House of Commons
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Oral Answers to Questions
Paul Burstow (Sutton and Cheam) (LD)
1. What steps he is taking to support town centres.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
Before I reply, I am sure that the whole House will join me in congratulating my right hon. Friend on his recent appointment to the Privy Council.
The Government have recently announced support to help revitalise more than 300 town centres in England through the town team partners scheme, which is in addition to the 27 Portas pilots that were announced in the summer. Building on this year’s success, we are delighted to announce another “Love your local market” campaign for next May.
Paul Burstow
I am grateful to my right hon. Friend for his kind remarks and for his answer.
Our town centres need to adapt to changing times and circumstances, and in particular the fact that we have an ageing society and growing numbers of people who suffer from dementia. The Prime Minister identified dementia as one of the Government’s key priorities, and the Government are working with the Alzheimer’s Society through the dementia challenge. Will my right hon. Friend ensure that his Department works with the Alzheimer’s Society to ensure that our town centres are dementia friendly?
Mr Foster
I congratulate my right hon. Friend on his advocacy of the rights of people with dementia, and on his work in that field. He will be delighted to know that a couple of days ago the Prime Minister received the latest report on this issue, and I can announce that more than 20 cities, towns and villages have already signed up to become more dementia friendly. We are working with a wide range of groups within society, including leading businesses, high street banks and others, to find ways of going still further. For example, Tesco supermarket is training its staff to provide better support for customers with dementia, as are many of our banks.
John Healey (Wentworth and Dearne) (Lab)
Will the Minister condemn the disruption caused by far-right groups that, twice in the past month, have brought their extreme and racist demonstrations into Rotherham town centre, landing us with a bill of half a million pounds in policing costs and lost trade?
Mr Foster
I certainly do condemn that, and I am grateful to the right hon. Gentleman for raising the issue. The Department is taking a lot of steps to bring communities together, and we will shortly be announcing further funding for further such measures. The right hon. Gentleman will be delighted to know that only a few days ago, my right hon. Friend the Deputy Prime Minister announced a further £214,000 for the “TELL MAMA” campaign, which is about reporting acts of anti-Muslim hatred.
Mr Philip Hollobone (Kettering) (Con)
People are delighted that Desborough and Kettering town centres are newly designated town team partners. When might they expect to receive the extra funding that goes with that designation?
Mr Foster
I congratulate my hon. Friend on his campaign to achieve that success for his constituents. The money available is £10,000, and some of the 300 successful towns have already received those funds. If the cheque is not quite in the post, I assure him that it will be fairly soon.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
Are not the Government’s attempts to revive town centres undone by the appalling Growth and Infrastructure Bill, which allows major out-of-town retail parks to be designated of national significance? When will we have clear guidance and joined-up thinking on our town centres?
Mr Foster
The hon. Gentleman is simply wrong. The national planning policy framework has a clear “town centre first” policy, and the Department is putting a large amount of funding into measures such as the Portas pilots schemes—and many others—to provide support for our town centres. The Government are supporting town centres, which have experienced real problems given the disastrous situation in which this country’s economy was left.
Fiona Bruce (Congleton) (Con)
2. What progress his Department has made on developing proposals to reform the Audit Commission.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
The Government are abolishing the Audit Commission. I am aware that in the past my hon. Friend has raised cases—and there are others—of where the auditor’s costs have been high in relation to the objections raised. That is why we have included provisions in a draft Bill to make it absolutely clear that the auditor has discretion to reject
“frivolous, repeated or vexatious objections.”
Fiona Bruce
I am sure that my residents in Swettenham will be relieved to hear the Minister’s reply. Will he confirm that, under the new approach, there will be a role to play for local district auditors in better holding council expenditure to account?
Brandon Lewis
Yes. Importantly, with local district auditors, we have clear, local accountability to ensure that scandals such as Labour-run Corby’s £47 million Cube simply do not go unnoticed by residents.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Is the Minister aware that the Audit Commission has fine, dedicated staff, many of whom have laboured under the uncertainty of not knowing whether they would have employment in future? What are we doing to look after those very good staff? Is he not aware that local auditors are very often more prone to corruption? How will he deal with that?
Brandon Lewis
That is an extraordinary comment to make about local external auditors, who have already shown local council savings of around 40%, which is part of the savings we can see for local councils, which they need to make. I met the new chairman of the Audit Commission recently. He is working with the teams, which are working well, towards the wind-down that will save this country around £650 million.
Andrew Bridgen (North West Leicestershire) (Con)
3. What steps he is taking to tackle (a) unauthorised development and (b) illegal encampments.
David Mowat (Warrington South) (Con)
7. What assessment he has made of the effectiveness of the powers of local authorities to deal with illegal Traveller sites.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
We have renewed councils’ powers to deal with illegal and unauthorised encampments. On 28 August, we sent new guidance to council leaders on how to best use these existing powers. We will also consult on giving councils greater freedom to stop unauthorised development related to caravans.
Andrew Bridgen
Over the past two years, there have been 78 reported incidents of illegal encampments in my constituency. Travellers are telling my local residents that they had better sell their properties to them now, because they will not be able to sell them at all when there is an encampment at the back of the property. That tends to undermine social cohesion in my constituency and people’s belief in the planning system. Will my right hon. Friend confirm that the Government will ensure that all parts of our society are dealt with fairly and equally under the planning guidelines?
Mr Pickles
My hon. Friend makes a reasonable point. It is immensely important to ensure that communities are free from intimidation, and that all communities can safely go about their work in the sure and certain knowledge that the Town and Country Planning Acts treat people the same. That is why we have issued the guidance. There can be absolutely no excuse for any local authority not taking prompt action.
David Mowat
A recent case in Warrington has involved a group of Travellers being repeatedly moved on peacefully using section 77 directions to leave orders, but they move only a few hundred metres and the whole process starts again, costing time and money. Will the Secretary of State consider amending the order, such that people will be required to leave the local authority area and not just the site?
Mr Pickles
It is probably no comfort to my hon. Friend to learn that the number of caravans on unauthorised sites has gone down—in 2007, it was 21%, and it is currently 16%. However, with regard to directions to leave orders, under sections 62A to E of the Criminal Justice and Public Order Act 1994, unauthorised campers commit an offence if they do not leave when directed to do so, or if they return to the district within three months after being directed, and the police may arrest and detain them.
Iain Stewart (Milton Keynes South) (Con)
4. What steps he is taking to inform social tenants of their right to buy.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
My Department is bringing right to buy directly to tenants. This month, we are writing to around 100,000 households, including those in Milton Keynes. We have a dedicated website, social media and helpline, and are working with councils to provide specialist events for tenants.
Iain Stewart
Milton Keynes council has produced an excellent guide to right to buy. May I urge my right hon. Friend to share it with other local authorities that, for some reason, might be more reticent about promoting this excellent policy?
Mr Pickles
My hon. Friend is rightly proud of his council. The website is exemplary, as is the information available to tenants. We are committed to ensuring that people have a clear understanding of right to buy, which offers discounts of up to £75,000. I hope the Local Government Association takes note of that excellent piece of work.
Mr Dave Watts (St Helens North) (Lab)
5. When he expects to announce the allocation of the transitional council tax grant to local authorities.
Jenny Chapman (Darlington) (Lab)
11. When he expects to announce the allocation of the transitional council tax grant to local authorities.
Yvonne Fovargue (Makerfield) (Lab)
17. When he expects to announce the allocation of the transitional council tax grant to local authorities.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
The Government published on 18 October the grant allocations that local authorities will be able to claim if they comply with the terms of the transitional scheme. These are available on the departmental website. The deadline for claiming the grant is 15 February, and payments will be made by the end of March 2013.
Mr Watts
I thank the Minister for his response, but is he aware that my council, St Helens, will have to make £48 million of cuts over the next three years? The only way it can access the transitional funding and keep council tax down is by cutting services to the most vulnerable members of our community.
Brandon Lewis
I would be very disappointed if the hon. Gentleman’s council was affecting the most vulnerable in the community, as this Government have put in place protections for them, and the guidelines are clear about that. Those who are among the most vulnerable suffered from the doubling of council tax under the previous Government and saw the benefits bill more than double. It is important that councils protect the vulnerable, which is why this Government have put the new scheme in place, with the opportunity and the money from the transitional grant, to help them do just that.
Jenny Chapman
I have listened to what the Minister has said, and I have to agree with my council leader, Bill Dixon, that the Government are behaving like a bunch of headless chickens. They have had to introduce a new fund to make up for a policy that was not quite thought through. Why did they not think it through?
Brandon Lewis
Under the previous Government, the council tax benefit bill went from £2 billion to almost £4.5 billion. It is right that this Government are dealing with the deficit that the previous Government left us and sorting out the economic problem. We are letting local authorities deal with what they need to do locally, and we have put in place £100 million to protect the most vulnerable, whom councils such as the hon. Lady’s unfortunately seem to want to hit.
Yvonne Fovargue
Wigan is consulting on a number of proposals, all of which, by necessity, will hit the working poor, people with disabilities, or families with young children. Does the Minister believe that forcing councils such as Wigan to chase people in those vulnerable groups for money that they simply do not have is either fair or a good use of council tax payers’ money?
Brandon Lewis
Again, I hope that the hon. Lady’s authority will do what it is supposed to do and look after the most vulnerable. Instead of attacking the most vulnerable, it should be dealing with its back-office costs, cutting down on fraud and error worth £200 million last year alone, and taking advantage of this Government’s scheme to help the most vulnerable, while still bringing down the benefits bill, which the last Government sent from £2 billion to nearly £4.5 billion.
Amber Rudd (Hastings and Rye) (Con)
The previous Government made absolutely no provision to continue the area-based grant, which provided important sustenance for communities such as mine in Hastings, so we are grateful that we have got the transitional grant. May I urge the Minister to consider looking carefully at whether councils such as Hastings can make additional efficiencies in order to justify additional access to the transitional grant?
Brandon Lewis
I thank my hon. Friend for her question. It was a pleasure to meet her, along with council leaders, just last week to discuss the transitional grant, which 12 authorities benefited from last year. We will certainly be looking at the issue she raises, and we will announce details of where we are with the transitional grant after the autumn statement.
Justin Tomlinson (North Swindon) (Con)
Can the Minister confirm that, despite the pressures left on local government finances by the last Labour Government, pensioners’ council tax support will not be reduced?
Brandon Lewis
Absolutely. I am very happy to confirm that this Government are protecting vulnerable pensioners. Pensioners have saved and worked hard all their lives. They deserve security and dignity in retirement, and this Government are protecting their position.
Charlie Elphicke (Dover) (Con)
May I pay tribute to the work the Minister has done in securing the £100 million fund, and to his energy in protecting coastal town communities and ensuring that the transition works effectively?
Brandon Lewis
I thank my hon. Friend for that question. Obviously we are doing what we can to ensure that the most vulnerable are well protected. It is just a shame that we have had to do that because so many Labour councils, such as Manchester and those of some hon. Members who have spoken today, have decided to take forward schemes that hit the most vulnerable. It is this Government who are doing their best to ensure they are well protected.
Helen Jones (Warrington North) (Lab)
This is an emergency relief scheme for Tory council candidates, and it is a shambles, is it not? The Secretary of State spent 12 months telling us he wanted local schemes; he has now had to design a national one. Because councils are getting back only a fraction of the money that has been cut, the Institute for Fiscal Studies says that it is not possible to design schemes that meet the criteria within the funding available. There is no clarity on whether councils will have to spend more money on consultation, and because the grant lasts for only a year, they will then have to design new schemes and consult on them again for 2014. Meanwhile, at the sharp end, the poorest people in the country are faced with bills that they cannot meet and the threat of being taken to court.
Brandon Lewis
It is amazing that the party that left us with a council tax benefits bill that had more than doubled is now complaining that this Government are trying to sort out the economic mess we inherited. It is very simple: we are talking about a voluntary scheme, and if councils want to take it up, they can. They will have the money in March to help them through the first year and they can then take their schemes forward, but many councils will have structured schemes that protect the vulnerable in the first place. It is a shame that too many Labour councils are trying to affect the most vulnerable. This Government are doing what they can to protect them from badly run Labour councils.
Mr Ben Bradshaw (Exeter) (Lab)
6. Whether he plans to implement the proposals by Lord Heseltine for unitary local government.
Mr Bradshaw
I have to tell the Secretary of State that my constituents in Exeter will be very disappointed by his reply, not least because one of his first acts in government was to take away their council’s hard-won unitary status. Given that both the Prime Minister and the Chancellor have described Lord Heseltine’s report as excellent, why does he have such a problem with this particular part of it?
Mr Pickles
It is indeed an excellent report, but I remind the right hon. Gentleman that the former permanent secretary to the Department, as its accounting officer, washed his hands of the unitary restructuring in Devon, Norfolk and Suffolk, demanding that Labour Ministers direct him to continue. He warned that it would
“impact adversely on the financial position of the public sector”.
He said:
“the evidence for such gains is mixed and representations that you have received provide no evidence to quantify such benefits”.
He also said:
“There is every likelihood of such judicial review proceedings being commenced.”
The system was a complete Horlicks, and that is why we abolished it.
Mr James Gray (North Wiltshire) (Con)
My right hon. Friend is right: the diversity of local government in England is very important, and there is no “one size fits all” solution. Does he accept, however, that it was the last Conservative Government who introduced unitary authorities in the first place, and that Wiltshire has been praised by my noble Friend Lord Heseltine for getting rid of five dual-tier district authorities and replacing them with one, thereby saving an enormous amount of money, keeping the council tax frozen, and getting rid of large layers of bureaucracy in the process?
Mr Pickles
I am glad to hear that my hon. Friend is at one with his local council. Of course I am not opposed to unitary authorities; what I am opposed to is the imposition on local authorities, from the centre, of costly reorganisations I am urging authorities, particularly small district authorities, to start to work together, to merge not just back-office but front-office functions, and to provide a much better deal for their people.
John Mann (Bassetlaw) (Lab)
What is the Secretary of State’s problem? Fewer politicians, fewer chief executives, fewer local government press officers—why does he not just get on with it, and actually make some savings that the public will enjoy?
Mr Pickles
I am sorry that the hon. Gentleman is not at one with his local council. I understand his frustration, but all the improvements that he wants—fewer press officers, fewer officials, lower costs—can be achieved by sensible local authorities that merge their front-office and back-office functions, and I for one would very much welcome that.
Mr Adrian Sanders (Torbay) (LD)
Notwithstanding the Secretary of State’s answer to the right hon. Member for Exeter (Mr Bradshaw), will he think again about some of the smaller unitary authorities, which experience real difficulties when demands are placed on them in respect of, for example, social care? If just one child requires 24-hour care, that can throw the entire budget out. Will he consider the need for larger unitary authorities?
Mr Pickles
My hon. Friend makes my point far more eloquently than I could. The problem was that the restructured authorities—one of which would have been Exeter—were too small. They lacked critical mass, and there was a risk that they would be unable to take the necessary steps. It makes much more sense for larger local authorities to deal with matters in a more strategic way, and to work together closely. The days when an authority could rely on having its own chief executive, its own director of social services and its own education director are long gone. Authorities must now look towards merging their functions.
Fiona Mactaggart (Slough) (Lab)
8. What assessment he has made of recent trends in private sector rents in local authority areas close to London; and if he will make a statement.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
There is no definitive source of data for rent increases at local authority level. What data we do have show an annual increase of between 0.9% and 3.3% to June 2012 nationally. For Slough, the Valuation Office Agency has published an indicative average rent of £750 over the same period. The figures for neighbouring boroughs range from £650 in Dartford to £1,200 in South Buckinghamshire.
Fiona Mactaggart
I feel tempted to give the Minister a geography lesson, but I will resist the temptation. Is he aware that spending in Slough on emergency housing provision for temporarily homeless people has gone up by 10 times in the last year? The reason for that is not an increase in homelessness; it is that landlords will not accept people who are being paid the local housing allowance rate as they prefer to wait for people being sent from London at higher rents and with premiums. What are Slough and other local authorities on the boundaries of London supposed to do about that?
Mr Foster
I think that all hon. Members are aware of that problem, as we all share it in our own constituencies. We are taking steps to address it, however. The hon. Lady should take a look at our latest moves that will make it easier for local authorities to use the privately rented sector. I can say to her that across the country some 30% of private affordable rental accommodation falls within the housing benefit levels, and we have invested £200 million to have more housing built specifically for that purpose. The key is to get more accommodation.
Sir Tony Baldry (Banbury) (Con)
Will not prosperous home counties such as east Berkshire and north Oxfordshire have to use our housing stock as effectively as possible? Will the Minister compliment housing associations such as Sanctuary Housing, which recently got together tenants in under-occupied property where children had grown up but had now left home, and tenants in over-occupied property, to see whether it was possible to arrange swaps so that the housing stock could be used more efficiently?
Mr Foster
I welcome what my hon. Friend’s local authority and many others are doing in that regard. We have put in place measures to make sure the limited accommodation that is available is made use of most effectively in precisely the way he describes, but the key is building more affordable housing, and that is what this Government are doing.
Mr Speaker
Order. Hyndburn has much to commend it, but it does not form part of a local authority area close to London. I call Karen Buck.
Ms Buck
With private rents in London in particular soaring and driving up homelessness, can the Minister tell us which of the following two statements is consistent with Government policy: the statement by the previous Housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps), that homeless households should not be uprooted from their local communities and moved hundreds of miles away, or what is actually happening in the seven west London local authorities, who in their homelessness strategy have talked of their aim to manage the movement of households out of London?
Mr Foster
There is no evidence that across the board there are rising—or rocketing—rents as the hon. Lady described. Only on Friday we announced measures that will make it easier for local authorities to make use of the privately rented sector. We have also introduced measures to ensure that accommodation is appropriate, taking account of not only the accommodation itself but local facilities, including schools. That will help councils keep people in the local area.
Philip Davies (Shipley) (Con)
10. What progress he has made on implementing the localism agenda in respect of planning policy.
The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)
I am pleased to say that 65% of local authorities have published local plans, and 200 frontrunners of neighbourhood plans are working hard to bring their plans into effect. We are working to revoke, subject to the environmental reports, the regional strategies that the last Government introduced and that were hated so much.
Philip Davies
Local referendum took place in Menston in my constituency. On a 49% turnout, 98% voted against a proposed 300-home development on previously green-belt land. Despite that, Labour and Lib Dem councillors from other parts of the Bradford district came over and voted to impose that development against the wishes of the local community. What is the Minister going to do about that, because until something is done, localism will seem a distant dream to my residents in Menston?
Nick Boles
It is fantastic that the people of Menston participate in democracy as vigorously as they do, and I am sure that almost 97% of them voted for my hon. Friend. I urge him to encourage his constituents to explore the possibility of a neighbourhood plan, as such a plan would enable them, rather than people from elsewhere, to determine the future shape of their community.
Bill Esterson (Sefton Central) (Lab)
My constituents have their doubts about the ability of neighbourhood plans to protect them. In Formby, a developer is talking about building affordable homes at the price of £300,000 on green-belt land in an area that floods. Will the Minister tell me what is in it for my constituents with that kind of proposal for developers, and what on earth happened to localism, because they cannot see any of it in Formby?
Nick Boles
What happened to localism is that local plans are coming in at a rate of nearly triple that achieved by the previous Government. We have neighbourhood plans that the previous Government never introduced, but which the hon. Gentleman’s party now claims to support. As a result of those plans, local wishes are being translated into planning policy, where people are willing to take responsibility for their communities.
Harriett Baldwin (West Worcestershire) (Con)
The Minister mentioned regional spatial strategies. The West Midlands RSS is proving harder to kill off than the Terminator. Will he please ensure that it appears next on his list for termination?
Nick Boles
My hon. Friend is absolutely right. We are as frustrated as she is by the way the European Court of Justice has put a very large spanner in the works. We are now conducting strategic environmental assessments to get rid of such plans, having created an assessment to bring that in. We have published five environmental reports, and the report for the west midlands will be published very soon. We will look at the results of that report before making a final decision, but our policy to revoke these unwanted, unloved strategies remains firm.
Roberta Blackman-Woods (City of Durham) (Lab)
In the spirit of localism, will the Minister take on board the concerns of the many councils that are against the centrally imposed relaxation of permitted development rights, such as Bromley, whose leader said it would result in an
“uncontrolled planning free for all”
and
“undermine the rights of our residents to voice their views on their surroundings”?
In the light of that, will the Minister allow councils to make their own decisions about whether they want to relax permitted development rights? When can we expect the consultation and why has it been delayed?
Nick Boles
Perhaps if the hon. Lady had checked, she would have discovered that the consultation was published an hour ago. Unlike her, I have met the leader of Bromley council. I explained to him that he retains, as do all local authorities, the right to issue an article 4 direction to set aside a particular permitted development where it is not appropriate for the area that they represent. That has always been the case and will remain the case with these permitted development rights, which are very popular across the country.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
12. What initiatives his Department has put in place to support access by householders to municipal rubbish and recycling centres.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
We are committed to the principle that householders have access to municipal rubbish and recycling centres where they can deposit waste and recycling without charge. The Department’s £250 million weekly collection support scheme will, where appropriate, support local authorities to invest in infrastructure, including municipal rubbish and recycling centres.
Gordon Henderson
I welcome that statement. Does my right hon. Friend understand that Kent county council is preventing council tax payers from accessing their waste recycling centres if they drive a privately owned pick-up truck, or a car decorated with advertisements for a company of any description? That Soviet-like diktat means that private motorists who possess only a pick-up truck are prevented from disposing of legitimate household waste, as are employees of companies that do not generate trade waste, such as driving school instructors. Does he agree with those policies?
Mr Pickles
I am most grateful to my hon. Friend. Up until this point, I had never seen Kent county council as cigar-chomping commies, but I will certainly pass his remarks on to the leader of the council. Councils have a legal duty to provide a civic amenity site for households free of charge for local residents. It is in a council’s interest to offer those services to reduce fly-tipping and increase recycling. We oppose tip taxes. Indeed, it was the previous Government, a Labour-run Department for Environment, Food and Rural Affairs, that actively considered introducing charging households as part of their bin tax agenda. We have consigned Labour’s bin tax to the dustbin of history.
Teresa Pearce (Erith and Thamesmead) (Lab)
13. What legal advice he has received on whether councils will have to carry out a new consultation process if they adopt a new scheme of council tax relief in order to qualify for the transitional council tax grant.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
As the hon. Lady may know, and as has been the practice of previous Administrations, the Government do not confirm or deny whether legal advice has been received on any issue. Whether further consultation is required is a decision for individual local authorities. Each local authority will have to make a judgment, taking into account the scope of its own initial consultation, the scale of any changes required and whether they require further consultation.
Teresa Pearce
Given that the Minister only weeks ago announced transitional relief should local authorities fulfil certain criteria, will he give them more time to consider and consult on the criteria by extending the deadline beyond 31 January, which is the date by which he said he would impose schemes?
Brandon Lewis
We are very determined to ensure that the local authorities applying for funding—bearing in mind that it is a simple scheme and that we will take the word of their section 151 officers—will have the money in advance and in full in March, which means a tight deadline. However, if local authorities and local authority leaders are looking at improving their scheme, in order to work with the Government’s scheme to protect the most vulnerable, they should challenge their officers over whether they need consultation.
Alex Cunningham (Stockton North) (Lab)
14. Whether he has had discussions with the Chancellor of the Exchequer on using the revenue received by the Exchequer from the forthcoming auction of the 4G mobile telephone spectrum to fund the building of affordable homes.
Mr Virendra Sharma (Ealing, Southall) (Lab)
16. If he will estimate the potential number of affordable homes, jobs and apprenticeships that would be created if the revenue from the auction of the 4G mobile telephone spectrum was used to fund an affordable house building programme by his Department.
Stephen Pound (Ealing North) (Lab)
18. If he will estimate the potential number of affordable homes, jobs and apprenticeships that would be created if the revenue from the auction of the 4G mobile telephone spectrum was used to fund an affordable house building programme by his Department.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
As the 4G auction has not yet taken place, we do not know what the total amount of generated revenue will be, but hon. Members should be aware that £600 million has already been allocated from the fund for science and innovation. We are making great progress in the development of affordable housing, and we hope to have 170,000 more affordable homes over the period, with £19.5 billion of investment.
Alex Cunningham
If the Government did the right thing, the cash could pay for 100,000 social and affordable homes, cut homelessness, create nearly 600,000 jobs, make a major contribution to the economic recovery and help rescue Ministers from their appalling house-building record. Will the Minister stand up to the Chancellor and demand the cash?
Mr Foster
No, what I will do is ask the hon. Gentleman where he thinks the £2.5 billion will come from, given that Ofcom put out a press release today saying that it expects the amount raised to be roughly £1.3 billion; remind him that we have already allocated £600 million of the sum; and point out the rather bizarre situation in which the press release to which he refers says that a third of the revenue will be used for affordable rented homes, whereas the hon. Member for Birmingham, Erdington (Jack Dromey),on the Labour Front Bench, says that the Labour party is against them.
Mr Sharma
With the latest affordable housing supply figures showing an across-the-board decrease, does the Minister agree that his Government’s failure to build enough affordable homes and homes for social rent, combined with their economic policies, are fuelling homelessness and rough sleeping?
Stephen Pound
On the subject of being staggered, the House was certainly so when during the previous DCLG questions the Secretary of State compared himself to Bertie Wooster. Whereas the right hon. Gentleman’s aspirations may be to the Drones club and an agreeable weekend in Blandings castle, many of my constituents want no more than a roof, and many of them want a job. The 4G revenue can provide them with both. Why not, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, stand up to those bloodless mandarins in the Treasury and say, “The people come before some fiscal policy”?
Mr Foster
My right hon. Friend the Secretary of State has already made it clear where he does not want to be: on a bushtucker trial. I was surprised to see the hon. Gentleman, for whom I have a great deal of admiration, table a take-out question from the Whips Office, and I am disappointed that he has not followed it through with a question that acknowledges the significant contribution that the Government are making to getting a roof over somebody’s head and getting them a job after the mess left by the Labour Government.
Sir Bob Russell (Colchester) (LD)
May I remind my right hon. Friend that the previous Government built fewer council houses in 13 years than the Thatcher Government built in 10 years? That said, it is quite a good question—can we not take on board what is being proposed?
Mr Foster
My hon. Friend must also look at the figures. We do not yet know what will be available, but £600 million has been allocated. There will still be questions about what will happen to house building in the period after the current spending review, and we are looking at that at the moment. Clearly, we want to have more houses, and more affordable homes. That is what we are already delivering, and we want to deliver more.
Jack Dromey (Birmingham, Erdington) (Lab)
The Secretary of State knows that millions are locked out of home ownership, that families are struggling to pay ever higher levels of rent in the private rented sector and that council waiting lists are lengthening by the day. Why will he not support the investment of the 4G windfall in a programme that the National Housing Federation has said would result in 100,000 homes being built and more than 500,000 jobs being created? Does he not agree with the director general of the CBI, John Cridland, who has said that that is exactly what the economy needs?
Mr Foster
My right hon. Friend the Secretary of State has done more than anyone in this House to get house building going, with the additional money that was announced on 6 September, which will result in a further 10,000 affordable homes and bring a further 5,000 empty homes back into use, and with measures involving £200 million to get more privately rented accommodation, additional support for homeless people and so on. My Secretary of State can stand up and be proud of what he has achieved, unlike the Labour Government, who failed people in regard to house building during their 13 years in power.
Mr Jim Cunningham (Coventry South) (Lab)
15. What consideration his Department has given to the proposal by the Association of Metropolitan Fire and Rescue Authorities for a flat-rate reduction for all fire services.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
The Government are considering responses to the technical consultation on business rates retention. All representations, including those from the Association of Metropolitan Fire and Rescue Authorities, will be considered before final decisions are made. Announcements on funding will be made in December in the usual way.
Mr Cunningham
Why are fire authority areas with a higher incident rate, such as the west midlands, suffering the largest cuts per capita? Can the Minister explain that?
Brandon Lewis
As I have just said, the funding decisions will be made in December in the usual way. Some Opposition Members do not support the idea of a flat line for metropolitan funding, and we are looking at that issue at the moment. The metropolitan brigades also have a higher per head grant in the first place, so there is full funding in there. I have already met a fair number of the metropolitan authorities to discuss this matter, and we will make our decisions and announcements in December.
Chris Williamson (Derby North) (Lab)
The Minister will know that fire and rescue services around the country are increasingly being called on to deal with the impact of severe flooding each year. Many of them, especially the metropolitan authorities, are struggling to meet their statutory obligations as a result of the Government’s swingeing cuts to fire and rescue services. Is the Minister happy to leave people who are affected by flooding this year to their own devices, or will he ensure that funding is available to enable the fire and rescue authorities to carry out that non-statutory function?
Brandon Lewis
I want to update the hon. Gentleman on a matter of fact. He might like to have a look at the figures, which show that the cut for fire authorities last year and the year that we are now in was 0.5%, as opposed to the swingeing cut to which he referred. Those authorities continue to do a fantastic job, as we are seeing. Problem with deaths from fire have fallen quite dramatically over the past few years, and the figures that he is citing simply do not add up.
Damian Hinds (East Hampshire) (Con)
19. What steps he is taking to tackle (a) unauthorised development and (b) illegal encampments.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
I refer my hon. Friend to my earlier answer on the problems of Travellers. I certainly look forward to what he has to say.
Damian Hinds
My constituents believe that everyone should be treated equally before the law, and they will welcome the news that councils are to get greater freedom to move quickly to prevent long-drawn-out stalemates such as the one at Dale Farm. Will my right hon. Friend confirm that his policy will result in a return to fairness in the planning system, unlike the policies of the Labour Government, which turned a blind eye to unauthorised development?
Mr Pickles
My hon. Friend is right. Dale Farm was a stain against the reputation of the planning system. We must never allow something like that to happen again. We have gone about this in a systematic way, trying to get a good balance to ensure that funds are readily available for authorities that wish to provide or should provide Traveller sites, but that resources and laws are there to ensure that those who wish to defy the law can be dealt with expeditiously—unlike what happened at Dale Farm.
Annette Brooke (Mid Dorset and North Poole) (LD)
21. What steps he is taking to support the creation of neighbourhood plans.
The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)
The Government have committed £50 million until March 2015 to enable local authorities to fulfil their legal duty to support neighbourhood planning. We are also providing direct support to front runners—£3.1 million this year to four organisations supporting neighbourhood plan areas.
Annette Brooke
I thank the Minister for his answer. I hear reports of delays in setting up the processes for neighbourhood forums, and I hear that not all planning officers are enthusiastic about neighbourhood plans. What more can the Government do to turn the Localism Act 2011 from a piece of legislation into a real change in culture and practice?
Nick Boles
I thank my hon. Friend for bringing this to my attention. The fact is that the duty to support neighbourhood planning is the law of the land, and we expect all local authorities and all people who work for them to obey the law of the land. If there is any evidence to the contrary, I look forward to receiving it from her.
Andrew Stunell (Hazel Grove) (LD)
22. How many homes for social rent have been (a) built and (b) sold in England since 1997.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
Before I answer the question, I am sure the whole House would wish to join me in congratulating my right hon. Friend on his elevation to the Privy Council.
As I mentioned earlier, the total number of social rented housing stock fell by a staggering 421,000 units from March 1997 to March 2010.
Andrew Stunell
I thank my right hon. Friend for his disarming answer. Many families in my constituency are stuck on the housing waiting list, and their plight has been made much worse by that sale of houses by Labour. Will he please push the Government strongly to increase their social and affordable housing programme to deliver for my constituents in Hazel Grove?
Mr Foster
My right hon. Friend can be absolutely assured that the Department and I will continue to press the Treasury, but he will know that we have already delivered the funding for a programme that will deliver 170,000 affordable homes, and that we have recently announced further funds that will increase the number of affordable homes and the number of empty properties that will be brought back into use. I congratulate my right hon. Friend’s own council on receiving nearly £1 million through the new homes bonus, bringing more units back into use. Nearly £2 million, furthermore, awaits his local authority from the Homes and Communities Agency to do more good work.
Jonathan Ashworth (Leicester South) (Lab)
T2. If he will make a statement on his departmental responsibilities.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
I would like to congratulate the Right Rev. Justin Welby on his appointment as Archbishop of Canterbury. The Church of England plays a valued and important role in the culture and constitution of our country. The established Church is one of the foundations of the modern British nation. It is entwined with the political liberties and freedoms that the House so jealously guards. This Government value both the role of faith in public life and the spiritual and moral leadership offered by the Church—and we wish the new archbishop well in the coming years.
Jonathan Ashworth
I am sure the Secretary of State will be aware that one consequence of the deep cuts many local authorities are grappling with, such as the £38 million that Leicester is losing, is that many voluntary and community organisations across the country face a deeply uncertain future. Given that this Government are supposedly committed to a big society, is he proud that many voluntary organisations could, because of his cuts, go to the wall?
Mr Pickles
I am grateful to the hon. Gentleman, but you will recall, Mr Speaker, that the Labour party tried to pull this last year, and went deep into voluntary groups, so we introduced our best value guidance, which makes it clear that there is a procedure to go through—and this year there is a right to bid. If I were a voluntary group in the hon. Gentleman’s constituency, I would be wanting to take over the local authority’s provision—with the money that goes with it.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
T3. Does the Minister agree that we could amend the law to help small businesses by reducing the amount of time between a business rate being appealed against and a local authority going after the money?
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
I understand the concerns of businesses—particularly small businesses—and ratepayers who are waiting for appeals to be settled by the Valuation Office. My Department is talking to the office, and we expect to resolve more than 400,000 appeals over 24 months to catch up with the backlog. The delay in the revaluation scheme will actually aid that process.
Hilary Benn (Leeds Central) (Lab)
After the Secretary of State’s shambolic performance in last week’s debate on the Growth and Infrastructure Bill, it is clear that he cannot even tell his Hackney from his Haringey. Why did he use out-of-date figures in his ministerial correction the following day when naming Haringey as the worst planning authority, when in the year to June the council that actually had the worst record on deciding major developments within 13 weeks—according to his Department’s figures—was Kensington and Chelsea; or is he just determined to blame a Labour council, as long as it begins with the letter H?
Mr Pickles
This gives me the opportunity to apologise to Hackney. I of course corrected the record at the first available chance, and wrote to the mayor of Hackney apologising. However, it is with regret that I must tell the House that this is by no means an uncommon occasion. Between 2007 and 2010, there were no fewer than 300-odd apologies and corrections, perhaps the most interesting of which—I am sorry that the former local government Minister has gone—was when Labour mistook Newcastle-under-Lyme for Newcastle upon Tyne and handed £10 million across to the former. I am delighted to say that no money changed hands under my mistake.
Hilary Benn
That was all very interesting but there was no answer to my question about performance. Let us turn to another shambles.
The Secretary of State’s determination to change the protection of our beautiful national parks from intrusive phone masts and telecoms equipment has caused a great deal of concern. He told the House during the debate last week that clause 7 of the Growth and Infrastructure Bill relates “exclusively to broadband”, even though the Bill says no such thing. Will he therefore now commit to introducing an amendment in Committee to make it clear that the authorities will still be able to object to phone masts of any height in national parks and areas of outstanding natural beauty?
Mr Pickles
Frankly, the right hon. Gentleman should know better. We replied to his question, and it is clear that such changes can take place only through secondary legislation. We have made it absolutely clear that we are only concerned with broadband, so his rather ridiculous posturing concerning 4G—[Interruption.] The right hon. Gentleman has become obsessed with 4G. He wants money to be spent on this and spent on that—he should do a bit more work and apply himself a bit more.
Dr Julian Huppert (Cambridge) (LD)
T4. Cambridge is a rapidly growing city. Its population has grown by some 15,000 in the last 10 years, and more building is happening. However, the new Office for National Statistics population model, which incorrectly predicted a population decline in the last census period, continues, unbelievably, to project a decline. What advice can the Minister give me on how to ensure that his Department uses more appropriate population figures, particularly when considering funding?
Brandon Lewis
The local government finance statement for 2013-14 will, as usual, use the most up-to-date and nationally consistent data available—not just the data on population, but all the data we use to inform the settlement. I am very aware from my conversations with the hon. Gentleman that there is real concern about the figures for Cambridge, and I am happy to meet him to see whether we can take the matter forward with the ONS.
Alex Cunningham (Stockton North) (Lab)
T6. The chief fire officer in Cleveland is trying to force through the creation of a mutual-type organisation to deliver the fire service that could, in time, have to compete for the contract. Every firefighter I have spoken to tells me they are against this move and see it as a step towards privatisation. Can the Minister guarantee that any such mutual would not face private sector competition for the contract in future, and tell me whether such an organisation could be created without the backing of the employees who would apparently own it?
Brandon Lewis
I am very disappointed to hear that the hon. Gentleman is against co-operatives and employee ownership. If the fire service does want to go to mutualisation and such a situation does exist, it would be a great thing for the employees to be part of it.
Charlie Elphicke (Dover) (Con)
T5. Does the Minister recognise the frustration of high street traders in Dover and Deal, who have to pay high business rates while charity shops conducting business for profit get a complete exemption? The traders feel that that is an unfair competitive advantage and a distortion of the competitive playing field. Will Ministers examine the rightness and properness of the exemption?
Brandon Lewis
I thank my hon. Friend for his question. It is right that charities receive relief, but we have temporarily doubled small business rate relief, too. That means that approximately a third of a million businesses, including many small independent shops, are currently paying no rates at all. We have also given councils powers to grant their own discounts, and they can use those powers to provide additional relief to other shops on the high street.
Joan Walley (Stoke-on-Trent North) (Lab)
Given that on 1 April next year a 10% cut in council tax benefit will be forced on local councils by the Government, and given the confusion on the transitional funding that could be available to help alleviate that, will the Minister give a clear set of guidance to local authorities, because some have already started consulting and might have to set their budgets before they know what they will be getting?
Brandon Lewis
As I said earlier, the scheme that the Government have put in place is £100 million to help councils that want to help the most vulnerable and to make sure that it pays to work. The schemes that councils put in place are a local matter for them. This Government are having to deal with the economic mess we inherited from the previous Government and to get down the bill for council tax benefit, which went from £2 million to nearly £4.5 million under the Labour Government.
Andrew Jones (Harrogate and Knaresborough) (Con)
T7. Constituents of mine, especially those in the Harlow Hill area of Harrogate, have contacted me as they are concerned about over-intensive housing development. Please could the Minister outline what protections there are for residents in the national planning policy framework?
The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)
The national planning policy framework makes it clear that local authorities should meet the full objectively assessed housing needs for their area, but that they should choose where exactly that development should take place. The local plan must be consulted on, so my hon. Friend’s constituents in Harlow Hill have every opportunity to put forward their views about any development affecting them.
Richard Burden (Birmingham, Northfield) (Lab)
Going back to the issue of council tax benefit reduction, will the Minister confirm that Birmingham takes the biggest hit in the country—more than £10 million? The transitional grant will not go anywhere near compensating for that, so does he think that the council tax freeze that he trumpets does not apply to the most vulnerable and that their council tax should increase, or that Birmingham city council should squeeze middle-income earners in Birmingham to compensate?
Brandon Lewis
I hope that Birmingham city council will do the right thing and look at its back-office costs and at cracking down on fraud and error, which were worth about £200 million last year alone. I also hope it will make sure that it follows this Government’s outlined scheme to have a council tax freeze for its residents last year, having had council tax double under the previous Labour Government.
Mr Marcus Jones (Nuneaton) (Con)
T8. Community groups in Galley Common and Whitestone in my constituency are considering forming neighbourhood plans, despite the lack of interest, help or enthusiasm from Labour-controlled Nuneaton and Bedworth borough council. Will the Minister join me in encouraging more communities across my constituency to go ahead to form neighbourhood plans and shape their local area?
Nick Boles
I want to do everything to help the people in my hon. Friend’s constituency to adopt a neighbourhood plan, if they can. There is simply no excuse for Labour-controlled Nuneaton and Bedworth borough council resisting or dragging its feet. It is remarkable that Labour’s Front-Bench team claims to support neighbourhood plans but Labour councils just try to get in the way.
Alison McGovern (Wirral South) (Lab)
The ferocity of the Chancellor’s cuts to Wirral council now looks clear, with significant job losses on the horizon. If this was our car factory closing, I would be standing here asking the Government to help, but these are the Government’s own cuts, trained on Wirral. So what can the Secretary of State do to help us?
Mr Pickles
The hon. Lady needs to understand that these cuts have been brought about by the failure of the last Labour Government, by the level of their deficit and by their inattention to the economy. We protected all local authorities last year—we protected them in terms of the income they received—and all the predictions by Opposition Members proved to be just hot air.
Dr Sarah Wollaston (Totnes) (Con)
T9. Does the Minister share my concern that councillors are sometimes put off from declining planning permission because of the fear of bearing the full cost of an appeal? Does he agree that that is sometimes acting as a barrier to localism?
Nick Boles
I reassure my hon. Friend that if councils go through the proper process of forming policies and a local plan under the NPPF, they have nothing to fear from appeals to the Planning Inspectorate, which upholds the decision of local authorities in 65% of cases and can award costs against applicants who conduct themselves unreasonably in launching such appeals.
Graham Jones (Hyndburn) (Lab)
In a recent survey, one in four tenants reported that they had been ripped off by letting agents. Do the Government recognise that and, if so, what are they going to do about it?
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
I understand the hon. Gentleman’s concern. He will be aware, however, that a number of letting agents have come together to form the safe agent scheme. We urge all people using such agencies to look out for that scheme, which gives an absolute guarantee that the funds are available to provide the necessary support.
Nick de Bois (Enfield North) (Con)
All the money awarded for the building of a new free school in my constituency should go to benefit our children’s education, so is the Secretary of State surprised to learn that Enfield council is demanding tens of thousands of pounds of that budget for section 106 costs, providing no educational support?
Mr Pickles
My hon. Friend makes a reasonable point and I, the planning Minister—the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Grantham and Stamford (Nick Boles)—and the Secretary of State for Education are looking into it as a matter of urgency.
Heidi Alexander (Lewisham East) (Lab)
The Secretary of State will be aware that Labour-run councils such as Lewisham and Lambeth are accredited living wage employers. In other parts of London, such as Croydon, local campaigns are under way to persuade councils to become living wage employers, too. Does the Secretary of State back those campaigns?
Mr Pickles
Local authority pay and conditions are matters for local authorities.
Andrew Percy (Brigg and Goole) (Con)
When the Conservatives took control of North Lincolnshire council in 2011, Labour said that 2,000 jobs would be lost. Instead, free car parking has been introduced, the number of apprenticeships has gone up, council tax has been frozen and a community grant scheme has been introduced. May I commend the leadership of North Lincolnshire council and invite the Secretary of State to pay us a visit?
Mr Pickles
I already feel the need to book my ticket to visit that fine council. My hon. Friend’s example clearly illustrates the reality of people dealing with budgets and looking after front-line services; the Opposition are the fantasists.
Petition
Nic Dakin (Scunthorpe) (Lab)
On an evening when we have focused on costs to the motorist, I am proud to present a petition on behalf of 2,400 or more residents of the Scunthorpe area. The petition states:
The Petition of residents of Scunthorpe and Ashby,
Declares that the Petitioners support the call for shoppers, retailers and businesses across North Lincolnshire to be treated equally and fairly.
The Petitioners therefore request that the House of Commons urge the Government to provide 2 hours free car parking across all car parks in Scunthorpe and Ashby.
And the Petitioners remain etc. [P001130]
BBC
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Ms Harriet Harman (Camberwell and Peckham) (Lab)
(Urgent Question): To ask the Secretary of State for Culture, Media and Sport if she will make a statement on the resignation of the director-general of the BBC, George Entwistle, and the situation at the BBC.
The Secretary of State for Culture, Media and Sport (Maria Miller)
The BBC is a global British institution of huge importance and value to millions of licence fee payers and people all over the world who look on it as an exemplar of independent public service broadcasting. In light of the ongoing crisis, it is crucial that the BBC puts the systems in place to ensure it can continue to make the first-class news and current affairs programmes on which its reputation rests.
George Entwistle has taken full responsibility for the failings of “Newsnight” in his role as editor-in-chief and it was for that reason he decided to resign yesterday. The circumstances of his departure make it hard to justify the level of severance money that has been agreed. Contractual arrangements are a matter for the BBC Trust, but the Trust also has clear responsibilities to ensure value for money for the licence fee payer. I know that Lord Patten has written to the Chair of the Select Committee on Culture, Media and Sport outlining why the Trust took the decision it did, and that letter has been made public. It is right that the Trust should account publicly for its decision and I have repeatedly emphasised the need for full transparency to rebuild public trust.
Members will know that procedures are now in place to scrutinise the BBC’s decisions in delivering value for money—procedures strengthened by this Government. The National Audit Office is empowered to conduct a value-for-money review of any issue. If it decides to review this decision, I expect that the BBC would co-operate fully.
The BBC is in the midst of the most serious of crises, and I have made it clear both publicly and privately that the Trust was slow off the mark in responding to the initial crisis over Savile. It is now acting decisively, with three reviews, one of which reported yesterday; the other two are ongoing. It is in the long-term interests of the BBC to have a period of stability in which to see this important work completed.
In my conversations with Lord Patten, I have been clear that the overall aim of the Trust must be to rebuild the public’s trust in the BBC, and I know that Lord Patten agrees. There are three things that the Trust needs to do to achieve that. First, the immediate task for the BBC must be to address whatever failings there have been in the editorial process, particularly in “Newsnight”, in order to restore public confidence in the BBC. The Trust needs to act swiftly to ensure that the management and leadership issues are resolved, and that the failings cannot be repeated. It is clear from the interim director-general’s interviews today that the BBC is looking seriously at what went wrong, where responsibility lies, and how to address the matter in the long term, and I welcome that.
Secondly, the Trust must get the right director-general in post, and Lord Patten has indicated that he will do that as soon as possible. Above all, it must get the right candidate to stabilise the BBC and drive through the change that is necessary. As I have said, the BBC is a global British institution, and it needs to function effectively.
Thirdly, in all this, we must not lose sight of the inquiries and what is at the heart of these events. None of the developments in recent days should overshadow the investigations into the alleged horrendous abuse of children in institutions around our country. It is vital that the BBC responds correctly and decisively to the Pollard inquiry on the decision to drop the “Newsnight” item on Savile, and to the Smith inquiry looking at Savile’s abuses and the culture and practices of the BBC.
The BBC is an independent institution, and its independence is not, and never will be, in question. Ultimately, the only organisation that can restore the public’s trust in the BBC is the BBC itself.
Ms Harman
I thank the right hon. Lady for that answer. Does she agree that, first and foremost, we need to have in mind the people who suffered the horror of sexual abuse as children? It takes great courage to come forward, and that we must encourage and support them to do that. Does she also agree that it was disgraceful that “Newsnight” falsely accused an individual of the sexual abuse of children—a damning accusation that could only have caused him and his family untold distress?
As the director-general is editor-in-chief and the buck stops with him, it was right for him to resign. George Entwistle is a decent man for whom this has no doubt been a personal tragedy. We have heard what the Secretary of State said about the pay-off, but surely she must agree that the BBC Trust cannot justify a pay-off of double the amount laid down in George Entwistle’s contract. Does she take the view that I do—that George Entwistle should reflect on this and only take that to which he is entitled under his contract?
Turning to what happens next, the Secretary of State is right that what is needed is a period of stability, so that the Trust can oversee the BBC’s sorting itself out. Does she agree that in the heat of this crisis, there are dangers that we must avoid? We should not trespass on the BBC’s independence. We do not want politicians to meddle with what newspapers write; neither should that happen with the BBC. Does she agree that the next victim of this crisis must not be the independence of the BBC? Does she also agree that while it is imperative that the BBC reinstates professional standards, it is important that the pendulum does not swing so far the other way that the BBC becomes cowed and retreats into risk avoidance?
The BBC is a loved and trusted institution, but it has enemies waiting to pounce. Will the Secretary of State assure this House that she will stand up to the commercial competitors and political opponents who are lining up to attack and wound the BBC at this moment of crisis? The BBC has made grave mistakes, and must sort them out, but everyone, including we politicians, must keep cool heads and let that happen, so that the BBC can restore trust. That is what the public want, and what the country needs.
Maria Miller
The right hon. and learned Lady called for an urgent question today, so she is very much standing there questioning the BBC. I endorse what she says, as we should let the BBC get on with putting its house in order. It is absolutely vital that we have a period of stability to do exactly what she was discussing, to make sure that the BBC can put its house in order, and restore stability to one of our most highly prized national institutions. I hope that she would join me in calling for that period of stability.
The right hon. and learned Lady is absolutely right that we should not at any point forget why these issues are under review right now—it is because of the sexual abuse of some of the most vulnerable people in society, and she will have noted the comments that I made in my statement. It is absolutely right that she should deplore the actions of those who repeated wrong accusations against people who clearly had absolutely no involvement whatsoever in the dreadful events that related to these problems.
As for the terms and conditions of those who are leaving the BBC, the right hon. and learned Lady will know that that is very much a matter for the BBC itself. I agree, as I have said, that it is hard to justify the level of payment that has been discussed. It is for Mr Entwistle himself to decide whether it is appropriate to accept that payment. I repeat again to the right hon. and learned Lady, as I said in my opening comments, that the National Audit Office can undertake a value-for-money review of the issues, which is an important thing to note.
Mr Speaker
Order. I am minded to run the exchanges on this question for approximately half an hour, but there is a premium, if I am to accommodate colleagues’ level of interest, on short questions and short answers. Long questions by one colleague will cause another colleague to be deprived of the opportunity to contribute.
Mr Richard Bacon (South Norfolk) (Con)
Given that under the one-off agreement between the Department and the BBC Trust, the Comptroller and Auditor General is unable, without the consent of the BBC Trust, to inquire into the regularity of the £450,000 severance payment to the director-general, would it not make sense to give the NAO unfettered access for its value-for-money audits and place the BBC on the same basis as every other public body?
Maria Miller
I know that my hon. Friend has looked at this issue in great detail. I repeat that the NAO is already empowered to conduct a value-for-money review. He makes an important point that in this day and age people expect all public institutions to be open to the widest possible scrutiny.
Mr Ben Bradshaw (Exeter) (Lab)
Will the right hon. Lady assure me that neither she nor anyone else in government on Saturday, or before, had any communication with Lord Patten or anyone from the Trust in which they suggested George Entwistle should go?
Mr Rob Wilson (Reading East) (Con)
As George Entwistle has been given a huge pay-off to go quietly, is my right hon. Friend at all concerned that the BBC will try to use pay-offs to ensure the silence of those implicated in the Savile and “Newsnight” scandals? Will she make it clear to the chairman of the BBC Trust that the BBC must be open about its failings and not use licence fee payers’ money to avoid the corporation’s own embarrassment?
Maria Miller
I can absolutely reassure my hon. Friend that I have received assurances that both current and former employees are expected to contribute fully to all the investigations and that they should be conducted in an open and transparent manner.
Sir Gerald Kaufman (Manchester, Gorton) (Lab)
Does not this sorry episode illustrate the folly of entrusting the regulation of the BBC to a neutered body presided over by passé politicians from both parties who act in cosy collusion with the BBC, when what the BBC needs is proper regulation—an independent body, but properly and appropriately regulated?
Maria Miller
The right hon. Gentleman makes a colourful intervention. I remind him gently that it was his party that put in place the present structure. We will make sure that in the long term we have a structure that can protect what I have already said is one of our iconic national institutions.
Mr John Leech (Manchester, Withington) (LD)
I welcome the Secretary of State’s opening comments. The recent catalogue of senior management failings has given the BBC’s opponents the ammunition to attack what is, for the most part, a great broadcasting institution. So does the right hon. Lady agree that the decision to award a pay-off worth twice the amount of the contract gives the BBC’s opponents a green light to maintain their attack, rather than giving the BBC an opportunity to learn from its mistakes?
Maria Miller
It is right to say that it is difficult to justify the level of payment that has been talked about. I hope that the level of concern about that is being noted by the BBC Trust and, indeed, by Mr Entwistle himself.
Ann Clwyd (Cynon Valley) (Lab)
I agree with both Front-Bench speakers that the main focus should be on the abuse of children in north Wales. There is a danger of intimidating the BBC. May I give the House a quick example? On Thursday I was interviewed by BBC Wales about child abuse. I mentioned the role of the Welsh Office and the fact that the Welsh Office had known for 20 years that this abuse was going on. I mentioned the fact that there was a convicted paedophile who had worked at the Welsh Office in a senior position, responsible for children’s services. The next day I did a similar interview and I was asked not to mention that person—I had not mentioned the person by name, anyway. I asked why not, and I was told, “That person might be identified because there were a small number of people.” He had already been identified; he was a convicted paedophile. So it is dangerous also that the BBC might now feel intimidated about broadcasting matters which it should broadcast.
Maria Miller
I understand the right hon. Lady’s point, although I say firmly that there are many lessons to be learned from the current situation. One of them is that it is in no way sensible to name individuals without there having been a proper and thorough criminal investigation associated with it.
Mr John Redwood (Wokingham) (Con)
Will the Secretary of State speak up for licence payers and ask Lord Patten, when she next talks to him, whether he will reconsider the outrageous and over-the-top pay-off and what he intends to do about the excessive number of highly paid managers, which he now condemns as if he were a critic, rather than their boss?
Maria Miller
My right hon. Friend makes a powerful point. He will know that we have frozen the licence fee, and I am sure he will know that I have made my views very clear to Lord Patten on this matter.
Mr Dennis Skinner (Bolsover) (Lab)
When Lord Patten talked about the retirement of George Entwistle, he went on to say that he had acted with honour, bravery, and courage. What kind of bravery and courage does it take to leave office with a million quid?
Maria Miller
The hon. Gentleman makes his own point. I am concerned about making sure that the Trust is doing everything it can to bring the current situation to order, and to make sure that the licence fee payers are getting the sort of value for money that they would expect from a national institution.
Dr Julian Lewis (New Forest East) (Con)
Who appointed the obviously ineffectual Mr Entwistle as director-general, and what does that choice say about the competence of the people who made it?
Maria Miller
My hon. Friend will know that the director-general of the BBC is appointed by the BBC Trust, and Mr Entwistle was appointed by the Trust on a unanimous basis. What is important now is that we have a new director-general in place who can tackle some real and important issues and a very serious crisis facing the organisation.
Pete Wishart (Perth and North Perthshire) (SNP)
The Secretary of State will know that there is great concern in Scotland about the crisis at the BBC, although BBC Scotland had no role in it. Does she agree with the National Union of Journalists and others who suggest that the job cuts to front-line journalistic staff have at least a part to play in this? May we have a moratorium on such job cuts until the crisis is resolved?
Maria Miller
I think that the hon. Gentleman would have to agree that the problem we face is a structural one within the BBC organisation. It is a problem that the BBC Trust is addressing through the plans and reviews it has put in place, and I hope that he will join me in welcoming that as the right way forward.
Tim Loughton (East Worthing and Shoreham) (Con)
In the past few days the main news headlines have been about structural overhaul at the BBC, heads rolling and severance payments, yet in the same few days we have heard about further arrests in connection with Savile and with child sexual exploitation in Rochdale and Leeds that have hardly troubled the headlines. The Secretary of State is right to say that the origins of all this mess are the inquiries into Savile and child abuse under the BBC’s roof. Does she agree that sensationalist celebrity scalp hunting by Opposition Members and shoddy reporting by “Newsnight” have undermined the possibility that witnesses will come back and that we need to get the inquiry back on track and focused on child abuse, which is where it started and where it should end?
Maria Miller
My hon. Friend puts it extremely well. We cannot let these debates fog the central question: how do we ensure that we protect some of the most vulnerable people in our society? I welcome the fact that there will be a Back-Bench debate on that tomorrow, when I am sure he will continue to contribute and make the excellent points he has made this afternoon.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
The tragic case of Madeleine McCann shows that newspaper editors can make the most appalling allegations without having to resign or being sacked by their proprietors, so we should bring some perspective to George Entwistle’s departure, whether it was truly voluntary or whether he was pushed. Does the Secretary of State agree that the BBC Trust has compounded all the errors by agreeing to this misjudged double pay-off and, in so doing, has made it doubly difficult for even the friends of the BBC, and there are many, to stand up for it?
Maria Miller
The hon. Gentleman is right that the level of pay-off will not be easy for Members in the Chamber to understand and that it is difficult to justify. However, I hope that he will agree that at this point we need to ensure that the BBC has a period of stability so that it can proceed with the reviews it has undertaken and we can create the sort of change that will strengthen the organisation for the long term.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
The BBC is bigger than “Newsnight”, which is one programme, and what happened is terrible, but does the Secretary of State agree that we should allow Tim Davie, who has already shown clear leadership today, some time to get the BBC back on track so that it can finish those inquiries?
Maria Miller
My hon. Friend is absolutely right. We have seen the BBC set up the reviews, and we now need to ensure that it can conduct its work and that the findings are acted upon.
Mr David Lammy (Tottenham) (Lab)
This has clearly been a dark time for the BBC, but does the Secretary of State recognise that last week it covered the American elections and that there was a range of programming on television and radio of an incredible standard and that this should not be used as a tool to undermine the basis of a public broadcaster?
Maria Miller
The right hon. Gentleman is right to focus on the incredibly important contribution the BBC makes. We saw that through the summer with its coverage of the Olympics. We must also ensure that the changes that are being made allow continued support for the sort of investigative journalism that is a critical part of its role.
Stephen Gilbert (St Austell and Newquay) (LD)
Yesterday our nation gathered to mourn our war dead, Israeli forces exchanged fire with forces in Syria and there was the small matter of an election in China. Does the Secretary of State share my concern about the interminable introspection the BBC is going through at the moment and agree that we need to put these events in perspective and focus on the real issue, which is uncovering child abuse?
Maria Miller
The hon. Gentleman is right that we should not let these matters cloud the central issue of child abuse. Equally, it is vital that we ensure that our country’s main news broadcaster has the management and editorial controls in place to ensure trust in the work it does.
Mr David Anderson (Blaydon) (Lab)
Over the weekend allegations were made that an abuser in the north Wales case had previously abused children in my constituency in the 1960s and ’70s. As other Members have said, we must ensure that it is those people we focus on and that we put as much effort, if not more, into ensuring that proper resources go into encouraging victims of abuse to come forward. That might well mean that the Government will have to look at giving further support to social services departments and the police, because those people will not just feel frightened and apprehensive; they might have spent a lifetime feeling that in some way they are guilty. They need a lot of support, and we should give it to them.
Maria Miller
The hon. Gentleman puts his finger on it when he says that the important issue that comes out of this is that people who have suffered abuse do not in any way feel impeded in coming forward for fear of being part of what has become a media circus. We have to make sure that people have the confidence to be able to do that, and he is right to make sure that we focus on it. Perhaps he will contribute to tomorrow’s Back-Bench debate as well.
Mark Pritchard (The Wrekin) (Con)
May I assure Labour Members that many Members of Parliament on the Government Benches think that the BBC is a great and fantastic global news organisation? Indeed, I love the BBC, not least BBC Radio Shropshire. Does the Secretary of State agree that it is absolutely vital that the new director-general is the right person for the job and that the Trust does not, in a panic and in a crisis, rush to judgment about putting someone in but ensures that we get the right person to lead this wonderful organisation forward into the rest of the century?
Maria Miller
My hon. Friend is right to pay tribute to the work of local BBC stations and organisations; we all know that they do a fantastic job of work in our constituencies. He is also right to say that we need to ensure that we have in the new director-general somebody who is able to deal with the real structural changes that are required in the organisation, as already outlined by the chairman of the Trust.
Mr Tom Harris (Glasgow South) (Lab)
This is certainly the worst crisis that the BBC has faced for at least nine years. Does the Secretary of State agree that if the editorial policy of the BBC is in need of review, then that review must be done by independent professional journalists and not by middle managers or by Government Ministers, and certainly not by Members of the House of Lords?
Maria Miller
The hon. Gentleman will know that the two reviews on the BBC that are still ongoing are being conducted by individuals not only with extensive experience in journalism, in the case of Mr Pollard, but of absolutely the highest standard and the highest integrity in the case of Janet Smith. He can therefore be assured that those investigations will be conducted in the most appropriate way possible.
Philip Davies (Shipley) (Con)
Lord Patten wasted hundreds of thousands of pounds on the appointment process for George Entwistle, and he has now wasted hundreds of thousands of pounds on paying him off, saying that he was not up to the job, that he was overwhelmed by it, and that he was right to resign. Lord Patten has been asleep at the wheel, he has been off the pace from the word go, and he is part of the problem rather than the solution. Is it not time that the Secretary of State tapped him on the shoulder and told him to move aside and manage all his other outside interests, which are probably why he has been treating this as a sinecure and has done absolutely nothing to earn the staggering salary that he gets?
Maria Miller
My hon. Friend’s strength of feeling is clear. While, as I said, the Trust could have acted more quickly with the initial inquiries, I now feel that it is acting decisively to address this very serious crisis. Lord Patten has a key role in ensuring that the crisis is well handled, and I support him in doing that.
Huw Irranca-Davies (Ogmore) (Lab)
Genuine supporters of the BBC will be appalled whenever it slips from the very highest standard of integrity and quality because we expect it domestically and worldwide to achieve that gold standard. Will the Secretary of State ensure that the detractors who seek to make mileage out of this predicament will not be given free rein, because we need the BBC to be there investigating, with the strongest possible standards, the child abuse that is at the centre of this issue?
Maria Miller
The hon. Gentleman will know that the way to restore the trust in the BBC that both he and I want to see is by allowing it to proceed with the investigations currently under way and by having a period of stability within the organisation.
Sir Tony Baldry (Banbury) (Con)
Is not one of the lessons that we need to learn that all of us in this place need to be very careful that we do not use parliamentary privilege simply to stand up stories for journalists outside? Is not one of the sad facts, as events have unfurled and unfolded, that some journalists and, I am afraid, some parliamentarians were so keen to have a crack at the previous Thatcher Government by way of association and innuendo that they made no, or no reasonable, effort to check the accuracy of their assertions and accusations?
Maria Miller
My hon. Friend is right: there are individuals who perhaps want to examine their consciences and ensure that, where appropriate, they apologise.
Alison Seabeck (Plymouth, Moor View) (Lab)
There are two strands to today’s discussion—that it is vital that the victims of abuse feel confident that if they come forward their cases will be considered, and that the BBC, whether it be local radio, drama or children’s programmes, is a national treasure. Can the Secretary of State say with confidence that she feels that the Trust fully understands that, apart from changing personnel, there is an issue around the ethos of the BBC that needs serious consideration, including the messages sent to the public about the golden goodbyes?
Maria Miller
The hon. Lady is right to ensure that we always keep to the fore the situation of children who have been victims of abuse. I am sure she has read Lord Patten’s words that he fully understands the issue with the ethos of the organisation—something that he made clear when he was appointed.
Mr Shailesh Vara (North West Cambridgeshire) (Con)
As a result of George Entwistle going there might be other departures from the BBC because of the present crisis. If so, will the Secretary of State assure the House that she will press Lord Patten to ensure that not only the notice provisions of individuals’ contracts but the clauses that speak of proper performance of their duties are looked at; and that if payments are made proper consideration will be given to what, if any, performance there has been?
Maria Miller
My hon. Friend speaks of ensuring that contracts are correctly put together. I join him in saying that any reward for failure is inappropriate not only for the BBC but for any organisation.
Susan Elan Jones (Clwyd South) (Lab)
Last week, the Children’s Commissioner for Wales made it clear he had had some contact with members of the public who had been abused in children’s homes in north Wales but had not come forward before. I am sure we welcome people feeling that they can do so, but many of us fear that certain events will make them nervous, especially given the current media reaction. Does the Secretary of State agree that it is spectacularly unhelpful when people who should know better refer to such people as “weirdos”?
Maria Miller
The hon. Lady talks about the language we use, and in this place we know it is incredibly powerful. She rightly counsels caution and I share her desire that individuals should be able to raise such issues in the most supportive environment possible.
Richard Fuller (Bedford) (Con)
Twice in the past 12 months the House has discussed the lack of management control over large media organisations—now the BBC and earlier News International led by the hon. Member for West Bromwich East (Mr Watson), who I see is not in his place today. Will my right hon. Friend say whether this raises issues about revising the roles of the BBC so that it can focus on doing right those things it does best?
Maria Miller
My hon. Friend is absolutely right to talk about the importance of focusing the BBC. I hope that at the heart of the review we will have the opportunity to ensure that we get back to doing what the BBC does best—world-class broadcasting and world-class news journalism.
Bill Esterson (Sefton Central) (Lab)
Will the Secretary of State ensure there is no witch hunt at the BBC? Does she agree that the priorities must be a combination of justice for the victims of the now well-documented abuse and of lessons being learned for now and for the future so that children’s protection is always at the heart of what we do?
Maria Miller
Management of the current situation is very much for members of the BBC executive. I see day in, day out their desire to get to the bottom of the issues, which I have encouraged them to do rather than look for any easy way out. The hon. Gentleman is right that we must ensure that we put the safeguarding of children at the heart of what the not only the BBC but every public organisation does.
Mr Lee Scott (Ilford North) (Con)
Does my right hon. Friend agree that, even after the shoddy journalism we have seen at the BBC, the most important thing is getting to the bottom of who perpetrated those crimes and ensuring that the police are allowed to get on and do their job? That journalism should not cloud the situation or do anything to stop the police.
Maria Miller
My hon. Friend is right that our focus needs to be on the welfare and safety of children, and on ensuring that the dreadful events we have heard about could never happen again.
Paul Flynn (Newport West) (Lab)
The BBC foolishly cut spending on its high-quality, in-house investigative journalism, and contracted it to outside bodies in order to spend excessively on salaries for managers and stars. Is it not true that the situation is serious for the BBC, but ephemeral, and that the nation’s trust in the BBC is deeply rooted and permanent?
Maria Miller
As the hon. Gentleman will know, the structure of the BBC is a matter for the executive. However, he is right that a review is looking at that structure to ensure that it works effectively in terms of both management and editorial content.
Mr David Nuttall (Bury North) (Con)
Does my right hon. Friend agree that this latest debacle will bring forward the day when the British public will have the freedom to decide whether to pay to watch the BBC, rather than being forced to pay for it by the criminal law?
Maria Miller
Every Member in the Chamber attaches enormous value to the role of the BBC. All those things are regularly under review as part of the charter renewal process. I am sure my hon. Friend will want to give his thoughts as we move forward to that.
Mr Jim Cunningham (Coventry South) (Lab)
Given that the BBC Trust appointed the BBC director-general in the first place and that he has had to resign, does the Secretary of State agree that there is a case for looking at the Trust and its composition?
Maria Miller
The role of the Trust is to ensure that the BBC executive works as it should. We will always work closely with Lord Patten on that. At this point, we want to ensure that there is a period of stability in which we can see the outcomes of the reviews that have been put in place. They may well raise the sorts of issues the hon. Gentleman raises.
Sir Bob Russell (Colchester) (LD)
The BBC, across local radio, regional television and national broadcasting, is more accurate and reliable, and better trusted, than Britain’s newspapers, particularly those with foreign owners who have a vested interest in, and commercial reasons for, wanting to damage the BBC. Will the Secretary of State give me an assurance that the failings will not be used as an excuse to dismantle a great British institution that is the envy of the free world?
Maria Miller
The hon. Gentleman is right that a mixed media in this country is important—both broadcast and press have an important role to play. He can have an assurance today that the Government, working in support of the Trust, are trying to ensure that the BBC goes back to being a global player in terms of highly respected journalism, including investigative journalism.
John Mann (Bassetlaw) (Lab)
How can the BBC move on unless and until Lord Patten is sacked?
Maria Miller
The hon. Gentleman wants to ensure that the BBC can move on from the situation it is in today, but perhaps he needs to join me in looking at the outcome of the three ongoing reviews before he calls for further changes.
Mr Speaker
Order. I am keen to accommodate remaining colleagues as there is but a sprinkling of them.
Mr Speaker
Order. Mr Johnson, you can take your seat and be comfortable. Brevity would assist us in this process. You can rise again now.
Gareth Johnson
There is no doubt that “Newsnight” broadcast a car crash of a television programme or that changes are needed at the BBC, but does the Secretary of State agree that it would be a mistake to use the problems emanating from that “Newsnight” programme and the current difficulties at the BBC to rubbish everything it does and all it stands for?
Maria Miller
My hon. Friend says that it is important to value the wide cross-section of things that the BBC does. He is right to do that, but it is also right to ensure that such an important institution in this country has the right management structures in place for people to have full confidence in it.
Mr Peter Bone (Wellingborough) (Con)
Is not the hon. Member for Bassetlaw (John Mann) right? Has not the problem at the BBC been going on for a long time, and has not the wrong person been forced out? Should it not have been the chairman of the Trust?
Maria Miller
I think my hon. Friend would have to agree that what we want now is a solution to the situation we are in. It is clear to me that we need to look at the factual evidence coming out of the reports that have already been commissioned. That is the most important thing we can be doing here and now.
Glyn Davies (Montgomeryshire) (Con)
The BBC is an institution of world renown that is respected in every corner of our world. Of course when there is failure and wasteful pay-offs they must be acknowledged, apologised for and put right; but does my right hon. Friend agree that it is much in the British national interest that the current crisis should be dealt with in a reasoned, balanced and proportionate way, without inflicting long-term damage on the BBC?
Jason McCartney (Colne Valley) (Con)
It is clear that a great number of people are busy grinding their axe on this issue. I personally hope that the BBC can get back to doing what it does best: quality programming and world-leading journalism. However, so that more funds from the licence fee payers are not diverted away from that and so they do not have to pay twice, will my right hon. Friend join me in suggesting that some of the outgoing director-general’s pay-off could be set aside for—I would not want to prejudge anything—any future payments that might have to be made?
Maria Miller
All these are things that I am sure the Trust and the executive will be looking at.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Does my right hon. Friend agree that quite frankly the BBC has shown itself always to be in contempt of this place? I remember when we first came here we had several debates about a lack of funding for local radio because of the freeze in the licence fee, yet Jeremy Paxman himself said yesterday that too much money is being put into middle management and not journalism. Will she ensure that the BBC gets back to doing journalism, rather than trying to beat the Government with a stick all the time?
Maria Miller
My hon. Friend says that we need to ensure that the BBC acknowledges the role of Parliament. I am sure that is absolutely right, although I am sure that we cannot stop the BBC occasionally wanting to ensure that it holds us to account as well.
Neil Carmichael (Stroud) (Con)
We all want a respected and independent BBC, so does the Secretary of State agree that although stability is important, so too would be change in middle management and editorial control?
Maria Miller
All these things are being looked at by the BBC in its overhaul of the way it works. I would urge Members to look at the important reviews being undertaken and ensure that when they are brought forward, we look at them in detail.
Dr Sarah Wollaston (Totnes) (Con)
I hope that “Newsnight” is back tonight, slowly turning politicians on the spit; but although the BBC can be held accountable in a court of law for its outrageous and devastating slur against an innocent man, the hon. Member for West Bromwich East (Mr Watson) cannot. Does the Secretary of State agree that he should have been here this afternoon to make an apology?
Maria Miller
I am sure these are things for the hon. Member for West Bromwich East (Mr Watson) to think about himself, but I fully understand the point my hon. Friend makes.
David Morris (Morecambe and Lunesdale) (Con)
A lot has been said in recent weeks about pay at the BBC, but anybody who has ever tried to ask a question about the BBC at the Table Office will know that it is near enough impossible. In the collegiate spirit of the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman), does the Secretary of State not think it time to reform some of the BBC’s archaic ways and allow Members of this House to find out exactly what is going on there, so that perhaps a lot of the debacles we have seen over the past few weeks will not happen again?
Maria Miller
The ability to scrutinise the BBC has been strengthened under this Government; my hon. Friend asks whether we should go further. Clearly all of us in public office—indeed, all public institutions—have transparency and scrutiny as our everyday business, and I think that goes for every single public organisation.
Justin Tomlinson (North Swindon) (Con)
If other media sources mess up, we can stop paying or switch off, forcing them to change. However, in the case of the BBC we must continue to pay. When will that change?
Maria Miller
I am sure that that will always be an issue to be raised in the Chamber, and we obviously consider it when the time comes for the charter to be reviewed.
Mr Philip Hollobone (Kettering) (Con)
Licence fee payers in Kettering and, indeed, throughout the country face a criminal sanction if they fail to buy their television licences. Is it not clear that the BBC is being far too liberal with licence fee payers’ money, whether it is spent on low-tax contracts for overpaid presenters or the awarding of twice the amount of severance pay that should be awarded? Given that Lord Patten, as chairman of the Trust, has presided over the appointment of a clearly unsuitable person and then presided over his departure with twice the severance pay that he should have received, is it not time for the chairman himself to go?
Maria Miller
My hon. Friend is right to suggest that it should be possible to hold every public organisation to account for the way in which it uses money. I remind him that the National Audit Office is empowered to examine value-for-money issues of that kind. However, I think that at this point it should be possible for there to be a period of calm within the BBC, so that it can establish the facts and the problems that it faces and introduce meaningful reforms.
Mr Speaker
I thank the Secretary of State and colleagues for their co-operation, which meant that every Member who wanted to take part in that series of exchanges was able to do so.
Abu Qatada
(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for the Home Department (Mrs Theresa May)
With permission, Mr Speaker, I shall make a statement about a court ruling on Abu Qatada.
Earlier today, the Special Immigration Appeals Commission upheld Abu Qatada’s appeal against his deportation. I hardly need to tell the House that the Government strongly disagree with that ruling. Qatada is a dangerous man, a suspected terrorist who is accused of serious crimes in his home country of Jordan. The British Government have obtained from the Jordanian Government assurances not just in relation to the treatment of Qatada himself, but about the quality of the legal processes that would be followed throughout his trial. We will therefore seek leave to appeal against today’s decision.
It is important to note that SIAC ruled that the Jordanian Government
“will do everything within their power to ensure that a retrial is fair.”
The court said that
“the Jordanian judiciary, like their executive counterparts, are determined to ensure that the appellant will receive, and be seen to receive, a fair retrial.”
SIAC also said that
“if the only question which we had to answer was whether or not, in a general sense, the appellant would be subjected to a flagrantly unfair retrial in Jordan, our unhesitating answer would be that he would not.”
Those words demonstrate the extent of the co-operation between the Jordanian and British Governments in the assurances that we received.
The House will remember the ruling by the European Court of Human Rights in January that Qatada could not be deported because of the risk that evidence obtained through the alleged mistreatment of two co-defendants from previous trials might be used in a new trial. I still believe that that ruling was wrong, but since then the Jordanian Government have provided the British Government with further specific assurances and information about the quality of any trial that Qatada will face, and the assurances directly address the issues raised by the European Court.
First, the state security court, which would hear Qatada’s case, is not a quasi-military court, as Strasbourg suggested, but a legitimate part of the Jordanian legal system that considers criminal cases. Moreover, the Jordanian Government have promised to ensure that Qatada’s case would be heard by civilian, not military, judges.
Secondly, on his return to Jordan, Qatada’s conviction in absentia would be quashed. He would be detained in a civilian detention centre, open to international inspection; he would have access to defence lawyers, who would be present during any questioning; and he would have the opportunity to make a fresh statement on his involvement in these cases.
Thirdly, while Qatada’s co-defendants from previous trials would be compelled to give evidence, they are both now free men, so we can be confident that they would give truthful testimony. SIAC also agreed that Qatada’s lawyers would be able to cross-examine those men during his trial. The Jordanian expert witness told SIAC that their evidence would anyway no longer be admissible, although the absence of case law and other witness statements meant that SIAC could not be sure that that was the position.
In addition, torture has been illegal in Jordan since 2006, and last year the Jordanian constitution was amended to make it clear that not only is torture forbidden, but
“any statement extracted from a person under duress...or the threat thereof shall neither be taken into consideration or relied on.”
That is a direct quotation from article 8.2 of the Jordanian constitution.
Despite these assurances, despite the determination of the Jordanian Government and judiciary to allow Qatada a fair trial, despite the change to the Jordanian constitution that expressly prohibits torture and the use of evidence obtained by torture, in the absence of clear case law, Mr Justice Mitting still found in Qatada’s favour. In doing so, we believe he applied the wrong legal test. But as a result of that decision, Mr Justice Mitting has also ruled that, from tomorrow, Qatada will be granted bail, subject to a 16-hour curfew. In addition, Government lawyers are arguing for the most restrictive bail conditions possible, and those conditions will be published by the court in the morning.
It is deeply unsatisfactory that Abu Qatada has not already been deported to Jordan. Successive Governments have tried to remove him since December 2001. He has a long-standing association with al-Qaeda. British courts have found that he
“provides a religious justification for acts of violence and terror.”
In Jordan, he has been tried and found guilty in absentia of planning to attack western and Israeli targets.
It is also deeply unsatisfactory that the European Court of Human Rights continues to move the goalposts for Governments trying to deport dangerous foreign nationals. The Court has long-standing case law in relation to article 3 of the European convention prohibiting torture and inhuman or degrading treatment, and successive British Governments have secured deportation with assurance agreements with other Governments, so deportations can proceed in accordance with the law, but the Court’s unprecedented ruling in January in relation to article 6—the right to a fair trial—has added yet another barrier to deportation.
Notwithstanding the fact that I still believe that the European Court’s ruling was wrong, I also believe that we have obtained from the Jordanian Government the information and assurances that would allow us to deport Qatada in compliance with that ruling and the law. That is why we disagree with today’s decision, and that is why we are seeking leave to appeal. The Government have been doing everything we can to get rid of Abu Qatada, and we will continue to do so. I commend this statement to the House.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
This is an extremely serious and worrying judgment that means that, from tomorrow, Abu Qatada will be back on Britain’s streets. People across this country will be horrified to learn that that is the case. It also completely contradicts the Home Secretary’s assurances to this House that she had the right legal strategy and evidence to get Abu Qatada deported to Jordan. The information from security experts, the Home Secretary and judges and the courts is that this is an extremely dangerous extremist who is a threat to national security. We all want him to be deported to stand fair trial abroad as soon as possible, and to be held in custody in the meantime to keep people safe.
The Home Secretary is right to appeal against this judgment as every avenue to secure Abu Qatada’s deportation must be pursued. However, there are some very serious questions that now need to be answered about the Home Secretary’s strategy to get this deportation in place and about the action she is now taking to keep the public safe.
The Home Secretary told us in April that the best way to deport Abu Qatada was not to appeal against the European Court judgment, but to rely on evidence from Jordan in the British immigration courts, and she gave very strong assurances to Parliament and the public that Abu Qatada would be quickly removed from this country. In April she told us that
“today Qatada has been arrested and the deportation is under way.”
She said:
“I am confident of our eventual success”
and
“I believe that the assurances and the information that we have gathered will mean that we can soon put Qatada on a plane and get him out of our country for good.”—[Official Report, 17 April 2012; Vol. 543, c.173-178.]
Far from being put on a plane, he is soon going to be out on our streets, and if the Home Secretary’s appeal fails, he will be a free man.
It is clear now that all the Home Secretary’s promises and assurances were overblown and her strategy has fallen apart as a result of this decision. Like her, I am concerned about the SIAC conclusion given the assurances Jordan has provided, to which she rightly referred. She also rightly referred to the SIAC view that Abu Qatada will not be subjected to “a flagrantly unfair retrial”, and that is why we believe he should be deported. However, the immigration court also makes it clear that it is bound by the European Court judgment:
“all that we can do is to return to the basic Strasbourg test: has the Secretary of State established that there is not a real risk that the impugned statements will be admitted probatively? To that question…the answer must be negative”.
It is clear that the court believes there is a new test established. The Home Secretary blames that European Court judgment and says she disagrees with it, so why on earth did she not appeal against it when she had the chance to do so, and as we urged at the time?
Secondly, what is the Home Secretary now doing to get that deportation back on track? We support the appeal. We hope she will be successful in arguing that the wrong legal test has been applied, but that is not enough. Has she started further discussions with Jordan? Has she put her junior Minister straight on a plane? The immigration court has said that what it needs now is a
“change to the Code of Criminal Procedure”.
What is she doing to pursue that, or other alternatives that might overturn that court decision?
Thirdly, what is the Home Secretary doing to keep the public safe in the meantime? Tomorrow, Abu Qatada will be released on bail. Is she preparing an application for a terrorism prevention and investigation measure? That would be weaker than the control orders she chose to abolish. If her appeal fails, she will need to take further action. Under her new system of TPIMs, he will still be able to meet contacts in London, use his mobile phone, have access to the internet and only have his movement restricted overnight. We have asked her about that repeatedly, but will she please now look again at her decision to water down counter-terror powers in the light of this case?
This judgment overturns the Home Secretary’s strategy to get Abu Qatada deported and to keep him in custody in the meantime. Her confidence and complacency have proved to be a mistake. There has been a catalogue of confusion and mistakes on Abu Qatada, including the Home Secretary getting basic dates wrong earlier this year. There is cross-party agreement on the importance of deporting Abu Qatada and protecting the public. We cannot afford further confusion and mistakes. The Home Secretary needs to take urgent action now to keep the public safe, and get this deportation back on track.
Mrs May
The shadow Home Secretary made a number of points, some of which, I have to say, were either wrong or irrelevant to what we have heard today. She seems to be trying to argue that the Government have not been doing enough to deport Abu Qatada. I can assure her and the whole House that, if it was the case that this was one of those situations where it was just a question of a decision by the Home Secretary, Abu Qatada would have been on the plane on 12 May 2010. However, it is not that simple and we have to work in accordance with the ruling of the courts.
The work that we have undertaken with the Jordanians, which she referred to and seemed to brush to one side as if it was nothing, is unprecedented. The security Minister visited Jordan; I visited Jordan; and the Prime Minister has raised the issue with the King of Jordan. We have secured information and assurances that I still maintain should enable us to deport Qatada. Although the right hon. Lady was dismissive of those assurances, I will remind her, as I said in my statement, of what Mr Justice Mitting said about them. He said that the Jordanian Government
“will do everything within their power to ensure a retrial is fair.”
He continued:
“The Jordanian judiciary, like their executive counterparts, are determined to ensure that the appellant will receive, and be seen to receive, a fair retrial.”
SIAC stated that
“if the only question which we had to answer was whether or not, in a general sense, the appellant would be subjected to a flagrantly unfair retrial in Jordan, our unhesitating answer would be that he would not.”
The right hon. Lady asked whether we will continue our negotiations with the Jordanians. We are very grateful for the significant assurances the Jordanian Government have already provided. Of course, our work with the Jordanians will continue in the light of today’s judgment. The Jordanian Government put out a statement earlier today, which said:
“We understand there will be an appeal and accordingly we will work with them”—
that is, the UK Government—
“to be able to bring him back to justice here in Jordan. Concerning the fear of a fair trial for him—there were guarantees for the British government on that, but also our constitution and our judicial system guarantees him that.”
I am grateful to the Jordanian Government for that support.
The right hon. Lady raised the issue of bail conditions. Abu Qatada will be subject to a 16-hour curfew. Other conditions will be determined by the court and announced tomorrow. I believe that a 16-hour curfew is as strict as the strictest of control orders, so I am afraid that what she says is not the case, and she needs to look at that issue again.
The right hon. Lady referred to the new test and to the relative merits of the article 3 and article 6 issues. Those are different matters: Governments have for a long time been able to seek assurances about article 3 —that process is mature and has existed for many years—whereas the need for assurances about article 6 emerged only because of the European Court’s unprecedented judgment early this year.
The right hon. Lady asked whether it would have been better had we referred the case to the Grand Chamber of the European Court. On that, she is wrong. Her argument seems to be that the European Court—the very court that has caused this difficulty by setting up a new barrier to deportation—is the solution to the problem. Not only is that palpably ridiculous, but an appeal to the Grand Chamber would have risked our wider deportation policies—[Interruption.] I suggest that she listens to this point. An appeal would also have made it harder to deport further terrorists, had we lost the appeal. It would have been unwise, as well as fruitless.
In April, and again today, the shadow Home Secretary told the House:
“We all want Abu Qatada deported as soon as possible, under the rule of law”.—[Official Report, 19 April 2012; Vol. 543, c. 508.]
Unless she is prepared to break the rule of law, she has no solutions other than what the Government have already done. I suggest that, instead of trying to score a political hit, she supports the Government, is straight with the public and supports us in what we are doing to deport Abu Qatada.
Mr William Cash (Stone) (Con)
The Home Secretary will recall that she has herself urged the repeal of the Human Rights Act 1998. In the light of these events, is it not now time to get on with this urgently? In that way, we will be able to protect not only the public from the likes of Abu Qatada but those alleged terrorists who deserve a fair trial. Let us give them a fair trial, legislate in this country and work out our own answers to these questions, rather than leaving it to the Strasbourg Court.
Mrs May
I am tempted to refer my hon. Friend to the answer I gave on this issue in my last statement on human rights, because I am afraid that I am not going to depart from the answers I have given him in the past. I have made clear my position on the Human Rights Act. Work is being done on it, including by the commission looking at the possibility of a British Bill of Rights in line with our human rights requirements. That commission will report in due course. On the operation of the European Court, as he knows, we have already taken steps to ensure that the Court focuses on the complex points of law that it was originally set up to address, instead of becoming just a court of appeal in so many cases.
Keith Vaz (Leicester East) (Lab)
The whole House will share the Home Secretary’s disappointment that this matter has gone on for seven years and cost the taxpayer £1 million in legal aid, and that yet again the silks of the Home Office appear to have been outwitted by a small north London firm of solicitors. I know that she has worked hard with the Jordanians—we are grateful for that—but the Jordanian Government are the key. I understand that the king is due here on 21 November. Is that an opportunity to ask him to do what the Court has suggested, which is to strengthen and change the Jordanian criminal code? That appears to be the only obstacle to ensuring that Abu Qatada goes back. The assurances have been accepted, but I understand that the structure of the criminal code is the main problem.
Mrs May
The right hon. Gentleman is right. Justice Mitting made several references to the criminal code and to the operation of the court of cassation. He is also right that the king will be in the UK shortly. We will work with the Jordanian Government across all parts of our representations in Jordan to ensure that we get the outcome that we all want, which is the deportation of Abu Qatada. I assure the right hon. Gentleman that we will consider every avenue to do that.
Sir Edward Garnier (Harborough) (Con)
I can see that my right hon. Friend is not pleased with the commission’s decision, but she stopped just short of personally abusing the judge, for which I am grateful to her. I assume that tomorrow morning lawyers instructed by her Department will be making an application for an expedited appeal hearing, and that the points she made in her statement are precisely those that will be made in the application.
Mrs May
Yes. I thank my hon. and learned Friend. He is right. The judge made his judgment, and we disagreed with it. Of course, we are disappointed; we think it is wrong, and that is why we will appeal. We believe that there is a point of law on which it can be appealed, and will look to expedite it.
Hazel Blears (Salford and Eccles) (Lab)
A very dangerous man is likely to be walking the streets of this country by tomorrow morning, and the public will simply not understand what has gone wrong. Indeed, I myself find it hard to believe that, despite having got the constitution of Jordan changed and the law changed, we are still unable to convince our own courts that those changes to the constitution and the law and the other assurances are sufficient to guarantee a fair trial. What more can be done to ensure that this man can be deported as a matter of urgency? Our legal system will find itself in a ludicrous position if this situation is allowed to go on for a moment longer.
Mrs May
The right hon. Lady is right. We are all deeply frustrated by the decision, given the strong assurances that we have received that Abu Qatada would receive a fair trial across a wide range of aspects. We believe that a point of law has been misinterpreted, and that it is therefore possible for us to appeal. We are asking leave to appeal; that is the first thing we can do. We are also talking to the Jordanian Government about what other avenues might be open to us. Ultimately, however, the problem is that the bar has now been set extremely high by the European Court, and it was that decision, which moved the goalposts, that made it harder for decisions to be made in the British courts.
Dr Julian Huppert (Cambridge) (LD)
What steps has the Home Secretary taken recently to investigate whether Abu Qatada could be charged in this country?
Huw Irranca-Davies (Ogmore) (Lab)
The failure to secure the deportation of Abu Qatada is a massive disappointment, but the public’s mind will now turn to the public safety issues involved. Will the Home Secretary tell the House what specific measures will no longer be available to her when Abu Qatada steps out tomorrow morning, now that we have done away with the control order regime?
Mrs May
The hon. Gentleman’s question is misguided. We have submitted our case this afternoon, and Home Office lawyers will be arguing in court tomorrow about the bail conditions. It has always been possible to have stricter conditions under bail than under control orders. The question is therefore what bail conditions will be set, and we will argue for the strictest possible ones.
Mark Pritchard (The Wrekin) (Con)
Of course, Mr Justice Mitting does have form in this area, not only with Abu Qatada but with Abu Hamza. Abu Qatada will be laughing in his prison cell right now, and in his luxury flat—no doubt paid for by the taxpayer—tomorrow. What further discussions can the Home Secretary have with the Jordanian authorities to ensure, in the light of the European Court of Human Rights’ second part judgment on evidence obtained by torture, that the Jordanian Government can satisfy not only SIAC but the ECHR and the British Government?
Mrs May
We are pursuing all avenues of discussion with the Jordanian Government to see what can be done to address the important point that the judgment has raised. My hon. Friend referred to Justice Mitting. I would point out that, although I obviously disagree with the judgment today, Justice Mitting has given a number of judgments favourable to the Government in deportation cases, so I suggest that my hon. Friend take a more rounded view of the judge’s decisions.
Paul Goggins (Wythenshawe and Sale East) (Lab)
The Home Secretary has highlighted the contradictions in the SIAC judgment, and she is right to seek an appeal. Members on both sides of the House are horrified at the prospect of this man walking freely around the streets of London, or indeed anywhere else in the country. Does she propose to provide further information to the Court of Appeal—perhaps, for example, in the form of a request for a personal appearance by the Jordanian ambassador—to make it absolutely clear that the assurances that she gave to SIAC can be relied on?
Mrs May
Obviously, we will look at every avenue that it would be appropriate to follow in order to uphold our case and to get what we all want, which is the deportation of Abu Qatada. If we look at the judgment, however, we can see that SIAC has been very clear about the vast majority of assurances in relation to the fair trial that Abu Qatada would receive, to his personal treatment, to his ability to have access to defence lawyers and so on. The problem lay with the one point about the admissibility of evidence and, even in that regard, the judgment refers to the fact that there would be the possibility of cross-examination in relation to such evidence. Justice Mitting still came to this decision, however. We will appeal it, and we will fight our case as strongly as we can.
Mr Julian Brazier (Canterbury) (Con)
Does my right hon. Friend agree that the concept of the rule of law, which this country played such a large role in developing, essentially involves a balance between the legislative, executive and judicial branches of the constitution, and that the combination of a European institution, which cannot be reformed by anybody, and a philosophy that is increasingly prevalent among our own courts, which imports ideas from outside British common law and outside statute, is undermining the confidence of the public in the rule of law in this country?
Mrs May
My hon. Friend has raised issues about which he has spoken on many occasions in the past, as have a number of my right hon. and hon. Friends. What the public want is to see Abu Qatada deported. We want to see Abu Qatada deported, and we are going to do everything we can within the rule of law to achieve that. It is still open to us to ask leave to appeal. We are doing that, and we will fight for that as hard as we can. We are doing everything in our power, working with the Jordanian Government, to ensure that we can bring about what the public want, which is the deportation of Abu Qatada.
Alison Seabeck (Plymouth, Moor View) (Lab)
My right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) highlighted some of the confusion that has led to Abu Qatada still remaining in the UK. However, one issue the Home Secretary raised was the weight given in the ruling to case law relating to Jordan. She also talked about agreements not being reached with other Governments. Can she say whether there is any precedent in any of those other cases where case law was not in place, but where deportations have happened?
Michael Ellis (Northampton North) (Con)
Bearing two things in mind—that the British Government have clearly taken unprecedented steps and bent over backwards to try to facilitate the court’s wishes in these matters; and that the judge indicated in his ruling that he did not feel that there would be an unfair trial in Jordan—are there not some inherent and unhealthy contradictions in this judgment, which clearly merit the strong and robust appeal that my right hon. Friend has indicated she will pursue in the higher courts?
Mrs May
I thank my hon. Friend for that contribution. With his legal background, I am sure he will have cast his eye over the judgment to reach exactly the point he made. We feel that there is an opportunity to appeal and that there are points of law on which we can appeal. That is why we will be seeking leave to appeal to the Court of Appeal with the strongest possible case we can put forward.
Jeremy Corbyn (Islington North) (Lab)
Clearly, the use of torture is illegal in Britain and the use of evidence obtained under torture is similarly illegal in this country. Does the Home Secretary not think that we would all be much better served if other countries, including Jordan, signed up to the UN convention against torture, which would make it illegal for them to use torture or any evidence obtained under it from any other jurisdiction? Until that day comes about, it is going to be difficult to deport people from European jurisdictions to those that have not signed up to the UN convention.
Mrs May
The whole point is that Jordan has made torture illegal. It has been illegal since 2006, and the country specifically changed its constitution last year to make it clear not only that torture was forbidden, but that
“any statement extracted from a person under duress…or the threat thereof shall neither be taken into consideration or relied on.”
That is from article 8.2 of the Jordanian constitution. Part of the issue in Justice Mitting’s judgment today is that that constitutional change took place last year; there is no case law that shows the operation of that constitutional change.
David Morris (Morecambe and Lunesdale) (Con)
I have been looking at Twitter as we have been speaking, and it is obviously a highly contentious issue, as all Members agree. We want to see the back of this man, but it seems impossible to get rid of him. Without wanting to pre-empt the tabloid press tomorrow, are there any contingencies in place to try Qatada here? Is that possible in any way, shape or form, or could it be done in Europe, leaving Europe to pick up the bill for it, as this is costing a fortune? This is a question not from a legal person, but from a lay person who is also a Member of Parliament.
Rehman Chishti (Gillingham and Rainham) (Con)
Can the Home Secretary clarify that stringent bail conditions will be applied similar to those previously used when Abu Qatada was on bail, which meant that he was unable to commit further offences?
Mrs May
We are certainly arguing for the strictest possible bail conditions. Justice Mitting has already set the curfew at 16 hours, which is less time than when Abu Qatada was previously on bail. We will find out tomorrow morning what the full conditions are, but we will certainly be arguing for the strictest possible conditions.
Jason McCartney (Colne Valley) (Con)
I apologise for asking exactly the same question I asked earlier this year, but it is on behalf of many of my constituents who will be totally perplexed by this situation. What would the sanctions be if we prioritised national security and just put Abu Qatada on a plane back to Jordan?
Mr David Nuttall (Bury North) (Con)
Can the Home Secretary confirm that until the European Court of Human Rights interfered and stopped Abu Qatada’s deportation last January, British courts and British judges had always agreed with the Government that he should be deported?
Mrs May
My hon. Friend is right: Abu Qatada had taken his appeal through all levels of the courts here in the UK, and at every level it had been found that he could be deported. It was the appeal to the European Court that prevented his deportation, and although today’s decision is one of a British court, it has been taken against the background of a very high barrier to deportation that has now been set by the European Court.
Mr Peter Bone (Wellingborough) (Con)
I have listened to an hour of excuses for why we cannot deport this man. The Home Secretary wants to deport him; the shadow Home Secretary wants to deport him; the Supreme Court says he can be deported; the British people say he should be deported: just deport him, and worry about the consequences afterwards. Does the Home Secretary agree?
Mrs May
I think we have had this conversation before, or a very similar one, and I repeat what I have always said: it is my intention to do everything in the Government’s power to deport Abu Qatada within the rule of law. It is important that Ministers standing at this Dispatch Box commit themselves to operating within the rule of law.
Dr Julian Lewis (New Forest East) (Con)
Do special circumstances apply in this case, or is a judgment of this sort sending a signal to any terrorist, on the run for crimes committed in any country that may not have a judicial system fully recognised as right up there with western standards, that they just have to make a beeline for the United Kingdom and they are safe, because nobody can deport them?
Mrs May
Judgments at the European Court have been making it harder to deport foreign nationals who are terrorist suspects or criminals, but I do not believe that this sends the message that my hon. Friend believes it does. There are some very particular aspects of this case. A trial in absentia took place regarding Abu Qatada, and evidence was allegedly obtained from mistreatment or torture, given by others in that trial in absentia. So there are particular aspects that would not read across to other cases, but that is precisely why I think it was right that we did not risk losing our deportation with assurances, which we could have, had we appealed to the European Court. There are other terror suspects whom we will be able to deport under our deportation with assurances that will not be affected by this judgment, but could have been affected by a judgment by the European Court to overturn those assurances.
Mr Philip Hollobone (Kettering) (Con)
My constituents in Kettering will be horrified at today’s judgment on Abu Qatada, disgusted that this dreadful man could be at liberty tomorrow, and appalled at the rising cost of legal aid for him to defend his cause. Does my right hon. Friend know how much money has been spent on legal aid in his defence, and is there no limit to the amount of money taxpayers are being asked for to fund his case?
Mrs May
The amount of legal aid available has been a matter for the Legal Services Commission. I am not aware of the complete sum that it has allowed in relation to this. I understand my hon. Friend’s and the public’s concerns, which is why, in a more general sense, setting aside this case, we want to ensure that we can deport and extradite people more quickly than we can do today, so that we do not have people sitting in these sort of circumstances.
May I correct something I said earlier in response to another of my hon. Friends, Mr Deputy Speaker? I believe I said that at every stage the British courts previously had found in favour of deportation. I understand that under the previous Government, at one stage, the Court of Appeal found against them on deportation, but that then went to a higher court, which found in favour of deportation. There was one judgment against deportation.
Glyn Davies (Montgomeryshire) (Con)
The content of today’s statement will come as a huge disappointment to hon. Members across this Chamber and to the constituents we represent. I had reassured my constituents that this man would be deported. We know that the law has been changed in Jordan, and I told my constituents that it had outlawed evidence gained by torture and that the deportation was very likely to go ahead. Can the Home Secretary tell me what I should say to my constituents? What certainty can I give them that this man, who should not be walking our streets, is going to be deported?
Mrs May
My hon. Friend can tell his constituents that this Government are as determined as they ever have been to deport Abu Qatada and that this Government are doing everything they can to ensure that we achieve that aim. We are at one on this: we want Abu Qatada out of this country.
Point of Order
Dr Julian Lewis (New Forest East) (Con)
On a point of order, Mr Deputy Speaker. I am sure that anyone who cares about the welfare of members of the armed forces will have been shocked by the Armistice day story in yesterday’s The Sunday Telegraph about a special forces sergeant who has been sentenced to a year and a half in prison for having kept a presentation weapon given to him by the Iraqi special forces five years ago. Has there been any indication from a Defence Minister that a Defence Minister will come to this House to make a statement soon on the outrageously disproportionate and unjust nature of the sentence that has been passed on this gentleman, who has spent his life fighting people from al-Qaeda, not proselytising for them?
Mr Deputy Speaker (Mr Nigel Evans)
Thank you for that point of order, Dr Lewis. I have not been notified that a Defence Minister, or indeed any other Minister, wishes to make a statement today on this matter or on any other. But should that change, the House will be informed in the usual way.
Opposition Day
Ash Dieback Disease
(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
18:59 - The House divided: - Ayes: 204 / Noes: 271 - Question accordingly negatived.
Mary Creagh (Wakefield) (Lab)
I beg to move,
That this House notes that ash dieback, which could affect 80 million native ash trees, has been identified in 115 sites; further notes that Government ministers were informed of the disease on 3 April 2012; regrets that the public were not informed about the disease this spring and that a thorough survey of woodland was not carried out this summer; further regrets that the Secretary of State for Environment, Food and Rural Affairs has circulated a briefing to hon. Members from the Conservative and Liberal Democrat parties, but not the Opposition; recognises that 530 staff posts have already been cut from the Forestry Commission, including 38 posts in Forest Research which investigates tree diseases, and that the Forestry Commission budget will be cut from £47.5 million in 2010-11 to £36.2 million in 2014-15; calls on the Government to issue clear advice to tree growers and the public as to the best way to prevent disease spread and to work with all hon. Members, including the Environment, Food and Rural Affairs Select Committee, as well as councils and other affected stakeholders to fight this disease and ensure that lessons are learned; and further calls on the Government urgently to assess whether the Forestry Commission has adequate resources to guarantee that there are enough Forestry Commission staff and scientists to carry out further tree health surveys and to commit to work with all stakeholders to overcome the environmental, economic and ecological impact of this terrible disease.
May I begin by saying what a disappointment it is to see that, once again, the Secretary of State for Environment, Food and Rural Affairs has delegated the challenge of explaining ministerial inaction on this disease to his colleague the Minister of State? I heard on this morning’s “Farming Today” that the Secretary of State was on a plane to China, yet Ministers were aware last Thursday that this debate was taking place. I believe it is a matter of courtesy to the House that Government business of this nature comes first. We wish him well on his trip to China, but we hope that he will, eventually, turn up in the House to tell us what he is doing.
The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)
I honestly think that if the hon. Lady believes that the Secretary of State should have cancelled a mission to the largest market in the world, where he is trying to promote British produce, in order to come to argue with her on her rather ridiculous motion today, her sense of priorities is very distorted indeed.
Mary Creagh
I will leave the public to decide whether flogging fromage to the Chinese is more important than explaining to the British people what action the Secretary of State is taking on a major environmental and ecological disaster that is unfolding on his watch. [Interruption.] I believe that “flogging fromage and fizz” are the words he used the last time he went off to France, so I am using his own words back at him. Clearly, it would be much more comfortable to be going off to China than to be in the hot seat, where the Minister of State finds himself.
The scale of the ash dieback emergency is now clear. It has been found in 129 sites in England and Scotland, including 15 nurseries and 50 recently planted sites. The most worrying discovery is that the disease is present in 64 woodland sites. That number will rise sharply as more trees are surveyed. Professor Michael Shaw from Reading university has described it as “catastrophic”.
Scientists believe that most of our 80 million ash trees will face a long, slow decline over the next 10 years. The tree that accounts for one third of our native broad-leaved woodland will all but disappear. A few resistant trees will survive and their seeds will be carefully stored to restock the forests when our children are already grown. Lichens, moths, beetles and bugs that rely on the ash’s alkaline bark will suffer. The 27 species of insects that depend on the ash as their sole food plant might become extinct. Plant nurseries and woodland owners will lose thousands of pounds as they destroy ash saplings, and the wood industry will suffer as wood prices rise. Timber that was planned for will not reach maturity. Chalara fraxinea, or ash dieback, will change our landscape for ever. It is an environmental, ecological and economic disaster.
Caroline Lucas (Brighton, Pavilion) (Green)
Does the hon. Lady agree that this Government’s preference for arguing that the primary reason for the spread of the disease is the wind rather than imports is politically convenient but not very accurate?
Mary Creagh
I do, and I shall expand a lot more on that later in my speech.
Mr David Ruffley (Bury St Edmunds) (Con)
On that point, the hon. Lady will be aware that in my part of the country, in East Anglia, the disease has been found in mature trees that we know have had no contact with nurseries that have imported ash plants. Wind-borne fungus is therefore certainly a possibility. In the interests of clarity and empirical evidence, will she acknowledge that that might be the case?
Mary Creagh
I am going on the empirical evidence, and I shall spend an extensive part of my speech reviewing the scientific facts, seeing how they have changed since they were first published last Wednesday—because they have—and going into great detail on that point.
George Freeman (Mid Norfolk) (Con)
Before the hon. Lady develops her theme of the Government’s having been caught short and not reacting properly, does she agree that the Department was alerted to the problem as far back as 2007, two years earlier than has been reported, and that the budget for studying tree disease was cut by more than half in real terms in the years leading up to 2010?
Mary Creagh
There has been confusion on both sides of the House about what the former Secretary of State, my right hon. Friend the Member for Leeds Central (Hilary Benn), who is in his place, did or did not do. He asked the Department for Environment, Food and Rural Affairs to do a thorough search of all the ministerial papers he saw on ash dieback, which has shown that he did not see the correspondence between the Horticultural Trades Association and the Forestry Commission about a possible import ban. The only mention of ash dieback was in a briefing note in February 2010, in which the disease was listed as absent from the country. The hon. Member for Mid Norfolk (George Freeman) chairs the all-party group on life sciences, so he should know that the way the disease has been discovered is still evolving.
In 2009, it was thought that the fungus that caused ash dieback was already present in the UK. It was only subsequently that a new virulent species causing ash dieback was discovered. The science changed in 2010, when a new pathogen, Hymenoscyphus pseudoalbidus, was identified as the fungus causing the disease. I advise all hon. Members to read an article by Andy Coghlan in the New Scientist of 31 October that gives the scientific chronology of the disease. I also have a copy of the scientific paper in Forest Pathology in which the change was first discovered, which was printed in 2011.
What did my right hon. Friend the Member for Leeds Central do? He published the “Forestry Commission: Science and innovation strategy for British forestry 2010-2013” on 1 April 2010. It stated:
“Over the next five years we will increase our budget for monitoring and biosecurity research particularly with regard to tree health to 15% of our research spend.”
Even as late as autumn 2011, the Forestry Commission pathology bulletin confirmed that Britain was clear of the pathogen.
Barry Gardiner (Brent North) (Lab)
The hon. Member for Bury St Edmunds (Mr Ruffley) made a fair point about the possibility of airborne transmission. Does my hon. Friend the Member for Wakefield (Mary Creagh) agree that there may be connectivity with nurseries to which seedlings were imported? It is quite possible that, over a year, there was airborne transmission to trees, as the hon. Member for Bury St Edmunds suggests, from those imported seedlings. That is not incompatible with his point.
Mary Creagh
It is much more likely that the disease spread from imported seedlings transplanted from nursery stock than that it blew in, on great gusts, over the North sea. We will examine that in more detail later. [Interruption.] Ministers can chunter; the science is not politically convenient for them, but we will stick to what continental scientists have discovered until those facts are disproved.
The disease was discovered in imported saplings in February this year. When did the public first hear that the infection was on UK soil? Was it in April, when Ministers were told that it had been discovered in a nursery? No. Was it in June, when it was discovered in newly planted sites, and there was increased risk to mature woodland, as the disease could blow in from those sites? No, it was not. We finally heard on 25 October, when the Secretary of State announced that he would ban ash imports during Department for Environment, Food and Rural Affairs questions in the House—a full eight months after the disease first appeared.
Ministers could have started the consultation on a ban back in April, instead of leaving it until the end of August. The question on everyone’s lips is: “Why didn’t they?” The Secretary of State told the House on 25 October:
“The minute we heard about this, we launched a consultation.”—[Official Report, 25 October 2012; Vol. 551, c. 1066.]
Does he understand that a consultation is not a ban? Why did Ministers keep the public in the dark? This really matters, because scientists have lost eight months in our fight against ash dieback, as the diseased leaves have already fallen. I congratulate the university of East Anglia on its ashtag.org app and website, but what a shame it did not know that there was a problem in April, when Ministers did. Ministers’ incompetence has meant that we are behind the curve of the disease’s spread. This matters because we, the public, who love our forests, may have unwittingly spread the disease from June to October, the main fruiting season for the fungus. Had we known in spring, we could have completed a comprehensive survey this summer, using public good will. Ministers’ incompetence has helped the disease spread and will cost the taxpayer money.
Alison Seabeck (Plymouth, Moor View) (Lab)
My hon. Friend is absolutely right about the need for public awareness. The nursery men—the people working closest to the new saplings coming in, and planting them out—say exactly the same: they were unaware. This is a very complex issue. Some 7,000 young saplings have been burned near Honiton, and the disease has turned up south-west of Exeter; we are really worried in the south-west. Should the Government not have given more information earlier?
Mary Creagh
If the Government had blown the whistle when Ministers first found out in April, the saplings would probably have been destroyed earlier, but nursery owners would not have lost the income that they spent over the summer tending and caring for those saplings, and they certainly would not have entered into any more contracts. The problem is that they have entered into contracts to buy from overseas, and that will be hugely problematic. Nursery owners have planted the tree seed and spent the money, and all those saplings will now be burned. Also, there has been unprecedented tree planting this year to mark the Queen’s diamond jubilee. That tree-planting effort by the nation to mark a very special event in the nation’s life could unwittingly have spread the disease, so Ministers’ incompetence has cost money.
I want to finish with a chronology of what happened. Even when the ban was announced, it was done quietly. The Minister of State, who is pretty heroic in these sorts of things—he gets all these battlefield commissions—was forced to come to the House to answer my urgent question. There had been no written statement from the Secretary of State and no oral statement. Why are the Government so keen not to talk about ash dieback?
On Friday 2 November, the Secretary of State convened Cobra to discuss the emergency response to ash dieback. That same day, a briefing letter went out—but only to Government MPs. My hon. Friend the Member for Ogmore (Huw Irranca-Davies) raised a point of order with the Speaker about this extraordinary behaviour. Does the Minister not think that, with a national emergency of this size and scale, her Majesty’s Opposition should be kept informed? Why was only one part of the House informed? Do our constituents not deserve to know what is happening to their trees? [Interruption.] I just want to finish this point about biosecurity. May I warn the Minister about the dangers of contradictory advice? The Secretary of State has advised people to wash their children and their dogs when they go to a wood to make sure that they do not transfer the disease to the next wood. On Monday 5 November, however, Martin Ward, chief plant health officer at DEFRA, contradicted him on the “Today” programme:
“It’s not a matter of scrubbing off all of the soil from boots. It’s just a matter of cleaning off the dead leaves…to stop the disease moving…from one site to another.”
Dr Sarah Wollaston (Totnes) (Con)
Has the hon. Lady looked at the map showing the distribution of Chalara? Is she suggesting that there are no imports in the south-west or anywhere in the west of the country? How else can she explain the distribution map and the epidemiology of the spread of Chalara? It is quite clear that she is just trying to make cheap political points. She needs to look at the map.
Mary Creagh
As a scientist, does the hon. Lady understand epidemiology? The dots are all different colours: the red ones represent mature woodlands, and there are others for trees planted out in newly planted sites and nursery sites. The ones in the south-west are in nursery sites: there are no red dots in the south-west, ergo the disease seems to have spread from—[Interruption.] My theory, and it has yet to be disproved—[Interruption.] No, I shall come on to that, but I wish to make progress. I shall explain it to the hon. Lady.
Mary Creagh
No, I shall make progress.
We had a 15-minute briefing from the Secretary of State last Wednesday, for which I am grateful, and we discussed the spread of the disease with Ian Boyd, DEFRA’s chief scientist. A document containing 10 key scientific facts was produced last Wednesday. Bullet point 10 said:
“Wind-blown spores may be dispersed up to 20-30 kilometres, (high confidence)”.
I was therefore surprised at the briefing to hear that the infection had blown in on the wind across the channel and the North sea, even though the channel is 30 km wide at its narrowest point. I was even more surprised, as the week went on, to learn that it had blown hundreds of miles across the North sea to infect mature trees in Northumberland and Scotland.
The key scientific facts document is quite clear:
“Longer distance spread occurs via infected plants or potentially via wood products”.
That would explain the infection in the south-west that the hon. Member for Totnes (Dr Wollaston) is worried about. However, it is politically inconvenient to have a disease which Ministers knew was in the country, with saplings left to infect their wild and mature cousins. I grew suspicious when I realised that the Forestry Commission's key scientific facts, published on Wednesday, changed over the weekend. Bullet point 10 now says:
“Wind-blown spores cause the disease to spread up to 20-30 km per year”.
The inconvenient fact that the wind blows the spores just 20 to 30 km has completely disappeared. A whole new fact, however, has emerged:
“On occasions, spores may disperse much further on the wind.”
However, unlike every other key scientific fact that is categorised as low, medium or high confidence, there is no scientific reference to back up this new scientific fact, because there is none. As yet, I have not seen any evidence to back up Ministers’ claims about the wind. The disease has moved slowly and predictably across Europe, yet now it has developed new powers to cross great seas on the wind.
Is an alternative scientific theory possible? Is it not possible that ash dieback has spread to mature trees in Northumberland and Scotland from the infected saplings that were planted out last winter and on which the fungus fruited this summer? It is certainly possible, and I would argue more probable than those gusts of wind.
Jim Shannon (Strangford) (DUP)
Nurseries have indicated that hundreds of thousands of saplings that they imported from Europe came in because of the “chaotic and unpredictable” system of grants for tree planting on the UK mainland. Is the hon. Lady aware of that? If so, does she think that the disease and the reasons for its spread go much deeper than they appear to do?
Mary Creagh
One can argue about the system for woodland grants, but we would argue that it may be much cheaper to grow the ash saplings abroad, which is perhaps one of the reasons landowners choose to buy them from abroad. It is also perhaps why the Horticultural Trades Association wanted the Government to regulate back in 2009, so that there was a level playing field in the industry and so that it did not impose its own voluntary moratorium, allowing others to import cheaper saplings and undercut the market.
What happens next? The Forestry Commission has conducted a tree survey over 29,000 hectares, an area the size of Wales. It has sampled four woodland sites in each 100 square kilometres, giving us a rough idea of where to look next for the disease. As the surveys continue this winter, more disease sites will be found. I have a number of questions for the Minister. First, will he now review the scientific advice he has been given on other tree diseases? Does he have any plans to restrict trade in other species of trees on a precautionary basis? Does his import ban apply to resistant strains of ash species, which are now present in Denmark and, I believe, Lithuania?
Secondly, have the detection and management of the disease been hampered by the cuts to the Forestry Commission? Its budget is being cut from £47.5 million in 2010-11 to £36.2 million in 2014-15. Some 530 staff posts have already been cut and seven regional offices closed. Thirty-eight posts have been cut in Forest Research, with another 22 earmarked to go. These are the scientists and experts who lead the fieldwork on tree health, and they are in the front line in our fight against this disease. Will the Minister review their posts? What assessment has he made of the impact of his Government’s cuts to the Forestry Commission on tackling tree disease?
Thirdly, in 2009, at the request of my right hon. Friend the Member for Leeds Central, the former Secretary of State, the Forestry Commission established a biosecurity programme board, bringing together the industry, NGOs, Forest Research, the Scottish Government, and the Food and Environment Research Agency. What has happened to that board? It appears to have met just twice—in November 2009 and July 2010. The minutes of the final meeting on the Forestry Commission website show that forestry staff had concerns about the Government’s publicity freeze and cancellation of much of the publication budget, yet I know from my discussions over the weekend that the board appears to have continued meeting informally. Was it affected by the re-organisation and cuts at the Forestry Commission?
The Secretary of State told the BBC last Friday that he is re-ordering his Department’s priorities and said:
“There will be some things we do in DEFRA now that we are going to have to stop doing.”
What are those things? And how does he know that not doing them is not storing up a fresh disease problem in the future in another area? Other areas of DEFRA will be quaking as they anticipate fresh cuts on top of the worst settlement of any Government Department.
What contact has the Minister had with councils that are in the front line of dealing with this disease? What advice has he provided to them about council parks? Should they be undertaking surveys of their own trees? The Local Government Association has informed lead officers, but nothing seems to be coming out of the Department for Communities and Local Government.
Graham Jones (Hyndburn) (Lab)
On that matter, I wrote to my local authority, Rossendale borough council, to which I had this reply:
“The council have not received any prior notification”—
this was last week—
“regarding the disease and only became aware of the issue when it was announced in the media last week.”
Is that not a shambles? Does my hon. Friend not find that staggering?
Mary Creagh
I find it amazing that a Department that is presumably present at a Cobra meeting to co-ordinate a national emergency response to a disease is not putting out any formal guidance to councils. Perhaps the Minister can explain that gross dereliction of duty.
Were Transport Ministers present at Cobra meetings? The Highways Agency is constantly planting new trees along its motorway network. What about Network Rail, which has been undertaking a tree-felling programme this summer along the east coast main line, perhaps unwittingly spreading the disease up the east coast? We need answers to these questions.
In conclusion, the British public care deeply about their forests. We saw that in the overwhelming opposition to the Government’s plans to privatise them last year. I am glad to see the right hon. Member for Meriden (Mrs Spelman) in her place; perhaps she can shed some light on some of the history of the disease. The forests now face a new and devastating threat from ash dieback disease. There is a bitter irony here: the Government who wanted to privatise the forests have now been forced to make further drastic cuts in order to fight tree disease. As the triennial review of Natural England and the Forestry Commission approaches, we will watch carefully to ensure that the Secretary of State does not embark on a further round of destabilising upheavals.
We await the scientists’ first report, which will be available by the end of November. We will support the Secretary of State when he does the right thing, but we will challenge him when we feel that he is taking a wrong turn. We will not be excluded from his decision making. This is a vital issue for the British countryside and for our natural environment. All parties must learn the lessons of this disease, slow its spread and safeguard our forests for the next generation to enjoy.
The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)
Earlier today I had an opportunity to see for myself the effects of Chalara fraxinea in woodland near Canterbury and to meet some of the 500-plus people who have worked around the clock to complete a survey on an unprecedented scale aiming to identify signs of the disease. I want to offer my sincere thanks to them all. They are not all Forestry Commission staff or employees of the Food and Environment Research Agency; a great many others have joined in and worked so hard to complete what has been a massive undertaking, including volunteers who have given up their time to help. As of today, the results of the survey show 155 cases of ash dieback caused by Chalara across Great Britain: 15 in nursery stock, 55 in recently planted sites and 85 in the wider environment. Further suspect cases are currently under investigation and we will continue to provide updates on confirmed cases on the Forestry Commission website.
I am grateful to the hon. Member for Wakefield (Mary Creagh) for giving me the opportunity to set out for the House the decisive action the Government have taken to tackle the threat from Chalara fraxinea and to lay to rest some of the myths she has perpetuated in recent weeks.
Graham Jones
The Minister said that he has received an assessment of the number of trees infected. Perhaps he could enlighten me on the answer I have received from Rossendale borough council. It states:
“Currently we are not aware of any infected trees in Rossendale. However, the announcement regarding the disease came when our ash trees had already dropped their leaves for winter and, therefore, it is not possible to identify symptoms positively until next spring at the earliest.”
Mr Heath
Clearly we need to educate the hon. Gentleman’s borough council a little more on the signs and symptoms to look for with regard to Chalara fraxinea. It is possible to see retained leaves that are diseased and lesions on the bark, as I saw this morning. Summer is not the only time of year when it is possible to see dieback. I understand that the borough council officials have been unable to see signs of Chalara in his area, but that is because we have found no signs of Chalara in the area either. It is a long way from the English channel.
Mr Heath
Thank you.
Ash dieback is caused by a fungal pathogen that has been present in Europe since 1992, when the disease was first discovered in Poland. Since then, it has spread to much of central and northern Europe. However, before 2010 the European scientific evidence indicated that the organism responsible for ash dieback was native in Great Britain. It was Hymenoscyphus albidus, which was drawn to the attention of the right hon. Member for Leeds Central (Hilary Benn) at the time. I understand perfectly his position at the time, because the advice was that it was unlikely to cause significant harm. That belief meant that it would not have been appropriate to use import restrictions to control the disease.
In 2010, new scientific evidence identified the pathogen that caused the disease, which was not known to be present in the UK. That meant that it was identified as a potential threat alongside many other potentially harmful organisms. In the light of that evidence, between 2010 and 2012 the Forestry Commission inspected ash trees across Great Britain—15,000 individual trees located in 8,310 groups. Only 103 trees were found to be suffering from disease, and in none of these was the cause identified as Chalara.
That position changed in February this year, when a routine check by Government plant health inspectors discovered Chalara in a nursery in Buckinghamshire. This finding was confirmed on 7 March, and the UK plant health authorities acted immediately.
Alison Seabeck
With the potential loss of a third of Plymouth’s ash trees, there is real worry about this. Given that the disease was beginning to be understood some time ago, what work was started on disease-resistant seeds and young saplings, and is that work ongoing, so that when, we hope, this moves on, we can start to replant?
Mr Heath
It is certainly ongoing; I will return to that shortly. What the hon. Lady must realise is that we did not believe that we had Chalara in this country. Indeed, there was some suggestion that our native ash was, in part, resistant to the disease. That might be one of the reasons the spread had not been observed until that point.
Alison Seabeck
In that case, given that the disease was present on the European continent, was any of that sort of work going on there? We may not have expected to have to think about doing it, but was it happening in Europe?
Mr Heath
The honest answer to the hon. Lady is that, surprisingly, very little work has been done on this. As she may imagine, we have reviewed all the scientific work that has been done across Europe, not only on pathogen identification but on silviculture, to see how to mitigate the effects of the disease. We have all been struck by how little work has been done and the great need for us better to understand the disease, how it develops, and how to develop proper resistance to it. She raises a perfectly proper point to which the answer, our scientists having reviewed all the literature and talked to their European counterparts, is that we are not as far advanced in our understanding as we perhaps ought to be given how long the disease has been endemic across the continent.
Barry Gardiner
The Minister is being extremely generous and courteous in giving way so often; I am grateful. He said that the first time the disease was positively identified was in April this year in stocks in a nursery. Can he therefore explain to the House, because this question is being widely asked, why it was not considered appropriate at that point to introduce a ban on imported ash seedlings? Many people look at this and say, “It was found in a nursery and we knew that these were imported seedlings, so why was the ban not put in place at that point?”
Mr Heath
The answer is that we do not import at that time of year and therefore no imports were coming in. The most important thing to do was to carry out a very detailed search as to where imports had taken place, going on from there to identify where sales and possible plantings had taken place so that we could identify any infected seedlings and have them destroyed. That was the thrust of what we were doing. As the hon. Gentleman is aware, we also then went to consultation on the import ban, but we needed to know exactly the extent of what was happening, and the time scale meant that there were no plantings going on at that time of year.
This calendar is very important to hon. Members’ understanding of exactly what has happened. For instance, a lot of people have the mistaken impression that we are now finding that the disease is suddenly spreading. It is not; it does not spread at this time of year because we are out of the sporulation season. We are identifying possible symptoms of disease, most of which have been there for a very long time—two years, three years, or perhaps more—in the trees in the wider environment that we had discovered to be infected. It is very important that people understand what is happening now.
Let me return to my point. When Chalara was discovered, additional resources were deployed to trace ash trees known to have been supplied from infected nurseries, and over the summer 100,000 young ash trees were traced and destroyed. In parallel, the authorities developed the pest risk analysis that was required to support the precautionary action taken and to justify continued intervention—that is part of my answer to the hon. Member for Brent North (Barry Gardiner). Such analysis was the basis for a fast-track consultation to strengthen evidence and seek views on an import and movement ban on ash trees. As I said, that took place outside the main planting season, but the industry took the sensible precaution of instituting a voluntary moratorium on imports of ash-planting material.
We can be reasonably sure—not absolutely sure—that no ash seedlings were imported during the summer, other than through very casual means such as if someone brought one back in their car boot. The hon. Member for Wakefield (Mary Creagh) asked me in an urgent question whether I could guarantee that no one had brought back an ash seedling in their car, but I am afraid I have not looked in every boot of every car, so I cannot give that guarantee. I can, however, give a reasonable assurance that commercial imports of ash seedlings did not take place during the summer.
Barry Gardiner
The Minister says that a ban on imports was not considered necessary because it was not believed that there would be imports at that time of year. Does he therefore accept that the horticultural trade and industry would have suffered no commercial detriment by the imposition of such a ban, and that prudence and risk analysis might have led him to do so?
Mr Heath
Again, I return to the fact that to impose a statutory ban, we must have evidence to suggest it is necessary. That is why we developed such evidence, which was put out in the consultation. The most important point is that plant importers recognised the potential damage the disease could do, and imposed a moratorium that stopped trees coming into this country over the summer. A statutory ban was not needed for that, but we ensured nevertheless that it was introduced at the earliest possible opportunity.
None of that activity was compromised by cuts to the Forestry Commission budgets, as the hon. Member for Wakefield suggested. Although its overall budget has taken cuts since 2010, funding for plant health has not been reduced. Indeed, a bigger share of the Forestry Commission’s budget is now dedicated to plant health than previously, and spending by the Department for Environment, Food and Rural Affairs in that important area has increased. The hon. Lady knows that to be the case because she asked questions and got answers, even if she is not prepared to accept them.
Angela Smith (Penistone and Stocksbridge) (Lab)
Extra costs will clearly be required to monitor and tackle this disease. Will the Minister confirm whether he is prepared to go to the Treasury for those extra resources, and that they will not be taken from elsewhere in DEFRA’s budget?
Andrew Miller (Ellesmere Port and Neston) (Lab)
May I ask the Minister to correct the record? Although it is true that the Forestry Commission programme shows an increased spend under the heading “tree health and biosecurity”, figures under the heading “tree breeding for increased resilience and improved markets” show a 52% cut over the lifetime of the review.
Mr Heath
The hon. Gentleman chairs the Science and Technology Committee, which I know will want to look at this issue in more detail. I invite it, however, to look at the totality of spend in this area, not all of which goes through the Forestry Commission—there are other heads. I hope that the hon. Gentleman will look at that spend, as I am sure he will, and come to an objective view about how much is being spent on this important matter.
On Friday 26 October, the consultation, which I mentioned, closed. It demonstrated overwhelming support for import and movement restrictions, and on Monday 29 October, my right hon. Friend the Secretary of State announced a ban on the movement of ash from anywhere that is not a designated pest-free area—I should point out that nowhere is labelled a designated pest-free area. There is now a criminal offence, carrying a maximum fine of £5,000.
On 24 October—during the consultation period—Chalara was confirmed in the wider environment in East Anglia. The trees had no apparent connections to nurseries. Since that finding, the Government have taken action on an unprecedented scale to tackle the problem. At the beginning of November, we initiated a rapid survey of the whole of Great Britain. More than 500 people worked around the clock to survey 2,500 10 km squares for signs of disease. That massive undertaking was completed by 7 November, and gave us an initial picture of the distribution of ash dieback caused by Chalara. We have also received valuable intelligence from organisations including the Country Land and Business Association and the Woodland Trust, which has mobilised its members to look for signs of the disease.
Jim Shannon
The Northern Ireland Assembly has adopted additional safeguards to ensure that there is no infiltration of ash plants. It has adopted a “Fortress Northern Ireland” approach—in other words, nothing gets in and nothing gets out. Perhaps that has happened in the past, but even with those strict rules and legislation, there is an outbreak in Leitrim in the Republic of Ireland. Will the Minister confirm and assure the House that every step is being taken to stop ash dieback in the whole of the United Kingdom of Great Britain and Northern Ireland, and that there is direct consultation with the Northern Ireland Assembly, the Scottish Parliament and the Welsh Assembly?
Mr Heath
I can indeed confirm that. Ministers or officials from all three Administrations have been involved in every one of our consultation meetings on the subject. We want to ensure that they have access to all the information we have, and that we have all the information they have. I ought to mention that we have been working closely with the Government of the Republic of Ireland, because we obviously need to co-ordinate our efforts to ensure that we understand how to treat cases, and particularly those in the wider environment, and how to preserve as far as possible the whole of the British Isles as a disease-resistant or disease-free area.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
One infected area is just a few miles north of my constituency. What work has been done to get an idea of the possible spread of the disease within urban areas, as well as in more rural and forested areas?
Mr Heath
We divided the country, including urban and rural areas, into 10 km grid squares. Every square where there is known to be ash trees has been examined, although there are only very few in some urban areas. Nevertheless, we have examined ash trees in all those areas, so the results of the findings cover the whole country, including urban areas. I am most grateful for the active interest of Scottish Government Ministers, who have been involved in our discussions from an early stage.
Angela Smith
I thank the Minister for giving way once again—he is generous with his time. He has spoken to the devolved Administrations, but has he consulted his counterparts in the Department for Communities and Local Government and spoken to the Local Government Association about the role of local authorities in tackling the disease?
Mr Heath
I can confirm what the hon. Lady asks—the DCLG and the LGA specifically attended Cobra meetings, so they are fully in the loop. We have given advice to the LGA for dissemination to local authorities, which understand their responsibilities. The Highways Agency is also involved—a point about transport links was made earlier. We are conscious of the fact that some new plantings are inevitably associated with major road systems—and, indeed, the railways—and we are taking great care to ensure that those trees are inspected and appropriate action taken.
Most of the cases confirmed in the wider environment are clustered in the east and south-east of England—in Norfolk, Suffolk and Kent. A few cases have been found further west or extending north up the east coast. The disease is present in mature trees in those areas. That pattern suggests two things. Chalara fraxinea first came to Britain through spores blown on the wind from continental Europe, and the advice from the specialists who know about these things is that it has been here for some time—at least two years, and possibly more.
Barry Gardiner
I am grateful to the Minister for giving way again so generously. The scientific advice that we have received says:
“Local spread may be via wind, rain splash or even transmission by insects. Over longer distances the risk of disease spread is most likely to be through the movement of diseased ash plants.”
That does not accord with the idea that the disease first had its impact on these shores after being blown across the North sea or the channel by wind; it suggests that it would have come here in saplings with the contagion then spread on the wind locally.
Mr Heath
The hon. Gentleman’s theory—it is also the theory of the hon. Member for Wakefield—does not accord with the advice of the leading experts—[Interruption.] The hon. Lady talks about “scientific facts”. I think that displays her underlying problem with understanding how science is developed. We can deal only with the most probable reason for the evidence that is put before us. The leading experts from the United Kingdom and Europe—whom we brought together over the last two weeks under the leadership of DEFRA’s chief scientific adviser, Professor Ian Boyd—have reviewed the evidence and said that what they see is consistent with a view that the disease is brought in by wind-blown spores.
Mr Heath
In a moment, because I want to correct the nonsense that the hon. Member for Wakefield is promoting.
When the hon. Lady talks about the disease’s speed of progress being 20 to 30 km, we are talking about the front of an epidemic; therefore, it is the speed at which a front in a forest develops over mainland Europe. That does not mean that a spore cannot be carried on the wind for further than 20 or 30 km—that it somehow drops out of the sky when it reaches the 30 km mark and feels it cannot go any further. That is not what the science is saying; what the science is saying is that this is the most likely outcome. Anyone who looks at the distribution will see that it is entirely consistent with wind-blown spread. In fact, many people have said to me that it looks very similar indeed to the distribution of blood tongue, when that hit these shores. [Interruption.] I see the right hon. Member for Leeds Central is nodding, because he knows that that is the case, and that—[Interruption.] Yes, the hon. Member for Glasgow South (Mr Harris) knows better than the scientific experts and a former Secretary of State; he knows that none of this can happen.
Mary Creagh
I find it extraordinary that the original version of the “Key scientific facts” document from Wednesday said:
“Longer-distance spread occurs via infected plants,”
whereas version 2—or version B, or whatever it is—from over the weekend contains this miraculous new scientific fact:
“On occasions, spores may disperse much further on the wind,”
albeit without any scientific reference at all. It seems as though the scientists are desperately trying to cover Ministers’ backs.
Mr Heath
Yes, I am sure the hon. Lady is right: we have an international conspiracy of all the leading forestry scientists in the world, who have decided they want to manufacture evidence to fit some theory concocted in the bowels of my Department. I mean, really, grow up! Look at the map, look at the facts, look at the evidence.
Caroline Lucas
Clearly wind has a role to play locally. No one is denying that. The issue is whether the wind is one of the primary vectors. Let us consider tree diseases more broadly. Does the Minister accept that since 2000, more than twice as many tree diseases have entered the UK as entered it in the whole of the last century? Does he want us to believe that it has been incredibly windy since 2000, or is it the case that the number of imports has increased vastly in that time?
Mr Heath
No, I do not want the hon. Lady to believe that. Actually, I believe that there has been hugely greater mobility of goods and people in recent years, which has spread disease. That is of real concern to all of us, and we need to deal with it. All I am saying is that, according to a detailed analysis, the incidence of ash dieback disease in this country is consistent with its having been brought in by wind-blown spores. That is what all the leading scientists are telling us, and I see no reason to disbelieve them or to involve some conspiracy theory.
Barry Gardiner
I am very grateful to the Minister. He has said that, according to the scientists, the incidence of the disease is consistent with its having been carried in by the wind. Of course I take his word for that, but he has used the same phrase repeatedly, which has led me to worry. Are the scientists saying that the incidence of the disease is consistent with its having been carried in by the wind, or are they saying that the wind is the most likely vector for its transmission? What do they believe is the most likely vector?
Mr Heath
The hon. Gentleman, who purports to know about science, really ought to understand scientific method. I think that a theory from our chief scientific adviser, supported by all the experts in Britain and Europe, is rather better than one propagated by the hon. Member for Wakefield to support her conspiracy theory.
As I have said, these conclusions have been endorsed by the leading experts, who have reviewed the evidence about Chalara to help us to understand how it is spread, its impact on our ash trees, and how we might tackle it. A summary of their conclusions was sent to all Members on 7 November and published on 9 November. As my right hon. Friend the Secretary of State said in a written ministerial statement last Friday, the advice from the scientists
“is that it will not be possible to eradicate Chalara.”—[Official Report, 9 November 2012; Vol. 552, c. 49WS.]
The experience in the rest of Europe is that there is no effective treatment. However, that does not mean the end of the British ash. While young trees succumb to the disease fairly quickly, mature trees with the infection can live for many years. We know that the Danes have identified a small number of trees that seem to be resistant to Chalara. That knowledge buys us some time, so what can we do?
It is clear that the Government alone cannot tackle this threat. On 7 November, we convened a summit that brought together more than 100 representatives of the forestry and horticulture industries and environmental groups to advise us. There was a broad consensus on the evidence and on the action that we should take. The strong message is that we should not be panicked into taking draconian action that could be futile or counter-productive. The lesson of the Dutch elm disease of the 1970s is that much of the costly action taken then simply did not work. We have a window over the next few months while the disease is not spreading, and that will enable us to develop the right approach. The disease is not spreading, incidentally, because this is not the sporulating season for it. There are no fruiting bodies, and there are therefore no spores—unless the hon. Member for Wakefield has a theory that there is winter sporulation as well.
Graham Jones (Hyndburn) (Lab)
I am grateful to the Minister for giving way—he is being very generous with his time—but why has he not written to local authorities about this? He has written to neither Hyndburn borough council nor Rossendale borough council. Will he tell us, and the local authorities, when he intends to write to them explaining how he will intervene to tackle the issue?
Mr Heath
I expect local authorities to show a little common sense. The whole country is benefiting from the very good Forestry Commission website, which is providing all the information that they need in order to identify the disease. We bring the Local Government Association into the inner workings of government at the Cobra committee, so it can provide information to local authorities. I do not think there needs to be a letter from me just to add to the pile of correspondence—and reduce the number of trees in this country in the process—rather than authorities taking sensible advice.
Building on the advice of the summit, on Friday the Secretary of State announced the immediate action we would be taking. Newly planted diseased trees and diseased trees in nurseries will be traced and destroyed, as young trees that are infected succumb quickly. Mature trees will not be removed, however, as they are valuable to wildlife and take longer to die. They can help us learn more about the genetic strains that might be resistant to the disease. Infection does not occur directly from tree to tree—a point which, again, is lost on some.
Better understanding of the disease will be built through research and surveys, looking not only for diseased trees, but for those that show signs of resistance to Chalara. The search for the disease will include trees in towns and cities—a point made by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz)—as well as in the countryside. It will also include building partnerships with a range of organisations beyond government and providing advice to foresters, land managers, environmental groups and the public about how to identify diseased trees and those likely to be resistant to the disease, and what to do with that information.
Organisations such as the Woodland Trust and the National Trust have endorsed this approach. None of the action we have taken to date or that is planned involves restricting access to the countryside. The scientists are clear that there is no need for that. We want to ensure rural businesses continue to operate and that people who want to enjoy the countryside can do so.
These are just the first steps, and by the end of November we will have developed a comprehensive control plan that will set up longer-term action to tackle Chalara. It will consider measures such as designating protected zones and improving diagnostics and biosecurity. Our approach will, for the first time, look at how we can mobilise the many people who love our countryside and value the trees in our towns and cities, in order to help us tackle this disease. For the longer term, we will learn the lessons from the response to Chalara and use them to consider our strategic approach to plant health. The Secretary of State has already told the House that he is prepared to look at radical options. He will come back to the House in a few weeks to report on progress.
I believe we have taken all appropriate actions to deal with what is a very serious situation.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
On a point of order, Mr Deputy Speaker. The Minister has not mentioned one very important point: the cost to the landowners in my constituency who have bought many thousands of saplings and who are now having to destroy them.
Mr Deputy Speaker (Mr Nigel Evans)
That is not a point of order for the Chair. The Minister is responsible for his own speech. Indeed, Mr Sheerman, you have only just come into the Chamber.
Mr Heath
I am most grateful to you, Mr Deputy Speaker.
As I was saying, this is a very difficult situation, and I believe we have taken all appropriate steps. To repeat something I said in response to the previous urgent question, we are not going to engage in the blame game. This is not a question of attributing blame to anyone; it is a question of getting things right, by working with everybody who has a genuine interest in the future of our forests and woodlands and making sure they are mobilised in the most effective way to deal with Chalara. Those who want to peddle conspiracy theories can do so if they wish; we will get on with dealing with the disease.
Mr Deputy Speaker (Mr Nigel Evans)
Order. This is a time-limited debate and the winding-up speeches will start at about 6.40 pm. As a large number of Members wish to contribute, there will be a six-minute time limit on Back-Bench contributions, with the usual injury time for two interventions.
Andrew Miller (Ellesmere Port and Neston) (Lab)
I want to deal with the issue of process. According to the DEFRA website, the ash has a high conservation value, and we all agree with that. I presume that in the national risk register of civil emergencies ash dieback fits into the category of
“an event or situation which threatens serious damage to the environment of a place in the United Kingdom—where environmental damage is defined as ‘contamination of land, water or air with biological, chemical or radio-active matter, or disruption or destruction of plant life or animal life’”.
There is a definitional issue, but will the Minister confirm that that was the basis on which Cobra was convened?
The national risk register—a first-rate document—offers enhanced guidelines for the creation of the Scientific Advisory Group for Emergencies. I am unclear—the DEFRA website does not refer to it one way or the other—whether the group has been constituted under the rules in the risk register and is managed as a SAGE process. It would be helpful if the Minister confirmed that. I presume that this fits into the level 1—significant emergency—category, which has a wider focus and requires central Government involvement or support, primarily from a lead Government Department or devolved Administration, alongside the work of emergency responders.
It seems that that process has been adopted, but it is not as clear as the Government intended when they established the register—a document that I confirmed to the Minister for the Cabinet Office to be first rate—earlier this year. It is a pity that DEFRA has not followed the rules set out in the document. Only a few months ago, the Select Committee on Science and Technology heard from the Forestry Commission trade unions that about 66 of the 230 members of staff in the Forest Research agency will be lost as a result of cuts. There is also a significant cut in tree breeding for increased resilience, which I am sure, in hindsight, the Minister agrees is a pity.
Alison Seabeck
I am interested to hear my hon. Friend’s analysis, but does he share my concern that people with expertise in how to protect not only the ash but the wider eco-system—the insects and flora and fauna that depend on the ash—will be among those losing their jobs? Is he concerned that we are not thinking beyond the current crisis?
Andrew Miller
That is precisely why I began by referring to the definition on DEFRA’s website, which encompasses the broader conservation issues. The National Trust, of which I am proud to be a member, welcomes the Government’s commitment to further research and calls for money to be committed to plant health, which is hugely important.
In my capacity as Chair of the Select Committee I wrote to the Minister on Friday—it is perfectly reasonable that he has not replied yet; I do not criticise him for that—asking what scientific evidence there is to support the theory that cases of Chalara fraxinea in East Anglia were caused by airborne spores from Europe. Will he put on the record the scientific citations that support that? He cannot do so because there are not any. An eminent group of people for whom I have the greatest respect has come up with possible explanations, but the Minister did not say that, given the way fungal infections spread, it is equally possible that these cases started some time ago and came from imported seedlings. He does not know the answer and perhaps he will confirm that.
Mr Heath
The hon. Gentleman is being fair. With epidemiology there are never definite answers, but I hope he will agree that the distribution is not entirely consistent with the view that this came from imported seedlings—one would expect a much more rational distribution across the country than the eccentric distribution shown in the tests.
Andrew Miller
I referred to the SAGE precisely because the Select Committee’s report on scientific advice in emergencies called for an opening up of the process. I believe that one alternative explanation has not been rigorously tested, although it could be by an open call for evidence from the Minister. Nurseries in places such as Lancashire, from where the trees I planted 10 years ago were sourced, source their trees from locally grown seedlings, whereas closer to the European mainland the probability is greater that seedlings were sourced from within Europe. That possibility needs to be tested, and by opening up the SAGE process I invite the Minister to do just that and close the missing link.
There are issues on the DEFRA website that concern me. My hon. Friend the Member for Wakefield (Mary Creagh) spoke of how the website had changed miraculously, but I remind the Minister that the changes were made without any reference to scientific citation whatsoever, and that must be examined.
Chief scientific advisers ought to be able to give scientific advice, based on the science, freely and openly to the Government, and it is not for Ministers to reinterpret that on their Department’s website. That is an improper use of the scientific advice, which should be available to the whole House and indeed the whole country. There is no reason that the process cannot be conducted most transparently, and if it is we will suck in all the information necessary to solve the problem once and for all. It is a challenging issue, but I hope the Minister takes my advice.
Zac Goldsmith (Richmond Park) (Con)
I welcome the recent action that my right hon. Friend the Secretary of State for the Environment, Food and Rural Affairs has taken to tackle ash dieback, imposing an import ban and restrictions on movement; initiating a national survey to map the extent of the disease; and hosting a summit of forest experts to identify ways of tackling ash dieback in the short term and tree health generally in the long term, on which point I wish to focus briefly.
It is hugely worrying that, as we heard from the Minister, there are 150 confirmed sites with ash dieback, but we need to keep sight of the fact that this is just one of many of the growing number of invasive pests and diseases threatening the UK’s native trees. Seventy per cent. of horse chestnut trees are affected by bleeding canker in some parts of England. Our iconic English oaks are in serious trouble, wilting under assault from acute and chronic oak decline. In part of my constituency, up to 50% of our oaks show signs of acute oak decline. It has been claimed by The Daily Telegraph—so it must be true—that there are more ancient oaks in Richmond park than in all of Germany and France combined. Even if we halve that and allow for a little exuberance, it is still a tragedy to think that these great oaks are facing a very serious threat.
In March, the usually fatal sweet chestnut blight was found to have hopped the channel from France. Sweet chestnut is the main tree species in an estimated 30,000 acres of woodland in Britain. According to a recent report by Robin Maynard of the Countryside Restoration Trust—I declare an interest as a trustee of the CRT—25 new pests and diseases are already established, recently arrived, on their way or seen as likely threats to our trees. Clearly, that is not just a rural problem; a high proportion of the trees under threat are planted in urban areas. For instance, plane trees constitute one 10th of all trees in the capital, and the plane wilt fungus has ravaged 80% of plane trees in France. Last year, French officials revealed that all 42,000 plane trees lining France’s historic Canal du Midi, a world heritage site for the past 10 years, in southern France, would be felled because of the disease.
What is happening? Research implicates a greatly expanded horticultural trade in imported species as the main Trojan horse for new pests and diseases. It accounts for up to 70% of invasive introductions to the US and anything up to 90% to the UK. It is believed that Phytophthora ramorum in larch came in on one viburnum shrub imported from the EU to a nursery in Cornwall in 2002. A batch of maples imported into the EU and Britain from China was found, despite being certified pest-free by the Chinese authorities, to be infested with Asian longhorn beetles. Oak processionary moth infestations have been tracked back to one large specimen oak brought in from Holland. It came in roughly six years ago, and in my constituency it has grown exponentially. The tragedy is that the annual cost of just managing the oak processionary moth is probably what it would have cost to deal with it outright in the year when it was detected. It costs £200,000 a year in Richmond park alone, not to mention Kew gardens and other such areas.
The Woodland Trust has pledged to support community and local tree nurseries to help to ensure that new tree planting is rooted in the community. Obviously, that is welcome. One thing many of us can do is ensure that, when we plant trees, they are UK-grown and disease-free. It seems absurd that we are importing ash trees, when there are hundreds of millions in the UK already.
The famous Mrs Beeton advised in her “Book of Household Management”:
“No matter how small your garden, always ensure you leave at least three to four acres for trees”.
[Laughter.] It was a different time. Small gardens do not normally have four acres sitting idle, but at one point or another most of us will plant a tree, so this is a lesson we can learn. As the Institute of Chartered Foresters has pointed out, the difficulty is that, whatever we do now, the arrival of more pests and diseases is inevitable. We therefore require new and more resources, if we are to get to grips with this growing problem, and we need to build greater resilience into our woods and forests.
DEFRA had reallocated £8 million over four years for new research into tree health. In the context of this discussion, that is not enough. Let me put that figure into perspective. The annual cost to UK forestry from pests and diseases has been put at about £130 million. That is bound to be an underestimate, reflecting the low value we attach to trees, not just in industry but culturally, socially, environmentally and so on. If the Asian longhorn beetle were to become established in the UK, based on the experience of the US authorities in eradicating it, it would cost £1.3 billion to attempt to do the same here —and there would be no guarantee of success either.
Dr Julian Lewis (New Forest East) (Con)
As part of a solution, is my hon. Friend advocating restrictions on imports, not just for ash but for other varieties of trees and shrubs?
Zac Goldsmith
Yes. We know the benefits of trade, but they pale in comparison with the costs of unwanted stowaways, so we need to take a far stricter approach to restricting imports, particularly for larger trees, which have become increasingly fashionable. The ones with large earth balls allow even greater opportunity for the introduction of unwanted species.
In his written ministerial statement on Friday, the Secretary of State said that he was prepared to consider radical proposals. I want to add one thing. As well as encouraging more local sourcing of trees and greater vigilance by the horticultural trade, I urge the Government at least to consider requiring the relevant horticultural sectors to contribute more to the cost of inspection services and forestry research. With 90% of invasive tree pests and disease attributed to imports, the horticultural and landscaping sectors should surely bear a proportion of the costs of preventing and containing outbreaks. It is a sad reflection on successive Governments that it has taken this tragedy to focus minds on the issue of tree diseases. This must be a turning point.
Barry Gardiner (Brent North) (Lab)
I am delighted to follow the hon. Member for Richmond Park (Zac Goldsmith), who made many of the points I wished to make.
Serious and genuine questions need answering about the genesis of Chalara fraxinea in the UK. Did the Horticultural Trades Association warning in 2009 go unheeded by DEFRA officials? Were Ministers made aware of that warning? When they were informed on 3 April of the infection in Buckinghamshire, why did they not impose a movement ban? When Crowders nursery in Lincolnshire notified officials in June this year that the disease was found in 15 of its trees, did DEFRA officials really issue it with a notice to stop it taking action? Did they put trade rules above environmental health? When the disease began to take hold in Poland in 1992 and other parts of continental Europe later on, did the EU take adequate steps to regulate and control its spread?
Is it credible to claim that wind-blown spores reached the UK from across the sea, from Denmark, given that scientific advice states that wind-blown spores can spread 20 to 30 km per year and that local spread may be via wind, rain, splash or even transmission by insects, but that over longer distances the risk of disease spread is most likely to be through the movement of diseased ash plants? Given that the UK introduced national measures to prevent the entry and spread of the disease on October 29, why did it claim that it could not do so to nurseries and growers previously? Did UK nurseries that became aware of the danger of Chalara fraxinea then stop importing seedlings from suppliers in infected countries, or did they rely on Government advice, rather than their own trade association?
All those questions will no doubt eventually be answered, and no doubt not all of them without embarrassment to politicians, officials and the industry. My focus today, however, is on examining the response that the Government must make to the increasing threat that our landscape and biodiversity face from climate change and the new vectors of disease that climate change has brought with it. In its excellent report published earlier this year, the Independent Panel on Forestry specifically addressed the need
“to see our wooded landscapes, in both rural and urban settings, being better protected from, and more resilient to future risks such as climate change, pests and diseases.”
It specifically recommends that the Government
“should speed up delivery of the Tree Health and Plant Biosecurity Action Plan by additional investment in research on tree and woodland diseases, resilience and biosecurity controls.”
The key question arises: have they speeded up the delivery of the action plan? I remind the House that the body meant to examine this was set up by my right hon. Friend the Member for Leeds Central (Hilary Benn), the Secretary of State for the Department for Environment, Food and Rural Affairs in 2010. The key diseases and pest identified at that time were sudden oak death syndrome, oak processionary moth and Phytophthora ramorum in larch. I believe that Chalara fraxinea was mentioned only as a disease predominantly in Europe that might manifest itself in the UK.
Perhaps one of the more foolish cutbacks imposed by the Government has been the freeze on public information spending. I ask the Minister how on earth the Government propose to combat infectious diseases in plant health if they constrain their own ability to communicate directly with growers and the industry, and rely on the passive mechanism of their own website. It has been estimated that the changing risks arising from climate change and the new vectors of disease will result in a decline in timber yield in England of up to 35% by 2080, according to the Forestry Commission’s report “Climate Change Risk Assessment”, published in February.
In the past 12 months, the Forestry Commission has reported increasing incidence of Phytophthora lateralis, which attacks Lawson cypress, Phytophthora ramorum, which attacks beech and rhododendron—itself a non-native invasive species, but now a part of the UK landscape—acute oak decline and Cryphonectria parasitica, which affects sweet chestnut. To these diseases, we must add pests such as the Asian longhorn beetle in broadleaf woodland, the pine tree lappet moth on native heath land, and oak processionary moth in beech and hornbeam—to name only a few of the most serious new threats.
The number of outbreaks of these pests and diseases has risen more than twelvefold over the past 40 years. It is one thing to identify these risks to our landscape, but it is quite another to develop a mitigation and adaptation plan to combat the way in which they might impact on our biodiversity and on the ecosystem services that our forests provide. Such a plan will not be cheap. Last year in the United States, the Animal and Plant Health Inspection Service’s eradication programme for the Asian longhorn beetle alone cost US$33 million.
I urge the Government to understand that it is not enough to have a plan to tackle Chalara fraxinea. They must develop a framework in which all the new vectors of risk that threaten our landscape can be tackled. That means having a clear understanding of the value of the ecosystem services that our trees and forests provide. The Government must look to the national biodiversity action plan and the national ecosystem assessment for a blueprint for a comprehensive response. The key message of the UK national ecosystem assessment begins:
“The natural world, its biodiversity and its constituent ecosystems are critically important to our well-being and economic prosperity, but are consistently undervalued in conventional economic analyses and decision making.”
Natural capital has not been properly accounted for, and the services that our forests provide through provisioning, habitat for pollinators, watershed protection and soil stabilisation are considered—
George Freeman (Mid Norfolk) (Con)
I speak as the Member of Parliament for Mid Norfolk, which sits right at the heart of the Norfolk cluster of the disease, and as the chairman of the all-party parliamentary group on agricultural science, which is taking a close interest in the matter. I know that all colleagues agree that this outbreak is a serious problem for our forestry industry and our landscape. I welcome the urgency of the reaction shown by the Secretary of State and the Department for Environment, Food and Rural Affairs team, and the professionalism with which they have handled the issue. More than 100,000 trees were felled in the summer, and the biggest ever survey of ash trees has been conducted. We have also seen several Cobra meetings, a national summit and an immediate ban on imports.
Outbreaks of disease that affect our biodiversity are never easy to manage, and it ill behoves the hon. Member for Wakefield (Mary Creagh) to criticise the Government in the way she did. Her words were somewhat at odds with the reaction of the former Secretary of State, the right hon. Member for Leeds Central (Hilary Benn), who I think all colleagues would agree has dealt with the matter in an extremely responsible way. He has also sat in the Chamber today and listened to the entire debate.
The hon. Member for Brent North (Barry Gardiner) is a former forestry envoy, and it was interesting that he devoted his speech largely to criticising the Government, rather than talking about the responsibility of the previous Administration. The truth is that this is a wake-up call for us all, as my hon. Friend the Member for Richmond Park (Zac Goldsmith) has said, and it is unhelpful wilfully, negligently or merely incompetently to distort the scientific evidence, to peddle petty personal conspiracy theories or to scaremonger.
I welcome the Minister’s clear, careful account of the issue. I particularly welcome his reassurance that the disease is not spreading, and that funding for plant health has not been cut—indeed, it has increased. I strongly endorse his acknowledgement of the role of the many voluntary groups and charities that have helped to support the Department’s work. The key now is to focus on what we can do to prevent the spread of the disease. We must use the British science base to explore all possible avenues—not least, resistance—and to put in place a proper framework for biosecurity.
The Government have taken a series of important steps in relation to prevention, and it is important to acknowledge the Minister’s assertion that the disease is not spreading now. We have some time in which to put in place a proper framework, which is why a responsible reaction from Members on both sides of the House is important. I also welcome the launch of the tree health action plan and the imposition by the Secretary of State of an immediate ban on imports. Unfortunately, however, the scientific evidence shows that because the disease has been allowed to incubate in this country for many years—probably between 10 and 15—we might not be able to eradicate it. Our ash population could be facing a serious epidemic.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Seven or eight outbreaks of the disease have been identified in mature woodlands in my constituency, yet in one of those woodlands no ash trees have been planted for 20 years. Is it not therefore plausible to suggest that it could be carried in on the wind or by birds, especially in the light of the maps of the infected sites?
George Freeman
My hon. Friend makes an extremely good point based on the evidence in her own constituency, which also sits at the heart of the East Anglian cluster. She allows me to draw attention to the map, which is extremely compelling. It shows that 90% of all incidences of the disease are down the east coast, and most of those are on the bit of the east coast that is closest to Europe and that is affected by the prevailing winds from the east.
I am quite pessimistic about the long-term prospect of our controlling and stopping the disease, but there is a glimmer of optimism in the science of resistance, and it is to that subject that I shall now turn. There are signs that some of our older ash trees might have developed a resistance to the disease, and we now have an opportunity to show scientific leadership by throwing as much resource as possible into identifying a solution.
Mr Tom Harris (Glasgow South) (Lab)
May I make a small technical point? The hon. Gentleman just mentioned prevailing winds from the east, but I think that he meant the west.
George Freeman
The hon. Gentleman has obviously not spent enough time in the east of East Anglia, where there are often winds from the north and from the east.
George Freeman
I stand corrected if I said “prevailing”. There are frequently winds from the east and the north-east and, as the map demonstrates, it is perfectly possible that the disease could have been carried over from mainland Europe.
The scientific research into resistance offers us an important opportunity to identify genetic markers and traits that would allow us to establish a breeding stock of clean, new ash strains, and to unlock as much funding as possible from the European budget to support UK leadership in that field. This is an opportunity for us to promote British plant and forestry science in the context of the European market. I should like to make a small plea to the Minister on behalf of Norfolk. It is perhaps the worst-affected county. It is also home to the John Innes Institute and the Norwich research park, and if there is any scientific work to be done in this regard, I should like us to be at the front of the queue. Our county has a lot to offer.
Mrs Caroline Spelman (Meriden) (Con)
My hon. Friend has considerable knowledge of these matters, and I am sure he is aware that where the disease has been established for longer, there is a greater chance of finding resistant varieties. The Poles believe that they might have some resistant varieties, but there is now great disappointment in continental Europe because it was thought that we might have resistant varieties because there was no incidence of the disease here.
George Freeman
I am grateful to my right hon. Friend the former Secretary of State. I am sure that the Minister will pick up on her extremely well-made point.
In the context of biosecurity in the UK, this is a wake-up call for us all. For far too long, we have not taken our biosecurity seriously enough. Over the past 15 years, we have seen a significant—and generally all to the good—globalisation of trade in commodities and products. We have also seen substantial climate change.
Neil Carmichael (Stroud) (Con)
Does my hon. Friend agree that we must have a clear understanding of the threats to our biosecurity, and that we should develop international contacts to enable us to identify those threats?
George Freeman
My hon. Friend makes a good point.
This outbreak presents us with an opportunity to establish our leadership in this important area of science. Over the past 15 years, we have seen a huge globalisation of trade in agriculture, plants and other commodities, as well as substantial climate change. That changes the context in which we should view the import and export of those goods. The UK’s biosecurity is of strategic national importance, as my hon. Friend the Member for Richmond Park eloquently pointed out. Colleagues who have visited Australia and the USA recently will know how seriously those and other countries take these matters. A person can hardly leave an aircraft without being sprayed, disinfected and checked, and without having their luggage checked for seeds. The outbreak represents a wake-up call for us in that context as well.
I welcome the Secretary of State’s strong leadership on this matter, and his highlighting of the potential for Britain to grasp the nettle and set out a new framework for biosecurity. If we can draw on our strengths in plant science, we will be able to turn this crisis to at least some advantage for the UK, and to establish ourselves once again as an island of biosecurity in a Europe that is awash with a number of plant and animal diseases, to the benefit of our landscape and of our agriculture and forestry industries.
Caroline Lucas (Brighton, Pavilion) (Green)
I was glad to hear the Minister say that he was determined to learn the lessons of this outbreak, because inadequate biosecurity has been a problem under successive Governments. Instead of arguing about wind direction, we need to ask more fundamental questions about the role of trade and imports. The present situation reminds me of the stories that were put about on bird flu when we were first invited to believe that it was spread purely by wild birds, rather than, as it turned out, as a result of the increasing international trade in poultry and eggs.
In April 2012, in a paper in the scientific journal Nature, scientists warned of wider threats, pointing out that the past two decades have seen an increasing number of virulent infectious diseases in natural populations and managed landscapes. The authors warn that in both animals and plants an unprecedented number of fungal and fungal-like diseases have recently caused some of the most severe die-offs and extinctions ever witnessed in wild species. That has serious implications for wildlife and food security.
On the import of trees, a strong scientific case is being built for more radical controls to tighten biosecurity. Hon. Members may have read in the press the views of senior scientist Dr Stephen Woodward, a specialist in tree disease research at the university of Aberdeen. He advises that the Government must now ban imports or use quarantine for other iconic trees such as oak, pine and plane if they are to be saved from disease. I believe that we have to take that call seriously. Dr Martin Ward, DEFRA’s chief plant officer is also warning that ash dieback is just one of what he calls a “tidal wave of pathogens” that are arriving in Europe. He rightly describes the situation as terrifying, and he warns:
“Unless we have better bio security in the EU it will be very difficult to stop them coming in.”
The scale of the trade in plants for forestry planting is absolutely vast. Approximately 10 million plants are imported for forestry planting every year. That means we need to take much more account than we have done until now of the potential for environmental damage from such trade. For example, in Australia, there are much stricter rules around quarantine, and my understanding is that what happens there is much more effective than anything we have in place in Europe. If plants that could be known to be carrying pathogens were quarantined, we might be able stop at least some of these diseases spreading and slow down others. The case for an import ban, if quarantine conditions are not met, must also be thoroughly and urgently considered.
We also need to look at why we have exposed ourselves to the risks that imports bring. Hon. Members may have read reports of the comments by Dr Jon Heuch, a member of the Forestry Commission’s biosecurity programme. He reports that the seed of the ash is frequently sent abroad from the UK and the trees grown from these seeds are then imported back and sold as having UK provenance. Indeed, there seems to be an extraordinary trade in plants and saplings that are grown in other parts of Europe simply because mass production there means that it is cheaper. Half a million ash trees are imported in the UK every year for use in woodland and gardens. The Horticultural Trades Association admits that many saplings are labelled as British because customers like “local provenance”.
Ms Margaret Ritchie (South Down) (SDLP)
Considering the importance of forestry and woodland as a tourist resource, does the hon. Lady agree with me that it was rather odd that it took nine months from the onset of the disease here for DEFRA to effect a ban? Would she like to shed some light on that in the context of plant biosecurity?
Caroline Lucas
I thank the hon. Lady for her intervention, and I hope she will forgive me if I agree with her point, but stress that what I want to underline right now—we have already had quite a lot of focus on the timetable and how long it took DEFRA and the Government to declare an emergency—is the central issue of the imports. I am really concerned that we are going to overlook the role of trade and imports when it comes to the vulnerability of the UK in particular and Europe in general to more and more of these diseases that are coming towards us.
Let me say a few words about the forestry grants system. In a sense, it also seems perversely to encourage greater imports. As I understand it, grant agreements specify the type of trees and how much will be spent, including the conditions for the money and specific type of tree, but this could be agreed much more quickly so that UK growers have time to be able to grow them here in the UK rather than feeling forced to source them from abroad. Because the Government tend to agree to these grant schemes very late, it does not give enough time for confidence to grow in the UK market. When they are eventually agreed, we do not have time to grow the saplings, so the foresters go abroad. The Government could usefully look at the whole issue of the forestry grants, and some of their perverse implications when it comes to promoting more and more of this sourcing of our saplings from overseas. Once the seed is grown in the UK, it then goes overseas and then we bring it back again. It seems a crazy system, and it is also very costly when we understand what it is doing to our vulnerability.
I want the Minister to look at two other pieces of legislation, which, although they deal with non-native species, could have some useful read-across for us. A forthcoming EU legal instrument, due in draft imminently, will look at forestry in particular. Scotland has new INNS—invasive, non-native species—legislation, which is far ahead of what we have here in the UK when it comes to biosecurity.
I hope that the Secretary of State will respond positively to early-day motion 663, tabled by the hon. Member for Richmond Park (Zac Goldsmith). Since he did not mention it, I will underline it for him now, because it calls precisely for increased resources to ensure both a rapid response to other disease outbreaks and greater screening and control of imports to minimise the spectre of disease.
Finally, let me underline what other Members have said, which is that it is not enough for the Secretary of State to say that he will move resources from elsewhere in DEFRA to deal with this problem. If he does that, we will not know what robbing Peter to pay Paul will actually mean in practice. We need to find new resources to tackle this issue; we need to look again at the resources for the Forestry Commission; and we need to learn the lessons so that we have much stronger biosecurity in the future.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As long as Members do not exceed four minutes, all who want to speak can participate in the debate.
Mrs Caroline Spelman (Meriden) (Con)
I do not believe the response to this disease will be improved by playing a blame game or by a partisan approach. The seriousness with which Members of all parties take this issue is evidence of how determined we are to tackle it.
It is to the credit of the Secretary of State, who cannot be with us today, that he has acknowledged that his predecessors acted on the advice they received at the time—essentially the same advice as was outlined by the hon. Member for Wakefield (Mary Creagh) who speaks for the Opposition—that ash dieback was listed as being absent from the country. When I came into office, the list of serious exotic diseases brought to my attention included sudden oak death syndrome, bleeding canker in chestnuts, red band needle blight, oak processionary moth, as well as Phytophthora ramorum, which has meant that hundreds of thousands of larches have already been felled.
My response was to produce a tree action plan on tree health and biosecurity—so the fightback has started. In the elaboration of this plan, tree experts provided a horizon scan of upcoming diseases, which we could build into our decision making. Members who return to this country from a third world country will have heard the DEFRA announcement on planes, which warns travellers not to import plant material into this country. That is just one of the improved biosecurity measures.
I have heard the argument that the cuts are to blame for the proliferation of ash dieback. I think we have now satisfactorily demonstrated that an extra £8 million was spent—on top of the protected budget for tree health research. I warn the Opposition to be careful with the argument that it is all about money, because no amount of money will stop wind blowing from continental Europe bearing diseases in this direction. That is just a fact.
The importing of ash is a paradox. Growers were supposed to have asked my predecessor, and challenged the Government, to introduce a ban. What I fail to understand is why, if they saw that as a risk, they continued to import the ash. I did not see that letter either.
Hilary Benn (Leeds Central) (Lab)
I want to avoid misunderstanding. The Horticultural Trades Association wrote to the Forestry Commission in autumn 2009. As my hon. Friend the Member for Wakefield (Mary Creagh) made clear in her speech, I asked DEFRA to check whether I had seen the correspondence, and I had not.
Mrs Spelman
I think that clarity is helpful. I had not seen it either.
The crux of the problem is misdiagnosis. Ministers do not have microscopes on their desks, so before we single out some hapless scientist in forestry research for blame, we should consider carefully how many other people failed to spot the problem as well. When the first case of the new ash fungus was confirmed, trees were felled as a precautionary measure, and a voluntary ban was put in place straight away, so there was no delay. The key to tackling this disease, as was argued earlier, is to find the resistant varieties.
Going forward, the EU plant health regime needs reform. Former and present Members of the European Parliament can perhaps help us with that. We stand some chance, as islands, of being able to have better biosecurity, and we need to fight for that now. In parallel with the EU review, the Government updated their own plant health strategy, deploying more inspectors at points of entry to our country to control imports and piloting new tools of detection. Passenger baggage conditions were reviewed; more funding was released for inspection at growing sites; and better co-ordination of research between the Food and Environment Research Association and the Forestry Commission was achieved. Common sense should tell us that, if tree experts, dedicated woodmen and woodland charities all failed to spot its presence earlier, this disease must be hard to diagnose. It is not helped by the fact that there are other forms of ash dieback, and that other tree diseases were listed ahead of ash dieback as priorities.
If ash dieback had been seen as the big threat we now believe it to be, all relevant stakeholders would have signalled that to me in the numerous face-to-face meetings I had with them during consultations on the public forest estate, or on the extreme weather conditions we experienced in 2011 and 2012. Meetings with the chairman of the Forestry Commission did not have this item on the agenda.
Mrs Spelman
I am not going to give way again. Moreover, one might have expected the trade press to have expressed its concern on the front pages of its publications.
We all need to share some responsibility and to redouble our efforts to spot the disease. I applaud the volunteers who have helped with the unprecedented survey of our woods and trees. As my action plan stated, collaborative working—of landowners, industry, academia, civil society and Government—is required better to protect the health of our nation’s trees. We need to pull together, not against each other, in the fight for tree health.
Mr Deputy Speaker
There are 10 minutes left. Perhaps three and a bit minutes each, and then everybody will get in.
Roger Williams (Brecon and Radnorshire) (LD)
I am very pleased that the debate has adopted a rather calmer and more constructive tone than the one it started with. Trying unsuccessfully to land political blows on the Department will do nothing to sort out the problems we face today. I compare this situation with the time when I entered this House and foot and mouth was rampant; a much more considered tone was adopted then.
I want to emphasise the international approach to dealing with these problems. The international community is much better organised at dealing with animal health than with plant health. The whole scientific scene seems to put much more emphasis on animal science than plant science, and we probably do not have the botanists we need to address these problems.
We have rightly been told that in Australia and the United States there is much better organisation and greater care taken in ensuring that those who enter the country bring no plant or animal material with them. In this country, we have the international observatory for foot and mouth, so whenever that disease is identified across the world, the variety in question is brought here and compared against other varieties. We need something of that nature to deal with plant health, and I am sure that Britain would be very well placed to achieve that.
I want to end on a fairly optimistic note. The disease has been compared to Dutch elm disease, but there are considerable differences. For instance, the English elm is reproduced by suckers, which means that almost every tree has the same genome as any other. Therefore, if one tree is susceptible to the fungus attack, all the trees will be. However, ash is propagated by cross-pollination, which means that there are a great variety of genetic types. As has already been said, some resistant varieties can be identified. The hon. Member for Mid Norfolk (George Freeman) pointed out that we have the skills in this country to do the plant-breeding work that could yield a tremendous benefit not only for this country’s ash population, but right across Europe and the world.
We face a particularly difficult disease that could affect our whole landscape, but we are in a better position to deal with it than we were with Dutch elm disease.
Neil Parish (Tiverton and Honiton) (Con)
It is very sad that the House of Commons cannot come together today to tackle this disease. The Opposition’s attempt to land a blow on the Government in this regard is absolute nonsense. There is no doubt that, as the relevant map shows, a lot of the disease comes across from the continent. No Government, irrespective of their political persuasion, can stop what blows on the wind. Therefore, we must concentrate on how we are going to deal with this disease. We must look for ash trees that will be immune in future, so that we can take the seeds from them and grow them. As the hon. Member for Brecon and Radnorshire (Roger Williams) said, we do not want to see the decimation that we experienced with Dutch elm disease. Indeed, I saw that on my own farm: the decimation of massive trees that were hundreds of years old. We have never really recovered from that: every time a tree grows, it catches the disease again perhaps 10 or 15 years later. We want to ensure that the ash tree is there for the future.
We must also be certain that the single market, the great wonder of the European Union, is not abused. The trouble is that no Government can stop the import of ash trees until they have proved that they have the disease, and by that time it is too late. That really has to be put right. We are surrounded by water—let us hope that not every disease can be blown across the channel—and Britain could develop the same methods that Australia and New Zealand have developed in trying to keep disease out of the country. We must ensure that we breed ash trees in this country—that we do not export the seed to Holland, where the trees are then grown, and then import the trees back again. The industry itself must take some responsibility here. When the disease is on the continent, it is absolute nonsense to keep this trade going backwards and forwards. Given the existence of the single market, it is very difficult to stop it, but we need to change things.
I want Britain to have beautiful trees into the future. As Members have pointed out, there are many diseases out there that we need to tackle, so let us adopt a positive approach. I praise what Ministers and the Secretary of State are doing to analyse where all the diseased trees are located, so that we can act quickly. We cannot simply stop the disease by chopping down all the ash trees that have it—the saplings, yes; but the mature trees, we cannot. Let us hope that some of those trees survive and that from those, we can grow the great ash trees that we want to see.
The lesson in all this is that we cannot keep exporting and importing trees, bringing disease with them. I look forward to a positive message from Ministers on research and maintaining “fortress Britain” so far as growing trees and keeping out disease is concerned, and then perhaps repopulating trees across Europe. I repeat my first point: I am very sad that the Opposition have made such a thing of this. I respect what the right hon. Member for Leeds Central (Hilary Benn) did while he was Secretary of State; he has taken a much more responsible attitude.
Mr Deputy Speaker (Mr Nigel Evans)
To resume his seat no later than 6.40, Dr Julian Lewis.
Dr Julian Lewis (New Forest East) (Con)
In the two minutes remaining to me I would like to say that, despite the rancour between the Front Benchers at the beginning of the debate about whether the disease was blown in on the wind or imported, in the letter the Secretary of State sent to colleagues, he took quite a balanced view. He said:
“The infections in the nurseries were caused by imported plants; those in the wider environment have no identifiable links to the nurseries and are likely to have been carried on the wind over the Channel.”
I am sorry that the Secretary of State is not here today to develop remarks that were apparently attributed to him by The Times. It stated on Saturday that he proposed to “take on the EU”, and that:
“He warned that the free movement of trees and plants within the single market was putting the British countryside at risk, and pledged to challenge European laws to prevent more diseases from entering the country.”
That shows at least an acknowledgement of the significance of the element of the problem that has been imported.
It is right that I should get the tail-end Charlie slot in this debate, because fortunately, the wonderful New Forest does not have many ash trees. However, we could be next in line, and this is where the argument made by my hon. Friend the Member for Richmond Park (Zac Goldsmith) is so important. There is a vast array of pestilences and diseases just waiting to hit us. According to yesterday’s edition of The Sunday Telegraph, the Woodland Trust now says that for the jubilee woodland project, it will use species such as oak and birch instead of ash. Well, if something were to hit oak and birch, the effect on the New Forest would be devastating. Therefore, I make one simple point: it is one thing to try retrospectively to address the problem with ash, but what we have to do is proactively to put measures in place—this is what all the experts are telling me—to prevent the importation of other diseases in the future.
Mr Tom Harris (Glasgow South) (Lab)
May I begin with an apology to those on the Treasury Bench? I have a mild chest infection, so if I cough at any point, I would not want the spores to carry across the debating Chamber and then for me to be blamed in a couple of days’ time if they come down with the dreaded lurgy. May I also say how delighted I am that the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Newbury (Richard Benyon) will be responding on behalf of the Government? I look forward to that, as I know that he takes a close and personal interest in our country’s forests.
I have enjoyed today’s debate, almost as much as I have enjoyed watching the permanently confused faces of the Ministers. Some excellent contributions have not only highlighted Government failings, but have offered us a way forward, and I hope that the Government have listened. This dreadful disease will subject 80 million ash trees to a slow decline over the coming decades, changing our landscape for ever. It will hit the pockets of the nursery owners, the timber merchants and the taxpayer, and it will wreak untold damage on our biodiversity, pushing species that rely on ash towards extinction.
The reality of the problem in front of us is stark, and it was ably described by the Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome (Mr Heath). Ash dieback disease has been confirmed in 155 sites, including 15 nurseries that had imported infected plants and 55 plantations that had received young trees. Most worryingly, it has now been found in 65 established woodland sites. Scientific opinion is, sadly, now unanimous: trying to stop the disease is a lost cause.
So how did we get to this situation? I ask Government Members who complain about political points being made during this debate to have a quick look at the letter they received from their Whips Office, as it will have the words “Opposition day debate” on it. It is the job of my party to oppose the Government, and that is what Labour Members are doing. It is our job to expose the failings of Ministers when that is necessary, and it is necessary now.
Despite recent personnel changes, it is not difficult to identify Department for Environment, Food and Rural Affairs Ministers. They can be identified by their permanently bewildered and startled expressions, and by their tendency, as they stagger from urgent question to statement and back again, to mutter curses against their civil servants along the lines of, “Why wasn’t I told about this before now?” What a terrific record Ministers in this Department have. Having refused to ban wild animals in circuses because it might conflict with their human rights, and having postponed the badger cull because no one told the Department that London was hosting the 2012 Olympic games, DEFRA Ministers found themselves in charge of a new national crisis when the fungus that causes ash dieback was discovered in England. What could possibly go wrong?
As soon as the UK presence of Chalara was confirmed to Ministers, on 3 April, they leapt into action in a veritable blur of activity. The alarm was raised and, with breathtaking urgency and efficiency, the dynamism for which DEFRA is known became all too evident. Before we knew it, a mere five months later, a consultation was launched. On behalf of a grateful nation, let me just say, “Phew!”
The Secretary of State, sadly, misspoke when he told the House:
“The minute we heard about this, we launched a consultation.”—[Official Report, 25 October 2012; Vol. 551, c. 1066.]
That would be an absurd statement, heavy with subconscious irony, even if it were true—but it was not. There was a completely unacceptable and unnecessary delay of five months between Ministers being told about the Chalara infection and the consultation being launched—why? That is the equivalent of seeing a burglar breaking into a neighbour’s house and responding by writing a stern and urgent letter to the local police to ask their opinion on local crime-prevention initiatives, and then posting it with a second-class stamp.
Of course, the current Secretary of State cannot be held entirely to blame for his Department’s peculiar reluctance to act when it should have done so seven months ago. [Interruption.] The former Secretary of State, the right hon. Member for Meriden (Mrs Spelman), is chuntering from a sedentary position—highly appropriate. After all, the current Secretary of State has been in his job only since early September. Had he been in post back in April, and had a civil servant perhaps dared to interrupt the latest of his many graphic demonstrations of, “How to drown a badger the proper way” with news of the Chalara infection, he might have acted immediately, and not with a consultation but with an immediate import ban and a public information campaign. Yet, when the ministerial car dropped him at DEFRA for the first time 10 weeks ago, and he walked into his new office clutching his good luck card from the Northern Ireland Office and his Brian May dartboard, was he even briefed as to the seriousness of this infestation? If he was, did he even ask officials’ advice as to whether he could end the consultation early and impose an immediate ash import ban? Did he even question the reasons behind having a consultation in the first place? Surely he recognised that every day the consultation lasted was an extra day in which the Chalara spores could, and certainly would, spread.
On Friday 2 November, seven months after Ministers were told, the Secretary of State finally found time in his diary to convene a Cobra meeting to come up with a plan to respond to the disease. But on the same day he used the functions and resources of his private office and the civil service to write an exclusive briefing letter for the eyes of colleagues on the Government side of the House only. That explains to the hon. Member for New Forest East (Dr Lewis) why the words he read out were completely new to Opposition Members. We were not worthy of receiving this great letter from the Secretary of State—only Conservative and Lib Dem MPs were. I ask the Under-Secretary, because I know him to be a reasonable man, whether he honestly believes that when his boss decides to brief only Conservative and Lib Dem MPs, that is a proper action for a Secretary of State to take. I think I know what the answer will be publicly, but the Under-Secretary is an honourable and understanding gentleman, and I am sure that he understands that that was a gross disservice to the House. This is not an issue that demands a secretive, high-handed approach. This is an issue that demands that everybody involved from the top of government to the general public, and everybody from across the political spectrum, pulls together and takes the necessary steps to fight against a destructive and devastating disease. With that in mind, will the Under-Secretary now promise to keep Opposition Members informed throughout this process? Everyone in this House has a right to know what is going on, as do our constituents.
On the topic of sharing intelligence, why was advice to tree growers and the public on the best way to spot the disease and prevent it from spreading not issued immediately after Chalara’s presence in the UK was confirmed? Does the Minister seriously believe that the delay was acceptable? Is he telling the House that if he could turn back the clock, he would do the same thing all over again? What early estimates has the Department made of the cost to the Exchequer of fighting this disease? The Minister of State said that lessons will be learned. How can lessons be learned if no mistakes have been made? If mistakes have been made, what mistakes were they? I have no doubt that Ministers will do what they always do whenever the Opposition have the bare-faced cheek to oppose them on anything: blame the last Labour government—I prefer the phrase “most recent Labour Government” to “last Labour Government”. But perplexing as it is, these Ministers are in government and we are not, and it is they who, at least occasionally, must take responsibility for the running of the country. If they do not blame us—and they will—they will blame something else, such as the weather or the wind. Science says that it is a possibility that the spores were blown across the sea from the continent to the UK. That small possibility has been turned by every Government MP into a cast-iron fact; it is a “fact” that is simply not supported by science.
Ministers have a great deal to answer for. That is less a partisan political point than a simple statement of democratic principle: this happened on their watch and it is not good enough for them to try to wriggle out of the responsibility they bear. The inaction, the dithering and the delay Ministers have shown is tantamount to a dereliction of duty, and the mishandling of this sorry episode is symptomatic of the dearth of leadership and the abundance of incompetence inside the Department. Government inaction has left our forests exposed. Government ineptitude has put us in the terrible situation where the disease is beyond containment and spreading rapidly. It is now the Government’s duty to face up to their responsibilities, admit that they got this one wrong and work towards overcoming the huge environmental, economic and ecological impact this terrible disease will inevitably bring.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
Despite some of the remarks that have been made, this has been an interesting debate with some good contributions from Members on both sides of the House. The ash is one of the best-loved species of tree in this country—it is one of my favourites. It is fundamental to our landscape, our ecology and our ecosystems. It is not just an important economic and environmental issue; it is deeply emotive, too. The House should remember that we are at our best when we join together to face a national crisis of this kind, and at our worst when we seek to trivialise and to make cheap party political points.
The Opposition could have handled the debate differently. Sadly, they have cheapened the subject through the wording of the motion, which they know cannot be supported. They could have been bigger than that, treating the matter as a serious one that concerns people outside this building: not just rural communities but urban communities that are worried about the loss of a much-loved tree. It is a great shame they did not do that.
Let me address one point made by the hon. Member for Glasgow South (Mr Harris). My right hon. Friend the Secretary of State updated the Environment, Food and Rural Affairs Committee on this issue on 6 November. He met the right hon. Member for Leeds Central (Hilary Benn) to discuss ash dieback, also on 6 November, and the hon. Member for Wakefield (Mary Creagh) on 7 November. He issued a science factsheet, sent to all Members, on 7 November and published a written ministerial statement on 9 November. I am beginning to wonder what more he could have done to keep hon. Members informed.
For those of us old enough to remember Dutch elm disease in the 1970s, which was mentioned by many hon. Members, the prospect of our ash trees suffering the same fate is deeply depressing. Although the scientists tell us that we will not be able to eradicate Chalara, they have also given us hope. By acting now and learning from experiences in Europe, we might be able to slow its spread and find resistant strains. To do that, we need the resolve to work together. We should not waste energy blaming each other. Above all, mobilising all those whose care for these trees in both town and countryside can assist Government to find a way forward.
Government cannot do this alone. Industry must be involved, and land managers, environmental groups and the public can all play their part. We know that there is a real will out there to do that. We will play our part, too. We are investing in world-class research and surveillance and improving our ability to diagnose the disease quickly. We are putting tools and advice in the hands of those who live and work among the nation’s woodlands.
I particularly pay tribute to my right hon. Friend the Member for Meriden (Mrs Spelman), who pointed out that, long before Chalara hit the headlines, the Government recognised the increasing threat to the health of our trees. In October 2011, we launched the tree health and plant biosecurity action plan, which sets out a UK-wide integrated approach to dealing with serious tree pests and pathogens. The plan included a commitment for £7 million of new funding for tree health research, which was increased to £8 million earlier this year and is available until 2015-16. That has unlocked a further £4 million from research councils in support of long-term support initiatives, led by Living With Environmental Change. We have grasped the very good points made by my hon. Friend the Member for Richmond Park (Zac Goldsmith) and the hon. Member for Brighton, Pavilion (Caroline Lucas), who, along with other colleagues, addressed important points about the potential threat from other diseases and how we must work to see what is coming and to be better prepared for such diseases.
Let me comment on one point made by the hon. Member for Ellesmere Port and Neston (Andrew Miller). We convened Cobra because this is an important issue, both for the rural economy and for the environment. It is important that we draw together a range of different stakeholders and players, particularly from local government, as has been made clear. We should not quibble about why we are doing that; it is a serious matter and it is important to see the involvement of government across the piece.
Other Members raised important questions about other tree diseases, such as Asian longhorn beetle, Phytophthora ramorum, oak processionary moth and sudden oak death syndrome. Those are all serious. I agree with hon. Members who have raised points about the need to promote home-grown industries for saplings and plant propagation. We must take that forward in the work we do.
I do not hold with those who believe that there is some dark conspiracy. I can honestly say that the scientists I have met to discuss the issue are not the sort of people to be pushed around by politicians to make points that would assist them. They give us advice and we take it; we have had some very good advice on this important issue.
I pay tribute to my hon. Friend the Member for Mid Norfolk (George Freeman), who stated accurately that such outbreaks should be a wake-up call to us all. He gave a responsible message from one of the areas most affected by the disease and talked about the importance of a science of resistance, promoting a centre of excellence in this country that can take forward work in UK plant sciences. There is a good economic reason for doing that. I have just returned from New Zealand and completely concur with the many points made about countries such as Australia, New Zealand and the United States. DEFRA has made big steps forward in trying to get that message across and my right hon. Friend the Member for Meriden mentioned the warnings that are now given on aeroplanes about the importance of biosecurity. We can do much more not just in the United Kingdom but in Europe.
I take the point that the hon. Member for Brighton, Pavilion made about the grant schemes. We will consider that. When we get resistant species, some work could be done to encourage people to plant them as part of their grant schemes.
The key message that the House needs to recognise is that the Government acted straight away to deal with Chalara fraxinea as soon as it was identified in England. We will focus our efforts on reducing the rate of the spread of the disease. We will continue to trace recently planted saplings and nursery stock and will destroy infected trees, as we have been doing through the summer. We are getting the public to help to identify diseased trees through raising awareness. We are looking for genetic strains that are resistant to the disease and getting land managers to look for healthy trees in affected areas.
We have taken swift action to identify where the trees were being sent to and arranged for infected trees to be destroyed. We have worked with the industry to deal with infected plants and encouraged best practice in sourcing plants. We have been the first to produce pest-risk analysis on the issue, ensuring that our approach is technically and scientifically robust. We have provided all relevant groups with an opportunity to contribute to how things are being handled through a consultation process.
We are now doing all we can to protect our native ash trees. A ban on imports is now in place, well before the start of the planting season. We are taking the threat to ash trees extremely seriously. Work is being done to control the spread of the disease; we have undertaken an unprecedented, rapid and intensive survey of Britain’s established woodlands; and much more action is being taken besides. However, although there has been a lot of urgent action to get a grip on the problem, more can be done.
There is a long-term commitment to tackling this disease, and it has made us take a long, hard look at the way we respond to plant health risks more widely. Other threats, as hon. Members have said, are on the horizon. As the Secretary of State announced on Friday, we are reviewing the current arrangements and are prepared to introduce radical reforms if necessary.
Key work is being done by Professor Ian Boyd’s tree health and plant biosecurity taskforce, which is made up of an eminent group of scientists. Its interim report will be available at the end of the month. The Secretary of State has given a commitment to update the House on proposals for controlling Chalara.
The motion is nothing but a cheap party political game when we are dealing with a problem. I urge the House to reject it.
Question put.
Fuel Duty
(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
21:59 - The House divided: - Ayes: 234 / Noes: 282 - Question accordingly negatived.
22:13 - The House divided: - Ayes: 283 / Noes: 235 - Question accordingly agreed to.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I inform the House that the amendment in the name of the Prime Minister has been selected.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I beg to move,
That this House believes that, at a time when the cost of living is rising and our economic recovery is fragile, it cannot be right to increase fuel duty by the planned 3 pence in January 2013; calls upon the Chancellor of the Exchequer to cancel this rise in fuel duty at least until next April; and believes that this change could be funded by clamping down on known tax avoidance schemes.
Everyone in the House knows that families are feeling the squeeze, that low and middle-income families are hardest hit, that prices are rising higher than wages, that small businesses are struggling and that the economy is still fragile, all of which makes it exactly the wrong time to hike up fuel costs. At the outset, I urge hon. Members on both sides of the House to join us and back our call to delay the January fuel duty rise. I particularly appeal to hon. Members who have rightly voiced concerns in recent months to do so. Difficult decisions have to be made to get the deficit down—we understand that. Yes, there were times in the past when Labour put up fuel duty, and no one disputes that.
Cathy Jamieson
I shall give way to the hon. Member for South West Bedfordshire (Andrew Selous), who I am sure is going to tell me that he supports our motion.
Andrew Selous (South West Bedfordshire) (Con)
Will the hon. Lady tell the House how many times her Government put up fuel duty?
Cathy Jamieson
I can tell the hon. Gentleman that on about 13 occasions the Labour Government decided not to put up fuel duty, to delay an increase or to change it because of economic circumstances, which was absolutely the right thing to do. We looked at the economic circumstances, and made decisions to delay or cancel when that was the right thing to do, including at the height of the economic crisis.
Mr Jim Cunningham (Coventry South) (Lab)
I hope my hon. Friend noted that about a fortnight ago there was an Adjournment debate in the House with cross-party support for a freeze on the increase. Although Conservative Members may go on about the increase under Labour, we must remember that they are in government now and that they could have stopped this 18 months ago.
Cathy Jamieson
My hon. Friend makes a good point. It is regrettable that some hon. Members who only a few weeks ago called for the very thing that our motion calls for now seem to have cold feet. Given that the economic recovery is fragile, the Government should back the motion.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
What is the total taxation on a litre of petrol, how does it affect the general public, and should that be advertised in every forecourt in the land?
Cathy Jamieson
My hon. Friend makes an interesting point, because it is about 81p per litre at the moment. He is absolutely right: when people go to the forecourt to fill up their car, they want to know exactly how much it is going to cost. They do not go to the forecourt and think about what might have been; they think about what the price is in the here and now. Petrol is 15p a litre more than it was at the general election, and it is 5p a litre more than it was in the summer, when the Government last deferred a rise. Let us remember that the Chancellor made that decision after pressure from the Opposition.
Cathy Jamieson
I shall give way to the hon. Member for Dover (Charlie Elphicke), who I am sure is going to tell me how many of his constituents have contacted him asking him to back our motion.
Charlie Elphicke (Dover) (Con)
I am not sure that this will quite fuel the hon. Lady’s bandwagon, but why did the Labour Government, in their closing stages, include in their Budget six further rises for this Parliament?
Cathy Jamieson
It may have escaped the hon. Gentleman’s notice that his party is now in government, and it has to take responsibility for its actions, including the Chancellor’s VAT rise, which has added 3p to the price of a litre of petrol, costing motorists on average over £100 more.
Cathy Jamieson
May I make a bit more progress, as we want to hear what the Government are doing? Their own figures tell us that the price of petrol is now more than 136p a litre. In my constituency, prices at a rural petrol station at the weekend were 139.9p a litre for petrol, and 144.9p for diesel. Only this morning, I heard a price of 160p a litre in the Scottish highlands.
Mr Alan Reid (Argyll and Bute) (LD)
When Labour was in power, other island MPs and I consistently went to see Labour Ministers to ask for an island fuel duty discount. It was refused. Within a year, this Government introduced that policy. Will the hon. Lady tell us what the Labour party’s policy is on a rural fuel discount?
Cathy Jamieson
I hope that when he goes back to his area, the hon. Gentleman is able to explain to his constituents why he has not backed the motion tonight.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Lady said at the outset that this is not the time to put up fuel duty. Will she tell us whether, each and every time Labour put up fuel duty over the past 13 years, it was the right thing to do, or do we have great joy in heaven with the repenting of the Labour hordes this evening?
Cathy Jamieson
Once again, I am rather disappointed with the hon. Gentleman’s approach. I should have thought that he, too, would want to be able to go back and tell his constituents that he had supported a motion to ensure that the rise did not go ahead. The tax on a tank of petrol at the general election was £37.60. It has now risen to £40.30, and if the 3p rise goes ahead on 1 January it will rise again to £42.20.
Caroline Lucas (Brighton, Pavilion) (Green)
On the day that the International Energy Agency has warned that two thirds of fossil fuels need to remain under the ground if we are to avoid catastrophic climate change, does the hon. Lady not see a contradiction in arguing for lower fuel prices, especially since the cost of motoring has fallen in the past 10 years while the cost of public transport has risen? Would a more consistent position not be to seek to support struggling households directly, using the money—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Lady is testing the patience of the House. It is unfair. We are going to have to introduce a time limit already. If she wishes to speak, would she please put her name down? She cannot make a speech now. Short interventions are needed on both sides
Cathy Jamieson
I gave way because I respect what the hon. Member for Brighton, Pavilion (Caroline Lucas) has to say, but I hope she will understand the real pressures on families and the pressures that individuals are facing as they try to get to work and go about their business.
It is not just Labour that is calling for the increase to be postponed. FairFuelUK, backed by the RAC and the Road Haulage Association, among others, has consistently and determinedly campaigned for lower fuel duty.
Mr Gerry Sutcliffe (Bradford South) (Lab)
The public are seldom interested in Opposition day debates, but they are interested in this one. My constituents have contacted me about it. Many organisations have contacted us because they care passionately about the issue. Should the Government not recognise that this is a big worry for all our constituents?
Cathy Jamieson
I hope the Government recognise that this is a big worry for constituents. We are all familiar with the e-mail campaigns and the correspondence that we have had through the FairFuelUK campaigns and from our constituents. FairFuelUK has produced a comprehensive report, which I know it has presented to the Chief Secretary to the Treasury. It sets out the impact of retaining the January rise, and gives a stark warning that about 35,000 jobs could be at risk.
Cathy Jamieson
No, I want to make a little progress.
The Federation of Small Businesses says that 85% of its members said that their car or van is crucial or very important to their business, and just over half its members said that rising fuel costs were one of the main concerns for their businesses in the third quarter of 2012.
Cathy Jamieson
No. I have given way already and I want to make some progress. It is important that people hear why we are proposing the motion tonight.
Almost 20% of FSB members identified fuel costs as a barrier to growth. Not only those organisations but—[Interruption.] Hon. Members on the Government Benches—those who tend to think they are the champions of industry—might want to listen to the voice of industry. The Petrol Retailers Association has reminded us of the impact of VAT and the impact on the price of fuel if the 3p per litre increase goes ahead in January.
Those are the voices of industry, but it is not just industry that will be affected:
“We must remember that motorists are not a lobby group. They are mums driving to school, children on buses and pensioners hit by inflation. When the cost of road haulage rises, the price of everything else rises too.”—[Official Report, 23 May 2012; Vol. 545, c. 140WH.]
Credit where it is due—those are not my words; they are the words of the hon. Member for Harlow (Robert Halfon) in a Westminster Hall debate in May 2012.
Robert Halfon (Harlow) (Con)
I am hugely grateful to the hon. Lady for giving way, but my constituents in Harlow will have much more trust in the Chancellor, who cut fuel duty last year, which the Opposition opposed, and provided two fuel duty freezes, than in the political opportunism that the hon. Lady is proposing today.
Cathy Jamieson
I am genuinely sorry that the hon. Gentleman adopts that tone because I know that he has worked determinedly to raise the issue. I am sure that his constituents will want to know exactly what the Chancellor is going to do. Our shadow Chancellor has said what he thinks, whereas the Chancellor seems to be debating by a nod and a wink, and nothing is determined.
Cathy Jamieson
Those on the Government Benches may want to listen to the consumer organisation Which?. It has told us that 85% of people polled recently were worried about the cost of fuel. That is up nine points since the previous poll in July. One in 10 people polled admitted that they had had to dip into savings to meet the costs of motoring. Many of these people rely on their cars to get to work, to get their kids to school, to take up education and training opportunities, or perhaps to care for elderly relatives.
As I said earlier, these are tough economic times and hard-pressed families out there know that only too well. They are the ones who are suffering most from this out-of-touch Government’s failed austerity plan, which has delivered the longest double-dip recession since the second world war—a plan that is failing on the deficit, with borrowing higher so far this year than last.
Cathy Jamieson
Not only are the Government’s plans failing—they are also deeply unfair.
Cathy Jamieson
I will give way in a moment, but it is important that this is heard.
The Prime Minister once promised not to balance the books on the backs of the poor. He also says that we’re all in it together, so perhaps the hon. Member for Nuneaton (Mr Jones) would like to tell me what his constituents think should be done in January. Should the 3p rise be delayed?
Mr Marcus Jones (Nuneaton) (Con)
I thank the hon. Lady for giving way. She said that we should listen to the voice of industry and of consumer groups. Did the Labour party listen to those groups when it put fuel duty up by 55% during its time in government?
Cathy Jamieson
Again, I regret the tone of the hon. Gentleman’s contribution. This is one issue on which we had the opportunity to unite and send a message to constituents, to all those who have contacted us and to businesses that are struggling, that the whole House could come together and agree. It is disappointing that the parties on the Government Benches have not done that.
My constituents and others are disappointed that while the Prime Minister and the Chancellor focus on giving tax cuts to millionaires, millions of families, businesses and pensioners are being forced to pay more. The cuts in child tax credits and child benefit, the hike in VAT and the cuts in age-related personal allowances have hit people hard throughout the country, just at the time when they and the economy need help.
The Leader of the Opposition has called this slow, remorseless squeeze
“a quiet crisis that is unfolding day by day in kitchens and living rooms in every town, village and city up and down this country”.
That is exactly what it is.
Cathy Jamieson
I will give way in a moment.
I suspect that I can predict what those on the Government Benches are going to say. They will tell us that we should celebrate the fact that the economy is finally out of a double-dip recession and things are back on track. Perhaps the hon. Member for Sherwood (Mr Spencer) is, however, going to tell me how many e-mails and letters he has had, asking him to back the 3p cut.
Mr Mark Spencer (Sherwood) (Con)
Does the hon. Lady acknowledge that words are cheap and deeds are what count? That is a simple philosophy. Her Government put up the tax and our Government have frozen it. It seems simple to me.
Cathy Jamieson
I agree that words are cheap and deeds are more important. That is why every constituent is going to be looking tonight to see which Lobby hon. Members are walking through and whether they back the delay or not.
Cathy Jamieson
I want to move on, because it is important that we get to the meat of the debate.
As has been said in earlier discussions on the economy, any recovery we have seen so far is fragile at best. Labour has put forward proposals that we believe the Government should put in place: a jobs plan to boost the economy, including using funds from the 4G mobile auction to build 100,000 affordable homes; a temporary VAT cut, which would cut around 3p off the price of a litre of petrol and give an immediate £450 boost for a couple with children; help for our high streets and pensioners; and a bank bonus tax to fund jobs for young people who are out of work. The Opposition believe that the Chancellor should use his autumn statement to help those on low and middle incomes with the rising cost of living.
Cathy Jamieson
I have given way to the hon. Gentleman already and want to make some progress.
We believe that the Chancellor should rethink his plan to give a tax cut to millionaires in April while putting up taxes for pensioners. As the shadow Chancellor announced on Friday, we believe that the Chancellor should cancel the 3p rise in fuel duty planned for January until at least April.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Does the hon. Lady agree that one of the unfairest aspects of the planned duty rise is the disproportionate effect of such taxation on folk in rural areas, as they have no alternative forms of transport and have further to travel?
Cathy Jamieson
The hon. Lady makes a valid point. I am certainly well aware of the problems faced by people in rural areas where there might be no alternative. I hope that she will support our motion this evening.
The Chancellor and the Prime Minister might never have had to worry about the cost of filling up their cars, but millions of people across the country worry about that every day, as we are hearing. To be fair, some Government Members recognise that and have been vocal about it, or at least they were until today, when they suddenly appeared to go quiet.
Mr Russell Brown (Dumfries and Galloway) (Lab)
Surely this is a no-brainer. If the Chancellor decided before August to freeze fuel duty and not introduce the additional 3p rise, surely the same logic should be used today, when fuel costs even more, and the increase should not be introduced in January.
Cathy Jamieson
My hon. Friend makes a valid point. We have neighbouring constituencies, so I am certainly aware of the difficulties some of his constituents face in trying to access fuel at an affordable cost. He will also be aware that although there have been some price reductions by the big supermarkets, which can afford to use fuel as a loss leader, the small and independent garages, many of which his constituents rely on, do not have that luxury. Many of those small retailers are under increasing pressure as a result of tighter margins and are having to take smaller deliveries of fuel to ensure that cash flow does not become a problem. Those are often the businesses that serve rural areas. If they cannot continue to operate, customers will face having to travel many more miles just to fill up the tank.
It was only after pressure from Labour and campaigns such as FairFuelUK that the Chancellor decided to delay the last rise until 2013. Indeed, if we look back on what could be called the fastest U-turn in history, we see that he backed down only hours after Labour called for that help for businesses and families. We welcomed his climbdown then, and we and millions of motorists up and down the country would welcome a renewed commitment from the Government.
Cathy Jamieson
I will give way to the hon. Lady if she can give that commitment.
Andrea Leadsom
Does the hon. Lady acknowledge that it was her Government who put in place the fuel duty escalator, which is the whole problem facing British motorists today? Does she accept that?
Cathy Jamieson
The hon. Lady must also recognise that it was in her Government’s Budget. What we are asking the Chancellor to do is listen. We have heard a great deal about how he is in listening mode, but I do not know how long he must listen before making the decision. According to the House of Commons Library, the cost of delaying the fuel duty rise again until April 2013 would be around £350 million, and we think that could be paid for through a clampdown on tax avoidance. I am conscious that the right hon. Member for Wokingham (Mr Redwood) wishes to intervene.
Mr Redwood
I am very grateful. Will the hon. Lady explain which specific tax loopholes Labour would close that the Government are not already closing, and why does Labour not provide any money after April when they would be putting the tax up again?
Cathy Jamieson
I absolutely will explain that. We think that there are loopholes that can be closed, and I am sure that the Government will also want to close every possible loophole. For example, there is a growing problem with some employment agencies forcing workers to become employees of umbrella companies. They then falsely inflate the workers’ travel and other expense claims, reducing tax and national insurance and pocketing the avoided tax as profits. Her Majesty’s Revenue and Customs forecast in 2008 that the cost to the Exchequer of that avoidance would be around £650 million by 2012-13. More recent reports have suggested that the current tax loss could be as high as £1 billion. Even if only a proportion of that money was recouped, it could pay for the fuel duty rise to be postponed.
As I said earlier, I know that many Government Members feel strongly about this issue. We have heard over the weekend and today all the talk about the Chancellor being in listening mode, but at the same time the Treasury’s official line is that no decision has been taken. Nods and winks are no good to families struggling in the run-up to Christmas. The approach that says “It will be all right on the night” is no use to the small business trying to balance the books and plan for the first quarter of next year. If the Chancellor has made up his mind to delay the duty rise, his Ministers should say so, and they should say so today. If we do not hear that announcement loud and clear, every hon. Member who wants to see the increase dropped should not only talk the talk tonight, but walk the walk; they should walk into the Lobby with us and vote for the 3p increase to be delayed.
The Economic Secretary to the Treasury (Sajid Javid)
I beg to move an amendment, to leave out from “House” to the end and add:
“notes that as a result of the action this Government has taken to cut, cancel and delay fuel duty rises families will save around £159 on fuel costs by April 2013; further notes that under the previous administration’s plans, voted for by the Leader of the Opposition and the Shadow Chancellor, pump prices would be 10 pence higher than they currently are; also notes that motorists in island communities are benefiting from the fuel duty discount pilot scheme; recognises that this Government has introduced a number of other measures to support families including a £1,100 increase in the personal income tax allowance from April 2013, three years of council tax freezes and a cap on rail fares; commends that these measures have been in part affordable because of the Government’s record of success in tackling tax avoidance and evasion which is on track to raise an additional £7 billion per annum by the end of this Parliament; and welcomes the Government’s commitment to do more to help with the cost of living in the future subject to the constraints of the public finances.”
I see that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) has been abandoned by her boss—
Sajid Javid
My boss is in Brussels on Government business. The hon. Lady’s boss is probably too busy cooking lasagne for someone. As usual, he is busy chasing the headlines and has left her to pick up the pieces.
Rising living costs have made life difficult for millions of households. I know that first hand. Like millions of others, I have lived under financial distress, so I know what it is like to worry about paying the bills and living within a tight budget, and the Government know about that, too. Times are tough. We inherited the biggest deficit in the developed world and the largest in our peacetime history, and international commodity prices continue to rise, raising the cost of living. Since May 2010, the price of wheat is up 72% and the price of Brent crude is up 31%. While talking about commodity prices, I note that the price of gold is up 40%. Had the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), not recklessly sold off the nation’s gold reserves, our country would be £10 billion richer. That is money we could have used to help hard-working families.
To clear up the mess left by the Labour party, we have had to make tough decisions, but we have prioritised the cost of living wherever we can. We have cut income tax, frozen council tax, capped rail fare increases and, moving on to the Opposition’s motion, we have delayed and cancelled the fuel duty rises that they supported.
Mr MacNeil
The Minister states that the price of wheat has gone up. Bread and butter prices have clearly increased dramatically. Is this not exactly the wrong time for the Government to put 3p on the price of a litre of fuel?
Sajid Javid
That is exactly why the Government have taken action on the cost of living, which I will move on to shortly. Let me first talk about the Labour party’s record. It will not admit that it delivered the biggest deficit in the developed world. The shadow Chancellor said only three weeks ago that under Labour
“there was not a structural deficit”.
In fact, there was a structural deficit of £71 billion in 2007-08—more than 5% of this country’s GDP. We should thank him. Whenever anyone might need reminding why the Labour party must never be allowed to run this country again, the shadow Chancellor steps up to the plate—and this motion is another reminder.
Sheila Gilmore (Edinburgh East) (Lab)
Does the Minister accept that it is misleading constantly to give a cash figure for the size of deficit and say that it is higher than in countries with a far lower GDP?
Sajid Javid
I think that the hon. Lady needs to study the figures and understand what “percentage of GDP” means.
Andrew Selous
On tax avoidance, will my hon. Friend confirm that this Government have done far more than Labour ever did to reclaim tax due to the Exchequer, and does he agree that the Opposition should give credit where it is due?
Sajid Javid
As always, my hon. Friend is absolutely right. I will come to that later.
In the Budgets of 2009 and 2010, the shadow Chancellor and his colleagues endorsed seven rises in fuel duty between 2010 and 2014.
Dan Rogerson (North Cornwall) (LD)
The Minister finds himself in a strange set of circumstances whereby he is having to take the Opposition’s advice to abandon the policy that they pursued in government. What does he think it will be next—returning the top rate of income tax to the 40% that it was for most of their time in office, or perhaps reintroducing the 10p rate?
Sajid Javid
My hon. Friend is absolutely right to point out that the Opposition are all over the place.
If we had found a way to halt all the rises that Labour had planned, we would have done so, but if we had gone ahead with its plans, fuel duty would have continued to rise. Fuel would be 10p per litre more expensive by now, costing the average Ford Focus driver £159 extra by April 2013. Let us put to bed once and for all the idea that Labour is the party fighting to support people on the cost of living.
Mr Donohoe
As the Minister was in his place earlier he will have heard me ask what is the amount of tax on a litre of petrol. Does he agree that, for the first time, a Government should allow that figure to be displayed on the forecourts of all our petrol stations?
Sajid Javid
I can tell the hon. Gentleman that because of the policies of the Government he supported, there were 12 rises in fuel duty, so it is a lot higher today than it would have been otherwise.
This Government are taking action. Since the coalition came together, our economic plans have won international credibility. We have cut the deficit by a quarter. Because of this, we have secured record low interest rates and opened up Britain for business once again.
Andrew Percy (Brigg and Goole) (Con)
The Opposition’s motion has absolutely no credibility given their record in government, and that is why I certainly will not support it. My hon. Friend is right to point out that the Government have done some good things in this respect. May I send him a message from the people of Brigg and Goole, which is that we welcome what has been done thus far but desperately want this rise to be cancelled or delayed again?
Sajid Javid
My hon. Friend makes himself absolutely clear. He has been an avid campaigner on this issue, and his point of view is certainly being taken on board.
These low interest rates have helped hard-working families up and down the country with their cost of living. With interest rates low, mortgage bills are also low. If interest rates rose by just 1%, average mortgage bills would increase by almost £1,000 a year.
Bill Esterson (Sefton Central) (Lab)
The hon. Member for Brigg and Goole (Andrew Percy) said that his constituents want the planned rise in fuel duty to be cancelled—as do my constituents—and the Minister said that he agreed with him, so why does he not support our motion?
Sajid Javid
If the hon. Gentleman is patient he will hear about the action we have taken to help with the cost of living.
Mr Marcus Jones
Who is trying more to help hard-working people with the cost of living—a Government who have frozen council tax for the past three years or a Government who doubled council tax during their term in office?
Sajid Javid
My hon. Friend knows that the answer to that question is that it is this Government who are on the side of hard-working families.
Mr Graham Stuart (Beverley and Holderness) (Con)
As my hon. Friend knows, many of my constituents live in sparsely populated rural areas, and the cost of fuel has an immense impact on their family finances, yet they realise that running the country with massive deficits puts their children’s futures at risk and means that money that could have been spent on public services is instead spent as Labour wants—on interest.
Charlie Elphicke
There is opportunism not only on fuel duty but on tax avoidance. Under the previous Government, income tax paid by hard-working families in the working nation rose by 81%, but Labour Members let business off the hook, with corporation tax receipts going up by only 6%, because they were so obsessed with the prawn cocktail circuit.
Sajid Javid
My hon. Friend has done a lot of work in this area and speaks with great knowledge. He is absolutely right to point out Labour’s inaction.
Guto Bebb (Aberconwy) (Con)
I speak as a Member of Parliament representing a Welsh constituency. Is my hon. Friend aware that this Government made available to the Labour Administration in Cardiff money to freeze council tax in Wales, but they declined to do so?
Sajid Javid
That is a shocking disclosure, but what more could we expect from Labour?
Dr Whiteford
We all know that the Government inherited a mess, but does the Minister accept that the increase in fuel duty will harm recovery by holding back businesses and households?
Sajid Javid
I think that the hon. Lady would welcome the action that the Government have already taken on the cost of living and on fuel duty.
This Government have also been working hard to get people into work. There are more people in employment than ever before. Unlike Labour, we have no problem in welcoming the fact that the private sector has created over 1 million jobs over the past two years. That equates to more net new jobs created in the private sector in two years than were created in 10 years under Labour. With this support in place, we have strained every sinew to cut taxes where we can to ease the cost of living. We have cut fuel duty—a cut that Labour opposed—and frozen it for nearly two years. Fuel is now 10p cheaper than it would have been under Labour, helping family budgets. We have cut income tax for 25 million people and lifted 2 million people out of income tax altogether. We have frozen council tax for two years and announced that we will do it again next year. This Government have saved families £220 per annum on the average council tax bill. We have capped increases in rail fares so that commuters do not face substantially above-inflation rises.
Gloria De Piero (Ashfield) (Lab)
Can the Minister explain how tax cuts for millionaires helped hard-working families?
Sajid Javid
If the hon. Lady is referring to the previous Budget, the changes we made to the top tax rate were covered more than six times by other changes that we announced. This Government want to create a tax system that is both efficient and helps to create jobs.
Ian Swales (Redcar) (LD)
Does the Minister share my surprise that the previous Government thought it was fine to give tax relief of £250,000 a year on pensions contributions, and may I confirm that not one of my constituents has complained about the cut to £50,000?
Sajid Javid
My hon. Friend makes a good point and shows again where this Government are taking action to balance the nation’s finances.
We are doing a lot more to try to help those in need. We are investing more than £4.5 billion over this Parliament in affordable housing, delivering 170,000 new homes. We have replaced Labour's ineffective stamp duty relief with schemes that work, such as Firstbuy and NewBuy, helping more than 25,000 first-time buyers to find their way on to the first rung of the housing ladder.
Let us look at Labour's claims on tax avoidance. It wants us to clamp down on a scheme that uses a specific tax relief around travel expenses—a relief about which in 2008 the Labour Government, when presented with the facts, chose to do nothing.
Sajid Javid
I will in a moment.
The Labour Government, when presented with the facts about this tax relief in 2008, chose to do nothing. They declared:
“The Government has considered—
Sajid Javid
If the hon. Lady is patient, I will give way in a moment—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I do not need an answer back; I am just saying that the hon. Lady does not need to keep jumping to her feet. The Minister has promised to give way, but I do not know whether he is giving way now.
Sajid Javid
Not yet.
The hon. Lady does not want me to tell the House what the Labour Government did when they looked at this tax loophole. They declared:
“The Government has considered all the consultation responses and believes that on balance the negative effects of changing existing legislation outweigh the benefits"
To address just this issue, this Government have already strengthened HMRC's enforcement and compliance teams, and protected tens of millions of pounds of revenue. So the nub of today's debate is a call to clamp down on avoidance of a relief that the Opposition declared they could do nothing about, to pay for a cut in fuel duty that they supported. Mr Deputy Speaker, you couldn't make it up.
Stewart Hosie (Dundee East) (SNP)
The Minister said he wanted to talk about tax avoidance, so let us talk about it. Why did the Chief Secretary to the Treasury promise at his party’s conference last year thousands of extra tax inspectors, and why have the Government failed to deliver any of them?
Sajid Javid
I thank the hon. Gentleman for that question; I will come on to it.
Bill Esterson
It would be great if the Minister spoke to the fuel duty motion—[Interruption.] The fuel duty part of the motion. He talks about tax avoidance. Many of my constituents used to work at HMRC—they do not any more because his Government got rid of them. How can he be serious about tax avoidance when he has not provided the new inspectors he promised and has cut some of the staff who were there when the Government took office?
Sajid Javid
The motion mentions tax avoidance—he really should read his own party’s motion. The number of HMRC employees went down from 96,000 to 66,000 under his Government.
Labour Members had 13 years to clamp down more widely on tax avoidance. They had 13 years to do what they are calling for today. Did they take that chance? No. There were 13 years of inaction, and a consultation gathering dust in the Treasury archives. Even then, their figures simply do not add up. They claim that clamping down on this tax relief would bring in £650 million, but figures released while they were in power show it would bring in significantly less. If they ever want to regain credibility on the economy, they need to apologise for the mess in which they left the economy and learn to stop making irresponsible, unfunded promises.
Christopher Pincher (Tamworth) (Con)
Only the deluded or those who want to avoid tax will oppose the closing of tax loopholes. Many people have criticised some companies for avoiding tax, but a company called Stemcor pays only £163,000 from the £65 million of profits it makes each year—about 0.1% of its revenues. If companies are to be criticised, should not Stemcor be criticised?
Sajid Javid
I thank my hon. Friend for that point. It would not be appropriate for me to talk about any individual company, but he makes a good point. Any company that is engaged in aggressive tax avoidance needs to explain itself.
Tax avoidance ran rife under Labour. We have taken action. We are investing £900 million to tackle tax avoidance and evasion, which will deliver £7 billion a year by 2014. We have already signed a groundbreaking agreement with Switzerland to make it much more difficult to evade tax. In March this year, HMRC closed a business property loss scheme within a week of its disclosure. At the G20, the Chancellor and his German counterpart announced concerted co-operation to close gaps in international standards and to crack down on international tax avoidance. Labour's former City Minister, Lord Myners, was on the radio only this morning welcoming this progress.
Underpinning all this progress, we are introducing a general anti-abuse rule so that no one can follow the letter of the law but abuse the spirit and get away with it—something else on which the Labour party never delivered. This is what real action on tax avoidance looks like.
Fiona O'Donnell (East Lothian) (Lab)
If it is all going so well, why cannot the Minister do something to help my constituents who cannot afford to fill up their cars?
Sajid Javid
This Government do not shy away from making tough decisions. We are getting on with cleaning up the mess left behind by the previous Government, and we are doing everything we can to help hard-working families with the cost of living and putting money back into their pockets. Our action on fuel duty is a part of this. Fuel duty is currently 20% lower in real terms compared with its peak in March 2000, and 7% lower compared with May 2010. If we had continued the policies of the previous Government, pump prices would, quite simply, be higher—fuel would be 10p more expensive per litre. I know that some hon. Members will call for a further freeze in fuel duty today. I can assure them that the Government understand the financial pressures that hard-working families are facing. Subject to the constraints of the public finances, this Government are determined to keep helping families with the cost of living.
I urge hon. Members to reject the Opposition's motion and to support the Government's amendment.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I remind Members that the time limit on speeches is seven minutes.
Albert Owen (Ynys Môn) (Lab)
I am disappointed by the Minister’s speech—I have heard it several times before. Whenever he addresses the House he uses the same argument: the previous Government got us into a mess. Today, my constituents are suffering from high petrol and diesel prices, which is why the motion, which I shall support, was tabled.
I have consistently supported the hon. Member for Harlow (Robert Halfon) over a period. Indeed, I opposed the Labour Government increasing fuel duties because I thought the timing was wrong.
Albert Owen
I will in a moment, but given the time limit I do want to make some progress.
I want to raise three issues, the first of which is the impact of fuel duty on businesses, especially those in peripheral areas of the United Kingdom. The Government also chose to impose a VAT increase, despite the Prime Minister having told the country before the election that they had no intention of doing so. Every time constituents throughout the country put petrol or diesel in their cars they pay an extra 3p per litre because of the tax introduced by this Chancellor of the Exchequer.
Pete Wishart (Perth and North Perthshire) (SNP)
I am genuinely confused. What is the difference between a Labour fuel tax hike and a Conservative one?
Albert Owen
Scottish National party Members always use that line on fuel duty, and I am not going to waste my time on it—[Interruption.] If the hon. Gentleman had checked the record, he would know that I have been consistent on fuel duty. I have followed SNP Members through the Lobby on that. Previous Labour Chancellors froze the duty following pressure from people. That is on the record. We can play games about previous Governments, but the serious issue is the cost—
Albert Owen
No. I want to make progress. The serious problem is that our constituents are paying 15p per litre more for petrol under this Government than they paid under the previous Government. Government Members can use nonsense hypotheticals, and say, “It would be 10p more expensive under a Labour Government,” but the fuel escalator was introduced by the Major Government. We could use the same argument, and say, “Had we stuck to that, fuel would by so many pence more expensive.” The reality is that it is 15% more expensive today.
Albert Owen
I will not give way—I want to make progress.
VAT is hurting families and businesses. Hauliers and small businesses in my constituency are paying extra fuel duty and VAT on their fuel. The impact is on goods—[Interruption.] The Lord Commissioner of Her Majesty's Treasury, the hon. Member for Scarborough and Whitby (Mr Goodwill), says from a sedentary position that they get the money back, but he should listen to businesses. They tell me that fuel duty and VAT impacts on their businesses. Are they wrong? He needs to listen to businesses rather than make silly party political points in the Chamber. That is the reality of the situation: they pay more for fuel.
There is a double whammy because, as the Minister said, businesses also pay more for raw materials. They are being badly hurt. The debate should concentrate on what our constituents are telling us.
Jim Shannon
In Northern Ireland, 25% of every worker’s wage is spent on fuel getting to and from work. Another 10% is spent on heating oil. Does the hon. Gentleman believe that the VAT increase should not go ahead for that reason, and that concessions should be made for people in Northern Ireland, where the price of fuel is higher than anywhere else in the UK?
Albert Owen
The motion calls for a freeze on duty, but Labour introduced a previous debate on temporarily cutting VAT to help hard-working businesses and people across the country. Businesses are being hurt.
We rightly say that road transport is hit hard, but ferry companies—this is a serious point that nobody raises—must, because of the high prices, put fares up and cut back on the time their service takes so they can cut fuel costs. The problems that British businesses face are real. In my part of the world, the extra fuel duties mean problems getting goods to market and getting people to the workplace. This is a real issue for real people. I hope hon. Members remember that tonight.
The hon. Member for Strangford (Jim Shannon) mentioned periphery areas. Northern Ireland has the highest fuel duty in the UK, but it is closely followed by periphery areas of Wales. The hon. Member for Aberconwy (Guto Bebb), who is not in his place, made a political point about council tax in Wales. The reality is that the Government cut revenue and capital spend in Wales, so those authorities have to make their decisions, but they are not responsible for fuel tax. Fuel tax lies at the door of the Government. Incumbents have the opportunity to increase fuel duty when they believe that is necessary and to reduce it when it hurts business and our constituents. Now is the time for this Government to think seriously about that.
The Minister is listening—he says the Government always listen and that they are in listening mode—but he needs to take action, and to tell businesses tonight whether or not he intends do so. It is no use the Chancellor and Government Back Benchers getting together, cloak and dagger, to say that the motion is opportunism. The reality is that many of those same Back Benchers have introduced the same motion and supported it in a Back-Bench debate. We need consistency from Government Members, because they know their constituents are feeling the pinch.
Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Gentleman makes a strong speech. He has shown personal consistency, but it is reasonable for Government Members to say that many of his colleagues show anything but. If he wants this duty freeze, what does he want to do to raise the money? Can tax loopholes instantly provide the money, does he want a cut in Government spending, or is he, like most of his colleagues, in favour of ever more borrowing?
Albert Owen
FairFuelUK’s argument is that money is lost to the Exchequer because of the serious impact of fuel duty on businesses. If we had growth in our economy, which all hon. Members want, the Exchequer would get more money, and businesses would be able to reinvest. That is one way. I would like the 4G windfall money to be used to help to alleviate small businesses—[Interruption.] The hon. Member for Scarborough and Whitby says the Opposition have spent the money, but that is not true—we are not sure how much it will be or how it will be spent. I should also point out to him that the Opposition do not spend the money; the Treasury makes those decisions. It is about time the Government took responsibility for their actions rather than making knockabout comments.
My final remark is about the ordinary family. In my part of the UK and many periphery areas, motorists do not go on luxury outings. Motorists are families taking their children to school and students getting to college and university. People in remote areas need their cars for the weekly shop because public transport is not available. It is great when people can take alternative transport, such as in central London and large cities, but that is not a choice in periphery and remote areas.
There is a choice tonight: hon. Members can vote for the motion or the amendment. They should vote for what their constituents want, and do what Members on both sides of the House have been asked to do. They should put loud and clear pressure on the Chancellor. If he is in listening mode, he will listen to the will of the House and suspend the 3p tax increase that he proposes to introduce in January, so that families can have a bit of a break and go into Christmas and the new year in the knowledge that they will have more money to spend, and so that businesses have more money to reinvest.
Ben Gummer (Ipswich) (Con)
The hon. Member for Ynys Môn (Albert Owen) has shown the merit of consistency over many years, but that is not a quality shared by the first two signatories to the Opposition motion—the Leader of the Opposition and the right hon. Member for Morley and Outwood (Ed Balls)—who, in proposing the motion, have shown that they are a very long way from being ready to form a Government. As my hon. Friend the Minister has shown so eloquently, the motion is riddled with contradictions and hypocritical, and shows that the Opposition do not understand in any way the appalling legacy with which the coalition Government have been charged with dealing by the British people.
I hope Opposition Members, and especially Opposition Front Benchers, have read the motion—at least one of them will be a little embarrassed by it—which states:
“That this House believes that, at a time when the cost of living is rising and our economic recovery is fragile”.
At least we have a begrudging admission from them that there is an economic recovery. That there is a recovery has taken a while to come out.
Alison Seabeck (Plymouth, Moor View) (Lab)
I thank the hon. Gentleman for acknowledging that the Opposition motion openly states that there is a fragile economic recovery. Will he do likewise and acknowledge that there was a fragile economic recovery in June 2010?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Before the hon. Gentleman answers that question, I remind hon. Members that, if they intervene, and if they drop down the speaking list, they will understand why—they keep adding minutes to the debate.
Ben Gummer
I thank the hon. Lady for her comment, because it helps me to remind her that, when Britain was in recession at the back end of 2008, fuel duty went up by 2p. When it was in recession at the beginning of 2009, fuel duty went up by 2p. When it was in recession in September 2009, fuel duty went up by 2p. When there was a faltering recovery—which was probably credit fuelled—in March 2010, on the eve of an election, at the point when the figures showed that the economy was recovering, fuel duty went up by 1p. So much for the correlation between recession and fuel duty increases.
Mr Deputy Speaker
Order. Those who think they are bottom of the list will also have minutes removed.
Bill Esterson
I am always happy to be guided by you, Mr Deputy Speaker. I wonder whether the hon. Gentleman is aware of the research—
Bill Esterson
Thank you. I wonder whether the hon. Member for Ipswich (Ben Gummer) is aware of the research by FairFuelUK that points out that a 3p increase in duty would deliver a 0.1% drop in GDP and the loss of 35,000 jobs. Does he accept those figures?
Ben Gummer
At least FairFuelUK sticks to its position. My point is that Labour put up fuel duty in government when the country was in a deep recession and increased it by marginally less when the country was showing signs of a credit-fuelled recovery—coincidentally, on the eve of an election—yet now, when there has been 1% growth in GDP, Labour objects to an increase in fuel duty that was programmed at that point by the previous Government. What Labour lacks in consistency it also lacks in remembrance of what it did previously, faced with the worst recession this country has ever suffered, when the Labour Government put duel duty up by 6p over 18 months.
Susan Elan Jones (Clwyd South) (Lab)
The hon. Gentleman speaks of remembrance, yet he seems to have forgotten the rise in VAT. Will he say how that impacted on fuel duty and how it affected his constituents?
Ben Gummer
I shall turn to disposable incomes and the cost of living in the round now, as it is mentioned in the motion. Of course times are incredibly difficult, for my constituents and most of our constituents. The cost of living and disposable incomes have come under considerable pressure, but a large part of that has resulted from the need to balance the books. We were left the largest deficit in peacetime history, which—as the Minister reminded us—we now understand was £71 billion before the recession came. Yet the inheritance was not just one of deficit in 2008, but one where real wages fell in the period from 2003 to 2008, when GDP figures showed at least nominal growth—of 11% perhaps —in the economy. Real wages for anyone who happened to be a middle-income earner stagnated in that period, while real wages for those in the bottom quartile fell by 0.4%. Therefore, when the country was growing under the previous Administration, incomes were falling for the vast majority of people in real terms.
The reason we now have to take painful steps to rebalance the economy is to address the fundamental problems that the previous Government not only failed to address, but in many instances laid the foundations for. This country cannot survive on the economic model built by a previous Chancellor of the Exchequer and leader of this nation. It was that model which broke so spectacularly in 2008, and it is this model which we are trying, little by little, to repair. The least the Opposition could do is recognise the problems that they gave this new coalition Government to sort out, yet we have before us a motion that is a consummate exploration of inconsistency and hypocrisy. What I would say to those on the Government Front Bench is this: do not listen to the Opposition when they give lectures on tax avoidance or fuel duty, because they have none to give.
I suggest that we have a system that will not work in the long term. The problem with fuel taxation is that—as the Office for Budget Responsibility has probably underestimated—it will cost the Exchequer some £13 billion by 2026. Fuel taxation is a system that has been modified so many times to allow for low-emission vehicles, heavy goods vehicles and rural drivers that it is becoming a sieve for the Exchequer, and it needs fundamental reform. I would push Ministers to think seriously again about road tolling, so that we can stop this silly exercise, which we now have year in, year out, of deciding whether to put up taxes—decisions that are often completely countermanded the next day or within a week by volatile rises and drops in the price of oil—and moreover allow ourselves to manage the vast assets that we have in the road infrastructure in this country. At the moment, there is no demand management and complete resource misallocation in maintenance and investment, all of which could be remedied by a sensible road tolling system, which would help us to target help specifically at those constituents whom many in this Chamber will talk about this evening.
We have before us an inconsistent and hypocritical motion—a motion that tells us nothing, apart from the fact that Her Majesty’s Opposition are a long way from forming Her Majesty’s Government. I therefore commend the amendment, which my hon. Friend the Economic Secretary has moved, and, in so doing, hope that he will look again at road tolling, so that we can stop this perennial debate once and for all.
Mr Iain McKenzie (Inverclyde) (Lab)
It is a pleasure to follow the hon. Member for Ipswich (Ben Gummer). He will be glad to know that I intend not to lecture, but to plead for hard-pressed motorists up and down the country, who are seeing fuel prices devastating both the private motorist and businesses.
In Inverclyde, my constituents are forced into choosing between paying more for fuel and doing without other essentials, or digging into their savings to meet the ever-increasing cost of motoring. A car is an absolute necessity for many of my constituents. I have a varied constituency. Many people live in outlaying areas some distance from the main bus and train links, so they are required to use their cars daily, with the increase in rail and bus fares giving them little consolation.
The weekly cost of filling up the fuel tank is for ever growing. The additional financial outlay to bring that fuel gauge to where it once used to reach means people digging deep into their resources. That is on top of road tax and insurance costs, not to mention maintenance against wear and tear, all of which adds to the joys of motoring. In Inverclyde, the price of a litre of fuel averages around £1.39 a litre. The two large supermarket petrol stations in my constituency kindly keep close to each other’s price, thus making it relatively easy to work out the average, although I do one supermarket an injustice. Morrisons in Inverclyde has decided to offer 15p off a litre for those spending £60 or more in the shop—and yes, Mr Deputy Speaker, it’s beginning to look a lot like Christmas.
This House has been united before on fuel prices, calling on the Government to drop the intended fuel escalator rise planned for earlier this year. I pay tribute to the hon. Member for Harlow (Robert Halfon) for securing that earlier debate. We on the Opposition Benches believe that a freeze in fuel duty will stimulate growth and create jobs. Fuel duty is having a huge effect on the UK’s road freight industry. The 3p increase in fuel duty planned for January will add £15 a week to the running cost of a vehicle. A fleet of 50 vehicles will have to recover £37,000 a year. The recovery of such costs simply drives up inflation in the supply chain and makes our haulage industry uncompetitive compared with its foreign rivals, who pay much less for their fuel. Indeed, foreign trucks enter the UK full of cheaper fuel—they have enough to work in the UK for a full week. Because they pay no fuel duty here, they can easily undercut our UK hauliers, thereby driving them out of business and creating unemployment in the UK.
Mr Gregory Campbell (East Londonderry) (DUP)
May I take up the hon. Gentleman’s point about drivers from other jurisdictions? Does he agree that the Treasury is actually losing money because of the duty increase? Drivers in Northern Ireland, particularly haulage drivers, cross the border to the Irish Republic to avail themselves of cheaper fuel. Tens of thousands of litres of fuel per day have been purchased in the Republic rather than in Northern Ireland, and duty has been lost to the Treasury as a result.
Mr McKenzie
I entirely agree with the hon. Gentleman. Moreover, I can tell the House that 30% of lorries carrying goods across the border from Scotland to the south-east of the UK are not from this country.
I hope that Members on both sides of the House will be able to unite again in calling on the Government not to apply the 3p increase in January and to give the hard-pressed motorist a better start to the new year. If the Government really want to enter into the festive spirit, the Chancellor may wish to drop the VAT increase on fuel, thus taking yet another 3p off the price at the pump.
Mr John Redwood (Wokingham) (Con)
The Opposition are right to highlight the issue of the cost of living, and it is timely that we are having a debate about the pressures on it. It is particularly timely that we are having a debate about the pressures that the outgoing Labour Government imposed on the cost of living, which still remain. I am thinking of the hidden increases in petrol duty, and all the other measures that they left in place or that were needed if we were to try to combat the deficit.
There is no doubt that the squeeze on people’s real living standards has been very severe in the last four years. It was most severe under Labour during its slump, but it has continued under the coalition Government. One of the reasons for the intensity of that squeeze on real incomes is the fact that price inflation has remained obstinately high, partly as a result of indirect taxation and partly, as the Minister said, as a result of world pressures on commodity markets.
I find myself unable to support the motion, which may come as no surprise to any Member on either side of the House. I consider it to be defective in two important ways. First, I do not think that a temporary three-month freeze will solve the problem. A double whammy in April, which is what Labour proposes, could be even worse, because people will not have become used to the rising fuel price that was inherent in the Labour plans.
Fiona O’Donnell
The right hon. Gentleman suggests that three months do not constitute a long period, but they will be three months of cold weather, during which people will be having to cope with an increase of up to 11% in their energy bills. The three-month freeze would make a difference.
Mr Redwood
I am all in favour of lowering energy bills, although that is probably a topic for another day and another debate. I have made many suggestions to the Government, all of which I think Labour would find unpalatable. I have, for instance, suggested possible methods of making gas much cheaper, thus reducing prices for all our constituents and affecting real incomes in a way that would please me, but is not often favoured by my party.
I think that the first part of the motion is flawed because what it proposes would not solve the underlying problem, namely, the tax increases left by the outgoing Government, but I am not very happy with the second part either. The Minister said that he did not think the Opposition had done their sums properly before proposing the measure to deal with tax avoidance, which they say would pay for the temporary lower duty rate. It was interesting to hear from him that the Labour Government had considered a scheme relating to travel costs, but had decided that it would be unwise to pursue it. We do not know whether they made that decision because of the impact that it would have on people or because it would not bring in enough revenue, but it appears from what the Minister said that there was an issue involving the amount of revenue that it would raise. For those two reasons—it would not solve the duty problem, and the numbers do not add up—I think that it would be unwise for the House to support the motion.
As for the coalition Government’s amendment, I find myself particularly in agreement with the final words, in which we are asked to welcome
“the Government’s commitment to do more to help with the cost of living in future”.
I was interested to hear the Minister not only say that he understood the points that many of my right hon. and hon. Friends had been making about the level of fuel duties, but imply that action might be forthcoming in the autumn statement and the subsequent Budget statement to tackle that or related problems. I shall be happy if the Government tackle the over-burden of taxation in a variety of ways. I do not think that we need be too prescriptive tonight. We know that an autumn statement is coming up, and we know that there will be a Budget statement after that. However, I want to address my few remarks in this short debate to the issue of what the commitment to do more to help people in the future might amount to in those two important statements of Government policy.
The first point that I hope the Government will grasp is that this country’s problem is not that it is undertaxed. If we look at the budgets and the state of the national finances, we see that there is every sign that successive Governments have tried to increase the tax burden substantially to keep pace with accelerating current public spending. I think that we have now reached the point of no return—the point of saturation. The high rate of income tax introduced by Labour has led to a big fall in income tax receipts at the top level, which is not very surprising—and which, of course, is of no interest to Labour Members. They had their little jibe about millionaires, but they should be asking themselves what tax rate will cause rich people to make the maximum contribution to filling the massive financial hole in which we find ourselves.
We are well above that rate now, as the figures clearly indicate. I think that the Government will find that their higher rate of capital gains tax also collects rather less revenue than before, or than they would like, and that fuel duties, while probably still contributing some increment to taxation, are not creating as big an increment as they would like either, as people simply cannot afford all the fuel that they used to buy because the duties are so high.
We know that more than 60% of the pump price—and the price of petrol and diesel in this country is currently very high—goes, in one form or another, to the UK Government. Of course, part of the rest of the price goes in taxes to other Governments so that they can produce the fuel in the first place. A massive amount of tax is being taken by the British Government directly, along with the 60%-plus that is taken by them indirectly through the tax on oil companies, and by foreign Governments in their taxation on the oil. The motorist is seen as an easy target for huge amounts of tax in an attempt to meet the bills. I hope that, when considering ways of easing the cost of living, the Government will bear in mind that motorists and business drivers—people who are trying to power the economic recovery—are incurring very large bills through this particular tax.
I think that all Members agree with two propositions about the economy. First, we would like it to grow faster, and secondly we would like to make big cuts in public spending by getting people back to work, so that they can earn more in jobs than they can receive in out-of-work benefits. Those are the aims that the Government must pursue. They have told us that they wish to make work more worth while. It is now clear that the economy has had a good job generation capability in the private sector over the last couple of years or so, and that is very welcome. However, we now need to ensure that we can reduce public spending by getting many more people into jobs, so that they require less benefit support, and we need to do that partly by cutting tax rates, so that we can collect more revenue in a friendlier way.
There is no doubt that we have tax saturation, and the Government need to take that on board for the purposes of the autumn statement and the Budget. We should reject the rather foolish motion, which was never going to ensnare many Conservatives—Labour will have to get better at ensnaring Conservatives, if that is its game—and support, and ensure that the Government deliver on, their proposal to do more about the cost of living, because that is a very real issue which worries many of our constituents.
Mr William Bain (Glasgow North East) (Lab)
I was intrigued by the Economic Secretary’s arguments when he moved the amendment. He is no longer in his place, but wherever he is at the moment, I hope he can afford enough fuel to return to planet Earth, as that was not a place he was able to inhabit much during his contribution. He spoke of the fanfare of international approval for the Chancellor’s policies, yet the OECD says that this year demand in our country will be one tenth of that in the United States and in the lowest fifth among EU countries. He said this Government dealt in costed spending commitments, from the very Dispatch Box where a few weeks ago the Prime Minister caused chaos in the energy industry by saying every consumer would be on the lowest possible tariff. The Economic Secretary also boasted about taking action on high commodity prices on behalf of a Government who are blocking the enactment of a global Dodd-Frank Bill in line with the successful approach in the United States.
Last week’s election in the United States showed that for voters both across the Atlantic and in the United Kingdom the key issue is living standards. During the longest journey out of an economic slump in Britain for 140 years, living standards have declined at a more prolific rate than during the recessions presided over by the Conservative party in the 1980s and 1990s. As last month’s Office for National Statistics study of well-being showed, on the net national incomes measure, incomes in the second quarter of 2012 were 13.2% lower than before the start of the great recession in 2008. We should be under no illusion: a real economic recovery for millions of lower and middle-income people in this country will not happen until these trends show signs of being reversed.
Mr Redwood
Does the hon. Gentleman agree that the biggest fall in living standards occurred on Labour’s watch, when boom went to bust?
Mr Bain
Tax credits helped to sustain family incomes in that period, but that is precisely the part of the tax and benefit system that is under such great assault from the Government the right hon. Gentleman supports.
We need a long-term strategy to tackle declining living standards, but there are short-term measures we can take now that will help ordinary families. We can have a cut in VAT and not proceed with the 3p rise in fuel duty next January. Both those measures would help to restore growth to an economy that has been starved of it for a year, and which is smaller now than at the time of the Chancellor’s comprehensive spending review of October 2010.
Despite a decrease in the headline consumer prices index inflation rate from 5.2% to 2.2% since last October, costs of basic goods such as electricity and food are going up. Average electricity bills are up by £200 since the coalition took office, taking the average bill to £1,310 a year. Costs for childminders for the over-2s in Scotland have risen at nearly twice the CPI inflation rate this year. Living costs are, therefore, soaring for millions of people.
Fiona O’Donnell
My hon. Friend missed out one boast the Minister made, which was about the creation of private sector jobs. In my constituency, many of those jobs are for care workers on the minimum wage and on a zero-hours contract. Those workers need a car to be able to sustain even that level of employment.
Mr Bain
I entirely agree. Most of the jobs that have been created over the last couple of years have been part-time, insecure, low-hours posts. We have soaring under-employment in our country, with as many as 3.3 million people unable to secure sufficient working hours to make work pay. Nothing in the amendment would deal with that trend.
Combined with a VAT rise under this Government, fuel duty rises are particularly regressive. In 2009-10 the poorest quintile paid 3.5% of their disposable income in fuel duty, compared with just 1.8% paid by the top quintile. Overall, in the first year of this Government indirect taxes took 31% of the disposable income of people in the lowest fifth of earners, compared with just 13% among the wealthiest fifth of earners, and that was an increase from the previous fiscal year. According to the latest ONS study of factors affecting the retail prices index and CPI inflation measures, two of the major factors driving upward pressures were the price of clothing and footwear, which rose by 4.7% between August and September this year, and the rising cost of motor fuel, with petrol up by 3.9p per litre and diesel up by 3.5p per litre, compared with falls of 0.3p per litre in the previous year. These changes contributed 0.12% to the shift in the CPI inflation rate. In the year to this September, motor fuel costs alone rose by 2.8%. The case for action is therefore clear.
All these trends must be considered in the context of our low growth. The International Monetary Fund recently downgraded its estimate for UK GDP by 0.6% for this year and by a further 0.3% for next year. That is a crushing verdict, showing that the Government’s policies have sucked even more demand from the economy—as much as an additional £76 billion given the new evidence of the destructive multiplier effects of the Chancellor’s austerity measures. As the National Institute of Economic and Social Research has established, implementing the Government’s preferred rise in fuel duty in January would further weaken growth by 0.1% of GDP next year and keep unemployment higher than it needs to be some 48 months since the downturn began.
That is why I hope Members across the House will tonight take this opportunity to release some of the pressures ordinary households and businesses are facing by voting to postpone any rise in fuel duty until at least April.
Mr Alan Reid (Argyll and Bute) (LD)
The hon. Gentleman referred only to postponing the fuel duty increase. I want to put it on record that I think the Government should cancel the increase, and I hope they will do so. Why is the hon. Gentleman only in favour of postponing it? Why not cancel it?
Mr Bain
If the hon. Gentleman has the courage of the convictions he has just expressed, he should join us in the Lobby tonight. That will be the evidence his constituents will be looking for tomorrow morning.
On incomes, millions of ordinary people are under huge pressure because of the collapse in real wages, which has hit particularly hard since the onset of the current recession.
Pete Wishart (Perth and North Perthshire) (SNP)
Will the hon. Gentleman give way?
Mr Bain
I am running out of time, and I am sure the hon. Gentleman will have a chance to make his own speech.
Since 2007, real wages have declined by about 4% for the vast majority of ordinary people, damaging their spending power and weakening prospects for a consumer-led economic recovery. In my constituency, almost three in 10 workers, including half of all the 10,000 part-time workers, earn less than the living wage of £7.45 an hour. The increases in fuel duty have hit them especially hard. As the Resolution Foundation’s recent Commission on Living Standards report established, just 12p in every £1 of growth generated in Britain finds its way into the pay packets of workers in the lower half of the income scale. They need help on fuel costs tonight.
Britain stands at a crossroads. Without a change in policy, people will be no better off in 2020 than they were in 2001, but with the right kind of reforms on pay, tax and benefits, that can be reversed and we can see the gap between rich and poor falling once again. Tonight we can make our contribution to supporting growth and improving the living standards of our constituents over the next few months, by rejecting the Government amendment and boosting much needed job creation by cutting fuel duty.
Robert Halfon (Harlow) (Con)
I believe that, as has been said, fuel duty has become a toxic tax, and that the public have just had enough. I also believe that the Government are listening, and that that is shown by their amendment, as highlighted by my right hon. Friend the Member for Wokingham (Mr Redwood). I am disappointed with Labour’s smokescreen. This debate is really about hiding the record of the shadow Chancellor and many years of putting up fuel duty. I have to say to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) that when I was campaigning hard last year, organising and working hard with FairFuelUK to get the Government to cut fuel duty, the Government cut fuel duty in the 2011 Budget but the hon. Lady, the shadow Chancellor and their party voted to keep fuel duty up, so let us have no discussion about who is being opportunistic. I am disappointed that the Labour party has chosen to conduct the debate in this way.
The heart of the debate should be the figures published by the Office for National Statistics almost a year ago. Its data proved that fuel duty is regressive and hits poorest Brits the hardest. It is with that fact in mind that we should consider the recent history, or at least the past five years, of the debate in the House on petrol taxes. In 2007, the shadow Chancellor said:
“In this Budget, we have set out further actions to advance the environment agenda, including…a fuel duty increase of more than inflation”,
and that that
“demonstrates the Government’s commitment to tackling climate change”.—[Official Report, 26 March 2007; Vol. 458, c. 1265.]
I think that that sums up the shadow Chancellor’s principles on the issue. I have to say that he makes the Vicar of Bray look like Gandhi. In reality, the shadow Chancellor’s petrol tax had very little to do with climate change, because families could not change their behaviour to respond to it. Like scrapping the 10p rate, it was a tax on the poor.
That is why I am sceptical when the Opposition motion makes much of the small delays that Labour has sometimes applied to its increases in fuel duty. If one looks at the substance of the Budgets of 2009 and 2010, one sees that it programmed in massive fuel hikes for 2010, 2011, 2012 and 2013. That is what we are dealing with today, and why I have campaigned, with many of my colleagues, to cut the cost of fuel duty. The argument is therefore not about whether we believe that the fuel duty rise should not go ahead—I passionately believe that—but about tactics. It is sensible and right to wait for the autumn statement. Given the Government’s record—they cut fuel duty last year and have stopped two planned fuel duty rises—I believe it is right to wait for the autumn statement.
Albert Owen
The hon. Gentleman has been consistent on this issue. He has also been campaigning hard for transparency on fuel duty matters. On that theme, will he tell the House what discussions he has had with the Chancellor? Which report in the newspapers is right: that the 3p rise will not go ahead and there will be a cut, or that there will be a 2p increase in the autumn statement?
Robert Halfon
Unfortunately, I am just a brand-new MP and I do not have the luxury of having discussions with the Chancellor. I have no idea what is in his lunchbox, but I do know that the Government have a record of cutting fuel duty. That is something that I am proud of and to which I can give strong support.
Dr Julian Lewis (New Forest East) (Con)
Will my hon. Friend accept the assurance, as least from Government Members, that if the rise does not go ahead it will have far more to do with his campaign than anything the Opposition have done?
Robert Halfon
I am hugely grateful to my hon. Friend and, I have to say, to many colleagues in this House, some of whom are on the Opposition Benches. My hon. Friend the Member for Cleethorpes (Martin Vickers) has done a huge amount of work behind the scenes, as have many other colleagues. We will have to wait and see what the Government say in the autumn statement, but I am happy to support them because I believe that they are in serious listening mode.
I have three concerns about the Labour motion. First, it is a non-binding motion; it is just gesture politics. My constituents care about the price of petrol, not the politics. Secondly, the only way that we can stop the petrol tax is through the autumn statement on 5 December. That is how it has been done in the past few years. Yes, I am asking the Treasury for action on fuel, but what my constituents want is action on the policy—the substance. My constituents will not be looking at what happens today; they will be looking when the Chancellor makes his speech on 5 December. That is when we hope the Chancellor will listen to British motorists.
Thirdly, we need a long-term settlement for cheaper petrol. My right hon. Friend the Member for Wokingham is exactly right. The motion proposes a three-month oil rush, which would lead to motorists being hammered with a 7p tax rise in April 2013. The only way to get the long-term settlement is to work constructively with the Government and look at reform and how we can permanently lower fuel duty.
Robert Halfon
I may if I have time, but I will continue for the moment.
I believe that the Government are in strong listening mode, and I would not go into their Lobby tonight if I did not believe that to be the case. If we look at the Treasury amendment carefully, we see that it does not rule out stopping the planned rise in January. That is a significant move from a few months ago, when the Government said that the rise would go ahead. As I said, the Treasury team have done more to cut fuel prices than Labour did in a decade. We do not have to work at Bletchley Park to read the signals the Treasury is sending about helping with the cost of living—it is written in black and white.
I will continue to ask the Government to lower fuel duty, but I want to end where I started: this is a matter of social justice. I have stuck my head above the parapet and tabled several motions urging the Government to cut fuel duty. Inevitably, the focus in the media today has been on the economics, but this is about social justice. The average person in Harlow spends £1,700 a year filling up the family car—one tenth of their income. In essence, those families are facing fuel poverty. According to data published last year, three quarters of bankruptcies in the transport sector were the result of fuel costs. High fuel prices are adding to Britain’s dole queues. Furthermore, as the AA shows, families are choosing between buying food and filling up at the pumps.
I urge the Chancellor and the Treasury to listen to the thousands of Harlow residents who have written to me, and take action. Given everything the Treasury team have done in the past two years to cut fuel duty and given that the Chancellor’s amendment leaves the door open to cuts in fuel duty, we should at least wait for the autumn statement before casting judgment. That is why I will be proud to vote with the Government tonight, and I urge the House to vote for the amendment. I would not support the Government if I did not believe they had genuinely taken this on board. I hope they do not let us down.
Alison Seabeck (Plymouth, Moor View) (Lab)
We have heard many high-quality speeches tonight, including a powerful argument from my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) and from the hon. Member for Harlow (Robert Halfon), who made a genuine plea—I think—to the Chancellor at the end of his speech, urging him to listen carefully.
The hon. Gentleman is absolutely right about the social issues around the fuel price increase, but it is not just the fuel increase that is causing problems. The cost of living has risen across the country, and these higher costs are taking particular hold in the south-west and my constituency. Average wages are rising nowhere close to inflation, and hard-working families are finding it harder to make ends meet—and this at a time when the south-west has been dealt another blow from this out-of-touch Government, who have allowed 20 NHS trusts to create a pay cartel in order to slash wages for NHS workers in Plymouth and across the region.
Wages in the south-west are already among the lowest in the country, with more than one in five employees—430,000 working people—earning less than the living wage. With prices for almost all commodities rising, in a recent survey more than 40% of workers in the region said that their finances were worse off now than just a month ago—and fuel has clearly been a major part of both the increase in the cost of living and their perception of how hard things are getting.
Families in the south-west have experienced a double burden in terms of wages and the cost of utilities. Water charges in the south-west are among the highest in the country, with customers paying £150 more than the national average on their yearly water bills, while energy bills and fuel prices are increasingly unaffordable across whole swathes of the country, as we have heard. Figures given in a written answer on 7 November showed that 16.4% of families living in England in 2010 were in fuel poverty, but that number is expected to rise significantly.
The south-west has a large rural population. My constituency is not rural, but Plymouth depends on its hinterland. The wider economic benefits to the region and Plymouth come from people in our travel-to-work area, which is largely rural. In addition to the high water costs and low wages, people in the rural hinterland are paying about £10 a week more on petrol, diesel and motor oil than the average UK household. Rural populations are struggling with the cost of living in general—on average about £2,000 per year for a rural household over and above that of urban inner-city town dwellers such as my constituents. Of course, some of the people in the south-west will have chosen to live in a rural area. Some might well have a second home there and be quite well off, but there are huge swathes of the population across Cornwall and Devon who are agriculture workers or who are working in small food processing factories, and they are not on very high incomes at all.
Bus services in rural areas are infrequent, so elderly people often need to drive to Derriford hospital. That can be a long journey for a lot of people. They might need to be driven to the hospital. This all costs money. Young people can feel isolated in rural areas. Unless their parents can afford to drive them into town, they can be stuck and feel very much out of the loop. That is not good for social cohesion. We know that many families are having to curtail the number of journeys they make. Travelling to and from rural areas for work can also be extortionately expensive. I recently met a Plymouth man who travelled out to Liskeard to work. He had been unemployed, and he was delighted to have got a job in Liskeard, but the petrol was costing him between £60 and £70 a week and the situation was becoming unsustainable. He was really keen to work, and he was willing to travel long distances, but it was becoming impossible.
David Simpson
I am sure that the hon. Lady is aware that we have a land border in Northern Ireland. The hon. Member for Harlow (Robert Halfon) seemed to have inside knowledge that the price of fuel might not go up, but if it were to do so the amount of fuel smuggling from the Republic of Ireland to Northern Ireland would increase, and the Exchequer would lose a lot of revenue.
Alison Seabeck
The hon. Gentleman speaks from the experience of his own constituency, and the Chancellor will need to consider that very serious point when he sets out his Budget later this year.
There has also been a huge increase in housing costs. Average house prices are now 11.5 times higher than the median income, and private rents are set to rise by an estimated 65% over the next 10 years. That will create huge cost of living issues for people in my constituency. Road fuel prices are higher by about 2.1p a litre in rural areas and, on average, people who live in rural areas travel 53% further than those who live in urban areas. They are also less able to access public transport alternatives. In my area, there are poor rail services down to Plymouth and we have no airport. All those factors push people into cars, and rises in the price of fuel make it extremely difficult for our economy and the economies of individual families to thrive.
I shall finish my speech early because you pulled me up for intervening, Mr Deputy Speaker. I hope that the Chancellor will have listened to his colleagues on the Government Benches, and that he will also take seriously those on the Opposition Benches as we go through the Lobby tonight to make it absolutely clear that we need a temporary halt to the increase.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I should just like to point out to the hon. Lady that she has not given me back a minute, because she has taken an intervention. So we ended up with nothing!
Peter Aldous (Waveney) (Con)
It is a pleasure to follow the hon. Member for Plymouth, Moor View (Alison Seabeck) who, like me, represents a periphery constituency. It is appropriate that we are having this debate now, less than a month before the Chancellor delivers his autumn statement on 5 December, when I expect him to set out his strategy on fuel duty, at least for the short to medium term. It is important, in deciding whether to proceed with the planned 3p increase in January, that he should be fully aware of the impact that fuel duty increases have on hard-pressed families and on businesses, particularly small and medium-sized enterprises. It is a concern that my constituents very much emphasise to me both in conversation and in correspondence.
Fuel duty is a highly regressive form of taxation that hits those on low and fixed incomes particularly hard. Those in isolated, more remote periphery locations such as East Anglia and my Waveney constituency feel the impact hardest. The car there is very much a necessity and not a luxury. In Waveney, the average monthly distance to travel to work is just over 400 miles, while in Kensington and Chelsea, where salaries are dramatically higher and where there is a far better public transport system, it is just under 210 miles.
I am acutely aware of the dilemma of those constituents who travel to work from, say, Lowestoft to Norwich—a round trip of 50 miles every day. At the moment, their commuting costs are biting savagely into their weekly budgets. Moreover, there are jobs in the leisure, tourism and care sectors where the hours of work are such that using public transport is no option whatsoever.
I am very much aware of the excellent campaigning work carried out by FairFuelUK, championed by my hon. Friend the Member for Harlow (Robert Halfon). As well as highlighting the crippling impact of fuel duty on households and businesses, it backed up its case with hard evidence. Its most recent research, carried out by the National Institute of Economic and Social Research, shows that if the 3p rise goes ahead, 35,000 jobs will be placed at risk, growth will be cut by 0.1% and 40% less tax revenue than the Government had predicted will be raised. In the weeks leading up to 5 December, it is important that the Government look at this evidence very carefully.
Over the past two and a half years, the Government have pursued the right course for the British economy. There is no such place as a safe harbour in the world today, but they have taken us out of the eye of the storm. Interest rates remain low; there has been no run on the pound; and the markets are looking at other countries that have failed to put their houses in order. Plenty of obstacles remain ahead: the ongoing crisis in the eurozone; rising food prices as a result of poor harvests around the globe; and fluctuating oil prices, which have the potential to stall the recovery.
There is a concern, too, that anti-competitive practices in the petrol trade are distorting the market. It has been suggested that £30 a barrel is added through speculation. This results in consumers not paying a fair price at the pumps. It is vital that the UK economy is not exposed to such unfair profiteering. I urge the Government to ensure that the oil market is fully transparent and that a suitable supervisory framework is in place, with increased fines for market manipulation.
While it is right that we are having this debate tonight, there are fundamental flaws in the Opposition motion. First, the Government have a proven track record of listening and of understanding the impact of fuel duty on families and businesses. They have already delayed and cancelled increases that the previous Administration put in place. Fuel is 10p a litre cheaper than it would otherwise have been, while the Government’s policies in this area have delivered savings to families of £159 a year.
Secondly, the feedback from FairFuelUK’s meeting with my right hon. Friend the Chief Secretary to the Treasury suggests that the Treasury is studying seriously the report produced and presented to it. I get the impression that its findings are being carefully considered and will be taken fully into account in the autumn statement.
Finally, I fear that the Opposition’s means of paying for this postponement do not stand up to scrutiny. The Government have already secured many of the savings that can be achieved through successful clamping down on tax evasion and avoidance. I fear there is nothing much left there.
I shall oppose the Opposition motion and support the amendment. In doing so, I say that the time to scrap the increase in fuel duty is in the autumn statement on 5 December. I urge the Government to do so at that time.
Pamela Nash (Airdrie and Shotts) (Lab)
I am disappointed that we have been forced to call this debate this evening. It shows just how out of touch with the public this Government are that they have yet to postpone January’s 3p increase in fuel tax. Dropping hints about the autumn statement is just not good enough at this stage.
I am sure that the high volume of correspondence I have received on fuel prices is replicated among Members across the Chamber, as fuel prices are now cutting into the quality of life of each of our constituents. In particular, I have been hearing from those who live in the rural and farming areas of my constituency. Rural sparsity, combined with the ongoing decline in rural bus services and a loss of local services, means that a car is a necessity in many rural areas, not a luxury. The Scottish Labour party has been calling for the re-regulation of bus services, as the Scottish Government’s policies have resulted in essential routes being unsubsidised and in many cases scrapped. Although voluntary projects such as the “Getting Better Together” project, in Shotts, and our regional transport partnership, Strathclyde Partnership for Transport, are working hard to fill the gaps, it will take direct action from the Government—to start with, by regulating our bus services—to fix this problem across the board.
The point is that the public transport infrastructure at this point is not at a level that could possibly allow the majority of people in rural communities to give up their cars without risking their quality of life and becoming increasingly isolated. The situation is becoming impossible for those who are having to decide to give up their cars, when there are little, if any, alternative forms of transport where they live. Every rise in fuel costs places a disproportionate burden on our rural communities, and now they feel that enough is enough.
It makes no sense to the Opposition that the Government, who postponed the fuel tax rise in August, seem to be ploughing ahead with this rise. Although we are cautiously coming out of a double-dip recession, most people have yet to feel this in their pockets. They are not yet seeing the difference in their bank statements at the end of the month. Incomes are still frozen, and the cost of essential bills continues to rocket. Those living in our towns are not escaping the assault on their standard of living, either. Increasingly, many have had to make difficult choices every day about using their car or paying other important bills.
Chapelhall, where I live, is home to many commuters. Commuters live where they can access more affordable housing, and homes are cheaper the further away they are from public transport links. Commuters also have to travel further to find jobs, as the employment market has yet to recover fully. This means that millions of commuters across the UK depend entirely on their cars to access work. Rocketing fuel costs are making work pay less.
I am particularly concerned about those of my constituents living with a disability that makes it difficult to travel. Labour introduced Motability way back in the 1970s to ensure that those living with a disability who require a car in order to travel can afford it. However, the costs are mounting for those running a car on Motability, and I have yet to hear the Government announce an increase in disability living allowance alongside the planned increase in fuel tax in order to plug the gaps caused by these additional costs. Some of the most vulnerable in our society will have to limit their car use, to the extent that it will jeopardise their chances of having a decent quality of life.
Robert Halfon
I am grateful to the hon. Lady for giving way, and for her speech. Given what she has just said, does she not recognise that the Government increased benefits by 5% and still froze fuel duty this year?
Pamela Nash
I thank the hon. Gentleman for his intervention, but the Government have taken other measures such as increasing VAT and cutting other benefits, which have had an adverse effect on the people I am speaking about. The fact that the Office of Fair Trading is conducting an inquiry into fuel prices reflects the public’s deep concern about the cost of fuel.
In press reports today, Government Back Benchers referred repeatedly to this debate as the cost of living debate; I have not heard it called the fuel duty debate at all. In his opening speech, the Minister seemed to talk about everything but fuel duty. It seems that Government Members want to talk about anything other than fuel tonight, because they know that the country is not on their side. I expected more Tory Back Benchers to be in the Chamber this evening trying to explain to their constituents why they are voting against our motion on fuel duty. I suspect that many of them are watching ITV to see their colleague in the “bug burial” in the jungle.
It is clear to Opposition Members, and to the thousands of constituents who have written to us about fuel duty in recent weeks and months, that the Government will be out of touch with the people of this country, who have been drastically affected by the increased cost of living, if they do not announce this evening the postponement of January’s fuel tax increase.
Christopher Pincher (Tamworth) (Con)
It is a pleasure to follow the hon. Member for Airdrie and Shotts (Pamela Nash). I gently point out to her that there are twice as many Government Back Benchers here tonight than Labour Back Benchers, and that is for an Opposition day debate, but we will let that one lie.
It is great pleasure to participate in this debate, and I congratulate the Opposition on tabling this motion, because it gives us all an opportunity to stand back and admire the brazen brass neck, the unbridled cynicism and the naked opportunism that characterises it. It seems that the shadow Chancellor is almost congenitally unable to stand and watch a bandwagon pass by without having the urge to jump aboard it. However, it seems that he has been overtaken with uncharacteristic modesty this evening, because he is not here; he has fallen silent. For the past few days he has been beating his chest, beating the drum and complaining about fuel duty increases, but now, this evening, he has donned the mantle of the mute. A week after Guy Fawkes night, he has lit the blue touch paper and withdrawn to a safe distance, leaving his ciphers and his sidekicks to propose and support his motion—and well he might, because we have heard a chorus of amnesia from Labour Members. We have heard them speak forgetting all they have done in the past, forgetting what they are saying while they are saying it and forgetting everything they have said when they have sat down. But we will not forget: we will not forget the meagre 75p increase in pensions; we will not forget the 12 hikes in fuel duty; and we will not forget the increase in fuel poverty between 2004 and 2009. I want to touch on that issue, because during Labour’s tenure—
Bill Esterson
According to the House of Commons Library, the proportion of a litre of fuel paid in tax rose from 59% to 75% between 1990 and 1997, whereas between 1997 and 2010 it fell back to 65%. Does the hon. Gentleman accept those figures?
Christopher Pincher
All I will confirm is that fuel duty would have increased many more times had Labour’s Budget been implemented and that 2.8 million more people fell into fuel poverty between 2004 and 2010 as a result of the policies that the Labour Government pursued. The fact of the matter is that energy prices went up on the watch of the Leader of the Opposition, when he was Secretary of State—that is all he did; he stood there and watched as millions more people fell into fuel poverty.
I am pleased to say that in my constituency fuel poverty has fallen by 5% in the past year or so, and we estimate that by 2020 it will have fallen by about 25%. Thanks to the Government introducing and increasing the cold weather payments, and thanks to the discount of about £120 a year that will help 600,000 vulnerable pensioners, these people will be better off. The Government are helping them, but it is not enough. If we try to stick sticking plaster over a problem such as fuel poverty, we will not resolve it. That is like treating pneumonia with Angiers junior aspirin. What we really need to do is get to the actual causes of fuel poverty. In the 10 years between 2000 and 2010, under the previous Labour Government, £25 billion was spent on trying to alleviate fuel poverty yet the increases in fuel prices swamped those measures. Now, three quarters of those who live in the most energy-inefficient homes are in fuel poverty compared with one in 20 of those living in the most energy-efficient.
If we are serious about dealing with the problem of fuel poverty and dealing with one of the greatest challenges in the cost of living, we need to get a grip on the demand side of the equation. That means ensuring that homes are properly insulated. Not only that, but they should have proper and modern boilers and smart meters so that people can for the first time take control of their energy demands and reduce them. That is what the green deal is all about.
We need also to deal with the supply side of the energy equation. A generation ago, there were 15 energy suppliers, but that number has now reduced to just six. A generation ago, energy bills were relatively straightforward but now people are confused by an array of tariffs. A generation ago, 75% of people rarely if ever switched their energy suppliers. That is still the case. If we are serious about dealing with one of the biggest challenges and biggest drains on people’s means, we need to deal with energy costs.
I hope that the Government’s proposals in the draft Energy Bill, to which I look forward, will ensure that people are put on the best and cheapest tariffs and that we invest in new nuclear and shale gas, which Labour left behind for 10 years, so that we secure our energy supply and are not exposed to international gas and hydrocarbon volatility, which has caused so much distress to bill payers over the past 10 years. The Government must also be careful in that Bill, because although we need to ensure that we have a sufficient, resilient and diverse supply of energy, we must ensure that the mechanism to deliver that capacity does not place undue burdens on the industry that will deliver it.
The industry reckons that the capacity mechanism could increase its costs, which it could pass on, by anywhere between £3 billion and £13 billion, meaning that anywhere north of £14 a year could be added to energy bills. We need to ensure that the Energy Bill does not have the perverse effect of adding to energy bills as it tries to reduce them. I hope that the Minister will pass on that message to his colleagues in the Department of Energy and Climate Change.
For the moment, let us thank the Labour party for tabling the motion and enjoy the theatre of the absurd. It is an absurd prospect: the Labour party introduced the fuel duty escalator, increased fuel duty and wanted to hike it again if it won the last election, but it is now proposing to freeze fuel duty by closing the tax loopholes that its own labyrinthine Treasury policies allowed. I am sure that the Chancellor is aware of the cost to the country of fuel duty, but I think that the country is also aware of the cost to it of the previous Labour Government—a grisly experiment that it will not want to repeat.
Sheila Gilmore (Edinburgh East) (Lab)
Anyone who listened to “The Westminster Hour” last night—perhaps it is only sad political anoraks who do so—will know that Ministers and Government Whips have been at their Back Benchers over the weekend, and no doubt for some days before, feeding them the line that they should not worry because everything will be all right in the autumn statement and the fuel rise will not really happen, so there is no need for them to vote against the Government tonight. Clearly, the Government are terrified that there will be more votes against them. However, it is not fair to people in Britain to tell them, with a nod and a wink, “It should be all right.” Government Members have sought to criticise our motion, on the ground that we should find a way to pay for not going ahead with the increase, but what they are really saying—the hon. Member for Harlow (Robert Halfon) gave this away completely—is, “This is not going to happen, but we will not tell you how we are going to pay for it.” Therefore, they cannot lecture us and accuse us of hypocrisy.
Mr Stewart Jackson (Peterborough) (Con)
On the issue of fiscal strategies and paying for things, does the hon. Lady really think that it is a compelling case to say that the catch-all concept of addressing tax avoidance is the way in which the Opposition will pay for any reductions that they make to duty? This afternoon, I sat on the Public Accounts Committee and listened to evidence from Google, Amazon and Starbucks, and it quickly became apparent to me that, over 13 years, the Labour Government allowed crony capitalism and did nothing about tax avoidance.
Sheila Gilmore
I thank the hon. Gentleman for his intervention. I think he has just walked into the Chamber to make it; I do not think he was present throughout the debate. I am glad that he and his Government want to act on these issues, and we look forward to seeing—perhaps in the autumn statement—the measures that they intend to put in place.
We heard from the Minister nothing about the fuel duty increase, but a lot of rehashed issues to do with the economy. There have been accusations that the Opposition are suffering from amnesia, but the amnesia that the Government are suffering from is even more profound; they seem to have forgotten that when, two and a half years ago, they came into office, they had an emergency Budget, which, we were told, would sort out the economy. If Ministers recall, at the time of that Budget and in the autumn statement of 2010, we were told that the economy would grow over the next two years, and that they would reduce, and indeed eliminate, the deficit in their term in government. They have since had to concede that there has not been that growth, and that they will not eliminate the deficit over that period, so if anyone has amnesia, it is the Government. That happened because of the absolute insistence on trying to cut the deficit so quickly, including by making cuts in investment spending; that has produced a lot of the problems that we have.
Even some of the Government’s supporters, including David Smith, who writes on economics in The Sunday Times, said recently that it was a huge mistake for the Government to cut investment in their first year—in their emergency Budget—and in their next Budget. They have tried, in some small way, to say that they will reinstate investment, but the damage has been done. Investment that could have been made in affordable housing and school building was cut—for ideological reasons, I would contend. As a result, there has been no growth for most of the period, and people have suffered from very high prices, in many respects, at a time when many people are on short time, and are not earning what they did.
Pete Wishart
Does the hon. Lady think that Scottish Labour’s cuts commission’s plans to do away with free personal care and free bus passes for the elderly, and to introduce tuition fees, would lower the cost of living for Scottish people, who are suffering in the very conditions that she describes?
Sheila Gilmore
I am glad that the hon. Gentleman has made those comments in an intervention, because I heard him say that earlier from a sedentary position.
Cuts have been made in Scotland—the hon. Gentleman should be absolutely clear about that. They have been made to social care in Scotland, partly because of the council tax freeze. I heard the Economic Secretary boast about that freeze, but it is an extremely regressive policy. For people who do not pay council tax because they receive council tax benefit, that policy has not benefited them by one penny. In Scotland, those people have not benefited for five years. Indeed, it gives a far greater benefit to people who pay the highest level of tax.
As a result of the council tax freeze, councils in Scotland have suffered a great deal, as councils in England are now suffering. A service that has suffered is social care. I will not take lessons from the hon. Gentleman, because cuts have already been made in Scotland as a result of his Government’s policies. Those things will happen in England too. I would not be as proud as the Economic Secretary of the council tax freeze, because it has a severe downside for many people who depend heavily on the services that councils provide, which are important for their living standards. We must not forget that.
As my hon. Friend the Member for East Lothian (Fiona O'Donnell) mentioned, people who work in social care are not only on low wages but they are told by their employers, who often have outsourced contracts from councils that are trying desperately to make savings, to use their own car to travel to do the job. They are not usually paid for travel time, and they are not refunded if they have to park somewhere and pay parking charges. They are on the lowest income levels, they are working hard in a hugely important service, and they deserve much more attention from us. They are suffering from the increases in fuel tax.
The Minister said yet again all this stuff about all the jobs that the Government claim have been created. As I have said before, if we say that there have been 1 million new jobs since the election and that that is a huge improvement, we should remember that, at the beginning of 2011, only eight months after the Government came to power, they said that they had created 500,000 jobs. I contend that those jobs were created as a result of the economic stimulus from the previous Government. In the following 22 months, another 500,000 jobs were created at a slower rate of growth. Many of those jobs are part time, which has increased spending on welfare benefits, thus increasing the problems that the Government face in trying to balance their financial books. People with part-time jobs claim housing benefit—98% of new housing benefit claimants are people in employment—and they claim more tax credits, because their hours of work have decreased. That is not a stable basis on which to proceed. If the Government want to scrap the proposed fuel increase in January, perhaps they should simply tell the nation that today.
Madam Deputy Speaker (Dawn Primarolo)
Order. I am reducing the time limit to six minutes for remaining speeches. I remind speakers that we have to conclude the debate before the winding-up speeches begin at 9.40 pm. If there are lots of interventions, that will cut speeches even further. I call Martin Vickers.
Martin Vickers (Cleethorpes) (Con)
It is a pleasure to take part in a debate that has featured knowledgeable and passionate speeches. I make no bones about it: what my constituents want—what I want—is the postponement and preferably the cancellation of the increase.
It is not unknown for Oppositions to jump on bandwagons—my hon. Friend the Member for Tamworth (Christopher Pincher) referred to that—but it is strange when an Opposition do so to abandon their own policies. The wheels have come off this bandwagon. Effective opposition is hardly evident this evening. What we are hearing is, “We don’t like our policy that we introduced. We’d like you to postpone it for three months.” Is that positive opposition? Clearly, Labour Members are going to have much more time on their hands to consider how to build effective opposition.
I remind the House that already, thanks to the actions of this Government, petrol is 10p a litre cheaper than it would have been had Labour’s increases been introduced. My hon. Friend the Member for Harlow (Robert Halfon), who has done some sterling work on the issue, mentioned that the cost of living is not just about fuel. It is about energy and a host of other things. The proposed increase goes to the heart of those cost of living issues.
I represent a predominantly working-class constituency where the average wage is about £20,500. That is £3,000 less than the average for the Yorkshire and Humberside region. We have had a few setbacks in recent weeks, most notably the 500 redundancies at Kimberly-Clark in Barton-upon-Humber, but there is growth in the local area. In particular, the road haulage industry represents an important part of the local economy. It is based around the Immingham-Stallingborough area and it is vital to the local economy.
Many speakers have mentioned being out on the periphery. Cleethorpes is a peripheral area. The surrounding hinterland is rural and many of the people who live there work on the Humber bank, a considerable distance away. There is no doubt that the tax in question affects them greatly.
Jake Berry (Rossendale and Darwen) (Con)
In Rossendale and Darwen, we have a rural hinterland. We are a working-class constituency and we have low wages. We are already paying the 3p fuel tax because our fuel is 3p more expensive in Tesco in Rawtenstall than it is in the adjoining town. Will my hon. Friend say what experience he has in his constituency of this rural disparity in fuel prices?
Martin Vickers
I thank my hon. Friend for his intervention. Yes, the situation that he describes in his constituency is very similar to mine. However, it is welcome that North Lincolnshire council, which is Conservative controlled, is particularly mindful of the impact of motoring costs and is at present considering the possibility of extending free parking, which has been an issue in the local area. That shows how local authorities can help to boost the local economy, particularly the high streets.
When I was preparing for this debate, I skimmed through the debate that we had about a year ago, to which I contributed. That debate took place before the Chancellor made a previous reduction. I noticed that I referred to fairness. I caution the Government again that it is rather dangerous always to talk about fairness. Of course all policies are intended to be fair. I am well aware that the Government want to be fair, but human nature being what it is, a policy is fair only if it benefits us. If it benefits our neighbour, we tend to think it is unfair. I urge the Government to reflect that when they talk about these issues.
It matters not whether our constituents are white-collared, blue-collared or dog-collared, for that matter—they are all hit by fuel increases. The Chancellor may already have made his decision, but if not I urge him to reflect on the contributions that have been made this evening. It is a vital subject that will not go away. The idea that the Labour party has proposed tonight, that we abandon the rise or cancel it for three months, is nonsense. If the Opposition are trying to tempt Conservative rebels into the Lobby, they should at least have a positive view and suggest three years, rather than just three months. It is pathetic.
Mr Robin Walker (Worcester) (Con)
I thoroughly agree with my hon. Friend that the Opposition motion is massively unambitious. Does he agree that the research we have seen from FairFuelUK shows that we should actually be cutting fuel duty, rather than freezing it or postponing an increase?
Martin Vickers
My hon. Friend makes an important point. I have certainly studied the FairFuelUK report. Indeed, the all-party group on fair fuel, which is chaired by my hon. Friend the Member for Harlow, has done considerable work on it, and I urge the Government to reflect on its recommendations.
I know that the Government have listened to the debate. Their amendment makes it clear that they want to do more to help with the cost of living, but who could disagree with that? What we actually want to see is some positive response from them. I know that they are not going to announce this evening what will be in the autumn statement, but we are three weeks away from something that could have a decisive impact on the local economy, certainly in my constituency, and a real impact on hard-working households there. I will conclude by saying to the Labour party, “Get your act together.” I will certainly be supporting the Government in the Lobby this evening and know that is in the best interests of those I represent.
Madam Deputy Speaker (Dawn Primarolo)
Order. I have to reduce the time limit again to five minutes, because interventions have slowed us down. I remind Members that if they take interventions it will have to come off their time, because we will start the wind-ups at 20 minutes to 10.
Bill Esterson (Sefton Central) (Lab)
As the hon. Member for Mid Bedfordshire (Nadine Dorries) is gathering votes from Government Members as we sit here, we find out that she lasted only five minutes of a bush tucker trial. Meanwhile, back in the real world, her constituents and mine are suffering grievously because of the cuts in living standards that have resulted from the Conservative party’s economic policies. The real struggle of many of our constituents stands in stark contrast to her outrageous behaviour. The impact of fuel prices is one of many worries that have brought living standards under attack. I wonder how many people out there in the country think it is appropriate for a Member of this House to be away for five weeks—
Bill Esterson
And that is when the country faces the toughest economic situation of modern times—[Interruption.] Goodness knows what the hon. Lady’s constituents think, but what of her colleagues? Judging by their reaction to what I have just said, they clearly approve. They have all said that they want to scrap the fuel duty rise, but they will not vote for it. Maybe they should all be in Australia cheering on Nadine, rather than rejecting efforts to help all our constituents.
There are many pressures on living standards and a lot of money has been taken out of the economy, affecting businesses and jobs and delivering hardship for many people in this country. As I have said, it is extraordinary that Government Members will not vote for a measure that would do exactly what they all say they support.
Let me say a little about some of my constituents—the pensioners, working families, young people out of work and commuters—all of whom will be hit by the Government’s failure to cancel the fuel duty rise. Pensioners, some of whom have to choose between heating and eating, face increased food prices and, at the same time, will have to pay more for bus and taxi fares or, if they have a car—some pensioners do—they will find it very expensive to run. It is no wonder we are seeing more and more people relying on food banks. The Government tell pensioners to deal with rising energy costs by going on the internet and looking at uSwitch, but my pensioners tell me that most of them have never used a computer, let alone the internet, and so would not know where to start. How is that a solution to rising energy costs and falling living standards? You tell me, Madam Deputy Speaker, or perhaps the Minister can tell me when he winds up the debate. That is before the granny tax has taken money from pensioners to pay for tax cuts for millionaires. Then there was the young man whose building firm was wound up because he and his partner could not get any work. He now works in a shop for £6.50 an hour and barely has enough money coming in to put food on the table and pay the rent, let alone put fuel in his car.
The least we could do is to make some kind of move to help these people by cancelling the fuel tax increase. As I said in an earlier intervention, and as FairFuelUK has demonstrated, its effect would be a fall in GDP and a loss of 35,000 jobs, so no jobs would be created for the more than 1 million young people who are out of work. At the same time, the tax credit cuts will hit part-time workers, and that is where jobs are being created. Part-time jobs have increased, but not the full-time ones that would help to build prosperity. Many small businesses tell me that they are getting by with fewer staff who are working longer hours. HGV owner-drivers tell me that the cost of filling their lorries has gone up and up, and all those increased fuel costs have to be passed on, either through cuts in their own income or price rises that hit the living standards of those on the lowest incomes. VAT is up, fuel prices are up, food prices are up, energy prices are up, and taxes are up—except, of course, for those millionaires.
Tonight we, as the House of Commons, have an opportunity to vote to cancel the fuel duty rise, not least because of the impact that it would have in the coldest part of the year when people rely on fuel for their cars more than at any other time. The Government have an opportunity, if they choose, to do this by closing tax avoidance loopholes and targeting the Starbucks, Amazons and Googles of this world, thereby helping those whose living standards have suffered.
Priti Patel (Witham) (Con)
Like all right hon. and hon. Members on the Government Benches, I welcome this debate and the opportunity that it presents to highlight the gross hypocrisy of Labour Members over fuel duty and the cost of living. Despite their contributions to the debate and the words in their motion, Labour’s record in government shows how shallow is their so-called concern about this issue. Today’s debate ranks as nothing more than a sanctimonious attempt by Labour Members to exploit the anxiety of the public for nothing more than superficial reasons of political opportunism. It is exactly these kinds of antics that erode public trust and confidence in politics.
Labour Members have come to the House today to argue for freezes in fuel duty, but at the time of their last Budget in March 2010 they came here to pledge the continuation of above-inflation increases in fuel duty for the duration of this Parliament. They may be afflicted by the collective amnesia that we have seen today regarding their record in office, but my constituents remember the misery inflicted on them as Labour presided over huge increases in the cost of fuel and the cost of living. In particular, they remember what happened in 2000, when the price of petrol at the pump surpassed 80p per litre. They have not forgotten the appalling way in which the Labour Government handled the matter back then and their failure to get to grips with the crisis and the impact that the fuel price increases were having on businesses and families. Despite various promises at the time, no action followed. Fuel prices consistently increased under the Labour Government. If Labour Members were genuinely concerned about the impact of the level of fuel duty on families and businesses throughout the country, they would not have increased fuel duty 12 times when they were in power.
By contrast, this Government have recognised the burden that fuel costs add to household budgets and businesses. As my hon. Friend the Minister highlighted, they should be congratulated on freezing Labour’s planned fuel duty increases and abolishing the fuel duty escalator, even managing to cut fuel duty by 1p. It is now 10p a litre lower than it would have been under a Labour Government, saving families £159 this year alone. The overall tax burden under this Government is lower than it would have been under Labour, as is the deficit. This country has been saved from the indignity of taking a begging bowl to the International Monetary Fund by dealing with the financial mess that the previous Government left for this Government. As a staunch believer in the power of low-tax economies, I would like the Government to go further in cutting this duty and lowering the overall tax burden, but of course Ministers are limited in what they can do because of the huge levels of borrowing for public spending that have existed.
One astonishing thing about fuel duty is that it raises far more money than is spent on our roads. The mismatch between the amount raised from motorists and the amount spent on improving our road network has caused huge concern to my constituents. Under Labour, revenue received from fuel duty rose considerably. In 1996-97, total receipts from excise duty on oils were £17.2 billion. However, when the Labour party left office, they were around £27 billion, and that is without taking vehicle excise duty into consideration. Despite that extra money from motorists—over 50% more in cash terms—Labour failed to invest in the road network, especially in Essex. My constituents have not forgotten that. Vital road schemes, such as the project to dual the A120, were completely axed. Labour pillaged the pockets of motorists in my constituency and gave them nothing in return. Instead of investing in infrastructure in Essex, Labour blew the money on unsustainable levels of public spending and the rising cost of debt interest payments. Many other schemes, including the Dartford road crossing, also demonstrate that point.
In conclusion, I want the cost of motoring to fall and investment in our road infrastructure in Essex to increase. That will never be achieved by anything suggested by the Labour party, including the shallow statements that we have heard today, hence my opposition to the motion.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
It is an honour to follow the hon. Member for Witham (Priti Patel) and her characteristically warm-hearted contribution to the debate.
This has been an important and much-needed debate. Members on both sides of the House have shown the strength of feeling that is out there on our roads against the extra burden that this fuel duty rise would place on families and businesses, at a time when prices are still rising faster than wages. Households that are already suffering from the Government’s failed economic policies cannot afford to be hit by an extra 3p per litre, especially with fuel duty already 15p more per litre than it was at the general election.
My hon. Friend the Member for Ynys Môn (Albert Owen) well summed up as hypothetical nonsense Conservative Members’ attempts to distract from their failure to support the motion by suggesting that were Labour in government the fuel duty might be 10p per litre more. Labour Members have been calling for a temporary VAT cut to take 3p per litre off the price of fuel immediately, but with the Government refusing to act, we are now calling on Members to support the motion to delay this extra tax that will hit families and businesses, slowing growth even further.
A clampdown on tax avoidance by employment agencies and umbrella companies would raise more than enough money to delay this rise until April. It would also bring an end to the exploitation of workers under those schemes, who are often left worse off as agencies pocket the extra profit from avoiding tax, leaving employees at risk of being pursued for that tax in later years.
There have been many excellent contributions to this debate, as well as some not so excellent. Many Members, especially those from rural communities, have raised concerns about the impact that the increase in fuel duty will have on them, and I mention in particular my hon. Friends the Members for Inverclyde (Mr McKenzie) and for Airdrie and Shotts (Pamela Nash). The hon. Member for Waveney (Peter Aldous) made a well-considered and reasonable contribution to the debate, but unfortunately failed to explain why he will not support the motion tonight. The hon. Member for Harlow (Robert Halfon) has long campaigned on this issue. He concluded his characteristically well-considered speech by saying that he is proud to support the Government tonight as the Chancellor is in “serious listening mode”, but that he hopes they will not let us down. Well, many of our constituents are sitting at home tonight, hoping that the Government will not let them down. Our economy has just emerged from a double-dip recession—a recession, I must add, that was made in Downing street. That emergence is welcome but there is no room for complacency. Our recovery is still fragile and people are feeling the struggle.
In government, Labour either cut, froze or delayed planned fuel duty rises 13 times because we thought it was appropriate, and did so twice following the financial crisis because we recognised that in a fragile economic environment, a postponement would provide practical help to ordinary people and businesses feeling the squeeze. The Government claim that they are in strong “listening mode”—Members on the Government Benches certainly seem to have been given that reassurance.
Robert Halfon
I am grateful to the hon. Lady for her gracious remarks, but why did she and her colleagues vote against the Government when they cut fuel duty last year?
Catherine McKinnell
How will Government Members explain to their constituents why they have not voted for a freeze in fuel duty tonight, when the overwhelming consensus is that that is much needed by families and businesses up and down the country?
Let us hope the Chancellor is listening to the debate. The price of a litre of petrol is now £1.36, 5p more than when the Chancellor agreed to defer the duty increase in August and 15p more than at the general election. The tax on a tank of petrol in 2010 was £37.60, but it has now risen to £40.30. If we do not delay the 3p increase tonight—if hon. Members do not vote to freeze it—it will go up again in January to £42.20. A family could spend £200 a year more on fuel tax in 2013 than they spent in 2010. Families cannot afford that £200. The increase in VAT has cost a family with children £450 each year, pensioners are facing extra burdens after the granny tax, cuts in child tax credits will cost some families up to £545 a year, and cuts to working tax credits mean that those on low incomes will lose up to £3,870 a year if they cannot increase their hours at work. That is the impact of this Government’s polices on family budgets.
Small businesses, too, are struggling. The Government’s flagship project Merlin agreement with the banks has flopped and failed, and much-needed cash is simply not getting through to help businesses to expand and create jobs. Businesses need a break, and a freeze in fuel duty would provide it. That is why the Opposition have tabled the motion. We want to give the Government and Government Back Benchers the chance to join us and vote in favour of easing the burden for people up and down the country who will be hit by the fuel duty increase.
It is clear how the Opposition proposal could be paid for. The Government need to take urgent action to crack down on tax avoidance schemes by employment agencies and umbrella companies that classify part of their employees’ pay as a reimbursement for travel and subsistence expenses and claim back the tax relief. In most cases, employees do not see even a fraction of the extra profits that companies make as a result. In some cases, workers are not even aware that their pay is being manipulated in that way, but if they end up with too few national insurance contributions, they lose out. They could even be liable to repay the tax and national insurance and end up personally out of pocket if Her Majesty’s Revenue and Customs successfully challenges the scheme. HMRC’s figures forecast that the tax loss from such schemes in 2012-13 will be £650 million, but more recent estimates put the figure at more like £1 billion, as more companies jump on the bandwagon. Even a conservative estimate of what could be raised from clamping down on that one area of tax avoidance would more than cover the £350 million needed to pay for the fuel duty delay.
The Opposition understand that the rules exist, but enforcement has been lacking. The Government’s cuts to HMRC—an additional 10,000 jobs are set to be lost by 2015, and £2.1 billion has been taken out of its budget—have made the job even harder. It is essential that we take action. Companies that play fair and pay their tax properly and transparently are disadvantaged by those that cheat the system. The tax that should be paid and is avoided, or in some cases illegally evaded, is sorely needed to support our struggling economy.
The Government have lots of tough talk on tax avoidance but very little action. The Opposition motion calls on the Government to get a grip and clamp down on tax avoidance and to use the money where it is needed. Government Members know that that is what their constituents want and need. Nods and winks from the Chancellor will not fill their petrol tanks. Without a proper commitment from him, Members should support the motion tonight. If MPs unite today and vote for the motion, the Prime Minister and the Chancellor will have no choice but to see sense and give that reassurance to families, motorists and businesses that we are on their side.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have seen this evening how what might have looked like a clever wheeze to the Opposition on Friday looks opportunistic on Monday and merely exposes their lack of credibility and consistency. That is perhaps a pity: as my right hon. Friend the Member for Wokingham (Mr Redwood) pointed out, the cost of living is an important issue.
I thank my right hon. and hon. Friends for their contributions today—and, indeed, Opposition Members. In particular, I thank my right hon. Friend the Member for Wokingham and my hon. Friends the Members for Ipswich (Ben Gummer), for Waveney (Peter Aldous), for Tamworth (Christopher Pincher), for Cleethorpes (Martin Vickers) and for Witham (Priti Patel) and, perhaps above all, my hon. Friend the Member for Harlow (Robert Halfon), who, unlike Labour, has a record of consistency on fuel duty.
Given the general sense of amnesia on the part of the Opposition, perhaps I can begin by setting out a little of the context, which was the set of policies proposed by the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), for reducing the deficit—his discretionary fiscal tightening. It was a plan seen as inadequate by the International Monetary Fund, the CBI, the Governor of the Bank of England, the credit rating agencies and, judging by the general election result, the British people. In lacking credibility, the plan ran the risk of leading to higher interest rates, and as my hon. Friend the Economic Secretary pointed out, for a mortgage of £100,000, a 1% increase in mortgage rates would lead to an additional £1,000 in mortgage payments.
What did the Darling plan not include? It did not include anything to increase the personal allowance for income tax, which under our policies has resulted in cash savings of £546 for basic-rate taxpayers, or anything on council tax. Our freeze—in contrast to the average 5% increases we saw from Labour—saved average band D households nearly £220. What was actually in the Darling plan? We had an increase in employers’ national insurance contributions—the jobs tax, which was largely reversed by us, although that does not stop Labour calling for cuts in employers’ national insurance contributions. Most pertinent for today, we also saw fuel duty increases, with a 1p increase on 1 October 2010, a further 0.76p increase on 1 January 2011 and then 1p increases in real terms on 1 April in 2011, 2012, 2013 and 2014.
The argument we have heard this evening from Labour is: “It’s all very well; we made the announcement, but we had no intention of implementing those proposals”—that is one for fiscal credibility from Labour. Alternatively, the decision has been completely ignored, so that one could have missed the fact that any scheduled increases in fuel duty are Labour’s proposed rises. Now Labour’s argument is: “We intend to save the nation from our very own policies.” It is as though the last Labour Government never existed, but unfortunately for all of us they did, and we are having to live with the consequences.
We know that high oil prices are causing real difficulties in ensuring that motoring remains affordable. We have listened to hard-pressed motorists and businesses, and we have acted. This Government have acted by easing the burden on motorists by £5.5 billion between 2011 and 2013 and by cutting fuel duty. We acted by cancelling the previous Government’s fuel duty escalator for the rest of the Parliament and by introducing a fair fuel stabiliser, so that fuel duty will increase by inflation only when oil prices are high. We acted to ensure that there will be no increase in fuel duty this year by deferring the next increase to January. That action ensures that duty at the pump will have been frozen for 21 months, and pump prices are now 10p lower than under Labour’s plans. Even following the inflation increase in January, average pump prices could still be approximately 6p a litre lower than if we had implemented the previous Government’s fuel duty escalator in 2011 and 2012. That means that a typical Ford Focus driver will be £159 better off between 2011 and 2013, and that the average haulier will benefit by approximately £4,900 during the same period.
Labour Members argue that we could do more about tax avoidance, but that ignores the fact that under the present Government yield raised by HMRC will increase by approximately 50%. It also ignores the fact that it was their party that voted against proposals to deal with disguised remuneration—a particular form of tax avoidance—which are now saving us £750 million a year. Instead, we hear about umbrella companies that are inflating workers’ travel and food expenses and reducing tax and national insurance contributions.
In an article, the shadow Chancellor—who, of course, is not here today to defend his own policies—wrote of tax avoidance:
“Ministers have failed to take tough action to stop it happening.”
What he did not mention was that the Ministers in question must have been those who consulted on the matter in 2008 and then decided not to change the law. Even four years on, the shadow Chancellor cannot stop himself briefing against the Treasury team of the right hon. Member for Edinburgh South West.
Incidentally, HMRC has strengthened compliance in this area. It has, among other things, won a large case worth £158 million. Moreover, changes in the national minimum wage scored an increase of £90 million, while protecting low-paid workers.
The fact is that it is this Government who are reinvesting money in HMRC, enabling us to secure an additional yield of £7 billion by the end of the current Parliament. It is this Government who are increasing the number of people working in compliance and enforcement in HMRC. It is this Government who are introducing a general anti-abuse rule. It is this Government who have passed legislation to deal with disguised remuneration. None of those measures was introduced by the Labour party when it had the opportunity to do so.
We have recognised the impact that high pump prices are having on motorists, families and businesses. The last Government had no credible plan to deal with the debts that they created and no credible plan to support motorists, but we have listened and responded. We have cut fuel duty, we have scrapped the fuel duty escalator, we have ensured that there will be no increase in fuel duty this year, we will have kept fuel duty frozen for 21 months, we will continue to support motorists with our fair fuel stabiliser, and we have tackled tax avoidance. We taken action not only on fuel duty, but on council tax and on income tax.
The British people know that this is a Government who, within the considerable constraints left to us by the Labour party, will take action to protect them from rising pressures and difficulties with the cost of living. The Labour party has tabled an incredible, opportunist motion. I urge the House to reject it and to support the Government’s amendment, safe in the knowledge that we will do all we can to protect the British people from the rising cost of living.
Question put (Standing Order No. 31(2)), That the original words stand part of the Question.
Business without Debate
22:26 - The House divided: - Ayes: 275 / Noes: 231 - Question accordingly agreed to.
Car Park Charges (Scunthorpe)
Nic Dakin (Scunthorpe) (Lab)
On an evening when we have focused on costs to the motorist, I am proud to present a petition on behalf of 2,400 or more residents of the Scunthorpe area. The petition states:
The Petition of residents of Scunthorpe and Ashby,
Declares that the Petitioners support the call for shoppers, retailers and businesses across North Lincolnshire to be treated equally and fairly.
The Petitioners therefore request that the House of Commons urge the Government to provide 2 hours free car parking across all car parks in Scunthorpe and Ashby.
And the Petitioners remain etc. [P001130]
Empty Properties (Newcastle)
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I am delighted to have this opportunity to raise such an important issue with the Minister. This is the first chance that I have had to congratulate him on his new job, and I hope that we can work together constructively on this very important issue. This is an opportunity for him to reflect on it from a fresh perspective.
At my surgeries and in my postbag, week after week, housing is consistently the No. 1 issue that constituents bring to me. Every month I publish a constituency report, which includes casework. For example, October’s shows that my office dealt with 23 housing cases—more than those involving benefits, health or crime. Every case is unique and heart-breaking. One constituent desperately wants to move to be near his father, who is suffering from dementia. Another is ill in private rented accommodation that is in such bad condition that it is making her children ill. Another knows that he cannot afford to stay in his home when the Government implement their bedroom tax, and the stress is undermining his mental well-being.
Everyone needs a safe and affordable roof over their head. I am sure that the Minister is a regular visitor to my website. He will have seen that I have recently launched a housing campaign, aimed at improving the availability of affordable housing in Newcastle. We need to build new housing and improve our stock, but Newcastle also has a large student population that needs quality housing at a fair price.
The Minister will know that my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) has voiced concerns regarding the near permanent installation of letting boards in parts of Newcastle. The council is seeking ways to address that. However, the particular issue that I am concerned with today is the number of empty homes in Newcastle. There are currently more than 3,770 of them. At least, those are the ones we know about, mainly from council tax returns; the real figure is no doubt higher. The council estimates that there are probably a further 1,000 that could be brought back into use, and 99% of empty homes in Newcastle are in the private sector.
Empty homes attract crime and antisocial behaviour. They reduce the value of surrounding properties, push rents up, and increase pressure on green-belt land. Often, they also attract vermin, such as rats, as several of Newcastle city council’s environmental officers know to their cost. One of Newcastle’s great local papers, the Evening Chronicle, has highlighted this issue a number of times.
Those problems are intensified when clusters develop, as they have in several areas of Newcastle, including Benwell and Cowgate in my constituency, and Byker in the constituency of my right hon. Friend the Member for Newcastle upon Tyne East. Empty homes also deprive people in need of homes. There are 4,430 people actively applying for housing in Newcastle, with many more on the waiting list. With just 1% of council housing stock empty, we need to build more homes, both social and private, and get as many empty homes back into use as possible.
Last year, Labour retook Newcastle city council from the Liberal Democrats. Since then, Labour councillors have set about tackling the challenge of empty homes in the city. The council and its partners—the housing management organisation, Your Homes Newcastle, and housing partnerships—have a very good record on bringing empty homes back into use. Last year, over 300 such properties were brought back into use through direct help from the council. For example, the council works with responsible landlords to help them get empties back into use, including offering training to hundreds of landlords next year on how they can make better use of their properties. The council also offers a rent deposit scheme and a private rental service to remove obstacles, and provides a highly focused lettings support service that can deliver higher standards for existing and future tenants.
That kind of effort is partly why Newcastle’s empty homes rate is below the national average, and one of the lowest of the “core cities” at just 3%. It is also why a French television crew recently came to Newcastle to look at the work that has been done and to learn from it. We have a certain “Je ne sais quoi”. As well as these and other schemes, the council has provided £500,000 to tackle the problem of empty properties. I was pleased to learn that the Government have made a commitment to match-fund that, as the Minister will doubtless mention.
For many of my constituents who are effectively homeless or inadequately housed that is not enough. We need more support from the Government. Unfortunately, there are still landlords with empty houses who are not prepared to work with the council and housing organisations, effectively preferring to see their properties go to rack and ruin. In those situations, the council has powers to issue empty dwellings management orders—EDMOs—and as a last resort, compulsory purchase orders, and Newcastle City council is fully prepared to use them to carry out its duties to the community.
Graham Jones (Hyndburn) (Lab)
Will my hon. Friend add to that list councils’ ability to introduce selective licensing? Does she think, like me, that selective licensing should be at the discretion of the local authority, which should be able to broaden it and roll it out across a whole borough, rather than just selected areas?
Chi Onwurah
My hon. Friend makes a good point. The housing situation in many cities has been affected detrimentally by the number of houses in multiple occupancy, which I shall come on to in the case of Newcastle. Councils’ ability to manage the proliferation of HMOs, especially when they are concentrated in particular areas, is important if we are to ensure that the housing stock is adequate and diverse.
I should like to make it clear that I am not waging a campaign against private landlords, who perform a useful and desirable service. Many of them offer homes of extremely good quality that provide good value for money. Nor do I want to see councils repossessing houses at every turn. However, I do believe that landlords—social and private—have a responsibility to their community. Does the Minister agree that property ownership comes with responsibilities as well as rights—a responsibility to the community in which the property is owned, and to the people of that community?
Housing associations tell me that landlords often prefer to convert their houses to houses in multiple occupation, and would rather leave these HMOs empty in the hope of eventually attracting tenants—often, in the case of Newcastle, student tenants—who will pay higher rents for the same square footage. I do not think that is responsible. Landlords say they are reluctant to let HMOs to families because they fear that they will never get the planning permission, sometimes necessary, to change the house back to HMO status, having let it to a family. Would the Minister look specifically into ways of addressing this barrier, perhaps by removing the HMO designation should houses sit empty for more than, say, one year?
The Government have fully committed themselves very publicly to localism and devolving powers to councils. Does the Minister support this? If so, could he explain to me why the Government are making it harder for councils to implement EDMOs? There is a statutory instrument currently before Parliament, No. 2625, which brings in a set of changes to EDMOs. From now on, councils will have to wait two years instead of the current six months before starting proceedings against private landlords. In addition, they will have to prove the social consequences of leaving the home empty. On the streets of Newcastle the social consequences of empty homes are all too evident.
Just on Friday the Minister for Housing was talking how about how his Department is acting to free councils to tackle homelessness—acting with only one hand, it seems, while the other hand takes these important powers away. Newcastle City council has made clear its opposition to the measure, passing a resolution against it. I hope the Minister will recognise the excellent work that Newcastle’s Labour council has done in reducing the number of empty homes in the city. But will he explain why the time limit for EDMOs is being extended by 300%? Will he explain why extra requirements have been added when the Government claim to believe that local authorities are best placed to make such decisions?
EDMOs were not being widely abused by councils. Used sensibly, in conjunction with incentives and schemes such as those run by the council and its partners in Newcastle, EDMOs are an important tool for reducing empty homes and homelessness. When I raised the issue at Communities and Local Government questions in March, I was told:
“The system for empty dwellings management orders remains in place and they can be brought into effect after two years, but there has been limited use of them so far.”—[Official Report, 12 March 2012; Vol. 542, c. 11.]
Could the Minister expand on that? Why, if he believes that there has been limited use, is he making it harder to use them? Their limited use is welcome and suggests that other measures are being used, but it does not follow from that there is no need for EDMOs or that the time limit should be extended. They are a last resort and an effective deterrent. That will no longer be so if the message goes out from Government that these orders will be much harder to implement in future.
When I raised the issue again at Communities and Local Government questions in April, the Minister’s predecessor said:
“It is not a very effective measure”,—[Official Report, 30 April 2012; Vol. 543, c. 1221.]
but councils disagree. Can he provide evidence for that statement?
I will not speak for too long, as I know that the Minister intends to give a considered response to each of my questions and I want to ensure that he has sufficient time to do so. I will finish by declaring a personal interest that perhaps I should have declared at the start of my speech. Social housing played a big part in my life. When my mother moved back to Newcastle in the ’60s with three small children, we spent six months living in my gran’s one-bedroom local authority bungalow before the council rehoused us in the home I grew up in. I am very grateful for that. As a family who could not afford to pay a market rent, having a safe and secure home available from the council made a huge difference and allowed us a decent start in life.
For the moment, we cannot build enough social housing fast enough to ensure that all those who need it can be properly housed, but we can do much more to encourage the private sector to meet the need for reasonably priced housing. Indeed, getting all the known empty private sector homes in Newcastle back into use affordably could reduce the number of applications for housing by up to 85%. I hope that the Minister will set out in his reply the Government’s position on the responsibilities that come with property ownership, how he will be empowering councils to tackle the problem of empty homes in their localities, why he is changing the EDMOs and whether he will look at the particular issue of empty HMOs.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
I begin by congratulating the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on securing the debate and saying how pleased I am to see that a number of her colleagues have joined her, showing that they, too, have an interest in the matter. I very much hope that we will, as she has suggested, be able to work together on these issues. Indeed, I have now become, as she indicated I might, an assiduous reader of her website.
I also agree about the importance of creating more affordable homes. Now is not the time to go into details, but the hon. Lady will be well aware that the coalition Government have a very robust plan in place to provide 170,000 additional affordable homes over the period of the spending review. She rightly focused on the particularly important issue of empty homes, which, as she indicated, are a waste of housing and can be hugely damaging to neighbourhoods.
As the hon. Lady is well aware, homes become empty for all sorts of reasons. Some are being renovated, some are in the course of probate after someone dies, and many will come back into use relatively quickly through the normal operation of the market. In fact, there are nearly 750,000 empty properties in England at any one time, but around 279,000 of them are what she and I would refer to as long-term empty, meaning that they are empty for longer than six months.
Neglected properties, in particular, can quickly start to cause problems for neighbours, damaging adjacent properties, attracting vermin, nuisance, vandalism and other criminal activities such as drug dealing and prostitution. They can create unnecessary additional burdens on local authorities and local emergency services. They can quickly lead to an area’s decline, decimating the local community as well as having a wider economic impact, for example by reducing the value of neighbouring properties and discouraging future investment.
In Newcastle upon Tyne there are currently around 1,650 long-term empty houses. We have been in dialogue with the council and know that it is working hard to tackle the problem, and we congratulate it on the work it is doing. In fact, since 2008 the council has taken action in relation to more than 1,000 empty homes, and last year alone more than 290 such properties were returned to use with help from the council. I am sure the hon. Lady will be pleased to know that the council has benefited from £62,371 from the new homes bonus for bringing those empty properties back into use.
However, as the hon. Lady will know—she referred to this briefly—solutions to empty homes are as varied as the problems that cause them. We know that a one-size-fits-all solution will not work, so our approach is to enable local solutions which will tackle the specific local issues. That is why we have put in place the incentives and practical support to enable local communities to take the lead. In part, that will address her concern about the orders.
The Government have already committed £160 million to bringing over 11,000 empty homes back into use, and that is being delivered through some key funding streams. Some £100 million of that sum is to bring empty homes back into use as affordable housing. That is done through two separate routes, with £70 million of funding, through the Homes and Communities Agency, for registered providers and £30 million, through the empty homes community fund, for community and voluntary groups. Another funding stream is to tackle clusters of empty homes in areas of lower demand. Some of those will be at affordable rent, but there are also mixed-tenure schemes. We have committed £60 million of funding for that.
There is more to come. In the housing and growth package announced on 6 September, we said that we would use a share of the £300 million of capital funding and £10 billion of loan guarantees to bring a further 5,000 empty properties back into use. We will be announcing details of the programme in the very near future, and we will be looking for more innovative ideas such as encouraging more empty commercial property to be brought back into use as housing where that provides value for money.
Chi Onwurah
Will the Minister clarify whether this additional funding will be delivered through local authorities or through the private sector?
Mr Foster
I know that the hon. Lady is listening carefully to what I am saying, and I said that we will be making an announcement in the very near future. She will therefore not have to wait long for the details that will answer her question.
As well as direct funding, we have put in place powerful incentives for all local authorities to tackle empty homes, such as the new homes bonus. Local authorities earn the same financial reward for bringing an empty home back into use as building a new one—over £8,500 for a band D property. As I said, the Newcastle area has already benefited from that and other forms of direct funding. For example, I am sure that the hon. Lady is well aware that Leazes Homes, a subsidiary of Your Homes Newcastle and a registered provider, was awarded £160,000 to bring 10 empty homes back into use. Working with the Cyrenians, a leading local charity, it will aim to help some of the most vulnerable and disadvantaged people living in Newcastle by providing opportunities for them to gain new skills and qualifications. The Cyrenians have separately been awarded £500,000 from the empty homes community fund to bring up to 25 empty homes back into use across the north-east. That is part of their Homes Life project, which aims to refurbish properties working in partnership with local authorities and estate agents.
Newcastle city council itself has been awarded £491,000 over the next two years from the clusters of empty homes fund to bring 124 empty homes back into use. The funding will be used to offer financial help to empty home owners through grants and loans towards renovation works to the empty properties. Where incentives do not work, our funding will also help to gap fund enforcement action. The local authority has committed to match the Government’s funding, taking total funding committed up to £1 million by March 2014.
However, as the hon. Lady knows, sometimes offering advice and support of the sort that I have described is not enough. Where empty properties have become dangerous or are causing a nuisance to neighbours, and the owners will not co-operate in sorting the problems out, local authorities can make use of a range of powerful enforcement tools. As she will be aware, several of the measures in the Housing Act 2004 provide such tools. For example, part 1 enables the inspection of an empty home that is falling into disrepair, and if it is found to contain serious category 1 hazards, the local authority has a duty to take action to address them. If the property owner does not comply with an improvement notice, they will be guilty of a criminal offence that carries a fine of up to £5,000. Where there is an immediate risk, the authority can take emergency remedial action and recoup the costs.
Graham Jones
The Minister will be aware that local authorities do not have a duty to inspect properties, and do so only when there is a complaint, for instance, which in practice makes it an ineffective tool. What is the Minister going to do about that? Should there be a duty on local authorities to inspect houses for category 1 and category 2 hazards, or will we remain with the current system that does not achieve what it promises?
Mr Foster
The hon. Gentleman raises an interesting point to which—let me be honest—I have not previously given any thought. Now that the point has been raised, I assure him that I will consider it and write to him subsequently.
As the hon. Member for Newcastle upon Tyne Central has said, there are a number of other measures, including empty dwellings management orders. I do not want to go into great deal about those because I think that she and I might sit down and have a lengthier dialogue about some of the issues she has raised. However, since the introduction of those orders several years ago, only 69 have been issued. She will be aware that, in her local authority area in Newcastle, not one EDMO was issued until last month when the first one was proposed.
Graham Jones
Again, I ask the Minister to look into this issue, but I think few orders were issued because the properties involved often required £30,000 or £40,000 to be spent. Under the old legislation, that had to be recovered in the seven years of the EDMO. Councils could not afford to lay out capital investment upfront, and they had no expectation of recovery, especially in cluster areas where there was no market demand for the properties involved.
Mr Foster
On this occasion I do not need to go away and think about the hon. Gentleman’s point, and if he was listening to my earlier comments he will have heard me mention a number of funding streams that we have made available to ensure opportunities for the provision of support to bring properties back into use more quickly. One reason we changed the arrangements from six months to two years, as the hon. Lady said, is that we believe that provides the right balance between enforcement and the opportunity to work with owners and the available funding to bring properties back into use, without ultimately using the serious sanction of the order.
Time is short and I want to pick up on a couple of points raised by the hon. Lady. She raised the issue of houses in multiple occupation, and suggested that, in certain circumstances, people have received planning permission to convert a property—largely such properties have three or more storeys and five or more people—into an HMO. At times, however, that property is no longer used for multiple occupation and could be used for a family, but that does not happen because people are afraid of losing the planning permission if they subsequently wish to convert the house back into an HMO. I have had a very brief conversation with officials about that situation, but I clearly need to have more detailed conversations. That might not be the problem that the hon. Lady describes, but I give her an undertaking to look at the issue. If necessary, we will have further dialogue, but I certainly commit to writing to her.
We believe that article 4 directions and licensing are a powerful tool. The hon. Gentleman will be aware that article 4 directions and licensing can be used either for an area or for parts of it. The important point is that local councils have the opportunity to make the decisions that best suit their circumstances.
Graham Jones
I am grateful to the Minister for giving me the opportunity to make the point. The Minister’s assessment is right but, putting aside many other problems with licensing, there are no qualitative standards in licensing. It is about low demand and antisocial behaviour. It is not about individual properties, but about a neighbourhood. It therefore does not tackle the problem that my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) has described.
Mr Foster
Another point to which it is worth drawing the House’s attention is on the valuable work of a number of housing associations that work to address a wide range of problems—they do not just let and manage properties.
The behaviour of letting agents was touched on. There are procedures to bring concerns about the behaviour of letting agents to the attention of relevant bodies within local authorities, but I recommend that people ensure they go with an agency that is in a safe letting scheme.
I thank the hon. Lady for introducing this important debate. As I said, I will continue to work with her. I share her passion for getting empty properties back into use. That will provide much needed additional houses, but it can also remove the blight on communities that, sadly, currently exists. I congratulate her on securing this debate.
Question put and agreed to.
Ministerial Correction
Foreign and Commonwealth Office
(12 years ago)
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Mr Lidington
I shall perhaps have an opportunity to say more about the general issue of anti-corruption measures when we reach the further stages of the Bill. Today, I would simply say that we are now seeing action being taken in high-profile cases, with convictions secured against a former Prime Minister, a former economy Minister and a former defence Minister.
[Official Report, 6 November 2012, Vol. 552, c. 803-4.]
Letter of correction from David Lidington:
An error has been identified in a statement given during my closing speech on 6 November 2012.
The correct statement should have been:
Mr Lidington
I shall perhaps have an opportunity to say more about the general issue of anti-corruption measures when we reach the further stages of the Bill. Today, I would simply say that we are now seeing action being taken in high-profile cases, including in the current trial against a former Prime Minister, and the convictions secured against a former economy Minister and a former defence Minister.
Written Ministerial Statements
ECOFIN (Budget)
(12 years ago)
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The Financial Secretary to the Treasury (Greg Clark)
The Economic and Financial Affairs Council—(Budget), was held in Brussels on 9 November 2012.
In the Council, the UK and a number of other member states were very clear that the Commission and the European Parliament should not be asking taxpayers for extra funds when spending in member states is being reduced.
The discussion covered Draft Amending Budget No. 6 for 2012 and Draft Amending Budget No. 5 for 2012, which would amend the 2012 EU budget to cover additional funding needs for structural and cohesion funds, rural development, research programmes and an application to the EU solidarity fund. The UK made clear that the Commission’s request for an extra €9.7 billion of spending to cover bills for 2012 should be met by redeployments of existing funds.
The Conciliation Committee with the European Parliament was suspended on Friday 9 November, after nine hours of discussions between the Council, Parliament and the Commission. It is anticipated that the Conciliation Committee will reconvene on 13 November at 19:00.
The UK will continue to work with like-minded countries to press for budget discipline and fairness for taxpayers in the UK and Europe.
ECOFIN
(12 years ago)
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The Chancellor of the Exchequer (Mr George Osborne)
A meeting of the Economic and Financial Affairs Council will be held in Brussels on 13 November 2012. The following items are on the agenda to be discussed.
Economic governance—“Two pack”
The presidency will update Ministers on the current state of play of trialogue negotiations with the European Parliament which will strengthen fiscal discipline and financial stability in the euro area.
Revised capital requirements directive (CRD IV)
Council will be updated on the progress of negotiations on these proposals in trilaogues. The general approach agreed at 15 May ECOFIN represents a well balanced compromise.
Banking Supervision Mechanism
The presidency will brief Ministers on the current state of play on the Commission’s proposal for a single supervisory mechanism (SSM).
Financial Transaction Tax (FTT)
Ministers will be updated on the state of play as regards the introduction of a FTT by some member states using enhanced co-operation procedures. Council will have an opportunity to discuss the European Commission’s proposal of 23 October for a Council decision authorising enhanced co-operation. The UK will not participate in an enhanced co-operation FTT.
Mandate for negotiations of amendments to the Savings Taxation agreements with third countries
ECOFIN will hold a discussion on the mandate for negotiations where Council will be asked to express its views on the way forward.
Implementation of the Stability and Growth Pact—Greece
ECOFIN (euro area vote only) will seek to adopt two recommendations: one amending Decision 2011/734/EU on reinforcing and deepening fiscal surveillance,
and one giving notice to take measures for deficit reduction to remedy excessive deficit.
Follow-up to the European Council on 18-19 October 2012
Ministers will hold an exchange of views on the October European Council which discussed a range of economic and financial issues, including the interim Four President’s report: “Towards a Genuine Economic and Monetary Union”.
Follow-up to the Annual meeting of the IMF and World Bank Group in Tokyo and the G20 Finance Ministers and Governors meeting
Council will hold an exchange of views on the outcomes of the annual meeting of the IMF and World Bank Group in Tokyo on 12-14 October 2012 and on the G20 Finance Ministers and Governors meeting in Mexico on 4-5 November 2012.
Preparation of the United Nations Framework Convention on Climate Change (UNFCCC)
Ministers will consider draft Council conclusions which endorse the Fast Start Finance Report and recognise the importance of continuing to provide support for adaptation and mitigation activities in developing countries after 2012.
EU statistics
ECOFIN will consider draft Council conclusions which set out a framework for required improvements in: EU statistical governance; quality assurance; the provision of information requirements for EU policy-making priorities; and, limiting future resource demands on the European Statistical System (ESS).
EU state aid modernisation
Ministers will consider draft presidency conclusions, which outline the Commission’s modernisation programme and in particular its emphasis on growth; focusing enforcement on cases with biggest impact on the internal market; and streamlined rules and faster decisions.
Ministerial dialogue with European Free Trade Association (EFTA) countries
This regular meeting with the Finance Ministers of EFTA countries will take place before the formal ECOFIN meeting on 13 November. Discussion is likely to focus on the wider economic backdrop.
Business Rates
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
On 18 October, the Government announced our intention to postpone the next business rates revaluation in England from 2015 to 2017. Clause 22 of the Growth and Infrastructure Bill currently before the House of Commons will deliver upon this commitment.
During the recent Westminster Hall debate on business rates and during the Second Reading debate on the Bill, Ministers committed to provide more information on the analysis which has informed the Government’s position to assist parliamentary scrutiny.
A full assessment would require a revaluation, which in itself would cost £43 million and take a significant amount of time. However, the Valuation Office Agency have today published their high level estimates of non-domestic rental and rating assessment movements for England as at January 2012; they provide an illustration of the potential impact those rateable values would have had on business rate bills. The agency’s analysis is based on professional judgments informed by limited rental market evidence up to January 2012. The analysis has been prepared independently of Ministers and published in full.
The last revaluation was based on April 2008 valuations and rents set at the height of an unsustainable property boom. Since then, the economy and property market have faced exceptional changes. Rents have fallen since that property boom. Some groups have assumed that falling business rents would entail falling business rates. However, this is not the case. While aggregate rateable values have fallen, this would automatically be offset at the revaluation by a higher rating multiplier. Firms would just be required to pay a higher proportion of their rateable value.
The agency’s estimates are based on an increase in the multiplier of 16%. My Department has actually forecast an increase of 20%, as a consequence of inflation and the adjustment required to the multiplier for appeals; in this context, in practice, the losers would be likely to be even greater than those presented in the agency’s paper.
Overall, the agency’s analysis suggests that 800,000 premises would have seen a real-terms increase in their rates at a 2015 revaluation. This compares to 300,000 seeing reductions.
Some sectors would have faced big hikes including petrol stations (+28% tax paid), the self-catering industry such as caravan parks (+29% tax paid), hotels (+6% tax paid), theatres (+25% tax paid), and pubs (+11% tax paid). The retail sector overall would have seen a tax rise of 1% above inflation, and food retail and convenience stores in particular would have faced significant tax increases. Given business rates are the third biggest outgoing for local firms after staff and rent, such changes would invariably feed through to more expensive prices for the family’s weekly shop, more expensive pints in pubs and a significant hit on British’s tourism trade. Indeed, as Minister with responsibility for community pubs, I am very aware of the concern expressed by hon. Members on the pressures being faced by local pubs.
Revaluations should be revenue-neutral, and equally, postponing the revaluation will be revenue-neutral. Overall the revaluation would not change the total business rates paid in England, so some sectors and locations would have seen reductions at 2015. During recent parliamentary exchanges, it was unfairly suggested that this change was being made to assist southern parts of England at the expense of other parts of the country. However, our analysis shows that offices in central London would have seen by far the greatest reductions in tax paid if the 2015 revaluation had gone ahead (a fall in aggregate rateable value is one of the reasons why the multiplier has to be increased by so much to make up for the lost revenue). There are complex variations by both locality and by sector in different parts of the country, but what is clear is that there would be far more losers than winners across the country as a whole. In making this decision, Ministers are seeking to support the national interest and the economy as a whole.
I appreciate that as a very direct form of taxation, business rates are not popular. Local government finance is too often opaque and confusing. However, we are acting in an open and transparent manner. This independent evidence shows that by postponing the 2015 revaluation, we will protect local firms and local shops from sharp changes in business rates bills at a time when we want to ensure the economy is growing. It will provide business with a stable economic environment in which to invest and support jobs for the next five years.
A copy of the document will be placed in the Library together with a copy of the Impact Assessment for the Growth and Infrastructure Bill.
Energy Efficiency Strategy
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
The UK has a huge opportunity to lead the world on energy efficiency. This coalition Government are determined to grasp it and I am proud to announce today that we are publishing Britain’s first comprehensive national energy efficiency strategy.
The UK could be saving 196TWh of energy in 2020 through cost-effective investment in energy efficiency. This is equivalent to 22 full-time 1GW power stations. Energy efficiency can also cut bills for households and businesses money, it can boost growth, competitiveness and create jobs. It can play a major part in helping the UK deliver our climate change goals.
This energy efficiency strategy sets the direction for energy efficiency policy for the coming decades. It makes clear our ambition, the barriers that we need to address and the additional steps we are taking now to stimulate the energy efficiency market. It shows that there is a clear role for ambitious Government leadership and spells out how we will act to connect finance with demand, encourage innovation, and make energy efficiency information more accessible to the consumer.
Energy efficiency is about progress and achieving more with less. It is an essential element of a resource efficient, resilient economy. UK commerce and industrial sectors have made significant strides but through this strategy we signal renewed efforts to help all businesses increase energy efficiency and cut their costs
The strategy is a significant step to achieving the coalition’s mission to achieve the cost-effective energy efficiency potential in the UK economy, but there is much more to do. We need to excite people with the opportunities for energy efficiency and this strategy sets the path to achieving that.
The energy efficiency strategy can be found on the website of DECC’s Energy Efficiency Deployment Office (EEDO): http://www.decc.gov.uk/eedo and I have placed a copy of the strategy in the Libraries of both Houses.
Birth Environment (Improvements)
(12 years ago)
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The Parliamentary Under-Secretary of State for Health (Dr Daniel Poulter)
I am announcing a £25 million capital funding in 2012-13 for the NHS to improve the birthing environment in the maternity units that need it most, so both mothers and fathers, and the staff who work in the units, can benefit from a more pleasant and appropriate environment.
Women should receive excellent maternity services that focus on the best outcomes both for them and their babies, based on women’s experience of care. It is important for all women to be able to give birth in a safe, high quality environment that is best suited for them. Birthing environments should be designed so to provide for the safe care of mothers, fathers and baby in a comfortable, relaxing environment that facilitates what is a normal physiological process, enabling one-to-one midwife care during labour and birth in privacy whenever possible, while enhancing the family’s enjoyment of an important life event.
This builds on the Government’s pledge to improve maternity care by making sure:
women will have one named midwife who will oversee their care during pregnancy and after they have had their baby;
every woman has one-to-one midwife care during labour and birth; and
parents-to-be will get the best choice about where and how they give birth.
Providers will be able to bid for central funding in the current financial year to support the refurbishment of wards, for example, by adding ensuite facilities, providing new facilities to allow fathers to stay overnight at the birth and new equipment such as birthing pools. Bids will need to meet the criteria set out in “Maternity care facilities: Planning and design manual, Version:0.8:England (2011)”.
The criteria for applying for funding and the deadline for receipt of applications will be announced shortly. It is important that the views and experiences of women and their families locally inform the development and design of birthing environments. The successful projects will have demonstrated involvement and support from service users and the ability to deliver the project in the current financial year.
House of Lords
Armed Forces: Reserve Forces
Lord Trefgarne
To ask Her Majesty’s Government what provisions exist within the public sector, and especially the National Health Service, to allow staff the necessary time to serve in the Territorial Army and other Reserve Forces.
Baroness Garden of Frognal
My Lords, the Government are committed to taking the lead as an employer of reservists. The Ministry of Defence works closely within the public sector to establish best practice; this includes providing standardised special paid leave for training, providing visible leadership, promoting the benefits of reserve service and also monitoring reservist employee numbers. In collaboration with the Defence Medical Services, the Department of Health traditionally provides a major part of the military medical manpower and has provisions in place to allow its staff to serve in the reserves.
Lord Trefgarne
My Lords, since the Army will increasingly continue to rely on territorial forces, in particular to man its medical services, is it not incumbent on the National Health Service to ensure its staff are able to take time off to attend to those duties? Is there anecdotal evidence that hospitals are being—understandably—difficult in that regard?
Baroness Garden of Frognal
My Lords, in Scotland the NHS boards have implemented a national HR policy covering training and mobilisation of reservists in which staff are allowed a minimum of 10 days of special paid leave and so on. Outside Scotland the HR policy is devolved to individual trusts and boards. It would appear that there is no centralised policy, so many organisations have no idea if they employ reservists and do not always record whether an employee is in the reserves. There is evidence to suggest that if leave is requested it is recorded as special leave, similar to jury duty, and so we are not entirely aware of the exact position.
Lord Walton of Detchant
I must declare an interest. When I was demobilised from the Royal Army Medical Corps on emergency commission in 1948 I joined the Territorial Army and served for 16 years, eventually commanding the 1 Northern General Hospital TA. At that time there was an agreement that the TA would never be called out except in the event of a world war. Of course, the situation has changed beyond all recognition and members of the successor unit to mine, the 201 Field Hospital, have served with great distinction in the Gulf, Iraq and Afghanistan. They found that experience to be invaluable, professionally and in many other respects. However, does the Minister agree that there is now growing concern that, under new plans, the Reserve Forces may be called out more frequently, that their employing authorities may be reluctant to give them the leave of absence that is necessary, and that such frequent recalls would have an adverse effect on their career progression within the NHS?
Baroness Garden of Frognal
I commend the noble Lord for his service, and will add that we also have evidence that medical reserves develop additional skills, which they bring back to the NHS at the end of their deployment. For instance, the National Institute for Health Research has brought both military and civilian trauma surgeons and scientists together to share innovation and research. This has also been to the benefit of civilian trauma patients. I hear what the noble Lord says about the concerns within the service. We hope that the consultation that is about to take place will allay some of those fears.
Lord Ribeiro
My Lords, I have seen the Defence Medical Services—many of whom are reservists—in action at Camp Bastion in the past year. Will there be a commensurate increase in the medical services when the Reserve Forces are increased?
Baroness Garden of Frognal
That is an interesting question. Obviously there will be a need for medical services, which will have to be provided either by regular troops or reservists. On how the balance will pan out, again, we need to wait to see what the need is and then make sure that the need is met.
Lord Touhig
My Lords, in the Minister’s previous answer she made reference to the contribution that people who have served in our Reserve Forces bring back to their companies. Many companies across the country will testify that when their reservist staff return, they have had new experiences and gained new skills, and add value. Can we make sure that those good stories are spread throughout the public sector as well so that people can see that there is a huge value in allowing their staff time to serve in the Reserve Forces?
Baroness Garden of Frognal
I entirely agree with the noble Lord that a great deal is brought back. Of course, we have to balance that against the disadvantage that employers see in having their people away for set periods of time. Under the proposals of the new consultation that should be more manageable—employers should have more notice of when it is going to happen—and we hope that all the good stories that the noble Lord has highlighted will be evidence that having reserves in your employment is a good thing.
Lord Palmer of Childs Hill
My Lords, on Friday 9 November, my noble friend Lord Astor reported that 75 members of the Reserve Forces had been called out in the year to date under Section 56, which allows continued permanent service. He also reported that 530 reservists are currently deployed in Afghanistan. Can my noble friend Lady Garden say how many of these are currently employed in the NHS, and what positions they hold?
Baroness Garden of Frognal
My noble friend picks up an interesting point. We do not currently keep statistics about Reserve Forces membership. It is not asked for and nor is it necessarily supplied, so it is not possible to give an accurate figure. We have an estimated figure of 2,400 clinical staff in the reserves, but this excludes auxiliary staff who may serve in other, non-medical reserve units.
Lord West of Spithead
My Lords, I had not intended to ask a question but I was rather shocked by the response to the Question of the noble Lord, Lord Trefgarne. It seems from what the Minister said that we do not quite know how we are going to provide these people from within the National Health Service; that we have no knowledge of exactly how many people are part of the Reserve Forces anyway; and that there is no central ability to monitor any of this. Can the Minister reassure me that we have got a grip on this and that we are not stepping into the unknown?
Baroness Garden of Frognal
I think that the noble Lord somewhat misunderstood me; perhaps I was not clear. I said that individual trusts do not necessarily have a note of which of their people are reservists when they are away. However, the overall tally of reservists is monitored for numbers and a note is kept of the numbers we have and how many we will need. We hope that the consultation paper will clarify how we can keep a record of that.
Lord Tunnicliffe
My Lords, the use of the reserves is absolutely crucial to achieving military objectives. Can we be more specific on the matter of policy? Command 8475, Future Reserves to 2020, envisages a kitemark with graduated levels from basic to top level, and in Appendix C it envisages an employers’ charter for reservists. Can the Minister assure me that all parts of the public service will achieve the top level in the kitemark and will sign up to the charter?
Baroness Garden of Frognal
These matters will be discussed in the consultation paper that has been issued. However, it is not intended that this will be imposed on all employers. We must talk with employers to ensure that the reservists they have on their staff also fit in with their employment needs. Of course, we hope that the kind of employers mentioned by the noble Lord, Lord Touhig, will see all the advantages and will wish to sign up to the highest levels.
Economy: Quantitative Easing
(12 years ago)
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Lord Barnett
To ask Her Majesty’s Government what evidence there is that quantitative easing is working.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Bank of England has estimated that the first round of quantitative easing reduced gilt yields by one percentage point, raised real GDP by around 1.5% to 2%, and increased inflation by around three-quarters to one-and-a-half percentage points. The Bank has also launched the funding for lending scheme to reduce bank funding costs and provide a strong incentive to make loans to companies and households cheaper and more easily available.
Lord Barnett
My Lords, therefore without QE, the recession would have been even worse. Is the Minister aware that since then, the Governor of the Bank of England said that the MPC would have to “think long and hard” before it restarted QE. The deputy governor said that it would be inappropriate to go on with it because there is no appetite to borrow and invest. On top of that, the chief economist of the Bank of England said recently that the economy is stuttering to start. He said that after knowing all that the Government are now proposing. What else are they going to do?
Lord Sassoon
My Lords, first, since the noble Lord talks about the state of the economy, we should recognise that employment is at a record high; inflation, for which the MPC has responsibility, has come down very significantly; the trade deficit is down; and the economy is growing again. We really do not need too much unreasonable doom and gloom. I could cite many other recent quotes from the Bank of England, which has made its position completely clear. In October 2012, the governor said that the MPC stands,
“ready to inject more money into the economy”.
As, when and if it thinks the assessment is right, it is free and able to do it.
Lord Low of Dalston
My Lords, what is the Government’s latest estimate of the reduction they have achieved in the deficit since taking office? Is it still a quarter? Will the noble Lord assure the House that that is more than would have been achieved at this point by the previous Government’s deficit reduction strategy, as evidenced by the Office for Budget Responsibility’s pre-Budget forecast in June 2010?
Lord Sassoon
My Lords, we are straying a bit from the effect of quantitative easing and on to the Government’s fiscal policy, for which the Bank of England is not responsible. However, the fiscal deficit that we inherited has been cut by over a quarter. We are on track. As to what would have happened under a Labour Government at this point, the independent research shows that the country would have been left with an additional £200 billion of debt on top of the present Government’s plans.
The Minister of State, Ministry of Justice (Lord McNally)
I think it is the Liberal Democrats. We have had a Labour Member and a Cross-Bencher.
Lord Taverne
My Lords, there is an urgent need in British industry for long-term loans for SMEs. The trouble is that our banks are not very good at this. Banks in Germany, France, the Netherlands and Canada are much better. Will the Government seriously consider following their pattern and setting up an investment bank or institution that specialises in providing such loans, perhaps modelled on the German Kreditanstalt für Wiederaufbau?
Lord Sassoon
My Lords, we are putting together a British business bank in order to bring together the various schemes that SMEs and all companies have access to. I entirely agree with my noble friend that this is an ongoing and very serious issue. We will continue to use the strength of the Government’s balance sheet, which is due to the credible deficit reduction plan, to back up schemes such as the infrastructure guarantee scheme, which goes precisely to one part of the demand and need for long-term bank finance. We will, and have already, come forward with schemes, because I completely agree with my noble friend that this is a critical area.
Lord Peston
My Lords, could the Minister just clarify his Answer a little? Is he saying that the economy is now on a continuous expansion path of a sustainable nature, and therefore that everybody else—all the experts who say that there are nothing but bad times ahead—is mistaken? Is that the Government’s view?
Lord Sassoon
My Lords, I merely stated that, on the last numbers from the ONS, the economy is growing again. If we bring this back to the subject of the Question—quantitative easing—the Bank of England’s analysis of 23 August is that economic growth would have been lower in the absence of the asset purchases and unemployment would have been higher.
The Lord Bishop of Ripon and Leeds
My Lords, the Bank of England accepts that quantitative easing has pushed up the value of equities and other assets, so favouring the 5% of households which own 40% of those assets. Have the Government any plans to recoup any of this windfall gain that has accrued to the wealthy?
Lord Sassoon
My Lords, what the Bank of England has been doing through the quantitative easing programme has been targeted at 2% inflation but it has been completely clear about the other effects of the policy on the economy, GDP, inflation and equity prices—it says that that was a large but uncertain impact, estimated within the range that the right reverend Prelate gave. It is wrong to see that as a one-off windfall. In that case, was it a one-off disastrous fall in asset prices caused by the banking crisis that preceded it? It is difficult to say what was the one-off windfall.
Lord Eatwell
My Lords, the Treasury announced on Friday that it is to take over part of the Bank of England’s profits from the quantitative easing programme to offset the fiscal deficit. What provision is to be made in the national accounts for those funds to be returned when, as the Governor anticipates in his letter to the Chancellor, interest rate differentials are reversed?
Lord Sassoon
My Lords, these were never the profits of the Bank of England, so I am afraid that the noble Lord, Lord Eatwell, has got it wrong. They were always profits that would fall to the Treasury—to the taxpayer. All that has been done by the announcement on Friday is very sensible, prudent cash management to make sure that £11 billion—in total, £35 billion—of taxpayers’ cash is not sitting idle at the Bank of England but is used to pay the Government’s bills. That is prudent cash management.
Health: Obesity
(12 years ago)
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Baroness Cumberlege
To ask Her Majesty’s Government whether they will include obesity as a priority for primary care in the Quality and Outcomes Framework for general practitioners.
Baroness Cumberlege
My Lords, I beg to ask the Question standing in my name on the Order Paper. In so doing, I declare my interests as set out in the House of Lords register. Perhaps I ought to add another: I love my food.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the Quality and Outcomes Framework already includes obesity. The process for reviewing clinical and public health indicators in that framework is overseen by the National Institute for Health and Clinical Excellence, which recommends changes annually for consideration as part of the GP contract discussions. NICE will continue to lead on this process but from April 2013 priorities for public health indicators will be set by Public Health England in consultation with the devolved Administrations.
Baroness Cumberlege
My Lords, I thank my noble friend for that full Answer. Does he agree that one of the successes in primary care has been the introduction of the Quality and Outcomes Framework, which incentivises GPs? Unfortunately, one of the incentives is to keep a register of obese patients—nothing else, just a register. In fact, that incentivises them to keep people fat. Does my noble friend also agree that obesity, which is forecast to cost the nation, or the NHS, £45 billion, needs prompt action? Will he assure me that under the new reforms that he just mentioned, Public Health England will prioritise the development of these indicators in the Quality and Outcomes Framework?
Earl Howe
My Lords, as my noble friend knows, the Secretary of State will set the strategic objectives and policy priorities of Public Health England. It will have operational autonomy and operate transparently. Rates of obesity remain high across England and continue to have clear links to health inequalities. GPs can play a key role in making every contact count by raising the issue of obesity and providing advice or referral to appropriate services, so I do not necessarily accept the criticism that my noble friend levelled at the current QOF indicators. GPs have every reason to act when they see obesity in front of them. I cannot pre-empt exactly what Public Health England will wish to prioritise in the development of the QOF, but I fully expect that it will want to work with NICE to review the evidence base for building on the current QOF obesity indicator.
Lord Hunt of Kings Heath
My Lords, I am sure that the noble Earl will agree that action on obesity is best taken when different government departments play their part. If he accepts that, does he regret the abolition of the Cabinet sub-committee on public health?
Earl Howe
My Lords, the role of Public Health England will undoubtedly stretch across government departments, because it should and will involve energising the efforts of not just the Department of Health and at not just national level. However, I agree that there is no single magic bullet to solve the problem of obesity. The call to action on obesity published last year set out a range of actions in which government and individuals, as well as local organisations, need to engage if we are to beat this threat to public health.
Baroness Finlay of Llandaff
Are the Government considering including in commissioning from health service employers a requirement to address obesity in their staff at all levels, given that the staff are often quite severely obese and act as a very poor role model for those patients whose obesity should be being addressed?
Earl Howe
My Lords, this is a very important point. Dame Carol Black and I chair a network within the responsibility deal in the Department of Health which draws together employers from a range of sectors to address health in the workplace. It is a tremendously important opportunity if we can engage employers to realise that it is in their direct interest to ensure that their employees enjoy good health and lead healthy lifestyles.
The Minister of State, Ministry of Justice (Lord McNally)
I suggest that we hear from the noble Lord, Lord McColl.
Lord McColl of Dulwich
I congratulate the Government on rejecting the misleading advice of that quango, NICE, which misled politicians by denying that the answer to the obesity epidemic was to eat less. What plans are there to prevent NICE making such serious mistakes in the future?
Earl Howe
I congratulate my noble friend, as ever, on his powerful advocacy in this area. He is absolutely right that NICE recognises in its guideline that dietary management, including calorie intake, is of predominant importance in battling obesity. It does, however, recognise that exercise is important. It emphasises that although an individual’s ability to be physically active may be hampered by their level of fitness, recommendations can be built up gradually. It is a balance. NICE will continue to act as a source of advice for the medical profession. It is an independent organisation, as my noble friend understands, and Ministers consciously do not interfere with its operational integrity or independence. However, we expect it to take advice and evidence from a range of clinical sources.
Lord Foulkes of Cumnock
My Lords, I, too, have an interest to declare; I think it is fairly obvious if you look at me. That is why I want to ask a serious question of the Minister. Will he say to medical practitioners and others that it does not help to be critical and condemnatory of those of us who are obese? It is important to give information and encouragement. Otherwise, there can be complications and people can end up with depression and other illnesses, so it is very important to give encouragement. I am glad to say that that is why I have been able to lose more than a stone in the past month.
Earl Howe
Not for the first time, the noble Lord is an example to us all. I agree with the point he makes about the way in which doctors engage with their patients on this often sensitive subject. That is why the previous Government very commendably put in place a suite of resources to guide GPs in this area. Those have since been supplemented by electronic training modules on the identification and management of obesity and supporting behaviour change in patients. NICE has produced a clinical guideline to supplement its advice on obesity and exercise to guide clinicians on exactly how they approach this topic.
Tourism: Chinese Visitors
Lord Lee of Trafford
To ask Her Majesty’s Government what steps they are taking to encourage Chinese visitors to the United Kingdom.
Lord Lee of Trafford
I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as the chairman of the Association of Leading Visitor Attractions.
Viscount Younger of Leckie
China is a priority tourism market. Compared with five years ago, there has been a 39% increase in visitor numbers from China, a 111% increase in nights they spend in the UK, and a 97% increase in their expenditure while they are here. VisitBritain is investing more than £125 million in a major four-year international promotional campaign in key overseas markets. The Government also recently announced additional funds for the GREAT campaign to drive trade and tourism from China. We are making the visa application process more user-friendly for Chinese visitors.
Lord Lee of Trafford
My Lords, that is all very well, but at present a potential visitor from China must fill in a 30-page visa application form in English and find £650 for a family of four in visa fees and air passenger duty. Is it therefore surprising that mainland Europe gets four times as many visitors from China as we do? I know that my noble friend is a great supporter of tourism. He led the last tourism debate in your Lordships’ House. However, when are the Government going to take tourism seriously? When are they going to fund VisitBritain properly, realise that its chairmanship is not a two-days-per-week job, and bring tourism into the title of DCMS? Is it not time that we had a national champion for tourism? Perhaps the noble Lord, Lord Coe, could take that on as part of his Olympic legacy.
Viscount Younger of Leckie
We must do all that we can to keep visa application costs down, even though research backed by the tourism industry shows that visa costs and indeed the process for applying are not a significant barrier to in-bound Chinese tourists. It is true that the cost of a UK short-term visa is £78. A Schengen visa is less, at £50, although this cost is expected to increase when the biometric capture is included in the near future. A UK visa has biometric capture, which we regard as important for our security. It is worth pointing out that by 2030 China will have 1.4 billion middle-income consumers. There is therefore a great opportunity for us all to capture some of this market in the future.
Lord Berkeley
My Lords, does the Minister agree that comparing the whole of Schengen—more than 20 member states—with one country here and saying that their visa costs are a bit lower is not really the answer? Once one has bought a Schengen visa, one can go around all these states; just one visa is needed. Worse still, to get a visa to come to this country, Chinese people must give up their ID cards for eight weeks, I believe, which is quite serious. Is there not more that the Government could do to rebalance the problems of coming here compared with going to the continent?
Viscount Younger of Leckie
The noble Lord makes a very good point. I can reassure him that much is being done as we debate on this issue. I am not in a position to give any more details than that. However, we are aware that tourism in the UK is the fifth biggest industry and the third highest export earner, generating £115 billion in direct and indirect business for the economy and supporting 200,000 jobs. There is therefore much to bear in mind when we look at streamlining and sorting out the issues.
Lord Clement-Jones
My Lords, is it not a fact that tourism from China is a fraction of what it could be? One way of dealing with this is to waive visas for trusted Chinese tour groups, which are already closely controlled through the bilateral approved destination status agreement between China and Great Britain.
Viscount Younger of Leckie
I cannot comment on my noble friend’s suggestion but it is possible that that is being looked at as well, as part of a review that is going on. Again, I am not in a position to give any more information on that.
Lord Bragg
My Lords, is the Minister aware of the severe damage being done to British universities and larger long-term British interests by the heavy restrictions on those Chinese visitors known as students? Does he realise that Leeds University, of which I am chancellor, is only one of the many universities in the UK that are suffering financially every year—and in the long term massively—through these ridiculous, unfair and unbelievable restrictions on Chinese students as well as Chinese visitors?
Viscount Younger of Leckie
The noble Lord makes a point about Chinese students; the Question relates more to Chinese tourism. But, having said that, it is very important indeed that we encourage all Chinese citizens to come to Britain, whether they are students or tourists. There is much going on in terms of marketing Britain abroad to China. VisitBritain has a £100 million marketing fund, jointly funded by the DCMS and the private sector. To answer the noble Lord’s question to this extent, it is particularly important that we improve the perceptions of the UK. By that, we should improve digital marketing, invest in trade engagement and improve the packaging and promotion of the UK to Chinese visitors.
Lord Dholakia
My Lords, is the recently announced increase in the visas for these Chinese visitors not at the expense of visitors from the Indian subcontinent?
Viscount Younger of Leckie
I can reassure my noble friend that that is not the case.
Disabled Persons' Parking Badges Bill
Scrap Metal Dealers Bill
Prevention of Social Housing Fraud Bill
Town and Country Planning (Fees for Applications, Deemed Applications, Requests and Site Visits) (England) Regulations 2012
Baroness Hanham
That the draft regulations laid before the House on 17 July be approved.
Relevant document: 7th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 6 November.
Benefit Cap (Housing Benefit) Regulations 2012
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the draft regulations laid before the House on 16 July be approved.
Relevant documents: 7th Report from the Joint Committee on Statutory Instruments, 10th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 6 November.
Financial Services Bill
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
16:02 - Division on Amendment 25B - Ayes: 184 / Noes: 187 - Amendment 25B disagreed.
Lord Flight
“(5A) In discharging its general functions the FCA must have regard to the desirability of not requiring the persons whom it regulates to observe any principles, rules or requirements that extend beyond those directly arising under the requirements of the EU single market legislation and of any other EU obligation (as defined in the European Communities Act 1972) or any directly applicable EU legislation, or of any related technical standards or guidance.”
Baroness Anelay of St Johns
My Lords, perhaps I may remind noble Lords who are seeking to leave the Chamber rather than listen to my noble friend Lord Flight that it is a courtesy of this House that they do not walk in front of him as they are leaving. I mean my own colleagues on my left.
Lord Flight
My Lords, Amendment 25A stands initially on its face. It proposes that the FCA should have regard to the desirability of not gold-plating EU directive regulations for the financial services industry. I have tabled it particularly in the context of the RDR reforms due to go live at the beginning of next year because the European Parliament has voted quite decisively not to ban commission as a form of remuneration. The German Government have elected to retain the commission structure for Germany’s IFA industry. It is my great concern that proceeding with RDR will ultimately cause grave damage to saving levels in this country but, more particularly, will rob the great majority of people of any access to financial advice. They will be left having to do it themselves or to buy the products of the large banks, which are not necessarily bad or good, but are, ironically, products on which commission will be paid.
I am certainly not attacking extremely professional financial advisers, many of whom have functioned on a fee basis for some considerable period. The reality is that their clients are upmarket clients. They are the elite. The great majority of people, to the extent that they save, do it occasionally. In my observation, they are extremely unwilling to pay fees, and it is uneconomic for them as well. Every time anybody phones their accountant or their lawyer, the clock ticks and they get a bill, so they do not do it any more than they can help. The existing sensible practice is that ordinary folk phone up their IFA from time to time to discuss the bit of money they have to invest and they have a sensible exchange. Only if some form of investment is made does remuneration by commission come into effect.
My first big criticism of RDR is that it is elitist. It is fine for the better off or for financial intermediaries who have those sorts of clients, but for the great majority it is not fine at all. I estimate that some 5 million people will be left without any form of advice as RDR works its way through. Although the FSA has sensibly committed to a review later on, by the time that happens it will be closing the stable door after the horse has bolted because there will be a very limited number of IFAs left.
On 7 September, the FSA announced that RDR would go ahead from the beginning of next year, but it gave individual IFAs the ability to apply for a waiver if they were not ready. It did not specify the conditions for the waiver being granted, nor is it clear whether the FSA has the staff to deal with what may be many applications. A money marketing survey as recently as September found that only 36% of financial advisers had their statement of professional standing. That means that 22,000 financial advisers are not going to be RDR compliant. The FSA stated that 91% were, but I do not know the basis for that figure. It is significantly in conflict with the latest information.
In the face of RDR, the financial advice industry is already contracting. There was a 6.2% reduction this year, and over the past two years there has been a 10.6% fall. That represents 4,300 financial advisers ceasing to be in business. If each of them had 600 clients, that is about 2.5 million people who no longer have access to financial advice. Under the new regime, it will be uneconomic for those financial advisers who survive to have occasional clients because the fee level they would need to charge for the work they would have to do is considerably higher than people would be willing to pay.
Lord Hodgson of Astley Abbotts
My Lords, my noble friend raised some very interesting points. Of course the RDR issue has two parts. He referred to the basis for charging, but there is the qualification aspect as well. RDR will require advisers to get QCF level 4, which is only A-level standard. It does not seem to me to be too much to ask that people who are advising on savings should have an equivalent of an A-level qualification. I rather support the idea that RDR should endeavour to encourage the emergence of a profession. He referred to the fact that the profession was largely an elderly one and that we needed to encourage some new, younger blood. Careers will be more likely to be attractive if the idea of RDR with some qualifications—making you like the solicitor and accountant in your high street—comes to pass.
My noble friend’s second point was about the method of charging. We have here the question of how we square the circle between the reluctance to pay fees and the need for continuing advice. If you have a pension scheme that will last you for 15, 20 or 25 years, you need someone who is prepared to step up and advise you as to how it is going ahead. My problem is that we are now sufficiently far down the track on the idea of fee paying and the ending of commission. There is no doubt that commissions were raised not so much from the IFAs but often from the producers, to try to make the sale of the product more attractive. I do not think, as my noble friend said, that by any manner of means the IFAs have been the only people to blame, but we are sufficiently close to the start now that we need to continue with the approach of fees. It is not ideal, but I think that order plus counter-order would equal disorder. We have been marching the IFA community towards a fee-based remuneration schedule for two or three years. To pull back in the middle of November, when it is due to go live on 1 January, would cause the most enormous difficulties for the producers and the industry.
Lord Naseby
My Lords, I was not intending to take part in this debate. At one time, I was chairman of the Children’s Mutual, which was a friendly society/insurance company. At the weekend, in Northampton, I had discussions with some friends whom I would call middle-class savers. Not a single person, frankly, was the least bit prepared to pay a fee. It goes deeper than that. One’s own children are not prepared to pay fees up front.
There may have been much wrong with the old system in that it was not as closely scrutinised as it should have been in terms of the total cost to the saver. Nevertheless, here we are three and a half years into a major austerity programme and sufficient resources are not available for people who are genuinely wanting to or having to save. I do not know what the minimum fee will be and perhaps my noble friends on this side will be more up to date on that. I cannot see that it can be less than £500, if not considerably more.
I say to my Front Bench that it is all very well ploughing on because this has to happen in January but, as an aside, I reflect on how the FSA took three and a half years to realise that the projections on pensions were totally out of court. We have all been living with a base rate of 0.5% for a couple of years. Here we have projections approved by the FSA at, I think, 5%, 7% and 9%. That was totally out of court and nothing happened from the FSA. There had jolly well better be a plan B somewhere in the hip pocket because I very much fear what will happen. During the first three or four months nothing much will happen but, thereafter, there will be a major crisis unless there is a plan B ready to deal with it.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, my noble friend Lord Flight has spoken eloquently on the issue of the retail distribution review both on this and a number of other occasions, both when we have been discussing this Bill and at other times as well. Clearly, his concerns go to the heart of the RDR. I respect him for the force and strength of his arguments and for the clarity with which he has put them. However, I think that my noble friend Lord Hodgson of Astley Abbotts, in his short remarks, takes a more realistic and pragmatic view of some of the things that are necessary in the RDR and of the practicalities of where we are now some five or six years into the process which was initiated back then by the FSA.
The RDR certainly goes beyond the requirements of the markets and financial instruments directive; that is true. It is to be implemented at the end of this year. It will, among other things, as we have heard, prevent product providers from offering commissions to advisers. These rules will go beyond the requirements of the directive, which does not prevent product providers paying inducements to intermediaries. I think that it is a bit of a leap from there to say that the EU has taken a positive view that commissions should be paid in the way that they have been to date, as I think my noble friend possibly recognises.
The Government are supportive of the RDR, which is intended to address long-running problems that impact on the quality of advice and consumer outcomes in the UK retail investment market. The financial detriment caused to consumers as a consequence of poor, biased financial advice leading to the mis-selling of products cannot be overstated and has led consumer groups such as Which? to support the measures in the RDR. For example, following the FSA’s pensions review in 2002, 1.7 million consumers received compensation totalling £11.8 billion due to pension mis-selling alone. More recent scandals such as Arch Cru, where between 15,000 and 20,000 people lost out on thousands of pounds because they were told that high-risk investments were low risk, demonstrate the devastating effects of poor financial advice. Indeed the FSA has estimated detriment to consumers to be in the region of £223 million per annum, so we cannot wish the problem away.
To tackle the problem, the RDR will raise the professional standards of investment advisers, address the potential for adviser remuneration to distort consumer outcomes and improve transparency for consumers. As part of this, the rules banning commission payments to advisers will tackle the risk as well as the perception that commission paid by product providers may bias advice, and rules requiring advisers to agree their charges upfront will promote transparency for consumers. Taken as a whole, the Government’s view is that the RDR should improve consumer confidence and trust in investment advice and it fits with the Government’s wider agenda on increasing transparency in the market.
I am not going to repeat all I said in answer to my noble friend’s recent Question, which led into the points about training. Again, while he and my noble friend Lord Naseby are quite right to raise concerns around the transition, I think that my noble friend Lord Hodgson of Astley Abbotts is right to point out the need for and desirability of professionalisation, but also that the bar has not been set excessively high. I do not want to trade data, but I think that this is quite important. The FSA’s latest research shows that the proportion of advisers who meet the RDR’s new qualification requirements has increased from 50% in summer 2011 to 71% in spring 2012. The FSA research also shows that 93% of advisers are still on track with their prediction—93%, not 91%. I know that my noble friend challenges that, but the FSA has looked at this very carefully and its advice and research shows that 93% are still on track with its prediction to complete the appropriate qualification in time.
Having said all that, I should just spend a minute on the amendment itself. As we discussed in Committee, the FCA and the PRA will be required to have regard to the principle that any burden they impose should be proportionate to the benefits that flow from it. This proportionality principle will apply to any proposed requirement whether it originates in EU law or purely domestically, so it already covers gold-plating. I would also point the House to government Amendment 44, which we will be debating in due course, and which adds a new regulatory principle giving the regulators the duty to have regard to the desirability of sustainable UK economic growth. That is a principle that will apply also to both the FCA and PRA. I am sure they will take it very seriously when they consider gold-plating. It will also be pointed out to them as a hook, as it should be, to avoid unnecessary gold-plating. So, in short, I do not believe that the amendment is necessary, nor does it fit with the Government’s wider aims in this area. I hope that my noble friend will feel able to withdraw it.
Lord Flight
My Lords, first, I am glad to learn that the amendment taken at its face value is not necessary, in the sense that the FCA already has the obligation when implementing EU directives to have regard to proportionality and reasonableness. With regard to the RDR situation, I remain of the view that the FCA, the FSA and the Treasury are complacent about what is going to be quite a serious situation for those who are not professionals, are not used to paying fees and have modest savings, who will be left with very few conduits. That is a particularly undesirable outcome.
I do not entirely agree with the noble Lord, Lord Hodgson. Clearly, yes, the industry wants to become professional going forward, but the point that I was making with regard to qualifications was about grandfathering existing practitioners. I would repeat the noble Lord’s comment, in that I hope that the Treasury has plan B in its back pocket—and, for that matter, I hope that the FSA has plan B in its back pocket. My understanding is that by no means all the senior members of the FSA are entirely happy about RDR.
It is clear that it is not appropriate to put this amendment to a vote, but it has at least served to air a subject that has been rather ignored in both Houses of Parliament. I beg leave to withdraw.
Baroness Hayter of Kentish Town
My Lords, there can be little doubt that an enforceable code of conduct is sorely needed in this industry. Many banks publish so-called codes of conduct that read impressively. The Barclays code of conduct says:
“We … expect every Barclays employee, and others who work on our behalf, to conduct themselves according to consistently high professional and ethical standards. This expectation applies equally to all, whatever their role”.
This from the bank that sold PPI and whose employees fixed the LIBOR rate. HSBC encourages employees to make decisions based on,
“doing the right thing but without ever compromising the ethical standards and integrity on which the company was built”.
Yes—that is the same HSBC that we learnt on Friday had been facilitating tax and AML-avoiding bank accounts in Jersey. Some integrity.
The Chartered Banker Code of Professional Conduct, which sets out the ethical and professional attitudes and behaviours expected of bankers, has been endorsed by virtually every major high street bank. But there is clearly something missing. The words are there, but the behaviours do not follow. The code does not have the necessary sanctions to strike people off the register, nor does it have governing structures independent of the industry.
Other professions have codes of conduct which are independently supervised and enforced. In the case of barristers and solicitors, the functioning and enforcement of these are overseen by the Legal Services Board. In the case of accountants, auditors and actuaries, they are overseen, and in the last resort enforced by, the Financial Reporting Council, which I noted before, sadly, gets no mentions in this Bill, despite the importance of its role. But here we are concerned with those bankers, and others, who do not belong to one of those professions and therefore have no individual code of conduct to cover integrity, the avoidance of conflict of interest and other behavioural matters. For them, there is no supervision of their individual behaviours, and no professional enforcement procedure; action kicks in only when specific rules are broken. This is not good enough for an industry that has shown itself lacking in the very attributes that this vital sector should have engraved in its DNA. The evidence read out about the last amendment by the Minister is ample evidence of that. It is an industry where conflicts of interest are too rarely identified, declared and avoided. LIBOR and PPI are examples.
There is a Bank of England code for members of the FPC, but there is no requirement for a code for directors and senior executives of banks and other parts of the financial services. Yet as the noble Lord, Lord Turner, acknowledged, bank directors bear responsibilities to the public which go beyond those of other private sector directors. Any failure on their part is therefore,
“of public concern, not just concern for shareholders”.
Hector Sants, then of the FSA, told the Treasury Select Committee that,
“we should change the regulatory regime to … ensure that people who have shown … serial misjudgment are not allowed to run financial institutions again”.
However, where does this Bill stop them? Simply relying on the significant influence function procedure may not be enough and, anyway, it is a slow burn. If the person concerned moves abroad, no penalty is exercised and no bonus returned. Or if they apply for a significant influence function after some years, there may be no current or warm evidence or witnesses on which to base a decision. A code of conduct is needed to which these people must individually sign up and a breach of which should expose them to investigation and possible action. Without this, we will continue as before with all our interests at risk.
I should note that the Government have accepted the need for a code to cover one aspect of banks’ day-to-day work—the submission of rates for the LIBOR benchmark. Amen to that; we will welcome that shortly. However, surely it is nonsense to agree the need for a code for just one aspect of the banks’ work, because it has been found wanting, but not to the myriad other decisions which banks and their staff take every hour of the day. The exact name of such a code may be debated: John Kay’s review spoke of good practice; some professions call it a code of ethics. The principle is that it governs behaviours, outlaws conflicts of interest and is enforceable. It governs the profession of stewardship, which is what most of this industry is about.
Since the Parliamentary Commission on Banking Standards was established, the BBA has launched a taskforce to investigate a code of conduct. However, I believe that a standards board run by the BBA—the organisation that administered LIBOR—would have zero credibility. A standards board must be independent of the industry, with the ability to set high standards, the tools to supervise the code and the power to strike off those who breach the code. The other professions’ codes of conduct lay down exactly what is expected of people and we need the same for banking. Anyone who breaks the conduct code should be struck off, whether for market manipulation, gaming indices or deliberate mis-selling. People should not be allowed in banking again if they have mis-sold a product.
I believe that confidence will not return until we strike off those whose conduct has let us all down. The details of the code need not detain us here. Amendment 31A, which is consequent on Amendment 25B, allows for the code to be drawn up by, we hope, the FCA and the PRA in consultation with relevant stakeholders. No one, I am sure, can argue against the intention of this amendment. I trust that the Minister will not argue against its wording. I beg to move.
Lord Peston
My Lords, I rise to support both of these amendments in the names of my noble friends. I think that my noble friend Lady Hayter is right to place all of this in the context of the experience of the past few years. The general proposition on which our discussion must be based is that, if the financial services sector misbehaves, we all suffer—not merely those who buy financial products directly, but everybody in the country. I use the word misbehave advisedly. Systemic risk and systemic events do not appear as if by black magic but result from the way that people who work in the financial sector conduct their business.
Why do they occur? They occur because of the way that people in the sector do things. The solution to the problems must be found partly through regulation, as the Bill recognises. On the one hand, we must bring in regulation to deal with some aspects of this matter. On the other hand, improved behaviour by the enterprises operating in financial services is not merely required but urgently required, as I think my noble friend said. Until recent events emerged I, for one, was not aware of the lack of professionalism and the seeming total unconcern with ethical standards on the part of people in the sector. Whenever I reflect on it, I still find it astonishing that apparently decent people behaved like a bunch of crooks, not to put too fine a point on it. They did not mis-sell products by chance; they deliberately mis-sold them.
Clearly, something must be done. My noble friends are right to see the Bill as the ideal vehicle for doing something, and for tabling amendments to it that would actually achieve something. The object is not to damage the sector, as it is a very important one that earns a lot of money for our economy, but to make it fitter for purpose, if I may use a cliché. My noble friend Lady Hayter is entirely right when she says that as a minimum—I underline “minimum”—there must be a code of conduct which is mandatory and enforceable. I was not clear whether she had in mind all sorts of penalties rather than just the most draconian of all of saying, “You cannot work in this sector again”. Perhaps she will clarify that when she sums up.
I hope that the Government understand all this. Certainly the public understand these problems. I also hope that the Government do not play their usual card and tell us that these amendments are not necessary because buried somewhere in some bit of fine print is an inferior version of what they do. In my judgment these amendments are necessary and the sooner we get them on the statute book, the better.
Lord Phillips of Sudbury
My Lords, I have amendments in the next group and so will keep most of my comments on this aspect of the Bill until then.
I wholeheartedly endorse what the noble Baroness, Lady Hayter, said in moving this amendment and, indeed, what the noble Lord, Lord Peston, has just said. The problem for all of us, most particularly my noble friend the Minister, is to try to contrive a state of affairs for the future which is fundamentally different from that which has prevailed hitherto. I think everybody in the House agrees that we cannot go on as we have done. The City of London, which has been the jewel in our economic crown, is now so tarnished and undermined by its own conduct that its future is far from certain. I have been involved in the City of London since 1964. It has strayed so far from its own mottoes of “My word is my bond” and “May God direct us” as to become almost laughable—indeed, “tragic” is a better word.
Lord Blackwell
My Lords, it is difficult to disagree with the objective of appropriate codes of conduct in this industry but I am left wondering what the amendment adds to the state of current regulations. As the noble Baroness will know, there is a regime of approved persons in the industry and to be an approved person, and to hold any position of responsibility in financial services, you are required to behave in accordance with a fairly clear code of conduct which covers many of the things that this amendment seeks to introduce. Before calling for the writing of yet another code, it would be helpful if the noble Baroness could explain what she thinks is omitted from the current code for approved persons, or whether it is an enforcement problem and, if so, how that would lead to better enforcement than currently exists under the approved persons regime. Otherwise, we are in danger of rewriting the same words over and over again.
Lord Barnett
My Lords, I strongly support my noble friend in her amendment. The noble Lord, Lord Blackwell, seems to be replying for the Minister, telling us why it is not necessary. Is it harmful to have this amendment in the Bill? If so, let him tell us how rather than asking whether it is necessary. As I would have expected, the case has been made very well indeed by my noble friend Lady Hayter and supported elegantly and eloquently by my noble friend Lord Peston. I hope the Minister will not take any notice of the noble Lord, Lord Blackwell, when he replies.
Lord Sassoon
My Lords, I always take a lot of notice of my noble friend Lord Blackwell. However, Amendments 25B and 31A raise a very important issue. The revelations during the summer about the attempts to manipulate LIBOR and Euribor demonstrated, if any demonstration were needed, that perhaps a considerable number of individuals in the banking sector have failed to live up to the most basic standards of professional conduct and that must, of course, be put right. We are tabling our amendments to this Bill to bring the setting of LIBOR within the scope of the regulatory regime and make it a criminal offence to attempt to manipulate benchmark rates, but that is only the first step.
The critical issue here, which I think has been rather forgotten in this debate, is that the Government acted very quickly to establish the Parliamentary Commission on Banking Standards and the noble Baroness, Lady Hayter of Kentish Town, made a passing reference to it. The noble Lord, Lord Peston, suggested that I may fob the House off by saying I have another version—he would say an inferior version—of this in the Bill. I absolutely will not say this. I will say there is a superior answer to this very big problem coming from the Parliamentary Commission on Banking Standards. I entirely accept that there is a serious issue to be dealt with but the commission is established, it is doing its work and it will look at precisely what is needed to deal with the challenge.
Lord Peston
I must be a bit thick; I thought that the Parliamentary Commission on Banking Standards was not due to report until this Bill is passed into law. Where will its recommendations, assuming it makes any, then be passed into law?
Lord Sassoon
I will come on to that if the noble Lord, Lord Peston, will hear me out. Of course it is no good having a commission if its recommendations are not going to be taken seriously or enacted if necessary. We should remind ourselves of how this House is represented on the commission. It is quite striking that I do not see my noble friends Lady Kramer or Lord Lawson of Blaby in their places this afternoon, nor indeed the right reverend Prelate the Bishop of Durham or the noble Lords, Lord McFall of Alcluith and Lord Turnbull. Why are they not here? I believe it is because the commission is at work today looking into these very critical questions. Experience and authority is being brought to bear on these issues in order to identify ways to put the highest standards of ethics and professionalism at the heart of the UK banking system and I believe that we should leave the commission to do its work.
I know, as do other noble Lords, that the commission will examine all possible solutions and of course the introduction of codes of conduct should be one of them. We have heard different views about the effectiveness of codes of conduct, but it is quite right for the commission to look at that. The commission has the membership and the tools it needs to do a very thorough job in this area and I do not think we should pre-empt it. It has the power to interview witnesses under oath and to send for the necessary people and papers. It has already heard evidence from, among others, Paul Volcker, the former chairman of the Federal Reserve, Martin Wheatley the chief executive designate of the FCA and from various members of the Independent Commission on Banking. The commission has already gathered an impressive range of written evidence from stakeholders, including the major banks, regulators and consumer groups, and that evidence was published last Thursday.
So, given that the commission’s work is ongoing, it is not the right time to make decisions on this very important matter. To do so would be to pre-empt and undermine the conclusions of the commission, which is investigating this issue so thoroughly.
Lord Sassoon
I will give way to the noble Lord, Lord Barnett, in a moment but perhaps I may answer specifically the question of the noble Lord, Lord Peston.
The Government look forward to receiving the commission’s report and recommendations and will consider them with great care. It is due to report by the end of the year. As to when we might legislate, as the House knows, the Government will introduce the banking reform Bill, which was published in draft last month, into Parliament in the new year. That Bill may well provide an appropriate vehicle to implement any of the commission’s recommendations that require legislation. So we certainly will not lack a possible legislative vehicle, in the right timeframe, when the recommendations are made by the commission.
Lord Barnett
My Lords, the noble Lord has not hesitated, quite rightly, to put the LIBOR scandal amendments in this Bill. Now he is saying that he does not want to put in the code of conduct in case the commission comes up with it. In that case, why has he put the LIBOR scandal amendments in the Bill?
Lord Sassoon
My Lords, the Government kicked off a number of inquiries and reviews immediately we became aware of the LIBOR scandal. Martin Wheatley, the managing director of the FSA and the chief executive designate of the FCA, carried out one of the reviews which have led directly to the amendments in this Bill. We have acted on his amendments specifically addressing criminal offences and so on around LIBOR in this Bill. We also set up the commission to look at the wider question of professional standards and the way that banking operates and it will report by the end of the year. We will have a legislative vehicle in the new year, if required, to take up its recommendations, which the Government will take very seriously.
It is not that we are dragging our feet or want to stop these issues being addressed. It would just seem foolish to pre-empt a commission of great eminence which is doing enormously important work as we speak. I hope that, on that basis and the confirmation I have given about what is going on, the noble Baroness will be persuaded to withdraw her amendment. While the Government agree with the need to restore public trust in banking, we should not jump to legislate now but do so once the parliamentary commission has had time to do its work.
Lord Peston
I am still a bit lost. As I understand it, the Minister cannot at this point commit the Government to bringing in any specific Bill that they have not brought in yet. However, setting that on one side, the more important point is that all of my remarks, as he will be aware, were addressed to the whole of the financial services sector. Is it possible to have a banking Bill in which amendments will be put down referring to the code of conduct for the whole financial sector? In my view, we will be told that either the short or long Title will not let us do it. That is why I argue that this is the obvious vehicle for this, and nothing the noble Lord has said so far tells me that this is not the obvious vehicle.
Lord Sassoon
My Lords, we have published the Bill in draft already, so it is already on the slipway in that sense. I am not equipped to get into questions about what precisely the scope could be in that Bill. I believe it is wide enough. If it is not, the Government will find other legislative vehicles in which to introduce this. However, I am reminded that although I loosely call it the banking reform Bill, it will actually be titled the Financial Services (Banking Reform) Bill and therefore the scope will be plenty wide enough to bring in a code of conduct right across the piece. I hope that provides further reassurance to the House.
Baroness Hayter of Kentish Town
My Lords, I thank noble Lords who have spoken on the amendment. I will give one specific answer to my noble friend Lord Peston: there would be a range of penalties possible under an enforceable code, from working under supervision to requalifying or even paying fines
It is disappointing that the Minister, if I heard him correctly, accepted the problem and—I think—the need for a code but simply said, “Not yet”. I do not think that is the right answer. We need to have stronger regulation. I do not agree that the approved persons regulation system worked—if it had, we would not have had all these problems. We need action now. It was not lack of regulation that led to PPI mis-selling, it was the banks’ lack of concern for their customers. It was not the absence of regulation that led to the LIBOR manipulation, it was, in the words of the noble Lord, Lord Phillips, a lack of morals.
Until we have an enforceable code of conduct across the whole of the financial sector to govern internal behaviours, we will not see the difference between the past and the future, to which I believe the noble Lord, Lord Phillips, also referred. I feel certain that the House will support the inclusion of a code of conduct within this Bill. We do not want to wait for a commission that may not have a unanimous report and whose findings the Government have said they will only consider, not endorse. Therefore, I would like to test the opinion of the House.
“( ) As part of upholding the FCA’s consumer protection and integrity objectives, and in order to support a cultural change across the UK financial system, the FCA shall also have a general duty to take into account firms’ professional standards.
( ) This must include—
(a) an assessment of firms’ competencies including the extent to which professional qualifications and continuing professional development are embedded across core functions; and(b) an assessment of firms’ conduct including adherence to a code of conduct or code of ethics, and the extent to which employees are members of a recognised professional body.”
Baroness Hayter of Kentish Town
My Lords, historically, bank managers were much trusted to act in the best interest of their clients, especially when I was a child. Sadly, however, today consumers and small businesses no longer retain that trust. Bank staff have been incentivised to sell complex and sometimes worthless financial products, such as interest rate swaps or PPI. Lloyds alone, for example, has had to set aside £5.3 billion to make good those mis-sellings. We need a banking system which is trusted: a return to old-fashioned stewardship banking which serves every region, business and family in the country. This demands professionalism, which this amendment seeks to embed within the Bill.
Ministers and regulators have both spoken about the importance of instituting cultural change within firms. The then FSA Chief Executive Hector Sants argued that regulators should,
“ensure firms have the right culture for their business model—the right ethical framework—to facilitate the right decisions and judgements”.
Earlier this year, in setting out his vision for a “new orthodoxy” in financial services, Martin Wheatley said that he wanted a world,
“where the culture of firms, from product governance to sales, is aligned with the best interests of the customer”.
These amendments seek to promote such a cultural change by ensuring that FCA supervisors judge professional standards when assessing the conduct risk posed by firms.
Professional standards are vital. The higher a practitioner’s commitment to professional standards, the lower the likelihood of customer harm. Likewise, high levels of professional standards are linked to increased consumer trust and confidence. However, the Bill makes no reference to professional standards, despite the recommendation of the Joint Committee and the evidence of incompetence and even dishonesty. This is a significant omission. Were they written into the Bill, the regulator would have greater persuasive powers and there would be a power incentive for firms to embed higher standards at every level. This would enhance consumer protection and underpin the integrity of the UK financial system. I beg to move.
Lord Phillips of Sudbury
My Lords, I have two amendments in this group, Amendment 26D and Amendment 27A. As I said during debate on the last group of amendments, this part of the Bill is extremely difficult and I make no pretence that what the Government and indeed the parliamentary draftsmen are contending with here is other than the greatest test of their skill.
None the less, I think that they have got the balance wrong. Noble Lords will know by now that there are three objectives that must be satisfied as far as possible under the Bill: the consumer protection objective, the competition objective, and what is called the integrity objective. My two amendments are designed to buttress the last of those three: the integrity objective. I suggest to your Lordships that of those three objectives, integrity must surely come first. It is frankly no use if the competitive aggression of the City of London remains the highest on the planet, bar perhaps Wall Street, if the standards of integrity are wanting. The same is true of consumer protection.
However, the Bill gives priority to competition over consumer protection and integrity. I dare say my noble friend the Minister will deny that, but I leave that to your Lordships to judge. Having set out those three objectives, proposed new Section 1B(4) to the FiSMA on page 20 then says the following:
“The FCA must, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, discharge its general functions in a way which promotes effective competition in the interests of consumers”.
That is either a pointless subsection because it has no meaning whatever, or it is a subsection which gives priority to competition. One does not need to labour the point that the tragic and appalling depths to which the City has sunk over recent decades and which it is not yet out of—let us make no bones about it—have their source in simple, ethical failure, and not in a want of competence, aggression of trades, shrewdness or anything else. We as a Parliament really owe it to the country—and, in a strange way, to the City itself—to make it clear that above, before and after all else it is integrity which must be supreme.
I must confess that I am now sorry that I did not attack proposed new Section 1B(4) head on. With other amendments, however, I have sought to strengthen the arm of the regulators in Amendment 26D, which puts as one of the issues that has to be considered when the regulator construes the integrity objective what I call,
“the fairness and integrity of policy and conduct of those directing or operating in the financial markets”.
It is a bit strange that there is no reference in this huge Bill to the regulator in relation to the individuals who are conducting business in the financial markets. My second amendment is to the proposed new section that defines the competition objective. It requires, among the matters to which the FCA must have regard,
“how far the methods or culture of any competition may undermine the integrity objective”.
I have just one more thing to say. The regulators in the City—as I said earlier, I have been there, mainly, not as a City player but within the City and acting occasionally for City entities and individuals—have an almost impossible task. That is because the law on regulation is now so voluminous and complicated, and those against the regulator are so clever, intensive and overwhelming in the resources that they can bring to resisting when it tries to intervene, that we owe it to what we are trying to achieve and, in aid of that, to the regulators to make it clear beyond peradventure that although this new Section 1B(4) will give competition priority between the three factors, none the less these additional subsections would introduce the conduct of the individuals and the concept of fairness into the equation, because they are notably absent in the wording of this Bill.
I have dealt with some of the regulators over the years and I can only pity them. We need to think what it is like when they are under huge attack and dealing with heaven knows how many cases, all of them complicated and all against businesses which will array against them 10 times the number of professionals that they have to deploy. We really need to make life that bit easier for them so that some cynical and crafty lawyer cannot say, “If you look at that clause and that clause, then that schedule and that schedule, then this Act and that Act and the rest of it, it is not clear. So, old friend, go ahead”. We do not want that.
Lord Barnett
The noble Lord makes a good point. He should perhaps have talked to some of his friends on the last group of amendments, when they all voted with the Government. I wonder what they might do this time. Has he convinced them, I wonder? We will have to wait and see. I was surprised by the proposed new section to which he referred because I thought I had understood the “may” or “must” argument. Those words are used profusely throughout the Bill. Indeed, the noble Lord, Lord Sassoon, told us that he had asked officials to go through the whole Bill and work out which of them they should keep. What I had not appreciated—this is a point drawn to our attention by the noble Lord, Lord Phillips—is that on page 20 we have, in new Section 1B(4), another method of having “must” or “may”. We have a qualified must:
“must, so far as is compatible”,
with the later words. In practice, it is not “must” at all. The noble Lord wants to strengthen it, and I agree. We need to strengthen the arm of regulators everywhere. That is why I voted for the previous amendment.
We may be told that we should wait for the banking Bill, which we have in draft. We cannot be sure that that Bill will appear in that form. I know that at least one noble Lord on the Opposition Benches wants to insert in it something that the Government do not have in mind to insert; namely, a Glass-Steagall amendment. The Minister will know what I mean. I do not know whether he has committed himself or the Government to the draft Bill appearing in the new year. I think he said that we will have it in the new year. Perhaps he will confirm that. We clearly need a banking Bill.
I understand when the Minister says that the Government will take into careful consideration what the banking commission says, but he has not committed himself on that either. What exactly are the Government committing themselves to? They have set up this very high-powered commission, of which colleagues on all sides of the House are Members, and I understand that they are doing a first-class job, but we have been told only that he may, after serous consideration, introduce what the commission recommends. Will he firm that up this afternoon? Will we definitely have a Bill early in the new year, based to a large extent on the work of this high-powered commission, that will deal with some of the points that have rightly been raised about integrity and care? All these matters could be in a banking Bill as well as in this Bill but, for the moment, we have only this Bill. I support my noble friend Lady Hayter and the noble Lord, Lord Phillips. I will support him when he moves his amendment, and I hope his colleagues on the Liberal Democrat Benches will do the same.
Lord Hodgson of Astley Abbotts
My noble friend Lord Phillips is quite right to draw attention to the importance of integrity. Integrity lies at the heart of confidence in the financial services system, indeed, in any commercial activity. In Amendment 26D, the noble Lord seeks to insert an additional requirement about,
“the fairness and integrity of policy and conduct of those directing or operating in the financial markets”.
He needs to be aware that the significant influence function committee already checks everybody who is undertaking the sorts of roles that he considers important—which are indeed important—and does so very thoroughly. It has done so with increasing pressure and difficulty in recent years, so much so that people are now ceasing to wish to undertake these roles. They are starting to ask whether they need all the hassle, the problems and the dangers of adverse publicity from people like the noble Lord, Lord Phillips. Powers exist to give authorisation to the people who will set the tone and the philosophy that he seeks to achieve, which all of us who work in the City feel are essential and which, as he rightly pointed out, have not always been present in the past. I say to the House, and to the noble Baroness, Lady Hayter, that we must get the philosophy right. The creation of codes and more regulations will not necessarily produce the right people. We are looking for people with judgment. We rely on judgment, not on process, and as we do this we are in danger of moving more and more to a process-driven system that does not allow the exercise of judgment that will lead to the desirable results that my noble friend indicated in his remarks.
Lord Peston
My Lords, I intervene reluctantly, but I see a lack of logic in what was said by the noble Lord, Lord Hodgson. If the amendment of the noble Lord, Lord Phillips, is not needed, and nor is that of my noble friend Lady Hayter, can he give us any explanation of how the criminal—I use that word again—activities of so many people in the City went on for year after year? If everything is fine and we do not need to establish standards, why did the City not behave appropriately? I use the words “the City” to indicate not just one or two people in the City but a culture right across it. It was the atmosphere there, that is what happened and that is why, in the last-chance saloon of your Lordships’ House, my noble friend Lord Phillips and others are trying to do something about it—in order, to put it bluntly, to get the reputation of the City back to where it was decades ago, when most of us were young and could look at it with admiration and pride. We cannot do that now.
Lord Hodgson of Astley Abbotts
I was not aware that I said that everything in the City was perfect. I said that integrity lies at the heart of the financial services industry, as indeed it lies at the heart of most commercial endeavour. I said that there were clearly areas where the City had fallen short, but I pointed out to my noble friend and to the noble Lord, Lord Peston, that the significant influence function committee has very considerable powers that it has been exercising with increasing strength in recent years. Therefore, I doubt that we need amendments such as this.
Lord Phillips of Sudbury
I am a bit confused. If the noble Lord absolutely agrees with me on the primacy of integrity, he cannot have read proposed new Section 1B(4) of FiSMA or he would not be content to oppose these amendments. New Section 1B(4) clearly states that the three objectives are equal but one is more equal than others—namely, competition. If he agrees with me and if one is going to be more equal than others, it should be integrity.
Lord Hodgson of Astley Abbotts
My Lords, I am not on the Front Bench, but as I read it, proposed new Section 1B(4) gives equal weight to these objectives. It states that in,
“so far as is compatible with acting in a way”,
the three are equal. I agree that integrity is extremely important, but we are not in a position where we want to avoid the other objectives, which have a real place in the creation of a dynamic City that is competitive on the world stage.
Lord Phillips of Sudbury
I hesitate to trouble the House with a further intervention—
Lord Newby
My Lords, perhaps I may remind noble Lords that the rules of the House are that on Report, Members speak once on an amendment.
Lord Peston
We can speak for clarification and to ask questions. We cannot make substantive points.
Lord Sassoon
My Lords, I spoke about the role of the Parliamentary Commission on Banking Standards when discussing the previous group of amendments. I am sorry that the noble Lord, Lord Barnett, doubts the seriousness with which the Government intend to take its recommendations. It is a joint commission of the two Houses—something that any Government would take extremely seriously. We acted to initiate the setting up of the commission so I am disappointed that the noble Lord seeks to tweak my tail on this one. When it comes to a legislative vehicle, I could not have made it plainer that we have already published a draft Bill. The Financial Services (Banking Reform) Bill is on its way. That provides potentially a perfect legislative vehicle if there are things that come out of the commission, as no doubt there will be, that require legislation. The issues raised by Amendments 25C, 25E and 26C are firmly within the remit of the commission and it would be wholly inappropriate for us to jump the gun in a semi-considered way rather than waiting for the magisterial output of the commission in a short time.
Amendment 26D would add a new paragraph (f) to proposed new Section 1D(2) to be inserted in FiSMA 2000 under this Bill. It refers to,
“the fairness and integrity of policy and conduct of those directing or operating in the financial markets”.
That is on the same theme but seeks to place specific emphasis on issues of integrity and fairness by making changes to the FCA’s objectives. As we have heard from my noble friend Lord Phillips of Sudbury, Amendment 27A would specify that, in considering the effectiveness of competition, the FCA may have regard to the extent to which the,
“methods or culture of any competition may undermine the integrity objective”.
I sympathise with the amendment to the extent that it is clear that when the FCA considers taking action, it will need to consider all its objectives. Recent events have demonstrated how important it is that the regulator has a mandate to take action to protect and enhance the integrity of the UK financial system.
The Government have given the FCA the three operational objectives, as we have been reminded, of competition, consumer protection and integrity so that it determines the right balance between them in individual cases. The regulator cannot unduly prioritise any one objective and neglect to consider the others. My noble friend Lord Hodgson of Astley Abbotts has already given another construction, which perhaps is more balanced, of proposed new Section 1B(4) and I am grateful to him for that.
This is a complex interaction of provisions. In one case we are talking about a competition objective but also, in the context of proposed new Section 1B(4), a duty designed to ensure that the FCA considers competition as a means to, and in the context of, delivering other objectives. But that needs to happen only as far as it is compatible with the integrity and protection objectives. I believe that it is a keenly balanced series of interlocking provisions here, of which these are only two. Of course, there are further elaborations of just what the integrity objective and the other objectives involve. Further, it is important to “have regard to” under this new section. I believe that the balance is right and that there is no need to adjust the structure of the competition objective to require the FCA to consider integrity in the way proposed here.
Similarly, the FCA’s integrity objective will come into play when the FCA is exercising its general functions in relation to conduct. While it must think about whether competition is working in the interests of consumers, I do not believe that it is for the FCA to police the markets to establish and enforce what fairness is. I do not believe that fairness should form part of the explanation of the term “integrity”. It is a separate issue.
There are other issues about the interrelationship between the two new authorities. Proposed new Section 3D requires the PRA and FCA to co-ordinate their functions in areas of common regulatory interest where one may have relevant expertise or wherever one may have a material adverse impact on the objectives of the other. This means that, while it is right that the PRA must focus on its safety and soundness objective, where its actions may impact adversely on consumer protection it will have to listen to the FCA, which has a strong consumer protection objective.
In summary, I accept the wider point about the importance of these issues. As this short debate has teased out, these issues are very complicated. They are best addressed through the Parliamentary Commission on Banking Standards. In the light of that, I ask the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
I thank noble Lords for their support on the amendment. I actually think that the Minister is wrong. This is not complicated; this is about integrity. The noble Lord, Lord Hodgson, had it right. We are not talking about how to impose rules. We are talking about something within the people who work in this industry. The problem is that the significant influence function has not worked. Sir Fred Goodwin was appointed under it. It was not working, it has not worked, and we need something different. We need it in the Bill.
The Minister talked about the report of the Parliamentary Commission on Banking Standards and what is going to come out of that, but that was not set up when the Bill was written. Would the Minister have accepted the code and the amendment on professional standards if Libor had not happened and if a banking commission had not been set up? The Bill was intended to mean no more failures and no more of that behaviour. We are talking about integrity. I had not planned to divide the House on this. However, as the Government have just voted against a code of conduct, I am so tempted now to put it to them that we should vote on professional standards to see whether they really want to say that they have a Financial Services Bill to make changes to the way we regulate but they do not want professional standards in that. For once in my life I will resist temptation. I beg leave to withdraw the amendment.
BBC: Resignation of Director-General
(12 years ago)
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Viscount Younger of Leckie
My Lords, I wish to repeat an answer to an Urgent Question tabled in the other place made by the right honourable Secretary of State for Culture, Media and Sport, which is taken as a Statement in your Lordships’ House. The Statement is as follows.
“The BBC is a global British institution, of huge importance and value to millions of licence fee payers and people all over the world who look to it as an exemplar of independent public service broadcasting. In light of the ongoing crisis, it is crucial that the BBC puts the systems in place to ensure it can continue to make the first-class news and current affairs programmes on which its reputation rests.
George Entwistle has taken full responsibility for the failings of “Newsnight” in his role as editor in chief and it was for this reason that he decided to resign yesterday. The circumstances of his departure make it hard to justify the level of severance money that has been agreed. Contractual arrangements are a matter for the BBC Trust but the trust also has clear responsibilities to ensure value for money for the licence fee payer. I know that the noble Lord, Lord Patten, has written to the chair of the Culture, Media and Sport Select Committee outlining why the trust took the decision it did and this letter has been made public.
It is right that the trust should account publicly for that decision. I have repeatedly emphasised the need for full transparency to rebuild public trust. Members will know that there are now in place procedures to scrutinise the BBC’s decisions in terms of delivering value for money—procedures strengthened by the Government. The National Audit Office is empowered to conduct a value-for-money review of any issue. If it decides to review this issue then I expect that the BBC would co-operate fully.
The BBC is in the midst of the most serious of crises. I have made it clear, both publicly and privately, that the trust was slow off the mark in responding to the initial crisis over Savile. It is now acting decisively with three reviews, one of which reported yesterday and the other two ongoing. It is in the long-term interests of the future of the BBC to have a period of stability to see this important work completed.
In my conversations with the noble Lord, Lord Patten, I have been clear that the overall aim of the trust must be to rebuild the public’s trust in the BBC. I know that the noble Lord, Lord Patten, agrees. There are three clear things that the BBC needs to do to achieve that. First, the immediate task for the BBC must be to address whatever failings there have been within the editorial process, particularly in “Newsnight”, to restore public confidence in the BBC. The trust needs to act swiftly to ensure that the management and leadership issues are resolved and that these failings cannot be repeated. It is clear from the interim director-general’s interviews today that the BBC is looking seriously at what went wrong, where responsibility lies and how to address this in the longer term. I welcome this.
Secondly, the trust must get the right director-general in post. I know that the noble Lord, Lord Patten, has indicated that he will do this as soon as possible, but above all the trust must get the right candidate to stabilise the BBC and drive through the change that is necessary. As I have said before, the BBC is a global British institution and needs to function effectively and in an exemplary fashion.
Thirdly, we must not lose sight in all this of the inquiries that are at the heart of these events. None of the developments of recent days should overshadow the investigations into the alleged horrendous abuse of children in institutions around the country. It is vital that that the BBC responds correctly and decisively to both Pollard, looking at the decision to drop the “Newsnight” item on Savile, and the Smith inquiry looking at Savile’s abuses and the culture and practices of the BBC.
The BBC is an independent institution and its independence is not and never will be in question. Ultimately, the only organisation that can restore the public’s trust in the BBC is itself”.
My Lords, that concludes the Statement.
Baroness Jones of Whitchurch
My Lords, I thank the Minister for repeating the Statement this afternoon.
This is, indeed, a serious crisis in an institution which is central to British life and whose output remains much loved and respected both here and abroad. It is vital that we in your Lordships’ House do all that we can to allow the staff and the trust the time they need to rebuild the institution and set it on a forward path. This is why, as parliamentarians, we should tread carefully in how we respond. Although, no doubt, there will be a range of views about the longer term role of the BBC, its internal structures and its governance, I hope that noble Lords will agree that this is not the moment for political point-scoring and micromanagement of the crisis recovery. I would go as far as to argue that we should work towards a cross-party response to the challenges now being confronted.
I hope we will also bear in mind that the real story behind this chain of events is a tragedy of sexual abuse of hundreds of victims by a BBC employee and by sexual predators exploiting vulnerable young children at the north Wales care home. It would be unforgivable if, as a result of this mismanagement, victims felt less able to speak out and be taken seriously. We should also acknowledge the understandable distress which has been inflicted upon Lord McAlpine, a former Member of this House, as a result of the poor journalistic standards displayed by “Newsnight” on this occasion.
We should bear it in mind that this crisis represents a small part of the overall BBC output, estimated to be more than 400,000 hours of TV and radio last year. As we speak, journalists and programme-makers around the country are continuing to deliver a high-quality output of sport, features, light entertainment and award-winning documentaries for which the BBC is rightly famous. The mission to inform, educate and entertain remains at the heart of its identity and purpose. It is vital that its morale and confidence is restored. The problems which the BBC is confronting now are not of the staff’s making; it is a fundamental crisis of management.
While not wanting to prejudge the outcome of the reviews, all the evidence that has appeared so far seems to show an endemic failure of decision-making and leadership. Time and again, there appears to have been a failure to take ownership of editorial issues and a lack of skills to make the important judgment calls. This needs to be addressed urgently, as the leadership reflects upon the lessons of the recent incidents.
In all the circumstances, it was right that George Entwistle should go; I hear what the Minister has said about the action already being taken on the level of his severance. In the mean time, I hope that he would echo our call for George Entwistle himself to reflect upon whether it is appropriate for him to receive that level of severance and to agree to limit the payment to that which is defined in his contract.
Secondly, there needs to be an orderly transition towards the appointment of a new director-general. Does the Minister agree that the new appointment should be made firmly in the context of the lessons learnt from this crisis? In particular, can we be sure, in the light of what we now know, that the job description is the same as before? Does the Minister share my concern about the press reports that the chairman intends to reinterview the failed candidates from the last round of appointments? Is there not a case for a rethink and a wider trawl of potential candidates next time around?
Thirdly, the Secretary of State was quick to take action in the early days of this crisis by writing to the noble Lord, Lord Patten, in what some felt to be inappropriate terms. Can the Minister tell the House what further letters, if any, have been sent by the Secretary of State to the BBC? In the light of the concerns, can he confirm that the details of any contact on this issue between the department and the BBC will be made available? Does he agree that the independence of the BBC is paramount and should not become the next victim of this crisis?
Fourthly, does the Minister agree that one way in which the BBC has demonstrated its independence in the past was its determination to pursue difficult issues through its investigative journalism? Does he agree that it would be regrettable if one outcome of this crisis was for the BBC to retreat from great, well researched, courageous journalism?
Finally, will the Minister make it clear that this Government recognise that the BBC is much-loved institution which plays an important role in the culture of this country? Will he and his colleagues commit to standing up for it in the future? Does he agree that the priority now is to support it in recovering the essential qualities of judgment, taste, decency and impartiality, which have been its unique hallmark?
Viscount Younger of Leckie
I thank the noble Baroness, Lady Jones, for her response. I entirely agree with her and appreciate very much the support she has given and the offer of cross-party support in this most difficult of times for the BBC. I entirely agree with her that we must allow for some stability and some calm, both for the trust and for the executive of the BBC, to allow them to see through these very difficult problems. I also agree entirely that we must not forget the precise issue that we are talking about, which is focused on the sexual abuse of vulnerable and young people. These, and the reasons behind them, are the issues which are to be investigated. It is vitally important that we get to the bottom of these, find out what happened and make some decisions accordingly. Clearly, there has been an endemic failure of leadership within the BBC. I have every confidence that my noble friend Lord Patten of Barnes has acted decisively and is making the right decisions to take things forward at this time.
The noble Baroness asked a number of questions. As for the level of severance pay for Mr Entwistle, it is up to him to decide whether he wishes to—how shall I put it?—give any money back that he will be receiving. It is entirely up to him. I agree with the noble Baroness about the job description of the director-general. It is not up to the Government to say what the job description should be and how it should be outlined. That is a matter for the BBC. There could well be a rethink of the job description and a relook at the current candidates. However, I again emphasise that that is a matter for the BBC to decide. We must allow the noble Lord, Lord Patten, to continue to work through these issues. He acted decisively yesterday to put in place a procedure for finding a new permanent director-general. I confirm that details of letters will be made public as and when they arrive.
Finally, I concur with the noble Baroness that the BBC is, indeed, a much loved institution. The priority, in a spirit of cross-party support, is to give every support that we can to the BBC at this time.
Baroness Stowell of Beeston
My Lords, before we start with the Back-Bench contributions, I will give the usual reminder that, as this is a Statement, noble Lords have the opportunity to make brief comments and questions only.
Lord King of Bridgwater
My Lords, the Minister is absolutely right to say that this is a matter finally for the BBC to resolve. Certainly, the BBC will survive. That great institution will continue to play an outstanding part in our public life, with the support of all parties in this House. However, Parliament has not served the BBC well in introducing the ludicrous structure of the trust and a separate director-general and his executive board. An all-party Select Committee of this House criticised that proposal at the time. It is now enshrined in a royal charter but it is not impossible to change it. Will the Government give urgent consideration to the mechanics of getting back to a sensible position in which the governors of the BBC are directly involved in issues and the chairman of the BBC has direct responsibility for them, as opposed to this rather remote arm’s-length arrangement? The exact problem about which the committee warned has now occurred.
Viscount Younger of Leckie
I take note of what my noble friend said about the structure of the trust and, indeed, of the BBC. However, I believe that now is not the time to review this. As I said earlier, we must have a period of calm and stability to allow the BBC to make the important decisions that it needs to make. The current BBC charter expires on 31 December 2016. As it is a free-standing instrument, changes to the charter cannot be made by Parliament. It is possible to make changes to the charter before that point only with the agreement of the trust itself.
Baroness Williams of Crosby
My Lords, the BBC and the trust have a direct responsibility to explore in great detail how sexual abuse could take place in the BBC’s own buildings and under its own culture and aegis. Having said that, let us not forget that the BBC is one of the most outstanding achievements of this country. It is a model to other countries and has a structure that has allowed for balance between different opinions and different views without ever being discouraged from pursuing the truth. It is a great institution and the sooner its management recovers the sense of that, the better for all of us. Having said that, I make one other crucial point. We cannot excuse the BBC Trust completely from the rather unwise judgment it made about the compensation to be paid to a director-general who was in place for two months, or slightly less. For the ordinary citizen in our country that is an extraordinary piece of behaviour and one they cannot begin to understand—and neither can I. I hope that candidates who were unsuccessful in the original competition will, like anybody else of outstanding ability and commitment, be included in the BBC Trust’s current selection process for the new director-general. However, as the noble Lord, Lord King, suggested, the BBC Trust needs to look at itself, not just at everybody else.
Viscount Younger of Leckie
I thank my noble friend for her supportive comments about the BBC. Putting aside the awful events that have happened, I wholeheartedly agree that the BBC acts as a role model throughout the world for high-quality journalism and, indeed, high-quality investigative journalism. Your Lordships will know that two inquiries are going on. One is looking into the culture and practices of the BBC, which is more of a long-term investigation. Mr Pollard is looking at editorial matters to find out why the “Newsnight” programme was in the position that it was in. The report will be out at the end of November.
Mr Entwistle’s compensation, to which I alluded earlier and which was mentioned by my noble friend, is a matter for the BBC. I do not wish to go into its precise details.
Lord Pearson of Rannoch
My Lords, the Government rightly say that the only organisation which can restore the public’s trust in the BBC is itself, but can the BBC do so under its present chairman and trustees? I ask that because in at least two of the most important areas facing this nation, they are marching determinedly in the opposite direction to the views of a growing majority of the British people. First, an analysis of the trustees reveals that a large majority of them are climate change enthusiasts.
Lord Pearson of Rannoch
Yes, indeed, my Lords, so it is not surprising that the BBC has decided not to allow informed debate on this subject. Secondly, the BBC remains blindly Europhile—I can prove that too—as exemplified by its chairman, who has a large EU pension which he could lose if he went against what the European Commission regards as the interests of the European communities. I need scarcely add that those interests are no longer the interests of this country.
Viscount Younger of Leckie
I do not wish to comment on the European matters mentioned by the noble Lord. As I said, although the trust could have acted more quickly with its initial inquiries, I feel that it is now acting decisively to address this crisis. The noble Lord, Lord Patten, has a key role in ensuring that this crisis is handled well. Again, I support him in everything that he is doing to sort out the mess.
Lord Jay of Ewelme
My Lords, it seems that the BBC has made two quite bad but very different mistakes over this period. It also seems that the BBC has become virtually ungovernable. I understand why the Government and the Opposition do not want to meddle in the BBC’s affairs, but to do nothing while the BBC deals with these difficulties seems to me to be quite difficult to justify. I wonder whether the Minister could confirm that he will do all that he can to support the noble Lord, Lord Patten, in the radical overhaul of the governance arrangements of the BBC, of which he spoke, so that once again we can have the confident, world-class, thoroughly professional BBC that has been so important for this country and its reputation both in Britain and abroad.
Viscount Younger of Leckie
I do not know whether it is true to say that the BBC is actually ungovernable. As I said earlier, some very serious problems need to be addressed within the BBC. I absolutely agree with the noble Lord that we should give the noble Lord, Lord Patten, every support that we can to sort out these issues at this very difficult time.
Lord Morris of Aberavon
My Lords, the extent to which the BBC lost the plot is illustrated by its failure in what I hope is an exceptional incident: to put to Lord McAlpine the facts that it was alleging. Why was there such an elementary failure to put these matters to him, contrary to law and natural justice? It is not rocket science.
Viscount Younger of Leckie
The noble and learned Lord makes a passionate point. I agree that what happened concerning the naming of Lord McAlpine was completely abhorrent. There are inquiries into the matter and I do not want to comment any further. We are looking to get to the bottom of that through the BBC. It is a matter for the corporation.
Lord Inglewood
My Lords, although I recognise the ghastliness of the events that we are talking about, does the Minister agree that the independence of the BBC is a central phenomenon that we must retain and that it would be a mistake, particularly as none of us knows the true facts, for those in positions such as ours to shoot from the hip? Will the Minister confirm that when the facts are clear and the steps that should be taken have been taken, the matter will come back to the House so that we can have a full debate on exactly what has occurred?
Viscount Younger of Leckie
I agree that it is very important indeed to uphold the independence of the BBC, but at this stage I cannot confirm whether there will be a debate. I am certain, however, that discussions are taking place to decide if there will be one in the future.
Lord Grocott
While everyone is agreed on the seriousness of the crisis that has engulfed the BBC, it is worth reflecting that it was a BBC programme, “Panorama”, which investigated the problems surrounding the Savile issue. One recent aspect of the crisis that has overtaken us is that BBC news bulletins have been leading on this issue hour after hour, day after day. Does the Minister agree that it is difficult to think of any organisation, let alone any news organisation—print or broadcast—which, having acknowledged incredibly serious editorial errors, would be as unremittingly self-critical and as open to public scrutiny?
Viscount Younger of Leckie
The noble Lord makes a very good point. Putting aside the very difficult issues that have arisen over these programmes—which I will not go into—the BBC inquiries will look at all the details and I am sure that in due course we will hear precisely what happened.
Lord Low of Dalston
I certainly associate myself with the important points that the noble Lord, Lord Grocott, made and that the Minister acknowledged. The BBC has obviously sustained a blow to its credibility and to the trust that is widely reposed in it, and I suppose that this may be described as a crisis. However, I hope that the Minister would agree—and I take it from what he said that he would—that these things must be kept in proportion and that it would be absurd to suggest that a feeding frenzy over particular incidents, however serious, constitutes a global threat to the BBC’s brand, which remains strong overall and rightly continues to command widespread trust and respect.
Viscount Younger of Leckie
I agree very much with the comments of the noble Lord; we must keep the issues in proportion. He is completely correct. I was alarmed by the feeding frenzy that came out of the press, particularly some of the headlines regarding the resignation of Mr Entwistle. I believe this should be a period of calm; there is a need for stability to allow the BBC to work through these very difficult problems. I appreciate the comments made by the noble Lord.
The Lord Bishop of Ripon and Leeds
My Lords, I am very grateful that in the initial Statement the Minister said that we must continue to recognise the needs of those who have been abused. He spoke of the BBC facing a series of crises. Those who were abused face a far more serious series of crises. Will he stress again that the primary concern at this point needs to be the protection of children and young people? Will he also stress the continuing desire of us all to encourage those who have suffered abuse to come forward so we can change the culture of how we deal with such issues?
Viscount Younger of Leckie
The right reverend Prelate makes a very important point, with which I concur. I encourage all people who have suffered this horrendous abuse to come forward, as a large number already have. I also agree with him that our thoughts today should be with these people who have suffered so badly. His point is well made.
Lord Campbell-Savours
My Lords, will the Minister confirm that heads have rolled at the BBC as a result of a story written not by a BBC journalist but by a freelancer—a Mr Angus Stickler? He sold his story to a “Newsnight” team which was reeling from the consequences of the fallout of the Savile business. The “Newsnight” team was in chaos as a result of that. I am not trying to excuse what happened but let us be absolutely clear: it was not a “Newsnight” employee. It was someone from outside the organisation who, I hope, will no longer be providing information or stories to the BBC in the future.
Viscount Younger of Leckie
The noble Lord makes an interesting point. It is still the case, however, that the BBC remains responsible, despite the fact that, allegedly, there was a freelance journalist involved. Again, these issues will be looked at as part of the ongoing inquiries.
Baroness Jay of Paddington
My Lords, perhaps I may echo or follow the comments of my noble friend Lord Grocott and the noble Lord, Lord Low. One of the things that I was always taught when I worked as a BBC journalist many years ago—and I declare that interest—was the priority of balance, and balance in this matter is absolutely essential. I would ask the Minister to observe that, at the same time as this whole firestorm about the various “Newsnight” problems, which are indeed reprehensible, was occurring, the BBC was once again demonstrating its enormous global power in its coverage of the American presidential election and of the events in Beijing while at the same time maintaining its very close watch—as the noble Lord, Lord Grocott, said—on the problems at home which it itself had partly created. I think that we should observe very strongly the question of balance, particularly when we take note, or do not take note, of the comments of some sections of the press.
Viscount Younger of Leckie
I agree with the noble Baroness’s comments. I consistently have said that we need a period of calm and stability, and the question of balance crops up as part of that. We need to take a balanced look at the issues, and there needs to be balance generally in looking at these very difficult issues.
Lord Roberts of Conwy
My Lords, my noble friend may wish to know that Mr Iain Overton, the editor of the Bureau of Investigative Journalism which produced the offending piece of shoddy journalism for “Newsnight”, has resigned today. Will my noble friend make certain that we and the BBC are fully informed as to how the organisation headed by Mr Overton secured such a trustworthy position with “Newsnight” so that its work on the north Wales child inquiry was not properly investigated and checked?
Viscount Younger of Leckie
I thank my noble friend for that information. I was alerted to it just before I came into the Chamber. However, I do not have any further details and I would not wish to comment further about the name mentioned. However, I imagine that this issue and the name mentioned will be taken up as part of the inquiry into these issues.
Lord Stoddart of Swindon
Does the noble Viscount agree that the selection pool for the BBC Trust is very narrow? Would it not be as well that that pool should be widened so that a perhaps more critical attitude could be taken of the operations of the BBC? Perhaps one of the new candidates could be the noble Lord, Lord Pearson of Rannoch.
Viscount Younger of Leckie
I would not wish to comment on any particular candidate. I presume that the noble Lord was referring to the search process that the chairman of the trust has said that he would carry out. I am not able to comment on that particular process at the moment. That is a matter, indeed, for the BBC.
Lord Harris of Haringey
My Lords, the right reverend Prelate has rightly reminded the House that the people we should be most concerned about in all this are those who were the victims of abuse. Can the Minister comment on whether the Government feel that the frenzy around the existential crisis of the BBC is not really a distraction from concerns that there was very real abuse in children’s homes in north Wales and elsewhere; that there was an individual who, because of his celebrity, was able to abuse children all over the country; and that we are in danger of being deflected, which of course plays into the hands of those who would rather cover up what happened and the names of those who were ultimately responsible?
Viscount Younger of Leckie
The noble Lord makes a very important point—that we must not lose sight of the awful events that have taken place and of why the BBC is in the position it is in at the moment. However, given a bit of calm and stability the immediate issues will, one hopes, blow over, and those who are now taking the right decisions will make those decisions and follow them through. I am sure that there will be a number of days of continued press reports but I absolutely take the noble Lord’s point that we must not forget the real issue behind these terrible reports.
Financial Services Bill
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
17:43 - Division on Amendment 25D - Ayes: 186 / Noes: 206 - Amendment 25D disagreed.
19:09 - Division on Amendment 26ZA - Ayes: 116 / Noes: 196 - Amendment 26ZA disagreed.
“( ) the general principle that, where consumers properly repose trust in a firm’s discretion and are vulnerable to the exercise of that discretion, the firm has a duty to act in the consumer’s best interests”
Baroness Hayter of Kentish Town
My Lords, financial services is perhaps less problematic than broadcasting at the moment. Amendment 25D stands in my name and that of my noble friend Lord Eatwell. This is perhaps the key amendment in all the ones that we will discuss today. We will simply not get this industry back on track and working in the interests of its savers and borrowers until firms put clients’ interests above their own bonus levels, remuneration or promotion prospects. Rather as doctors take care—above all else—of their patients, so must the banks, the insurance companies, those who lend us money and those who care for our savings put our interests centre stage.
These amendments seek to ensure that where consumers put trust in a firm’s discretion, and are vulnerable to the exercise of that discretion, the firm must act in their best interests. Trust is key to this industry. As John Kay wrote in his July review for the Government:
“Financial intermediation depends on trust and confidence: the trust and confidence that savers who invest funds have in those they choose to manage these funds”.
This goes to the heart of the behaviours, ethics and very thought patterns of this vital industry. Surely, as we have heard already today, we have enough evidence from LIBOR, precipice bonds, mortgage mis-selling and interest rate swaps that cultural change is needed in this industry. The costs of the PPI scandal, which has already been referred to, are now being picked up by those very offending banks. I believe that this amendment is in their interests. If they were stopped from doing these things beforehand, they would not then have to put things right afterwards.
The PPI scandal has sometimes been blamed on the lack of early intervention by the FSA, on the insufficiently rapid transmission of intelligence from the Financial Ombudsman, or on absolutely anything or anyone other than the mis-selling banks themselves. Had those banks had a duty of care towards clients, or been required to consider their best interests, there is no way that they could have continued to sell those products once they realised how few of their purchases would actually be covered by them.
Surely it is strange that where a saver puts their money into a trust-based pension scheme it is governed by trustees who have fiduciary duties to act in the best interests of beneficiaries, but that if that same saver puts their money in a contract-based pension scheme or similar scheme run by commercial providers, the FSA’s rules governing such contracts impose no duty on providers to put beneficiaries’ interests first. That cannot be right. It is not what savers expect of their provider.
The amendments would ensure, in an enforceable way, that authorised persons act in the best interests of their clients. As I argued in Committee, the Bill expects consumers to,
“take responsibility for their decisions”—[Official Report, 11/6/12; col. 1255]—
but without placing a corresponding requirement on firms to act in the best interests of their clients. This lacks balance. As the Kay review says:
“Stewardship is incompatible with conflict of interest”.
Kay calls for all those involved in the equity investment chain to observe fiduciary standards in their relationships with clients. Thus financial services should owe their customers the same duty of care as a lawyer or other professional by acting honestly, fairly and professionally in the best interests of their customers and in managing conflicts of interest. It is no good relying on rules to ensure this. Such requirements on firms have been in the FSA’s principles for business, yet consumers have still been shabbily treated.
We want there to be a duty of care in the Bill to ensure proper oversight and to emphasise its importance both to the regulators and the regulated. Such a duty of care will ensure that financial services can no longer profit unfairly at the expense of their customers. It is not enough—in case the Minister is going to say it—to leave this simply to the banking commission. It should be central to the Bill.
The Kay review calls for the application of fiduciary standards of care by all those who manage or advise on the investments of others. That is what we seek in these amendments and what I hope this House will now support. I beg to move.
Lord Stoneham of Droxford
My Lords, I support the amendment. The issue behind the amendments in this group is that the investment industry’s duties to savers appear to be poorly understood and observed. As the Law Commission has confirmed, where firms are managing other people’s money or giving them financial advice, they have strict fiduciary duties to act in those people’s interests. This includes both individual clients and institutions such as pension funds which represent large numbers of underlying savers.
Fiduciary duties are stricter than FSA rules, yet they are not universally accepted within the industry. There is anecdotal evidence that firms often seek to exclude or restrict their liability for breach of fiduciary duties through contractual terms which may not be read or understood by the lay trustees of pension funds. Even where they are accepted, it is very clear that they are not being applied. In the past week, the FSA has published a “Dear CEO” letter on conflicts of interests among asset managers which found that,
“many firms had failed to establish an adequate framework for identifying and managing conflicts of interests”,
and that,
“in most cases senior management failed to show us they understood and communicated this sense of duty to customers”.
In other words, firms are often not meeting even the FSA’s standards regarding conflicts of interest, which are lower than fiduciary standards.
As these are common law duties, they do not form part of the FSA’s regulatory approach. Indeed, there is confusion over whether it is appropriate for the FSA to enforce them, with some arguing that it is for beneficiaries to pursue court actions if duties are breached.
Where pension savings are concerned, this is unrealistic and unsatisfactory as a means of achieving high standards of care across the market. An explicit, best-interests principle in a Financial Services Bill would give the FCA a powerful tool to ensure that consumers’ interests were protected.
The concern is that the Bill’s new wording is significantly weaker than that proposed by the Joint Committee and may not provide a high enough level of protection for consumers. It lacks clarity in what might constitute an appropriate level of care, thereby leaving open the very question it was intended to resolve. Where those managing people’s long-term savings are concerned, the problem is precisely that there is confusion and misinformation about what is the appropriate level of care. Explicit confirmation that those managing other people’s money must act in their best interests would be a clear and effective way to help achieve the Joint Committee’s intention. Amendment 25D would provide that confirmation, since anyone managing somebody else’s money would meet the criteria of discretion and consumer vulnerability.
The noble Baroness, Lady Hayter, drew attention to the fact that this issue has the potential to seriously undermine the aims of auto-enrolment. In trust-based pension schemes, it is clear that the trustees are there to act in beneficiaries’ best interests. Indeed, as the ABI pointed out in oral evidence to the Joint Committee, one positive feature of the National Employment Savings Trust—NEST—is that it has a trustee structure that looks to protect its members. However, many savers are likely to be auto-enrolled into contract-based pension products where, as things currently stand, no such protection exists. Since the House of Lords considered the Bill in Committee, we have had the Kay review of UK equity markets. It recommended that:
“Regulatory authorities … should apply fiduciary standards to all relationships in the investment chain which involve discretion over the investments of others, or advice on investment decisions. These obligations should be independent of the classification of the client, and should not be capable of being contractually overridden”.
This amendment seeks to address a number of objections to similar amendments raised in the Commons and in the Lords in Committee. First, it does not rely on the term “fiduciary duty” but rather seeks to enshrine the common sense principle that underpins these duties—that where consumers rely on a firm’s discretion, that discretion must be exercised in the consumers’ best interests. Secondly, it would not supersede or restrict the specific standards to be laid down in FCA rules but rather would provide an overarching principle that the FCA should bear in mind when setting those rules. Thirdly, it would not apply across the board but only where appropriate—that is, where consumers have a particular relationship with providers that justifies a best-interest standard.
When we looked at a similar amendment to Amendment 25D in Committee, my noble friend Lord Sassoon expressed sympathy with the intent but argued that it was a matter for the FCA to make detailed rules on, rather than to be included in the Bill. However, as I have already said, part of the problem is that the common law status of fiduciary duties makes it unclear whether it falls within the FCA’s remit to uphold them, hence the need for an explicit reference in the Bill. It has also been suggested that refusal to amend the Bill in this way indicates a lack of political support for robust action to challenge the interests of financial intermediaries. Indeed, this could make the FCA feel that it has limited room for manoeuvre. Therefore, I hope that my noble friend will be more prepared to consider accepting the amendment and, at the very least, that he will give some indication of the support that the Government will give to the full implementation of the Kay recommendations.
Lord Peston
My Lords, in supporting my noble friend’s amendment I reread this section of the Bill, and I realised that I did not understand it at all. On the face of it, we are discussing here the consumer protection objective—that is, a series of statements most of which could be read as totally vacuous. In fact, as I read them again, I immediately thought, “What does it leave the FCA to do, rather than simply tell them?”. There are remarks like:
“the general principle that consumers should take responsibility for their decisions”.
If that is a general principle, why do any of the other principles hold?
There is,
“the needs that consumers may have for the timely provision of information and advice that is accurate”,
and so on. Anyone who knows anything about systemic risk knows that the relevant amount of information is massive and that few people on this planet would be capable of processing it in order to come to a view.
My noble friend’s amendment at least seems to have some impact on the FCA possibly doing something. Reading the Bill, I have great difficulty seeing what the FCA then does. Perhaps the Minister can tell us.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, this is another group of amendments where we have not only debated the issues at length at previous stages but seen broad agreement across the House on the driving principle behind them. The notion behind the amendments is both clear and unarguable. Firms have and should have responsibilities to their customers. I agree that consumers have, all too often, suffered detriment at the hand of financial services firms because the regulator’s overly broad remit meant that such important matters were not given sufficient attention. The main answer to the challenge of the noble Lord, Lord Peston, is that it is for that very reason that we are creating a focused conduct of business regulator with a new suite of powers to tackle firms that do not take their considerable responsibilities in this area seriously.
Lord Peston
Is the Minister telling your Lordships that the FCA will have the power to intervene with specific firms? On the basis of what information, I wonder.
Lord Sassoon
Yes, I can confirm that. The information may come from a whole range of sources. Obviously, consumer complaints could be one source, but I know that the noble Lord postulated a circumstance in which there was no consumer complaint. It will clearly be going in regularly to review how a firm operates and conducts its business. That will be another source of information. I am sure that it will regularly compare products on offer, one against another, and if there are outlying products, that is another source of information. There is a whole range of sources of information. The key thing here is that we have in the FCA a regulator that does not have to be concerned, as the FSA does, with all the considerations of prudential regulation and supervision and can therefore take a much clearer approach. As we discussed, there are specific product intervention powers, which the FSA does not have.
The noble Lord helpfully raises the general background. We are putting the FCA in a much better position to tackle those issues proactively. Specifically, Amendment 25D would insert a factor that the FCA would have to consider when advancing its consumer protection objective. Namely, it would require the FCA to have regard to,
“the general principle that, where consumers properly repose trust in a firm’s discretion and are vulnerable to the exercise of that discretion, the firm has a duty to act in the consumer’s best interests”.
As I reflected in Committee, this is a cleverly worded amendment and the motivation behind it is noble, but I am still not convinced that it would result in firms acting in the way that the amendment is intended to ensure.
I am clear that the best way for the regulator to ensure that firms act in the best interests of their customers is through detailed, clear and unambiguous rules. Noble Lords have already highlighted the FSA’s “treating customers fairly” principle, under which it has carried out important work to protect consumers. With the renewed focus on consumer protection which I have just highlighted, the FCA will be empowered to go further. The precision attached to rules offers a much more effective shield for consumers than a broad duty, which will be near-impossible for the FCA—or, indeed, firms or consumers—to interpret, given the breadth of interests of different consumers at different times.
Moving to Amendment 26B, we return to the thorny question of fiduciary duty. Amendment 26B is drafted to reflect the recommendations of the Kay review in this area. The Government are in the process of responding formally to the recommendations of the review, and I hope that the House will concede that it would be inappropriate for me to pre-empt that response. I assure my noble friend Lord Stoneham of Droxford that we are taking the Kay review recommendations very seriously and that they will receive a substantive response.
I reassure the noble Baroness, Lady Hayter of Kentish Town, that the regulatory framework that we are establishing will enable the FCA to consider to what extent current regulatory rules in this area support these standards, if they advance its objectives. However, I am concerned that there are aspects of this amendment which would not have the effect that we desire. In particular, the proposal that the regulator gives guidance as to what is the effect of common law, notwithstanding what we have heard, seems very dangerous to me. It risks absolving firms of the duty to consider their role and duty under common law and places the burden on the regulator to outline how the common law applies. Seeking to codify common law in guidance in this way also means that the scope for the common law to develop and adapt to reflect changing circumstances—which is, of course, one of the great virtues of the common law—may be impeded. As a general point of principle, this amendment is unnecessary, because the FCA is empowered to issue such guidance as it sees fit.
The last amendment in this group, Amendment 45A, is another that we have seen before. It would require the FCA and PRA to have regard to,
“the principle that authorised persons should act honestly, fairly and professionally in the best interests of consumers who are their clients”.
Of course firms should act in this way. The right way to ensure that is to empower the FCA, when firms do not act in that way, to act under its consumer protection objective, with strong mechanisms in place to ensure that it co-ordinates effectively with the PRA when it does.
I agree that we want financial services firms to act in a way that puts customers first. It is precisely for this reason that we are creating the FCA as a focused conduct and business regulator. I maintain that the regulatory framework that we are putting in place will lead to better outcomes for consumers, with a focused regulator empowered to act and armed with substantial new powers to ensure that it does. On this understanding, I ask the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I thank the noble Lord, Lord Stoneham of Droxford, and my noble friend Lord Peston for their support. When my noble friend Lord Peston spoke of vacuous statements, it slightly reminded me of the Simon Hoggart test of everything: if one says the opposite of a statement and it is absolutely meaningless, then maybe the statement was not worth saying anyway. If one says the opposite of “firms should act in their clients’ best interests”—that is, “firms should act in their clients’ worst interests”—it shows that this is an important statement and is worth considering.
The uncertain and rather confusing reply from the Minister is not the one he should have given. His reply is not good for the industry, it is certainly not good for consumers, and it is not good for UK plc, which needs this industry to be thriving and therefore trusted. He is not right in saying that detailed rules are the answer; they did not work before. Treating customers fairly—that phrase that some of us know very well—is not the answer either, because it did not work before. A broad duty is needed.
In these amendments we ask for what we believe to be the common law position, and what the Kay report recommended. Why the Government could not have responded to that report by today so that we could have known whether this could be in the Bill I do not know; they have had it since July—I had a holiday, I do not know if the Government did. In these amendments we ask for what every other profession has to offer its clients or patients. It is what consumers, whether savers or borrowers, expect from their providers—that authorised persons, managing other people’s business, have a duty to act in their clients’ best interests. This means avoiding conflicts of interest, acting in good faith, not profiting unreasonably at the expense of customers without their knowledge and consent, and a duty of confidentiality. It is not that painful. This needs to be in the Bill: first, to make sure it happens; and secondly, to empower the FCA. I feel sure that noble Lords will support this move, and I therefore wish to test the opinion of the House.
Lord Blackwell
“( ) the need to balance protection for consumers against the desirability of consumers having affordable access to appropriate products with appropriate information or advice or both”
Lord Blackwell
My Lords, in moving Amendment 25F I should ask the House to take note of my interests as set out in the register. The purpose of this amendment is to make it explicit that the FCA is able and, indeed, required to balance the absolute objective of consumer protection against the desirability of ensuring that the costs and risks of regulation do not result in customer detriment by discouraging providers from serving customers with products from which they can benefit.
The context of this amendment is the retail distribution review, which is coming into force shortly and to which my noble friend Lord Flight referred earlier. In my view, this quite properly moves the industry from selling investment products through often hidden commissions and ensures that independent advice is truly independent, high quality and paid for through a transparent fee. While my noble friend Lord Flight raised a number of practical issues, I am supportive of the aims of the RDR. Clearly, industry practices in the past led to some customers being sold inappropriate products and paying high commission charges without being clear about the size of those charges, how they were levied or how they might influence the advice they were receiving. The new regime should, on the whole, lead to those who want advice being clear what they are getting and what they are paying.
However, one consequence of higher standards is that those with relatively modest amounts to invest, or with relatively modest pension pots to turn into retirement income, may find that the cost of advice is prohibitive. By modest I am talking about people with tens of thousands of pounds, at and above the population average, not just those on low incomes or from disadvantaged communities. We are talking about a large part of the population finding the cost of advice prohibitive. Yet such people, while they have the need to invest, are less likely to be financially sophisticated and need the most help and guidance—particularly as they approach retirement.
It is important that the industry is therefore able to do its best to support those customers by providing information and guidance that helps individuals to understand their options, weigh up the risks and, where they do not want to take or cannot afford personal advice, come to their own decisions about which investment is best for them. We are talking here not about exotic investment products but simply, for example, about whether to stick to a cash ISA or purchase one with potentially higher long-term returns, or a decision about what kind of annuity to purchase—a decision that an increasing number of ordinary citizens will face over the coming years as direct benefit plans decline and more direct contribution pension plans mature. It is clearly up to the industry to provide the best information and guidance it can to help these customers, but, inevitably, without personalised advice and the full fact find and high costs that go with it, there will be some customers who make the wrong decisions.
The aim of this amendment is to make it clear that the FCA can and should balance the objective of protecting consumers in these circumstances against the risk that placing too high a bar for consumer protection will discourage providers from seeking to serve this market, for fear of the compliance risk that they take on. Of course we should want high standards of protection for everyone against deliberate mis-selling or plain negligence, and there may well be many customers who are better off doing nothing than being encouraged into inappropriate products, but there needs to be a balance to enable those providers who seek to act responsibly in providing information and guidance to do so with some confidence that the compliance risks are acceptable.
Baroness Noakes
I added my name to this amendment because my noble friend has raised some important issues, and I support everything he said. When approaching consumer protection, it is often easy to want to insure or underpin the consumer in every possible way, but we have to have a market in which financial service providers can be confident that when they provide a financial product, whether it is a mortgage, an ISA or an insurance or pension product, they know the risks they are undertaking in relation to that. Understanding the balance that will be taken by the FCA when approaching its consumer protection objective is extremely important to the financial services industry. If the financial service industry gets very unconfident about how this will play out in practice, we will end up with a worse outcome for consumers because it is almost certain that the range of products and the degree of financial innovation that will be invested in would decline. It will not happen immediately, but it will decline over time because firms will not be confident about how they can approach them.
The financial service industry reads very carefully what the people involved in regulation say about these things. The FSA recently put out a document dealing with the direction for the new FCA. It was very useful to be updated how those in the part of the FSA which is migrating to the FCA developed their thinking. In the introduction to that document, Mr Martin Wheatley, who will be the chief executive of the FCA, said:
“We expect a mortgage that is affordable”.
That sounds like an uncontroversial statement, until you think that that might mean that a variable rate mortgage could never be provided to a consumer if it were at all possible that plausible fluctuations in the interest rate could end up with some kind of consumer detriment. We might end up closing off certain products that would benefit consumers because the firm cannot be confident that the standard by which it would be judged will allow it to provide those products safely. The issues raised by my noble friend are extremely important, and I look forward to hearing what the Minister has to say.
Lord Deben
My Lords, I refer again to my declaration of interests. I understand the reason for this amendment, but it seems not the right way to achieve its end. To suggest that you have to balance protection on the one hand with access on the other seems a misunderstanding of what protection ought to be. I am sorry that the Government have so far been unwilling to place upon the regulator a responsibility to have regard to the extent to which advice is available. That ought to be part of what the regulator does when he thinks about how he is going to regulate and the demands that he is going to make. There is a real argument that we are going to find that there will be fewer opportunities for those of modest means to get proper advice. It is important for the regulator to take that into account when he lays burdens upon the industry. I think that is right, but I am sure that this is not the way to achieve that end, partly because it does not help the industry to suggest that somehow or other protection for consumers is necessarily contrary to the need to provide for a wider range of people to have advice. The failure to get this right has been one of the problems with the industry in the past.
I hope that the Minister will resist this amendment, but that he will do so recognising that there is a real concern behind it, which is that the cost of regulation and the degree to which regulation is disproportionate falls most on those who most need advice and very often are not in receipt of a great income and do not have large reserves. I hope that the Minister will accept that there is a concern here. It is one that the Government have failed properly to address, and it is not well addressed by suggesting that there is a kind of conflict where conflict does not necessarily occur.
Lord Hodgson of Astley Abbotts
My Lords, my name is on this amendment, and I briefly rise to support my noble friend. The key phrase in his remarks was “responsible behaviour by providers” and the key phrase in the comments by my noble friend Lady Noakes was “nervousness among providers”. This comes about because this is an industry where there is huge opportunity for ex post judgments. What appears extremely fair and reasonable at one point can, with the effluxion of time, without any malfeasance on either side, come to be seen as having been perhaps not a very suitable way to provide information, products or whatever. We have to be very careful that we do not shut off opportunities for the moderately wealthy or the less than moderately wealthy to get access to proper advice. In doing this, we will need to address the sorts of issues raised by my noble friend.
It is now made worse by the activities of claims management companies that jump on the bandwagon. It is instructive that each firm that is complained against is charged £850 by the Financial Ombudsman Service, irrespective of whether the claim is found to be genuine. This is not a completely free exercise because it will end up on the shoulders of the consumers, or customers, because of the circularity of the way that these firms have to operate. The combination of products with a very long life, a volatile financial services system and a predatory claims management system will lead, unless the regulator has the proper balance in his requirements, to withdrawal of advice, products and services to a large number of our fellow citizens.
Lord Flight
My Lords, I have lent my name also to this amendment. I am seriously concerned at a contrarian impact from quite a lot of what is in this Bill. There will be less and less product and advice for ordinary people. I have already made the point with regard to RDR. The FSA itself has decided that VCTs and EIS are not suitable unless people are sophisticated investors. In the end, mostly ordinary folk will just be left with cash deposits for their savings. Anyone who has studied economics must expect that at some stage in the not-too-distant future there will be a period of very high inflation as a result of QE so people will be severely damaged if they hold all their investments in cash long term. I am not sure whether the balanced approach is correct, but if you want providers to continue to provide other than to the more sophisticated part of the population, if you make the risks and penalties in so doing sufficiently high, the common-sense commercial judgment is to say that we are not interested in being in that part of the market. It is important and makes sense to think of a balance between the two.
Baroness Turner of Camden
My Lords, I am a bit concerned about the wording of Amendment 27 with which this amendment is grouped. It refers to,
“the ease with which consumers … may wish to use … services, including consumers in areas affected by social or economic deprivation, can access them”.
I am very concerned, as many of us are, with people who are perhaps in a rather vulnerable situation being persuaded into services that are really not appropriate for them. This wording here at least lays that open so it would be possible for consumers who are affected by social or economic deprivation to be persuaded into services which are certainly not available or should not be available for them because they are not really suitable. This particular wording gives that impression and I am not very happy about it.
Lord Newby
My Lords, the question of access to financial services is obviously one that the House has considered very carefully as we have been going through the Bill. We all agree that it is very important that consumers, irrespective of where they live, their income levels, or any other characteristics, should have access to the financial services they need. However, while we have agreed on the principle, we have found it less easy to reach the same consensus on what should happen if the needs of people for access to financial services are not being met.
In debate in Committee, my noble friends Lord Sharkey and Lady Kramer in particular spoke eloquently about the problems caused by a lack of access to basic financial services in deprived communities and by a lack of lending and funding for SMEs in those same communities—a state of affairs that can further inhibit growth. The noble Baroness, Lady Hayter, offered her support in speaking up for the importance of ensuring access to financial services for everyone. I know this is a subject also very close to the heart of the right reverend Prelate the Bishop of Durham and I am delighted to be able to be the first Member of your Lordships’ House to congratulate him from the Dispatch Box on his new appointment.
Lord Newby
I will reiterate that I agree with these important points. Access to financial services is crucial. However, the Government have had concerns about the role assigned to the Government as opposed to the regulator in addressing these issues. We have made the point on several occasions that while the Government believe that the regulator has a role in promoting access and helping the most vulnerable, this should extend only as far as the FCA making sure that markets deliver, and that supply and demand meet people’s needs. Where effective competition cannot deliver, the Government, not the regulator, should step in.
To put beyond doubt that we want the regulator to play a role in promoting access where markets already exist, the Government have tabled Amendment 27 that would add a new “have regard” to the FCA’s competition objective. The Bill already states that in considering whether there is effective competition, the FCA may have regard to,
“the needs of different consumers who use or may wish to use financial services”.
The new “have regard” inserted by Amendment 27 complements this by setting out that the FCA may have regard to,
“the ease with which consumers, including those in areas affected by social or economic deprivation, can access the services they may wish to use”.
Lord Deben
I can see what my noble friend is arguing. However, at no point do I see where the FCA is supposed to say about its own activities that they may be good for perfection but may reduce access. It is really a question of the non-accountability for the costs which the FCA lays on an industry. There does not seem to me to be a precise way—perhaps he would like to point to it—when its own activities and regulatory costs are assessed in that way. Proportionality is one word, but there are many occasions on which it looks as if the cost of regulation itself reduces accessibility to poorer people.
Lord Newby
Perhaps the noble Lord will look at the government amendment, which refers to the need for the FCA to consider,
“the ease with which consumers who may wish to use those services, including consumers in areas affected by social or economic deprivation, can access them”.
The ease with which consumers can access products is affected directly by the costs that might be imposed by the FCA. This puts a duty on it to consider how its own costs, and not just the product characteristics, impact on consumers in those communities. I think what is required is there.
Lord Flight
It seems to me that the FSA is already doing this. It is weighing access against consumer risk. It said that you cannot market UCIS, VCTs or EIS to other than sophisticated investors because it has been judged that it is better to ban unsophisticated investors completely from being able to use these products as they are too high risk for them. That judgment has been made already.
Lord Newby
I am sure that the noble Lord is right. However, with this amendment, we are seeking to address the problem that people in deprived communities are denied access to many of the products that are available in more affluent communities. We want to give the FCA a nudge towards trying to see how simple products and various other products can be developed, which will support people in deprived communities. It does not in any way detract from the FCA’s requirement to protect unsophisticated investors from sophisticated investment products.
The challenge that this amendment seeks to deal with is that, for many people in deprived communities, the range of products available, even simple products, is very limited. We want to see how we can help to ensure that the regulatory framework does not keep that straitjacket as tight as it sometimes has been.
I hope that I have been able to persuade your Lordships that the government amendment will have a material impact on access in deprived communities. I hope that I have also been able to reassure noble Lords that what they intend to provide through Amendment 25F is already enshrined in the Bill and that the noble Lord will be persuaded to withdraw his amendment.
Lord Sharkey
I support Amendment 27 and I am grateful to the Minister for bringing it forward. It is a significant and important change. As we discussed in Committee, we believe that the question of ease of access to financial services is key to a proper and robust regulatory system. Ease of access to financial services absolutely needs to be a factor in any consideration of whether competition is effective or not. Nowhere is this more true than in areas of social and economic deprivation. There is already evidence of market failure in precisely these areas, to which we will return in some detail with Amendment 28A.
I am very glad to see that in this amendment the Government propose to put explicitly into the Bill consideration of ease of access to financial services in areas affected by social or economic deprivation.
Baroness Kramer
My Lords, perhaps I may add a word. Frequently when I get to my feet in the debate on this Bill, it is to criticise the language being used by the Government. In this case, I want to express real pleasure at what is now becoming the “access clause”. As others have said, this is quite a big step forward for the regulator. The original concept of the role of the regulator was financial stability, guarding against anything that would challenge financial stability and looking out for and dealing with market abuse, partly because the language in the Bill has been very much driven by the appalling experiences of the financial crisis of 2007.
As time has gone on, it has become more and more evident that we also have an underlying problem with market failure. I am one of the many who think that when market failure occurs, in some way the regulator must be engaged in that process. The banking institutions take notice of the regulator in a way which they will never do either of BIS or the Treasury. If you look at other countries, the United States is a very good example where the regulator is absolutely key in tackling issues around market failure with the consequence that even in the most deprived communities of the United States, a range of products is available to individuals and small companies which, frankly, we can only dream of in the UK. We will be going on to the data issue later.
I am on the Parliamentary Commission on Banking Standards, as are others here including the right reverend Prelate. I, too, will take this opportunity to offer congratulations. I think that in this House we are all thrilled at his role of designated leader of the Church of England. However, the whole issue of socially useful banking has been absolutely key. This access provision in many ways deals with, or takes on, that issue of socially useful banking. It makes sure that there is a role for the regulator to look particularly at areas of social deprivation—but it is broader than that—to ensure that there is genuine access to financial services. In today’s world, without financial services, it is very difficult to live successfully as an individual and even harder to begin to thrive as a small business.
I very much want to congratulate the Government on a forward-looking amendment, rather than one that simply responds to the crisis of 2007.
Lord Blackwell
My Lords, I am grateful to the noble Lords who have spoken to my amendment and to my noble friend the Minister for his response, in particular for his statement that he and the Government are sympathetic to its aims. It is a very difficult issue. As he and I recognise, full advice based on a full fact find is a very expensive process. Only a small proportion of the population with significant assets would sensibly be able to afford that scale of advice and the costs that go with it. My amendment concerns the larger group of people who will not have personalised advice and will need to rely on what the Minister called generic advice, and which I described as guidance and information, where people will have to make their own decisions based on the information provided for them.
The essence of my amendment was not focused on more people having access to personalised advice—while that would be desirable, the costs speak against it—but on ensuring that where providers are trying to serve the market through generic advice, guidance and information, the level of protection that consumers can expect reflects the reality of the level of information and guidance that they can be provided with, and that the industry is not discouraged from entering into that market because of the potential costs of compliance. I note my noble friend’s comments that he believes this is adequately dealt with in the Bill. I am not completely convinced, but I will go back and read his comments and look at the Bill again before Third Reading. I encourage him and his colleagues to do the same to see whether there is a better way of resolving this difficult issue. In the mean time, I beg leave to withdraw my amendment.
Lord Newby
“(ea) the differing expectations that consumers may have in relation to different kinds of investment or other transaction;”
Lord Newby
My Lords, this group of amendments concerns social investment, a topic that we have already spent considerable time discussing during the various stages of the Bill. It is an important issue, and one that the Government have given considerable thought to, and so it is only right that we return to it at Report.
There is one point that we have made on numerous occasions and that I would like to reiterate before I turn to the detailed amendments. There is no doubt in my mind that the Government are committed to supporting the nascent social investment sector and will stand firmly behind it. However, we must not forget that this is, after all, not something in which consumers engage for purely altruistic reasons. If that were the case, individuals would simply donate or gift their money. That means that we must offer the appropriate protections to consumers entering into a social investment, as we would expect for any other financial transaction. As my noble friend Lady Kramer noted in our discussion on 25 July,
“we have no wish to expose people to scams or to create an opportunity for this to be used as a back door to taking unfair advantage. That is extremely important”.—[Official Report, 25/7/2012; col. 717.]
I could not agree with her more.
I turn to the government amendments in this group. Amendment 26 adds a new “have regard” to the list of matters which the FCA must consider when assessing what constitutes an appropriate degree of consumer protection. In future it will need to consider the different expectations of consumers in relation to different types of financial advice. This is intended to ensure that the regulatory approach takes into account that consumers might have non-financial—for example, social—goals.
Amendment 45 will add a new regulatory principle to proposed new Section 3B which applies to both the PRA and FCA and will require them to have regard to the different nature and objectives of different financial services businesses. This is intended again to make clear that there should not be a one-size-fits-all approach to regulation.
Noble Lords will be aware that these amendments do not refer to social investment specifically. That is because we want them to apply across the board rather than exclusively to social investment. We want the regulator to take a measured and targeted approach to regulating both alternative and existing firms and business models and protecting their consumers, and we do not want this to be limited to social investment alone. For example, there are other innovative sectors that would benefit from this, such as peer-to-peer lending. Incidentally, I can confirm to the House today that the Government will be transferring the regulation of peer-to-peer platforms to the FCA as part of the wider consumer credit transfer in April 2014.
My noble friend Lord Sassoon promised an update on two matters of policy concern that my noble friend Lady Kramer and others have raised on previous occasions. My officials have been working very closely with the Cabinet Office and the FSA over recent weeks and months. On suitability, I hope noble Lords will be pleased to hear that the FSA has confirmed that its assessment is that the existing rules do not restrict advised sales of social investment products. I have therefore agreed with the FSA that it will find a suitable way of communicating this to the industry and to consider whether anything more needs to be done to increase certainty for industry, because I know that that has been a major issue. To decide on the best way forward, the FSA will liaise with industry and other interested parties in the coming months.
On financial promotions, at this point the Government are not proposing to make any changes either through the Bill or through secondary legislation. We are alive to the potential for consumer protection concerns to arise in this area, and the potential for any instances of consumer detriment to have a highly damaging impact on a nascent sector. However, the issue is still being actively debated and is open for consideration as part of the Cabinet Office’s red tape challenge. Interested parties may make representations on the issue until the final panel meeting takes place at the end of the month.
There are also opportunities to explore whether there are any other, non-legislative ways of mitigating costs to social investment offerings of complying with the financial promotions regime, for example working with larger firms which may be able to provide assistance with compliance or approval. I encourage large firms to step up their efforts in this area. Finally, I can confirm that the FSA will provide a named contact to industry and other interested parties on matters relating to social investment. I hope that I have given noble Lords some reassurance that progress is being made in this area.
Lord Hodgson of Astley Abbotts
My Lords, my Amendment 31 is sandwiched between the two government amendments in this group. I think it is important not to look a gift horse in the mouth. Amendment 26, which adds to the consumer protection objectives, and Amendment 45, which adds to the regulatory principles, are a substantial improvement. The situation is certainly a great deal better than it was when we were in Committee and we had to rely on proposed new Section 137R, which is entitled “General supplementary powers”. Therefore, I am most grateful to my noble friend, the Bill team and the Government for the thought that they have given to this matter.
I shall speak briefly to Amendment 31. I recognise what my noble friend Lord Newby has said—that the Government have got it. By “got it”, I mean they understand the importance of creating a regime which, while recognising the need for proper consumer protection, will provide an appropriate regulatory structure, which in turn will not impede the proper and measured development of social investment. I hope that the Government will keep up the pressure and continue to stress this policy clearly and strongly to a wider audience. The wider audience has two major parts to it. The first is the regulator, which my noble friend referred to.
The Financial Services Authority very kindly arranged for me to meet two of its staff between Committee stage and now. They were interested, considerate, and keen to learn. However, without being in any way critical, they were a long way down the learning curve as far as social investment was concerned. When I discussed with them what their other responsibilities were, which included RDR, I was worried as to how they would be able to give sufficient time to the work that will be needed to provide and develop a proper regulatory framework for the issue of social investment. We have heard already this afternoon about the size and complexity of RDR and one is worried that social investment will be squeezed as a result. I hope that when my noble friend responds to my brief remarks he will feel able to stress again the importance that the Government place on the FCA in future and the FSA now in devoting the necessary time to the intellectual heavy lifting required to establish the right regulatory framework. This is not just a UK-centric issue; we have the thought leadership on social investment here in the UK, and some of the most innovative ideas have been pioneered here and are now being copied around the world. There is a real opportunity for the UK to lead the way in creating a new asset class, and we must not let it slip by allowing the regulator to put the issue into the “too difficult” tray.
The other audience that I hope the Government can spend some time persuading is that of the professions. If the Government want the social investment market to grow, there are many professional groups that have the power to help or hinder—inter alia, financial advisers, bankers, accountants, lawyers, auditors and investment managers. Each of these groups will have their individual concerns, the intellectual heavy-lifting required to devise rules and procedure for the new activity and the inevitable risks in anything new. The argument will run among some in each of those groups that we could stand back until it is clear that the social investment market will take off. In part, this reluctance to move forward is one reason why it is not taking off.
There are plenty of examples of how the attitudes in the professions have impeded this development. We came across a charity that wanted to make an investment of between £50,000 and £75,000 in activities in Nepal. It was told that if it was going to do that it would have to take a due diligence programme, which would have cost about £25,000. The result was that instead of making an investment, it gave a grant. It is those sorts of attitudes that one has to tackle—and it requires a fresh type of thinking. That example will not be dealt with by my amendment, but my amendment was designed to help to create an atmosphere in which social investment can become a mainstream rather than peripheral activity. That is why my preference has always been to have the words “social investment” in the Bill.
As I have said many times in the Chamber, I have been involved in the private equity industry for most of my career. It is worth remembering that all these concerns, worries and questions arose 30 years ago as private equity investment got under way, with doubts about interim valuations, suitability and investor protections. We overcame the doubters then to the great benefit of the UK and, in doing so, made the UK a world leader in private equity—and we can do the same with social investment, if the Government are prepared to make their support and encouragement clear. Nevertheless, I recognise that the social investment movement is at a very early stage. There are great hopes for it, but it is still a very fragile flower. That is why my amendment, while mentioning social investment directly, is entirely permissive; it does not require the regulator to do anything now.
It would be helpful if my noble friend the Minister could confirm that, in relation to the consumer protection objective, the Government recognise the different expectations that the social investors may have; that in relation to the competition objective, they recognise the importance of community finance provision to the financially excluded; and that in relation to the regulatory principles, they recognises the different natures and objectives of social investment businesses. I would be most grateful if he could do this when he comes to reply. Notwithstanding that, I again reiterate my thanks to the Government for the improvements that they have made.
Lord Flight
My Lords, it seems to me that social investment is clearly a territory that should be confined only to more sophisticated investors. It is unrealistic to imagine that unsophisticated retail investors will really understand investing in a project that might return them 10% or 20%, or they might lose all their money—or it might really be a charitable gift. I would be extremely concerned if social investment was something that was being made widely available to unsophisticated investors. In terms of the list of the products that the FSA or FCA might decide to keep away from unsophisticated investors, it ranks much higher than a VCT, for example, in terms of understandable risk.
Lord Phillips of Sudbury
My Lords, my name is on Amendment 31, but before saying a word or two about that I would like to thank my noble friend the Minister for government Amendment 26, which is surely another big step forward to take account of social investment.
Amendment 31 is a harmless amendment, I am almost inclined to say, which gives a bit of flexibility in the light of experience for the Government to amend the considerations to which they must have regard when considering what degree of protection to make for consumers under proposed new Section 1C. That seems a bit of good common sense, so I hope that the Government will accept it.
Baroness Noakes
My Lords, I hear what the Minister said about the drafting of Amendment 26 not referring to social investment or anything like that. As drafted, however, it says that the things which the FCA must take into account include,
“the differing expectations that consumers may have in relation to different kinds of investment or other transaction”.
Read as it is, that seems to require the FCA to take account of consumers’ expectations, whether or not they are reasonable. So if consumers have unrealistic expectations about what they will have in return from their pension investment, for example—and that is a fairly widespread misconception—because the Government have chosen to use this unspecific form of drafting this could quite easily be interpreted as applying to expectations that operate in a quite different sphere from that intended. While the Government might say that it is intended only for social investment, these are clear words; they do not need any other explanation from the Government to make them understandable. It may be dangerous in its current drafting to leave it without the reference to social investment that my noble friend’s Amendment 31 has. His amendment is clearly rooted in what it is that is trying to be achieved.
Baroness Kramer
My Lords, I just want to join in the chorus that essentially says to the Government that we appreciate the move forward that comes with their amendment. I am very supportive of the noble Lord, Lord Hodgson of Astley Abbotts, and his thought process over Amendment 31. It has tremendous overlap with Amendment 26—and I think that I can be very happy with Amendment 26 today. But the financial promotions order issue is going to have to be tackled. I would like to reply very briefly to the noble Lord, Lord Flight, who suggested that a social investment should be marketed only to sophisticated or high net worth individuals. The kinds of projects involved in social investment may be an extension to a local school, or a resettlement programme attached to a local prison. It is quite likely to be a small project—that is the whole point—of the kind that cannot afford to go and get regulated so that it can be marketed to the general public. It is the kind of project of £1 million or £2 million, which cannot pay the £150,000 that would put it into a regulated environment so that it could be marketed to the general public. The whole point is to provide those people with an alternative who, typically, might be asked to donate to a local project, so that they could invest in that local project. You are talking about people who would be close to the project, understand the community and perhaps even engage themselves in the work that the community does. So we are looking at a very different range of projects when we talk about social investment.
Although the language is very tricky and I recognise that it will not be easy, at some point the Government will have to get a grip on the financial promotions language and find a way to craft it so that it can be sold appropriately to people who know and understand what is going on but will never meet that benchmark of being a high net worth individual or a sophisticated investor. They might put £1,000 or £2,000 into a project, or perhaps even £50 or £100. At the moment, they are barred from doing anything other than donate, which seems reasonably insane when we look at the kind of projects that are involved.
Lord Newby
My Lords, I thank all noble Lords who spoke on these amendments. The noble Lord, Lord Hodgson of Astley Abbotts, asked for specific confirmation about the Government’s approach in respect of consumer protection, regulatory principles and competition. I am very happy to confirm that, in respect of consumer protection, the Bill will now require the regulators to consider expectations; the regulatory principles, ditto. As far as the competition objective is concerned, it will consider access in general terms. I hope that I have satisfied him on those points.
On his concerns in respect of the regulator and the professions, I am not at all surprised at what he said about the regulators being on a learning curve—not least because this is a rapidly growing, innovative area which has been very small. Because I think it is rapidly growing, and because we are giving it a bit of a push, I think that the regulator will be required to take it more seriously. I think that all those involved in the sector now have a lever to apply to the FCA to ensure that it does not get submerged as an area of interest.
As far as the professions are concerned, as I said earlier, the one area where we are hoping that some of the larger firms will get involved—particularly in terms of bringing products to market—is where the bank can act as an umbrella under which social investment projects can seek funding, so they themselves do not have to go through huge regulatory hoops. We are at a very early stage in evolving a mechanism for doing quite a lot of these things because they are so new.
The noble Lord, Lord Flight, raised the point about sophisticated investors; he said these were sophisticated investments. The noble Baroness, Lady Kramer, answered him in large measure, because although they are sophisticated—in the sense that you might lose all your money—we do not envisage that, unlike many sophisticated products, they will be restricted to people putting in very large amounts of money. We hope they will be projects that will attract relatively small sums, albeit with the acknowledgment that there may be a very considerable risk attached to the investment.
Lord Flight
I thank the noble Lord for giving way. It seems clear to me that, whether spoken or unspoken, government policy is to keep unsophisticated investors away from any form of higher risk investment. You do it by the RDR getting rid of the majority of IFAs; you do it by banning the ability to market VCTs—pretty low risk—and EIS to unsophisticated investors. Both of these could be quite small investments. I think the Minister has followed the logic that if that is the policy, it does not fit to say, “Ah, but it is perfectly all right to market a new concept which people will not particularly understand, or understand that they might lose all their money”. In the spectrum of risk, it is a relatively high risk investment. As far as I can see, the policy is all over the place.
Lord Newby
It is not all over the place because people who are investing in these products are doing so for different motives. They are doing so because they want a project to be successful and to achieve a social outcome. That is not the kind of product that one normally associates with a product that is limited to sophisticated investors, so I think that the noble Lord is talking about two different sorts of products entirely. Very often, the products that are marketed to sophisticated investors have the attraction that, if all goes well, they will bring a larger than average rate of return. Nobody expects the kind of products we are talking about here ever to be generating vast returns for anybody; that is not their purpose. The purpose is to get new money into socially desirable areas of activity. There is a distinction and I hope that he is persuaded that we are not all over the place.
Although I was beguiled, as always, by my noble friend Lord Phillips’ comments about my accepting Amendment 31, I am sorry that I am not able to do so. I think that our amendment does the business.
Lord Phillips of Sudbury
I am terribly sorry to interrupt my noble friend. He says that Amendment 26 does the business. With respect, Amendment 31 is a very gritty one: it simply gives the Government of the day the chance to amend, or add to, the crucial provisions by order. Surely that is desirable, because we wait to see how all this is going to work out.
Lord Newby
Yes, we do indeed, but the government amendment is broader and gives considerable flexibility to the FCA in the way that it deals with this new mandate.
The noble Baroness, Lady Noakes, raised the question of what happens if consumers have unrealistic expectations, and she thought that this could, in effect, be a dangerous amendment. I do not think that it is, because I do not believe that this is the way that the amendment will be interpreted by the FCA when it looks at products in this area and gives advice about them. While I can see where she gets the arguments from, I am confident that the FCA will ensure that we do not have the kind of dangerous consequences which she mentions.
Baroness Noakes
I thank the Minister for that, but how can he be confident that the FCA will—for all time—interpret the words in the way that he wishes them to be interpreted?
Lord Newby
My Lords, it is very dangerous to be confident about anything for all time, but if you turn the proposition of the noble Baroness on its head, is it conceivable that the FCA would interpret this clause at any point in a way that would be dangerous? Frankly, I cannot see why it would. One can never say absolutely that in 50 years’ time—assuming that this piece of legislation is on the statute book—interpretations might be exactly the same as they are today, but it would be perverse to think that the FCA would interpret this provision in a way that opened up the dangers about which the noble Baroness is concerned.
“( ) the need of the Consumer Panel to have its views heard by the PRA”
Baroness Hayter of Kentish Town
My Lords, there are two major reasons for these amendments, which seek to ensure that the PRA hears the views of consumers or their spokespeople. First, it is imperative that those who understand, follow and monitor the experience and needs of users of financial services—whether individual clients, SMEs, or holders of collective investments—can input into the decision-making of the regulator of banks, the PRA. There will be many decisions falling to the PRA, not least on leverage rates and, if the press is to be believed, even over bank charges. In both the mortgage and the insurance markets, there is clear interaction between conduct and prudential regulation and the potential for overlap between the PRA and the FCA. The importance of co-ordination is illustrated by the role the consumer panel played in the FSA’s review of mortgage market regulation, where it ensured that unnecessary or onerous restrictions on lending were not introduced.
Baroness Noakes
My Lords, I am grateful to the Government for the amendments that they have tabled, commencing with Amendment 32, in regard to the PRA practitioner panel. However, as the noble Baroness, Lady Hayter, said, that is not the solution that the industry wanted and it is a rather narrow solution. Therefore, I have considerable sympathy with what the noble Baroness said in relation to the need for the PRA to listen to a broad spectrum of views, including that of the consumer panel. In particular, I am more attracted to her Amendment 37ZB, which would require the PRA to have some sort of dialogue with each of the panels which are being set up for the FCA: that is, the practitioner panel, the smaller business practitioner panel, the consumer panel and the markets practitioner panel. Each will have their own particular issues which would be usefully communicated to the PRA in certain circumstances.
Notwithstanding the fact that there will now be a practitioner panel for the PRA, I continue to have concerns that the PRA’s concept of consultation is a narrow one when it should be a broad one based on regular dialogue and feedback loops with the industry. Therefore, I have very great sympathy with what the noble Baroness, Lady Hayter, has said.
Lord McFall of Alcluith
My Lords, I support the amendment and the proposition of the noble Baroness, Lady Noakes. If we look at the history of prudential regulation and consumer interest, we find that prudential regulation has trumped conduct of business for a number of years. I suggest that the PRA will be a more enhanced body than the FCA and therefore will win out all the time. Therefore, what the noble Baroness is saying about a broader range of opinion is extremely important. We need to look at the history of the representation of consumers in the financial services industry over a number of years. I lobbied the FSA for years to get a consumer representative on board. It came back to me very excited one day and said, “We have someone on board”. However, one out of 12 or one out of 13 is inadequate. It is very important that we redress the asymmetry of knowledge that is at the centre of selling because we have to restore trust and confidence in the industry, and to do that we have to balance the needs of the industry with those of the consumer. Therefore, I could not agree more with the need to have broader representation. That would put the status of the PRA at one with that of the FCA so that they served the interests of the industry and the consumer.
Lord Newby
My Lords, the Government obviously recognise that consumers have an interest in the outcome of the PRA’s actions and decisions. In particular, consumers will be beneficiaries of a safer and more stable financial system. However, the PRA will not focus on consumer protection as an end in itself. That will be the job of the FCA.
New Section 3D in the Bill requires the PRA and the FCA to co-ordinate their functions in areas of common regulatory interest where one may have relevant expertise or a material adverse impact on the objectives of the other. This means that while it is right that the PRA must focus on its safety and soundness objective, where its actions may impact adversely on consumer protection it will need to listen to the FCA, which obviously has the lead consumer protection objective. As the regulator with expertise and analytical capacity in relation to consumer protection, it is right that the FCA should consider stakeholder perspectives, including the views of the consumer panel, come to a balanced view and then communicate this view to the PRA. I do not think that it would be sensible to require the PRA, which will not have detailed expertise in general consumer issues, to consider separate consumer representations and potentially develop an alternative rival consumer view about the best way to deliver consumer protection.
For these reasons, I cannot support the amendment. I hope the noble Baroness will be satisfied that the system will enable all consumer concerns to be represented to the PRA, but that that will be done through the principal channel of the consumer panel that the FCA is to establish.
Baroness Hayter of Kentish Town
My Lords, I thank the noble Baroness, Lady Noakes, and my noble friend Lord McFall for their support. I am sorry the amendment does not find favour with the Minister. I think he misunderstands. If he thinks consumer protection is just about conduct, he does not understand the impact of things that the PRA will be doing. The FCA will put only a combined view to the PRA; it will not put the consumer viewpoint.
If we listen to the Minister, the PRA will still listen to consumers but through newspapers, through lobbying, through letters, and so on. I would like something different: a grown-up dialogue between the consumer panel and the PRA, rather than the sort of campaigning that the rest of us have done as lobbyists for many a year. I still hope for that. Therefore, I would like to test the opinion of the House.
Lord Flight
“(3) In discharging the consumer protection objective, the FCA shall work with the Department of Education to secure the provision of teaching on financial literacy at both primary and secondary level as part of the core curriculum.”
Lord Flight
My Lords, I return with an amendment relating to the teaching of financial literacy in schools essentially because when I raised the matter in Committee, understandably, the Minister referred me to the Department for Education. I took up the issue with the Chief Secretary and I am afraid there was yet a further sort of ducking motion and eventually I received a kind letter from the Minister David Laws to the effect that this was really about teaching mathematics and that perhaps I should take it up with a different Minister.
It seems to me that we have a lot of academic debate about how to deal with appropriate consumer protection, whereas, for the long term, the biggest thing that we can do is achieve a situation where at least the next generation understands finance—not in all its intricacies but the fundamental concepts. What is a mortgage? What is a pension? What is debt? What is equity? What is a student loan? What is compound interest? With the greatest respect to the Department for Education, I think the mathematics bit is way down the line. I suggest that the first bit is teaching people the concepts.
I may have made this comment before, but both of my parents were at London grammar schools in the 1920s when a standard part of the general certificate was the teaching of the concepts of finance and basic accountancy. Unfortunately, that was got rid of at the time of war, when I think it was regarded rather as a dirty subject to teach children. I well remember that my mother was pretty much equipped for the rest of her life with what she learnt in her teens at her school.
There is widespread agreement across all parties that this is something worthy to achieve, but there is a lack of ability to grasp it and to make it happen. The experiment with PFEG did not work particularly well because PFEG’s role was to try to teach existing teachers to teach financial literacy and few teachers felt confident enough to do that, often because they did not understand the subject themselves. Interestingly, the more successful courses have been put in by RBS, where the teachers are provided directly, but that does not extend to all schools by a long chalk. I think the majority of schools are still relatively uncomfortable with the territory and pupils are not being taught financial literacy.
PFEG has lost much of its funding. It has gone to an alternative body which I hope will use it more constructively. As we presently stand, the biggest single problem in the whole area of consumer protection is that people do not understand what they are investing in. Not only do they not understand the complexities but very frequently they do not understand the basic concepts and how they operate. I would hope that this amendment, which deliberately ties in with the consumer protection objective, might see the light of day in some form and see a commitment to make the teaching of financial literacy happen. It has been on the agenda since the FSA was established back in 1999-2000 and the progress to date is disappointing. To put it bluntly, unless the Department for Education and the Treasury get together, work out what is wanted and implement it with some constructive work from the FCA, nothing much will happen for quite some time to come. I beg to move.
Lord Phillips of Sudbury
My Lords, I support the sentiment of the noble Lord’s amendment. He is absolutely correct in diagnosing the woeful inadequacy of education for ordinary pupils as being a source of trouble now and the problem is getting worse. I should declare an interest as the founder and now president of the Citizenship Foundation. We work with over half the state primary and secondary schools providing citizenship education, including a very big vein of financial education which was for many years supported by Deutsche Bank. I wonder whether this amendment attacks the issue in quite the right way in that it seeks to insert, as a matter of primary law, financial literacy into the core education curriculum. That has been hugely debated for the past year or more and I am not even sure that Mr Gove has not already come out with his latest proclamation on what shall be the core curriculum in the future.
The noble Lord, Lord Flight, is absolutely right in the broad thrust of what he says. As with my complaint about the failure of governments of all persuasions to provide adequate implementation resources for legislation such as that we are putting through in this Bill, so too governments of all persuasions fail consistently to give our young people the chance to be citizens with sufficient knowledge and confidence to deal with the complicated world they are supposed to be citizens of.
Lord Deben
My Lords, I would like to support the comments of the noble Lord, Lord Phillips. This may not be the right amendment but I hope the Minister will accept its thrust. It seems to me very curious how the education curriculum excludes for many schools and scholars two issues which may be of most importance to them in future life. One is financial literacy, which should be taught to boys and girls, and the other is proper cooking, which should also be taught to boys and girls. The obesity problem which we have today is very much affected by the fact that we do not seem to be able to produce at home the food which enables us to have a proper balance. The financial problems we have today seem to be very much affected by the fact that we do not seem to be able to produce in the average family the ability to make the sort of decisions which necessitates a basic understanding of the way in which finance works.
I hope the Government will not just brush this amendment aside on the basis that it does not quite work. I think it probably does not quite work but I hope the Government will take it seriously as one of those things that we really have got to stop hiding from. If young people do not learn how to balance their budgets and do not understand the basics of finance, it will not be surprising that financially illiterate people will make choices they should not make. The fault is not theirs. It is the fault of an education system which has decided that these necessary tools of life can be left on one side. I hope that the Government will take seriously the amendment of the noble Lord, Lord Flight.
Lord Newby
My Lords, we can indeed all agree on the importance of financial education so that young people and adults are able to take responsibility for their finances and make informed financial decisions or, to repeat what the noble Lord, Lord Flight, said, know what they are investing in. I absolutely agree with the noble Lord, Lord Deben, about schools getting better at teaching the necessary tools of life. He mentioned cooking. Before I took up this post, a number of years ago I was an adviser to the School Food Trust, which has been extremely successful at starting cooking clubs across the country. We are looking to provide the same kind of experience in financial literacy.
There are a number of ways in which we can do this, one of which is through the formal curriculum. The All-Party Parliamentary Group on Financial Education for Young People is one of the largest in Parliament and it has been giving guidance to the Department for Education about financial education and the curriculum. Another is to consider how we can insert financial literacy into school life in a way that young people will find engaging. In that regard, the work by organisations such as the Citizenship Foundation and some of the banks has been really valuable. The Royal Bank of Scotland’s money sense for schools programme and Nationwide’s financial skills programme provide materials which make the subject interesting and bring it to life. That is very important. It is worth underlining that £25 million of initiatives by the financial services sector took place last year.
The amendment requires the FCA to work with the Department for Education. The FCA is the regulator but the Money Advice Service is the appropriate body to work with the DfE at an operational level on matters of financial literacy. The Money Advice Service was established by the FSA and its objectives are set out in new Section 3R of FiSMA, as inserted by Clause 6 of the Bill. Those objectives specifically include a requirement to promote,
“the publication of educational materials or the carrying out of other educational activities”.
The Money Advice Service has been engaged with officials from the DfE and has provided a written response to the department’s invitation to engage in the debate on financial education in the curriculum. It will continue this engagement when the formal consultation on the national curriculum takes place in the new year.
I am extremely sorry that the noble Lord, Lord Flight, has not had a reply from my right honourable friend David Laws in the terms that he would wish. The Department for Education has attempted, through the new EBacc, to make sure that all children have basic academic skills at school. The life skills we are now talking about need to be added to those parts of the curriculum that are not given statutory cover. However, curricula are definitely beyond my pay grade and the exact way in which we ensure that financial literacy is better promoted in schools is an issue that the Money Advice Service and the Department for Education need to be engaged in.
I agree with the noble Lord, Lord Flight, on the importance of financial education and on the need to improve the way in which we teach it in schools, but I do not think that his amendment is the way we will achieve it. I hope the other ways that I have mentioned will prove more effective and that my noble friend will feel able to withdraw the amendment.
Lord Flight
My Lords, I accept that the amendment is not appropriate, although it was the only way in which I could raise the issue. I would like to think that the Treasury will be motivated to co-operate with the Department for Education to address this issue. That is the only way in which we will make significant progress. I beg leave to withdraw the amendment.
Lord Phillips of Sudbury
“( ) the fairness and integrity of policy and conduct of those directing or operating in the financial markets”
Lord Phillips of Sudbury
My Lords, it is now three and a half hours since we had the debate on this amendment and scarcely anyone who was present then is present now and vice versa. Therefore, it would be rather fruitless to do as I had intended originally and put the amendment to the vote. However, I shall bring back the principle involved—which is the primacy of integrity over the other two objectives—at Third Reading. On that basis, I withdraw the amendment.
The Deputy Speaker (Lord Geddes)
My Lords, as the noble Lord has spoken to the amendment, I must give the opportunity for other noble Lords to speak if they so wish.
Lord Newby
“( ) the ease with which consumers who may wish to use those services, including consumers in areas affected by social or economic deprivation, can access them,”
Higher Education: Reform
Lord Wills
To ask Her Majesty’s Government what is their assessment of the impact of recent reforms of the higher education system on university education and research in the arts, humanities and fundamental science.
Lord Wills
My Lords, I sought this debate tonight to highlight concerns about the future of the arts and humanities and fundamental science in higher education. These subjects play a vital part in our country’s well-being but they are not immediately apparently commercially valuable and that places them more at risk than they should be.
The study of the arts and humanities, and research into them, are crucial to developing the critical thinking and human empathy which nourish democracy and nourish society more widely, and which, incidentally, apart from their intrinsic value, also provide the best possible environment for business and economic prosperity to flourish.
All Governments of recent times have recognised this. However, we are entering a new era of higher education, where students incur unprecedentedly large amounts of debt to pay for their education and where they will be entering an increasingly competitive and insecure jobs market. In this new era I have three concerns about the future of the arts and humanities. First, that students will abandon their studies in favour of subjects that, on graduation, are more likely to get them work and larger salaries. Secondly, that those who do study them will tend to be those who need to worry least about debt and work—in other words, the children of the affluent. It would be a sad day if the study of these vital subjects were to dwindle and become the preserve of the children of the affluent. Such outcomes would not occur independently of government. They would flow directly and significantly, though not exclusively, from policy on higher education. My third concern is that such trends could encourage government further to reduce support in higher education for the arts and humanities.
This is not a prediction. The data for the past decade are too mixed to be able to draw any firm conclusions about trends, and the radical changes introduced by this Government to higher education funding are too recent for any data to be meaningful. However, it is a worry because students, like most of us, respond to economic stimuli, and in this case the justification for studying these subjects is not economic but cultural.
The Minister may say that there is no cause for alarm—Governments tend to say that kind of thing—but she will be aware that such concerns are not confined to this country. Many countries are undergoing much the same pressures as we are, and have much the same concerns about the future of these subjects. Three years ago, for example, in an article for the New York Times, the president of Harvard wrote of her concern that in the US,
“there has been a steep decline in the percentage of students majoring in the liberal arts and sciences, and an accompanying increase in preprofessional undergraduate degrees”.
The distinguished American philosopher Martha Nussbaum wrote, in Not for Profit: Why Democracy Needs the Humanities, which was published in this country earlier this year, of her concerns about education in the United States. She wrote:
“The ability to think and argue for oneself looks to many people like something dispensable if what we want are marketable outputs of a quantifiable nature”.
She worried that,
“the humanities are widely perceived as inessential”.
She concluded her book, which looks at liberal arts education across the globe, by saying that, sadly, in terms of support for the traditional role of humanities, the worst case by far is Britain. Professor Collini of Cambridge University has written of,
“the difficulty, in a consumerist democracy, of justifying the expenditure of public money on open-ended scholarly enquiry”.
For all their merits, markets are imperfect. They should not be the measure of all things. The introduction of market disciplines into higher education should not be allowed to jeopardise the viability and vibrancy of subjects so critical to our national well-being. I should be grateful if the Minister would indicate that, if my concerns turn out to be justified, the Government will not stand by but will intervene to protect the position of the arts and humanities in higher education. There are a range of possible interventions, although at this stage I am not advocating any particular one. I am simply asking the Government whether, in the circumstances that I described, they would be prepared to intervene to preserve the position of the arts and humanities.
I turn now to the question of research into fundamental science. For the past 20 years, successive Governments have tried to develop what this Government have called a “robust methodology” to allocate scientific research funding on the basis of the impact such research makes on what they described as,
“society, public policy, culture, the quality of life and of course the economy”.
This sounds reasonable. Democratically elected Governments need some measure to reassure taxpayers that their money is not being wasted.
It might seem as if such a formulation would protect fundamental science, as impact is to be measured over 10 to 50 years. However, the impact of fundamental science is often hard to measure except with hindsight, and the position of fundamental science is made all the harder when all the noises from politicians from all parties are, perhaps understandably, about the need to promote economic growth. We hear very little about the cultural merit of advancing knowledge for its own sake, or of the value of transmitting learning and knowledge to future generations. This is dangerously short-sighted, not simply because we neglect cultural enrichment at our peril but because it is to misunderstand the complex relationship between scientific research and economic development and prosperity.
Hendrik Casimir, a theoretical physicist who once worked with Niels Bohr and became research director of Philips—so had a foot in each of the two camps of academic life and business—once pointed out the role of fundamental science in the development of transistors, basic computer circuits, nuclear power and electronics. What all those had in common, as Sir Christopher Llewellyn Smith, the former director-general of CERN, argued, was that they were all highly profitable and were all unforeseen when the underlying discoveries were made—and in each case, there was a long time lag between the discoveries and their exploitation.
It is simply not possible for politicians and scientific administrators to predict with any certainty what the impact of scientific research will be. What, for example, might have been the impact assessment of Tim Berners-Lee’s original work on the world wide web 20 years ago? It was designed to enable different national proprietary computer systems to communicate with each other at CERN, an organisation dedicated to,
“nuclear research of a pure scientific and fundamental character”.
It would have taken a bold and visionary leader of the sort not usually found in the ranks of politicians and scientific administrators to have predicted the impact of that world wide web just 20 years later.
Intellectual curiosity and exploration, not “impact”, ought to be the yardstick for scientific research, and politicians ought to have the courage to justify that to taxpayers. Apart from all its other merits, history and experience suggests that, in the long term, this is the best way to ensure the economic growth to which the Government attach such priority. If problems develop with the arts and humanities in higher education, and with fundamental science, they may well become evident only when it is too late, when the most brilliant academics and researchers have left for more congenial environments overseas, and when intellectual communities have been gravely damaged.
Research and learning subsist in a fragile ecology which, once harmed, can take a long, hard time to repair and rebuild. The science base in this country received a tremendous one-off boost from brilliant refugees from Nazi tyranny—a boost that lasted generations as outstanding scientists passed on their learning and wisdom to new generations. Ill judged public policy could reverse that process, to the benefit of other countries.
The House of Lords Science and Technology Committee report, Setting Priorities for Publicly Funded Research, stated that it understood the wish of the Higher Education Funding Council to take account of the wider impact of research, but that it was,
“yet to be convinced that a practicable and fair way of doing so has been found”.
It suggested that the weighting given to “impact” should be significantly less than the 25% proposed. Since then, I understand that the Government’s response has been to lower the weighting to 20%, but with an expectation that it may rise again in future.
Will the Minister say something more about this tonight? Will she also say whether, in the weighting given to quality of outputs, which accounts for 65% of the total and the criteria for which are “originality, significance and rigour”, there is any overlap between the term “significance” and “impact”?
As the Government review such concerns and develop further their policy on allocating research funding, I hope that they will bear in mind that research in near-to-market fields where it is already apparent that there are commercial opportunities should surely be more appropriately funded for the most part by the private sector and not by the taxpayer.
In conclusion, I hope that the Minister will reassure your Lordships tonight that as the Government develop their approach, their “robust methodology” will be sufficiently ecumenical to place the highest priority on fundamental science and the pursuit of knowledge—a pursuit in which this country has such a glorious history and that should not be abandoned now.
Baroness Morris of Bolton
My Lords, I thank the noble Lord, Lord Wills, for bringing this important subject to the attention of your Lordships’ House. I will take the opportunity to make more general comments but my concerns have just as much effect on the arts, humanities and fundamental science.
In July, at the degree congregation of the University of Bolton, where I have the honour and privilege of being chancellor, I said, with confidence, that our university was well placed to meet the considerable challenges faced under the reforms to higher education. October 2011 had witnessed our biggest intake of students, with queues around the building to register. We had one of the healthiest bank balances in our history and had responded to the changes in a positive and innovative way, keeping our fees low to deliver value for the learner and the taxpayer, and restructuring our courses to ensure the best possible experience for our students.
Then came the downturn in demand. Universities like my own are being affected and are going to have to make and take some hard decisions to balance the books. Good people face losing their jobs. Large numbers of our world-leading universities, including Russell Group universities, have not been immune from the reduction of more than 60,000 first-year learners as new fee levels were introduced. At the same time, established universities face new competitive pressures, with commercial and for-profit entrants taking advantage of increased fees and market conditions. No one on this side of the House would ever be against the operation of the free market but there must be a level playing field, with similar freedoms or restrictions placed on all providers in the marketplace. For example, the student number control experienced by publicly funded universities is not being applied to the for-profit sector.
I have two questions I wish to raise on these issues but will first briefly mention student visas. A large proportion of Bolton’s overseas students come from India, and India seems to have decided that the UK is no longer welcoming to its students. We must never take any risks with our home security and have to ensure that students are genuinely coming here to study. However, international students establish strong and lasting links with the UK, and unless we make our processes more user-friendly and send a message to the world that the UK values overseas students, our universities and our country will be the poorer, both culturally and economically.
How do the new funding regime and the significant downturn in the take-up of places at universities in England affect the national interest in our increasingly knowledge-based economy? How long can we afford to have reduced participation in higher education and continue to compete with the best in the world? What mechanism do the Government propose to ensure fair competition between maintained and for-profit providers?
British universities are the envy of the world. They are huge contributors to the well-being of this country and to the Treasury’s coffers, and we must do all we can to ensure their continued health and success.
Baroness Sharp of Guildford
My Lords, I, too, congratulate the noble Lord, Lord Wills, on launching a very timely debate given today’s announcement by the Council for the Defence of British Universities. Its core principle is to emphasise the public gain from advancing university education. I notice that in an article in the latest Times Higher Education, Sir Keith Thomas states:
“A university education should assist students to develop their intellectual and critical capacities to the full—that is a good in itself, but it will also give them the transferable skills that will be essential in an uncertain future. Scientists and scholars should be permitted to pursue knowledge and understanding of the physical and human world in which we live and to do so for their own sake, regardless of commercial value”.
This echoes the sentiments that the noble Lord, Lord Wills, expressed and takes me back to a report on higher education that I found incredibly valuable when it was published and continue to do so today. It was that of Lord Dearing. In his report, he did his best to define what he and his committee considered to be the four main purposes of higher education. Let me quote them because they link up well this same theme. They are,
“to inspire and enable individuals to develop their capabilities to the highest potential levels throughout life, so that they grow intellectually, are well-equipped for work, can contribute effectively to society and achieve personal fulfilment; to increase knowledge and understanding for their own sake and to foster their application to the benefit of the economy and society; to serve the needs of an adaptable, sustainable, knowledge-based economy at local, regional and national levels; to play a major role in shaping a democratic, civilised, inclusive society”.
That sums up what I would like our university sector to do and I think that this view is shared by a great many people.
One of Lord Dearing’s other principles was that the cost of universities should be shared fairly equally between, first, the individual, who, as he pointed out in his report, benefits in terms of extra earnings; secondly, the Government, because there is public benefit; and, thirdly, employers, because there is a definite benefit to them. His suggestion was that the individual should contribute approximately 25% of the cost. With the introduction of the tuition fees that he proposed in 2001-02, the student contribution rose to just about 20%, with the top-up fees in 2006 taking that increase to 33%—so the individual has been contributing 33% of the cost of teaching and learning for higher education. The current increase, the trebling of tuition fees to £9,000, has taken the individual’s contribution to more than 50%. OECD statistics highlight the fact that the UK even before this increase was spending a lower proportion of its GDP on higher education than most of its competitors, approximately 0.6%. When you compare this with countries that we often seek to emulate such as South Korea, Singapore, the USA and Finland, you see that all of them are spending rather more than 1.5%—in other words, almost three times what we are spending. These figures were taken before the current increase, which will take us even higher. Are we cutting it too fine and putting too much emphasis and burden on the individual student?
I should like to raise two further points about the impact of fees. The first is in relation to mature students, where I worry very much that the drop in numbers has been disproportionate, and the second is in relation to postgraduate students, where, again, the issues raised by the increase in fees are substantial.
Lord Rees of Ludlow
My Lords, I shall go back even further than the noble Baroness, Lady Sharp, to the Robbins report, which 50 years offered an articulate vision appropriate to the 1960s. Today, higher education has hugely expanded, but some things have not changed, and we should still temper the managerial and instrumental view of higher education with an appreciation of its intrinsic value. It is still a public good as well as a private benefit for young people to receive a rigorous education.
Our system should have become more diverse as it expanded, but that has not happened. Nearly all universities focus on three or four-year degrees; nearly all offer at least some postgraduate degrees and aspire to rise in a single league table. A latter-day Robbins would surely have set out a blueprint for a more diverse “ecology” of institutions, with more flexibility, more collaboration and a “credit system” that facilitates student transfers between them.
The Government hope that the mantra “the money follows the student” will bring this about. But even if, when the dust settles, the system is more diverse, the transition will have been more painful and wasteful than if it had been planned. And it frankly is not clear that the market-driven choices of financially pressured students will drive up teaching standards and raise levels of rigour and achievement rather than favouring “soft” and cheap options.
Let me mention two trends that a latter-day Robbins might commend. First, the Open University’s well tried model—distance learning supplemented by a network of local tutors and so forth—has vastly more potential in the era of the internet and smartphone than when it was founded. Indeed, because distance learning will erode the benefits of the traditional “mass university”, there will, I think, be a deepening bifurcation between, on the one hand, institutions that really offer personal mentoring and, on the other, the OU model. The serious downside of the current funding system is that the OU charges fees of £5,000. That is inflexible and a major disincentive to the kind of people whose educational horizons the OU has raised during the past four decades.
My second comment concerns graduate-level education. There are immediate concerns, as already mentioned, about whether UK students are being unduly deterred by lack of funding. But there is a structural issue, too. We should welcome the trend to concentrate PhD-level education and encourage alliances and clustering of university departments. In doing this, it is important to reassure academics that this need not entail an equal concentration of research, especially in the humanities. Many who teach in the best American liberal arts colleges are productive researchers and scholars, but if they have graduate students, those students are based in another university.
Students aspiring to a PhD need more than just a good supervisor; they need to be in a graduate school where courses are offered over a wider range. Without this second component, newly minted British PhDs will not have the flexibility and range that is needed for their later careers.
Overall, current disruptive changes could foreclose rather than facilitate the needed restructuring. Once quality falls, it will be nearly impossible to restore, especially because we are networked in a worldwide system where other countries are strengthening their grip. To ensure that our universities continue to be a magnet for talented students and faculty, the Government must at least be mindful of these concerns.
The Lord Bishop of Ripon and Leeds
My Lords, I, too, am grateful to the noble Lord, Lord Wills, for initiating this debate and keeping before us the issue of how best to encourage that depth of understanding that is key to the humanities. Many Members of your Lordships’ House will have been involved yesterday in Remembrance Sunday events, which will—or should—have posed the question of how we live peaceably and with dignity in a world of diversity. That needs a deep sense in our society of subjects such as history, philosophy, sociology and indeed theological and religious studies. What will the Government do to encourage studies to maintain and develop that understanding of a world of diversity that has been at the heart of the development of a liberal society?
We cannot simply assume that liberal values will continue to be accepted in our society. Your Lordships have spent the last five hours or so debating ethical issues around sexual abuse, financial integrity and journalistic honesty—all marks of how a liberal society is to live with the illiberal and the selfish. That all needs an understanding of society which is heavily dependent on the culture encouraged in HE. One example: Islamic studies used to be viewed as a strategically important and vulnerable subject. Now that category seems to be reserved for subjects deemed to be economically important. Will the Government renew this category and understanding with a view to including humanities subjects which, as their name suggests, deal with relationships between human beings?
A crucial aim of HE must be to encourage the development of all students as responsible, ethical human beings. There needs to be a stress on values which are not dominated by market forces. The HE sector, including the Church of England cathedral group of universities, has always endeavoured to develop this. Will the Minister affirm that understanding of the development of all students as responsible, ethical human beings? Will she pledge the Government’s support for those aims, for both undergraduate and research programmes?
Baroness Warwick of Undercliffe
My Lords, I, too, thank my noble friend for introducing this timely debate. The new and substantial reforms to university funding have had some unpredicted effects on applications and admissions. We do not yet have reliable data on enrolments but we know that application figures, though down by just over 7%, have been less badly affected by higher fees than many predicted. In particular, it is reassuring to note that applications from students from the lowest participation backgrounds have decreased by less than those from students from higher participation groups.
However, within this, I am concerned about the decrease in applications for some languages, arts and design, and social studies courses. Some of these subjects have recorded decreases in applications of between 16% and 20%. We need to pay attention to this but it is also worth taking the long view. Subjects in arts and design have experienced considerable growth over the past few years: a 36% increase between 2006 and 2011. Although that growth has slowed and has been less than that for STEM subjects during the same period, the trend has been positive. Unfortunately, languages have been in longer-term decline. The other worrying feature has been the fall-off in applications from mature students. If this experience is repeated in future years, we may have a serious problem. Encouraging older students into higher education is increasingly important to the economy. A huge amount of progress has been made in the past decade and we cannot afford to see it reversed.
The change in the profile of applicants this year may explain some of the variations in subject choice, so we will need to distinguish between short-term effects—because this is the first year of a new system—and longer-term trends. For instance, there is widespread concern about the combined effects of higher fees at undergraduate level and an inadequate supply of commercial loan funding on the take-up of postgraduate education. There is concern, too, about the way in which government funding and student number control policies, combined with an increasing concentration of research funding, could lead to increased stratification of the university system. I urge the Government to tread cautiously. The past year has created huge challenges for university leaders. Very strong institutions from all parts of the sector have found it extremely difficult to operate in circumstances where several sets of goalposts have shifted simultaneously.
This instability in the English system has added to concerns about simultaneous disruption of international activities. This is one of a number of areas where our universities excel. Their international reach is phenomenal. Much has been said about the economic value of their international activities, but I think that we in this House understand that the internationalisation of universities is as much about the character of their teaching and research, and the quality of the educational experience enjoyed by their students, as it is about their considerable export earnings. The Government have been urged by not one, not two but three separate Select Committees to take students out of net migration targets. When will the Government respond to these calls?
I will make a final point on research funding. What will the Government do to ensure that the European research and innovation budget is protected in the forthcoming EU budget negotiations, especially since EU funding currently constitutes 10% of national research investment? As David Miliband recently put it, we have to get the EU budget,
“out of supporting cows, sheep and goats and into supporting skills, universities, and innovation”.
If the Government do not back our universities, other Governments in other parts of the world will help their own universities fill the very big gap that we will leave.
Lord Smith of Clifton
My Lords, the debate could not be better timed and I congratulate the noble Lord, Lord Wills, on initiating it. The introduction by the coalition of a threefold increase in university tuition fees has led, as other noble Lords said, to a plummeting of applications by part-time students. Yesterday, the Observer reported significant falls in applications among middle-class families, citing the well heeled parliamentary constituencies of Banbury, Tatton and Witney as examples. In a three-page article in the same issue, the Observer analysed the prospects for the survival of the university system as we know it, in view of the exponential explosion in the provision of online distance learning courses. Students will be increasingly attracted by such lower-cost courses. Following the Browne report, the coalition hiked up fees to encourage the privatisation of higher education and make it much more market led, which will continue to have enormous reverberations.
Tomorrow, as has been mentioned, the newly formed Council for the Defence of British Universities holds its inaugural meeting. Like many of your Lordships, I am a founding member and declare my interest. The CDBU has been set up to monitor the effects of coalition policy on the HE sector, many of which seem deleterious. The STEM subjects need to be encouraged and the Government have provided funds for them—but leaving the arts, social sciences, law and particularly the performing and plastic arts to fend for themselves in a world of untrammelled market forces will lead to an imbalance among the academic disciplines that will certainly change the system of higher education. It is these trends that the CDBU will keep under continuous review.
Of course, change is inevitable and diversity is to be welcomed, but it needs to come about within a coherent framework that necessarily involves the Government. On a number of occasions in the House, I have advocated the introduction of a three-tier scheme for higher education along the lines pioneered by Clark Kerr in California. I was very gratified to see that it had been endorsed and elaborated on by the noble lord, Lord Rees of Ludlow. It is gratifying to have such an authoritative recommendation from so eminent a source.
At a time of austerity and scarce resources, it is imperative that this country has a robust system of higher education. Since the Robbins report of 1963, no wide-scale review has been undertaken. A successor to Robbins is long overdue. Leaving the system to market forces will lead to gaps in the range of disciplines in Britain. National criteria need to be devised and deployed of the kind used by the noble Lord, Lord Oxburgh, in his planned reduction of the provision of geology in the 1980s.
Finally, I turn to the possible unintended consequences of the recent Finch report on open access to the results of research and scholarship. The mandatory dissemination of the results of research and scholarship funded by UK taxpayers will of course offer free research and development to overseas competitors.
Secondly, the so-called article processing charge being levied by academic publishers on contributors will seriously handicap younger academics who can ill afford the upfront charges of up to $3,000. Those and other reservations have been raised by learned societies such as the Political Studies Association, of which I declare an interest as a vice-president. Will Her Majesty’s Government address those worrying concerns, which impact particularly on the arts and social sciences?
In winding, I ask: does the coalition propose to appoint a Robbins-type inquiry; will Her Majesty’s Government get a resolution to the contradictory policies of the Department for Business, Industry and Skills and the Home Office over student visas; and will they look carefully at the deleterious effects of the Finch report?
Viscount Hanworth
My Lords, reform is a weasel word. It commonly denotes the removal of abuses and malpractices, the enhancement of efficiency, the defeat of vested interests and much else besides. Successive Governments have used the word as an accompaniment of coercive attempts to gain power and to exercise control over organisations or groups of people who serve specialised functions in society and who depend on government funding.
The university sector is faced at present with major reforms that entail an attack on the professional status of academics and a belittlement of their capabilities. Under such specious slogans as “students at the heart of the system” and “putting students in the driving seat”, proposals are being made to accompany a radical change in the way that universities are financed.
Those who will have to pay more for their education are being mollified by the thought that universities will be forced to improve the quality of their provision in accordance with the increased fees. The ideological imperative of the reforms is ostensibly to create a market in higher education in which students as consumers will face universities as producers in a competitive struggle. A concealed objective is that of reinforcing the privileges of a select group of universities, described as the top institutions, which also serve the educational needs of a social elite. Universities of the middle ground will be hollowed out and, at the lower end, entrants will be allowed to participate in the competition.
Successive reforms by Governments have imposed a heavy burden of quality control and performance assessment on university lecturers. The burden has accumulated. Nowadays, vastly inflated parallel organisations exist within universities that instruct lecturers how to conduct their business, that investigate their work via peer appraisals and student assessments and that demand detailed documentation of the taught courses in respect of their objectives, their content and their methods.
One might reasonably expect there to be strong resistance on the part of the majority of the academics to those impositions, as well as a modicum of success in resisting them. However, academics have lost the power to resist and, nowadays, they are outnumbered by administrators. The loss of power has been hastened by the fact that a declining proportion of academic staff is native to the UK. For many years, our universities have failed to generate native academics to succeed those who retire. The new recruits lack the sense of ownership that one would expect of native British academics; and there is an acute sense of impermanency in many departments, where the annual rates of staff turnover can be as high as 30 per cent.
The proposals that have been set forth in the White Paper, Students at the Heart of the System, can only exacerbate the problems that I am describing. It is proposed to enhance students’ experiences by making universities more responsive to their demands and complaints. Student appraisal of individual courses is to play a major role, as is the National Student Survey, which records the overall degree of student satisfaction with the departments in which they have been taught. We are told that there will be a new focus on student charters, student feedback and graduate outcomes. By graduate outcomes is meant the success of graduates in achieving well remunerated employment; and the competitive evaluation of comparable courses will depend crucially on this.
The pursuit of student satisfaction has already led to an inordinate grade inflation in higher education; and this development is subverting the didactic process. An ignorance of the real criteria of excellence is of no benefit to the student.
In the commercially competitive environment that is envisaged by the White Paper, in which university administrators are in control of the academic processes, the opinions and demands of students are liable to dictate what is taught and how it is taught. Indeed, this has already happened and to the severe detriment of quality.
Baroness Howells of St Davids
My Lords, I thank the noble Lord, Lord Wills, for raising this crucial debate at this time, and for his insight into the subject.
I declare my interest as the Chancellor of the University of Bedfordshire, to which I shall devote my few minutes. Bedfordshire is a successful modern university where 90% of our students are in work or further study six months after graduation. The university prioritises a first-rate student experience and, despite significant changes to student number control, which have hit many universities, the University of Bedfordshire has achieved its student number control this year.
There is a risk that the increased cost to the individual of undergraduate education will reduce the likelihood of advanced study and research, as graduates move quickly to employment to start repayments to their loans. The number of UK students undertaking research in areas that are not likely to have a direct impact for potential sponsors will therefore reduce further than currently.
The university continues to offer scholarships for postgraduate study and research to offset that impact and to support the development of the next generation of researchers and research-skilled individuals in those areas. Despite the steep gradients in the HE landscape introduced in the recent reforms, the University of Bedfordshire continues in its upward progress in education, research in the arts, humanities and fundamental sciences. Although the winds have been cold and cutting, we have weathered the immediate storms in student recruitment and in reduced funding for research, especially in the arts and humanities.
We are far from complacent, as each new term introduces yet more unforeseen consequences with which we have to deal. The creative industries, which link the arts and the sciences and where the university is recognised as a leader both nationally and internationally, are a major contributor to the UK’s GDP. The university finds itself in a position where the funding for education and research in this area is being trimmed excessively. We fear that if current trends continue, the viability of our portfolio in the creative industries will be under threat. Inevitably, this will lead to the likelihood that the UK will no longer be the global leader in international business. I ask the Minister if that is the Government’s intention.
Even the Russell group has said that the university access plan will fail. Sir Keith, a member of the newly formed council already mentioned, has said that it is right that safeguards be placed on the spending of public money. He continued:
“The degree of audit and accountability now demanded is excessive, inefficient and hugely wasteful of time and resources”.
These demands, he claimed, will grossly distort the very purpose of the university and will undermine the capacity of universities to develop the intellectual and critical capacities of future generations. He begged the Government to sit up and take notice before it is too late. I urge the Government to consider the students of tomorrow.
Lord Stevenson of Balmacara
My Lords, I thank my noble friend Lord Wills for securing this debate and all noble Lords for the excellent contributions they have made to this important topic. I complained a couple of weeks ago that there were too few opportunities to debate HE policy in your Lordships’ House. As welcome as this debate is tonight, it has confirmed my feeling that we need still more opportunities in the continuing absence of the long-promised but never-arriving higher education Bill. I will touch on a few of the many issues raised by others this evening, and look forward to hearing the responses from the Minister.
First, on demand, as mentioned by my noble friend Lady Warwick the overall drop in applications and admissions for undergraduate study this year is about 14%, according to UCAS figures. This is a significant drop in itself and of course in terms of future funding of higher education institutions over the next few years, it will be devastating. In terms of future demand, a recent poll by Ipsos MORI suggests that fear of debt may be deterring up to one-third of 11 to16 year-olds from applying to university in the future. This raises a general concern that students’ decisions to invest in their own future are being affected by increased financial commitments and potential debt-burdens. There are also worrying trends for part-time and mature students. Does the Minister recognise these concerns?
On investment in higher education, as the noble Baroness, Lady Sharp, said, the UK now sits near the bottom of the OECD countries when looking at the amount that the state invests in higher education. Looking at public expenditure on higher education alone, the UK’s investment of 0.56% of GDP is one of the lowest in the OECD. Our universities are experiencing cuts while other nations are investing. The UK spends about $16,333 per student, well below the USA at $29,200, Canada at $20,000, and Switzerland at $21,000. Surely new and more innovative ways of funding university places may be required. The recent review of the noble Lord, Lord Heseltine, recognised this. He called for Government to provide incentives for employers to employ more skilled graduates. Can the Minister tell us what the Government intend to do about this recommendation?
On postgraduate study, the recent report by the Higher Education Commission on postgraduate education has argued that progression to postgraduate study is threatened by rising financial pressures on students, and called for a system of state-backed loans for postgraduate study. These points were also made by Alan Milburn in his recent report on social mobility and access to higher education. Does the Minister recognise these issues, and will she consider implementing changes?
On immigration policy, several noble Lords have mentioned the problems that have been caused, particularly the impression being given that the UK does not welcome overseas students. As we have heard, excellent international students are indispensable for world-class universities and a thriving society, culture and economy. There is fierce global competition for the best academic talent. At the moment, the UK is the second most popular destination in the world for both international students and PhD students, behind only the USA. The noble Lord, Lord Heseltine in his recent growth review also argued for a review of immigration arrangements to provide,
“a welcoming environment for foreign students because this is an important market in which the UK excels”.
What steps will the Government be taking to implement this recommendation?
Finally, I turn to private providers—raised I think by the noble Baroness, Lady Morris. These providers remain remarkably unscathed and unregulated as a result of the failure to include a higher education Bill in the current legislative programme. Is this remedy going to be brought forward? There is really a concern here. At the same time, we gather that the Treasury is proposing that a VAT exemption be granted for some of the services provided by these private providers. Can the Minister explain what justification exists for offering for-profit providers with this additional benefit at taxpayers’ expense?
Baroness Garden of Frognal
My Lords, I, too, am grateful to the noble Lord, Lord Wills, for this opportunity to consider the enormous contribution that our higher education sector makes to national life. Our universities are a tremendous national asset, which we need to sustain and to grow. BIS is developing a long-term education export strategy as part of its broader work on an industrial strategy. This will recognise the significance and contribution of the HE sector and be published next year, while 2012 has certainly been a significant year for higher education as the Government’s reforms take effect. These are fundamental reforms designed to achieve a well funded, diverse and responsive sector that values both research and teaching but in which institutions focus on what they do best and are able to attract funding based on excellence within their field.
Inevitably, there is some stress and uncertainty accompanying change on this scale but the higher education system is mature, well managed and financially well prepared to meet the challenges ahead. The sector has an income of more than £22.7 billion per annum and, last week, the Higher Education Funding Council for England published a report on the English sector’s finances, which assessed them as sound with a likely continuation of positive cash in-flows and healthy cash-backed reserves. The OECD has said that our reforms are an exemplary model of how to reform higher education. The research councils continue to invest in the UK’s world-leading research base, which of course includes the arts. Just last week, the Chancellor announced an additional £20 million for synthetic biology.
The new higher education funding regime does not mean that the Government fail to support certain subjects. We are told that the shift from grants to fees and loans somehow penalises the arts and humanities or penalises expensive science courses. In fact, it is a scrupulously neutral policy. Under the arrangements we have put in place it is the source of university funding that will change, not the overall amount. What will dictate whether courses run will be their quality and the efficacy of the institution in making them attractive to students. I well understand that there may be concerns about the fate of particular courses but the noble Lord, Lord Wills, and others can rest assured that Ministers and the funding council will continue to monitor the position and will keep strategically important subjects under review. Arts and humanities can lead to rewarding and fulfilling careers. The British Academy reports that admission figures for 2012 show the humanities holding up, with around half of all applicants. Indeed, Bristol University has announced an expansion in humanities on the back of the reforms.
I listened with interest to what the right reverend Prelate the Bishop of Ripon and Leeds said about diversity and social understanding, and about producing responsible and ethical students. I think we would all support that, but it would be down to the autonomous universities as to how it was implemented. We must remember that the system the Government have introduced is more progressive. The noble Baroness, Lady Howells, expressed concern about access for all students and the noble Lord, Lord Stevenson, expressed concern about adults being put off studying. However, repayments will be made only when graduates can afford to do so and are earning a good salary. We have been clear that university study has intrinsic value, irrespective of any economic or financial potential. We heard powerful inputs from my noble friend Lady Sharp and the noble Lord, Lord Rees, in support of the intrinsic value of universities.
The coalition has protected the budget for science and research. The ring-fenced settlement for 2011-15 extends further than its predecessor as, for the first time, it covers all core publicly funded research activity, including specific support for knowledge exchange. Protecting resource funding inside the ring-fence is a commitment to maintaining activity even in tough times. The research base is among our greatest national assets and vital for our future. The UK relies on a strong base of scientific skills; science and technology underpin much of our economic growth and universities are integral to helping to stimulate growth through dynamic research.
Two weeks ago, seven new university and business research partnerships in sectors including life sciences, energy efficiency and advanced manufacturing were announced by the Minister for Universities and Science. I entirely take the point made by the noble Lord, Lord Wills, that one cannot predict which of these branches of science will result in fruitful outcomes but there has to be funding for blue-skies thinking and research. The new projects double the number of successful projects supported by the UK Research Partnership Investment Fund to 14, covering the whole of the UK and leveraging a total of more than £600 million of private support. Noble Lords expressed interest in having private money coming into university funding. When fully allocated, the scheme will secure more than £1 billion of new support for research from government, industry and charities.
Turning to some specific points that have been raised in the debate, I recognise the concerns of the noble Lord, Lord Wills, about impact. However, we think that there must be some mechanism for assessing impact. For the first time, the RIF for 2014 will include recognition of past impact and explicit assessment of recent impact, but we must get that balance right in measuring the value of universities.
My noble friends Lady Morris and Lord Smith, the noble Baroness, Lady Warwick, and the noble Lord, Lord Stevenson, all expressed concerns about visas and the messages that we are sending to overseas students—that they are not welcome in this country. I assure noble Lords that we are looking closely at simplifying the visa system and trying to ensure that no legitimate students are denied entry and are indeed made most welcome to the country. The difficulty is in trying to deny the false students—those who do not really come here to study—but somehow that message must go out: that the universities in this country are open for business and warmly welcome students from overseas.
My noble friend Lady Morris mentioned her concerns about the University of Bolton in particular. Overall applications for HE were down slightly this autumn, but this is an atypical year. It has been affected by a demographic dip as well as the reforms. It means that some institutions did not have as many students, and therefore for some their income stream was affected. We are encouraged that applications so far for 2013-14 are up. We hope this will be a temporary situation for my noble friend’s university.
My noble friend Lady Sharp mentioned the Dearing report on the four core purposes. Indeed, they are still very valid today, as is so much of Lord Dearing’s thinking. She and my noble friend Lord Smith also referred to the launch of the Council for the Defence of British Universities. We shall be watching with interest the thoughts that come out of that initiative.
The noble Lord, Lord Rees, spoke eloquently about the merits of the US system and the clustering of departments, but I would put the case for the merits of the university system here in the UK. Our institutions are autonomous and are free to determine their own admission arrangements and choose their own mission. There are also exciting times ahead with the expansion of distance learning and online learning, which the Government will consider with keen interest. We note the tremendous work of the Open University in expanding horizons and access for so many people in this country.
The noble Baroness, Lady Warwick, mentioned student visas and international reach. Once again, we will do our level best to ensure that research and innovation budgets are protected because our links with the EU are valuable.
My noble friend Lord Smith mentioned open access. The Government have made £10 million available to pump-prime the formation of publication funds to enable institutions to act on the Government’s open access policy. That is again something we shall be watching.
The noble Viscount, Lord Hanworth, mentioned that the administrative burden on universities exacerbates the difficulties for students. The Government make no apology for asking institutions to focus on an improved student experience and on providing information to help students make informed life-changing decisions. Once again, one needs to get the balance right. The noble Viscount also mentioned the turnover of staff, which one would want to discourage in an academic institution where continuity can often be an enormous benefit. We welcome international academics to this country in order to ensure that students can profit from the most expert and skilled people in each of our institutions.
The noble Baroness, Lady Howells, mentioned her chancellorship of the University of Bedfordshire, and we note the points she made about it and its success.
The noble Lord, Lord Stevenson, raised a number of questions, on which I cannot go into detail at this time, including about the mix of private providers. We feel that it is important that our higher education sector should have a mix of private and public funding in order to ensure that it is as healthy as it can be.
Any new funding system will change behaviour, both of students and of institutions. What we are seeing is a paradigm shift. The impact of such a dramatic change for the sector will be felt both immediately and in the longer term as students become more discerning consumers of higher education, as institutions develop a greater diversity of funding streams and develop a renewed focus on high-quality teaching so that it has the same prestige as research.
I thank all noble Lords who have taken part in this thought-provoking and stimulating debate. If in the short time I had, I have not covered all the questions raised, I undertake to write to noble Lords. Our reforms are intended to make our world-class system stronger. As noble Lords have made clear, we must ensure that our universities continue to encourage reflective inquiry, as the noble Lord, Lord Rees, mentioned in his recent pamphlet; they must encourage thinking the unthinkable, intellectual curiosity and cutting-edge research. The Government are determined that our universities’ international reputation will be maintained and enhanced.
Financial Services Bill
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sharkey
“(3) In order to facilitate the objective set out in subsection (1), the FCA must require each holder of a banking licence to publish relevant data each quarter, by post code, including the total amount of lending to small and medium sized enterprises.”
Lord Sharkey
My Lords, this amendment has two purposes. The first is to make sure that relevant data on each bank’s performance are in the public domain. This will make it possible to have an informed debate on whether the banks are competing effectively in the interests of consumers, as the FCA is required to promote. At the moment, all we have is aggregated and regional data. We do not know to what extent, or even whether, the banks are effectively competing, or indeed whether they are properly engaged in all the areas where we might want to see effective competition.
In a more general sense, increasing the amount of data on bank activity in the public domain is a very good thing. We need banks to change their practices, and their culture and transparency is a critical part of doing exactly that. We need to be able to see the changes in both practice and culture and not have to rely just on assertions that changes are taking place. For example, we need to see evidence that, as it says in the coalition agreement, the banking system serves businesses and not the other way round. Exactly the same applies to ordinary customers, too.
The second purpose is to focus attention on banks’ lending to SMEs. Your Lordships will have heard many times about the absolutely critical role of SMEs in our economy, and of their role as key providers of jobs. The importance is hard to exaggerate. Our economic recovery and our enduring economic health depend on the performance of our SMEs, as it always has. The ONS data for July 2011 show that SMEs provide 60% of all jobs in the private sector and generate 49% of private sector turnover. The BIS economics paper of 16 January this year re-emphasises the importance of SMEs to the economy, but goes on to say that,
“there are a number of structural market failures restricting some viable SMEs from accessing finance”.
The report notes that access to debt finance is now harder than before the credit crunch.
In 2007-08, 90% of SMEs seeking finance obtained it. This figure now stands at 74%—and, crucially, the total stock of lending to SMEs is in decline, especially to those with a turnover of less than £1 million. To place this in a long-term context, the Breeden report of March this year estimates that by 2016, if things go on as they are, there will be a shortfall of between £26 billion and £59 billion in the finance needed by SMEs for working capital and growth. The Government are very clearly alive to these problems and hope, as we all do, that the Funding for Lending scheme will succeed in making a real difference in funding for SMEs.
The data provided by the banks on lending to SMEs are provided on an aggregated basis. That means there is no information to allow assessment of performance and suggestion of improvement, or to show which banks are performing better than others or, critically, which are effectively absent from which areas. We do not know which banks are supporting—and to what extent—the third sector in taking advantage of the new rights conferred under the Localism Act. To do all this properly, we need access to disaggregated data and data on a postcode level so we can see clearly which banks are doing what and where with the vital SMEs. We need this data so we can identify in detail the areas of market failure and therefore of competitive failure, which the Government acknowledge do exist.
The SMEs are vital to the economy and to jobs. Funding SMEs is vital to their performance. Underfunding, which is the current situation, threatens our economic recovery and the creation of jobs. There is evidence of market failure and of a failure of competition. The amendment will allow us to identify that failure and will provide us with the information to help put right that failure. It will help promote effective competition, as the Bill requires the FCA to do, and it will help fulfil the coalition agreement’s pledge to develop effective proposals to ensure the flow of credit to viable SMEs.
Of course, I hope that my noble friend will agree to this amendment, but it has occurred to me that he may have one or two reservations about doing so. In particular, he may worry that the amendment imposes too onerous a burden on the banks. He may worry that the publication of a bank’s performance may somehow be prejudicial to its commercial activities. I hope that I can give him some comfort on both points.
The burden that this amendment imposes on the banks is not onerous. The FCA may decide, in general, what data it considers to be relevant. I am sure that, in general, it will take into account the burdens imposed. Specifically, publishing the disaggregated and postcode-level data on lending to SMEs imposes, if anything, a trivial additional burden on the banks. The BBA already publishes aggregated data on a quarterly basis, which includes lending to SMEs on a regional basis. By definition, disaggregated data exist before they can be aggregated. Surely, the banks know the postcodes of their customers—except, it appears, for some HSBC Cayman Island accounts.
For the worry that publication of disaggregated data may somehow be prejudicial to the bank’s commercial activities, it is hard to make a convincing case. Exactly like all other large, competitive organisations, the banks will already have detailed research on what their competitors are up to with SMEs—or, if they do not, they are even less competent and less competitive than we might have supposed. The amendment simply puts that information into the public domain.
The amendment is not onerous. It simply requires more transparency from the banks in the interest of more effective competition. It requires, in particular, more transparency about the banks’ support for the SME sector. We would all benefit from that, and people and businesses in deprived communities would benefit greatly. Even the banks would benefit from a move to greater transparency.
I very much hope that the Minister will be able to agree to this amendment or to assure the House that at Third Reading the Government will bring forward something equivalent. I beg to move.
Lord Newby
My Lords, it might be to the benefit of the House if I give the Government’s response to this amendment now. In responding to an earlier amendment, I said that the FCA would necessarily need to gather data from industry to understand what existing provision there was and whether it met the needs. But we need to make proper provision for any data requirements. Normally, that is in the FCA’s rulebook, or covered by commitments made by industry to provide and publish relevant information, working through trade bodies as appropriate. Ideally, we would not need to legislate to make that happen.
Let me be clear on our position: the Government agree that we should be able to see where provision is lacking, particularly where there are areas where bank lending is simply not being offered or getting through. Getting this data in the public domain will help to crystallise the problem, and what should be done about it by industry and by the Government if necessary.
I can confirm today that we will be working with industry, through the British Bankers’ Association and other interested parties, to get a commitment from the banks that they will publish more granular data. This will build on the work that industry is already doing and will deliver publication of the kind of data that all sides of the House clearly want to see. The members of the business lending taskforce already publish subregional aggregated lending data on an annual basis. While this is a good first step, I think we all agree that it is not enough. Therefore, we will work with industry to collate and publish lending data that is disaggregated by institution and presented on a postcode-level basis.
The Government will take this forward as an urgent and pressing matter. In reiterating our commitment to make progress in this area, I confirm that should our negotiations with industry fail to deliver—I sincerely hope that that does not happen—the Government will introduce amendments to the Banking Reform Bill along the lines proposed in the amendment we are debating today, to ensure that the data, in disaggregated and postcode-specific form, are published.
I hope that this reassures noble Lords that the Government share their commitment to making progress in this area and that the noble Lord will be prepared to withdraw his amendment in light of this commitment.
The Lord Bishop of Durham
My Lords, my name is down on the amendment. I thank the noble Lord, Lord Newby, for that most helpful intervention, which essentially satisfies what I hoped for with the amendment. I also thank the Minister and other noble Lords for their kind remarks earlier.
It is particularly important that this information is available not only for this House and the public but also for the FCA itself in view of the very welcome earlier amendment about the access to finance in areas of social deprivation. For that to be effective, the FCA itself will require these kinds of data. Having them available is not only useful to us but ensures that the FCA’s regulatory obligation can be fulfilled and that it will feel an obligation to make sure it is fulfilled. It prevents regulatory comfort, which is often as much a danger as regulatory capture. The noble Baroness, Lady Hayter, spoke in those terms on an earlier amendment.
I am particularly conscious of this in the area where I live—in the smaller towns of the north-east, the ex-pit towns and pit villages and de-industrialised areas—where access to finance for SMEs, especially the very small SMEs, is almost non-existent. This will reveal that kind of problem extremely clearly. Recently, through a social enterprise, we were able to support someone who had been seeking £200 for 18 months in order to start his own painting and decorating business. Such a small amount has enabled him to become self-sufficient, with an order book full until next May. It is that kind of thing that can make a significant difference in the small economies of the more rural areas of my diocese and other places like it. I thank the noble Lord again for the assurance that he has given the House and we look forward to seeing the results.
Lord Flight
My Lords, perhaps I may just add a brief comment. I had a conversation this morning with the entrepreneur Luke Johnson. He made a point to me that resonated strongly. Would it not be a good idea if we could organise key entrepreneurs to take up the challenge of different towns around the country to give a lead in entrepreneurial rejuvenation? I can certainly think of examples, particularly Swindon in the past, where that sort of principle has worked extremely well. Then the SME lending makes more sense.
Baroness Kramer
I join the strong voices that we have heard so far on the amendment and again thank the Minister for the commitment that he has made on behalf of the Government to meet the essential needs that the amendment sought to fill. Amendment 27, which we discussed earlier, in effect wills the end. Amendment 28A in effect wills the means. Providing the database that tells us where the market is failing means that not just the regulator but also many other parties can begin to step in to take action to fill that gap.
Many people know that this has the nickname of the CRA amendment because the focus on making sure that data are exposed comes out of the Community Reinvestment Act in the United States. It started out as a civil rights measure but has ended up exposing vacuums in lending across that country and action has been taken that follows on. I suspect it will be the work of many years, quite frankly, to help to build the appropriate financial institutions to provide these services. It may be that it is not necessarily the major banks themselves. It may be the major banks working in partnership with community development institutions, social entrepreneurs, charities and local communities. There may be many varieties of response. In the United States we have seen that response happen and we need that response here.
We have been in the frustrating situation since the crisis of 2007 of looking at the small businesses that are the backbone of any country’s economy and recognising that they have not been able to expand at their potential rate because of the lack of credit availability. That is merely one example. Again, many individuals turn to payday lenders and others with absolutely extortionate interest rates and borrow just to be able to function financially. Frankly, if you can repay a payday lender, you can certainly repay a properly priced loan. This proposal lets us address that.
I wanted to make two comments on the CRA, reflecting communications that I have had with the United States over the past week. The first is an e-mail from John Taylor, president and CEO of the National Community Reinvestment Coalition. In his e-mail of last week, attempting to explain to me how this programme had worked there, he said:
“The success of the CRA cannot be overstated. Where once lenders feared to tread, they now make loans. CRA requires that such loans be made in a safe and sound manner, which is why so few CRA mortgage loans were involved in the recent widespread fiasco in the US mortgage industry”.
It is exactly that which we seek to come out of this—organisations and arrangements that are capable of lending into these areas where the big banks have chosen not to tread. They can do it in a safe and sound manner, which many general lenders might decide is beyond their particular capabilities—but at least we can get institutions that can fill the gap.
My noble friend Lord Sharkey talked about the importance of public awareness and the ability to put data into the public arena. I am quoting now from the manual of the National Community Reinvestment Coalition from 2007, which says:
“If banks and regulators are the only stakeholders involved in a secretive or mysterious CRA process, chances increase that CRA exams and merger applications become rubber stamps without imposing meaningful obligations to serve the community. On the other hand, if the general public is actively engaged in providing thoughtful and penetrating insights and comments on bank performance, CRA becomes a rigorous process, holding banks accountable to serving community needs. Consequently, bank lending, investing, and services increase for low- and moderate-income communities”.
That, I would argue, is what we all wish to see and seek to achieve with this amendment and with the Government’s commitment that stands in its stead.
Baroness Hayter of Kentish Town
My Lords, I am delighted, nay honoured, to see my name alongside that of the future Archbishop of Canterbury, the right reverend Prelate the Bishop of Durham. If his contribution today is anything to go by, we can look forward to a thoughtful, progressive and determined ministry, which will serve this House and this country well. Like all my colleagues, I warmly welcome his appointment and congratulate the right reverend Prelate. I wish him well in the challenges ahead, which may be a little more demanding than getting an amendment accepted by the Government.
As has been said, there is a real lack of transparency in the financial sector, which is a key problem, given our reliance on competition to make the market work. Without information, choices of customers or of policy-makers are hampered. We know a few things but not enough; we know that one-third of a million small and medium-sized businesses could not get access to finance from mainstream banks in 2011. Indeed, only half of the young, fast-growing, small businesses had their loans fully met last year compared with 90% in 2007, so it is no wonder that our economy has stalled. But regulators and others cannot take action until we have these better, more precise and locally based data. Banks have to made to be more open about what and where they are lending. They are too important to work in the shadow. I am delighted that the Government have accepted this amendment, although I note that the Financial Services (Banking Reform) Bill is potentially growing larger by the amendment. I think that this is the third reference today to something that may be in the Bill. Nevertheless, we welcome the Government’s move on this matter.
Lord Sharkey
I would like to thank all noble Lords who have spoken in this brief debate, particularly my noble friend Lord Newby for his commitment to the publication of disaggregated, postcode-level data in this important area and also, in a way, for helping us to look forward to a slightly more varied Financial Services (Banking Reform) Bill than we might have expected in the new year.
Last week it was the noble Baroness, Lady Noakes, who told us what the correct technical response was to this kind of government commitment: she said it was “bingo”. I would like to echo that. I finish by saying that, although I hope we will be able to get a satisfactory voluntary agreement on this, I am enormously encouraged by the Government’s firm commitment to legislate should this not be the case. I beg leave to withdraw the amendment.
Lord Newby
Lord Newby
These amendments relate to the matter raised by the noble Lord, Lord Davies of Oldham, during earlier discussions of the FCA’s objectives. At the time, the noble Lord made the point that it seemed odd that the new section in this Bill setting out a number of indicative and non-exhaustive matters that may be considered to fall within the definition of financial crime should not include a matter of grave concern; namely, the financing of terrorism. My noble friend Lord Sassoon wholeheartedly agreed at the time that this was an odd state of affairs and promised to return to the matter on Report. That is why I am today tabling these two amendments, which have the effect of adding the financing of terrorism to subsection (3) of new Section 1H in Clause 6. This brings the provision very much into the 21st century and reflects the reality that we need our regulators to be ever more vigilant and do what they can to reduce the extent to which the financial system and firms within it can be used to finance terrorism.
I should stress that the list describing what may be considered to constitute financial crime is indicative and non-exhaustive and that there is no question that the FSA at present does not have the mandate to act in this space. It absolutely does. However, I agree with the noble Lord that this is very much a change worth making. I beg to move.
Lord Eatwell
My Lords, I am amazed at the inability of the Treasury to get this one right. My noble friend Lord Davies of Oldham pointed out that the definitions, even in this indicative list of financial crimes, do not accord with our international obligations to the Financial Action Task Force. The FATF defines the crucial area of international financial crime as money laundering, the financing of terrorism, with which the Government have now caught up, and the financing of the proliferation of weapons of mass destruction. Why are the Government not following the definition given in our international obligations? Why do they not consider including the financing of the proliferation of weapons of mass destruction—one of our key international obligations—as appropriate in the indicative list?
Lord Newby
My Lords, it is an indicative list. We have added to it on the basis of comments by the noble Lord, Lord Davies of Oldham. It is a non-exhaustive list and the question of weapons of mass destruction is already covered by the powers that we have. There can be no question but that the authorities will be bearing down very heavily if they think there is any question of the financing of weapons of mass destruction.
Lord Newby
(d) the financing of terrorism.”
Lord Newby
Lord Newby
My Lords, this group of amendments includes the government amendments which introduce a practitioner panel for the PRA. Government Amendments 32 to 36, 38, 39 and 64 introduce a standing practitioner panel for the PRA and make consequential amendments, for instance to make clear that there are now two practitioner panels—the PRA practitioner panel and the FCA practitioner panel.
We have always recognised that robust consultation arrangements will be vital if the PRA is to regulate effectively. The approach as originally envisaged in the Bill was to have a high-level duty to consult, giving the PRA substantial flexibility as to how that consultation was carried out. To ensure accountability, that approach also required the PRA to report on its consultation arrangements.
However, having listened to the arguments advanced by noble Lords, and in particular my noble friend Lady Noakes, I am persuaded that it is right that Parliament should set out more detail for the PRA about how it should go about that consultation. A standing practitioner panel will be well placed to monitor cumulative burdens of regulation and give advice to the PRA on an ongoing basis about the effectiveness of its co-ordination with the FCA.
Of course, the Government expect that the PRA will consult much more widely and draw on the expertise of academics and others and the Bill does not take away from its power to do so. The new panel will be a useful addition to these arrangements, and I hope that these amendments meet the concerns that the noble Baroness raised at an earlier stage.
I turn briefly to Amendment 37A, tabled by my noble friend Lord Flight. This would have a very similar effect to the government amendments except that it specifies that the FCA may appoint persons to the PRA’s panel. The PRA panel is, of course, intended to give advice to the PRA about the best way to achieve its objectives, and, as such, it is right that the PRA should appoint people who it thinks are appropriate to the panel. The FCA’s objectives and its expertise will be quite different and I do not think it is appropriate to have the FCA appointing people to the PRA practitioner panel.
Overall, I think that the Government’s proposed approach works well, and I am not persuaded that my noble friend’s amendment improves upon it. I hope that, having seen the government amendments and heard my explanation, my noble friend will feel able to withdraw his amendment.
Lord Flight
My Lords, I am delighted to see that my Amendment 37A has effectively been reproduced by the Government. I apologise as I note that my amendment states, “The FCA may appoint”, whereas it should refer to the PRA. I had taken the same wording for the PRA panel as for the FCA panel. It is healthy to have this structure, which will give people greater confidence to work with the PRA.
Baroness Hayter of Kentish Town
My Lords, as I said earlier today, it feels rather wrong to establish a PRA practitioner panel while excluding the views of those whose money and savings are at the heart of this industry and who depend on well regulated companies for their well-being. It also looks a bit too cosy a set-up between the regulator and the regulated community with no user-interest input. So, while we do not oppose these amendments, we do not think that they are a balanced response to the demand for the PRA to listen to those who work in financial services.
We know from the Treasury Select Committee report on RBS of the silos that existed even within the FSA between its prudential and conduct sections. With the move to two regulators, physically a mile apart, there is an even bigger risk of such silos. This will not be helped by having two separate practitioner panels, so that even within the industry there will be a split between those addressing one regulator and those focused on the other. This will be the case as regards numerous issues, including, for example, benchmarking. The proposal is for LIBOR to be overseen by the FCA, and therefore have input from the FCA practitioner panel, but how it is working out in practice, the inputs to it and the use made of it will be the preoccupation of that part of the regulated community represented by the PRA practitioner panel. This proposal might therefore not be the best that the Government could have come up with. It was not the first choice of the industry and it would not have been our first choice.
Lord Newby
I am grateful to the noble Lord, Lord Flight, for his support for what we are seeking to achieve. I am not surprised by the comments of the noble Baroness, Lady Hayter. However, I hope that the House will feel able to support these amendments.
Lord Newby
Lord Flight
“(c) seeking to sustain and encourage a competitive banking industry”
Lord Flight
My Lords, Amendments 36A and 36B are, to some extent, alternatives. I prefer Amendment 36A. As an objective for the PRA, it simply provides that the authority should be,
“seeking to sustain and encourage a competitive banking industry”.
Part of financial stability is a competitive banking industry. A considerable element of the problems that the banking industry got into were, to my mind, the result of a cartel, and cartels always cause trouble. Therefore, if you want a safer banking industry, you want it to be reasonably competitive. As it stands today, the British banking industry is not particularly competitive. I have forgotten the precise figures, but four banks have a very substantial proportion of the total deposit base. I should declare an interest as the senior NED of Metro Bank, which is pioneering banking competition—with, I am glad to report, considerable success—as a straightforward traditional retail bank.
However, I hope that the Government might at least consider Amendment 36A, which is not imposing anything particularly demanding on the PRA but which rightly includes that provision as one of the objectives in order to create a safer banking climate. Amendment 36B provides a wider definition of the banking objective of creating a competitive banking industry and, effectively, narrows the definition to the taking of deposits. It is based on the special PRA insurance objective.
Lord Newby
My Lords, I shall speak to the government amendments in this group and then I shall address the amendments in the name of my noble friend Lord Flight. In Committee we debated several amendments relating to whether the PRA should have a competition objective. Since then, the Government have considered further how the PRA should take account of competition considerations in its work, and decided to introduce provisions that, broadly speaking, require the PRA to be aware of the adverse effect that its actions can have on competition, and to minimise this wherever possible. In my view this strikes the right balance, ensuring that the PRA contributes to the creation of a more competitive environment in banking, but not to the detriment of safety and soundness. The PRA will have to explain how any rules it proposes to make are compatible with this new duty, as with its other regulatory principles.
I hope the new requirement addresses concerns that the PRA’s focus on safety and soundness will mean that it could impede competition within the financial services firms that it regulates or that it will ignore the impact of its actions or inactions on competition; for example, in setting barriers to entry for new entrants to the banking sector. In support of the new “have regard” requirement on the PRA, we are also introducing a requirement for the PRA’s annual report to include how it has complied with this new duty.
I turn to the amendments of my noble friend Lord Flight. As my noble friend Lord Sassoon stated in Committee, the FSA was required to balance multiple competing objectives and this led to a lack of institutional focus on prudential matters. Therefore, the Government remain firm on their decision that the PRA should have a single general objective against which it can be held to account by Parliament and the wider public. Giving the PRA a competition objective would also risk a new confusing overlap with the FCA’s competition objective, given that all firms regulated by the PRA will also be regulated by the FCA. As I have said, in our view a new “have regard” requirement strikes the right balance, ensuring that the PRA will provide an appropriate level of regulatory support to the need to have a more competitive environment in banking, but not to the detriment of safety and soundness.
Earlier in debates on this subject my noble friend Lord Flight suggested that there is a cartel operating in the banking sector. The OFT, rather than the FCA or indeed the PRA, has enforcement powers in relation to the prohibition of anticompetitive agreements, including cartels, in the Competition Act 1998. In addition, under the Enterprise Act 2002 it is a criminal offence for an individual to engage dishonestly in cartel activity and the Government are amending this provision to make prosecutions easier, via the Enterprise and Regulatory Reform Bill. If there is a cartel in any area of financial services then this is properly for the OFT to investigate as it has the appropriate expertise and powers. However, where I do completely agree with the noble Lord, Lord Flight, is that there are not enough banks. Whether it is Metro Bank or any of the other banks that are now getting established, there is general agreement that a more diverse and competitive banking sector will be very much to the benefit of the consumer. Therefore, while I thank the noble Lord, Lord Flight, for his amendments, we are unable to accept them and I hope that they will not be pressed.
Baroness Kramer
My Lords, I speak in support of the noble Lord, Lord Flight. I appreciate that the Government have moved in a significant way in their Amendment 37. What they have put in place is a sort of passive language that the PRA will not stand in the way and be an obstacle to the competition objective of the FSA. I would, however, very much like the Government to look at this again and see if they can turn it into the active, preferably with the same language as they use for the FCA, so that the two are aligned. The underlying reason for this is very straightforward. The PRA is the body that issues bank licences and is therefore significantly in control of the process that leads to more or fewer banks in this country. Its history has been one of discouraging the appearance of new banks. One in the last 137 years is really not the kind of target or the rate at which we want to continue in the future in order to have a more competitive environment. We need to be aware that competition is one of the underpinnings of banking reform—not competition for its own sake but competition because it impacts on standards and because it impacts on the potential for banks that provide customer service. It impacts across a whole range of behaviours, all of which are deeply embedded in the banking reform that everyone in this House is seeking.
Rather than just speak on my own account, I can refer this House to others who have spent more time than I going in detail through these issues. Having looked through many of the issues, the Treasury Select Committee of the other place, in its Financial Services Bill Report of May 2012—so it is recent—concluded:
“It remains our view that competitive markets need both freedom to exit and freedom to enter. The Bill contains no proposal for specific objectives related to competition for the Prudential Regulation Authority. We recommend that the House of Lords consider amending the Bill to make competition an objective of the Prudential Regulation Authority”.
So, that is a significant step on from the concession that the Government have made so far.
I believe that in this House many have a great deal of respect for Sir Donald Cruickshank and the work that he has done on competition. It is something of a scandal that a report produced more than a decade ago has seen so little action when evidently, in hindsight, it has been shown to have got to the heart of many of the issues. I quote from recent comments that Sir Donald has made to the Parliamentary Commission on Banking Standards:
“I can tell you that if the Financial Services Bill becomes an act in its present form, with that wording for the FCA relative to competition, it will have a minimal impact on the decisions of the FCA, because it is not a primary objective—it is qualified”.
The fact that it is not a primary objective of the FCA adds to the argument for introducing language for the PRA; it is an alternative mechanism if the FCA language is to stand. Sir Donald went on to say:
“If a regulatory body that is overseeing the activities of a sector of the economy that is central to the operation of the state does not have a competition objective … it is very likely that competition will be muted. Because it is then in the interests of both the regulated and the regulator to keep competition muted. It is easier for both parties … It would be extraordinarily difficult for the PRA in this case, if it thought that its objectives might be better delivered via better competition in a particular sector of the economy, to act to achieve that”.
His final comment was that,
“my preference would be to have both the PRA and the FCA with precisely the same competition objective and powers so that when they are asked to act together, they do so within the same framework vis-à-vis competition. Then, if there are real tensions between their other objectives, we have the FPC and the Bank itself moderating the answer”.
Lord Flight
I thank the noble Baroness, Lady Kramer, for her support, and I agree with everything that she has said. I would just add the following point. I think that government policy is perhaps not wholly joined up in that I had a party from BIS come to see me as it was conducting an investigation into the problems with licensing new banks—how long the process took and what issues might be addressed to increase competition and make it, in a safe way, easier for new banks to get started. BIS is aggressively pursuing a more competitive banking system, and although I welcome the Government’s passive guideline for the PRA, it seems to me that it is slightly unnecessarily muted.
I was delighted to read an article on the noble Lord, Lord Sassoon, in yesterday’s Sunday Telegraph. In relation to the PRA it said:
“In particular, the test”—
of its success—
“will be whether competition in the banking sector improves. ‘One of the mysteries or tragedies of the banking system is how few new entrants there have been over many decades’”.
The noble Lord, Lord Sassoon, added:
“I would like to see a world much more like the US where thresholds for new entrants are lower, not higher, because they are less systemically risky”.
Again, the noble Lord, Lord Sassoon, seems to be equally of the opinion that a more competitive banking industry is a desirable objective.
I should explain that I was using the term cartel not in a legal sense but purely reflecting that where four organisations have about 80 per cent of the business they automatically tend to behave as a cartel. If one looks at the history one will find that, first, the abolition of banks giving any services to their customers was started by Lloyds and followed by everyone else, and likewise with the abolition of banking charges. So if there are four key players the others always have to follow whatever the lead one does. They are not necessarily collaborating. It was an economic point that I was seeking to make, not a banking point.
I shall withdraw the amendment although I think that merely asking the PRA to encourage a competitive banking industry is fairly mild. I greatly welcome the Government finally crossing the line and giving the PRA some kind of competitive objective. I hope that before the Bill is enacted the Government might reconsider, as the noble Baroness, Lady Kramer, commented, moving from a rather strange, passive, tortured objective to a simple, non-too-pushy, positive objective. I beg leave to withdraw the amendment.
Lord Newby
(b) the need to minimise any adverse effect on competition in the relevant markets that may result from the manner in which the PRA discharges those functions.(2) In subsection (1)(b) “the relevant markets” means the markets for services provided by PRA-authorised persons in carrying on regulated activities.”
Lord Newby
“2LA The PRA Practitioner Panel
(1) Arrangements under section 2L must include the establishment and maintenance of a panel of persons (to be known as “the PRA Practitioner Panel”) to represent the interests of practitioners.
(2) The PRA must appoint one of the members of the PRA Practitioner Panel to be its chair.
(3) The Treasury’s approval is required for the appointment or dismissal of the chair.
(4) The PRA must appoint to the PRA Practitioner Panel such persons representing PRA-authorised persons as it considers appropriate.
(5) The PRA may appoint to the PRA Practitioner Panel such other persons as it considers appropriate.”
Lord Newby
Lord Hodgson of Astley Abbotts
My Lords, in moving Amendment 41, I will speak to Amendments 42 and 43. My noble friend Lord Sharman has put his name to them as well but sadly he cannot be with us tonight. This is familiar territory for noble Lords who took an interest in Committee, so I will endeavour to cut to the chase, emphasising both the reasons for these amendments and why I have so far failed to be reassured by my noble friend’s response. These amendments seek to change Clause 6, which introduces a new Section 3B entitled:
“Regulatory principles to be applied by both regulators”.
The clause goes to the heart of the philosophy that underpins the new regulatory structure. At present, the regulator is only required to be “proportionate” in its approach. My amendment seeks to add the words “reasonable and fair” so that there are three adjectives.
I make it clear at the beginning that this is not an attempt to plead for lower regulatory standards. It is absolutely in the interests of the City to have proper standards of regulation, which is the best way to encourage the growth and development of the financial services industry. Achieving the appropriate level of regulation requires a difficult balance to be struck. If it is too low, London’s reputation as a good and safe place to do business will be damaged and business will move away. If it is too high, the costs, both financial and in management time, will mean that innovation will be discouraged, whole areas of activity will have the stability of the graveyard and plans for the expansion of established businesses will be shelved or transferred to other financial centres. Somebody explaining it to me in the City said, “It’s like Neapolitan ice cream, you have to try to scoop out the vanilla layer that is in the middle between the chocolate and the strawberry”.
I am convinced that the new system will work most effectively if we can encourage the use of judgment and not rely merely on the rigidities of process or box-ticking. Process of course has an important part to play; it provides the framework of the regulatory system, but unless it is informed by judgment it cannot be truly effective. In earlier debates on this issue, I explained why, in my view, confining regulatory principles to “proportionate” emphasised process at the expense of judgment. I explained in Committee the definition of these three words in the Oxford English Dictionary. I pointed out that “proportionate” suggested a defined, fixed relationship, as well as a one-way one. The example that I used from the Oxford English Dictionary was:
“The toll .. on the canal is proportionate to weight”.
By contrast, “reasonable”—
“Having sound judgement; ready to listen to reason, sensible”—
suggested an element of judgment and of a two-way process.
Currently, there is a widespread view in the City that the regulatory philosophy has shifted to give a much greater emphasis to process and box-ticking, and to the regulator being seen to have covered the bases at the expense of an open judgment-based relationship. I referred earlier to the Star Chamber-like processes of the significant influence function committee, whereby individuals are left in a Kafkaesque limbo for months. I have referred to the indiscriminate use of Section 166 skilled persons reviews, 800 of which are said to be outstanding and likely to cost some £160 million to £200 million to complete. All of that will in due time be paid for by the consumer.
My noble friend Lord Sassoon, not here tonight, has pointed out that if people or firms believe that they have been unfairly treated, they can apply for judicial review. The idea that an individual would take on the might of the regulator is laughable. Whichever of my noble friend’s Bill team officials drafted that reply needs to get some exposure to the real world.
This change of approach by the regulator has caused an equal and opposite reaction in the regulated community. We have seen the emergence of plea bargaining. Just as Mr Tappin, extradited to the US on a charge that he strongly denied, concluded that a guilty plea leading to three years in a UK jail was preferable to a possible 30 years in a US penitentiary, so individuals decide to give up the fight and agree to a reduced penalty in return for a guilty plea. As one person put it to me, “I want to get on with my life”. He did not believe that he was guilty, but he had a life to live and did not have the time available or the resources that the regulator has at his disposal.
As my noble friend Lord Flight pointed out in our debate in Committee on 24 October, firms now disclose the minimum necessary to comply with the law. They have learnt that any admission of weakness will be seized on by the regulator, who all too often appears to act as if they believe that they have been told only half the story.
I do not believe that these and similar developments bode well for a future regulatory approach. How do we break this vicious circle? The early signs from the FCA are not encouraging. Some testosterone-fuelled remarks about “shooting first and asking questions after” have been quoted previously in your Lordships’ House. Could there ever be a sensible regulatory principle? The tone of Journey to the FCA, the booklet recently published, seems to give only the slightest of nods to the need to create appropriate relationships with the regulated firms. I have quoted previously at some length from that document to show what I mean and I shall not trespass on the good will of the House at this late hour again this evening.
This is not just a theoretical discussion. Once confidence in the regulator’s readiness to listen to reason is damaged or lost, we risk a move away from the United Kingdom and the City. It may be a trickle at first, but it could quickly gather pace. I hope that the Minister’s officials have drawn his attention to the article in last Friday’s Financial Times,
“MPs to probe London job losses”,
in which a lobby group points to,
“an ‘amber warning light’ flashing over the country”.
I hope that his officials have also picked up the piece in the Sunday Times about London being ousted by New York as the largest financial centre. The Bill team may disregard that as journalistic puff, but they might like to read the document from the ABI which states:
“As we discussed in Chapter 1, we would like to go further in developing a common FCA and industry sense of purpose, to deliver well-functioning markets that benefit consumers and, ideally, help the country tackle some significant public policy challenges. It is in the interests of the FCA and the industry to work together to jointly enhance their reputations. Increased public trust and greater customer confidence would be beneficial for the industry, but they would also reflect well on the FCA, and indeed the Government”.
Significantly, it then states:
“This requires a change from the FSA’s traditional approach, which did not usually convey a drive towards medium-term positive outcomes”.
These may or may not be the beginning of a trickle, but they are certainly a lot of straws in the wind of people dissatisfied with the philosophy that is being adopted and that would be enhanced if we had just the word “proportionate” left in the regulatory principles.
I shall make one final point. I said earlier that my noble friend had always maintained that there is no need to add “reasonable and fair” because “proportionate” includes that requirement. As I have explained, I do not agree. However, I am not sure that the Government really agree either. When my noble friend wrote to me, the noble Lord, Lord Phillips, and the noble Baroness, Lady Kramer, about the social investment issue that we discussed earlier today, the note read,
“Ministers are clear that this should not be done at any cost … we want to see the regulator react flexibly, openly and proportionately”.
Clearly, his officials do not believe that the definition of proportionality includes flexibility or openness, or why would they have drafted the note in that way? How then can they argue that “proportionate” includes “reasonable and fair”? If my noble friend were to say that, if I were to withdraw my amendment in favour of one that replaced the words “reasonable and fair” with “flexible and open”, he would accept it, I would be happy to do so. I beg to move.
Lord Flight
My Lords, I rise to speak most strongly in favour of my noble friend Lord Hodgson’s amendment. I hope that the Government will heed what he said. First, it is quite clear—you have only to look it up in the dictionary—that “proportionate” does not mean “reasonable and fair” as well. It has an arithmetic type of meaning. Secondly, my understanding when my noble friend Lord Sassoon was working on his plans for regulatory reform was very much that we wanted to have a well equipped central bank regulator of banks that would act in a judgmental way and be bright enough to see problems coming, not work on a box-ticking basis, and head them off as, in the past, various central banks have done quite successfully. You really cannot have a judgmental regulator without the inclusion of “reasonable and fair” in their objectives.
I add to some of the figures quoted from the FT Weekend. It was not just about New York; it also pointed out that the number of people working in the financial services industry in Hong Kong is now larger than that in London and indeed that London has lost about 100,000 jobs in the financial services industry since 2007.
Within the territory—I may have made the point in a different way before—I perceive that what happened is that light-touch regulation got a bad name and should never have been what it turned out to be. The reaction to that has been regulators turning macho. The reaction to that has been even very large and proper businesses saying, “We do not want to discuss things with the regulators. We are not going to voice our objections. We will shut up because we are frightened we will be picked on if we cause trouble”. Again, I would like to see the regulators state publicly that they want to discuss things with the industry, they welcome comments and are certainly not in the business of taking it out on firms just because they may disagree with what the regulator proposes. We have an extremely unhealthy situation right now where there is not dialogue or constructive reaction and discussion to the proposals coming out of the regulator.
I repeat: my noble friend Lord Hodgson has got it absolutely right. The amendment is fundamental to the reforms going through, if they are to work as I believe the Government intend.
Lord Newby
My Lords, these amendments again look to amend the proportionality principle to which both regulators are required to have regard when carrying out their general functions. Noble Lords will not be surprised to hear me say that that principle will play an extremely important role in the new regulatory system. It ensures that the regulators must consider whether the burdens they impose will be proportionate to the benefits that are likely to result. I am sure that that principle is universally accepted.
Amendment 42 specifically adds a requirement for the regulators to have regard to being “reasonable and fair”, as well as “proportionate”. Noble Lords will remember that my noble friend Lord Sassoon expressed support for the sentiment behind the amendment at an earlier stage. I am sure that all noble Lords would accept that nobody from this Dispatch Box would be a proponent of a new regulatory system we were creating if for one second we thought that the regulators would act in a way that was unfair or unreasonable.
Does the Bill achieve that objective? We believe that it does. The regulators will not be required to have regard to being fair and reasonable; they will have legal duties to be fair and reasonable; they go further than the amendment proposes. As we explained at an earlier stage, the regulators will have a duty under public law to act reasonably; they are also under a duty to comply with the rules of natural justice, so they will be required to follow procedures and processes that are fair.
My noble friends Lord Hodgson and Lord Flight gave a definition of proportionality. The definition that they gave was narrower than most people’s view of what proportionality means. In certain circumstances, it is a mere mathematical concept, but if I say that I am going to give a proportionate response to something that someone does to me, it is not simply calibrated or adding up figures; I think that it is seen in common parlance as being synonymous with a reasonable and fair response. As I said, the requirement on the regulators under public law to act in that way underpins that thought.
I have considerable sympathy, however, in respect of the threats that London faces as a pre-eminent financial centre. It is not surprising that Hong Kong and Singapore are growing very quickly, given what has happened to the economies in those parts of the world. You would expect growth there, although London is contracting in part because some of the activities that have been undertaken in London are no longer either profitable or, in some cases, credible. When one sees, for example, UBS downsizing significantly in London, it is not doing it because of the regulatory regime; it is doing it for fundamental business purposes, against which these provisions would have no bearing.
Where I agree with my noble friends is that we must ensure that the mindset of regulators in the UK is not negative. It has always been our intention that they would adopt a judgment-based approach; that has been stated on many occasions. That is the key to effect a change of culture in the way that the regulators work. If the amendment would have that impact, the Government might be more sympathetic to it. We simply do not believe that it would. As I said, we believe that the Bill will require the regulators not just to act proportionately but, under their more general duties, to act reasonably and fairly as well. On that basis, I hope that my noble friend will feel able to withdraw the amendment.
Lord Hodgson of Astley Abbotts
My noble friend will not be surprised to hear me say that I am extremely disappointed with that response. I thank my noble friend Lord Flight for his helpful comments, in particular, about effective regulation being a two-way street where people communicate issues and problems that they are facing, not in fear that they will have the book thrown at them but because it is in the regulators’ and regulatees’ interests to address problems and find solutions before they become unmanageable.
My noble friend falls back on the legal words that the regulator has to be fair and reasonable and that there is natural justice. I prefer his point about mindset. The fact is that “proportionate, fair and reasonable” imposes a different mindset on the regulator than “proportionate” on its own. He and the Government may have convinced themselves that the threat to London is coming from the natural effluxion of economic activity to the Far East. I think that they are in danger of being sadly mistaken. We have a chance in this Bill to address the problems that have bedevilled us until recently and to set out our stall for a new, judgment-based, regulatory regime, philosophy and approach. By these as by a series of other decisions taken by the Government, we are missing an opportunity which we will greatly regret having not taken in the years ahead. However, the hour is late, and though I am sorely tempted to divide the House just to have my own bit of testosterone, I beg leave to withdraw the amendment.
Lord Newby
“( ) the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term;”
Lord Newby
My Lords, we all accept that the financial services sector is integral to the prosperity of the wider economy. However, we have also seen what happens when light-touch regulation and excessive risk-taking by financial institutions conspire to produce the perfect storm, culminating in the recent financial crisis. The aftermath of this, of course, is still an impediment to growth in the UK. An appropriately regulated financial sector will be key to the economy’s resurgence, and I am confident that the reforms that we are making to the regulatory system in this Bill will ensure this.
However, at Second Reading and in Committee, my noble friend Lord Sassoon listened to concerns from noble Lords on all sides of the House that the regulators would be excessively focused on their remits and would act in a disproportionate way which might constrain the financial services sector from acting to support activity in the wider economy. That is why a commitment was made to return with an amendment that would require the PRA and FCA to consider the wider impact of their actions.
Amendment 44 delivers on this commitment. It requires the FCA and PRA to have regard to the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term. This is a concept with which of course it would be extremely difficult to disagree. Sustainable economy growth is desirable, and it is important that the regulators will now be required to show how they have considered this in carrying out their general functions.
To a certain extent, this gets back to the amendments that we have just debated. The regulators should not be the agents of the industry that they regulate. Regulation itself is not about enhancing the international competitiveness of our domestic financial sector, even if that is an outcome when regulation is proportionate and effective. This amendment recognises the link between an apparently appropriately regulated financial sector and the growth of the wider economy, and requires that the regulators bear it in mind. That is why the amendment I have tabled strikes an appropriate balance: it creates an expectation that the regulators must think carefully about the impact that their regulation may have on the wider economy; this is absolutely right. Seen in the light of the recent financial crisis, it is clear that taking appropriate regulatory action in good time would have served to safeguard sustainable economic growth in the medium to long term. This amendment will ensure that the regulators consider the wider economic impact of their actions. I beg to move.
Lord Hodgson of Astley Abbotts
My Lords, despite my disappointment over the last three amendments, I congratulate the Government on having brought forward this amendment. It follows the Government’s sensible decision earlier in the passage of the Bill to give the Financial Policy Committee an explicit objective of growth and employment. This amendment achieves a sensible and pragmatic solution, takes account of the needs of the economy and the priorities of business and the financial sector, and at the same time allows regulators rightly to focus on their important consumer protection and financial stability objectives.
There is a small sting in the tail for the Minister. Given that this is a new requirement for the regulators, I encourage him to ask the FCA to come forward with its vision of how it will interpret its regard to economic growth. The regulator is already up and running in shadow form, with designated leadership teams already starting to set out publicly their approach. It is clearly important that the will of the Government and indeed of Parliament is incorporated in that regulatory planning. I applaud the Government for bringing forward this amendment but would argue that in order to achieve their desired goal of supporting growth, work needs to begin now to set out how the regulators will interpret and implement this new requirement.
Baroness Kramer
My Lords, I simply want to ask a question of the noble Lord, Lord Hodgson, as well as to say that I am very pleased with the amendment, and especially with its focus on the medium to long term. It gets away from some of the short-termism that has plagued a lot of financial regulation in the past. In terms of crowd funding, I wonder whether the noble Lord is somehow distinguishing that from the peer-to-peer and crowd funding that we have talked of fairly extensively. He will know that in the UK the shoe is on the other foot; providers of both crowd and peer-to-peer funding have been coming to the Government, saying, “We need a regulatory environment in which to operate. We operate with virtually total freedom now, particularly on the lending side, which is not healthy for our industry because it creates the opportunity for rogues to come in”. It is my understanding that the Government have given a commitment to the industry that they will work with it to create exactly that regulatory environment.
The equity side is of course different because it is already regulated by the FCA, so players such as Seedrs and others have obtained the various authorisations and are beginning to build their books here in the UK. In this country, rather than having the US’s problem of excessive regulation, we are coming at it almost from the opposite situation: can we please have some measure of regulation so that the cowboys are kept out of this industry and do not destroy it by creating some terrible losses and headlines?
Baroness Noakes
Will the Minister elaborate on what he said about the role of this amendment in relation to the fostering of a successful financial services industry in this country? The UK is a service-led economy, and the largest sector within it is the financial services sector. If we are looking at sustainable growth in the UK economy in the medium term, and probably in the long term as well, we need to look to a successful financial services sector. I thought that I heard the Minister say something along the lines that this is really about the non-financial services sector and about underpinning economic growth outside it. It seems to me that the amendment enables the regulators to take into account the importance of a successful and sustainable financial services sector that is competitive internationally, because it is through that that we will produce growth in the UK economy. I will be interested in the Minister’s views.
Lord Tunnicliffe
It is not often that I rise to offer sympathy to the Minister. He was quite right to say that the generality of this amendment, which in my recollection came from all sides of the House, particularly from these Benches, was stressed by us in another place. Every now and then, one has to look at a massive Bill such as this and recognise that the final test of all legislation is that it contributes to the general good. I think that the two lines of this growth amendment produce the right reminder to the regulators that they have to contribute to the general good—I share the emphasis placed by the noble Baroness, Lady Kramer, on the medium and long term—and I warmly welcome it.
Lord Newby
I am grateful for the contributions from all noble Lords who have spoken. I do not want to go into a lengthy response at this time of the evening, but not because I do not feel that we know the answers to the questions. I shall deal with a couple of specific points that were made. My noble friend Lord Hodgson asked in particular about crowd sourcing. To a certain extent, my noble friend Lady Kramer dealt with that. Government Amendment 26, which we debated earlier this evening, goes some way to recognise the validity of crowd sourcing. As my noble friend Lord Hodgson will know, there is already one fully authorised, equity-based crowd-funding platform operating here and growing. We will continue to consider how we can help this and other platforms grow. It is all part of increasing diversity of funding, which we strongly support.
My noble friend Lady Noakes asked whether this amendment relates to the financial services sector as it relates to the rest of the economy and whether the Government accept that sustainable growth in the financial services sector is desirable. We agree that it is crucial. The financial services sector plays a major part in the UK economy, not just in helping the rest of the UK economy to grow, but in its own right. It is a very significant source of export earnings. The whole of the Bill is designed to provide regulatory underpinning that will mean that the financial services sector is safe and secure and can grow in the medium and long term. I hope that with those comments the House will feel able to support the amendment.
Lord Newby
“(da) the desirability where appropriate of each regulator exercising its functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons subject to requirements imposed by or under this Act;”
Lord Newby
“( ) the exercise of their functions in relation to the stewardship of listed companies by institutional investors, with a view to controlling systemic risk and protecting consumer interests”
Baroness Hayter of Kentish Town
My Lords, these amendments are about the heart of banking and insurance. They are about stewardship. Amendment 46A requires the FCA and the PRA to co-ordinate to ensure effective stewardship. Amendment 79B clarifies that the FCA’s powers enable it to make rules on stewardship. They give stewardship an explicit place n the Bill and confirm that the Government expect the FCA to act on this.
In the aftermath of the financial crisis it was acknowledged that institutional investors had acted as “absentee landlords”, not doing enough to challenge the risky behaviour of the banks they effectively owned. This had direct consequences for the savers whose money these shareholders were investing. The Financial Reporting Council established the stewardship code to encourage investors to behave as active owners in the companies in which they invest. This is vital to building responsible capitalism where shareholders exercise greater oversight of, for example, executive pay. As the noble Lord, Lord Turner, told the Joint Committee,
“shareholders … have major responsibilities. A lot of what went wrong with our banking system was encouraged by a set of shareholders who thought that high levels of leverage, rapid growth of EPS and aggressive acquisitions were rather sensible”.
Stewardship was identified by the Kay review as a principle of more effective capital markets. The first of his principles reads:
“All participants in the equity investment chain should act according to the principles of stewardship ... respect for those whose funds are invested or managed, and trust in those by whom the funds are … managed”.
Therefore, if this Bill is to help prevent another financial crisis, regulators must address the quality of shareholder oversight.
The FSA has a rule requiring asset managers acting on behalf of institutional clients to disclose whether they commit to the stewardship code. However, the organisation FairPensions found that the quality of such disclosures is often poor, particularly over managing conflicts of interest. Furthermore, this FSA rule does not mandate compliance and does not apply to firms acting on behalf of retail clients. It looks rather as if the FSA does not regard stewardship as a consumer issue, despite its implications for consumer outcomes.
The Bill makes no mention of stewardship despite the importance of the objectives of both the FCA and the PRA and despite the fact that shareholders have the primary responsibility for ensuring that banks are well run. Regulators simply must take an interest in how shareholders discharge this responsibility. I should add, as was mentioned earlier, that the millions of employees soon to be auto-enrolled will depend in part on their agents making sure that the companies in which they invest are well run.
Stewardship is key but there is a mismatch between the code and its enforcement. The FRC oversees the stewardship code, but does not regulate the entities to which the code applies. The PRA may take little interest because the firms are FCA-regulated. Yet the FCA may not accord this any priority, given that the system-wide problems caused by a lack of stewardship make it hard for the FCA to intervene in relation to a particular firm or group of consumers.
The current duty of co-ordination will not resolve this, since it focuses on reducing the burden of regulation on dual-regulated firms, rather than on preventing gaps in regulation between the two new authorities. Stewardship might just end up between the cracks. I feel sure that the Minister will agree on the importance of stewardship and I therefore ask him where responsibility for it will sit in the new architecture. I beg to move.
Lord Newby
My Lords, no one would doubt the importance of stewardship and of ensuring the proper conduct of those authorised persons who manage investments on behalf of others, including in relation to the exercise of voting rights. Stewardship is also a matter for a wider range of authorities than the financial regulators—in particular, the Financial Reporting Council which has issued a stewardship code.
Amendment 46A would require the regulators to include in their MoU provision about the exercise of their functions relating to stewardship. This amendment is based on the premise that the PRA has a role in stewardship. I do not think that this is a correct premise. First, only the FCA will have any powers in relation to listed companies themselves. The PRA has no responsibilities in relation to listing. Secondly, the regulated activities which cover managing investments are not PRA-regulated activities. The PRA will need to regulate an authorised person who manages investments only if the firm also has a permission to carry on a PRA-regulated activity, such as accepting deposits or effecting or carrying out contracts of insurance. In those cases, the PRA will be the prudential supervisor and the MoU will already cover the co-ordination of FCA and PRA interests in these firms.
Amendment 79B would make clear that the FCA’s powers to make general rules include the ability to make rules relating to stewardship. I can assure the noble Baroness that the amendment is not needed. First, there is no doubt that the FCA’s general rule-making powers extend to making rules about stewardship. New Section 137A to be inserted into FiSMA 2000 under Clause 23 of the Bill is quite clear. It states:
“The FCA may make such rules applying to authorised persons … with respect to the carrying on by them of … activities … as appear to the FCA to be necessary or expedient for the purpose of advancing … its operational objectives”.
Secondly, the FCA’s powers essentially follow the existing FSA powers. The FSA has already made a rule which requires UK-authorised asset managers to put statements of commitment to the FRC’s stewardship code on its websites or, if an asset manager does not commit to the code, to provide its alternative investment strategy there. I expect the FCA to continue with this rule. Far from any suggestion that the responsibility will fall through the cracks between the two regulators, it is absolutely clear that the FCA will take on the FSA’s existing powers in respect of stewardship and ensure that they are properly implemented. I hope, therefore, that the noble Baroness will agree to withdraw her amendment.
Baroness Hayter of Kentish Town
I thank the noble Lord, Lord Newby, for that. Of course, he did not answer the point that I made. When research is done, it is found that details of the “the comply or explain” commitment are not on the web—neither what is being complied with in the code nor what is there instead.
However, I thank him for the clarity of his answer that it is an FCA responsibility. That rather begs a question that I asked in Committee, and to which I may return, that the code is the responsibility of the Financial Reporting Council, which gets no mention in this Bill. In Committee, the Government refused my suggestion that there should be an MoU between the FCA and the FRC, which is regrettable. The importance that the noble Lord has said about the code and the ability of the FCA to make rules, including the commitment to follow it, strengthens the case for a better connection between them. I at least thank him for clarity on that, but we may need to come back to look at the FCA aspects. For the moment, I beg leave to withdraw the amendment.
Lord Newby
“(1) The regulators must prepare and maintain a memorandum which describes in general terms—
(a) the role of each regulator in relation to the exercise of functions conferred by or under this Act so far as they relate to with-profits insurers, and(b) how the regulators intend to comply with section 3D in relation to the exercise of those functions so far as they relate to the effecting or carrying out of with-profits policies by with-profits insurers. (2) The memorandum required by this section may be combined with the memorandum required by section 3E.
(3) If the memorandum required by this section is contained in a separate document, the PRA and the FCA must publish the memorandum as currently in force in such manner as they think fit.
(4) Subsections (1) to (3) apply only if the effecting or carrying out of with-profits policies is a PRA-regulated activity.
(5) For the purposes of this section—
(a) a “with-profits policy” is a contract of insurance under which the policyholder is eligible to receive a financial benefit at the discretion of the insurer;(b) a “with-profits insurer” is a PRA-authorised person who has a Part 4A permission, or permission resulting from any other provision of this Act, relating to the effecting or carrying out of with-profits policies (whether or not the permission also relates to contracts of insurance of other kinds).(6) The Treasury may by order amend the definition of “with-profits policy” applying for the purposes of this section.”
Lord Newby
The government amendments in this group make a change to the way that with-profits policies will be regulated under the new framework. We had a very useful debate on this subject in Committee. As my noble friend Lord Sassoon stated at the time, with-profits policies give rise to a particular risk of unfairness because the benefits that policyholders receive are largely at the discretion of the firm. The tensions between the firm treating current and future policyholders fairly, and maintaining safety and soundness, are especially acute. It is therefore difficult to separate the prudential and conduct issues in the regulation of “with-profits”, much more so than in any other type of financial services business. The Government’s main objective, therefore, is to ensure that there is clarity in decision-making in this area. The approach that was originally envisaged in the Bill was that this clarity would be delivered by giving the PRA sole responsibility for ensuring an appropriate degree of protection for policyholders in relation to the making of discretionary payments.
The noble Baroness, Lady Drake, raised a number of concerns including the possibility that excluding the FCA from decision-making would lead to consumer detriment, as the prudentially focused culture of the PRA may lead it to pay insufficient attention to the fairness element of policyholder protection. The Government have now given further consideration to this, and on balance we agree that this is an area where the Bill could be improved. We have therefore brought forward amendments that will ensure that both the FCA and the PRA have a responsibility in relation to the regulation of with-profits, rather than giving sole responsibility to the PRA. This will mean that the FCA has a full role in consumer protection, as it does in other firms. The PRA and FCA will have to put in place an MoU setting out their respective responsibilities in this area.
However, to preserve the sense that there should be a final decision-maker, the PRA will be given the power to require the FCA to refrain from actions that conflict with its general or insurance objectives, for example if it considers the FCA action could harm the safety and soundness of a particular with-profits insurer or with-profits insurers generally. To ensure scrutiny and accountability, any such veto must be published unless the PRA considers it is against the public interest to do so. The Government’s view is that this approach strikes the right balance between giving the FCA a much stronger mandate, and preserving clarity of decision-making and responsibility in this exceptionally complicated area. I hope that the amendment meets the noble Baroness’s concerns, and I beg to move.
Lord Tunnicliffe
My Lords, I thank the Government for bringing forward this group of amendments, which meets the concerns raised by the noble Baroness, Lady Drake. I particularly thank the Minister for mentioning her in his speech. She regrets that she cannot be here, but I am sure she will feel her efforts were worthwhile by resulting in this group of amendments.
Lord Newby
“3IA Power of PRA in relation to with-profits policies
(1) Where the first, second and third conditions are met, the PRA may give a direction under this section to the FCA.
(2) The first condition is that the FCA is proposing to exercise any of its regulatory powers in relation to with-profits insurers, a class of with-profits insurers or a particular with-profits insurer.
(3) In subsection (2) “regulatory powers”, in relation to the FCA, means its powers in relation to the regulation of authorised persons, including its powers under Part 24 (insolvency) but not its powers in relation to consent for the purposes of section 55F or 55I.
(4) The second condition is that the proposed exercise of the power relates to the provision of financial benefits under with-profits policies at the discretion of the insurer, or affects or may affect the amount, timing or distribution of financial benefits that are so provided or the entitlement to future benefits that are so provided.
(5) The third condition is that the PRA is of the opinion that the giving of the direction is desirable in order to advance the PRA’s general objective or its insurance objective.
(6) A direction under this section is a direction requiring the FCA not to exercise the power or not to exercise it in a specified manner.
(7) The direction may be expressed to have effect during a specified period or until revoked.
(8) The FCA is not required to comply with a direction under this section if or to the extent that in the opinion of the FCA compliance would be incompatible with any EU obligation or any other international obligation of the United Kingdom.
(9) Subsections (1) to (8) apply only if the effecting or carrying out of with-profits policies is a PRA-regulated activity.
(10) In this section “with-profits insurer” and “with-profits policy” have the same meaning as they have for the purposes of section 3F.”
“(3A) The PRA must—
(a) publish the direction and statement, or the notice, in such manner as it thinks fit, and (b) where the direction or notice relates to a particular authorised person or a particular with-profits insurer, give a copy of the direction and statement, or the notice, to that person.”
“(7) Subsection (3A) does not apply where the PRA, after consulting the Treasury, decides that compliance with that subsection would be against the public interest, and at any time when this subsection excludes the application of subsection (3A) in relation to a direction under section 3I, subsection (5) also does not apply.
(8) Where the PRA decides that compliance with subsection (3A) would be against the public interest, it must from time to time review that decision and if it subsequently decides that compliance is no longer against the public interest it must—
(a) comply with that subsection, and(b) in the case of a direction under section 3I, notify the Treasury for the purposes of subsection (5).”
Lord Newby
“( ) an assessment as to how well markets are meeting the needs of businesses and households in lower income communities,”
Baroness Hayter of Kentish Town
My Lords, we have spoken already about the need to have information from banks about their lending to different communities and sizes of business. The noble Lord, Lord Newby, said that the FCA will collect data about access to financial services. In the amendments we seek to obtain information to identify how well markets are working for lower-income communities. This is therefore broader than simply small businesses, and is about whether lower-income households can get credit, insurance, saving products and banking services. We know already, for example, that about 1.5 million people have no bank account, but we need to know more about what other groups are excluded from such services and products. We therefore ask for the FCA—which will be able to obtain the information—to research and assess whether such needs are being met and to include its findings together with any strategy for dealing with identified unmet need in its annual report. If the FCA is doing its job, it will do this anyway, but this is belt and braces so let us write down our expectations of it in this regard. I beg to move.
Lord Newby
My Lords, having agreed earlier today that we want to require the FCA to obtain and publish these data, obviously we have considerable sympathy with these amendments to the extent that they seek to flesh out how that remit should be undertaken. However, that is the end of the good news because we think that the amendments are in part unnecessary and in part inappropriate because they are too prescriptive.
We believe that there is no need for a specific provision relating to the annual report for the FCA because in paragraph 11(1)(b) of Schedule 3 we state that the annual report must cover,
“the extent to which, in its opinion, its operational objectives have been advanced”.
Given that in a series of amendments today we have strengthened the role of the FCA in looking at disadvantage and making that a new area where the FCA has a very specific responsibility, it will have to report in those areas in any respect.
Amendment 61B is very prescriptive. Our view is that with the FCA reporting on this, as with many other things that it will report on, the Bill itself should not have detailed prescription as to how the FCA should do its work. It has a legal requirement to report and it is up to the FCA to respond as it thinks fit. If there is any sense that it is falling down on its objectives, it will be reporting to Parliament and will be questioned by Parliament and Parliament will have the opportunity to raise with representatives of the FCA on a regular basis how it is meeting this and any other of its statutory objectives. I hope that the noble Baroness will feel that the outcomes that she seeks will be achieved in any event and that she can withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I warmly thank the Minister because sympathy was much more than I got when I spoke on consumer input to the PRA. So I think that I will bank that one. I thank him, too, for endorsing the spirit of my amendments on the record so that when the report comes out people will be able to quote his very wise words that that was what we were looking to the FCA for. With that, I beg leave to withdraw the amendment.
Lord Newby
“19A (1) The FCA must in respect of each of its financial years pay to the Treasury its penalty receipts after deducting its enforcement costs.
(2) The FCA’s “penalty receipts” in respect of a financial year are any amounts received by it during the year by way of penalties imposed under this Act.
(3) The FCA’s “enforcement costs” in respect of a financial year are the expenses incurred by it during the year in connection with—
(a) the exercise, or consideration of the possible exercise, of any of its enforcement powers in particular cases, or(b) the recovery of penalties imposed under this Act.(4) For this purpose the FCA’s enforcement powers are—
(a) its powers under any of the provisions mentioned in section 133(7A),(b) its powers under section 56 (prohibition orders), (c) its powers under Part 25 of this Act (injunctions and restitution),(d) its powers under any other enactment specified by the Treasury by order,(e) its powers in relation to the investigation of relevant offences, and(f) its powers in England and Wales or Northern Ireland in relation to the prosecution of relevant offences.(5) “Relevant offences” are—
(a) offences under FSMA 2000,(b) offences under subordinate legislation made under that Act,(c) offences falling within section 402(1) of that Act,(d) offences under Part 6A of the Financial Services Act 2012, and(e) any other offences specified by the Treasury by order.(6) The Treasury may give directions to the FCA as to how the FCA is to comply with its duty under sub-paragraph (1).
(7) The directions may in particular—
(a) specify descriptions of expenditure that are, or are not, to be regarded as incurred in connection with either of the matters mentioned in sub-paragraph (3),(b) relate to the calculation and timing of the deduction in respect of the FCA’s enforcement costs, and(c) specify the time when any payment is required to be made to the Treasury.(8) The directions may also require the FCA to provide the Treasury at specified times with specified information relating to—
(a) penalties that the FCA has imposed under this Act, or(b) the FCA’s enforcement costs.(9) The Treasury must pay into the Consolidated Fund any sums received by them under this paragraph.
19B (1) The FCA must prepare and operate a scheme (“the financial penalty scheme”) for ensuring that the amounts that, as a result of the deduction for which paragraph 19A(1) provides, are retained by the FCA in respect of amounts paid to it by way of penalties imposed under this Act are applied for the benefit of regulated persons.
(2) “Regulated persons” means—
(a) authorised persons,(b) recognised investment exchanges,(c) issuers of securities admitted to the official list, and(d) issuers who have requested or approved the admission of financial instruments to trading on a regulated market.(3) The financial penalty scheme may, in particular, make different provision with respect to different classes of regulated person.
(3A) The financial penalty scheme must ensure that those who have become liable to pay a penalty to the FCA in any financial year of the FCA do not receive any benefit under the scheme in the following financial year.”
Lord Newby
My Lords, this group of amendments provides for new arrangements for the use of revenue from financial services fines. In future, regulatory fines revenue in excess of enforcement case costs for the year will go to the Consolidated Fund. The new arrangements will apply to all fines imposed by new FCA and PRA and to fines imposed by the Bank of England in the course of exercising its regulatory powers in relation to financial services. This will apply to FSA fines received from 1 April 2012, so the measure will include the penalty imposed on Barclays in relation to the attempted manipulation of LIBOR.
Under the current arrangements, where enforcement action results in a firm paying a financial penalty, this is applied as a discount to fees paid by other firms in the following year. Without reform, unprecedented fines such as the Barclays fine would have represented a significant windfall to regulated firms. We have of course thought carefully about the impact on those firms which obey the rules. Compliant financial services firms will still be protected from costs directly attributable to the misconduct of others, as the regulators will be able to net off enforcement case costs before handing over penalties to the Treasury and provide a rebate to compliant firms the following year. However, in future, any benefit above these costs will go to the taxpaying public, rather than the financial services industry.
For this year, the Government have announced that £35 million received this year from fines imposed for attempted LIBOR manipulation and other unacceptable behaviour will be used to support Britain’s Armed Forces community. Additionally, £5 million will go towards the creation of the new, ground-breaking First World War galleries at the Imperial War Museum. I beg to move.
Lord Flight
My Lords, I just want to say that clearly the Government could do with the money, but the original arrangements where, in essence, fines revenue benefited the clients of financial institutions—because it is always ultimately the clients who pay for everything—seemed to be fair and appropriate. There is less logic for saying that the fines revenue should benefit citizens as a whole rather than that it should benefit the clients of all the institutions that have to bear regulatory costs, which clearly get reduced if the fines go as they did go. I rather assume that the logic is that the Government need all the revenue they can get, but with whom was this discussed to reach this conclusion? Certainly, at the time of FiSMA, I remember there was quite a bit of debate about the subject and it was concluded that the proposed arrangements then were the fair ones.
Lord Newby
Possibly the new component in the equation is just the scale of the fines that we have seen. The Government took the view that, in those circumstances, the taxpaying public as a whole should get the benefit rather than that there should be a rebate to the industry. I hear what the noble Lord says about policy-holders benefiting from that. Of course, there is a large overlap between people who have financial services products and the electorate as a whole. It is not a complete overlap. It is one of those issues where it is simply a judgment call and the Government’s judgment was that, in future, where a significant amount of money is levied as fines, the benefit of that revenue should flow to the community as a whole.
Lord Newby
“(1A) Anything done or omitted by a person mentioned in sub-paragraph (1)(a) or (b) while acting, or purporting to act, as a result of an appointment under any of sections 166 to 169 is to be taken for the purposes of sub-paragraph (1) to have been done or omitted in the discharge, or as the case may be purported discharge, of the FCA’s functions.”
Lord Flight
Lord Flight
My Lords, during the Committee stage of this Bill I made the point that it would surely be appropriate for the life industry to be represented on the PRA board, against the background that the PRA fairly openly was admitting that it did not have much interest in the life industry. It was really concerned with its banking duties. But in the event of severe bear markets in equities, life companies can get into a situation where it is desirable for the solvency rules to be suspended in the short term so as not to have a downward spiral effect on asset values. This amendment simply proposes that there should be at least two non-executive members with experience of the insurance business on the board of the PRA. The Government certainly took the point in principle that the industry should be regulated. This is designed to put modest bones on that. I beg to move.
Lord Hodgson of Astley Abbotts
I will briefly support my noble friend’s amendment. There has been quite a lot of talk about how the Bill is oriented towards banking and that particular sector of the financial services industry. The insurance industry—particularly the life insurance industry, which marches to the beat of several different types of drum, one of which, in respect of solvency, my noble friend referred to—needs to make sure that its voice can be heard, because it is such a critical part of our savings industry. While one does not wish to be too prescriptive in the way these bodies are made up, I am sure that some reassurance to the life insurance industry that its particular expertise and particular needs will not be overlooked would be welcome and desirable.
Lord Newby
My Lords, the Government absolutely agree that insurance expertise should be represented on the PRA board. That is why my noble friend Lord De Mauley said when we previously debated this matter that the Bank had committed to that principle and that there would be insurance expertise on the PRA board. However, we believe that it is up to the Bank to ensure that the board has the right balance of skills and experience to enable it to make effective decisions and deliver its objectives in respect of all the firms it regulates. The trouble with the amendment is that if we were to require in the Bill that the board should have insurance expertise, people would rightly ask why the Government had not made similar provision for other sectors such as mutuals and investment banks. We do not think that that is a sensible way to go. However, with the commitment that there will be insurance expertise on the PRA board, I hope that the noble Lord will feel able to withdraw his amendment.
Baroness Noakes
Before my noble friend sits down, when we discussed this matter before, the Minister replied in the same terms as the noble Lord, Lord Newby, has today, and said that there would be insurance expertise on the board. I sought to clarify whether that would include the non-executive component or whether there was a possibility that there would be simply an executive member. Subsequent to the Committee stage, the noble Lord, Lord De Mauley, wrote to me—I am not sure whether the letter has been circulated more widely—to say that the intention was that there would be an insurance non-executive member. Will the Minister confirm that that is still the Government’s intention?
Lord Newby
My Lords, nothing has changed since the point at which the noble Lord, Lord De Mauley, wrote his letter.
Lord Flight
Is it felt that a single representative is sufficient in relation to the overall size of the board?
Lord Newby
My Lords, neither the Government nor the Bank have said that there will never be more than one insurance representative on the board. The commitment is the other way round. We have said that there will be at least one insurance representative on the board. At some points there may be more than one, but whether or not that is ever the case, there will always be one. That is the core commitment that we wish to make.
Lord Flight
I thank the noble Lord for his comments and beg leave to withdraw the amendment.
Lord Newby
“27A (1) The PRA must in respect of each of its financial years pay to the Treasury its penalty receipts after deducting its enforcement costs.
(2) The PRA’s “penalty receipts” in respect of a financial year are any amounts received by it during the year by way of penalties imposed under this Act.
(3) The PRA’s “enforcement costs” in respect of a financial year are the expenses incurred by it during the year in connection with—
(a) the exercise, or consideration of the possible exercise, of any of its enforcement powers in particular cases, or(b) the recovery of penalties imposed under this Act. (4) For this purpose the PRA’s enforcement powers are—
(a) its powers under any of the provisions mentioned in section 133(7A),(b) its powers under section 56 (prohibition orders),(c) its powers under Part 25 of this Act (injunctions and restitution),(d) its powers under any other enactment specified by the Treasury by order,(e) its powers in relation to the investigation of relevant offences, and(f) its powers in England and Wales or Northern Ireland in relation to the prosecution of relevant offences.(5) “Relevant offences” are—
(a) offences under FSMA 2000,(b) offences under subordinate legislation made under that Act, and(c) any other offences specified by the Treasury by order.(6) The Treasury may give directions to the PRA as to how the PRA is to comply with its duty under sub-paragraph (1).
(7) The directions may in particular—
(a) specify descriptions of expenditure that are, or are not, to be regarded as incurred in connection with either of the matters mentioned in sub-paragraph (3),(b) relate to the calculation and timing of the deduction in respect of the PRA’s enforcement costs, and(c) specify the time when any payment is required to be made to the Treasury.(8) The directions may also require the PRA to provide the Treasury at specified times with information relating to—
(a) penalties that the PRA has imposed under FSMA 2000, or(b) the PRA’s enforcement costs.(9) The Treasury must pay into the Consolidated Fund any sums received by them under this paragraph.
27B The PRA must prepare and operate a scheme (“the financial penalty scheme”) for ensuring that the amounts that, as a result of the deduction for which paragraph 27A(1) provides, are retained by the PRA in respect of amounts paid to it by way of penalties imposed under this Act are applied for the benefit of PRA-authorised persons.”
“( ) The financial penalty scheme must ensure that those who have become liable to pay a penalty to the PRA in any financial year of the PRA do not receive any benefit under the scheme in the following financial year.”
“(1A) Anything done or omitted by a person mentioned in sub-paragraph (1)(a) or (b) while acting, or purporting to act, as a result of an appointment under any of sections 97, 166 to 169 and 284 is to be taken for the purposes of sub-paragraph (1) to have been done or omitted in the discharge, or as the case may be purported discharge, of the PRA’s functions.”