is now back up to around 20%. I have no idea how one translates that into a conventional bowling average but I think that it is pretty good. I note that his fellow Lancastrian, Jimmy Anderson, is on 30.41 for his test average. I think we can say that the noble Lord, Lord Davies of Oldham, is close to that. However, I am left with the question as to why the noble Lord is not being promoted to the strike bowler role. He comes on as the first change bowler day after day; we want to see him, like Jimmy Anderson, as the strike bowler from hereon.

I hope I have reassured the Committee that we share its desire to see accountability and transparency in the system, and that my noble friend will be prepared to withdraw her amendment.

[Baroness Noakes]

My Lords, despite having spent a couple of years in the Treasury in the dim and distant past, I could never do cricketing talk so I shall not try to follow my noble friend the Minister. I am sure that the noble Lord, Lord Davies of Oldham, is thrilled with his success in this opening group of amendments. I am very grateful for the support of noble Lords opposite for my amendments and I was pleased to hear what my noble friend had to say. I look forward, as do we all, to the outcome of the may/must investigations which are clearly occupying the great brains that live in the Treasury night and day. With that, I beg leave to withdraw the amendment.

Amendment 190AA withdrawn.

Amendment 190B not moved.

Clause 64 agreed.

Clause 65 : Power to appoint person to hold an inquiry

Amendment 191 not moved.

Clause 65 agreed.

Clause 66 : Power to appoint person and procedure

Amendment 192 not moved.

Clause 66 agreed.

Clauses 67 and 68 agreed.

Clause 69 : Duty of FCA to investigate and report on possible regulatory failure

Amendment 192ZZA not moved.

Clause 69 agreed.

Clause 70 : Duty of PRA to investigate and report on possible regulatory failure

Amendment 192ZZB

Moved by

[Lord Davies of Oldham]

192ZZB: Clause 70, page 144, line 3, at end insert—
“( ) Any direction under subsection (5) must be laid before Parliament and published.”

[Lord Davies of Oldham]

I beg to move.

[Lord Skelmersdale]

My Lords, as an observer of this scene, it is clear to me that my noble friend Lord Sassoon has said that he will take into consideration the two amendments in the name of the noble Lord, Lord Davies of Oldham, and bring something back—whether it is a total positive or a half positive, we do not yet know—at the next stage of the Bill. Therefore, it would be appropriate if the noble Lord would also withdraw this amendment.

[Lord Davies of Oldham]

My Lords, I apologise to the House. I am sure that the noble Lord is absolutely right and that I got lost in my cricketing batting average. I beg leave to withdraw the amendment.

Amendment 192ZZB withdrawn.

Clause 70 agreed.

Clause 71 agreed.

Clause 72 : Modification of section 70 in relation to Lloyd’s

Amendment 192ZA not moved.

Clause 72 agreed.

Clause 73 agreed.

Clause 74 : Conduct of investigation

Amendment 192A

Moved by

[Lord Hodgson of Astley Abbotts]

192A: Clause 74, page 145, line 20, at end insert—
“( ) In carrying out an investigation, the regulator must have regard to its regulatory principles and act proportionately, reasonably and fairly.”

[Lord Hodgson of Astley Abbotts]

My Lords, after that diversion through a possible Division and a discussion of batting averages, I rise to move Amendment 192A and shall also speak to Amendment 192B. We discussed, in relation to the previous amendment moved by my noble friend Lady Noakes, whether an investigation should take place. My amendments are concerned with Clause 74 and the way investigations take place once they are under way—the conduct of investigations, as in the heading of the clause.

At our Committee session just before we rose for the Summer Recess on 25 July, I moved a series of amendments which were designed to ensure that the regulatory approach was properly balanced and appropriate. Those amendments related to a point some way back in the Bill, on page 28, where we were looking at the regulatory principles to be applied by both regulators. My noble friend, who is not here at present, was able to reassure me on a number of the amendments that I moved, but on one I fear he failed. I argued that it was not sufficient for a regulator to be only proportionate in his activities; he also needed to be reasonable and fair. I then gave the Committee some practical examples of where, in the view of many in the financial services industry, the regulator may have been acting proportionately but was not acting reasonably or fairly. Therefore, my Amendments 192A and 192B are concerned with Clause 74, which relates to the conduct of investigations, and they seek to bring those two words into the phraseology of the clause.

At present in Clause 74 the wording is quite strange in the sense that in subsection (2) the regulator has only to,

“have regard to the desirability of minimising any adverse effect that the carrying out of the investigation may have on the exercise by the regulator of any of its other functions”.

It says nothing about the investigated firm; it refers only to the duties and responsibilities of the regulator. When my noble friend on the Front Bench comes to reply to the debate, it would be helpful if he could explain the exact purpose of this clause and what its practical effect would be.

Amendment 192A is designed to make it clear that investigators must be not only proportionate but, for the reasons that I have made clear, fair and reasonable in their work. Amendment 192B amends subsection (3) of the clause and provides for the postponement or suspension of the investigation where those regulatory principles are not being met.

When we discussed the “fair and reasonable” issue on 25 July, one reason that my noble friend gave was:

“The provision itself in Amendment 134 is unnecessary”.

He went on to say:

“The regulators have a duty under public law to act reasonably and can be challenged in the Upper Tribunal or by way of judicial review if they fail to discharge that duty, which would be broadly the case if the requirement were on the face of the Bill. The regulators are already under a duty to comply with the rules of natural justice—in other words to follow procedures and processes which are fair”.—[Official Report, 25/7/12; cols. 794-5.]

My noble friend read his speaking note beautifully but he cannot really believe its consequences. He is far too experienced a campaigner to consider that judicial review provides an answer to a firm that has been unfairly and disproportionately treated. A judicial review will take months and perhaps years to complete, whereas the effective life of a financial services firm in these circumstances can be measured in days. Confidence, as all of us who work in the City know, is an essential part of any firm’s reputation. Confidence is a fragile flower and news of an impending judicial review will cause it to wither and die. Indeed, fighting the regulator by means of a judicial review will increase the damage to the firm. Even if, after several months, the judicial review finds in favour of the firm, the firm will most likely then be only a pile of ashes.

When my noble friend replied, he said that “proportionate” equalled “fair” equalled “reasonable”, so I have since spent a little time with the Shorter Oxford English Dictionary. At page 2372—so “shorter” is not very short—“proportionate” is defined as:

“That is in … proportion (to); appropriate, proportional, corresponding”.

The example given there is:

“The toll … on the canal is proportionate to weight”.

In other words, there is a fixed relationship. There is no flexibility. There is the weight of the goods and that is what is going to be charged.

Turning to “reasonable”, the definition is:

“Having sound judgement; ready to listen to reason, sensible”.

That seems to be a slightly different relationship. It is slightly more of a two-way relationship which the definition of proportionate did not imply. So I would argue, despite my noble friend’s persuasive remarks in July, that fair and reasonable are not otiose in relationship to “proportionate”.

16:15

Another issue that one has to guard against is that one is seen as being interested only in reducing regulatory stringency. It is not about reducing regulatory stringency in any way. These amendments are about ensuring that the regulator, first, engages with regulated firms in a positive and constructive way and, secondly, demonstrates some imagination as to the consequences of any action he may take. The regulator and the regulatee have at least some symbiotic relationships, and not entirely pedagogic ones, which are implied by the Bill as presently drafted.

Last week, my concerns were further enhanced by the publication by the FCA of its document, Journey to the FCA. I am not alone in my concerns. The Lex column in the Financial Times on 17 October says that,

“the exact route of the FCA’s journey is still unclear and, despite its insistence that companies doing the right thing have nothing to fear, both the industry and investors who have backed it should be wary. First, while the FCA’s paper gives a nod to innovation and new ideas, they are not its core purpose. If the FCA makes overactive use of its power to ban products, the industry will lose its incentive to innovate. Just look at the impact of growing regulation on the pharmaceutical industry.

Second, the government is trying to rope the FCA in to its drive for more competition in financial services. That suggests a wider remit—market structure is not the same as market conduct and the FCA could struggle to combine the two.

Finally, it is not clear whether the FCA will look at consumer conduct. The wave of claims for mis-sold payment protection insurance (over a quarter of which, according to some banks, are fraudulent) demonstrates a growing enthusiasm for launching legal complaints at the drop of a hat, raising costs for both investors and other customers. The danger is that, encouraged by their PPI success, claims management companies swiftly move on to another target. This type of financial services conduct should also be covered by the FCA’s journey”.

It is only in chapter 6 of the document, headed “Maintaining effective relationships”, that you get to the beginnings of something about relationships. However, the effective relationships that are being listed there are, first:

“We will be part of the wider family of regulatory bodies that are in place”;

secondly:

“We will shape policies and drive the consumer protection agenda in Europe”;

thirdly:

“We may take action to address domestic issues even if standards are due to be set internationally at a later date”;

fourthly:

“We will work with consumer groups to help us … understand issues”;

and finally:

“Our communication with firms will also improve. There will be more regional workshops and roadshows to clarify our expectations.”

All the wording is a one-way street which will not be “fair and reasonable”, but will just be a pedagogic relationship without the firms, or the interests of the industry, being properly considered.

Against this background there is a growing fear and suspicion in the City that investigations are becoming fishing expeditions. The regulator cannot find the evidence to support his suspicion, however flimsy and unsubstantiated, and sets up an investigation to see if anything can be found. Investigations need to be carefully circumscribed, both as to their inception and their conduct. That is what Amendments 192A and 192B seek to do by adding “fair and reasonable” to “proportionate”. I beg to move.

[Lord Flight]

My Lords, I wish to speak in support of my noble friend’s amendment. It touches on unfortunate developments. The reaction of regulators to being criticised for what were described as the failures of light-touch regulation have increasingly led to a much more tough-guy, macho approach by them. In turn, I find major, totally responsible financial services businesses saying to me when they are unhappy and think some regulatory proposals are mistaken, “But we don’t want to talk to the regulators in case they punish us”. An unfortunate culture has developed of seeing the regulators as being very likely to use their powers against you, if you fall out with them.

The whole light-touch regulation story is a misinterpretation. What was wrong with FiSMA in that territory was the assumption that large institutions could be left to run their own affairs, which, as I warned at the time, missed out the fact that when large institutions go wrong they risk bringing down the whole system. The amendment may be belt and braces—I agree with my noble friend that to rely on complicated legal processes to get justice is not satisfactory—but I think it is perfectly straightforward, sensible and common sense to have that guideline as regards how investigations are handled. In the present climate, I think that is necessary.

[Viscount Trenchard]

My Lords, I, too, support my noble friend's amendment. I apologise for going back to the regulatory principles, but I continue to believe that it is a huge pity that the regulatory principles, by which both the PRA and the FCA are bound to operate, do not contain, to my mind, the very necessary principle that they should have regard to maintaining the competitiveness of the marketplace on which the United Kingdom depends so much for tax revenues, for prosperity, for employment and for all kinds of things.

I also speak with the experience of having been a member of the executive committee of a regulated firm for several dark years. I can assure the House that at least 90% of the time of an executive committee is spent discussing how to respond to regulators. There is a real fear of increased supervision and a more intrusive approach and, nowadays, many firms spend very little time talking about how to develop and to expand the business in order to provide further employment and earn more money so that the business can be consolidated and maintained in London. In the absence of, to my mind, such necessary principles, which ought to be there and by which the new regulators ought to have to abide, it is more necessary than it otherwise would have been that the regulators should act, as my noble friend’s amendment suggests and requires, “proportionately, reasonably and fairly”. I wholly support the amendment and I look forward to hearing the comments of the Minister.

[Lord Peston]

We are indebted to the noble Lord, Lord Hodgson of Astley Abbotts, for raising these matters, although we discussed similar matters last week under the guidance of the noble Lord, Lord Flight, and my noble friend Lady Hayter. The central question here is our fear—fear in the relevant sector as well—that the regulators damage our financial services sector rather than improve its performance. I think that is the theme that lies behind these matters. I have two questions, but I am bad at reading amendments, so I want to be certain about them. Presumably the new subsection proposed in Amendment 192A would come before subsections (1) to (7) in Clause 74. Am I right that it would be the lead-in?

[Lord Hodgson of Astley Abbotts]

Yes.

[Lord Peston]

It would establish the principle which everything else must follow. That is fine; I understand what the noble Lord is saying. That leads me to ask two central questions. In Clause 73, and I think in something similar earlier, subsection (2) refers to “Relevant events” that occur in relation to,

“(b) a person who is, or was at the time … carrying on a regulated activity”.

What worries me as a matter of logic is whether we will end up with the regulator having to investigate him or herself. If these people have not met the standards, who is responsible? They are partly, of course, but this would also be an indication of regulator failure. To my way of looking at it, we have a part of the Bill that is totally bizarre. From a logical point of view, the answer to the question “Quis custodiet ipsos custodes?” is that the regulator is the custodes himself, if you like. I would certainly welcome an analysis from the Minister in his reply which shows that we are not seriously involved in a logical contradiction here.

My second question is whether the fact of an investigation of the kind we are discussing is to be in the public domain. In other words, will it be publicly known that the regulator is investigating one of the things going on here? It may be that I have not read it properly, but is not that itself potentially enormously damaging, again a point that was raised last week? I should like the answer to these two questions. It may be that Treasury officials will have to do a bit of thinking about this part of the Bill when they are not thinking about the logical nature of “may” versus “must”. As I have pointed out before, there is a vast philosophical literature on this. How much of it they will have time to read, I do not know. However, the central point is to get a rational response to the amendment moved by the noble Lord, Lord Hodgson.

[Lord Davies of Oldham]

My Lords, I am grateful to the noble Lord, Lord Hodgson, for identifying this issue, but I must say that if noble Lords opposite do not think that the nation is expecting a Bill and eventually an Act of Parliament that tightens up regulation in the wake of the circumstances we suffered four to five years ago, then all I can say is that such a position is not tenable. The noble Lord, Lord Hodgson, is indicating that the principles of the regulator should be expressed in these terms. Who can be against the principles of fairness? Of course we want and expect the regulators to act fairly, but let us remember that they may be acting under a direction from the Treasury because something has gone wrong. The idea that the first thing the regulator must do is consider the principles on which it must act rather than in fact investigate the nature of the problem, as it has been instructed by the Treasury to do, seems to put the cart very firmly before the horse.

In responding to this amendment, I am sure that the Minister will have some warm words for his noble friends who have spoken in favour of the amendments, but I hope that he will defend the basic objective of the Bill. I shall give way to the noble Lord.

[Lord Hodgson of Astley Abbotts]

I am extremely grateful. I did not want to interrupt his peroration, but dare I say that if he had listened carefully, he would know that I said that this is not about reducing regulatory stringency? I made that absolutely clear and I said it in terms; there is no question about that. This is a question about being fair and reasonable, it is not about reducing regulatory stringency. I do not want that particular line of attack attached to my amendments. I could not be clearer than that, and I think my noble friends on this side of the Committee are all as one so far as that is concerned.

[Lord Davies of Oldham]

The noble Lord will forgive me if the consideration that others might have with regard to a regulator potentially operating under direction from the Treasury to deal with a serious situation is that it should be dealing with it quickly and efficiently, and not just having regard to how much it acts appropriately or fairly, in the way in which the noble Lord has indicated. Of course, regulators know that if they act entirely improperly, even unlawfully, legal action will follow against them, but, in a Bill that is concerned to make regulation more effective, it surely cannot be that the principles upon which the regulators must act are more important than the effectiveness with which they carry out their role.

16:30

[Lord Newby]

My Lords, I will start by giving the Government’s response to the first of these two amendments, and then come to the specific points that have been raised by a number of noble Lords.

As noble Lords have pointed out, Clause 74 provides in some detail how investigations should be conducted in order to deliver transparency and confidence, which, as I think everybody agrees, well conducted and appropriate inquiries should bring about. Amendment 192A seeks to add to these requirements by setting out that,

“the regulator must have regard to its regulatory principles”

in carrying out these inquiries, and to act proportionately, reasonably and fairly. I agree that high standards of conduct should apply as much to the conduct of an investigation as to the regulator’s normal regulatory work, but the noble Lord, Lord Hodgson, will probably not be totally surprised when I say that there are two reasons why the amendment is not necessary.

First, on proportionality, we do not believe that it is necessary to put this in the Bill again because the regulator already has to have regard to the regulatory principles in exercising its general functions, and the regulatory principles include proportionality, under proposed new Section 3B. Proportionality is already built in to the way that the regulator does everything so we do not think it is necessary here.

Secondly, as the noble Lord has set out, and we have set out before, public law already requires regulators to act reasonably, and the principles of natural justice require the regulator to deliver procedural fairness. The noble Lord talked about the problem of judicial review. I think everybody agrees that if you have to initiate a judicial review, this is an extremely expensive, long, drawn-out process, but if the noble Lord’s amendment was accepted, my understanding is—I may be wrong—that if the regulator were to be challenged it would be under a judicial review anyway, so the same problem would arise. The noble Lord, Lord Flight, said that this amendment was a question of belt and braces. We agree, but in legislation you do not need belt and braces—you need a good belt or good braces, and we think we have got that.

The other thing that is possibly slightly confusing is that the investigations we are talking about in this part of the Bill are investigations into regulatory failure rather than the conduct of firms. The noble Lord, Lord Peston, asked whether an investigation would come into the public domain. The real concern, which we have debated before, relates to the conduct of business of a company—has it been misbehaving?—which is different from the issue of regulatory failure, which is what Clause 74 deals with.

[Lord Peston]

The noble Lord did say that this will be an investigation into regulatory failure. Therefore, the investigator is investigating himself or herself. After all, who has failed? It is the regulator.

[Lord Newby]

My Lords, we come to the noble Lord’s point which concerns Clause 73(2)(b). The architecture is that the regulator will look at the failure of firms and regulatory failure. We have seen this with the work the FSA did on RBS. It produced a comprehensive report on what it saw as regulatory failure. Although there were arguments about what would or would not be published, in terms of whether the regulator did a good job and whether it is capable of doing so, the answer we would draw from that investigation is that it did do quite a good job. There will be many cases when it is appropriate for the regulator to look back at what has happened in the past—

[Lord Peston]

I am sorry to interrupt the noble Lord, but I am trying to get some sense of reality about this. It is the Treasury that considers that something needs to be done. Therefore, the Treasury must suspect something. Where, for example, does the Treasury get its information from, for it to feel that it has to issue this directive? What does the Treasury know that the regulator did not? Then it tells the regulator to look at something because it observes regulatory failure. The whole thing seems to be an intellectual mess. That is my point. It is not necessarily the point that was made by the noble Lord, Lord Hodgson. Like my noble friend Lord Davies, I am keen to have a powerful and effective regulatory system. I am also keen that we do not have a botch of a regulatory system. What we have said on the previous two Committee days on the Bill is that we think quite a few aspects of this are a botched job. Is that going too far in criticising? I do not think so.

[Lord Newby]

My Lords, the noble Lord asks a number of questions. First, why might the Treasury have a role and why is the regulator not doing it already? There may be a number of occasions when the Treasury first gets information from somebody and wants to tell the regulator. There are some occasions when the Treasury might want to prod the regulator into action. I have been critical of occasions when I felt the regulator has not moved as quickly as I would have liked in undertaking investigations. This part of the Bill enables the Treasury to give it a kick if it is needed. The other point, which is a valid point, is that if there is a really serious problem of regulatory failure, this is not the only way in which the Treasury can make sure that an investigation is undertaken. The Treasury can appoint any kind of investigator that it wants. This part of the Bill simply explains how the Treasury operates and the rules which apply if there is a lesser regulatory failure which probably happened some time in the past, where it seems appropriate for the regulator to have a look. I understand the noble Lord’s concerns, but he should not be as worried as he is.

I will respond to the second amendment in this group, which we have not debated at great length. It seeks to add to the grounds on which the regulator may decide to postpone or suspend an investigation if the investigation did not meet the principles by which the investigator must abide. Unlike with the previous amendment, where we agree with what the noble Lord seeks to achieve but do not think that he needs to have his belt and braces, we think that this amendment could have perverse and unexpected effects by enabling the regulator to stop an investigation for any reason it wanted. For example, it could realise that an investigation was going to be very time-consuming and burdensome, perhaps because of the level of detail involved. Under this proposal, it could end an investigation and argue that it was doing so because the investigation breached its principle on economic and efficient use of resource. For those reasons, we cannot support that amendment.

A number of noble Lords, including the noble Lords, Lord Hodgson and Lord Flight, expressed broader concerns about the FSA and the noble Lord, Lord Hodgson, quoted Lex in aid of that. The noble Viscount, Lord Trenchard, and the noble Lord, Lord Peston, said that the FCA should have regard to competitiveness. These are broader issues that go beyond the scope of the amendments, but on the concerns expressed by Lex, I can understand why people are at this stage worrying about whether the balance that the regulators strike between the interests of the firms and those of the consumers of their products is right. We are pretty confident that it will be. The noble Lord, Lord Davies, pointed out that it is important that the regulators are rigorous and balance the interests of the firms and those of their consumers. The way in which the Bill is structured should enable them to do that and we are confident that they have that very much in mind.

Competitiveness has been debated previously and we have already agreed that we will look at this issue, particularly the degree to which the PRA and FCA should have regard to the importance of economic growth. We have said that we will return with further amendments in this area on Report, when we will no doubt have an extremely interesting debate on them. For today, however, I hope that the noble Lord, Lord Hodgson, will decide not to press his amendments.

[Lord Hodgson of Astley Abbotts]

My Lords, I am grateful to my noble friend Lord Newby for that extensive and courteous response. I am grateful to the noble Lord, Lord Flight, and the noble Viscount, Lord Trenchard, for their support. I can accept that this is a part of the Bill where the particular concerns that I have do not weigh as heavily as they did on the regulatory principles on page 28 of the Bill which we debated before we broke for the Summer Recess. I am happy to withdraw my amendment today, but I am not yet convinced that “reasonably and fairly” is not a useful addition in some part of the Bill even if it is not here. I beg leave to withdraw the amendment.

Amendment 192A withdrawn.

Amendments 192B and 192C not moved.

Clause 74 agreed.

Clauses 75 to 78 agreed.

Clause 79 : Arrangements for the investigation of complaints

Amendment 193 not moved.

Amendment 193A had been retabled as Amendment 187TA.

Clause 79 agreed.

Clause 80 : Relevant functions in relation to complaints scheme

Amendment 193B

Moved by

[Lord Sassoon]

193B: Clause 80, page 149, line 13, leave out “, 318 or 328” and insert “or 318”

Amendment 193B agreed.

Clause 80, as amended, agreed.

Clauses 81 to 83 agreed.

16:45

Amendment 193BA

Moved by

[Lord Sassoon]

193BA: Before Clause 84, insert the following new Clause—
“Objectives and conditions
(1) The Banking Act 2009 is amended as follows.
(2) In section 3 (interpretation: other expressions), after “this Part—” insert—
““client assets” means assets which an institution has undertaken to hold for a client (whether or not on trust, and whether or not the undertaking has been complied with),”.
(3) In section 4 (special resolution objectives), after subsection (8) insert—
“(8A) Objective 6, which applies in any case in which client assets may be affected, is to protect those assets.
(8B) Objective 7 is to minimise adverse effects on institutions (such as investment exchanges and clearing houses) that support the operation of financial markets.”
(4) In section 8(2) (Condition A: private sector purchaser and bridge bank)—
(a) in paragraph (b) for “the banking systems of the United Kingdom, or” substitute “those systems,”, and(b) after paragraph (c) insert “, or(d) the protection of any client assets that may be affected.”(5) In section 47 (restriction of partial transfers), for subsection (3) substitute—
“(3) Provision under subsection (2) may, in particular, refer to—
(a) particular classes of deposit;(b) particular classes of client assets.”(6) In the Table in section 261 (index of defined terms), after the entry relating to “central counterparty clearing services”, insert—

“Client assets (Part 1)

3”.”

[Lord Sassoon]

My Lords, last week I introduced the first set of amendments that seek to extend the UK’s resolution regime for banks to investment firms, group companies and UK clearing houses. Today, I am introducing the remaining amendments, which put in place a regime that gives the Government and the Bank of England the powers to take action when one of these institutions is likely to fail, allowing them to resolve the situation in an orderly manner in order to maintain the financial stability of the UK.

Amendment 193BA adds two new special resolution regime objectives. The collapse of Lehman Brothers in 2008 and MF Global in late 2011 highlighted the difficulties and uncertainties surrounding the treatment of client assets and money when an investment firm enters insolvency. During normal business, client assets and money are held by the investment firm on behalf of the client, in segregated or non-segregated accounts. Firms also rehypothecate client assets, borrowing them to use for their own purposes. There can be complex arrangements to unwind if a firm enters insolvency or resolution.

The new objective 6 is intended to ensure that the resolution authorities look to protect not only cash deposits but also shares and other assets. The new objective will apply to any resolution where client assets are held by the firm, whether it is a bank that offers investment services or an investment firm which is not a bank. To complement this legislation, the FSA has recently launched a wide-ranging consultation on client money and client asset rules. The Government will report to Parliament on the review of the special administration regime—the bespoke insolvency regime for investment firms —by February 2013.

The new objective 7 will help minimise the adverse effect on financial market infrastructure, such as investment exchanges and clearing houses, when stabilisation powers are used. For example, in resolving an investment firm, this objective will require the resolution authorities to consider the impact of their actions on exchanges and clearing houses in which the investment firm was a participant.

Under the Banking Act 2009, no special resolution scheme objective is prioritised over any other—the regulator must take each into account equally. The same will apply to the new objectives inserted by these amendments, so the resolution authority will have to balance the objective of protecting client assets with the objective of minimising the adverse effects on financial market infrastructure.

The public interest test in Section 8 of the Banking Act 2009 for the exercise of stabilisation powers currently refers to the protection of depositors. Subsection (4) of the proposed new clause therefore adds reference to the protection of client assets. In line with the extension of the special resolution regime beyond banks, the proposed new clause also amends the reference to the “banking systems” of the UK in the public interest test in Section 8 into a reference to the UK’s financial systems. This makes Section 8(2)(b) of the Banking Act suitable for the resolution of all the types of firm that we propose to be eligible for the special resolution regime.

The effect of the new clause inserted by Amendment 193F is to extend the resolution tools under the special resolution regime to investment firms and their group companies. In doing so, it is important that this legislation captures only those firms that are deemed systemic to the financial stability of the UK. Casting the net too wide, and unnecessarily capturing firms whose failure would not pose a threat, could adversely affect the UK’s competitiveness. On the other hand, we do not want to exclude from the special resolution regime those firms that, in normal market circumstances, would not be seen as systemic but which, in times of market crisis, might pose systemic risks.

This is a difficult balancing act. With an eye to developments in Europe, particularly the European Commission’s recovery and resolution directive, the legislation adopts a wide definition of “investment firm” from European law but also confers on the Treasury a power to exclude categories of firm from the special resolution regime. In this way, we can ensure that smaller firms that clearly do not pose a threat to financial stability—such as a small stockbroker or financial adviser—will not be subject to the new regime, while on the other hand providing the necessary flexibility to react as circumstances change. I beg to move.

[Lord Barnett]

My Lords, this is a big enough Bill without two more new clauses being put in it. I hope the noble Lord will forgive me but the amendment refers of course to the Banking Act 2009. Why have we got these amendments here? We have got a banking Bill wending its way through the House of Commons which will no doubt arrive here soon, so why do these new clauses not go into the banking Bill and we could consider them then?

The likelihood is—certainly I want to see it—that the present situation will be substantially changed so that investment firms, which are referred to in both these new clauses, are no longer part of the main bank. There will be a separate bank looking at investment firms so these amendments, it seems to me, are certainly very relevant to the new banking Bill. Why are they here? Perhaps the noble Lord could first tell us the answer to that one?

Are we now to understand that the Government are absolutely set on accepting the Vickers report? I have not yet seen the details of what they are accepting, but I hope the noble Lord will forgive me since there are enough papers to look at on this huge Bill without looking yet at the banking Bill. I am sorry if I am straying into areas I should not be entering—except that these two major amendments are related to banking. I wonder why they are here.

[Lord Flight]

My Lords, in relation to these proposed new clauses, can the Minister tell me where lender-of-last-resort doctrine stands with regard to this legislation? A brief piece of history I observed in the course of my career was that at the time of the collapse of Johnson Matthey and Barings, there was a change in lender-of-last-resort doctrine. Since the 1870s it had operated on the basis that, in the event of a run, the central bank stood behind any bank that was properly managed. It was changed to stand behind any banks which were too big to fail. That led on to moral hazard and cartel, and a lot of smaller banks like Hambros closed, resulting in much less competition. At the time I had conversations and correspondence with Eddie George when he was Governor of the Bank of England, who virtually said he agreed with me but it was the way the then Conservative Chancellor of the Exchequer, Ken Clarke, had cast things.

Some of what the Minister just talked about touched slightly on the issue, but I would very much hope that the intent is to go back to lender-of-last-resort arrangements as originally intended, and as operated amazingly well for more than 100 years. I am not at all clear where we are.

[Baroness Kramer]

I have a couple of comments —they are really questions—on both amendments. Amendment 193F, as the Minister has said, essentially extends the Banking Act 2009 special resolution regime to investment firms. In the next two groups there are similar amendments extending that same resolution regime to holding companies and clearing houses. I am sure the Minister does not want me to speak three times on the same point, so perhaps he could extend his comments to those two groups as well.

I share some of the concerns expressed by the noble Lord, Lord Barnett, that we are getting a set of amendments which, by definition, will have to change fairly significantly because this area is being driven by European directives. Even the definition that we are using for an investment firm is a European directive. It is very difficult to understand how this works when the context and framework will be constantly changing. Perhaps the Minister could help us understand how that process is going to happen. With ring-fencing likely to change the way in which we look at and define an investment firm, that is one obvious set of problems. It may end up being different under European law from the application in the UK, because we may draw lines at different points. We may choose ring-fencing, and others separation. I cannot see how this set of language manages to comprehend all those complexities.

It is not just me who is concerned; I know that I have raised this issue before. This time, the BBA is very concerned about marching all the troops up the hill in one direction, finding that there has to be substantial change, and marching them all the way down and back up in another direction. I cannot understand why we are doing this now when we will have clarity in just a few months’ time.

I also want to raise a question which I have asked before but to which I have not had much of an answer, under Amendment 193BA. Again, it concerns the central clearing houses and the central counterparties. I am trying to understand if that amendment deals with an issue that concerns me: the waterfall of the resolution and whether, at the end of that waterfall, it is permissible under the legislation to tear up contracts. That is a reading which the Minister will know that the industry has asked about. When he talks about the protection of client assets, does that apply to contractual relationships—for derivative contract or whatever else—where the clearing house may not be able to meet its obligations because it has got into difficulties and has been put into a resolution procedure? I am unclear whether the legislation establishes that that contract may be torn up as the last resort in the resolution process. That is a big issue that needs general discussion, if that is right. It would be extremely helpful if the Minister could give us some clarity on that.

[Lord Davies of Oldham]

My Lords, the Minister has a few interesting issues to respond to, but I must say that I am very much on the Government’s side with regard to these two amendments. After all, they are the result of consultation. We agree with the Government that investment firms and clearing houses have the potential to cause instability in the financial system and that therefore, including them within this scheme to ensure their orderly resolution or, perhaps, wind-down in the event of failure, is obviously sensible.

I am slightly embarrassed by the fact that, although 35 years ago, as his PPS, I was used to agreeing with every word that my noble friend Lord Barnett uttered as a Member of Parliament, I have to say to him today that I do not quite agree with the line which he has adopted. I entirely recognise that we will be enmeshed in many of these issues in the not too distant future with another significant Bill but, on the whole, when the Government have a good and constructive idea, it is best for the Opposition to seize it with both hands as early as possible, and that is what I want to do.

[Lord Sassoon]

My Lords, I am very grateful to the noble Lord, Lord Davies of Oldham, because he has got it exactly right. The previous Administration brought forward the 2009 Bill, which necessarily came forward in a hurry as a proper part of the response to the crisis. This Bill picks up a lot of other lessons from the crisis, but the Banking Act 2009 put in place some arrangements for banks. We have now seen through the examples of what happened in the crisis and, regrettably, to MF Global and others since, that the 2009 Act, although it put in place some important new powers, did not cover the waterfront. We are therefore seeking to ensure that we learn the lessons and that arrangements are made that cover other very important parts of the sector.

As I said to the Committee last week, I think that we would be very severely criticised as a Government and as a House of Parliament if we were to delay putting in place an extension of a regime that is already based on one that is in law in the 2009 Act. The banking reform Bill has not yet started its passage in another place and it will be some time after the completion of this Bill that it comes into law. We really should get on and make proper provision, as I said last week, for situations that we do not anticipate. In this very uncertain environment one can never be sure what may next hit the system. It is important, therefore, that we get on to it. In answer to my noble friend Lady Kramer, if there are changes coming out of the banking reform Bill or out of Europe, then in due course we will amend these provisions to take account of that. However, we would be putting ourselves in a terrible position if we said that we can only move at the speed of Europe or at the speed of some slower Bill that is coming on. It is better to put these necessary clauses and arrangements in place now and change them later if we have to.

17:00

[Lord Lawson of Blaby]

What my noble friend has said is most helpful. Can he give us an indication of when the banking reform Bill is likely to reach this House? I am sure that noble Lords on all sides will be greatly interested in this.

[Lord Sassoon]

I shall probably get into trouble if I say anything that is terribly helpful. However, the Government want to get on with it as quickly as we reasonably can. I would like to think that it will not be very many months before the Bill gets here. But, whenever it arrives, it is no excuse for not getting on with these clauses.

[Lord Barnett]

My Lords, perhaps I may make it clear that I do not disagree with the two new clauses. I was saying that we will have a banking Bill in this House shortly. This Bill relates to banks and investment firms. However, if the banking Bill is amended to allow two separate companies, as I hope it will be, so that investment firms are handled quite separately from the way they are handled in the present situation, it would change the whole process. The Minister says that we must get on with it. But this Bill will not be an Act until approximately the end of the year. The new Bill will be before us a few months later. Does the Minister know of some crisis that we do not know about?

[Lord Sassoon]

No, my Lords. I have already answered these questions. I know of no crisis. However, we would be remiss if, having identified a sensible, consulted-on extension of the regime that came in under the Banking Act 2009 to cover these other, systemically important parts of the system, we did not act. If we left even a few months, having identified what needed to be done, we would be open to very heavy criticism as a House and as a Government. Now is not the time to discuss the ins and outs of the banking reform that is proposed. However, it is certainly not the case that—as the noble Lord, Lord Barnett, put it—investment firms and banks will be in separate groups. They will not be.

As I say, if the detail of the resolution arrangements changes, then of course these clauses can be amended to take account of the new structure. We have future-proofed them as far as we can, in the sense that my noble friend, quite rightly, talks about the European approach. As I said last week but will say again, of course we are going to remain fully consistent with the European approach to these matters and indeed we are actively taking part in shaping it. The fact that we have a worked-out solution ahead of others in Europe itself puts us in a very good position to influence things, and the legislation—the proposals that we are introducing and considering today—is consistent with what is set out in the Financial Stability Board’s document on key attributes for an effective resolution regime. We have taken every possible step to ensure consistency with Europe.

[Lord Peston]

I am sorry to interrupt the Minister but I want to ensure that noble Lords understand what he is saying. He is saying that the Treasury has discovered two problems that can be dealt with rapidly by mending the Banking Act 2009 and he is therefore using this Bill, which is not specifically about banking, as a convenient vehicle to put those into law. That is the result of the Treasury's work; it has found those two things and feels that it ought to act rapidly. I also therefore infer, validly, that the Treasury has not found any other changes that need to be made rapidly and could well have been dumped in this Bill as well—just these. That is my interpretation—that they have found these two and we must get a move on. Am I right?

[Lord Sassoon]

First, my Lords, these clauses fall properly in the Bill because essentially we are giving powers to the Bank of England to resolve things. I would not like to leave the thought that we were somehow using the Bill as a Christmas tree to add on other unrelated things; this is definitely related to the purpose of the Bill because we are talking about the powers of the authorities.

Secondly, the noble Lord, Lord Peston, could be mistaken for giving the impression that somehow we just discovered these things last week or last month. As I have already said, very important new powers were put in place in the Banking Act 2009. Over a period it was then, partly after seeing the collapse of other investment firms and partly by talking to the market, a consultation process, so this is not something that has just emerged. In this area, we have nothing else up the Treasury’s sleeve, as it were. If anyone identifies any other gaps in the regime, of course we will consult on them and do all the proper things that Parliament would expect us to do.

That leaves one area that my noble friend Lord Flight asked about: the doctrine of “lender of last resort”. Fascinating and important though it is, I am reluctant to get into this area because it does not directly impact on where the lender of last resort doctrine, as he puts it, has now got to. It was the Banking Act 2009 that made sure that the authorities, including the Bank, had the full suite of powers. The Bill further improves those tools and clarifies responsibilities, but of course it does not alter the basic premise that the Bank will continue to be the lender of last resort to the banking sector and to the resolution authority for a variety of firms. As for the precise doctrine of how they operate, that is a matter for the Bank of England and should remain so. I recognise that that is clearly called into question by the events in 2007 and 2008, but I assure my noble friend that it is not affected by the substance of the clauses that we are discussing today.

[Baroness Kramer]

Will the Minister basically send me a note on how the resolution process is going to work with the clearing houses? I have an outstanding concern. In our discussions in Committee last week, he was very keen to assure the House that, in a resolution situation, clearing houses would not turn to their members and ask for additional funds in order to meet their outstanding obligations. He made it clear that the resolution process would contain the liability that would fall on members. However, we have had no discussion of what happens with an outstanding contract entered into in good faith by a party with that clearing house for, say, the future delivery of FX, or foreign currency. What happens to the person with that outstanding contract in a case of resolution? Where do they stand in that process? We need some clarity at some point on who is carrying the liability. Of all the innocent parties involved, they would seem to be the main one.

[Lord Sassoon]

I apologise to my noble friend because I forgot to answer her question. The answer to her question on whether contracts will be torn up is an unequivocal no. Contracts will not be torn up. That is quite clear. In answer to the other question—

[Baroness Kramer]

Can I ask—

[Lord Sassoon]

If my noble friend will forgive me I will answer the other question first. It is an important question about the call on members and shareholders of firms. I thought that I had made the position completely clear last week: there will be no new powers here to call on shareholders and members to put up new funds, except in circumstances where there are already agreements in place for contingent calls or other ways of calling down funds in arrangements that exist before this situation kicks in. I know very well that there are one or two clearing houses and others who do not seem happy to accept that assurance of last week. I can only give it again—that is the position under the clauses that we have been debating. There is nothing here that causes calls to be made on members if it is not under an existing arrangement.

[Baroness Kramer]

I am afraid that the Minister misunderstands where my concern is coming from. I recognise that there are some in this House who are very concerned to give that kind of assurance to the various members of the clearing house—that there will be no further call other than that which has been agreed in their fundamental arrangements. However, that leaves open the question of the open contracts that are left if a clearing house fails. This becomes very serious as we move to a limited number of extremely large clearing houses with a very significant number of contracts in their hands. Who will meet the obligation under those outstanding contracts? If it is not going to be the members of the clearing house, because there can be no further call on them, will it be the taxpayer? If the taxpayer is not standing behind this then we are in a “tear up contract” situation. We really need to understand how that waterfall is going to work rather than end up in the actual situation in life and find that we have lawsuits served from every direction and some real undermining of the whole system. That is what I am trying to get to the bottom of. If the Minister has not really sat down and addressed that question, perhaps somebody in his team could send me a note.

[Lord Sassoon]

My Lords, we have addressed the situation. First, the contracts are the contracts. They need to be enforced by the appropriate mechanisms, whatever they are, which may require legal routes to be gone through. What we are trying to do here is to make sure that, as far as possible, we put in place arrangements and tools which mean that some of the difficult unwinding of contracts, such as were seen in MF Global, for example, can be dealt with more quickly and effectively.

As for who pays up at the end of the day, there are well established procedures to make sure that, first, the shareholders pay, subject to the limitations on shareholders as we understand them—my noble friend is not challenging that. Then, of course, there may be holders of debt. Beyond that, the normal arrangements that exist through the financial services system will apply as regards where the liability falls. Nothing we are doing in these clauses makes any changes to the arrangements that are generally in place about the split between the taxpayer and other parts of the financial services industry to pick up liabilities.

Amendment 193BA agreed.

Clause 84 : Private sector purchasers

Amendment 193C agreed.

Clause 84 agreed.

Clause 85 agreed.

Clause 86 : Reports following exercise of a stabilisation power

Amendment 193D agreed.

Clause 86 agreed.

17:15

Amendment 193E

Moved by

[Lord Sassoon]

193E: After Clause 86, insert the following new Clause—
“Groups
(1) The Banking Act 2009 is amended as follows.
(2) In section 1 (overview), for the entry in the Table relating to sections 82 and 83 substitute—

“Sections 81B to 83

Groups”.

(3) In section 20 (directors), after subsection (1) insert—
“(1A) Subsection (1) also applies to a director of any undertaking which is a banking group company in respect of a specified bank.”
(4) After section 36 insert—
“36A Directors
(1) A property transfer instrument may enable the Bank of England—
(a) to remove a director of a specified bank;(b) to vary the service contract of a director of a specified bank;(c) to terminate the service contract of a director of a specified bank;(d) to appoint a director of a specified bank.(2) Subsection (1) also applies to a director of any undertaking which is a banking group company in respect of a specified bank.
(3) Appointments under subsection (1)(d) are to be on terms and conditions agreed with the Bank of England.”
(5) For the italic heading before section 82 substitute “Groups”, and after that heading insert—
“81B Sale to commercial purchaser and transfer to bridge bank
(1) The Bank of England may exercise a stabilisation power in respect of a banking group company in accordance with section 11(2) or 12(2) if the following conditions are met.
(2) Condition 1 is that the PRA is satisfied that the general conditions for the exercise of a stabilisation power set out in section 7 are met in respect of a bank in the same group.
(3) Condition 2 (which does not apply in a financial assistance case) is that the Bank of England is satisfied that the exercise of the power in respect of the banking group company is necessary, having regard to the public interest in—
(a) the stability of the financial systems of the United Kingdom,(b) the maintenance of public confidence in the stability of those systems,(c) the protection of depositors, or(d) the protection of any client assets that may be affected.(4) Condition 3 (which applies only in a financial assistance case) is that—
(a) the Treasury have recommended the Bank of England to exercise a stabilisation power on the grounds that it is necessary to protect the public interest, and(b) in the Bank’s opinion, exercise of the power in respect of the banking group company is an appropriate way to provide that protection.(5) Condition 4 is that the banking group company is an undertaking incorporated in, or formed under the law of any part of, the United Kingdom.
(6) Before determining whether Condition 2 or 3 (as appropriate) is met, the Bank of England must consult—
(a) the Treasury,(b) the PRA, and(c) the FCA. (7) In exercising a stabilisation power in reliance on this section the Bank of England must have regard to the need to minimise the effect of the exercise of the power on other undertakings in the same group.
(8) In this section “financial assistance case” means a case in which the Treasury notify the Bank of England that they have provided financial assistance in respect of a bank in the same group for the purpose of resolving or reducing a serious threat to the stability of the financial systems of the United Kingdom.
81C Section 81B: supplemental
(1) In the following provisions references to banks include references to banking group companies—
(a) section 10(1), and(b) section 75(5)(a).(2) Where the Bank of England exercises a stabilisation power in respect of a banking group company in reliance on section 81B, the provisions relating to the stabilisation powers and the bank administration procedure contained in this Act (except sections 7 and 8) and any other enactment apply (with any necessary modifications) as if the banking group company were a bank.
(3) For the purposes of the application of section 143 (grounds for applying for bank administration order), the reference in subsection (2) to the Bank of England exercising a stabilisation power includes a case where the Bank of England intends to exercise such a power.
81D Interpretation: “banking group company” &c.
(1) In this Part “banking group company” means an undertaking—
(a) which is (or, but for the exercise of a stabilisation power, would be) in the same group as a bank, and(b) in respect of which any conditions specified in an order made by the Treasury are met.(2) An order may require the Bank of England to consult specified persons before determining whether the conditions are met.
(3) An order—
(a) is to be made by statutory instrument, and(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.(4) If an order contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without complying with subsection (3)(b)—
(a) the order may be made, and(b) the order lapses unless approved by resolution of each House of Parliament during the period of 28 days (ignoring periods of dissolution, prorogation or adjournment of either House for more than 4 days) beginning with the day on which the order is made.(5) The lapse of an order under subsection (4)(b)—
(a) does not invalidate anything done under or in reliance on the order before the lapse and at a time when neither House has declined to approve the order, and(b) does not prevent the making of a new order (in new terms).(6) Undertakings are in the same group for the purposes of sections 81B, 81C and this section if they are group undertakings in respect of each other.
(7) Expressions defined in the Companies Act 2006 have the same meaning in section 81B and this section as in that Act.”
(6) In the Table in section 259 (statutory instruments), in Part 1 after the entry relating to section 78 insert—

“81D

Meaning of “banking group company”

Draft affirmative resolution (except for urgent cases)”

(7) In the Table in section 261 (index of defined terms), after the entry relating to “bank insolvency order” insert—

“Banking group company

81D”.”

[Lord Sassoon]

My Lords, the purpose of Amendment 193E is to extend powers available under the special resolution regime, or SRR, to group companies. It will grant the Bank of England the power to exercise share and property transfer powers in respect of companies in the same group as the failing entity in order to facilitate the resolution of the failing entity. We believe that extending these powers is necessary because the situation could arise where exercising powers over only the failing entity may not be sufficient to fully protect the public interest.

For example, the business of a failing bank may rely on assets or services provided by another group company which is itself in trouble and the only way to preserve a viable and coherent business may be to transfer those assets or facilities out of the other group company. Having said what I said about the previous amendments and clauses, we now move on to another area which will be of interest to my noble friend Lady Kramer, because we think that, in particular circumstances, it is also right to call in assets or facilities out of another related group company.

The legislation will give the Treasury the power to set conditions to the exercise of powers over group companies. The Government intend, for example, to set the condition that the group in question must be engaged primarily in financial services in order for these powers to be exercisable. We will also set a requirement that the Bank of England exercise powers at the lowest level of the group. The clauses also give the Bank powers similar to those available to the Treasury to remove or vary the appointments of directors of failing entities and, if necessary, to group companies where it exercises stabilisation powers.

It may be useful for me to give an example of how this power might be exercised. There could be a large listed entity—a retailer, for example—that has subsidiaries engaged in banking or other financial services as well as in traditional retail businesses. The extension of powers that we are introducing will ensure that the Bank of England has the ability to exercise share and property transfer powers over financial subgroups operating under the listed retailer, but not in respect of the retailer itself.

The legislation we are debating today contains further safeguards. The Bank of England will only be able to exercise powers over group companies where necessary in the public interest, and it must have regard to the need to minimise any adverse effect of its actions on the rest of the group. Therefore, although these are broad powers, the Bank will only exercise them where necessary, and must do so proportionately.

The order-making power will be subject to approval by both this House and the other place, either on a draft order or, where the power is exercised in an emergency, within 28 sitting days. I beg to move.

Amendment 193E agreed.

Amendment 193F

Moved by

[Lord Sassoon]

193F: After Clause 86, insert the following new Clause—
“Application to investment firms
(1) The Banking Act 2009 is amended as follows.
(2) In section 1 (overview), after the entry in the Table relating to sections 84 to 89 insert—

“Section 89A

Investment firms”.

“(8) Section 89A applies this Part to investment firms with modifications.”
(4) In section 75(5) (power to change law: application to other institutions), omit the “or” following paragraph (c) and after that paragraph insert—
“(ca) to investment firms,”.(5) After section 89 (and in Part 1) insert—
“Investment firms89A Application to investment firms
(1) This Part applies to investment firms as it applies to banks, subject to the modifications in subsection (2).
(2) Ignore sections 1(2)(b), 4(2)(b) and (6), 5(1)(b), 7(7), 8(2)(c) and 14(5).”
(6) After section 159 insert—
“159A Application to investment firms
This Part applies to investment firms as it applies to banks.”(7) After section 258 insert—
“258A “Investment firm”
(1) In this Act “investment firm” means a UK institution which is (or, but for the exercise of a stabilisation power, would be) an investment firm for the purposes of Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions.
(2) But “investment firm” does not include—
(a) an institution which is also—(i) a bank (within the meaning of Part 1),(ii) a building society (within the meaning of section 119 of the Building Societies Act 1986), or(iii) a credit union (within the meaning of section 31 of the Credit Unions Act 1979 or Article 2(2) of the Credit Unions (Northern Ireland) Order 1985), or(b) an institution which is of a class or description specified in an order made by the Treasury.(3) An order—
(a) is to be made by statutory instrument, and(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.(4) If an order contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to make the order without complying with subsection (3)(b)—
(a) the order may be made, and(b) the order lapses unless approved by resolution of each House of Parliament during the period of 28 days (ignoring periods of dissolution, prorogation or adjournment of either House for more than 4 days) beginning with the day on which the order is made.(5) The lapse of an order under subsection (4)(b)—
(a) does not invalidate anything done under or in reliance on the order before the lapse and at a time when neither House has declined to approve the order, and(b) does not prevent the making of a new order (in new terms).(6) In subsection (1) “UK institution” means an institution which is incorporated in, or formed under the law of any part of, the United Kingdom.”
(8) In the Table in section 259 (statutory instruments), in Part 7 after the entry relating to section 257 insert—

“258A

Meaning of “investment firm”

Draft affirmative resolution (except for urgent cases)”.

(9) In the Table in section 261 (index of defined terms), after the entry relating to “inter-bank payment system”, insert—

“Investment firm

258A”.

Amendment 193F agreed.

Amendment 193G

Moved by

[Lord Sassoon]

193G: After Clause 86, insert the following new Clause—
“Application to UK clearing houses
(1) The Banking Act 2009 is amended as follows.
(2) In section 1 (overview), after the entry in the Table relating to section 89A, insert—

“Sections 89B to 89G

UK clearing houses”.

“(9) Section 89B applies this Part to UK clearing houses with modifications.”
(4) After section 39 insert—
“39A Banks which are clearing houses
Sections 89C to 89E (clearing house rules, membership and recognition) apply in relation to a bank which would be a UK clearing house but for section 89G(2) (exclusion of banks etc from definition of UK clearing house) as they apply in relation to a UK clearing house.”(5) In section 75(5) (power to change law: application to other institutions), after paragraph (ca) insert—
“(cb) to UK clearing houses, or”.(6) After section 89A (and in Part 1) insert—
“UK clearing houses89B Application to UK clearing houses
(1) This Part applies to UK clearing houses as it applies to banks, subject to—
(a) the modifications specified in subsections (2) to (5), and in the Table in subsection (6), and(b) any other necessary modifications.(2) For section 13 substitute—
“13 Transfer of ownership
(1) The third stabilisation option is to transfer ownership of the UK clearing house to any person.
(2) For that purpose the Bank of England may make one or more share transfer instruments.”
(3) For sections 28 and 29 substitute—
“28 Onward transfer
(1) This section applies where the Bank of England has made a share transfer instrument, in respect of securities issued by a UK clearing house, in accordance with section 13(2) (“the original instrument”).
(2) The Bank of England may make one or more onward share transfer instruments.
(3) An onward share transfer instrument is a share transfer instrument which—
(a) provides for the transfer of—(i) securities which were issued by the UK clearing house before the original instrument and have been transferred by the original instrument or a supplemental share transfer instrument, or(ii) securities which were issued by the UK clearing house after the original instrument;(b) makes other provision for the purposes of, or in connection with, the transfer of securities issued by the UK clearing house (whether the transfer has been or is to be effected by that instrument, by another share transfer instrument or otherwise).(4) An onward share transfer instrument may not transfer securities to the transferor under the original instrument.
(5) The Bank of England may not make an onward share transfer instrument unless the transferee under the original instrument is—
(a) the Bank of England, (b) a nominee of the Treasury, or(c) a company wholly owned by the Bank of England or the Treasury.(6) Sections 7 and 8 do not apply to an onward share transfer instrument (but it is to be treated in the same way as any other share transfer instrument for all other purposes, including for the purposes of the application of a power under this Part).
(7) Before making an onward share transfer instrument the Bank of England must consult—
(a) if the UK clearing house is a PRA-authorised person, the PRA, and(b) the FCA.(8) Section 26 applies where the Bank of England has made an onward share transfer instrument.
29 Reverse share transfer
(1) This section applies where the Bank of England has made a share transfer instrument in accordance with section 13(2) (“the original instrument”) providing for the transfer of securities issued by a UK clearing house to a person (“the original transferee”).
(2) The Bank of England may make one or more reverse share transfer instruments in respect of securities issued by the UK clearing house and held by the original transferee (whether or not they were transferred by the original instrument).
(3) If the Bank of England makes an onward share transfer instrument in respect of securities transferred by the original instrument, the Bank may make one or more reverse share transfer instruments in respect of securities issued by the UK clearing house and held by a transferee under the onward share transfer instrument (“the onward transferee”).
(4) A reverse share transfer instrument is a share transfer instrument which—
(a) provides for transfer to the transferor under the original instrument (where subsection (2) applies);(b) provides for transfer to the original transferee (where subsection (3) applies);(c) makes other provision for the purposes of, or in connection with, the transfer of securities which are, could be or could have been transferred under paragraph (a) or (b).(5) The Bank of England may not make a reverse share transfer instrument under subsection (2) unless—
(a) the original transferee is—(i) the Bank of England,(ii) a company wholly owned by the Bank of England or the Treasury, or(iii) a nominee of the Treasury, or(b) the reverse share transfer instrument is made with the written consent of the original transferee.(6) The Bank of England may not make a reverse share transfer instrument under subsection (3) unless—
(a) the onward transferee is— (i) the Bank of England,(ii) a company wholly owned by the Bank of England or the Treasury, or(iii) a nominee of the Treasury, or(b) the reverse share transfer instrument is made with the written consent of the onward transferee.(7) Sections 7 and 8 do not apply to a reverse share transfer instrument (but it is to be treated in the same way as any other share transfer instrument for all other purposes including for the purposes of the application of a power under this Part).
(8) Before making a reverse share transfer instrument the Bank of England must consult—
(a) if the UK clearing house is a PRA-authorised person, the PRA, and(b) the FCA. (9) Section 26 applies where the Bank of England has made a reverse share transfer instrument.”
(4) For sections 45 and 46 substitute—
“45 Transfer of ownership: property transfer
(1) This section applies where the Bank of England has made a share transfer instrument, in respect of securities issued by a UK clearing house, in accordance with section 13(2) (“the original instrument”).
(2) The Bank of England may make one or more property transfer instruments.
(3) A property transfer instrument is an instrument which—
(a) provides for property, rights or liabilities of the UK clearing house to be transferred (whether accruing or arising before or after the original instrument);(b) makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities of the UK clearing house (whether the transfer has been or is to be effected by the instrument or otherwise).(4) The Bank of England may not make a property transfer instrument in accordance with this section unless the original instrument transferred securities to—
(a) the Bank of England,(b) a company wholly owned by the Bank of England or the Treasury, or(c) a nominee of the Treasury.(5) Sections 7 and 8 do not apply to a property transfer instrument made in accordance with this section.
(6) Section 42 applies where the Bank of England has made a property transfer instrument in accordance with this section.
(7) Before making a property transfer instrument in accordance with this section, the Bank of England must consult—
(a) if the UK clearing house is a PRA-authorised person, the PRA, and(b) the FCA.46 Transfer of ownership: reverse property transfer
(1) This section applies where the Bank of England has made a property transfer instrument in accordance with section 45(2) (“the original instrument”).
(2) The Bank of England may make one or more reverse property transfer instruments in respect of property, rights or liabilities of the transferee under the original instrument.
(3) A reverse property transfer instrument is a property transfer instrument which—
(a) provides for transfer to the transferor under the original instrument;(b) makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities which are, could be or could have been transferred. (4) The Bank of England must not make a reverse property transfer instrument unless—
(a) the transferee under the original instrument is—(i) the Bank of England,(ii) a company wholly owned by the Bank of England or the Treasury, or(iii) a nominee of the Treasury, or(b) the reverse property transfer instrument is made with the written consent of the transferee under the original instrument.(5) Sections 7 and 8 do not apply to a reverse property transfer instrument made in accordance with this section.
(6) Before making a reverse property transfer instrument in accordance with this section, the Bank of England must consult—
(a) if the UK clearing house is a PRA-authorised person, the PRA, and(b) the FCA. (7) Section 42 applies where the Bank of England has made a reverse property transfer instrument in accordance with this section.”
(5) For section 81 substitute—
“81 Transfer of ownership: report
(1) This section applies where the Bank of England makes one or more share transfer instruments in respect of a UK clearing house under section 13(2).
(2) The Bank must report to the Chancellor of the Exchequer about the exercise of the power to make share transfer instruments under that section.
(3) The report must comply with any requirements as to content specified by the Treasury.
(4) The report must be made as soon as is reasonably practicable after the end of one year beginning with the date of the first transfer instrument made under section 13(2).”
(6) The table mentioned in subsection (1)(a) is as follows—

Provision	Modification
Section 1	Ignore subsection (2)(b) and (c).
	In subsection (3)(c), for “to temporary public ownership” substitute “of ownership”.
	In subsection (4)(a), for “15, 16, 26 to 31 and 85” substitute “15, 26 and 28 to 31”.
Section 4	Ignore subsection (2)(b) and (c).
	Ignore subsection (3)(a), (b) and (ba).
	In subsection (5), for “banking” substitute “financial”.
	In subsection (6), for “protect depositors” substitute “maintain the continuity of central counterparty clearing services”.
	Ignore subsections (8A), (8B) and (9).
Section 5	Ignore subsection (1)(b) and (c).
	In subsection (3)— (a) for “Sections 12 and 13 require” substitute “Section 12 requires”, and (b) ignore the words “and temporary public ownership”.
Section 6	In subsection (4)— (a) after “Before” insert “issuing or”, and (b) ignore paragraph (d).
	In subsection (5) after “after” insert “issuing or”.
Section 7	In subsection (1), for “PRA” substitute “Bank of England”.
	In subsection (2), for the words following “satisfy the” substitute “recognition requirements”.
	The Bank of England may treat Condition 1 as met if satisfied that it would be met but for the withdrawal or possible withdrawal of critical clearing services by the UK clearing house.
	In subsection (3), for “satisfy the threshold conditions” substitute “maintain the continuity of any critical clearing services it provides while also satisfying the recognition requirements”.
	In subsection (4), for “PRA” substitute “Bank of England”.
	Ignore subsection (4A).
	In subsection (5)— (a) for “PRA” substitute “Bank of England”, and (b) ignore paragraph (a) unless the UK clearing house is a PRA-authorised person, in which case for “Bank of England” substitute “PRA”.
	Ignore subsections (7) and (8).
	For the purposes of section 7— (a) “critical clearing services” means central counterparty clearing services the withdrawal of which may, in the Bank of England’s opinion, threaten the stability of the financial systems of the United Kingdom, and (b) “recognition requirements” means the requirements resulting from section 286 of the Financial Services and Markets Act 2000.
Section 8	In subsection (1), omit “in accordance with section 11(2) or 12(2)”.
	Ignore subsection (2)(c) and (d).
	In subsection (3), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
	In subsection (4), ignore the words “in accordance with section 11(2) or 12(2)”.
Section 9	Ignore section 9.
Section 11	Ignore subsection (2)(a).
Section 13	See above.
Section 14	Ignore subsection (5).
Section 16	Ignore section 16.
Section 20	Ignore subsections (2) and (4).
Section 24	In subsection (1), ignore paragraph (c) unless the UK clearing house is a PRA-authorised person.
Section 25	Ignore section 25.
Section 26	In subsection (1), for “11(2)” substitute “13(2)”.
	In subsection (5), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
	In subsection (6), for “11(2)” substitute “13(2)”.
Sections 26A and 27	Ignore sections 26A and 27.
Sections 28 and 29	See above.
Section 30	In subsection (5), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
Section 31	In subsection (4), for “7, 8 and 51” substitute “7 and 8”.
	In subsection (5), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
Section 41	In subsection (1), ignore paragraph (c) unless the UK clearing house is a PRA-authorised person.
Section 42	In subsection (5), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
Section 42A	In subsection (5), for “7, 8 and 50” substitute “7 and 8”.
	In subsection (6), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
Section 43	In subsection (6), for “7, 8 and 52” substitute “7 and 8”.
	In subsection (7), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
Section 44	In subsection (5), for “7, 8 and 52” substitute “7 and 8”.
	In subsection (6), ignore paragraph (a) unless the UK clearing house is a PRA-authorised person.
Sections 45 and 46	See above.
Sections 49 to 53	Ignore sections 49 to 53.
Section 54	In subsection (1), for “A compensation scheme order” substitute “An order under section 89F”.
	In subsection (4)(b), for “compensation scheme order” substitute “the order under section 89F”.
Section 55	In subsection (10), for “to which section 62 applies” substitute “under section 89F”.
Section 56	In subsection (6), for “to which section 62 applies” substitute “under section 89F”.
Section 57	In subsection (1), for “A compensation scheme order” substitute “An order under section 89F”.
	In subsection (4)(a), for “has had a permission under Part 4A of the Financial Services and Markets Act 2000 (regulated activities) varied or cancelled” substitute “no longer qualifies as a recognised body under Part 18 of the Financial Services and Markets Act 2000 (recognised investment exchanges and clearing houses) or is subject to a requirement imposed under that Part”.
Section 58	In subsection (1), for “A resolution fund order” substitute “An order under section 89F that provides for transferors to become entitled to the proceeds of the disposal of things transferred”.
	Ignore subsection (3).
	In subsection (4), for “A resolution fund order” substitute “An order under section 89F that provides for transferors to become entitled to the proceeds of the disposal of things transferred”.
	In subsection (5), for “A resolution fund order” substitute “An order under section 89F that provides for transferors to become entitled to the proceeds of the disposal of things transferred”.
	Ignore subsections (6) to (8).
Section 59	Ignore section 59.
Section 60	In subsection (3)(c), ignore the references to bank insolvency and bank administration.
	In subsection (4)— (a) ignore paragraphs (a) and (b), and (b) in paragraph (c), for “a third party compensation order” substitute “an order under section 89F”.
	In subsection (5)— (a) ignore paragraph (a), and (b) in paragraph (c), for “a compensation scheme order or resolution fund order” substitute “an order under section 89F”.
Section 61	In subsection (1)— (a) ignore paragraphs (a) to (c), and (b) treat the subsection as including a reference to orders under section 89F.
	Ignore subsection (2)(b).
Section 62	Ignore section 62.
Section 65	In subsection (1)(a)(ii), for “order” substitute “instrument”.
	In subsection (3)— (a) in paragraph (a), ignore the words “where subsection (1)(a)(i) applies”, and (b) ignore paragraph (b).
Section 66	In subsection (1)— (a) in paragraph (a), ignore the reference to section 11(2)(a), (b) in paragraph (d)(i), ignore the words following “England”, and (c) ignore paragraph (d)(ii).
Section 68	In subsection (1)(a), for “order” substitute “instrument”.
Section 69	In subsection (4)— (a) in paragraph (a), ignore the words “in relation to sections 63 and 64”, and (b) ignore paragraph (b).
Section 70	In subsection (3)— (a) in paragraph (a), ignore the words “in relation to section 63”, and (b) ignore paragraph (b).
Section 71	Ignore subsection (1)(a).
Section 72	Ignore subsection (1)(a).
Section 73	Ignore subsection (1)(a).
Section 79A	In subsection (2), ignore the words “share transfer instruments and”.
Section 81	See above.
Section 81B	In subsection (1), for “or 12(2)” substitute “, 12(2) or 13(2)”.
	Ignore subsection (3)(c) and (d).
	In subsection (6), ignore paragraph (b) unless the clearing house is a PRA-authorised person.
Section 81C	In subsection (2), ignore the words “and the bank administration procedure”.
	Ignore subsection (3).
Sections 82 and 83	Ignore sections 82 and 83.

89C Clearing house rules
(1) A property transfer instrument made in respect of a UK clearing house may make provision about the consequences of a transfer for the rules of the clearing house.
(2) In particular, an instrument may—
(a) modify or amend the rules of a UK clearing house;(b) in a case where some, but not all, of the business of a UK clearing house is transferred, make provision as to the application of the rules in relation to the parts of the business that are, and are not, transferred.(3) Provision by virtue of this section may (but need not) be limited so as to have effect—
(a) for a specified period, or(b) until a specified event occurs or does not occur.89D Clearing house membership
(1) A property transfer instrument made in respect of a UK clearing house may make provision about the consequences of a transfer for membership of the clearing house.
(2) In particular, an instrument may—
(a) make provision modifying the terms on which a person is a member of a UK clearing house;(b) in a case where some, but not all, of the business of a UK clearing house is transferred, provide for a person who was a member of the transferor to remain a member of the transferor while also becoming a member of the transferee.89E Recognition of transferee company
(1) The Bank of England may provide for a company to which the business of a UK clearing house is transferred in accordance with section 12(2) to be treated as a recognised clearing house for the purposes of the Financial Services and Markets Act 2000—
(a) for a specified period, or(b) until a specified event occurs.(2) The provision may have effect—
(a) for a period specified in the instrument, or(b) until the occurrence of an event specified or described in the instrument.(3) The power under this section—
(a) may be exercised only with the consent of the Treasury, and(b) must be exercised by way of provision in a property transfer instrument (or supplemental instrument).89F Clearing house compensation orders
(1) The Treasury may by order make provision for protecting the financial interests of transferors and others in connection with any transfer under this Part as it applies by virtue of section 89B.
(2) The order may make provision establishing a scheme—
(a) for determining whether transferors should be paid compensation, or providing for transferors to be paid compensation, and establishing a scheme for paying any compensation,(b) under which transferors become entitled to the proceeds of the disposal of things transferred in specified circumstances, and to a specified extent, and(c) for compensation to be paid to persons other than transferors.(3) An order—
(a) is to be made by statutory instrument, and(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.89G Interpretation: “UK clearing house” &c.
(1) In this Part “UK clearing house” means a clearing house—
(a) which is incorporated in, or formed under the law of any part of, the United Kingdom,(b) which provides central counterparty clearing services, and(c) in relation to which a recognition order is in force under Part 18 of the Financial Services and Markets Act 2000.(2) But “UK clearing house” does not include a clearing house which is also—
(a) a bank,(b) a building society (within the meaning of section 119 of the Building Societies Act 1986),(c) a credit union (within the meaning of section 31 of the Credit Unions Act 1979 or Article 2(2) of the Credit Unions (Northern Ireland) Order 1985), or(d) an investment firm.(3) Where a stabilisation power is exercised in respect of a UK clearing house, it does not cease to be a UK clearing house for the purposes of this Part if the recognition order referred to in subsection (1)(c) is later revoked.
(4) In this Part—
“central counterparty clearing services” has the same meaning as in section 155 of the Companies Act 1989 (see subsection (3A) of that section), and
“PRA-authorised person” has the meaning given by section 2B(5) of the Financial Services and Markets Act 2000.”
(7) In the Table in section 259 (statutory instruments), in Part 1 after the entry relating to section 89 insert—

“89F

Clearing house compensation orders

Draft affirmative resolution”.

(8) In the Table in section 261 (index of defined terms)—
(a) after the entry relating to “bridge bank share transfer instrument” insert—

“central counterparty clearing services	89G”,
“PRA-authorised person	89G”, and

(c) at the end insert—

“UK clearing house

89G”.”

[Lord Sassoon]

My Lords, as the Committee will see, we continue with a related group. Amendment 193G would apply the special resolution regime set out in Part 1 of the Banking Act 2009 to UK clearing houses with a number of important modifications. Where a UK clearing house is in serious financial difficulties that threaten its ongoing viability and pose a systemic threat, the Bank of England will be able to exercise stabilisation powers to ensure that financial stability is maintained.

These stabilisation powers are based on those applicable to the bank sector and will allow for part or all of the business of the failing UK clearing house to be sold to a commercial purchaser; for the transfer of all or part of the business of the failing UK clearing house to a company owned by the Bank of England; and for the transfer of ownership of the UK clearing house to another legal person.

The transferee could be an existing clearing house which agreed to take on the failing entity in the interests of the stability of the sector as a whole, a new entity created for the express purpose of supporting the resolution or, in extremis, a public sector entity. The transferee would ensure the continuity of vital services while the problems that necessitated the transfer were resolved. Such a transfer could be of the entirety of the equity, property, rights and liabilities of the clearing house.

The transfer of the ownership of a company does not, of itself, restore the financial condition of the clearing house. As such, in the event that a transferee is found, it is anticipated that the transferee would take steps to restore the clearing house to viability. The purpose of any such transfer is to eliminate contagion risk by ensuring the continuing function of the clearing services of the clearing house.

One of the main modifications made in the application of the special resolution regime to UK clearing houses is that the third stabilisation option provided under the SRR as it applies to banks that provides for the temporary public ownership of banks, is replaced by a power that allows for the transfer of ownership of a UK clearing house to any person by way of one or more share transfer instruments. In extremis, this could facilitate a share transfer to the Government—that is, a period of temporary public ownership. The other main modification is a reverse share transfer power to allow the Bank of England to transfer back ownership to the UK clearing house in question once the problems have been resolved. In much the same way as for the share transfer powers that I have just described, similar powers for the transfer and reverse-transfer of property rights and liabilities of UK clearing houses are also provided for.

Other modifications to the application of the SRR regime to UK clearing houses have also been provided for in this amendment, including the requirement that the Bank reports to the Chancellor when a share transfer has been enacted and provisions relating to the consequences of a share transfer on a UK clearing house’s membership. This amendment also confers power on HM Treasury to make compensation orders in respect of transfers made in respect of UK clearing houses.

Finally, I should make clear that this amendment could not be used by the Bank of England to direct owners and members of a clearing house to recapitalise or refund the default arrangements of that clearing house, which was a point that I made, even if I was not being directly asked to do so, in our earlier discussion.

As I explained last week, the envisaged power of direction could not be used to do so either, unless the UK clearing house had existing contractual rights that allowed it to do so. In that case, the Bank could direct the UK clearing house to exercise its rights. However, the Government remain of the view that taxpayers should not be expected to meet the cost of restoring a failed clearing house to viability. The Government therefore wish to build on the positive developments around loss allocation rules that are already taking place in the industry. This would see changes made to the recognition requirements that would require all UK clearing houses to have in place such loss allocation rules.

Again, that is important because, as regards my noble friend Lady Kramer’s quite proper points, these clauses are one part of making sure that we have the proper resolution tools in place around some of these really complex matters about how to resolve the contractual issues. The industry is, in parallel, working on loss allocation rules, which is another complementary part of what we want to see in place as a complete improvement to the picture. The authorities will consult industry further on those proposed changes in due course. I beg to move.

[Baroness Kramer]

Does the Minister have any sense of when we will have a feel for what these loss allocation rules are? I suspect that that is where my questions have generally been headed.

[Lord Sassoon]

My Lords, I do not know what the timing is but I will find out.

Amendment 193G agreed.

Clauses 87 to 90 agreed.

Schedule 17 : Amendments of Banking Act 2009 related to Part 2 of this Act

Amendment 193H

Moved by

[Lord Sassoon]

193H: Schedule 17, page 279, line 32, at end insert—

“Section 81B

(a) Treat the reference to the PRA in subsection (2) as a reference to the FCA. (b) Ignore subsection (7)(b).”

Amendment 193H agreed.

Amendment 193J

Moved by

[Lord Newby]

193J: Schedule 17, page 281, line 6, at end insert—
“( ) In subsection (6), after “filed” insert “(in Scotland, lodged)”.”

[Lord Newby]

My Lords, this small group of government amendments are of a purely technical nature. Amendment 193J amends Section 120 of the Banking Act 2009 to reflect the terminology of Scottish law, under which documents are “lodged” with the court.

Amendments 201A, 201B and 201C are concerned with the rulebooks that the new authorities will use. The FSA’s rulebook is currently made up of around 9,000 pages of rules. In the new system, these rules will become FCA rules, PRA rules, rules shared by both the FCA and the PRA, or Bank of England rules in relation to recognised clearing houses. Noble Lords will no doubt be aware that the Government intend that the new regulatory system will be put in place on 1 April next year. The Government are working closely with the FSA and the Bank of England on the practical aspects of transition to the new regulatory system, while listening to representations from industry on how disruption can be minimised in the run-up to the new system being put in place.

The amendments will give greater precision to the transition of the rulebook by enabling the new regulators to adopt relevant sections of the FSA rulebook, and its supporting materials, by designating the relevant regulatory material to the PRA and/or the FCA, or the Bank, and to make any necessary modifications. The amendments also permit the FSA and the PRA to appoint a set of persons to undertake this designation exercise. The recruitment processes to appoint members of the boards of the new regulators are well under way and the amendments will permit the future PRA and FCA boards to be appointed so that they, rather than the current boards, can make the decisions on the designation of rules.

The new rulebooks will not come into force until 1 April next year but we need the new boards to be able to make and publish their new rulebooks as early as possible in advance of 1 April next year so that industry and the public have certainty and sufficient notice to get ready. These are technical but practical and helpful amendments and I beg to move.

[Lord Davies of Oldham]

My Lords, it may be a source of some surprise on the Government Bench that I rise to speak on these purely technical amendments, but I merely ask Ministers to recognise that, their having looked kindly on three amendments that I proposed earlier today, I have kept my silence on three groups of amendments that they proposed and which have gone through without dissent.

Amendment 193J agreed.

Schedule 17, as amended, agreed.

17:30

Clause 91 : Power to make further provision about regulation of consumer credit

Amendment 194

Moved by

[Lord Sassoon]

194: Clause 91, page 162, line 20, at end insert—
“(ga) enable the Department of Enterprise, Trade and Investment in Northern Ireland to institute proceedings in Northern Ireland for a relevant offence;”

Amendment 194 agreed.

Amendment 194A

Moved by

[Lord Newby]

194A: Clause 91, page 162, line 23, at end insert—
“(2A) If an order under this section makes provision by virtue of subsection (2)(b) enabling the FCA to exercise any of its powers under sections 205 to 206A of FSMA 2000 (disciplinary measures) by reference to an act or omission that constitutes an offence under CCA 1974, the order must also make provision by virtue of subsection (2)(d) ensuring that a person in respect of whom the power has been exercised cannot subsequently be convicted of the offence by reference to the same act or omission.”

[Lord Newby]

My Lords, the Government are bringing forward amendments to Clause 91 in response to concerns raised by the Delegated Powers and Regulatory Reform Committee. I am very grateful to that committee, chaired by my noble friend Lady Thomas of Winchester, for its close and rigorous scrutiny of the powers that Clause 91 will confer and for the committee’s useful suggestions, which have informed the government amendments that I am now bringing forward.

Clause 91 enables the Treasury to make further provision about consumer credit following the transfer of regulation from the OFT to the FCA. It is necessary to take a power in this instance because the precise amendments that we will need to make to FiSMA and the Consumer Credit Act to effect the transfer will depend on the detailed proposals for the new FCA consumer credit regime, on which we will consult next year. These amendments clarify and put certain limits on how the power may be exercised.

Amendment 194A responds to the committee’s concern about the risk of double jeopardy. The amendment provides that, where criminal sanctions under the Consumer Credit Act and regulatory sanctions under FiSMA are available to the FCA in relation to the same act or omission, a person may not be convicted if he has been the subject of regulatory sanctions under FiSMA. This approach reflects that taken in Section 41 of the Regulatory Enforcement and Sanctions Act 2008, which the Delegated Powers Committee helpfully highlighted in its report as a useful precedent.

The second set of amendments in this group responds to the committee’s concern about the need to introduce certain constraints on the power in Clause 91 to ensure that it continues to be exercised in accordance with current government policy. Government Amendments 196ZA to 196ZC require the Treasury to have regard to the importance of securing an appropriate degree of protection for consumers and the principle that a burden imposed should be proportionate to its benefits.

These new duties to have regard reflect the two values underpinning the Clause 91 power. First, the Government remain very conscious of the fact that the primary rationale for the transfer of credit regulation to the FCA is to strengthen consumer protection. Thus, the requirements in the Consumer Credit Act should be repealed only where their effect can be replicated in an FCA rulebook under a FiSMA-based regime or where they are no longer appropriate. Secondly, this duty to have regard confirms that the Government remain committed to ensuring that regulatory burdens on small businesses are proportionate to the benefits.

I hope that these amendments adequately address the committee’s concerns. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, in keeping with our previous remarks, I think that we have very little of substance to make in the way of comment on these proposals, as set out by the noble Lord. As he said, they are largely technical and clarificatory, and they focus on the good work done in the committee, which we all welcome.

Amendment 194A agreed.

Amendments 195 to 196ZC

Moved by

[Lord Newby]

195: Clause 91, page 162, line 24, after “(2)(g)” insert “and (ga)”

196: Clause 91, page 162, line 30, at end insert—
“(3A) The Treasury may make provision by virtue of subsection (2)(ga) only with the consent of the Department of Enterprise, Trade and Investment in Northern Ireland.”

196ZA: Clause 91, page 162, line 32, leave out from “may” to “by” in line 34

196ZB: Clause 91, page 162, line 38, at end insert—
“( ) In exercising their powers under this section, the Treasury must have regard to—
(a) the importance of securing an appropriate degree of protection for consumers, and(b) the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction.”

196ZC: Clause 91, page 163, line 2, at end insert—
““consumers” has the meaning given in section 1G of FSMA 2000;”

Amendments 195 to 196ZC agreed.

Clause 91, as amended, agreed.

Amendment 196A

Moved by

[Lord Sassoon]

196A: After Clause 91, insert the following new Clause—
“Suspension of licences under Part 3 of Consumer Credit Act 1974
(1) The Consumer Credit Act 1974 is amended as follows.
(2) In section 32 (suspension or revocation)—
(a) in subsection (1), omit “or suspended”,(b) in subsection (2)—(i) in paragraph (a), omit “, as the case may be,” and “, or suspend it until a specified date or indefinitely,”, and(ii) in paragraph (b), omit “or suspension” and “or suspend”,(c) in subsection (3)—(i) in paragraph (a), omit “, as the case may be,” and “, or suspend it until a specified date or indefinitely,”, and(ii) in paragraph (b), omit “or suspension”,(d) in subsection (4)—(i) in paragraph (a), omit “, as the case may be,” and “, or suspend it until a specified date or indefinitely,”, and(ii) in paragraph (b), omit “or suspension”,(e) in subsections (6) and (7), omit “or suspension”,(f) omit subsection (8),(g) in subsection (9), omit “or to suspend”, and(h) for the title, omit “Suspension and”.(3) After section 32 insert—
“32A Power to suspend licence
(1) If during the currency of a licence it appears to the OFT to be urgently necessary for the protection of consumers that the licence should cease to have effect immediately or on a specified date, the OFT is to proceed as follows.
(2) In the case of a standard licence the OFT must, by notice—
(a) inform the licensee that the OFT is suspending the licence from the date of the notice or from a later date specified in the notice,(b) state the OFT’s reasons for the suspension,(c) state either—(i) that the suspension is to end on a specified date, which must be no later than the last day of the 12 months beginning with the day on which the suspension takes effect, or (ii) that the duration of the suspension is to be as provided by section 32B,(d) specify any provision to be made under section 34A, and(e) invite the licensee to submit to the OFT in accordance with section 34ZA representations—(i) as to the suspension, and(ii) about the provision (if any) that is or should be made under section 34A.(3) In the case of a group licence the OFT must—
(a) give general notice that the OFT is suspending the licence from the date of the notice or from a later date specified in the notice,(b) state in the notice the OFT’s reasons for the suspension,(c) state in the notice either—(i) that the suspension is to end on a specified date, which must be no later than the last day of the 12 months beginning with the day on which the suspension takes effect, or(ii) that the duration of the suspension is to be as provided by section 32B,(d) specify in the notice any provision to be made under section 34A, and(e) in the notice invite any licensee to submit to the OFT in accordance with section 34ZA representations as to the suspension.(4) In the case of a group licence issued on application the OFT must also—
(a) inform the original applicant of the matters specified under subsection (3)(a) to (d) in the general notice, and(b) invite the original applicant to submit to the OFT in accordance with section 34ZA representations as to the suspension.(5) Except for the purposes of sections 29 to 32 and section 33A, a licensee under a suspended licence is to be treated, in respect of the period of suspension, as if the licence had not been issued.
(6) The suspension may, if the OFT thinks fit, be ended by notice given by it to the licensee or, in the case of a group licence, by general notice.
(7) In this section “consumers”, in relation to a licence, means individuals who have been or may be affected by the carrying on of the business to which the licence relates, other than individuals who are themselves licensees.
32B Duration of suspension
(1) This section applies where a notice under section 32A provides for the duration of a suspension under that section to be as provided by this section.
(2) The suspension ends at the end of the period of 12 months beginning with the day on which it takes effect, but this is subject to—
(a) subsections (3) and (4) (where those subsections give a later time), and(b) the powers of the OFT under section 32A(6) and section 33.(3) Subsection (4) applies where—
(a) the OFT gives notice under section 32 that it is minded to revoke the licence, and(b) it gives that notice—(i) on or before giving the notice under section 32A, or(ii) after giving that notice but before the end of the period of 12 months mentioned in subsection (2).(4) The period of suspension is to continue until—
(a) the time of any determination by the OFT not to revoke the licence in pursuance of the notice under section 32, or (b) where the OFT determines to revoke the licence in pursuance of the notice, the end of the appeal period.” (4) In section 33 (application to end suspension), for subsection (1) substitute—
“(1) On an application made by a licensee the OFT may, if it thinks fit, by notice to the licensee end the suspension of a licence under section 32A, whether the suspension was for a fixed period or for a period determined in accordance with section 32B.”
(5) In section 33A (power of OFT to impose requirements on licensees) after subsection (6) insert—
“(6A) A requirement imposed under this section during a period of suspension cannot take effect before the end of the suspension.”
(6) After section 34 insert—
“34ZA Representations to OFT: suspension under section 32A
(1) Where this section applies to an invitation by the OFT to any person (“P”) to submit representations, the OFT must invite P, within 21 days after the notice containing the invitation is given to P or published, or such longer period as the OFT may allow—
(a) to submit P’s representations in writing to the OFT, and(b) to give notice to the OFT, if P thinks fit, that P wishes to make representations orally,and where notice is given under paragraph (b) the OFT must arrange for the oral representations to be heard.(2) The OFT must reconsider its determination under section 32A and determine whether to confirm it (with or without variation) or revoke it and in doing so must take into account any representations submitted or made under this section.
(3) The OFT must give notice of its determination under this section to the persons who were required to be invited to submit representations about the original determination under section 32A or, where the invitation to submit representations was required to be given by general notice, must give general notice of the confirmation or revocation.”
(7) In section 34A (winding-up of standard licensee’s business), in subsection (2)—
(a) in paragraph (c), omit “suspend or”, and(b) after paragraph (c) insert—“(d) a determination to suspend such a licence under section 32A (including a determination made under section 34ZA on reconsidering a previous determination under section 32A);”.(8) In section 41 (appeals) after subsection (1) insert—
“(1ZA) References in the table to a determination as to the suspension of a standard licence or group licence are to be read as references to a determination under section 34ZA to confirm a determination to suspend a standard licence or group licence.”
(9) Nothing in this section affects the powers conferred by section 22 of FSMA 2000 or section 91 of this Act.”

[Lord Sassoon]

My Lords, Amendment 196A inserts into the Bill a new clause which gives the OFT a new power to suspend a consumer credit licence with immediate effect if the OFT considers it urgently necessary to do so to protect consumers. Amendment 202 makes a consequential change to commencement provisions to accommodate this power.

This new licence suspension power is the first step on the road to greater consumer protection in the consumer credit market. It will make sure that bad practice is tackled and that consumers are protected even before the move of consumer credit regulation from the OFT to the powerful new FCA in April 2014.

Noble Lords may ask why the Government are bothering with this change now, given the move to the FCA in 2014. We think it is worth ensuring that the OFT can act as a strong and credible regulator in the interim, particularly to protect vulnerable consumers.

The power has been very well received by those working closely with consumers. For example, the consumer organisation Which? stated:

“Our research has found that people taking out payday loans are often caught in a downward spiral of debt so it is important that the Office of Fair Trading will have the power to instantly suspend the credit licences of unscrupulous lenders caught breaking the existing rules.

This is a good step towards ensuring the regulator has the powers it needs to be a more proactive consumer watchdog. The Government must now … make sure the regulator has the resources it needs, and ensure there is no gap in supervision as these powers transfer to the Financial Conduct Authority”.

The current regime does not allow the OFT to do its job properly in this area. At present, where the OFT calls into question a licence holder’s fitness to hold a credit licence it can take various measures, including suspending, varying or revoking the credit licence. However, under the current regime a licence holder’s credit licence remains in effect until all rights of appeal have been exhausted, and the licence holder can continue to trade during this period. The appeal process may take up to two years to be completed; we saw that in the case of Yes Loans. The potential for detriment during that time is immense, particularly as rogue operators who are aware that they may soon lose their licence are incentivised to operate even more unscrupulously to maximise profits.

Amendment 196A amends the Consumer Credit Act 1974 to provide for an enhanced licence suspension power which will enable the OFT to suspend a licence with immediate effect or at a specified date, and the test is that the OFT considers it urgently necessary to protect consumers. It would be used in cases where there was an urgent need to take action in order to stop actual, or prevent further, consumer detriment.

The sorts of factors that the OFT might take into account when deciding whether or not to use the power would include evidence that the business has engaged in violence or threats of violence, fraud or dishonesty, or is targeting particularly vulnerable consumers with harmful practices. In fact the OFT issued a consultation document yesterday that sets out a number of examples of when and how they might apply the new tool.

It is important to note that the new power will have no adverse impact on businesses that comply with existing law and do not cause serious actual or potential consumer detriment. However, the Government expect it to have an important deterrent effect.

In addition, the power includes a number of safeguards. First and foremost, any suspension can only be in effect for 12 months from the date it is issued, unless during that time the OFT issues a notice that it is “minded to revoke” a licence. If no “minded to revoke” notice is issued, the suspension expires, and it cannot simply be made again.

There are also a number of procedural safeguards included in the power, setting out what notices must be given and what representations the licence holder must be permitted to make. Finally, the licence holder has the usual appeal routes open to them, although crucially a licence remains suspended while appeals are being heard.

In conclusion, this is a crucial step towards affording consumers in the credit market greater protection, a matter that we have discussed in a number of contexts during Committee. It strengthens the OFT in the interim period before the FCA takes over. During that period, it will allow the OFT to take firm action against those who may be mistreating their customers. I beg to move.

[Lord Borrie]

My Lords, I find the Minister’s explanation exceedingly clear and well justified. The case that he has put for being able to suspend a licence instantly is something that will only be rarely exercised. However, most importantly, as the Minister said, this power if exercised even once or twice will have a deterrent effect on others. Its value in the exceptional case is undoubted. I am so glad that the Minister has not been persuaded by those who say, “Oh, well, it’s all disappearing into the FCA shortly so why bother at this stage?”. I am glad that this has been done. It will send a message and it is very helpful for this to be put into law now.

[Lord Stevenson of Balmacara]

My Lords, as we have heard, this amendment would ensure that a decision by the OFT to suspend a consumer credit licence could take effect before an appeal process ends. This follows widespread concerns that appeals from consumer credit licence holders can take up to two years, as the noble Lord said, and the current law allows the trader to continue with any bad practice while the appeal is pending. We warmly welcome these amendments and are very grateful for them. The consultation paper that came out only yesterday is a very useful contribution to the debate.

However, perhaps the Minister could answer two questions—one small point and a larger one. The amendment sets up the legislation so that the OFT would suspend the whole licence; in other words, all activity covered by the licence. That generally makes sense. However, there may be circumstances where the OFT has concerns with a particular feature of a credit licence holder’s business activities—say, a lender whose lending practices are all right but who perhaps has problems with debt collection practices—and the right decision might be to close down one part of the business. The noble Lord may be able to point me to where these powers already exist or, if necessary, perhaps he would reflect on this point. There may be a slight issue here, but it is not a major one. If in doubt, the right thing is to withdraw the licence.

The second point is slightly broader. To date, the OFT has done a very good job in this area, and perhaps does not receive as much thanks as it should for that. It seems to us that the main problem is that it has never had the resources that it needs to do the job it wants to do. There is little point in providing powers to a body, as in this amendment, if the resources to do the job are not also provided. So my second question is about the transition: the OFT will probably have jurisdiction on credit in this relationship for only another 18 months or so. What will happen over the transition? I would be grateful if the Minister can give us a reassurance that the transfer arrangements will be such that this amendment will survive the transfer, and that the FCA will be willing and able to provide the necessary resources so that there is a seamless handover.

[Lord Sassoon]

My Lords, I am very grateful to the noble Lord, Lord Borrie, for giving his clear welcome to this provision. It is always gratifying to have his agreement on such things, as he has immense background experience in this area.

I turn to the two points made by the noble Lord, Lord Stevenson of Balmacara. I believe that there is no way of partly suspending a licence; it is an all-or-nothing situation. I note his suggestion to reflect on this, and I will check that it has been taken fully into account, as I suspect it has. It reinforces the point made by the noble Lord, Lord Borrie, that it is hoped that this power is not used very often and that it will be used in what are clearly extremely egregious cases.

On the second point, I can certainly assure the noble Lord that the planning relates to the transfer being seamless and appropriate—not only that the appropriate powers are taken into account but also the appropriate resources. My understanding is that people are clearly working to ensure that we achieve the objective that he and I share in this area.

Amendment 196A agreed.

17:45

Amendment 196B

Moved by

[Lord Mitchell]

196B: After Clause 91, insert the following new Clause—
“Power of the FCA to make further provision about regulation of consumer credit
(1) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment.
(2) This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.”

[Lord Mitchell]

My Lords, by any criteria, 4,214% being charged on a personal loan is outrageous. It is usury par excellence. Yet this is the rate of interest being charged by one of our largest and most popular online payday lenders. There are many others who are charging similar amounts. This amendment does not seek to ban payday lending because it fulfils a role and, for many people, they have no choice. What we do seek is to permit the Financial Conduct Authority to place a cap on the total cost of any loan if it judges that that loan will cause consumer detriment.

Payday lending has gone viral. Noble Lords need only stand in Parliament Square this evening and see the advertising copy plastered on London buses—one says “Go on. Get money. Go on”, while another one says “Arrives in 15 minutes”—in order to realise that this really is big business. Or they can do what I did, and go to Walthamstow in north-east London and there on the high street see the plethora of payday lending shops, all of which seem to be doing good business. Or they can go on to the Blackpool FC website, there to see that this football club is selling replica kits with “Wonga” plastered all over the shirts. You can even buy a baby Blackpool FC shirt so that your baby has “Wonga” on full display.

Until a year ago, I knew nothing about payday loans. Of course I had heard about loan sharks and I knew that this is an illegal, murky underworld where desperate people seeking immediate cash can get it quickly from backstreet dealers. I also knew that if you did not repay your loan, nasty people with black gloves and baseball bats would come round and make you an offer you could not refuse. I decided to look up the definition of “loan shark”, which the OED defines as,

“a moneylender who charges extremely high rates of interest, typically under illegal conditions”.

The truth be told, loan shark is an ugly expression and baseball bats are unacceptable, so many of the new generation have gone upmarket and spruced up their image. They have become illegal and, like any good marketing company, they have rebranded their product. Now their offerings are called “payday loans”, and if you do not repay, it is no longer the baseball bat but the bailiff and the threat that your personal credit rating will be shot to pieces. Some 4 million people are using these loans, and the amounts advanced exceed £2 billion. This is an industry that is enjoying stratospheric growth—no double dip here. It is a world where the companies have jaunty, blokey names like “Quick Quid”, “The Money Shop”, “My Advance Loan” and “Wonga”. Need a few quid over Christmas? It is easy-peasy.

But I have seen another side of the fun-filled world of easy loans. I have met people whose lives have been destroyed as they are sucked into the payday loan vortex. For some of them, it becomes a never-ending cycle of payment and repayment, payment and repayment, shuffling credit cards, borrowing from one payday loan company to meet the never-ending demands of the other, and all the time the inexorable clock of compound interest keeps ticking away. It is a Kafkaesque nightmare. Once you are in, it is hard to get out. I know it shows my age, but the words from the song “Hotel California” keep reverberating in my brain:

“You can check-out any time you like,

But you can never leave”.

I am in a beneficial position to understand what is going on as I come from an asset finance background. In my day, we financed capital equipment to large companies, which is clearly not the same as consumer credit, but the fact is that I totally understand the workings of compound interest and I know the games that people play.

Wonga is a good example to examine. The payday loan companies have taken to the internet like ducks to water—no shops, more upmarket and they have become very slick. They have turned loan sharking from a shabby backstreet activity into a recreational pursuit. I decided to do my own investigation. Wonga itself has no history of illegal loan sharking. It is a true 21st-century online payday loan company and is by far and away the most well known and maybe the most successful, so it made sense for me to go on to its website. It is brilliant. In terms of user friendliness, it is right up there with Apple and Google; it is very seductive. To test it out, I set out to borrow £300 for a 21-day period. It was so easy. Wonga wanted my personal details—where I live and where I work—and required details of my debit card so that it could capture the repayment after three weeks. So far, so good.

Wonga was able instantly to assess my credit rating, which enabled it to accept or reject my application within minutes. It highlighted the fact that it offers straight-talking money and promotes responsible lending. It told me that it would give me a decision in six minutes and that the £300 would hit my bank in 15 minutes. It also told me clearly and upfront that I would have to repay £365 in 21 days’ time. It stated, as it must, that this loan was equivalent to an annualised interest rate of 4,214%—totally transparent and totally exorbitant. Noble Lords will be pleased to hear that I did not click the “Accept” button.

Payday loan companies are correctly obliged by law to display their APR. As I say, in Wonga’s case, it is 4,214%. Some are more, others are less. Most of them claim that APR is an unjust measure. “After all”, they say, “how can you apply an annualised rate of interest to a loan that lasts for just a matter of days?”. But the fact is that you can apply an annualised rate of interest to any loan, whether it lasts for one day or 100 years. It is the only comparative measure. Attempts to rename interest and call it a fee payment must be resisted. Payday lenders are obliged to display APR on their websites but for some reason they do not have to show it on their advertising. I think they should. Imagine a bus advertisement where one panel says, “Straight-talking money”, and the other says, “APR 4,214%”.

Payday lending and loan-sharking are not going to disappear. This sector provides a vital service to those in our community who cannot get credit elsewhere. In these straitened times, it is only going to get worse. This amendment gives the Financial Conduct Authority the power to act where it sees that the terms on offer cause “consumer detriment”. I hope that the Government and noble Lords are able to support this amendment. I beg to move.

[Baroness Kramer]

My Lords, I will speak very briefly to this amendment, with which I have great sympathy.

I understand that the Government are carrying out a review of payday lending. I have two concerns. First, we really need to nail the banks, frankly, because I suspect that if the various fees charged for unauthorised overdrafts were translated into an APR, they might not be so different from that charged by Wonga. Secondly, we need to understand this dynamic between companies like Wonga and the kind of loan sharks that come after their clients with a baseball bat, because the last thing any of us want would be to see people driven back to those illegal lenders and subject to their violent and aggressive behaviour.

Would the noble Lord, Lord Mitchell, not agree that the most important way to combat this kind of exorbitant charging is to make sure that there is a proper alternative for individuals, whether it is through a credit union, community development banks—which we do not have this in this country—or some other mechanism where there is a legitimate provider that serves this particular market? Would he not agree that one of the frustrations with much of the language in this Financial Services Bill is that it is not taking the necessary actions to promote those kinds of organisations coming forward and to provide regulator backing to ensure that the alternatives are in place so that people do not have to resort to Wonga or to banks charging exorbitant fees for unauthorised overdrafts?

[Lord Kennedy of Southwark]

My Lords, I thank my noble friend Lord Mitchell for his very welcome amendment. The time has come to deal with this issue. All of us, I am sure, are greatly concerned that those in poverty or on a low income, with a poor credit rating, actually pay the most for financial services—those who can least afford it pay the most, and that is wrong.

Like the noble Lord, Lord Mitchell, I think it is outrageous that people pay 2,000%, 3,000% or 4,000% for credit. It is a great concern to me that on the streets of Walthamstow and Southwark, where I come from, you see these payday loan companies offering these services. If you are at home watching daytime television, you are bombarded with them then and at other times. It is outrageous. The Government should look to create an environment that enables people to pay a fair price for the credit they need. The noble Baroness, Lady Kramer, spoke about the credit union movement. I am a big supporter of it as well and it certainly has a role to play in finding part of the solution to this problem. The Government have got to help it. I know it had some welcome support from the Government, with £38 million from the development fund. That is great, but it needs additional support to enable it to offer some of the services discussed here today. It may also be time for the banks to do something. We often talk about the problems we have had with the banks in recent years. They could earn some credit by working to help people in this sector. These are often the people the banks do not want to lend money to. They all have charitable arms and trusts, though, so why can they not work to help those whose business the banks would not otherwise want, to access credit elsewhere? The banks should step up to the mark and look at this.

As my noble friend said in introducing this amendment, there is no attempt to stop these firms trading, but it gives power to the FCA to set the interest rate they charge. That is very welcome. My noble friend also said that the cost is displayed as an annualised rate, but it is so small, it is hard to read. What should happen is that the print is like that on a packet of cigarettes, with a great big sign saying what it costs. We should see it clearly so that if we borrow £1,000 or £2,000, we know without dispute what we are actually paying. I am delighted to support my noble friend and look forward to the response of the Government.

[Lord Flight]

My Lords, I shall make two brief points. First, when I started my career there was a money-lending licence. You could not be in the business unless you had one and if you did, the interest rate that you could charge was limited by law. Secondly, wearing my hat as a commissioner of the Guernsey Financial Services Commission, Guernsey has refused to allow such companies to register or operate within the States of Guernsey.

[Lord Newby]

My Lords, the amendment suggests that the FCA should make rules about the maximum cost and duration of a loan. Obviously the Government share many of the noble Lord’s concerns about some practice in the payday lending sector, including poor affordability checks, particularly in relation to rolling over loans and the unfair treatment of customers in financial difficulty. The noble Lord is absolutely right: what we have seen in the last year or two has been an explosion of this kind of loan, available within minutes over the internet. That is the new, all-pervasive problem. I, too, looked at taking out a loan and the companies vied not only to let me have a loan, but to do so quickest—almost saying how many minutes. Some would do it in half an hour, some in 15 minutes. That is a new development. I did not have to go to Walthamstow; I could do it sitting at my desk while doing other things. That is a particularly seductive approach and one of the reasons the sector has grown so quickly. It also has an aura of simplicity and respectability, which going into a shop in a high street to get a loan does not necessarily have.

The Government and I are extremely sympathetic to many of the things that the noble Lord seeks to achieve. As we see it, one of the key benefits of transferring consumer credit to the FCA is that it will equip that regulator with better tools than exist at the minute to keep up with this kind of development, particularly the new developments in respect of the internet and via text messaging. The FCA will also have greater resources to supervise the compliance of these firms and a much wider range of powers to take action when it spots a problem, either at a firm-specific or sector-wide level.

18:00

While we think that the transfer of powers to the FCA will enable a big improvement to take place, we cannot wait until April 2014—when those powers move across—before we see any action. The OFT is halfway through a review of the compliance of payday lenders. The review involves on-site inspections of 50 major payday lenders and surveys of industry and consumer organisations. Its findings will be used to drive up standards and to take enforcement action against specific lenders where appropriate. We are of course giving the OFT a new power to suspend licences with immediate effect should this be necessary to protect customers. BIS is also undertaking a review into the case for a cap on the total cost of credit. Both these reviews are due to report in a matter of months.

In addition, in May, BIS also announced agreement from the four main trade associations representing the high-cost credit sector to strengthen the consumer protections in their codes of practice; for example, by providing increased transparency about loan repayment terms, more help for customers in financial difficulty by freezing charges and interest, and robust credit and affordability assessments to ensure loans are suitable for the customer’s situation.

Returning to the amendment, I reassure the noble Lord that the Bill already contains adequate provision to enable the FCA to take effective action to tackle detrimental lending practices in respect of payday loans. In particular, Clause 22 already provides the FCA with a broad power to make rules on products and product features, including in relation to specific product features such as the duration of contracts. It would also—this deals with the point made by the noble Lord, Lord Kennedy—enable the FCA to make rules in respect of the way in which interest rates were displayed in the marketing and other materials of payday loan companies.

I reassure the noble Lord that the powers that he seeks for the FCA already exist in the Bill. The lack of specific provision on the face of the Bill in no way reflects how seriously the Government take these issues.

[Lord Mitchell]

My Lords, I thank noble Lords who have participated in this short debate. To the noble Baroness, Lady Kramer, I say that credit unions are very interesting. They have started very slowly. As to the rates of interest they charge, I think that it is presently 2% per month of the capital cost and they are pushing hard for it to go to 3%. I do not know what that is when it is compounded out—I do not have my calculator with me—but it is probably about 50%. That strikes me as a reasonable amount to charge given the credit involved.

To the noble Lord, Lord Flight, I say that I think that Guernsey has probably got it right and we should pay attention to it. There is a lot of financial expertise there. I thank my noble friend Lord Kennedy for his support for the amendment. He lives in a deprived borough of London where, exactly as we saw in Walthamstow, payday loan shops are to be found everywhere.

To the Minister, I should like to make just a couple of comments. First, with online payday loan companies, ease of use is a significant issue. It is a bit like online betting: it is so easy to do; it is so fast. Let us think of people who perhaps do not have self-control or need the money quickly. It is frightening what people can do in the privacy of their front room to get money very quickly. It is not like it was before, when you would go into a payday loan company on the high street not knowing who was watching and perhaps not wanting to be seen there. This is between you and your computer, and it is very difficult.

I heard what the Minister said about compliance and licensing, but I am not sure that the issue of interest rates has been taken as the cost. It is the interest rate aspect of it that we are trying to push in this amendment, so that the FCA would have the power to control the effective interest rates being charged.

I shall reflect on the comments made and perhaps return to the matter on another occasion. I beg leave to withdraw the amendment.

Amendment 196B withdrawn.

Amendment 196C

Moved by

[Lord Stevenson of Balmacara]

196C: After Clause 91, insert the following new Clause—
“Phasing out commercial debt management
In Part 2 of FSMA 2000, after section 30 insert—“30A Prohibition of specified fees for debt management
(1) The FCA will make rules under this section to prohibit any person whether authorised or not from charging a consumer fees of a specified description in respect of debt management services or debt solutions.
(2) For the purpose of subsection (1), rules may specify fees to be prohibited in terms that include, but are not limited to—
(a) the total amount of fees charged in respect of one or more debt solutions,(b) the size of any particular fee payment,(c) the timing and manner that fees fall due,(d) the type and nature of debt management services or debt solutions, and(e) any other matter that the FCA deems necessary to meet its objectives.(3) The rules may define debt management services and debt solutions for the purpose of this section and this may include both regulated and unregulated activities.
(4) Subsection (5) will take effect no later than three years after rules under this section come into effect and not later than 6 years after the passing of this Act.
(5) At the expiry of the period set out in subsection (4) the FCA shall make rules prohibiting any person, whether authorised or not, from charging a consumer fees or charges of any amount in respect of an agreement for debt management services or debt solutions made after these rules come into effect.
(6) The FCA may extend the period set out in subsection (4) where it is satisfied that the prohibition in subsection (5) would result in significant detriment for consumers.
(7) Any agreement made in contravention of a prohibition in this section will be unenforceable against the consumer or consumers it relates to.
(8) A consumer who has entered into an agreement that contravenes a prohibition under this section will be entitled to recover—
(a) any money or other property paid or transferred by him under the agreement, and(b) compensation for any loss sustained by him as a result of having parted with it.(9) The FCA may specify persons, or classes of persons who may be exempted from the prohibitions set out in this section in respect of more or more specified debt management services or debt solutions.””

[Lord Stevenson of Balmacara]

My Lords, I declare my interest as chair of CCCS—soon to be re-named StepChange—the debt charity. We are the UK’s leading free, independent debt advice charity and the only charitable provider of debt management plans, administering around a third of the total number in place today.

This is a probing amendment. We have considered the question of regulating debt management companies already in this Committee, but I make no apology for returning to this issue. We estimate that some 6.2 million families in this country are in financial jeopardy, and all the signs are that increasing numbers will need help, advice and solutions to their unmanageable debts over the next period. At present, there are a variety of providers, and a number of companies operating on a strictly commercial basis compete for business with the free services provided by the charitable sector.

To complicate matters, the Department for Business, Innovation and Skills is attempting to establish a voluntary protocol in this area, but we do not believe that it will be comprehensive. Nor will it be sufficient to eliminate the poor practice that has been found to exist or ease the detriment often caused to vulnerable, indebted people who sign up with fee-charging commercial debt management companies and, as a result, end up paying more, for longer, before they are debt free.

Debt management companies, along with payday loans—about which we have just heard—and claims management companies, are a new type of financial company which have come to the public notice in recent years. We must ensure that our regulatory structures look forward as well as back and that we do not miss the opportunity to protect consumers from the new problems that are coming down the track as well as learning lessons from the past.

Of course, it would be folly to believe that simply regulating debt management companies better, and including CMCs and payday lenders in the scope of the FCA more explicitly than at present, is the answer. However, it seems perverse that, while we are restructuring the conduct and prudential aspects of our present regulatory system, we are missing the opportunity to include other areas such as payday loans and claims management and debt management companies, which are currently regulated to different standards and for different purposes, and with very different resources, by other government departments. This results in a piecemeal approach and is surely a suboptimal way to proceed.

It has been argued that these areas are not “pure” financial services and therefore should not be regulated by the FCA, but I put it to the Minister that most people would regard the operations of CMCs, payday lenders and debt management companies as having a common thread of operating to earn money from helping people with their debts or future credits and, as such, they are in common parlance “financial companies”. When you tell people that there is no financial regulation in these areas, and that such as there is is to be found in the Ministry of Justice or BIS, they are very confused. Surely we need to think again about this.

The proposed transfer of consumer credit regulation from the OFT to the FCA is to be welcomed. Despite the excellent work done by the OFT, the current licensing regime has arguably not provided consumers with enough protection, not least because the OFT has not been given the resources properly to police the industry. However, as I said earlier, there is a persuasive case for debt management companies, claims management companies and payday lenders to be subject to the same regulatory regime governing other financial service providers. The worst of all worlds is to be subject to different regulatory authorities, which is what we are condoning if we do nothing here.

While it has been argued that powers already exist in primary legislation, at least in so far as debt management is concerned and perhaps for payday lenders, that does not mean that the FCA will be ready and willing to move into these areas with the speed that we think may be required.

The amendment seeks a firm commitment in the Bill that the FCA will regulate commercial debt management companies. The FCA should provide clear and directly enforceable standards for both business conduct and the design of products. This could, for example, enable the FCA to stop commercial debt management firms charging excessive and exploitative fees. Firms make around £250 million every year from already over-indebted borrowers, and three quarters of them frontload their charges, with customers paying hundreds of pounds before getting a reduction in their debts. On top of this, a further slice of repayments is swallowed up by “administration fees”, further extending the time taken to pay back debts.

We want threshold conditions that will keep rogue firms and harmful business models out of the market. We want tougher sanctions, including unlimited financial penalties, that enable the FCA to build a credible deterrent strategy against bad practice. We need more effective supervision and enforcement, and the power to order firms to directly compensate customers for losses arising from business conduct that falls below required standards. We also think there should be the power to ban misleading advertising. The Office of Fair Trading currently regards misleading advertising by fee-chargers as the most significant area of non-compliance with its guidance.

We think that the good commercial debt management firms would welcome such an approach, and StepChange is committed to working with them until such time as the FCA is ready to act. I beg to move.

[Lord Borrie]

My Lords, my noble friend Lord Stevenson has made some very powerful points with his criticism of the behaviour, over a period of time, of debt management companies—any company that eases, or purports to ease, the problems of debtors by making a plan for them to pay off their debts. What a debt management plan offers is, or may be, perfectly good and in the interests of the debtor. I would not like it to be the case that the only people in that business are not-for-profit organisations, even those such as the excellent one, StepChange, which my noble friend is involved with. He is quite right in criticising the commercial debt management companies that have been operating so far; but they have not operated without restraint, because, as he indicated, the Office of Fair Trading has been concerned with a number of their practices, including misleading advertising and exorbitant charges. A number of debt management companies have had their consumer credit licences removed after evidence was presented.

My concern about my noble friend’s amendment is not over the prohibition of specified fees for debt management or the other details of this clause that he would like to insert into the Bill. I am all in favour of those. However, I am not very keen—and my noble friend has not mentioned them—on the opening words of the proposed clause, which are:

“Phasing out commercial debt management”.

I do not want to see commercial debt management phased out so that it does not exist, as I do not believe that charitable organisations can provide for all the needs that debtors legitimately have and the services that they could legitimately seek and benefit from, assuming there were adequate controls over debt management companies, as there are for other firms who have to have a consumer credit licence.

The suspension of consumer credit licences, which we dealt with half an hour ago, and the increasing powers of the FCA compared with the Office of Fair Trading should do a great deal to help. It may be that an amendment of the kind that my noble friend is putting forward would be a helpful advance, but I hope he does not stick to the opening words about the “phasing out” of commercial debt management.

[Lord Newby]

My Lords, the Government obviously sympathise with the concerns about some of the practices in the fee-charging debt management sector, which this amendment seeks to restrict and ultimately close. Debt management firms by their very nature deal with some of the most financially vulnerable consumers in the country. It is therefore absolutely vital that there is an appropriate regulatory framework in place to make sure that these firms treat their customers fairly.

We also need to do more to make sure that there is effective signposting to free-to-customer debt advice options, such as the services provided by organisations like Citizens Advice and StepChange, of which the noble Lord is such a distinguished chair. The Government are therefore working with the debt management sector towards a protocol of best practice for the industry. The OFT has also recently updated its guidance for debt management firms, expanding on the practices that the regulator considers “unfair or improper” and could cause a business to lose its licence.

It is right that, from April 2014, the FCA’s more proactive and intrusive regulatory approach, and the stronger and more sophisticated regulatory powers available under FiSMA, will extend to the debt management sector. I can give the noble Lord that assurance. The rules that the FCA will be able to make could indeed cover many of the points in his amendments, but at this point, in advance of the powers being moved across and in advance of any consultation on the details of the rules, we think it would be inappropriate to set those out in the Bill.

18:15

Debt management, along with payday lending, is one of the areas where we expect the transfer from the OFT to have the most significant impact, not least because the Consumer Credit Act, as it stands, does not contain any specific requirements on debt management. Nevertheless, as the previous Financial Secretary set out in debates on similar amendments in the other place, the fact that there needs to be stronger regulation does not mean that the sector needs to be regulated out of existence. The noble Lord, Lord Borrie, set out some of the arguments on that extremely clearly. The Government are clear that consumers should have the choice of paying for debt management services if they want to. However, we want to also make sure that the services that they pay for are operated properly.

We debated this last week, and I will just say that, following the request from the noble Lord, Lord Kennedy, for us to have some further discussions about claims management companies, I have set up a meeting involving the noble Lords, Lord Kennedy and Lord Stevenson, myself and MoJ officials, which will take place very early next month, so that we can at least explore some of the issues there.

However, for the reasons I have given, we do not feel that we can agree to the amendment and hope that the noble Lord will be able to withdraw it.

[Lord Stevenson of Balmacara]

My Lords, I thank my noble friend Lord Borrie and the Minister for their comments. My noble friend Lord Borrie puts me in a difficult position. He is warm in his praise for the work that the not-for-profit charitable sector can offer in this area but is sceptical about the ability of the sector as a whole to rise to the challenge. I would like to reassure him about that but it would take too long, so will speak to him privately.

One thing that comes up time and time again in this area is that we sometimes pray in aid competition, as if it is the answer to many problems. In many cases it is, although there is one sense of “competition” that is used by those who benefit from it, which one has to be careful about.

There are some good debt management companies in this sector. Indeed, I was at a meeting held in Parliament only last week, where a number of MPs and Peers listened to a presentation from one of the leading firms, which was extraordinarily similar to the sort of things that I would have said, had I been in a position to make the presentation. We agreed on so many points that it was almost embarrassing to bill it as some sort of contest. In particular, this company was also very concerned about the bad practices, including advertising, up front fees and the way in which some of the marketing is carried out, and would be prepared to move much further towards the good practice that exists in the charitable sector and which I am trying to advocate through this probing amendment.

I was not, in that sense therefore, trying to phase out commercial debt management companies. Perhaps, on reflection, I could have phrased that better as phasing out bad practice within commercial debt management firms. You are often dealing with vulnerable customers who are at pains to pay off their debts, many of whom are there not because they have been feckless or in any way irresponsible but because of unfortunate circumstances, and have a commitment to work with a body such as StepChange in order to get themselves to a point where their debts are extinguished. It clearly cannot be helpful if, as a result of signing up with a commercial provider, perhaps on the basis of false information, they spend a far longer time—perhaps two or three years longer—paying off their debts and end up paying perhaps £2,000 to £3,000 more in total, when we would argue that they could get the same service by working with the not-for-profit sector.

It is in that sense that simply arguing for competition is wrong. However, I understand the point that there should be opportunities for people to choose where they take their debt management plans and to be able to sign up with the one that suits them best. I am not against that, provided certain thresholds about which we talked are met. In that sense I thank the Minister for his comments, and I particularly welcome what he said about signposting towards the free services. We are aware of the protocols and work being done by both the OFT and BIS. It is not only that there are so many but also the final transition that causes difficulties. The more we can do to move in a coherent way towards an agreed set of rules, an agreed process and an agreed target of trying to get this area working well, the better it will be, because the numbers are quite frightening.

Finally I thank him for his offer to meet with MoJ to talk about CMCs and I look forward to that meeting. I beg leave to withdraw the amendment.

Amendment 196C withdrawn.

Clauses 92 to 94 agreed.

Amendment 197

Moved by

[Lord Flight]

197: After Clause 94, insert the following new Clause—
“Retail account transferTransferability of retail banking current accounts
(1) If an individual customer gives notice in writing to a bank at which he holds a personal current account (Bank A) that he wishes to transfer the balance standing to the credit of that account (Account A) to a personal current account established or to be established at another bank (Bank B) and thereafter to close Account A—
(a) Bank A shall without charge within a period of 10 working days—(i) transfer to Bank B the balance of Account A less any charges owing in respect of that account;(ii) notify Bank B of all standing orders, direct debits and other orders for periodical payments that the customer has created in relation to Account A;(iii) pass to Bank B a copy of all material that it holds in relation to the customer as a result of having performed checks on his identity, the source of his funds or otherwise with regard to its regulatory obligations to counter financial crime;(b) Bank B shall without charge—(i) accept the funds transferred under paragraph (a)(i) and credit them without deduction to the account that the customer has applied to open (Account B);(ii) accept the details that Bank A provides under paragraph (a)(ii) and apply them to Account B so that they operate in accordance with the customer’s instructions from the date that Account B is credited under sub-paragraph (i);(iii) save where it has grounds for suspicion, accept the material provided under paragraph (a)(iii) in lieu of performing fresh checks on the identity of the customer, the source of his funds or otherwise in relation to its regulatory obligations to counter financial crime.(2) In this section a bank shall mean any person authorised under this Act and holding a permission for deposit taking granted by the PRA.”

[Lord Flight]

My Lords, I hope that all sides of this House would at least agree with the objectives of my amendment. It seems self-evident that a healthy banking system should be competitive, and an important ingredient of that is to make it as easy as possible for individuals and businesses to move their bank accounts from one bank to another. Historically the hassle in doing so obstructs and constrains people from moving their bank accounts easily. Members will know the issues with transferring direct debits, standing orders and standard remittances, and the most tedious of the lot, the anti-money-laundering requirements. I think that the wrong territory has been addressed here. It should be focusing on money flows, not having hundreds of millions of people filling out these pieces of paper.

When I put down this amendment, I was not aware that in September 2011 the Payments Council—a collaboration between banks—had approved a £650 million project to design and implement a new and much easier account-switching service for bank customers. This is supposed to be operative by September 2013, with a guarantee that the customer process for switching will be completed within seven days. That means the customer will receive whatever they need to operate the new account within seven days, and the new bank will arrange for all their incoming and outgoing payment instructions to be redirected from the old bank to the new one. The customer’s balance will be transferred, and any payments sent to the old account on or after the seventh working day will be automatically caught and moved to the new account. The customer will not suffer if there are any bank errors and the old current account will be closed at the end of the process. My amendment includes specifically the grandfathering of anti-money-laundering requirements, which I suggest is an important ingredient of the whole process.

I should perhaps have started by declaring an interest as a director of Metro Bank. Metro Bank has cracked the whole issue of people needing to get passports endorsed and provide originals of bills. Within the legal requirements we can obtain all the evidence we want from someone’s driving licence, and they can open an account within a 15-minute period.

There are two issues within the Payments Council proposals which potentially need some degree of FCA involvement. The first is that there is no automatic agreement from all banks to participate in this scheme. I understand that 97% have said they will participate, but others that have not. Whether they will or not remains to be seen, but for it to be really efficient it seems it should be universal, with all banks participating. Secondly, there is the issue of costs. I understand from HSBC—a major participant in the Payments Council initiative—that to make switching accounts straightforward it is proposed that there will not be any charges, but there is no agreement or requirement across the board. My amendment is essentially a probing one, although I would like to see its objective implemented, so does the Minister feel that the FSA needs to be given some degree of statutory power to ensure that all banks participate, and that with regard to charges there is a level playing field or no charges at all?

[Baroness Hayter of Kentish Town]

My Lords, I welcome this amendment. As the noble Lord, Lord Flight, has said, competition should mean that the standards of banking are driven up by consumers walking with their feet—taking their chequebooks elsewhere. We need to change a lot of banks’ behaviour, not least because they seem to be the only organisations in the world that can take money from your account without sending an invoice. They can decide on a charge and take it from your bank account without your agreement. This is behaviour we need to change but, as consumers, we can only do this if we can move easily.

I particularly feel this as I am in the middle of trying to switch accounts. After 28 years with one bank, they refused a cheque that was made out to “Baroness Hayter” instead of “Dr Hayter”. I would have thought they could have worked out it was the same person, but there you are. What is really interesting is that First Direct would not take my account unless I showed all my resources and assets—not that there are a lot—the sources of my assets and how I had paid off my mortgages. This was just to open a current account. Needless to say I complained and, when I did, the answer was that it was anti-money-laundering—this from a bank whose big owner has maybe done rather less about big anti-money-laundering on the other side of the world, yet is worried about my tiny bank account. My suspicion is that it wants this information to find out what else it could sell me.

If those of us who find it easy to argue and complain still find it difficult to change our accounts, how can ordinary consumers use the power and drive up standards unless moving is made easy? It is difficult with direct debits and it is even harder with payments in. I am an old-age pensioner, so I now have to find out who in the DWP pays my pension so that they can change it to a new bank.

I know that the Government are very unlikely to accept this amendment, but it raises a really important issue about whether we can leave it to the banks to reach a voluntary agreement themselves. It seems the answer is no. The noble Lord, Lord Flight, has told us that the banks say they will do this voluntarily, but my own experience suggests that they will not without a firm crack of the whip. We will be looking to the new FCA for a bit of muscle on this. We look forward with interest to the Minister’s response to this amendment.

18:30

[Lord Newby]

My Lords, this amendment seeks to codify a process for switching bank accounts and—as with a number of other amendments—we sympathise with the intention behind what the noble Lord, Lord Flight, is seeking to do, but I do not think the amendment is technically necessary for reasons which I will explain. As the noble Lord pointed out, there has been a great deal of progress since the Independent Banking Commission recommended that a new switching redirection service should be set up to ease the process of switching current accounts. The Payments Council has committed to delivering that recommendation. The new switching service will provide a safe, hassle-free and convenient service for customers to switch their bank accounts in no more than seven working days.

We believe that, working with the industry, the Payments Council is on track to deliver the new service by September next year. As the noble Lord, Lord Flight, said, all the major current account providers in the UK have signed up and the Treasury is keeping the pressure on the Payments Council via monthly working-level meetings and quarterly reports. The banks which have not yet decided to join, the 3%, obviously cover a very small percentage of the market. The reason for their having declined is usually that they do not yet offer a current account or because they are unable to update their systems in time. The Payments Council plans to launch a second wave of switches, possibly in the first quarter of 2014, to accommodate those institutions, while allowing sufficient time for the switching service to prove its stability. So we hope that the small rump will be included in the system by the first quarter of 2014.

The noble Baroness described the problems that she has had in switching her bank account. I had a better experience. When I decided to combine my bank account with that of my wife—after more than 30 years of marriage—I found that, broadly speaking, I got the service envisaged in the Payment Council’s new approach. The problem I had was that although the bulk of my direct debits were satisfactorily dealt with, for reasons which were completely unclear a small number were not. Of course, one finds that out only when one gets a stiff letter saying that some essential thing which you are funding on an ongoing basis is about to be revoked because you have cancelled it. In my case, the problem was not that the intentions were dishonourable, it was simply that the system was not as effective as the two banks would have liked me to believe.

The noble Lord, Lord Flight, demonstrated the value of competition in the banking sector, in that Metro Bank seems to have achieved something in respect of money-laundering that the serried ranks of the established banks have failed to do, which is to have a simple way to prove who you are to their satisfaction. No doubt noble Lords such as me have experienced this bizarre situation in the past couple of years. I have been rung up by my bank to say that because I am a politically sensitive person, I had to prove my bona fides to the bank. Given the nature of the bank, which I had better not name, my response was to say, “I think you had better prove your bona fides to me”, which did not go down desperately well. Of course, it did not have to and I did.

The noble Baroness asked a very important question: can we trust all the banks to do that in a timely manner and in a way that does not cause the sort of problems that she had? I point out that the drafting of the FCA’s competition objective at new Section 1E(2)(b) requires the FCA to have regard to the ease with which consumers can switch providers in considering the effectiveness of competition. So the importance of removing barriers to switching in promoting effective competition is hardwired into the legislation. The FCA will have a lean to require the banks to behave in an efficient and effective way.

In the light of all those considerations, I hope that my noble friend will feel able to withdraw his amendment.

[Lord Flight]

My Lords, the first point I would like to stress is that, as I understand it, the Payments Council’s proposals do not involve grandfathering anti-money-laundering. I will take that up further, but if we do not get that, it ends up achieving very little. The noble Lord has in part answered my second point: if you start off with domestic competition being an objective of the FCA, part of achieving that has to be being able to move bank accounts easily. I hope that the empowerment that the FCA has in this area, to which the Minister referred, will be adequate.

As I said earlier, this is essentially a probing amendment, but it is important. Going back to why banks make a great problem of anti-money-laundering, it is because they do not want to lose customers. It is not a question of cracking anything marvellous; anti-money-laundering requirements were wonderful for financial services businesses. They made it a hassle for everyone to move their custom somewhere else. Those businesses are not stupid. Indeed, I have regarded anti-money-laundering as almost a plot by the whole financial services industry to strengthen their oligopoly.

The Payments Council measures are crucial, and I hope that the Treasury will clarify that point in its discussions with the council. Having said that, I thank the noble Baroness, Lady Hayter, for her support—I agreed with everything she said, in truth—I hope that the profile of this issue will be raised and I beg leave to withdraw the amendment.

Amendment 197 withdrawn.

Amendment 197ZA not moved.

Clause 95 agreed.

Schedule 18: Further minor and consequential amendments

Amendments 197A to 200B

Moved by

[Lord Sassoon]

197A: Schedule 18, page 286, line 16, at end insert—
“In section 177 (offences), in subsection (2), after “director or” insert “other”.”

198: Schedule 18, page 289, line 13, at end insert—
“In paragraph 8 of Schedule 6 (additional threshold conditions), in sub-paragraph (2)(b), for “the Authority” substitute “such of the FCA or the PRA as may be specified,”.”

198A: Schedule 18, page 291, line 32, at end insert—
“Lloyd’s Act 1982 (c. xiv)In section 7 of the Lloyd’s Act 1982 (the Disciplinary Committee and the Appeal Tribunal), in subsection (1A)(c), for “Financial Services Authority” substitute “Prudential Regulation Authority or the Financial Conduct Authority”.”

199: Schedule 18, page 302, line 5, at end insert—
“Trustee Act 2000 (c. 29)(1) Section 29 of the Trustee Act 2000 (remuneration of certain trustees) is amended as follows.
(2) In subsection (3)—
(a) for “an authorised institution under the Banking Act 1987” substitute “a deposit taker”, and(b) for “institution’s” substitute “deposit taker’s”.(3) After that subsection insert—
“(3A) In subsection (3), “deposit taker” means—
(a) a person who has permission under Part 4A of the Financial Services and Markets Act 2000 to accept deposits, or(b) an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to that Act which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to accept deposits. (3B) A reference in subsection (3A) to a person or firm with permission to accept deposits does not include a person or firm with permission to do so only for the purposes of, or in the course of, carrying on another regulated activity in accordance with that permission.
(3C) Subsections (3A) and (3B) must be read with—
(a) section 22 of the Financial Services and Markets Act 2000,(b) any relevant order under that section, and(c) Schedule 2 to that Act.”.”

200: Schedule 18, page 310, line 32, at end insert—
“Finance Act 2011 (c. 11)(1) Part 4 of Schedule 19 to the Finance Act 2011 (the bank levy) is amended as follows.
(2) In paragraph 37(2), in both places, for “section 213(2)(b)” substitute “section 213(3)(b)”.
(3) In paragraph 38(3)(a), for “section 139(1)” substitute “section 137B(1)”.
Terrorism Prevention and Investigation Measures Act 2011 (c. 23)In Part 1 of Schedule 1 to the Terrorism Prevention and Investigation Measures Act 2011 (measures), in paragraph 5(4), for “Part 4” substitute “Part 4A”.”

200A: Schedule 18, page 311, line 16, at end insert—
“Charities and Trustee Investment (Scotland) Act 2005 (asp 10)In section 106 of the Charities and Trustee Investment (Scotland) Act 2005 (general interpretation), in the definition of “relevant financial institution”, for “Part 4” substitute “Part 4A”.”

200B: Schedule 18, page 311, line 37, at end insert—
“Part 5Amendment of Measure of the National Assembly for WalesWelsh Language (Wales) Measure 2011 (nawm 1)In Schedule 6 to the Welsh Language (Wales) Measure 2011 (public bodies etc: standards)—
(a) in the Welsh text, omit the entry relating to “Awdurdod Gwasanaethau Ariannol (“The Financial Services Authority”)” and at the appropriate place among the entries headed “Cyffredinol” insert—

“Awdurdod Ymddygiad Ariannol (“Financial Conduct Authority”)

Safonau cyflenwi gwasanaethau Safonau llunio polisi Safonau gweithredu Safonau cadw cofnodion.”

(b) in the English text, omit the entry relating to “The Financial Services Authority (“Awdurdod Gwasanaethau Ariannol”)” and at the appropriate place among the entries headed “General” insert—

“Financial Conduct Authority (“Awdurdod Ymddygiad Ariannol”)

Record keeping standards Service delivery standards Policy making standards Operational standards.”

(c) in the Welsh text, at the appropriate place among the entries headed “Cyffredinol”, insert—

“Awdurdod Rheoleiddio Darbodus (“Prudential Regulation Authority”)

Safonau cyflenwi gwasanaethau Safonau llunio polisi Safonau gweithredu Safonau cadw cofnodion.”

(d) in the English text, at the appropriate place among the entries headed “General”, insert—

“Prudential Regulation Authority (“Awdurdod Rheoleiddio Darbodus”) Record keeping standards Service delivery standards Policy making standards Operational standards.”.”

Amendments 197A to 200B agreed.

Schedule 18, as amended, agreed.

Schedule 19 agreed.

Clauses 96 and 97 agreed.

Clause 98: Interpretation

Amendment 201 not moved.

Clause 98 agreed.

Clause 99 agreed.

Clause 100: Transitional provisions and savings

Amendments 201A to 201C

Moved by

[Lord Sassoon]

201A: Clause 100, page 166, line 41, at end insert—
“(aa) make provision treating any relevant instrument which was made, issued or given by the Financial Services Authority under any enactment before section 5 is fully in force and is designated by the FCA, the PRA or the Bank of England (or any two or more of them) in accordance with the order—(i) as having been made, issued or given by the designating body or bodies;(ii) as having been made, issued or given (or also made, issued or given) under a corresponding provision of this Act or of an enactment as amended by or under this Act;(ab) make provision enabling a body which makes a designation by virtue of paragraph (aa) to modify the instrument being designated;(ac) make provision treating anything done before section 5 is fully in force by persons appointed by the Financial Services Authority with the approval of the Treasury as having been done by the FCA;(ad) make provision treating anything done before section 5 is fully in force by persons appointed by the Prudential Regulation Authority Limited with the approval of the Treasury and the Bank of England as having been done by the PRA;”

201B: Clause 100, page 167, line 1, leave out “rules made,”

201C: Clause 100, page 167, line 20, at end insert—
“(b) “relevant instrument” means rules, guidance, requirements or a code, scheme, statement or direction.”

Amendments 201A to 201C agreed.

Clause 100, as amended, agreed.

Schedules 20 and 21 agreed.

Clauses 101 and 102 agreed.

Clause 103: Commencement

Amendment 202

Moved by

[Lord Sassoon]

202: Clause 103, page 167, line 41, leave out “Section 94 comes” and insert “Sections 94 and (Suspension of licences under Part 3 of Consumer Credit Act 1974) come”.

Amendment 202 agreed.

Clause 103, as amended, agreed.

Clause 104 agreed.

House resumed.

Bill reported with amendments.

18:40

Sitting suspended.

Arrangement of Business

Wednesday 24th October 2012 Lords Chamber

Announcement

19:00

[Lord Newby]

My Lords, as the Question for Short Debate in the name of the noble Lord, Lord Luce, will now be taken as last business, the time limit for the debate becomes 90 minutes rather than 60 minutes. Speeches should therefore be limited to six minutes except for those of the noble Lord and the Minister, which remain limited to 10 and 12 minutes respectively.

Piracy

Wednesday 24th October 2012 Lords Chamber

Question for Short Debate

19:00

Asked By

[Lord Luce]

To ask Her Majesty’s Government what action they are taking to reduce piracy in the Indian Ocean and to help stabilise the neighbouring states in the Horn of Africa and South Arabia.

[Lord Luce]

My Lords, I hope that the House will agree that this is a relatively good time to focus our short debate on the progress that is being made on reducing piracy in the Indian Ocean and on helping to stabilise neighbouring states in the Horn of Africa and the Arabian peninsula. It would be valuable to hear from the Minister what our assessment is of the present position and the action that HMG are taking together with the international community. I welcome the fact that so many experienced Peers are participating in this debate, not least my former ministerial boss, the noble and learned Lord, Lord Howe.

There can be no doubt that British interests are at stake here. Something like 23,000 ships transit the Gulf of Aden each year, and nearly $1 trillion of trade to and from Europe alone travelled through the gulf last year. The total cost to British commercial interests is thought to be around $10 billion per annum. However, piracy arises from instability in Somalia, and wider regional instability is fuelled by illicit networks operating from Yemen shifting people, weapons and narcotics between Africa and the Arabian peninsula.

Moreover, the disastrous condition in recent years of both countries has provided a base for extremism, expressed through al-Shabaab in Somalia and al-Qaeda in the Arabian peninsula in Yemen. This in turn poses a threat to the international community, as well as to those countries. There is some evidence, for example, that a few British-born Muslims are radicalised by events in that region. We welcome the fact that there are well over 250,000 Somalis living in Britain and something like 70,000 Yemenis, thus giving us a direct link with the region.

There is a British and international interest in reducing piracy by helping to stabilise those two countries. The lessons from the Malacca Straits are that piracy can be more easily tackled if the littoral states are relatively stable. We are helped by an excellent updated report on Indian Ocean piracy by the House of Lords European Union Committee, published on 21 August. From this we learn of the substantial reduction of piracy in the past year. In June this year, eight pirated vessels and 215 hostages were held, compared to 23 vessels and 501 hostages in June 2011.

Could the Minister indicate what lessons can we learn from this? Is the reduction caused by the fact that many ships are now allowed armed guards and that pirate shore bases have been attacked? Is it also the case that drones have been used in the Indian Ocean against pirate ships? I hope that the Minister will also want to say something about the co-ordinated progress being made with neighbouring countries such as Seychelles, Mauritius and Kenya in terms of co-operation over the trials, sentencing and imprisonment of pirates and how the international community is countering the money-laundering of the proceeds from the ransoms.

In general, we should note the value of international military co-operation, with a strong EU/NATO contribution and the participation of ships from China, India and Russia, for example. It is good that the United Kingdom provides leadership of Operation Atalanta but regrettable that we do not provide a patrol ship more regularly.

I turn now to the Horn of Africa. I first explored parts of Somaliland by camel in 1959 and worked among nomadic Somalis in northern Kenya when I became the last British district officer there in 1961. The Somalis are friendly, proud and independent-minded people, dominated by clans and pretty suspicious of foreigners. They are fiercely individualistic and resist central control. Since the 1960s they have been through the Cold War under the tough dictator Siad Barre, and for the past 20 years the country has suffered from conflict and fragmentation, thus providing material for al-Shabaab to exploit. The future of Somalis must be in the hands of Somalis, but HMG are to be congratulated on taking a lead by convening an international conference on the Horn of Africa in London this year, with a second one in Istanbul this summer. How is this being followed up now?

We can at least now welcome the fact that the international African Union force, AMISOM, with the involvement of forces from Burundi, Djibouti, Uganda and Kenya, has driven al-Shabaab out of Mogadishu and Kismayo. Against that background, the disastrous transitional Government have come to an end, and it is most welcome that President Mohamoud, who is a committed Somalian academic and activist, has been elected as president. The elected constituent assembly is tasked to develop a constitution for Somalia.

However, experts will stress that it is vital to acknowledge that, while Somalia is generally made up of a single ethnic group, the clan system means that they tend to resist strong control from central government. This has led to fragmentation, and each region is different. For example, Somaliland is now relatively stable and has an elected parliament and president, with municipal elections to follow shortly. The harsh experience of the past 40 years means that the northern Somalilanders do not want complete reintegration with the rest of Somalia. It must therefore be up to the Somaliland leaders to negotiate their future relationship with Somalia as their new constitution is being prepared. Many want independence and others some kind of confederal arrangement. The ultimate political settlement has to suit the Somali character.

Knowing the history of Somalia, I think it would be risky to be too optimistic, but the international community must continue to capitalise on recent developments and do everything to encourage its new president to work in partnership with the clans, business and civic society. We for our part must provide our development assistance only where it will be used productively, not wasted through corruption, as happened with the recent transitional Government. Are we, for example, encouraging alternative livelihoods to piracy?

I turn briefly to Yemen, where there is a close link with the Horn as many Somalis have emigrated to that country, and some to Saudi Arabia. Indeed, it is worth highlighting the fact that the camel, sheep and cattle trade across the Red Sea to Saudi Arabia is the biggest cross-border livestock trade in the world, with the potential for constructive wealth creation as opposed to piracy and conflict. The country is undergoing a fragile but significant two-year political transition process, following a popular “Arab Spring” uprising that dislodged the long-serving President Saleh from power. The international community is united in its support for the transition process but the challenges ahead are immense—namely, addressing the grievances of separatists in the south and “Houthi” rebels in the north, as well as tackling extremism. Poverty is acute, with 46% living on only $2 a day. A large number suffer from severe food shortages. Oil and water supplies are diminishing.

Chatham House should be congratulated on producing some excellent analyses and assessments of that strife-torn country. It warns of how the multimillion-dollar shadow business networks spanning the Gulf of Aden hinder counterterrorism and counterpiracy strategies. The national dialogue is due to begin in November under the stewardship of Yemen’s new caretaker president. President Hadi needs to embrace all Yemenis in these discussions, to examine ways in which power can be diffused and to encourage the development of local communities. He is right to give priority to security and the defeat of al-Qaeda, but he will not be likely to carry the people with him unless he encourages economic and social development at the same time. I am glad that the United Kingdom is co-chairing, with Saudi Arabia, the Friends of Yemen international group to encourage development pledges and economic investment. Yemeni civil society organisations, however, must be allowed to play an oversight role in all this.

I hope that the Minister will give her assessment of the situation in Yemen under President Hadi. Above all, while I strongly support Britain playing its part internationally, it is the people of those countries who must be given the framework and encouragement to build their own future. It is the African Union and the Gulf countries which must play a leading and prominent role in supporting them. For our part, we must also encourage some of the Somali and Yemeni diaspora in the United Kingdom to contribute not only their very substantial remittances but also their skills to the rebuilding of their countries of origin. I commend the excellent work of the Royal African Society in facilitating contact and dialogue with the diaspora.

There is a better alternative for the region than destructive piracy, civil conflict and terrorism. We must keep on encouraging it.

19:11

[Lord Howe of Aberavon]

My Lords, it is a privilege to follow my noble friend, who has opened this debate with characteristic clarity. He certainly indentifies a situation that clearly calls for positive consideration in the context of UK foreign policy. We certainly have a substantial interest. We also have a significant capacity to try to help. We need to follow, if we can, the advice that I so often quote:

“Give me a place to stand, and I shall move the world”,

as Archimedes said. That is where my noble friend has started in this debate.

There are several helpful footholds for Britain in intervening in this. First, there is our Commonwealth membership, which gives us solidarity with the other Commonwealth states which surround the Indian Ocean, the African eastern coast and, indeed, the Aden Gulf—all of which look for relief from Somalia’s problems. Secondly, we are going there putting forth propositions with the backing of the European Union. That is important. It is the first European Union naval mission. EU NAVFOR is its codename, and the additional name Atalanta almost gives it a NATO benediction as well. Certainly it is right for us to be trying to intervene and be as helpful as we are.

Other interventions are taking place in teaching the Somalis how to improve their coastal defence and train their own soldiers more effectively. They are all clearly directed towards trying to enhance the ocean’s security, which will be helpful to Somalis themselves as well as to the rest of the world. We are supported in our advocacy of this approach by two major states, the United States and Russia, with whom we of course rub shoulders in NATO.

The propositions that we are trying to uphold are correct and useful. When I last spoke a year ago about Somalia, I discussed the social problems and tensions which still arose in those countries, and it looked like being a real problem for us to be intervening with it. However, their constitutional structures have at least held; they have changed substantially, as my noble friend has pointed out. Corruption and conflict have remained, not diminished. All of that increases the case for us to be trying in this way, not only to evade the risk of piracy on that part of the world, but also to enhance and improve the structure, lives and well-being of the citizens of Somalia itself. For all those reasons, I commend the analysis presented by my noble friend.

19:14

[Baroness Warwick of Undercliffe]

My Lords, I wanted to say a few words in the debate tonight because I had the privilege of visiting Dubai and Bahrain in August this year as a member of the excellent Armed Forces Parliamentary Scheme. It was an intensive week. I spent time with our naval forces on HMS “Diamond” and HMS “Atherstone”, experiencing at first hand their working lives at sea, and gaining an understanding of their mission and purpose in the Gulf and off Somalia. We were also given comprehensive briefings at the base in Bahrain by the UK Maritime Component commander and Combined Maritime Forces—CMF—and by the UK Maritime Trade Operation in Dubai.

It is a small force, yet it does vital work supporting current HERRICK operations, as well as working with partners to prevent piracy, thwart terrorism, encourage regional co-operation and to promote a safe maritime environment, as well as countering malign Iranian influence. The Gulf is a crucial waterway for oil and gas supplies, and in the central sea lane linking Europe, the Far East and the US. Yet it will be obvious that the threats are legion. At first glance, it seems a near-impossible mission: to effectively police 2.5 million square miles of ocean, where pirates and terrorists and others with criminal intent can roam freely. My visit impressed on me the international context of the UK’s mission there, and the variety of collaborative partnerships which had been developed with other nations in order to build stability in the region.

It is clear that, through collaboration and sharing knowledge and expertise between the 26 nations that form the CMF, and working closely with the EU’s NAVFOR operation and NATO, a strategic and effective force has been established. It is also clear that the Royal Navy exercised and exercises an important leadership role with the shipping industry as well as with other nations. It is getting results: there has recently been a reduction in the number of pirated ships. This is clearly a mission where we need to sustain our commitment.

I thought that the EU Committee’s third report, referred to by the noble Lord, Lord Luce, in introducing this debate, entitled Turning the Tide on Piracy, Building Somalia’s Future admirably summed up the issues at stake here, particularly its conclusion that,

“piracy would not be ended until the root causes of the problems in Somalia were successfully tackled”.

However, Somalia remains a fragile state and one which can only too easily be exploited, to our detriment and that of the region as a whole. It is clear that unless current efforts are sustained any gains made will be nugatory. The noble Baroness, Lady Ashton, the EU High Representative for Foreign Affairs, said earlier this year:

“Fighting piracy and its root causes is a priority of our action in the Horn of Africa”.

The noble Lords, Lord Luce and Lord Howe, have spelt out coherently the severity of the threats that we face. I hope that the Minister will be able to tell the House that the Government will continue to support this operation and do what is needed to make the UK’s action in the Gulf as effective as possible.

19:17

[Lord Avebury]

My Lords, the capture of Kismayo makes it harder for al-Shabaab to generate income and to replenish their weapons and ammunition. However, the military success needs to be followed by the establishment of an interim administration in Kismayo and the province of Jubaland as a whole that balances the interests of the local clans. Can my noble friend say what discussions are going on between regional stakeholders to this end, and whether they might be facilitated by a disinterested chairman from either IGAD or the AU? Although the Kenyan troops were welcomed, they do not want to be seen as an occupation force, and the sooner civilian government can be established with its own police force the better.

Piracy has dropped by half this year compared with last, but there are still 11 ships and 188 hostages held at the latest count. We shall not have solved the problem until the pirate bases, almost entirely in Puntland, are taken out. An operation by Sterling Corporate Services and the Puntland Maritime Police Force to forcibly close down the bases and arrest pirates was already achieving results when it was abruptly curtailed, leaving the police and SCS staff without pay or rations. The UN was hostile to the programme because the PMPF was an armed force not subject to control by the recognised government of Somalia. It was treated as being on a par with terrorists, and its sponsors had violated the terms of the arms embargo on Somalia. But since there are 800 half-trained and well armed police at their well equipped camp, would it not be sensible to legalise them as servants of the Somali Government, or as a component of AMISOM, and allow the UAE to resume their funding and training?

Progress is being made in the region on setting up networks of courts where pirates can be tried and prisons where resultant convicts can serve their custodial sentences. Kenya’s Court of Appeal has ruled that the state’s courts can try pirates arrested in international waters, and I welcome that. In June, Prime Minister David Cameron signed an agreement with the Prime Minister of Mauritius to establish a court there. Subsequently, however, a row erupted between the parties because it appeared to have been agreed that we would enter into talks with them on the future of the Chagos Islands and that turned out to be a misunderstanding. Could we at least say that once the imminent court rulings on the islands are out of the way, the UK will happily enter into discussions with Mauritius on the future of the islands in the hope that good relations between our two countries can be restored and so that setting up the piracy court can be accelerated?

19:20

[Lord Hannay of Chiswick]

My Lords, the incidence of piracy in the Indian Ocean has rather slid off the front pages of the newspapers in recent months. That is partly due to the relative success of the measures taken by the international community to combat this modern form of an ancient scourge. However, it would be ridiculously complacent to believe that the problem has gone away or been mastered. There is all the more reason, therefore, to be grateful to my noble friend Lord Luce for initiating this debate and for swinging the spotlight back onto the many aspects of this problem which have yet to be effectively addressed.

I want to concentrate my own remarks on one aspect of the problem to which the EU home affairs sub-committee, which I chair, has devoted a good deal of attention, without as yet receiving any fully satisfactory response from the Government. That is the question of the laundering of the money paid out to the pirates in ransom. Some facts are not disputed. The pirates or their sponsors—their godfathers—have received and are still receiving massive quantities of cash in ransom for ships and their crews. Much of that money is assembled in this country, which is not in any way illegal. These moneys are therefore quite evidently criminal assets—the proceeds of crime—as soon as they are handed over. Yet those assembling these ransoms are not required to file with the Serious Organised Crime Agency a suspicious activity report, as they would have to do in any other circumstances in which money was being transferred to criminals or people suspected of being criminals.

My committee has stated on several occasions that it considers this omission—the omission of the requirement to file an SAR—as quite indefensible. Moreover, it surely does hamper any attempt to prevent these moneys subsequently being laundered. More recently, in a move that I warmly welcomed, and as part of the international community’s fight against piracy, it was decided to established a regional intelligence centre in the Seychelles to pursue, among other matters, the issue of money laundering. I asked in an earlier debate whether any relevant SAR material we might have would be made available to this new intelligence centre as it surely should be. The noble Lord, Lord Henley, who was at the time a Minister at the Home Office, said he would reply to that in writing, but I have still—some months later—not received any substantive reply on this point.

Therefore, I should be most grateful if the Minister would now respond to both these questions. What justification can there possibly be for not requiring the assemblers of ransoms to file an SAR? Are we making available relevant SAR material we may have to the intelligence centre in the Seychelles? Any serious campaign against piracy in the Indian Ocean must surely get to grips with the issue of money laundering.

I have one final point which was also made by speakers who preceded me. The challenge of piracy in the Indian Ocean cannot, of course, be met by naval action alone or even by naval action backed up by good intelligence. It must also involve the gradual re-establishment of stability and the rule of law in Somalia and the other countries of the region. I hope that the international community, of which we are a leading part in this region of the world, will not allow that task to fail through lack of resources and lack of political will, as it so lamentably did before in the 1990s.

19:24

[The Lord Bishop of St Edmundsbury and Ipswich]

My Lords, I should like to echo the gratitude to the noble Lord, Lord Luce, for introducing this debate at this time. It has been heartening to hear about the reduction in the rates of piracy and also what needs to be done to establish the long-term solution to this awful modern scourge. However, I feel it incumbent on me to remind the House again of the human cost to the crews of those ships.

We are very well aware of that from that excellent organisation, the Mission to Seafarers, which works very hard to care for those who have been released from captivity. We can certainly be very glad that the number of people who are now being held captive has been reduced. Nevertheless, if the report by the Oceans Beyond Piracy group, The Human Cost of Piracy 2011, is anything to go by, one of the very disturbing aspects is that, while there might be fewer people being held hostage, the violence towards them is getting worse. There are very serious reports of people being horribly mistreated, such as being put in the freezers of the ships for 40 minutes or left out in the blazing sun without clothes, among other things. That is extremely disturbing, and not surprisingly leaves people horribly traumatised afterwards.

The Mission to Seafarers, a Christian maritime charity, is working with seafarers in this high-risk area and has chaplains at Dar es Salaam, Mombasa, Aqaba, Bahrain and the United Arab Emirates. Chaplains are trained in post-trauma stress counselling to help seafarers adjust when they come back. Very often, Mombasa is the port where newly released ships arrive. The welfare facilities there, with that network of chaplaincies, are able to reconnect people with their homes and families and provide counselling and debriefing.

I should like to put some flesh on this. The vessel “Asphalt Venture” was taken two years ago on a journey from Mombasa to Durban. Fifteen crewmen were initially on board when negotiations began. Six months after being taken, the ship was released after ransom was paid, along with eight seafarers. The remaining seven were taken on land into Somalia and they are still in captivity. One of them is a 27 year-old Indian seafarer called Daniston Lytton. There has been little or no movement in freeing the remaining crew, who now have now been held hostage for over two years. His family is desperate to know what more can be done. The Mission to Seafarers in south India has been providing pastoral assistance and counselling some of the families associated with the ship. The chaplain has regularly written to the Indian Government and liaised with the ship owners and agents in the hope of finding a satisfactory conclusion to this case, but nothing has come of it. The national media in India are beginning to ask whether the Indian Government have forgotten about the nationals being held hostage and there is speculation that two of them might even have died since, though there has been no confirmation of that. That is the reality of what being a hostage taken by pirates is about.

Most of the seafarers come from major labour supply countries such as India, the Philippines and others. In the light of what the Mission to Seafarers is offering at the moment in terms of counselling and help to release seafarers and help to their families, I wonder whether the Minister would be willing to meet representatives of the mission to ensure that suitable support is available in the event that British hostages—I hope this never happens—are taken. There needs to be joined-up thinking about this. As we have already heard, so many of these seafarers come from Commonwealth countries, so can the Minister indicate what assistance Her Majesty’s Government might be able to offer to other nations, particularly those within the Commonwealth, which are working to secure the release of their nationals?

I hope that noble Lords will forgive me for introducing this human cost, which, of course, will be solved entirely if the measures outlined solve the international situation. An urgent human problem continues and anything that we can do from this Chamber to support those who treat and care for people in that situation, and who can do more for those who are still being held hostage, must be welcomed.

19:30

[Baroness Nicholson of Winterbourne]

My Lords, first, I congratulate my noble kinsman Lord Luce on securing this powerfully important debate. As I perceive it, the root sources and drivers of piracy in the Indian Ocean exist on land, not only in Somalia but in other countries in the region, such as Yemen. Surely success in eradicating piracy in the Indian Ocean in the long term requires actions to boost the current extraordinarily poor quality of life and the paucity of livelihoods in Somalia and Yemen and more widely.

The action taken by Her Majesty’s Government to lead the international community on Somalia and to support most strongly the re-establishment of Somalia’s Government has been most welcome, as has been the opening of the FCO’s office in Hargeisa in Somaliland, which I see as a welcome possible step towards wider recognition as a nation.

DfID has recently published an operational plan for its work in Yemen, having not been able to do so before due to the continuing political and security crisis. I will focus my few remarks on our Government’s strategies in these two countries. The link between piracy and terrorism is now well established, particularly considering the recent history of arms flows uncovered between Yemen and Somalia, which is documented not only in UN reports but in the recent news of al-Shabaab weapons from Yemen being seized in Puntland.

The first and most obvious question to pose is: what is the Government’s strategy? How are our Government, working across the relevant departments, focusing on the region? Is there such a strategy? I am not aware of one, but I would welcome learning from the Minister how the Government are co-ordinating their activities in the Indian Ocean’s conflict formation, in what is undoubtedly a strategically critical geopolitical area.

Leading on from that, the House of Lords EU Select Committee’s report, Turning the Tide on Piracy—I am sure that we will hear more on this from the noble Lord, Lord Teverson—highlights that it is key that we invest in the development of coastal communities in order to offer not just an alternative income to people but a considerably greater quality of life than they have at present. Perhaps the Minister might outline the current funding that our Government are providing for such coastal communities in Somalia, as well as in Yemen, where the south and the area around the great city of Aden are currently of particular humanitarian and security concern.

Earlier this year I had the honour of acting as the chief international election observer in Yemen, which is the second time that I have had this opportunity. This time I spent several days on that duty in Aden. I saw the shockingly low standard of life of a thoroughly civilised people who had previously—prior to their very low standards now—enjoyed what they called a European standard of life. That creates the vacuum into which al-Qaeda will draw its suicidal victims and its fighters. President Hadi, when he recently withdrew the head of the Social Fund, remarked that it was working as an alternative Government. Are the UK Government, who are putting their funding in Yemen through the Social Fund, ready to reconsider their way of spending money in the light of the President’s decision?

Of course, the picture of people’s daily survival and the conflict in Yemen comes through very powerfully in the figures provided by organisations such as the United Nations. The possible life expectancy of people in Yemen, for example, not just in the coastal regions but throughout the country, is one of the lowest in the world. Life expectancy is 46 or 47 years. Yemen has the lowest figures for the whole region and beyond. It is at the bottom of the pit in terms of infant mortality, maternal mortality and child mortality. When one looks at the life available to people in Aden and Yemen generally, is it any wonder that they turn to piracy to try to survive?

I therefore seek some understanding of DfID’s new operational plan in Yemen. The bulk of our assistance is going to humanitarian needs but DfID is discontinuing its funding in the health and education sectors. It has already exited from maternal and neonatal health programmes. Is that really the right way to assist the people in the coastal city of Aden, for example? I would suggest that it is not a strategy for long-term future development of the people of Aden and the coastal towns around it. That is demonstrated by the fact that the women of the area are seeking training, involvement and political involvement in public-life sectors. I would like to see us supporting that.

Tonight’s debate makes it very clear that detailed plans, analyses and policies are not only desirable but essential if the amount of funding that we can provide from the United Kingdom, and our undoubted influence in the region, will tilt the balance and give the people locally a better future that will end their reliance on piracy.

19:36

[Lord Greenway]

My Lords, I, too, would like to express my gratitude to the noble Lord, Lord Luce, for introducing this debate. I would also very much like to endorse what the right reverend Prelate has said about the human element. I have had the great pleasure of working closely with the Mission to Seafarers over the past 20 or so years. It is worrying to hear that the problem, as I elaborated on when we last debated this topic, was one of malnutrition. That has now moved on into violence, which is a distressing development. As we have heard, much progress has been made and the number of attacks has been greatly reduced. However, caution must remain our watchword and any hint of complacency could see the pattern escalate again very quickly, especially now that the monsoon period has come to an end.

It has been a very worthwhile effort from all sides but it is very resource intensive. UK interests have benefited in that no UK ship has been taken for some months, and we can put this success down to three things. First, there has been best management practice. That involves ships taking the correct defence against pirate attacks, such as weaving and the use of hoses and barbed wire—anything that acts as a deterrent to stop the pirates boarding. Secondly, there have been the efforts of EU NAVFOR with Operation Atalanta and the wider international coalition’s efforts. Thirdly, there has been the use of armed guards aboard ships, which has already been mentioned, although the shipping community accepted that with reluctance. In this regard, it is not keen to set a precedent that would continue. The fact that armed guards are aboard ships has worked so far, without any ship being attacked.

However, there is always the chance of something ending in a firefight in which a crew member is killed. I hope that we will not reach that position, but there is always that risk. At the moment, 1,170 pirates have been detained in 21 countries. Many of them are prosecuted in the regions to which they are taken. However, there remain an estimated 2,000 to 3,000 people engaged in piracy activity, so there still are many more people around. The risks must be seen to outweigh the rewards and we must seek to prosecute the pirates wherever possible. However, the mere removal of arms and boarding gear, such as the ladders the pirates use, from the pirate skiffs is often a sufficient deterrent, as the pirates, when they return to their bases, are not made welcome at all because the ringleaders and the investors—this is a business—are not pleased to see them return empty-handed. There are estimated to be around 20 to 30 ringleaders, of which some nine or 10 are active at the moment. Some of them have diversified, with their ill-gotten gains, into the restaurant business, selling cars and other such things.

The EU NAVFOR attack on one of the shore bases and the destruction of some of the boats has already been mentioned. That is a great move forward; I wish it had been done earlier. It has had a great effect in demoralising the pirates. There has been something of a change of tactics recently. Only two ships have been taken recently and these were a dhow and a fishing vessel, but there is a belief that these are to be used as mother ships to take the smaller skiffs out to sea—they go 1,000 miles offshore, which is a very long way.

One thing that worries the UK shipping industry is moves that I believe are taking place towards at least discussing a possible ban on ransom payments. The ability to pay ransom is important as it allows hostages—as we have heard from the right reverend Prelate—to be retrieved and also maintains the confidence of seafarers. Intelligence and surveillance remain the key. I understand that the few maritime patrol aircraft involved have been very effective. For that reason, I cannot help regretting the fact that we destroyed those Nimrod aircraft, which would have been very effective in this instance. Convoys are being used in the very congested region where ships enter the Red Sea: Japanese, Italian and Chinese ships are involved in this, but convoys are, of necessity, a quasi-military operation and not all ships, seafarers or shipping companies are keen to use their ships in this way, since ships have to arrive at a certain time and so on.

Finally, I have kept clear of the political situation onshore, but it would be wonderful if Somalia could declare a 200-mile exclusive economic zone. We could then assist them to rebuild their fish plants and perhaps supply them with a number of trawlers in order to train the younger people and give them some jobs and hope. I hope that the new Administration in Somalia will begin to tackle this.

19:43

[Lord Teverson]

My Lords, first, I thank those noble Lords who have said kind words about the report of EU Sub-Committee C, which I am privileged to chair, Turning the Tide on Piracy. This is an important subject around which we feel there have been a number of success stories. It may be worth mentioning some of those. Apart from the reduction in the amount of piracy, it is often forgotten that Atalanta was primarily set up for two other reasons. One was to protect the World Food Programme in distributing very important emergency aid to Somalia and, in that instance, there have been no incidents at all of piracy being successful. The second is that it is an area in which Britain has been very successful in leading a European operation—Operation Atalanta is based out of Northwood and has been a very successful operation, headed by a British admiral, showing that Britain can be very successful within a European operation.

Thirdly, it is also an area in which international co-operation on the high seas has perhaps not been recognised enough. We have players here who do not often get involved in this type of operation—China, India and the Russian Federation, as well as NATO and the European Union. The fact is that these operations and these various nationalities have, after some initial caution, operated very successfully together—international co-operation not always reflected elsewhere, particularly, ironically, between the EU and NATO, where operational co-ordination has managed to work practically very well indeed.

There are a couple of other lessons that need to be learnt. One area that came to light when we undertook our inquiry around Somali piracy was what the Somalis themselves feel about these operations. I am not an expert in that area, but one thing that has to be taken into account is that one of the reasons that Atalanta was formed—part of its mission, long forgotten—was to protect fishing grounds from what are often European predator fleets taking out some of the economic ability of Somali coastal populations to make a living. That area has not been fulfilled by any of those international operations, as I understand it, and this is an area in which there has to be a balancing factor for the local population.

Another area which is a greater success now, but was not so when it started, is the inability not of the UK shipping industry but of much of the international shipping industry to take any notice at all of recommendations by Atalanta and other operations based in the Middle East to help merchant vessels avoid piracy. A lot of this was just ignored and most of the vessels that were taken captive and their crews held for ransom were those that ignored these rules. The sub-committee felt that the insurance industry in particular did not in any way help at that time to add greater caution and make sure that these guidelines were adhered to. I believe that that has got better, but I would be very interested to hear from my noble friend the Minister as to what further discussions there have been with insurers and merchant fleets to make sure that that discipline is much better than it was.

One thing we were very sure about was that without solving Somalia’s problems onshore, as soon as Atalanta and the other naval operations went away piracy would return to the levels that were there before. We welcome the EU initiative to have a much more holistic policy toward Somalia and the EUCAP Nestor operation, which is trying to build up the coastguard ability and the rule of law of those coastal areas, is important in that. I thank the noble Lord, Lord Luce, for bringing forward this debate; there are some really good lessons to be learned, but at the moment, as soon as those operations disappear, piracy will return.

19:48

[Lord Stirrup]

My Lords, I am delighted that we are able this evening to be able to debate such an important topic. I, too, thank and congratulate my noble friend Lord Luce for his persistence in securing us the opportunity. We have already heard a number of wise and powerful contributions, which have made many of the points I might myself have made but will not now seek to repeat. I would, though, like to say a few words about the maritime security mission and about Operation Atalanta in particular. It has been a great success. It has been demonstrably successful in contributing to a reduction in pirating. Not all of that reduction can be attributed to naval activity alone, of course, but Operation Atalanta has, nevertheless, made a significant contribution. It has been successful in fostering maritime co-operation with nations that have little experience in working with partners and with little previous incentive to do so. The most significant example of this is China.

We must not make too much of China’s participation in anti-piracy operations. It remains, after all, a difficult and uncomfortable bedfellow on a great range of international issues. Nevertheless, the role that China has played is, to my mind, a healthy and positive development in the context of wider global security. A China that plays its part in multilateral efforts to foster peace and security must be a good thing. The longest journey starts with one step.

Operation Atalanta has also been successful in demonstrating that the EU can have an important role in certain kinds of military operations. I spent too long sitting in EU military committee meetings to be under any illusion about the organisation’s capacity for the harder, more complex kind of operations. Too often, discussions were dominated by political manoeuvring and demarcation disputes with NATO. Unlike NATO, the EU has no proper, effective military strategic organisation or process. Nevertheless, when it works in concert with NATO, when it makes use of shared resources rather than trying to duplicate structures, and when it focuses on operations that make use of its political strengths and avoid exposing its military weaknesses, then the EU can be a very valuable player on the global security stage. Operation Atalanta has clearly demonstrated that.

Having said all that, we must remember that, as the noble Lord, Lord Teverson, said, Atalanta was set up with a very limited objective: to protect World Food Programme shipping. Anything else it might be able to do to counter piracy more widely was subject to it having the spare capacity, and there is not very much of that.

The area of sea space that has to be covered is immense, particularly when wide-area surveillance capability, such as that provided by maritime patrol aircraft, is so scarce. Of course, the pirates inevitably react to and counter tactics that are employed successfully against them. They have ranged ever further from shore, for example, through the use of mother ships. We should therefore expect further innovation from them. It would be dangerous to assume that any reduction in the number of successful pirate attacks will necessarily be permanent.

The military operation is an essential tool in addressing piracy but, as other noble Lords have observed, it will not provide a lasting solution. It is a truism that in the long run piracy is dealt with not at sea but on land. That is why the wider issues of Somali governance are crucial. The fact that Somalia as an entity does not really exist makes the problem even more challenging and reinforces the need for us to continue our efforts to understand and influence, for example, Puntland, which is home to so many pirates.

Finally, this is not a problem that will be resolved quickly. It has been with us for a number of years already. Operation Atalanta itself has been running for four years and we must expect that the need for the current multi-strand approach to security in the region will continue for some considerable time. That will require patience on our part and it will require persistence, but it will also require sustained investment in the kind of diplomatic and military effort which is often taken too much for granted but which does not happen by accident.

19:53

[Lord Triesman]

My Lords, I join the House in thanking the noble Lord, Lord Luce. I admire his long attention to the detail of this issue. I also thank other noble Lords who have taken part in the debate, as well as the committee of the noble Lord, Lord Teverson, which has added a great deal to our knowledge.

In the United Kingdom there has always been an interest in Somalia, not least because so many Somali citizens live here, and I used to find that many in the interim Government held dual citizenship. Indeed, the interim President, President Yusuf, who did not hold dual citizenship none the less declaimed frequently to me that he was partially British as he had a British liver. He told me that he was the longest-surviving transplant patient with a British liver and he held this country in great esteem.

Greater action has always been needed to address state failure, failure in the rule of law, failure in civil institutions and fratricidal clan warfare—the failures on dry land, as the noble Baroness, Lady Nicholson, described them, which lie behind the piracy. The instability both internally and internationally, in the Yemen and through the Horn of Africa all make us focus on this issue. It is quite right to say that the African Union has a vital role to play. I believe that it needs and deserves greater support in what it does. It has always had painfully small resources and it has always addressed the reality that military action is not the sole response. There needs to be a much wider palette of opportunities for response.

At present, as I understand it from the One Earth Future foundation’s analysis—there are probably other analyses—the annual headline cost of piracy is in the order of $6.6 billion. Just 1% of that amount is spent on building Somali anti-piracy capacity and on prosecution. Ban Ki-Moon’s special adviser on Somali piracy reported last year that just one in 10 captured pirates are brought to the point of prosecution. Convicted prisoners are held in a variety of countries, as we have heard, and many of those countries are themselves under considerable pressures, as is the Seychelles. I share the concern of the right reverend Prelate and the noble Lord, Lord Greenway, that many victims of piracy will feel that this is hardly an adequate response to some of the things that they come to suffer at the hands of the pirates.

I also know, and accept, that there have been advances, but, as the noble Lord, Lord Luce, said, the problems are still there. The advances are significant and they cover what my noble friend Lady Warwick described as 2.5 million square miles—something like 4 million square kilometres—of ocean. One good year—and it has been a good year—is not a guarantee of good years in the future. There is still a huge amount to be done, although the noble and gallant Lord, Lord Stirrup, has been absolutely right to celebrate the successes that there have been.

My feeling this evening as we debate this is that in the previous Government we sustained a naval and supply presence. That has now been cut, notwithstanding the priorities expressed by the Prime Minister. Those are matters that should concern us if we take the issue as seriously as the Prime Minister urges us to do. Therefore, what aid have Her Majesty’s Government provided and will they provide to create sustainable economic opportunities in Somalia? What careful and pragmatic analysis has been made of trade opportunities that would assist? What arrangements have been made with Somaliland, Puntland and their neighbours in Kenya and Ethiopia to assist in dealing with many of the problems? My question includes Ethiopia because of the outstanding assistance that was consistently provided by the late Prime Minister, Meles Zenawi, whenever he was asked to enlist his help, particularly with clan factions.

Should not the United Kingdom, as chair of Working Group 1 of the CGPCS, deploy its frigate more frequently, and preferably permanently? The noble and learned Lord, Lord Howe, and others described that help as being a very interesting EU naval role and one that could well be better co-ordinated with NATO assistance, and I am sure that that is true as well. What future role does the Minister see the Navy playing?

Can the Minister also tell us what pressure has been brought to bear for internationally agreed standards for accredited private security companies? Those standards have been promised for a long time. How close are we to agreement on them? When will the United Kingdom ratify the 2005 protocols concerning acts of terrorism at sea and the enforcement powers that are sought to deal with it? Before the Minister tells me, perhaps I may say that I readily accept that we did not do so in the latter part of the Government in which I served; I am merely eager to know what progress there is now.

What are the Government doing to assist the Seychelles on the imprisonment problems it plainly has and which are stretching its resources to breaking point? What progress is being made on the new maritime intelligence co-ordination centre in that nation—another issue raised by the noble Lord, Lord Hannay, earlier?

Will we contribute to the Dutch-German joint investigation team which has been tasked with pursuing what they have described in their terminology as the “kingpins and financiers”, the “money launderers”? It is obviously not whatever the maritime and piracy equivalent is of the term “foot-soldiers”. Those are pursued, but not many are brought to trial. What about the people who organise them, finance them, and benefit from them?

Finally, what is our contribution to assist the new Somali president to build the authority of his Government, his courts and civil institutions? We have here a permanent presidency. It will succeed or fail on the basis of the tangible support that it receives, and the expertise that we are prepared to deploy.

I accept that not one of these issues is easy, but they are all essential to progress, both on land and on the water.

20:00

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)]

My Lords, it is a pleasure to participate in this debate and I pay tribute to the noble Lord, Lord Luce, for raising these important issues, and for managing to gather such great experience and expertise around the House to partake in this debate. The noble Lord, as with other Lords, brings a significant depth of knowledge of the region, and the debate has been richer for that. Other noble Lords have spoken from the perspective of their valuable experience, and I thank them for their contributions.

The noble Lord, Lord Triesman, summed it up at the end, in terms of what can be done in a region which has multifaceted challenges: how is what we are doing co-ordinated, and where are we in applying specific British expertise? Are we dealing with the underlying causes, and are we going after the small number of people who are the real kingpins at the top of this chain? I hope I can answer most of those questions, but if any remain unanswered I will write to noble Lords.

Piracy is not a new phenomenon. It is a type of criminality that has existed for hundreds of years. First and foremost there is the human cost that comes as a result of piracy, and that was vividly outlined by the right reverend Prelate the Bishop of St Edmundsbury and Ipswich.

However, it also has an economic impact. British shipping generates £10.7 billion of our GDP. The impact that piracy off the coast of Somalia has had in recent times affects each of us in our everyday lives. Some 90% of global trade moves by sea: the food we eat, the gas and oil we use at home, in our cars and in industry, and the clothes that we wear all pass through there. The stretch of water between South Arabia and the Horn of Africa—the Gulf of Aden—is one of the busiest waterways in the world. Nearly $1 trillion worth of trade a year passes through the Gulf of Aden to and from European ports. This illustrates the seriousness of the threat both to the UK and other nations.

The existence of piracy stems from wider issues of instability in the Horn of Africa and South Arabia. Many of those were spoken about in the debate today. In February, at the London conference on Somalia, we reiterated the importance of supporting communities to tackle the underlying causes of piracy, such as poverty, instability, and a lack of opportunities. It is those that are contributing to the problem. This is precisely why the Government’s approach to countering piracy is robust and multifaceted. We are working closely with partners in the region and beyond.

My noble friend Lady Nicholson asked about government co-ordination of activity. The UK continues to take a leading role in international efforts, including through the Contact Group on Piracy off the Coast of Somalia—the CGPCS—which has been referred to a number times today, which has over 65 participating nations and more than 25 international organisations. We contribute to all three international naval counter-piracy forces: the European Union’s Operation Atalanta, referred to by the noble Lord, Lord Luce, has also been referred to by other noble Lords; NATO’s Operation Ocean Shield; and the independent US-led Combined Maritime Forces, which include over 20 independent deployers including India, Russia, Pakistan and China. These nationalities, as the noble Lord, Lord Teverson, and the noble and gallant Lord, Lord Stirrup, said, have come together and not always been given credit for this unified work. Their combined efforts have contributed to reducing pirate attacks by over 65%. We also invest in building further capacity in Somalia and the region to police, prosecute, and detain those behind piracy.

We are the largest bilateral donor to the UN Office of Drugs and Crime’s counter-piracy programme, and we encourage our partners to match our support. Through UNODC, the UK is helping to build and renovate prisons in Somaliland and Puntland. We also work with regional states such as the Seychelles and Kenya in furthering their counter-piracy efforts and continue to support the regional prosecution of pirates.

The noble Baroness, Lady Warwick, was right to say that we must deal with the root causes of piracy, and I am sure that the noble Baroness will welcome the fact that in Somalia we are implementing a £250 million development programme, focused on institution-building, jobs and opportunities, health, and humanitarian assistance. The hope is that it will prevent people being driven into piracy. In practice, this means supporting the creation of Somali-run ministries to allow the Somali people to manage their own affairs; the continued health and humanitarian assistance means we are keeping over a million people from starving. Through developing jobs and opportunities we are offering communities hope for themselves, their children and their future.

We continue to support the African Union Mission in Somalia—AMISOM—and the EU Training Mission for Somali national security forces. AMISOM, with the support of Somali forces, is doing an excellent job in very difficult circumstances. Their efforts to increase security in Mogadishu and southern Somalia are essential to enable progress on other fronts. Also, just last month, my right honourable friend the Secretary of State for International Development announced support of £38.3 million over three years to improve the Government of Somalia’s core functions, and my right honourable friend the Foreign Secretary announced a further £10 million to help the Government with their immediate needs following the end of the transition period.

We are providing crucial support to other regional partners too. In Yemen, we are working with our Gulf and international partners to support transition, including through co-chairing the Friends of Yemen. This co-ordinates international efforts to support Yemeni-led political reform.

We are the third largest humanitarian donor after the US and the EU. My noble friend Lady Nicholson asked about that financial assistance. DfID has committed £28 million of humanitarian aid to Yemen. In Kenya, we have provided more than £11 million to support the implementation of the new Kenyan constitution, as well as police reform and training and conflict prevention activities. In Oman, we are helping the Government to invest in the coastguard, with new UK-supplied patrol vessels to be delivered early next year.

A new initiative is the unique multinational, multiagency centre, referred to by the noble Lord, Lord Hannay, which is being established in the Seychelles to investigate the kingpins of piracy. Evidence suggests that there are about two dozen individuals behind the piracy business model—if we can call it that—and prosecuting them will have a huge impact on further reducing the levels of piracy. The noble Lord, Lord Hannay, also spoke about money laundering and suspicious activity reports. I can inform the House that officials tell me that the Home Office is planning to provide the noble Lord, Lord Hannay, with an update. If that update does not arrive, I am sure the noble Lord will bring the matter to my attention and I shall ensure that he receives a full response.

My noble and learned friend Lord Howe and the noble Lord, Lord Luce, referred to piracy and terrorism. Thankfully, to date we do not have evidence that terrorists are using piracy as a means of raising funds or that pirates are engaged in their activities in order directly to support al-Shabaab. There is strong evidence to suggest that pirates continue to seek to distance themselves as much as possible from al-Shabaab activity or control. However, it is possible that some personal clan or other links may exist between individuals who are involved in pirate groups and individuals who may also be affiliated with extremist or insurgent groups in southern Somalia, including al-Shabaab. It is a matter on which the Government keep a keen interest.

The noble Lord, Lord Luce, also asked specifically whether drones are being used against pirates in the Indian Ocean. I can confirm to the noble Lord that they are not. The noble Lord, Lord Avebury, raised the issue of the Chagos Islands. I can confirm that there is no link between the issues of piracy and the Chagos Islands. The noble Lord also asked about the local facilitation of talks in Somalia. The Intergovernmental Authority on Development, IGAD, has been in negotiations with local clan leaders for some months now and the new Government of Somalia and IGAD are working towards a solution, following the fall of certain areas which were originally al-Shabaab strongholds.

The noble Lord, Lord Greenway, raised the issue of ransom payments. The noble Lord will be aware that the British Government do not facilitate or take part in concessions to hostage-takers, including the payment of ransoms. Although there is no UK law against a third party paying a ransom, we counsel against that, as we believe that that encourages future kidnappings. The noble Lord will also be aware of the piracy ransom task force, which brings together policy makers from 14 countries to gather evidence, develop an analysis and agree a set of preferred options. The final meeting for that task force is to be held in London tomorrow. As part of that process, industry has been consulted and we have taken on board its views and expertise throughout the lifetime of the task force. I cannot say what the outcome of that meeting tomorrow will be; there are no predetermined outcomes for the task force. We will not know the final outcome until after tomorrow’s meeting, but the task force will deliver a series of policy recommendations to policy makers. Any decision will need to be taken by the international community outside the context of the task force.

My noble friend Lord Teverson was right to say that successful attacks are overwhelmingly against ships that do not comply internationally with approved best management practice. Self-protection measures remain the most effective method for avoiding a pirate attack and the Government strongly encourage flag states and the shipping industry to adopt and to adhere to BMP standards. We are working with international partners, the insurance industry and ship owners, via the contact group on piracy, to examine ways to encourage BMP compliance by the strongest means possible. However, I can confirm to the noble Lord that 98% of UK shipping is BMP compliant.

The sharp reduction in pirate activity that we have witnessed in the past 12 months—from 46 successful attacks last year to just five so far this year—is testament to the enduring commitment of the international community to tackle piracy and its causes head-on. We recognise that the work of the international community has been effective because it has been collaborative, co-ordinated, and in close co-operation with regional partners. A unique and positive part of the London conference was the role played by the Somali diaspora, referred to by noble Lords today. My right honourable friend the Prime Minister and I hosted key engagement events with the Somali diaspora, which has an important role to play in supporting the stabilisation of Somalia, through offering networking opportunities, investment and technical and financial assistance.

The Government are clear in their resolve to support our partners in the Horn of Africa and South Arabia in their efforts to address causes of instability in the region. There should be no room for complacency. Countering piracy is important to us all. It affects our economy, the safety of our citizens and it creates a climate of instability in a region where stability is very much required. However, as recently as Monday, reports show that we are achieving success. The International Maritime Bureau report was very positive. We are achieving success in difficult circumstances and it is in our interests to stay the course.

House adjourned at 8.13 pm.