Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Viscount Ullswater)
My Lords, if there is a Division in the House, the Grand Committee will adjourn for 10 minutes.
Benefit Cap (Housing Benefit) Regulations 2012
(12 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Benefit Cap (Housing Benefit) Regulations 2012.
Relevant documents: 7th Report from the Joint Committee on Statutory Instruments, 10th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, these regulations will allow for the introduction of a benefit cap, as set out in Sections 96 and 97 of the Welfare Reform Act 2012. From October 2013, the benefit cap will form a key part of our plans for universal credit and we will shortly be bringing regulations to the House to support the introduction of this. However, we do not believe that it is right to wait until all existing claimants have migrated to universal credit before taking action. We are, therefore, bringing these regulations forward now, which will enable us to introduce the benefit cap from April 2013 by working with local authorities to reduce the amount of housing benefit in payment. The regulations are regarded as being compatible with rights under the European Convention on Human Rights.
The regulations set out the detail of the cap, including the level that it will be set at; how we will calculate a household’s overall entitlement to welfare benefits for the purpose of applying the cap; what benefits will be taken into account; how any reduction will be applied; exemptions from the cap; the relationship between the cap and benefit sanctions and other deductions; and rules on decision-making and appeals.
The level of the benefit cap will be set with reference to average earnings for working families. On its introduction in 2013, the cap will be set at £500 per week for couples and single parent households and £350 per week for single adult households. For couples and lone parents, that is a weekly income from benefits equivalent to earnings of £26,000 a year net or £35,000 gross. Exempting those entitled to working tax credit and setting the level on an earnings basis ensures that we incentivise work even further by not including in-work benefits in the cap.
This policy was debated at length during the passage of the Welfare Reform Act. On top of that, many noble Lords came to the briefing session that I ran for MPs and Peers before the Summer Recess. I am grateful for their input. Noble Lords will by now be well aware of the Government’s reasons for introducing a benefit cap. It is about incentivising work and promoting fairness. As it is currently designed, we know that we pay some claimants more money when they are out of work than they could reasonably expect to earn from working full time, making it hard for people to see that they are better off in work. We are trying to tackle this with the introduction of universal credit and, alongside it, the benefit cap. The core principle is that the state should not pay more in benefits than the average family earns from work.
We have said from the start that there are certain groups to whom it would not be appropriate to apply the cap. We are exempting households which are in receipt of disability living allowance, personal independence payment, attendance allowance and the support component of employment and support allowance, as well as households entitled to working tax credit and war widows and war widowers. Since the debate on the Welfare Reform Bill, the Government have announced some additional easements: namely, those relating to industrial injuries benefits and war disablement pensions and their equivalents under the Armed Forces Compensation Scheme.
We do not want to penalise those who have recently found themselves out of work and are doing the right thing to find new employment. Therefore, we have put in place a 39-week grace period for those who have been in work for the 12 months previous to losing their job. This will allow people time to find alternative employment or consider alternative options in order to avoid the cap. Following the point raised very helpfully by the noble Lord, Lord McKenzie, during the Welfare Reform Bill debates, we have made sure that this grace period will run from whenever a person’s job comes to an end, whether or not the job finished before or after the introduction of the cap. We have consulted with stakeholders and the Social Security Advisory Committee, which considered the regulations and subsequently consulted on the impact of the cap. This has informed our plans for evaluation. We have already announced that we will publish a review after the first year of operation.
It was inevitable that our proposal for a cap would raise concerns about how it would be delivered and the impacts it might have. Many of the concerns that have arisen around the cap are based on an assumption that people will not change their circumstances. We do not believe that this is right, although sometimes people will need help and encouragement to make these changes. In the run-up to April 2013 we are working with claimants who may be affected by the cap to do exactly that.
Since May this year, those households which may be affected by the cap have been offered support from Jobcentre Plus. To date we have written to over 85,000 claimants potentially affected by the cap. We have followed this up with over 150,000 phone calls to make sure that claimants understand what the benefit cap means for them and to offer them the opportunity to work with Jobcentre Plus for employment support or to speak to their local authority for housing advice. We are also engaging across government and with local authorities to ensure that households are given the assistance they need to avoid the cap or mitigate its impact.
This Government firmly believe that those in the local area are in the best position to make decisions which impact people in their locality. That is why we are providing up to an additional £75 million for discretionary housing payments in 2013-14 and up to a further £45 million in 2014-15. This will be divided among local areas based on which has the greatest need. It will be used by local authorities to support those claimants affected by the benefit cap who, as a result of a number of complex challenges, cannot immediately move into work or more affordable accommodation, providing support to those who need it most, such as those fleeing domestic violence, and to prevent homelessness.
Finally, the Government firmly believe that there has to be a limit on the overall levels of benefit it is appropriate for the state to provide to those who are not working. The benefit cap aims to encourage long-term positive behavioural effects through changed attitudes to welfare, responsible life choices and strong work incentives. I commend these regulations to the Committee.
Lord McKenzie of Luton
My Lords, I thank the Minister for the way in which he introduced these regulations. They will inflict profound hardship on many households—according to the department’s own impact assessment, nearly 60,000 households, including 80,000 adults and 190,000 children. Next year the average reduction in benefit is estimated to be some £91 a week. Our opposition to these regulations should be clear from consideration which took place just this morning in another place. It is clear, and has been since our debates on the Welfare Reform Bill, that a one-size cap never fits all—we believe that people should be better off in work than on benefit, but these regulations are flawed and likely, in our view, to increase homelessness with a likelihood also of the cap costing more than it would save.
Having said that, we welcome the commitment to the 2014 review and, as far as they go, to the categories of persons who are exempt from these and the limited DHP top-up—the loaves and fishes as they will for ever be known as a result of my noble friend Lady Lister. The Minister’s department says that it is giving early notice to all claimants who could be affected by the cap. We have heard that 85,000 claimants have been contacted, with 150,000 phone calls made, so that they can change their circumstances and perhaps move into work. In addressing the inequities of the underoccupation provisions, the Government expect households to cope with this loss of income by starting work, reducing non-rent expenditure, using other income and moving to cheaper accommodation or a cheaper area. Given the work which the department has done to identify those households affected, can the Minister tell us how many households have other income to ameliorate the effect of the cap, what types of income are involved and what the average amounts involved are?
Some 64% of those affected are claiming either ESA or income support; that is, they are not required to be available for or seeking work. Some 50% of the households likely to be affected are lone parents. The criteria under which people are characterised at the moment under the welfare system are stringent. They are not spurious, so on what basis is the department seeking to override these designations? Is the department seeking to differentiate between individuals for this purpose and, if so, on what basis? We know that some 5,200 affected by the cap are in receipt of carer’s allowance because the qualification for carer’s allowance depends, among other things, on a person not being gainfully employed. What advice would the Minister give to these households and what is their route to avoiding the impact of this cap?
So far as reducing non-rent expenditure is concerned, can the Minister tell us what the department’s detailed engagement with those affected has concluded to date? How many households has it assessed as having scope to reduce non-rent expenditure and what are the main types of expenditure involved? So far as moving to cheaper accommodation is concerned, we note that nearly half of the households affected—46%—are in the social rented sector. What cheaper accommodation does the Minister think can be accessed and how does he consider that local authority allocation policies, which would typically have a local connection requirement, will assist in these circumstances? As for uprooting and going to other areas, has any assessment of the impact of this on families been made, especially the consequences of fracturing local support arrangements with the impact on health and educational outcomes? From the work undertaken to identify those families currently likely to be affected by the cap, how many such households have someone with a mental health condition and how many occupy housing that has been the subject of a disabled facilities grant?
We are indebted to the National Housing Federation for its briefing notes and the points that it raises, which I would like to go over. So far as discretionary housing payments are concerned, it says that the announced increase to help people hit by the cap after losing their jobs is welcome but that it is not appropriate to rely upon a discretionary, time-limited scheme to cover ongoing and legitimate higher housing costs. Concerns have also been raised about the levels of DHP available. In its report on the impact of housing benefit changes, published this month, the NAO said:
“It is not clear how the current level of funding for Discretionary Housing Payments has been determined or whether it is likely to be sufficient for local authorities in tackling the impacts of reform”.
Perhaps the Minister can therefore give us a breakdown of those calculations and the assessment.
The issue of temporary accommodation has, I think, exercised a lot of people. The National Housing Federation says:
“Temporary accommodation is a vital part of the homelessness safety net. It saves money by minimising the need for more costly emergency interventions such as housing families in Bed and Breakfast accommodation. However, it is more expensive to procure and manage than mainstream private sector accommodation.
It is for this reason that the Federation has argued for it to be exempted from the benefit cap. Due to these additional costs, without an exemption from the cap, many families will find themselves unable to meet their rent.
Households are placed in temporary accommodation by local authorities and as a result will have little scope to move to reduce their housing costs. These families, who have been made homeless through no fault of their own, could be forced to move long distances or cut back on essentials in order to pay for accommodation which they themselves have not chosen”.
How does the Minister respond to that point? The federation goes on to say:
“The cost of exempting temporary accommodation from the cap is £30 million—a small proportion of the estimated £270 million savings expected to be gained from the imposition of the benefit cap itself”.
What is the Minister’s response to that? It continues:
“While Government has said that under Universal Credit it will fund the management costs, if not the housing costs, of temporary accommodation outside the benefits system—helping some families avoid the cap—this will not protect claimants before they transfer to Universal Credit”.
Lord German
My Lords, I want to examine the two areas of change which took place during the final days of the passage of the Welfare Reform Act. These were, of course, the extra £120 million of discretionary housing payment and the nine-month grace period. However, I start by saying that my party opposes regional pay in this country—as does the Labour Party in Wales—very strongly indeed. Ipso facto, for the same reasons we oppose regional benefits. The reason given by the Welsh Labour Party for the opposition to regional benefits is that they trap people in poverty. In this case, we in my party find ourselves on a similar message: having uniformity of these issues around the country helps to encourage prosperity across the country. I hope that that message will be borne out. However, I recognise that the major difficulties of the benefit cap relate to London, as the impact assessment clearly states.
I do not wish to add to the huge array of all very valuable questions that the noble Lord, Lord McKenzie, has just outlined. However, it is very important that the guidance for local authorities and customers is made available in as open and detailed a manner as possible. I note the very friendly document titled Benefit Cap—Frequently Asked Questions for Local Authorities, in which local authorities would expect to find answers to some of these questions. Nowhere in this document does the DWP reference any information about the discretionary housing payment. Will my noble friend tell me where, when and in what format that detailed guidance to local authorities is going to appear, so that people can be aware of the answers to some of these questions? Perhaps the issue of distribution of discretionary housing payment needs to be well known as well. I presume—although I have not been able to find the exact percentages and figures given—that it is related to the impact of the cap on housing benefit in each local borough and local authority. Perhaps my noble friend could clarify that.
I further note from the impact assessment that the figure of 56,000—considerably less, of course, than the number we were led to believe would be affected by the cap from the earlier impact assessment—takes no account of behavioural change. Could my noble friend tell me how, in his expectation, that behavioural change is likely to play out? Is it likely to reduce the numbers substantially, or just in a minor way? Has any work has been done by the department on that change?
One key issue that my noble friend mentioned was the ability to exempt oneself from the cap by making oneself available for working tax credit. There is always a process in getting oneself into work and into a working tax credit position. I wonder whether that period of transition, which may not take place until such time as the cap actually hits, will be taken into account through some support process by the department. Could my noble friend explain that?
I am also interested in the impact upon London. I would not want to say that it is a very strange place, but it is a very different place in terms of housing. I can only quote my own example. I just renewed my two-year rental on a flat in London, and my rent went up by £2.50 per week after two years of being stable. I just could not understand; I was expecting it to be much larger than that.
Baroness Lister of Burtersett
My Lords, I think that I and the noble Lord, Lord Kirkwood, were the only Members of this House to oppose the benefit cap on principle and I remain opposed to it on principle, but I will not go through all those arguments again, although the Minister put the principled arguments for the cap, except to say that we have rather different views about fairness. I refer to that in relation to what is not yet a proposal but a suggestion mooted by the Secretary of State that a further benefit cap should be imposed on families with three or more children—exactly the same group who stand to lose most from this benefit cap—before this cap has even been applied. What possible basis is there for floating yet further caps until we know the effects of this one? I should be grateful if the Minister could say something about the interaction between the caps and what work has been done in the department on the likely impact on child poverty.
Like my noble friend Lord McKenzie, I read the Guardian and saw yesterday’s report. I followed it up by contacting the Child Poverty Action Group— I declare an interest as its honorary president. It has just, with the London Advice Services’ Alliance, published a study of London local authorities and how they are dealing with the various cuts in housing benefit.
It is clear that one of the common solutions, as evidenced in that Guardian piece, is to move families from inner to outer boroughs, or well beyond. Like the localisation of council tax benefit, it seems that the Government are taking a Pontius Pilate position here—washing their hands of all responsibility and then saying, “It is the local authorities that are responsible”. A Government spokesperson was quoted in the Guardian yesterday as saying:
“It is neither acceptable, fair nor necessary for local authorities to place families far away from their area”.
I agree, but to the extent that it becomes necessary, the blame lies with central government.
The National Audit Office spelled out, in its report last week, the pressure that the combined cuts in housing benefit would put on the supply of affordable local housing in some areas. The National Audit Office also drew attention to one of the findings of the interim report from the evaluation being carried out for the departments:
“Claimants’ reluctance to consider moving to other areas appears to reflect a considerable attachment to their local area as a place to live”.
The evaluation report refers to the importance of proximity to family, friends and schools.
I have heard Ministers—I do not think that this includes the Minister here today—say that people have no right to be able to live in nice areas that other people cannot afford to live in, as if we are talking about posh areas here and it is all about the niceness of the area. Actually, quite a few pieces of research around poverty and place show the importance of local roots and the networks that people have, and the Government seem completely impervious to this. I find it very strange because it seems to me to fly in the face of the whole philosophy of the big society, which is about the support that people give to each other. Yet this and other policies—I will probably say more about this this evening—wilfully destroy, or are happy to countenance the destruction of, these social support networks. One of my hobby-horses is that this is something that we must look at in all the evaluation that is being done. Like my noble friend I welcome the fact that there will be a review of the impact of the cap, but nothing is said in the Explanatory Memorandum about the impact on social networks.
The Minister talked about incentivising work. We have heard this on a number of occasions. I shall quote the Secretary of State, who said, in the House of Commons in an Oral Answer in September:
“When we recently started dipping into the issue and surveying those who were likely to be affected, it was interesting to find out that, already, well in advance of what is going to happen, about a third of people have admitted that they are out looking for work as a result of the oncoming benefit cap”.—[Official Report, Commons, 10/9/12; col. 15.]
I am interested; I keep hearing this. I am sorry to add to the questions the Minister is being asked, but what is this survey? Is this the telephone calls that he mentioned? Does the department ring up and they say, “Oh, yes, I am looking for work because you are about to cap me”, or what?
I have heard a number of social policy academics say that, if it is in terms of people going into work, this is the normal turnover one would expect. How do we know it is because of the forthcoming cap? Even to the extent that it is having this effect, the CPAG/Lasa study confirmed that several local authorities are working actively with residents to help them move into work or increase their hours in order to avoid a cap, and this is obviously very welcome. It stated:
“However, few see this as an approach able to solve the problems of more than a small proportion of families hit by the cap. One authority estimates that there are at least 500 families who would not be able to be supported into employment due to disability, caring or parental issues”.
Many emphasise the high cost of childcare as a barrier.
My noble friend Lord McKenzie and the noble Lord, Lord German, have mentioned carers and the fact that 5,200 of those expected to be hit by the cap are in receipt of carer’s allowance—that is about one in 10 of everyone affected in 2013-14. The mean reduction will be £105 a week, the median £77 a week. That is a lot of money for people to lose.
The Minister talked about the long-term positive behavioural effect. He might recall that in Committee on the Welfare Reform Bill my noble friend Lady Sherlock and I asked the noble Lord—this is a variation on the question asked by my noble friend—what are the positive behavioural effects that the Government are seeking from carers? Presumably they are not to stop caring. I asked the noble Lord and I am glad to say that he confirmed that that was the case. What other behavioural effects are being sought of carers? I am as baffled as I was then.
I turn to the question again raised by my noble friend on supported housing. I am grateful to Crisis for its briefing on this. It estimates that 10% of those affected could be single adults and it is likely that some of them will be living in supported accommodation. Supported accommodation ranges from hostels for homeless people to domestic violence refuges; it is exempt from normal housing benefit rules so it is not subject to LHA restrictions; the rents charged by different accommodation projects vary, depending on a number of factors but particularly the level and range of support provided. Therefore, a hostel that houses, for example, long-term rough sleepers with severe mental health problems will have higher running costs. A small number of people who live in such high-cost accommodation and who receive other benefits will be affected by the cap. They are not in a position to move elsewhere and they pay a lower rent. We are talking possibly about higher-rate ESA or incapacity benefit as was, and they are likely to be some distance away from moving into work so would not be able to avoid being hit by the cap.
I do not believe that it is right, nor do I believe it is the intention of the policy that the cap should impact on people who are extremely vulnerable or who are at a crisis point in their lives and cannot live independently. Supported accommodation providers rely on housing benefit as a source of funding and they would struggle to provide the vital services that they offer if their residents’ housing benefit were to be cut. Although Ministers have stated publicly that there will be no more exemptions to the cap, I understand that there are discussions going on as to how residents in supported accommodation will be treated. Ideally, I would like to see people who live in supported accommodation exempt from the cap but, failing that, I would be very grateful if the Minister could explain to your Lordships how it is intended to protect supported housing residents from the impact of the cap.
Crisis is also concerned that in the worst instances, households that are not able to find alternative accommodation could be left facing homelessness. That is a point made by my noble friend. I would like to read from the CPAG/ Lasa report, which states:
“Applying the benefit cap to families in temporary accommodation effectively means that families who are accepted as homeless, could be made homeless once more due to their inability to pay the costs of temporary accommodation”.
The situation was recognised by the noble Lord, Lord Freud, during the passage of the Welfare Reform Bill. I quote the noble Lord:
“We need to get a solution to this so that we do not have a ludicrous go-round of people moving into expensive temporary accommodation which they can no longer pay for because of the cap. We are absolutely aware of this and have measures in train to get a solution in the round to that issue”.—[Official Report, 23/1/12; col. 893.]
The report continues:
“At present, however, local authorities see themselves pushed into precisely this ‘ludicrous go-round’, with little option for escape”.
Could the Minister please comment on that and explain what measures exactly are in train to solve what he himself described as a ludicrous situation?
Lord Best
My Lords, I thank the Minister again for that period of grace. I had an amendment seeking a 26-week period of grace and this is the first time that I have ever had a Minister exceed my expectations. I knew I should have gone for 52 weeks but I thank him for confirming that that is safely in place.
Although I agree with a great deal of what has already been said, I particularly wanted to pick out the problem faced by those going into temporary accommodation. There are 51,600 households currently in these properties leased from private landlords. The housing association and sometimes the local authority itself stand in the middle. The private landlord charges a rent and on top of the rent that the landlord charges, the housing association, in taking on this commitment, has to agree to return the place to the landlord in pristine condition at the end of the period so there is a need for reinstatement costs. Management costs are also involved in this, so it is unsurprising that rents for these temporary accommodation leases are higher than other rents. In the areas where the other rents are already very high, these are going to be very high rents. However, the £500 per family cap kicks in regardless of the fact that rents in particular places will be very high.
Baroness Sherlock
My Lords, so much wisdom has already been shared with the Committee that I am not going to try to tread over the ground so impressively covered. I would like, however, to ask the Minister to focus on two particular categories of people. I am particularly concerned about families with children, especially vulnerable families with children. The Minister may recall that, among the many amendments that he faced during Committee stage, I moved an amendment that specifically asked that families be exempted from the cap if their household contained a child who was the subject of a child protection plan, a children-in-need assessment or a common assessment framework team. The Minister sadly did not smile on that amendment, but I hope that he has had the opportunity in the mean time to think some more about what happens to particularly vulnerable children. Since the Government now have data about the families who will be affected by the cap, will he tell the Committee today how many of the households that will be affected contain a child who was the subject of any of those protection plans or assessments or a common assessment framework team? If he cannot do so today, would he commit to write before his regulations are considered or, if time does not permit it, to place that in the Library as soon as possible?
I briefly remind the Committee why this matters. I raised this on Report and I am not going to revisit the principle, but I was concerned at that stage because of discussions that we had had in Grand Committee, where I had heard a noble Lord—I shall not name him, because he is not here, but he was someone with great experience—describe having sat in a serious case review of a very serious incident with a child. He described what I have heard over and over again from social workers, which is that when you get to a serious case review, people gather around the table from all the different agencies and, about an hour in, somebody always says: “If only we had talked to each other sooner; if only we had all shared information previously, maybe it would not have come to this”. Reports from one London safeguarding board showed that, in a significantly high proportion of families affected by serious case reviews, rent arrears or impending eviction had been an issue; of them, a significant number were known to more than one authority.
A number of noble Lords from all sides raised throughout our consideration of the Bill the question of what happens to families who are forced to move repeatedly—in particular, what happens if households containing vulnerable children of the kinds that I have described are forced to move some considerable distance. There must be a real danger that these children disappear from the system. Could the noble Lord tell me whether he has considered my proposal to exempt those families from the cap? If he has not, what assurance can he give the Committee as to precisely how those families will be protected and how those children in particular will be protected?
Picking up the point made by various noble Lords about families in temporary accommodation, I am very concerned about the considerable distances that they and other families with children may end up moving. Like other noble Lords, I have been reading the newspapers this week—but I do not read those left-wing communist rags. I shall quote a headline to the noble Lord:
“Homeless families to be kicked out of London and sent as far away as WALES as councils buy up cheap properties to house them”.
The article goes on to state:
“Local authorities say sky-high rental costs in the capital, combined with the incoming benefits cap has forced them to send people miles away from home. Areas as far away as Manchester, Merthyr Tydfil and Hull … ‘It is going to be practically impossible to provide affordable accommodation to meet our homelessness duties in London,’ Dagenham Council say”.
I am sure that the noble Lord recognises that that is from the Daily Mail.
Will the noble Lord tell the Committee whether that is true? Is he expecting significant numbers of homeless or potentially homeless families to be rehoused hundreds of miles away? If not, why are so many of our grand newspapers labouring under such a misapprehension? Perhaps the Minister could put their minds at rest. He might want to write to the editors with a copy of his speech when he has reassured us today.
I would be interested to know whether there is any danger that families could be forced to move, as has just been described by the noble Lord, Lord Best, more than once, either because accommodation for the homeless has become too expensive or simply because, as was raised in Committee, the median rents have gone up over the area. Rents may rise in an area as a result of an influx of families and then they could hit a cap again. Is there any danger that that could happen? I am sure that the noble Lord is aware of the evidence showing the impact of repeated house moves on a child’s achievement in school. If that is the case, will he say how the Government will protect vulnerable children in particular from the damage that could happen to them not only in childhood but in later life as a result of their schooling being impaired?
Finally, turning to the report from the Child Poverty Action Group, to which my noble friend Lady Lister of Burtersett, referred earlier, I should like to draw the noble Lord’s attention to a paragraph on page 40. It states:
“Authorities are also concerned about the impact of the cuts on their ability to meet other government priorities, in particular around the ‘troubled families’ agenda”.
Will the Minister tell the Committee what discussions he has had with the DCLG and other departments about the extent to which this policy may impact on their ability to deal with troubled families? If so, what steps are being taken to address that?
Lord McAvoy
My Lords, I rise to speak briefly because my noble friend Lady Sherlock has spoken with wisdom and analysis, as have my noble friend Lord McKenzie, the noble Lord, Lord Best, and others. I do not think that I could hope to match that. I prefer to speak about the effects of what this Government are doing on families and people. First, I should make it plain that I am not a social liberal or a bleeding-heart liberal with a small “l” or even with a large “L”. As a genuine member still of the honest working class, I am totally opposed to people fiddling the public purse and the benefits system.
I do not think that the Government care so much about that. I am not trying to paint a picture of an uncaring Government, although the effects of what they are doing here are exactly that. Some of the stuff that has come from the Government for dealing with the people who will be affected by this is in the Explanatory Memorandum to the regulations. Paragraph 7.7 states:
“The Government expects different households to have different behavioural responses to the cap but those affected will have a number of options to consider”.
What are the options to consider? The options include,
“reducing their non-rent expenditure”.
I should like to ask the Minister some questions. Under what budget heading should that come? Does he have any suggestions about which item of household expenditure in these poor households should be cut to make up the shortfall in rent? Paragraph 7.7 suggests that they should make up the shortfall,
“using a proportion of their other income or moving to cheaper accommodation or area”.
We will come to that later, because to me that has the biggest impact on families who are being treated in this way.
Baroness Thomas of Winchester
My Lords, I have a very simple question for my noble friend. I think that he probably gave us the answer during the passage of the Welfare Reform Bill, but I am afraid that I have forgotten what it was. Those in receipt of disability living allowance are going to be exempt from the cap. What about those who have appealed against their initial assessment? I declare an interest because, while I have never been on benefits, I have appealed against a decision, which I won, so I feel for those who may not have been successful the first time in their assessment but who have then appealed. There can be a few months between these two events and it would seem very unfortunate if someone or their family was forced to move only to find that they had won an appeal at the tribunal, with all the upheavals that that would amount to. Can my noble friend tell me about that situation?
Lord Freud
My Lords, as I would have expected, we have had a very knowledgeable debate, and a lot of very learned views, which I always listen to very closely, have been put forward. Clearly, I am also aware of the concerns that have been voiced in expressing the anxieties of a number of external organisations and stakeholders, some of which were referred to today. I will try to deal with as many of the questions as I possibly can, although there were a lot of them.
Let me start with support and exempt accommodation. That needs to be looked at in two periods. As I said, once universal credit comes in we are looking to keep the housing costs outside universal credit. I am looking to make some long-term arrangements for people in exempt accommodation. I am particularly concerned about people in refuges and, clearly, in hostels. I acknowledge absolutely the issue of support and exempt accommodation, which needs some quite sophisticated work. Meanwhile, we are writing very specific guidance, as these are the people for whom DHPs really are designed to prevent some effects that we do not want to see.
On temporary accommodation, a point raised by the noble Lord, Lord McKenzie, that is again an area where we will use DHP. I know that the noble Lord, Lord Best, did some sums, but clearly this will be a huge incentive to move people very quickly to something much more permanent rather than staying for the full year in temporary accommodation, which, as he rightly said, is very expensive. Under universal credit, there are likely to be changes. We are looking at how we deal with temporary accommodation—especially the division between the management costs to which he referred and the actual housing payment element. We are out to consultation on that area and there will be more developments.
On the mental health issue that the noble Lord, Lord McKenzie, raised, those who have been assessed as being in the support group under ESA will be exempt, as will those receiving DLA and, later, PIP, so they will not be affected. The reason that PIP is not specifically mentioned in the regulations is that the PIP regulations have not yet been laid, so they will be consequential.
We do not have any information about other types of income that those households have—to answer a question asked by the noble Lord, Lord McKenzie. Where they do not have any other income, a claim for DHP can be made. I have already detailed the funds available.
Several noble Lords asked about stories of local authorities sending people all over the country. I remind noble Lords that it has always been the case that London boroughs have sent people out of borough and, in some cases, many miles away. The reason is that people come from all over the country to London boroughs; it is not always appropriate to house them in those boroughs and they are sent out. There is an important distinction to be made between local people and those who arrive with a homeless obligation in a particular borough. It is important because new regulations come into force later this week, on 9 November.
Lord McAvoy
Sorry, but will the noble Lord let me intervene at this stage? So if there are two families, a recently arrived family and a longer staying family in a borough, somebody would decide that the newer family, for want of a better description, should go and the older residential family should stay?
Lord Freud
I am referring to people who arrive in Euston and turn up homeless in Camden. They do not have the local links. There is a homelessness duty on Camden to do something, but there are not the local links. That has always been the position.
Baroness Lister of Burtersett
I am sorry to interrupt, but those are not the people we are talking about; we are talking about people with local links that matter to them for all sorts of reasons. This policy will destroy many of those local links.
Lord Freud
Perhaps the noble Baroness will let me finish the point. A lot of the stories in the newspapers refer to the former. Councils have had arrangements for many years with other councils some distance away. We have reinforced the point—this is where the regulations coming in on 9 November apply—that where people are local, the council has to consider whether the location is suitable for the household’s individual circumstances, including the significance of any disruption to employment, education and caring responsibilities. Local authorities are required to carry out a full impact assessment before moving people out to other boroughs.
Baroness Lister of Burtersett
I am sorry to push this, but if the stories are referring to the first group, why are local authorities expressing fear that they could be subject to legal challenge for moving families out? We are talking about a different group.
Lord Freud
I am trying to say that if you read the stories carefully, as I have been, you will see that they refer to preparatory moves about what councils may do and what they are preparing for. The stories are fairly evanescent, if you look at them closely. Clearly one reason for that is that these changes have not happened yet. Through this year, we have had the introduction of the LHA reduction from 50% to 30%, which my noble friend Lord German talked about. There has not been a huge flood of changes as a result of that. The stories are about councils being worried and their preparatory plans. They are about plans to move people around councils, but local authorities have always done that, for the reasons that I have given. They have always had this problem in London—people arrive and the councils have had to do something about them. Let me repeat the obligation in the 9 November regulations. Under the regulations, local authorities are required to keep people in the local area whenever they can and to carry out a full impact assessment before moving people out to other boroughs. We have strengthened that localism point in recognition of the same sentiments that are concerning noble Lords today.
Lord McKenzie of Luton
Could the noble Lord just remind us which regulations these are? Is it right that they have already been laid and will come into effect? Under which provisions are they?
Lord Freud
They were DCLG regulations—I cannot remember the exact title, so forgive me. They have been laid and cleared and they are due to come into effect on 9 November. They are under the Localism Act—the noble Lord may be more familiar with them than I am.
On whether people will be treated as intentionally homeless if they are evicted as a result of rent arrears caused by the cap, again, it is for local authorities to make decisions on individual homelessness applications, as they do now. Under the statutory legislation, if the only reason for a person’s homelessness is a reduction in benefit that is outside their control, they should not be considered intentionally homeless by their local authority. The help available includes cases where the reduction is not much; it includes help in renegotiating rent or making up small shortfalls, help with moving to more affordable accommodation, other means of trying to help people back into the workforce, and so on.
There was a group of questions around the delivery process, which I will try to gather up into one. The department will identify cases through scans of analytical data, which will be clerically checked against live IT systems to see whether any exemptions or grace periods are in place, and it will obtain up-to-date benefit amounts. Data will then be transferred electronically to local authorities via ATLAS. The LA will confirm the correct amount of housing benefit and can apply the cap via an automated system. It will issue a notification to the claimant informing them that their housing benefit is being capped and the amount of their new housing benefit award. This notification will also give information on support available and who they should contact if they have a query about the decision.
Lord McKenzie of Luton
Before the Minister leaves that point, I am interested to understand the process, the mechanics. He said that there will be scanning of all the data. Of course, some of that would have to be of benefits that do not currently feature in housing benefit calculation. Will that be an ongoing scanning? I see that the Government are going to do something upfront to try to identify people, but people’s circumstances change. Will it be a real-time scanning?
Lord Freud
When there is a change in circumstance, it is up to the claimant to inform us of that, as it is now. We are still in the old world, or the existing world before universal credit. To ensure that all changes of circumstance are applied in a timely manner, we will use CIS, the customer information system, to report them. I think that the noble Lord is referring to that system, which holds a record of most benefits included in the benefit cap calculation. As the noble Lord pointed out, some of them are not included in CIS—especially child benefit, which will be identified by a further data match with the monthly IGS scans.
Lord McKenzie of Luton
I know that the noble Lord has a lot to get through, but is the obligation to report a change of circumstances an obligation arising from a change of circumstances which would affect the application of the cap, quite apart from obligations in respect of other benefits? Is that what we are talking about here?
Lord Freud
I was referring to the change of circumstance to the individual. Clearly, if we are changing benefit structures in some way, we will know that and be able to make that adjustment and send the new information over to ATLAS, but the important facts are the changes of circumstance of the individual, who will make the application for the benefit in the normal way. It will come through the systems and be scanned, checked, compared and sent over.
Lord McKenzie of Luton
A change of circumstance that would put someone within the benefit cap when they were not currently? Would an individual making a housing benefit claim have to say, not only, “I have applied for a change of circumstances that may change the level of housing benefit”, but, “I think I am therefore liable for the cap? Can you do me for it?”?
Lord Freud
It will not be exactly like that. It will be no change from the present position, where you should inform us of changes in your benefits in the normal way. When that happens, it will work through in the normal way into our systems. There is an obligation on all benefit recipients to inform us of changes in circumstances. There is no obligation on the part of the benefit recipient to inform us in relation to the cap; it is only to inform us in the normal way of changes in circumstance, as applies to the rest of his or her benefits.
Lord McKenzie of Luton
I apologise; I promise not to intervene again after this one, but that obligation, for example in relation to housing benefit, would be to report the change of circumstance to the local authority, not to the DWP. How does that fit with the notion that it is basically the DWP which has to notify the local authority, “We’ve got somebody here who may be subject to the cap”? Seemingly, there is no ongoing separate obligation on the local authority to report back in the opposite direction?
Lord Freud
I will be corrected on this if I am wrong, but ATLAS works both ways, so the information flows both ways, so we will have the information and will be able to notify and go through the normal process. We will know what is happening on housing benefit. That is how it will flow back and forth. There had to be an adaptation to ATLAS to make it a two-way flow. When it started, as the noble Lord probably remembers, I hope with nostalgia, it was a one-way process.
How and when are the guidelines being produced? The local authority Practitioners Operational Group, with a subgroup based on the benefit cap, has been briefed at working level on detailed procedures and guidance. Members have confirmed that people will develop detailed guidance and products which will supplement those to be published via the DWP intranet and the LGA’s knowledge hub.
The way that the benefit cap interacts with financial sanctions is that the benefit cap will apply to the overall level of household benefits. If the sanction is imposed, any reduction will be applied to the sanctioned benefit after the application of the cap. Otherwise, clearly, the impact of the sanction would be negated.
My noble friend Lord German and the noble Lord, Lord McKenzie, raised the issue of ESA. The specific exemption is to do with the people in the support group of ESA, not in the WRAG group. Several noble Lords mentioned carers. The benefits system is designed to provide financial support where caring responsibilities prevent carers working full-time. As such, the carer’s allowance should be treated in the same way, for the purposes of the cap, as other income-maintenance benefits. Clearly, where the carer is in the same household as someone entitled to DLA or ESA support, the whole household, including the carer, will be exempt. Most carers of working age want to retain a foothold in the labour market where possible. We know that more than nine in 10 claimants receiving carer’s allowance are claiming another out-of-work benefit. In other words, they are looking for work. Carers who move into work clearly become eligible for the working tax credit and will be exempt from the cap.
Baroness Lister of Burtersett
I am still unclear what behavioural change the noble Lord seeks from that group of carers. If they are already seeking work anyway, why do they need the cap to spur them on to do it on top of their caring responsibilities?
Lord Freud
Clearly, we are expecting that they will find work at that level.
On the grace period questions from the noble Lord, Lord McKenzie, which really boiled down to the self-employment questions, they are entitled to working tax credit if they meet the other conditions. On the 50 out of 52 weeks, there may be a gap in employment, but my understanding is that SSP, statutory sick pay, which is paid by the employer in the case of the employed, would constitute being in work, for obvious reasons. That actually responds to my noble friend Lord German’s questions.
Lord McKenzie of Luton
Can the Minister help me on one more point on the period of grace? If somebody is employed but falls out of work completely, and would otherwise fall within the benefit cap, the period of grace would operate. One of my questions is to do with circumstances where somebody is outwith the benefit cap because they are fully employed and then they fall below the level at which working tax credit kicks in. They are not unemployed at that stage, but their earnings are lower, their benefits are higher and they are potentially within the cap. Does the period of grace protect them in those circumstances? It would be logical that it should, but I am not sure that it does.
Lord Freud
Yes, effectively, in the current system, going below the 16 hours would take you into the benefit system, so formally out of work. Clearly, under universal credit it would be a very different system, and we would have to have a notional figure of what the equivalent of work is, which we will introduce when we have the universal credit. The noble Lord is absolutely right in his analysis and his conclusion that there is no other way of doing it when you think about it, given our existing system.
My noble friend asked when we will publish our guidance. We had consultation on that guidance in August and we will make it available towards the end of the year. I can confirm that DHP will be allocated on the basis of greatest need. We are consulting with local authority representatives right now—in November—and we will make an announcement at the end of that time.
I am taking a long time, but with the forgiveness of noble Lords I will keep going, because there are a lot of interesting questions to answer. I could end up writing, but I would prefer to deal with them now if noble Lords will indulge me. My noble friend raised the cumulative impact of the changes on the housing market. We are monitoring this really robustly; I think we have one of the best assessments on what happened to housing changes in terms of the LHA changes that we have made. I think the noble Lord, Lord Best, would agree that it is one of the most thorough examinations of what really happens in a housing market when you make these changes and it will be valuable for a lot of the purposes. Clearly there is an overlap when we look at the effects of the benefit cap as well.
On the issue of the calculator not working, we have had stringent availability standards and there were two short periods when it was down for maintenance. There is a lot of help available to use it. On behavioural change, one of the things you can never predict when putting in these pressures is how people’s behaviour will change. However, we really are working with a lot of stakeholders to make sure that decisions are made such that people respond positively to the implication of the cap for them.
I can confirm to my noble friend that we are committed to tackling child poverty, but clearly our focus is on trying to tackle the causes of that poverty and not just moving people around on slightly artificial income lines. One of the things that universal credit will do is to move a lot of adults and children out of poverty. I make the same point to the noble Baroness, Lady Lister. We are looking for better measures and clearly the negative impact on child poverty may be mitigated if affected adults in the family move into work and the benefit cap supports our plans to make work pay. The £500 per week limit for couples and households with children is above the poverty line for a lone parent with up to four children, and broadly equates to the poverty line for a couple with four children; looking at the mechanics, that is where it is.
Baroness Lister of Burtersett
The point I was raising was about the effect on child poverty should the Government introduce a new cap on families who are not in work with three or more children, over and above the benefit cap. What work is being done in the department to look at the effect of the interaction of these two different caps on child poverty? It is possible that the noble Lord was about to go on to this but he seemed to be moving on to another issue.
Lord Freud
We have not done any work on that because it is not agreed government policy, but it is something that we are looking at, clearly. To the extent that we do look at it, it will be done on flow and not on stock. That was very clear in some of the discussions on this particular option. However, it is about people who get more than two children rather than people with more than two children. People will at least be able to plan their families should that become government policy. Regarding local networks, as raised by the noble Baroness, Lady Lister, clearly we acknowledge their importance. That is one reason for the regulations coming in on Friday: to try to ensure that people are not moved without very serious consideration.
There was a question about our early findings. There has not yet been a coherent survey. However, there are some interesting figures from our early findings showing the effect of the cap, and I think we will be able to share those more widely when they are locked down. As the noble Baroness said, it is absolutely essential that we do not confuse things that are happening anyway, and that we try to get analysis of the excess. There is, however, an interesting point: quite a few people dropped out of the benefits system when this started. That is not a surprise. One would expect to find some of the people who feel uncomfortable claiming gathered in the area with the highest numbers of claims—I put that as delicately as I can. I hope to be able to give some more information on that.
The noble Baroness asked about childcare. Jobcentre Plus recognises the importance of childcare as a key enabler, and clearly financial assistance is available for a claimant moving into the labour market. We accept the need for appropriate childcare when we make that judgment.
I think that I have done my best to deal with the point about temporary accommodation. The noble Lord, Lord Best, talked about rent levels and urged a regionalised system, quoting the originator of the welfare state. The rate of increase in rent has slowed down a bit over the past year and local authorities are working with households affected by the cap to ensure that they are able to locate affordable homes. I was just looking at some rental levels, which show a slight slowdown in some months of the year.
I am running out of time. There is a lot of other business and I have to stop now. I will have to write on the other matters, as there was just so much—I counted 40 questions from the noble Lord. I commend the draft Benefit Cap (Housing Benefit) Regulations 2012 to the Committee.
Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) Regulations 2012
Baroness Hanham
That the Grand Committee do report to the House that it has considered the Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) Regulations 2012.
Relevant document: 7th Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, the regulations laid before the House on 17 July 2012 consolidate 12 statutory instruments dating back to 1989 and introduce new levels of planning application fees. The draft regulations have been approved in the other place and, if approved by this House, they will come into effect in the week commencing 19 November.
As noble Lords will know, the planning service is funded from local government grant and from council tax; in addition, the planning application service is also funded by fees for planning applications. The Government’s policy is that, in aggregate across England, the income generated by planning application fees should, as far as possible, cover the estimated total costs incurred by local planning authorities in determining those fee-paying applications. The principle underlying the planning fee regime is that would-be developers and applicants, rather than the council tax payer, should meet the majority of the costs incurred by local planning authorities in determining planning applications.
Planning application fees were last increased in 2008, overall by 23%. The fee increase in 2008 aimed to provide for local authorities to move closer to a position of cost recovery in determining planning applications. Since 2008, there has been a significant fall in the number of planning applications, from 649,000 in 2007-08 to 483,000 in 2010-11. Over the same period, the number of major applications has fallen by 18%. The overall decline is partly as a consequence of the extension of permitted development rights but is also due to the credit crunch under the last Administration.
In 2009, Arup undertook research to consider the effects of the 2008 fee increase and the impact of the decline in planning applications. The research, which was published in 2010, showed that fee income was approximately 10% lower than the cost of the service, based on an average cost of £619 per application and an average fee income of £563. This shortfall is because application fees have remained constant since they were last amended in 2008 while inflation has increased.
In early 2011, we consulted on proposals for planning application fees, which included an option to decentralise fee setting to local authorities. We have also worked closely with the Local Government Group, which undertook a comprehensive benchmark exercise with over 200 authorities to assess the real-time costs of processing different types of planning applications.
Baroness Hanham
My Lords, I remind noble Lords that I was talking about working with the Local Government Group, which undertook a comprehensive benchmark exercise with more than 200 authorities. The results of the benchmark showed that there were potential reductions in some fee categories, but significant increases in others, including for the householder category for which, on average across England, the fee would be more than doubled. It also concluded that the overall increase needed to achieve cost recovery was closer to 26%. That would account for the 10% which Arup identified as the shortfall and inflation since 2008.
The effects of decentralisation are complex and we have had to balance the need to ensure that local authorities have the necessary resources to deliver an effective planning service alongside the effects on applicants and developers, who are key to delivering economic growth. Therefore, on balance, we have decided to continue to set fees centrally for planning applications. In time, decentralisation should be part of a package of measures to make council planning departments more responsive to the needs of business and local residents. The benchmark work has been undertaken by the Planning Advisory Service arm of the Local Government Group, and the Government fund completely the Planning Advisory Service. Please let me assure you that we will continue to support and work with the Planning Advisory Service to develop further the benchmarking work and to understand the costs at the local level. We therefore propose to uprate planning application fees by 15% in line with inflation between 2008 and 2012. This uplift in planning fees will provide additional resources to local authorities of some £32 million per annum.
In addition to the much needed consolidation of the regulations, we have also introduced some new fees as a result of changes to primary legislation. These include fees for applications for urgent Crown development, where the application is made directly to the Secretary of State, and for an application for a certificate of appropriate alternative development. An amendment has also been made to allow for fees in respect of deemed applications—applications as a result of the local authority taking enforcement action—to be paid in full to the local planning authority rather than half to the local planning authority and half to the Secretary of State. This does not change in any way the fee to be paid, but it does mean that the local authority will benefit from receiving the whole fee.
The draft regulations before you are intended to keep planning application fees at a modest level for developers and householders, compared to overall project costs, while providing local authorities with the necessary resources to turn round planning applications efficiently and effectively and while protecting applicants from any significant increase. I commend these regulations to the House.
Lord McKenzie of Luton
My Lords, I start by thanking the noble Baroness, Lady Hanham, for the introduction of the regulations. The Minister will be aware that these were not hotly contested in the other place and that they will not be by us on these Benches. They have our support and we are not seeking to give the Minister any trouble—not very much trouble, anyway. The approximate 15% increase is said to reflect inflation since the last uprating in 2008. Can the Minister let us know what measure of inflation has been used for this purpose?
My colleague in another place asked a question relating to the removal of permitted development rights under Article 4 directions relating to HMOs and whether fees would be applied to planning applications relating to HMOs. Has the department yet had the chance to produce an answer on that? We note the reluctance of Government to go down the path of decentralisation of fee setting, although I think the door is not completely closed on that matter.
The question of resources is a matter of importance and it seemed to be tacitly accepted that the increase in fees would not bridge the current deficit. There are always difficult questions in this area. I remember talking to planning officers in Luton about what goes into the cost base when one is looking at costs and fees. There was some shenanigans around central administration charges and all that. The Minister in the other place was rather broad-brush in suggesting that the new homes bonus could deliver lots of money to help support a range of things, including planning. Clearly, for some it may, but for others it will not, particularly if it is constructed on net rather than gross additions to stock. There will not be a bonanza for already tightly developed areas where new build comes, in large measure, from demolition of old. Surely it must be important for central government that local authorities have access to quality planning capacity, if local authorities are to be leading the charge for growth.
Will the Minister say more about what assessment the department has made of the capacity of planning departments up and down the country in the current environment? Will he say when it is proposed to look at fees again and whether there is merit in having more regular changes, rather than larger step increases? It seems to me to be fairer to those who are developing along the way, but I reiterate that we have no problem with these regulations and are happy to support them.
Lord True
My Lords, I, too, thank my noble friend for what she said and for the change that has been made. I declare an interest as leader of a planning authority. I agree with what the noble Lord, Lord McKenzie, has just said—that it would be desirable, in principle, if changes could be made more regularly, rather than in a stepped arrangement. I think I heard my noble friend say, and I find in the papers, that she recognises the need to go back and examine, at some point, the case for decentralisation. I very much welcome that. In the nature of things the balance of planning applications, the nature of business between one authority and another, will be different. Some will have very large numbers of large construction projects, others will rely mainly on householder projects; but given that the principle that the Government sets down, that it should be possible to recover costs, is accepted, I hope that, over time, we can also move towards decentralisation. I am sure that local authorities would welcome that and work with it.
I note that it is said that there is a need for restraint; that councils should not respond to current reductions in central government grant funding simply by increasing fees to raise lost grant revenue. That is a nice obeisance to Treasury doctrine, but of course the principle is that within the planning framework, planning costs should be met by planning fees, plus whatever grant is available. I hope that that principle is accepted. We are obviously not allowed to charge a commercial rate for part of a function, whereas everybody else who is involved in a planning process is. That is by their nature, whether it is the lawyers indulging in some judicial review or the builders charging a commercial rate, so councils in time should be allowed to do so. With that rider, I welcome the commitment to look again at decentralisation. I thank very much my noble friend for her announcement and give it my warm support.
Baroness Hanham
My Lords, that makes a change from the previous debate, for which I may be extremely thankful. I thank the noble Lord, Lord McKenzie, for his support for these measures, although I appreciate that there was some qualification from both the noble Lord and my noble friend Lord True because of the fact that the 15% does not totally meet the inflation rise. The noble Lord asked what measure of inflation it is. It is CPI. The noble Lord and my noble friend Lord True also asked about passing the planning fee question to local authorities. There has not been a decision on that at the moment. It was part of the consultation, as I said, and it has not been thrown out. In answer to the question from my noble friend, work is continuing with the Local Government Association to look at that and at reviewing fees more regularly.
Another question which the noble Lord, Lord McKenzie, asked was on Article 4 directions and HMOs. I have three pages here—the noble Lord may not want all of that but I am happy to send them to him. The changes made in October 2010 mean that a change in use of a family dwelling to a small HMO is permitted development. Where there are local concerns about concentrations of HMOs, on the other side, authorities can make Article 4 directions to restrict the national permissions after consultation with the local community. We do not believe that councils with substantial HMO problems have been slow in applying for Article 4 directions as a consequence of not being able to charge a planning application fee to determine them. I think that covers the question that the noble Lord asked. He is looking as if the answer is sort of yes. If there is anything further on that, I will of course let him know.
The question of capacity is something that varies from local authority to local authority. I think what was meant by capacity is the number of planning officers available to deal with applications. To some extent, that will be governed by the amount of work that local authorities have. In somewhere like London, there may need to be more than there are. The gap in a local authority’s budget, if there still is one, will have to be borne by that local authority, certainly for the time being, but we do not expect those gaps to be very large. I think that that answers some of the noble Lord’s questions. There were only five on these regulations instead of the 40 on the previous matter. I am very nervous about the noble Lord, Lord McKenzie, because he normally produces whole strings of questions which are usually quite difficult to get a grip on, but I think I have answered him today. I am grateful for the responses from the noble Lord and from my noble friend Lord True.
Schools: Classics
(12 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Aberdare
To ask Her Majesty’s Government what steps they will take to promote the teaching of classics in schools.
Lord Aberdare
My Lords, I did think briefly of making my opening remarks in Latin, but I desisted for two reasons. First, as a distinctly lapsed classicist—despite having studied Latin for at least 15 years and Greek for over 10—I am ashamed to say that my Latin would no longer be up to the task. Secondly, addressing your Lordships as “O Senatores” might take this debate into areas beyond its proper boundaries.
I sought this debate because I myself have benefitted enormously from the opportunities I had to study classics, which I take to include Latin, Greek, ancient history and classical civilisation. I would like to extend such opportunities much more widely. In preparing for the debate, I have been greatly helped by briefing materials provided by Peter Jones, that princeps or primus inter pares of classicists. I nearly said éminence grise, which would have been inappropriate. He is a leading light of the charities Classics for All and Friends of Classics; some of your Lordships might be familiar with his Ancient and Modern column in the Spectator. I was also helped by the excellent briefing pack put together at short notice by Venetia Thompson of the House of Lords Library. I am grateful to noble Lords who plan to speak and much look forward to hearing what they say. I thank them for their patience in coping with the unpredictable timing of business in this place.
I will seek to make three points: that classics is important; that it should be offered in more, preferably most, schools; and that Government should actively support that aim, including by providing for appropriate qualifications and examinations systems and ensuring an adequate supply of trained teachers.
First, to adapt the old Guinness ad, “Classics is good for you”. Surely there can be no other subject area offering such a breadth of learning opportunity and interest encompassing language, literature, history, philosophy, art, technology, culture and others. Latin and Greek are not only helpful in learning languages in general; they can be invaluable aids to improving grammar and vocabulary in our own language, English. Some 60% of English words are estimated to have Greek or Latin roots. In the vocabulary of the sciences, that figure rises to over 90%. As highly inflected languages, with all those conjugations, declensions, cases, tenses, moods, voices and so on—never forgetting the ablative absolute—Latin and Greek are invaluable routes to learning intellectual discipline and logic. My own former skills—in debugging complex programming code as a systems analyst at IBM—owed much to my training in classical languages. The chairman of IBM UK in my later years there, Sir Anthony Cleaver, was himself a classicist.
One only has to list some of those who have gone on from studying classics to distinguished careers to recognise the breadth of opportunities it can open: Mary Beard, Colin Dexter, Stephen Fry, Ian Hislop, JK Rowling, Tom Stoppard, Fay Weldon, and PG Wodehouse. In your Lordships' House—indeed, in this very room in some cases—we have the noble Lord, Lord Butler of Brockwell, the noble Baroness, Lady Greenfield, the noble Lord, Lord Waldegrave of North Hill, the noble Baroness, Lady Warnock, and others. Last year, London was fortunate enough to have both a mayor and a lord mayor who were classicists.
In 2011, Friends of Classics conducted a survey of almost 2,200 people who had studied classics. Well over 80% of them supported classics being taught in schools; over half saw classics as useful or very useful for their own area of work—for example by enhancing language skills, breadth of understanding, and thinking and reasoning skills. Sixty-eight per cent of them thought that studying classics had helped them personally. Perhaps most striking of all, no less than 81% believed their own quality of life had benefited—a view which I wholly endorse.
Secondly, classics is good for schools. Currently, about 70% of independent schools teach classics, but only about 25% of state schools—in many cases mainly to their more talented students. State schools often face problems of timetabling classics lessons and finding staff able or willing to teach it. Despite that, three-quarters of state school classics teachers would like to increase the numbers studying classics and 47% of state schools without any classics teaching would try introducing classics subjects if offered small grants to do so—of the order of £5,000 over three years. The number of state schools which have started Latin in the past 10 years, using the Cambridge Schools Classics Project e-Latin initiative, is over 500.
Burntwood School for Girls in Tooting, despite specialising in science, not only offers Latin to its students, but last year added Ancient Greek as an extended curriculum offering in years 9 and 10. Some 250 girls are doing Latin and 30 girls have now started working towards a GCSE in Greek. This has been achieved largely through the appointment of a single classics teacher, Sarah Brack, and in a school where some 60 languages are spoken at home and 20% of students are eligible for free school meals. Yet its exam performance puts it in the top 10% of non-selective schools in England.
If more schools like Burntwood are to start teaching classics, they need to be confident that appropriate qualifications and examination systems are in place to support them. I congratulate the Government on the fact that Latin, Greek and ancient history are all included in the English baccalaureate, although the number of boards offering them is small. On the GCSE front, the withdrawal of AQA's Latin GCSE exams in 2006 led to a fall in the number of candidates nationally. However, the introduction of a new Latin exam by the Welsh Joint Education Committee in 2010, despite not having full GCSE status, resulted in a significant increase in candidates, from 8,500 to 12,000.
The Government plan to move to a system with only one examination board for any subject. This could present a real challenge for specialist subjects like classics, where there is a wide variation in the needs and attainments of students: for example, between those who study Latin for GCSE for up to 500 hours at independent schools with a long tradition of teaching classics, and those who have no more than 120-140 hours of teaching at a state school new to the subject. If there is to be only one board, the Government should ensure that it can offer examinations with the flexibility to cater for these different needs, without loss of rigour.
Finally, the most crucial factor in successfully teaching classics, as with other subjects, is the quality of the teachers themselves. There must be an adequate supply of properly-trained classics teachers. At present, there is a net loss of something between six and 26 specialist trained classics teachers every year, despite the interest of schools, parents, students and others in increasing the numbers studying the subject.
The various bodies dedicated to promoting classics teaching are actively working on alternative ways of addressing this challenge. For example, they are looking at developing “bolt-on” classical modules for PGCEs, so that someone studying to teach modern languages or history would also receive a month or so of classics training to offer schools employing them the basic skills needed to try out classical subjects. For teachers already in schools, mentoring and support services could be offered to enable them to start classics courses.
Initiatives like these cost money, and the classics bodies have a strong record of coming up with funds to support their subjects. But the Government could help to achieve a great deal more, and to bring the benefits of classics teaching to a much wider range of state students. They might offer small grants to encourage schools to take the first steps into classics teaching: perhaps a few thousand pounds, possibly in the form of matched funding for money raised by the schools themselves. They should ensure that there are suitable exams in place to recognise the achievements of schools and their students in classics subjects; and they must take steps to halt the current downward trend of qualified classics teachers. I look forward to hearing the suggestions of other noble Lords on how the Government could help.
Noble Lords may recall Winston Churchill's statement that,
“I would make them all”—
that is school children, and I am afraid I cannot do Sir Winston’s voice—
“learn English: and then I would let the clever ones learn Latin as an honour, and Greek as a treat”.
I would argue that he was wrong. I prefer to end with a 19th century quote from the Reverend Thomas Gaisford, Dean of Christ Church, Oxford, my own former college:
“Nor can I do better, in conclusion, than impress upon you the study of Greek literature, which not only elevates above the vulgar herd but leads not infrequently to positions of considerable emolument”.
I strongly endorse his recommendation, and would add that even without the considerable emolument, which I regret I have failed to attain, classics teaching offers incalculable benefits not just to those lucky enough to receive it, but to the wider communities in which they live and indeed to the UK as a whole. For that reason the Government should do all that they can to promote, extend and support it.
Baroness Perry of Southwark
My Lords, it is a great pleasure to follow the noble Lord and I thank him for securing this debate and for the delightful speech that he has made to introduce the topic. I, too, am a great lover of Latin, in particular, and I owe a lifetime debt to my big sister, who was a Cambridge classicist. She introduced me to Latin for Today: Book One a year before anyone else in my class had begun to study it, so that I was able to shine throughout my first year. That ensured that Latin has always been one of my favourite subjects.
I agree entirely with the noble Lord in his analysis of what is needed in terms of teaching and the teachers who are capable of inspiring and enthralling the young. However, I want to celebrate our success stories and how good it is that Latin is now increasing in popularity not only in independent schools, as seen by the number of young people who are taking it. As the noble Lord has said, in the past 10 years, more than 500 state secondary schools have started Latin for the first time. The previous Government are greatly to be commended for their e-course initiative with its videoconferencing and mentoring for teachers, which made a great leap forward in the popularity of the subject.
The UK has a world beater in the Cambridge Latin course. It sells more than any other classics course in the world. The Cambridge School Classics Project has given about £1 million of its profits to promote the teaching of Latin in state schools. The coalition initiative put Latin on a par with modern languages and that has helped to fuel the expansion. Secondary schools have, as I said, found that Latin and Greek are increasingly popular and that they help with the understanding of grammar and of English words and spelling. One reason why I believe that classics is so enormously helpful to young people is that it teaches them about sentence structure and so helps them to think much more clearly. It also helps them with their appalling spelling.
Another great success story is the expansion of the teaching of Latin in primary schools, which I wholly support and think is wonderful. In London alone the Iris Project, with the mayor, Boris Johnson, has started the Love Latin project in schools. Already, 200 primary schools in London alone are enjoying that programme. Teachers say that it is engaging children who, in other ways, are quite hard to reach.
For me, Minimus is the real hero of primary school Latin. Minimus is a mouse who lives with a family in Vindolanda in the Roman Britain of 100AD. He lives in the family with the fort commander’s wife and their three children. They also have a cat but, most importantly, they have Minimus who becomes a hero of the primary syllabus. He apparently has won so many friends among young children that the popularity of the Minimus course is spreading to the point where it has sold 140,000 copies throughout the United Kingdom. I am happy to say that the equivalent for ancient Greek—whether it will be a mouse or another animal, I do not know—is now being developed.
I will close with some quotes from teachers and pupils about the Minimus course. One teacher said: “There are such brilliant stories in the classics and it is so good to be able to introduce children to them”. A pupil said: “Latin helps me with writing in literary classes”. Above all, there was the pupil who said, “You learn to deal with words. You can’t talk to an ancient Roman with gestures and smiles. The language is all there is”.
Lord Thomas of Gresford
My Lords, the noble Lord, Lord Aberdare, must be congratulated on introducing this debate. He failed to mention one of the most distinguished classicists in the Room, who was my former law tutor at Cambridge. The noble and learned Lord, Lord Lloyd of Berwick, not only carried away first-class honours in the first part of the tripos but won the ancient and much revered Sir William Browne gold medal in 1951, for, I think, an ode in the style of Sappho. That feat did not prevent him getting first-class honours with distinction in part two of the law tripos. I am afraid that I was a student of baser metal. Indeed, my director of studies, Professor Edward Kenney of Peterhouse, the professor of Latin in the university, advised me at the end of an undistinguished part one to read something else, which is how I came under the control of my noble and learned friend, Lord Lloyd.
It was asked then and still is: what is the point of a classical education? For me, it is the source of those generous liberal values which have from time to time leavened the culture and civilisation of Europe and the West. On common humanity across millennia, I have always been tickled by Homer’s tale that old men love to talk of their deeds of valour in past battles. Anyone who has ever played rugby will know that when two or three old rugby players get together over a pint of beer, they talk about their past battles. As to love, Hector’s farewell to Andromache and his son—to fight a battle that he did not desire but had, for the sake of honour, to endure—touches us to the heart. The fall of sacred Troy, the death of his father and his brothers and his own predicted end at the hands of Achilles meant nothing compared with the pain he felt that his wife would be sold into slavery and that those who saw her would weep and say:
“That woman is Hector’s wife”.
On fidelity, Argus, Odysseus’s dog, was cast out on to a heap of dung. He was covered with fleas and the only creature to recognise Odysseus as he returned to Ithaca from his travels. Argus lifted his ears and wagged his tail but was too weak to get up from the pile of dung. Homer tells us that as Odysseus departed:
“Argos passed into the darkness of death, now that he had fulfilled his destiny of faith and seen his master once more after twenty years”.
We touch people over that period of time—3,000 years—and common humanity is there.
Then there were the beginnings of democracy in Athens in the golden period with an assembly open to all citizens, regardless of wealth or class. It had an executive council chosen by lot, which, as your Lordships know, is a solution sometimes proposed for this House. There was justice by the verdict of one’s peers, the creation of the jury and courts composed of jurors drawn from the older citizens, who heard cases without the intervention of judges or lawyers—those who buzzed, as Aristophanes put it in “The Wasps”. There was the defiance of unjust law, told by Sophocles in the story of Antigone, whose loyalty to her brother led her to defy the edicts of the tyrant Creon. This is where drama was born; not just drama but comedy, poetry, Greek sculpture and architecture, which gave inspiration to the Renaissance and permeates the whole of our own civilisation. There were the philosophers, Socrates and Plato, who laid down the foundations of the philosophy that we share.
Romans were concerned with more mundane matters: belief in their right to rule over a lesser humanity; the exercise of power; law and order; dominion, with the spreading of boundaries “wider still and wider”—there was something of the Conservatives about them, one tends to feel. However, we learn much from the fate of the Roman empire when the Visigoths broke down the gates of Rome.
I heard at the weekend that my grandchild is taking up the study of Latin. The noble Lord, Lord Aberdare, is right: it is all down to inspirational teachers. I was fortunate in having two inspirational teachers in my state school, Frederick Rowlands and Mr Noel Jones. They inspired me to appreciate my place in the world and the fact that humanity is the same now as it was then. These are values that I hope will continue to be maintained.
Baroness Warnock
My Lords, I am sure that I speak for everyone in thanking the noble Lord, Lord Aberdare, for this inspirational occasion to talk about classics. However, I am not going to do that. I am going to talk about Latin and linguistic considerations, but nobody who has heard the noble Lord, Lord Thomas, speak could fail to weep with recognition of the excitements that there are in classical literature.
I am sure that I am not alone in judging our colleagues on the Bishops' Benches by the way that they read the Parliament prayer. The Parliament prayer, as everybody here knows, contains at its core an ablative absolute: “we … laying aside” and then it goes on until the words “partial affections”. The bishops who know Latin properly know that you have to pause after “grant that”; then comes the ablative absolute; then it goes on with what is being asked for, which is that our deliberations should have good effect. If you do not know that it is an ablative absolute, you make absolute nonsense of the grammar and the syntax of the prayer. That is my criterion of what is a good bishop, or archbishop.
I believe that the study of Latin is unique in that it gives one a feeling of the sense of the structure of a sentence, its syntax. I do not think that Greek, although it is a wonderful language, is quite as good as an instrument of learning about language as Latin is. Latin is indescribably clear and moreover small children, youngish children in primary school, love learning Latin because it is in the nature of code-breaking; there are certain rules and you can apply them to the sentence in front of you. You can get it right or you can get it wrong and that is of enormous attraction to children when learning. It is better, in some ways, than a modern language because it can be taught in its purest form—it is formal in the purest sense—and you do not have to be inhibited by pronunciation, accent or keeping up with slang. You do not have to learn how to ask the way to the station or how to get on a bus. It is there without the necessity of speech. It is to do with writing. Of course, that affects the way one speaks but it is essentially the written word. I believe that there is no profession—not just that of journalists and writers—where one does not need to be able to write coherently, clearly and in a way that is persuasive. The utility of learning the structure of sentences and their syntax is therefore without compare.
For about 20 years, I have been setting a paper and examining it for an essay competition for the Girls’ Day School Trust—it covers about 25 schools. There is the most enormous difference in the essays that I read, of which there are about 220 every year, between those girls who can write proper sentences and those who cannot. Even if their ideas are exciting or interesting, if they cannot write proper sentences then I cast away the essay. Over the 20 years, I have noticed a very severe decline in this ability. Largely, it is connected with the way that children communicate with one another through blogs and various kinds of electronic devices, which have changed the language. They can no longer distinguish between informal and formal writing: the kind of writing which they will need if they become civil servants, politicians, lawyers or doctors. They will all need to be able to write, so I recommend very much the use of formal Latin teaching. Also, as I have said, children greatly enjoy that kind of formal teaching.
Although I would hope that many of the people who learnt Latin at school would go on to study classics, ancient history or Greek or even classical studies—although I have never been quite sure what that actually embraces—Latin on its own is nevertheless infinitely worth teaching. I am delighted that there is this movement towards teaching it. As for finding the teachers who are able to do it, there is much to be said for the suggestion of the bolt-on to the modern language training course, as there is for someone who is already in the school—perhaps a modern linguist or an historian—teaching themselves Latin as they go along. If children can learn it, so can the teacher. It would be great fun, when teaching, to go along one step ahead of your class in North and Hillard, or whatever the appropriate Latin book now is. I hope that this will gather weight and that the Minister can assure us that the Government are behind this and see the point of it.
Baroness Coussins
My Lords, I want to draw attention to the common cause between modern and ancient languages. A joint meeting a couple of years ago of the All-Party Group on Modern Languages, which I chair, and the group on classics noted that Latin automatically offers the integration of language, literature and culture that teachers of modern languages are also trying to achieve. I am sure the same goes for Greek. When I started Latin aged 11—in the same class, incidentally, as the noble Baroness, Lady Greenfield, who has been referred to—we had a dynamic young teacher who taught us as though it were a modern language. For the first few weeks, no English was spoken in our classes. We learnt it by speaking it, as well as through the rigours of grammar and by writing. That certainly fuelled my interest in modern languages and when I spent my gap year in Spain, having done no Spanish at school, it was thanks to eight years of Latin much more than to eight years of French that I became fluent in Spanish after only a couple of months. It is generally acknowledged that Latin provides a strong foundation for learning all Romance languages.
I get cross when people say that Latin is dead. We do not go a day without hearing or using words like media, video, referendum or agenda; phrases like quid pro quo, pro bono, bona fides, mea culpa; or even abbreviations like et cetera, eg, or ie. Some people are quite surprised to discover that they are speaking Latin. Some would argue that we do not need to learn a modern language either, as English is enough. This is not true, of course, although this is not the debate in which to explain why. What is relevant is the evidence showing that learning languages, whether classical or modern, improves oracy and literacy in English too. That is one reason why modern languages have been so enthusiastically welcomed by primary school teachers, and why the Minimus resource for primary school Latin has been so popular.
Another criticism of classics is that it is elitist, and the Government should pay special attention to this. Again, there is a parallel with modern languages. In state schools only about 40% of pupils take a modern language GCSE now that they are optional after age 14. In the independent sector, it is about 90%. I am sure that a similar breakdown applies to Latin and Greek. I expect that the Minister will tell us that the EBacc will come riding to the rescue, and I readily acknowledge that it has led to some improvement. However, the Government must do more if they want to achieve their aim of closing what they have called “the vast gulf” between state and independent schools. Nearly half of state schools say that they are not improving their language offer at all as a result of the EBacc. Surely it would be a win-win initiative to complement the EBacc with a languages-for-all policy, effectively restoring compulsory languages, whether ancient or modern, for all children up to age 16. Without this, all languages, but especially the classical ones, will remain the elitist preserve of the independent sector. I hope that the Minister will tell us whether the Government are still open to restoring compulsory languages to age 16.
Languages are not just for the bright ones or the top set. Children of all abilities can learn, love and benefit from doing Latin, just as they can from doing French. They should be doing it in the mainstream timetable, too, and not in the lunch hour or in after-school clubs. There has been an interesting proposal from the charity Classics for All to help boost the supply of teachers, which is that a one-month classical element could be bolted on to all modern language PGCE courses. This is worth looking at and I am interested in the Minister's views.
We risk a lot if we let classics go from schools. In the words of Professor Mary Beard, in a lecture she gave last year,
“it would be impossible now to understand Dante without Virgil, John Stuart Mill without Plato, Donna Tartt without Euripides, Rattigan without Aeschylus …. if we were to amputate the classics from the modern world, it would mean more than closing down some university departments and consigning Latin grammar to the scrap heap. It would mean bleeding wounds in the body of Western culture”.
Lord True
My Lords, I, too, thank the noble Lord, Lord Aberdare, for introducing this debate. It was also a pleasure to hear from a fellow Peterhouse classicist. If Professor Ted Kenney was not happy with him then, he certainly would be now.
It is 53 years since I was introduced to Kennedy’s Latin primer—or Kennedy’s eating primer, since some assiduous boy had altered every front cover at my school. Forbidding though the fruit may have seemed at first, the eating of it ever since has been a pleasure and a delight. As others have said, a classical education needs no other justification than the pleasure it gives. It opens a window into the mindset that has created or informed some of the greatest achievements of art, literature, architecture and music, not just in classical times, but over all the centuries of civil education until, I regret to say, the modern, vandalistic and often deliberate sundering with all that was beautiful and good in the past culture of European nations.
I think it matters, too, at the individual level. If you are in a country church and see the carved memorial of a talented young woman who died from consumption in the neoclassical 1820s or, perhaps, the proud epitaph of a rather unsuccessful Venetian admiral, you can—if you know Latin—cross the wall of death and enter the world of that person. If you know no Latin, they lie dead and cold for ever. Not a week goes by without my reading or using Latin. I regret not a moment of that and I certainly, as the noble Baroness said, do not regret the discipline and precision of expression that comes from it.
Abbott and Mansfield followed a few years later—and the beautifully flexible Greek language has given me equal pleasure. I was probably one of the last who went through the university tripos, translating and writing prose and poetry both ways. I am not going to venture to be torn like Cinna the poet by this intelligent Committee by trying some of my verses on you, my Lords.
We recently did a straw poll of local secondary schools. Almost all the independent schools offer classics; of the state schools, two established academies offer none and the other offers Latin from year 7. Of the maintained schools, one offered no classics; neither did the second. It believed there was no demand for it. Two others do offer extracurricular Latin and each has about 30 takers at key stage 3. The last one sends four year 10s to a local independent school to study Greek.
I am sure that this mixed picture is fairly typical and I make no criticism of those that do not offer classics. Overexpansion of the curriculum did have an impact; I know that my noble friend Lord Hill of Oareford is addressing this and I support him. I urge him, as he reforms what is taught, not to fall under the influence of those with a utilitarian delusion that what is taught is a school for work, not a school for life.
I have one final thought. In taking classics to fresh places, let us please not fight shy of the critical place of grammar, as the noble Baroness said, in the name of accessibility. All my children were offered Latin; the first worked to greats at Oxford; the second to A-level; the third fell by the wayside at GCSE. When I asked her why, she said that she was bored with the discovery method of learning used to try to work out what the ending “amus” meant for herself, when her brothers had learned their “amo, amas, amat” in a day and have remembered it ever since. Ironically, she would have preferred to have been taught like them. Therefore, let us not neglect the essential foundations of grammar, which, as others have said, equip us to confront so many languages, including that poor mauled old thing that is our own language.
Finally, will the Clerk of the Parliaments help us? Can we please have some Latin back on the business of the day?
Lord Stevenson of Coddenham
I thank the noble Lord, Lord Aberdare, and congratulate him on instigating this debate. I join with him in recognising the extraordinary work of Peter Jones, without whom I do not think we would be here. I do not think there would have been a revival of classics without Peter Jones; he is a remarkable human being. I think I am a vice-president of whatever it is he runs and I should declare that interest. I agree with everything that has been said, so I am not going to repeat it. Where else can you learn the basics of comparative philosophy, literature and history in one go—and the basis of our civilisation? It is the only way, so take that as read.
I want to make two much more banal, practical points addressing government. First, this is cheap. My other obsession with schools is reintroducing musical education into schools—that is expensive. I had a modest part to play in the financing of Minimus; that was not expensive. Organising the kind of teacher training and the serving up of Latin and Greek—Mansfield and all in schools—is not expensive in the big scheme of things.
Secondly, I buy everything that the noble Lord, Lord True, has said, but I am unapologetically going to argue the utilitarian, vocational case. I am fed up with people saying, “Well, it’s jolly nice but it’s over there. It’s not very vocational, as though it were nuclear physics or medicine”. From my experience—and I am afraid that I am going to talk about my experience—I found it vocationally very important to me.
Bear with me if I say that most of my life has been spent setting up things—enterprises for profit and a lot not for profit. What do you need if you are going to do that? First, you need rigour, intelligence and the ability to analyse—there are no two ways about it. Secondly, you need resilience. Thirdly, you need creative resourcefulness in a tight corner, because you get into tight corners whether you are in a for-profit business or, as I am at the moment, a large mental health charity. What do you think doing a Latin unseen is about? It is about bashing your head with pure a priori logic against what is happening. I am sure that all previous speakers had no problems in getting Latin unseens out, but when you are up against it, boy, you need resilience—there are 30 minutes to go and you are panicking. Fourthly, when you are five minutes from the end and you have not got it out, you need outstanding intelligent creativity to produce something that might fool the examiner. Many a true word is spoken in jest, but I have found that grounding extremely helpful and useful.
I would argue everything else, but I just look down the Table at the Minister to say that the facts are clear: a revival is going on; it has not cost very much; to keep it going will not cost very much; and it is fundamentally useful for our children. Finally, in the briefing papers I read the astonishing statistic that 70% to 80% of private schools teach classics, whereas the figure for maintained schools is a small minority. The private schools, I regret to say, are not doing it out of cultural wisdom; they are doing it for fundamentally utilitarian reasons.
Lord Butler of Brockwell
My Lords, I, too, thank the noble Lord, Lord Aberdare, for giving your Lordships this chance to speak up for the classics. I am particularly pleased to follow the noble Lord, Lord Stevenson, whose son read classics at my college under my care with great success and distinction.
For years after I ceased to be a classical student, I feared that Latin and Greek were dying as areas of study. It therefore came as a great, but extremely encouraging, surprise to me to be told when I returned to Oxford that—this may surprise your Lordships—more students were studying classical-related studies today than at any time in Oxford’s history. That is extraordinary, especially since during most of its history there was nothing else that you could study. The university is, of course, much bigger today, but even so that is an encouraging statistic.
The truth is that, perhaps surprisingly, the demand for classical studies exceeds the supply, especially, I am afraid, in the state sector. As has been pointed out, although it is greatly to the credit of the Government to have included Latin, Greek and ancient history in their EBacc proposals, they are not making sufficient provision for training teachers in classics to replace those who are retiring. Yet, as has also been said, those state schools that have introduced Latin in particular have found that the children love it.
Last week, I had the great joy of taking a 14 year-old grandson on a tour of the great classical sites of Turkey and of witnessing his reaction—time even better spent than time in this House. My grandson, however, has a great advantage. He is at a private school. He can go where his academic inclinations and talents lead him and he will get the necessary support. In this, as in other areas, we should be working to make sure that all children have similar opportunities.
The eloquence with which noble Lords have spoken in this debate makes a sufficient case for the classics in itself and, like the noble Lord, Lord Stevenson, I will not add to it. However, one other thought occurred to me as I was going round Turkey. It does not need me to remind your Lordships that the Middle East is a crucible where so many of the issues affecting the future peace of our world will be resolved. The history of the Middle East goes very deep—back to classical times and before. I believe that many of the wrong decisions taken in recent years have been taken because of a lack of deep understanding and knowledge of the region—another reason for teaching classical history.
We have every reason to be grateful to organisations such as the Friends of Classics, Classics for All, and, although it goes against the grain for me to praise any Cambridge initiative, the Cambridge School Classics Project. They have done great work in supplementing the Government’s support for the classics. We know that government resources are limited, but I hope that the Minister will tell us that, where it is in the Government’s power to support the classics at little or no cost—with examples of where that can be done and where constraints can be removed—they will remove obstacles in the way of those who seek to promote the learning of classics.
Baroness Hughes of Stretford
My Lords, I, too, thank the noble Lord, Lord Aberdare, for initiating this debate and giving us the opportunity to listen to many interesting and informed contributions this afternoon—all passionately in favour and convinced of the benefits of having the opportunity to learn an ancient language or study classical culture. I share that passion. I was lucky enough to have the opportunity to study Latin, despite going to a state school and coming from a very working-class background in which no one had any idea about the classics. None the less, and despite having a teacher unlike that of the noble Baroness, Lady Coussins, called Mr Durden, who was very much like his name, he did not put me off and I came to love Latin.
I share the views expressed this afternoon about the benefits that spill over into other areas of activity and study. In my case, I have no doubt that the logical thinking, the accurate application of rules and structure, and so on, helped me in my subsequent university-level studies, which were not in the arts but in science. Like the noble Lord, Lord Aberdare, I think that there is great crossover in the skills gained from classical languages into science and technology. As the excellent briefing reminded us, we perhaps all agree with the classic comment by Dawkins that what classics has always done is to teach people fundamentally how to think.
Obviously, over recent years, there have been many impediments to sustaining the teaching of classics. We are all concerned about the disparity that exists between private schools and the state sector, with many children in state education, unlike me, not having the opportunity to study classics. The removal of classics from the matriculation requirement of some of our major universities some years ago was significant, leading to fewer schools teaching the subject, fewer teachers being able to teach the subject and the Training and Development Agency for Schools, I understand—the Minister will correct me if this is not still the case—putting a cap on the number of teachers each year who can be trained for the postgraduate teaching certificate to teach Latin and Greek.
It is remarkable that, despite that rather hostile environment, the classics are clearly having a renaissance. There is clearly demand, including in the state sector, for the opportunity to study classics. The charity Classics for All, as the noble Lords, Lord Aberdare, Lord Stevenson, and others, have said, has played a major role in that. We have seen considerable evidence of some schools being innovative in experimenting with how they can provide classics teaching by joining together, providing after-school tuition and, as the noble Baroness, Lady Perry, said, introducing primary school children to the classics, which is excellent. The stimulation of online resources, the e-course which the noble Baroness mentioned, and the Cambridge School Classics Project have also been very important.
Could the Government do more—arguably, by including ancient languages, at least, in the English baccalaureate? The Government have done more for classics, at least the languages, than they have for some other subjects, but there are still big issues about the supply of teachers, not having a comprehensive examination system and addressing the disparity that we have all mentioned with state schools. However, at least the Government have given their support in that way to the classics. If the Committee will indulge me, I wish that they had also done so for contemporary arts, culture and music, which we are now seeing disappearing from our schools because they are not included in the new performance management system, which is the English baccalaureate.
The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)
My Lords, I should probably start with a declaration of an interest: I am not a classicist. That will become evident as my comments unfold, as I shall clearly not be able to demonstrate all the qualities and attributes that a classical training would have endowed on me had I not been a mere historian.
I am grateful to the noble Lord, Lord Aberdare, for giving us the opportunity for this debate, not least for assembling the formidable brain power which has been assembled here and which has entertained us with a range of observations. He set out a compelling case for teaching classics in schools, a case that other noble Lords endorsed and, in many ways, amplified. We heard how the classics help to develop an understanding of English grammar and vocabulary, as the noble Baroness, Lady Warnock, argued; how they help with mastering modern European languages, as the noble Baroness, Lady Coussins, explained; and how they help to instil more disciplined ways of thinking that benefit children in other subjects.
When I had my own very small business, I was always interested in job applicants who had read classics because I knew that the chances were that they would be able to think logically, to write well, to express themselves clearly and to bring a different perspective. I agree very much with the points made by the noble Lord, Lord Stevenson of Coddenham, about the merits of a classical education from a utilitarian point of view as well. For people who think that the classics are dated, the noble Lord, Lord Aberdare, told us of his experience of debugging programs for IBM. The other day, I read that Mark Zuckerberg, the founder of Facebook, that modern communications phenomenon, was a classicist. The noble Lord, Lord Aberdare, I think, talked about the considerable emolument that would be derived—and he has made more than £10 billion, which constitutes a considerable emolument.
There are good practical reasons for children to study the classics, but we should not rest solely on the utilitarian argument that classics are good because they will help young people to get a job or to do better in other subjects. I agree with my noble friend Lord True on that. We should argue for education as being a good in itself. My noble friend Lord Thomas of Gresford reminded us that the power of the classics is timeless. We should want our children to have a window into a different world, to be thrilled or moved by the Greek myths, to be astonished by the achievements of the Greeks and Romans and to see how much we still owe to them today. Nor do I subscribe to the notion—the noble Baroness, Lady Coussins, made this point forcefully—that classics are somehow elitist and that they cannot have any relevance to children from poor backgrounds. It is patronising in the extreme to suggest that children on free school meals or who live in inner cities are not able to study Latin or that it is not relevant to their lives.
Like other noble Lords, I feel strongly that we should want the benefits of learning classics to be extended more widely. Yet, as we have heard, whereas 60% of independent schools were teaching Latin in 2011, the figure for state secondary schools was only 14%. For Greek, not surprisingly perhaps, the situation was even starker: 37% of independent schools were teaching Greek but only 1% of state schools were. So as my noble friend Lady Perry said, it is excellent news—and I agree with the noble Baroness, Lady Hughes of Stretford, on this—that there is a growing number of examples of state schools, primaries and secondaries, in some of the poorest parts of the country giving their pupils the chance to learn Latin and to learn about the ancient world. The Iris Project, which is led by classics departments in some of our leading universities, is taking Latin into inner-city primary schools in London and Oxford, and I think now in Liverpool and south Wales. Independent schools such as JAGS, Tonbridge, St Paul’s and King’s College, Wimbledon, are working with local primary and secondary schools to inspire an interest in Latin. My noble friend Lady Perry reminded us about the Minimus course and the fact that it has sold some 140,000 copies. We have also heard about the Mayor of London’s Love Latin initiative, which should reach 200 schools this year. Academies such as the ARK-sponsored Burlington Danes offer students the chance to study Latin and two European languages.
I have been particularly struck by the example of the West London Free School, one of our first free schools, which is consciously offering a classical liberal education. This comprehensive school has one-quarter of its children on free school meals. It has decided to make Latin compulsory at key stage 3—that is, up to the age of 14. It has drawn up its own curriculum and hired outstanding teachers from the independent sector to help to deliver it. It has, incidentally, been able to do that by virtue of the freedoms that academy status gives them—namely, freedom over the curriculum and freedom to employ good teachers from a wider range of walks of life. So convinced is it of the benefits of what it is doing and the impact on its pupils that it is setting up a local south-west London branch of its Classical Association. Its approach seems popular with parents, as it has just had nine applicants for every place.
We have heard this afternoon about a number of initiatives, many of which were prompted by the excellent organisation Classics for All, which certainly is reigniting an interest in the classics in state schools. Rightly the question put was: what are the Government doing to help to support that revival? Alternatively, as the noble Lord, Lord Butler of Brockwell, put it, one may ask whether there are any constraints that the Government can help to overcome.
The first point that I should make is that our overall approach is a permissive one. We want schools to have more freedom to decide what they teach. We have pursued that goal in two main ways. First, we are seeking to slim down the national curriculum for all schools, making it less prescriptive and leaving more time for schools to make their own judgments about what and how to teach and, in the context of today’s debate, freeing them up to teach classics.
Secondly, and of growing significance, academies do not have to follow the national curriculum. They have the freedom to develop a curriculum that they think best meets the needs of their pupils. More than half of all secondaries are now academies or on the way to becoming one and they have those freedoms. That number is going up the whole time. As I said, those academies also have greater freedom to employ staff from a variety of backgrounds, thus making it much easier to recruit teachers from independent schools or, as some independent schools are doing, to take a bright young classicist straight from a top university and to train them on the job.
New teacher recruitment was a recurring theme. We are providing bursaries of up to £9,000 for trainees studying to become teachers of Latin and Greek, which are priority secondary subjects. Schools where there is a demand for classics can also bid directly for School Direct places. The Teaching Agency aims to allocate enough teacher training places each year to match the demand for individual subjects. If demand goes up, the number of places that it offers will increase as well. I was asked specifically about the PGCE and the add-on. I will be happy to pursue that point further and to understand the details better. We are encouraging teacher training providers to offer more flexible solutions to the needs of schools and developing new PGCE courses in response to the new primary national curriculum, which is taking modern languages to younger pupils. Developing a love of learning a language means that providers of training are offering wider choices in language training, including Latin as part of a modern foreign languages PGCE.
I have mentioned the work being done by independent schools to support local schools to offer their pupils a taste of the classics. I am prompted by this debate to seek a meeting with independent school representative bodies to explore whether there is any more that we might be able to do together to see whether we can spread that. As has been mentioned, initially by the noble Lord, Lord Aberdare, we have also introduced the EBacc measure, which shines a spotlight on those schools offering the mix of subjects, including Latin and Greek, that are most likely to enable students to be able to go to the top universities. The effect of the introduction of the EBacc on schools seems to be striking. Whereas in 2010 22% of pupils in maintained schools took the EBacc subjects, we estimate that that figure will rise to 49% by 2014, which is quite a marked take-up.
I was asked specifically about having more than one exam board for Latin—the noble Lord, Lord Aberdare, asked me about the Government’s intention to move to one exam board per subject. As he knows, we think that it is necessary to protect the rigour of qualifications and to stop a race to the bottom on standards. That lies behind our thinking in moving to one exam board. We certainly do not want the new EBCs to prevent greater breadth of study and a balanced curriculum that includes time to study other subjects. We are exploring that as part of the current consultation.
By giving schools more freedom around the curriculum and employment, by raising the bar on academic achievement, by re-emphasising the importance of academic subjects through the EBacc, by tackling the culture of low aspiration for children from disadvantaged backgrounds, we are, I contend, helping to create an environment in which the seeds of a classical revival can take root. I will certainly draw some of the points made this afternoon to the attention of my honourable friend Liz Truss, who is the Minister responsible for these matters, and flag them up with her.
Rather than having a top-down approach with a range of new initiatives shooting off in all directions, we are seeking to build a schools-led system in which schools are more in the driving seat. I very much agree with all noble Lords this afternoon that the case for classics is strong. I applaud the work that is being done by its champions. I celebrate the encouraging signs that I think there are of quickening interest in the classics and I thank the noble Lord, Lord Aberdare, for bringing this matter to our attention this afternoon.
Azerbaijan and the South Caucasus
(12 years ago)
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Lord Laird
To ask Her Majesty’s Government what is their assessment of the United Kingdom’s relationship with Azerbaijan and the South Caucasus.
Lord Laird
My Lords, I thank all those who have supported and helped me in securing this debate on Azerbaijan and the south Caucasus. Azerbaijan is a country I know well. I have to declare an interest as a member of the European Azerbaijan Society’s advisory board, for which I receive an honorarium. Also, I have visited Azerbaijan at their expense.
The subject of this debate is the UK’s relations with Azerbaijan and the south Caucasus. These relations go back many years. The UK was one of the first western nations to open an embassy in Azerbaijan after it gained independence in 1991. In 1994, energy Minister Tim Eggar signed the “contract of the century” which installed BP as the lead company in developing Azerbaijan's oil resources, a pivotal position which it maintains to this day.
In common with all those who visit Azerbaijan—not just Baku but also the regional cities and the countryside—I see a country which is benefiting from the proceeds of oil and gas wealth. New infrastructure is being built, and not only in Baku. Evidence of wealth trickling down is provided by the United Nations. Their figures show that poverty levels have been reduced from 49% in 2002 to 11% in 2009. The president is genuinely popular, and people are optimistic about the future of the country.
However, there is one large cloud which hangs over the whole country. That cloud is the 20 year-old conflict with Armenia, which is the continuing illegal military occupation of Nagorno-Karabakh and the seven surrounding Azerbaijani regions. There are also the resultant 875,000 refugees and internally displaced persons who are still unable to return to their homes and lands. This is despite more than 20 years of talks under the auspices of the OSCE Minsk Group, and four UN Security Council resolutions instructing Armenia to withdraw its forces.
This ongoing conflict is far from being frozen, as some commentators describe it. I am sad to say that every week there are casualties along the line of contact, with small arms fire and mortar fire being exchanged. However, the casualties go far beyond the immediate proximity of the combat zone, and even beyond the refugee and the internally displaced persons camps.
There has also been a blurring of the lines, with some Armenians unable to separate Nagorno-Karabakh from their campaign for recognition of the genocide. That campaign has included violent action, spreading from Paris to California. The Armenian terrorists responsible were released as a result of Armenian diplomatic pressure, and on their return home were feted as heroes. Recently Azerbaijan pardoned Ramil Safarov, who was convicted of murdering an Armenian officer in Hungary, and when he, in turn, was feted on his homecoming, this led to increased tensions between Azerbaijan and Armenia, and some bellicose statements by the Armenian Government and Armenian pressure groups.
As in any conflict, there are faults on both sides. It is always tempting for both sides simply to rehearse past wrongs. The inability to forgive and forget previous atrocities is, however, only part of the problem. The make-up of the OSCE Minsk Group means that it is seriously compromised. The three permanent chairs are the United States, France and Russia. These just happen to be the three countries with the largest Armenian diaspora anywhere in the world, and this makes it extremely difficult for the Minsk Group to develop a workable compromise. Has this point been recognised by Her Majesty's Government?
This is where the UK can play a constructive role. The UK's involvement in Azerbaijan goes right back to the first oil boom at the turn of the 20th century. In Baku, I have visited the war memorial to British servicemen who died defending the oil fields during the First World War. More recently, as I mentioned, the UK was quick to recognise Azerbaijan's independence, setting up an embassy very quickly, and positioning itself from the outset to help to develop the second oil boom and the new gas boom. Given the length of our involvement with Azerbaijan and our close involvement in developing the country's energy resources, do the Government think that it is appropriate that they take a more active interest in the plight of the refugees? What proposals do they have to take a more active interest in the search for a resolution to the conflict?
On a more practical level, one of the primary objectives of the coalition Government and of the Foreign and Commonwealth Office is to help the UK economy to grow by fostering trade and investment links. In that context, do the Government consider that it is time that a Cabinet Minister should visit Azerbaijan? During the past year, eight heads of state and heads of government have visited the country. Such a high-level visit would be most meaningful to the Azerbaijan Government and people. What plans do the Government have to send a senior government Minister to Azerbaijan in the near future? I note that many recent contracts for construction and infrastructure have been awarded to non-UK companies. Outside the energy sector, we seem to be missing out on contracts because of our failure to send top-level representation to the country.
I conclude by reminding noble Lords of our long association with Azerbaijan and the huge amount of investment that is at stake. The country is barely 20 years old and is not yet a fully developed democracy by western European standards. However, by the standards of the region, it has a good story to tell and it can only benefit both sides if we engage more closely. The UK can benefit even more from trade and industry. Once a peaceful settlement of the conflict has been achieved and the refugees and the internally displaced persons have returned to their homes, progress towards becoming a fully fledged democracy can be completed. I thank the Minister and noble Lords for listening closely to my remarks and I look forward to the response in due course.
The Earl of Sandwich
My Lords, Shakespeare wrote,
“O, who can hold a fire in his hand,
By thinking on the frosty Caucasus?”.
We should indeed be thinking more about the frosty Caucasus and I thank the noble Lord, Lord Laird, for bringing the region, especially Azerbaijan, to our attention. This is a timely debate, since our EU Select Committee has just embarked on an inquiry into EU enlargement. It is a time when there are doubts even about the viability of fellow member states, let alone our neighbours in the Balkans or others further east. I am thinking, of course, of our economic crisis but also of belated worries about the judiciary in Romania and Bulgaria. I am one of those who would like to see much closer relations with the south Caucasus within a wider European fraternity. The Commission seems to think and act the same, but it does not call it “enlargement”.
As member states, we live in a time of great hesitancy and we, the British, generally do not like to commit ourselves to anything new—especially this Government. But Georgia for me is a good test of the real intentions of the EU over the coming decade. While in the West we are concerned day by day about the inner eurozone and its economic impact on the 27, we seem to lose sight of the enormous political and strategic dimensions of eastern Europe, especially the impacts of the West on the old Cold War frontiers and in the zone of continuing Russian influence. With the recent Nobel Peace Prize quite rightly awarded to the EU, it must be in Europe’s interest to share her experience of the rule of law and fundamental rights as a means of achieving greater freedom and political stability elsewhere.
No one is talking about political union or even a federation; people are talking about a gradual strengthening of relations along the fringes of Europe where enlargement or an enlarged association might take place. Some would say that we are already doing that in Kosovo to secure the border with Serbia—they are both states that seem some way away from full membership, although Kosovo is entering a new stabilisation and association process. We may be undertaking something very similar in the south Caucasus in the future. However, Kosovo has been a whipping boy for a number of states that fear separatist tendencies in other countries—namely, the Basques and the Catalans in Spain and the attempted breakaway of South Ossetia and Abkhazia, now recognised by Russia and only a handful of mainly Pacific and South American sympathisers.
The fragile borders with these territories remind me of the EULEX programme in Kosovo—going nowhere but keeping a fragile peace along the river at Mitrovica. The EU monitoring mission has similarly been critical to the prevention of conflict along the so-called administrative boundary lines on Georgia’s northern border. The mission was established after the war in 2008 to monitor compliance with the 12 August plan and the agreement between Presidents Sarkozy and Medvedev on 8 September. Since the Russian veto closed the UN and OSCE missions in June 2009, it has been the only international monitoring presence in the area and, remarkably, the only CSDP mission to which all 27 member states contribute personnel.
Georgia has also entered an association agreement with the EU. The Minister may well point to the enormous investment that the EU is making in the Caucasus arising from the partnership formed after the August 2008 conflict. This is the EU’s little known Eastern Partnership, which covers Georgia and five other former Soviet Union republics. It is benefiting from a €600 million aid programme in 2010-13 to include reform, institution building and regional development. There are many other examples of aid from the European Union, which make it possible for us to have closed our international development programme.
I have been lucky to keep a group of Georgian friends, some of them dating back to my visit to Tbilisi in 1964. Most are in exile, but they keep me informed of events in Georgia. While wanting improved relations with Europe, they were never enthusiastic about President Saakashvili’s style of government. They are more hopeful of change under Ivanishvili, the new billionaire Prime Minister, while not quite knowing his intentions. He is a rather maverick character but, by all accounts, a benevolent, art-loving oligarch. While his fortune was made in Russia, they do not accept the smear that he will necessarily take a pro-Russian stance. Nevertheless, having just appointed a new special envoy to Russia, he clearly wants to rebuild confidence on both sides and, above all, new trade links.
Let us not forget that Georgia is to Russia a little like Ireland has been to England—romantic, wild, poetic, violent and rebellious. It cannot be culturally cut off from Russia and should not be soldered on to the EU either. It must inevitably now find some modus vivendi with Moscow. Georgia signed the European Convention on Human Rights in 1997 and became a member of the Council of Europe two years later. However, there have been serious concerns about Georgia’s human rights record under President Saakashvili. Excessive force, for example, was used by police against protesters on 26 May last year and, while four officers were dismissed by the Interior Ministry, no independent public investigation took place and allegations against the police were never followed up. That is just one small example of the need for the spreading of the rule of law.
What exactly is the reason for the EU’s deepening engagement with this region? Does the Minister believe there have been substantial internal reforms in Georgia justifying this level of international support or does he think that the EU Commission has an eastern mission to contain the sphere of Russian political, and perhaps military, influence? It is 12 years since the CSDP was developed in Cologne and Nice. According to the EEAS website,
“the EU’s role as a security player is rapidly expanding”.
Is HMG satisfied that this expansion is taking place with the support of the whole international community?
Lord Sheikh
My Lords, I am thankful for the opportunity to speak in the debate this afternoon, not least because of my increasingly close relationship with Azerbaijan following my visit there in June this year. I hold a deep conviction for increasing our ties with the country and I am grateful to the noble Lord, Lord Laird, for securing this debate.
I visited Azerbaijan with my colleagues the noble Lords, Lord Dykes, Lord Risby and Lord Patel of Bradford, and we were privileged to hold a number of successful meetings with senior figures, including the President of Azerbaijan. We learnt a great deal about the modern-day concerns of the country, what we share with them, what our differences are and how we can assist each other and build on our relationship in the future.
As a businessman, perhaps my foremost concern was establishing how we can further our trade and investment opportunities. The UK is already responsible for half of all foreign investment in Azerbaijan, investing nearly £1 billion in 2010. Most of this comes from BP’s investments in oil projects, although we have more than 175 other companies investing in commercial activities over there. The state-owned oil company, SOCAR, has worked closely with BP for many years. I believe that we need to use this as a platform on which to build further on trade and take advantage of opportunities beyond the energy sector.
The Deputy Chairman of Committees (Lord Geddes)
If the noble Lord could avoid hitting the paper on the microphone, that would be helpful.
Lord Sheikh
I am sorry about that.
Azerbaijan has one of the fastest-growing economies in the world and there are a number of sectors within which it is looking to expand, including finance, telecommunications and infrastructure. Other European countries have recently secured a number of high-profile contracts in technology and construction. We must harness our current relationship with Azerbaijan to increase our trade with it before more countries beat us to it.
I understand that the Azeri Government currently hold a surplus of cash and are keen to explore the potential for their investments in foreign businesses and properties. Securing such inward investment in the UK would be of great assistance in these troubled times. In assisting this effort, I would like to see more high-profile trade missions to the region or at least more senior ministerial visits to Azerbaijan. I applaud the Prime Minister’s current tour of the UAE and would like similar action to be taken to acknowledge the potential for future trade and investment with Azerbaijan.
During my visit, I was also struck by the social and cultural reform taking place in the country. I met the Sport and Youth Minister and understand that Azerbaijan has a desire to increase its sporting sector, as it has a new-found appreciation for the social, economic and health benefits gained through team-centred physical activity. I feel that we need to look into providing assistance to develop new sports programmes and summer camps for young people. Such an offer seems particularly timely given our sporting legacy this past summer and the long-term implications for increasing the health and stability of the country.
I attended a meeting chaired by the Minister of Religion, where the discussions related to the new wave of religious moderation spreading across the country, with which young people are increasingly engaging. There were delegates from across the region and I was impressed with their attitude to promote the true message of Islam as a religion of peace. I found that, as well as generally opening up the country to the international community, this was very encouraging for its prospects in combating terrorism, which remains one of its Government’s priorities.
This wide liberal shift in attitudes is also evidenced through SOCAR’s new drive towards corporate social responsibility. As a large state-owned company, it is leading by example by implementing a long-term environmental strategy, with commitments on pollution prevention and waste management, as well as acknowledging the need to address issues of biodiversity and sustainable development. It is simultaneously reducing its carbon emissions and increasing the efficiency with which it uses natural resources. Perhaps more impressively, it is constructing an ecological park to regenerate contaminated land and provide educational facilities for children.
It is safe to say that the international community is already recognising the changes that Azerbaijan has been making, having elected it a non-permanent member of the UN Security Council for 2012-14 and progressing negotiations on the EU-Azerbaijan association agreement. These are historic milestones for the country and represent a more assured and stable relationship with the UK and other countries around the world. Colleagues will be aware of Azerbaijan’s continual state of conflict with the Republic of Armenia over the disputed region of Nagorno-Karabakh, which constitutes 20% of Azeri territory. This issue continues to be Azerbaijan’s largest diplomatic challenge and a source of wider instability throughout the region. It is very important that we continue to pledge our full support to the OSCE Minsk Group peace process and to be very proactive in keeping both sides at the negotiating table.
I hope that my contribution has evidenced not only how proud we should be of our ties with Azerbaijan but also the very substantial potential heading forward. During my visit I noticed that society in Azerbaijan has become freer and more prosperous since gaining independence more than 20 years ago. The Azeri Government appeared highly enthusiastic about advancing international engagements economically, culturally and politically and I would like the UK to play an active part in this.
Baroness Cox
My Lords, I declare an interest as chair of the British-Armenian All-Party Parliamentary Group and as a recipient of awards from the Governments of Armenia and Nagorno-Karabakh. I have visited the region 78 times, many during the war against Karabakh. I regret that my contribution to this debate will be unpopular, because it is critical of Azerbaijan, but it is based on first-hand evidence.
I begin with a brief reference to aspects of recent history relevant to current issues. I visited Azerbaijan in 1991, when I met the then president and political leaders. I was dismayed by the explicit commitment to ethnic cleansing of the Armenians from the enclave of Nagorno-Karabakh. I also visited Karabakh then and met Azeris living in homes which had recently been owned by Armenians who had been evicted by Azerbaijan’s well documented policy, Operation Ring, in which Armenian villagers were surrounded by Azeri troops who killed, tortured and drove villagers off their land.
I tried to follow the example of Andrei Sakharov, who was committed to being on the side of the victim. Clearly, the Armenians were the primary victims as they had already been victims in the massacres in Baku and Sumgait. Then Azerbaijan unleashed full-scale war. I witnessed 400 Grad missiles daily raining onto Karabakh’s capital city, an aerial bombardment of civilian homes with 500 kilogram bombs. I also witnessed war crimes perpetrated by Azerbaijan on Armenian civilians at Karabakh, such as the cold-blooded massacre of villagers in Maragha. I was there hours afterwards and saw corpses whose heads had been sawn off and burnt, mutilated bodies. I visited Khojaly and can testify that the tragic events were not as portrayed by Azerbaijan—a massacre of Azeris by Armenians. Independent journalists and Azerbaijan’s former President Mutalibov have publicly come to the same conclusion.
It is important to understand that the capture of Azeri territories by Armenians was not aggressive land grabbing, but essential for survival, as they were used as bases for constant shelling of towns and villages inside Karabakh. I was there when one ceasefire was broken by Azerbaijan, with renewed bombing from Azeri bases in these lands. Therefore, continued occupation needs to be understood as a necessary buffer zone in any peace agreement.
This recent history is relevant to current concerns as the 1994 ceasefire is precarious. There is an urgent need for peace for the peoples of Azerbaijan and Armenia and because the peoples of the south Caucasus do not want another destabilising regional war. However, Azerbaijan’s continuing hostile policies are detrimental to attempts to reach a solution to this semi-frozen conflict. For example, the noble Lord, Lord Laird, mentioned the case of Ramil Safarov, the Azeri military officer who used an axe to murder an Armenian officer in his sleep while both men were attending a NATO course in Budapest in 2004. Safarov was arrested, convicted and sentenced to a lengthy term of imprisonment. But, when Hungary repatriated Safarov to Azerbaijan, on the understanding that he would continue to serve his prison sentence, he was released from prison and welcomed as a hero. According to the Economist in September 2012, this led to a new war of words in one of the world’s most volatile regions.
Patrick Ventrell, spokesman for the US State Department, said that the United States was extremely troubled by the pardon of Safarov and would be seeking an explanation from both Budapest and Baku. Russia, involved in trying to ease relations between Armenia and Azerbaijan, said that the actions of the Hungarian and Azeri Governments contradicted internationally brokered efforts to bring peace to the region. May I ask the Minister what representations have been made by Her Majesty’s Government to Azerbaijan concerning the release and the honouring of the convicted murderer Safarov?
The Economist also raised questions about the EU’s credibility when it pledged €19.5 million to reform oil-rich Azerbaijan’s justice and migration systems. Since 2006, Azerbaijan’s economy, with its vast oil and gas reserves, has nearly tripled to $62 billion. May I ask the Minister what the EU’s justification was in giving €19.5 million to such a wealthy country? Moreover, there is widely-held concern over Azerbaijan’s massive investment in its military arsenal—a 20-fold increase in seven years. Apart from expenditure on arms, in a nation where many still live in poverty, there is deep anxiety over the propensity to renew war with Nagorno-Karabakh. This danger is exacerbated by Azerbaijan’s constant use of belligerent and hostile propaganda, which is not conducive to confidence-building or effective peace negotiations.
Finally, I refer to Azerbaijan’s disturbing record on human rights, particularly on freedom of the press and religious freedom. Accordingly to an article in Time magazine in April this year:
“Despite Azerbaijan’s post-Soviet economic success, international critics say the country remains an autocracy with little respect for human rights…The Human Rights House Foundation described the country’s most recent elections in 2010 as a farce. Azeri citizens who criticise the political elite face reprisal…Azeri authorities have ignored dozens of assaults on journalists in recent years, including two murders. According to the Norwegian Helsinki Committee, a human rights NGO, about 70 people are in jail for political reasons, where many are allegedly tortured.”.
There have also been frequent reports by Forum 18 of imprisonment of people for their religious beliefs. May I ask the Minister whether Her Majesty’s Government have raised these widely-publicised concerns over violations of fundamental human rights with the Government of Azerbaijan? Or does the situation remain as it did on a previous occasion several years ago, when I raised the issue of Azerbaijan’s violation of international human rights conventions when it was dropping cluster bombs on civilians? I was told by a senior representative from the Foreign Office:
“No country has an interest in other countries, only interests—and we have oil interests in Azerbaijan.”.
Azerbaijan pours massive funds into propaganda, disseminating positive images of its progress while trying to prevent access to Karabakh by intimidating potential visitors who wish to see the situation there for themselves. After one of my visits in recent years, an article appeared in an Azeri newspaper, entitled “Shoot the Cox!”. Parliamentarians visiting Armenia receive letters from Azeri authorities threatening to place them on a blacklist if they visit Karabakh. The British Ambassador is still not allowed to visit Karabakh, although the political and diplomatic representatives of other nations do so. Therefore, it is hard for the Armenians of Karabakh to have their story of Azerbaijan’s policies told.
I deeply regret having had to make such a critical speech. Of course, I can be accused of partiality, but if my contribution is partial, it is accurate, based on first-hand evidence and corroborated by many independent sources. I hope it is helpful to put on record some often untold aspects of the situation, because the search for a just and lasting peace can only be based on an understanding of historic and contemporary reality in all its multi-faceted complexity.
Lord Kilclooney
My Lords, I, too, declare an interest as someone who has visited Azerbaijan many times, although not nearly as often as the noble Baroness, Lady Cox, has visited Armenia. I took an interest in Azerbaijan and Armenia when I was in the European Parliament over 20 years ago and then more recently when I was in the Council of Europe. I was one of those who argued strongly for Azerbaijan and Armenia to join the Council of Europe on the same day, in the hope that by doing so and bringing both in equally, it would lead to a resolution of some of the very sensitive problems that exist. We have heard one extreme example of the problems in that part of the world.
I want to underline very quickly one or two things that have already been mentioned. The noble Lord, Lord Sheikh, mentioned United Kingdom investment. As he said, 50% of the foreign investment in Azerbaijan is by the United Kingdom—mainly in the energy field, of course. As the noble Lord, Lord Laird, mentioned, we must try to get greater British interest in other aspects of investment in Azerbaijan. I congratulate him on securing this debate.
It is a reflection on not only the present Government but earlier Governments that we as a nation, while so heavily involved financially in Azerbaijan, have never sent anyone more senior than a Minister of State to that country. Yet we find that even in the last two years, some 15 top politicians in Europe have visited Azerbaijan. Among them are the Prime Minister of Turkey—naturally, because Turkey and Azerbaijan have very close connections—but also the Foreign Minister of Germany and the French, Austrian, Czech and Polish Presidents. I could continue. These countries do not have as great an investment nor interest in Azerbaijan as we in the United Kingdom have. When one goes to Baku, it feels like little Scotland because there are so many people there from the oil industry. This is why we should be investing more in Azerbaijan and ensuring that the Prime Minister and Foreign Secretary go there in the near future. One thing for which we must pay tribute to the present Foreign Secretary of our nation is that he has been developing contacts with foreign countries right around the world. I would like to see him take a further initiative in Azerbaijan to strengthen the British economic presence there.
As has been mentioned, we need to remember that Azerbaijan is a member of the Security Council of the United Nations and will be an important country over the next two years in terms of foreign affairs. It is a partner of NATO, facilitating what is going on in Afghanistan. However, we must always remember that there are two countries looking very closely at Azerbaijan which could destabilise it. One is Russia and the other is to the south: Iran. When I was there I discovered that Iran is now beginning to influence the mosques in the south of the country, and that is always a threat to stability in a Muslim nation. As for Russia—that pillar of democracy—when I monitored the elections on one of my last visits to Azerbaijan, who had the largest delegation there to ensure that democracy was taking place? Russia. They had even more there than the OSCE or the European Union. That is a warning that these two countries are watching Azerbaijan.
One of my great experiences when I went to Azerbaijan a few years ago was going to the border with Russia near Dagestan. I was monitoring an election in the city of Guba. It is mainly Jewish; I had not realised there were so many Jews living in Azerbaijan. It was a most wonderfully controlled election. The officers in the polling stations were very efficient, and it was a great thing to see in a Muslim nation that Jews were happy and welcomed as equal citizens.
However, as the noble Baroness, Lady Cox, mentioned, there is of course the problem of Nagorno-Karabakh. Twenty per cent of Azerbaijan is now occupied by Armenia. It is supported by Russia, which also has troops based in Armenia: do not ignore that fact. The United Kingdom should join the United Nations, NATO, the European Parliament and the European Commission in supporting Azerbaijan’s right to reassume control over its own sovereign territory.
I underline what the noble Lord, Lord Laird, said about the Minsk partners. Every time I look at who they are, I realise that there is no chance of them settling the problem. I was deputy leader of my own party in Parliament when we negotiated the Anglo-Irish agreement. There were three elements to it. One element was Irish-British relations. Another, of which I was in charge, was Northern Ireland-Republic of Ireland relations. That was a very difficult subject, just like Armenia and Azerbaijan. You had to have an impartial chairman to succeed. Once we have the Minsk process we do not have an impartial organisation. I am sorry to say that it is biased in favour of Armenia.
I am not asking the Minister to reply to any questions tonight. I must apologise because I have to leave quickly. I have a meeting arranged with Christians and Muslims of the Middle East at 7.30 pm. However, one thing we need to look at is how to get someone impartial to help Azerbaijan and Armenia reach a settlement over this very difficult subject of Nagorno-Karabakh, which could explode and destroy stability in that whole region if it is not handled carefully. One thing I ask of the noble Baroness, Lady Cox, is that we join together in opposition to Azerbaijan when it next plays Northern Ireland in the football.
Lord German
My Lords, I am grateful for the opportunity to underline a couple of the points which have been made in this debate. I declare my interest. I have been to Azerbaijan this year, supported by the European Azerbaijan Society. One of the things that has clearly come out of this debate introduced by the noble Lord, Lord Laird, is the huge amount of foreign direct investment that the UK has in that country. What needs underlining is the potential for more. It is a country which has enormous amounts of regeneration prospects and the opportunity for other forms of investment from UK companies. I am afraid that we may be losing out to others, particularly Germany, which is seeking to do better and bigger business there as well.
In his winding up, will the Minister agree that we need a high-level trade delegation from this country led by a senior Minister to promote those new opportunities? After all, this country needs more opportunity to trade, to invest and to gain funding for this country.
The second issue that needs underlining underpinned some of our discussion. The amount of trade and investment that we have enables this country to be a critical friend of Azerbaijan. After all, we must recognise that it is not a perfect democracy—perhaps not even ours is a perfect democracy. It has had 21 years of existence since its life within the Soviet Union but it takes a huge amount of time to make the changes to reach a full democratic status. It is a country leaning towards that and it wants to achieve it.
As a critical friend, it seems that that is a role that the UK is well established to play. I regard investment in human rights and investment in justice systems as a crucial part of that journey, which I think this country wants to move on to. I suggest that justice systems’ support, supporting alternative measures and ways of approaching public order issues are things that this country can achieve. I believe that it is much better to support that from within than to try to complain from without.
We are in a unique position to influence the way in which Azerbaijan moves forward. It wants to move forward in a direction to which this country is sympathetic and I believe that we can undertake that. I have met Opposition MPs in Azerbaijan who have a role in human rights and say that they need support and help. They are not overcritical of the way in which their Government behave but they need the extra help that this Government could provide in the way of support. They need support for a free and open media. They have Opposition-leaning newspapers but we can provide more assistance in that direction.
In summing up, I hope that the Minister will give reassurance to noble Lords that we will be a critical but supportive friend working from within.
Lord Triesman
My Lords, I am grateful to the noble Lord, Lord Laird, for giving us the opportunity to have this discussion. The debate illustrates the difficulties faced by the United Kingdom in balancing, on the one hand, a complex set of concerns which do not always sit comfortably together and, on the other, a very small capability as a single sovereign nation to influence the trajectory of the region. The issues concern us, but it may be more realistic to recognise that it is our work through the European Union and NATO that is likely to have the greatest impact on the country and the region.
I am obviously aware, as noble Lords have been throughout the debate, of the struggles for independence that have taken place in Azerbaijan and the region more generally. I emphasise that history because it appears to me that it is shared to a greater or lesser extent by the whole region. Independence has been fought for in many ways and with diverse allies, each with their own motivations. At the moment, at the heart of all these struggles, one can see the assertion of national identity, but it is based on some very different premises—some national, some subnational, some regional, some ethnic, some religious—in their identity. It is perhaps unsurprising that deep fault lines have appeared and will continue to appear, making it difficult to find simple solutions.
For those reasons, the previous United Kingdom Government and, I believe, the current one, have been consistently concerned about the dangers inherent in conflicts between Azerbaijan and Armenia over the disputed territories, the question of the ethnic Armenians in the enclave and the alliances which have been formed around them. What does the Minister believe are the still current and useful bases of the Madrid principles and the work being done by the Minsk group? Do the Government believe that we can achieve a withdrawal of remaining Armenian forces from the country? How do they see the demilitarisation programme? How do they see the deployment of international peacekeepers? What are the prospects for reconstruction and the return of displaced Azerbaijanis? What programme do the Government have? If that programme is a European one, I make no criticism of that whatever; it may be the right way to go.
As I suggested, this is by no means the only fragile regional problem. The breakaway republics in Georgia, which have been supported by Russia, plainly in response to Georgia’s potential closeness to NATO, have created ongoing tension. David Miliband in another place was right in my view to describe Russia’s actions as aggression. The United Kingdom has been right to call for respect for Georgia and for its territorial integrity under international law. I should like to know that the Government still adhere to that position. Georgia is entitled to know that it retains our broad support. I do not for a moment underestimate the difficulties that would occur in discussing any future developments moving closer to NATO that would occur with Russia but, none the less, I am keen to know what the character of those discussions might be.
Several noble Lords made the point that visits to the region in general, including to Azerbaijan, by prominent politicians give signals. The first signal is one in the interests of the future of the country but it is also an opportunity—Hillary Clinton took that opportunity on 6 June 2012—to give signals about our expectations for a more normal and generous attitude to human rights, as well as to trade opportunities. Of course, there are signals being given all the time by Europe and by the United States; it may very well be that we can add to those. All speakers in this debate will appreciate the importance of energy supplies but, while we cannot ignore that, we need to place it in a context. The impact of having alternative sources of energy supplies to those provided by Russia unquestionably increases the prospects for energy security throughout Europe. I entirely see the arguments for developing the links and the commercial possibilities that BP and others have produced—not just in the extraction of oil and gas but in the construction of the pipelines. All of these are important economic developments.
In the last few moments that I have, I suggest that these interests should not for ever silence us to the issue of the poor human rights records in Azerbaijan. When one looks at how the wealth that has been generated has underpinned the power of just one political entity in Azerbaijan, it should concern us a great deal. The country is rated as not free by international indices; it has a number of political prisoners; its TV channels are controlled by the Government; its journalists are routinely threatened and, of 178 nations ranked in the 2011-12 press freedom index from Reporters Without Borders, the country ranks 162nd. The political opposition has all but been eliminated.
I therefore ask whether the Government have a view on whether the economic measures we have taken through the European Union and the discussions about the potential for NATO membership are, in themselves, having any kind of impact on a recognition of the need for human rights and democracy in that country. Like others, I do not say that out of a spirit of hostility but rather to make this point. If we believe that our influence has been significant, and significant through international bodies including the EU and NATO, how are we making sure that that influence is beginning to change what I believe is a human rights record which needs urgent attention?
Lord Wallace of Saltaire
My Lords, I thank noble Lords for this interesting debate. I am constantly struck by how much diverse expertise we have in this House on the many countries around the world. I can recall the questions that were asked some months ago on the Georgian Government’s reform of public services by a number of Peers who had just returned from Georgia. I recall my first visit to Yerevan in 1995, when the key lady on the floor of the hotel where I was staying said to me, in hushed tones, that I was staying in the very same room that Caroline Cox—the noble Baroness, Lady Cox—had stayed in some months before. I recall some years later in Abkhazia, with Anna Politkovskaya and a number of other journalists, meeting the Foreign Minister of what seemed to me that benighted and unrecognised country. His last words to me as I turned to leave were: “May I ask you, when you return to London, to please give my best regards to Lord Avebury?”.
We all recognise that there are many comings and goings. I enjoyed the pictures on the web that I looked at this morning of the noble Lords, Lord Laird and Lord Kilclooney, on their most recent visit to Azerbaijan. If I may make just one partisan point: when noble Lords demand that Ministers should travel more often and then demand that Ministers are always here at short notice to answer debates, it should be recognised that this coalition Government have visited more countries with more senior Ministers than our predecessors but that the demands of Parliament are one of the things that hold us all back.
The coalition Government are of course keen to promote Britain’s security and prosperity and, at the same time, to influence the Governments with whom we deal to improve the quality of their rule of law, human rights and democracy. None of the three countries in the Caucuses is yet a fully-fledged democracy. All of them have had problems with media freedom and media ownership; all have had problems with the rule of law. We are extremely happy that Georgia has just had an election which was ruled by most observers to be free and fair, and in which there has been a democratic change of Government from one party to another. Azerbaijan has not yet reached that stage, nor is there a fully-fledged opposition in Azerbaijan, but there was not one in George until relatively recently. Armenia has elections next year, which we very much hope will be up to the standard of being assessed as free and fair.
We are working across the region with our partners in the EU, the Council of Europe and the OSCE. I should say to the noble Earl, Lord Sandwich, that our assessment of the EU’s mission is that it is there to strengthen the stability of our neighbourhood. The basis of the European neighbourhood policy—the eastern partnership is part of this—is that we export security or we import insecurity. It is much better to export security. There is no more expansionist mission than that. I have visited Georgia on a number of occasions and talked to the EU and OSCE representatives there, and that is very much what they are attempting to do. He commented that the relationship between Russia and Georgia is very similar to that between Britain and Ireland. I did once say in a discussion in Moscow that it seemed to me that the attitude that the Russians—with whom I was talking—had towards Georgia was very similar to that which the British had towards the Catholic Irish in the middle of the 19th century. That is part of the problem of accepting that these are countries which are entitled to their independence and to be treated as equal partners. I say to the noble Baroness, Lady Cox, who complained about the Azeris acquiring weapons in large quantities from others, that the Russians sell weapons to Azerbaijan and to Armenia. That is one of the problems in trying to resolve that frozen conflict.
We are, as several noble Lords have remarked, the largest foreign investor in Azerbaijan—primarily in the oil industry, but also now spreading to the retail sector and others. I recognise that several noble Lords have commented that they would very much like to see a senior Minister going there. As we speak, the Minister for Culture, Ed Vaizey, is in Baku attending the internet governance forum. The Prime Minister has met the Azerbaijani President twice in the last six months. Other Ministers have visited the country. There are at the present moment no plans for a Cabinet Minister to visit in the near future, but such plans are kept fully under review. I had the great pleasure last night of speaking at the Iraqi-British business commission with the noble Baroness, Lady Nicholson, who was, as always, fully up to speed. It is not simply a matter for the Government: I encourage all noble Lords to be as actively engaged as possible in encouraging further British investment and trade with all these developing countries.
Why are we interested in the region? Of course for all these connections; the transit of oil and gas to Europe via a southern energy corridor is of considerable importance to Europe’s energy security as a whole. The region is important to us in terms of security, and is one of the many transit routes to Afghanistan. Noble Lords have mentioned that Iran is also a neighbour and that the sanctions on Iran have led to an increased Iranian interest in both Azerbaijan and Georgia. The Azeris are always conscious that there are more Azeris living in Iran than in Azerbaijan itself and that to go to Nakhchivan you have to go partly through Iran.
However, our common security means that we are engaged with the region. All three countries have contributed to the ISAF in Afghanistan. There are now two Georgian battalions in Helmand, taking over some tasks from the US Marine Corps and thus actively assisting the British forces in that region. The Eastern Partnership sees this as a collective Western relationship with the region. Georgia is the country which has most openly declared its intentions of joining both the European Union and NATO. This is a long-term process, but deeper relationships are currently being negotiated with Armenia and Georgia, and a deep and comprehensive free-trade area, to use the EU jargon, is now under way in terms of negotiation with both these countries.
We have also talked about the frozen conflicts. In response to the noble Baroness, Lady Cox, what happened across Georgia and between Armenia and Azerbaijan, and in a number of other areas as the Soviet Union broke up, were some very bloody and disorderly conflicts, which have left us with what we have now. There were faults on all sides. Let us also touch on what happened in Moldova, Belarus and Ukraine. We are left, however, with the enormous problem of the Nagorno-Karabakh and with people on both sides of this ethnic conflict who feel deeply aggrieved at each other.
The Minsk process has failed yet to make much progress. We do, however, have only that process to work with. The United Kingdom, which is not a member of the Minsk group, continues to support the Minsk process, difficult as it is. We cannot entirely get rid, for example, of Russia as a major player in all this. Therefore, to rebuild a group which would attempt to negotiate without Russia would not be particularly helpful. If we were to invite China to adjudicate, I am sure that the Chinese Government would be much more impartial than the current chairs of the Minsk group but they might not necessarily be that much more helpful.
The British Government are putting in a certain amount of money themselves in terms of supporting NGOs, British and others, within Azerbaijan and across the region. We also support what the EU is doing in terms of promoting human rights and the rule of law. Of course, we invest as well. We would love the Azeris to fund what we do but we have, across the whole of eastern Europe, invested heavily, as we now are also doing in north Africa, in rule of law missions, in improving the capability of political parties to take part in elections and in looking at the administration of elections. That is very much how we see our democratic mission.
To wind up, we are committed to this region because it is part of the wider European neighbourhood. We are committed with our European partners because we share common interests. We are committed as a country that is an active exporter to compete with our European partners—the Germans, the French and others—for business and investment in the region. So we have a mixture of interests in which we recognise the growing importance of Azerbaijan, the importance of the Caucasus as a whole to our future energy security and the importance of helping the Caucasus to become more stable, more prosperous and more democratic for the peace of that region and of our broader region as a whole.
House of Lords
NHS: Women Doctors
(12 years ago)
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Baroness Deech
To ask Her Majesty’s Government how they propose to facilitate the retention of women doctors in the National Health Service.
Baroness Hollins
My Lords, on behalf of my noble friend Lady Deech, and at her request, I beg leave to ask the Question standing in her name on the Order Paper.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, over the past 10 years, from 2001 to 2011, the number of female doctors in the National Health Service has increased by 75%. Female consultants have increased by 105%, female registrars by 288% and female GPs by 58%. The Government, in partnership with other organisations, including NHS employers, the NHS Leadership Academy and royal colleges, support good working practices, such as flexible working, job sharing and part-time working, which support the retention of female doctors.
Baroness Hollins
Is the Minister aware that part-time training in the NHS is becoming much less available because of workforce pressures and difficulties in filling hospital rotas? Now that the majority of medical students are women, does he agree that the challenge is how to support those doctors who wish to work part time, perhaps while their families are young or while they have other caring responsibilities, and then to support them to move between full-time and part-time work that makes proper use of their talents and training? I declare an interest as president of the BMA and also as someone who worked part time for seven years as a trainee doctor.
Earl Howe
My Lords, I agree with the noble Baroness. I think this is less of a problem with retention of female doctors than a problem with the career progression of female doctors, which is a serious and significant issue. The noble Baroness, Lady Deech, published a very well argued report about three years ago, and a number of worthwhile initiatives have been started as a result of that. I do think that these need greater focus with more support at a higher level. Women are in a significant minority in more senior leadership roles in the NHS, and that is a loss all round.
Baroness Cumberlege
My Lords, I declare an interest, and my interests are in the register. Does my noble friend agree that some of the brightest women in the land choose a medical career and are well equipped to take on positions of leadership? Does he also agree that they are under-represented on the boards of the new clinical commissioning groups? Can he suggest to the national Commissioning Board that it examines this issue before authorising the individual boards?
Earl Howe
My noble friend makes a very important point. There is good evidence that women doctors make safer decisions, are often better at communication than men and understand better the needs of women, and we need them to inspire the next generation of women doctors. Therefore, to fish for clinical leaders from half the talent pool is not a sensible thing to do. As for CCGs, my noble friend makes a very important point. The NHS Leadership Academy has established development opportunities, including action learning sets for female CCG leaders. But we recognise that more work is needed at a system level to aid progress in this area.
Baroness Afshar
My Lords, do we have any details about minority women in high positions in the medical profession? Many minority women, particularly Muslim women, would prefer to be seen by a woman expert if they can possibly do so, and it is a matter of regret that very often they cannot.
Lord Sharkey
Does the Minister agree that monitoring the number of women in leadership roles in the NHS from consultant upwards will be a marker of appropriate career progression?
Earl Howe
Yes, indeed, my Lords. The noble Baroness, Lady Deech, raised that in her report as an action point. It can be done at a trust level or at a higher level in the health service. But it is certainly important to monitor—I understand that the term is “credentialing” —the skill sets of those doctors, who may move out of the health service and want to move back in again, so that jobs can be found for them more easily.
Baroness Wheeler
My Lords, I am sure the Minister will agree that recruiting women into the medical profession is just as vital as retaining them once they are trained and working. Given the high costs of university fees and the burden that these place on young people, particularly those from poorer backgrounds and those with family and caring responsibilities, how will the Government ensure that women are not put off applying to medical school?
Earl Howe
My Lords, there is no evidence that there is a problem with female recruitment into the health service. Indeed, the male-to-female gender balance over the past few years has decreased from 1.83:1 in 2001 to 1.25:1 in 2011. However, I recognise that we should not be complacent. Even with the increased participation of women in medicine, we appreciate that more can be done to improve the selection of senior doctors into senior positions.
Lord Ribeiro
My Lords, I declare an interest as a member of the committee chaired by the noble Baroness, Lady Deech. In 1998, I introduced the first job-sharing scheme for female trainees in London and Essex. This involved two girls who both had children and managed to complete their training before the 48-hour week was introduced. What efforts are the Government making to encourage job-sharing and less than full-time training?
Earl Howe
My Lords, the Government fully support flexible working. We encourage organisations to take account of the recommendation made by the noble Baroness, Lady Deech, on that subject and adopt working arrangements that are amenable both to doctors who are parents and doctors who are carers.
Lord Patel
My Lords, first, I declare an interest. In my family there are four women doctors—I do not call them “girls”. They are all higher achievers than I could ever be. Does the Minister agree that there are in some of the most demanding specialties more women doctors in higher positions than in some of the other specialties and that in the specialties where there are not, it is the attitude of the senior doctors—possibly even male doctors—that is the problem?
Earl Howe
I discussed this subject in my briefing with departmental officials. There are multiple and quite complex barriers to career progression, including a conflict of roles between someone’s clinical responsibilities and their domestic responsibilities. There are structural barriers, as I have mentioned, in relation to part-time work, and in terms of general practice there is the sessional GP contract, which is another barrier to progression. The lack of role models is a factor and we should not overlook individual and organisational mind-sets, to which the noble Lord alluded, which result in lower personal aspiration in this area.
International Development
(12 years ago)
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Lord McConnell of Glenscorrodale
To ask Her Majesty’s Government whether they will seek to include goals in relation to conflict and security in the successor to millennium development goals after 2015.
Baroness Northover
My Lords, conflict-affected and fragile states are the furthest from reaching the current millennium development goals. Conflict and security are also often overriding concerns for poor people. The Government recognise that a post-2015 framework will need to reflect the particular challenges faced by these countries, and address the root causes of poverty in all developing countries.
Lord McConnell of Glenscorrodale
My Lords, I thank the Minister for her Answer, and I understand completely the Government’s commitment to this agenda. The reality is, however, that in conflict-affected and fragile states, children are twice as likely to be undernourished, babies are twice as likely to die before the age of five, and none of these states is likely to reach any of the millennium development goals by 2015. Will the Government use their position of leadership, as a co-chair of the high-level panel on the post-2015 development framework, to take responsibility for the next generation? Will they ensure that, unlike the previous millennium development goals, the next set of goals for the international community reflect the importance of justice, security and peace, without which there cannot be development in these affected states?
Baroness Northover
The noble Lord is right about how the effect of conflict wipes away development gains. He refers to the high-level panel which the UN set up; the Prime Minister is one of its co-chairs, and it met last week. Given that it is seeking to address the causes of poverty, it is acutely aware that, as he says, no fragile and conflict-affected state will reach any of the MDGs.
Lord Chidgey
Is my noble friend aware that the aid effectiveness forum in Busan launched a new deal for fragile states, to give voice to the 1.5 billion people who did not benefit and are not benefiting from the MDGs? What position is the United Kingdom taking on the new deal’s five peacebuilding and state-building goals—the PSGs—which are quite separate from the MDGs?
Baroness Northover
My noble friend will be aware that my right honourable friend the previous Secretary of State for International Development was instrumental in trying to ensure that the peacebuilding and state-building goals were addressed at Busan. The current Secretary of State is taking this forward. We are very strongly in support of what was decided at Busan, and in fact, we are already taking this forward in South Sudan and Afghanistan, and are applying the principles in other countries as well.
Lord Anderson of Swansea
My Lords, do the Government believe that democracy and the rule of law should have a higher role and profile in the new goals?
Baroness Northover
We are at the beginning of working out how to take forward millennium development goals that will be signed up to internationally. However, I note that the UN task team that is considering what might underpin this is looking at social development, inclusive economic development, environmental sustainability, and peace and security. It is well understood that justice, fairness and security are all important in underpinning the relief of poverty.
Lord Hylton
My Lords, are non-recognised entities in the former Soviet Union and other special areas such as the Gaza Strip or ethnic minority regions of such countries as Burma and many others receiving their fair share of aid and technical assistance?
Baroness Northover
I may need to write to the noble Lord with details but I assure him that, as I think he knows, a great deal of United Kingdom assistance goes to support the people in Gaza.
Baroness Nicholson of Winterbourne
Following the Minister’s most helpful answers and given that not one of the conflict-ridden and sensitive countries has reached a single millennium goal, will the Government consider recommending to the United Nations that for those countries the single millennium goals in place now be retained rather than put something more complex in place which they would never reach?
Baroness Northover
There is a strong argument for keeping the current MDGs. They have been a great international focus and have done a great deal to relieve poverty around the world, get children into education and so on. I am somewhat sympathetic to that. However, these are to run until 2015. The important thing now is to build on the progress that has been made, carry forward the things that work well and learn some of the lessons of those MDGs: for example, universal education for children does not necessarily mean that those children in schools are actually learning something. All those things need to be addressed. However, my noble friend is right: we have to build on what has already been set in place.
Baroness Kinnock of Holyhead
My Lords, the Minister will, of course, be aware that women face disproportionate disadvantage and discrimination and that they are behind in all the development goals, especially in conflict-affected and fragile states. Will the Government call for a new post-2015 stand-alone goal on gender inequality and a specific target on violence against women and girls?
Baroness Northover
The noble Baroness is quite right about the disproportionate effect on women and girls. She will know that of the eight current MDGs, gender equality is the third and maternal health is the fifth. Given that the groups are looking at the causes of poverty and noting the disproportionate effect, as she has, I would be astonished if gender equality did not run right the way through any replacement of these MDGs.
Universal Credit
(12 years ago)
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Lord Touhig
To ask Her Majesty’s Government whether the information technology project required for the implementation of universal credit is on schedule.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the universal credit programme remains on schedule to launch the pathfinder in April 2013 and to go live in October 2013.
Lord Touhig
I regret that I do not share the Minister’s confidence in this matter but, on behalf of those who depend on benefits to survive, I sincerely hope that he will be proved right and I will be proved wrong. In Grand Committee the noble Baroness, Lady Stowell of Beeston, told me that,
“universal credit will be a digitally based process”—[Official Report, 8/10/12; col. GC377],
and confirmed that the Government intend people to claim this benefit online. However, work carried out by the noble Baroness, Lady Grey-Thompson, indicates that 8 million people in this country do not have access to a computer, and that of those, 3.9 million are disabled. What proposals do the Government have to ensure that people who are disabled and do not have access to a computer will be able to claim universal credit?
Lord Freud
My Lords, we did a survey on our complete claimant base and found, somewhat to our surprise, that 78% of them were already online, and, indeed, that 41% of them used online banking. Our target when we start next year is to have 50% of people going online, with others going to our other channels which support the online process. We plan to have a support and exceptions process to help the people who need support in getting their universal credit.
Baroness Sherlock
My Lords, is the Minister aware of the recent report of the Joseph Rowntree Foundation which showed that it will be very difficult for people to claim online because only 20% of people now do so and only 40% are ready and able? What will the Government do if people do not feel able to claim online? How far and for how long are the Government willing to extend paper applications to those who struggle?
Lord Freud
My Lords, I should make clear that we are not entertaining paper applications. We are looking at either face-to-face or telephone support groups. We have looked at pushing JSA online and the figures have gone up from 16% in September last year to 39% this September. We are moving people very rapidly to the online route.
The Countess of Mar
My Lords, the banks have shown us that computer systems are not infallible. Can the Minister tell the House what provision there is for back-up in case something goes wrong? These people are very vulnerable and cannot do without money for a long time.
Lord Freud
My Lords, we have a very substantial contingency prepared if, for instance, a disaster takes down our data centre—we have two data centres for that reason—and particularly if we have a cyberattack. We will have contingency built into the system to make sure that our payments systems do not go down because of these problems.
Lord Stoneham of Droxford
Can the Minister confirm that the Treasury is giving the fullest possible co-operation to his department on the computerisation of the universal credit system? In particular, are employers being sufficiently geared up to provide monthly pay information on their employees?
Lord Freud
My Lords, I am happy to confirm that the Treasury is whole-heartedly in support of this radical transformation of our welfare system. Part of the system relies on real time information through HMRC networks, and HMRC is driving ahead with a series of expanding pathfinders. It currently has 2 million employees or pensioners on the system today and is ramping it up into April and October next year.
Lord McKenzie of Luton
My Lords, the Minister will be aware, no doubt, of the KMPG survey undertaken recently. It concludes that:
“Moving to real-time information (RTI) reporting in which employers send payroll information to HMRC on or before every payday instead of after the end of the tax year is an enormous change. In the main, the larger employers are putting plans in place, or at least thinking about it. But many small and medium-sized businesses are likely to be blissfully unaware of this radical change”.
Is that not a cause for concern?
Lord Freud
My Lords, there is naturally a programme to get employers on board. HMRC has launched a major campaign—for instance, writing to 1.4 million employers so that they are ready in time. Even in the KPMG report, 75% of employers were aware of the change over and that was before this campaign got going.
Baroness Armstrong of Hill Top
Is the Minister content that people currently being moved from one benefit to another frequently have to wait three, four or more weeks because the system cannot cope? How is that meant to give us confidence in what the Minister and the department are proposing for next year?
Lord Freud
The noble Baroness is absolutely right on this particular problem. It is one of the reasons we are sweeping away the existing system—it is simply too complicated for people to operate. The real difference in the new welfare system is that we do not have a distinction between out-of-work benefits and in-work tax credits. You do not have to jump from one system to the other when you move category. You stay on the same system and do not have to suffer awful delays.
Baroness Browning
Will my noble friend confirm that people claiming disability benefits will be reassured that when the Government calculate the minimum amount they need to live on, the cost of maintaining a computer and purchasing internet access will now be part of that computation?
Lord Freud
My Lords, that is not how the benefits system is built up. It is not, and has not been ever under any Government, built up on the basis of needs. It is based on a particular set of payments for people in different categories. That will continue. In fact, under universal credit the gross amount for people who are unemployed will remain more or less unchanged as a direct result. Clearly people can get access to computers. They do not necessarily have to have them at home.
Lord Bach
My Lords, does the Minister accept that when universal credit comes in, an enormous number of wrong decisions are bound to be made? Is he aware that just when universal credit comes in, legal aid for legal help with benefit law will just have been abolished? Are those two facts merely coincidental, or is it a calculated act of policy, whose aim is to punish the vulnerable and the poorest?
Lord Freud
My Lords, when you turn what can be 200 pages of applications for the current suite of benefits into one very much more simplified system, clearly you will dramatically reduce the number of errors that people will make. I therefore think that the complaint is about the existing system and not about the system we are planning.
Justice and Security Bill [HL]
(12 years ago)
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Lord Clinton-Davis
To ask Her Majesty’s Government how they will respond to the view expressed by the Equality and Human Rights Commission that the proposals in the Justice and Security Bill [HL] regarding closed material procedures are incompatible with the Human Rights Act 1998.
The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, Her Majesty’s Government disagree with the EHRC’s analysis. Case law shows that closed material proceedings can occur compatibly with the right to a fair trial in Article 6 and the other rights contained in the convention. CMPs are explicitly made subject to Article 6 in the Bill. The UK Supreme Court affirmed as recently as last year in the case of Tariq that a procedure involving CMPs was compatible with Article 6 of the European Convention on Human Rights.
Lord Clinton-Davis
The proposals regarding CMPs are controversial and difficult, are they not? How do the Government now propose, as they must, to deal with the powerful criticism of the Equality and Human Rights Commission and others that CMPs are incompatible with a fair trial, in breach of Article 6 of the European Convention on Human Rights and fail to define clearly the national security concerns which are claimed to lie at the heart of the Government’s proposals? Are we too late to intervene and discuss the position with this body?
Lord Wallace of Tankerness
My Lords, I certainly agree with the noble Lord that these proposals are controversial, difficult and complex. Indeed, they have already been the subject of much debate in your Lordships’ House. As I indicated, the Government believe that they are compatible with Article 6. Upon introduction of the Bill, I signed a statement that its provisions are compatible, and the Government have published their own summary of the human rights issues in the Bill, which we gave to the Joint Committee on Human Rights and which has been published. The definition of national security was debated in your Lordships’ House in Committee, and there are many reasons as to why national security is not defined in many statutes. The noble Lord asked if there will be a further opportunity for discussion. Indeed, there will be such an opportunity because the future business set down for the House indicates that the Report stage will be held on the 19th and 21st of this month. I anticipate some informed and robust discussions during those debates.
Lord Marks of Henley-on-Thames
My Lords, my noble and learned friend the Advocate-General will no doubt agree that the opinion of John Howell QC obtained by the commission needs to be taken seriously. Have the Government yet had time to consider how far amendment of the Bill might address the thrust of the criticisms he advances—in particular, by ensuring that its impact is strictly limited to material that would otherwise be subject to public interest immunity and to cases where otherwise no trial at all would be possible, and by giving claimants as well as the Government the right to have such material considered by a court, with the assistance of a special advocate?
Lord Wallace of Tankerness
My Lords, I can certainly assure my noble friend that the Government give serious attention to representations from the Equality and Human Rights Commission and to this particular opinion, as I have indicated. There is a good response to the two key concerns that have been raised. It is the Secretary of State who applies for the CMP, but it is nevertheless the courts which decide whether to grant a declaration and, thereafter, which material will be heard in closed proceedings. With regard to criticism of the standard of gisting, we believe, as we said in Committee, that following the judgment in the Tariq case the Supreme Court found that the requirement of fairness can vary from case to case. The Bill states that closed material proceedings must comply with Article 6, when it applies, and we leave it to the courts to decide what Article 6 requires in any case. I am grateful for the constructive proposal of my noble friend. He will be aware that as well as considering seriously the opinion of the ECHRC, we will also consider the comments made in Committee, and I think we will receive before Report stage the report from the Joint Committee on Human Rights. I certainly look forward to giving that the consideration it deserves.
Lord Beecham
My Lords, given the dictum of the late Lord Scarman that public interest immunity is a matter of substantive public law, not private right, and that of the late Lord Bingham, that:
“It is an exclusionary rule, imposed on parties in certain circumstances, even where it is to their disadvantage”,
does the Minister agree with the opinion of leading counsel furnished to the Equalities and Human Rights Commission that,
“it is the duty of courts and tribunals to give effect to such immunity if applicable”—
on their own motion—
“even if the parties do not wish it”?
If so, what are the implications for the proposals in the Bill?
Lord Wallace of Tankerness
My Lords, again the issues regarding public interest immunity have been well aired and were referred to by my noble friend Lord Marks. I am sure that we will return to this on Report. The concern expressed during our earlier debates was that if PII is successfully asserted by the Secretary of State, that material in respect of which PII is successfully claimed has no part to play—it is not admitted to the proceedings. The Government’s concern is that there may well be situations where the Government have an answer to serious allegations made against them but, under the PII system alone, they are not able to bring that material before a judge. We believe that it is better if it is before a judge, subject of course to the proper safeguards in this Bill.
Lord Campbell of Alloway
My Lords, I support what my noble friend has said, having appeared before that court on more than one occasion and set up my own chambers in Brussels, and having had an interest there. However that interest was always in our country, which predominated over that of the interest of Europe.
Lord Wallace of Tankerness
In these debates, my Lords, I very much welcome my noble friend’s support.
Welfare of Wild Animals in Travelling Circuses (England) Regulations 2012
(12 years ago)
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Lord De Mauley
That the draft Welfare of Wild Animals in Travelling Circuses (England) Regulations 2012 laid before the House on 12 July be approved.
Relevant document: 7th Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on 24 October.
Baroness Oppenheim-Barnes
My Lords, for many years I have been deeply concerned about all the issues that these regulations deal with. Unfortunately, I was not able to attend the Committee, but I read the reports and in particular the careful Explanatory Note that went with the regulations. I pay tribute to the Government for the work that they have done in a difficult and emotive, although narrow, field. We cannot have a full answer, but they have given us something which I believe to be very acceptable.
North Wales Abuse Allegations
(12 years ago)
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The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)
My Lords, with the leave of the House, I will repeat a Statement made earlier today in another place by my right honourable friend the Home Secretary. It is as follows:
“Mr Speaker, with permission I would like to make a Statement on historic allegations of child abuse in the North Wales Police force area. In 1991, North Wales Police conducted an investigation into allegations that, throughout the 1970s and 1980s, children in homes that were managed and supervised by Clwyd County Council were sexually and physically abused. The result of the police investigation was eight prosecutions and seven convictions of former care workers. Despite the investigation and convictions, it was widely believed that the abuse was in fact on a far greater scale. But a report produced by Clwyd Council’s own inquiry was never published because so much of its content was considered by lawyers to be defamatory.
In 1995, the then Secretary of States for Wales, my right honourable friend the Member for Wokingham, appointed a QC to examine all the relevant documents and recommend whether there should be a public inquiry. The recommendation was that there should be not a public inquiry but an examination of the work of private care homes and the social service departments in Gwynedd and Clwyd councils.
This work revealed not only shortcomings in the protection of vulnerable children, but that the shortcomings had persisted even after the police investigation and subsequent prosecutions. In 1996, my right honourable friend the Foreign Secretary, then the new Secretary of State for Wales, therefore invited Sir Ronald Waterhouse to lead an inquiry into the abuse of children in care in the Gwynedd and Clwyd council areas.
The Waterhouse inquiry sat for 203 days and heard evidence from more than 650 people. Statements made to the inquiry named more than 80 people as child abusers, many of whom were care workers or teachers. In 2000, the inquiry’s report, Lost in Care, made 72 recommendations for changes to the way in which children in care were protected by councils, social services and the police; and, following the report’s publication, 140 compensation claims were settled on behalf of victims. But the report found no evidence of a paedophile ring beyond the care system, which was the basis of the rumours that followed the original police investigation, and indeed one of the allegations that has been made in the past week.
Last Friday, a victim of sexual abuse at one of the homes named in the report, Mr Steve Messham, alleged that the inquiry did not look at abuse outside the care homes, and renewed allegations against the police and several individuals. The Government are treating these allegations with the utmost seriousness. Child abuse is a hateful, abhorrent and disgusting crime, and we must not allow these allegations to go unanswered. I therefore urge anybody who has information relating to these allegations to go to the police.
I can tell the House that Mark Polin, the chief constable of North Wales Police, has invited Keith Bristow, the director-general of the National Crime Agency, to assess the allegations recently received, to review the historic police investigations and to investigate any fresh allegations reported to the police into the alleged historic abuse in north Wales care homes. He will lead a team of officers from the Serious and Organised Crime Agency, and other investigative assets as necessary, and the Child Exploitation and Online Protection Centre will act as the single point of contact for fresh referrals relating to historic abuse in north Wales care homes. He will produce an initial report reviewing the historic investigations and any fresh allegations by April 2013. I have made it clear to Mark Polin and to Keith Bristow that the Home Office is ready to assist with the additional costs of this work.
In addition, as the Prime Minister said yesterday, the Government will ask a senior independent figure to lead an urgent investigation into whether the Waterhouse inquiry was properly constituted and did its job. Given the seriousness of the allegations, we will make sure that this work is completed urgently.
Given that there have also been serious allegations about other historic child sex offences, I should also inform the House of the work being conducted by Her Majesty’s Inspectorate of Constabulary. This will establish a full picture of all forces that have received allegations in relation to Jimmy Savile, examine whether the allegations were investigated properly, and identify wider lessons from the responses of the police forces involved. I have been assured by HMIC that its work will also take into account any lessons that emerge from these latest allegations.
Before I conclude, I would like to warn honourable Members that if they plan to use parliamentary privilege to name any suspects, they risk jeopardising any future trial and therefore the possibility of justice for the victims that I believe the whole House wants to see.
I believe that the whole House will also be united in sending this message to victims of child abuse. If you have suffered and you go to the police about what you have been through, those of us in positions of authority and responsibility will not shirk our duty to support you. We must do everything in our power to do everything we can to help you, and everything we can to get to the bottom of these terrible allegations. I commend this Statement to the House”.
That concludes the Statement.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for repeating the Statement today because for the past few weeks we have reacted with increasing horror as new details of historic allegations of sexual abuse of children and young people have emerged. Your Lordships’ House will emphatically agree with the noble Lord that these are deeply disturbing allegations. It is not only that the crime itself is so despicable and that many young people’s lives have been deeply affected and in some cases destroyed. It is not just that the very adults who have abused children and young people seem to have enjoyed the protection offered by positions of trust and fame. The most evil and despicable aspect is that these children and young people have been failed by the very institutions charged with protecting them, including the criminal justice system. The noble Lord is right. It is clear that Parliament must act to ensure that justice is done and that the perpetrators are held to account. The Government are right to act and I welcome their swift response and the announcement today.
But I remain to be convinced that this is the most appropriate way forward given what could be the scale of the problem. The whole House will welcome the Government’s Statement that all allegations must be treated with the utmost seriousness. As the noble Lord said, child abuse is a hateful, abhorrent and disgusting crime. We would concur that anyone who has information must go to the police.
As my right honourable friend Yvette Cooper, the shadow Home Secretary, has said, we need to have a full criminal investigation and we also need to examine what further changes are needed in the way in which we protect children and investigate abuse. But we also need to know whether there has been institutional failure to deal with historic allegations, whether by turning a blind eye, by covering up, or by simply failing to get to the bottom of what has happened.
For any child or young person to report physical or sexual abuse takes an enormous degree of courage. Any and every abused child or young person has the right to expect that the authorities will take them seriously, believe them and take action to protect them and deal with the abuser. That is why we must examine whether there is a further, deeper problem, whether in north Wales, in the cases involving Jimmy Savile and the BBC, or in those of grooming and sexual abuse in Rochdale and Rotherham. If children and young people who have been physically and sexually abused have reported their abuse and the authorities have failed to believe them, or even worse have believed them but then failed to act, that is truly shocking. Those who have failed to investigate or have sought to protect abusers or cover up abuse are equally guilty.
Given the scale of this issue, it has become evident that we cannot look at the allegations in north Wales in isolation. I hope that the noble Lord will understand when I express concern that the Government’s response will not address the wider concerns and seek assurances from the Minister.
I welcome the new criminal investigation into the allegations in north Wales. In particular, I very much welcome the involvement of the Child Exploitation and Online Protection Centre, which has considerable expertise. But can the Minister confirm that the inquiry can go wherever the evidence takes it and will not be confined to north Wales?
Also, the Minister may be aware from our debate on the Crime and Courts Bill with his predecessor and the Parliamentary Questions that I have asked on this issue that I remain concerned that the transition to the new National Crime Agency may leave the organisation underfunded. I have raised this now on several occasions. Will the Minister confirm that these investigations will not in any way be hampered by a lack of funding?
On the second point about historic reviews, it is right to look again at the Waterhouse inquiry, but can the Minister explain what is meant by,
“whether the Waterhouse inquiry was properly constituted and did its job”?
Are the Government now questioning the terms of reference or the operation of the inquiry? Can the Minister be more specific about that point?
Does the Minister understand the widespread concerns about there being so many inquiries? I am aware that these have grown rather than being planned in this way, but in addition to the police investigations there are three BBC inquiries into Savile, a Department of Health investigation into Savile’s Broadmoor appointment and several individual hospital inquiries. There is the CPS inquiry into why Savile was not prosecuted; there is the new north Wales inquiry; there is the HMIC inquiry into other forces that may have received information about Jimmy Savile; and there are others.
The Minister will be aware that we have already called for all the Savile inquiries to be held together. Is there not a strong case for a single, overarching, robust inquiry, not just about the abuse itself but also about whether individuals or groups used positions of influence—either their own or that of friends—to evade criminal prosecution? Of course we need to get to the bottom of what happened in each and every case but we also need to see if there are common themes and problems to prevent them happening again. There is a genuine concern that too many individual and specific inquiries is not the proper way to learn the right lessons for effectively and properly safeguarding children and young people. Time and again, evidence of serious institutional failures is presented; a single overarching inquiry into whether these allegations were ignored, or if there was a cover-up to protect abusers from public exposure and prosecution, is now essential.
The Waterhouse report led to, I believe, 72 recommendations and significant changes in child protection. The Children’s Commissioner was introduced, there is the Care Standards Act and the child protection Act, and we saw a strengthening of the law in introducing new measures and policies on safeguarding children and young people in schools and in social services. We saw the creation of the Child Exploitation Online Protection Centre, but yet again we are now presented with evidence that children and young people who came forward to report abuse were not taken seriously. We know that abuse was ignored for far too long against girls and young women in Rochdale and that concerns raised in Rotherham were not acted upon.
The Minister may be aware of previous debates we had with his predecessor about our concerns on the weakening of the vetting and barring system, our concerns about the changes to CEOP as it was merged into the new National Crime Agency, and our concerns about the funding of the new National Crime Agency. PCTs have warned that child safeguarding has been jeopardised by confusion and transitional arrangements in NHS reforms. Is the Minister confident that the fragmented inquiries announced today will give a clear picture of the action that is needed to really protect children from abuse in the future?
It demands enormous courage for a child or young person to speak out and report sexual or physical abuse; if they are not believed or if their reports are not acted on, it only compounds that abuse. I believe the Minister and your Lordships’ House are united in the objective of wanting the most effective and robust inquiry possible for lessons to be learned and for actions that will really make a difference, because only then can we truly provide justice to those who have suffered.
Lord Taylor of Holbeach
I thank the noble Baroness, Lady Smith, for her response to the grave Statement that we have had to make to the House today and for her general welcome for the way in which the Government are responding promptly to the issue. I agree with her that perhaps the most serious issue is whether there has been institutional blindness, if one can put it like that. I absolutely agree that this must be the key to the agenda going forward in order to make sure that the interests of victims are properly recognised, that the police prosecute without fear or favour, and that justice is seen to be done.
The noble Baroness asked whether there would be restrictions on these investigations. Police investigations are police investigations and they go wherever the evidence takes them. She asked, too, about the funding. The Government understand that there will be resource pressures because these investigations will involve all of the authorities engaged in them in additional work. The Home Office will encourage those organisations to apply to it so that any extra additional costs can be considered as part of the funding provided to them by the Home Office.
The thrust of the noble Baroness’s questions was whether it would be better to wait and set up an overarching inquiry in order that the lessons may be learnt. I do not believe that that is the right approach. I believe that these allegations demand immediate investigations. The lessons that will be learnt by these investigations may well require a comprehensive review of child protection in this country—that is a reasonable conclusion to come to—but I do not believe that the House would thank us if we stood by and delayed the investigations involved. I hope that I have the support of the noble Baroness in that. If I have misunderstood the noble Baroness, I apologise. I think the Government are on the right track here and doing what the House would wish of them.
On the question of organisational change and whether it will impede or assist these investigations, as the noble Baroness said, this issue has been debated over time and in all ways. All I can say is that Keith Bristow will be heading up an organisation which has considerable resources available to it through the National Crime Agency. These bodies will be there to do their task, to assist him to achieve our objective of better child protection for all young people.
Baroness Stowell of Beeston
My Lords, perhaps I may assist the many noble Lords who I am sure will want to contribute today by reminding them that the Companion advises that, in order that as many people as possible are able to contribute, today is an opportunity for brief comments and questions only.
Baroness Hamwee
My Lords, one area which has not been mentioned in the Statement is support for the victims. Justice will be one form of reparation, but can the Minister say anything about any other form of support that will be given to individuals?
Quite separately, following the question about what is meant by inquiring,
“whether the Waterhouse inquiry was properly constituted and did its job”,
can the Minister assure the House that for every inquiry—I am not talking only about police inquiries—there will be consultation as to its terms so that the best, most proper terms are put in place? If the remit is not right then the outcome will tend not to be right. In this case, for instance, the involvement of the Children’s Commissioner in the terms of the inquiry seems quite obvious.
Lord Taylor of Holbeach
I thank my noble friend for her questions. Clearly, the victims are at the heart of this inquiry and providing them with the confidence to come forward is one of the most important things that we can do. I hope that we in this House will echo the wishes of the Home Secretary by giving that support.
The terms of reference of inquiries are very important to the outcomes they produce. I am particularly concerned that we make sure that the original inquiry in North Wales, the Waterhouse inquiry, was indeed set up in such a way. The noble Baroness, Lady Smith, asked about that but I did not reply to her. However, my noble friend has given me the opportunity to do so. We must make sure that that inquiry addressed the right issues. We now have an opportunity to revisit the inquiry and to make sure that it was not too restrictive in what it was seeking to do.
Lord Lloyd of Berwick
My Lords, am I right in thinking that Mr Justice Waterhouse was appointed to investigate allegations of abuse within the care system but he in fact investigated allegations of abuse outside the care system? We know that he sat for 203 days and found no evidence at all to support those allegations. Should that not have been an end to the matter? I do not know whether the noble Lord is aware of the principle that there should be an end to litigation; so also there should be a principle that there should be an end to investigations.
Lord Taylor of Holbeach
Were it so easy just to put an end to these things, that would be fine, but we are faced with a situation where it is quite clear that this matter was not at an end. Allegations are still being made that should cause a responsible Government to be prepared to revisit the matter. That is not to cast aspersions on the work that was done at the time, but everybody would expect us to look again to make sure that we know exactly what the scope of child abuse was in those very far-off days.
Lord Roberts of Conwy
My Lords, I have a copy of Lost in Care, the late Sir Ronald Waterhouse’s report—all 937 pages of it. It is a very thorough piece of work, as one would have expected from a High Court judge. The terms of reference are spelled out in this report, as is an explanation of why he ordered that names should not be published, largely for the protection of the victims, as in rape cases. Does my noble friend really think that, after all these years, any new evidence will actually emerge as a result of these further inquiries? I have heard most of the media reports over recent days and, frankly, I have heard nothing new. There is also the further point that the report contains a subsidiary report by Sir Ronald Hadfield, the assessor of the police activity in this context. His report comes right at the very end of the Waterhouse report and is critical of some of the police operations.
Lord Taylor of Holbeach
I am very pleased that my noble friend has made that contribution to the debate. If I disagree with him, it is not because I do not respect his experience and the fact that he was active in politics in that part of the country at the time when this report was being produced. He has a copy and has no doubt studied it. However, if I thought that nothing more was going to come out of this further investigation, all I would say is, “Fine. That is very good”. If there is nothing more to be found, we can rest content that the matter is indeed closed. However, if we find that there is other material, we should know of it. We are right to seek to pursue this matter even though many of the individuals involved may long ago have disappeared.
Lord Campbell-Savours
My Lords, on 17 June 1996 I asked the then Secretary of State, Mr Hague, whether all the cases that have been referred to in the appendices to the Jillings report had led to prosecutions. I was told that that was not the case, and that there were names which were still outstanding. Can we be assured that, as a result of what the Government are planning, those outstanding names will be reconsidered with a view to prosecution if at all possible?
Lord Taylor of Holbeach
I am sure that is the purpose of the further inquiries that are being made.
The Earl of Listowel
My Lords, does the Minister agree that it will be a considerable comfort to those children who were abused in the past to know that children are not abused in this way in the care system today? However, he will know that it is unfortunately still the case that children are being abused; the deputy Children’s Commissioner’s report finds that thousands of children are still being abused and sexually exploited today. Does he hope that this report might contribute to the swell of public feeling to say that we will do better for these children in care, ensure that their staff have the qualifications they need to give the excellent care and protection that these children need and change legislation to ensure that these occurrences will not take place so frequently?
Lord Taylor of Holbeach
The whole House will be awaiting the results of the inquiry from Sue Berelowitz which is likely to come out later this month. However the noble Earl is absolutely right: we have perhaps been complacent in the past. We can no longer be complacent on this issue. I hope that the Government are making it clear that they do not intend to be complacent and will pursue all these matters so that we have a better environment for child protection in this country.
Baroness Walmsley
My Lords, following on from what the noble Earl has just asked, will the reports that the Minister has just announced be free to make recommendations to public services and organisations? It seems likely that recommendations will be made to social services, the criminal justice system and the police. Health services, such as STD clinics where young girls go over and over again, are very often in a position to pick up warning signs, which they do not always pass on. This has recently come out in the report referred to by the Children’s Commissioner. Similarly, in the education service, schools can help to prepare children to understand the dangers and to protect themselves.
Lord Taylor of Holbeach
My noble friend is absolutely right. A multi-agency approach is the way in which this issue needs to be addressed across government. She quite rightly points to the fact that different aspects of government are able to assist in this process. It is certainly the Government’s objective to have a cross-departmental, cross-agency approach in order to make sure that the information that we have gained through these unfortunate events, and the public attention which has been drawn to the exposure of the Jimmy Savile case, can be properly addressed so that we can create a better place for young people in this country.
Lord Touhig
My Lords, I apologise to the Minister and the House. I had to absent myself from the Chamber for the first couple of minutes of the Minister’s Statement, but I did hear it in full in the other place. I have one question for the Minister. Clwyd County Council carried out an inquiry and produced its own report which was never made public, for legal reasons I believe. Can the Minister tell us whether the new inquiry will have access to examine this report?
Lord Taylor of Holbeach
I am sure that any new inquiry will have access to all relevant papers, including that original report.
Lord Bates
I commend my noble friend on the report that he has brought forward. The noble Baroness, Lady Smith, touched on the potential dangers of having multiple inquiries going on at the same time. Will my noble friend reflect on the possibility of consulting the right reverend Prelate the Bishop of Liverpool on the best way forward, the Lord Bishop having delivered a widely respected and thorough investigation into highly complex issues, illuminating a great tragedy and bringing out truth that previous investigations had failed to do?
Lord Taylor of Holbeach
As someone who holds the right reverend Prelate the Bishop of Liverpool in the highest possible regard, I would always be happy to consult him. I am not suggesting for one moment that there are not lessons to be learnt from these different inquiries that will need to be pulled together at some stage, but the House and the broader public would not thank us for failing to deal with the immediate issues facing us in order to get to the bottom of this.
Lord Rowe-Beddoe
My Lords, I express and share the concerns of the noble Baroness, Lady Smith, the noble Lord, Lord Roberts, and indeed the noble and learned Lord, about the characterisation in the Statement about whether the inquiry led by the distinguished jurist and High Court judge was properly constituted and did its job. There is already a commingling in the media between that aspect and new evidence that is contained further on in the Home Secretary’s Statement. For the benefit of people involved here, we should seek further clarity.
Lord Taylor of Holbeach
I have tried to provide a proper balance between my regard for the way in which the original report was undertaken by Sir Ronald Waterhouse and what we are seeking to achieve today. We would be wrong to ignore the terms under which that inquiry was held. It has much to contribute to discovering what went on in the light of the allegations being made today. We would be mistaken if we chose to preserve that inquiry in aspic and say that it did not have lessons to teach us about how to investigate these matters today.
Lord Harris of Haringey
My Lords, I am sure that we all welcome the fact that there is to be a new police inquiry into these matters, but I would be grateful for the Minister’s explanation of the thinking behind this being led by Keith Bristow, who is heading up the new National Crime Agency. I have enormous faith in Keith Bristow himself. However, given that the Serious Organised Crime Agency and the yet-to-be-created National Crime Agency are going through a period of enormous flux and confusion while this happens, and the job of the chief executive of an agency that is being set up is usually pretty highly committed to setting up that agency, how will it be possible for him to lead the sort of inquiry that all noble Lords have said they want—very thorough, potentially extremely lengthy and potentially extremely involved? In practice, where will the resources come from? I am not talking about the money but the individual officers. Who is going to co-ordinate that? How is that going to be practically done when the person you are asking to lead the inquiry is supposed to have a more than full-time job setting up a new government agency?
Lord Taylor of Holbeach
I remind the noble Lord that the Statement made it quite clear that it was the chief constable of North Wales Police, Mark Polin, who actually requested Keith Bristow to head up this investigation, and to do so using the resources that are available to him through SOCA and other assets that are available for serious investigations. Indeed, we will face a new world with the National Crime Agency, but that still has to come before your Lordships’ House and I would not presume on that. This is a recognition that the inquiry itself may well cross police boundaries; it may well be a matter that is quite properly addressed by an agency set up to deal with serious organised crime.
Baroness Uddin
My Lords, I declare my interest as a former child protection worker. Will the inquiry say why 80 people were named in the inquiry, but only eight prosecutions took place and seven convictions were made? It would be interesting to know what the Minister intends to do, not just in supporting and listening to those victims and survivors who are coming forward, but in terms of long-term support, which is critical. If I may echo what my noble friend Lady Smith said, this is a great opportunity to look generally at the level of abuse in different institutions. As the noble Earl also said, this is rampant and still the experience of hundreds and thousands of young people whom we are continuing to fail.
Lord Taylor of Holbeach
I thank the noble Baroness for her contribution, particularly as she speaks from direct experience as a child protection officer. I said earlier that the police will prosecute without fear or favour. The reason why these matters are being reopened is to make sure that the judgments that were made at that time were correct. Further information that the investigations uncover will, I suspect, lead to other prosecutions being brought; certainly, they should do if the investigations discover further evidence of child abuse. I hope that that will be one of the consequences.
A second consequence, to which the noble Baroness alluded, is support for victims. The Government are mindful of the fact that it is victims of crime who need support and we intend to implement policies to provide exactly that.
Financial Services Bill
(12 years ago)
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17:16 - Division on Amendment 3A - Ayes: 158 / Noes: 237 - Amendment 3A disagreed.
Lord Sassoon
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, this group of government amendments comprises two straightforward technical concessions, which I signalled in Committee. The first, government Amendment 20, responds to an amendment moved by my noble friend Lady Kramer in Committee. This helpfully highlighted that the legislation does not expressly prohibit the Chancellor from appointing the governor, or one of the deputy governors, of the Bank to be chair or deputy chair of court. As I assured my noble friend at the time, the policy intention—indeed long-standing practice—has always been for non-executives to play these crucial roles. However, Amendment 20 puts this beyond all doubt by explicitly prohibiting the governor and deputy governor from being appointed as chair or deputy chair of court.
The other amendments in the group deal with the terminology around the Court of Directors. In Committee, various noble Lords, including my noble friend Lord Philips of Sudbury and the noble Lord, Lord Burns, commented on the oddity of the Court of Directors being comprised of directors, which refers to the non-executive members only, and the executive members, who are not classified as directors at all. I make a commitment to go away and look at options for clarifying this, and the amendments in this group are the result. The amendments would change all references to “director” to “non-executive director”. This means that all the members of court are now directors, with the legislation distinguishing clearly between non-executive and executive directors. As I have said, these are straightforward concessionary amendments, which usefully tidy up the court arrangements, and I hope that the House will support them. I beg to move.
Lord Eatwell
My Lords, I congratulate the noble Lord on the improvement to the drafting of the Bill that these amendments secure. It is worth pointing out that this is not a mere clarification. A persistent feature in the development of corporate governance in this country in the past several years has been the enhancement of the role and responsibilities of non-executive directors. Clear recognition in the Bill that these are non-executives carries with it the potential for them to play a proper role in the overall oversight of the Bank, a matter which we will come on to later when we discuss the role of the oversight committee. I support the Minister’s amendments.
Lord Sassoon
Lord Eatwell
“(2A) The Directors of the Bank of England shall only be appointed if Her Majesty is satisfied that they have the relevant knowledge and experience, and that their appointment will enhance the mix of skills and experience of the Court.”
Lord Eatwell
My Lords, in Committee my noble friend Lady Hayter and I sought to ensure that the body of what we can now comfortably refer to as “non-executives” was suitably diverse to overcome the dangers of groupthink. Groupthink, combined with a persistent failure to challenge the executive, has been all too evident at the Bank of England over the past five years and, indeed, in the years preceding the economic and financial crisis.
We were criticised at the time for the imprecision of the term “diverse”, which we included in our amendment in Committee. We have taken those criticisms on board. We have gone away and thought about them. In particular, we were very struck by the words of the noble Lord, Lord Sassoon, in criticising our position:
“As the Committee may be aware, the Treasury’s Select Committee report into the accountability of the Bank of England concluded:
‘The new responsibilities of the Bank will require its governing body to have an enhanced mix of skills’.—[Official Report, Commons, Financial Services Bill Committee, 21/2/12; col. 21.]
The Government agree with this conclusion and in their response to the Treasury Committee they committed to take it into consideration in relation to future appointments”.—[Official Report, 26/6/12; col. 176.]
We have decided to assist the noble Lord in taking it into consideration by using exactly those words, to which he has already agreed, in this amendment.
Let me reiterate the main point. Until now, those involved at the Bank in a non-executive capacity have not shown themselves capable of holding the executive to account. That is a serious failing in corporate governance. Until now, those involved in a non-executive committee at the Bank have been seduced by groupthink or overwhelmed by the power of the governor or deputy governors. This is again a serious failing in corporate governance. It is simply not good enough for the Government to say, “Well, we understand and we’ll do better in future”. It is simply not good enough to provide vague assurances. If we are to create a new Bank of England with new major powers and responsibilities, it should be capable of dealing with those responsibilities in a clear structured way with suitable non-executive scrutiny. That is what Amendment 2A would achieve using the words to which the noble Lord, Lord Sassoon, has already agreed.
Amendment 6A, which is also in this group, makes the same point with respect to the mix of skills on the Financial Policy Committee. Of course, the skills mix will be different on the FPC from on the court. There will be a need for more technical expertise. For example, it would be a huge mistake to rely just on people with experience of working in financial services. I notice, for example, that no one appointed to the interim FPC has done any serious economic research into the phenomenon of systemic risk—not a single one. That is exactly the phenomenon on which the FPC is supposed not merely to opine but to take action. Therefore I think that a degree of diversity in the skill set of non-executive directors appointed to the FPC will greatly enhance its effectiveness and indeed its reputation.
I hope, particularly since I used his own words in my amendment, that the Minister will be happy to accept these two constructive amendments. I beg to move.
Lord Sassoon
Noble Lords may be aware that a similar amendment to Amendment 2A was tabled and debated in another place. Then, as now, and as I said in Committee, the Government do not believe that such a legislative provision is necessary or appropriate. Starting with the question of knowledge and experience, the Government have repeatedly confirmed their commitment, as I did in words quoted by the noble Lord, to ensuring the appointment of serious, knowledgeable and experienced candidates who have the appropriate qualifications and skills to carry out the functions of non-executive directors of court. These appointments are fully regulated by the Office of the Commissioner for Public Appointments, which ensures a fair, transparent and competitive process. The code is binding and the Treasury is responsible for ensuring its compliance, thereby ensuring that appointments to court are made openly, transparently and on the basis of merit.
Even without a prescriptive legislative obligation, in order to build an effective court the Treasury is mindful of the need to seek not only an appropriate depth but breadth of skills and experience. Ministers can and do take this into account in forming their recommendation without the need to further impose a duty on Her Majesty to form a view as to the candidate’s knowledge or experience before she makes the appointment.
I turn to the question of diversity, which I understand to mean not only of gender, geography or ethnic background but also of sectoral experience, insight and knowledge, as is suggested by Amendment 6A. Court and, in future, FPC appointments are advertised openly, and applications are welcomed from candidates from a variety of backgrounds. For example, the role profile for the most recent court vacancies sought people with substantial experience as board members, as head of function of major financial organisations and as senior managers in a relevant area of public policy, or in the voluntary sector or a trade union.
The latest iteration of the Government’s code of good practice for corporate governance in central government departments clearly states that,
“a board should have a balance of skills and experience appropriate to fulfilling its responsibilities. Moreover, it stipulates that the membership of the board should be balanced, diverse and manageable in size”.—[Official Report, Commons, Financial Services Bill Committee, 21/2/12; col. 22.]
However, given the size of the non-executive contingent on court and the number of external members of the FPC, it would simply not be possible to prescribe a set of criteria to ensure full diversity—that is, to ensure that each and every different background and characteristic is represented on the board and committee —without severely limiting the potential field of qualified applicants. It is therefore a question of judgment.
I stand by exactly what I said in Committee, which is that the Government are committed to ensuring an appropriate breadth as well as depth of skills; and this is as true of the FPC as it is of the court. While I agree entirely with the sentiments and principles behind these amendments, I do not believe that it is necessary or appropriate to legislate to achieve these aims.
I hope that I have provided sufficient reassurance to the noble Lord and that he will be able to withdraw his amendments.
Lord Peston
Could the Minister confirm that all these appointments will be advertised in appropriate places? I think that he said it but I am not sure that I caught what he said.
Lord Sassoon
That is what I said, and I am sure that it will be clear on the record when the noble Lord reads it.
Lord Flight
Could I ask the Minister whether he feels that the arrangements as they stand, where these posts are advertised and people apply, have actually delivered the sort of Court of the Bank of England that is appropriate to the needs going forward? There has been, I believe, fair criticism of the court for not being a robust enough body, but the court is assembled by the very arrangements that the Minister is talking about.
Lord Sassoon
My Lords, the whole substance of the point here is that we are giving the court a very clear and enhanced mandate, particularly through the oversight committee, which we will come on to. In the context of the new role and mandate for the court, it will increasingly attract the very best people who go with the new mandate. The comparison with the past is not necessarily a fair one.
Lord Eatwell
The Minister in reply says that this amendment is not necessary or appropriate. However, in attempting to substantiate those propositions, he referred to the policy of the Public Appointments Committee, which is not responsible in any way for a mix of skills but simply for the quality of the individuals who come before it. When he referred to the variety of backgrounds, he did exactly the thing that I was afraid he would do: he referred to people with senior board experience in commercial and financial organisations and not to anybody who actually understands systemic risk or how to manage it. If they did, perhaps we would not have got into the mess that we did. So I am surprised—well, I suppose that I am not surprised—but I am disappointed that he finds it neither necessary nor appropriate.
Lord Sassoon
Can I clarify that I was citing the advertisement for the most recent court appointments and not for FPC appointments?
Lord Eatwell
That is very helpful, and I thank the Minister for it, but my point on the FPC is reinforced by what he has just said. I would hope that in FPC appointments some reference would be made to the appropriate skill set, which was not that quoted, although it may be appropriate for the court. Perhaps if I could nudge the Treasury in that direction when making an advertisement, that might be a result. Having said that, I beg leave to withdraw the amendment.
Amendment 2A withdrawn.
Amendment 2B
Lord Eatwell
“(2A) Within one month of the appointment of a person under subsection (2)(a), Her Majesty’s Government must make parliamentary time available for the House of Commons to debate and express a view on that appointment.”
Lord Eatwell
My Lords, this moves us on to a rather serious matter. Everybody in the House will be aware that there is considerable and growing disquiet about the powers heaped on the Governor of the Bank of England; he or she will chair the court, the Monetary Policy Committee, the Financial Policy Committee and the Prudential Regulatory Authority. On top of that, he or she is designated by the Bill to be the sole interlocutor between the Bank and the Treasury in the designated meetings with the Chancellor. On top of that, the governor must guide the Bank’s other activities in policy and research. And on top of that, the governor will continue to represent the Bank in international fora. I suppose that just occasionally he or she will sleep.
This is a ridiculous amount of power in the hands of an unelected official. Kate Barker, a former member of the Monetary Policy Committee, said, in August this year, said that the,
“steady erosion of democratic control over regulation of the financial system would accelerate under proposals by the coalition government”,
and that,
“Mervyn King’s successor will be appointed to an unduly powerful role for an unprecedented eight-year term”.
Kate Barker has great experience in this field and seems to have captured exactly the problem. As noble Lords will be aware, there has been considerable disquiet from serious financial commentators about the future position of the governor.
There is another inevitable downside to this agglomeration of powers. The post of the governor has become—and will become yet more—excessively politicised. That is very unfortunate. However, that is the inevitable consequence of the Government’s proposals. If that is the Government’s wish, they should face up to the consequences, and permit Parliament to debate the appointment, at least after the appointment is made. Even then, the prospect of such a debate will focus the mind, let us say, of the Chancellor in making a recommendation, in the knowledge that he will have to defend it before the House of Commons. I beg to move.
Lord Barnett
My Lords, I strongly agree with much of what my noble friend has said. As I have said before, I have been extremely concerned about the new governor’s huge job. As my noble friend has spelt out, we would be giving enormous powers to that new governor. That is why I have expressed my dissatisfaction, to put it mildly, with the way that this Bill has been drafted. I hope that my noble friend will accept an amendment from me to his amendment; namely, that it should be available not only to the House of Commons but to Parliament. This House has scrutinised this Bill to an enormous extent. To say now that the appointment should be deferred only to the House of Commons is something that I certainly do not like. I hope that my noble friend will rearrange his amendment to accept the word “Parliament” rather than “the House of Commons”.
We will come later to the question of “must” and “may”, but I am very pleased to see that in this amendment my noble friend has put “must” rather than “may”. It is certainly crucial that it should happen, because the appointments are extremely important. Somebody should be doing the job that the current governor is not doing, and which he is not being asked to do. Now we are asking the new governor, whoever that may be, to do such an enormous job that some potential contenders have already withdrawn from the race—and understandably, because the job that will be asked of this man or woman is enormous. I hope to have the opportunity to propose an amendment a little later to reduce some of those powers, but for now I strongly commend my noble friend’s amendment, subject to my suggested draft amendment to his amendment.
Lord Flight
My Lords, I do not particularly see how having a debate about the appointment after the governor has been appointed does very much to improve accountability. Ongoing accountability is needed. The debate is whether or not that should be through the Treasury Select Committee, or whether potentially there should be much greater constitutional development in terms of appearing before one or both Houses of this Parliament, in the sort of way that occurs in the USA. I agree with the principle that there is a great deal of power, which needs to have some accountability. Looking back over the events of the past five years, there was certainly a period between autumn 2007 and summer 2008 when it was very clear that the Governor of the Bank of England was completely unaware that a major banking run was overtaking this country. A bit of accountability and some questions from this House or the other place would perhaps have stirred things up.
Lord Phillips of Sudbury
My Lords, I concur with what the noble Lord, Lord Flight, has said, and I am a bit foxed by the way in which the noble Lord, Lord Eatwell, introduced this amendment. I think I heard him say that these appointments have become more and more politicised, and that he regretted that. It strikes me that to require a debate to be held in the House of Commons after the appointment has been made is an invitation to the utmost politicisation, especially because, as far as I can see, there would be no consequence to that debate, in that the appointment would already have been made.
Lord Sassoon
My Lords, before I turn to the detail of this amendment, I thank the Bill team for dealing with a significant hatful of amendments, this being the first, that turned up from the noble Lord, Lord Eatwell, rather late yesterday evening.
Lord Sassoon
I will give way in a moment. I will do my best to engage in constructive and meaningful debate. As I say, I am very grateful to the team because we did not have much notice of a number of these amendments.
Lord Eatwell
I am sure the noble Lord does not want to mislead the House. The amendments were sent to the Bill team on Friday afternoon and I had a long telephone conversation with it to discuss them. I assure the noble Lord that I had that telephone conversation. He says from a sedentary position, “not on all of them”. All the major items were discussed at that time. For him to suggest that they appeared only yesterday is inaccurate.
Lord Sassoon
My Lords, Amendments 2B, 2C, 3L, 3M, 6B, 6G and 7F, among others—maybe that is the lot—appeared at the Treasury late yesterday and not all the amendments were discussed in the conversation to which the noble Lord refers. However, there are some important and some not so important matters in these amendments and I will do my best to do them justice.
As we have heard, this amendment relates to the role of Parliament in the appointment of the Governor of the Bank of England and has been the subject of much debate both here and in another place. Specifically, Amendment 2B seeks to secure a debate in another place following the appointment of the governor, something which I do not believe is necessary or appropriate. The Government are committed to maintaining an appointments process that is proportionate and attracts candidates of the highest quality. It is important to ensure the credibility of the candidate and safeguard his or her independence. If the appointment was subject to a debate in another place, I suggest that there is a significant risk of politicising the process and undermining the appointment of the new candidate. Of course, it has been argued that such a debate could enhance the credibility of the candidate but previous governors have achieved credibility without being subject to such a debate. Credibility ultimately stems from effective action to meet the Bank’s objectives. If the appointment were subject to a debate in another place, the candidate would not be present to answer questions or defend him or herself.
The noble Lord, Lord Eatwell, has already quoted me in the previous debate. I quote what he had to say on this matter in Committee on 26 June. He said:
“We do not want to politicise appointments to the extent that has occurred in the United States”.
The suggestion that appointments might end up being considered by the whole House made him “nervous” as it would,
“inevitably be whipped and become very political indeed”.—[Official Report, 26/6/12; col. 165.]
I very much agree with that. Therefore, the Government believe that the pre-commencement hearing held by the Treasury Committee strikes the right balance in terms of scrutiny of this executive appointment and allows for a more constructive debate with the candidate in attendance to satisfy the committee’s concerns about his or her personal integrity and professional competence. The Government welcome the Treasury Committee’s ongoing role in holding such hearings and, importantly, as my noble friend Lord Flight reminded us, holding the governor to account throughout his or her tenure. I hope I have provided sufficient reassurance and that the noble Lord feels able to withdraw this amendment.
Lord Peston
I wish to make a comment and ask the Minister a question. My comment is that there are no long words in this amendment. I would have thought that the average person who had been at school could just about understand it in a few minutes of reading it. The idea that the Minister cannot address your Lordships’ House without several days, if not weeks, of Treasury back-up seems to me absolutely preposterous. He should stop bellyaching about this sort of thing.
My question to him is: if this debate took place in both your Lordships’ House and the other place, has it not occurred to him that that debate might be devoted mainly to saying what an excellent appointment has been made in this case, what an extremely good person has been chosen and wishing him well in his very arduous task? Why is the Minister taking it for granted that the debate would be mostly about slagging off whoever the appointed person may be?
Lord Sassoon
My Lords, I am not taking it for granted. I am merely quoting the fears of the noble Lord, Lord Eatwell, when he addressed this issue in Committee. “Inevitably be whipped and become very political indeed,” were his words, not mine. However, I agree that this is the way that these things tend to go. The concept of a congratulatory first is not one that sits easily with another place.
Lord Eatwell
My Lords, I am grateful for the comments that have been made—some accurate, some less so. First, with respect to the issue of being politicised, my concern is motivated primarily by the powers being translated from elected persons to an unelected person. That is what is happening in this Bill. This will inevitably make the position of the governor much more of a political focus rather than the markets and technical focus it has been very much in the past—perhaps not in the 1930s with Montagu Norman, but in recent years. That is where the politicisation has come from. We need to recognise that powers have been transferred from the elected to the unelected by giving the elected some role.
The Minister did me the honour of quoting me, although of course out of context. I was referring—as I am sure he would agree—to pre-appointment hearings as are common in the United States. This is not the intention of this amendment at all. However, a series of important issues is going to come up again and again unless the Government take very seriously the very considerable conglomeration of powers in the hands of the governor, given by this Bill, and the fact that powers are being moved from the elected to the unelected. It is vital that Parliament should consider this crucial issue. I hope that the Minister will take some of these considerations away and think very carefully about them. In the mean time, I beg leave to withdraw the amendment.
Lord Eatwell
“(2A) Any persons appointed under subsection (2)(e) shall be appointed with the consent of the Treasury select committee.”
Lord Eatwell
My Lords, the noble Lord, Lord Sassoon, has made it clear today that the non-executives will play a major role in the governance of the Bank. This amendment seeks to ensure that non-executives, essentially here in the court, are appointed with the consent of the Treasury Select Committee. The point is being reiterated. Given the powers invested in the Bank, including and especially the FPC powers that have previously rested only with the Chancellor or other elected persons, it is appropriate that there should be some political oversight of the appointments. The Treasury Committee is surely the right place.
What are the major arguments against this pre-appointment scrutiny? First, that the procedure will be unduly intrusive and onerous; and, secondly, that it will be too politicised. As a result, suitable persons will not apply. I think that the arguments in the context of what is being done in this Bill are ill founded. The Government decided to politicise the position of the Bank by giving it powers previously reserved for elected persons. The Government decided to load on to the Bank virtually all regulatory functions and control of monetary and credit policy. In this context, the Government should accept that the Treasury Committee’s scrutiny is entirely appropriate. Let us remember that that committee has played a serious non-partisan role for a number of years, both when chaired by my noble friend Lord McFall and now, as chaired by Mr Tyrie. The committee does an excellent, non-partisan, technical and difficult job. In that context, it could play an important role in monitoring those persons to whom the powers previously assigned to elected persons are now to be given.
While Amendment 2C relates to the non-executive directors of the Bank, Amendment 6B in the group extends the same principle to the independent members of the Financial Policy Committee. If anything, the point is even stronger here, because these are people who will be participating in decisions that directly affect individuals’ lives. The members of that committee will be making decisions about your mortgage rate and the availability of credit in general to individuals in society. It is therefore surely right that appointments should be subject to the consent of the political part of national governance, as represented by the Treasury Select Committee, which is handing over these powers.
Sometimes, we in Britain are a bit overly sensitive about appointments procedures. I remember that university appointments used to be totally confidential to appointments committees. Now appointees have to appear before the whole faculty and the students, give lectures to demonstrate how good they would be and defend themselves.
Lord Eatwell
Yes, it is true. They have to do that prior to any form of appointment. Therefore, the sort of sensitivity I mentioned is overdone. Greater transparency and more robust procedures would serve us well. Most important of all, there must not be an abdication of powers that in the past were reserved to elected persons without some substitution of proper political oversight, as provided for in Amendments 2C and 6B. I beg to move.
Lord McFall of Alcluith
My Lords, I agree with my noble friend on this issue. Anyone with experience of the Court of the Bank of England would say that its impact has been less than useful over past years. Given the powers that we have given to this Governor for an eight-year period, it is important that the sentiments expressed in the other place as regards accountability are satisfied, because, paradoxically, if that is not the case, it will make the role of the Governor even more political and members of the court will come under pressure.
I had personal knowledge of this during the height of the financial crisis. My concern at that time was to ensure both the political and the financial stability of the situation. It is therefore important that that is adhered to. There needs to be, as the Treasury Committee said, proper records of the court’s proceedings. If transparency is not available, the accountability element will not be pursued. The Government are making a big mistake by establishing what is, in effect—although some people may disagree—a multinational corporation with one person at its head, with little corporate governance best practice.
There needs to be a stage at which the Government can listen to Parliament on this, make the Bank truly accountable to Parliament and ensure the best outcome for the country. We have the Financial Policy Committee and the Prudential Regulation Authority, but there is no doubt that there will be conflicts of interest there. There will be one individual responsible, while the Government and Parliament are spectators and bit players. That should not be the case, and the Government really need to think very clearly and seriously about this issue.
Baroness Noakes
My Lords, as a former member of the court, I feel slightly under attack this afternoon, but I was long gone before the financial crisis. In the context of the previous amendment, my noble friend Lord Flight pointed out that the important way to express accountability is on an ongoing basis, not at the point of appointment. The most important thing, going forward, is whether or not the new oversight committee will do its job and who will make sure that it is held to account. It seems to me that it should be the Treasury Select Committee in another place and it is not something for which we need to legislate. The Treasury Select Committee is well apprised of the need to ensure that there are proper accountability mechanisms to act as a counterweight against significant additional powers for the Governor of the Bank of England; and that there are proper checks and balances within the Bank of England and then from the Bank to Parliament.
Lord Sassoon
My Lords, I am grateful to the noble Lord, Lord McFall of Alcluith, and to my noble friend Lady Noakes. My noble friend was an estimable member of the court and I am sure that she brought great distinction to its deliberations. As she reminds the House by referring to the oversight committee, the noble Lord, Lord McFall is right to say that the court has not always necessarily done everything that Members of Parliament would have wished in recent years. Critically, that is why the oversight committee that we are introducing changes the way that the court and particularly non-executives on the court will operate. I am grateful to be reminded of this critical background to our discussion. The other background point to make is that the noble Lord, Lord Eatwell, has made a number of references in this and earlier debates about politicisation and transferring powers from elected politicians to the Bank. This is a red herring. I am sure that I should not say it is nonsense, but I simply do not accept this background analysis.
Powers are not somehow being moved from elected politicians to the Bank. The Bank is being granted a range of powers which are regulatory in nature. Financial regulation has been undertaken by independent regulators for over a decade in the UK and before that, of course, large swathes of it were not in any way carried out by elected politicians or even properly constituted regulators. They were done in a self-regulatory way. So this idea that somehow we are transferring stuff from politicians to the Bank, as if some heinous crime was being committed and that we need lots of belts and braces, is the wrong background.
Let me specifically address the amendments here and the role of Parliament in key appointments. As we have heard, they are different in some respects from the previous amendment about appointing the Governor. The appointments of non-executive directors of the court are not currently subject to a pre-commencement hearing by the Treasury Select Committee. As with the Governor, the appointments of non-executive directors are made by Her Majesty and governed by the OCPA code. As I explained earlier, this stipulates certain practices in terms of a robust and fair appointment process, with appointments made principally on merit. Members of the court are accountable to Parliament and it is right that the Treasury Select Committee can and does invite them to give evidence at the appropriate juncture. However, the non-executive directors are not policymakers. Their role is to oversee the running of the Bank and it would be highly unusual to make such appointments subject to the consent of the Treasury Select Committee. The Government therefore believe that the current appointments process for non-executive directors of the court remains the right one. Similarly, the appointment of external FPC members will be subject to a robust process that seeks qualified and experienced candidates. External members of the FPC will be subject to pre-commencement hearings—as was the case with the appointees to the interim FPC. The FPC will be accountable for its actions to the Bank’s oversight committee and directly to the Treasury Select Committee, which we expect to take regular evidence from the external members of the FPC, as it does already from the MPC and the interim FPC.
As with the roles of governor and external members of the MPC, the market-sensitive nature of these roles means that the combination of pre-commencement hearings and Treasury Select Committee scrutiny in-post offers an appropriate balance in terms of parliamentary scrutiny. Again, the Government welcome the ongoing role played by the Treasury Select Committee. I hope that I have provided sufficient reassurance for the noble Lord to withdraw his amendment.
Lord Eatwell
My Lords, I am grateful to everybody who took part in this short debate, and especially for the support of my noble friend Lord McFall, who has such experience in these areas. I always take very seriously indeed the opinions of the noble Baroness, Lady Noakes. I quite understand her concern that accountability should be a phenomenon that is ongoing and not just on appointment. Why not on appointment, too, so to speak?
I was puzzled by the introduction with which the noble Lord, Lord Sassoon, prefaced his remarks. He stated that financial regulation had been going on for a decade. It has been going on at an international level since 1974. The whole point of this legislation is that macroprudential legislation has not been done at all before. That is why the various reports such as the Turner review by the FSA, the report of the US Treasury in 2009, and the report of the high-level committee of the European Union led by Monsieur de Larosière, all identified a new role for financial regulation in dealing with macroeconomic variables, which it had never done before. This is a new area of financial regulation which is specifically the responsibility of the Financial Policy Committee.
The Minister said that there had been no transfer of responsibilities. Was not the control of credit in our economy the responsibility of the Treasury? Has it not been so since the Second World War? Did not the various Acts on the control of credit start as Treasury Bills? Now the availability of credit is predominantly the responsibility of the Financial Policy Committee. That is a transfer of powers. I wonder if the Minister would like to consider that example.
The Minister then said something truly extraordinary. He said that the non-executive members of the court were not policymakers. Perhaps I may refer him to Clause 4 on financial strategy, which states:
“The Court of Directors must … determine the Bank’s strategy in relation to the Financial Stability Objective”.
That sounds to me as if they are policymakers. They must “determine the Bank’s strategy”. Are the non-execs therefore to sit down and keep quiet?
Lord Sassoon
My Lords, will the noble Lord, Lord Eatwell, concede that that is the responsibility of the Court of Directors as a whole, not of the non-executive directors as a group?
Lord Eatwell
Certainly, but that is not what the Minister said. He said that the non-executive directors were not policymakers—but they are to participate as a nine-member majority of the court, including the chair, as he pointed out. However, we now hear that they are to sit silently while the executive directors determine policy. That is nonsense and the Minister knows it. These individuals are policymakers—and rightly so; they should be. That is why we need the right sort of people, and why it is right that there should be suitable hearings preceding their appointment, as suggested by the amendment.
The Minister is getting into a muddle. He should go away and think hard about what the Financial Policy Committee is required to do, recognise that there has been a transfer of powers and that macroprudential regulation is something entirely new that has not been done before; and try to get some of the legislation right. In the mean time, I beg leave to withdraw the amendment.
Lord Sassoon
Lord Eatwell
Lord Eatwell
My Lords, this is a major amendment that I had the pleasure of discussing with the Bill team on Friday. I was going to preface my remarks by saying that there is a developing consensus that the Government are piling responsibilities on the Bank of England. But I hear that consensus is not developing on the other side of this Chamber, since the noble Lord, Lord Sassoon, does not seem to recognise that the Bank and the governor are having these extra responsibilities or indeed that there has been transfer of powers.
Interestingly enough, others do recognise that. Mr Tyrie, just last week, with the oversight committee already in the Bill, referred to the Bank’s defective governance. Then, Mr Bill Winters, a former executive at JP Morgan and author of one of the very tightly constrained reviews into the Bank’s operations that was published last week, concluded that the Bank was too “centralised and hierarchical”. Then Sir John Gieve, a former deputy governor, commented on the same review saying,
“how do you bring more challenge into a hierarchical organisation?”.
That was last week, with the oversight committee in place. Those comments echo criticisms made by a number of former senior Bank of England staff and by serious commentators in the financial press. This is a serious issue.
I have already listed the major issues, but I will list them briefly in the context of this amendment because it may help the House. With respect to the powers assigned to the governor in the Bill, the power of an unelected person will be equivalent almost to that of the Chancellor of the Exchequer. Indeed, it will exceed the Chancellor’s powers in that the Chancellor is under constant scrutiny from Parliament whereas the governor is under less intense and less constant scrutiny.
We have to remember that the governor will not only chair every financial policy committee in the land with the sole exception of the FCA, but will be the lone high-level interlocutor with the Chancellor. He holds these positions while having no statutory responsibility to consult or involve other senior officials at the Bank or non-execs. He may consult and he may delegate, but it is entirely up to him or her. If they do not wish to do so they can ignore them all.
In Committee, the Government took an important step by creating the oversight committee. But noble Lords will notice that within the designations of the responsibilities of the oversight committee, there is one notable oddity. There is a notable absentee. Nowhere does there appear the verb “to oversee”. We have an oversight committee that does not oversee. In fact, a careful reading of the designated activities of the oversight committee reveals that all its key responsibilities are retrospective. It must keep under review. It must monitor. It must review procedures. It must conduct performance reviews. The only thing that it must not do is oversee. This is not an oversight committee, it is a hindsight committee—a valuable role, no doubt, but hardly an activity to moderate the powers of the “Sun King” governor other than by retrospective embarrassment, and governors of the Bank of England seem to be peculiarly impervious to embarrassment.
The amendment introduces the verb “to oversee”. It gives the oversight committee the power of oversight. This will have a number of beneficial consequences. The governor and the executive will, as in all good governance systems, be accountable to the non-executives for their activities and their policies. As in all well run organisations, the non-executives will not design the strategy or tactics of the Bank—that is the job of the executive—but they will be the advisers and the arbiters. They will oversee.
Instead of being either a glorified review committee in the shape of the noble Lord’s hindsight committee, or creatures of the executive, as in the court, the quality of a person likely to be willing to devote a considerable amount of time and effort to the job of non-executive of the Bank will be significantly enhanced because they are getting a real job. The foundations will be laid for the creation of a modern governance structure within the Bank of England, appropriate to the 21st century and to the major powers now vested in the Bank.
In this group there are also Amendments 3B, 3G and 3H, which are a direct consequence of the recognition of the role of the oversight committee in overseeing the activities of the governor in particular, and of the Bank in general. If the oversight committee is to exercise this role effectively it should have the final sign-off to the policies prepared by the court and by other executive institutions. I should be clear that in all well run firms it is the task of the executive to prepare policy and to execute it, but it is the role of the non-executives—of the oversight committee—to scrutinise and sign off the executive’s proposal. The oversight committee should oversee.
Amendment 3K makes clear that the role of the oversight committee in its task of overseeing is to approve the policy prepared by the court; it is the precise role of non-executives in all well run companies. Amendment 6C makes clear that the oversight committee is not to be confined to the impotent ghetto of reviewing procedures of the FPC but can also review the FPC’s policies. After all, if it cannot review policies what will the performance review be about? If it is given the task of performance review, surely it should review policies and not simply procedures.
I quite understand that the Government have not had long to consider this core idea, although they have had a bit longer than the noble Lord earlier suggested. I give credit to the Bill Committee and I understand the pressures it is under; similar pressures are experienced in my office.
Lord Sassoon
I do not want to labour the point but would the noble Lord, Lord Eatwell, accept that I did not list Amendment 3A as one that came late? I fully accept that this is not one of the hatful that I referred to as arriving late. We have indeed had longer to consider this amendment.
Lord Eatwell
Then I am sure that the noble Lord, having given the amendment such mature consideration, will be able to accept it.
I hope that, at the very least, the Government will agree to take this proposal away and think about it. After all, if we are going to have an oversight committee it should oversee; otherwise perhaps the Government should simply change the committee’s name. I beg to move.
Baroness Noakes
My Lords, I am a bit puzzled by these amendments and I should say that while the Minister’s officials may have had them since last Friday, those of us who are trying to take part in this Report stage saw them only first thing this morning, which comes of when the party opposite chose to table its amendments.
The noble Lord says that there is no oversight in the new section dealing with the oversight committee. If I were to define oversight I would say it is about reviewing and monitoring; that is the very nature of what is involved. The noble Lord suggests it means some real-time involvement by the non-executives in what happens on a daily basis within the Bank. That simply cannot be—it seems to me the noble Lord misunderstands the role of non-executive directors.
This group of amendments also contains the concept of the non-executive directors, via the oversight committee, approving the strategy. The oversight committee is a sub-committee of the Court of Directors and is not there to approve what the court should be doing. This is correctly formulated in that it is the court that is preparing the strategy. The oversight committee has no role in relation to that except by virtue of the membership of the individual non-executive directors who are also members of court. I really do not understand this sequence of amendments.
Lord McFall of Alcluith
I support my noble friend’s amendment. It is important to emphasise oversight because we are setting up a more complex body than the one we had before; we are going from a tripartite body to a quadripartite body. There are many interstitial areas and oversight is even more important in those areas.
As I mentioned earlier, there will be many conflicts between the FPC and the PRA. On the relationship between the Prudential Regulatory Authority and the Financial Conduct Authority, will prudential regulation trump conduct of business, which has happened in the past? Will the FCA feel inferior to the PRA as the FSA felt inferior to the Bank of England?
As to the culture, we can have all the rules we like but, within a plethora of rules, there can be a monoculture which reports to the top and a diverse range of opinions do not get listened to. There are many lessons to be learnt there. An oversight committee is very important in order to look at that and ensure that the Bank of England is indeed exercising the best corporate governance and best practice.
Lord Hodgson of Astley Abbotts
My Lords, like my noble friend Lady Noakes I have some difficulty in understanding the thrust of these amendments. I see the issue of the nomenclature, which may be unfortunate, but I have to say, as a director of a company, that keeping under review and overseeing are almost one in the same. I do not see the difference between those two functions. It is absolutely clear that keeping under review and oversight are running on similar tracks.
The dangers behind the noble Lord’s amendments are that we are starting to find a way of dividing responsibilities. We are moving from clear lines of responsibility to a situation where a sub-committee of the board, as appears in the Bill, is starting to dictate the pace of the board itself. That is an unworthy, unnecessary and potentially dangerous development.
Lord Myners
My Lords, I support my noble friend’s amendment. The decisions on the aggregation of power within the Bank of England are now set. The Government are clear in their determination to achieve that.
In my view, no one form of regulatory architecture can be assuredly more successful than others. Looking around the world at what happened with the global financial crisis, we saw many different structures of regulatory architecture come under strain. Some point to the twin peaks system associated with Canada as evidence that the Government’s current thinking in this area is consistent with a model that appeared to work better there than in other jurisdictions. However, if one wishes to understand why Canada did not experience the same harsh consequences of the global financial crisis, as in the United States, Europe and the United Kingdom, one finds the answer in matters other than regulatory architecture—including the nature of the economy and control of lending and leverage—which are inherent in the Canadian system and distinct from those followed elsewhere.
If we are going to aggregate this power in the hands of the Bank of England, we have to ask ourselves questions about checks and balances because we learnt from the failure of individual UK banks and institutions that, in almost all cases, there was an overly dominant individual in charge of the organisation that failed. That is the big lesson, which the FSA has not picked up completely in its reports on the collapse of RBS and HBOS. However, it is a clear lesson, whether it is Sir Fred Goodwin at Royal Bank of Scotland or Mr Adam Applegarth at Northern Rock; and similarly Mr Crawshaw at Bradford & Bingley and Mr Cummings, Mr Hornby and others at HBOS.
Are we creating an architecture here in which we are putting too much power in the hands of one person? I think we are. I was a member of the court for four years and have seen how it and the Bank operate. One must be careful not to extrapolate from the behaviours of the existing incumbents of senior positions in the Bank and members of the court into the future, but a very clear lesson to me was that the court just could not be effective at corporate governance, as both the noble Baroness, Lady Noakes, and the noble Lord, Lord Hodgson, referred to earlier. The court cannot be effective in that way. When I was a member in 2007, three members of the court sought to escalate matters to the Treasury about the Bank’s management of liquidity and of risk. It simply was not possible for my two colleagues and me to register with the Treasury or anyone else, in any meaningful way, our concerns about the Bank’s failure to understand the risks that were accumulating in the system.
Are we creating a structure now in which that could not happen again in the future? I do not think we are. We are not clear as to the role of the court. We give it some responsibilities but very little power to influence the responsibilities that we give it. We must ask important questions about the constitution and membership of the court to ensure that, in future, it is not simply a ceremonial body that is, on the whole, discouraged by the governor from asking questions, but something that at least approaches the independent challenge that one would expect—
Lord Myners
I will give way in a moment to the noble Lord, Lord Hodgson, who has had his opportunity. We must look to create a body that is capable of appropriately challenging the current governor and governors in the future. I am not sure that this is necessarily seriously advanced by the language we are using here. Perhaps I will anticipate the point on which the noble Lord, Lord Hodgson, wishes to intervene by saying that he is quite correct about perhaps dancing on the head of a pin when it comes to whether these are questions about supervisory roles or oversight. However, it is absolutely critical that we ensure, in this Bill, that the court is able to appropriately challenge and check the authority that this Bill places in the hands of the governor. We have learnt painfully in recent years about the consequences of coping with a dysfunctionality between the governor and members of the court. I give way to the noble Lord if he still wants to come in.
Lord Hodgson of Astley Abbotts
The noble Lord was quite right. I understood the force of his polemic and the seriousness of the point he was making but could not see how that is in any way addressed by adding the word “overseeing” to “keeping under review”, which seems to me, as he indicated, to be a distinction without a difference.
Lord Myners
The words proposed by my noble friend take us a little further in the right direction. I would like to go a great deal further but am more than happy to support my noble friend’s amendment.
Lord Blackwell
My Lords, despite the cogent words of the noble Lord, Lord Myners, I share the confusion on this side of the House about what these amendments are intended to do. Everyone agrees that it is vital that there should be strong oversight of the governor and the executives of the Bank by the non-executive directors and that we have proper accountability and scrutiny. But what is proposed here is a court that will have a clear and very sizeable majority of non-executive directors. The amendments proposed by my noble friend earlier made it clear that all the members of that court would be directors, and would be directors in common, sharing responsibility for the decisions of the Bank. However the non-executive directors would be in a majority, and if those non-executive directors disagreed with what the executives proposed, they could make that clear in the court and they would have the majority to hold sway.
According to these amendments, the court, involving all directors, would be able only to propose policies and then a sub-committee of the board of only the non-executives would then go away and approve them. That seems to turn corporate governance on its head. Either we have a supervisory board of non-executives, which is a totally different structure, or we accept that the Court of Directors is indeed the Court of Directors and should, with all its members, accept responsibility. What we have here is a very sensible proposal for an oversight committee of non-executive directors that will play its role in allowing non-executive directors to review and scrutinise offline, but to report to the full court, as is normal in any governance process. All directors must share equal responsibility in the end for the decisions of that organisation.
Lord Nickson
My Lords, I apologise for the fact that I have not taken part in the proceedings and I did not intend to do so today. I am completely out of date in that my experience goes back a long way. When I was the chairman of a Scottish bank, which belonged to an Australian bank, Fred Goodwin, as chief executive, reported to me, before he went to RBS for five years. We got on very well. I am quite thankful that he went to RBS and that I did not have responsibility at the end.
I completely sympathise with the points of view that have been put from the government Benches. The principles are exactly the same. It is impossible to conceive that one would appoint a majority board of non-executive directors along with an executive. They have the responsibility for oversight. You might have a sub-committee, but I would be very surprised if any candidate for the position of governor would actually accept it having power over the non-executives in the Court of the Bank of England. Therefore, I think that the amendment is nonsense in practical terms. Although I may be out of date, I strongly believe that it should be rejected.
Baroness Wheatcroft
My Lords, I share the qualms that have been voiced about this group of amendments. I believe that the court needs to exercise far more power than it has appeared to in the past, although I am intrigued to hear the noble Lord, Lord Myners, say that when three members of the court tried to make their views and their concerns known, they had no impact at all. That would seem to be a failing of the Government rather than the governance of the court.
The amendment that causes me particular concern is Amendment 3B, which proposes that the Bank’s strategy should for the time being be “prepared” by the Court of Directors. It does not seem to me that “preparing” a strategy should be for the non-executives. It may well be, and should be, their right to determine whether that strategy is the right strategy. However, we want them to “determine” rather than “prepare”.
Lord Flight
My Lords, it seems to me that none of these things makes any difference. The real issue is that if a board of directors cannot sack the chief executive if it thinks that he is not doing his job properly, then it is an enfeebled board. That is the fundamental issue. As long as we have the chief executive appointed for a term period and not able to be removed by the board, then there will be an issue about the effectiveness of that board.
Lord Kerr of Kinlochard
My Lords, I did not take part in the Second Reading debate. I should have done so. I support what the noble Baroness, Lady Noakes, said, which seemed to me to be absolutely correct. On the point made by the noble Baroness, Lady Wheatcroft, I find Amendment 3B the most bothersome in this group. If the court is merely preparing, not determining, who is determining? There is a danger here of the decision-taking power moving to this oversight committee.
I cannot see that Amendment 3A has any real effect. Clearly, there is an overseeing role if the committee is called “oversight”, but I think that the noble Baroness, Lady Noakes, is quite right about that.
The amendment that seems to be completely correct and would go some way to meet the point being made from the opposition Benches is Amendment 3C, which proposes that the committee should be entitled to a degree of professional support. That seems sensible to me.
Lord Sassoon
My Lords, I am grateful for this debate. The noble Lord, Lord Eatwell, started by welcoming the creation of the oversight committee as an important step, but then went a leap too far in getting rather confused about what, in his terms, “modern corporate governance” really means. As so many noble Lords have explained, it means that ultimately the governing body as a whole—the board of directors, the Court of the Bank of England—has to take the key decisions. As the noble Lord, Lord McFall of Alcluith, said, the principal role of the oversight committee is for learning lessons. I completely agree with him, and will go on to explain that the role of the oversight committee, as constructed in the Bill before these amendments, is completely in line with what the Treasury Select Committee envisaged.
My noble friends have explained all these things much more clearly than I could. The noble Lord, Lord Nickson, modestly said that he is out of date. I do not believe that he is out of date at all. He and the noble Lord, Lord Kerr of Kinlochard, who has great current experience of corporate governance in one of the UK’s largest multinationals, have got this right. I had been puzzled—I wondered whether I had missed something in all this—but I am grateful that the House shares my concerns.
To address the specifics, Amendment 3A would shift the oversight committee’s functions from a more backward-looking, reviewing role—the lesson-learning role that the noble Lord, Lord McFall, referred to—to a real-time overseeing role, which would involve scrutinising and perhaps second-guessing the Bank’s policy decisions while they are being taken. As my noble friends and other noble Lords have made clear, if that role is taken at the board level, it is taken by the board as a whole. I do not believe that this proposed new role would be at all appropriate.
As I have said, we can look to what the Treasury Select Committee in another place said when it recommended the introduction of ex-post reviews of the Bank’s policy performance. This is worth quoting at some length, from the committee’s 21st report of the Session, Accountability of the Bank of England:
“The Governor stressed to us that ‘the decisions that the PRA, FPC and MPC make on policy are not decisions that the Court needs to second guess’. We agree. The Bank’s governing body should place more emphasis on oversight and ex-post scrutiny. This does not require or authorise it to become involved in second guessing immediate policy decisions. But there is a need to analyse and learn lessons from the actions of the Bank on a routine and consistent basis, drawing on expertise from within the Bank. Ex-post review of the Bank’s decisions would, we believe, be in the interests of good governance of the Bank”.
The report went on to recommend that ex-post reviews of the Bank’s performance be carried out,
“not less than a year after the period to be reviewed”
in order to avoid,
“second guessing at the time of the policy decision”.
The current wording describes one of the functions of the oversight committee as,
“keeping under review the Bank’s performance”,
which is entirely consistent with the Treasury Select Committee’s recommendations and strikes the right balance between ensuring effective retrospective scrutiny of the Bank’s policy decisions and avoiding a situation where the non-executive members of the court would be second-guessing the policy decisions taken by the Bank’s expert policy committees and Bank executives. Of course, in this context my noble friend Lord Blackwell is quite right to point out that when these decisions are for the court as a whole, the non-executives are, as one would expect in any good modern corporate governance structure, in a majority.
I am a little puzzled by Amendments 3B, 3G, 3H and 3K, which seek to make the non-executives of the court solely responsible for determining the Bank’s financial stability strategy. Again, this is completely at odds, as the House has been told, with the way in which model corporate governance operates. Surely the reason for making the governing body as a whole, in this case the court of directors, responsible for the strategy is because it is that body, and in particular the executive members of that body, who will be accountable for delivering the strategy. Like other noble Lords, I struggle to see how the process that is proposed in these amendments could possibly work in practice. The oversight committee is made up of the non-executive directors of the court and those non-executives make up the majority of the court, as my noble friend has suggested.
On the role of the non-executives, I am sure that the noble Lord, Lord Myners, is right when he says he could not get the Treasury to take concerns seriously back in 2007, but I cannot answer for what happened in the Treasury under the previous Administration. All I can say is that if any member of the court of the Bank, whether executive or non-executive, came to the Treasury now, we would take their concerns extremely seriously.
I do not want to belabour the point, but I am not sure whether the noble Lord, Lord Eatwell, is envisaging situations in which the non-executive directors, coming from a court meeting in which they agreed the financial stability strategy, then go into an oversight committee meeting where they decide perhaps that the strategy agreed by the whole court was wrong in some way. We need to distinguish here clearly, as have many noble Lords, between the differing responsibilities of the court and of the non-executives on the court. The court, as the Bank’s governing body, is responsible for setting the Bank’s overall strategy, including its strategy for financial stability. It is the responsibility of the executives of the Bank, with the support of the court, to deliver that strategy. It is the responsibility of the oversight committee to hold the executive to account for how it delivers on the strategy by keeping its performance under review and, again in the words of the noble Lord, Lord McFall, for learning the lessons. This split of responsibilities in the Bill is appropriate and consistent with modern corporate governance.
Finally, Amendment 6C would add policies to the existing requirement in subsection (4) of new Section 9B that the oversight committee keep the procedures of the FPC under review. I can assure the noble Lord, Lord Eatwell, that this amendment is entirely unnecessary. The oversight committee is already responsible for keeping the policy and performance of the FPC under review. Subsection (2)(a) of new Section 3A of the 1998 Act, as inserted by Clause 3 of this Bill, clearly states that the oversight committee is responsible for keeping under review the Bank’s performance in relation to all of its objectives and strategy, including the objectives of the Financial Policy Committee. With the benefit of this useful debate, I hope that the noble Lord will see fit to withdraw his amendment.
Lord Myners
I want to be helpful and pick up one point about the references that have been made by several Peers to models of good corporate governance. The noble Lord, Lord Flight, with considerable experience and great standing in business in the City, has already pointed out one respect in which the court cannot be compared with a conventional board of directors: its ability in the end to remove the executive if it has lost confidence in it.
The point that I raised about our experience in 2007 is another distinct difference from corporate governance; namely, there is no shareholder to whom the non-executives can appeal. What happened in 2007 was that three members of the court had meetings with Treasury officials to raise their concerns about the absence of full challenge and the dominant influence of a single voice in the court. They expressed those views to Treasury officials, who shrugged their shoulders and said that there really was not much that they could do. The governor is ultimately appointed by Her Majesty and members of the court are elected to do their work, and there is nothing that the shareholder—effectively the Treasury—can do. That is another area where we must be very careful not to assume that we are just picking up the corporate model and inserting it into the Bank. The Bank is different by virtue of the very limited powers placed on the court and the absence of a shareholder.
Finally, I question whether the Minister’s constant references to good corporate practice would be reflected in the role of a board in overseeing ex post facto what a company does. My experience of sitting on boards is that boards are very much involved in reviewing the formulation and implementation of strategy on a constant basis, not in carrying out post-implementation exercises. Your Lordships’ House should be careful to recognise that there are limits to the complete applicability of corporate practice to the particular circumstances of the Bank of England, the court and the governor.
Lord Sassoon
My Lords, I know that the custom of this House on Report is that noble Lords do not make second substantive speeches, so the noble Lord will understand if I do not respond to his points—otherwise we will not make much progress. However, I will clarify one point in answer to the question asked by my noble friend Lord Flight about the removal of the governor and the suggestion by the noble Lord, Lord Myners, that the governor cannot be removed. This is of course wrong, as I am sure the noble Lord, Lord Myners, knows. If he would like to refresh his memory of the Bank of England Act 1998, paragraph 8 of Schedule 1 sets out precisely the conditions under which the governor can be removed.
Lord Eatwell
My Lords, I am very grateful for the discussion which I have enjoyed very much. I have been educated and entertained by the remarks made by noble Lords all around the House. The key position that we have to start from is that the Bank of England is different. Its structure is different and the structure of responsibilities is different. When we think about corporate governance, we have to think about the way in which we can maintain a suitable degree of accountability.
In Amendment 3A, I was attempting to nudge the Government a little further on the oversight committee which, as the noble Lord made clear in contradiction to what the noble Baroness, Lady Noakes, said, is entirely retrospective at the moment. In those circumstances, the maintenance of accountability is not really enough, given the degree of responsibility and powers that the Bank will have.
It occurred to me that a non-executive committee often has the final say. When things really go wrong, it is the non-executive committee that has to gather together and deal with what is going wrong in a company. Here the non-executive committee, by nudging it a little further and including the word “oversee”—for an oversight committee—would actually nudge the oversight committee, as conceived by the Government, in a direction in which it could hold to account the executive of the Bank to a greater degree than is the case at the moment. I think that the Government are being excessively complacent about this. We have this massive switch of powers, and we are being told that everything will be all right and that this Committee—which, as the noble Lord says, is entirely retrospective—will somehow create an aura of accountability. I just do not see that happening.
I regret that the noble Lord has not taken a constructive view of what we were trying to achieve. I would have been quite happy to accept some recognition by him that there is a degree of a problem in this particular institution and that we need—in this House and, indeed, in Parliament in general—to address this problem if we are to move forward successfully with the structure of financial regulation and oversight in this country. The noble Lord has given no indication of any sympathy whatever. Instead, he wants to keep the oversight committee purely retrospective, with no ability to take a broad view—not on a daily basis, of course not—and he wants the non-executives to have that specific role. Given that he has shown no interest at all and no understanding of the serious issues involved, I would like to seek the opinion of the House.
Lord Eatwell
“( ) The Bank will ensure that the Oversight Committee has adequate economic, legal and research support.”
Lord Eatwell
My Lords, in the debate that we have just had we heard a lot about the values of the oversight committee and what an important job it has to do. The noble Lord, Lord Sassoon, made some comments about new Section 3C, perhaps inadvertently, while he was reflecting on the group of amendments that we have just looked at. The purpose of this amendment is to ensure that the oversight committee—or hindsight committee, as I think it should be called—has the resources to do its job.
We have to remember that the Bank of England has form in this respect. In the early days of the Monetary Policy Committee, independent members were deliberately starved of resources by the Bank in order to enhance the position of the executive members. We all hope that the Bank has learnt its lesson from the very negative publicity that that incident produced. However, we are now in different territory. The powers are greater, and the responsibilities are wider. Hence it is vital that the oversight committee should be well resourced. New Section 3C refers to the possibility of hiring people to conduct a performance review, but that is one step down the line. The committee needs its own staff to help determine exactly which performances should be reviewed, and who should be asked to do that sort of important secretarial work.
That is the purpose of the amendment before us. It can do nothing but strengthen the Bank of England, making the committee into an effective instrument of retrospective monetary and financial governance. I am sure that that is what the Government would like, so I would like to hear them accept this amendment, or at least give an undertaking to take the idea away and think about it with care. I beg to move.
Lord Peston
My Lords, I support this amendment in substance. The noble Lord will be delighted to hear that I also wish to make a couple of semantic points. My noble friend said that the committee should have its own staff. My view is that it should not only have its own staff but should appoint its own staff, thereby guaranteeing that the staff are its own, work for it and, to use the slang expression, are not “narks” of the governor. Therefore, the noble Lord ought to accept the amendment.
My two semantic points are as follows. First, I find the committee’s name most unattractive. Will the noble Lord ask the Bill team to look up the definition of “oversight” in the dictionary as it has a very definite meaning which I am sure the Government and the Minister do not wish to be associated with this committee. It may not be too late to choose a more felicitous name. I wonder whether I am the only person who has thought what a ridiculous name the committee has.
Secondly, I congratulate my noble friend Lord Eatwell on solving the problem with which, as your Lordships know, the noble Lord, Lord Barnett, and I are obsessed: that is, the “must/may problem”. My noble friend has solved it in a really interesting way. He does not use “must” or “may” but “will”. I would like the Minister to ask the Bill team whether it would consider going down the path of using “will” rather than “must” or “may”.
Lord Sassoon
If the noble Lord, Lord Peston, could persuade his noble friend to rein back to just a couple of amendments a day, I am sure that we could carve out time to look at all sorts of semantics. However, I shall stick to the substance of this amendment, which seeks to place the bank under a statutory duty to ensure that the oversight committee has,
“adequate economic, legal and research support”.
I entirely agree with the sentiment behind this amendment. As we have already discussed this afternoon, the non-executive oversight committee has a very important job to do in reviewing the Bank’s performance and will require access to the information and analytical support that it needs. That is why, for example, the legislation makes it clear that members of the oversight committee have access to the meetings and papers of the MPC and FPC and have a specific remit to commission work and reviews from external bodies and experts.
It is a well established principle that it is the responsibility of the governing body of any organisation to ensure that its members and sub-committees are properly supported. I recognise that the Bank was slow to realise that the external members of the MPC required dedicated resource and support. I am confident that the Bank has learnt its lessons on this. Both the MPC and the FPC members have access to all the analytical and secretariat support that they need. I am wholly confident that the Bank will similarly make support available to the oversight committee to make sure that it is adequately supported without the need for legislation on this point. I hope, therefore, with the further reassurance on that, the noble Lord will see fit to withdraw his amendment.
Lord Eatwell
What the noble Lord has said does not address the important issue here. He said that the oversight committee will have access to papers, be able to commission work and have access to the secretarial and research skills of the Bank. However, the point of this amendment is to give what every non-executive group really needs, which is access to independent advice. Any non-executive group of which I have been a member has always prized its access to independent advice: that is, its ability to seek advice outwith the immediate organisation of which it is a part.
The point has been made around the House this afternoon that the Bank of England is different in a series of ways with respect to its overall organisation. It is also different in terms of the sorts of powers which it will exercise. Therefore, I feel very strongly that it is important that the oversight committee, which is, after all, the committee of non-executives, has access to independent advice. It is regrettable that the Government feel that assurances are enough. I entirely accept that the noble Lord and, indeed, the officials who have looked at this question feel confident in giving their assurances but they cannot bind their successors. The point of this amendment is to ensure that successors who hold this responsibility both within the Treasury and within the Bank recognise the importance of the advice and support that the oversight committee should receive if it is to do its job. I hope that the noble Lord will take that away and think about it although I probably hope in vain. Nevertheless, I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, I am afraid it is me again. These amendments refer to the decision to publish performance reviews. Let me remind the House that the performance reviews referred to in the particular clauses which are to be here amended are reviews that the oversight committee has commissioned or conducted. The amendment removes the Bank’s veto over the oversight committee: a veto which the Bill gives to the Bank—otherwise known as the governor—over the publication of such reviews.
Again, the Bank has form in this respect. As Members of your Lordships’ House will be aware, the Bank of England is the only major public institution directly involved in the financial crisis that has not seen fit to conduct and publish a full assessment of its own activities, procedures and policies during the crisis and to own up to the contribution it made to the crisis. The Financial Services Authority has done that as has the Treasury. The Bank has not seen fit to do that. The three reviews published last week have been very carefully circumscribed in their terms of reference to prevent proper consideration of the Bank’s record. You only have to read the Bank’s tepid response to the reviews—it did not refer at all to the comments on the Bank’s excessively hierarchical structure—to realise there is still a deep-seated cultural failing in this respect in the Bank. Where other organisations review what they have done, think through and learn from their experiences, the Bank seems to be unwilling to do this.
In these circumstances, it would be quite wrong to give the Bank a veto over the publication of the oversight committee’s reports. If this serious committee of non-executives—a majority of the court—put together a report and decide that it should be published, then why should there be a veto over them? The oversight committee is quite capable of taking the advice of the Bank, the governor or whoever on whether the publication is against the public interest. If the Government really want effective performance reviews and not whitewash I am sure they will support these amendments.
Baroness Noakes
My Lords, I share many of the frustrations that the noble Lord, Lord Eatwell, has exposed in relation to the reviews that were commissioned, late and inadequate, and I completely accept that the Bank’s response did not seem fulsome. However, I think we have to give the new Government’s arrangements within the Bank a chance. While the Bill says that the Bank will decide about publication, that should be the Court of Directors and, as we know, the Court of Directors has a majority of non-executives. I hope that they will be invigorated by the new context provided by the separate oversight committee. If we keep trying to make functions of the Bank be carried out by the oversight committee we will undermine the court. We need to ensure that the court is strengthened and takes its responsibilities seriously. I also sincerely hope that the Treasury Select Committee in the other place becomes more active in seeking to engage with the non-executives via the oversight committee on how things work in practice.
Lord Barnett
My Lords, I agree with my noble friend very strongly indeed. He has made a very strong point. I should declare an interest, I suppose. Until very recently I was probably the oldest living non-executive chairman of a plc. I hope I was a very active chairman. However, I know through many experiences of my own that some non-executive directors do not play a very constructive part, they just take their money and go and do very little—so there are two different kinds of non-executive directors.
I hope my noble friend manages to persuade somebody to change the name from the oversight committee. It is, as my noble friend Lord Peston said, a very strange name to have in the Bill, but it is not the only strange thing in the Bill. I hope the officials who advise the noble Lord, Lord Sassoon, will perhaps come up with a new name but on the whole I would like to commend the officials, particularly those headed by Mr Whiting. He has been extremely diligent in the job he has done on all sides of this Bill, sending things and meeting people. He has been excellent.
I wish I could say the same about the Minister. I like him personally but I cannot say the same about his response to the amendments. My noble friend has made a very important point that an important committee here—whatever we call it, it is now called the oversight committee—can be overruled by the governor. I find that quite unacceptable. I do not know whether the noble Lord, Lord Sassoon, shaking his head means he cannot overrule it. I would be glad to hear that, but that is what it seems to be saying. I would like to hear how he puts that given the wording of the Bill, but for the moment I strongly support my noble friend Lord Eatwell.
Lord Kerr of Kinlochard
I think one has to draw a line between the past and the future. I once again found myself very much in agreement with what the noble Baroness, Lady Noakes, said. If a report was made to the oversight committee and it believed it should be published, and the decision goes to the court, as it should because a subset of the court cannot decide that, it seems to me extraordinarily unlikely—almost unthinkable—that the governor, from a position of one or four against nine, would be able to overturn the view of the oversight committee. The decision must be taken in the court, but it will be a very rare occurrence when a decision as to what is the public interest is taken by the executives overturning the majority view of the oversight committee when the issue comes before the court, so I do not understand the amendment.
Lord Peston
My Lords, I do not understand the intervention. Why has the governor been given the power if he cannot use it? If you do not want him to use it you do not give it to him.
Lord Armstrong of Ilminster
My Lords, if I may take the semantic point raised by the noble Lord, Lord Peston, if the word “oversight” is capable of being misinterpreted why not use “supervisory”, which is just the Latin version and means exactly the same without the possible misunderstanding?
Lord Sassoon
My Lords, I am not at this point going to get sidetracked into semantics, fascinating though I find it, as noble Lords know. Let me echo again, because I had said already what a good job the Bill team was doing, that I completely agree about that. I am very sorry that the noble Lord, Lord Peston, thinks—I am sorry; I meant the noble Lord, Lord Barnett. Do forgive me. The noble Lord, Lord Peston, may think that I am doing an excellent job but I know that the noble Lord, Lord Barnett, does not. Anyway, it is entirely my fault and not the fault of my officials, as the noble Lord recognises.
Let me try to be brief on this one. This is not a question of the governor having a power to overrule the oversight committee, as other noble Lords have said. The construction in the Bill is that it is for the Bank as whole—the court of the Bank—to decide and to make an informed judgment whether damage might be caused by the publication of a report on a public interest test. I understand the starting point of the noble Lord, Lord Eatwell, which is some suspicion or concern that the people who commissioned the report—the oversight committee—should be the group of people who decide whether it should be published. However, it is appropriate for the Bank as a whole—that is, the court, with a majority of non-executive directors, as my noble friend has reiterated again—to take the decision.
Lord Sassoon
Perhaps the noble Lord will let me finish. It is a decision of the Bank. The Bank is better placed to make that judgment and the noble Lord, Lord Kerr of Kinlochard, makes the point that it would be only in exceptional extraordinary circumstances —I cannot remember his exact words—that one would envisage this being overturned somehow on the whim, or rather the view, of the governor, when the Court of the Bank of England looks at it.
Let me make one more point before I give way to the noble Lord, Lord Eatwell, because one critical part of this is that the Treasury will receive copies of all reports, regardless of their sensitivity. I would expect the Treasury to come to its own view on whether each report is genuinely unsuitable for publication. If it believes that the public interest carve-out was not justified, it would challenge that decision where appropriate, because the Treasury ultimately has an even wider perspective on the public interest. It is therefore right to remember that there is that further fallback, because the reports in all cases will go to the Treasury. Let me, as well as asking the noble Lord to consider withdrawing his amendment, give way to him.
Lord Eatwell
I just wanted to ask a question of clarification. What particularly disturbed me about subsection (3) of new Section 3D was that it refers to “the Bank”. Can the noble Lord assure me that in that subsection “Bank” means “court”? If he can, I would be happy. That is the point that I was trying to make. I think that I confused the noble Lord, Lord Kerr, slightly in that respect.
Lord Sassoon
Yes, my Lords, the court is the governing authority of the Bank, and that is, I believe, completely the right construction for this particular matter.
Lord Barnett
What the noble Lord said just now seems to provide a new reason to change the name of the oversight committee. We do not need one. He is saying that the governor and the board of the Bank will know better than the oversight committee. Why bother with an oversight committee at all? That would be a simple solution.
Lord Eatwell
My Lords, I must say that I am very happy and I will now read through the Bill with great care and presume that wherever the term “Bank” appears, it means “court”. If that is so, I will check all the various clauses as we go along to ensure that “Bank” means “court” at all stages. If it means “court”, the Bill should say so and be clear—and that is what it is not.
Lord Peston
My noble friend should not really accept this, because no one reading the Bill could conceivably read the word “Bank” to mean “court”. “Bank” means the Bank, and the Bank, in practice, is the governor.
Lord Eatwell
With all due respect to my noble friend, these days, where matters are in dispute about the interpretation of Bills, reference is made to Hansard. The noble Lord has effectively amended this clause in his remarks by saying that “Bank” means “court”. On that basis, we have now clarified this section of the Bill considerably. We have had a successful debate and achieved something valuable.
Given the various comments on the name of the oversight committee, I must confess that until my noble friends pointed it out I had failed to notice the double entendre in that label. I thought that “oversight” meant to oversee or supervise. I take it as meaning “oversee”, and I will not go as far as my noble friends.
I will go through the rest of the Bill, note where it refers to the Bank and either write to the noble Lord or raise in the House those points at which there is ambiguity as to what “Bank” actually means. However, now that we are absolutely clear that in new Section 3D “Bank” means court, I am happy to beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
In Committee, I raised the issue referred to in the amendment and not only argued that should the Treasury be able to make recommendations to the FPC at any time—which it appears not to be able to, given that it is left out here—but proposed to make subsection (3) consistent with subsection (2) of proposed new Section 9A. The amendment would allow the Treasury to approach the FPC at any time.
After the Committee stage, the noble Lord, Lord Sassoon, was good enough to write to me on this matter. I appreciated that. In his letter, he argued that there was no need for specific statutory provision because the Treasury could make recommendations at any time as it already had a common-law power to do so. This was one of those “not necessary” defences. Therefore, the common-law power was the basis for the Treasury being able to make recommendations at any time.
I have considered this matter carefully and, after long reflection, I regret that I find the noble Lord’s argument unsatisfactory for two reasons. First, it is not good enough in the complexity of financial legislation to rely on the common law. There are people who will use this Bill who will not be lawyers and, even if they are, they may be lawyers who are not fully conversant with the common law. For example, many of our European Union partners are not conversant with the common law, and members of the relevant European Union regulatory bodies that will need to understand the Bill will not necessarily have familiarity with the common law that we would expect in common-law jurisdictions. Therefore, relying on the common law is not good enough in this legislation. We need real clarity about who does what to whom and we ought to include the Treasury in the provision so that everyone knows that it can intervene with the FPC at any time. The European authorities in particular, which will have a locus in this respect, would understand that point.
Secondly, a fundamental problem with the regulatory system before the crisis was the lack of communication between the Treasury and the Bank, as the noble Lord himself argued in Committee. I am sure that he will remember saying that a real problem with the tripartite structure was that the Chancellor of the Exchequer and the Governor of the Bank never met. He said:
“One of the major problems leading up to the financial crisis was that the tripartite committee did not meet at principals level”.—[Official Report, 10/7/12; col. 1052.]
The amendment re-emphasises the need for regular communication and co-operation between the Treasury and the Bank in general, and the Treasury and the FPC in particular, given the FPC’s macroeconomic responsibilities.
As I said, there are two reasons for the amendment. First, we should not rely on the common law as there are lots of people who are not conversant with the common law who need to understand this relationship clearly. Secondly, we need to reiterate the importance of regular communication between the Treasury and the Bank, especially the Treasury and the FPC. I beg to move.
Lord Sassoon
My Lords, I find it is bizarre and slightly disappointing to see this amendment again. My noble friend Lord De Mauley explained in Committee why the FPC requires an express power in statute to make recommendations whereas the Treasury does not. As the noble Lord, Lord Eatwell, recognises, I wrote to all interested noble Lords on 2 July setting out that explanation again, so I had rather hoped that the matter was resolved. I fear I should again explain the legal position, which is that the Government are clear that both the Treasury and the FPC should be closely involved in the ongoing development of the Bank’s financial stability strategy. I am happy to put that on the record. I have said a lot of other things which I am happy to be quoted on, such as comparing the practice under the old tripartite regime of people not talking to each other on a regular basis with what I now observe, which is much more regular communication. However, by amending this part of the Bill, I suggest we will not do anything more on that front. The Government are clear on that, which is why subsection (2) of new Section 9A of the Bank of England Act, as inserted by Clause 4 of the Bill, requires the court to consult both the FPC and the Treasury before determining or revising the Bank’s financial stability strategy. We do not need to overlabour the point, but it is a critically important one that the noble Lord raises and it is in there.
Moreover, the Government’s view is that neither the FPC nor the Treasury should have to wait to be formally consulted on the strategy. This should be part of the normal ongoing dialogue. If either body wishes proactively to suggest changes or amendments to the Bank’s strategy for financial stability, it should and will be able to do so. In order to ensure that this is the case, it is necessary to create an express power for the FPC to make recommendations to the court regarding the Bank’s strategy. As I have said before, this is because the FPC is a creation of statute, which means that the FPC’s main functions need to be set out in the legislation. That is why new Section 9A gives the FPC a power to make recommendations to the court on the financial stability strategy. If the provision did not exist, it would be unclear whether the FPC had the power to do so. In contrast, it is not necessary to create specific statutory provision to allow the Treasury to make recommendations. The Treasury already has a common-law power to make recommendations at any time to whoever it wishes.
Of course, the noble Lord, Lord Eatwell, does not challenge that underlying basis, but he makes a huge drama out of European authorities and overseas bodies needing to understand whether the Treasury has authority to do this, that or the other. I find it very unlikely that European bodies would need to do that, but if they did, their lawyers would understand very clearly the common-law construction, which would be explained to them. If we went down the line of not relying on the common law in legislation, I hate to think how a Bill like this would grow like Topsy.
I am genuinely puzzled by all this, but I hope that the explanation of the common-law position is clear and that it can be explained in these unlikely situations that the noble Lord postulates. Of course, these European authorities will have the benefit of reading Hansard as well. It is an important point that the interaction is much better than in some respects it has been in the past. We expect that to be the case. I would like to think that perhaps we have finally put this point to rest and I ask the noble Lord to withdraw his amendment.
Lord Eatwell
My Lords, it would be easier to withdraw the amendment if the noble Lord had actually answered the points. Essentially, all he has done is reiterate the common-law point and make the rather bold assumption that European-trained lawyers on the European Systemic Risk Board would understand the common law. However, if he is confident that that is the case and that a suitable number of British-trained lawyers, or the equivalent, can be seconded to that body, then perhaps things will work out in a satisfactory manner. I am glad to hear that he is confident that the interrelationship between the Bank, the Financial Policy Committee and the Treasury is ongoing and regular today as it was not in the past. That is a considerable improvement and I am pleased to have that assurance. However, there is an important element in financial legislation which the noble Lord overlooks. Financial legislation in a global financial market has to be really clear to all those around that market who read it. Simply saying, “We know because we are trained in the common law,” is really not good enough. I was trying not to change the relationship but to make it clearer. However, given that the Government are apparently not interested in doing that, I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, once again, we return to an issue that we discussed in Committee and I promised at that time to return to it on Report. I am keeping that promise. Subsection (6) of new Section 9A requires the court to review the financial stability strategy once every three years. That is far too long. Let us consider what has happened over the past three years. Since 2009 there has been a fundamental change to the overall economic environment, a radical change in government policy, and a double-dip recession. Really significant things have happened, which should be taken on board in assessing the strategy. The idea that, over that period, the court would not review the financial stability strategy in the light of events is, I believe, inconceivable. If the court really is going to review the strategy in the light of events, the markets need to know that. A regular report once a year would be a significant reassurance, even if that report says no change. Indeed, that would be a significant reassurance to the markets that the financial stability strategy is unchanged.
I quite understand that strategies are not designed to be the creatures of current events, but it is important to learn from events and not plough on regardless when the facts change. An annual review would provide the court with ongoing insights into the systemic risks associated with the financial stability strategy. That is far better than a review which is postponed, as facts change, for three years.
Let us then suppose that something really dramatic happens so that there has to be a review before the three-year time limit is up. What effect will that have on confidence? How much better to pursue the reasonable strategy of an annual review, both to ensure that the financial stability strategy is up to date and to provide appropriate confidence that the Bank’s strategy deals with matters with which the markets are concerned. I beg to move.
Lord Phillips of Sudbury
My Lords, I wonder whether the noble Lord, Lord Eatwell, has taken sufficient account of the provision in proposed new Section 9A(1)(b) that allows the court to review the strategy at any time. There is reference later in the proposed new section to revision of the strategy. I would have thought that those provisions covered precisely the concern that he correctly raised.
Lord Hodgson of Astley Abbotts
My Lords, I am slightly concerned at the proposed obligation to conduct an annual review. The role of directors is constantly to keep a strategy under review and to see whether it is still relevant. However, to impose this would impose a burden. A proper strategy review is an extremely expensive and far-reaching undertaking. It would be far better to have a backstop of a three-year requirement and rely on the good judgment and good sense of the directors, in particular the non-executives, to call for more frequent reviews as and when they are needed. It is inconceivable that we would go through the sorts of events that we have been through since 2008 and that non-executives would sit and say, “We do not need to look at the strategy”. It is part of their role to do that and we should rely on their judgment, not on process, with a backstop of the three years, as proposed.
Lord Myners
My Lords, I will pick up on a term in the final sentence of the contribution of the noble Lord, Lord Hodgson. He referred to relying on the judgment of the non-executives. Many issues around the court will depend on the quality of the people appointed, and how they conduct themselves. A slightly less than perfect structure, superbly implemented, is likely to give a better outcome than a perfect structure that is poorly implemented. The Minister on a number of occasions referred to best corporate practice. Can he envisage any situation in which a corporate board performing effectively would not carry out an annual review of strategy? Every board of which I have been a member has had an annual strategy session to look again at past strategy and in many cases endorse or modify it in the light of circumstances. Regardless of what we say here, court directors seized by their legal responsibilities would almost certainly want to carry out an annual review. Does the Minister agree with that observation?
Lord Sassoon
My Lords, I certainly agree with the construction of my noble friends Lord Phillips of Sudbury and Lord Hodgson of Astley Abbotts. I think that essentially they are agreeing with the noble Lord, Lord Myners, that boards will take sensible views on these matters, and that we do not need to require the court to review the Bank’s stability strategy on an annual basis because a perfectly sensible arrangement will emerge that will to some extent involve a strategy that is set for a longer period than a year. Clearly, to some extent, a strategy needs to look out further—as the noble Lord, Lord Myners, agreed. Equally, of course a board will look to see how a strategy is going on a more frequent basis.
I have not changed my view since Committee on the lack of need for the provision proposed in the amendment. The interventions in this discussion reinforced my view. The legislation does not set out how regularly the Bank’s strategy should be reviewed. In practice the court has revised the financial stability strategy on an annual basis. That is understandable, given the sheer volume of legislative and other changes that there have been in the system of financial regulation in the past three years. On the other hand, as the noble Lord, Lord Myners, agreed, a strategy needs also to be a longer-term, forward-looking document. We do not need to hardwire in an annual review and suggest in any way that we require a short-term, business-plan view to be taken rather than a genuine strategy. That is why new Section 9A will require the court in future to revise the strategy at least every three years—so that it is a longer-term document—but there will also be flexibility for the court to revise the strategy earlier. I continue to believe that a three-year timeframe is the correct requirement for the Bill. It leaves plenty of flexibility.
I will add that I am conscious that in talking about this matter I use “court” and “Bank” to mean different things. I did not want to prolong the earlier debate, but I did not say then that court equals Bank. I am sure that the noble Lord, Lord Eatwell, did not believe that to be the case, or that I suggested it. What I suggested in the earlier context was that there were certain critical issues on which the court would take a decision. The matter that we talked about—the public interest test in connection with publishing reports—was one. Here is a clear example of a case where we are talking about the court setting a strategy for the Bank. There will be many more examples as we go through the Bill of cases where “court” and “Bank” mean different things. We need to look at each instance as it comes up. With that slight digression, I hope that the noble Lord has been comforted by this further discussion of the strategy timeframe issue.
Lord Eatwell
My Lords, we are debating two things at the same time. I will refer first to my amendment dealing with the timing of reviews of the financial stability strategy. Writing into the Bill that there should be a backstop of three years is a major mistake because it creates the possibility—even probability—that a review will have to take place in a shorter timeframe, as the noble Lord, Lord Phillips, pointed out. If that is done, what will be the effect on confidence? It will give the impression that the Bank is panicking and is not willing to go to its three-year period; it has suddenly had to shorten things. The reaction will be: “My gosh, something is really going wrong”. That is why the notion of an annual review has solidity and regularity. It fits in with the publication of the financial stability review, which is twice per year. So every year there would be a review, even if it endorsed a policy of no change to the financial stability strategy. Including the three-year figure is a major mistake because it will tend to excite apprehension when reviews take place more frequently.
Lord Phillips of Sudbury
Is the noble Lord not assuaged by the wording of the Bill, which seems to be extraordinarily wise? It calls for a strategic review, which it later defines as coming every three years. It then states that the court of directors must,
“from time to time review, and if necessary revise, the strategy”.
Surely that is exactly what the noble Lord was talking about. If circumstances take an unexpected and dramatic turn, that stipulation is precisely germane. I do not see why the noble Lord is not satisfied with what seems to be an extremely sensible arrangement: a report every three years, but also a power of review.
Lord Eatwell
I am sorry that I did not make myself clear. I was referring to a review taking place other than at three years and the effect that that might have on the confidence of the markets. They might feel that the Bank is not sticking to its usual three-year timetable but is bringing things forward because something is going badly wrong that it knows about and perhaps the markets are not fully informed about. An annual review is embedded in so many companies. The annual away-day where everybody goes off and does the annual review is such a standard procedure that I think the three-year business is a mistake.
I want to return to the noble Lord’s revisionist comments on the position that he took on the earlier amendment when we were referring to the business of the oversight committee and the public interest notion of publication. I asked the noble Lord whether in this section Bank meant court. I think that I made clear that if it did mean court, the best option would be for it to say so. Therefore, the best option would be for him to come back at Third Reading and say, “Look, the word Bank occurs all the way through the Bill. It is used in different contexts in different places and let us be absolutely clear who is responsible. We will amend this clause at Third Reading to say ‘court’ because that is what I mean. It is not what I say; it is what I mean”. Let us now say that the noble Lord means court.
I was quite deliberately saying that if the noble Lord really wants the word Bank to mean court throughout the Bill I would read through it. I was confident that I would have no difficulty finding a number of cases where he did not want it to mean court. That is why he has now stood up, having received the advice of his officials, to correct what he said earlier.
Lord Eatwell
I am just finishing.
With respect to new Section 3D, it is important that we are clear that Bank means court there. We will take on advisement what the word Bank means elsewhere in the Bill.
Lord Sassoon
I merely wanted to say that I was not standing up to correct anything I said before: I stand exactly by everything that I said before. I wanted to head off the noble Lord, Lord Eatwell, from wasting a lot of time by going through and analysing the precise meaning and the underlined way in which the powers of the Bank would be exercised situation by situation in the Bill. It is up to the court as the governing body of the Bank as to what it takes unto itself and what it delegates to the executive of the Bank. I was merely trying to make a helpful suggestion that perhaps the noble Lord would find himself doing quite a lot of wasted work if we went too literally down this path.
Lord Eatwell
My Lords, I am sorry to prolong this, but now we are told that the court can delegate to the executive of the Bank. Is that the case in new Section 3D, which we discussed before? I am sorry to prolong this but I thought that the noble Lord made absolutely clear that in that section, Bank meant court—not a delegation to the executive or the governor or anyone else. He actually said himself, if I recollect accurately, that the court contains the nine members of the oversight committee, they would be sitting there and therefore they would not contradict themselves. There was no notion of delegation. They had a role. It is very important that legislation, particularly in financial policy, is clear. Can we please be clear on this particular element?
Lord Sassoon
I do think that the noble Lord, Lord Eatwell, is trying to get into semantic games. There is an important point. I was completely clear before and I think it is understood. It would be complete nonsense if a recommendation on such an important matter of the oversight committee, which is a committee of the court of the Bank, was taken by anything other than the court itself. That is plain and completely clear. That is what I said before and that is what I stand by. It would be absurd to suggest that the court would delegate such a matter. That is what I said and that is clear. But there are plenty of other matters throughout the Bill on what the Bank does where, equally, it would be ridiculous to suggest that the court did something itself and did not delegate.
Lord Eatwell
Well I rest on the proposition that I made earlier. If that is what the noble Lord means, why does he not say so instead of leaving this ambiguity on the face of the Bill?
However, returning to the issue of three years, I think that it is unfortunate for the reasons that I have spelt out. Annual reviews are completely usual and normal in the corporate and financial worlds. Everyone knows what they are. Three years leaves too much of a gap for unfortunate and disturbing events to occur that could then be exacerbated by the Bank’s seeming need to change tack at that time.
I hope people go away and think a little about this. I know that I almost certainly hope in vain, but hope springs eternal. In the mean time, I beg leave to withdraw the amendment.
Baroness Noakes
Baroness Noakes
In moving this amendment, I will also speak to Amendment 5 in this group. In so doing, I hope to give the noble Lord, Lord Eatwell, a break from his obsession with the difference between the court and the Bank.
The amendments concern membership of the Financial Policy Committee. In Committee, the noble Lord, Lord McFall of Alcluith, and I tabled an amendment that reflected the conclusion of the Treasury Select Committee in another place that there should be a majority of external members on the FPC to mitigate against groupthink. The Joint Committee that examined the Bill had reached a similar conclusion.
The Bill prescribes 12 members of the FPC in total. There should be six from the Bank, the chief executive of the FCA, four external members and a representative from the Treasury. I will ignore the Treasury in my remarks because the Treasury person cannot vote and his views can be ignored quite a lot of the time according to Schedule 1. I will talk about the 11 active and voting members.
The Government like to portray this composition of the FPC as a 6:5 split, putting the chief executive of the FCA in the external-to-the-Bank category, with six internal to the Bank and five outside. But the chief executive of the FCA, while he is external to the Bank, is not a completely independent member because of the many and varied associations and interactions between the FCA and the PRA which are envisaged in this Bill. While the chief executive of the FCA will have independent responsibilities in relation to the FCA, he will inevitably be susceptible to the kind of groupthink that the Treasury Select Committee warned against. The de facto ratio in the Bill is 7:4, because seven members have custodianship of the financial system as part of their day jobs and only four would be independent of that. I do not believe that that ratio is a healthy one.
In Committee, my noble friend the Minister argued against having external members in the majority because it would interfere with the holding of the Bank of England to account in some way. I think that that is a highly arguable position but my noble friend will be relieved that I am not going to argue with it this evening. Instead, I propose with Amendment 4 a more modest rebalancing of the FPC and I am delighted that my noble friend Lady Wheatcroft and the noble Baroness, Lady Kramer, have added their names to this amendment.
Lord Myners
My Lords, I support the amendment in the name of the noble Baronesses, Lady Noakes, Lady Wheatcroft and Lady Kramer. I, too, have been struck by the potency of the Walker report appendix on group effectiveness, drafted by the Tavistock Institute. My experience leads me to conclude that the larger the group, the less effective it becomes. The R-squared is actually extraordinarily high and making the FPC any larger would not be the right solution, although it would be better than doing nothing.
Amendment 4 is, in my judgment, significantly superior to Amendment 5 and I think the noble Baroness, Lady Noakes, has, as she so often does, put her finger on the issue. It is almost certainly the governor who is insisting on having this right to appoint additional people to the committee. The past culture of the Bank is that it speaks with a single voice and that voice expresses the opinion of the governor. The more people around the committee table who therefore speak with that single voice, the better it is from the perspective of the executive. From the perspective of a functioning committee, that is almost certainly not an optimal outcome. In fact, if the Tavistock Institute had been invited to comment on the existence of a cabal or blocking group within a committee, I am sure it would have been even more powerful in its views about its appropriate constitution.
The central thrust of everything we are doing in helping the Government get this legislation through Parliament is to try to ensure that we have as many checks and balances in place as is appropriate. One of them must be a check on the strength of the voice of the executive of the Bank on these committees and, while both of the amendments put forward by the noble Baroness, Lady Noakes, will achieve that, Amendment 4 is preferable to Amendment 5.
Baroness Wheatcroft
My Lords, Amendment 4 will achieve an improvement in the balance of the FPC and I support the other amendments in this group, tidying-up amendments which would bring the number of extra appointees from the Bank down to one instead of two. It is obviously better to have a balance, if we can, between the Bank team and the outsiders—as they will undoubtedly feel that they are to start with.
We have heard about groupthink. There obviously has been a fair amount of groupthink at the Bank in the past, although it is worth remembering that on the Monetary Policy Committee the Governor of the Bank of England has been outvoted on several occasions, so it is possible for people to disagree with the governor and for the committee to go against him. However, on the basis that a balance would be better, bringing down the level of Bank people represented on the FPC would be an improvement.
Lord Deben
I merely suggest that in these detailed discussions, when we hear mainly from those who are very expert, it is as well to consider views from outside, from business as a whole. A trick which all businessmen know is that there are two ways in which you can control a committee. One is to have a very small committee mainly related to you, and the other is to have a very large committee in which you know very well that you can organise the dynamics. I am much impressed with the arguments of the noble Baroness, Lady Noakes, who has put her finger on a very important issue. I hope that the Government would accept that nowadays there is a good deal of expertise looking at these matters and the Tavistock Institute has much of it. I would be unhappy if we suggested that we knew better than its experience, over a very long time, of how best to do these things. I hope the Government will see this as a perfectly reasonable thing, a balanced situation. The noble Baroness, Lady Noakes, and I do not always agree on matters—indeed, there are lots we disagree on—but on this occasion, coming from my understanding of trying to run boards and companies, this would be a good thing to do and not to do it would seem a little perverse.
Baroness Kramer
My Lords, I cannot pretend to have the expertise on boards that the previous speakers have had and I do not want to repeat the very powerful arguments they have made; I merely add two quick comments. I think that the Minister will have understood from the debate that has gone on for much of today that there is still a general uneasiness over the amount of power that flows to the Governor of the Bank of England under this new framework. Here is a sensible way to put a bit more challenge into the system. I think that we all feel that a bit more challenge would be a good way in which to make sure that the governor has to do the thing that is the greatest check on any individual: to persuade others to go along with him. That is rather more necessary in an absolutely core function, one of financial stability and economic growth.
Secondly, we have all been somewhat concerned about the role of the FCA and the kind of status that the chief executive of the FCA may have in comparison to his peers in the regulatory family that falls more directly under the Bank of England. His role becomes a little more pivotal when you look at Amendment 4 and I suspect that that is no bad thing. It also makes sure that the FCA voice is heard rather more clearly and independently than it might have been without this amendment. I hope that the Minister will take all that on board.
Lord Eatwell
My Lords, I have added my name, as has my noble friend Lady Hayter, to Amendment 5, which is the second-best amendment of the noble Baroness, Lady Noakes. However, even in this second-best version, achieving what the noble Baroness, Lady Kramer, referred to as “a bit more challenge” is an excellent and desirable objective.
Lord Sassoon
My Lords, this is an interesting and important area. The balance of the FPC’s members between the Bank and non-Bank executives is an issue that has been raised a number of times in this House, in another place and in the committees that have scrutinised the Bill. My noble friends who have spoken to this issue have done so with characteristic clarity and eloquence.
There is clearly an important argument about the possibility of rebalancing the membership of the committee away from the Bank executives and towards the external members. The external members will need to provide an outside perspective and challenge function to the deliberations of the FPC and, crucially, Amendment 4 achieves the important objective of enhancing the role of the non-Bank members while avoiding creating a situation where the Bank would be in a minority on the committee, which would make it virtually impossible to hold the Bank accountable for the FPC’s actions.
I see a great deal of sense in the alternative ways of doing this, but in the Amendment 4 approach rather than the Amendment 5 approach—the second best approach, as we now know it. I could not talk in the language of cognitive limits and other good stuff but, in a practical sense, I understand why having only nine voting members, which is comparable with the MPC, is better than having 11 members with a Treasury observer. Making the FPC larger by creating additional members would risk making the group unwieldy, and I now understand—which I did not before—that the Tavistock Institute provides a theoretical underpinning to what I see as a practical argument.
On balance, the proposal put forward by my noble friends to rebalance the committee by removing a Bank member is not only preferable to the one of adding an external member but has some attractions. The tone of my noble friend Lord Deben’s remarks was to assume that of course I would dismiss all this out of hand. However, this is a serious point and the committee has come back to it. We have been here before in a number of respects and it is important.
Amendment 6 would ensure that it is the executive director with responsibility for the analysis of markets who would be removed from the FPC. Although the person in this position may have an important role in providing information relating to financial markets to the committee, it is true that this role could be achieved without that person being a voting member. The executive director who would remain as a voting member on the FPC would be the director with responsibility within the Bank for financial stability, and I agree that that executive director would seem to be the appropriate person.
The remaining amendments are consequential in nature and simply remove a later reference to the executive director with responsibility for the analysis of markets and reduce the quorum of the FPC from seven to six, reflecting its reduced size.
Baroness Noakes
My Lords, I thank all noble Lords who have taken part in this important debate and I thank the Minister for his welcome remarks. I believe the technical response in this situation is “bingo”. With that, I beg leave to withdraw my amendment.
Lord Eatwell
Lord Eatwell
My Lords, my noble friend Lord Peston, who tabled this amendment, had to leave earlier this evening, but he asked me to move it on his behalf. I do so because it is an important and valuable amendment.
In Committee, the Government conceded the arguments made by the Treasury Select Committee and by Members in the other place that the growth and employment objective should be written into the terms of reference of the Financial Policy Committee. However, they have undermined the pursuit of this objective by the way in which it has been incorporated into the Bill. The phrase “subject to that” in proposed new Section 9C(1)(b) makes the growth and employment objective secondary to the stability objective.
Perhaps the Government are over influenced by current events here. Any Government who have presided over the economic policy of the past two-and-a-half years and continually justified their own actions with reference to levels of interest rates and financial stability will undoubtedly be motivated to downplay the growth and employment objective in the Financial Policy Committee’s considerations. However, in the longer view this is surely a mistake. Under the Bill as currently constructed, the Financial Policy Committee could cite the financial stability of a persistent recession as evidence that the objective has been met—stability, but the stability of the economic grave.
How much better that the Financial Policy Committee should take a balanced and mature view of the relationship between financial stability and growth and employment? I am confident that, if we get the right people in place, the committee will be able to take that mature view and would much better serve the overall financial stability strategy of the Bank. My noble friend’s amendment would achieve this and it deserves both serious consideration and support. I beg to move.
Lord Deben
I am distressed that the Minister should feel that on the previous occasion I suggested that he would be other than magnanimous, for he is always magnanimous. I speak in his support because we have to be very careful about constantly adding all the good things that we might like to have taken into account in all circumstances. Financial stability in these circumstances is exactly what we should be saying first and we refer to the other, perfectly rightly, because it is necessary. I find it incredible that any committee, in any circumstance, would get up and say it thinks it is a frightfully good idea to have the stability of total sterility. I do not understand where the noble Lord, Lord Eatwell, really thinks that anybody would come to that conclusion. This seems a totally unnecessary amendment and I hope very much that the Minister will refuse it.
Baroness Kramer
My Lords, I feel positively disturbed by this amendment. I am far more concerned that ultimately we will have to resist the optimism and buy-in to “all is going well, let’s take the leash off”, and the erosion of regulation and structural protection. It is important that financial stability should be the primary objective for the Financial Policy Committee. It was important to add the economic growth objective to sit alongside it, but in a secondary role—to say that if the requirements for financial stability are met, the committee should make sure that, alongside and within that, economic growth has the chance to take place. That is an appropriate balance, which has been achieved by earlier amendments to this Bill.
To pull away that protection now and put us back exactly where we were—perhaps I may say, under the last Labour Government—would suggest that people have not learnt their lessons. That is the great fear: we have a crisis and people immediately react to counter the crisis. However, my goodness, our memory is short. As soon as times become good, it is very hard for a regulator to continue to impose constraint and manage risk. It is absolutely crucial that we make clear that this is meant to be a permanent feature of the Financial Policy Committee, not just a feature for now.
Lord Phillips of Sudbury
My Lords, I will add a rather mundane legal point. I do not believe that the amendment tabled by the noble Lord, Lord Peston, would achieve anything, even if it were accepted. Subsection (1), whose two limbs cover the matters to which the Financial Policy Committee must have regard, is quite clear about the stability objective. However, in a situation where the Government had no objective for growth, it would not bite, even if you took the words “subject to that” out of the clause. That is, as I said, a very mundane lawyer’s point.
Baroness Noakes
My Lords, I recall that when the previous Government set up the Monetary Policy Committee, they formulated its secondary policy objective in precisely this form, “Subject to that”. Can the Benches opposite explain when they had a damascene conversion on this topic?
Lord Eatwell
I am sorry, I will say something. The Monetary Policy Committee has had a damascene conversion. You can see it in the quantitative easing policy. Indeed, the Treasury continuously encourages the Bank to take a more aggressive monetary policy with respect to growth and employment and to ignore the high rate of inflation.
Lord Sassoon
My Lords, first, this is well trodden ground for the House so I will be brief. In any case, my noble friends have all made extremely telling points, which knock this one pretty comprehensively on the head. The FPC’s primary focus must be financial stability. That is its primary purpose, in the same way that the MPC’s primary focus must be price stability. Both financial and monetary stability are necessary prerequisites for stable and sustainable growth, so both committees already contribute to growth by achieving their primary purposes. Subject to doing so, they should act to support the Government’s economic objectives. The result of giving the FPC dual, equally weighted objectives for financial stability and economic growth would be to allow the FPC to take action that would damage financial stability with the aim of encouraging growth. This would take the FPC outside its remit and expertise, and frustrate its primary purpose—which has got to be financial stability.
I do not believe that the model proposed in this amendment is appropriate or workable and I ask the noble Lord to withdraw it.
Lord Eatwell
My Lords, this has been an intriguing discussion, since it appears to ignore the economic history of the last two years. I was struck by the comment from the noble Lord, Lord Deben, that nobody would possibly accept the notion that financial stability was important when growth was absent. He should come more often and listen to the noble Lord, Lord Sassoon, justifying the current policies of the Government. The Minister continuously says it is vital that the policy which has produced zero growth over a year, and leaves us with a level of output about 3.5% lower than the peak in 2008, is entirely justified by the need to secure financial stability. He refers to low interest rates and financial stability all the time. If the noble Lord would like to hear someone justify that position, he can just turn up and listen to the noble Lord, Lord Sassoon, justifying the Government’s policy. He will get that straightaway.
Lord Deben
The noble Lord really must not interpret what I said in a way that is convenient for his argument and then blame the noble Lord, Lord Sassoon, for speeches that I have certainly heard and with which I agree. All I am saying is that the noble Lord’s idea that somehow or other, unless this is in here, nobody will take any notice of growth at all and that everyone will want a kind of sterile system is just not true. Nor is it sensible.
Lord Sassoon
I really do not want to prolong this too long, but the idea that somehow financial stability is the same as a sustainable fiscal position is really stretching the concepts a bit far. However, there we are.
Lord Eatwell
I was merely describing the way that the noble Lord continuously justifies the current squeeze that the Government wish to exert on the economy. The other really intriguing point is that it is the Government’s amendment that has introduced the growth and employment objective here, but he now tells us that it is outwith the committee’s expertise. So he has now introduced an amendment that is outwith the expertise of the committee that he has asked to consider it, even if as a secondary objective. I have been very struck by the debate, which has also failed to recognise, as I suggested earlier, the dramatic change in policy by the Monetary Policy Committee, urged on by the Government. This amendment simply attempted to believe, perhaps naively, that the Government might recognise what is happening in the policy-making of their institutions at the moment might give the FPC some credit for being able to make a mature and balanced judgment, given its overall responsibility for financial stability. However, I was no doubt overly naive there. On that basis, I beg leave to withdraw the amendment.
Lord Eatwell
“( ) factors likely to lead to a loss of confidence in the financial system as a whole”
Lord Eatwell
My Lords, this amendment seeks to include in the list of factors that are to be considered as systemic risks the factors likely to lead to a loss of confidence in the financial system as a whole. I am afraid that this is a significant bugbear among those of us interested in the economic foundations and problems of systemic risk. The list of elements that are included here—
“structural features … distribution of risk … unsustainable levels of leverage, debt or credit growth”—
are all essentially microeconomic. They miss the whole point about macroprudential regulation and the macroeconomics of risk, which the FSA tried to put forward in the Turner review and the US Treasury put forward in its review. They missed all that. The point is that at the macroeconomic level, there can be a transmission of risk which is not observable in the microstructures of the market, and is transmitted through a loss of confidence. Factors which can lead to a loss of confidence may not be identifiable in precise microeconomic connections.
I understand that this list is not intended to be exhaustive. That is why I composed this amendment to be a very general statement. I was not attempting to be precise, just presenting factors which can lead to a general loss of confidence. The point is to recognise that the systemic risk which we encountered in the last four or five years does not derive simply from the observable microeconomic variables listed here, but derives—most importantly, or at least, equally importantly—from the general loss of confidence which can sometimes be associated with these variables, and sometimes with others.
Lord Sassoon
My Lords, again, this was an issue on which there was a comprehensive debate in Committee. As set out in subsections (1) and (2) of proposed new Section 9C of the Bank of England Act, the FPC is tasked with contributing to the Bank’s financial stability objective by identifying and monitoring systemic risks and taking action to reduce or remove those risks.
Subsection (5) defines “systemic risk” to mean,
“a risk to the stability of the UK financial system as a whole or of a significant part of that system”.
That means that any risk to UK financial stability is captured within the FPC’s remit. At the prompting of the Joint Committee that scrutinised the Bill in draft, we added subsection (6) to underline the fact that,
“it is immaterial whether the risk arises in the United Kingdom or elsewhere”.
Let me be clear: the FPC must identify and address any risk that could compromise the stability of the UK financial system regardless of its origin.
The purpose of subsection (3) is to specify certain types of systemic risk which the FPC should look for. This does not limit or restrict the FPC’s remit in any way. In other words, just because a systemic risk is not listed in subsection (3) does not mean that the FPC has any less of an obligation to identify, monitor and address it. There could perhaps be a temptation to continue adding to subsection (3) in an attempt to try to define all possible sources of systemic risk. But this would be a fruitless, and potentially counterproductive, endeavour.
Amendment 6E seeks to add,
“factors likely to lead to a loss of confidence in the financial system as a whole”,
to the list. I agree that a loss of confidence can magnify cross-sectional or structural risks captured in the financial system. But I do not believe it would be appropriate to expand subsection (3) in this way. As I have said, the list is not intended to be exhaustive, rather it is designed to highlight the broad categories of systemic risk that have been identified by academic research, something which the noble Lord is rightly keen that we should factor in. Subsection (3) as it stands already serves this purpose by describing the main categories of cross-sectional and cyclical risk. I hope that, on the basis of this explanation, the noble Lord will withdraw what I continue to see as an unnecessary amendment.
Lord Eatwell
Before the noble Lord sits down, I heard but one argument against the case that I was making, which was that it was not appropriate. Will he explain why it is not appropriate?
Lord Sassoon
My Lords, I thought that was what I had done in the last three minutes. I explained that this is not an exhaustive list. Yes, the factor that the noble Lord identifies is an important consideration, but we have included the much more specific categories of systemic risk which are identified in the research. If we started putting looser considerations in there, it would be difficult to know where the list should stop. Indeed, as one extends lists like this, it risks by implication leaving out other important factors. I do believe that subsection (3) and the whole of proposed new Section 9C as drafted completely embrace the ability and the requirement for the FPC to pick up what the noble Lord is getting at, but does not run the risk of us trying to draft in some of the other things that we all might be able to think of.
Lord Phillips of Sudbury
Before my noble friend sits down, will he comment on the essential point made by the noble Lord, Lord Eatwell, about the risks defined in subsection (3) covering only “micro” rather than “macro” risks? It does seem that the language is actually “macro”. It talks about systemic risks, structural features and so on. Does the Minister agree?
Lord Sassoon
Yes, I agree with my noble friend. He makes an important point.
Lord Eatwell
Well, yes, my Lords, the logic of the noble Lord’s argument is either to accept my amendment or delete proposed new subsection (3) altogether, because one has to ask: what does it do? It says:
“Those systemic risks include, in particular”.
In particular, this is what the committee should be looking at. That is misleading in that it focuses on structural issues of the economy, which are microeconomic —on leverage and on debt, which are microeconomic, and on credit growth, which is moving into the more macroeconomic area. What it fails to do is to take in the general point of the loss of confidence which can come from other sources.
As I pointed out when I introduced this amendment, I deliberately constructed it so as not to get into the trap of attempting to produce a detailed list. It certainly does not do that. It simply alerts the committee. If the committee is to be alerted to deal with a number of factors in particular, it seems that it should also be looking in particular at those factors which might lead to a general loss of confidence in the economy as a whole.
So if the Government really wish to ask the committee to focus in particular on some things, I would like my amendment to be accepted. If, on the other hand, it is quite happy to rely on subsections (5) and (6), I suggest that subsection (3) be deleted, so as not to create this spurious concentration on a particular list of points.
However, given that the argument has made little progress, I beg leave to withdraw the amendment.
Baroness Noakes
“(1A) If the Treasury considers it appropriate to proceed with the making of an order under section 9L, the Treasury may lay before Parliament—
(a) a draft order, and(b) an explanatory document.(1B) The explanatory document laid under subsection (1A) must—
(a) introduce and give reasons for the order,(b) explain why the Treasury considers that the order serves the purpose in section 9L, and(c) be accompanied by a copy of any representations received from the FPC or the Governor of the Bank.(1C) Subject as follows, if after the expiry of the 40-day period the draft order laid under subsection (1A) is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
(1D) The procedure in subsections (1E) to (1H) shall apply to the draft order instead of the procedure in subsection (1C) if—
(a) either House of Parliament so resolves within the 30-day period, or(b) a committee of either House charged with reporting on the draft order so recommends within the 30-day period and the House to which the recommendation is made does not by resolution reject the recommendation within the period.(1E) The Minister must have regard to—
(a) any representations,(b) any resolution of either House of Parliament, and(c) any recommendation of a committee of either House of Parliament charged with reporting on the draft order, made during the 60-day period with regard to the draft order. (1F) If after the expiry of the 60-day period the draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
(1G) If after the expiry of the 60-day period the Minister wishes to proceed with the draft order but with the material changes, the Minister may lay before Parliament—
(a) a revised draft order, and(b) a statement giving a summary of the changes proposed. (1H) If the revised draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the revised draft order.
(1J) For the purposes of this section, an order is made in the terms of a draft order or revised draft order if it contains no material changes to its provisions.
(1K) In this section, references to the “30-day”, “40-day” and “60-day” period in relation to any draft order are to the periods of 30, 40 and 60 days beginning with the day on which the draft order was laid before Parliament.”
Baroness Noakes
My Lords, this has taken me a little by surprise—I thought I had another few minutes’ rest before we got to my amendment.
Amendment 7 deals with the parliamentary procedure for approving the Treasury’s direction to the FPC setting out the macroprudential measures that the FPC can impose on the PRA and the FCA. Under proposed new Section 9N of FiSMA, as inserted by Clause 4 of the Bill, the procedure is to be the draft affirmative one. My amendment seeks to convert that into a super-affirmative procedure.
The draft affirmative procedure requires parliamentary approval of the draft of an order before the final order is actually made. It gives slightly more opportunity for parliamentary scrutiny than an ordinary affirmative order, but the end result of the parliamentary procedure is binary—it is either approved or not. Such an order is not amendable and the only option available to either House would be to reject the whole order. The political composition of the other place effectively means that an order is always passed, whether draft or not. It does not matter whether the debate is in a Committee Room or, as has been suggested by the Chancellor of the Exchequer, on the Floor of the House. The end result is the same. In this House, technically we can reject an order but by convention we do not do so. It has happened only very rarely and is rightly regarded as a nuclear option.
Like the Joint Committee that scrutinised the draft Bill, the Treasury Select Committee in another place concluded that the content of an order setting out macroprudential measures deserves an enhanced level of parliamentary scrutiny. The Treasury Select Committee believes that the situation satisfies the Erskine May formula that talks of the super-affirmative procedure being used where,
“an exceptionally high degree of scrutiny is thought appropriate”.
The super-affirmative procedure in my amendment would require the Treasury to set out, in some detail, why the order is to be made. It would allow either House of Parliament to make recommendations on the draft order, which the Government would have to have regard to before returning with the final version of the order. Neither House would have any power of amendment but would have the power to recommend amendments, which the Government would have to consider.
It was suggested in Committee that macroprudential measures are very technical and not amenable to amendments—the noble Baroness, Lady Kramer, made this point. That may or may not be correct, depending on the particular measure. It is certainly true that the wider economic impact of the use of macroprudential tools is a proper subject for parliamentary debate, and either House may well want to say to the Government that their chosen tools are perhaps too wide or not wide enough. In contentious cases, Parliament may well say that the tools should be sunsetted or should be subject to additional reporting to Parliament on the impacts of the measures over time. Many important things could come out of a proper parliamentary debate that may or may not represent suggestions for amendment.
I have no particular concerns about the initial macroprudential toolkit. The FPC has been open about what it wants and why, and the Government are consulting transparently on their draft order. However, the initial tools are probably the easy ones because they largely align with international developments, and my amendment is directed at the development of the measures over time. For example, the FPC deliberately held back from asking for loan-to-value or loan-to-income powers, recognising that these should be decided by Parliament and that a full public debate would be necessary before such measures were introduced. If enforced, loan-to-income or loan-to-value rules could have a massive impact on the availability of mortgage credit and therefore raise wider societal issues as well as financial stability ones. Without the backstop of the super-affirmative procedure it is far from clear how Parliament could ensure that its—or anyone else’s—voice would be heard.
Lord Sassoon
My Lords, of course, this is another issue that was discussed at some length in Committee. The Government recognise the importance of proper public and parliamentary scrutiny and accountability for macroprudential tools. That is why the Bill requires that macroprudential orders be subject to the affirmative procedure.
The Government have given a number of undertakings to further demonstrate our commitment to ensure transparency and effective scrutiny of macroprudential orders. In another place the previous Financial Secretary to the Treasury, Mark Hoban, clearly stated the importance that the Treasury places on taking a consultative approach to policy-making, and that he expected this to apply to macroprudential tools. In addition, my right honourable friend the Chancellor of the Exchequer has said that he would be happy for debates on tools to take place on the Floor of the House, subject to arrangement through the usual channels.
The Government have also committed to consult on their proposals for the FPC’s initial toolkit. I note that my noble friend has no complaint on that score. Nevertheless it is important to recognise that the consultation document containing the Government’s proposals, a draft order and an impact assessment on those proposals was published on 18 September. The consultation will run for a full 12 weeks. In Committee a number of noble Lords highlighted the 90-minute restriction on debates and the inability for orders to be amended. However, I believe that consultation and the statement made by the Chancellor address these concerns effectively. I encourage noble Lords to read the consultation and respond if they feel able to improve the drafting of the order. I also hope that the relevant parliamentary committees will make their views on the Government’s proposals known.
Importantly, the Government’s stance on the parliamentary control of these macroprudential orders has been endorsed by the Delegated Powers and Regulatory Reform Committee. Maybe I did not notice it, but I do not think that my noble friend referred to the DPRRC. I know that she regards the committee, in her words, as an early warning system of problems for Parliament to address. In this instance, it has considered our proposed procedure and determined that there is not a problem to address.
As I suspect my noble friend knows, the DPRRC has stated:
“The importance of the power is recognised by the application of the draft affirmative procedure or, in urgent cases, the 28-day ‘made affirmative’ procedure … The Joint Committee on the Draft Bill and the House of Commons Treasury Select Committee have recommended an enhanced affirmative procedure for the non-urgent orders, based on that in the Public Bodies Act 2011. But the affirmative procedure provided for in the Bill should be a sufficient safeguard against inappropriate use of these powers”.
It is also important to remember that orders made under new Section 9K will not always be major pieces of legislation. It could be the case that minor technical amendments need to be made to the tools over time. Under such circumstances, requiring the super-affirmative procedure would be a disproportionate use of parliamentary resources. I note that my noble friend has made some adjustments to the super-affirmative procedure that would make it less onerous, and she has addressed those at some length in her remarks. I still feel that her proposal would require a disproportionate amount of parliamentary time and resource.
The bare minimum amount of time to pass an order under these proposals is 40 days, which can be increased to 60 days by resolution of either House or by recommendation of a committee of either House. The time taken to make an order where the consultation process shows that substantial changes are required is even greater. Even once the 60-day period has elapsed, this amendment would require the Treasury to obtain prior approval to the amended instrument before it could be made. This would introduce a significant amount of uncertainty around the time it would take to amend the FPC’s macroprudential toolkit.
I have stated many times that the Government place great importance on public and parliamentary scrutiny of the macroprudential tools. Given the steps already in the Bill and the commitments made by this Government, I ask my noble friend to withdraw her amendment.
Baroness Noakes
My Lords, I am disappointed with my noble friend’s response on this. He has repeated that in the other place there can be a debate on the Floor of the House, but the location of a debate on a statutory instrument is completely irrelevant. The outcome is exactly the same. He has rested on the full process for the early order but, as I said, those ones, with a high degree of international agreement on what the early phase of macroprudential tools should be, were easy to do. That is not really an issue. My noble friend rightly raises the Delegated Powers and Regulatory Reform Committee, for which I have the highest respect. I have equally the highest respect for the Joint Committee which scrutinised the draft Bill, and high regard in particular for the Treasury Select Committee in another place, which has been tireless in its scrutiny of this legislation. I have two committees to play one.
The best parliamentary procedure would in this instance be the super-affirmative. I can only say that I am extremely disappointed with my Government for hiding behind the easiest option of parliamentary procedure, but I will accede to my noble friend’s request and beg leave to withdraw.
Housing Benefit (Amendment) Regulations 2012
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the draft Housing Benefit (Amendment) Regulations 2012 laid before the House on 28 June be approved.
Relevant documents: 6th Report from the Joint Committee on Statutory Instruments, 7th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 15 October.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we have already conducted a debate on these regulations in Committee and I am under no illusion about the strength of feeling that many noble Lords have on this measure. Clearly we have been through the issue thoroughly as we went through the Bill. We went through that a number of times. The Commons gave us a response and noble Lords will remember that at the conclusion of those debates I proposed undertaking some research to make sure that we understood the impact of this measure. On that basis in the Bill process it was decided not to proceed any further.
Let me summarise some of the main issues. We are not introducing this change lightly. There are a number of important principles behind this reform. There is a major financial imperative behind it; there is a compelling argument for reining in housing benefit expenditure and spending more generally. I know that many noble Lords do not disagree with the need to bring spending under control, but would no doubt wish to find a saving of £500 million a year from somewhere else. The question is, exactly where from? I have not yet heard any clear alternative for finding this kind of saving. That is why it would be quite wrong for the Government to backtrack on this measure now.
Another reason for this reform is that we believe that it will result in more efficient use of social housing stock over time, which in turn should help us to tackle some of the overcrowding. At the very least I hope that noble Lords agree that we need to do everything we can to improve the way that we use our housing stock. Doing nothing is not an option, not when we are paying for something approaching one million extra bedrooms for those affected by this measure and when there are more than a quarter of a million households living in overcrowded conditions in the social rented sector in England. In 2010 we inherited the highest level of overcrowding in the social rented sector since the published data began in 1993, with 7.1% of those households in England living in overcrowded accommodation. That is a fact we cannot ignore.
The noble Lord, Lord McKenzie, has asserted that this measure will risk costing more than it will save. Even if some people move—the Housing Futures Network research suggests that around 25% of people might move—that does not mean that we will not save money.
Where a claimant moves to smaller accommodation, it is important to consider the bigger picture rather than to look at just that one household. Even where a claimant moves into the private rented sector, that frees up accommodation in the social rented sector that can be relet to other families needing that accommodation. The relet may still generate housing benefit savings if, for example, the property is offered to claimants who would otherwise be renting privately or who were currently placed in more expensive temporary accommodation. I beg to move.
Amendment to the Motion
Lord McKenzie of Luton
As an amendment to the above Motion, at end to insert “but this House regrets that the measures under the draft Regulations to introduce size criteria restrictions to the calculation of housing benefit for working age claimants living in the social rented sector are blunt and take no account of whether alternative accommodation is available; will result in cuts to the incomes of some of the poorest in society; fail to provide sufficient safeguards to protect the most vulnerable claimants and ensure that they are not pushed into poverty and homelessness; will not achieve their aim of tackling under-occupancy; and will risk costing more than they will save.”
Lord McKenzie of Luton
My Lords, for many people who are out of work, disabled or on low incomes, housing benefit is a crucial safety net and a vital support to help pay the bills at the end of the month. I am moving this Motion of Regret at the measures to introduce size criteria restrictions in the calculation of housing benefit for working-age claimants living in the social rented sector because we see this as a very important issue.
It is but one of the changes to housing support introduced by the coalition which overall will result in around 2 million households receiving lower benefits. The National Audit Office tabulates the range of losses as running on average from £5 a week for those affected by the CPI uprating of local housing allowance to £91 a week for those affected by the overall benefit cap. The size criteria restrictions—called the bedroom tax by the noble Lord, Lord Best—are estimated by the DWP to affect 660,000 claimants with an average weekly loss of £14. Most underoccupy, as defined, by just one bedroom with the average weekly benefit loss being £12. Half of those affected will lose between £10 and £15 per week. Of those affected, 390,000 will be local authority tenants and 270,000 will be housing association tenants. Alarmingly, 420,000 of the households contain a family member with a disability. Noble Lords will recall the extensive and intense debates on this issue and the strong views expressed by your Lordships’ House in opposing these measures. The Minister referred to them a moment ago.
The overriding issue is fairness. The arguments have not changed and will not go away. Hundreds of thousands of tenants have been penalised for the circumstances in which they find themselves, with no ready means, for most of them, to mitigate what is perceived to be their alleged offence. Of course we recognise the need to deal with the deficit, but it is who you choose to bear the burden that is at issue here. In an era when we are producing tax cuts for millionaires, we are asking 660,000 of the poorest people in our country to bear a cut of £14 a week. Most people deemed to underoccupy will not have a smaller alternative property to which they can move. All housing benefit claimants of working age considered to have spare bedrooms will see their benefit cut by 14% for one extra bedroom and 25% for two or more extra bedrooms. The reality is that this is not a serious attempt to address underoccupancy but is about cutting people’s benefit.
Of course underoccupancy must be addressed. We agree with the Minister on that. Many councils have imaginative schemes to do so for the elderly, who are not affected by these regulations, as well as for working-age tenants. The DWP’s own impact assessment is clear that there is a mismatch between household size and the availability of suitable houses in the social sector for underoccupying claimants to downsize to. The NAO’s report reached the same conclusion, noting that there is a mismatch between need and availability. Modelling by the National Housing Federation found that while 180,000 social tenants in England are underoccupying two-bedroom houses, only 85,000 one-bedroom social homes became available for letting in 2011-12. It concludes that the lack of mobility in the sector is not a product of tenants needlessly underoccupying larger homes but rather of the logjam created by a national shortage of affordable homes.
What choices do tenants have if they are to avoid the benefit hit? The Government say that they can make up the shortfall by using their other income or their savings, which is the same argument we heard in relation to the benefit cap. Is this really living in the real world? What level of savings do the Government think these families may have? An alternative is that tenants can move into work or work longer hours. This is notwithstanding that many are not, under the stringent rules that apply to conditionality, required to be available for or seeking work. For those who are, it presupposes that they are not already trying to, that the current claimant obligations are somehow deficient and that the level of support available via the work programme is not helping them. As for taking in a lodger, for many, this will be an unworkable and unreasonable option putting the safety and privacy of the family at risk.
The alternative is to take the hit or move to accommodation that better suits the current size of the household, assuming that it is a stable size. But where? It is not very likely in the social rented sector, where there is not only a shortage of supply but, as has been identified, a dearth of one and two-bedroom properties. A move to the private rented sector would inevitably lead to higher rents and higher benefits. There would be no certainty of that being cancelled out, as I think the Minister suggested, by a move in the opposite direction to a cheaper area, but given the allocation policies of local authorities, that is likely to be only in the private rented sector.
The Housing Futures Network found that 50% of claimants would not be likely to move home when they were faced with a cut. Over one-third considered that they would be likely to run into arrears, so we have a certain recipe for driving the poor into greater poverty and debt. We have seen the now-familiar tactic of the bit extra in the discretionary housing payment fund each year, albeit funded by bumping up the percentage reductions for underoccupancy. While this will undoubtedly give some help where the properties of disabled claimants have been subject to significant adaptations and to foster carers between placements, it should be compared with the annual cut of half a billion pounds that the Treasury is seeking.
A review of the consequences of this is right, but it will not help with the misery that these provisions will cause in the mean time. The discretionary housing payment fund has a fixed budget and is having to cover an increasing range of circumstances, as we discussed on the benefit cap when my noble friend Lady Lister referred to it as “the loaves and fishes” concept. We challenge whether it is an appropriate or sufficient method to deal with disability issues. The DWP’s equality impact assessment shows the disproportionate effect the size criteria measure will have on the 420,000 sick and disabled tenants. An additional £25 million of discretionary housing payment for tenants whose homes have been adapted will undoubtedly be challenged as being insufficient mitigation, and rightly so. It is not a reliable safeguard against rent arrears, evictions and homelessness for chronically sick and disabled tenants.
True to form, the Government seek to offer some justification for this approach by juxtaposition with some other group, in this case, those in the private rented sector. As we have heard, the argument goes that private rented sector claimants receive housing benefit for accommodation based on the reasonable needs of their household, while in the social rented sector, it is based on the accommodation that they occupy. This is not comparing like with like. The nature of the tenancies is different and, in any event, when tenants are first placed in accommodation in the social rented sector, it would typically have regard to the size of the family. The reality is that household composition and need can change over time. The changes may not be permanent. Families grow with children and reduce as children fly the nest. The logic of underoccupation provision is that each change should drive a change of home; what a nonsense. It is a back-door way of undermining security of tenure in the social rented sector.
The National Housing Federation is deeply concerned that no flexibility has been given to social rented sector landlords to define whether a property is underoccupied. For example, if a home has a double bedroom and two box rooms, according to the regulations it would be underoccupied if a couple and two children were living in it, despite the reality being that the home is fully used. If the landlord reclassifies the property as a two-bedroom unit, it would lose money, which simply does not seem right. This is just another anomaly of the system.
This is a grotesque experiment in behavioural economics. The department has no idea how tenants will react, and the Government do not seem to care. Indeed, they hope that tenants will sit tight and take the hit because that way the Treasury maximises its saving. It is a callous piece of public policy that will put people into debt, drive increased homelessness and fracture communities, and we should have none of it. I beg to move.
Baroness Turner of Camden
My Lords, I rise to support my noble friend in his amendment. I agree with him fully that the new regulations before us are unfair to vulnerable people. They are being introduced at a time of a housing crisis that is particularly acute in places such as London. The situation in London is that rents are too high and wages are too low. The right to buy was fine for some, but it reduced the number of social homes available for rent. The social homes should have been replaced but, of course, that did not happen. Now local authorities are already looking to acquire premises for alternative social housing, often on sites very many miles away from where the individuals concerned are actually living and where they have some sort of support. This would be particularly difficult for people who are disabled, for disabled people require the support services that are often where they happen to live. It is quite unfair that they should be placed in the position of having to worry about future housing.
As far as London is concerned, my own neighbourhood has a particularly acute situation. When I first moved to West Hampstead, the area in which I now live, it adjoined Kilburn and was never regarded as a very posh area. Unfortunately that is no longer the case. The rents now being charged are absolutely enormous, and I do not understand how ordinary working people can be expected to afford them. It is quite common for large houses to be converted into one-bedroom flats, and the landlords charge as much as £500 a week for a one-bedroom flat. That is the kind of area and range of accommodation that is available in the area, and I do not see how working people on very low incomes can possibly afford it.
As for underoccupancy, quite frankly domestic circumstances for people change. Children move away; sometimes, nowadays, they move back because they cannot find anywhere to live. There are people who require support because they are ill. Sometimes they die. Domestically the whole situation changes for people, and it is unfortunate that they should be placed in the position of worrying, every time there is a domestic change, about what is going to happen to their living accommodation. It really is quite unsatisfactory.
As for general housing, I well remember what the situation was like at the end of the war—I am old enough to remember that. There was an acute social housing crisis because a lot of London had been bombed and there was no accommodation available. So what did the then Labour Government and the subsequent Governments do at that time? They had a very bold policy of social housing that was radically put up; we used to call these houses prefabs, and some of them are still in existence. There was a set of regulations that involved rent tribunals. In those days, if you were overcharged, you could go to a rent tribunal and your rent would be reduced. That meant that you could go on living in your accommodation. If you were concerned about it, the rent tribunal had the final say about what the rent should be. That meant that your rent had some relationship to the general level of wages, and therefore people were able to go on living in their homes because they had legislation to support them.
The Lord Bishop of Norwich
My Lords, there is a logic, if a rather cold one, in suggesting that those on housing benefit should not be supported from the public purse if they live in homes larger than they need. However, as we have already heard, it is the lack of availability of alternative accommodation in reasonable proximity that may make this proposal so socially disruptive and prompts me to support this amendment.
If, as we are told, 660,000 households will be affected, a great many people might be on the move. A couple in middle life whose children have left home would be entitled to only one bedroom, although they may have lived in their rented home for many years. There would be no room for an adult child to return after a failed relationship, which then creates a greater burden on much-needed housing. It would be tough on those in their 50s in this situation when their pensioner neighbours would be excluded from the reach of this regulation. Households such as this will be given a stark choice: move to a smaller home or take a substantial cut in housing benefit—on average, £14 a week. Housing associations are telling us that even if people want to move, there is not sufficient housing stock of the right size to enable them to do so. In practice, tenants will mostly have no choice but to remain in their own home and cover the shortfall out of their other income; this on top of reductions in council tax benefit and rising fuel prices.
A significant proportion of those who will be affected have become single because of the breakdown of relationships and, in many cases, the removal of their children elsewhere. They want to see them regularly. What looks like unoccupied space in the house is very important to them. Many single people rely on the local social networks that they have built over the years. That is where they find such stability as they can. A job, even a poorly paid, part-time one, may be lost and not replaced. Depression may set in. Alcohol or drug abuse may compensate for loneliness. Social disruption has economic consequences. While the housing budget may reduce, other budgets may rise. Worst of all, those affected may think that they are not treated as being of much value in our society. A loss of human dignity has a great many social and spiritual consequences. We save a bit of money, perhaps, but we are a lot worse off in all sorts of other ways.
What concerns me is that that will not be simply an urban problem. In rural areas the possibilities of alternative accommodation are even scarcer, the disruption greater, and the harm to diverse social networks larger. The Christian charity Housing Justice estimates that between 25% and 30% of rural social housing tenants will be affected.
One reason why rural deprivation is so hidden in our small villages, hamlets and settlements is that they often have the very wealthy, the vulnerable and those living on benefits living in close proximity, even in small numbers. That is one of the reasons why rural England is comparatively socially healthy. People in rural areas often cope with smaller incomes than their urban counterparts, while the cost of rural living is actually higher. They live more simply, even if their accommodation is a bit larger than seems logical to someone devising a system in a government department. It would be a tragedy to undermine all this, and I believe that the potential cost to our social fabric, especially in rural areas, could be very large indeed.
Baroness Lister of Burtersett
My Lords, we have heard some powerful speeches in support of the amendment. I take us back to the debate in Grand Committee on 15 October and what the Minister had to say:
“A lot of people will decide that they will have enough money or that they will be able to take in a lodger or take extra work. Those are the kind of decisions that we expect to happen in the marketplace”.—[Official Report, 15/10/12; col. GC 485.]
How many of us think of our homes as the marketplace or the decisions that we make around our homes as market decisions? We are not just talking about bricks and mortar; we are talking about the homes that people live in and the local roots that nourish them. The Minister made it sound so simple, saying that people will decide whether they have “enough money”; we are talking by definition about people on a low income, as my noble friend Lord McKenzie said. Or, the Minister says, they can “take in a lodger”; my noble friend has explained why that is not always appropriate. Or, the Minister says, they can find “extra work”; that is not so easy, either to get a job or increase one’s hours.
According to the National Audit Office report, one-third of households surveyed by Housing Future expect to fall into arrears as a result of this policy. According to Citizens Advice, other debts are likely to increase because, initially at least, people will try to prioritise their rent. Yet the Minister made no mention of debt or arrears as a likely solution, if that is a solution, even though debt is identified by the Government as a primary cause of poverty. One thing that we discussed in Grand Committee was the disproportionate impact of this policy on disabled people. There is evidence about the particular effects on disabled people of debt, and how debt can itself create mental health problems.
I come back to a point that I made earlier, and I have made before. I know that I probably sound like a broken record, but I refer to the impact on social networks when people move as a result of this policy—to people’s lives and to their being able to find work. Often lone mothers can use those networks for childcare, and so forth. The Minister mentioned the evaluation that will take place, which I welcome. In our last gasp, when we were discussing the then Welfare Reform Bill and this provision, the Minister committed that the monitoring would include the impact on social networks. In every subsequent reference that I have seen to that monitoring, I have not seen a mention of that, so I would be very grateful if the Minister could recommit this evening that that monitoring will include the impact on social networks.
On discretionary housing payments, I will not labour the loaves and fishes point any further, but I would instead like to quote from the National Audit Office report that came out last week, which says:
“It is not clear how the current level of funding for Discretionary Housing Payments has been determined or whether it is likely to be sufficient for local authorities in tackling the impacts of reforms. The £390 million of funding over the Spending Review period represents around six per cent of the total £6.4 billion savings expected from Housing Benefit reforms during this period. This works out at around £200 per household affected … There is also no established process for reviewing the level of funding for Discretionary Housing Payments over time. For example there is no mechanism to assess whether the overall funding amount should change to reflect higher claimant numbers. Uncertainty about the basis for future funding in part reflects the fact that the Department is still reviewing how to provide support for housing as a result of broader welfare reforms … Monitoring of how payments are made by local authorities would improve the Department’s understanding of local need. At the moment monitoring is limited”.
I would be grateful if the Minister could tell your Lordships’ House what the department’s response is to those observations from the National Audit Office.
Letters have already been going out to people who are likely to be affected by this policy, and it is striking fear into their hearts. It is a mean-minded policy that shows scant concern for the lives of those affected—and, as the right reverend Prelate put it, shows no concern for the dignity of those affected. Human dignity is at the heart of human rights.
Lord Best
My Lords, the noble Lord, Lord McKenzie, attributes the phrase “bedroom tax” to me, so I take responsibility for this—because it is a tax. It is not about trying to ensure that people are allocated to the property that best suits their needs; it is about raising money and reducing the deficit. We all understand about deficit reduction. Where we differ on this is whether people on the lowest incomes should be contributing to that deficit reduction with what is in effect a tax. It is a payment, which the tenant makes out of their benefits—out of the other benefits they receive, such as disability living allowance, income support or child benefits. It goes to government; that is where the payment ends up, and it reduces the deficit. That is a perfectly valid objective, but I and others maintain that it should not be at the expense of people who are living on the very lowest incomes at present.
The noble Baroness, Lady Turner, attributed the underlying problem to the shortage of accommodation, which then means that rents are much higher than one would hope and expect that they should be. It is not the fault of the occupier that they pay a large rent. We say that it is a disgrace that people are paying these enormous rents, but it is not that people wish to pay large sums in rent; that is what the market has determined. It is very different in London, as the noble Baroness pointed out, as it is in so many other places.
I am collecting examples of people who have written to me with their own cases. One after another, they are cases in which any reasonable person would say, “In that particular case, it seems very unfair for people to have to pay a new tax that they didn’t pay before—in that case, I agree that there should not be this tax to be paid”. One such case I can cite comes from the diocese of the right reverend Prelate the Bishop of Norwich. I agreed very much with his words. I apologise to the Minister for repeating the content of an e-mail that I mentioned in Grand Committee, but it is such a typical case. The lady has lived 23 years in her council house and now it contains herself and her husband. It has three bedrooms. They have actually done quite a bit of work to the House; the garden is immaculate—this is their home. But it is a tax, and they will face a bedroom tax of £25 a week unless they can move out. They have been told that there is a place in another Norfolk town. It is 16 miles from where they live, but there will be a place there in due course. It is not available at the moment, but in due course they will be able to get a one-bedroom flat. The absolute last thing that they want to do is to leave the family home where they have been for 23 years, where their children still come back at Christmas and on other occasions, and where she has a base to look after her mother in the village. It will cost the social services an arm and a leg to have to send in carers to look after mum. At the moment she goes in three times a day: once in the morning, briefly at lunchtime, and once in the evening. She will not be there to do that once she has moved away to the town. This is all ridiculous, and anyone would say, “Look, in that case don’t charge them the tax. Leave them where they are”. Anybody can see that that is the sensible thing to do. However, it will be extremely difficult to make those special cases, and to find the resource that will bridge the gap in their rent in those cases.
Lord Smith of Leigh
My Lords, I rise to support my noble friend’s amendments, and express my concern about the impact of this bedroom tax. Before I do so, I declare my interest as leader of Wigan council. I will provide some hard evidence from Wigan about the impact that this would have in Wigan. In terms of council properties in Wigan, some 4,708 properties will be subject to the potential for a bedroom tax: 3,600 of the one-bedroom and over, and just over a thousand of the two-bedroom. In the private sector a further 300 houses will be affected. The financial implications, if the bedroom tax was paid on council properties, would be £2.9 million—an average of between £9 and £29 a week, depending on the property, and a further £250,000 in the private sector.
In introducing the measure, the Minister raised two factors which he said supported this. First, it would help to reduce the cost of the housing benefit budget, and secondly, it would tackle overcrowding. He could have added a third, which he sometimes uses: encouraging return to work. I could not deny those objectives, which many of us would share, but we are saying that this tax will not achieve any of those objectives. Cost reduction will only occur, of course, if tenants do not move, and pay the costs. If they move—and the evidence is that some will do so—different things will happen. I can give the example of a current case in Wigan. A mother aged 51 shares a three-bedroom property with her 26 year-old son. If they choose to move into the private sector, as they have indicated they want to do, they will look for separate properties: the mother for a one-bedroomed flat, and the son probably for a bedsit. In Wigan, the average three-bedroomed council house rent is £74 a week; for a one-bedroomed private sector property it would be £89 a week; and for a bedsit probably a further £75. Rather than saving housing benefit, therefore, the Government would be paying £5,406 more for that particular family, if they choose.
The second issue is about overcrowding. In a letter to one of my local MPs, the Minister said,
“The Government only expect a minority of claimants affected would actually seek to move”.
If that is the case—if very few people move—then how will that help overcrowding? If they are still in the same place, then it will not help overcrowding. The message from my noble friend Lady Turner of Camden was very powerful. She explained the London housing market, but it is not like that in Wigan. The problem is that people will not move because of the lack of suitable properties to move into. An insufficient number of affordable houses has been built in this country by a succession of Governments. We are now beginning to pay the price for that. The current waiting list for a one-bedroom or two-bedroom property in Wigan is five years, so people cannot move into these properties even if they wanted to. We have no shortage of three-bedroom properties in Wigan. You can move into a three-bedroom property more or less straight away. Therefore, there is a geographical imbalance in housing markets and the flat rate bedroom tax will not work. According to the Department for Work and Pensions’ own figures, 42% of families in the north-west of England will be liable for the bedroom tax but only 22% in London and the south-east, so clearly the measure is having a bigger impact on the markets that do not need it.
The third issue is about seeking employment. There are at least four jobseekers for every vacancy in Wigan, and that probably understates the number of people looking for work, so the people we are discussing will be in a very crowded job market. The consequences of this measure are not what the Government think they will be; there will be unintended consequences. Noble Lords have mentioned the impact on rent arrears. I believe the Cambridge study claims that 42% of people may fall into rent arrears. In Wigan that would mean just under 2,000 families getting into arrears. Substantial arrears would lead to a commencement of the legal process. Whether we like it or not, there will be evictions, which cost around £6,000 each. These people will probably largely move out of the public sector into the private rented sector and the cost of housing benefit will rise.
Noble Lords have mentioned the impact that the measure would have on incomes. By definition, people who receive housing benefit are on low incomes. Therefore, if the bedroom tax is introduced on top of all the other things that are to be introduced, poverty will inevitably escalate. As I said when we discussed the Local Government Finance Bill, the likes of Wonga.com and all the other payday lenders will rub their hands at the thought of more and more clients coming their way, seeking to get themselves out of a crisis only to get into a much deeper one. As the right reverend Prelate the Bishop of Norwich indicated, we want families to stay together and fathers to take responsibility for their children, but this tax negates the Government’s claim to be a family-friendly Government.
I am not sure whether people in Wigan would take in lodgers but I certainly remember that when I joined the council some time ago one of the big issues we had to deal with was that of houses in multiple occupation, such as terraced properties that were taken over by a landlord who let every available space to different tenants. Those properties had inadequate kitchen and bathroom facilities and constituted fire and health hazards. They were terrible and the council largely got rid of them. However, I can see these types of properties appearing again in the current situation because people will not be able to afford anything better.
During debates on the Local Government Finance Bill we discussed the single person discount which reduces the amount of council tax payable by individuals living alone. Clearly, that constitutes underoccupation as regards most properties in Britain. It is somewhat ironic that we are keeping the single person discount as a council tax benefit but if you are renting a council house such underoccupation will result in you being charged the bedroom tax. This is an unsafe tax. As I say, I do not disagree with the Government’s objectives but I do not think that this tax will achieve them. I think we will find that it leads to an increase in housing benefit rather than a reduction and increases poverty in this country.
Lord German
My Lords, I apologise to your Lordships’ House for missing the first few minutes of this debate. I was involved in another debate in the Moses Room at the time and it was difficult to shift sufficiently speedily between that Room and the Chamber.
I can well understand why many noble Lords want to reprise our lengthy debates on the Welfare Reform Bill. I also understand why people still have major concerns in this area. I do not think that any noble Lord present would say that these changes will be easy to accommodate. Difficult decisions will have to be made. As we all know, the changes are intended to relieve some of the strain on the housing benefit budget. However, the only fair element is that the benefit we are discussing will be brought into line with the local housing allowance.
Some noble Lords share my concern about the future of housebuilding. As the noble Lord, Lord Smith of Leigh, said, the previous Government did not meet housing demand. I only hope that the present Government will be able to build extremely quickly the number of houses that are needed to cope with society’s demand for them. We await action as regards achieving the number of houses that are needed.
There are two major concerns about the way these regulations will be implemented. The first is the ability of the housing stock to adapt and provide accommodation of the size needed in each area in order to allow those who wish to move to a different sized property to do so. The second issue relates to the changes affecting specific groups of people. I would like to ask some questions in relation to both those issues. I preface my remarks with mention of behavioural change. I have heard it said frequently in your Lordships’ House and in Committee that people’s behaviour in this area is of the worst kind. However, people do not always behave in a way that leads to the worst outcome for them. Some people behave differently.
There are two key issues I would like to ask questions about. My first question to my noble friend is: what assessment has the Department for Work and Pensions made, given the contact it now has had with people who will be affected by this measure, about the likely outcomes and the directions people will take as a result of what is happening? There undoubtedly will be, of course, some people who will wish to move. The issue then is the ability of the housing stock to be adapted very swiftly. Can my noble friend tell us what discussions there have been with housing associations, local authorities and private landlords to see whether adaptations can be made for people to move, probably into smaller properties, where house building has moved onto larger properties? Where are we in readiness for the sort of behavioural changes? I hope my noble friend the Minister can tell us.
I also wanted to ask about the £30 million of DHP—the £25 million for adapted properties and the £5 million for foster carers. This was an issue we pursued at some length during the course of the passage of the Welfare Reform Act. This was a very welcome area but I would like to really understand the Government’s dynamic on adapted properties. Will £25 million be provided over a longer period and what assessment has been made of the need for that length of time? Will £25 million be sufficient to cope with what it is thought will be the behavioural arrangements for people who live in adapted property where it would make no sense whatever for them to be moved on?
The second area I would like to investigate is rurality and rural housing, mentioned by the right reverend Prelate the Bishop of Norwich. Having spent some considerable time as an elected Member trying to get more social housing into rural communities, I do not underestimate the difficulties there have been in building social housing in rural communities. It is very much more difficult if people want to move to have to move away from a rural community into a quite different environment altogether. What estimate has my noble friend the Minister made of the demand and the pressures there will be on rural housing? Has he taken into account the community shift that would have to take place given the shortage of accommodation in rural areas and often the very high price of private sector rented accommodation there?
I also want to examine the issue of redesignation of properties. This is also one of the approaches that some housing associations are looking at. For example is a bedroom really a study or is a partition wall not really a partition wall? Have there been any discussions with housing associations and social landlords about the role and about designation, and about who has the authority to redesignate housing in this area? There is undoubtedly some scope for action for here. There is no national register of what is a room size. It would very difficult and probably a bureaucratic nightmare to try to create such a reference document. However, is it possible to look at the way in which housing associations can define their property differently where the circumstances provide and who would have the authority to undertake the redesignation, which may take some of the pressure off the ability to find appropriate housing? I do not envy the job of the Government and my noble friend the Minister in undertaking this obviously difficult task and I would be grateful if he could give me some answers to those questions.
Lord Freud
My Lords, this has been a powerful debate and I will do my best to answer the questions. We dealt with an enormous number of questions in Grand Committee and so, rather than me going on for a very long time, I would like to suggest that I confine my responses to the new issues that I have not already dealt with and then leave my responses on the other matters that are on the record in Hansard.
The noble Lord, Lord McKenzie, referred to the NAO report and to 2 million households receiving lower benefits. That assumes that claimants will not adjust their behaviour by doing the things that we are hoping they will do, such as taking on work, moving to more affordable or more appropriate accommodation, and so on. We are beginning to see evidence from local housing associations that with the change from 50% to 30% people are changing their behaviour.
As regards the point about the pressure on the supply of affordable housing, the early signs from the LHA are that there is no discernable impact on the levels of homelessness, which have remained steady. The housing benefit claims from people renting in the private rented sector are increasing, which suggests that people are able to find affordable accommodation.
The noble Baroness, Lady Lister, referred to the NAO report and to its observations on the monitoring of discretionary housing payments. We are currently considering the recommendations in the report and will look at how feasible it is to monitor the way that DHPs are used.
I have dealt with the point raised by the noble Lords, Lord McKenzie and Lord Smith, about movements. There are movements of people from underoccupied homes, presumably to smaller homes, which will allow larger families, if they are being supported in the private sector, to have cheaper accommodation and gain from making that exchange.
As regards the issue of room sizes, raised by the noble Lords, Lord McKenzie and Lord Best, and whether there should be an adjustment for single bedrooms, we wanted to keep the system simple and did not want to introduce something that might require landlords to go around measuring rooms. Indeed, the stakeholders, including the National Housing Federation, have welcomed that. It is therefore up to landlords and tenants to decide between them whether a property is appropriate for their needs.
When it comes to designation of what exactly constitutes a property, it is up to landlords to take that decision. They are unlikely to do that on a wholesale basis, but there will be individual properties where it makes sense for landlords to redesignate them as not being appropriate. There may be an individual property for which it is straightforward to do that. To be honest, we are not expecting there to be a massive effect, but there may be some instances of that.
The noble Baroness, Lady Turner, asked about temporary changes of circumstances. There are housing benefit rules to protect households from either temporary absence, such as going into hospital or being on remand, or where the death of a member of the household would result in the reduction of housing benefit. For example, housing benefit provides up to 12 months’ protection from rent restrictions if there is a bereavement in the family.
The right reverend Prelate the Bishop of Norwich asked about non-resident children. Where the tenant has non-resident children, housing benefit may already be paying for a room for the child or children in the place where they usually reside. It would be double provision potentially to fund an additional room in both parents’ properties.
The issue of rural impact was raised by the right reverend Prelate and my noble friend Lord German. The use of the percentage reduction, rather than a flat rate, means that the impact, because it is proportionate, is likely to be lower because rents are likely to be less in rural areas. On the specific question asked by my noble friend Lord German on the approximate amounts, roughly 10% of the impact is likely to be seen in rural areas.
As to my noble friend’s question on what evidence we have received so far, the responses by local authorities and housing associations indicate that there is a lot of activity—whether you are talking about the West Midlands making best use of a stock partnership that brings together seven local authorities and 11 housing associations in finding people the right number of bedrooms, speed dating in the London Borough of Southwark, or the Stockport homes initiative to look for joint tenancies. Indeed, Wigan Council, the council of the noble Lord, Lord Smith of Leigh, and Wigan CAB have developed Wigan Housing Solutions, which acts as a social lettings agency and is a natural progression from the existing bond-guarantee scheme. It is a bridge between the private and social sectors, with Wigan Housing Solutions helping to relieve pressure on the housing waiting list. There is a lot of activity.
Lord McKenzie of Luton
My Lords, I start by thanking all noble Lords who spoke in the debate, particularly those who spoke in support of my amendment. I think that that was all noble Lords apart from—not surprisingly—the Minister, with perhaps a degree of equivocation from his noble friend on the LibDem Benches.
My noble friend Lady Turner spoke movingly about how the measures were unfair to vulnerable people—we heard about the London experience in particular—and about the impact of the right to buy scheme, about which we all too readily forget. The right reverend Prelate the Bishop of Norwich spoke about the changes that take place in family groups over time. He and a number of other noble Lords acknowledged that there is insufficient housing stock. He spoke in particular about the rural dimension and the cost to the social fabric of disrupting the current arrangements.
My noble friend Lady Lister, as ever, spoke movingly, in particular on the point that homes should not be treated as a marketplace; that is not how we should view things. The impact of social networks was a strong theme that she rightly continues to pursue.
My noble friend Lord Smith told us about his practical experience of how these things are playing out in the area for which he has responsibility; about the problems arising from the lack of suitable alternative accommodation; and about the impact on rent arrears. He also gave us some history about HMOs and the drive to get rid of them in the past.
The noble Lord, Lord Best, confirmed our view that this is about raising money, not tackling underoccupation. The noble Lord made the point that it is not the fault of occupiers that they have to pay higher rents; it is the fault of the market. He spoke in particular about the significance of all this to housing associations, which effectively will have to collect the tax, about what it means to their finances, and about how potentially it could restrict the role that they can play and have played in the big society.
The noble Lord, Lord Freud, talked about the NAO figures and said that they did not assume behavioural change. I accept that, but it is exactly the basis on which the Government have costed the savings that they hope to achieve. He said that homelessness appeared to be steady under the current statistics. The reality is that the big impact of the changes that are coming is just about to start. The underoccupation rule will come into effect in April, along with the benefit cap. These will be the big drivers of change and concern, driving people into debt and homelessness. That is yet to come—a point made by the noble Lord, Lord Best.
The Minister said that he was unhappy to see the amendment before us tonight. I certainly do not propose to press it, because it would not change anything. The points that noble Lords raised are already on the record, or will be as a result of this debate. I do not promise the noble Lord that he has seen the last of this. We feel very strongly that the contributions in the Chamber tonight focused predominantly on the problems that the legislation will create. We are getting closer to them as the regulations come towards implementation. I have no doubt that we will have to return to the matter again and again in the hope that we can persuade the Government to change course. The circumstances that will arise when the regulations come into effect will help the Government realise how draconian, unfair and unjust their provisions are. In the mean time, I beg leave to withdraw the amendment.
Financial Services Bill
(12 years ago)
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Lord Eatwell
Lord Eatwell
My Lords, noble Lords will notice that this group includes Amendments 6M and 6Q. I apologise to the House for not moving those amendments at the appropriate time, but as noble Lords may recall, there was considerable confusion between the Deputy Chairman and the clerks and everyone here. The noble Lord, Lord Sassoon, was not confused. He never is. But in the confusion I inadvertently failed to move these amendments. I also apologise that at that time I failed to support the noble Baroness, Lady Noakes, when she presented her arguments for Amendment 7, which I wholeheartedly support, as indicated by the fact that I added my name to hers. With the leave of the House, I will proceed with the remaining amendments in group 19, namely Amendments 7A, 7B and 7C.
The purpose of this group of amendments is to ensure that there is regular consultation between the Treasury and the FPC over the FPC’s directions and its recommendations. Leaving aside—since the time has passed—the question of directions, even though they are more important, Amendments 7A, 7B and 7C serve to emphasise the interest that we all have in requiring that regular consultation takes place. The idea is simply that in making a recommendation the FPC would have a discussion with the Treasury about that to ensure that both sides are, if you like, singing from the same hymn sheet.
This is part of the endeavour that we have on this side of the House to ensure that the whole development of the financial stability analysis, the financial stability strategy and the financial stability actions is co-ordinated effectively between the FPC and the Bank as a whole—whether Bank means court or Bank or whatever—and the Treasury. I beg to move.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, this group of amendments seeks to require the FPC to consult with the Treasury before issuing a recommendation, directing the PRA or FCA to take action or revoking an existing direction. I am certain that not only are these amendments unnecessary, they would damage the independence of the FPC.
As I am sure noble Lords are aware, the Bill provides for a non-voting representative of the Treasury to be a member of the FPC. This Treasury representative will be able to ensure that the views of the Treasury are available to the committee if required. This renders these amendments unnecessary.
Let me explain why, more seriously, I feel that the amendments could be harmful to the work of the FPC. The Government have drafted the Bill so that the FPC will be housed within the independent Bank of England. It is paramount that macroprudential policy decisions are insulated from political considerations. The purpose of the FPC is to “take the punchbowl away” when the party is getting too raucous, something that politicians of any affiliation may be reluctant to do.
By insulating the decisions of the FPC from political considerations, it will be much easier for the committee to be a credible and effective policy-making body. The amendments would risk that credibility by requiring the FPC to consult the Treasury before it makes any policy decision. For that combination of reasons, I ask the noble Lord to withdraw his amendment.
Lord Eatwell
My Lords, the noble Lord has left me somewhat puzzled with his final point. First, as he is well aware, consultation does not necessarily mean acceptance of any argument or the idea that there should be any direct influence of the Treasury on the FPC. All we are trying to do is to ensure that there is effective communication. As I noted earlier, the Minister has in the past raised the fact that communication between the Bank and the Treasury has been very poor. There are other issues about the lack of communication which will be raised on Report.
The Minister says that somehow consultation between the Treasury and the FPC would endanger the credibility of the FPC and of the macroprudential strategy. Yet earlier it was argued that under the common law, as he put it, the Treasury may at any time make recommendations on the provisions of the Bank’s financial strategy. Is the Treasury involved or not? Surely recommendations and discussion are very valuable at all times, but that does not in any way limit independence. Perhaps the failure of the Bank and the Treasury to communicate, which the Minister has referred to in the past, arose from a mistaken idea that independence means non-communication. It does not; communication is important to the development of coherent policy. If he is saying that consultation would undermine independence, this is a very serious matter for an area of macroeconomic policy with which the financial stability strategy and the Financial Policy Committee, as its agent, will be intimately involved.
I find the Minister’s remarks very disturbing indeed. They suggest a fundamental misunderstanding of the way in which we can take forward constructive developments in this novel and important area of economic policy. It is a matter to which we may have to return but for the moment I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, this amendment refers to an oddity in the drafting of new Section 9T(1)(a). The Bill requires the Financial Policy Committee to review each direction that it makes over the relevant period, which is 12 months, other than,
“a direction revoked before the end of the review period”.
I do not understand this business about leaving out directions revoked before the end of the review period. Suppose the direction has been a great success but was enforced for only 11 months. Or suppose the direction was a great failure but lasted for only 11 months. Should not these directions be reviewed? Can lessons not be drawn from them just as much as from directions which are in force for 12 months? Why would you have a direction that has been revoked from which we are not allowed to draw lessons but a direction that has been kept in place from which we are? This is too limiting in a novel area of economic policy from which we should seek to get all the information and draw as many lessons as we possibly can, whether or not a direction has been revoked within the relevant period. I beg to move.
Baroness Noakes
My Lords, what the noble Lord, Lord Eatwell, has said is entirely sensible. I cannot see the distinction between those directions which have been made and continue in force and those which have been made and revoked. This is about public communication, the directions being made and their effect. The information that we gain from a revocation must be at least as good as from the making of a direction.
Lord Sassoon
My Lords, the amendment reflects a slight misunderstanding of the purpose of the reviews that we are talking about in new Section 9T of the Bank of England Act, as inserted by Clause 4. The purpose of these reviews centres around live actions and requiring the FPC regularly to look again at all live actions—in other words, at the directions and recommendations that still have effect—and to review whether or not the action is still needed. That is a rather different matter from the admittedly important question of reviewing past actions and learning lessons, which is not the subject of the clause.
The idea behind the new section is to ensure that FPC actions do not remain in place if the circumstances which originally merited them have disappeared or changed substantially. Of course, we would expect the FPC as a matter of course to keep its past actions under review and revoke them once they are no longer needed, but new Section 9T ensures that this will be the case by creating a formal requirement for the FPC to review regularly all of its live directions and recommendations.
Amendment 7D seeks to remove the wording in subsection (1)(a) which provides that the FPC need not review directions that have already been revoked. The provision is appropriate because once a direction has been revoked there is no need for the FPC to review it to determine whether it is still needed; the direction is already defunct. It is as simple as that.
The concern of the noble Lord, Lord Eatwell, lies clearly in the importance of the FPC evaluating the impact of its actions. I can reassure him that mechanisms already exist elsewhere in the clause to address this issue. First, new Section 9S requires the FPC to set out for each of its actions an explanation of its reasons for believing that the action is compatible with its objectives and associated “have regards”, including where practicable an estimate of the costs and benefits of the action. Secondly, subsection (4)(b) of new Section 9W requires the FPC to include in each financial stability report an assessment of how its actions have succeeded in achieving its objectives. Finally, the new oversight committee of the court has an explicit remit to oversee the FPC’s performance and can undertake or commission a more comprehensive review of the FPC’s past actions or approach where appropriate.
I am confident that the FPC’s actions are already subject to extensive mechanisms of oversight and evaluation and, as I said at the outset, that the amendment reflects, perhaps, a slight misunderstanding of what the purpose of the specific provisions in new Section 9T is all about. I hope that on the basis of that explanation the noble Lord will feel able to withdraw his amendment.
Lord Eatwell
My Lords, my immediate reaction is that if that is what the new section meant, why did it not say so? We persistently have a point where there is a lack of clarity in the Bill and, time and again, the noble Lord says, “That is what we said but it is not what we really meant”. It is truly unsatisfactory.
On the areas which he says cover the issues that I raised, proposed new Section 9S specifically refers, I think—although of course it may not mean this—to a prior explanation of specified purposes. It provides for an explanation of why the FPC is doing something, which seems to be a prior requirement, not an assessment of effect.
The Minister is on stronger ground on new Section 9W(4)(b), which refers to whether the functions of the FPC have succeeded, but it refers generally to its functions rather than to the specific issue in new Section 9T, which refers to the very sensitive and important area of directions.
There is another important point. It is quite possible that a direction would be introduced to deal with a particular set of circumstances and revoked because those circumstances have been mitigated, but then reintroduced some time later because the problem reappears. In those circumstances, all this stuff about live actions is irrelevant. We need to learn from both those actions that are contemporaneous and those that may be introduced from time to time to deal with specific circumstances. I really feel that this is a very unsatisfactory approach to the general issue of review.
I will keep talking so that the Minister can get his note and say why I have got it wrong; he has it now. The issue of keeping matters under review should include those matters that only last for a period within the relevant 12 months, as well as those that go forward. Shall I sit down? No, the Minister did not get a good reply in that note. This is an issue that I want people to think about: either the clause is badly drafted and not clear, or the amendment should be considered appropriate. However, for the moment I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
I assure the House that this is going to stop soon. First, I draw attention to a drafting error in the amendment as tabled. It refers to the “Chairman of the PRA”, who is of course the Governor of the Bank of England, rather than the chief executive. The objective of the amendment is to widen the group who meet to assess the importance of the Financial Stability Report, a very important document that has been one of the most interesting and creative documents published by the Bank for some years, not least because of the major intellectual influence of the executive responsible for financial stability. Since the FCA and the PRA are the vehicles through which the FPC—I apologise, everything is just three letters—exercises its influence, it is important that informed discussion and assessment between the Treasury and the Bank should include the chief executives of those two bodies and not simply be between the governor and the Chancellor.
The amendments have the added advantage that, should we have a governor who wishes to delegate responsibilities in order to reduce the excessive load placed on his or her shoulders by this Bill, this would in no way reduce the value of the Bank-Treasury meeting and the quality of the assessment of the Financial Stability Report. It seems enormously valuable to have these two individuals—the chief executives of the FCA and PRA—there, because they are the people who implement the proposals of the Financial Policy Committee and will help in the general assessment of the Financial Stability Report. I beg to move.
Lord Sassoon
So it is chief executive. I am not sure whether I heard chairman or chief executive but it should have said, “Chief Executive of the PRA”.
In responding to Amendment 7E it may help if I explain the purpose of the meetings set out in new Section 9X of the 1998 Act. The success of the new regulatory structure will rely heavily on the relationship between the Treasury and the Bank of England. As has already been noted this evening, one of the major problems leading up to the financial crisis was that the tripartite committee established under the previous Government’s regime did not meet at the principals’ level for a decade. The Chancellor and the governor simply did not meet often enough to discuss financial stability. When the crisis hit—I am sorry the noble Lord, Lord Eatwell, thinks this is an amusing matter. Unfortunately, this was one of the most serious issues when it came to handling the crisis.
Lord Eatwell
I agree with the Minister. It is a terribly serious matter. When he adds the phrase “for a decade”, it is such desperately bad news that some degree of amusement is the only relief to the depression that one feels at the failure of this mechanism.
Lord Sassoon
Believe you me, I was on the standing committee of deputies for three years and I saw it at first hand. There we are—we understand the difficulty. At a personal level and in terms of institutional arrangements and practices, the absence of meetings clearly has a very significant impact when it comes to handling a crisis. However, everything is now different and as it should be. The Chancellor and the governor now meet often. Indeed, under the previous Government, once the crisis hit, of course that was also the case. But it was not always the case, as I have said, and as we understand. Without the requirement in new Section 9X, there would be no guarantee that the regular meetings would happen in the future, once the individuals concerned change and memories of the current crisis have faded.
New Section 9X therefore places a legal requirement on the Chancellor and the governor, in his capacity as chair of both the FPC and the PRA, to meet formally at least twice a year, shortly after the publication of the FPC’s twice-yearly Financial Stability Report. I agree that it is a truly creative, in the best sense of the word—which I am sure the noble Lord, Lord Eatwell, meant—and important document.
Of course, both the Chancellor and the governor may invite others to attend the meeting. For example, the Treasury’s Permanent Secretary or another senior official may attend. The Chancellor’s private secretary may also be in the room. On the Bank’s side, the governor may well choose to invite another deputy governor or the executive director responsible for financial stability to attend the meeting with him. However, I believe the approach taken in the Bill—for the legal requirement to meet to be on the Chancellor and governor only, leaving it up to each attendee to decide if others should be present—is the correct one. The governor will be best placed to decide, based on the content particularly of the Financial Stability Report and the wider financial stability context, which, if any, of his senior executives should attend the meeting.
If the chief executive of the PRA were required by statute to attend every meeting, surely there would be an argument for all the other senior Bank officials who had some responsibility for financial stability to also be added to the list. Equally, if the CEO of the FCA were required by legislation to attend every meeting, would there not be an equal argument for the external members of the FPC also to be required in the room? This could go off in all sorts of directions. A small, personal meeting between the Chancellor and governor could easily turn into a large committee if we were to take that approach.
This is an important opportunity to restate our common objective: to make sure that the principals meet. It should not be necessary to have such a meeting in legislation, but regrettably history has shown that it is. That is the purpose of the requirement, as a backstop for those meetings to happen, but it continues to be the Government’s view that the attendance of others should be left to the discretion of the principals. On the basis of that explanation I again ask the noble Lord to withdraw his amendment.
Lord Eatwell
Before the noble Lord sits down, perhaps we could probe the discretion of the principals a little. Supposing the governor wants to turn up alone and the Chancellor wishes the chief executive of the PRA to attend, would that be possible?
Lord Sassoon
That is not then a question of legislation but a question of common sense and how the parties get on with each other, and I am sure that common sense would prevail. For that sort of circumstance, no amount of legislation is going to get around people behaving sensibly. If we put a particular attendee or two into these meetings the same question arises about others who one side or the other might believe would be sensible to have at a particular meeting given the topics that might be under discussion. We have to rely on the good sense of the principals here.
Lord Eatwell
Yes, well, we hoped that we could rely on the good sense of the principals to run the Financial Stability Committee, but they did not meet for a decade so they were not very sensible, were they?
If I may respond to the noble Lord, I feel that his vision of the committee extending to indefinite size is really excessive. We are identifying the chairman of the Financial Policy Committee, namely the governor, and the two operational figures—the chief executive of the FCA and the chief executive of the PRA—to be in this meeting to assess the financial stability position in the light of the financial stability report. I think that would be valuable. I quite understand that others can be invited in but, as we have seen in the past, these matters are not necessarily as well handled as, in retrospect, we would like. I hope that this matter might be reconsidered in due course, but for the moment I beg leave to withdraw the amendment.
Lord Eatwell
“9ZZA Financial Stability Advisory Panel
(1) There will be a Financial Stability Advisory Panel.
(2) The membership of the Panel will be—
(a) the Deputy Governor for Financial Stability;(b) 6 members appointed by the Treasury, subject to approval by the Treasury Committee of the House of Commons; and the members appointed under paragraph (b) will be academics, members of staff of international organisations, practitioners, or others with particular skills in the analysis of systemic risk.
(3) The Financial Stability Advisory Panel will—
(a) provide written advice to the Financial Policy Committee concerning the analysis of systemic risk;(b) once a year prepare a report assessing the analysis of systemic risk by the Financial Policy Committee over the preceding 12 months (the first report to be twelve months after this section comes into force);(c) assess the effectiveness of measures prescribed under section 9K in the attainment of the financial stability objective of the Bank;(d) assess the effectiveness of directions and recommendations of the Financial Policy Committee under sections 9G and 9N in the attainment of the financial stability objective of the Bank;(e) prepare an annual report on matters referred to in section 9ZZA(3) to be presented by the Supervisory Board of the Bank, and subsequently published on the Bank website.”
Lord Eatwell
My Lords, Amendment 7F picks up an amendment that I moved in Committee and promised to return to on Report, concerning the establishment of a financial stability advisory panel.
I will not go through the whole argument of different forms of financial stability arrangements as between this country and the United States and so on, but I will deal with one central issue: we want people of very high quality advising and reflecting on financial stability issues. The appointed members of the Financial Policy Committee are crucial but there is going to be some difficulty in identifying them satisfactorily because there will be a number of conflicts of interest in the financial services industry that will be difficult to manage.
We can overcome that difficulty by creating an advisory panel that does not have powers, as such, to make decisions, but which can advise on a variety of areas, including the success of measures taken and general effectiveness, by presenting a report to the oversight committee—not the “Supervisory Board”, as mistakenly referred to in the amendment as printed on the Marshalled List. We could gather together a wider group of people who felt it to be their responsibility to follow carefully the actions of the Financial Policy Committee and to express their views even if they have significant conflicts of interest, because these could be taken into account in the assessment of their views. Of course, they are distanced from any actual decision-making, unlike the appointed members of the Financial Policy Committee, who are right at the heart of decision-making.
Given that we are dealing with an area of policy which, as I have said already this evening, is novel, we are going to encounter entirely new problems. We will probably make some mistakes. We want to be able to assess a very wide horizon of experience around the world, where the European Union, the United States and other major jurisdictions are introducing financial stability committees of one sort and another to deal with the issue of macroprudential regulation. An advisory committee could be a valuable supplement to the information and assessment to which the Bank and its committees have access. I beg to move.
Baroness Noakes
My Lords, we do not need to hardwire this into legislation. If the FPC thinks that it needs some form of advice from other parties in relation to most of the matters mentioned in subsection (3) of the amendment of the noble Lord, Lord Eatwell, it can arrange it. Similarly, if the oversight committee thinks that it needs any assistance from outside parties in relation to matters mentioned in paragraph (e) of subsection (3) of the amendment of the noble Lord, Lord Eatwell, it can arrange it. I do not see why these matters need to be enshrined in law. If there are gaps within the resources available to the Bank, it can supplement them, or it may have them sufficiently internally. The statute does not need to deal with these matters.
Lord Sassoon
I completely agree with my noble friend Lady Noakes. This amendment was debated in Committee, as the noble Lord, Lord Eatwell says. The gremlins seem to have been getting into one or two of these amendments. He has already pointed out that this has been retabled in the previous form that it was in and should refer to the oversight committee and not the supervisory panel.
Putting that aside, the nub of this is that I am puzzled and disappointed that the noble Lord, Lord Eatwell, does not agree that the oversight committee that we have already created will have responsibility for carrying out the function of performance evaluation referred to in this amendment, and that the oversight committee will have a wider-reaching role looking over the entirety of the Bank’s financial stability remit. That is surely better than an advisory panel with rather limited and specific terms of reference.
I am also disappointed that the noble Lord, Lord Eatwell, feels that an independent oversight committee led by non-executives would be either inadequate or insufficient to hold the Bank to account. I cannot see how it is better to create a committee chaired by an executive of the Bank who would simultaneously be a member of the FPC, responsible for providing advice to the FPC and expected to assess its performance.
Of course, the Bill already creates in the FPC a committee on which the deputy governor for financial stability sits, together with external members, some of whom may indeed be academics. As we have discussed before, there is plenty of provision for either the FPC or the oversight committee to take on any additional expert, academic or other advice that it requires at any point. The FPC will have a statutory responsibility to assess risks to financial stability and to take action to mitigate them. If it wants to take advice it is entirely able to do so, but it should have the autonomy to do so on its own terms if it is to be properly responsible for financial stability.
In conclusion, the effect of the amendment of the noble Lord, Lord Eatwell, would be to create duplication of responsibilities, to blur accountabilities and to diminish focus. As such, there is no way that I could accept such an amendment and I hope that, on reflection, he will withdraw it.
Lord Eatwell
Before the noble Lord sits down, if the FPC wished to seek external advice, would it be suitably resourced to do so?
Lord Eatwell
In that case, I am far more content than I thought I would be, and I beg leave to withdraw the amendment.
Lord Sassoon
Lord Sassoon
My Lords, this is a group of minor and technical amendments. They update the Bill in the light of changes to EU law that have been made since the Bill was introduced to Parliament to reflect the effect of existing law by providing expressly that requirements imposed on firms may have indefinite duration, and to clarify the drafting of some sections of FiSMA. I am happy to discuss in more detail any particular amendment, but I beg to move.
Lord Sassoon
“(a) for “director” substitute “non-executive director”, and(b) ”
“( ) In paragraph 4, for “director” substitute “non-executive director”.”
“(a) in sub-paragraph (1), for “director” substitute “non-executive director”, and(b) ”
“( ) In paragraph 7(2), for “director” substitute “non-executive director”.”
“( ) in that provision, for “director” substitute “non-executive director”,”
“( ) In paragraph 13, after sub-paragraph (3), insert—
“(3A) But a member of the court who is the Governor or a Deputy Governor of the Bank may not be designated under paragraph (a) or (b) of sub-paragraph (3).””
“( ) In paragraph 15, for “director” substitute “non-executive director”.”
Lord Sassoon
“(1) Section 244 of the Banking Act 2009 (immunity) is amended as follows.”
Lord Sassoon
My Lords, like the FSA, the PRA and FCA have statutory immunity from liability in damages for anything done in pursuit of their statutory functions. The Bank has a similar immunity in its capacity as the monetary authority which includes its regulatory functions. This is necessary because it would be very difficult for the regulators to take effective regulatory action if they thought that at any moment they could be bogged down in litigation resulting in multimillion pound awards of damages.
These amendments modify the immunity to ensure that where one regulator or a member of its staff carries out an investigation or produces a formal report for another regulator, that person is also covered by the immunity. This is being done to ensure that, where necessary and appropriate, the PRA can outsource the operational element of its enforcement activities to the FCA—in particular, the work of carrying out investigations into firms.
Prudential regulation involves far less enforcement work than conduct regulation, as it primarily involves the setting and monitoring of prudential standards, rather than, for example, detailed investigations into possible money laundering. It is therefore likely to be a far more efficient approach for the PRA to outsource these functions to the FCA, rather than maintain its own standing expertise. This approach is also likely to ensure that these investigations are well co-ordinated.
Enforcement is a highly litigious area in which the subject of an investigation is likely to cast around for any possible chink in the armour of the regulators’ statutory immunity. There is a risk that vexatious litigation could slow down or undermine the progress of an investigation. These amendments are therefore intended to ensure that when investigations are contracted out to another regulator, they can be undertaken without risk of litigation.
Government Amendments 22 and 23 provide that the Bank of England has statutory immunity if it is appointed to carry out an investigation or to produce a report on behalf of the PRA or the FCA under Sections 97, 166 to 169 and 284 of FiSMA. Government Amendment 63 provides that if the FCA or a member of the FCA’s staff is appointed to carry out an investigation or produce a report, their actions and omissions are treated as actions and omissions of the FCA for the purposes of the immunity. Amendment 69 makes the same provision for the PRA.
I trust that the House will agree that these are sensible provisions which will allow the regulators to take an efficient approach. I beg to move.
Lord Eatwell
My Lords, I agree that these are indeed sensible measures. I have just one question. These days many actions and investigations by regulators are taken on behalf of what are truly other regulators—that is, regulators in other jurisdictions—and that exchange of information and co-operation is a hugely important activity. When the British regulators are taking very sensitive information in an area where there is a great deal of legal activity—for example, the relationship between the FSA and the regulator in Austria is a particular case—would they have immunity in that case as well?
Lord Sassoon
If the situation that the noble Lord is suggesting is one in which the FSA or a successor body was taking an action at the request of the Austrian authorities, I can confirm that in that case the immunity provisions would apply to the actions of the UK regulators.
Lord Sassoon
“( ) After subsection (2) insert—
“(2A) The Bank’s functions under the Financial Services and Markets Act 2000 are to be taken to include any functions that it may exercise as a result of an appointment under any of sections 97, 166 to 169 and 284 of that Act.””
“ In section 4 of the Bank of England Act 1998 (Bank’s annual report), in subsection (4)(a), for “directors” substitute “non-executive directors”.”
“ In Part 3 of Schedule 1 to the House of Commons Disqualification Act 1975 (other disqualifying offices), in the entry relating to the Bank of England, for “Director” substitute “non-executive director”.
In Part 3 of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975 (other disqualifying offices), in the entry relating to the Bank of England, for “Director” substitute “non-executive director”.”