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Oral Answers to Questions
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Stephen Mosley (City of Chester) (Con)
1. what steps his Department is taking to increase the number of cadet forces in the UK.
Jessica Lee (Erewash) (Con)
16. what steps his Department is taking to increase the number of cadet forces in the UK.
The Minister of State, Ministry of Defence (Mr Mark Francois)
As announced by the Prime Minister and Deputy Prime Minister on Armed Forces day, the Department for Education and the Ministry of Defence are working together to enable 100 more state-funded schools to have cadet units by 2015. The extra cadet units will be formed through partnerships with existing units, or by self-standing new units, both using third-party sponsorship funding. The departments have identified £10.85 million to meet the programme’s training and equipment costs. More than 50 schools have already registered their interest, and the joint departmental team, supported by the reserve forces and cadets associations, will work with schools to develop the most appropriate cadet option for them.
Stephen Mosley
I welcome my right hon. Friend’s answer. I recently had the pleasure of attending my local sea cadets, TS Deva, which like other sea cadet groups does not receive much financial assistance from the Ministry of Defence. Has my right hon. Friend considered whether the MOD could provide more support to sea cadets?
Mr Francois
I commend my hon. Friend for supporting the cadet movement in his constituency, which I am sure will be genuinely grateful for his support. Sea Cadets receives financial assistance from the Ministry of Defence, and as part of the memorandum of understanding it received £8 million as grant in aid from the Royal Navy. It also raises money from trusts and legacies and through fund raising events locally and more widely. We wish it every success in its endeavours.
Jessica Lee
In my constituency of Erewash we are lucky enough to have fine cadets across all the armed forces, learning skills and providing exemplary services to the community. Does my right hon. Friend agree that the best way of promoting cadets is to support the community work they undertake across the country?
Mr Francois
I am happy to agree with my hon. Friend’s assertion. Activities such as those offered by the cadets and inviting armed service leaders into the classroom help to instil qualities such as confidence, self-discipline and responsibility, while developing team work and leadership skills. Experience from the military and education sectors has demonstrated how those core values can help pupils reach their academic potential and become well rounded and accomplished adults, fully prepared for life beyond school. The Government very much encourage the movement, and I am grateful that my hon. Friend gives it her personal support.
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
I support the Minister in what he is trying to do and draw his attention to the excellent work carried out at Walker Technology college and Heaton Manor school in my constituency. Is a core problem the way in which the BTEC in uniformed public services counts towards the evaluation of state-funded schools more generally? I know the Education Secretary is aware of that problem, and it will have to be overcome if cadet forces are to flourish in state schools.
Mr Francois
The right hon. Gentleman knows that part of the new programme of expansion is deliberately aimed at state schools—I take it he welcomes that. I take on board the point about the BTEC. I recently met Lord Hill, the Under-Secretary of State at the Department for Education, to discuss how we can further increase the cadet movement in schools, and when we next meet I will ensure the issue is on the agenda. It would be helpful if the right hon. Gentleman and some of his colleagues used their links with the trade union movement to ensure the fullest possible participation among trade unions in helping to support cadet units.
Mrs Mary Glindon (North Tyneside) (Lab)
Will the Minister join me in congratulating the air cadets of 2344 (Longbenton) Squadron on being made the Newcastle Evening Chronicle’s children and young people’s champion 2012 for their outstanding work with young people? Does the success of that exemplary cadet squadron show how important it is for the Minister to increase the number of cadet forces across all our communities?
Mr Francois
I am glad to add congratulations from the Dispatch Box to those of the hon. Lady, and I hope they will appear prominently in her local newspaper. She might be aware that the cadet movement has more than 140,000 members, of whom at the latest count 35,700 are members of the Air Training Corps. As the House has heard, the Government are trying to increase those numbers further because we appreciate the values that cadets bring to our society.
Rehman Chishti (Gillingham and Rainham) (Con)
3. What assessment he has made of likely UK military commitments in Afghanistan in 2015.
Jack Lopresti (Filton and Bradley Stoke) (Con)
11. What assessment he has made of likely UK military commitments in Afghanistan in 2015.
The Secretary of State for Defence (Mr Philip Hammond)
The UK and the international community are committed to Afghanistan for the long term. As part of our enduring legacy in Afghanistan, UK troops will support the continuing development of the Afghan national security forces by mentoring trainers at the Afghan national army officer academy. In addition, it is likely that some troops will remain in a non-combat role after the end of 2014 to complete the recovery of our equipment. Beyond that, no decisions have yet been made about any longer-term UK mission in Afghanistan, but detailed planning with NATO and other allies is ongoing. We are clear, however, that we will not be involved in a combat role after 31 December 2014.
Rehman Chishti
Will the post-2014 strategy also see an end to drone strikes in Afghanistan?
Mr Hammond
Speaking for the United Kingdom, it is not our intention to remain in a combat role after the end of 2014. That would include combat drone strikes.
Jack Lopresti
Does my right hon. Friend agree that international support for Afghanistan beyond 2014 must be sufficient to send a clear message to insurgents that they cannot wait us out?
Mr Hammond
There are two audiences in this matter: the Afghan national security forces, to whom we need to send a clear signal that they will have the continuing support of the international community as they take over responsibility for security in their own country, and the Taliban—the insurgents—who need to understand that they cannot simply adopt a policy of trying to wait us out, and that we will not abandon Afghanistan but will support it as it takes over responsibility for its own security and for containing the insurgency beyond the end of 2014.
Mr Bob Ainsworth (Coventry North East) (Lab)
Will the Secretary of State join me in congratulating 12th Mechanized Brigade on the degree of transition that it achieved over the summer? He will know that it will be marching to Parliament later today. How far are we are down the road to the total transition that we need to achieve by the end of 2014, and what impact is the current spate of “green on blue” attacks having on our ability to carry out that transition?
Mr Hammond
I am happy to join the right hon. Gentleman in congratulating 12 Mechanized Brigade on the considerable advances that have been made over the past six months. For all that we read in the media, and for all the siren voices attempting to tell us something different, the evidence on the ground is that steady progress is being made. Incidents of violence continue but are increasingly outside the population centres, and life in much of Helmand is increasingly returning to normal, with bazaars reopening, schools operating and health centres being constructed. Of course, the current spate of “green on blue” attacks has a significant impact, but I am confident that we will not allow it to deter us from our mission.
Paul Flynn (Newport West) (Lab)
The Royal United Services Institute reported in September, after it had met some senior Taliban people, that the Taliban were prepared to do a deal for the continuing presence of American troops after 2014, but not prepared to do a deal with Karzai because they regard him as weak and corrupt. That would mean a return to Taliban rule in parts of Afghanistan. What is the Secretary of State doing to prepare the British public for that eventuality?
Mr Hammond
The hon. Gentleman will know, having been present at most of these exchanges, that in the 13 months for which I have been in this job I have repeatedly said that although the military dimension is important, a lasting solution in Afghanistan necessarily involves political reconciliation. As we in this country know perhaps more than anyone else in the world, reconciliation in war-torn, strife-torn countries invariably means some compromise with the people we have been fighting. There will have to be a compromise in Afghanistan if we are to get a sustainable solution.
Patrick Mercer (Newark) (Con)
Further to the question asked by the right hon. Member for Coventry North East (Mr Ainsworth), the Secretary of State has already reflected on the ugly and demoralising nature of so-called “green on blue” attacks. What else can be done to minimise them over the years that lie ahead?
Mr Hammond
Our commanders on the ground have already taken a significant number of steps to reduce the risk of “green on blue” attacks—to reduce the number of opportunities for the perpetration of such attacks. As we go through the cycle of transition, we will expect there to be mentoring and assistance at increasingly higher levels of command. There will be fewer and fewer instances of mentoring at tolay and even kandak level as the situation proceeds, which will in itself reduce the opportunities for such attacks.
Diana Johnson (Kingston upon Hull North) (Lab)
4. How many joint strike fighter jets his Department plans to procure.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
The UK took delivery of its first joint strike fighter aircraft in July and its second in October, both of which are both operating from Eglin air force base in Florida, where they are undergoing operational testing. A third aircraft is due in the second quarter of 2013. Decisions on the overall order for joint strike fighters will not be made until the strategic defence and security review in 2015.
Diana Johnson
When will the Minister be able to tell the House precisely how much the Government’s U-turn to procure the F-35B rather than the F-35C, which the SDSR committed to, will cost the taxpayer?
Mr Ben Wallace (Wyre and Preston North) (Con)
The previous Government entered into the joint strike fighter agreement without securing the source access code to allow British manufacturers to make British products for our planes without having to go via the American prime contractor. Will the Minister update the House on what progress has been made in acquiring the very important source data?
Julie Hilling (Bolton West) (Lab)
5. What recent progress he has made on enabling businesses to employ members of the reserves.
Nadhim Zahawi (Stratford-on-Avon) (Con)
15. What support he has received from major employers for the proposals set out in his reserves Green Paper.
The Minister of State, Ministry of Defence (Mr Mark Francois)
The Government are fully committed to delivering reserve forces that are integral to and integrated with the regular forces, and we are investing an additional £1.8 billion over the next 10 years to meet that aim. Our aspirations, as set out in the “Future Reserves 2020” Green Paper, will require a closer relationship with employers, based on partnering and on giving greater predictability and certainty to the employer, the reservist and the Ministry of Defence.
Julie Hilling
What specific support have the Government put in place for small and medium-sized enterprises to employ reservists, given that SMEs will face the greatest struggle to achieve this?
Mr Francois
When we mobilise a reservist we already provide financial assistance to employers, to help both with recruiting an additional employee and to pay some marginal additional costs for their employment in certain circumstances. We are examining this area extremely closely in the context of the Green Paper and if we have further proposals to announce to strengthen things even further, we will make them plain in the White Paper in the spring of next year.
Mr Francois
I have told the House that we provide some financial support to employers when we mobilise a reservist. We are examining this closely in the context of the Green Paper, but I encourage my hon. Friend to submit any specific suggestions to the Green Paper process. I should also add that companies such as BT, Carillion, Serco, the Automobile Association and BAE Systems have shown their support to our reservists in the consultation process, but clearly we would like to see more contributions from SMEs, too.
Mr Kevan Jones (North Durham) (Lab)
Earlier this year, the Government announced quite radical changes to our reserve forces. I understand that the recruitment campaign has already begun. What confidence does the Minister have that those recruited will have their employment rights protected without a change in the law? Will he update us on where the Department is with the review of Defence Estates?
Mr Francois
I take a close interest in this matter. I spent the best part of a day at Army HQ last week going in detail through proposals to increase the size of the reserve forces. We are considering the issue extremely closely. The Green Paper asks employers and others whether we might need primary legislation to change some of the terms, but as the consultation has only just begun it is perhaps a little rich of the hon. Gentleman to ask me what the answer is.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
6. What steps he is taking to enable small and medium-sized enterprises to bid for procurement contracts with his Department.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
As set out in the White Paper published earlier this year, increasing opportunities for SMEs in defence procurement is an important strand in our open procurement policy. We have set up an SME forum, which I chair, precisely to identify barriers to participation. Specific measures include standardising and simplifying procurement systems, promoting opportunities for SMEs through e-procurement mechanisms and marketplace events, and working with our prime contractors to boost opportunities for smaller businesses in the supply chain.
Gordon Henderson
I welcome that statement. I was a senior contracts officer with GEC Marconi Avionics, so I would like to think I know something about the complexity of the MOD procurement process. Large companies such as BAE Systems have access to teams of expert contracts officers who can plough through the bid documents. Sadly, SMEs often do not have that luxury, which puts them at a disadvantage. Will my hon. Friend consider how the bid process can be made less complicated and more user-friendly for SMEs?
Mr Dunne
I am grateful to my hon. Friend for demonstrating his expertise and bringing it to bear on our complicated procurement processes. We recognise that smaller companies, unlike the larger ones, do not have the resources to focus on putting bid proposals together, which is why we are introducing a number of measures to make that easier for them. They include publishing on web portals all tenders over £10,000, streamlining contract processes and speeding up invoice and bill payment systems, which will make it more convenient for SMEs to receive timely payments. We are also considering requests for interim payments on procurement.
Angus Robertson (Moray) (SNP)
According to the MOD’s own statistics, only 2% of SME contracts are given to Scottish companies. Meanwhile, the new Defence Business Services organisation is set to have 1,672 members of staff, only 13 of whom will be in Scotland. Is the Minister not embarrassed by that track record?
Peter Luff (Mid Worcestershire) (Con)
The Minister has explained to the House how much has been done to make it easier for smaller businesses to do business with the MOD. One outstanding action item is publication of the audited equipment programme. A month ago, the Secretary of State told me that it would be published “shortly”. How shortly is “shortly”?
Mr Dunne
I pay tribute to my predecessor for his work in championing the role of SMEs in defence procurement. As far as his direct question is concerned, as he knows the equipment plan is with the National Audit Office, and as soon as it has finished its deliberations the Department will publish it, alongside the NAO’s review.
Mr Jim Murphy (East Renfrewshire) (Lab)
SMEs will be affected by any decision by BAE Systems to shut any of its three yards in Portsmouth, Scotstoun or Govan. Will the Minister update the House on behalf of the businesses and workers in Glasgow who want to know whether, if they were in an independent Scotland, they could compete for work on Royal Navy warships? Will he also update the House to address the concerns of SMEs and workers in Portsmouth who will want to know about any future order of two offshore patrol boats that could fill any production gap?
Mr Dunne
The shadow Secretary of State is well aware that under EU procurement rules any nation can direct warlike stores, such as large warships, to be built within its national boundaries. That would mean that in the very unlikely event of a Scottish independence vote leading to an independent Scotland, a new Scottish Government could place orders for Scottish warships to be built in Scottish yards, whereas the residual UK Government could direct warships to be built in their own yards, if they decided to take advantage of the EU exemption. As far as Portsmouth is concerned, the terms of business agreement entered into by the previous Government left the decisions about how the company should rationalise the ship building programme for another day. Having placed large orders that would run beyond the general election, they were not prepared to take tough decisions on what should happen to consolidate the industry.
John Glen (Salisbury) (Con)
7. What assessment he has made of the success of Operation Atalanta.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
Operation Atalanta is one of three multinational counter-piracy operations in the Indian ocean that have played an important role in the dramatic reduction in piracy observed over the past 12 months. Operation Atalanta assesses that there are now only five vessels and around 140 hostages held captive off the Somali coast. That compares favourably with May 2011, when there were believed to be 23 vessels and about 500 hostages being held.
John Glen
I thank my hon. Friend for that answer. Deterring piracy at sea is essential, but it addresses the symptoms, not the causes, of Somali criminal activity. Will he commit the Government to tackling the deeper political causes by supporting the parallel EUCAP NESTOR mission on the ground in Somalia?
Dr Murrison
My hon. Friend is right that the piracy will not be resolved entirely at sea, and EUCAP NESTOR is showing early promise of delivering effect. The subject will be returned to at the next EU Foreign Affairs Council early next year. I pay tribute to the EU training mission in Somalia, which is showing early promise and already training people to ensure that we tackle this problem at its heart and do not rely simply on our undoubted success offshore.
Andrew Gwynne (Denton and Reddish) (Lab)
But what assessment has the Minister made of the links between al-Shabaab and piracy in the region, and what are the Government’s long-term plans to tackle the growth of extremism operating both within and out of Somalia?
Dr Murrison
We have seen some early signs of improvement politically and economically in Somalia. It is absolutely essential that the root causes of insurgency are dealt with at source, and that is happening. The international community is absolutely committed to dealing with this and tackling the menace that al-Shabaab poses.
Sir Nick Harvey (North Devon) (LD)
8. What assessment he has made of the scope for improved European defence co-operation.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
We believe that there is scope for improved European defence co-operation focused strongly on supporting operational effect and capability. We would encourage closer co-operation through either multilateral or bilateral initiatives, such as the UK-France Lancaster House treaty signed in 2010. That is becoming increasingly important as nations face reductions in their defence budgets.
Sir Nick Harvey
I commend the Minister for his participation in the European Defence Council last week and welcome the subsequent announcements on pooling capabilities, helicopter training and air-to-air refuelling, but with America rebalancing its defence away to the Pacific what is the future of UK involvement in the European Defence Agency?
Dr Murrison
The United Kingdom stood alone last Monday in insisting on flat cash for the European Defence Agency. I am very pleased that we did so, as we have been forced, because of the deficit we inherited, to make fairly substantial cuts to the defence budget and it would have been perverse to vote through an increase in the EDA budget. It is absolutely crucial that the EDA takes every opportunity to ensure that it extracts efficiencies from its programmes, and it will have our support in levering in effect, but the emphasis must be on effect and capability, not institution building.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
On European defence co-operation, the Minister will be aware that the separatists in Scotland have recently announced that they would wish a separate Scotland to join NATO at the same time as getting rid of Scotland’s nuclear weapons—a very difficult thing to achieve. Is he aware of any discussions between the Scottish Government and NATO?
Dr Murrison
I think that it would be premature for the Scottish Government to engage with NATO, as I confidently expect the good people of Scotland—people of sound good sense—to reject independence at the forthcoming referendum.
Michael Fabricant (Lichfield) (Con)
Following the successful deployment of Iron Dome and the trials of David’s Sling, what discussions has the European Defence Agency had with Israel regarding procurement of those two vital tools?
Dr Murrison
It is important to stress that NATO is the cornerstone of our collective defence. I know that my hon. Friend would agree with that, but it is also important for the European Union to ensure that it engages with what might be called its near abroad. Colleagues—defence Ministers—across the EU keep a very close eye on developments.
Mr Russell Brown (Dumfries and Galloway) (Lab)
One of the objectives of the UK-France defence accord was the potential jointly to develop a new unmanned combat air vehicle. Has agreement been reached with France on its development, and if not what is causing the delay?
Dr Murrison
I thank the hon. Gentleman for his question. We have agreed the assessment phase, which is under way, and we will have further to report in the fullness of time. I am very pleased that he raises the important liaison that we now have with France. I pay tribute to my right hon. Friend the Member for North Somerset (Dr Fox) for securing that in 2010 and for the two Lancaster House treaties that we now have with France. I look forward to ever closer co-operation with France, noting of course that France spends a proper amount on defence; we would like other European colleagues to follow suit.
Joan Walley (Stoke-on-Trent North) (Lab)
9. What his policy is on combat immunity; and if he will make a statement.
The Minister for the Armed Forces (Mr Andrew Robathan)
Combat immunity is an important legal principle that the MOD is committed to defend. The courts have consistently held that a soldier involved in combat or under an immediate threat should be able to focus on the task of fighting. Constant assessment of personal liability on the battlefield could lead to paralysis across the chain of command and result in military failure and increased loss of life through operational inefficiency. Imposing a duty of care in those circumstances is not appropriate and would reduce operational effectiveness. However, there is a recognised mechanism to compensate for injury or death under existing statutory schemes.
Joan Walley
Does the Minister agree, though, that the MOD’s decision not to make a further appeal against the ruling of the Court of Appeal in the case of the late Corporal Stephen Allbutt—I pay tribute to his widow’s courage—is a landmark in respect of combat immunity? Given that the clear consequences of that ruling are that the MOD owes a duty of care properly to equip its troops when they go into battle, does the Minister agree that an urgent review of procurement and training—never mind statutory schemes—is needed in the interests of the safety and morale of our armed forces?
Mr Robathan
You will understand, Mr Speaker, that it would be inappropriate for me to comment on any ongoing legal procedures. The hon. Lady should realise, however, that we are absolutely committed to defending the position of combat immunity. It would be very worrying if soldiers, sailors and airmen in battle were concerned about looking over their shoulders the whole time for fear of legal challenge. Of course we wish people to be properly trained and properly equipped; we are determined that that should happen and we believe that they are so.
Andrew Bridgen (North West Leicestershire) (Con)
What legal advice is provided to battlefield commanders to make sure that they fully appreciate their obligations?
Mr Robathan
All battlefield commanders of whatever rank are given appropriate training and advice on the legal position, from the Geneva convention onwards, and on training with equipment and the like.
Dan Jarvis (Barnsley Central) (Lab)
10. What recent progress there has been on security transition in Afghanistan.
The Secretary of State for Defence (Mr Philip Hammond)
Transition of security to Afghan control, as agreed at the Lisbon conference in 2010, remains on track to be achieved by the end of 2014. The Afghan national security forces are taking an ever greater role in their domestic security. They now have lead responsibility in areas that are home to three quarters of the population, including all 34 provincial capitals and the three districts that make up Task Force Helmand’s area of operations. We expect that by mid-2013 all parts of the country will have entered the process and that Afghan security forces will be in the lead for security nationwide. The progress of security transition will allow ISAF, gradually and responsibly, to draw down its forces to complete its combat mission by 31 December 2014.
Dan Jarvis
I thank the Secretary of State for that response. He will know that, to date, not one senior official or political figure in Afghanistan has been successfully prosecuted for corruption or other abuses, despite the many major scandals that have taken place. Does he agree that governance and the rule of law will be more, rather than less, critical to progress in Afghanistan after the security transition, and how does he propose to ensure that it is at the heart of our engagement post-2014?
Mr Hammond
I am glad to be able to say that I absolutely endorse the hon. Gentleman’s view. As I said a moment ago, what happens in the military space is only one part of the overall equation. There needs to be political reconciliation, progress on building good governance, particularly on the eradication of the extreme corruption that is still prevalent in Afghanistan, and progress on developing relationships with Afghanistan’s neighbours.
Mr Philip Hollobone (Kettering) (Con)
Given the limited capacity of the RAF airbridge and the difficulty of transporting stuff overland to seaports in Pakistan, how much equipment do we expect to leave behind when we finally exit Afghanistan?
Mr Hammond
Our intention is to extract all equipment whose value to the armed forces is greater than the cost of extraction and recuperation. We hope to be able to use the southern route overland via Pakistan and we are also negotiating northern lines of communication through Uzbekistan, Kazakhstan and Russia, but in extremis we have the capacity to bring equipment out by air.
Derek Twigg (Halton) (Lab)
One of the key factors in ensuring a secure Afghanistan is, of course, the position of Pakistan, whose security services have given help to the insurgents and the Taliban over recent years. Will the Secretary of State update the House on what he thinks the latest position is with regard to the help and support given to the Taliban and insurgents by Pakistan’s intelligence services?
Mr Hammond
I am glad to say that relationships between Afghanistan and Pakistan are improving significantly. The recent visit of the High Peace Council to Islamabad marked an important step forward in building collaborative relationships in the region. Both countries understand the threat that the Taliban and other insurgent organisations pose to their security, as well as the benefits of collaboration in dealing with that threat. We are making significant progress, but the hon. Gentleman will know that Pakistan is not a simple country, that the situation is complex and that the issue will require a lot of effort for many years to come.
Mr Tobias Ellwood (Bournemouth East) (Con)
The Secretary of State will be aware that British troops preparing for deployment to Afghanistan undertake important training at the British base in Laikipia in Kenya. Will he join me in paying tribute to those who make sure that those troops receive the necessary training for Afghanistan? Will he also look into the absence of navigation aids at Laikipia air base, which means that British troops are prevented from flying directly to the training area and instead have to travel the long route via Nairobi?
Mr Hammond
I will indeed join my hon. Friend in paying tribute to those who make possible that valuable training facility in Kenya. He has raised an issue that I was not previously aware of; I will look into it and write to him.
Mr David Ruffley (Bury St Edmunds) (Con)
12. What estimate he has made of the cost of UK military intervention in Libya.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
We currently estimate the net additional cost of Operation Ellamy at £199 million.
Mr Ruffley
I thank the Minister for that reply. After the first Gulf war, Her Majesty’s Government recovered £2 billion from Kuwait and other countries to help to cover the cost of our operations there. Is he able to tell us that the Secretary of State will be unyielding in his demands of the oil-rich Libyan Government to help to cover the £200 million cost underwritten by the British taxpayer for the Libyan intervention?
Dr Murrison
I thank my hon. Friend for his question; I know that he takes a deep interest in these matters. It is important to emphasise that Libya’s security is our security, and this was a mandated operation. We will not seek to recover costs from Libya; that would not be the correct course of action. I look forward to Libya rejoining the international community of nations and to the UK and Libya proceeding on that basis.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
What assessment has the Minister made of the security of UK staff in our diplomatic buildings in Libya following the attack on the US embassy?
Dr Murrison
That is primarily a matter for the Foreign Office, but I will try to reassure the hon. Lady. When I was in Tripoli recently, I visited UK staff, both uniformed and civilian. We have a small presence of staff embedded in the interim Government to assist them. Our staff are, of course, protected according to the risk assessment on the ground.
Mr James Gray (North Wiltshire) (Con)
13. Whether he has met the commander of 12th Mechanized Brigade following its return from Afghanistan.
The Minister for the Armed Forces (Mr Andrew Robathan)
My right hon. Friend the Secretary of State for Defence met the commander of 12th Mechanized Brigade, Brigadier Doug Chalmers, during his last visit to Afghanistan in September. On 23 October, the Secretary of State and I were pleased to meet the commander in Parliament when he briefed both Houses and all parties on the brigade’s deployment on Operation Herrick 16.
Mr Gray
I hope that the Minister for the Armed Forces, other Ministers and all Members of the House are aware that some 20 minutes from now, there will be another opportunity to meet Brigadier Doug Chalmers and the 120 soldiers of 12th Mechanized Brigade as they march, led by the band of the Grenadier Guards, through the gates of Parliament and down to the north door of Westminster Hall. As we welcome them, I hope that hon. Members will remember not only those who have not come home with the brigade, but those who have come home with life-changing injuries and the families who support our soldiers, sailors and airmen as they go off to operations in Afghanistan.
Mr Robathan
I pay tribute to my hon. Friend for setting up the march-ins at Parliament. They are a valuable and tangible sign of the respect that we owe our armed forces when they go to war on our behalf. He has done a great deal to organise them. I share his sentiments about those who have not returned, the families of the bereaved and those who have come back with life-threatening illnesses. I shall be at the march-in at some stage this afternoon or this evening, and the Secretary of State hopes to be there as well.
Mr Speaker
I shall be here, but I hope that the hon. Member for North Wiltshire (Mr Gray) will pass on my respect and appreciation, which I would have preferred to convey in person.
Toby Perkins (Chesterfield) (Lab)
I echo the Minister’s comments on the massive contribution of 12th Mechanized Brigade.
I recognise what the Secretary of State has just said about the importance of the message that we send to the Taliban and the Afghan army, but what message will be sent by the reduction in the size of the Afghan army in respect of the security of Afghanistan?
Mr Robathan
The total size of the Afghan national security forces is approaching 352,000. It is for Afghanistan to make decisions for the future. We continue to support the democratically elected Government of Afghanistan, as do the Opposition.
Mr Iain Wright (Hartlepool) (Lab)
14. What plans he has for the future of Defence Equipment and Support; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
Our evaluation of how best to improve the delivery of procurement and support is progressing well. A soft market testing of the potential for a Government-owned contractor-operated model is due to conclude before Christmas, and the outcome of the value-for-money comparison is expected shortly. Subject to those conclusions, we are on track to make decisions on how we intend to proceed in the new year. In the meantime, we continue to drive efficiency and improvements within Defence Equipment and Support.
Mr Wright
Defence procurement is a key part of an active industrial strategy. Defence firms need certainty to plan and invest for the long term. There has been far too much uncertainty over the future shape and direction of Defence Equipment and Support. Notwithstanding what the Minister has said, the position is still vague, with promises made about the new year. Will he provide further clarity and, in so doing, help British businesses to invest for the long term?
Mr Dunne
The single most effective answer to the hon. Gentleman’s question is that this Government have removed the overspend in the defence equipment budget that we inherited from Labour. By narrowing the spend for the next 10 years into a £160 billion envelope, it is now clear that some 95% of that money is committed and the contractors know that the programmes will be delivered. That was not the case under the previous Government.
Alison Seabeck (Plymouth, Moor View) (Lab)
The success of the future structure of Defence Equipment and Support lies at the heart of our ability to deliver Future Force 2020. The concerns raised by the industry about exactly how a Government-owned, contractor operated model would work therefore need to be taken seriously. The Minister’s predecessor, the hon. Member for Mid Worcestershire (Peter Luff), also highlighted the delay to the announcement on the equipment programme. My hon. Friend the Member for Hartlepool (Mr Wright) was absolutely right about the Department for Business, Innovation and Skills perspective—it is vital that the defence sector has certainty. Will the Minister undertake to come to the House at the earliest possible opportunity in the new year to set out the detail of the GOCO model and give us a definitive list of the projects that will be overseen by it?
Mr Dunne
I thank the hon. Lady for her question. This Government are engaging with industry more proactively than has been the case in recent times. We have just announced the defence growth partnership in conjunction with the Department for Business, Innovation and Skills to drive forward how we support defence contractors in growing the economy in this country. Once we have made the decision, we will make an announcement to Parliament in the usual way.
Caroline Nokes (Romsey and Southampton North) (Con)
17. What comparative assessment he has made of the value and terms of armed forces pensions and other public sector pensions.
Caroline Nokes
As a member of the armed forces parliamentary scheme, I often have the opportunity to discuss pension provision with serving members of the armed forces. Surprisingly, not only those coming to the end of their term of service but young soldiers too raise the issue. What steps are being taken better to communicate to service personnel the future terms and conditions of their pensions?
Mr Francois
When I was in Camp Bastion two weeks ago for the remembrance celebrations, I had the pleasure of meeting a dozen or so regimental sergeant majors, who impressed upon me—at close range, shall we say?—a number of questions about pensions. Perhaps I could help to reassure them and my hon. Friend. John Moore-Bick, who heads the Forces Pension Society, which is expert in this matter, has said that the new pension scheme is
“as good as it gets”.
We are redoubling our efforts to explain that to serving personnel, including by developing a new pensions calculator from the middle of next year, so that they can plug in all the details on how pensions will affect them and get a clear answer.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
Last week, the Secretary of State announced plans to allow serving personnel to access their pension funds early to buy a house. Will the Minister confirm that an individual who takes up that offer will therefore receive lower pension payments in future?
Mr Francois
Lord Hutton’s report confirmed that the armed forces pension schemes in general stood up very well compared with others in terms of benefits to members. We should bear it in mind that, unlike many other schemes, the armed forces scheme will remain non-contributory and that the normal pension age will be lower than it is for most other schemes. Personnel will also qualify for an early payment at age 40. We are looking at incentives to assist servicemen to purchase their own homes. That is actively being worked on but no final decisions have been taken.
Iain Stewart (Milton Keynes South) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Defence (Mr Philip Hammond)
My first priority is, and will remain, the success of the operation in Afghanistan. Beyond that, my priority is to deliver the military tasks for which the Ministry of Defence is mandated.
The MOD is also engaged in a major project of transformation to ensure the behavioural change needed to maintain the budget in balance and deliver the equipment programme so that our armed forces can be confident of being properly equipped and trained. With the benefit of a balanced budget to build on, we now need to focus on the future, and in particular on building the trust and confidence of the people who make up defence. Over the next few weeks, we will publish—jointly with the Foreign and Commonwealth Office—the defence engagement strategy, and I will announce the decisions emanating from the review of Army basing in the UK as we bring our troops home from Germany.
Iain Stewart
Has my right hon. Friend received any evidence from the Scottish Government on the economic and employment prospects of people in Gairloch if Scotland becomes independent and if a non-nuclear defence policy is announced?
Mr Hammond
I have received no evidence whatever, but this is not simply about people in Gairloch: the impact of the 6,000-plus jobs at Her Majesty’s naval base in Clyde is felt throughout the entire west of Scotland. The removal of those jobs or any erosion of their numbers would be a devastating blow to the Scottish economy.
Mr Jim Murphy (East Renfrewshire) (Lab)
The veterans interview programme aims to get private sector employers to guarantee job interviews for unemployed veterans. This scheme was designed by the Labour Opposition and is today being rolled out nationally by Jobcentre Plus. For months, Ministers have been asked to do something similar in the public sector. Will a Minister—any Minister—update the House on the progress made in getting public sector employers to guarantee job interviews to suitably qualified unemployed veterans?
Mr Hammond
I am not sure from the right hon. Gentleman’s tone whether he is pleased or saddened by the news today. He does not sound very joyous about it. The Department for Work and Pensions is rolling out a programme to ensure that veterans leaving the services are guaranteed interviews. I should have thought that he would be rather pleased about that.
Let me make a further point. Any suggestion that people leaving the services are unable to get work would not do them any favours. More than 90% of people leaving the services have found work within six months, and more than 97% within 12 months. I would have thought that that was rather a good record to build on.
Amber Rudd (Hastings and Rye) (Con)
T3. May we have an update on the Government’s policy towards Syria and a commitment that British ground troops will not be sent there?
Mr Hammond
I can tell my hon. Friend that our policy in relation to Syria remains that we believe that a diplomatic and political solution is necessary to deliver a sustainable solution to the crisis. While we pursue such a solution, we will not rule out any option that is in accordance with international law and might save innocent lives in Syria and prevent the destabilisation of a region that is of critical importance to the United Kingdom.
Kevin Brennan (Cardiff West) (Lab)
T2. Given the Government’s plans to impose the bedroom tax on the parents of serving soldiers, will the Secretary of State at least undertake to invest the Department’s forecast underspend in forces’ welfare, rather than returning it to the Treasury?
Mr Hammond
I, too, have seen speculation in the media that the Department will be underspending and returning money to the Treasury. It is our policy to operate a prudent approach to our budget, but—unlike the previous Government—it is also our policy to work closely with our colleagues in the Treasury to ensure that we deliver the equipment programme and support the armed forces in the most cost-effective way possible, and over a number of years, not just over a single year.
Stephen Mosley (City of Chester) (Con)
T5. Following recent international cyber-security incidents such as the Flame and Shamoon viruses, what recent steps have been taken to secure MOD systems and critical national infrastructure?
The Minister for the Armed Forces (Mr Andrew Robathan)
My hon. Friend will understand that I would not wish to go too deep into security systems. What I can say is that we take the threat of cyber-attack very seriously. That applies both to the commercial world and the public sector in the UK, including defence. We are pursuing this issue with other organs of Government and we are also ensuring that we have niche capabilities within defence that can assist us in protecting against cyber-attack.
Jim McGovern (Dundee West) (Lab)
T4. Does the Secretary of State agree that he should make an assessment of the contribution made by UK armed forces and related MOD contracts to Scotland’s economy? I am a member of the Scottish Affairs Committee and our inquiry, although not yet complete, would seem to suggest that the contribution is immense and the implications of separation would be devastating. Do any of the Ministers agree that the loss of jobs and investment is simply too high a price to pay if the MOD and UK armed forces leave Scotland?
Mr Robathan
The hon. Gentleman will not be surprised to know that all MOD Ministers agree with what he said—not just “any” of them. Furthermore, probably all Members in the Chamber at present would agree with him.
Nick de Bois (Enfield North) (Con)
T6. I have had the opportunity to visit a number of living quarters as a member of the armed forces parliamentary scheme. What investment are the Government making to improve the quality of both single and family accommodation for our armed forces?
The Minister of State, Ministry of Defence (Mr Mark Francois)
I assure my hon. Friend that we take the issue of accommodation very seriously. Within a week of my appointment, I attended an Army Families Federation conference where one corporal in particular raised with me the issue of his quarters at Aldershot. Two weeks later I went to knock on his door to see them for myself. I hope that that counts as taking it seriously. We have recently put £100 million back into the budget for accommodation. We anticipate further announcements on this subject in the context of the basing review.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
In his exchanges with my hon. Friend the Member for Barnsley Central (Dan Jarvis), the Secretary of State agreed about the need to deal with corruption in Afghanistan. I understand that the first prosecutions in relation to the Kabul bank scandal are taking place. Is the Secretary of State convinced that there are any prisons in Afghanistan at the moment that would be secure enough to hold anybody convicted?
Mr Philip Hammond
Strictly speaking, this is not a matter for the Ministry of Defence. However, the working of the Afghan justice system does concern us, not least because our normal practice until recently has been to transfer UK detainees into the Afghan justice system to allow them to them to be processed. There is a great deal of work to be done to get the Afghan justice system into a satisfactory state.
David Mowat (Warrington South) (Con)
T7. Some weeks ago in Prime Minister’s Question Time I raised an issue relating to my constituent Emma Hickman, whose fiancé had died in Afghanistan and who was having difficulty determining a paternity because a DNA sample had not been released by the MOD. May I thank the Minister of State for the work he has done on this case, which is almost resolved? Will he consider asking the Army to hold DNA samples routinely for those on active duty, as happens in France and the United States?
Mr Francois
I thank my hon. Friend for his kind remarks. It has been a long journey, but I believe we are nearly there. On his wider question, it is current Ministry of Defence policy to offer all military deployable MOD civilians and other entitled personnel the opportunity to provide reference samples suitable for DNA analysis. This is entirely voluntary and is to enable identification post mortem, should that unfortunately be required. The policy is under review, and I can confirm that the United States position is being considered. I expect this work to be complete by spring 2013.
Nick Smith (Blaenau Gwent) (Lab)
The Army cadet forces outreach programme aims to reach troubled youngsters and deter them from a life of crime. Will the Secretary of State commit to expanding this programme?
Mr Philip Hammond
We certainly support the expansion of cadet forces. Earlier, a colleague talked about the programme already in place to deliver an additional 100 cadet forces. I cannot give the hon. Gentleman a commitment at the Dispatch Box that we will be able to go beyond that, because of the resource implications. However, we are certainly reviewing it all the time, with my right hon. Friend the Secretary of State for Education.
Robert Halfon (Harlow) (Con)
T8. In Harlow, we are fortunate to have a strong Royal British Legion that has raised more than £45,000 for ex-servicemen so far this year. Harlow and Essex have now signed up to the Royal British Legion’s community covenant, but 200 local authorities have not done so. Will the Minister urge them to sign up today and back the Royal British Legion?
Mr Francois
I thank my hon. Friend for his question. May I take this opportunity to place on record our gratitude for everything that the Royal British Legion does in support of our servicemen and women, and of course our veterans and their families? I was in Essex when Harlow, among others, signed the community covenant. It is wonderful that more than 200 local authorities across the United Kingdom have signed the community covenant, which helps to give effect to the armed forces covenant at local government level. I recently wrote a joint letter with Sir Merrick Cockell, chairman of the Local Government Association, congratulating councils that have signed the community covenant and gently urging those that have not to do so. We would like every local authority in the land to sign it, if possible, and that is what we are working towards.
Bill Esterson (Sefton Central) (Lab)
Warm words alone are not enough when it comes to enabling small businesses to compete in the defence supply chain. Will the Minister confirm that he will take the action needed to create a level playing field, so that small businesses can compete?
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
The Ministry of Defence is determined to increase the participation of small and medium-sized enterprises in the supply chain. To that end, we are holding a marketplace next week, on 3 December, which the hon. Gentleman is welcome to attend, to show off the innovation coming out of our SMEs to the prime contractors.
Sir Menzies Campbell (North East Fife) (LD)
May I take the right hon. Gentleman back to the issue of Syria? Will he tell the House in what conceivable circumstances he would think it appropriate for British troops to intervene in a civil war?
Mr Philip Hammond
As I have already told the House, our clear intention is to pursue a diplomatic path towards a political solution in Syria, but it makes no sense to take any options off the table in such an uncertain situation, where future developments are not yet clear.
Mr Speaker
Order. I am sorry. Colleagues know that ordinarily I like these sessions to be very full, but we have an important statement, and we must now proceed.
Bank of England
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr George Osborne)
I would like the House of Commons to be the first to know about the future leadership of the Bank of England, and the identity of its next Governor.
Sir Mervyn King has served as Governor with great distinction and unquestioned integrity for almost a decade, five years of which have been during the most difficult period of economic policy making of the modern age. He will continue to do his vital work until 30 June next year, and there will be opportunities then to thank him for his service to our country.
Today’s task is to appoint his successor in good time and in good order. We have, for the first time in the history of the Bank, advertised the post, invited applications and put together an experienced panel to interview potential candidates. I want to thank my permanent secretary, Sir Nicholas Macpherson, and the chairman of the court of the Bank of England, Sir David Lees, for conducting this new, open process in a very professional way.
I also want to thank the many individuals who put themselves forward for the job. I have myself interviewed in London all the very distinguished candidates shortlisted by the panel for the job, any one of whom would have made a good Governor. I have made my recommendation to the Prime Minister, who in turn has made the same recommendation to the Queen, and she has today approved the appointment.
I can tell Parliament and the public that the next Governor of the Bank of England is to be Mark Carney. He is currently Governor of the central Bank of Canada and chair of the world’s Financial Stability Board. He is quite simply the best, most experienced and most qualified person in the world to be the next Governor of the Bank of England and to help steer Britain’s families and businesses through these difficult economic times.
Britain needs the very best at a time such as this, and in Mark Carney we have got him. Mr Carney is unique among the potential candidates in combining long experience of central banking, huge international credibility in economics, deep expertise in financial regulation and first-hand experience of private sector financial institutions. He is acknowledged as the outstanding central banker of his generation, and I believe he will bring the strong leadership and external experience that the Bank of England needs as it takes on its heavy new responsibilities for regulating our banking system.
In that respect, Mr Carney will bring a fresh new perspective. During his five years as the Bank of Canada Governor, Canada was acknowledged to have weathered the economic storm better than any other major western economy. Bank bail-outs have been avoided and sustained growth has returned, and it says something of Mark Carney’s abilities and the regard he is held in that he was chosen by his fellow central bank governors and regulators around the world to be the chair of the FSB—the body tasked with strengthening and co-ordinating global financial regulation. That gives him the experience to bring better regulation to the world’s largest global financial centre here in London and other financial centres across the UK.
Subject to the views of other members of the board, he could expect to remain chair of the FSB until 2018. While the appointment as Governor will be for eight years, Mark Carney has indicated that he intends to serve for five years and to stand down at the end of June 2018. That will align with the timing of his role at the FSB, and reflects the fact that by then he will have served for 10 years as a central bank governor. I have spoken to my opposite number in Canada, Finance Minister Jim Flaherty, and the Prime Minister has spoken to the Canadian Prime Minister. I am grateful for the constructive way they have handled this transition, as Members would expect from one of our closest friends and allies.
Mark Carney will continue as central Bank Governor of Canada until the end of May next year. My statement today is matched by a simultaneous announcement in Ottawa at a press conference currently being held by Mr Carney and the Canadian Finance Minister. Mr Carney will be answering questions about his decision to take this new job, but he has made it clear that he will not be commenting at length on British economic policy until he takes up his new post on 1 July 2013. There is one exception to that: Mr Carney has said to me that he would like to appear before the Treasury Select Committee at a mutually convenient time for a pre-commencement hearing, where he will of course expect rigorous questioning about British monetary and financial policy. This will be the first time ever that a new Governor has appeared before a Committee of this House before their term of office begins.
Mr Carney’s pay and benefits are a matter for the non-executive members of the court of the Bank of England. The chair of the court, Sir David Lees, has today confirmed that Mr Carney will be paid a total pay and pension package that is broadly equivalent to the current Governor’s salary and membership of the now closed pension scheme available to the current Governor and deputy governors. The package is also lower than that of other senior regulators, such as the recent chief executive of the Financial Services Authority—even though the Bank now takes on many of that organisation’s responsibilities—and is less than that of the current chief executive of the Financial Conduct Authority. As Mr Carney is moving from Canada with his wife and four children, the non-executive members of the court of the Bank of England have said that they will consider in addition a relocation and accommodation package, which one would expect with such moves.
Mark Carney is not a British citizen, but he is a subject of the Queen. His wife is British, his four children have dual British citizenship and he has lived, worked and studied in Britain for a decade. Although not required of the role, he will apply for British citizenship in the normal way, with no special favours. Let me also say something about—[Interruption.]
Mr Speaker
Order. These are very serious matters. I am pleased that the House is hearing about it first, but the House will hear only if it wishes to hear—and it should wish to hear. Let us hear what the Chancellor has to say.
Mr Osborne
Let me also say something about the deputy governor for monetary stability, Dr Charlie Bean, whose term in office expires at the same time as Mervyn King’s. Charlie Bean is a world-class macro-economist and a powerful voice on the Monetary Policy Committee. To ensure a smooth transition next year, he has agreed to my request that he serve for one more year as deputy governor. I am most grateful to Charlie Bean for his continuing service.
The role that the Bank of England plays in our economy cannot be overestimated. It is tasked with keeping prices under control; it sets interest rates, which affect what home owners pay for their mortgages and businesses for their loans; and, following this Government’s reforms, it plays a lead role in keeping our banking system safe. My job brings with it many responsibilities, but few are greater than ensuring that the next Governor of the Bank of England is a person of real quality. Mark Carney is a quality Governor. He is the outstanding central banker of his generation, with unparalleled expertise in financial regulation. He will bring a fresh perspective. He has got what it takes to help British families and businesses through these incredibly challenging economic times. My responsibility was to get the best for Britain, and with Mark Carney we have got that. I commend his appointment to the House and to the country.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I thank the Chancellor of the Exchequer for notice of today’s statement—although not of its content. I join him in thanking the outgoing Governor of the Bank of England, Sir Mervyn King, for his public service and I wish him a long and happy retirement. I commend the Chancellor on his choice of successor, Mr Mark Carney, to be the third Governor of the Bank of England since our decision to make it independent in 1997. We on this side of the House look forward to working with him closely in the coming months and years.
I have known Mark Carney for a number of years and have worked with him closely. He has a long and distinguished record of public service, great financial expertise and a track record of handling tough and complex challenges. He follows in a tradition established in 1997 when the first appointments to the Monetary Policy Committee included Willem Buiter and DeAnne Julius, neither of whom were British citizens at the time. In my view Mark Carney is a good choice and a good judgment, and his experience will be invaluable.
The Chancellor has made a short statement today, but this is a decision of great significance. With the leave of the House, I would like to ask a number of questions of the Chancellor concerning Mr Carney’s appointment and the role that the new Governor will step into.
At a time of economic stress, the new Governor will need to get to grips with a new and massively enlarged central bank that has new, onerous and complex responsibilities in prudential and consumer regulation as well as its role in monetary policy and financial stability. That is a near impossible job for one person, but in our view it is made harder by the way in which the Chancellor has drawn up the Financial Services Bill, which is still being considered in the other place. We remain disappointed that he is continuing to resist the amendments tabled by the Chair of the Treasury Select Committee and ourselves that would enable the complex new arrangements for the Bank of England to be properly scrutinised. In our view, the new Governor would be strengthened and enhanced, not weakened, by greater transparency. Will the Chancellor think again about that matter?
The Chancellor also needs to clear up the deep confusion at the heart of the new arrangements about who is responsible in a crisis, which he has not managed to clear up to our satisfaction under the current Governor. The Bill heaps far too much power on the new Governor, who, when dealing with the Chancellor, will be able to internalise and suppress the inevitable conflicts within the Bank of England between financial stability on the one hand and monetary stability, fiscal risk and moral hazard on the other. It makes no sense that the deputy governors, including the deputy governor who heads prudential stability, will have no undisputed right to put their views directly to the Chancellor, whether or not the Governor agrees. That is neither stable nor sensible. There is obfuscation in the Bill, and it is not good enough simply to have a memorandum of understanding with ad hoc committees. If the new Governor is to have a fair chance of success, the flaws in accountability and crisis management must be resolved. Will the Chancellor agree to sit down with the new Governor and sort this out?
The new Governor of the Bank of England also looks set to inherit a difficult external economic environment, a global economy that still has serious imbalances, the eurozone in continuing crisis, and, here in the UK, challenges to our banking system, to growth and to fiscal policy. So let me ask the Chancellor a further question about the relationship between the Treasury and the Bank of England that the new Governor will inherit.
Given the blurring of the relationship between monetary and fiscal policy following the recent decision to transfer £35 billion from the Bank of England’s quantitative easing programme to the Treasury coffers—a move that is set to reduce short-term Government borrowing and increase the longer-term burden on the taxpayer—I very much hope that the new Governor and the Chancellor will agree with the Institute for Fiscal Studies, which has stated today that they should
“exclude the impact of this change from all figures when assessing compliance with the fiscal targets”.
Is that a matter that the Chancellor has discussed with the present Governor, the new Governor, the Office for Budget Responsibility or the Office for National Statistics? Can he reassure us that the IFS’s recommendations will be taken on board?
Writing in the Financial Times earlier this year, I began an article by saying:
“Wanted, a new governor of the Bank of England. Only superhumans need apply.”
Superhuman or not, the new Governor of the Bank of England, Mr Mark Carney, is well qualified to take on the role at what will be a very difficult time. I am sure that I speak for the whole House when I say that we wish him and his family well.
Mr Osborne
Given the many fierce exchanges that the shadow Chancellor and I have across the Dispatch Box, it is only right for me to acknowledge my real gratitude to him today for welcoming this appointment. He knows Mark Carney, and he knows that he is an outstanding candidate for the job. I shall certainly cherish the words “I commend the Chancellor”, because I will probably never hear them from the right hon. Gentleman again. I sincerely thank him for that.
One of the important things about the independence of the Bank of England, which the right hon. Gentleman helped to establish with the previous Prime Minister, is that it commands cross-party support—it did not at the time; it does now—and we must try to keep the appointment of the Governor out of the day-to-day partisan debate. The right hon. Gentleman has certainly played his role in doing that today. Let me answer specifically his questions about the new role of the Bank of England.
First, on the shadow Chancellor’s point about the new responsibilities, the Bank has heavy new responsibilities because, in our judgment, the tripartite system did not work and was not properly co-ordinated. Indeed, the Select Committee of the last Parliament, which was chaired by Lord McFall—John McFall as he was then—said that it was not clear who was in charge. By insisting that the Bank of England is in charge of macro-prudential and micro-prudential regulation, we bring those things together.
It is also important, secondly, that we recognise that the Government have an important role. When there is a material risk to public funds, there is a clear responsibility in the Bill for the Bank of England to inform the Treasury, without deluging it on a day-to-day basis with everything that is happening and not differentiating the things that are significant and really important. We have taken in the Bill the power of direction that did not previously exist. In the memoirs of my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), he made it clear that at one point he was considering using the almost nuclear power of direction in the Bank of England Act 1946, which no one had ever used, but that he backed away from it because he did not have a more targeted instrument. We now have that targeted power of direction, which the elected Government can use.
Thirdly, we have discussed the role of the deputy governors. Although it is incumbent on any good Governor and any good Chancellor of the Exchequer to try to make sure that views are heard, ultimately the Bank has to reconcile its internal differences rather than, as I have said, allowing the internal differences to be expressed externally without any attempt to resolve them internally. I make it my business in doing my job to see the deputy governors and to make sure that their views are heard.
Finally, let me deal with the asset purchase facility coupons. This was done with the support and acceptance of the Governor of the Bank of England and the Monetary Policy Committee, which discussed it and agreed that that was a more transparent way of accounting for the quantitative easing coupons and how they will affect the public finances through the coming years. I can confirm for the right hon. Gentleman that when the Office for Budget Responsibility produces its report next week for the autumn statement, it will clearly show the impact of the APF coupons on the public finances, both before and after.
Mr Andrew Tyrie (Chichester) (Con)
May I begin by thanking Mervyn King for his outstanding public service and hard work through the appalling financial crisis with which he has had to grapple? I support what appears to be the appointment of an extremely talented and experienced Governor, who has already been welcomed on both sides of the House. I welcome the fact that the Chancellor has come out in support of the Treasury Committee’s holding a hearing prior to the appointment of the new Governor and of the reporting of its conclusions to the whole House. Does the Chancellor agree that the legitimacy of the appointment would be further bolstered by giving the House an opportunity to debate that appointment in the light of our findings?
Mr Osborne
These days, of course, the House of Commons can choose what it wants to debate through the Backbench Business Committee, while the Opposition are always able to table motions, too. I do not think it would be sensible to try to divide the House on something the appointment of the Governor of the Bank of England. One of the advantages of the Bank of England, as I was saying to the shadow Chancellor, is that there is an agreement that it should be kept out of party politics and the like; we have achieved that today. Mr Carney said clearly in my discussions with him that he did not want to talk about British economic policy at any great length at his press conference today or, indeed, while he continues as the Governor of the Bank of Canada, but that he did want to talk at length to my hon. Friend’s Committee. At a mutually convenient time, he will do that.
Mr Geoffrey Robinson (Coventry North West) (Lab)
Is the Chancellor aware that this may be the first occasion under his chancellorship at which we can wholeheartedly welcome his decision? I hope he will extend to Mark Carney, the prospective Governor, a warm welcome to these shores. We also hope that he will get his citizenship before his term of office expires.
Mr Osborne
I welcome the hon. Gentleman’s support. Perhaps we could bottle this cross-party consensus and use it on future occasions, but I doubt it.
Mark Carney will apply for British citizenship, but he is absolutely clear that he should do so in the normal way—the same way in which anyone else would apply for it. One thing that I have learned from the last Government is that Ministers of the Crown should be very careful about becoming involved in citizenship decisions.
Mr John Redwood (Wokingham) (Con)
I welcome the appointment of someone who should bring new thinking to troubled banking and monetary policy in the United Kingdom. Will the Chancellor confirm that, when he has studied the subject, Mr Carney will be free to change our monetary and banking policy in ways that could promote a more sustained and favourable economic recovery?
Mr Osborne
I thank my right hon. Friend for his support for the appointment. We have now united all points on the spectrum.
The Governor of the Bank will chair the Financial Policy Committee, the body that will be responsible for macro-prudential regulation. In other words, he will set overall guidance on issues such as capital and liquidity, about which I know my right hon. Friend has spoken powerfully. Any decision on the framework of the inflation-targeting regime and the like will be made by the elected Government and not by the Governor of the Bank.
Helen Goodman (Bishop Auckland) (Lab)
I am sure that this is a question that the Chancellor has considered. Will he explain how Mr Carney will handle any conflicts of interest that arise during the period between now and his taking up his post in London?
Mr Osborne
There should not be any conflicts of interest, because he is very clearly the Governor of the central Bank of Canada, will remain so until the end of May, and will fight Canada’s corner as we would expect him to do. However, he is also the chair of the Financial Stability Board, of which we are a member. He is already heavily involved in international financial regulation and in decisions that have a real impact on our financial services. Moreover, Canada is a G7 country, and is probably one of our closest allies: it is difficult to think of a closer ally than Canada. We already work incredibly closely with the Canadians. Incidentally, the fact that we co-ordinated the press conference in Ottawa and the statement in the House of Commons today and the news did not leak in advance shows that the two Governments work together and trust each other.
Stephen Williams (Bristol West) (LD)
On behalf of the Liberal Democrats in the coalition, I welcome Mr Carney to his post. Although he will not take up his position until next summer, no doubt his views will be keenly studied in expectation of his doing so. Does the Chancellor agree that one thing that all our constituents will want to hear from him is a clear indication that he will expect the very highest professional standards in the banking industry, so that bankers can be seen to be working in favour of taxpayers and consumers and not just with self-regard?
Mr Osborne
Mr Carney has been pretty tough in Canada, and Canada has a much better record than this country of avoiding bail-outs and keeping Canadian banks safe. As chair of the Financial Stability Board, he has been very keen to secure international agreement on new, tougher rules on pay, risk-taking and the like in order to ensure that individual financial centres do not try to out-compete each other for less and less regulation. I should also make clear that he supports the John Vickers reforms that will be introduced in the Financial Services (Banking Reform) Bill, including the ring-fencing of retail banking, which is the really major reform of banking that the coalition Government are bringing about.
Mr Dennis Skinner (Bolsover) (Lab)
Having listened to all the plaudits, all I can say is that this man Mr Carney and Mr Bean had better be good.
Mr Osborne
I can assure the hon. Gentleman that Dr Carney and Dr Bean are excellent.
Andrea Leadsom (South Northamptonshire) (Con)
I am so excited about this appointment that I could jump up and down—but I won’t.
Does my right hon. Friend agree that at some point during the next year he should have a chat with Dr Carney about the ground-breaking bank revolution that would ensue from bank account portability, and about the fact that that could be the very first thing that he did as the new Governor of the Bank of England?
Mr Osborne
I hope that my hon. Friend will contain her excitement when she has a chance to question Dr Carney, when he appears before her Select Committee. As she knows, from next year we will have full account-switching, which means that people will be able to switch their bank accounts, including direct debits and so on, within seven days. That will make switching much easier. My hon. Friend has advanced strong arguments for going further and introducing account portability, and we are studying that idea closely. There are pros and cons, which the Vickers commission considered, but she has put her case very powerfully.
Mr Speaker
The father of the hon. Member for South Northamptonshire (Andrea Leadsom) is a distinguished constituent of mine. I do not know what he would make of it if I allowed her to jump up and down in the Chamber. It scarcely warrants contemplation.
Mr George Mudie (Leeds East) (Lab)
The present Governor has commented on the dire state of the economy. The new Governor has international commitments, will face European commitments, and new regulations going through the other House give him many other responsibilities. Will the Chancellor please genuinely reconsider the number of posts that the new Governor will be forced to hold under the new arrangements? The grimness of the economic situation demands his full attention, and the posts are far too many for one person.
Mr Osborne
The one thing that we have learned is that regulation of banks and managing of demand in our economy cannot be separated; they are part of a continuum and that is one of the things that went wrong. Of course the Bank of England takes on heavy responsibilities, and the new Governor will have to manage the Bank in a very effective way to manage those new responsibilities. Mervyn King has already said that there needs to be a chief operating officer in the Bank, and there will be three deputy governors: for macro-prudential, micro-prudential and monetary policy. They too need to shoulder the burden, as indeed they currently do.
One thing that attracted the panel that interviewed Mr Carney, and me when I interviewed him, was his management experience in Canada. He is well regarded for having run a good bank in Canada as a manager, as well as for the international credibility he has earned for his economic and financial policies.
Mary Macleod (Brentford and Isleworth) (Con)
I welcome my right hon. Friend’s announcement and wish Mr Carney the very best. Will my right hon. Friend reassure me that women were encouraged to apply for this role? If he is looking for someone superhuman, often it is women who fit that category.
Mr Osborne
There were some excellent female candidates but—I will be absolutely candid with my hon. Friend—it was rather disappointing that there were not more female candidates of the highest quality. Both I and my predecessor faced that issue with appointments to the Monetary Policy Committee, and I would like to work constructively with people who have ideas on how we can encourage women in the economics profession to aim for a career in public service, the MPC, or central banking. We must do more to encourage that because, as I said, both I and my predecessor found that we did not have as wide a range of female candidates for the MPC as we would have liked.
Mr Pat McFadden (Wolverhampton South East) (Lab)
There are good reasons for the Chancellor to appoint the Governor of the Bank of Canada. As he said, Canada weathered the crisis well and was the first G7 country to restore employment and GDP to pre-crisis levels—a stark contrast with our own position. Will the Chancellor discuss the Canadian experience with the new Governor in order to get lending moving? He will know that initiatives such as Merlin have not worked, and unless we get lending flowing to the real economy we will not get the recovery that we all want.
Mr Osborne
Canada had the advantage of going into the crisis with properly managed public finances, and it avoided the large bank bail-outs that we had in this country—RBS was the biggest bank bail-out in the world—because its banks were better regulated. Hopefully, Mr Carney will bring some of that experience.
The right hon. Gentleman makes a serious point about lending in the economy. The Bank of England has created the funding for lending scheme, and we see the impact of that in new products that banks such as Santander and Lloyds have launched. He is right to say that that is one of the things we have to be on in terms of economic management. The de-leveraging in our economy is still one of the real headwinds to recovery.
Sir Peter Tapsell (Louth and Horncastle) (Con)
My right hon. Friend, if I understood him aright, has just said that Dr Carney supports the ring-fencing arrangements recommended in the Vickers report. May I ask him to bear in mind that Sir Mervyn King made it clear last week that he does not support them and nor do Mr Paul Volcker and the Archbishop of Canterbury-select? And nor do I.
Mr Osborne
My right hon. Friend has read out an extremely distinguished group of individuals. What he did not say was that, as I understand his position, he would like the banks split entirely in a Glass-Steagall-like separation. Over the past couple of years we have constructed a consensus on ring-fencing. We appointed John Vickers and his very experienced commission to do the job, and they looked explicitly at ring-fencing and came forward with their proposal. That proposal has now been discussed in this Chamber and commands consensus across the system. If we were suddenly to back away from it now and say that we wanted to start all over again with some other approach, that would delay everything. That would not be the right approach, and it would destroy the consensus that exists on ring-fencing.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I do not want to strike a dissonant note, but is it not a little surprising that in practically the leading banking nation on earth we could not find a British candidate for the job? We have chosen a Canadian, who I am sure was a good candidate. Normally, the overlap between the retiring Governor and the new one would be longer. Is that not a worry, even with Dr Bean staying on an extra year?
Mr Osborne
As I said, there were excellent British candidates, any of whom would have made a good Governor. In my judgment, though, Mr Carney was a better candidate. He was the only one who combined central banking experience, economics, experience of financial regulation and experience in the private sector. It says something about Britain that we have the self-confidence to go and get the very best in the world to serve as our Bank Governor.
Mr David Ruffley (Bury St Edmunds) (Con)
I welcome this bold announcement. The Chancellor is rightly concerned with the stability of the transition and has extended Dr Bean’s term, but does he wish the immensely able Paul Tucker to continue as deputy governor?
Mr Osborne
The very short answer is yes. Paul Tucker has been an excellent deputy governor, and I hope he continues to do his excellent job at the Bank of England.
Kelvin Hopkins (Luton North) (Lab)
Mervyn King’s predecessor Eddie George said that the single currency should be kicked into the long grass and left there. Will the new Governor continue to support the independence of Britain’s currency?
Mr Osborne
I will not speak for the new Governor, but I am sure he could be asked that question. I am pretty clear that he would support the pound, because he has seen at first hand through the Financial Stability Board some of the problems that have arisen in the euro. I reassure the hon. Gentleman that any decision to ditch the pound would be one for the Government of the day and the House of Commons, and while this Government are in office we will keep the pound.
Claire Perry (Devizes) (Con)
In Mr Carney, we have a man with unprecedented experience of financial stability. We also have an Office for Budget Responsibility that publishes transparent, independent numbers, and we now have a structural and regulatory plan for the banking system and a Government committed to restoring faith in the public finances. Does the Chancellor agree that the risk of boom and bust is therefore diminished?
Mr Osborne
I will not make the mistake of the last Prime Minister and claim to have abolished boom and bust. I do not know which young adviser of his put that idea into his mind. [Interruption.] With transparent and independently audited public finances, an excellent central bank Governor and new responsibilities for the Bank of England, we have a better framework than the one that we inherited.
Ian Austin (Dudley North) (Lab)
Is it not the case that Mr Carney ruled himself out some months ago? So what does the Chancellor think changed his mind—could it have had anything to do with Labour’s new lead in the opinion polls and the new Governor’s long-standing friendship with the shadow Chancellor?
Mr John Baron (Basildon and Billericay) (Con)
The risk with quantitative easing is higher inflation and a weaker currency. Will the Government use this appointment to re-examine whether QE actually encourages better or higher economic growth?
Mr Osborne
The Monetary Policy Committee has not requested additional headroom to conduct QE. As I have said, I think QE has been the right instrument to try to keep yields down and support demand, but any questions about Mr Carney’s view of QE in the British context will be ones that the Treasury Committee can direct at him.
Mr Andrew Love (Edmonton) (Lab/Co-op)
I welcome this appointment and, in particular, Mr Carney’s willingness to come before the Treasury Committee as his first duty. What discussions has the Chancellor had with the Office for National Statistics and the Office for Budget Responsibility about the £35 billion asset purchase facility coupon scheme? Does he accept that it will be an exceptional item in the Government accounts?
Mr Osborne
Crucially, I discussed this matter with the Governor of the Bank and he discussed it with the Monetary Policy Committee, and they thought it was a sensible move. As I have said to the shadow Chancellor, when the OBR produces its fiscal forecasts next week it will make very clear—I requested this—the distinction between the public finances with and without the APF move.
Mr Philip Hollobone (Kettering) (Con)
May I applaud the Chancellor for making his statement to the House of Commons first, and urge him to use that as a precedent for any future statements he may wish to make? What particular experience of recent Canadian economic performance will be of most use to Mr Carney in his new role as Governor of the Bank of England?
Mr Osborne
First, I am glad to have been able to make this announcement to the House of Commons, and I commend all those involved in the process for keeping the information secret. I want to pay tribute to the Canadian Government for also keeping this information secret until we could simultaneously make this announcement to the House of Commons and to the Canadian people in the Ottawa press conference. Sorry, I have forgotten the second bit of the question—
Mr Osborne
The Canadian economy did better than any other major western economy in weathering the financial crisis. Its public finances were in better shape, its banks were better regulated and the Bank of Canada was able to take Canada through this period in a way that in Britain and in many other western economies we wish we could have emulated.
Bill Esterson (Sefton Central) (Lab)
When the Chancellor speaks to the new Governor, will he discuss the Engineering Employers Federation’s comments that further austerity will not help the British economy because it is too weak and that the policy should be for growth and not cuts?
Mr Osborne
Fiscal policy is the responsibility of the elected Government and the House of Commons, but I would say that all the business organisations have supported our plan to deal with the deficit because they know how important it is to securing low interest rates and stability. Frankly, I have yet to hear what the current alternative is from the Labour party. I will save this for next week, but the Opposition used to have a five-point plan and I have no idea whether they are still committed to it. They claim that they want to be responsible with the deficit, but they have absolutely no plans to cut the deficit. I am just getting warmed up for next week, but we will wait a week to have those arguments.
Charlie Elphicke (Dover) (Con)
Will the Chancellor and the new Governor examine the possibility of bringing in depositor preference with a view to reducing the risk of bail-outs and nationalisations of UK banks in future?
Mr Osborne
Depositor preference does not exist in the UK, but it does exist in countries such as the United States and Switzerland. It is something that we are planning to introduce and it was one of the recommendations of the Vickers commission.
Alison McGovern (Wirral South) (Lab)
I thank the Chancellor for his announcement and associate myself with the warm words of welcome from both him and the shadow Chancellor. He has already mentioned the ring fence between investment and retail banking. Will he go a little further and tell the House what specific conversations he has had with Dr Carney about the ring fence?
Mr Osborne
I think that that would breach the confidentiality of the interview process, but Mr Carney will come before the Select Committee and will no doubt be asked about his views on the Vickers reforms. As I have said, he supports them and it is important—this comes back to a point made by my right hon. Friend the Member for Louth and Horncastle (Sir Peter Tapsell)—that we now have consensus across our regulatory system. John Vickers has provided that consensus. We will introduce a Bill next January. Let us get on and make that important change. We are leading the world and, interestingly enough, a lot of the rest of the world is thinking of following us in that direction.
Alun Cairns (Vale of Glamorgan) (Con)
Mark Carney’s actions have played a major part in helping Canada to avoid the worst of the financial crisis. Will the Chancellor reassure the House that he will be given the necessary freedom to take the required action here in the UK —something that the current Governor did not always enjoy under the last Administration?
Mr Osborne
I will leave the accounts of what happened under the previous Government to the various memoirs and the like. Of course, Mark Carney has independence in monetary policy and will have to work with the Government on financial stability, which is a crucial issue in which the elected Government are also involved when public money is put at risk. We will work closely together to secure the British recovery and ensure that we have something more of the Canadian experience here in Britain.
European Council
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Prime Minister (Mr David Cameron)
With permission, Mr Speaker, I would like to make a statement on the European Union Council last week.
Last week’s Council was unable to reach agreement on a seven-year budget framework. This Government rejected a proposal that would have risked UK taxpayers paying for unaffordable increases in the EU’s annual budgets. We did so together with like-minded allies from a number of countries. As net contributors to the EU, those countries, like Britain, write the cheques and together we had a very clear message: we are not going to be tough on budgets at home and then sign up to big increases in European spending in Brussels.
Let me explain to the House the proposal we rejected, why a deal is still doable, why it is still in our interests to work to achieve that deal and why throughout these negotiations I will continue to protect the UK’s rebate. Our objective for EU spending in the seven years to 2020 is clear: we want to see spending reduced and will insist on at least a real-terms freeze. As the House knows, the actual EU budget is negotiated annually. What we were negotiating in Brussels last week, and will return to again next year, is the overall framework for the next seven years, which includes the overall ceilings on what can be spent. During the last negotiation, which covered the period 2007 to 2013, the last Government increased the payments ceiling by 8%. The commitments ceiling was effectively set at €994 billion, well above the level of actual spending. It was a bit like having a credit card limit far above what one can afford and it was an open invitation to the EU’s big spenders to push for higher and higher spending every year. We are still paying the price for that decision.
This year, 2013, the Commission and the European Parliament are attempting to grow the annual budget by another 6.8%. I am determined to get the ceilings down in line with what we can afford. Prior to the Council, the Commission produced a ludicrous proposal to increase the commitments ceiling still further to more than €1 trillion. We said no. The Cypriot presidency produced a slightly lower total, and going into this Council, the President of the Council, Herman Van Rompuy, produced a new proposal, this time with a ceiling of €973 billion.
As you can see, Mr Speaker, we were making progress in getting the ceilings down, but as I and other leaders made clear, it was not enough. We set out a number of very reasonable ways in which the seven-year ceiling could be reduced even further, by tens of billions more. What was disappointing at the Council was that having heard those proposals, the presidency offered a new proposal that failed to reduce significantly the previous total and simply redistributed money to buy off different countries. In a seven-year budget of almost €1 trillion, the idea that there are no real savings to be found is simply not credible. For example, when it came to the bureaucratic costs of the European Commission, not a single euro in administrative savings was offered—not one euro. We need to cut unaffordable spending. The deal on the table was not good enough and that is why we and others rejected it.
But we do believe that a deal is still doable. There is absolutely no reason why we should not be able to reduce the seven-year ceilings down to the level needed. There is plenty of scope for significant savings in the common agricultural policy and the structural and cohesion funds, but there are also savings to be had in the rest of the budget. For example, freezing the ceilings for security, justice and external spending would allow €7.5 billion of additional savings. There are some programmes, such as Connecting Europe, which have enormous proposed increases in their budgets that could be radically scaled back.
As I have said before, there is simply no excuse for not taking a much tougher approach towards the EU’s administrative costs. The EU institutions have simply got to adjust to the real world. A 10% cut in the overall pay bill would save almost €3 billion. Relaxing the rules on automatic promotion, which they have at the EU Commission, would save €1.5 billion. Reducing the extraordinary generosity of the special tax rules for Brussels staff—the levy—could save around another €1 billion, and changes to pension rights could save another €1.5 billion. All these are perfectly reasonable proposals. That is why a deal is still doable. We will push hard for these reductions when negotiations resume next year.
Let me briefly be clear about why we want a deal. If no deal is reached, the existing ceilings are simply rolled over and annual budgets are negotiated on a year-by year-basis, taking account of those ceilings. Crucially, we would not get the reduction we need in the seven-year budget ceilings negotiated by the last Government. The credit card limit would stay beyond what is affordable, tens of billions of euros higher even than the deal we rejected at this Council. It is therefore in our interests to get a deal, but it must not come at any cost. We must not lock in unaffordable ceilings for the next seven years, so if necessary we may have to galvanise a coalition of like-minded countries to deliver budgetary restraint through annual budget negotiations each year.
Finally, let me say a word about the UK’s rebate. As well as ensuring fairness in the overall size of the EU budget, it is also essential to ensure fairness in the net contribution that each country makes to that budget. At this Council, we faced, as ever, determined pressure from many sides for our rebate to be slashed. The changes on the table, in the proposal in front of us, would have cost the UK more than €1 billion every year. I was clear that all of that was completely unacceptable. Britain more than pays its way in Europe. On a per capita basis, Britain is the eleventh richest nation, yet as a share of our national income we are the third largest contributor, and that is with the rebate—or what remains of it after so much was given away by the last Government. Without the rebate, we would have the largest contribution in the European Union, double that of France and almost one and a half times as large as Italy’s or Germany’s. That would be completely unfair. It is why Margaret Thatcher was right to fight so hard to win the British rebate, why the last Labour Government did this country such a disservice by agreeing to give part of it away and why no Government I lead will ever put the British rebate back up for negotiation.
We put down a marker at this Council. We stood up for the taxpayer. Together with like-minded allies, we rejected unacceptable increases in European spending, and we protected the UK’s rebate. We are fighting hard for the best deal for Britain, and that is what we will continue to do. I commend this statement to the House.
Edward Miliband (Doncaster North) (Lab)
I thank the Prime Minister for his statement. Clearly, this is not the first EU budget negotiation to go into a second round, and no doubt it will not be the last. The real question remains what deal will eventually be delivered. I want to ask about the budget level, what the budget will be spent on and the Government’s negotiating position.
On the budget level, I was surprised by one omission in the Prime Minister’s statement. Somehow, he forgot to thank this House for sending him into the talks with the strongest possible mandate in the negotiations: a vote supported by Members on both the Government and Opposition sides. At the time of the vote, the Deputy Prime Minister, who I notice is absent, said that what was voted on was a completely unrealistic position and that there was no hope of getting a deal—a tell-tale sign that the opposite might be true.
Given that the Prime Minister now says that there is widespread support in Europe for a tough settlement, can he say what prospects there are for meeting the call of this House of Commons for a real-terms cut in the EU budget? Does he now regret not seeking to build alliances for a real-terms cut in spending at the outset of negotiations?
Looking ahead to the deal that still needs to be done, can the Prime Minister confirm in precise terms what he means by a real-terms freeze? There are obviously many different definitions around, but we have the Government’s definition set out by the then Economic Secretary in her memo of 16 July 2011. That was for a European budget of €885 billion in actual payments over the seven-year commitment period. The Prime Minister has been somewhat coy on this point, so can he confirm that that remains the position as set out by the former Economic Secretary to the Treasury?
Next, may I ask the Prime Minister about the composition of the budget, which is as important as the budget level itself? We need to reshape the budget so that it supports jobs and growth with investment in infrastructure, energy and research and development. He said as he arrived in Brussels that
“it is not a time for tinkering”,
and at his press conference on Friday he said:
“Already being contemplated is a big cut in agricultural spending”—
something that is supported in all parts of this House. However, what is the big cut in agricultural spending that he is talking about? Will he confirm that the proposal on the table sees agriculture spending remaining on average at 38.3% of the European budget—almost exactly the same level as it is now? Does he really believe that that is the major reform that is required in the spending of the European budget? Does he agree that what is even worse is that to keep the subsidies high, money is being taken from much-needed investment in energy and other infrastructure? I think that part of that comes from the Connecting Europe budget. Did he object to this part of the proposal?
As we anticipate the further negotiations in the months ahead, the wider stance of the Government towards the EU will also have an impact. The Prime Minister has said repeatedly that he is in favour of Britain remaining a member of the European Union. Why, therefore, is he allowing his colleagues to take the opposite position? Last month, the Education Secretary briefed that he is open to leaving the European Union. On Saturday, the chairman of the Conservative party said that we should threaten to leave if we did not get a good deal. Now we have the new vice-chair of the Conservative party—we think it is great to see him in his place—touring the studios, talking not about a budget deal but about a deal with the UK Independence party. Does the Prime Minister believe that such divisions help or hinder our national interest in delivering a good budget deal? Why, at a time of continuing negotiations over the budget, is he allowing members of his Cabinet openly to undermine his position on membership of the EU? It is no wonder that everyone, from British business to our European allies, believes that we are drifting towards the exit door.
As we look ahead to the next round of budget negotiations, is not the reality of the situation that the Prime Minister has a divided party on Europe? Instead of confronting the issue—[Interruption.] They say that they are not divided, but half of them want to leave the EU, and that is not the position of the Prime Minister—so we gather. He has a divided party on Europe, and instead of confronting the issue he is just letting the problem get worse. He spent his statement talking about the deal that he did not do; what matters is what he delivers for Britain. For as long as he allows his party to drag him towards the exit door, he will find it far harder to build lasting alliances and far harder to deliver for the national interest.
The Prime Minister
First, let me answer on the right hon. Gentleman’s specific points about figures. He asked about the scale of the cut that was envisaged for the common agricultural policy. In terms of tier 1 of the CAP, the proposal, to be fair to pillar one—to be fair to the Council and to the Commission—was to cut it from €336 billion to about €270 billion. So a cut was proposed for the CAP, but we made the point that even with that, we could go ahead and reach a good budget settlement. We said that without doing even more on the CAP we could reach a deal by looking at administrative savings and Commission savings, and also by looking at some of the programmes that are, quite rightly, being expanded, but expanded far too much. For example, Europe spent €8 billion on the Connecting Europe proposal in the last financial period, and it was proposed that that was increased to some €36 billion, so we could make significant cuts in that proposal and still land a sensible deal.
The right hon. Gentleman referred to the memorandum that we put in front of this House, which referred to the 2011 situation and the 2011 budget. What I have said is that, yes, we want a cut, but we should settle, at worst, for a real-terms freeze—and of course that freeze would be across the period 2013 to 2020.
The right hon. Gentleman asked why we had not built any alliances. I am happy to tell him that the Dutch, the Swedes, the Danes, the Finns and the Germans all very much backed our position. I might ask him about his alliance, as he is in alliance with the socialists in the European Parliament, whose position was to favour a 5% increase in the ceilings, not a cut. They wanted to end all rebates and to introduce a financial transactions tax of up to €200 billion. If he does not believe that, he should listen to the leader of the European socialists and democrats, Mr Hannes Swoboda, who said:
“Regarding the additional cuts, it is unacceptable that the majority of member countries are letting themselves be blackmailed by David Cameron”.
That is the view of the socialists.
The right hon. Gentleman has made his approach in this Parliament, but if he had been at the Council he would have heard a lecture by the socialist head of the European Parliament, who told the whole Council that anything that was a cut to what was being proposed would be completely opposed by everyone in the socialist group in the European Parliament, including his MPs. If the right hon. Gentleman wants to get a good deal for Britain, he might start by talking some sense to his socialist friends.
Mr William Cash (Stone) (Con)
Given the fact that, over the past 20 months, we have had about as many economic summits, and they have gone nowhere, given that Mrs Merkel is now saying that she wants the European Commission to be the European government and given the statements that have been made by Mr Barroso about a federal union, does my right hon. Friend not think that the time has now come to establish a lead on the question of a fundamental change in our relationship with the European Union and to do what the British people want, and get on with it as soon as possible, before it is too late?
The Prime Minister
I agree with my hon. Friend about the number of European Councils. That is undeniable; there has been a huge quantity.
I agree with my hon. Friend that there is an opportunity for a change in Britain’s relationship with the European Union. That is why I have talked about a new settlement and fresh consent for that settlement. Where I think I disagree with him is that we need to show some patience while the eurozone sorts itself out, and as the eurozone integrates I think there will be opportunities for that. As for his comments about the Germans, I hope that he is a regular reader of Der Spiegel online, because after the Council it said:
“Danke Grossbritannien…you’ve given hope to many people suffering under the terror of EU bureaucracy”.
Keith Vaz (Leicester East) (Lab)
A hundred thousand Syrian refugees have entered Turkey in the past year and 16,000 have applied for asylum in the EU, having crossed the border between Greece and Turkey. No matter what the Prime Minister’s negotiation position is in respect of the overall budget, will he give an assurance that he will protect the budget for Frontex, which protects the external limits of the EU, which must be in Britain’s best interests?
The Prime Minister
The right hon. Gentleman makes an important point. Frontex does good work and we have supported its budget, but like any Government, what we are asking the European Commission and European Council to do is attempt to do more for less. They have to look across each budget area, work out where the pressures are and, obviously, direct resources in that way, but they also have to try to find savings elsewhere, as every Department of Government has had to do.
Sir Menzies Campbell (North East Fife) (LD)
As someone who supported my right hon. Friend in the Lobby a fortnight ago out of conviction, may I offer my congratulations to him on the alliances that he appears to have formed in Europe? Is that not an eloquent illustration of the principle that engagement is always more effective than detachment?
The Prime Minister
I am very grateful for my right hon. and learned Friend’s support. It has been important to have these alliances on behalf of countries that want a sensible settlement. We now have to work very hard to keep that alliance together so that we can land a deal that is in the interests of British taxpayers and, I would argue, taxpayers across Europe.
Mike Gapes (Ilford South) (Lab/Co-op)
The Prime Minister said that he wanted to galvanise a coalition of like-minded countries and referred in another answer to the Netherlands, Sweden, Denmark, Finland and Germany. Is it not a fact that, while they may have tactically agreed in this summit, there are very large differences between all those countries and his party’s position?
The Prime Minister
Actually, I think that the hon. Gentleman is wrong about that. The countries on the list that I read out are our classic allies that we put together in almost every year’s budget negotiations to try to ensure a reasonable outcome. The problem is that annual budgets are decided on a qualified majority basis, so we can be outvoted. The multi-annual financial framework is subject to unanimity, so we can put our case vigorously. The point that I made in my statement is that if we do not achieve a new framework, we will need even more than today to keep the tough budget discipline together for the annual budget negotiations that follow.
Richard Ottaway (Croydon South) (Con)
Far from being isolated, I congratulate my right hon. Friend on consolidating the alliance with Germany, Sweden, Holland and Denmark. Are there any signs that that new grouping will work with us on further reforms and, in particular, on reform of the single market?
The Prime Minister
The countries on the list that I read out tend to be fairly strong allies on much of the single market agenda. We are also joined in our support of the single market by the Italians and, to an extent, with the Spanish now that Mariano Rajoy is Prime Minister. We need to try to win the argument with large net contributors, such as Italy, that the best way to protect the interests of their taxpayers is to restrain the overall budget, rather than simply to measure their receipts under the CAP or the cohesion policy.
Mr Dennis Skinner (Bolsover) (Lab)
Isn’t this scenario getting a bit boring? When the Prime Minister went to Europe fighting alone, he came back with nothing. He has now formed alliances with all the dodgy people he referred to and he has still brought nothing back. Even John Major came back with two opt-outs—even John Major.
The Prime Minister
I will tell the hon. Gentleman what I have managed. The last Government put us into the bail-out fund; I got us out of the bail-out fund. The last Government gave away part of our rebate; I am keeping our rebate. We are making progress, but obviously we will have to do a little more to satisfy him.
Michael Ellis (Northampton North) (Con)
Does my right hon. Friend agree that the bloated Brussels bureaucrats are talking balderdash when they refuse to offer a single cut, despite the fact that more than 200 Commission staff earn more than he does and that they apparently have up to 93 holiday days a year?
The Prime Minister
I think that it is perfectly possible to save money in the Commission’s budget. Its staff have things such as automatic promotions, very generous pension arrangements and expatriation allowances for living in Brussels, even if they have been there for 30 years. It is time to have a clear-out of such things and the Commission needs to be convinced of that. Part of the point of building the alliance is to say to the Commission, “You really have to look at your own budget.” That is not the whole answer, because administration makes up only 6% of the total, but it can make a contribution.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
I am concerned that the Prime Minister says that there are savings to be made in cohesion and structural funds. He is aware that many areas of the UK, such as west Wales and the valleys, enjoy receiving such payments. Is he saying that he can foresee a cut in that support?
The Prime Minister
There is a need for cuts in the overall cohesion and structural funds budget of the European Union, given the fiscal constraints that the net contributors are operating under. We should be frank and honest as a country in saying that, although there are regions of the UK that still benefit and should go on benefiting from structural funds, such funds should, on the whole, be for the poorest regions of the poorest countries. Britain’s negotiating position is different from that of many countries in that we do not go to Brussels and simply defend every penny that we receive; we try to seek an outcome that is right for the whole European Union. We cannot for ever argue for restraining the budget if we want to keep hold of structural funds for countries that are better off than most.
Simon Hughes (Bermondsey and Old Southwark) (LD)
The Prime Minister will know that he is supported by those on the Liberal Democrat Benches in being robust in Brussels and in ensuring that the European Union understands that we live in a time of austerity in which it has to restrain its spending, as we are restraining ours. Although he is working satisfactorily with our allies on this matter, will he confirm that there is no truth in the rumour that we are trying to get an opt-out on the common market for financial services? If we are to prevent tax evaders, criminals and terrorists from using our country or any other to hide their assets, we need a common market for financial services. Will he confirm that we will lead in arguing for that objective?
The Prime Minister
We support the single market in all its forms. We are trying to ensure that when the banking union proposals, which include a proposal for a single supervisor under the European Central Bank, come through, they do not damage the interests of those countries that are in the single market but not the single currency. As I have already said, part of our G8 presidency next year will be targeted on cracking down on tax evasion, tax avoidance and the rest of it.
Kate Hoey (Vauxhall) (Lab)
What will the Prime Minister do if he does not get a real-terms freeze? Is he prepared to use his veto? Will he also make it clear that he is quite happy for decent, respectable people in my constituency to be members of UKIP?
The Prime Minister
I am very happy for anyone to join any political party—it is a free country. On the budget, we have a clear position. We are trying to get the ceilings down and cuts are already proposed. We want the ceilings down to such an extent that we achieve the real-terms freeze at worst, or a cut at best. I am convinced that we should achieve that if we keep the force of our arguments and keep the coalition of like-minded countries together.
Nicholas Soames (Mid Sussex) (Con)
My right hon. Friend the Prime Minister will have been fortified by the solid alliances he built in the interests of dealing with the budget. Does he agree that those alliances are particularly serviceable when it comes to driving ahead with the growth agenda in Europe? Will he not allow that to slip below the radar?
The Prime Minister
My right hon. Friend is absolutely right. We will keep pushing forward the growth agenda, based on completing the single market in digital, services and energy. It is also important to recognise that the budget, even with the reductions I propose, would still be a growth budget, because it would transfer funds from agriculture into growth areas such as supporting research and investment, from which Britain is quite well placed to benefit.
John Cryer (Leyton and Wanstead) (Lab)
Does the Prime Minister believe that the rising tide of unemployment and poverty across western Europe is a price worth paying in order to save the euro?
The Prime Minister
The rising tide of unemployment across Europe is clearly a tragedy, but we need to look across Europe and ask why some countries are doing so much better than others at tackling unemployment, and particularly youth unemployment. Youth unemployment is far lower in, for instance, Holland and Germany than in Spain, Italy and—yes—the UK. There is more to learn about welfare reform, apprenticeships and education standards. We can apply those lessons here to ensure that we keep unemployment falling.
Jacob Rees-Mogg (North East Somerset) (Con)
I hope the Prime Minister will be pleased to know that he is once again the toast of Somerset for returning from the European summit so successfully, and we look forward to his further success. For as Sir Francis Drake said, it is not the beginning but the continuing of the same until it is thoroughly finished that yieldeth the true glory. We look forward to the true glory of the Prime Minister when he comes back next time with a cut.
The Prime Minister
I am grateful to my hon. Friend for his remarks and his support, but I commiserate with him and many in Somerset who will not be toasting anyone today because they are suffering from the appalling floods over the weekend.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
As my right hon. Friend the Leader of the Opposition has said, we need to reshape the EU budget to support jobs and growth rather than cut investment in R and D, as this Government have done by 7% in one year. Will the Prime Minister say specifically what he is doing to support R and D investment within an overall budget cut?
The Prime Minister
I can; the hon. Lady makes a very good point. If she looks at budget heading 1a, which includes all research, university and other spending—out of which Britain, with high-quality universities, does quite well—she will see that, in the last period, 2007 to 2013, the EU spent about €83.5 billion. The proposal on the table on 22 November was to spend €108 billion. That is quite a significant 20% increase. I would argue that we could take that increase back a little in order to help to get an overall deal without harming the fact that this is a growth budget that wants to support research and jobs.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I join my right hon. and learned Friend the Member for North East Fife (Sir Menzies Campbell) in commending engagement rather than detachment, but does the Prime Minister agree that this is not about submitting to European demands, but about staking out our own national interest and building alliances around that? Is not that a lesson for the future?
The Prime Minister
I do not want to come between this great friendship that is opening up across our Benches. It is important to form alliances to try to get deals that are in our national interest, but as in all these things we have to have a bottom line, and sometimes that means that we will have to go it alone.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Does the Prime Minister agree with his party chairman that we should leave open the option of exiting the EU?
The Prime Minister
As the hon. Gentleman knows, my view is that the problem with an in/out referendum is that both the options are not really what I would want or what the British people would want. I do not think that keeping our membership as it is under the status quo is acceptable: nor do I think that walking away from Europe would be a sensible idea. That is why we need a new settlement—and new consent for that settlement —and that is what we will set out.
Mr Edward Leigh (Gainsborough) (Con)
At an appropriate moment of the Prime Minister’s choosing—say, around the next general election—will he grant the British people a referendum on our relationship with the EU?
The Prime Minister
I will be saying a bit more about that later this year. As I have said, I think that opportunities are opening up. As Europe changes—and the changes are coming because of the single currency and what it is doing to the European Union—options are opening up to form a different, better relationship that the British people would back. We will then have to work out exactly how to get the consent for that relationship that the British people deserve.
Paul Blomfield (Sheffield Central) (Lab)
Following the Prime Minister’s earlier answer, he will know that the draft research and innovation budget in Horizon 2020 includes a number of elements that were not part of FP7 and therefore the growth is misleading. Will he reassure the House that he will fight unambiguously to protect the research and innovation budget?
The Prime Minister
The hon. Gentleman makes a good point. The figures I read out are the correct ones—€83.5 billion in the last period and a proposal for more than €108 billion in the last negotiating box. I can reassure him that the like-minded group of countries that came together to argue for further tens of billions of cuts in this proposal were looking for only a very small reduction in that heading in the European budget. We can get down to the sort of figures we need without fundamentally changing that budget heading.
Michael Fabricant (Lichfield) (Con)
My right hon. Friend will know that I am rather keen on pacts. Does he recall that Opposition Front Benchers said that he would be in utter isolation when he went to negotiate in Europe? Does he agree with me that working with other countries, such as the five that he has mentioned, actually delivers results for the British taxpayer?
The Prime Minister
I absolutely agree with my hon. Friend. He is completely right to talk about the importance of working with other countries. I commend him on all the very good joint working that he managed to do in encouraging colleagues to go and campaign in the Corby by-election.
Kelvin Hopkins (Luton North) (Lab)
The Prime Minister and my right hon. Friend the Leader of the Opposition made much talk of agriculture today. Is it not time to call for the abolition of the common agricultural policy and the restoration of agricultural subsidies to national Governments, not the European Union?
The Prime Minister
The hon. Gentleman makes a very interesting submission to the balance of competences review that this Government are carrying out, and I urge him to engage fully with that process.
Mr James Clappison (Hertsmere) (Con)
I commend my right hon. Friend for doing all that can humanly be done to defend our national interest on this, but is not the most important alliance that he has formed the one with public opinion in Europe, which no doubt finds it astonishing that this profoundly undemocratic organisation is seeking a large increase at a time when the whole of the rest of Europe faces fiscal pressure and, in some cases, grave economic crisis—in no small measure due to the euro itself?
The Prime Minister
My hon. Friend makes a good point. While it is disappointing not to get a budget deal at the first time of asking, this will give European leaders further time to reflect on public opinion in their own countries. I think that many people across Europe in all those countries that are significant contributors to the EU—and maybe even some that are not net contributors —will agree that it is right that when difficult reductions are being made in budgets at home, the same should happen in Brussels.
Sheila Gilmore (Edinburgh East) (Lab)
Does the Prime Minister agree that his negotiating hand in Europe would be stronger if there was not constant debate here, particularly among his own Back Benchers, about an in/out referendum?
The Prime Minister
I think what matters is that we need to explain very clearly to our European partners that we are committed members of the European Union. We think the single market is vital for Britain’s national interest. We stand behind, and have helped to arrange, some of the key successes for the European Union in recent years, such as the oil embargo against Iran, the enlargement of the EU and the completion of the single market—those are all British initiatives. But I think it is perfectly acceptable to explain to partners in Europe that we are not satisfied with every aspect of our relationship —we are prepared to stand up and defend Britain’s national interest.
Mr Peter Bone (Wellingborough) (Con)
Does the Prime Minister notice the difference between coming back from this European summit and coming back from some of the others? There is hardly anyone on the Opposition Benches to support their leader, but on the Government Benches, the Conservative party is united in supporting the Prime Minister.
The Prime Minister
I take it from that that even Mrs Bone is satisfied by the weekend’s activities, and that makes me a happy man.
Nick Smith (Blaenau Gwent) (Lab)
Voters in Blaenau Gwent support the EU, but do not want us to be a soft touch. They want investment in infrastructure projects in Wales and in research spending, and they want a big reduction in farm subsidies. Will the Prime Minister support continued investment in infrastructure projects in Wales?
The Prime Minister
Yes, I do support infrastructure investment in Wales and I do support the EU having cohesion and structural funds, but those funds have to be affordable. As I have said, I think that the better-off countries have to be honest about those countries that joined the EU as part of enlargement with a realistic expectation that some of their infrastructure was going to be brought up to scratch and, crucially, that they were going to be connected with the rest of the EU, when, of course, some of them have had previous economic connections heading in other directions. We should stand by those commitments.
Mark Pritchard (The Wrekin) (Con)
I congratulate the Prime Minister on standing firm on round one of the negotiations, but the budget talks underline how, over nearly four decades, the United Kingdom has lost its independence and the House of Commons has lost its sovereignty, given that any subsequent budget deal proposed by Her Majesty’s Government can be effectively vetoed by 26 other member states.
The Prime Minister
Where I agree with my hon. Friend is that I think there have been too many occasions where issues have gone to qualified majority voting rather than majority voting, and so the veto, as it were, has been given away in too many areas. Where I would not agree with my hon. Friend is that I think that Britain does benefit from our membership of the single market. It is important, in our national interests as a trading nation, that we do not only have access to that market, but help write the rules of that market. In that regard, I think the single market is very important for the UK.
Mr William Bain (Glasgow North East) (Lab)
Can the Prime Minister tell us whether his coalition of allies on Europe includes both the Mayor of London, who believes that an in/out referendum on EU membership would be a bad idea, and his Education Secretary, who believes we should be quitting the EU altogether?
The Prime Minister
The hon. Gentleman is a little bit out of date, as the Mayor of London has chosen a visit to India to make it clear how much he supports my policy.
Mr Robert Buckland (South Swindon) (Con)
As an enthusiastic European, may I congratulate my right hon. Friend on continuing to engage closely and constructively with our colleagues, and on building coalitions and consensus? May I urge him, in the months ahead, to carry on working particularly closely with the German Government to make sure that the progress made this weekend can be consolidated?
The Prime Minister
I will certainly continue to do that work. On the issue of the EU budget, I think there is a good reason why that coalition should stick together and push hard for a budget that, yes, is about growth, but comes in far lower than where it is today. I will work very hard to try to make that happen.
Helen Goodman (Bishop Auckland) (Lab)
I am afraid that I am still not quite clear what the Prime Minister’s view on a referendum is. Is it that he thinks it is not a good time now because of the problems in the eurozone, or does he take the view that it would never be right to have an in/out referendum?
The Prime Minister
My view is that Britain should be looking for a different and better settlement between Britain and the EU. That is something we can push for, because Europe is changing. The single currency is driving change in Europe. When we have achieved that new settlement, we should seek fresh consent for it—and, yes of course, that could include a referendum.
Chris Heaton-Harris (Daventry) (Con)
I also congratulate the Prime Minister on gaining so much support in these negotiations—this, not signing off the accounts of the Commission recently and other negotiations have shown to those living in the Brussels bubble that it is not business as usual when they deal with Britain. May I urge him to continue pushing for reductions in the various headings and especially to look at the EU quangos being set up?
The Prime Minister
I thank my hon. Friend for his remarks. He makes a good point. Given what we have done in the UK, such as abolishing or merging about 200 quangos and cutting central Government Departments’ own spending by about 30% in some cases, there is clearly room in the EU—not just in the Commission but in the other institutions—to find proper savings in cost and bureaucracy. We should continue pushing at that. The seven-year multi-annual financial framework provides the one moment when we really have the opportunity to drive home the advantage and make those cuts.
Bill Esterson (Sefton Central) (Lab)
One more time, then: does the Prime Minister agree with those in his party who want a referendum, or does he agree with those in his party who do not want a referendum?
Mr Philip Hollobone (Kettering) (Con)
My constituents are appalled that the European Commission should propose a budget with no administrative savings whatsoever, at a time when every Government in Europe are trying to cut back on unnecessary expenditure. Given that these people are clearly living in a parallel universe, what chance is there that they will advance administrative savings before the next budget round?
The Prime Minister
I am afraid it is worse than my hon. Friend says. According to so-called heading 5 —administrative costs—between 2007 and 2013 the EU was spending €56.5 billion under that heading, but the proposals from the Commission and the presidency of the Council were to increase that figure to €62.6 billion. Far from just freezing the figures, they were looking to increase them. That is one reason why I think it is perfectly possible to make a cut in their proposal. That is not unrealistic or tokenistic, or just some populist urge; it is a proper way of saving several billion euros and getting an affordable budget.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
The Prime Minister cannot even galvanise a coalition of opinion in his own party, so I am not sure how he expects to galvanise a coalition of countries. Given that his own opinion is as clear as mud, how will he deal with the constant debate on his own Benches about an in/out referendum?
The Prime Minister
This Government are not frightened of standing up for Britain in Brussels. The last Government gave away part of the rebate and got absolutely nothing in return; they joined up to the bail-out fund for absolutely no reason; and they gave away our opt-out from the social chapter and got nothing in return. They just turn up in Brussels, give in and show absolutely no backbone.
Martin Horwood (Cheltenham) (LD)
I, too, commend the Prime Minister for his statement. Does not his commitment to negotiation and building alliances with other Governments demonstrate real British leadership in Europe, in contrast to the tub-thumping opportunism from the Labour Front Bench?
The Prime Minister
I agree with my hon. Friend. It was an extraordinary performance from the Leader of the Opposition to come here one day and tell us he was one of Britain’s leading Eurosceptics, only to go to the CBI and say that he was more pro-European than Tony Blair. He has been shown up as a complete opportunist.
Mr John Baron (Basildon and Billericay) (Con)
Our letter in June, signed by 100 Conservative Back Benchers, called on the Prime Minister to legislate in this Parliament for a referendum in the next Parliament on our membership of the EU. The Prime Minister declined but said that he wished to continue discussions. In congratulating the Prime Minister on standing up for Britain, may I ask if he would allow us to have a meeting to discuss this matter, further to our letter?
The Prime Minister
I am always happy to meet my hon. Friend, who I know has strong views on this issue. He favours an in/out referendum and voting out, which is where he and I do not agree. I am happy to have that conversation with him, but I think it makes much more sense to look at the new settlement we would like to achieve within the EU before seeking consent for it. I do not think that legislating in advance is the right way forward, but I am happy to discuss it with him.
George Eustice (Camborne and Redruth) (Con)
I welcome the statement. The Prime Minister has been absolutely consistent on this issue for two years. Rather than walking away from our allies, as some urged him, he stuck with them and expanded the alliance for a real-terms freeze. Does he agree that if we were to limit the scope of structural funds and reduce the deadweight costs of recycling between richer countries, we could not only reduce the EU budget, but allow countries such as Britain to have more money to spend on their own independent regional policy?
The Prime Minister
My hon. Friend makes an extremely important point. If we can encourage the better-off countries in Europe to take that approach, we can do exactly as he says and restrict the EU budget, but ensure that those countries that joined the EU with an expectation that they would get structural and cohesion funds to update their infrastructure can get those funds. That is important.
Chris Kelly (Dudley South) (Con)
I congratulate my right hon. Friend on once again doing the right thing by the hard-working taxpayers of Dudley South, unlike Labour. Is bamboozling and attempting to bully Heads of Government during such negotiations while depriving them of food and sleep for days at a time really any way to run a union of nation states?
The Prime Minister
I thank my hon. Friend for his support. He makes an important point about the working methods of the European Union, where meetings seem to be held at extremely late hours—although I have to say that, having gone to European Councils for two and a half years, there is certainly no experience of being starved of either food or drink.
Margot James (Stourbridge) (Con)
I congratulate the Prime Minister on the excellent progress he has made in forming an alliance of net contributors both in the run-up to and during the budget negotiations. Does he welcome, as I do, the closer relationship with Germany, which Der Spiegel has aptly dubbed “Merkeron”?
The Prime Minister
I am grateful for my hon. Friend’s support. I think it is a bit premature to raise this new spectre, as it were, but I certainly enjoy working closely with the German Chancellor, and there are many areas—not just the EU budget—where we agree very forcefully.
Mrs Anne Main (St Albans) (Con)
I do not think I have a particularly odd postbag, but I have never had one letter, e-mail, conversation or text that has encouraged me to ensure that we keep up the EU wine budget, ensure that the bureaucrats have a comfy lifestyle and increase their budget left, right and centre. The Brussels sprouts and turkeys of Europe will not be voting for Christmas. I congratulate my right hon. Friend on his firm stance and say more power to his elbow. I believe that my constituents are typical.
The Prime Minister
I am grateful for my hon. Friend’s support. On this side of the House at least we will go on arguing for a tough settlement.
Christopher Pincher (Tamworth) (Con)
Does my right hon. Friend recall the warning given by Aneurin Bevan—one Labour figure who knew how to stand up in Britain’s interest—who said that it is dangerous to send a British Foreign Secretary
“naked into the conference chamber”?
With respect to retaining our veto as a weapon in our negotiating armoury, does the Prime Minister think the Leader of Opposition could benefit from a bit of Bevan?
The Prime Minister
I think the Leader of the Opposition could benefit from a little bit of time with his socialist colleagues in the European Parliament, because they have done so much to try to undermine all of us who want to see a tough budget settlement. They are calling for a 5% increase, getting rid of all the rebates and having a financial transactions tax. That is what the socialists stand for in Europe and if the Opposition do not agree, they should have the courage to do what we did and leave their group.
Gavin Williamson (South Staffordshire) (Con)
I want to know from the Prime Minister whether he thinks we would have given away all our rebate or just most of it if the Leader of the Opposition had been in charge of our negotiations.
The Prime Minister
I do not think our rebate would last long with the Labour party. Tony Blair—the last Labour Government—gave away the rebate, in return for which they thought they had secured a promise for reform of the CAP, but they got absolutely nothing in return. It was a terrible piece of negotiation, and one, I am afraid, for which we are still paying the price.
Dr Sarah Wollaston (Totnes) (Con)
Far from being isolated in Europe, the Prime Minister has plenty of allies. Does he feel it was at all helpful to be able to go to Europe and demonstrate the strength of feeling of this House? Will he set out when this House—and more importantly the British people—will be able to see his proposals for a new settlement on our relationship with Europe and when the British people will be able to give their consent?
The Prime Minister
I do not think that anybody in the EU doubts the very strong views of this House of Commons and of the British public about our relationship with Europe and the fact that we should not be having big increases in the EU budget. That is well understood and this Government reflect that very clearly, unlike the last Government, who endlessly gave away our money. I have explained that I will be saying more this year about the new settlement that we are seeking in Europe.
Guy Opperman (Hexham) (Con)
People in Northumberland will be delighted that it is this Government who are keeping the rebate, stopping the budget rise and working with the fiscal sensibles in Sweden, Holland and Germany. Does the Prime Minister agree that fiscal restraint and constraint are gradually becoming the prevailing argument in Europe?
The Prime Minister
My hon. Friend makes an important point. We must work hard to keep this alliance together, because there are many countries and parties in Europe that want to see an even bigger EU budget. Sadly, that includes the socialist party, which Labour belongs to. It is campaigning and fighting for an increase in the budget. This is what the leader of the European socialists says:
“If the EU budget is decided on the basis of Van Rompuy’s latest proposal—or an even worse compromise—it will be a budget of broken promises.”
That is the policy that Labour is signed up to, and it is only this Government who are preventing it from happening.
David Rutley (Macclesfield) (Con)
I congratulate the Prime Minister on taking a strong lead, on putting the spotlight firmly on economic growth and on placing trade on the EU agenda. Will he tell the House what steps the EU is taking to tackle the burden of Brussels-backed bureaucracy, just as this Government are doing here in the UK in relation to historical home-grown regulations?
The Prime Minister
I am afraid that the answer to that is not nearly enough. There is some good news, which is that, at the last European Council before this one, we secured a commitment from the European Commission to examine existing regulations and to try to remove the most burdensome of them. It was disappointing, however, that at this Council, the European Commission would not brook any idea of reducing its bureaucracy or its budget. As I have said, the proposals being put forward were to increase the budget of the central administration, not to reduce it.
Neil Parish (Tiverton and Honiton) (Con)
I congratulate the Prime Minister on standing up for Britain and on having strong allies in Europe. The Council of Europe is beginning to see the light in regard to expenditure, but the culture of the European Commission is always to spend more and more. If it is good enough for this Government to cut back on Whitehall, why is it not good enough to cut back on the European Commission?
The Prime Minister
My hon. Friend makes an important point. That point was made not just by me but by a number of other leaders of Governments. We were talking about the tough pension changes, budget changes, administration changes and cuts that we have had to make, and it is just not acceptable for Brussels to continue as though nothing has changed.
Mr David Burrowes (Enfield, Southgate) (Con)
Before the European Council, the shadow Chancellor kept going on about the Prime Minister being weak and isolated. Following the Prime Minister’s strong leadership on budget reform, in alliance with countries such as Germany, Holland and Sweden, who in this House does my right hon. Friend now think is weak and isolated on Europe?
The Prime Minister
First, may I congratulate my hon. Friend on his absolutely superb piece of Movember fundraising? He would not look out of place in a spaghetti western, and I am sure that a number of film studios near Enfield will want to call on his services. So excited was I by his facial hair, however, that I have forgotten his question—[Laughter.] Ah, yes! He is absolutely right. The last Labour Government gave away our rebate, and if they got back in again, they would give away the other half.
Jane Ellison (Battersea) (Con)
May I congratulate the Prime Minister on the important work that he did this weekend, particularly the alliance building? It is clearly absurd of the EU to say that there can be no cuts in the central administrative budgets when, up and down this country, councils such as mine in Wandsworth are finding ways of doing it at local government level. Surely it is inconceivable that it cannot be done at EU level.
The Prime Minister
My hon. Friend is absolutely right. I have set out in my statement and also at the European Council a number of specific steps that could be taken on pay bills, on pensions and on automatic promotion. Frankly, however, perhaps the best way of getting the Commission to engage in the reality is to give it a cut that it has to achieve and then challenge it to do so. That is what we have done with some Government Departments. We have said to them, “Okay, you know your Department and your departmental spending better than anyone. Here is the sort of reduction you need to achieve.” There is not an organisation or business in the world that has not had to budget for a 10% or 20% reduction over the past few years, and we should ask the Commission to do that.
Neil Carmichael (Stroud) (Con)
This statement certainly demonstrates that the building of an effective alliance on the European Council really can deliver some results. Through good leadership, that is clearly benefiting this country. Does the Prime Minister agree that the next big thing to do is to make sure that we have a truly competitive Europe and that the alliance that he has created should be used as a powerful mechanism to demonstrate what we need and how to get it?
The Prime Minister
My hon. Friend is entirely right. That is why we spent so much time putting together the so-called like-minded group, particularly over single market issues where we have not only the traditional allies of Denmark, Holland and Germany, but the Baltic states, the Nordic states and now the Italians and the Spanish, along with others including the Hungarians and the Czechs. They all support single-market and growth-oriented measures, which is very encouraging.
Mr Marcus Jones (Nuneaton) (Con)
Can my right hon. Friend reassure us that he will never agree to any new EU taxes, particularly to an EU-wide financial transaction tax?
The Prime Minister
I can certainly give my hon. Friend the assurance that we do not support new EU taxes. One of the ways in which particularly the left in Europe has endlessly tried to argue for higher budgets for more spending is by altering the so-called “own resources” and coming up with new taxes. We oppose a financial transactions tax. Some countries may well go ahead and introduce it in any case. If they do, as far as I am concerned, that is their own decision and we will not take part in it.
Andrew Jones (Harrogate and Knaresborough) (Con)
The current multi-annual financial framework has a commitment of €994 billion; the van Rompuy proposal cuts that to €973 billion. Does my right hon. Friend agree that this is progress, but still not good enough?
The Prime Minister
My hon. Friend is entirely right. The Commission initially came up with a proposal that was over a trillion euros. One problem has been the need to argue against a proposal that is clearly wrong and wrong-headed and bring it back to some sort of sanity before it becomes possible to argue about getting a proper outcome for the budget. It is not often that we hear politicians say this, but what is lacking in some cases is a Treasury approach of going through these budgets rather than having people like the permanent staff all sitting around in the Commission and in the Council protecting their own budgets rather than looking at the savings that should be made.
Andrew Bridgen (North West Leicestershire) (Con)
Did my right hon. Friend see the headline in last Friday’s Der Spiegel online, which read “Cameron leads revolt of the net contributors”? Of particular interest was the second online comment, which read “Wir sind heute alle Engländer! Danke Herr Cameron”—today we are all British; thank you, Mr Cameron. I do not think that we are at all isolated in Europe.
The Prime Minister
It is impressive to see Conservative MPs speaking German in the House of Commons. I am impressed by my hon. Friend and I take what he said as a compliment.
Jason McCartney (Colne Valley) (Con)
I praise the Prime Minister’s tough and principled stance at the EU summit. Those are not just my words—they are the words of some of my constituents who e-mailed me over the weekend. They had just been on a cruise around the Baltic, where they spoke to many citizens who were also fed up with being fleeced by the EU. As the Prime Minister goes back to the summit in the future to negotiate and get control over this bloated EU budget, will he realise that he has the full support not only of the British people, but of hard-pressed taxpayers in the EU, too?
The Prime Minister
I am grateful for my hon. Friend’s comments. He makes an important point—that we should use the time between now and the resumption of this European Council to try to make sure that the voice of people in Europe who want a tougher budget is actually heard, not just in Britain, but in other countries, particularly the net contributors.
Jessica Lee (Erewash) (Con)
My constituents, the good people of Erewash, are keen to know that the great British rebate, initially secured under Margaret Thatcher, remains safe in the Government’s hands. Can my right hon. Friend offer some reassurance that this important aspect of the budget remains a priority at the negotiating table?
The Prime Minister
My hon. Friend is absolutely right. It must remain a priority for Britain to make sure that there cannot be changes to our rebate. What happened at this European Council is that the disagreement about the spending figures dominated the discussions, so we did not really get on to the whole conversation about rebates and the so-called own resources and income side. I was very clear, however, that when we get to that discussion, there cannot be changes to the UK rebate.
Stephen Mosley (City of Chester) (Con)
The Commission and many EU countries have a vested interest in always increasing EU budgets. Has the Prime Minister given any consideration to whether there might be a better way of agreeing EU budgets in future?
The Prime Minister
My hon. Friend makes an important point, to which I referred to earlier. When a rotating president was responsible for trying to put the budget deal together, at least we felt that European taxpayers were getting more of a look-in than we do now that it is being done by the European Council and the European Commission. I think we need to make sure that the voice of the people of Europe, who want to see tough budgets, is properly heard. There may be more that Parliaments can do in scrutinising European spending and helping to come up with some sensible savings, which we can then take to the Council table and get agreed.
Mr Speaker
Order. I am extremely grateful to the Prime Minister, the Leader of the Opposition and other colleagues. The fact that 53 Back Benchers were able to take part in 44 minutes of exclusively Back-Bench time is a comment on succinctness.
Flooding
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)
With permission, Mr. Speaker, I shall make a statement on flooding.
The House will be aware of the exceptional rainfall that has been experienced over the last few days, and will also be aware that as a result some areas across the United Kingdom have been flooded and others continue to be at risk of flooding. The Environment Agency currently has 197 flood warnings and 291 flood alerts in place in England and Wales.
Tragically, three people lost their lives over the weekend. Two were men whose cars were caught up in flood water in Somerset and Cambridgeshire, and the third was a woman who was killed in Devon by a falling tree. I am sure that the whole House will wish to express its profound sympathy to the families and friends of those who have lost loved ones.
Heavy rainfall is not unusual at this time of year. However, we experienced bands of low pressure over the weekend, bringing often intense rainfall on catchments that are now saturated. Areas in the south-west of England, Wales and the midlands received 20 to 30 mm —over an inch—of rain in most places, and up to 50 to 60 mm—over 2 inches—fell in 24 hours elsewhere. Persistent rain will continue to affect much of northern England, south-east Scotland and north Wales today.
As a result of the rain, there has been significant river and surface water flooding in Cornwall, Devon, Wiltshire, Worcestershire, the midlands, Yorkshire and Wales, and there is a continued risk of significant flooding in parts of north-east England and north Wales. More than 900 properties have been flooded, of which up to 500 are in the south-west, more than 200 in the midlands and more than 100 in Wales. A great many people have been evacuated, and the numbers may well increase given the further rain forecast for today and early tomorrow.
The Under-Secretary of State, my hon. Friend the Member for Newbury (Richard Benyon), visited Malmesbury in Wiltshire on Sunday, and saw for himself the damage caused by the flooding to homes in the centre of the town. I visited Northampton on Friday and Exeter and Kennford earlier today, and saw some of the devastation caused by the flooding there. I spoke to families who had had to leave their homes with their children in the middle of the night, and people who had flood water a good way up their walls. I really do want to praise the local Environment Agency and council staff, because this was a real example of partnership working in action.
I also feel desperately sorry for the residents of Kempsey, in Worcestershire, whose properties were flooded when the local pumps failed. The Environment Agency will be carrying out a detailed investigation into what happened.
Many areas, such as the Somerset levels, have experienced significant flooding of farmland. That has had a major impact on local farmers, who have lost grazing land and crops. In Somerset, which is still an area of serious concern, the Environment Agency is already working with the community to review the floods that have happened during 2012, and to consider how flood water could be better managed. The flooding has also disrupted road and rail networks. Many roads were closed, particularly in the south-west, in Solihull, across north Yorkshire, in Gloucestershire—including the M5—and in other areas, including County Durham and Teesside.
The main concerns for Network Rail have been the routes between Exeter and Taunton and between Exeter and Yeovil. The route between Exeter and Taunton was badly affected, with parts of the track under 2 feet of water. Buses have replaced trains in a number of areas. Some routes have reopened, although there may still be delays to some journeys. I saw some of the damaged track for myself, and since my visit I have discussed these issues with my right hon. Friend the Secretary of State for Transport.
I extend my sincere thanks to the many people who responded so magnificently to these events. They include staff of fire, ambulance, police and other rescue services, local authorities, the Environment Agency, the voluntary sector and local communities. I appreciate how hard everyone has been working, and how difficult it is for those whose homes and businesses have been affected. I assure the House that the Environment Agency and its local emergency partners, including local authorities, are working round the clock and doing all they can to prevent flooding in areas currently at risk. My officials have been working closely with other Departments throughout the recent events.
Protecting our communities against flooding is a vital priority for the Government, and I am pleased to say that over the past few days nearly 50,000 properties have been protected by recently built flood defences. The Environment Agency issued flood warnings to over 93,000 properties, and such warnings are often crucial in giving people time to protect their properties or move precious belongings to somewhere safe. More than 1.1 million households have now signed up to the Environment Agency’s flood warning system, and I encourage others at high flood risk to do the same.
Nationally held flood rescue equipment was deployed to support local partners in Devon and Cornwall; six high-volume pumps were used and four boats were deployed, managed locally by the fire and rescue service national co-ordination centre. As flood waters recede, we will move into the recovery effort, which will need support from across central, regional and local government, as well as from businesses and voluntary organisations. I know that local communities are pulling together as recovery operations begin in earnest.
The Secretary of State for Communities and Local Government will be activating the Bellwin scheme of emergency financial assistance to help local authorities with the immediate costs associated with protecting life and property in their areas. The scheme will reimburse local authorities for 85% of their eligible costs above the threshold. Government officials will also discuss recovery arrangements with local authorities in the areas affected.
The recent flooding has been a tragedy for those affected, and I finish by paying tribute to the wonderful community spirit that I, the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury, and Members across the House have witnessed as communities rally round to support people in need. I shall, of course, keep the House informed of any further significant developments.
Mary Creagh (Wakefield) (Lab)
I thank the Secretary of State for his update.
I begin by paying tribute to the emergency services that worked to evacuate homes, rescue those who were stranded and keep people safe this weekend. I echo the Secretary of State’s thanks to staff of the Environment Agency and local councils who worked all weekend—and throughout the night on Saturday—clearing rivers and ensuring that flood defences were activated.
Hon. Members from across the House will wish to send their condolences to the family and friends of the three people who tragically lost their lives. With two months’ worth of rain set to fall in the north of the country today, we are not yet in the clear. The communities affected face months of disruption and upheaval. People who were cleaning up after the July floods have been flooded again, and some have been flooded more than once this week. Pubs that were looking forward to their busiest period are throwing out carpets and cancelling bookings.
The Department for Environment, Food and Rural Affairs classes areas as being at low, medium or high risk of flooding. Have this week’s floods triggered the medium-risk threshold that activates the Cabinet Office civil contingencies secretariat? Will the Secretary of State tell the House how many schools, roads, railways and businesses have been affected across the country so far, and how many people have been evacuated? How many acres of productive farmland are under water, and what estimate has he made of crop losses to farmers?
The Secretary of State mentioned the Somerset levels, which rely on drainage boards. The Environment Agency, however, is already consulting on changes to flood management, pump houses and maintaining river courses. Will he guarantee that those operations will be protected in future? What contact has he had with the Department for Education to ensure that children whose schools have been flooded continue to be educated? What contact has he had with the Secretary of State for Communities and Local Government on the recovery effort? Is he aware that there is no statutory obligation on fire services to respond to flood events, and does he share my concern that the current round of cuts to fire and rescue authorities, particularly in metropolitan areas, is reducing our resilience to flood events in future years?
The Secretary of State’s predecessor, the right hon. Member for Meriden (Mrs Spelman), told the House in a written statement in June that central Government would cover 100% of local authority costs under the Bellwin scheme, yet today the Secretary of State has announced that just 85% of their costs will be met in the case of the latest floods. Why is that?
Councils have just one month after a flood incident to lodge with the DCLG a claim for reimbursement under Bellwin. However, Bellwin covers only the costs of immediate action to safeguard life and property, such as evacuation and rehousing, not the capital costs of road repairs. Just three of the 20 areas flooded last summer have reached the Bellwin threshold to receive any money at all from the Government. Have the Government made any payments to those three councils for the costs of the June and July floods? If, as I suspect, they have not, when can councils expect that money?
What measures has the Secretary of State put in place to help the other 17 councils whose claims did not meet the Bellwin threshold? Whether the Government cover 85% or 100% of the costs, their failure to help 17 of the 20 councils affected in the summer is no help at all. What funding will he put in place for major capital expenditure on damaged roads?
After the 2007 and 2009 floods, the Government set up the flood recovery grant as a one-off payment to councils to help households seriously affected by the floods. This Government have chosen not to help communities in that way. Why is that?
What support will the Government give to those who are under-insured or uninsured? The answer has to be more than warm tweets from the Prime Minister. As we move from response to recovery, flood-hit communities are growing more and more anxious about the availability and affordability of flood insurance. The Secretary of State’s predecessor told the House in June that
“we are at an advanced stage in intensive and constructive negotiations with the insurance industry”.—[Official Report, 25 June 2012; Vol. 547, c. 26.]
Yet the Association of British Insurers has stated today that a deal on the future of flood insurance has “stalled”. We were promised a deal in the spring, and then by July. It is now November. What has happened? If the deal is not done by the time of the autumn statement in just nine days, the risk of people being unable to insure, mortgage and eventually sell their home will rise exponentially. We must not have whole communities blighted because the Chancellor refuses to negotiate in good faith. When will he get a grip on the issue?
We know that every pound invested in flood defences saves £8 in costs further down the line, yet this Government have cut capital spending on flood defences by 30% from the 2010 baseline. They are spending less on flood defences now than we were five years ago in 2007. As a result, 294 flood defence schemes have been deferred or cancelled. Will the Secretary of State resist any pressure from the Treasury to cut flood defence spending in the next comprehensive spending review?
Last Monday in Westminster Hall, the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth (Brandon Lewis), told Members that
“while the flooding incidents of this summer were locally significant, we did not witness the devastating effects of previous years.”—[Official Report, 20 November 2012; Vol. 553, c. 93WH.]
Communities that have been devastated by flooding should not have to listen to Ministers telling them that their experience is not nationally significant. Today and this weekend, we have once again had a reminder that floods are the greatest threat that climate change poses to our country, and flood-hit communities deserve not to have to go through that terrible experience again.
Mr Paterson
I thank the hon. Lady for echoing my tributes to the Environment Agency, councils and all those who have worked so extraordinarily hard in recent days. I thank her also for expressing her sympathies to those who have lost relations and friends.
The hon. Lady asked detailed questions about the picture on schools, roads and crops. It is too early to tell, because the current weather is carrying on, and I think we had better review those questions when it settles down.
The hon. Lady mentioned local councils. We are co-ordinating the matter carefully and meeting DCLG on a regular basis, including on the subject of fire services. She mentioned the Bellwin scheme, which we have continued in exactly the same vein as the previous Government. There is a 0.2% threshold, and we have said that we will pay up to 85% of costs. We will keep that under review and keep assessing the situation as it develops.
The hon. Lady mentioned flood insurance. Today’s story is complete nonsense. The first meeting I had on taking office was with the ABI. We have had constructive and detailed discussions with it since, and there was a senior level meeting as recently as the end of last week. I am looking forward to receiving the ABI’s latest suggestions. We are determined to arrive at a replacement for the statement of principles that provides universality, is affordable and does not put a major burden on the taxpayer. I would like to remind the hon. Lady that the statement of principles covers 2003 to 2013, and we inherited absolutely nothing from the previous Government on this issue.
The hon. Lady mentioned spending on flood defences, and there is a complete canard about this reduction; our reduction is 6% over the whole spending round compared with what Labour spent over its spending round. I would have thought that she would have been pleased that our partnership scheme is really working, and a range of schemes that were just on the threshold and did not make the cut will now go ahead. In the last major incident, in 2007, 55,000 homes were flooded but this time the figure is 5,000 to 6,000. That is still traumatic for those households, and I repeat that my real sympathies are with those affected. I stress that we are continuing with a major programme of flood defence schemes to reduce the number further.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Today’s tragedy is truly of national proportions, but the response has been so much more effective after the Flood and Water Management Act 2010 came into effect. Will the Secretary of State revisit the damage done in September to the roads and bridges in north Yorkshire, which has now been made 10 times worse today? Will he also examine the impact on the community of operating theatres potentially closing at the Friarage hospital in Northallerton, as well as of school and road closures? There is something the Government could do to ease the impact of surface water flooding: introduce the regulations on sustainable urban drainage long before the deadline of 2014, which marks a huge delay from what was originally proposed.
Mr Paterson
My hon. Friend mentioned various local issues relating to schools and roads, and I can tell her that we are meeting colleagues in other Departments on a regular basis. As the local MP, it is appropriate that she should raise those issues with those Departments, but I am happy to discuss them with her separately. On the issue of sustainable drainage systems, we intend to have an implementation date of April 2014, but this has turned out to be extremely complicated and we will have to work this out in detail to make sure we get it right.
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
Will the Secretary of State, together with his colleagues in government, examine the case for making targeted use of flood recovery grants for those in the most unhappy of circumstances?
Mr Paterson
I am very happy to look into that. If the right hon. Gentleman would like to write to me detailing a specific example, I am happy to take it up.
Stephen Gilbert (St Austell and Newquay) (LD)
Not only are hundreds of homes in Cornwall flooded now, but they were flooded two years ago. What plans does the Secretary of State have to ensure that flood insurance remains affordable and available for communities such as mine in Cornwall, that have been devastated again and face the risk of not being able to get insurance?
Mr Paterson
We are clear that we want to arrive at a scheme that is affordable and is as comprehensive as possible, but that is not a burden on the Treasury. This is a real conundrum and we are determined to find a solution. We hope that we will find something that is better than the existing statement of principles.
Mr Ben Bradshaw (Exeter) (Lab)
The Secretary of State talks about something that is not a burden on the Treasury, but no country in the world has a free market in flood defences, as he knows very well. However, I thank him for coming to Exeter today and, through him, his Minister, for keeping in touch with me by phone over the weekend. The Secretary of State will know that Exeter narrowly escaped a flooding disaster over the weekend. It tops the south-west Environment Agency’s list of priority schemes for upgraded flood defence. The city and county councils have come up with money to help fill the shortfall left by his Government’s cuts. Will he now get together with the Environment Agency to come up with a scheme urgently, so that Exeter is safe in the years to come, given the greater threat of climate change?
Mr Paterson
I thank the right hon. Gentleman for his comments and his question. I pay tribute to his constituents, who have rallied round magnificently in very difficult circumstances, particularly all those in the services whom I met today. I met his council leaders and stood on the bridge looking at the scheme, which has protected 6,000 properties in the heart of Exeter. We should pay tribute to that scheme, which is most effective. I was interested to learn that councils are thinking of taking up our offer of a partnership and are working with the Environment Agency, topping it up and making a scheme that is targeted at the local requirements. Such schemes will be decided on in the coming months.
Sarah Newton (Truro and Falmouth) (Con)
Those who have suffered terribly from flooding in Cornwall are uppermost in my mind. Will my right hon. Friend join me in paying tribute to the partnership between the emergency services in Cornwall, which do such a magnificent job, and the Environment Agency in particular, which introduced, with the Government’s help, a new programme that defended many homes and businesses in Truro from flooding?
Mr Paterson
I am very happy to join my hon. Friend in paying tribute to the Environment Agency and everyone in those different services and councils who have worked so hard on the ground and made an enormous difference.
Mr David Anderson (Blaydon) (Lab)
The Secretary of State quite rightly praises the work of the emergency services. What will we do going forward given that fire services in places such as Tyne and Wear are having their budgets reduced by 35%, 1,500 local authority workers in Gateshead have been sacked and the Environment Agency in the north-east faces a 20% cut in resources? How will we manage these situations then? When will he stop putting ideology before practicality?
Mr Paterson
We have provided £2.5 million to fire authorities to help on this issue. Under very difficult circumstances—I do not want to make tiresome political points, but we inherited them from the previous Government—we have managed to hold up the investment in flood defence schemes. We are looking at a 6% reduction over the whole spending period compared with that over the previous spending period, which under the current circumstances shows the priority we are giving to these schemes.
Bill Wiggin (North Herefordshire) (Con)
Will my right hon. Friend carry out a full investigation into why maintenance is not always done properly, as that causes most of the flooding in my constituency? Will he also ensure that the Bellwin thresholds work for small county councils as well as for large ones?
Mr Paterson
Several Members have raised the question of keeping drainage channels clear. If my hon. Friend has specific examples, I urge him to take them up with his local officers in the Environment Agency, who understand the matter. If he does not like that, perhaps he will grab me directly after the statement.
Yvonne Fovargue (Makerfield) (Lab)
Many people in my constituency trying to renew their yearly household insurance policies, which include protection against flooding, are now having difficulties because the statement of principles expires in seven months’ time. Does the Secretary of State not agree that the closer we get to June 2013 without an agreement, the more people will be left without that vital insurance or with paying a much higher premium through no fault of their own?
Mr Paterson
The hon. Lady is absolutely right. We want a solution to this conundrum, which is why we have been meeting the ABI regularly and why we are determined to get a good solution. There is no point in rushing into a scheme that will not work. Getting a balance is a difficult conundrum and we are determined to get it right.
Mr Laurence Robertson (Tewkesbury) (Con)
I thank the Secretary of State for his statement. He is well aware of the effects flooding has on my constituency. Is it not time to develop a national strategy to ensure that the culverts, ditches, drains and waterways are regularly maintained and cleared? Is it not also very important to stop building houses in flood risk areas? Will he assure me that no inspector appointed by this Government will force councils such as Tewkesbury to build houses where it is inappropriate to do so?
Mr Paterson
My hon. Friend is absolutely right—making sure all those channels are kept clear is part of the management of them. In recent days, we have seen complete and total saturation of the land and no matter how clear some of the channels have been kept, there has been nowhere for the water to go. He is quite right to mention the channels—several Members have raised that point with me—and I will talk to the Environment Agency about it.
Diana Johnson (Kingston upon Hull North) (Lab)
Hull had 14,000 homes affected by the flooding in 2007 and the former Secretary of State said to me on the Floor of the House:
“I am proud that we have found a way forward with the insurance industry that, above all, guarantees that universal and affordable insurance remains available to all, including to her”—
my—
“constituents.”—[Official Report, 25 June 2012; Vol. 547, c. 30.]
Was she correct or incorrect to say that?
Mr Paterson
We are quite clear as a Government that we want to come up with a scheme that is affordable, as universal as possible and not a burden on the Treasury. We are working towards that, as was my right hon. Friend the Member for Meriden (Mrs Spelman), my predecessor.
Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)
I am grateful that the Secretary of State mentioned the Somerset levels and glad that the Minister of State, Department for Environment, Food and Rural Affairs, my hon. Friend the Member for Somerton and Frome (Mr Heath), is in his place. One of the problems the levels have had is that successive Governments have refused to spend money on the pumps that are brought in to try to clear them, and they are having to be brought in more and more. Will the Secretary of State, after the statement, please look urgently at upgrading the pump system across the Somerset levels, which cover my constituency and that of my hon. Friend?
Mr Paterson
I am grateful to my hon. Friend for that question. I took a train through the levels this afternoon on my way back, and they looked like the Irrawaddy in spate. I must say that it is a huge challenge for any pump system to keep that huge volume of water clear. If he would like to write to me, I would be more than happy to take the matter up with local Environment Agency officers.
Bill Esterson (Sefton Central) (Lab)
I note that the Secretary of State did not answer part of the question on development on floodplains. Developers in Formby and Lydiate in my constituency want to build on farmland that often floods. Will he ensure that the Chancellor and the Secretary of State for Communities and Local Government do not prevail in their desire to force through development in areas, such as my constituency, that already have a significant problem with flooding?
Mr Paterson
I am grateful to the hon. Gentleman for giving me the chance to clarify this. The national planning policy framework is absolutely clear that development should be located away from flood risk wherever possible.
Jessica Lee (Erewash) (Con)
Does my right hon. Friend agree that one of the consequences of the current flooding is the impact on transport links? The train I took to London last night was slightly delayed due to flooding, but severe disruption in the east midlands followed. Will he confirm that he is of course liaising with colleagues in the Department for Transport on the matter?
Mr Paterson
I am happy to confirm that at official level we are working and talking with Department for Transport officials on a daily basis. One of the first calls I made after leaving Taunton today was to the Secretary of State for Transport, who had already been on the case to get the Exeter line reopened. We hope to see services resume tomorrow.
Helen Goodman (Bishop Auckland) (Lab)
Unpredictable weather events are one of the main consequences of climate change. Does the Secretary of State not understand that if he continues to resist the scientific evidence and refuses to take sensible policy measures to prevent climate change, his successors for years to come will have to come to this House to make statements such as the one he has made this afternoon? [Interruption.]
Mr Paterson
I wish I had such extraordinary powers. The fact is that we have to react and adapt to the weather, and that is what the Government are doing.
Nigel Adams (Selby and Ainsty) (Con)
In recent months, and this weekend, constituents of mine have woken up to flooding. Today, loss assessors are visiting constituents in the village of Saxton and bridges are still closed in Cattal. On Saturday I visited a Kelfield farmer, Richard Bramley, some of whose land is in a floodplain designed to help protect the village of Cawood. Thankfully, the flood defences worked, but Mr Bramley has lost more than £50,000-worth of crops. As flooding is becoming increasingly frequent, does the Secretary of State agree with Mr Bramley and me that the management of the water system does not appear to be keeping pace with changing weather conditions?
Mr Paterson
That is why we are putting this huge sum of money into flood defence schemes and encouraging partnerships with local government and, on the ground, with individuals and farmers, such as the one my hon. Friend cites, working with local drainage boards and councils to ensure that there is a co-ordinated approach.
Grahame M. Morris (Easington) (Lab)
I would like to thank the Secretary of State for not blaming Opposition Members for the weather and join him in paying tribute to the emergency services, especially the fire and rescue services in the north-east, particularly in Durham and Teesside, who have been doing such a terrific job. Does he share my concern that in areas such as my constituency we are gradually losing resilience due to cuts in front-line fire and rescue budgets at a time when floods are becoming an increasingly common phenomenon?
Mr Paterson
I was in Northampton on Friday and talked to the senior fire officer there. I echo the hon. Gentleman’s congratulations, as have we all, to those in the fire service and others who have been working so hard. The reaction I got from Northampton fire brigade was that they have been thoroughly involved in evacuating a number of people, and I am sure that we will see the same sort of dedication in the north-east.
Jacob Rees-Mogg (North East Somerset) (Con)
May I join the Secretary of State in mourning the deaths of the three people, particularly the gentleman in Chew Stoke who was washed to his death in spite of the very valiant efforts of the fire brigade to rescue him? May I thank the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon), who has assured Bath and North East Somerset council that it will be given every help following the floods? May I raise an issue that has been brought to my attention by constituents who are concerned that silt is not being dealt with because of esoteric wildlife issues, and ask whether this policy will be reconsidered?
Mr Paterson
I am grateful to my hon. Friend for his comments and wholly endorse them. The issue of keeping watercourses clear has been raised by other Members. I am absolutely clear in my own mind that the purpose of these watercourses is to get water away, and I will be discussing the issue with the Environment Agency.
Ian Lavery (Wansbeck) (Lab)
The Secretary of State dismissed the discussions between the ABI and the Government on flood risk insurance as utter nonsense. He said categorically that the Government face a conundrum. Perhaps he can tell the House what that conundrum is.
Mr Paterson
I am glad to clarify my earlier comments if the hon. Gentleman wants me to. What I said was nonsense is the concept that the talks had stalled. Only at the end of last week we had, at the most senior level, a very constructive meeting with the ABI, as has been going on in recent weeks. We are quite clear—I will repeat this again—that we want to get to a system that is affordable, that is as comprehensive as possible—
Mr Paterson
I will explain the conundrum to the hon. Gentleman if he will stop interrupting. We also want a system that is not a burden on the Treasury. That is not an easy series of demands to meet. We are absolutely determined to keep working in a constructive manner with the ABI, and we are currently waiting for it to come back to us. However, no doubt to the hon. Gentleman’s disappointment, I am not prepared to negotiate on the Floor of the House of Commons.
Julian Smith (Skipton and Ripon) (Con)
Having been hit particularly badly earlier in the year and now with these floods, North Yorkshire county council is very worried about capital expenditure not being included in the compensation scheme. Will the Secretary of State arrange for civil servants in his Department to have a direct conversation with the council, which is having trouble getting an answer on this?
Mr Paterson
Probably the best thing would be for my hon. Friend to have a meeting with my hon. Friend the Under-Secretary to go into the detail of the case.
Jeremy Lefroy (Stafford) (Con)
What consultations is my right hon. Friend having with local councils and the Highways Agency to ensure that existing roads that do not have sufficient surface water drainage capacity will be made a priority for investment?
Mr Paterson
As I said, we are having daily meetings with other Ministries such as the Department for Transport. I talked to the Secretary of State for Transport this afternoon, and we will continue in that vein. If my hon. Friend is concerned about a particular road, he should write to the Secretary of State to take it up directly with him.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)
I thank the Secretary of State for his statement and for his reassurance on the renewal of the statement of principles. On 11 June this year, Bognor Regis and Littlehampton were severely affected by flooding, with hundreds of homes flooded following 36 hours of intense rainfall. West Sussex county council, as the lead statutory authority, is about to publish a detailed report into the implications of those floods. Will he ensure that Southern Water is encouraged and enabled by the regulator to allocate all the capital that is needed to upgrade surface water drainage systems so that weaknesses in the current system are strengthened and people can feel safe in their homes?
Mr Paterson
My hon. Friend raises a very important point—the key role played by water companies, which have an absolutely essential task in managing water. The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury and I will be happy to discuss the particular case that he mentioned.
Mel Stride (Central Devon) (Con)
May I thank my right hon. Friend for this morning visiting Kennford, a small village in my constituency that has been overwhelmed by the flooding, and affording me the time to discuss the situation with him? Will he join me in thanking in particular Martin Weiler and his team at the EA, who have done such extraordinary work in the village in reassuring people, providing information, and so on?
Mr Paterson
I am sorry that my hon. Friend could not be there in person, but I much appreciate him ringing me in the car as I arrived. I would like to pay tribute to Martin Weiler, his team and all those from the Environment Agency whom I met and spent time with when I went to Kennford. I want to stress how completely awful it was to see those houses in Kennford. There was a thick black line about three feet off the ground, everything in people’s downstairs rooms was completely wrecked and all the electrical appliances were gone. All of that happened in an extraordinarily short amount of time—people were hit by the rapidly rising water over the course of about an hour on Saturday evening. It was shocking and I pay tribute to all the local agencies that I met, the local councils and the local community for how they are pulling together.
Neil Parish (Tiverton and Honiton) (Con)
I thank the Secretary of State and Ministers for keeping us informed by phone about the problems. I have had flooding in Bampton, Tiverton and Cullompton, and the canal has broken its banks at Holberton. Feniton has now flooded in 2007, 2008 and 2012. One of the problems is that, although the local authorities have resisted more houses, the inspector has allowed them, despite flooding in the village. We need to ensure that inspectors have the same views on flooding as the Government and local authorities.
Mr Paterson
I pay tribute to my hon. Friend’s constituents, who are stoic under these very difficult circumstances. I stress that the NPPF is absolutely clear on this: it is the intention that developments should not happen on floodplains. He is absolutely right to raise the issue and he should bring it to the attention of all those involved in planning locally.
Craig Whittaker (Calder Valley) (Con)
One of the biggest challenges for residents in Calder Valley who suffered from flooding over the summer is ongoing insurance for both business and residents. On the scheme to replace the statement of principles to ensure there is affordable insurance for those properties most at risk, will the Secretary of State update the House on whether the Government will consider assisting the industry by providing a temporary overdraft, to be paid back with interest, for the proposed not-for-profit scheme, which, of course, would not be a burden on the taxpayer?
Mr Paterson
I am grateful to my hon. Friend for trying to tempt me into negotiating in public but, as I have said many times today, we are involved in a long negotiation with the ABI. We had a very constructive meeting at senior level last week, are waiting for its counter-proposals and I am afraid that I cannot go into the sort of detail that he has asked me to on the Floor of the House.
Stephen Mosley (City of Chester) (Con)
Given your first-hand experience of this flooding, what advice would you—sorry, Mr Deputy Speaker; I mean the Secretary of State—give to those who seek to build on floodplains?
Mr Paterson
I am not sure what plans you have, Mr Deputy Speaker, but I would strongly advise all those who are considering developments around the country to look very hard at the NPPF, which says that developments should not happen on floodplains wherever possible.
Mr Robin Walker (Worcester) (Con)
I thank the Secretary of State for his statement and, in particular, his concern for residents in Worcestershire who have been flooded. Worcester city suffered badly in 2007 but, partly as the result of improved flood defences, I have yet to hear of a home being flooded there and hope that that will not happen. My constituents are concerned about their ability to get insurance, as are local businesses. May I offer my strong support to the Secretary of State in his attempts to get a deal with the insurance companies as soon as possible?
Mr Paterson
I am grateful to my hon. Friend. I was in his city on Friday evening at a dinner for one of his parliamentary neighbours and discussed the issue with people who may have been constituents of his. He is right that we have to work through this negotiation and get a good deal on insurance that is satisfactory to all parties.
Mr Adrian Sanders (Torbay) (LD)
In addition to those that the Secretary of State has already praised, will he mention South West Water, the transport companies, which have done a great job today, and, crucially, the local media? Will he also address the public concerns in Devon about the resilience of our infrastructure, particularly Cowley bridge, which controls rail in and out of the county to Paddington, the Clennon valley pumping station in my constituency, which deals with most of the sewerage in Torbay, and roads throughout Devon that were cut off from the rest of Devon at some point over the weekend?
Mr Paterson
I went to Cowley bridge to look at the damage to the railway line and I am pleased to say that it will be mended by tomorrow, which will be a triumph for those involved, because I was told that something like 200 tonnes of aggregate had shifted. The hon. Gentleman is right to raise a number of detailed issues, and they will have to be worked through by local councils and agencies. I was impressed by the resilience of all those affected by events in recent days and I have every confidence that they will see their way through this situation.
Harriett Baldwin (West Worcestershire) (Con)
West Worcestershire has had the benefit of six new flood defence schemes since 2007. They have protected 360 homes and more than £8 million has been spent on them. Sadly, the Kempsey pump failed on Sunday morning, and I pay tribute to the engineers and emergency workers who came out in the middle of the night to fix it. When the investigation discovers the cause of the incident, will the Environment Agency seek compensation from the manufacturers of the pump, and how will it get that compensation to the home owners whose homes were flooded? How will the situation resolve itself in the long term in respect of the insurance for those homes?
Mr Paterson
I am grateful to my hon. Friend for raising the situation in Kempsey. It was sickening that, according to my knowledge, the pump failed at 4 am. The scheme was designed to protect 70 properties, but 20 of those were damaged. A detailed investigation into what happened is taking place. I congratulate the Environment Agency on getting the pump going again. I believe that it had tripped out. There will be detailed results from the investigation and we will take the matter further when we see them.
Neil Carmichael (Stroud) (Con)
I congratulate and thank the agencies in Gloucestershire for dealing so well with the various transport challenges and the localised flooding. Will the Department consider further attenuation schemes, which have some attraction in my constituency?
Mr Paterson
My hon. Friend raises a good point. During my train journey back from Taunton today, I saw graphically the extraordinary volume of water that has landed in such a short time. The areas that have been set aside as soaks have become completely saturated. He is right that having such small-scale schemes down the road can be very helpful and we will certainly look at that.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
What discussions is the Secretary of State having with his colleagues in the Welsh Government, given that the management of Welsh rivers has a profound effect on the risk of flooding in England?
Mr Paterson
My hon. Friend makes a good point. Rivers do not respect political boundaries. We are keeping in touch with all Ministries and Government agencies.
Mr Peter Bone (Wellingborough) (Con)
I thank the Secretary of State for coming to the House and informing us in such detail of what is happening and what he has been doing over the past few days. Flooding is occurring on the embankment in Wellingborough. Northamptonshire’s fire brigade and local councils are doing an excellent job. Like other Members, I ask the Secretary of State to look again at the issue of building on the floodplain, because regional spatial strategies forced councils to have residential homes in areas where they opposed them.
Mr Paterson
I went very close to my hon. Friend’s patch on Friday and saw the scheme that worked incredibly effectively in protecting Northampton town. The Nene was tamed. He rightly says that the huge wet area was saturated. I saw a permanent caravan site that had been badly flooded and a large number of people had been evacuated. I pay tribute to all the agencies in his area that I met: the Environment Agency, the police, the fire service and the local council. He is right that it is completely barmy to build on floodplains. I want to drill it in to everyone who is listening that the NPPF makes it very clear that that is a bad idea and that it should not happen.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the Secretary of State for making that statement on such an important issue.
Points of Order
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr William Bain (Glasgow North East) (Lab)
On a point of order, Mr Deputy Speaker. Have you received any intimation from the Secretary of State for Work and Pensions or the Under-Secretary of State for Work and Pensions, the hon. Member for Wirral West (Esther McVey), who has responsibility for disabled people, that they intend to deliver a statement to this House, either this evening or tomorrow, about the outrageous decision to close the Remploy factory in Springburn in my constituency, with the loss of 46 jobs, which was announced today? Do my constituents not deserve clear answers on what went wrong in the tendering process, why they have been so badly let down at this final stage, and how the Government will strain every sinew to get them replacement jobs?
Mr Deputy Speaker (Mr Nigel Evans)
Thank you for that point of order. I have received no information that any Minister intends to make a statement on that issue or any other issue today. Should that alter, the House will be informed in the usual way. As far as tomorrow is concerned, we will have to wait until tomorrow.
Diana Johnson (Kingston upon Hull North) (Lab)
On a point of order, Mr Deputy Speaker. During oral questions in July 2010, I was told by the then Secretary of State for Environment, Food and Rural Affairs, the right hon. Member for Meriden (Mrs Spelman), that she was proud that she had found a way forward with the insurance industry on flood insurance. Today, we see that the Government have done no such thing. My constituents were relying on the word of the Secretary of State in the House of Commons and they now feel very let down. What can be done to correct the record?
Mr Deputy Speaker
That sounds to me more like a matter of debate than a point of order. The hon. Lady is a senior Member of the House and will know the tools that are available to her to pursue the matter.
John Robertson (Glasgow North West) (Lab)
On a point of order, Mr Deputy Speaker. I am speaking on behalf of the shadow Home Office team, in my role as shadow Parliamentary Private Secretary, with regard to the answering of named day questions tabled by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper). Questions 126091, 126092, 126093 and 126106 were tabled at the end of October for answer within two working days. They have still not been answered. Will you, with the help of Mr Speaker, help to get those questions answered so that Her Majesty’s Opposition are able to fulfil their duty to scrutinise the Government?
Mr Deputy Speaker
It is unusual for one Member to raise a point of order on behalf of another and I do not wish to encourage the practice. There is nothing to inhibit Front-Bench Members from the official Opposition in making their own points of order. That said, questions for written answer on a named day should receive some kind of answer, preferably a substantive one, on the day that is named, and a full answer should be provided in a reasonable time. If the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) cannot get satisfaction by raising the matter with the Minister concerned, she should inform the Procedure Committee of her problems.
Grahame M. Morris (Easington) (Lab)
On a point of order, Mr Deputy Speaker. This is the first opportunity that I have had to apologise to you and the House for any suggestion or perception that I breached parliamentary procedures by failing to make reference to my entry in the Register of Members’ Financial Interests, which states that I participated in a study tour of Venezuela, before I asked a topical question of the Foreign Secretary during Foreign Office questions on 4 September. I have made no secret of my visit. In fact, I have written to newspapers and blogged about it extensively. If I breached procedures, it was unintentional and I place on the record my apology.
Mr Deputy Speaker
The House will have noted what the hon. Gentleman has said. It is worth putting it on the record, however, that the resolution of the House of 12 June 1975, which was last amended on 9 February 2009, excluded supplementary oral questions from the requirement for declaration. It appears to me that a topical question is a supplementary question. It is up to Members to judge whether an interest is of a nature to justify a declaration at such times, but the House’s rules do not require it. The hon. Gentleman has now made such a declaration.
Small Charitable Donations Bill
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
19:42 - The House divided: - Ayes: 175 / Noes: 268 - Question accordingly negatived.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss the following:
New clause 2—Post-legislative review—
‘The Government shall, within 24 months of this Act coming into force, undertake a review of the operation and administration of the Gift Aid Small Donations Scheme and lay a report of the review before the House of Commons.’.
New clause 3—Complementary gift aid for small donations to small charities—
‘(1) Smaller charities, community amateur sports clubs or recently established charities, which do not meet the eligibility criteria in section (1) shall be eligible to apply to HM Revenue and Customs for complementary gift aid for small donations.
(2) “Small donations” for the purposes of complementary gift aid shall be as provided for in section 3 and the Schedule.
(3) That maximum donations limit for complementary gift aid shall be £5,000.
(4) The “connected charities” conditions in sections 4 and 5 shall also apply for charities making claims for complementary gift aid for small donations.
(5)
(a) HM Revenue and Customs may stipulate the supporting verification it may require from relevant agencies or authorities or designated persons in respect of any claims for complementary gift aid for small donations to small charities;
(b) such agencies, authorities or designated persons may include charity commissions, local government officers, police or police and crime commissioners, members of relevant professional bodies or others designated by devolved administrations in agreement with HM Revenue and Customs for these purposes.
(6) This section shall come into force on 6 April 2014.’.
This would provide for a separate scheme of supporting payments from HM Revenue and Customs, in the spirit of gift aid, to smaller or newer charities including those formed in response to a particular event.
Amendment 9, in clause 1, page 2, line 7, leave out subsection (6) and insert—
‘(6) The “specified amount” for a charity for a tax year is (subject to section 2(1))—
(a) £5,000 for a charity eligible for the full specified amount; or
(b) £2,000 for a charity eligible for the reduced specified amount.’.
This amendment is consequential on amendment 8.
Amendment 8, in clause 2, page 2, line 11, leave out subsection (1) and insert—
‘(1) A charity is an eligible charity for a tax year if—
(a) it has made a successful gift aid exemption claim in at least three of the previous seven years. In such cases, a charity will be eligible for the full specified amount; or
(b) it has made successful gift aid exemption claim in the previous year. In such cases, a charity will be eligible for the reduced specified amount.
This amendment introduces a probationary period for charities that do not have the claims history required in subsection (1)(a) of this clause. It allows them to benefit from a reduced specified amount until a claims history has been established. This also removes the requirement for a start-up period.
Government amendment 24.
Amendment 32, page 2, line 14, at end insert ‘or
(c) the charity is a “small charity”;
(d) the charity has been established for a specific event or project which has concluded.’.
This amendment extends the meaning of eligible charity to small charities and those established for specific events or projects.
Government amendments 25 and 26.
Amendment 10, page 2, line 26, leave out paragraph (a).
This amendment is consequential on amendment 8.
Government amendment 27.
Amendment 11, in clause 4, page 3, line 9, leave out paragraph (b) and insert—
‘(b) are eligible for the same rate of specified amount (subject to section 2(1)) for the tax year.’.
This amendment is consequential on amendment 8.
Amendment 12, page 3, line 15, leave out paragraph (a) and insert—
‘(a) the specified amount (subject to section 2(1)), divided by’.
This amendment is consequential on amendment 8.
Amendment 13, in clause 6, page 4, line 41, leave out paragraph (b) and insert—
‘(b) if less, the specified amount (subject to section 2(1))’.
This amendment is consequential on amendment 8.
Amendment 14, page 4, line 45, leave out paragraph (b) and insert—
‘(b) if less, the specified amount (subject to section 2(1))’.
This amendment is consequential on amendment 8.
Government amendments 28 and 29.
Amendment 15, in clause 9, page 6, line 20, leave out paragraph (a) and insert—
‘(a) two or more charities (“connected eligible charities”) are connected with one another in a tax year and are charities eligible for the same rate of the specified amount (subject to section 2(1)) for the tax year, and’.
This amendment is consequential on amendment 8.
Amendment 16, page 6, line 37, leave out paragraph (b) and insert—
‘(b) if less, the specified amount (subject to section 2(1))’.
This amendment is consequential on amendment 8.
Amendment 21, page 7, line 10, at end add—
‘(8) The Treasury must, within 24 months of this Act coming into force, prepare a report assessing the impact of—
(a) the connected charities provisions; and
(b) the community buildings provisions
on the ability of charities to benefit from the Gift Aid Small Donations Scheme and lay it before the House of Commons.’.
Government amendment 31.
Amendment 33, in clause 18, page 12, line 20, at end insert—
‘“small charity” means a charity whose gross income for a tax year is no more than £25,000.’.
This amendment defines a small charity as one whose gross income for a tax year is no more than £25,000. This figure is consistent with that given for lower-income charities in the Charities Act 2011 and the Office of the Scottish Charity Regulator’s Routine Monitoring Policy.
Cathy Jamieson
I look forward to further interesting debates on the proposals—we had interesting debates both on Second Reading and in Committee. This large group includes significant proposals, although a number are consequential on acceptance of the main amendments.
We discussed a number of the significant proposals on Second Reading and in Committee. They follow a pattern. I thank the Minister—it might be one of the few times I do so—for listening to some, but not all, of the concerns raised in Committee. At the time, it was not always clear that he would introduce amendments or deal with other things, but I thank him for listening. Crucially for the charities, if not for the Opposition, he has responded to points that the charitable sector raised with us.
Today we have once again heard concerns from the wider charity sector about the reported deficit of more than £300 million in 2011, which it has brought to public attention. That shows the current difficulty of getting donations and income into charities while at the same time they are facing increased burdens on the services they provide—not that the sector sees its services as burdens. Hopefully, more charities will benefit from the Bill now than would have benefited from it when we debated it in pre-legislative scrutiny, on Second Reading and in Committee.
We had long debates in Committee on some clauses and amendments. I am sure the House will be relieved to know that I have no wish to repeat them verbatim—that would be unhelpful—but it is worth noting that the same issues came up in Committee time and again, which suggested that further work needed to be done to amend the Bill. We also need to continue to scrutinise what the Bill will do in the light of subsequent amendments.
There is an extensive list of proposals in the group, and I want to refer to a number of them. It would be wise of me to put on record that we have tabled new clauses 1 and 2 because they would deal with a number of concerns that the Opposition and the charity sector have raised throughout the Bill’s progress. Perhaps the Government have acknowledged—in their amendments in Committee and on Report—that the original Bill was not drafted as tightly as it might have been, or in a way that ensured as much fairness and equity as possible.
It is therefore right and proper that we return to the issue of formally reviewing the Bill after a two-year period. The Minister said many times in Committee that he was willing to look again at the measures and acknowledged that he wished to amend the Bill—we will discuss that later. However, when the Chancellor first announced the scheme, he said he wanted it to deliver
“gift aid on the contents of the collecting tin and the street bucket”—[Official Report, 23 March 2011; Vol. 525, c. 962.]
He also pledged that the reforms would be “bureaucracy-lite”. That theme has run throughout our discussions.
The Bill will doubtless benefit a number of charities and community amateur sports clubs, which is welcome, but the Government need to reassure charities that they are committed to making the Bill the best it can be. Given that many of the concerns that have been outlined will not result in changes to the Bill before Royal Assent, we can know how well the scheme is performing in practice only if there is a formal review. In any event, it would be good practice to review legislation after a period of its operation. That theme ran through a number of proposals that the Opposition tabled in Committee.
The Minister will note that we are trying in new clauses 1 and 2 to add extra detail to the report that we originally asked for in Committee. Let me say a few words about why a detailed report is so important. I do not want to go through all the arguments again, but we heard in Committee that anywhere between a third and a fifth of charities would benefit as a result of both the strict eligibility criteria and the community buildings and connected charities provisions, which we have debated extensively at various stages. The corollary to that is that a significant number of charities will be unable to benefit. The scheme could therefore be divisive, favouring some types of charities over others. That theme also ran through the debate.
Attempting to solve one problem often produced unintended consequences and difficulties—I am thinking of our debates on churches, and on large versus small charities—and that is why we ask in the new clauses for a breakdown and a review that gives more detail. That is important. New clause 1 mentions registered charities, exempt and excepted charities, and charities in different regions. That would mean that we can fully understand the impact of the scheme once it is in operation and redress any inequalities as soon as possible.
We spoke extensively in Committee about the complexity of the Bill. As we heard, it is estimated that 160 pages of guidance on Her Majesty’s Revenue and Customs website will be needed to explain it. There are 80 pages on registering for gift aid, so perhaps we can agree that the Bill is more complex than we would like it to be. Not just the Opposition and the charity sector understood that and raised such particulars; the Minister, in the sixth sitting of the Bill Committee on 23 October, admitted that the rules were complex in response to one of my hon. Friends. He said:
“I readily admit that this part of the Bill is complex and that we do not know exactly how it will work until it comes into practice.”––[Official Report, Small Charitable Donations Public Bill Committee, 23 October 2012; c. 207.]
In another Committee sitting, he said that
“the very nature of trying to capture issues such as connectivity—whether it is here where we are dealing with charity, or in other laws where we are dealing with trusts—is complex.”
He has also said that:
“Clearly HMRC is like any organisation; mistakes can always be found.”––[Official Report, Small Charitable Donations Public Bill Committee, 25 October 2012; c. 223-5.]
I make those points simply to reinforce the rationale for building into the process a formal review, because of the nature and complexity of the Bill and the amount of guidance that will be required. At one point in Committee, I said that if a charity had £1 for every word of guidance needed, there would be a fairly significant donation to good causes. It is important that the Bill requires a formal review, so that we can understand the provisions and ensure that we keep tabs on the costs of the scheme.
In the Minister’s deliberations in Committee, he often spoke of having to be a good guardian of the public purse. I would have thought that it would therefore be only right and proper for the Government to commit formally to reviewing the costs of the scheme after an appropriate period—reviewing the spending, because the Minister said that as many charities as were eligible would be able to take part in the scheme, and to ensure that the money was equitably distributed, identifying any problems in the regions of the different nations that make up the UK.
There are a number of concerns about the data on which we begin the process. The Minister was good enough to write to the Opposition to answer a number of the questions we raised in advance of the debate. He mentions in his letter amending the matching rate; amending the eligibility period to two years; introducing a power to amend the eligibility criteria in future; and changing the powers in some of the clauses. He goes on to give some information about organisations that can claim gift aid but are not covered by Charity Commission data. He gives figures, and that is helpful, although—as is often the case in these scenarios—the answers to questions immediately prompt a series of other questions. Some of the responses that we have subsequently had from the charity sector suggest confusion in some areas, and I hope that the Minister will be able to clear that up. He could also help us to establish that baseline from which the success or otherwise of the scheme could be judged in the future.
For example, in the Minister’s letter he suggests that 60% of the organisations claiming gift aid in 2009-10 were registered charities. I am not entirely sure what that 60% represents. Was that 60% of the 68,357 charities to which gift aid repayments were made in 2009-10? That figure comes from HMRC’s own release. If that is the case, it would suggest that just over 41,000 registered charities were claiming gift aid in that year, which of course means that some 40% of the total were claiming other types. It would be helpful if the Minister could clarify the point and reassure us.
The Minister also indicates in his letter that HMRC does not hold data on the number of charities making gift aid claims. That is a bit confusing because HMRC has been able to provide some statistics and figures, so it seems that it does hold some underlying data, if perhaps not all of the data that we have sought. It would be helpful to have some clarity on that point. Does HMRC not hold up-to-date data on the number of registered charities or have we somehow misunderstood the Minister’s letter? If so, the charitable sector is saying that it too could have misunderstood, and that does not bode well for good communications.
It would be helpful if we were able to ensure that we have such provision in the Bill. As we know, Ministers come and Ministers go. This Minister is relatively new in post and it is good to see that he is still here to reap the benefits and take the plaudits when the Bill passes—as it no doubt will—but another Minister may come along in due course who may not have paid quite so much attention to the Bill and perhaps has not fully appreciated the amount of attention to detail from this Minister and the commitments that he made in Committee. For that reason, it would be helpful to have something on the face of the Bill, as outlined in new clauses 1 and 2.
I fully appreciate the fact that the Minister has tabled some amendments, to which he will speak in due course. Depending on what he has to say, those amendments may make some of the amendments that we have tabled superfluous or redundant, but it is important to place on record our reasons for tabling them.
A whole series of consequential amendments flow from amendments 8 and 9, which provide for a sort of probationary period for charities before they qualify. The Minister will no doubt already be thinking that his amendments on the claims history would give more benefits to some charities than our amendments. That may well be the case, but the counter-argument would be that under our amendments charities would be able to benefit sooner.
The Minister will also remember that in Committee we tabled several amendments pushing him to reconsider various aspects of clause 2. We did that because the sector essentially felt that the three-year history of successful gift aid claims and the requirement that charities must have been in existence for at least three complete tax years before they could benefit from the scheme were overly onerous and out of proportion to any risk of fraud. The Government have tabled some amendments in this area and I take that as a sign that they have listened to our concerns and taken steps in the right direction.
Martin Horwood (Cheltenham) (LD)
Is it the hon. Lady’s understanding that Government amendment 31, which seems to allow some flexibility for subsequent changes of the rules, nevertheless—according to the explanatory statement in the notes—insists that previous gift aid claims have to have been made, which of course may well preclude large numbers of the very small charities that the Minister presumably wants to help? Therefore it will still work against the interests of some of the smallest charities, and I am personally very disappointed that an amendment with more flexibility has not been tabled.
Cathy Jamieson
I thank the hon. Gentleman for making that powerful point, and we will come back to it later when we discuss other amendments. Whatever happens, I would hope that the Minister sees the point that the hon. Gentleman raises as a reason for ensuring that, at the very least, a review clause is built into the Bill. We would want to know whether a continuing number of small charities continued to be unable to access the scheme and gain benefits. Indeed, at some stage we will discuss the whole question of charities set up in response to particular circumstances—for very worthy causes—that may not be able to benefit at all from the scheme because the need will have been met and they will have moved on by the point at which they become eligible even to apply.
The idea behind the scheme is to boost the income of small groups that rely on bucket donations, and the hon. Gentleman has pointed out very succinctly that there are many such groups which simply will not be able to take advantage of the scheme, including those which do not have the resources to apply for gift aid or are just starting out. Our amendments seek to help those charities by removing the requirement for the start-up period and instead introducing a qualification period. We had some debate on this in Committee and our amendment would allow charities—new or established —without that claims history of gift aid to claim for a reduced amount of £2,000 after one year of claims history and then to claim for the full £5,000 once they had built up a three-year history.
As we have already heard, there are concerns that the Government’s requirements will be a significant barrier to participation for many charities that have not previously registered. They will also exclude organisations to which even an additional £500 would make a huge difference in income. Instead, it would tend to favour the bigger, more established organisations that may have the finance and fundraising departments to make gift aid claims. Many of the smaller, ineligible charities will already have been registered with the official regulator for three years. They will have had to submit accounts and pass the fit and proper person test, which is pretty robust. For some charities, their major fundraising may be from non-eligible sources, such as donations from trusts, events and charity shops, and they will not have been able to claim gift aid for the required three years even if they have significant income from small donations through collections which would be eligible for this scheme. For trustworthy established charities to be forced to wait a number of years before making claims reduces the incentives for registering.
The sector gave us a couple of examples. I will not go into all the detail, but one example was Wansbeck CVS, which has just set up a small grants fund in memory of a community development worker. It is designed to give small grants to local charities, but it had not been previously registered for gift aid. Under the current proposals, only donations received years after it registers for gift aid will be eligible. That is one of the examples of possible problems we were given.
We suggested that introducing a qualification period would go some way towards allowing charities that stand to benefit most from the scheme to be able to claim a reduced amount of £2,000 after only one year. That would at least allow them to cover their administration costs for claiming, while giving them an incentive to fundraise further and claim for standard gift aid. We tabled the amendments to try to provide a way forward that would balance the risk of fraud, identified by the Minister in Committee, with the ability to give a boost to the scheme for charities that need all the help they can get in tough times.
Amendments 17, 18, 19 and 20 relate to community buildings, on which points have been raised consistently during this process. The Minister will recall that in Committee we tabled a number of amendments to try to change the community buildings provisions substantially. We believe that they are seriously flawed and unfair to charities that would find themselves disadvantaged and unable to benefit. Many in the sector were disappointed that the Government did not give any ground, and I am disappointed that they have not used the opportunity of the Report stage to reconsider, as the Minister has done on other matters.
I suspect that the Minister will not move on these provisions, but if we cannot have a wholesale change to the Bill at this stage, I hope that the Government will at least be persuaded to look again at one particular aspect of the community buildings provisions. Clause 6(3) defines the community building amount as
“the sum of the small donations that are made to the charity in the community building in the tax year by group members while it is running charitable activities in the building”.
Even before Second Reading, that point was raised consistently as one that had the potential to cause difficulty for some organisations. In an attempt to solve the problem in relation to churches—the Minister rightly and understandably wanted to find a solution—we have a scenario in which it will be very difficult for other charities to take advantage of this part of the scheme, and that will potentially cause more problems than it solves. As we have heard previously—it is worth reiterating the point—clause 6(6) goes on to define a group member as:
“a member of the group of people with whom the charity is carrying out the activity”.
We heard a number of examples relating to that point, most vividly from my hon. Friend the Member for Leeds East (Mr Mudie), who spoke about a potential scenario with regard to a charitable group involving Alzheimer’s patients and asked whether it would only be those within the group who were able to make donations.
We have an issue with the principle here. We are concerned that for a great number of charities the beneficiary and the donor groups are likely to be two separate constituencies of people, and we do not want that to become a discriminating factor in whether charities can access the scheme. Indeed, it seems to us to be the exception rather than the rule that funds would be raised during the course of charitable activities by those benefiting from them. If we set aside churches and the collection plate, there are many scenarios where it would be entirely inappropriate for the bucket to be passed around the 10 or more members sitting there while the charitable activity was being undertaken. For example, during counselling work or work that provides activities for young people, or in which young people are involved, that would simply not be sensible.
The nature of fundraising is highly dependent on the type of activity and an organisation’s beneficiary group. The requirement in question would disadvantage the types of charities in respect of which it would not be appropriate or possible to raise funds in this way. Notwithstanding the debates we had in Committee, we still have concerns about whether such provision will go against the benefit principle of gift aid where gift aid is not available and where a donor receives personal benefit. In Committee, the Minister was at pains to say that that was not the case. However, we still have some concerns about the wording in the Bill, so this is another area where it would be important to have some review and some consideration about whether the Bill will work as it is intended to.
I will not repeat what was said in all the debates, but in Committee we heard that it would be difficult for such charities as Victim Support and the Alzheimer’s Society to benefit from these schemes, which is why we have tabled these amendments. Once again, the charitable sector—most recently the Charity Finance Group, the National Council for Voluntary Organisations, the Institute of Fundraising and the Charities Aid Foundation—has stressed that point. Such organisations are concerned that the only donations that will count will be those made within a community building. Although some changes have been made, there are concerns about whom the provision would actually apply to, because the people participating, not including staff or volunteers, might be vulnerable people.
I appreciate that I am speaking at some length, but we have a number of important and significant amendments. In my notes, my shorthand for amendment 21 is that it is a review amendment. It may seem that all Opposition Members talk about is review, review, review, but I hope that I have begun to lay out exactly why we feel that the provision to review is important. Although we have tabled an amendment that focuses on the part of the community building provisions I have just been talking about, however, I do not want the Minister to think that we have given up on all the concerns we had on other aspects of the community building provisions.
From our debates in Committee, the Minister will recall our concerns about clause 7. The clause states that charities must run their charitable activities “in a community building” for them to be eligible for top-up payments. We had a wide-ranging discussion about whether charitable activities could be run from community buildings, whether they had to be in community buildings and the relationship between the organisation setting up and those participating. The Bromsgrove scouts became a touchstone—how the provision would effect the Bromsgrove scouts became the main discussion point. We also heard from charities such as the Royal National Lifeboat Institution, which runs its charitable activities—this has been mentioned on a number of occasions—at sea, and a large number of charities that run their activities in the community, such as Victim Support and the Alzheimer’s Society. They often hold their counselling sessions or work in homes or in other community spaces, and we heard concerns that those organisations should not lose out.
We also raised concerns in Committee about clause 8, which specifically excludes from the scheme properties used for residential purposes, limiting the ability of care homes and hospices to access it. In Committee, the Minister stated that patients in hospices would still be registered at their homes, as he understood it, for the purposes of the Bill. People go to a hospice at a sad stage in their life, but to all intents and purposes their home is elsewhere and therefore a hospice should not count as a residence. He gave us some assurances on the care home sector, but there are still some concerns.
I gave the example of organisations providing residential provision for young people possibly for 52 weeks of the year. To all intents and purposes, such provision might form young people’s home for a time. There remain concerns in that area. The sector is also concerned that this approach might be a bit short-sighted, failing to take into account not only the ageing population and possible changes in hospices’ and care homes’ functions but the possibility, notwithstanding the best will of the Minister, that the legislation might exclude people from benefiting.
Susan Elan Jones (Clwyd South) (Lab)
It is a privilege to speak in this debate. As hon. Members present at the time will know, we had some good, positive and, indeed, consensual discussions in Committee. Labour Members are keen to see the Bill passed, because we recognise that much of it is an extension of what previous Labour Governments did. That is why we want to get it 100% right. Things such as the compact for the voluntary sector and the immense growth and development of gift aid happened on Labour’s watch, and we are keen to see that trend continue in the Bill.
Certain groups will rightly be especially pleased with the Bill. It is fair to say that the dioceses, Churches and faith groups welcome the Bill, as do we, and it is right that we support those groups and the tremendous work they do in communities across the country. A range of other charitable groups will also benefit.
I am pleased with certain changes in the matching principle: I am not a betting person, but, on this occasion, 10:1 is clearly better than 2:1. Nevertheless, we are asking the Minister to listen to the voice of the national charities’ voluntary organisation, the Institute of Fundraising, as well as the Charities Aid Foundation and other groups, which are saying, “If you are prepared to improve the Bill in certain ways, as you have been, please think again about having the link with gift aid, if we really want charities, including those not currently claiming gift aid, to benefit.” I urge the Minister to have at least a little think about that. He and the Government have gone some way towards accepting some of the changes that those groups wanted. Let us get it 100% right. I urge him to consider those other changes too.
I want to look at the issue of reviewing the legislation, about which my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) spoke with great eloquence. We know that many things in the Bill will work, but if the development of community and voluntary sector groups over the last 10 to 20 years is anything to go by, we know too that fundraising has changed dramatically. What worked yesterday will not work today, and what will work tomorrow will probably not have worked today. It will change over time. That is why we ask the Minister to consider having a review.
Mention has been made about the way donations are made, and I am confident that more mention will be made of it. What interests me is that if one made a £10 cash donation, there could be benefits under this Bill, but not if the same donation was made on a mobile phone or with a bank card. As someone from generation X—I have not actually checked, but I think I am—that strikes me as a little odd, but let us think about the new donors we want to cultivate in generation Y, as I think it is called. If we are to build a new philanthropic culture that encourages younger and newer donors, we must at least be open on that point. I urge the Minister to look carefully at that provision, which I know has already been mentioned by my hon. Friend the Member for Kilmarnock and Loudoun, and I know it will be mentioned later. I urge him to reconsider and to support the concept of an ongoing review so that future charities Ministers and other Ministers can look at this legislation and say, “Let us make it work for today’s generation.”
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Let me begin by declaring an interest. Until relatively recently I was a trustee of two charities registered in Scotland and I remain a trustee of the Parliament Choir, which also has charitable status.
I acknowledge the progress made on the Bill in Committee and the steps people have made across the House to come up with constructive solutions to the acknowledged weaknesses of the legislation in its original form. I hope the Minister will take on board some of this evening’s amendments, not least the two in my name in this group—amendment 32 and the consequential amendment 33. My amendments are designed to provide a mechanism to allow smaller and project-specific charities to benefit from gift aid top-up payments without having to have made a successful gift aid exemption claim in three of the last seven years, or two of the last four—I am conscious that the Government have tabled an amendment to improve that part of the legislation. For the sake of clarity and simplicity, I propose that a “small charity” be defined as one with a gross annual income of £25,000 or less. As with other amendments in the group, the aim is to bring more small charities within the ambit of the legislation, which is a shared aim across the House this evening.
The reason I urge the Government to look closely at my amendments is simply that smaller charities often do not benefit from gift aid, and in some cases do not even register for it. The very charities that this Bill is intended to benefit are among those that are least likely to be registered for gift aid or to have claimed it regularly even when they are. As the proposals stand, an eligible charity has to have been registered with Her Majesty’s Revenue and Customs for a minimum of three years, made a gift aid claim in three of the past seven years, and not had a penalty imposed in making a gift aid claim. We know that around 100,000 organisations are registered with HMRC for gift aid, but only 65,000 claim each year, which is a significant gap. They include not just general charities, but excepted charities, such as churches, exempt charities, such as museums and foundation schools, and community amateur sports clubs. At the moment, many small charities are not registered with HMRC and do not have a three-year track record of making gift aid claims, which particularly affects charities run solely by volunteers—those that do not have professional staff, including fundraisers, or the time and resources that other, more professionalised charities do. Such charities are often involved in the very projects that attract the largest active community involvement and support, which in my view are exactly the sorts of activities that we should use the Bill to incentivise in our civil society.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
Charities are facing challenging circumstances, with falling financial support from the Government and falling regular donations as a result of the squeeze on people’s spending. This is a tough environment for any charity to work in. Furthermore, the reliance on the charitable and voluntary sector is increasing, as we are seeing from the number of food banks that are springing up and the greater reliance on homelessness services.
We owe it to charities to help them out when we can, and I must admit that the Chancellor’s announcement of these proposals was one of the few parts of the Budget that I welcomed. Now that we have had a chance to look at the details, however, we see that there are still some outstanding issues. We will of course support the Bill on Third Reading, but I still have concerns about accessibility for many of the charities that could benefit most from it.
Offering charities the chance to take advantage of a gift aid top-up is of course welcome. My constituency is facing a number of serious challenges, but we are fortunate to have a thriving charitable and voluntary sector that does much good work throughout the area. I am thinking of the small charities run by a handful of local volunteers, such as Home from Home in Dumbarton, and the Clydebank Asbestos Group, which has a very wide reach but relies on a small team of dedicated volunteers, as well as the slightly larger ones with some staff, such as Y Sort-It in Clydebank. They all contribute so much, working alongside the services offered by the local authorities to help with a range of issues.
As I am sure other Members will recognise, it is often many of the smaller charities which are getting by on tiny incomes that help so much with the provision of local services. Many of them do not have steady income streams or the time and manpower—or, often, the womanpower—to administer complex donation rules. They rely on simple methods of fundraising, such as bring-and-buy sales and collecting donations in buckets on the street. Those small activities all add up.
I am sure that, like me, many of those smaller charities will be pleased with the effect that the proposals could have on their incomes. They remain concerned, however, about the restrictions that could make them ineligible. The Government need to ensure that the rules will work for charities and not against them. As my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) has comprehensively set out, we need the Bill to help charities out, not to add to the burden of bureaucracy.
Bureaucracy can be a headache for small charities. Compliance with the rules is essential—they are there for a reason—but they can pose real difficulties, particularly for the smaller charities. A Treasury spokesperson said the Government’s proposals were intended to reduce the administrative burden on charities, but I am not sure that that is what they will do. It is possible that the bigger charities, not the smaller ones, will benefit.
The Government’s amendments are helpful; they are heading in the right direction. The original proposals could have resulted in the smallest charities losing out the most, because placing so many conditions on the new top-up would have made it difficult for those charities to take advantage of the scheme. I am pleased that the Government seem to have recognised the problem with the three-year criterion, and that they are moving towards a two-year period instead. That will widen the benefits to include more charities. However, the proposals will still favour the larger charities that have a history of gift aid claims over the smaller ones that rely on bucket donations.
Similarly, the Government’s amendments do not properly reflect the needs of newly established charities, which will naturally not have any history of gift aid claims. The hon. Member for Banff and Buchan (Dr Whiteford) said that her amendment would acknowledge the fact that, although many charities are proactive in their work, there are those that react to events. A charity might be set up to react to a natural disaster, for example; another might be set up in memory of a loved one. Newly established charities often receive a significant proportion of their donations at the very beginning, and their donations might subsequently tail off. Under the current proposals, they would not be able to claim top-up payments related to those important initial donations.
Our amendments are intended to help those small and new charities by removing the lengthy start-up period and replacing it with a probationary period. That would provide a real benefit. It would allow all charities without a claims history, whether new or established, to benefit from the top-up scheme while keeping the protections in place. It is important to have protections against fraud, but I believe that our proposed probationary period would be sufficient in that regard. I therefore encourage Members to support our amendments.
We need to ensure that we get the scheme right. The Government’s own “Giving” White Paper, published last year, made it clear that they wanted to work more with business and charities to make it “easier and more compelling” for people to give time and money, and so make the change that they want to see. Our amendments would make it much easier for the Government to meet their aims.
New clauses 1 and 2 would ensure a proper review of the impact of the measures on access to the scheme. The charity and voluntary sector deserves to have the rules properly reviewed, with a report being laid before Parliament so that all Members can see how accessible the scheme is. I hope that, in the spirit of openness and transparency that the Government say they are in favour of, all Members will consider supporting the new clauses.
The simple principle of giving charities the extra bit of help that is contained in the Bill is very much welcome, but the proposals could and should go further. As the Bill stands, thousands of small charities could lose out. Our amendments would take a few steps towards giving charities that extra support, and I hope that Members will support them.
Mark Durkan (Foyle) (SDLP)
As other hon. Members have already said, many practical concerns and suggestions were aired and shared by members of the four parties represented when we discussed the Bill in the Public Bill Committee. It is important that we use the Report stage to return to a number of those issues. I do not intend to rehearse all the arguments that were made in Committee. This is not the time for “Here are our best bits” or for simply making our pitches again. However, it is important to reflect on the fact that the Minister indicated that he was listening to some of the points that were made in Committee, even if he refuted many of the others. That is reflected in some of the Government amendments that he will no doubt speak to later. I welcome the fact that further progress has been made, just as I welcome the fact that, in Committee, the Minister tabled an amendment to clause 2 as a direct response to an issue that I had raised on Second Reading. I appreciate his doing that.
There is still a basic problem with the Bill. The original Budget promise made by the Chancellor of the Exchequer was widely welcomed across the House, and certainly in the charity sector. People expected something along the lines of what they thought had been promised—that the equivalent of gift aid would be available, with certain conditions, to charities, without them having to fulfil all the gift aid criteria and the necessary processes attached to them.
Sheila Gilmore (Edinburgh East) (Lab)
Being a member of a Public Bill Committee, particularly a Back-Bench member, can be a soul-destroying experience. It often seems to Opposition Members—under all Governments, I am sure; I do not intend to suggest otherwise—that what happens is this: the Committee debates the amendments that we have tabled, the Government generally oppose them, in some instances there is a vote, the Opposition generally lose the vote unless the Government have been uncommonly careless in losing some of their members somewhere in the building, and we move on to the next debate. However, that is probably not what the public think is involved in the scrutiny of a Bill in Committee.
When I became a member of the Committee, I wrote in my local newsletter that I was quite excited about it. Because the Bill did not appear to me to have created huge party political dividing lines, I believed that we would have the sort of opportunity for scrutiny that does not always arise. Unfortunately, however, there came a time when I began to feel that that was not the case, and that, for all my hopes that we would be open with one another about what was right and wrong with the Bill, we were merely engaging in those traditional Committee procedures. I was therefore extremely pleased to observe that the Minister, who had given little away in Committee, had tabled Government amendments on Report. That, I think, shows that he listened to what was said in Committee, and subsequently thought about difficulties that had been created during the drafting of the Bill but had not really been intended by legislators.
We must surely acknowledge that returning the time for which a charity must have existed before it can even claim under the scheme to two years, as the Government amendment proposes, would be an improvement, although our new clause takes a rather different approach. At least the amendment recognises that charities, particularly new charities, need a great deal of help. However, part of the problem with the Bill has been the fact that it is so strongly hitched to the gift aid mechanism.
It was assumed that small charities that could not obtain money through gift aid should be helped by means of the mechanism that already existed. That created a huge extra obstacle race. In fact, there will still be an obstacle race even if the Government amendments are accepted. The charity must be registered, it must have existed for a certain number of years—for the three years originally proposed, or for two—and it must be registered for gift aid. For all the reasons that have already been given, that can be quite a cumbersome process, particularly for small organisations that are entirely run by volunteers.
The whole apparatus of gift aid is quite complex, and the original mechanism involved a fairly lengthy process. It seemed to us in Committee that very small charities in particular were being expected to jump through a huge number of hoops to make their claims. Ironically, it appeared that they would be faced with far more obstacles than larger organisations which were claiming substantial amounts of gift aid, and that a scheme that had been intended to benefit small organisations was unduly elaborate.
The Economic Secretary to the Treasury (Sajid Javid)
I will start by reflecting on the Bill’s constructive Committee stage, and I thank the Opposition for their continuing support. I also thank the hon. Members for Edinburgh East (Sheila Gilmore), for Clwyd South (Susan Elan Jones), for Banff and Buchan (Dr Whiteford), for West Dunbartonshire (Gemma Doyle) and for Foyle (Mark Durkan) for their contributions to today’s debate. I will try to answer as many of the issues raised as I can.
Proceedings in Committee, and now on Report, have provided an excellent challenge to and scrutiny of the Bill—as they should have done—and I hope it is clear from the amendments that they have tabled that the Government have listened to hon. Members from across the House. The amendments in this group cover mainly the eligibility conditions for charities that wish to claim under the small donations scheme. New clauses 1 and 2 would have a wider effect, as they require HMRC to publish certain details about the scheme as a whole. Amendment 21 would require HMRC to publish details of the connected charities and community buildings rules. Government amendments 28 and 29 are minor and technical and simply change the Government Department to which powers in clauses 7 and 8 are given.
In Committee we debated a variant of new clause 1 and the same text of new clause 2. I opposed the measures then, and I am afraid I shall oppose them again today, as I will amendment 21. As I explained in Committee, we need neither the new clauses nor amendment 21. We are already doing much of what they ask and it would not be a good use of civil servants’ time to duplicate that work.
Let me start with the annual report. As I said in Committee, HMRC publishes national statistics on the cost of various charitable tax reliefs three times each year. Once the gift aid small donations scheme is up and running, HMRC will include details of that in those national statistics. HMRC does not separately identify gift aid claims by types of organisation, regions of the UK, or their regulators. Those details are not published for gift aid claims and it would not be a good use of HMRC’s time to produce such information for this scheme.
HMRC does not collect information on whether a charity is exempt or excepted. Charities would have to provide that extra information, and HMRC would need to change its IT system to cater for that. Again, that cannot be a good use of resources for either charities or HMRC. HMRC does not publish details of fraud rates in particular schemes or tax reliefs, as that would be tantamount to advertising them to fraudsters. I therefore cannot commit to publishing such information. All information that HMRC can reasonably publish will be published, and interested Members will be able to find all relevant information on its website.
New clause 2 would require a review of the scheme two years after the Act comes into force. As I said in Committee, the Government are committed to a review of the scheme three years after it has started. That will allow enough time for the scheme to get up and running, and for charities to learn about it and get used to claiming. Any less time than that, and the review would not be representative of the scheme. A two-year review would be premature, but it would be wrong to think that no one will look at the scheme for three years. HMRC engages with charities every day through its helpline, outreach and audit teams. It will listen to what charities are saying and look for ways to improve the scheme.
HMRC’s charity tax forum has been discussing this scheme since it was announced in March 2011. The forum will share experiences of the scheme as it beds down, and identify areas for improvement. HMRC keeps all guidance under review and makes changes as necessary so that any issues raised can be responded to without having to wait for three years to pass.
Amendment 21 would require the Treasury to carry out a separate review of the scheme in relation to the community buildings and connected charities rules. As they currently stand, the community buildings and connected charities rules will affect only a few charities. For the vast majority who take advantage of the scheme, such rules will be irrelevant and can be ignored. Most charities are not connected with other charities, and do not operate within community buildings or collect more than £5,000 in small cash donations.
We will debate later more Opposition amendments on the community buildings and connected charities rules. The amendments would extend those rules—and their complexities—to a far larger number of charities. Whatever the outcome of that debate, I do not believe that amendment 21 is necessary. I have already said that we will review the scheme after three years, and that review will be wide ranging and look at all aspects of the scheme. It seems unnecessary and wasteful to hold another review 12 months earlier to look at just a small part of the scheme; it would be better to review everything at the same time.
The hon. Member for Harrow West (Mr Thomas) spent two Committee sittings setting out his concerns about HMRC, which he doubted would have enough resources to administer the scheme—if we go ahead with all these reviews and reports, he may well be right. I do not feel that the new clauses or amendment 21 are a necessary or effective use of public resources, and I therefore ask the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) not to press them.
New clause 3 was tabled by the hon. Member for Foyle, and amendments 32 and 33 by the hon. Member for Banff and Buchan. They are designed to support new and smaller charities and to mitigate the effects of a three-year eligibility period. I hope that hon. Members have noted the amendments that I tabled on eligibility requirements, and that my proposal to drop the eligibility period to two years goes some way to allaying their concerns.
We debated new clause 3 at length in Committee, but I am afraid the concerns that I raised still apply. HMRC would be expected to gather information from other agencies to check the credibility of small charities. That would place a significant administrative burden on it to verify each and every charity that applied through that route. HMRC would be required to make subjective judgments about whether a charity was in or out, and would be constantly at risk of a legal challenge to its decisions. The scheme would be impractical in operational terms and I ask the hon. Member for Foyle to consider not pursuing the new clause.
Mark Durkan
The Minister suggests that under the new clause, HMRC would have to check with all sorts of other agencies, but the measure clearly states that HMRC can provide for a scheme to which charities may apply. It would be up to the charities to produce and submit the verifying information. It would not be HMRC’s duty to verify information with other charity regulators or anybody else; it would be up to the charity making the claim to produce the necessary evidence as laid down in the scheme.
Sajid Javid
I thank the hon. Gentleman for that point. He sat on the Public Bill Committee and will understand from those debates—probably more than most Members in the Chamber today—the eligibility requirements. I know that he welcomes some of the Government amendments, but the remaining eligibility requirements provide a degree of protection for the public purse, so that charities that make claims and use the benefits introduced by this Bill are those that HMRC has good reason to believe are using the measure in the right way, and there is protection against fraud. I have looked closely at his new clause, which he has tabled with the best of intentions, but it is not a change that we can afford to make at the moment.
I turn to amendments 32 and 33, tabled by the hon. Member for Banff and Buchan. Again, I am afraid I cannot support them. They would allow certain charities— those with an annual income below £25,000 and those set up for specific projects and events, such as she described—to claim top-up payments from the time when they were established without meeting any other eligibility requirements. I sympathise with the intention behind the amendments, but they would cost a lot of money—tens of millions of pounds.
Most small charities starting up have an annual income well below £25,000, and those set up in reaction to events such as disasters would also qualify for payments under the amendments, so nearly every new charity would qualify immediately. As I said, I sympathise with the intentions behind the amendments, but it is essential to have some eligibility requirements, otherwise the scheme will be wide open to fraudsters and the cost to the public purse will rocket.
Dr Whiteford
The charities in question would be registered with charity regulators on both sides of the border, and those are surely the bodies that decide whether their purposes are charitable. What benefit will the Bill bring to people raising money for a one-off or fixed-term good cause?
Sajid Javid
The Bill is intended to complement gift aid, because the Government received many representations from charities that when they received cash donations, such as in bucket collections, they were unable to take the information necessary for gift aid, such as whether the individual was a taxpayer and their name, address and other information. The scheme is intended to address that. One-off charities, including those set up in response to a disaster, are worthy causes but do not fit into how we intend the scheme to complement gift aid.
To answer the last part of the hon. Lady’s question, if a charity is created in response to a particular event or disaster, there is nothing to prevent it from registering for gift aid immediately and taking advantage of the gift aid provisions that already exist. If it stayed in existence for a number of years and therefore met the new eligibility criteria, it could also take advantage of what is available under the Bill. For the reasons that I have given, although she introduced her amendments with the best of intentions, I ask her kindly to consider not pressing them.
Amendments 8 to 16 would abolish the three-year start-up period and allow charities that have made a gift aid claim in the previous year to claim under the scheme. The maximum donations that could be claimed on would be £2,000, instead of £5,000. Proposals for a reduced rate for new charities have been put forward several times, and I am afraid that I cannot support them. Reducing the eligibility period to a year or less would increase costs, which would include a lot of costs caused by fraud. Requiring just one gift aid claim would leave the scheme open to unacceptable abuse.
The amendments would also make the scheme very complicated for some charities. Charities would need to know which other charities connected with them had claimed, and at which rate, because the rules would be different depending on those factors. The Government have listened to all the concerns that have been expressed about the eligibility rules, and we have put forward our own proposals. Our amendments are safe and affordable, and they will minimise complexity. I therefore ask Opposition Members not to press amendments 8 to 16.
I turn to the amendments that I have tabled on eligibility. Amendments 24 to 27 will reduce the eligibility period for the scheme to two years, and amendment 31 will introduce a power to enable us to amend the criteria in future if necessary. The eligibility criteria have been a key issue raised by the charity sector throughout the development of the scheme, and by Members in our earlier debates. The sector has welcomed the amendments since I tabled them last week, and I hope that hon. Members will support them, too.
Nigel Mills (Amber Valley) (Con)
Can my hon. Friend explain the logic of why amendment 31 will take away the Government’s power to amend the provision requiring a gift aid payment in a previous year, yet amendment 30, which we will come to later, will give them the power not to require any matching gift aid amount in the next year? The impact will be that a charity can make a claim without having any gift aid claims in the current year, but will have to have claimed at least a pound in the previous year. Is it not slightly perverse to table amendments with those two opposite intentions?
Sajid Javid
I believe that they fit together, and I hope that the purpose of the Government amendments will become clear.
Concerns were raised that the eligibility criteria in the Bill were too restrictive, that too many charities that did not already claim gift aid would be put off the scheme because it would take too long to become eligible, and that some short-lived charities would never reach eligibility. Balanced against those concerns is the fact that the Government have always been concerned to protect the scheme against fraud. I have looked again at where the balance lies between accessing the scheme and protecting it from people who would try to exploit and abuse it, and I have concluded that we can reduce the eligibility period to two years without undermining the integrity of the scheme. Eligibility for the scheme is defined by reference to successful gift aid claims made by a charity in the past, and I now propose that the minimum period should be set at two years.
I shall explain in more detail what our amendments will do. Four factors will determine the eligibility of a charity or community amateur sports club for the scheme, as set out in clause 2. The first is the start-up period—the number of complete tax years for which a charity must have been established before it becomes eligible for the scheme. We are reducing that period from three years to two years, so a charity or CASC will now be able to access the scheme a year earlier than was originally set out. The second and third elements are that a charity has to have made claims in two of the previous four years, and that there is a gap of no more than two complete tax years between the claims. The amendments will ensure that HMRC is guaranteed to see a minimum level of claiming activity by the charity or CASC in question, so that it can get to know that organisation and understand its ability to claim gift aid correctly.
The fourth element is the impact of a penalty on eligibility. If a charity receives a penalty, it will be excluded from the scheme for the tax year in which it makes the claim and the following tax year. Originally, the charity would have been excluded for the following two years, but amendment 26 means that the exclusion will be for only one year following the year of the claim.
That all adds up to a significantly more accessible scheme for new charities that have not claimed gift aid before, but we do not know exactly how the scheme will operate in practice. As I have said, we will review it after three years, when we might find that fraud rates are much higher or much lower than expected, so it is sensible to build flexibility into the Bill to amend the eligibility criteria in future. Many charities have asked the Government to do that. That power will enable us to vary the elements of the eligibility criteria up or down, depending on the evidence that we see on how the scheme operates and its susceptibility to fraud.
Those four elements interact with each other, and with the matching criteria, to provide safeguards for the scheme. We want to build the maximum flexibility into the Bill by allowing each of those periods to be reduced, increased, removed or reinstated. Any use of that power would be through the affirmative procedure, so it would be consulted on and subject to debate in the House. However, we do not want flexibility to undermine the integrity of the scheme or its important link with gift aid, so the requirement for a charity to make a minimum number of gift aid claims over a set number of years will always remain.
I now turn to the last set of amendments in this group. Since the Public Bill Committee, we have reassessed the distribution of powers to make secondary legislation in the Bill, some of which are conferred on the Treasury and some on HMRC. Broadly speaking, a power that changes the nature of the scheme in some way should be exercised by the Treasury. A power given to HMRC should be to allow the collection and management functions to be carried out correctly. The powers in the Bill are currently inconsistent with that approach, so we are introducing amendments 28 and 29 to change the powers in clauses 7 and 8. Those relate to running charitable activities in a community building and the definition of a community building. The powers are currently assigned to HMRC, but we now think it would be more appropriate to assign them to the Treasury. That is because they could be used to make significant changes to what is in or outside the scope of the rules. I hope that that helps explain why we have tabled those amendments.
I come now to my conclusion, Mr Deputy Speaker. [Hon. Members: “Hear, hear.”] The conclusion is very popular. I do not consider that there is any need for statutory reviews of the scheme at 24 months, and neither is there a need to require HMRC to publish certain data. There will be a full review of the scheme after three years, and HMRC will be publishing what data it has three times a year. New clauses 1 and 2, and amendment 21, would be wasteful and would require duplication of resource for no good reason. I therefore ask the hon. Member for Kilmarnock and Loudoun not to press those to a Division, just as I ask other hon. Members not to press new clause 3, amendments 32 and 33, and amendments 8 to 16.
I hope that hon. Members are comforted by the Government amendments that will reduce the three-year eligibility rules to two years. I am introducing a set of amendments that do what many charities and hon. Members have asked us to do, which is reduce the barriers to entry for this scheme and cut the eligibility period. I accept that some hon. Members wanted me to go further, but that would leave the scheme too exposed to fraud. These amendments represent an important concession by the Government, and I call on hon. Members from both sides of the House to support them. I am also introducing two technical amendments, Nos. 28 and 29. I commend the Government amendments to the House.
Cathy Jamieson
I will not take up much time. [Hon. Members: “Hear, hear.”] It is always great to be popular. The Minister has gone some way towards addressing the concerns we raised in the Public Bill Committee, but I feel it is important that we press new clause 1 to a Division.
Question put, That the clause be read a Second time.
Cathy Jamieson
I beg to move amendment 4, page 1, line 17, leave out ‘maximum donations limit’ and insert ‘the specified amount.’.
This amendment is consequential on amendment 3.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Amendment 3, page 1, line 19, leave out subsections (4) and (5).
This amendment removes the matching principle from the bill.
Government amendment 23.
Amendment 1, page 2, line 1, leave out ‘double’ and insert ‘triple’.
To increase the maximum claim to triple the amount of gift aid claimed each year. Cathy Jamieson
Amendment 5, in clause 4, page 3, line 13, leave out ‘for the purposes of section 1(4)’.
This amendment is consequential on amendment 3.
Amendment 6, in clause 6, page 4, line 27, leave out ‘for the purposes of section 1(4)’.
This amendment is consequential on amendment 3.
Amendment 17, page 4, line 38, leave out paragraph (a) and insert—
‘(a) the sum of the small donations that are made to the charity in the community building in the tax year, or’.
This amendment seeks to remove the requirement that donations under the community buildings amount can only be made by group members while the charity is running its charitable activities.
Amendment 18, page 5, line 3, leave out ‘by group members while it is running charitable activities in the buildings’.
This is consequential on amendment 17.
Amendment 19, page 5, line 5, leave out subsection (6).
This is consequential on amendment 17.
Amendment 20, in clause 7, page 5, leave out lines 20 and 21.
This is consequential on amendment 17.
Amendment 7, in clause 9, page 6, line 29, leave out ‘for the purposes of section 1(4)’.
This amendment is consequential on amendment 3.
Government amendment 30.
Cathy Jamieson
Again, I hope not to detain the House to any great extent. As the Minister will recall, we consistently pushed the Government to reconsider the matching principle in the Bill as we believed that it was too onerous for many small charities and would mean that many of them could not benefit from a scheme that was supposedly set up to help them.
The Government amendments show that the Minister has bowed to the pressure not just from members of the Committee but from people in the charitable sector who had serious concerns about the impact of the measures from the very start. I will not repeat all the comments made by the different organisations over the course of our discussions about the Bill.
We could of course continue to argue for the matching principle to be dropped completely and could make a case for that. However, given that the Government have seen fit to introduce changes that will take the ratio from 2:1 to 10:1, I think we should recognise that they have moved a significant amount, which has been welcomed by the sector. I look forward to hearing what the Minister has to say about his amendments and I want to make it clear that I do not think our amendments are required at this point as they have been superseded by his.
Nigel Mills
I wholeheartedly agree with the hon. Lady. In Committee, the Minister promised to make the situation more generous, but last week I saw that no amendments had been tabled to that effect. I thought that I would just try to help him be a little more generous by reflecting the wishes of a local church in my constituency that had asked me to try to make the figure three times, not twice. I have no desire to be only a third as generous as the Treasury and so welcome this move by the Minister. I think that it is a sign that he has listened to the argument. I genuinely hope that this new-found generosity in the Treasury will extend into next week.
Sajid Javid
We have had a constructive and lively debate so far. I welcome the comments of the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) and, in particular, her decision not to press her amendments. I also welcome the comments of my hon. Friend the Member for Amber Valley (Nigel Mills) and his decision not to press his amendment. He has recognised that Government amendment 23 will reduce the matching rate by 10%, which is even more generous than the reduction proposed in his amendment. I cannot promise him that this generosity will continue into next week—we will have to wait and see what happens then—but he does tempt me.
I will say a few words about why the Government have brought forward these amendments. Although some hon. Members wanted to remove the matching rate altogether in Committee, I understand that they accept that the Government have listened and that a 10% rate is much more generous than what was offered when the Bill was first introduced.
Let me say explain why we have this matching provision. HMRC sees even the 10% rate as an act against gift aid fraud. Unfortunately, there are unscrupulous individuals who want to misuse charitable tax reliefs. They defraud the taxpayer and undermine the good name of the charitable sector, so we must be in a position to protect the taxpayer and the charitable sector. The lack of records also means that HMRC would have less evidence when a charity is claiming correctly under the scheme if there was no kind of matching principle. Gift aid is the closest proxy we can use to help ensure compliance under the new scheme, and the matching requirements will significantly increase protection against fraud and abuse.
Government amendment 30 introduces a wide-ranging power that will allow us to reduce or increase the matching rate. It will allow us to remove the matching provision entirely or reinstate it at a later date if it is removed. Removing the matching provisions altogether would remove the need for charities to claim a set proportion of their small donations claim in gift aid in that year. Even so, charities would always need to claim some gift aid in each year to ensure that they can claim under the scheme. That is because of the provision in clause 1(1)(b). That helps to retain the important link between this scheme and gift aid.
Any use of that power would be through the draft affirmative procedure, so it would be consulted on and subject to a debate in this House. That power means that the matching rule is fully flexible. We have no intention of using the power in the near future, but it will be there if we need it. It is something that many charities have asked us to introduce, so I am pleased that we have been able to do so. I believe that the Government’s approach is better than some of the other amendments that have been tabled, as has been recognised in the comments we have heard.
We debated the community buildings rules in some detail in Committee so, unless hon. Members have questions, I do not propose to go into much detail now, but I would like to remind Members that the purpose of those rules is to recognise that not all charities are structured in the same way. There are charities that, because of the way they were set up or for other reasons, effectively operate as branches of a master charity. We want to ensure that the proposals are as fair as possible and that branches of a bigger charity are effectively treated as individual charities and have their own £5,000 limit. The purpose of the community buildings rules was not to give more than £5,000 by allowing charities to have multiple claims, and I believe that the changes we are making to the Bill will achieve that effectively.
I again warmly welcome the support the House has shown for the Government amendments and thank the hon. Member for Kilmarnock and Loudoun for looking at them carefully and not pressing her amendments. I commend amendments 23 and 30 to the House.
Cathy Jamieson
I beg to ask leave to withdraw the amendment.
Amendment 4, by leave, withdrawn.
Amendment made: 23, page 2, line 1, leave out ‘double’ and insert ‘10 times’—(Sajid Javid.).
This amendment changes the gift aid “matching” rate from 2:1 to 10:1. In other words, to make a claim in respect of £5,000 of small donations, a charity would need to make successful gift aid claims in respect of £500 of donations, rather than £2,500.
Clause 2
Meaning of “eligible charity”
Amendments made: 24, page 2, line 12, leave out ‘3 of the previous 7’ and insert ‘2 of the previous 4’.
This amendment, and amendments 25 to 27, change the criteria for determining a charity’s eligibility for the small donations scheme. Under this amendment, the charity must have made successful gift aid claims in 2 out of the previous 4 tax years, rather than 3 out of the previous 7.
Amendment 25, page 2, line 16, leave out ‘3’ and insert ‘2’.
Under clause 2(2), earlier gift aid claims are ignored for the purpose of the eligibility rules where a charity doesn’t claim for 3 consecutive tax years. This amendment reduces that period to 2 consecutive tax years.
Amendment 26, page 2, line 22, leave out ‘2 tax years’ and insert ‘tax year’.
This amendment reduces the period for which a charity is not eligible where a penalty is imposed on the charity. Under the amendment, the period will be the tax year the claim was made and the next tax year (rather than that year and the next 2 tax years).
Amendment 27, page 2, line 26, leave out ‘3’ and insert ‘2’.—(Sajid Javid.)
This amendment reduces the “start-up period” for a charity to the first period of 2 (rather than 3) consecutive tax years during which it is at all times a charity.
Clause 7
Meaning of “running charitable activities in a community building” etc
Amendment made: 28, page 5, line 24, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)
This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 7(3).
Clause 8
Meaning of “community building”
Amendment made: 29, page 6, line 4, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)
This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 8(5).
Clause 14
Power to alter specified amount etc
Amendments made: 30, page 11, line 5, at end insert—
‘(1A) The Treasury may by order amend this Act for the purpose of—
(a) amending the gift aid matching rule;
(b) abolishing that rule;
(c) reinstating that rule (if previously abolished), with or without amendment.
(1B) In subsection (1A) “the gift aid matching rule” means the rule that limits the amount of top-up payments to which a charity is entitled by reference to the amount of gifts made to the charity in respect of which it has made successful gift aid exemption claims.’.
This amendment gives the Treasury power by order to amend the gift aid matching rule (see clause 1(3), (4)(a) and (5)), to abolish the rule or to reinstate it. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).
Amendment 31, page 11, line 5, at end insert—
‘(1C) The Treasury may by order amend section 2 (meaning of “eligible charity”).
(1D) Section 2, as amended by an order under subsection (1C), must as a minimum include a condition requiring the making of a successful gift aid exemption claim in a previous tax year.’.—(Sajid Javid.)
This amendment gives the Treasury power by order to alter the eligibility rules in clause 2. But the altered rules must include a condition requiring the making of previous gift aid claims. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).
Schedule 1
Meaning of “small donation”: conditions
Dr Whiteford
I beg to move amendment 34, page 14, line 4, leave out ‘in cash’.
This amendment allows for gifts made by contactless cash card and mobile telephone transactions where it is impractical to obtain a gift aid declaration.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following:
Amendment 35, page 14, line 5, leave out ‘of cash’.
Consequential on amendment 34.
Amendment 36, page 14, line 9, leave out ‘“cash” means coins and notes in any currency’.
Consequential on amendment 34.
Amendment 22, page 14, leave out line 9 and insert—
‘“cash” means coins, notes, cheques and money donated electronically in any currency.’.
This amendment seeks to include non-cash donations within the Gift Aid Small Donations Scheme.
Amendment 2, page 14, line 9, after ‘currency’, insert ‘and any equivalent electronic payment as may from time to time be prescribed by the Treasury by order.’.
To future proof the Bill by enabling the Treasury to allow electronic payments to be treated as allowable donations.
Amendment 37, page 14, line 16, leave out ‘cash’ and insert ‘gift’.
Consequential on amendment 34.
Dr Whiteford
The last time the House debated the Bill, I raised the challenge of new ways of donating to charity. The purpose of the amendment is to take account of changes in the way people donate to charities, recognising the sea change that has occurred over the past 10 years or so in how they donate and the fact that people increasingly donate small amounts through text message giving. The technology driving us in that direction is developing rapidly. Conversely, and perhaps somewhat paradoxically, the amendment would also allow charities to benefit more from small donations made by cheque.
The thinking behind the amendment is derived from work done by the Institute of Fundraising. In a previous life, when I worked in the charity sector, I worked closely with the institute and so pay tribute to the immensely valuable research it undertakes to understand how and why people support charities in order to promote good charity governance and support large and small voluntary sector organisations alike.
The reality is that technological developments, especially with smartphones and tablets, mean that the number of electronic cashless donation options is growing. For instance, I am sure that many of us watched and donated to the BBC’s “Children in Need” appeal a couple of weeks ago, many of us doing so through text message donations. The use of mobile phones as cashless wallets is growing, and I think that the Bill would benefit by reflecting that. UK high street banks are already working on a mobile payments scheme to create a common infrastructure to link bank accounts to mobile phone numbers. That will help keep account details more secure, but it also heralds further changes in how we conduct transactions, including charitable donations.
There are now more than 30 million contactless cash cards in circulation, contactless functionality is now available on an increasing number of mobile phones, and 68 national retailers are already live with contactless payments, including the Post Office, Marks and Spencer and W.H. Smith. There are 135,000 terminals across the UK where donations can be made. I have to confess that I personally have not yet caught up with this technology beyond automatic top-ups for my Oyster card. However, I am aware that the Cabinet Office is working with the National Endowment for Science, Technology and the Arts to explore the possibility of using Oyster cards for spontaneous charitable giving through the “Chip In” project. We should encourage this kind of small electronic donation, as it has significant advantages over bucket-rattling. These donations are a lot more secure, they are significantly more auditable, and they are substantially less susceptible to fraud, particularly the small-scale fraud that has always been a risk associated with spontaneous cash donations. The upper limit of payments by contactless cash cards is currently £20, which could provide a nice compliance with the Bill.
Another aspect is online transactions, which continue to grow. Between 2007 and 2012, the number of adults buying goods online increased by 9 million to 37.6 million —74% of the UK population. It would be valuable for the Bill more overtly to keep pace with these significant changes in behaviour. The Government’s impact assessment for the Bill suggests that current text giving systems make it easy to comply with the gift aid scheme, but I am not convinced that this is borne out by the evidence. Fundraisers say that only 20% to 25% of donors properly complete gift aid declarations for text donations, but some charities report that the figure is as low as 5%. That compares with 85% of sign-ups for online donations.
The Institute of Fundraising points out that when a text donation has been made the provider usually sends a bounce-back text message with a link to a website page that the donor needs to visit to make a declaration. This is because the donor needs to complete their full name and address and to provide a declaration statement, which is a rather long thing to include in a text message. We do not have typical texting rates across the sector because providers do not give that information, but we do know that charities that have spoken out on the issue are concerned about the amount that they lose through people not completing this rather cumbersome bureaucratic process. Nevertheless, those forms of giving are auditable and would fit quite closely with the spirit of the Bill with regard to cash donations in recognising that, as time moves on, more and more of us are using different forms of contactless payments to make donations.
JustTextGiving does not give people’s phone numbers to charities, so if someone does not respond to the initial text bounce-back there is no other way for the charity to get the donation, and declaration rates therefore remain very low. Where charities get the details, they will typically call the donor back if they have not had a response to the bounce-back. However, we have to bear in mind that if it is a mobile number, it might be a fairly expensive phone call, and if the donation has been only the £1 that the donor would otherwise have thrown in the bucket, we have to measure the cost-effectiveness of that relative to the amount of gift aid that might come back. This only really works for higher value donations.
In its evidence to the Committee, Camphill Scotland said that as a charitable organisation it frequently uses the newer methods of collection, and that it was keen that the Bill should start to explore the possibility of new ways of enabling donations by text messages. It went so far as to say that
“the Bill as drafted would either discriminate against those choosing to use this technology, or discourage charities from making use of this technology.”
My amendment—this is somewhat ironic—would also cover small donations made by cheque. Very often, cheque donations are made by donors who are already known to a charity, but cheques handed over at one-off fundraising events or plate collections at funerals, for example, might not be so easy to identify, and it might not be worth the administrative costs of chasing up the donor. In some circumstances, filling in the gift aid declaration is a time-consuming process, and therefore not something that everyone will be able to do.
Another reason why the amendment would strengthen the Bill is that younger people have different giving habits from other parts of the population. The Charities Aid Foundation, with Bristol university, commissioned a report entitled, “Mind the Gap—The growing generational divide in charitable giving”, published in September 2012, which identified a widening gap in giving between the over-60s and under-30s. Of course, many young people do give very generously to charity and are very involved in charitable activities, but a lower proportion of younger people are giving than older people. Making electronic giving more relevant and attractive could be one way to help to reverse this decline.
Reputational risk is one of the greatest threats to charitable giving. A failure by one charity is felt by other charities in the same sector. While collection cans still have a valuable part to play and are a very effective means of raising money quickly, they carry an inherent susceptibility to fraud. Electronic giving diminishes the opportunity for money to go astray. It is a win-win situation. The amendment would strengthen the Bill, increase the benefits to charities, and help legislation to keep pace with the accelerating changes in technologies. I therefore commend it to the House.
Nigel Mills
I support many of the points made by the hon. Member for Banff and Buchan (Dr Whiteford). I am trying to achieve a similar end result with amendment 2. Having recognised that the Government have some problems, I tried to find a way of future-proofing the Bill so that in a couple of years’ time, when they saw the trend for cashless donation going beyond even what the hon. Lady set out, they could introduce an order to allow electronic donations to count for these purposes.
We have to be careful. The world is moving on. Only a few weeks ago, my credit card company sent me a strange thing that I can stick on the back of my mobile phone. Apparently, I can make payments with it. I have to say that I was not quite ready to go that far. I thought, “What happens if I lose my mobile phone? I will not only have lost all my contact details but my credit card as well.” However, we can see that this direction of travel is with us. I suspect that in many ways the Treasury is quite keen for us all to become even more cashless. Tax avoidance is made much harder if everyone starts to make payments by an electronic traceable means rather than through cash. The UK is the EU nation with the highest propensity to use cashless technologies, and I think that that trend will continue.
In its evidence to the Committee, the Royal National Lifeboat Institution said that it was not yet ready to replace its cash collecting tins with electronic swiping points. I accept that. However, I suspect that in a few years’ time that system will become rather more common and people will be out there with a placard saying, “Swipe your card here and donate a fiver to this charity.” We heard ideas about how people could swipe their Oyster cards to make small donations and how that might help Transport for London to get fundraisers off its stations. I gave the example of how an Oyster card that someone had finished using and that had some cash left on it could be used to donate to the Railway Children charity. At the moment, there is no way in which such a donation could be traced to see whether the donor was willing to give gift aid.
The Minister argued in Committee that there is no need to take account of that type of giving because it is not that widely used and, where it is, it is still easier to get a gift aid declaration. I am not sure that that argument will stand firm in the next couple of years. We will start to move towards that type of giving and people will see it as an alternative to the quick cash donation. They will think, “I’ll swipe my card and give you £1, £2 or £5, and I don’t fancy stopping to fill out a gift aid form any more than I do with cash. I don’t fancy having some e-mail come from my card provider saying, ‘If you click here you can have gift aid on that.’” We need to try to future-proof the Bill so that in two or three years’ time we are not faced with charities moaning and saying, “Look, we’re getting more and more donations by some electronic means that we can’t use to claim gift aid. Can’t you change the Act?”
I have tried to find an easy compromise for the Minister and to assuage his concerns that this is perhaps too risky, not popular enough, or not needed. I suspect that it is quite unusual for a Back Bencher to offer a Minister the power to make a change in law by order. Usually Back Benchers—I am one of them—say, “I’m a bit concerned that the Government are taking too much power to change this, and we don’t want them to have that power.” Today, I am offering the Minister a power. He does not have to use it now, this year or next year, but at some point, if this became something that would help charities and fit with the aims of the scheme, he would have a nice simplified method of making the change without needing to come back to the House with primary legislation. He has already tabled amendments to give the Treasury powers to change things by order, and none of us had a problem with that. My amendment is a gentle, helpful one, and I commend it to the House.
Cathy Jamieson
Many of us who served on the Bill Committee or listened to the Second Reading debate and have heard the representations made by the charitable sector have a degree of sympathy with the comments made by the hon. Members for Banff and Buchan (Dr Whiteford) and the for Amber Valley (Nigel Mills), particularly in relation to ensuring that the Bill does not become out of date before it gets under way.
The hon. Lady made some powerful arguments. Indeed, her case is reflected in our amendment 22, which relates to some of the difficulties involved in getting information from those who have made donations by means other than cheques, such as JustTextGiving, or—this issue was raised a number of times in Committee—if they have placed a cheque on a plate or in a collection box at an event such as a funeral.
We had hoped that the Minister would give an indication—he may well do so—that he would at least be minded to consider this proposal at some point in the future. I understand that there may be technical reasons against that at present and that the Cabinet Office is engaged in ongoing work on the different methods of making donations and on following up on gift aid. Although I support the principles of amendment 34 and want action to be taken—that is why we have tabled our own amendment on the issue—I understand that there may be some difficulties. It would be odd, however, if the Minister said that at no point would he consider moving in the direction suggested, particularly when the Cabinet Office is engaged in those schemes.
I hope that the Minister will be able to comfort us by saying that he will consider the proposal at some stage. I also hope that the order-making powers that the Government will adopt under the Bill could, if necessary, be utilised at some stage to extend the way in which donations can be made. It seemed odd during Committee that, while someone can donate using whatever currency they choose, donations by electronic means do not count.
I look forward to hearing what the Minister has to say. I hope that he will take account of the persuasive case that has been made and that he will take a further look at the proposals in the amendments tabled by the hon. Lady and in my amendment 22.
Sajid Javid
I thank the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) for her comments, and I also thank the hon. Member for Banff and Buchan (Dr Whiteford) and my hon. Friend the Member for Amber Valley (Nigel Mills) for their contributions. I will try to respond to their points, which they made very well.
The amendments would do slightly different things, but, in general, they all seek to broaden the gift aid small donations scheme to include not only cash donations but donations in the form of electronic payments. Amendment 2 seeks to do that by introducing a power to allow the Treasury, by order, to broaden the scheme, whereas amendment 22 and the group of amendments 34 to 37 seek to expand the scope of the scheme immediately. I thank my hon. Friend for his original amendment on the issue and for all his contributions on this particular topic in Committee.
It might be worth reminding Members of the scheme’s primary objective, which is to provide a gift aid-style top-up payment when it is difficult or unduly burdensome to collect a gift aid declaration from the donor. The most obvious examples are when a charity is making a street collection or when a religious group is passing around a collection plate during a service. In such situations it would be difficult to ask everybody who makes a contribution to fill out a gift aid declaration form. They would have to stop, confirm they were a UK taxpayer and then fill in a form with their name, address and other details. I think we would all agree that that would be unrealistic for a donation of just a few pounds. As a result, charities are missing out on potential gift aid on such donations. That is exactly why the gift aid small donations scheme is being introduced—that is what it is designed to tackle. It will fill the gap in gift aid for donations for which it is difficult or unduly burdensome to collect the necessary paperwork.
Giving by using digital technology means that the donor is already providing some or all of their details to the charity. If any extra information is needed to make a gift aid declaration, it will be relatively small. When a charity has an ongoing relationship with a donor, they should use gift aid, if at all possible. Compared with a bucket collection on a busy street, it is considerably less burdensome to ask someone to provide their details if they are donating through a website or a text message. It is easy to use gift aid when making a donation through a website and it is also possible to attach gift aid donations to a text message.
I want to sound a note of caution about complexity. Text messages and internet donations can be made from anywhere in the world, but I hope Members will agree that the UK Government should not make a top-up payment on donations made from outside the UK unless there is firm evidence that the donor is a UK taxpayer or resident. Introducing other forms of giving to the small donations scheme would make it more complicated. In order to make a top-up payment on UK donations only, charities would need to keep records of the donation’s origin. That is comparatively straightforward when rattling a tin on a UK high street, but it would become much more burdensome, if not impossible, for some charities if donations were made through texts and website visits from around the world.
Hon. Members mentioned the possibility of making the gift aid system easier via text giving. The hon. Member for Kilmarnock and Loudoun will be aware that the Government are in discussions with a number of charities and their representative organisations about how we can do just that. The discussions are going very well and have been constructive. The Government are open to the possibility that, eventually, we might have to pass legislation to make the gift aid system easier and we are working with charities to try to achieve that.
It is possible that new forms of electronic giving will be developed in the future that are completely anonymous. Indeed, my hon. Friend mentioned the possibility of using Oyster cards, which are anonymous. It is very early at this stage, however, to understand what technology might come along in a few years’ time, so it would be difficult to set out the circumstances in which the power he proposed could be used. Without complete knowledge of Oyster cards or other developing technologies for giving, it is difficult to know whether they would fall under the scheme’s scope and rationale. It is, therefore, possible that the power could never be used.
I understand my hon. Friend’s concerns and he has made some important points, so I want a review of the forms of giving to be undertaken when we review the scheme after its first three years. If people are able to make completely anonymous electronic donations, we shall look again at whether the scope of the scheme should be extended. That is the Government’s commitment.
It is harder for charities to collect gift aid declarations in the street or at a religious meeting than through other channels. That is why the focus of the scheme is on cash donations. I accept that things may change, so I am committing the Government to review the situation after three years. I therefore ask hon. Members not to press their amendments to a Division.
Dr Whiteford
Madam Deputy Speaker, I am sure that you will be as pleased as other Members to hear that I do not intend to detain the House for long.
We have heard a few contributions on this group of amendments. The hon. Member for Amber Valley (Nigel Mills) was on the same page as me in looking to the future and in considering ways of giving that are already developing in the charitable sector. The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) alluded to some of the technical challenges that the proposals might meet and pressed the Minister on amendment 22, which she tabled.
I have listened carefully to the Minister and heard his commitment to review the forms of giving after three years. I am sorry that he did not go further, but I do not intend to press the amendment on the basis that there will be an opportunity for the “Chip-in” pilot scheme to be evaluated. I suspect that the technology will have moved far beyond that by the time of the review. I urge him to recognise the technological advances in giving that have already taken place.
Making a £1 text donation is like throwing a pound in a bucket. That is how we will give in the future. It will provide a better way for charities to create an audit trail. We do not know whether the people who give to someone who is shaking a bucket are taxpayers. Many of them may not be for one reason or another, whether they be pensioners or overseas students. In the same way, people making text donations may or may not be taxpayers, but I am sure that it is not beyond the wit of humanity to work out where the phones are or where the numbers are registered. Just as we are allowing this scheme to work in a proportionate way for cash donations that are collected in a bucket, we should respect the spirit of the Bill for contactless payments.
I look forward to the review in three years and hope that the Minister will take those points on board. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Sajid Javid
I beg to move, That the Bill be now read the Third time.
It is a pleasure to move the Third Reading of the Bill. It has been many months in development through consultation, drafting and a fair amount of discussion in Parliament. In a way, I am sad to say goodbye as it heads off to another place, subject of course to Members’ support for its Third Reading.
I am sure that everyone will agree that the Bill leaves the Commons in good shape. We have considered a lot of amendments and the Government have introduced amendments where we have agreed that there was room for improvement. Not only have we introduced the amendments that Members have accepted today on reducing the eligibility period to two years and lowering the matching rate to 10%, but we were active in Committee as well. We have listened to the concerns of charities and Members, and have brought forward a number of amendments to reflect them.
I am pleased that the Bill has reached this stage and that we are able to move towards the introduction of the gift aid small donations scheme, for which the Bill provides the legislative framework. The scheme was announced as part of a significant package of measures in Budget 2011 to encourage charitable giving and philanthropy by donors from all walks of life, from the largest donors to those who give small amounts to charity bucket collections.
The gift aid small donations scheme is at the heart of that package. Its purpose is to enable charities and community amateur sports clubs to claim a gift aid-style payment on small donations of up to £20, for which it is often difficult to obtain a gift aid declaration. Eligible charities and CASCs will be able to claim top-up payments on up to £5,000 of small donations each year. The scheme does not require individual donors to complete a gift aid declaration, nor does it require the charity or CASC to collect and provide the donor’s details with their repayment claim, as under gift aid. The aim of the scheme is to complement gift aid, not to replace it. It is for donations for which a gift aid declaration is too difficult to collect.
Tax reliefs for charities and charitable giving are an important source of income for charities, totalling more than £3 billion a year. Gift aid is the single largest relief and is worth more than £1 billion a year to charities. We estimate that the gift aid small donations scheme could result in additional Government funding of about £100 million a year for charities and CASCs. That represents a significant boost in income for the sector and will be especially valuable to smaller charities.
We have worked closely with the charitable sector to try to get the scheme right. Concerns have been raised on the details of the Bill, and we have debated those points throughout the Bill’s different parliamentary stages. In developing the scheme, we have had to ensure that it operates as fairly as possible, but we have also had to ensure that it remains affordable and protected against fraud. We want the money to go to real charities that do good work, and not to fraudsters and others who would try to abuse the scheme.
That is why we have introduced safeguards—the community buildings rule is one such feature of the Bill. We want to ensure that charities that do similar work at a local level but have different historical structures get allowances under the scheme that are not hundreds or even thousands of times different from one another. That is why we have introduced the community buildings rule. The charity sector has raised concerns about the complexity of the rule. It is true that, to obtain a simple result, we have needed to introduce detailed rules, but I am sure hon. Members will agree that that is preferable to disadvantaging some charities just because of how they have been set up.
In conclusion, the Bill represents a potentially significant new opportunity for charities and CASCs. When it is up and running, it will give them a new stream of income and provide £100 million of new funding to the sector. It therefore represents an important part of our strategy to support charitable giving across the board.
I thank the Opposition and Members on both sides of the House for their support of the Bill, and for the constructive way in which they have scrutinised it. Together, we have improved the Bill. I hope hon. Members join in me in supporting this important new scheme and I commend the Bill to the House.
Cathy Jamieson
As the Minister has indicated, this is an important Bill. I hope the Opposition have delivered on what we undertook to do on Second Reading, in Committee and on Report. At the outset, we said that we would attempt to ensure that the Bill came out of the process in better shape, doing more to support charities than the original Bill. I do not say that to be critical of the Bill as it was introduced. The Minister came into things at that stage. He has since listened to a number of the points we have raised and introduced appropriate amendments.
The Minister said that he was sad to say goodbye to the Bill. Perhaps all members of the Bill Committee were sad when the Bill moved on. There was much agreement across the different political parties in our debates. We did not always agree—we sometimes split on party lines and we were disappointed that some of our amendments were not accepted in Committee—but we can safely say that the Bill is in better shape as it leaves the Commons. More charities will benefit more from the Bill as a result of the scrutiny. The fact that charities will benefit from an additional £100 million per annum is positive. The Minister and his team have a responsibility to ensure that the uptake is such that every penny of that money ends up in the coffers of charities and CASCs, which is where he intends it to end up—it is worth emphasising that CASCs will benefit, because we have not spoken about that in great detail and it is none the less important. The Opposition were concerned at different stages that the Minister was focused more on the potential for fraud than on the potential for take-up. We are therefore pleased about the amendments that have been made tonight. They enhance the opportunity for charities to use the Bill.
I noted that the Minister gave the hon. Member for Banff and Buchan (Dr Whiteford) a strong assurance on a review. It would be churlish of me to say that I wish that some other areas would be reviewed, and I will do my best to remain positive at this stage. I welcome that commitment and I am sure that the Minister will be as good as his word when he says that all aspects of the Bill will be reviewed in order to ensure that any changes that can be made to assist charities will be undertaken.
The Bill also saw the trying of new ways to deal with legislation as it goes through Parliament. For example, explanatory statements on all the amendments were included, which was helpful to the Opposition in unlocking some of the language with which the parliamentary draftsmen deal daily. It certainly put the onus on the Opposition to ensure that we were clear about the purpose of the amendments that we tabled, so that we could summarise it in 50 words—no bad thing. We also had the public reading stage and the consultation. It took a little time to get that consultation going, and the website was perhaps not as clear or accessible as it might have been, but I am sure the Minister will want to look at that and provide feedback for colleagues in the Cabinet Office. We eventually got a lot of very good information from organisations through that process.
Several bodies engaged with us on the Bill and helped us to scrutinise it effectively and properly. They also supplied the information that we needed to table various amendments. They included the Institute of Fundraising, the Charity Finance Group, the National Council for Voluntary Organisations and the Law Society of Scotland. They all gave us information and campaigned tirelessly on behalf of the constituent organisations that they represent and of the charity sector. The Charities Aid Foundation, the National Association for Voluntary and Community Action and the Foundation for Social Improvement also provided invaluable help, support and advice at various stages. Notwithstanding the efforts that the Opposition have made, the Bill is undoubtedly a better one as it leaves this place because of the input of those organisations and their commitment to do the best they can for the charitable sector.
This is a very important Bill. It may have seemed a small Bill, but we gave it thorough scrutiny in Committee—perhaps more scrutiny than the Minister would have liked on some points of detail. As the Bill leaves this place, we can be assured that we have done our best in making representations. The Bill will make a difference to charities and perhaps changes will be made after the three-year review. I certainly hope that we will continue to look at what additional support we can give.
I thank people for their work in Committee, including the Chairs, the officials and everyone else who gave us inspiration and comments at various stages. All of the organisations in the charity sector and those who will benefit in the future will be glad of the amount of effort that has been put into the Bill. I am happy to support Third Reading and to join the Minister in commending it to the House.
Sheila Gilmore
The process of the Bill from start to finish, including the pre-legislative stage—as my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) mentioned—was very important. It is good to see that things can change. We sometimes become very rigid in this place—people take up positions and then cannot dig themselves out very easily without feeling a loss of face. A lot of improvements have been made, although some issues remain. The following may or may not prove to be the case; we will see how it works out in practice. During the pre-legislative scrutiny we attempted to grapple with the imbalance between organisations, whether national or regional in scope, which operate in such a way that each of their branches is a separate charity, and those which do not operate as a separate charity. Clearly, the Government listened to the concerns expressed, particularly by some churches, and made important changes. The by-product is a remaining complexity and an obstacle for organisations that cannot quite fit themselves into the model that has been adopted.
I hope that the ongoing review that the Minister at various times assured us will take place—regardless of whether there is a formal review built in for certain parts of the Bill—will look carefully at whether that model can be modified. It is genuinely difficult for some organisations to meet the requirements on where the money has to be collected and the reference to community buildings—linking not only where the collection takes place, but where the charitable activity takes place. There are numerous examples of organisations that do not fit into the model that has been adopted. It clearly fits the church model, where the charitable purpose takes place at precisely the same time as the donations—the collection—but constituent elements or branches of other charities that cannot fit that model may still be unable to take advantage of the provisions, even though they are collecting money and making exactly the kind of efforts that the Bill is designed to encourage.
Even though Opposition amendments and our suggestion of a clear review process have not been accepted by the Government—of course, it depends on what happens to the Bill in the other place; further amendments and suggestions may be made about how some obstacles could be smoothed further and ironed out—I hope that some of these issues will be looked at in coming years to ensure that the Bill does what we all say we want it to do and allows small charities, which take fairly low levels of collections that are critical to their operation, to be able to take advantage of it.
Ben Gummer (Ipswich) (Con)
I have been following the Bill with great interest, as have my constituents. It is a pleasure to be here for the Third Reading of one of Her Majesty’s Government’s most progressive measures. I look forward to its being passed from this House imminently.
The most generous people are often those with the least means. If we look at the income distribution of people who give charitable donations, we see that those who give the largest proportion of their income are the poorest. It is unfair that those who are the richest should get the biggest tax break, as it were, in the Government top-up on their donation through gift aid and by the myriad other schemes that we have discussed in this Chamber in the past year, and that people who might give £20 or £15, which would be much more than £50,000 to a rich person, should receive less of an advantage. The Bill, therefore, is a progressive and forward-looking reform of tax legislation, which will help give the same benefit to people who give little amounts of money, which for them is a great deal, as to those who might give a lot and not think so greatly about it.
The Bill is not just good for small donors; it is also good for small charities. In all our constituencies, the people who really pull our communities together are those in the small charities, whether they be churches or charitable groups looking after the disabled, the sick or children. The Bill will make a real difference to those charities, not only because they will get more money from the Government but because it will help bind them to their donors and, importantly, facilitate the sense of community that arises when people give what they can both in time and small amounts of money. It will help to build communities and make them better places. For that reason, I support the Third Reading of this fantastic Bill put forward by Her Majesty’s Government.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Business without Debate
(11 years, 10 months ago)
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Delegated Legislation
(11 years, 10 months ago)
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Madam Deputy Speaker (Dawn Primarolo)
With the leave of the House, we shall take motions 2 and 3 together.
Motion made, and Question put forthwith (Standing Order No. 118(6)),
Legal Services
That the draft Legal Services Act 2007 (The Law Society) (Modification of Functions) (Amendment) Order 2012, which was laid before this House on 15 October, be approved.
Housing
That the draft Housing Act 1996 (Additional Preference for Armed Forces) (England) Regulations 2012, which were laid before this House on 18 October, be approved.—(Mr Swayne.)
Question agreed to.
committees
(11 years, 10 months ago)
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Madam Deputy Speaker
With the leave of the House, I shall take motions 4 to 7 together.
Ordered,
Communities and Local government
That Heidi Alexander be discharged from the Communities and Local Government Committee and Andy Sawford be added.
Home Affairs
That Karl Turner be added to the Home Affairs Committee.
Transport
That Tom Harris be discharged from the Transport Committee and Lucy Powell be added.
Welsh Affairs
That Susan Elan Jones be discharged from the Welsh Affairs Committee and Stephen Doughty be added.—(Mr Randall, on behalf of the Committee of Selection.)
Access to Sanitation
(11 years, 10 months ago)
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Naomi Long (Belfast East) (Alliance)
Each year, 19 November marks world toilet day. While that might, at first hearing, sound rather comical, the issue it seeks to highlight is extremely serious—that of the continued lack of access to basic sanitation for about one third of the world’s population—and it was to mark that event and highlight again this important issue in Parliament that I sought this debate.
I acknowledge the work that the Government have been doing as part of the UK’s overall international development agenda, and I will refer to that further later, but water and sanitation still suffers from a lack of overall priority in political and investment terms, both nationally and internationally, compared with other aid portfolios, such as health and education, despite the fact that it impacts heavily on the achievement of other development objectives. The former Secretary-General of the United Nations, Kofi Annan, has noted that
“no other issue suffers such disparity between its human importance and its political priority.”
Clearly, without access to water, sanitation and hygiene, the progress that can be achieved in other areas is significantly constrained. The importance of access to clean water and sanitation cannot be understated. In the UK, the biggest step change in public health and mortality rates came as a result not of medical advances but of widened access to clean drinking water and adequate sanitation. During the late 19th century, as both water and sewerage infrastructure expanded dramatically, the life expectancy of an average member of the population in this country rose by 15 years—a remarkable increase delivered over a relatively short period. Indeed, the British Medical Association has recognised the commissioning of the sewerage system in London as the most important breakthrough in public health—of more significance even than the discovery of penicillin or the development of vaccines.
As a direct result of poor or non-existent sanitation infrastructure, people—the majority of them children—are dying of diseases that, with the provision of potable water and sustainable sanitation, are preventable. In fact, they could be almost entirely eliminated. By way of illustration, I point to the fact that the biggest killer of children under five in sub-Saharan Africa, and the second-biggest killer globally, are diarrhoeal diseases, the vast majority of which are entirely preventable conditions caused by inadequate sanitation and hygiene. More children under five die annually as a result of these diseases than from HIV/AIDS, malaria and measles combined. Indeed, the disease burden of malaria itself is also impacted on by the availability of open drainage channels and sewers, providing environments conducive to the breeding of mosquitoes that spread the disease.
Every day 2,000 mothers lose a child due to an illness caused solely by poor sanitation and dirty water. Even vaccines that hold out the hope of progress are less effective in the absence of water, sanitation and hygiene—WASH. But the impact of inadequate sanitation infrastructure is not limited to disease; it extends to the one in three women worldwide who risk shame, harassment and even physical attack simply seeking somewhere to defecate. This debate is timely, then, not only in the context of world toilet day but because yesterday marked the international day for the elimination of violence against women.
I want to draw on the everyday ordeal that the lack of access to sanitation is for people, especially women, who are the most acutely affected. Globally, 2.6 billion people lack access to basic sanitation, 1.25 billion of them women—one in three women in the world lack access to safe sanitation. Put simply, privacy, modesty, cleanliness and safety are almost impossible for those who have no access to sanitation facilities. Their experience often involves trading those factors against each other simply to survive. The reality is often shame, indignity, disease and even violence.
Some 526 million girls and women are without access to any form of sanitation. They are forced to defecate in bushes or ditches, or even in the open, their choice being between doing so in broad daylight, compromising their modesty and risking shame, or waiting until dark to cling to their dignity but risk their personal safety. A 2005 UN development programme report confirmed that the need to travel further from home to secure the family’s water can expose women and girls to sexual harassment and rape, which can also happen when women who lack safe nearby sanitation move about at night in search of privacy. It is estimated that women and girls in developing countries spend 97 billion hours each year searching for a place to go to the toilet—more than double the total hours worked every year by the entire UK labour force. An 18-year-old mother from Mozambique has described her arduous journey each day to defecate in the bush. Her ordeal involves crossing a dangerous bridge that has claimed the lives of many people who have fallen through it. Sometimes she feels so ashamed that she returns home without being able to reach the point she needs to reach, or she waits until dark to go, so that no one will see her. However, at night the journey is even more dangerous. A woman and a boy have been stabbed to death on that bridge, and one woman she knows of has been raped on the journey.
Even where public latrines are available, provision is rarely adequate. In the Kifumbira slum in Kampala, there are only four toilets for every 2,000 people, these consisting merely of holes into a cesspit, covered in faeces and maggots. Women worldwide have reported incidents of men hiding in public latrines at night, waiting to rob or assault those who enter them. In two slum districts in India, women reported incidents of girls under 10 being raped while on their way to use public toilets. In work carried out by WaterAid in Bhopal in India, 94% of the women interviewed said they had faced violence or harassment when going in search of a toilet, and more than a third had been physically assaulted. Amnesty International has also reported that women and girls in the slums of Nairobi were staying away from communal toilet facilities at night because of their fear of physical violence and rape. A WaterAid poll of women in Lagos in Nigeria revealed that 67% of women interviewed said they did not feel safe using a shared or community toilet in a public place.
The only alternative for those women—if it could be called that—is to defecate at home. However, that too carries huge health risks and social consequences. One woman living in Kampala in Uganda has said that
“when someone knows you defecate in your house, your household is hated and people”
will not visit. In addition to the stigma attached to this choice, resorting to so-called “flying toilets”—plastic bags or buckets used at home—carries significant health risks, not only for the woman but for her family, as storing and disposing of waste and maintaining even basic hygiene is almost impossible. Women are more susceptible to urinary tract infections and dehydration by trying to limit going to the bathroom for long periods and drinking less water over the course of the day, and as a result are more likely to become seriously ill.
Further, as women are generally responsible for the disposal of human waste when provision is inadequate and for caring for others in the family who are affected by communicable hygiene-related diseases, they are more exposed to diseases such as dysentery and cholera than their male counterparts. This caring role and enhanced risk of contracting disease significantly restricts the degree to which women can be economically active and financially independent, and provide for the most basic needs of their family. That compounds the effect that a lack of provision of proper and private sanitation facilities has on girls’ ability to access education, particularly as they reach puberty.
Having outlined the problem, I want to turn my attention in the time remaining to the progress being made towards achieving millennium development goal 7, target 10—halving the proportion of people without sustainable access to safe drinking water and improved sanitation by 2015. Although we have met the target of halving the proportion of people without access to improved sources of water, the sanitation target is significantly off track. At the current rate of progress, it will be over 25 years before south Asia meets its sanitation MDG target and 70 years to achieve universal access. Even more starkly, it will be the 23rd century before sub-Saharan Africa meets its sanitation MDG target and 350 years before universal access is achieved. The failure to meet the water and sanitation target threatens the progress of many other millennium development goals and undermines wider development efforts. Without water and sanitation, nothing else really works.
I welcomed the UK Government’s commitment in April 2012 to double, to 60 million, the number of people whom they plan to reach with water, sanitation and hygiene promotion by 2015. I remain concerned, however, at the lack of clarity as to how the Government intend to ensure that that commitment will effectively target the areas and the people in the greatest need and as to how DFID will effect delivery on this scale through DFID’s current WASH budget.
Good governance and stewardship of international assistance by foreign Governments also remains a challenge to the effective implementation of the Government’s plans—a matter to which I am sensitive. For example, the freezing of international assistance to Uganda due to the risk of corruption will mean that people living in the slums of Kampala who have benefited from DFID projects will see no further improvement in their circumstances in the short term. Urgent consideration must therefore be given to how the most needy can be targeted on the ground, even in the most volatile and unstable regions, and to how this increased commitment can be accompanied by an increased number of advisers dedicated to WASH, in order to maximise the impact and value for money of WASH sector support. I believe that the UK should take the lead on this issue, encouraging multilateral partners—particularly the World Bank, the European Community and the African Development Bank—to increase investment and better to target WASH investments.
I believe that this is the time to give consideration to how the current trends will be addressed after the millennium development goals have expired in 2015. If present trends continue, 2.4 billion people will still lack access to safe sanitation facilities in 2015, so it is imperative to construct a post-2015 goal framework to include a commitment to universal access to basic water and sanitation services, including a specific target date of 2030. I also believe that post-2015 goals should better reflect the central importance of WASH to human health, education, welfare, economic productivity and gender equality, as well as reflecting the interdependence of those goals. Water, sanitation and hygiene targets and indicators must focus explicitly on reducing inequalities by targeting resources at poor and disadvantaged groups as a top priority.
The United Nations human development report estimates that for every £1 invested in this sector, £8 is returned in saved time, increased productivity and reduced health costs. It is therefore a wise investment as well as a necessary one, and its impact can be multiplied if the Government also collaborate with non-governmental organisations and charities, as well as with Governments, who can assist in providing education to local communities through church and community networks and supporting increased capacity among state and non-state players.
I therefore urge the Department for International Development to outline how it will achieve its commitment to improve WASH for 60 million people in its budget, how it will ensure that the neediest can be prioritised, even in volatile and difficult countries, and how it will take the lead in framing the goals for the post-2015 agenda and ensure that a goal for universal access to basic water and sanitation services remains a key priority.
Jim Dobbin (Heywood and Middleton) (Lab/Co-op)
I congratulate the hon. Member for Belfast East (Naomi Long) on choosing this subject for the debate. I should also like to thank the Minister, who I am sure has okayed my contribution this evening.
Jim Dobbin
I speak as the co-chair of the all-party parliamentary group on child health and vaccine preventable diseases. The other co-chair is Lord Avebury. I tabled an early-day motion recently on this subject, and it now has quite a number of signatures. I am also vice-chairman of the Council of Europe public health committee.
Diarrhoea is the most common cause of childhood illness and kills about 760,000 children each year. Around 90% of those deaths are caused by a lack of access to safe water, adequate sanitation and hygiene. Those deaths are preventable. Vaccines against rotavirus, the most common and severe diarrhoea in children, are critical, and their availability is a major development in public health. However, those vaccines should not be seen as a silver bullet for tackling diarrhoea; nor can they address the other health impacts of a lack of sanitation.
Reducing deaths from the top killers of children requires the prioritisation of interventions across different sectors, including health, nutrition, hygiene, water and sanitation. We must apply the package of prevention and treatment solutions that we know to be effective, and this must be built on solid collaboration between health systems and the water and sanitation sector.
This was reinforced last year when I visited health care facilities in Bangladesh and Kenya, where we were launching a programme of vaccination. I witnessed extremely successful vaccination programmes in both countries, which were helping to protect children against terrible diseases such as pneumonia. During my visit, however, I was struck by the poor levels of basic sanitation and access to clean water at many of the health care facilities we visited. This emphasised to me how important it is to ensure that preventive measures such as vaccines are coupled with improvements in sanitation and access to clean water.
I also saw on these visits small wards packed with up to 25 children, with the mothers in the same ward. I saw three babies in one incubator, and I saw a single oxygen cylinder with five or six lines coming out of it. It is all the basic stuff that is missing there. The vaccination was great—it is absolutely superb—and the efforts of the medics and nursing staff in each of these hospitals was just brilliant. The common basic hygiene and sanitation, however, are just not there.
It so happens that I will be in Geneva tomorrow with the Earl of Dundee, who is the chairman of my Council of Europe committee. We are going to be in discussions with the World Health Organisation, UNESCO and the Global Alliance for Vaccines and Immunisation. The issue of sanitation is one that we want to raise, because this is a global problem that needs to be tackled globally. I wanted to make only a short contribution; I will be interested to hear the Minister’s response.
The Minister of State, Department for International Development (Mr Alan Duncan)
I thank the hon. Member for Belfast East (Naomi Long)for calling what I think is the second debate this year on this important issue. Making progress on the appalling world statistics on access to sanitation is vital to the health and well-being of poor people. I commend the hon. Lady for her efforts on this topic. If I may put it this way, I think she has become one of Parliaments supreme champions—if not Parliament’s main champion—on this issue.
It is truly shocking that in 2010, 2.5 billion people—nearly 40% of the global population—remained without access to the improved sanitation that would have protected their health. Even more shocking is the fact that 1.1 billion people have no form of toilet at all. This is why the UK Government have given sanitation such a high priority. The previous Secretary of State announced in April this year that the UK would increase its ambition and reach 60 million people with sustainable access to water, sanitation and hygiene. As I said in my speech in March, providing these services is the bread and butter of development. I have seen for myself in my visits to countries such as Yemen and Bangladesh, which the hon. Member for Heywood and Middleton (Jim Dobbin) has mentioned, how effective DFID sanitation programmes are on the ground.
Mr Russell Brown (Dumfries and Galloway) (Lab)
On the commitment given back in April, I appreciate that we are just six or seven months on, but is the Minister in any position at all to tell us what progress has been made towards that 60 million target in 2015? Is progress really being made?
Mr Duncan
Since the announcement was made only recently, it is probably a little premature to report on progress because results come after the investment has been made in the area, but I undertake to keep the hon. Gentleman and the House fully informed of our progress. Through debates such as this, we will continue to treat this as a highly important topic.
We know the enormous impact that the lack of a basic toilet has on people’s health and livelihoods. People who do not have adequate sanitation are far more likely to get sick than those who do, and it is often young children who suffer the most. The World Health Organisation estimates that up to 2.4 million deaths could be avoided each and every year simply by providing good sanitation, safe water and good basic hygiene.
Poor sanitation does not only cause sickness. As the hon. Lady pointed out, women who lack toilets are at a much higher risk of sexual and other violence as they try to find secluded and private places. Without a decent toilet, women and girls cannot manage their menstrual periods privately and with dignity. Having nowhere to safely clean and dry their rags can lead to reproductive tract infections, which can be the most horrid things.
We know from the United Kingdom’s own history the importance of sanitation to the economy and health of our people. This very Chamber was closed during the “great stink” of 1858. Not long afterwards, improvement in the treatment of London’s sewage led to a great improvement in the health of our capital city. We also know from the World Bank that providing sanitation in poor countries will deliver broader economic benefits, and will mean that such countries do not suffer unnecessary economic losses. It has been estimated that countries lacking widespread access to sanitation lose between 1% and as much as 9% of their GDP every year.
The world is frequently faced with natural disasters. Last month, we saw Hurricane Sandy wreak havoc in the Caribbean before hitting the eastern seaboard of the United States. Floods, in particular, lead to disease because people have to live with dirty flood waters containing pathogens from waste that has not been disposed of. That is what leads to devastating epidemics of cholera and other diseases. Good sanitation is essential to reducing the unacceptable human cost of such disasters. It can be critical in helping communities to rebuild themselves more quickly after floods. Work supported by the Department for International Development during the 2010 floods in Pakistan showed that sanitation could really help a community to recover.
How can we start to tackle the huge unmet needs for sanitation? Well, we can start by listening to women. Sanitation is important to them, often much more important than it is to men. One study in Indonesia found that, in urban communities, women listed sanitation as their second priority for improving their communities—after improved job opportunities—while men ranked it seventh.
We need to foster and respond to demand. A latrine that is wanted is one that will be used and maintained. Approaches based on demand, such as a programme called Community-Led Total Sanitation, are proving very effective in ensuring the uptake of sanitation. We also need to keep sanitation simple. Expensive and water-hungry sewerage systems are not the answer if we want to improve sanitation for poor people. Simple technologies, such as pit latrines, are affordable and effective ways of providing the safe sanitation that we want to see.
As was mentioned by the hon. Member for Dumfries and Galloway (Mr Brown), the United Kingdom’s ambition is for 60 million people to have sustainable access to water, sanitation and hygiene in the countries that are furthest from meeting the millennium development goal. We have a strong track record of supporting those basic services. A portfolio review of water, sanitation and hygiene projects supported by DFID showed that UK aid in the sector was well targeted at the poorest.
The principal means by which the UK will meet our target of 60 million people is through programmes developed and managed by our offices in African and Asian countries. We currently have sanitation and water programmes in 15 countries. We are looking into how we can expand our existing programmes, and have already identified additional results that could be achieved in Ethiopia, Liberia, Sierra Leone, Tanzania and Zimbabwe. That builds on the successful experience of our country programmes. For example, our support in Bangladesh through UNICEF has reached more than 30 million of the poorest people in that country. We are continuing our support in Bangladesh by working through BRAC, a major national non-governmental organisation with a good record of helping the poorest. The Department also funds programmes to deliver improved sanitation through other interventions. For instance, in Yemen we are funding a nutrition programme, implemented by UNICEF, which will provide sanitation in 300 schools and benefit nearly 250,000 children.
We will achieve those results through a number of partnerships with organisations such as the Water and Sanitation Program, Water and Sanitation for the Urban Poor, and WaterAid. To complement those activities, we have been exploring the potential of new programmes to reach more people who currently lack access to sanitation, in more countries, through partnerships with the UN, civil society and the private sector.
In response to the hon. Member for Heywood and Middleton, the UK Government are the leading donor of the Global Alliance for Vaccines and Immunisation, which delivers new and underused vaccines to the world’s poorest countries. UK support alone will vaccinate 80 million children and save 1.4 million lives by 2015. GAVI will roll out the rotavirus vaccine as part of its programme, protecting against diarrhoea which, as the hon. Gentleman said, is one of the leading child killers in the world, accounting for 450,000 deaths each year. With UK support, GAVI plans to help the vaccination against rotavirus of up to 50 million children in at least 40 of the world’s poorest countries by 2015.
We need solid evidence to underpin our investments, and to that end the Department for International Development is funding key research programmes to improve our evidence base. The sanitation and hygiene applied research for equity programme is developing new and robust evidence on the benefits of sanitation, and on how sanitation and hygiene behaviours can be improved most effectively. The Department has started a new programme of operational research to improve value for money and efficiency in our programmes. As part of that, we will test and evaluate innovative ways of providing sanitation services to poor people in urban areas, in partnership with the Bill and Melinda Gates Foundation.
Support for sanitation is also about creating the right incentives for Governments to mobilise their own resources. In June this year, the UK Government sent a strong message of our political commitment with the recognition of the right to sanitation. The Government will place an emphasis on the delivery of basic sanitation services to poor people in the long term. We will continue to invest in programmes to provide sanitation, and use the Sanitation and Water for All partnership to encourage other donors, Governments in developing countries, and civil society to do the same.
I say to you, Madam Deputy Speaker, all hon. Members, and in particular the hon. Member for Belfast East who initiated this debate, that the Government will do their utmost in this area. I hope that Members of the House will continue to support us in that essential work.
Question put and agreed to.
Ministerial Correction
(11 years, 10 months ago)
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Defence
(11 years, 10 months ago)
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Jeremy Corbyn
To ask the Secretary of State for Defence which countries have hosted a British Military Advisory Training Team since 2007; and in each such case on what dates and at what costs.
[Official Report, 25 October 2012, Vol. 551, c. 982-85W.]
Letter of correction from Andrew Robathan:
An error has been identified in the written answer given to the hon. Member for Islington North (Jeremy Corbyn) on 25 October 2012.
The full answer given was as follows:
Mr Robathan
[holding answer 22 October 2012]: British Military Advisory Training Teams are small military teams based permanently within the country where they are delivering military training and advice. The following table also shows other permanent small military teams that have delivered similar effect since 2007.
Country | Organisation | Dates | Year | £ million |
|---|---|---|---|---|
Czech Republic | British Military Advisory Training Team | 2000-present | 2007-08 | 13.0 |
2008-09 | 2.9 | |||
2009-10 | 2.2 | |||
2010-11 | 2.3 | |||
2011-12 | 2.3 | |||
Ghana | British Military Advisory Training Team | Until 2010 | 2007-08 | 1.4 |
2008-09 | 1.4 | |||
2009-10 | 20.4 | |||
Jordan | British Military Advisory Training Team | 2010-present | 3— | |
Kenya | British Peace Support Team (East Africa) | 20004-present | 2007-08 | 2.8 |
2008-09 | 3.1 | |||
2009-10 | 2.8 | |||
2010-11 | 2.5 | |||
2011-12 | 2.5 | |||
Kingdom of Saudi Arabia | Royal Naval Liaison Team | 1986-present | 3— | |
Kingdom of Saudi Arabia | British Military Mission to the Saudi Arabian National Guard | 1964-present | 3— | |
Kuwait | British Military Mission | 1992-present | 3— | |
Libya | Defence Advisory Team | January 2012-present | 2012 | 51.1 |
Nigeria | British Military Advisory Training Team | 2008-present | 2007-08 | 62.0 |
2008-09 | 0.9 | |||
2009-10 | 0.6 | |||
2010-11 | 0.8 | |||
2011-12 | 0.9 | |||
Oman | British Loan Service Team | 1970s-present | 3— | |
Qatar | British Loan Service Team | 2009-present | 3— | |
Sierra Leone | International Military Advisory Training Team | 2000-present | 2007-08 | 12.0 |
2008-09 | 6.8 | |||
2009-10 | 7.0 | |||
2010-11 | 6.8 | |||
2011-12 | 4.8 | |||
South Africa | British Peace Support Team (South Africa) | 2003-present | 2007-08 | 0.9 |
2008-09 | 0.6 | |||
2009-10 | 0.7 | |||
2010-11 | 1.3 | |||
2011-12 | 1.4 | |||
United Arab Emirates | British Loan Services Team | 2001-present | 3— | |
1 Annual budget allocation. Costs include a small element of training provided by external teams. 2 Costs for completing training courses and extraction of team. 3 Host country pays. 4 Originally established as British Army Training Team (Kenya). 5 Annual platform costs and operational costs. 6 Last year of BMATs predecessor organisation—the British Defence Advisory Team, Nigeria. |
The correct answer should have been:
Mr Robathan
[holding answer 22 October 2012]: British Military Advisory Training Teams are small military teams based permanently within the country where they are delivering military training and advice. The following table also shows other permanent small military teams that have delivered similar effect since 2007.
Country | Organisation | Dates | Year | £ million |
|---|---|---|---|---|
Czech Republic | British Military Advisory Training Team | 2000-present | 2007-08 | 13.0 |
2008-09 | 2.9 | |||
2009-10 | 2.2 | |||
2010-11 | 2.3 | |||
2011-12 | 2.3 | |||
Ghana | British Military Advisory Training Team | Until 2010 | 2007-08 | 1.4 |
2008-09 | 1.4 | |||
2009-10 | 20.4 | |||
Jordan | British Military Advisory Training Team | 2010-present | 3— | |
Kenya | British Peace Support Team (East Africa) | 20004-present | 2007-08 | 2.8 |
2008-09 | 3.1 | |||
2009-10 | 2.8 | |||
2010-11 | 2.5 | |||
2011-12 | 2.5 | |||
Kingdom of Saudi Arabia | Royal Naval Liaison Team | 1986-present | 3— | |
Kingdom of Saudi Arabia | British Military Mission to the Saudi Arabian National Guard | 1964-present | 3— | |
Kuwait | British Military Mission | 1992-present | 3— | |
Libya | Defence Advisory Team | January 2012-present | 2012 | 51.1 |
Nigeria | British Military Advisory Training Team | 2008-present | 2007-08 | 60.6 |
2008-09 | 0.9 | |||
2009-10 | 0.6 | |||
2010-11 | 0.8 | |||
2011-12 | 0.9 | |||
Oman | British Loan Service Team | 1970s-present | 3— | |
Qatar | British Loan Service Team | 2009-present | 3— | |
Sierra Leone | International Military Advisory Training Team | 2000-present | 2007-08 | 12.0 |
2008-09 | 6.8 | |||
2009-10 | 7.0 | |||
2010-11 | 6.8 | |||
2011-12 | 4.8 | |||
South Africa | British Peace Support Team (South Africa) | 2003-present | 2007-08 | 0.9 |
2008-09 | 0.6 | |||
2009-10 | 0.7 | |||
2010-11 | 1.3 | |||
2011-12 | 1.4 | |||
United Arab Emirates | British Loan Services Team | 2001-present | 3— | |
1 Annual budget allocation. Costs include a small element of training provided by external teams. 2 Costs for completing training courses and extraction of team. 3 Host country pays. 4 Originally established as British Army Training Team (Kenya). 5 Annual platform costs and operational costs. 6 Last year of BMATs predecessor organisation—the British Defence Advisory Team, Nigeria. |
Petition
Dog micro-chipping
Written Ministerial Statements
(11 years, 10 months ago)
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Advanced Manufacturing Supply Chain Initiative
(11 years, 10 months ago)
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The Secretary of State for Business, Innovation and Skills (Vince Cable)
I would like to inform the House of the successful bids from round 1 of the advanced manufacturing supply chain initiative (AMSCI).
A total of 11 supply chain projects will receive approximately £30 million through AMSCI subject to due diligence, with a further £50 million being leveraged from private sector partners.
The supply chain projects cover the automotive, aerospace and chemical sectors, and are expected to create or safeguard over 2,160 jobs.
With available finance of up to £125 million, the initiative was established in December last year to help existing UK supply chains grow and achieve world class standards, while encouraging major new suppliers to come and manufacture here in Britain.
The initiative is part-funded by the Government’s regional growth fund and is delivered in partnership with the technology strategy board—the UK’s innovation agency—Birmingham city council, and Finance Birmingham on behalf of the Department for Business, Innovation and Skills.
Project successes include:
Stream 1
“The Proving Factory”
Location: Rotheram, Yorkshire
Lead organisation: Productiv Ltd
Partners: Tata Steel, Bladon Jets, Drive Systems Design Ltd, Flybrid Systems LLP, Libralto Engines Ltd, Zytek Ltd, Aeristech Ltd, Unipart Eberspacher Exhaust Systems Ltd, MIRA Ltd and MTC Ltd
“BioMOD”
Location: Wilton, Tees Valley, North-East
Lead organisation: Centre for Process Innovation
Partners: ECOSYL Products Limited, BioProcess Engineering Services Ltd, National Renewable Energy Centre Limited and University of Leeds (UoL).
Stream 2
“High Strength Glass Manufacture”
Location: St Helens, North-West
Lead organisation: NGF Europe Ltd
“Indestructible Paint Ltd—Production growth development programme”
Location: Birmingham, West Midlands
Lead organisation: Indestructible Paint Ltd
“Automated Body-in-Black Architectures”
Location: Coventry, West Midlands
Lead organisation: Penso Consulting Ltd
“Turbocharger Housing Machining”
Location: Walsall, West Midlands
Lead organisation: Chamberlin plc
“EXAMP”
Location: Coventry, West Midlands
Lead organisation: Expert Tooling and Automation Ltd
“Manufacturing expansion in the Midlands”
Location: Walsall, West Midlands
Lead organisation: ZF Lemforder UK Ltd
“Collaborate to Growth”
Location: Uttoxeter, Staffordshire, West Midlands
Lead organisation: Advance Consultancy Ltd
Partners: Agile Business Solutions (UK) Ltd, Midland Aerospace
Alliance Ltd, Liverpool University and Aventa UK Ltd
“Business and Capacity Improvement Project”
Location: Birmingham, West Midlands
Lead organisation: QPP
“Aluminium Low Pressure Die Casting Manufacturing Company—NewCo”
Location: Coventry, West Midlands
Lead organisation: King Automotive Systems Ltd
EU Foreign Affairs Council
(11 years, 10 months ago)
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The Secretary of State for Business, Innovation and Skills (Vince Cable)
The Minister of State for Trade and Investment—Joint with Foreign and Commonwealth Office, my noble Friend Lord Green, has today made the following statement:
The trade formation of the EU Foreign Affairs Council will meet in Brussels on 29 November 2012 under the chairmanship of the Cypriot Presidency. I will represent the UK for all the items on the agenda.
The meeting will open with updates from Trade Commissioner Karel de Gucht and an exchange of views on the Commission’s two trade omnibus proposals which bring common commercial (trade) policy regulation into line with post-Lisbon decision-making arrangements. Omnibus I amends trade regulations by replacing Council decision making with Commission decision making. Omnibus II converts previous Commission decision making in consultation with member states into so-called delegated powers. I expect the Commissioner’s focus at the Council to be on the pace of progress on the proposals, rather than the substance. The UK supports the proposals. It is right that the Council examines closely any transfer of responsibilities to the Commission.
The only other legislative proposal relates to financial responsibility for investor-state disputes arising from EU investment protection treaties with third countries. The proposal sets out how financial liability and responsibility for legal representation should be divided between the EU and its member states when claims are made against them by foreign investors. The UK position on the proposal is broadly supportive. We believe the regulation is necessary and agree with the main principle that it follows: where the claim is made against EU-level legislation, the EU is responsible; when the claim is made against national legislation, the member state is responsible.
There will then follow four substantive “non-legislative” items each relating to bilateral trade negotiations. On each item, Commissioner de Gucht will give an update and Ministers will respond.
The first of these items concerns the potential launch of formal negotiations between the EU and Japan on an economic partnership agreement (a free trade agreement in all but name). The Council will be asked to adopt the negotiating mandate which has been debated in Council working groups and redrafted by the presidency. The adoption of the EU-Japan negotiating mandate is the only item on the agenda that may be subject to a vote. Assuming the proposed text for a negotiating mandate takes on board UK sensitivities I intend to vote in favour of adoption with a view to negotiations getting under way in the coming months.
The second and third non-legislative items relate to the negotiation of the EU-Canada comprehensive economic and trade agreement (another FTA) and the negotiation of the EU-Singapore FTA. Both of these trade negotiations are in their final stages and are expected to be close to conclusion by the time of the trade FAC meeting. In the case of the EU-Canada negotiations it may be possible to conclude, whereas further political level engagement is likely to be required in the coming months in order to finalise the EU-Singapore FTA.
I am confident that UK priorities are being taken seriously both by EU negotiators and the third-country negotiators on the EU-Canada and EU-Singapore FTAs so I expect to be able to intervene positively in support of rapid conclusion in order to bring the benefits of these FTAs to UK business as quickly as possible. I shall update Parliament after the Council.
The fourth non-legislative item relates to potential EU-Southern Mediterranean trade negotiations which may be ready to launch in the coming months. As well as representing opportunities for UK firms, trade agreements with these countries would prove useful tools, in delivering political stability.
Over lunch there will be a discussion on EU trade relations with Russia following its recent World Trade Organisation (WTO) accession, and a discussion on co-ordination within the EU of our trade and investment relations with China.
In summary, my aims for formal sessions of this Council meeting will be to:
Support the presidency in making progress with the trade omnibus dossiers while stressing the importance of maintaining the balance between interests achieved in the Council working group;
Support progress on the financial liability proposal;
Call for the imminent launch of EU-Japan FTA negotiations as a driver for economic growth;
Support rapid conclusion of the ambitious EU-Canada agreement
Urge rapid conclusion of the EU-Singapore FTA
Support plans to launch negotiations with Southern Mediterranean countries when they are ready, meaning most probably Morocco in the first instance and Tunisia thereafter.
Patrick Finucane Review
(11 years, 10 months ago)
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The Secretary of State for Northern Ireland (Mrs Theresa Villiers)
Following my written ministerial statement of 13 November 2012, Official Report, column 13-14WS, I would like to announce that the report of the Patrick Finucane review, chaired by Sir Desmond de Silva QC, will be published on Wednesday 12 December. A statement will be made to this House at the time the report is published.
Grand Committee
(11 years, 10 months ago)
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Arrangement of Business
(11 years, 10 months ago)
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The Deputy Chairman of Committees (Lord Bichard)
Good afternoon and welcome to this meeting of the Grand Committee. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Disabled People’s Right to Control (Pilot Scheme) (England) (Amendment) Regulations 2012
(11 years, 10 months ago)
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Baroness Stowell of Beeston
That the Grand Committee do report to the House that it has considered the Disabled People’s Right to Control (Pilot Scheme) (England) (Amendment) Regulations 2012.
Relevant document: 9th Report from the Joint Committee on Statutory Instruments
Baroness Stowell of Beeston
My Lords, for the record, I should like to begin by paying tribute to the noble Baroness, Lady Campbell of Surbiton. Although she is not here today, it was her work that helped shape this policy and it was she who chaired the Advisory Group on Right to Control until earlier this year.
The purpose of these amendment regulations is to make two changes to the main Right to Control regulations, which were made in November 2010. The first change is to extend the period of the current pilot from December 2012 to December 2013, and the second is to remove Oldham Council from the list of local authorities delivering Right to Control.
In November 2010 your Lordships considered and supported the Right to Control (Pilot Scheme) Regulations. The purpose of the 2010 regulations was to pilot giving disabled people in certain parts of England a legal entitlement to choice and control over some of the public services they receive. Rather than providing disabled people with what we think they need or what is most convenient for the service provider, the Right to Control pilot gives the power to the disabled person to decide how money is best spent to meet their needs. For many, this right has been empowering. However, others have concluded that they do not want the responsibility of managing a personal budget and are happy for the services they need to be purchased and managed on their behalf. A third group may have been keen to take control of the funding allocated for them but have felt that they lacked the knowledge or experience to do this. This is where the support of their peers, perhaps from a disabled people’s user-led organisation, has helped them to gain the skills and confidence to take control of their funding.
The purpose of running a pilot scheme is to test what works and what does not, and Right to Control is no different. Seven trailblazing areas in England are currently testing the right. The results from the pilot will be used to inform decisions about the long-term future of Right to Control. The pilot scheme is currently due to end in December 2012, and when the 2010 regulations were made we thought that two years would be enough time for the pilot to show us what has worked best and how. However, while a great deal of progress has been made since the pilots began, there is still insufficient evidence on which to make an informed decision about the long-term future of Right to Control.
This view was informed by the interim evaluation report, which was published in February of this year, and by our ongoing monitoring, review and discussion with all the trailblazing areas. The interim evaluation identified some early successes as well as some areas for improvement. Moving from the start-up phase to a steady-state environment took longer than originally envisaged and the trailblazing areas also told us that the cultural change required proved to take far longer than had been anticipated.
Although progress continues to be made and more than 34,000 people have benefited from Right to Control, we concluded that there was insufficient evidence on which to make a firm decision about the best way forward. As a result, we decided that the best solution was to extend the pilot scheme by a further year, taking it to December 2013. This will enable us to gather more information and evidence of what works best, both for disabled people and for the authorities and organisations delivering Right to Control.
At this point, I should reassure the Committee that the primary legislation in the Welfare Reform Act 2009 places an overall limit of 36 months on the pilot. To be clear, it is not possible, even if it were our intention, to come back in another year with a proposal to extend the pilot again. The Welfare Reform Act 2009 also requires us to consult on any draft regulations about Right to Control. So between June and September of this year we consulted on the draft regulations before the Committee today. Although the number who responded to the consultation was low—only 40— those who did respond were in favour of extending the pilot by a year. We also consulted with, and sought the agreement of, each of the local authorities currently delivering the right, and all but one agreed to continue in the extension period. Oldham Council decided that it did not want to remain as part of the pilot but, importantly, its participation so far will be captured in the evaluation. The experiences of disabled people living in Oldham and of Oldham Council will feed into the formal evaluation and the overall lessons learnt from the pilot. We will use the extension period to continue to collect management information and to monitor progress. The results from this, together with the results of the full evaluation exercise, which is due next spring, will enable us to make a final, evidence-based decision on the way forward.
In conclusion, we see the extension of the pilot scheme as a key factor in reaching the right decision about the future of Right to Control. I am satisfied that the draft regulations are compatible with the European Convention on Human Rights and therefore I beg to move.
Lord McKenzie of Luton
My Lords, I thank the Minister for the introduction of these regulations, which have our full support. Right to Control is an important new right for disabled people, giving them greater control and choice over the support they receive to go about their daily lives. It results from the powerful advocacy, not least from the noble Baroness, Lady Campbell of Surbiton, who the Minister rightly referred to, which was advanced during the Welfare Reform Bill 2009 and from the approach of co-production which helped frame these important opportunities. We were also supportive of Right to Control being piloted through trailblazers prior to being rolled out nationally, with the inevitable lessons and challenges that emerge from its practical application.
As the noble Baroness has said, we have had the benefit of the interim evaluation of the trailblazers. However, although not published until February 2012, this related to field work undertaken between June and September 2011, not long after the trailblazers had started. The interim evaluation is therefore inevitably influenced more by start-up issues and less by what might become the steady state. Nevertheless, there are some encouraging messages, even from this early assessment, around changes in culture, encouraging partner organisations to work together and positive influences on how delivery staff work with disabled people. The evaluation identified co-production as having long-term benefits for the design and delivery of services for disabled people.
However, at the early stage the evaluation pointed up some big challenges, including lack of awareness and understanding of Right to Control among staff, including front-line staff. This extended to a lack of certainty over process, a lack of differentiation from previous personalisation initiatives, and a lack of knowledge about legal entitlement.
There was also a lower than expected take-up of Right to Control in the Work Choice and Access to Work funding streams, although it was noted that young people’s access might be through their college rather than through Jobcentre Plus. There was caution on the part of some delivery staff about investing time if the future of Right to Control is not assured. There was the perception of conflicting priorities with the belief by some that it made it more difficult to safeguard vulnerable adults. For some trailblazers some funding streams were already tied into block contracts. Moving away from these has resource implications at a time of severe financial constraints. Budget cuts, redundancies and organisational restructuring have affected trailblazers, making implementation and delivery of Right to Control more difficult.
The Minister said in the other place, and the noble Baroness has reiterated it this afternoon, that the Government continue to monitor the position and to collect management information. Perhaps we can hear how matters are progressing on those above issues. What proactive steps are the Government taking to overcome some of these difficulties and challenges? Collecting information is all very well but there needs to be something more positive, particularly around awareness and understanding. Clearly, trailblazer authorities and stakeholders have a role in this, but so do the Government. Is it still the Government’s intention to see Right to Control being rolled out nationally?
As I said, we support these regulations and the extension of the pilots for one year—as we have heard, the maximum permitted under the 2009 Act. However, we would not wish that to be an excuse for doing nothing in the mean time to help make a success of Right to Control.
Lord Low of Dalston
My Lords, I declare an interest as an ambassador of Disability Rights UK, the largest pan-disability, user-led organisation in the United Kingdom, which has only come into being in the past year as the result of a merger between the Disability Alliance, RADAR and the National Centre for Independent Living. It supports the extension of these pilots but takes this opportunity to raise a number of key issues relating to the promotion of the Right to Control objectives and the evaluation of the pilots.
The Right to Control is about transforming disabled people’s lives and giving them real control over the support that they need to enable them to play a full and equal part in society. That was supported by all political parties when the Welfare Reform Act 2009 went through Parliament. It would be good to see the DWP explicitly recognise that objective, and promote it strongly and consistently both within the department and across government. I hope that this would be used as an opportunity to ensure that the evaluation process will be co-produced with disabled people. “Nothing about us without us” critically and essentially means that researchers should work with disabled people—in particular with disabled people’s organisations which have participated in the pilots—to shape and review the evaluation, so that disabled people are not involved only as respondents.
Disabled people also seek an assurance that, in looking at the cost benefits of Right to Control, the department will take full account of the outcomes achieved. Even where there are no direct savings from the pilots—although it is hoped that there will be savings, especially in reducing bureaucracy—there needs to be recognition that the benefits in freeing up disabled people so that they can access education and employment opportunities and play a full and equal part in society will bring long-term savings as well as improve their quality of life.
I observe that the trailblazers have suffered from a lack of consistency and a change in DWP structures and Civil Service roles. I hope that, in the time left for the project, there will be no more changes of this kind. I would also welcome it if the Minister met with disability organisations to discuss what personalisation means in the context of the work that the department is doing on Right to Control and how to advance choice and control for disabled people. This is particularly relevant in the light of the care and support reforms, the transition to the personal independence payment, the Access to Work review that is going on and the disability strategy.
Finally, I raise a question on the Access to Work review. What assessment has the department made of the readiness of Access to Work to be included in the Right to Control, so that users can make spending decisions across funding streams? The evaluation report says that most significant barriers to the integration of the funding streams under the Right to Control relate to money being tied into block contracts and framework agreements. As a result, there is low eligibility for multiple funding streams. People cannot spend budgets across funding streams while still facing different monitoring systems. However, those trailblazers that invested early in co-production with user-led organisations and individual disabled people have progressed further in this respect. As regards Access to Work, in particular, it is mentioned that someone with an eligible frequent need to use taxis could not buy a train season ticket due to Access to Work guidelines.
From evidence from the Disability Rights UK helpline, Disability Rights UK says that often people who get social care funding and who are also at work will be caught between social care and Access to Work. For example, someone who needs personal care such as help getting to the toilet is told by social care services that the latter do not have to meet the needs for personal care if they arise at work, and Access to Work says that it does not have to fund personal care because that is the responsibility of social care services. Indeed, at an event run by Disability Rights UK last year the case arose of a man who has an adapted bathroom at home and does not need assistance to get to the toilet. However, his workplace does not have an adapted bathroom and so he needs assistance when he is at work.
I would be glad if the Minister would take these issues of overlap and conflict between these different funding streams—Access to Work and social care—and consider how these conflicts can be resolved as the evaluation moves forward.
Lord Addington
My Lords, I have listened to what has been said. It is very nice to discuss the continuation under this Government of a good idea that originated with the previous Government. Clearly, the political class has reached a degree of understanding on this issue. We should all applaud that. Most of the points that I was going to make have already been made. Indeed, the principal one has just been made by the noble Lord, Lord Low, which concerns what we are going to use the information for outside the immediate study area. People often say yes to something in a certain area but forget that it will apply across to something else. This information will be held not only within the subsets of a particular department but will be passed across departments. That often takes a great deal of time. I hope that in responding my noble friend will give us some idea of how the information will be used and will give a guarantee that it will be used not only throughout the relevant department but throughout the Government, or at least that it will be made available to all government departments. I would be very relieved if that were the case because this information is used to allow people to function independently. At the very least it should be brought forward to the start of the assessment process and not just kept for when a decision is implemented.
Baroness Stowell of Beeston
My Lords, I am very grateful to noble Lords for their contributions. I am particularly grateful for the support that has been expressed by the noble Lords, Lord McKenzie and Lord Low, and my noble friend Lord Addington. This is an important matter and, as has been pointed out, it achieved cross-party support when it was first put forward a couple of years ago. It is heartening to know that that support continues.
I shall try to deal systematically with some of the points that have been made. The noble Lords, Lord McKenzie and Lord Low, asked what the Government’s view is on whether they will be able to roll out Right to Control nationally. Obviously, because we are continuing this pilot, we do not currently have a view on whether Right to Control should be rolled out, because there is insufficient evidence to make a firm decision on its future. But the very fact that we are continuing this pilot and want to gain more evidence and information, because as a principle this is something that we support, I hope provides some confidence to all noble Lords.
The noble Lord, Lord McKenzie, asked how the pilots will be monitored during the extension period. The process will continue to include monthly reports and management information submitted by the trailblazers to DWP, monthly meetings between the project managers and DWP’s Right to Control project team, six-monthly reviews of individual trailblazers by the team and, of course, monitoring and support given to them by the team back at DWP.
The noble Lord also asked about awareness. After highlighting, as he did, the good things that had come out of the interim evaluation and the advantages that had been delivered by Right to Control so far, he went on to summarise some of the things that were perhaps less encouraging. He asked whether people were aware of this opportunity and what efforts we were going to make to raise further awareness. The legislation requires that, once it has been decided that a person is eligible for a Right to Control service, the responsible authority must inform them that they have a right to control—telling them which services are included and the likely monetary value of the support for which they are eligible—and about organisations that can provide advice and information about Right to Control and what it involves. The trailblazers also have a programme of awareness training for staff, and in the department the Right to Control team has facilitated the delivery of events for practitioners from all funding streams where learning and good practice in delivery has been, and will continue to be, shared.
The noble Lord also asked how many people have benefited from Right to Control. As I said in my opening remarks, until June 2012, over 34,000 disabled people have exercised their right; the latest management information for the period to the end of September, which is currently being evaluated, indicates that at least 37,000 now stand to have benefited.
The noble Lord, Lord Low, sought further information about how Right to Control is being evaluated. He made an important point, referring me to the fact that “no decision about us should be taken without us”. There are three elements to the independent evaluation; it is quantitative and qualitative, and there is a cost/ benefit analysis. The views and experiences of staff involved in the implementation and delivery of Right to Control will be taken into account, as will those of providers, customers and their carers, and, of course, disabled people’s user-led organisations. So everybody involved will be properly consulted as the evaluation continues.
The noble Lord, Lord Low, also asked about potential conflict between different benefits that someone might be entitled to, and their operation within Right to Control. It is worth making the simple but important point that Right to Control is about services and not benefits. On Access to Work in particular, this is currently part of Right to Control within trailblazing areas, and we will consider the future of Access to Work and Right to Control together.
The noble Lord, Lord Low, raised concerns around the impact of changes in structure in the department and the local authorities, and their effect on the delivery of Right to Control. While it is correct that there have been some inevitable changes in staff in local authorities and the DWP, some staff have also been working on Right to Control throughout. We have tried to ensure that there is best practice and learning both when people are replaced and between the different trailblazing areas. In the same vein, the noble Lord, Lord Low, asked about joined-up working and the efforts we will make to break down some of the institutional barriers. I can confirm that officials in the DWP are in regular contact with their counterparts in other government departments and that they have also facilitated the delivery of events for practitioners from all funding streams where learning and good practice regarding the delivery of Right to Control can be shared.
The noble Lord, Lord Low, also asked about the level of control that people can have over their support. People can choose different degrees of control. For example, they might choose to continue to allow the public authority to arrange support on their behalf, whether it is an existing or a different service. They might choose to receive a direct payment or might prefer, as some people surely would, a mixed approach, with some funding taken as a direct payment while continuing to use some services arranged by the authority.
My noble friend Lord Addington asked whether any local authorities act as control sites for the purposes of evaluation. I can tell him that seven local authorities have agreed to be matched as comparison sites for the trailblazers. The outcomes of deserving people and their Right to Control trailblazer areas will be compared with a group of disabled people who are eligible for services included in the Right to Control pilot scheme but who do not live in the trailblazer areas. These individuals will be drawn from the matched comparison areas that have been selected because they are similar to the trailblazer areas. That information will be used when considering the final decision along with the formal evaluation.
The noble Lord, Lord Low, asked whether I would meet disabled people’s organisations to discuss choice and control more generally. Of course, I would be delighted to do so and I am sure that my honourable friend Esther McVeigh, who is the Minister responsible for disabled people, is in regular contact. I would happily join her in meeting representatives of organisations to hear more from them and to see what more we can do. As I said at the beginning, the principle of Right to Control is one that we can support, and I hope to see an extension of the pilots and to receive a full and comprehensive evaluation of something that might be part of the future. On the basis that I have addressed all the points raised, I beg to move.
Protection of Freedoms Act 2012 (Disclosure and Barring Service Transfer of Functions) Order 2012
(11 years, 10 months ago)
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Lord Taylor of Holbeach
That the Grand Committee do report to the House that it has considered the Protection of Freedoms Act 2012 (Disclosure and Barring Service Transfer of Functions) Order 2012.
Relevant document: 8th Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)
My Lords, I am sure that the Grand Committee will be aware that the Government have introduced effective measures to scale back the former vetting and barring scheme and to return to a more common-sense approach to handling criminal record checks through the Protection of Freedoms Act 2012. Measures in the Act received widespread support.
Our first priority remains to safeguard children and other vulnerable groups from those who may seek to cause them harm. The changes recognise that we need to do that in a way which does not discourage volunteers from working in these areas and without imposing unnecessary bureaucracy. As part of the process of change, and to help provide a more effective service to the public, we are combining the work previously carried out by the Criminal Records Bureau and the Independent Safeguarding Authority. The draft order before the Committee brings about the transfer of functions to a new single body, known as the Disclosure and Barring Service, in order to achieve this.
The necessary provisions of the 2012 Act to establish the DBS as a legal entity were commenced on 15 October. It is a new non-departmental public body, independent of government but overseen by the Home Office as its sponsor department. The DBS is expected to start its operations on 1 December, subject to the approval of this order. The order transfers to the DBS all the previous functions of the Criminal Records Bureau under Part 5 of the Police Act 1997. These are powers for the Secretary of State to consider applications for, and to issue, criminal records certificates—powers currently exercised on behalf of the Home Secretary by the CRB. Some functions under the 1997 Act are retained by the Home Secretary—setting fees for applications, for example, or issuing certain guidance.
The order also transfers all functions of the ISA under the Safeguarding Vulnerable Groups Act 2006 to the new DBS. The ISA considers whether individuals should be barred from work with children or other vulnerable groups, taking account of criminal records and other relevant information, such as that provided by employers. It maintains the barred lists and has powers to review barring decisions and to remove barred persons from the lists. All these functions will be taken over by the DBS, which will take barring decisions independent of Ministers. It also provides for the dissolution of the ISA once the functions have been transferred. Similar changes are made to enable the DBS to be the barring authority for Northern Ireland.
By means of a separate order, subject to negative resolution, certain core functions are retained for the DBS. The ISA core functions are set out in the 2012 Act and are intended to ensure the independence of decision-making by the new DBS for all barring decisions. The CRB core functions are prescribed and mainly concern powers to verify identity of applicants, including by checking other publicly held records, and to receive and process police criminal records and local information.
The creation of the DBS will involve the transfer of staff from CRB and ISA to the DBS through a statutory staff transfer scheme made under the 2012 Act. Staff will be notified in writing that they will transfer to the DBS in line with the requirements of the Cabinet Office statement of practice on staff transfers in the public sector. Staff and unions have been consulted about the transfer and have received clarification about their terms and conditions, continuity of service, future staff numbers and the likely impact on jobs.
The purpose of the order is to bring together the work of the Criminal Records Bureau and the Independent Safeguarding Authority into a single body. I am very pleased to have been able to visit both organisations, the CRB in Liverpool and the ISA in Darlington, and to see at first hand the important work they undertake. I thank the staff of those organisations for all the hard work that they have put into planning for a successful merger to the new DBS. Particular thanks are due to Sir Roger Singleton, Adrian McAllister and Anne Hunter of the ISA, who have provided effective leadership of that organisation and who will now be stepping down from their posts. Congratulations are due to Adrienne Kelbie and Bill Griffiths, the new chief executive and chair of the DBS.
The policy underlying the order was fully debated during the passage of the 2012 Act. It reduces bureaucratic requirements for a central registration scheme, amends the scope for regulated activity to which barring applies, and strengthens the criteria for disclosure on local police information. These changes will make the system fairer and more proportionate but they will also make sure that criminal record checks remain available to those who need them. The changes are part of a rebalancing of the responsibilities for safeguarding children and other vulnerable groups between the state, employers and other organisations. The order before the Grand Committee brings about the key changes which will enable the DBS to start its important work in December. I commend the order to the Committee.
Baroness Walmsley
My Lords, I thank my noble friend the Minister for explaining this statutory instrument. I have no reason to object to the streamlining of these organisations. It makes sense to bring together the collection and dissemination of criminal records information and barring decisions and to maintain those lists. However, I turned to the Explanatory Memorandum to have a look at what it says about consultation and I noted that it says that the changes are consequential on the Government’s remodelling review, on which there was consultation. Many of us who were part of that consultation were most grateful to my noble friend the Minister’s predecessor, the noble Lord, Lord Henley, at the Home Office, who was kind enough to spend quite a lot of his time consulting us. The problems identified by those who were concerned about the original legislation have been recently compounded. Employers in the further education colleges sector and the amateur sports organisations sector were particularly concerned about the reduction in the number of people who were going to be subjected to revelations about their background.
Perhaps I could summarise my remarks by asking my noble friend the Minister to tell the Committee how he feels that these new arrangements will help to prevent recent situations such as the Jimmy Savile situation and the terrible stories that came out of the Bryn Estyn school in North Wales some years ago. Those situations related to people who had never committed a crime and therefore they did not have a criminal record. So I would like to know how this streamlined arrangement will help to protect children in those circumstances.
Baroness Smith of Basildon
My Lords, I thank the Minister for his explanation and the information he gave in speaking to this order. I appreciate that orders of this kind often necessitate a long list of amendments. There is always the hope that the Explanatory Notes will make them clearer ... but they rarely do. I liked the comment in the Explanatory Note on page 20:
“Chapter 2 makes amendments to the principal enactments which are consequential on this transfer of functions and Chapter 3 makes amendments to other enactments which are consequential on this transfer of functions. Chapter 4 makes supplemental provision”.
It then goes on. It is quite a minefield for anyone to negotiate exactly what the order does. I know that the Government say in the Explanatory Notes that a consolidation order is not necessary but I wonder whether there should be a rethink on that. Just on page 2 of the order, there are six different pieces of legislation; there are also a number of orders and other secondary legislation—rules, procedures and regulation—referred to, which all concern amendments.
Those who need to consult this legislation should be able to do so as easily as possible and with the utmost clarity. Many people have a professional responsibility to enact this legislation and, presumably, need to be aware of it all and any other changes made to it since 1997. I wonder how much legislation somebody will have to have to hand to work their way through the minefield of amendments in this order and in other provisions. I do not know whether the legislation referred to on page 2 has previously been amended. If so, it seems quite a complex task for anyone and I am interested in the guidance that is being issued to professionals alongside this order. When and how will that be made available and can it be made available to those attending today’s Committee? It is crucial, particularly given the change of name and the merger of the two organisations, that there is some professional and public understanding and awareness of all the different changes being made. It would be helpful if the Minister could say something about publicity or any other measures being taken to alert the public and professionals to the changes being made.
The Minister explained the broad outline of the order, which is basically that the Disclosure and Barring Service—not a particularly catchy name; I hope people understand what that is going to mean—will take over the powers that were previously the responsibility of the Secretary of State under Part 5 of the Police Act 1997, the Safeguarding Vulnerable Groups Act 2006 and the safeguarding vulnerable groups order of 2007. It was helpful that the Minister gave some description of the functions that will transfer, and those that will not, because there is concern that functions are being transferred from the Secretary of State to the newly merged organisation—the DBS. As originally intended in the legislation, such responsibilities are those of the Secretary of State, with the holder of that office being accountable to Parliament. Given the number of issues that have been raised about failures in the system to fully protect vulnerable children and vulnerable adults, it is clearly advisable that parliamentarians should not lose an opportunity to ask questions or seek Statements from the Secretary of State or a government Minister on these issues, if they so wished.
I have a question about accountability issues. Will that accountability and scrutiny role still be available to parliamentarians? In particular, if Members of either House are asking parliamentary questions of Ministers, will they in future merely be referred to the head of the DBS and not be answered by Ministers? Clearly, the original intention of Parliament was that there should be a direct responsibility to Parliament for those functions. The issue is whether it is appropriate for those powers to be handed to a new, separate body, unaccountable in parliamentary terms, through secondary legislation. That is my point about questions and Statements. Can the Minister also say anything about the scrutiny arrangements that will be put in place to oversee the performance of those functions?
The SI lays out the legislative steps required to merge the two bodies. The Minister spoke to that but can he update us on the practical steps being taken? He said something about it, but the DBS will inherit powers from the ISA and it would be helpful to know what practical, step-by-step arrangements are taking place. It was helpful that the Minister referred to both sites. Will the two sites operate as they do now or will there be a movement and integration of staff and functions across them? Is the new management structure now in place? He referred to the chief executive and chair, but does that go further down the organisation? How much progress has been made on the new IT system? We all know that there are always issues with new IT systems. Is it possible to update the Committee at this stage on the costs related to it and when it is expected to be fully operational?
Lord Taylor of Holbeach
The noble Baroness has been true to form in providing the Minister with lots of questions—quite rightly—to challenge his knowledge of the subject. I have taken quite an interest in this particular area, because, as Minister for Criminal Information, my Home Office responsibilities include the current CRB and ISA and will include the DBS. So I hope that I can reassure the noble Baroness.
Baroness Smith of Basildon
Perhaps I could correct something that the Minister said—that I am asking questions to challenge his knowledge of the subject. That is really not why I am asking them; I never doubt his knowledge of the subject. It is just because there are issues, when I am reading through an order like this, which occur to me and to which I would like answers. There is nothing more sinister to it than that.
Lord Taylor of Holbeach
I do not attribute any base motive to the noble Baroness. However, it sets me on key, because these are legitimate questions, as she rightly points out, to which everyone has the right to know the answer. It has been helpful to be able to explain the main purpose of the transfer of functions order, to put it in the context of the change of management that will flow from it. As we are making a substantial change, in the sense that the two bodies are being merged into one, it is important that I have the opportunity to explain it to the Committee. We are trying to bring about reform. We have tried to avoid unnecessary bureaucracy to encourage volunteering and employers and other organisations rightly to share responsibility for the adequate safeguarding of children and other vulnerable groups.
We need to move away from a tick-box mentality. Employers think that a criminal records inquiry is all that they need to check on the desirability of employing someone. That leads in quite well to the comments made by my noble friend Lady Walmsley, who has been assiduous in dealing with these matters. I am pleased that she paid tribute to the engagement of my predecessor, the noble Lord, Lord Henley, in this issue. This change is not designed, of course, to weaken checks. The noble Baroness mentioned this in the context of various current investigations and, in truth, these matters should have been promptly reported to the police. She also mentioned the absence of criminal records of particular individuals. This shows that effective management and supervision of volunteers and professionals within the group is key: the checks go only so far. Effective management and supervision of all volunteers is one of the reasons why we can have an updating service and a capacity for people to volunteer more easily. However, the people who are responsible for managing volunteers have an enhanced responsibility to make sure that they perform their tasks in a proper way and do not exploit them for more sinister purposes.
The noble Baroness, Lady Smith of Basildon, asked about guidance. She made a little fun of the complexity of the order. It is complex—it is the kind of document that drives me mad—and, as I am a simple country chap, I find this stuff largely beyond me. However, the law needs to be regularised and this statutory instrument is there to regularise the legal framework. The key is how the public see these matters. They do not see them through a statutory instrument but through what we tell them about the service. Promoting the CRB update service will be important as a part of this.
We have highlighted these changes through road shows and both organisations have been communicating regularly with stakeholders about the changes. So people who regularly use the facilities have been kept in the picture. I have been impressed by the way in which both organisations see themselves as supporting the employers and managers of the people who are part of the information service they provide.
It is important to mention—I alluded to this earlier—the role of the Home Secretary in connection with a non-departmental government organisation. The Home Office will continue to answer questions about the new body and its accountability from Members of Parliament in another place and Members of this House. We will monitor the progress of this merger and I hope, in a year’s time or so when the system has settled down, we might be able to persuade the usual channels to hold a debate on how the service is functioning. I hope I have been able to reassure noble Lords on that.
As for staff moving from Liverpool and Darlington, obviously this would be a cause for concern but it is not part of the current plan. The chief executive-designate and the chair-designate have confirmed that they do not anticipate doing anything about changing the two site locations in the first two years. This position has been shared with staff and the TUC. They will continue to seek some flexibility from staff over travelling between the two work locations to attend meetings so that they can establish an effective organisation, but that is going on already and people have been working well together. I have gathered that there is a sense of ambition about the new service from both the CRB and the ISA.
Will there be efficiency savings? There will be some efficiency savings but, more to the point, it provides a single focus for a complementary service that will be found within the CRB and the ISA. We are not looking to make any particular changes to the structures other than those that have already been consulted on. As the noble Baroness would expect, TUPE provisions will apply in these circumstances but there are no redundancies, so it has been a matter just of consultation and having regular briefings on how the future organisation might work to provide an integrated service.
The noble Baroness asked about numbers and whether there had been an increase in referrals to the ISA. I was not aware of that. Although I was shown some figures, I did not bring them with me today. I know that there was a slight rise in CRB figures over the summer but it was a modest percentage, which may have been because of the increased activity around the Olympics. I know we have figures from CRB up to September. If I may, I will write to the noble Baroness and give her the full set of figures on that.
Meanwhile, I hope noble Lords are content to commend the order to the House by approving this draft order.
Statement of Changes in Immigration Rules (Cm 8423)
(11 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Smith of Basildon
That the Grand Committee takes note of the Statement of Changes in Immigration Rules (Cm 8423). 9th Report from the Secondary Legislation Scrutiny Committee
Baroness Smith of Basildon
My Lords, I have put forward this Motion to take note of the statement of changes in the Immigration Rules to make sure that the Government give your Lordships’ House an opportunity to debate a very serious matter. You just have to look at the Explanatory Memorandum to see the range of criteria covered by these changes to the Immigration Rules. The changes were brought in by negative resolution, so this is the first opportunity that your Lordships’ House has had to discuss the matter, despite the legal judgment that led to these changes being given on 18 July this year and the fact that the rules have already come into effect. It would have been helpful to your Lordships’ House had there been an opportunity for an earlier debate and an explanation of why the matter had to be dealt with in this way. I do not intend to go into the individual areas of guidance but I have a number of questions for the Minister. It would be helpful, first, to hear about the circumstances that led to the statement of changes being laid.
I think it is appropriate to say how grateful we should be to the Secondary Legislation Scrutiny Committee, whose work on this matter has been extremely helpful. Perhaps the summary at the beginning of its report is the best place to start. To give some background, on 18 July the Government lost a major immigration case in the Supreme Court. In the case involving Alvi v Secretary of State for the Home Department, the Supreme Court maintained that substantive changes affecting immigration applications must be laid before Parliament. Mr Alvi had been refused leave to remain under tier 2 of the points-based system because his level of skills and salary did not meet the criteria. However, the Supreme Court quashed that ruling as the criterion used to make the decision was not part of the rules as laid before Parliament under Section 3(2) of the Immigration Act 1971 but had been published only in the guidance, which had not been subject to parliamentary scrutiny procedure and, therefore, approval.
The last compete revision of the Immigration Rules was laid before Parliament in 2008, but since then considerable guidance from the previous Government and this Government have been added. The question raised by this and previous cases was whether this was really guidance or a substantive change in the rules.
As we can see from this weighty document, Cm 8423, there are 290 pages of what had been issued as guidance but on 19 July, the day following the Supreme Court judgment, the Government laid the document before Parliament to take immediate effect on 20 July, even though the House of Commons was not then sitting— of course, your Lordships’ House was and a Written Statement was made by the Minister at that time. Does the ruling of 18 July 2012 mean that all immigration cases decided on the basis of guidance issued since 2008 have been decided on without a legal basis for that decision?
Paragraph 4.3 of the Explanatory Memorandum states that the changes apply to all applications on and after 20 July, when the statement to change the rules was laid, but what about the decisions taken before? What is the status of the decisions taken before Cm 8423 was laid? Have there been any further appeals against refusal since 18 July on the basis of the court’s judgment? It would be helpful if the Minister could say whether all the guidance issued is included in the statement. If it is, I am not 100% clear why all the guidance is imported into the rules—the Secondary Legislation Scrutiny Committee referred to that as well. Was any work undertaken to see what should legitimately remain in guidance or whether it should all be imported into the rules?
It strikes me that within the rules—that is, what was in guidance—are lists and lists over pages and pages referring to banking organisations where the financial information will be accepted by the Government. That was previously in guidance but is now in the rules, so does that mean that any deletions or additions to the list can be made only by rules and in future not be changed in the guidance? Because of the volume of the material, the Secondary Legislation Scrutiny Committee was unable to verify the Government’s statement that the new statement of changes includes all and only that previously issued in the guidance. It would be helpful if the Minister could confirm that there is nothing in the rules other than what was previously in guidance.
The basis of the Supreme Court decision was that the guidance was not subject to any parliamentary procedure. Now that the Government have brought in this statement of changes by negative resolution, are they satisfied that they have done enough to ensure that this has the full force of law? One of my concerns relates to the negative procedure, which I shall mention again in a moment. If we had not requested this debate today, there would have been no debate in your Lordships’ House on this issue. We will not be asking for a vote on this, as the Minister is aware.
As the Secondary Legislation Scrutiny Committee said, the statement of changes provides a short-term solution, but I know that from previous debates the Minister is aware of concerns that have been raised about the interaction between the Immigration Rules and the ECHR. The committee also raised further concerns about this on that occasion, as it had done previously. Is the Minister able to make any comment about that? I noted that paragraph 6 of the Explanatory Memorandum states that no statement is needed on the ECHR as the order is subject to the negative resolution procedure. However, unless I have misunderstood, that is not the view taken by the Secondary Legislation Scrutiny Committee.
We all understand that from time to time Governments have to bring forward emergency legislation or react immediately to events such as court judgments. Can the Minister confirm that that was the Government’s reason for laying the statement of changes by negative resolution on the day following the judgment in the case of Mr Alvi? If it was, I am then unclear about why the Government waited until then, because they had been aware of this problem for two years. It was pointed out to the Government by the then Merits of Statutory Instruments Committee, following a previous statement of changes—HC96—in 2010 that was also laid urgently following two other court judgments.
Having read through the judgments, it seems that in 2010 the situation could not have been clearer. In July 2010, the challenge made in the case taken by an education charity, English UK, was that the decisions were taken ultra vires. It said it was challenging the change made to the Immigration Rules because it,
“ought to have been introduced by a change to the Immigration Rules and was not capable of being introduced by a change in the UKBA’s Guidance”.
In his judgment on that case, Mr Justice Foskett said that,
“the revised criterion could not be put in place by virtue of a process of issuing guidance. The ratio of the decision appears to me to be that a provision that reflects a substantive criterion for eligibility for admission or leave to remain must be the subject of a process that involves a true Parliamentary scrutiny”.
He made other comments on that in his judgment, such as that:
“It would follow from this that, if a change to current practice (even if reflecting the requirement of a rule) did not involve any alteration of a substantive criterion for admission or for leave to remain, there would be no objection to the change being effected in some form of extrinsic guidance”.
Basically, if it is a substantive change to the rule, it cannot be in guidance but has to be via legislation. He also said:
“I do not doubt that the changed approach in the new guidance does operate to change materially the substantive criteria for entry for foreign students”,
and that that,
“cannot be achieved by a change in guidance—it must be achieved through the medium of a rule change”.
That was in July 2010.
He recognised the complexity of the issues and said that the difficulty,
“arises when something is done by means of a change in existing guidance which arguably constitutes a change in the practice adopted by the Secretary of State in the administration of the rules regulating the entry into the UK of non-nationals”.
He said that the,
“word ‘guidance’ itself would ordinarily connote something less prescriptive than a rule”.
He said that it was a very complex area. He then went on to say that, if that is correct, simply,
“extrinsic guidance cannot be used in the manner in which it was sought to be used in this case to make a material or substantive change in existing immigration policy without the negative resolution procedure set out in section 3(2) of the Immigration Act being implemented”.
There was a similar case in June 2010 in the Court of Appeal, where it was said that,
“immigration rules are today different from and more than policy”.
The Government also lost that case a month earlier.
I know that I have already asked the noble Lord a couple of questions but I struggle to understand this and perhaps he can help. Why did the Government not act earlier when the judgment in those two cases seems very clear? In both cases, the judge said that guidance was different from rules and substantive change could not be made by guidance. Were there any further challenges between those two dates, from June and July 2010 through to July 2012? Clearly, changes were not made in 2010 that should have been made. By bringing this order forward now, the Government recognise that perhaps changes should have been earlier. It would be helpful if the Minister could tell the Committee what changes there will be in practice from now on to ensure that the Government do not find themselves in this position again.
The other point concerns scrutiny. In his final comments, Mr Justice Foskett referred to the negative resolution procedure, but earlier in his judgment he said that there had to be true parliamentary scrutiny. It would be helpful to the Committee to be given an assurance that the negative procedure now being adopted satisfies the courts and the parliamentary process that this matter has been subject to parliamentary scrutiny.
This is a complex area. The bit that I struggle with most is that the measure was introduced as an emergency process to deal with the 2010 judgments. Anything that the noble Lord can say to enlighten me on that position will be very helpful.
Lord Avebury
My Lords, a month ago we debated the first of the post-Alvi statements of changes in Immigration Rules, on a Motion to Regret tabled by the noble Baroness, Lady Smith, not so much because she disagreed with the Government’s objectives but on the narrow ground that the minimum annual income requirement for a person wanting to bring in a spouse from a non-EEA country was not the most effective way of protecting the taxpayer and delivering fairness for the would-be sponsors and their partners. We wanted to highlight the far more questionable government objective of reducing the number of net immigrants below 100,000 by fair means or foul, picking on easy targets wherever they can find them.
As the noble Baroness has explained, the purpose of this statement, which is 295 pages long, including its Explanatory Memorandum, is to transfer requirements that were previously embodied in guidance into the Immigration Rules, satisfying the Supreme Court judgment in the Alvi case that only rules approved by Parliament could have the force of law. It is a weighty document and I cannot help feeling that it is a good thing the Almighty did not have anything to say about the Immigration Rules or Moses would have had a hard time carrying this lot down from the summit.
The Secondary Legislation Scrutiny Committee suggests that we should ask the Government to clarify the status of cases decided on the basis of the guidance since 2008, when the last complete revision of the Immigration Rules was laid, and I will come back to that point. The committee goes on to observe that, in the light of its previous reports and a number of unresolved questions about the interaction between the rules and the European Convention, changes to the primary legislation might be necessary to put its application beyond question. I hope that we shall hear something from the Government on both those matters.
There is a further detailed point about the salary threshold for IT workers. These thresholds are now subject to parliamentary scrutiny, and we are prompted to ask the Government to set out the methodology for calculating them. The statement contains 74 pages specifying the salaries for particular occupations. How often is it intended to revise the figures, with presumably a statement requiring parliamentary approval every time? The problem with this approach is that every minute requirement that has to be satisfied by an applicant for leave to enter or remain in the UK now has to be set out in the rules without any element of discretion whatever being provided to the decision-makers. If a rule leads to an outcome that is unreasonable, it can be rectified only by a further statement of changes, and if there is a minor error in the documentation that has to be submitted in connection with an application, the decision-maker has no option but to reject it. The applicant has to submit a fresh application with all the delay and expense that that involves.
I give an example of the rigidity of the system. Mr AD is self-employed, and in connection with an application to bring his partner in from a non-EEA country he has to prove that his earnings exceed £18,600. For every other purpose “certified” accounts are acceptable, but on page 280 of this statement, the rules demand a full audit, at an additional cost which may exceed £1,000. In response to a letter from Mr AD’s MP, Stephen Lloyd, the Minister for Immigration, Mark Harper MP, says that the Home Office is currently considering whether it needs to insist on audited accounts—a requirement that must have already imposed an unnecessary burden on dozens of sponsors. That is clearly inconsistent with the Government’s declared policy of reducing the load of bureaucracy on small businesses and I would like the Minister to say this afternoon that it will be removed, presumably by a further statement of changes in the rules.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)
My Lords, I welcome the debate and I am grateful to the noble Baroness for tabling it. To some degree, scrutiny requires us to find opportunities like this to discuss substantial and important documents such as these statements of changes to Immigration Rules. Although they are frequently introduced under the negative resolution and are of only minor consequence and not debated, they are important for the people whose lives they are designed to affect.
Command Paper 8423, was laid, as the noble Baroness said, in response to the Supreme Court’s judgment in the case of Alvi. It was, in terms of volume, a substantial change to the Immigration Rules. However, it is not a change of policy: it transferred a number of existing requirements that migrants are required to meet from UKBA guidance into the Immigration Rules so that they could continue to be lawfully imposed.
In the case of Alvi, the Supreme Court established the principle that any requirement which, if not satisfied by the migrant will lead to an application for leave to enter or remain being refused, is a rule—it defines a rule—meaning that all such requirements need to be laid before Parliament, albeit through a negative procedure, in the immigration rules in order to be lawful. Prior to this judgment, the law as to what did and did not need to be in immigration rules had been unclear, resulting in numerous legal challenges and uncertainty. For this reason, we welcomed the judgment in Alvi, which overturned some unhelpful case law and provided a clearer framework for the future which will help inform our ongoing work to improve the immigration system.
Although we welcomed the judgment on 18 July when it was handed down, some requirements in the Immigration Rules and associated guidance that still exist were not consistent with its findings. In particular, the visitor, the points-based system and family rules all to varying degrees imposed requirements on applicants by way of guidance. In order to preserve the integrity of the immigration system and to minimise the impact on applicants and case workers, we acted quickly to move the necessary guidance into the Immigration Rules. We laid these changes the day after the judgment and it was in this context necessary to bring the changes into force the following day.
This rule change has raised questions both today and in the Secondary Legislation Scrutiny Committee’s report, which I welcome. Some questions are a direct consequence of the Supreme Court’s judgment; others are in relation to the general approach and style of the rules; and some are in relation to the specific policies contained within this change. I shall answer the questions in that order.
Questions have been asked about the status of the cases decided before the Supreme Court’s judgment, some of which have been based on the failure of the applicant to meet requirements subsequently found to be unlawful because they were in guidance and not in the rules. I can confirm that all applications decided before Alvi were on the basis of Immigration Rules and guidance which were understood to be lawful under the case law of the time. Current Court of Appeal case law makes it clear that these decisions remain lawful unless and until they are quashed in a judicial review proceeding or a statutory appeal succeeds. To that extent, I bow to the fact that this was the view expressed by my noble friend Lord Avebury in this debate.
Further to this, on 6 September, the Home Office published guidance to case workers on how to deal with applications potentially affected by Alvi. This stated that when a case was within time for a legal challenge it would be reviewed on request; this could be done by making a decision without reference to the unlawful guidance or, if that were not possible, because the rule simply did not work without the guidance, it would be remade under Immigration Rules in force at the date of the fresh decision.
I can confirm also that only those requirements that need to be put into rules following Alvi were included in this rules change. The majority of the UK Border Agency’s guidance remains outside these rules and sits alongside it. The Secondary Legislation Scrutiny Committee mistakenly understood this change to be a wholesale importation of guidance into rules, but that is not the case.
It has been suggested that the Home Office should have addressed the distinctions between rules and guidance in a more planned and orderly way. However, that was not possible until the Supreme Court clarified what as a matter of law needed to go into the Immigration Rules. The earlier lead case of Pankina failed to settle the law around what needed to go into the Immigration Rules, but the case of Alvi has. This has necessitated another round of changes, but having settled the law in this area we do not anticipate any similar problems in future. It is undeniable that, as a result of the statement of changes under discussion today, the rules have become much longer—it has been suggested, impractically so, since the full rules now occupy 778 pages. It is important to remember that as the underlying policy remains the same, in that sense they have not made the system as a whole more complicated. Published guidance continues to assist applicants and UK Border Agency staff to navigate and understand the rules. That said, we recognise that the system is complex and are undertaking a more substantial review of rules to consider how they might be made more practical. Indeed, the Migration Advisory Committee has already reported on how codes or practice could be updated and improved, for example by simplifying the resident labour market test. We are currently considering its recommendations.
I turn to the contents of the rule changes. Although the change did not alter the underlying policy, part of it can be seen as belonging to a series of three rule changes, including HC 194 in June and HC 565 in September. Together they constitute a major set of reforms of the requirements for entering or remaining in the UK on the basis of family or private life, and the form part of the Government’s programme of reform of all routes of immigration into the UK. People have a right to respect for private and family life under Article 8, but it is a qualified right; it is legitimate for the Government to interfere with its exercise when it is in the public interest to do so and when the measures taken are necessary and proportionate to achieving a legitimate aim of protecting the public or safeguarding the UK’s economic well-being. For the first time, the Immigration Rules properly reflect the public interest in controlling immigration and protecting the public.
The Secondary Legislation Scrutiny Committee asked whether the Immigration Rules would fully achieve this aim and specifically whether the approach could be sustained through the courts. It is right to highlight that it remains to be seen what view the courts reach on the effect of the rules and their compatibility with the qualified right with respect to private and family life under Article 8. The courts have a clear constitutional role in reviewing the proportionality of measures passed by Parliament and the executive decisions made under them, but the Government now expect that the courts will give due weight to the views of the Government and Parliament on these matters of public policy. These matters were not, however, introduced by this statement of changes. This rule change was quickly and effectively implemented under the Supreme Court’s judgment in Alvi, successfully maintaining the integrity of the immigration system with minimal disruption to applicants and case workers alike. That was the objective of the prompt response which we made.
Baroness Smith of Basildon
I am grateful to the noble Lord. He has attempted to answer a number of the questions that have been raised. I am not a lawyer but I struggle when two judgments from the Court of Appeal say there is a problem with guidance and something not being in the rules, and then no action is taken so there is a further Supreme Court judgment. Common sense must tell us that we should be prepared for this or at least take action to ensure that in future we are careful what goes into guidance and what goes into rules. Perhaps the noble Lord could write to me. I do not want to press the point today but I asked if there were any cases between 2010 and 2012 because of there having been a change from guidance to rules. If he can let me know on that, that would be helpful. He said that a review would be undertaken around this issue. That would also be helpful and anything that he can share with your Lordships’ House on that would be welcome.
One point he did not raise is the issue of parliamentary scrutiny. Perhaps the review could look at that. I asked about negative resolutions, what was said in the Court of Appeal judgment about the process of scrutiny and whether negative resolutions were acceptable because they do not—as the noble Lord, Lord Avebury, pointed out—give Parliament the opportunity to discuss the content in the same way. Of course, they are unamendable. They are brought for discussion only if a Member of your Lordships’ House decides to do so. The noble Lord did not raise that point, presumably because he is satisfied on the negative resolution order. It would be helpful if the review could look at the issue of parliamentary scrutiny of what are significant rule changes.
As our last debate showed, these rule changes have an enormous impact on people’s lives. I seem to have become the noble Baroness for immigration cases since our previous debate. Many of the e-mails and letters I have received and passed on to the Minister are heartbreaking. I do not think that the rule changes achieved the Government’s objectives. I do not know what objectives they achieve other than keeping families apart. It is very sad to read of people who can support themselves in this country being kept apart as a couple because that is the impact of the Government’s rule changes. The opportunity to debate the content at times would be one that your Lordships’ House would welcome. I beg to move that the Motion be agreed to.
European Union Committee Report
(11 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Boswell of Aynho
That the Grand Committee takes note of the Report of the European Union Committee on its work in 2010 (1st Report, HL Paper 13).
Lord Boswell of Aynho
My Lords, today’s Motion invites us to consider the committee’s report on its work during the long 2010-12 Session of Parliament. The committee has produced regular reports on its work since 2003 but this is the first time for many years that we have invited the House to debate one. During that Session, the committee was of course under the expert chairmanship of the noble Lord, Lord Roper, and I am delighted to see him here today. I pay tribute to his excellent leadership. It is also gratifying to see so many other Members of the committee here. It enables me to thank them and also our excellent committee staff for their hard work.
Effective parliamentary scrutiny of EU matters must not be the preserve of a small number of specialists. We must spread it among active Members of the House. In that spirit, I feel that we are building on a strong base but we should always be ready to examine how we can do things better. I hope that today’s debate will range widely and that Members will feel free to address recent developments in the European Union. I also hope that this Committee will look forward and consider how the House as a whole and the committee appointed by the House to examine EU matters can most effectively scrutinise it. That scrutiny of the EU is one of the core activities of our House. European Union legislation affects the people, businesses and other organisations of this country in many different ways. Whatever view one may take about the desirability of this—there are differing views in your Lordships’ House and on our committees—it is nevertheless crucial for the United Kingdom Parliament to play a full and effective part in this scrutiny.
During the two-year Session in question, around 1,800 European documents were deposited in Parliament. Of these, the chairman of the committee referred over 700 either to the Select Committee or one of the then seven sub-committees for close examination. In the course of examining these 700 items, the committee sent over 1,200 letters to Ministers. The committee has produced 34 full reports, ranging from major cross-cutting issues such as the single market and the euro area crisis on the one hand to more specific policies, such as the mobility of healthcare professionals in the EU and the EU drugs strategy, and foreign policy matters such as the European Union and the situation in Sudan. The aim of all this work is for the family of House of Lords European Union committees to play their part in parliamentary scrutiny of these matters by influencing and holding to account the United Kingdom Government; influencing and scrutinising the European Commission and other institutions, such as the European Parliament; engaging with stakeholders at home and abroad; and informing the House of Lords as a whole and contributing to a wider public debate about important European Union policies.
I hope that the scrutiny process is extremely open. It certainly benefits greatly from the input of people and organisations affected by the policies that we examine. In preparing our reports on this Session, we sought out evidence from around 400 people and organisations in writing and from more than 300 witnesses in person, so in this short speech I can give only a broad overview of the Committee’s work. I hope that others, who are in good numbers here, can give further specific examples in support.
I would like, however, to draw out two examples of effective working. First, on a very specific issue: at a meeting in September the Minister for Europe explained that the committee’s 2011 report on the EU police mission in Afghanistan, which highlighted the need to focus on gender issues and human rights, to encourage the recruitment and training of female officers and to invest in literacy, had been accepted by Her Majesty’s Government and the Commission and followed up by the Afghan Government. Secondly, on the major and multifaceted policy of the multiannual financial framework, whose outcome is not yet determined, the Select Committee co-ordinated two major inquiries into that framework for 2014 to 2020. It of course sounds highly technical and even a bit rebarbative, but at heart this is about our taxpayers’ money that the European Union intends to spend over the next seven years and how it intends to fund that spending. At a time of austerity, yet in the light of the critical need to support economic growth, the next framework will be the most important of all.
The committee took advantage of the expertise residing in each sub-committee and made a comprehensive analysis of the Commission’s initial proposals. We broadly supported the United Kingdom Government’s call for much greater restraint than the Commission proposed but we also called for greater attention to the quality of spending, with proportionately more directed towards programmes that offered potential to support economic growth and less towards agricultural maintenance. We also noted that the British rebate remains justified while spending is so skewed towards agricultural support.
Our work on the MFF demonstrates some good examples of our committees engaging effectively with others. We launched the report in April 2011 with a seminar hosted by the Centre for European Policy Studies, at which my predecessor, the noble Lord, Lord Roper, talked through our findings with a range of stakeholders including some from overseas. He was subsequently invited to act as a rapporteur at a mini-convention on the MFF convened by the Polish presidency, the Commission and the European Parliament last November. This demonstrates well that, although the MFF is only now making headlines in United Kingdom newspapers, the House has been involved throughout and played an important role in the debate that shaped the policies and is still being listened to.
Debates on the committee’s reports enable all Members of the House, whether or not they are members of a European Union committee, to engage with important policies. The committee helps the House as a whole to a greater understanding and engagement on European matters. Like all serious work in Parliament, it is sometimes a challenge to get our messages across through the media. However, as the report notes, in the first week of May 2012 the committee published three major reports, which were the subject of 19 articles in national and regional papers, over 20 reports in online and specialist media, and coverage in the broadcast media. More recently, the topical report on women on boards was covered in international media, including the New York Times.
A new feature is that the Lisbon treaty has given specific duties to national Parliaments particularly to examine legislative proposals for proportionality, and whether they comply with the principle of subsidiarity. If at least one-third of national Parliaments issue a reasoned opinion that a principle does not comply with subsidiarity, a yellow card is triggered, which requires the Commission to reconsider its proposal. During the 2010-12 Session, the House of Lords, acting on reports by the European Union Committee, issued two reasoned opinions, although in neither case was a yellow card triggered. However, in this September, we learn that the subsidiarity check by national Parliaments could have a definite impact on European legislation. A yellow card was then triggered on a proposal on balancing the right of free movement and a right to strike, and the Commission has now withdrawn it.
The Commission is making strides in improving its dealings with national Parliaments, and I have been impressed with Maros Sefcovic, who is the responsible commissioner. We are, however, working to improve the timeliness and level of detail that the Commission provides in response to concerns raised by national Parliaments. There is a general appetite for greater intensity of activity in that area.
At the end of this long Session, the House decided to reduce the number of EU sub-committees from seven to six. This was decided before the House appointed me to the chairmanship. Many Members of the House regret that decision. For my part, I understand the pressures on the House and on other committees, and I do not currently propose to reopen this matter, although we will of course keep it under review in the light of our workload.
Looking ahead, I would like first shamelessly to plug the Select Committee’s current inquiry into the further enlargement of the European Union. The committee is examining whether the Union should continue to expand and, if so, what principles should underpin that expansion and how they should be translated into action. What effect will the long economic crisis have on the prospects? The committee intends to publish its report before the end of the session.
I turn to the role of the Government in facilitating effective Parliamentary scrutiny of EU matters. The scrutiny reserve resolution, by which the Government undertake not to agree to proposals in the Council of Ministers unless their scrutiny by the European Union Committee has been completed is an important element of this. From July 2011 to June 2012 there were 87 overrides of scrutiny. For our part, the committee will try to avoid unnecessary overrides. But, for their part, all departments must provide us with information quickly and fully and allow us to carry out our scrutiny work effectively before proposals come up for decision within the Council. Government as a whole must be firm not to allow itself to be railroaded into premature agreement to proposals without allowing proper time for parliamentary scrutiny.
Over the summer the committee, and our counterpart committee in the Commons, became embroiled in an entirely unnecessary row with the Government about whether a report from President Van Rompuy about further economic and monetary union should be deposited in Parliament for scrutiny. It was deposited, after a short delay, and I hope that the Government have learnt their lesson and fully accept that their role is to facilitate rather than inhibit effective parliamentary scrutiny.
Scrutinising European documents provides a good starting point, but we must make sure that we do not become document-obsessed. Appointing subject-specialist sub-committees is a good way to ensure that the House acquires and makes use of the existing expertise in key European Union subjects, ensuring that it does not over-fixate on this or that document and at the same time is nimble enough to contribute to major policy debates at an early stage. Recently, the Internal Market, Infrastructure and Employment Sub-Committee investigated the issue of quotas for women on boards—I have already mentioned media coverage of that—and was able to produce a detailed report on the matter before the Commission had even managed to agree on its own proposal. In what I suspect is a record for the House, the report was debated two working days after it was published.
My priorities for the committees themselves are as follows. We must ensure that we engage as effectively as possible beyond the confines of the committees: with the broader House; with stakeholders; with the media and the general public; and with the major EU institutions such as the Commission and the European Parliament. We must doggedly pursue the major policy issues, in particular by following up our key policy reports. European policies often develop slowly, and our subject-specialist committees give us a unique ability to engage with them consistently, over a period of years. We must continue to work hard on our external communications. In recent years, we have held seminars and stakeholder events. Only last week there was a well attended seminar on the new European External Action Service. I hope that we will continue this work in future sessions.
Over the years, the House has built a strong reputation in other parts of the Union for its EU scrutiny work. Shortly after my appointment, I visited Brussels for introductory meetings and was struck by the high level of awareness of what we do. When meeting Vice-President Sefcovic I even noticed a copy of the report we are debating now on his desk. I have also represented this committee at COSAC, the conference of EU committees of national Parliaments. Our reputation there is high and, because of this, I think that there is something of an open door to advancing our levels of engagement further.
I have said that the work of the committee is transparent. However, it is not easy for people with an interest in a particular European Union policy to find all the relevant documents: the proposal itself, the United Kingdom Government’s memorandum and any comments by the scrutiny committee. I hope that we can come together to find a technical solution to permit much easier and better searching of all the material relating to EU matters, which is currently spread widely across the web.
The Session on which we are reporting finished on 1 May. Our report was published at the start of June, but we are only now debating it. Although I am of course grateful for this slot in Grand Committee, it is not quite what one would call “prime time”, particularly when there are European Statements in the Chamber itself. Reports by Select Committees sometimes have to wait longer to be debated, and we need to do some hard thinking about how this can be better organised.
We also need to think how we can encourage as many non-committee members as possible to speak in debates. We want to make sure that our work engages the interest of all Members of the House and is intelligible to them. Equally, we must work the system to facilitate and encourage participation in debates.
In conclusion, I suggest that, at a time of uncertainty and change in Europe, it is more important than ever that this House retains its ability, assisted by the European Union Committee, which now reports, to understand, examine, challenge and influence the European policies of Her Majesty’s Government and the development of European Union policy and law across the whole Union. In that spirit, I beg to move.
Lord Foulkes of Cumnock
My Lords, it is a great pleasure to follow the noble Lord, Lord Boswell, and indeed to precede the noble Lord, Lord Roper, the present and past chairs of the committee. As a member of the committee, I have seen how much work it does. It is a Trojan amount of work. As noble Lords have heard from the noble Lord, Lord Boswell, it sees and sifts hundreds of documents before we see them on the sub-committees. I pay tribute to each of the members, because they have done—and are doing—a fantastic job. Well deserved praise should be showered on them.
I also agree with the noble Lord, Lord Boswell. I find it strange that on a subject that is so important and so central, particularly to politics in the United Kingdom at the moment, we are discussing this report in Grand Committee and not on the Floor of the House. It is even more ridiculous when we have a Statement on the European Council on the Floor of the House that no doubt all of us would like to be in on. It is really quite astonishing.
I am proud and pleased to serve on the committee. I find it fascinating to be a member of the European Union Committee of this House. I have been on committees elsewhere and I find this one of the most interesting jobs that I have undertaken—particularly Sub-Committee C, which the noble Lord, Lord Teverson, chairs with great skill. We are carrying out a huge volume of work.
The work of committees is central to this House and this part of the legislature, and sometimes it is undervalued. I was dismayed when the House agreed to cut the number of sub-committees and make the work of this committee and its sub-committees much more difficult. I am even more dismayed to have read in the Guardian on Saturday that we will have to put up with 80, or maybe 100, more Peers at a time when we are cash-limited. I do not know where the money is going to come from; we are going to be squeezed again, and no doubt the committees will be squeezed again. What committees will they serve on? It really is quite outrageous that this should be forced upon us. There seems to be an unlimited amount of money for ceremonial purposes or new security measures, but not for the central work of the legislature—the committee work that we are undertaking. Well, noble Lords did not expect me to be non-controversial!
I move on to the very valuable reports. As the noble Lord, Lord Boswell, said, they are very well thought of. I have heard some really great comments about them. However, there are two things to express some regret about, one being that they do not get enough coverage in the media, as the noble Lord said. We need the resources and skills to enable that to be done, and we need opportunities to get more coverage. Thankfully, the situation has improved in the past 12 months but more needs to be done. We also need to push the Commission to get more responses from it more quickly. The Commission says that it likes our reports, but it is not responding to them as quickly as I and the committee would like.
I shall mention some of the reports that are worth further publicity and further noting. One is the report on Operation Atalanta, which was fantastically interesting work. We went up to Northwood and heard some very valuable evidence about what is being done to combat piracy in the Indian Ocean. That is absolutely vital work and it is life-saving—it is a life or death operation that is being undertaken. Much more attention should have been paid to that. Then there was the very important report on the multiannual financial framework. What is central and what is happening in the Chamber is the Statement on the European Council. This is central to the discussions that the Prime Minister has in Brussels—and we have been working on that.
Two other reports have been particularly valuable. One is on the equivalence of medical professional qualifications, on which the former Sub-Committee G, under the excellent chairmanship of the noble Baroness, Lady Young, produced a report—and then they abolished her committee to save money, in the strange way that they have here. This was a vital report. We know that there was one example where someone purported to be a medical doctor and a death resulted because he was not qualified. In the report we suggested putting the safety of patients before the free movement of labour. The ability of people to move from one jurisdiction to the other with qualifications being automatically accepted is a vital matter.
The last of the reports that I want to mention—I am conscious that a lot of noble Lords want to speak—is the one on credit rating agencies. That was a prescient report. To be honest, it did not go as far as I would have liked because I see them as a problem as far as the economy of the world is concerned. Nevertheless, we were ahead of the game in relation to that.
As the noble Lord, Lord Boswell, said, there are two fascinating reports under way: one by the committee itself on enlargement—again, a central issue—and one by Sub-Committee C, on which I serve, on the External Action Service. We have already started work on that with a seminar that the noble Lord, Lord Boswell, mentioned and with the evidence that we have had. Each report will prove very useful.
Finally—I am watching my time—I come to a wider issue. It is really quite depressing that for short-term, party-political gain, some people, not just in the government parties but in my own party, are starting to think or even talk about a further referendum on being in or out of Europe. It is about time that those of us who believe in Europe stood up and said so, and said that we think Europe is important not just for trade in the United Kingdom and a free trade area but for the security and prosperity of the United Kingdom. Therefore, we want to make sure that that is spoken of loudly. Of course we can be sceptical about Europe. We can challenge it, rightly, but we should be right in the centre of Europe to do that challenging and questioning. I hope that Members of this Committee, who know the work of the European Union better than anyone, will join me during this debate in echoing the fact that our membership of the European Union is absolutely vital for the future prosperity of this United Kingdom.
Lord Roper
My Lords, I begin by thanking the noble Lords, Lord Boswell and Lord Foulkes, for their very kind remarks. I wish the noble Lord, Lord Boswell, well in his time as chairman. I also thank the members of the committee and its staff for having made my time as chairman so agreeable. It has been a very pleasant job. Listening to the eloquence of the noble Lord, Lord Foulkes, at the end of his remarks reminded me of the speeches that he made in 1975 during the last referendum. He has been campaigning on this issue for a year or two.
I have three brief points, which overlap to some extent with the remarks of the two previous noble Lords. I begin with the reference in paragraphs 8 and 9 of the report to a decision to reduce the number of our sub-committees from seven to six. This was the most disappointing thing that occurred during my chairmanship. Although I am sure that the six sub-committees do their best to cover the substantial flow of European Union legislation—the noble Lord, Lord Boswell, made clear just how much flows in and is sifted to the sub-committees—the loss of the sub-committee so ably chaired by the noble Baroness, Lady Young of Hornsey, inevitably means a reduction in the effectiveness of our scrutiny of European proposals and of the Government’s position on them. I very much hope that in due course consideration can be given to returning to seven sub-committees.
Secondly, during the discussion on the number of sub-committees at the beginning of this year, it became clear that the work of our committee is not as well understood within the House as it should be, not only among Members of the House as a whole but among members of the Liaison Committee, which made the recommendation to the House to reduce the number of committees. I am extremely glad that the present chairman of the Liaison Committee has had recent experience as chairman of one of our sub-committees and as an active member of the committee over a long period.
As has been suggested, the debate today is one way in which we try to make the work of this committee better known, but, alas, as has been said already, relatively few non-members of the committee are present. I wonder whether the committee can think of other ways of doing this, perhaps through a wider circulation of our monthly newsletter, certainly to people who have served on the committee or one of its sub-committees, whom I sometimes refer to as our alumni, or your alumni—I am sorry; I slip into “our” all too easily.
It is extremely sad that, as has been said, the committee’s work is very widely recognised in Brussels, in Whitehall, as one sees from the correspondence which we have with Ministers, who are very much aware of the questions that we ask, and, indeed, as the noble Lord, Lord Boswell, said, as we find when we go to the meetings of COSAC, where other European member states’ parliamentary European committees are represented, but it is not sufficiently noticed in Westminster. We need to think about that.
The third point concerns our relations with those in this country who are affected by the matters that we are considering. The report contains two examples of seminars that were held during the two-year period. One is referred to in paragraph 47 by the sub-committee on social affairs under the noble Baroness, Lady Young of Hornsey; the second is referred to in paragraph 76, and the sub-committee on agriculture, fisheries, environment and energy had a very interesting seminar following up one of its reports.
More recently—last week—the Sub-Committee on External Affairs held a most useful seminar on the European External Action Service. I believe that this form of outreach is mutually beneficial. It is beneficial to our sub-committees to learn from those affected by European legislation in the more informal setting of a seminar rather than in more formal meetings or, indeed, in written evidence. It also enables those affected by the legislation and activities of the European Union to discover the way in which this House addresses European issues. I realise the significant additional burden that organising such seminars places on the hard-working staff of the committee, but I hope that they can be continued because I believe that they are a very useful part of the committee’s work.
In conclusion, while I do from time to time get disheartened by the state of the European Union and the relations of this country with the Union, I am always heartened when I think of the effectiveness of your Lordships’ committee. I wish it well in its future work, which I shall certainly watch with interest.
Lord Hannay of Chiswick
My Lords, I believe that this may be the first occasion on which the House has debated the work of its EU Select Committee over the previous three years. Whether it is or not, it is surely a debate worth having. I welcome the participation in it of our two distinguished and effective chairs during the period in question—the noble Lords, Lord Boswell and Lord Roper, who have both preceded me.
It is a debate worth having because it has been alleged frequently in the House by at least one of its Members that the work of the committee is worthless and because it is also suggested that the resources devoted to the work of the committee are excessive. I believe that neither of these criticisms is well founded, but it is right that a member of the committee, such as me, should be ready to defend that view in debate and not simply to assert it. I was a little disappointed to see that the noble Lord, Lord Pearson of Rannoch, made only a cameo appearance some moments ago— 10 seconds, I think. He may have gone off to get a string of garlic to hang round his neck before facing such dangerous people around the Table. If he has not, I wish that he would come and substantiate some of his claims in the sort of debate that we are having.
I will focus first on the work of the Sub-Committee on Home Affairs, Health and Education, which I have the honour to chair, and to whose members both past and present—I note that at least two of them are here—I pay tribute for their hard work and effective contributions. During the period in question, the sub-committee produced two major, thematic reports: on the European Union’s internal security strategy and on the European Union’s drug strategy. A third on the general approach to mobility and migration will be published within the next month. Since it has not yet been adopted, I will make no further reference to it in this debate.
In each of those thematic reports we have addressed European Union policies that are still being formulated and shaped, and we have thus aimed to contribute to that process, not merely to commenting after the event. I believe that we have had some success. In our work on the internal security strategy, we focused mainly on counterterrorism, civil protection and cybersecurity. Our overall conclusion can be summed up in a single, very brief phrase: Britain’s internal security neither begins nor ends at the water’s edge. We strongly recommended that a cybercrime centre be established within the existing Europol agency and not as a separate free-standing agency, and it seems likely that the Commission will accept that advice when it brings forward proposals for the development of Europol early next year. During this and other work we have done, we have formed a high opinion of the work of Europol and of its use and value to this country. That view will certainly be relevant when we take up the Protocol 36 opt-out decision in the next few weeks.
On the drugs strategy, as in so many areas with which our sub-committee deals—internal security and migration are others—we found ourselves in a policy area where there are mixed competences and where the principle of subsidiarity is alive and well and is actually being applied. We did not think in any of those cases that the boundary between the European Union as such and national competences should be shifted; rather, we thought that the European Union’s input should be better focused and less broad-brush. We called for a wide and inclusive public debate on drugs. I wish I could say that that call has been heeded, but it has not. The paucity and poverty of public debate on drugs is truly shameful.
In addition to those thematic reports, the Lisbon treaty has heaped on to our plate a whole range of new responsibilities reflecting the fact that now, for the first time in the EU’s history, national Parliaments have been given a clear role in the EU’s legislative processes. Thus, we not only intervened in a yellow card subsidiarity procedure in respect of the draft seasonal workers directive but we produced opt-in reports on the passenger name recognition directive and on the proceeds of crime directive. On the first of those, our recommendation to opt in was accepted by the Government; the second has not yet been so, but I very much hope that it will be at the adoption stage. In one area—the data protection directive—I fear that the Government failed to implement their commitment under the Ashton-Lidington undertakings to provide time for a debate before the opt-in period expired. That was lamentable. The noble Lord, Lord McNally, accepted that that had been an error and the Government’s decision to opt in was in any case what the committee had recommended. Least said, soonest mended.
In conclusion, I shall turn to two matters that fall outside the purview of my sub-committee. First, there is the EU’s multiannual financial framework, which has been referred to by other speakers, on which the main committee has spent much time and effort. The European Council’s failure at the end of last week to reach agreement was regrettable but not surprising—nor was it unprecedented. The gaps between the different groups in the Council were too wide to bridge at one attempt. That was exactly what happened, too, in December 1987, but it did not prevent a satisfactory agreement being reached in February 1988. The problem is that these budgetary negotiations really are zero-sum games: one country’s gain is another’s loss and the overall common interest tends to get overlooked as the competition for resources becomes more acute.
Our committee supported the Government’s aims to achieve a real-terms freeze over the next seven years. We did not consider that a cut was either desirable or achievable. The fact that the Prime Minister was able to work together with a group of like-minded member states was admirable and greatly increases the chances of an ultimate outcome with which the UK can live, even if it may contain some difficult compromises. Failure to reach agreement in the new year, particularly if the UK were alone to be responsible for that, would not, I believe, be in this country’s interests given that in the absence of an agreed MFF the European Union would have to fall back on an annual budgetary system that could well produce higher figures and an even less desirable distribution between policies.
The second matter, to which several other noble Lords have referred, is the decision that the House took earlier this year to cut the resources allocated to EU scrutiny and to abolish one of the Select Committee’s sub-committees. To have taken that decision shortly after the Lisbon treaty had considerably increased the overall work of European scrutiny and just when national Parliaments had gained a foothold in the EU’s legislative process was, I would say if I was being polite, counterintuitive. I would call it aberrant. I trust that when these matters next come up for review—for example, at the beginning of the next Session—that lamentable decision will be reversed. Unless the Minister, in replying to the debate, is tempted to retreat into procedural obfuscation and to argue that this is a matter for the House and not for the Government, I urge him at least to make it clear that the Government want to see the work of the EU Select Committee properly resourced and up to the challenges that it faces in the years ahead.
Baroness O'Cathain
My Lords, as the chairman of EU Sub-Committee B, which scrutinises proposals from the Commission in the fields of the internal market, infrastructure and employment, I am delighted to have the unusual opportunity of sharing with the Grand Committee the highlights of our work within the 2010-12 Session. Before doing so, I thank the current and past members of the committee and the clerks, policy analysts and our committee assistant, who is about to retire. Everyone has contributed unstintingly to our work in the 2010-12 Session. Of course, we are all very grateful that we operate under the guidance of the Select Committee itself. We say a big thank you to the noble Lord, Lord Boswell, who took over from the very effective noble Lord, Lord Roper. It seemed to be seamless but I am sure that it was not. At the risk of repetition, I also thank the noble Lord, Lord Roper.
During the 2010-12 Session, Sub-Committee B produced two reports and undertook enhanced scrutiny on other issues of interest. The two reports were on the single market and on the Channel Tunnel. The single market report was particularly significant because it dealt with the Single Market Act I in the light of the Commission’s recent proposal for the Single Market Act II. It is gratifying to realise that our recommendation that e-procurement be introduced at EU level will be included in the Single Market Act II. We also realise that the tax harmonisation that we suggested is likely to be included likewise.
The committee’s second report was about the Channel Tunnel, and scrutinising proposed legislation and reporting on issues of significance within the EU is what we are about. However, we have also adopted in our sub-committee a consumer focus—not consumer issues per se but saying whether the consumer will either benefit or not benefit from the results in our recommendations. The second report was completed in conjunction with consideration of the interoperability of the rail network throughout Europe. Closer to home, we looked at the Channel Tunnel and found to our amazement that it is operating at about 50% of its capacity for passenger traffic and at only 10% of its capacity for freight traffic. Frankly, the idea that we as a nation cannot benefit from the huge rail markets in the rest of the single market of which we are part because of the limitations placed by the Channel Tunnel is inexcusable when you consider the huge amount of investment and all the financial problems that have been sorted out—we hope.
We took an amazing amount of evidence from a wide range of sources, including representatives from Eurostar and Eurotunnel, from government officials, as well as, of course, from Deutsche Bahn, which has been trying—without success so far, but it is almost there—to use the Channel Tunnel. As I said, the report concluded that the total potential of the tunnel is a long way off being realised.
We recommended that the Government and the Commission work harder to deliver this interoperable, effective European rail network within reasonable timescales. We were not happy with the response that we got from the Government to our report and when we had a debate on the Floor of the House, so we decided to follow up with an evidence session with the newly appointed Minister for Transport, Simon Burns MP, in which we made no secret of the lack of government engagement. This was addressed. The session revealed that some headway had been made in the direction of the committee’s conclusions. The talks with Deutsche Bahn, the potential passenger carrier, for example, have progressed greatly. This means that there is only one more safety-related issue to be agreed. It is clear, however, that much work is still to be done and the pressure still has to be kept on the Government, Eurostar and the other operators. However, I can assure noble Lords that, as we warned during the evidence session, we are keeping a close watch on progress, or the lack of it.
We also covered several items of enhanced security. It was a very interesting part of our work; indeed, all of our work has been interesting. We looked at enhanced security on matters directly relating to consumers because, as I have said, we had a focus on consumers. We undertook an in-depth look at enhanced security on roaming charges for data—not the roaming charges for mobile phones. In May this year, the European Parliament voted for further cuts to roaming charges for data. We were quite pleased about that.
We were also instrumental in holding the Government to account during the volcanic ash crisis caused by the eruption of Eyjafjallajökull—we call it “E15”, because there are 16 letters and it begins with “E”—the Icelandic volcano that caused such disruption to air travel; I apologise for my non-Icelandic pronunciation. We took evidence from Jonathan Moor, the then director of aviation at the Department for Transport, and senior government officials, clarifying, among other issues, whether there was scope for the European Aviation Safety Agency to play a role in regulating flights within such levels of ash concentration and whether the six-day ban on air travel in Europe had been excessive.
This is very much a snapshot of the diligent, concentrated work by Sub-Committee B by an enthusiastic membership. On the rare occasions when we cancelled a meeting because the scrutiny work was not urgent, and it was thought better to have a full and interesting meeting in a fortnight’s time, I have been upbraided by some members for denying them the opportunity of their Monday afternoon fix of fascinating topics.
Since it has already been mentioned, I ought to mention the report that we did on women on boards. It has been mentioned by the noble Lord, Lord Boswell. Of course, we made history about “within two working days”. We had a debate, and were there one day before the decision came out of the Commission. One of the points that I want to make, and at this stage this is the only opportunity that I am likely to have, is that we had a time-limited debate on the Floor of the House and there were 15 speakers—in fact, there were more men than women. Other than me and the winders-up, the speakers were limited to two minutes. It was a remarkable debate because each of the Members who was limited to two minutes made a specific relevant point, not repeated by any of the others, and the whole debate was actually fizzing. We ought to think about that when it comes to the long, exhausting debates that we have on the Floor of the House and try to get our act together. That way we might engender more respect for European issues in the House as a whole.
Baroness Crawley
My Lords, it is a pleasure to follow the noble Baroness, Lady O’Cathain. I congratulate her on her work on women on boards and on her consumer focus in her committee. As a non-committee member, it is a pleasure for me to take part in this debate where we look back at the extensive and thorough scrutiny of EU legislation undertaken by the European Union Committee and its sub-committees. We thank the noble Lord, Lord Boswell of Aynho, and the former chairman, the noble Lord, Lord Roper, and indeed all the former committee members, including my non-controversial noble friend Lord Foulkes of Cumnock, for their detailed and influential work at a time of great flux for the EU.
As president of the Trading Standards Institute, I was particularly interested in the work of the sub-committee on consumer protection. Part of reinvigorating confidence among British consumers and getting us out of this recession is improving, protecting and increasing their buying activity within the EU. The committee’s report on the EU financial framework for 2014 heralded the difficult discussions in Brussels over the past few days on the future of the EU’s budget. The Prime Minister has the unenviable task of negotiating not only with the EU Commission and each of the member states but also with his out-and-proud Back Benches, whose idea of a successful relationship with Europe is spelt “D-I-V-O-R-C-E”.
In his speech to business leaders in London this week, Tony Blair will make the essential case for the EU to become more relevant, not less, as a trading bloc in an increasingly competitive world. In the UK, we should be standing up to the BRIC countries in trading terms through our membership of the EU, not throwing verbal bricks through the Commission’s windows from a position of pedantic insularity. The CBI and others in the UK’s business community do not want us to have second-class membership of the EU; they want us to travel into the next decade in business class only.
The committee’s work on the scrutiny of subsidiarity and proportionality, which was raised by the noble Lord, Lord Boswell, is all the more important at a time when the public’s view of the EU is so often of resentment towards perceived high-handedness from Brussels. As my taxi driver told me today, “I hate that Europe. Why should some Danish geezer sitting in Brussels tell us what a Cornish pasty should look like—or was it some Cornish geezer sitting in Brussels telling us what a Danish pastry should look like?” He has a point. There is often a case for less Europe, just as there is sometimes a case for more. That is all part of the reform agenda, which this EU Committee takes an energetic role in.
Ed Miliband spoke last week to the CBI on that very subject. Being pro-European does not mean being complacent in our European policy. As Ed Miliband said,
“there is an urgent imperative for us to reform the European Union so that it can help us compete and pay our way in the world”.
In that process of reform, we need to seek to build and rebuild alliances for a different approach. From our point of view in the Opposition, that means a more pro-growth, pro-jobs approach for all parts of Europe, including the UK.
Does anyone really think that a weaker and de-integrating Europe would bring us improved living standards in the UK in the future or that it would be anything other than a wondrous windfall for all those Asian and South American businesses that are busy plotting, as we speak, to dominate global consumer markets tomorrow, never mind the next decade? Does anyone really think that, if our Eurosceptic friends—all those people who still have trouble dealing with the tragic events of 1066—have their way, we would have anything other than a Europe that simply could not protect our future prosperity, in Birmingham as much as in Barcelona and in Manchester as much as in Milan? Do we really want Britain to be decoupled and to cast itself adrift from Europe, and to set itself up as some kind of bargain basement Atlantis, with all the economic strength of the Faroe Islands and all the political influence of Rockall?
Some may want to take risks with Britain’s prosperity, but the Opposition most emphatically do not. This EU Committee will continue to be an example to us all.
Lord Maclennan of Rogart
My Lords, it is a privilege to follow the noble Baroness, who is the first non-member of the committee to speak in this debate, particularly to hear the robust statement of her view about the future of Britain without membership of the European Union.
I begin by thanking the two chairmen of the committee under whom I have served for many years. The noble Lord, Lord Boswell, has taken over from the noble Lord, Lord Roper, in a very strong manner. I am delighted that both of them are here today and have contributed so notably to the debate. The remarks that the noble Lord, Lord Boswell, made about this being a time of uncertainty and change are, if anything, underestimating the crisis that we face. However, he is a man of moderation, and I would not expect him to exaggerate.
The work that the committee has performed under the two chairmen seems to demonstrate that this Parliament in which we serve has the capability to open up what is actually happening in the European Union and, by the care that is taken and evidence that is submitted, adjust policy, influence government and influence the European Union itself. In all my contacts with the European Union over the past 10 years since I served on the Convention on the Future of Europe, I have been conscious that this committee is very highly respected throughout the institutions. There is one institutional question that we might consider addressing to enhance our effectiveness, which is by having a closer link with the Members of the European Parliament who are elected from this country. It would serve them well, as well as us, to have a dialogue on a more frequent basis about particular issues. We have bilateral meetings, but they are infrequent and they tend to be rather general in their thinking.
I also believe that the work that this committee does is notable for its transparency, its openness to influence from all those stakeholders who are effective and to real dialogue with Ministers. That makes the work of this committee worthy of greater notice than we are actually attracting. I think we have to put our heads together to work out how to draw the attention of the public to what we are doing and saying because the European Union has for some years been a whipping boy. Politicians have taken whatever opportunity they could to suggest that our difficulties are in some way a consequence of the European Union, and that is so far from the truth. I am a child of my generation; the Second World War is closely knitted into my very being. Those who are saying the European Union is not about the prevention of war in Europe are showing a remarkable lack of understanding of history. It is vital, in my opinion, that we reflect on the centuries of tension and military confrontations which have caused tragedy beyond measure, particularly in the 20th century.
In this debate, we are considering 34 reports which are summarised in their conclusions. I do not intend to speak about them in detail because that is not the role of this debate. It is about the nature and direction of our work, but I will mention three in particular. The justice and institutions report on the overload of the European Court of Justice was a very brave report, indicating that more money needed to be spent, even at this time of recession and tight budgets. Strong concern was expressed by the members of that committee because there was fear that the European Court of Justice, if not sustained by our membership, could go the way of the European Court of Human Rights, with great delay frustrating the delivery of justice through inadequate support and inadequate judges. The government response to our report was not as straightforward or as strong as it should have been. Subsequently, we heard from the Commission that it shared the committee’s concern and expressed support for the court’s own proposal to increase the number of judges in the General Court. That is an issue that is still alive and we will need, in my view, to return to it.
I listened with interest to the remarks of the noble Lord, Lord Hannay, about drugs. It is a very good point of view. This is not a matter that should be considered wholly within the ambit of the European Union’s responsibility. However, it is currently reconsidering its drugs policy. We ought to bring out the fact that there are differences of experience within the European Union in the treatment of the drugs problem, which has a massive impact on levels of crime in this country and in other European countries, and which has cross-border aspects as well. I agree with the thrust of the noble Lord’s report, which was that we must have better communication on these issues. That is very true.
One major point that the noble Lord’s report brought out that we should all study with care is the experience of the Portuguese Government, and how in the past decade they took a more advanced and radical view on the criminality of drugs and on the legalisation of drug taking. The evidence that was produced following a visit to Lisbon indicated that progress was being made. That seems to be an example that we in this country might want to follow. I hope that it will be considered.
The final report I will refer to is that on defence capability. Basically it indicated that the German nation was not paying enough attention to, and not participating significantly in, this sphere. That was a reasonable view. We and the Government have tended to emphasise Anglo-French co-operation in defence matters, but the German nation has the resources to make a significant contribution—not necessarily in imposing the will of the European Union on third countries outside, but in participating in what the European Union regards as in its interests.
I conclude by expressing the view that the noble Lord, Lord Boswell, was right to talk about the slow development of policy in the European Union. However, that might change if the public were more aware of how policy is being developed, if Members of Parliament and members of the Government were more open in discussing these matters, and if the media covered these things with greater attention than they do. I say this particularly in the light of the fact that we have a new director-general of the BBC, who I hope will give some consideration to this and who is also a Member of our House. These are issues of much greater importance than the daily reports of local crime that take up at least one-third of news bulletins. I am tremendously eager for what this Committee is debating to be understood, and for the Government to stop talking in general terms about the European Union and to focus more on the particularities with which this committee gets to grips.
Lord Jay of Ewelme
My Lords, I, too, greatly welcome the report and the debate. I have greatly valued my participation over the past five years. Half of it was on Sub-Committee E and half on Sub-Committee C. The report shows the importance and relevance of EU committees and sub-committees and of the work that they do: the scrutiny, the reports they produce and the occasional visits abroad. In my case this involved a trip to Brussels and 24 hours with the noble Lord, Lord Teverson, in an underground conference centre in Paphos, where speeches were limited to one minute each or—the Minister may note—30 seconds for members of coalitions. The committees’ reports are, rightly, highly regarded here and in Brussels. I stress that they are widely, if not universally, respected. I, like the noble Lord, Lord Hannay, rather regret that some of those who are rather more critical of our reports are not present to take part in this debate. With some trepidation, I noticed that the noble Lord, Lord Gilbert, had slipped in for a moment or two just now, but he has since slipped out.
Since the period of this report, the number of sub-committees has been reduced from seven to six, as several noble Lords have mentioned. I understand the reasons for that; I also understand why some members of the committees regret it. Although I ought perhaps to duck at this point, I do not think that the reduction necessarily weakens the importance or visibility of the EU Committee or its sub-committees. Speaking as a member of Sub-Committee C on external affairs, I am secretly pleased that the oyster of foreign policy has been infiltrated by the grit of international trade.
However, I want to make one more general point. For those of us who have been involved in difficult EU negotiations over the years—in my case, under successive Prime Ministers and Governments, they included the negotiations over the single market, the Single European Act of 1986, the Maastricht treaty involving enlargement from 12 to 27, and the introduction and birth pangs of the euro—even against that background, we are in the middle of an extraordinarily difficult time, both for the EU, as the eurozone struggles to find some sort of equilibrium, and for Britain’s participation in and possibly departure from the EU.
To some extent I echo the noble Lord, Lord Maclennan, in saying that the EU clearly has two huge achievements to its credit: first, the knitting together of western Europe after two world wars and, secondly, its provision of an economically liberal, democratic home for the countries of eastern Europe after the break-up of the Soviet Union and Yugoslavia. I, for one, do not see the award of the Nobel Peace Prize as being over the top for that. Perhaps I could ask the Minister to tell us who will be representing the United Kingdom at the awards ceremony for that prize next month.
However, given that there is no political goal similar to those of the past 30 years, and with the euro in trouble and opinion here increasingly sceptical there is—to put it at its mildest—a real question about the future of the European Union. There is a real need in this country for a proper, informed and dispassionate debate about the options before us. What are the implications for Britain of a semi-detached or completely detached status from the European Union? What are the implications for British industry, agriculture, the environment, social policy, aid policy or our foreign and defence policy? What are the potential implications for Britain’s role in the world and its relation with, say, future United States Administrations?
I believe that Britain’s interests and our hard-headed national interests lie in continuing to remain in, and influence, the EU’s institutions and policies to contribute to a stable relationship between those in and those outside the euro, so that we can benefit from the single market. To avoid any misunderstanding, I see absolutely no contradiction whatever between full participation in the single market and strengthening our commercial, economic and trading relations with China, India, Brazil, Indonesia and South Africa. We really need to do both. One has only to look at the contrast between Britain’s commercial and economic relations with China and those of Germany to realise how much needs to be done. As I say, we need an informed debate about those issues.
No one has yet mentioned this today, but the Government’s work on EU competences will no doubt help in that. I hope that the EU committees can be involved in that work, but that will go only so far and will take time. Meanwhile, politics advances. An increasingly isolationist tendency here and an increasingly self-absorbed eurozone, with the non-eurozone countries deeply reluctant to follow the UK towards a semi or complete detachment, is not a happy prospect for this country. This House should be well placed to play a part in that debate, which we really need. We have the expertise from different standpoints. Both in our committee work and on the Floor of the House, there is a real need for us to try to ensure that there is a properly informed, dispassionate debate about the hugely important issues before us.
As others have said, this House will be listened to if it engages in such debates. This is perhaps a question for the noble Lord, Lord Boswell, when he ends the debate. Could the EU Committee contribute ideas for ways in which the House can play a full part in that debate? Does the Minister have thoughts about how this House can play a more effective role in such a debate? That is hugely important for us; this House has a huge role to play in that.
Lord Marlesford
My Lords, I start by briefly and as simply as possible setting out my position on Europe. I am neither a Euro-enthusiast nor a Eurosceptic. I am a Euro-challenger. In fact, I believe that that should be the role of the EU Select Committee and its six sub-committees. There is much to challenge in what comes out of Brussels. In our work, it is not our function, to appear, as was the fashion in earlier years, communautaire—that is, to support the Commission in its endeavours to create an ever closer union. The path to that objective diverged long ago, first with the formal introduction of the concept of subsidiarity in the Maastricht treaty in February 1992 and, subsequently, with the introduction of a single currency for some EU members. Our task is to establish whether what the Commission proposes is sensible, practical, necessary and, I would say, above all, in the interests of the UK.
I am currently a member of both the Select Committee and EU Sub-Committee A, the economic and financial affairs sub-committee. Sub-Committee A is chaired by the noble Lord, Lord Harrison, who regrets that he is unable to be here today because he is at a conference of EU finance committee chairs. I regard it as a particular privilege to be on the Select Committee. It is my second time on it, so I have been lucky enough to serve under two remarkable previous chairmen: first, the noble Lord, Lord Grenfell, who has done so much for the reputation of the House of Lords in Europe; and, secondly, the noble Lord, Lord Roper, who is one of the most fair-minded people I have ever been lucky enough to serve under. Now, I am under my old friend and colleague from more than 40 years ago, when we were both children in the Conservative Research Department, my noble friend Lord Boswell.
A central element of Sub-Committee A’s work has been its analysis of the ongoing euro crisis. The committee’s first report on the crisis, entitled, The Future of Economic Governance in the EU, was published in March 2011. We concluded that the interconnection of sovereign debt and banking sectors was one of the principal causes of the euro area crisis. We pointed to the weakening effect on public finances of transferring private debt to the public sector and argued that effective mechanisms needed to be put in place to ensure that the public sector did not carry the cost of failing banks. We highlighted the risk of a vicious circle between sovereign debt and a weakened banking sector.
However, it took a long time for this particular penny to drop in Brussels. It was the Commission, in cahoots with the ECB, which persuaded the Irish and Spanish Governments to take on to their books the debts of their banks. Their Eureka moment appears to have come only last month, when the Council conclusions announced that,
“it is imperative to break the vicious circle between banks and sovereigns”—
a bit late, my Lords. We also drew attention to the flaws in the concept and design of EMU, revealed in:
“An asymmetry between a centralised monetary policy and decentralised fiscal and supply-side policies … with a build-up of competitiveness imbalances between Member States”.
We published a follow-up report in February 2012, written in conjunction with the EU Select Committee, which noted how,
“National governments and EU institutions have … struggled to keep up with the pace of events”,
and stressed the need for “effective and proactive leadership” in meeting the massive challenges faced by the EU and the euro area in particular. Since that report was published, we have continued our analysis, most recently in the form of three follow-up evidence sessions with appropriate experts in July. We wrote to the Minister at the end of July setting out our views on such issues as the future of the euro area, the implications of fiscal and banking union for the UK, the role of the ECB and banking supervision, and the direct recapitalisation of banks. We also covered euro bonds and the compact for growth and jobs. We will continue our examination of the crisis in the new year.
EU Sub-Committee A has also reported on other highly significant legislative proposals, notably the European Commission’s proposals for a financial transaction tax. Our report, Towards a Financial Transaction Tax?, was published in March 2012. We were highly critical of the Commission’s proposals, described the proposed residence principle as “impractical and unworkable”, and concluded that there was significant risk of the relocation of financial activity outside the EU if an FTT was introduced. We also stressed that the implications for the UK of an FTT could be considerable, even if it chose to stand apart.
In October this year, 11 member states announced their intention to proceed with an FTT under the enhanced co-operation procedure. It is clear to me that the introduction of an FTT limited to some euro area countries could not only damage financial businesses in Frankfurt and Paris but have an adverse effect on banks based inside the euro area. Its effects on London remain uncertain. At present, London leads New York in being one of the three major financial centres of the world; the third is Hong Kong. I am sure that the American and Hong Kong-based banks will benefit, which must have implications, for example, for the future organisation of HSBC.
EU Sub-Committee A has scrutinised a number of other important legislative proposals, including those for deposit guarantee and investor compensation schemes, EU prudential capital requirements and on various other technical issues—I do not have time to go into them all now. The sub-committee has also assessed various bodies and organisations whose roles have become more prominent since the financial crisis erupted. Its July 2011 report, Sovereign Credit Ratings: Shooting the Messenger?, analysed the role and behaviour of these important institutions. We found that the valid charge against the rating agencies was not so much that they precipitated or exacerbated the euro area crisis but rather that, in the years leading up to it, they conspicuously failed to challenge the assumptions on which their assessments of the sustainability of sovereign debt were based. They just got it wrong. We stressed that investors should see sovereign ratings ultimately for what they are: subjective and sometimes remarkably amateur predictions that rely heavily on personal judgments made by rating agency staff who are not that wonderful. Investors should not follow those ratings blindly, but view them as options to be balanced and confirmed by other market indicators. The role of the credit rating agencies remains contentious, but they now seem to recognise the reality, as seen most recently in the decision reached by Moody’s last week to downgrade France’s credit rating.
In July 2011 we also published a report on the new European supervisory authorities: the European Banking Authority, the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Systemic Risk Board. These bodies have responsibility for macroprudential oversight of the EU financial system. We considered their powers and their contribution to macroprudential stability, and the influence of the UK on these bodies. We continue to analyse their roles, not least in the case of the European Banking Authority in relation to the sub-committee’s current inquiry into proposals for a banking union. We shall keep a close eye on the Commission’s review of the European system of financial supervisors, which is meant to take place next year. Further, as I have mentioned, we are shortly going to produce a report on the European banking union.
When I visited Brussels recently with the sub-committee, I was struck by the confusion of thought that exists inside the Commission about the implications of a banking union. Not only had it set out a wholly unrealistic timetable, under which the union was to be set up and running by January 2013, but had failed to understand the crucial difference between setting the rulebook for banks and the invigilation or supervision of their behaviour and compliance with those rules. The lesson I draw from that is not that the European Commission should be expanded so that it can perform better, but that it should be less ambitious in what it seeks to do. Her Majesty’s Government have decided that we should not be part of a banking union, but that does not mean that there should not be an overall rulebook for banks throughout the EU. It should mean that the European Banking Authority, which is very properly based in London, should draw up the rules. In 2013 we also expect to receive legislative proposals arising from the Liikanen report on reforming the structure of the EU banking sector.
I have a final comment to make. We all started off by celebrating the single market when it was set up under the 1985 Luxembourg treaty and enacted in 1987. It appeared to be a logical step on the road from a free trade association to a customs union with, eventually, completely free movement of capital, people, goods and services. Necessary harmonisation for that purpose was to be supported, but now the single market is being revealed as a Trojan horse. Harmonisation is being promoted as a stepping stone to deepening, which is the prerequisite for ever closer union. Facing the tough realities of globalisation, it is being argued that there are no limits to the harmonisation that is needed in the EU.
A key area is taxation. Several years ago a senior énarque from the French Ministry of Finance complained to me that there were 30,000 French working in England because of our tax structure. “We must”, he declared, “have a level playing field”. “But at whose level?”, I asked. My clever friend merely smiled. The soldiers inside that horse are not Greeks or Germans. They are mainly French, accompanied, I suspect, by a cadre of hardened Brussels federalists. Today, French refugees are again flooding into London. I am not surprised. President Hollande is leading his countrymen towards the cliff of economic suicide. He would like to take us with him. We must not follow.
As you have heard, the Select Committee is now looking at enlargement. Widening the EU can be either an alternative to further deepening or it can attempt to build upon it. I believe that the cost of deepening, both in terms of the EU budget and the erosion of treasured cultural differences between member nations, may make further deepening politically unacceptable. I hope that our inquiry may be able to identify a looser structure as an alternative to ever closer union. It may be that the so-called variable geometry EU is a way to relieve the stresses which could fracture the whole enterprise. I, for one, would be greatly disappointed if fracture were the outcome. In one sense, the EU is like a political party—it has to agree on more than it disagrees on if it is to survive. If that means an EU of variable geometry, that may be no worse than coalition government in the UK. The cross-party approach of the Select Committee and its sub-committees can be both a guardian of half a century of achievement and a guide to the hazards ahead.
I remain astonished at the insensitivity—some would say arrogance—of the Brussels Commission in making a bid for a 6% increase in the EU budget. One consequence has already been an erosion of public support for the EU. Whether or not we like it, we must face the fact that Britain’s continued membership of the EU as at present constituted is now in doubt. The EU Select Committees have a responsibility to guide Europe’s leaders away from inappropriate and unsustainable EU Commission proposals which could undermine Britain’s role at the heart of Europe, which is where I still wish us to be.
Lord Giddens
My Lords, having heard the excellent speeches of other noble Lords, I have had to scrub out parts of my speech and modify others. As you can see from this document, I will be lucky to make any sense of it at all.
I applaud the decision to hold this debate on the report of the European Union Committee. As other noble Lords have said, it demonstrates the extraordinary range of work carried out by the committee and its sub-committees. It is a fundamental part of the contribution that the House of Lords makes to our wider political life.
If the Committee will forgive me for being slightly didactic, I have points of reflection and the Minister might want to comment on one or two of them. The first one is to underline that the environment that we have to respond to in Europe in the future will be very different from that of the past.
Lord Giddens
My Lords, I am not a member of the European Union Committee but a happy little member of Sub-Committee D. Essentially, these comments occurred to me on reading through the report. As I have mentioned, there are five of them but they are fairly short. The first is very important to me; namely, that the environment to which we have to respond in Europe in the future will be very different from that of the past.
Most reports of the EU committees have been oriented towards the European Commission but the Commission is no longer where the power is, if it ever was. For the moment, for better or for worse, power lies in the hands of three or four EU national leaders and Mr Draghi. They are pushing through very rapid changes. Even though everyone says that the European Union is moving slowly, the changes that have been introduced are very rapid in historical terms. We all know that the EU has to move fast: it is a case of either much more integration or bust. The eurozone has to become far more integrated, opening up a distance from other EU members. A tangle of complex problems and opportunities will result.
Secondly, this suggests to me that the EU Committee will have to be more proactive than in the past and less Commission driven. It should anticipate likely events in the eurozone and consider implications for a range of possible futures. One could offer many examples; for instance, it is likely that the eurozone might have its own budget. What will the implications of that be for the eurozone and for the rest of Europe? There are a whole range of other issues, such as that which Joschka Fischer famously called “finality” in a very well known speech about 15 years ago; that is, what should the outer boundaries of the EU be? It is hard for me to see that you can have a federal system, which is what is being proposed for the future of the EU, without clearer boundaries than the EU has at the moment. At least the boundaries issue will be raised again forcefully.
Thirdly, there is no mention of media strategy, although some noble Lords have commented on aspects of this. It is clear that some reports deserve wider attention in the media—by which I mean in the European media and not just the UK media—than they get. I know that individual noble Lords go out proactively and give speeches about the reports. However, it is not clear to me that there is an overall strategy. If there is such a strategy, perhaps the noble Lord, Lord Boswell, or the Minister would say what it is.
Fourthly, partly in regard to what the noble Lord, Lord Maclennan, said, some thought might be given to preparing a more accessible document for a wider public. The public’s perception is that the EU is an arcane bureaucracy. If one looks at this document, certainly it would tend to confirm that to the legendary taxi driver who was just mentioned. To any pro-European, it is clear that the EU provides a whole range of opportunities for British citizens, which could be brought much more clearly into the open. Why not think of having a shorter, more accessible document for public consumption?
Fifthly, I do not know whether it is legitimate for me to raise this—I will be prepared for the Minister to humiliate me—but I am not clear how noble Lords get on these committees. By that, I mean in the context of the European Union and the other sub-committees. I am not referring to the rules but to the practices. Is there a systematic and public procedure?
I have been on two EU sub-committees and I do not know how I got on them. It just seemed to eventuate. Are there more people than needed—or perhaps there are not enough—to go on these committees? It is a mystery to me how I managed to get on them, although I am very happy to be on them. Is there a place for more transparency in the ways in which noble Lords come to be members perhaps not just of the EU committees but also the other committees of the House?
Baroness Parminter
My Lords, I speak today on behalf of the noble Lord, Lord Carter of Coles, who is unable to be here. Sub-Committee D, which he so ably chairs and of which I am a very happy member, was responsible for agriculture, fisheries and environment during the 2010-12 Session; since then, energy policy has been added to our portfolio of competences. In terms of our scrutiny load, it was a Session that saw two major packages of legislative proposals; the first of those was the common fisheries policy. Back in 2008, when things were in an initial phase, the sub-committee published a report on the progress of the reform and looking forward to new proposals. Many of the core messages in that report appeared in the Commission legal proposals in July 2011. Upon publication of those proposals, we reasserted our messages to the Government, the Commission and the European Parliament. After the Minister, Richard Benyon MP, managed to secure an interim deal in June 2012, we held an evidence session with him. Regrettably, we also had to haul him over the coals for over-riding parliamentary scrutiny. Otherwise, the scrutiny performance of Defra has been of a high quality in recent times, and I was pleased to be able to reinforce that message and explain a scrutiny committee’s needs to Defra staff at an internal staff training event this June.
The second major package of documents is related to reform of the common agricultural policy. In preparing for the work on the CAP reform, the committee identified an aspect that did not receive significant public policy debate but merited closer examination. This issue was innovation in EU agriculture and an inquiry was duly launched in July 2010, reporting 12 months later. It was encouraging that a number of our recommendations were reflected in the CAP legislative proposals, published in 2011, and the proposals for a new research funding instrument, known as Horizon 2020. In the UK specifically, we were pleased to note progress on farm advice, with the creation of a new Farming Advice Service, providing advice on competitiveness, nutrient management, climate change adaptation and mitigation as well as cost compliance.
The noble Lord, Lord Boswell, referred to the seminars and stakeholder events held by some of the sub-committees. On publication of the CAP and Horizon 2020 proposals, we convened an informal seminar with ministerial and senior Commission officials as well as key stakeholders. The thrust of our report was welcomed, particularly in its recognition of the need to promote the concept of innovation networks, bringing together industry researchers, administrators and the food sector.
On the broader CAP reform package, we continue to scrutinise the Government closely. As your Lordships may be aware, the Cypriot presidency hoped to achieve a partial deal later this week, although how that will work after this weekend’s failed budget negotiations is far from clear. Before the summer, we held a mini-inquiry into the sugar regime aspects of the reform, and took evidence from the then Agriculture Minister, Jim Paice. The new Defra Secretary of State has agreed to meet us soon, and we have engaged with other national Parliaments, most recently at a conference in Cyprus.
Our second major inquiry of the last Session was into the EU freshwater policy. We were aiming to make a contribution to the European Commission’s preparation of its publication 10 days ago of a blueprint for the future EU water policy. Some of our recommendations were reflected in a text, notably on an integrated local approach to water management, and on the use of European Investment Bank loans to support investment. I am delighted that we have secured a slot in the Chamber next Wednesday evening to debate our report so soon after the publication of the blueprint.
We were also pleased to secure a session devoted to our report at the European Commission green week in May. Around 60 people from around the Union came to debate our report and were extremely positive; the head of water policy in the German Administration, who gave evidence to our inquiry, reiterated her support for the report and noted that she had referred to it regularly in her work internally in Germany as well as internationally. Our thanks must go to the excellent work of the EU liaison officer in helping to secure the session at green week. On behalf of Sub-Committee D members, I take the opportunity to thank our staff for their diligence, professionalism and good humour during this Session.
In conclusion, I wish to make a few brief personal remarks. As a fairly new girl to the committee systems, it seems to me that the committee has three roles, two of which it has down to a fine art. The first is that of scrutiny, where we can look to the noble Lord, Lord Boswell, to continue the eminent traditions which have been put in place by my noble friend Lord Roper. The second is that of influencing the policy debate in the Westminster and Brussels villages. I cite the recent report on women on boards as the most recent of an excellent number of reports doing just that. Where there may be some room for further improvement—this has been referred to by a number of noble Lords—is in informing the public debate on the value, or otherwise, of the EU to the lives of British citizens.
Like the noble Lord, Lord Marlesford, I accept that there is much to challenge in Europe but, at heart, I think that I am probably closer to the positions adopted by the noble Lords, Lord Jay and Lord Maclennan. I add to the list of reasons to be cheerful about Europe cited by the noble Lord, Lord Foulkes, that of progress on the environment. We may not be there yet but, let us be clear, we would be nowhere on this if it were not for the phenomenal contribution of the European Union to pushing forward environmental issues over the past 20 years.
I hope that of all the stakeholders we think about—national Parliaments, Ministers, civil servants—we do not forget the general public in the United Kingdom who are one of the key stakeholders. Yes, our committees must be non-party political, but that should not stop us, particularly our chairs, being hard hitting and prepared to say things simply and boldly so that the public can hear.
Lord Haskel
My Lords, I add my congratulations and thanks to the committee and its staff for the report.
I agree that the EU Committee is one of the jewels in our crown. It does an enormous amount of work and, indeed, is one of our core activities, but the point I wish to make is that this is a jewel that could perhaps shine brighter. Indeed, the noble Lord, Lord Boswell, hinted at this in his review of working practices and in his words today. He spoke of involving the broadest range of people in our work—I agree. The reason we do not do that is because our work is directed towards the House, the Government and EU institutions. But what about the British public? Surely we have a duty towards them, as the noble Baroness, Lady Parminter, suggested just now.
Now that we are likely to remain an appointed House for the foreseeable future, surely more than ever it is incumbent on us to explain to the public who we are, what we do and why we do it. Members of this committee are in a unique position to do this. The work we do scrutinising Commission documents, studying Explanatory Memorandums and holding the Government to account draws information to our attention which puts us in a position to help the British public and British organisations participate more fully in Europe and, indeed, explain the benefits that my noble friend Lady Crawley spoke about so powerfully. May I give an example? I no longer work in business but I work with several business organisations. I am the honorary president of the Materials Knowledge Transfer Network, which is perhaps the largest network set up by the Technology Strategy Board to speed up the flow of knowledge between science, industry and the consumer. In my capacity as a co-opted member of sub-committee B, almost weekly there is an item on the agenda of interest to this network and I become aware of it because I am on Sub-Committee B. Otherwise, these matters are often very difficult to find and rarely apparent, even though they are publicly available. So, without breaching confidentiality, I raise these matters with the network. Frequently, this leads to a discussion about the role and duties of the House of Lords as well as the benefits of EU membership. In effect, it is a kind of outreach. This is why I would like to see outreach added to the duties of this committee.
My noble friend Lord Foulkes was disappointed at the media coverage that we get. Our press people do an excellent job, but should we not be reaching out ourselves? Could this not be part of the strategy that my noble friend Lord Giddens seeks? Other parts of your Lordships’ House do this. Is the Grand Committee aware that recently we had the 1,000th visit to a school by the Lord Speaker’s school outreach scheme? Last week was Parliament Week, and 42 noble Lords participated in visits and other events to tell the public about the House of Lords.
The noble Lord, Lord Jay, asked how we could stimulate and play a part in a debate on our future in Europe. I suggest that we could start with our own outreach. We could make our website a bit more friendly and responsive. It certainly explains what we do, and perhaps why we do it, but the only way to respond is through the social websites that figure at the bottom of the home page. For instance, as other noble Lords said, at the moment we are discussing EU enlargement. Could we not somehow invite views from the public on our website, and offer to discuss our report with those who are interested in it? In this way we could share our useful information to everybody’s benefit, and at the same time stimulate debate.
I will give another example. The European Investment Bank has many millions of euros available to match loans to SMEs. Among the larger member states, the lowest take-up is here in Britain. Because of our work we are aware of the scheme. Surely it would be helpful if we made others more aware by outreach or by public lecture, as suggested by the noble Lord, Lord Roper. We could also work more closely with other parts of your Lordships’ House. The Peers in Schools programme and the information department have far more requests for speakers and visits than they can find Peers willing to go. Could we not go and speak about the work of our committee, as well as about the work of the House as a whole? In my experience, sixth-formers are very quick to raise European matters with us. We could work with the Parliamentary Office of Science and Technology, which has post-docs beavering away on matters of science and technology that are of interest and concern to parliamentarians. Frequently, their work has a bearing on matters being considered by our committees. Surely we could benefit by having their expert views, and by them having our views. So my response to the report on the 2010-12 work of the committee is: fine, but could we not do better by being a bit more outward-looking?
Baroness Young of Hornsey
My Lords, I will focus on the work of the sub-committee formerly known as G on social policies and consumer protection, which I chaired before it was wound up. I take the opportunity to thank the sub-committee’s clerk, admin assistant and analyst, and all the sub-committee members, for their contributions to the work outlined in the report. Many noble Lords this afternoon acknowledged the effectiveness of the noble Lords, Lord Roper and Lord Boswell, as chairmen of the EU Select Committee, and I, too, express my admiration for their hard work.
During the 2010-12 Session, EU Sub-Committee G undertook the varied work that is set out in the report. As many noble Lords will be aware, EU legislation and issues are such that they invariably take several years to sort out. In the 2009-10 Session, we undertook an inquiry into the European Social Fund, identifying the types of changes that might be helpful for the period, both in the short term and in the longer term for the 2013-20 period. The proposal for the new European Social Fund, published in October 2011, was an important item of scrutiny for the sub-committee. We decided to reconvene some of the witnesses to our original inquiry, along with other stakeholders, the Government, the European Commission and the devolved Administrations, at a public seminar in December 2011 to share views on the new European Social Fund. In addition to committee members and staff, around 50 stakeholders attended. Feedback on this seminar was very positive and it gave us helpful input into our scrutiny of the European Social Fund proposals. Notable issues we pursued were simplification, local flexibility and strategic alignment with other structural funds. The latter point is one that Sub-Committee A is still following in its continued scrutiny of the structural funds proposals.
It was most encouraging to see so many stakeholders coming together and debating key issues at the invitation of the EU committee and on the basis of an EU committee report. Building on this work, we organised a more general stakeholder engagement seminar, which has already been mentioned by the noble Lord, Lord Roper. That was some months later. In fact, this was originally his brainchild. It was correctly identified that a great many stakeholders from across the range of subjects with which Sub-Committee G dealt simply do not understand the work of the EU Committee and its sub-committees. This is something that a number of noble Lords have raised this afternoon. How can they engage with what we do if they do not understand what we do? Why should they engage? What is it that we do that is important to them? Calling it a stakeholder engagement seminar makes it sound a bit more formal than it actually was. It was a very informal event. Part of its value was simply mingling with colleagues from across the range of subjects which we dealt with. We also had a very good discussion and some of those groups certainly have had more of a dialogue with the committee since then. It has also led to work improving the website to ensure that it is more accessible to those wanting to find out more about our work, although I appreciate that there is an awful lot more work to be done on that score.
During the 2010-12 Session, Sub-Committee G undertook three substantial inquiries. The first was a subject which at first glance does not sound like the kind of thing that we would be discussing in an EU committee. This was grass-roots sport and there were members of the sub-committee and elsewhere who took the view, at least initially, that it was not a suitable subject for us to look into. However, the Lisbon treaty had introduced sport as a policy area in which the European Commission could encourage member states to work more closely and we wanted to find out what this would mean for grass-roots sport in this country. This was pre-Olympics and before all of that euphoria. Above all we heard that grass-roots sport should be mainstreamed into other policy areas, such as health, education and social inclusion. We met with some previously excluded individuals who had developed core social and leadership skills through sport. One of our specific recommendations was that there should be a distinct budget to support grass-roots sport-related actions. We were therefore pleased to see the inclusion of such a budget within the new Erasmus for All programme. The budget will support actions which include exploitation of the potential of sport to foster social inclusion. An interesting benefit of pursuing this issue was that we were able to communicate with a wider range of individuals and organisations, both as witnesses and during visits, who would not normally consider themselves to have an interest in the work of the House of Lords in scrutinising EU issues.
Our second inquiry concerned the mobility of healthcare professionals in the context of the review of the professional qualifications directive published in October 2011. We considered that the current directive failed to command the confidence of patients and professionals, striking the wrong balance between encouraging mobility and ensuring patient safety, and therefore needed to be revised. We hoped that our recommended improvements to the directive would enhance rather than undermine free movement by rebuilding confidence among patients, employers and professionals.
The report was very well received among stakeholders, including the General Medical Council and the Nursing and Midwifery Council. The Government also credited it with influencing their response to the Commission’s Green Paper consultation on the revision of the directive. After the Commission’s proposal for a revised directive was published in December 2011, I met with senior representatives of all the UK professionals covered by it at the beginning of this year and their views helped to inform the sub-committee’s subsequent scrutiny of that proposal. I am glad that Sub-Committee F has continued to scrutinise this important matter, most recently in its oral evidence session with the Health Minister, the noble Earl, Lord Howe, on 21 November.
Sub-Committee G’s third and last inquiry was into the modernisation of higher education in Europe, which was published last March. We considered not only the EU’s role in this area but also the ongoing Bologna process, which has seen the creation of a European higher education area, including 47 European countries. We concluded that while the EU can continue to make a positive contribution to European higher education, it must nevertheless be pragmatic and concentrate only on the areas where it can add value. In addition, we considered that the Government should place higher education at the centre of their growth agenda, domestically and across Europe, by maximising the potential of both the EU and the Bologna process. The report also considered the Erasmus programme, which we considered to be an important activity in terms of increasing students’ employability. However, the UK’s participation has been historically low compared with other large member states, and we decided that making language learning compulsory in both primary and secondary school would be one way of increasing the UK’s participation, alongside taking steps to encourage a more diverse range of participants. In this vein, we also called on the Government to support the allocation of a greater proportion of the next multiannual financial framework budget to research, innovation and education.
The day after the report was published, I also participated in an LSE workshop, chaired by the noble Baroness, Lady Blackstone, and attended by a range of academics which discussed some of the same themes as our report. Like other noble Lords, I think that we could be much more effective in obtaining press and media coverage. The noble Lord, Lord Giddens, points to the need for a media strategy and I would concur with that. We should also embrace more fully the opportunities afforded by social media. Chairs of sub-committees have appeared on YouTube—to great acclaim, I understand—and written blogs. But there is more we could do with Twitter, for example, in spreading the word to a wider public about the work we do.
Lord Foulkes of Cumnock
I know that it is very seldom that we intervene, but this is brilliant as I have just tweeted with regard to this Committee on the excellent contribution of the noble Lord, Lord Haskel. I am now about to tweet about the contribution of the noble Baroness, Lady Young.
Baroness Young of Hornsey
I have to tell the noble Lord that I tweeted before him. We should embrace all social media and spread the word about the work we do to a wider public. I concur absolutely with the noble Baroness, Lady Parminter, and the noble Lord, Lord Haskel, on engaging much more widely, whether we call it outreach, engagement, stakeholder engagement, or whatever. There are structures such as those named by the noble Lord—the Peers in Schools programme, Parliament Week and so on—which all represent opportunities for us to do so.
I now have the privilege of sitting on Sub-Committee C on External Affairs—a very different set of challenges to those posed by social policies and consumer protection. I am pleased to state that there, too, our chairman, the noble Lord, Lord Teverson, is also keen on new ways of communicating with different sets of stakeholders. As has already been said by the noble Lords, Lord Boswell and Lord Roper, we held a seminar last week, attended by a wide range of stakeholders with an interest in our current inquiry on the European External Action Service. I look forward to further discussions on this matter on how to make more progress in outreach, engagement, et cetera. I know that that is something that both the present chairman and the previous chairman hold close to their hearts.
Lord Judd
I am very glad to have the opportunity of following the noble Baroness, Lady Young of Hornsey, because, as others have said, it is important to pay a warm tribute to her and her committee for all the excellent and outstanding work they have done. I am a member of Sub-Committee F and already, from the work that has come through to us from her committee, it is clear that the quality and significance of that work was very great indeed. For my part, I do not just think it was a contradiction; it was absolutely ridiculous and farcical to cut the number of committees at the very time when the Government say that they want to tighten our scrutiny of Europe. It is madness; it makes no sense and needs to be reversed as soon as possible.
We are fortunate to have with us both the past chairman, to whom I have paid tribute on previous occasions, and the present chairman, with whom I have worked on a number of issues across the party divide over the years and for whom I have tremendous respect. What they do to set the context for everything we are trying to achieve is very important and we cannot underline our gratitude too often. Also—others have done this and I certainly want to do so—I pay a very warm tribute to the clerks, staff and specialist advisers at our disposal. There is no doubt whatever that the impact our reports have in Europe—sometimes more of an impact in Europe than here—is because of the expertise and professionalism that goes into them. We are very well blessed.
The other people to whom I want to pay tribute are the chairs of our sub-committees, who work immensely hard on our behalf. In our sub-committee, it is impossible to say how lucky we are to have the noble Lord, Lord Hannay, as our chair. He brings with him a huge background of commitment and experience which is almost unrivalled and helps immensely whatever we are trying to do.
When I look at our work, one of the things that frequently strikes me is the commitment and quality that goes into the preparation of the evidence that comes before us from witnesses. We ought to pay tribute to them, too, because without that evidence we would not be able to produce the thoughts that we finally produce.
It is absolutely vital—we try to do this—that in our call for evidence we go to as wide a cross-section of the community as possible: to not only the in-circle of the usual, more highly-tuned policy players but to the real practitioners out there who are often in the front line of the implications of the matters on which we are deliberating. They are often so preoccupied with their work that they do not have time to think about making recommendations on policy. We ought to assist and encourage them in that because it would make our work more relevant.
Even more important, at a time when there is no doubt that for many people in the British public Europe is remote and does not seem to be engaged with real life as people experience it, the more we can engage a wide cross-section in feeling that we really take their work as highly significant and relevant to our deliberations and want to bring it on board, the more we will be bringing home to a wider cross-section of people in our society the relevance of Europe.
Reference has been made to the opting-out debate, if we are to call it that, which lies ahead. It seems a bit of a nightmare. I am sure that we shall all do as constructive a job as we possibly can but I find it extremely distasteful to be starting this job in the context of a situation in which we say, “Of course, we will opt out of everything because we have got to demonstrate to ourselves that whatever we opted into is really of significance to Britain and then we will reapply again”. How on earth do you create an atmosphere in which there is going to be positive good will towards our reapplication if you start off by saying we reject everything and now we want to come along and do some cherry picking? If you belong, you belong, and you can constructively play your part in strengthening the wholeness of the work.
I am glad that my old, long-standing and good noble friend—I nearly said “George” but I must not do that—Lord Foulkes, as he so often does, made the point which is central to the essence of the matter. Others have referred to it but he put it bluntly. The first reality of life is that we are locked into a totally interdependent world. There is no way in which we can look to the interests of the British people—whether in finance, trade, the management of the economy, climate change, health, security, immigration, terrorism and all the rest—on our own. We simply have to work with others because these issues cross all national frontiers. In that context, Europe becomes an indispensable part of meeting that global reality of which we are a part. In so far as we repeatedly fail to bring this home to the British people, we are failing our children and grandchildren. History will judge us by the degree of success we have in contributing positively and constructively to the international institutions and their work. I am certain of that.
Of course, it is equally true that if we believe that—I believe it passionately, as noble Lords can see—then we must not allow our commitment to be abused. It is therefore tremendously important to take financial and administrative accountability, and the search for maximum possible cost-effectiveness, efficiency and the elimination of waste, as central to our purpose. We want efficiency and to be sure that every penny spent in this vital way is spent to good effect. We do that if we are seen to be members of the club, playing a central part in the evolution and strength of the whole community. If we are just regarded as the awkward squad, as rather neurotic, even insecure islanders to the north and west of Europe, how on earth will we have the influence that we want to bring to bear in a cause that matters? It is a matter of engaging, belonging and being felt to belong. Then, if we come along with tough policies on cost-effectiveness, on cutting budgets to make sure that the priorities are right and the rest, we carry some weight. At the moment, we undermine our whole role in that because of the general way in which we are seen as the negative brigade.
I conclude with one other point. If Europe is to go down the road of closer integration and tougher policies towards unity in fiscal and economic matters, I do not see how it can avoid going down an equally important road of greater co-operation on social policy. I do not see how we can have a stable Europe unless we do that. To go along with fiscal policies that are not balanced by sound, progressive social policies is playing a dangerous game in terms of future stability. I believe that in the context of our own society, but I believe it in the context of Europe, too. The whole cause matters. We make ourselves effective in getting the efficiency and financial disciplines we want in these institutions by being second to none in our commitment.
Lord Rowlands
My Lords, the more than three years that I have been a member of Sub-Committee E on Justice, Institutions and, now, Consumer Protection, have been a pleasure. It has been a particular pleasure to serve under our chairman, the noble Lord, Lord Bowness. He regrets that he is not here this afternoon, for a simple reason: he is in Brussels on committee work. He is grappling with the issue of the common European sales law, which we have under sceptical scrutiny at the moment. I am sure that we all agree that he is still serving our committee in that particular way.
The one major report that we have fulfilled is the one that I am glad to say that the noble Lord, Lord Maclennan, referred to and gave such a ringing endorsement to our findings. That was on the workload of the Court of Justice and the General Court. We warned of the very heavy workload building up at the General Court and the potentially heavy workload that would occur as a result of the changes in jurisdiction of the Court of Justice. We saw that both courts were going to be under considerable pressures to deliver. As the noble Lord, Lord Maclennan, said, our report received a somewhat lukewarm response from Ministers. They doubted our concerns and even possibly our pessimism. But figures since the production of our report have shown that in fact there are real concerns about the workload of both courts. Those concerns need to be addressed.
Indeed, quite a lot has happened since and I hope that the Minister will bring us up to date on what exactly the situation now is regarding the discussions that have gone on about the workload of the courts. It is not a matter of cost and savings but a matter of justice. Delayed justice can be as unjust as any other action and can create injustices. I hope that Ministers take seriously the issues we have raised in this respect. We have just started an inquiry on combating European fraud. This will bring within our scope and purview the controversial issue of the European public prosecutor’s office. We are in the early days but it will be interesting to see how the evidence falls.
For me, the core of our committee’s work is the scrutiny that has arisen out of the decision to scrutinise opt-ins. I find this particularly satisfying because I was on the Constitution Committee that drove this case forward some years ago. We not only recommended specific parliamentary procedures to deal with the opt-ins but, very unusually, carried our recommendations on to the Floor of the House. For those who remember those debates, we sought to amend the European Union Bill to introduce parliamentary procedures. It was as a result of that pressure that, in the end, the Ashton undertakings were delivered. I therefore have a particular concern and interest in how the experience of scrutinising opt-in issues has worked out in relation to our sub-committee.
It might be useful if I explain to the Committee the experience to date on a very important aspect of the new scrutiny procedures that we have. Since December 2009, there have been 63 proposals to opt in, of which 29 fell within our committee’s jurisdiction. Of the 29 proposals we agreed concerning 17 opt-ins, disagreed on nine and did not express a view on two. We agreed with 13 of the Government’s decisions to opt in and with four of their decisions not to opt in. Of the two occasions on which the sub-committee did not express a view, the Government opted in on one but not the other. In total, we have disagreed with nine decisions that the Government have made on both opting in and opting out. That may sound like quite a considerable disagreement but in fact the number exaggerates that disagreement.
That was, first, because one of those nine decisions was on the human trafficking directive, where we were very surprised that the Government did not opt in initially. After that, they gradually got involved in negotiations and have now opted in—so that is one less. Of the rest, six all pertained to what we on the sub-committee considered was a group of proposals and dealt with as one decision, while the Government treated it as six. It was the application of the Hague Convention on child abduction to Gabon, Seychelles, Albania, Morocco, Armenia and the Russian Federation. In fact, there have been very few disagreements between the committee and Ministers over opting in. I find that interesting, given the background.
Given the broader political background where we have had a high degree of rhetoric, including on repatriations of powers, this Government have opted into a majority of opt-ins since they have been in power. It is an interesting reflection; they have in fact shown considerable pragmatism towards opt-ins. Opting in is transferring power, particularly in the field of justice that we have been dealing with, so I shall be interested—as I am sure many of us will—to see whether this pragmatism will be carried forward into the protocol 36 issues, and how far and to what extent that is going to happen.
One thing that puzzles me is not the argument on whether one should opt out or opt in completely but what basis or evidence to date the Government have used in their provisional decisions to opt out. I tabled a Question because the noble Lord, Lord McNally, said that there were three categories as regards the 130 measures: useful, not useful and defunct. Will the Minister at least intimate whether in the eyes of the Government the majority of those 130 measures fall in the last two categories of being not useful or, indeed, defunct? If the majority fall into those categories, you can see there is a possible case for saying, “Let us opt out”, but what if those cases are a minority and that leaves us with a majority where we might seek to opt back in? That is a considerable problem. The thought of doing that on such a scale would determine a lot of our thinking.
Our sub-committee, jointly with Sub-Committee F, is going to conduct inquiries and scrutiny on these matters but we expect an intimation from Ministers of where they stand on these issues and what the numbers and percentages are regarding the opt-ins and the opt-outs. Therefore, I look forward with considerable interest not only to the work we are going to do on protocol 36 but also to finding out whether the pragmatism that has been a feature of the Government’s attitude towards case-by-case studies of opt-ins to date will be carried forward into protocol 36.
Lord Liddle
On behalf of the Opposition, I thank the committee, its chairs, members and excellent staff for all their work. It represents a huge volume of activity of very high quality which has very considerable impact. The House ought to celebrate this committee as one of its finest achievements. The speech that we have just heard from my noble friend Lord Rowlands about the detailed examination that the committee has done of proposals in that sub-committee’s field is a tribute to the work of the committee.
Whatever you think of Europe, it needs scrutiny. Like my splendid noble friend Lady Crawley, I am a very strong pro-European. But just because you are pro-European does not mean that you are not critical of an awful lot that happens in the EU. I have always been pro-Europe and pro-reform in Europe. If you are of that disposition, the work of this committee is very valuable. You have only to look at the recommendations in its reports—a classic example was the report of the noble Baroness, Lady O’Cathain, on the Channel Tunnel—to get an agenda for reform that this country ought to be pushing.
I wish to comment briefly on the institutional points about the committee that have been made. First, I think it is a pity that we have seen a reduction in the number of sub-committees. I do not say that just because I was briefly a member of the one that was abolished under the excellent chairmanship of the noble Baroness, Lady Young. However, if the House of Lords, as an appointed House which is full of people of political experience and specialist expertise, cannot do a committee job properly, what is the point of the place?
Secondly, I very much agree with the noble Lord, Lord Judd—this may be a little criticism of the EU Committee—in that I think that Europe cannot avoid the social agenda. Social sustainability is one of the real challenges facing Europe. Therefore, I think it is a pity that the axe fell on the committee that specialised in that area. I agree with the noble Lord, Lord Boswell, that we should try through the usual channels to make the debates on the Floor of the House more timely.
Thirdly, I agree with many of the speakers in this debate that we should promote as much as we can the engagement of people outside in the committee’s work. The point made by the noble Lord, Lord Maclennan, about good regular contact with MEPs is a very good one. The point I want to press on the Committee is the need for networking with other national Parliaments in order that the subsidiarity clauses of the new Lisbon treaty can be made properly and demonstrably effective to the European public. That will work properly only if we really get engaged with the relevant bodies in other national Parliaments.
On the wider point, I think the noble Lord, Lord Jay, is right that we are on the threshold of a great national debate about Europe. Of course it has to be a dispassionate debate, though I hope some of us will be allowed a little passion as well. The purpose of any debate has to be to try to engage intelligent Eurosceptic opinion. We have to bring round to the merits of British membership of the European Union those who are critical but at the same time open to reason and persuasion. Perhaps I am being very unfair but if we succeed with the noble Lord, Lord Marlesford, that is a very important test, given the very interesting speech he made, critical of aspects of the Union.
I will make one final point about the agenda of the committee’s work. First, I would like to think that the committee could make a real contribution to the balance of competences review and I ask the Minister how the Government think the committee might make a contribution to that. Secondly, although the focus is naturally on specific EU policies and proposals, we have to raise our sights to the very big challenges, which basically are the arguments around the European Union. Internally, the European Union has this huge economic and social challenge. At the moment the short-term requirements of austerity are not matched to the medium and long-term need to make Europe ecologically sustainable, competitive in a global world and able to cope with the demographic challenge. Frankly, it is this lack of connection between the short term and the long term that we have to think about. Externally, people are just not conscious of how rapidly the world is changing and what role Europe, acting together, can play in defending our values and interests in a world where power is dramatically shifting to Asia and other countries. So the committee should try to broaden its sights on to these big questions. But it is excellent in its work. I fully support it and I am delighted to back everything that it does.
Lord Wallace of Saltaire
I thank the noble Lord for his six-minute speech. I am conscious that we are past 7.30 pm and I will attempt to be shorter than is usual in a wind-up speech and I will promise to write to noble Lords if I do not cover everything. I should start with a number of regrets. I share the Committee’s regret that the House took a decision to reduce the resources available to the committee. I recognise that this is an issue for the whole House in terms of how many committees the Lords should have and what resources are available. That is part of the wider debate about the future of this Chamber which we tackled and failed to come to a conclusion on earlier this year.
The Government value the work of this committee enormously. I value the work of this committee enormously. I feel that I almost came in at the beginning of it. Michael Wheeler-Booth, the first Clerk of the committee, used to enjoy telling the story of how a young woman who was one of the few experts on the EU outside the Government at the time came to give evidence to one of the first sessions and he gave her a double gin and tonic to stiffen her nerves. That young woman, my wife, was also educating me about the European Union at the time.
When I was chair of one of the sub-committees I was conscious of the very high reputation that our reports have in Brussels. I met last Thursday with a Polish Minister who, in almost his first remark, said how glad he was to be in the House of Lords and how much the Polish Government valued the reports of this committee, so we are maintaining the standard and the reputation.
We are all conscious that the weight of work and the number of Commission proposals and communications —and therefore of Explanatory Memorandums— continues to grow. This committee struggles very well to strike the balance, to which the noble Lord, Lord Boswell referred, of detailed scrutiny and capturing wider issues at an early enough stage to influence the debate. A number of excellent examples of that have been mentioned today
Let me say a little about the Government’s current approach to the European Union and therefore to the role of this committee. Her Majesty’s Government are strongly committed to continued membership of the EU, as my noble friend Lady Warsi repeated in the Chamber today, and to active engagement in the development of European Union policies. This is not from any commitment to a European ideal, let alone, as some Eurosceptic conspiracists claim, to the creation of a European superstate: it is, clearly, that the coalition Government believe that continued membership remains in the UK’s national interest. That is our belief and that is how we have to defend the European Union. As the noble Lord, Lord Liddle, remarked, it matters not whether we are pro or against: we have to look at the hard evidence and see where Britain’s interests lie.
The noble Lord, Lord Marlesford, attacked the European project—the belief in an ever closer union through which power would progressively be transferred from national Governments to Brussels. That is now over, although there are still some within the Commission who cling to that ideal. Generational change has swept away some of the old disillusion with the European state and enthusiasm for Europe instead, but our interests remain engaged with our neighbours across a range of shared concerns.
Of course, the current crisis in the eurozone is forcing changes in the EU’s priorities and structures, as the noble Lord, Lord Giddens, remarked. The Foreign Secretary, in his speech in Berlin, and the Deputy Prime Minister, in his speech at Chatham House, in the past few weeks have both addressed this broader issue. As the Foreign Secretary said during his recent speech in Berlin, the EU will be stronger if it made more sense to people by acting only where there was clear justification for action at the European level, which is one of the themes that we all need to discuss. The catholic principle of subsidiarity, which to me is similar to the liberal principle, is that decisions should be taken as close to those they affect as possible; that the most democratic politics is local politics. I say in mild criticism that I am not ever sure that grass-roots sport is an appropriate area in which the European Union should interfere.
One should always ask the hard question of whether or not such matters are dealt with by the federal Governments in Australia, Canada and the United States, and if they are not, we should look carefully before we transfer competence, authority, cost and benefit to the far weaker and less democratically accepted institutions of the EU. That is what we are trying to do in the balance of competences exercise. I encourage this committee, as the whole Government wish to encourage it, to get as actively engaged in the balance of competences exercise as possible over the next two years. I speak with some passion on this because I have now been nominated as one of the three Ministers who will play a role in scrutinising this review within government and we are looking for engaged and expert partners on the outside. We will be briefing the committee throughout as fully as possible and I hope that it will respond to calls for evidence. This will help to inform an evidence-based debate within the UK, which is what we now need.
I hope that, as the noble Lord, Lord Liddle, has said, we are opening up again a wider, rational debate about whether Britain should stay in the EU. I stress “rational” debate, because when I saw the 10-page spread in the Daily Mail last week about common purpose and the conspiracy in the Leveson inquiry, I rapidly went on to Google to see what was behind it and found myself discovering the wider shores of Euroscepticism. One of the articles even told me that Francis Maude is not really a Conservative but is part of the socialist conspiracy to establish a European superstate. This is the world of alternative reality and irrational belief. Mainstream arguments are the ones that we have to address, with, as the noble Lord, Lord Liddle, said, the rational Eurosceptics—and there are many. That is what the balance of competences exercise in Britain, but engaging others, wishes to do. We already have some interest from Berlin in contributing to that exercise. Chancellor Merkel has said that less in some areas is a good thing for the European Union, and the leader of my party, the Deputy Prime Minister, when he was an MEP used to talk about the European Union doing less better, which is an entirely sensible approach.
The balance of competences review is very important to us in promoting a debate and therefore, I hope, to your Lordships as a committee. Similarly, the whole question of the JHA opt-in, the Protocol 36 debate, is one in which we hope that the committee will remain actively engaged. The Government have not reached a settled view on the final decision to opt in or opt out. Noble Lords will remember the exact words used in the Statement given to Parliament, which were that the Government’s “current thinking” was to opt out, which meant that a final decision had not yet been taken. It very much depends on active debate in detail on the various proposals made, consultation with other Governments, consideration of national interests and so on. In terms therefore of engagement with Parliament, we are committed to a vote in Parliament when the Division comes up and we wish therefore to maintain active discussion on all these matters—I hope perhaps on the Floor of the Chamber as well as in Grand Committee.
A number of noble Lords, in particular the noble Lord, Lord Roper, talked about co-operation with other national Parliaments. Again, Her Majesty's Government would encourage your Lordships to develop those links as far as we can. I am a member of a European affairs sub-committee of the Cabinet which is about to go to Berlin in early January for its second meeting there and its third meeting overall with our German counterparts. Germany is clearly one of the most important partners that we have to deal with in the world and the most important partner in the European Union. We hope that your committee will perhaps develop a similar bilateral relationship with your German counterpart but also pursue further the ways in which COSAC, COFADS and the various other conferences of your EU Committee chairs can help you to plug into other national debates.
A better awareness of the complexities of national history was what the noble Lord, Lord Maclennan, talked about, which of course fits in with another issue that we were discussing last week: the 100th anniversary of World War I. I remind your Lordships of the 300th anniversary of the Hanoverian succession. I trust that the House will plug into all those matters. If I may rapidly put in a plug: I am interested in discovering what your fathers, grandfathers and great uncles did in the First World War. I have so far discovered in this House one whose grandfather fought for the Germans at Tannenberg, another whose father fought for the Austrians at Caporetto and a third whose father was rescued from a torpedoed troop ship by a Japanese destroyer. There must be a lot that will demonstrate to us the complexity of our relations with our European partners in our modern world.
I strongly sympathise with those who have said that the third task of this committee, which is outreach and engagement with wider public needs, as the noble Baroness, Lady Parminter, said, needs to be thought about further. That perhaps means asking for more time in the Chamber and paying more attention to making sure that reports are fully covered in the media and get on to the “Today” programme, as I know you have succeeded in doing, rather more often.
The noble Lord, Lord Giddens, asked about the mysterious process by which Peers are selected and invited to join committees. That sounds like a subject worthy of in-depth sociological analysis, but perhaps if he were to ask his good Whips they would tell him a little better.
The noble Lord, Lord Jay, asked about representation at the EU peace prize. That has not yet been decided although some interesting and rather imaginative ideas are currently floating around Whitehall.
We need a wider debate in the United Kingdom and across the EU, as the EU now struggles to adapt to the current crisis in the eurozone, to deal with the challenge of further enlargement. We all recognise that enlargement is getting more and more difficult and, with each extra applicant country, there is a lot to contribute. Perhaps the committee would like to invite evidence from Norway and Switzerland. The chairman of the recent massive Norwegian study on the advantages or disadvantages of Norway’s current relationship with the EU—
Baroness O’Cathain
I am rather astonished to hear the Minister say that we should go and get evidence from Norway. We have; we do it all the time. There is a disconnect between people in government who are in ministries in positions of power and those who work on the sub-committees. There is a lot of discomfort, too, about the response, both in the Chamber and from the Government, to the very difficult reports on which we have spent hours and weeks collecting evidence. The Government’s response to reports is pathetic and the Minister ought to look at that.
Lord Wallace of Saltaire
I stand corrected. I am not sure whether the justice and home affairs inquiry has yet taken evidence from the Irish Government, who have a clear stake in the question of the opt-out or the opt-in. It may be that the Irish Government—
Lord Hannay of Chiswick
Just to enlighten the noble Lord, as he has effectively asked a question, the call for evidence does address the Irish dimension. It will, of course, be a matter for the Irish Government to decide whether or not to offer evidence. I do not think that we should go around telling other Governments what they should do. It has been made clear to them that evidence would be extremely welcome.
Lord Wallace of Saltaire
I thank the noble Lord very much for that. I happen to know that there are those within the Irish Government who are enthusiastic about coming to give evidence, and I look forward to them accepting the invitation that has been made.
The wider issue we all face is the gap between globalisation—internationalisation—and publics who regret the extent to which power is slipping away from local control. Last summer I read an excellent book by Dani Rodrik, the Turkish economist who is now at Harvard, on the limits of globalisation in which he talks about the underlying contradiction between popular desire for stability, local control and understanding what has happened, and the driving forces of a global economy—the global social elite, immigration, et cetera—that appear to be taking power away from the local level and sweeping away autonomy, identity, sovereignty and democratic accountability. That is the tension that we all face. In the United States the American Tea Party takes it out on international law, international organisations and the federal Government. In Britain, by and large, our often disturbed and discontented public take it out on the European Union. Part of what we have to do is address that contradiction to see how far we can persuade our public that some of the regulation that now appears to them to be imposed from the European Union is unavoidable, desirable and necessary, and to persuade the European Union in return that it should not attempt to regulate everything in sight or expand its competences too far.
Lord Boswell of Aynho
My Lords, very briefly in view of the hour, I thank all those who have participated in the debate, including the Minister for his closing comments, and also those Peers who are not members of our committee but have managed to sit in and imbibe some of the interest in what we are doing.
It seems that there are five potential pitfalls, which I will list briefly. First, there is the danger of excessive expectation and that we should think that somehow a single report we make will change the map irredeemably in Europe. It does not usually work like that in a community of 27. Secondly, there is what one might call a kind of arrogant assertion of power. We are not running British foreign policy and should not seek to do so. Thirdly, we should be alert to any producer capture by HMG or anybody else. We retain our independence and will express our views as appropriate. Fourthly, there is the possibility that we will disappear down a mire of detail, though I see no sign of that happening. The detail deployed in this debate has been impressive and very much to the point.
Finally in the dangers is the question of resourcing, which cuts across three areas. First, there is the suggestion the Minister made about international collaboration. We have to find the resources if we are to do that. Secondly, there is what we might be able to contribute to the balance of competences review. Thirdly, there was the universal call across the debate for greater attention to our outreach and publicity. A lot of that can be done electronically and relatively thriftily and economically, but it cannot be done for nothing. However, I take that as the single strongest message that we should be doing it.
In conclusion, we should carry on doing what we have to do but ever more thoroughly and do it further back upstream and further down into implementation. Secondly, we should pay particular attention to making sure that all our stakeholders—of all walks of life, home and abroad, government and otherwise—know what we are doing and feel able to be part of our processes.
House of Lords
(11 years, 10 months ago)
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Health: Atos
(11 years, 10 months ago)
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Lord McAvoy
To ask Her Majesty’s Government what instructions they have given to Atos regarding its employment of outside personnel to carry out medical assessments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the department has clear contractual requirements for contractors in relation to the recruitment and training of health professionals involved in carrying out assessments related to benefit entitlement. Any professional not meeting these requirements will not be given approval to carry out assessments.
Lord McAvoy
My Lords, I thank the Minister for his Answer. He will recall, as many of us on both sides of the House do, the passage of the Welfare Reform Bill, when, quite frankly, the Minister promised that everything would be all right on the night. However, at one point Atos had 900 doctors performing the work capability assessments and now it has only 231. Does this mean a reduction in the standard of how the tests are conducted? In addition, these tests are being conducted with computer-based systems using descriptors in the assessment and they are failing a large number of people, leading to an even larger increase in the number of appeals. Does the Minister not realise the devastation caused when people get word of these things? When will the Government undertake a fundamental reform of the work capability assessment to make sure that the poorest and most vulnerable people in this country are not reduced to even lower levels of poverty?
Lord Freud
My Lords, over the past month Atos has been running at about 200,000 assessments; its average is about 100,000. There are 962 full-time-equivalent healthcare professionals working on them. We inherited this review and have now had four subsequent reviews: one internal and three from Professor Harrington. We have basically accepted and largely implemented 40 of the recommendations from Professor Harrington, who said in his latest review, last week, that significant and lasting improvements are coming.
Lord German
My Lords, is it not terrible that one in four of the premises that Atos uses for its assessments does not have flat-level disabled access and that wheelchair users cannot access these assessments? Can my noble friend tell the House whether the original specification for the Atos assessment centres contains any references to disability access? In view of the terrible circumstances in which many people in wheelchairs now find themselves, when will the Government be able to complete ensuring that all people needing wheelchair access have access to these assessment centres?
Lord Freud
I am not aware of the fine print of that particular contract, as it was done under a previous Government. A proportion of the assessment centres—currently 31, I believe—are not on the ground floor and lifts must be used. If there is then an emergency, such as a fire, those people will have to go down the stairs, which is obviously not satisfactory. To the extent that people are concerned about that, we make other arrangements: they are visited on the ground floor, somewhere else or at home.
Lord Cormack
My Lords, did anyone prior to seeing the Order Paper know what Atos was?
Lord Freud
My Lords, Atos is not an acronym in this case; it is the name of the company that does these assessments.
Lord Haskel
Following on from the question from the Liberal Democrat Benches, the Minister—
Lord Low of Dalston
My Lords, the Minister will be aware of all the concerns that have been raised concerning Atos Healthcare’s conduct of the work capability assessment, some of which have already been mentioned in the exchanges that have preceded my question. Given that, can he explain why it has been appointed to carry out the new assessments for the personal independence payment? Have any lessons been learnt that might enable these new assessments to be carried out in a way which better commands the confidence of the disability sector?
Lord Freud
My Lords, one matter that concerns me a lot is the way in which Atos has been attacked. It is something that has also concerned Professor Harrington, who writes in his latest report:
“The WCA continues to be portrayed in an extremely negative light, often fuelled by adverse media coverage, representative groups and political points scoring. … Some recognition of the considerable work to date would give a more balanced picture”.
Atos’s quality target, which is to be below 5% on the quality side, has been achieved in 10 of the past 12 months and is now running at around 4%. Indeed, we are looking at whether we should now move the target figure for quality down from 5% to 4%.
Baroness Uddin
My Lords, given what the Minister says about the 200,000 assessments being undertaken, and to a high professional standard, how does he explain some of the figures that are coming from the disabled community about the lack of standard? What do the Government have in place to monitor the quality standard to which he aspires? Will he explain that to the House, and will he also explain why disabled people and their carers would complain about a perfectly professional, high-quality system?
Lord Freud
My Lords, the number of complaints against Atos is running at 0.57%, which compares, for example, with a figure of 3.5% for complaints about doctors to the General Medical Council. That is the level of complaint.
Baroness Wilkins
My Lords, 40% of those who go to appeal about an Atos assessment win their appeal. Will the Minister say what the cost of those tribunals has been and why the taxpayer should pay for the inadequacy of Atos’s assessments?
Lord Freud
My Lords, while the figure of 40% for those who go to appeal is roughly accurate, the total number of those found fit to work by the tribunal changes only 15% of that total. The reasons are usually to do with fresh evidence, which is either written or oral. The cost of that runs at about £11.3 million from the DWP’s perspective and £14.9 million from the point of view of the courts. That figure is for the first half of the current year.
Education: Vocational Education
(11 years, 10 months ago)
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Baroness Jones of Whitchurch
To ask Her Majesty’s Government what steps they are taking to raise the status and quality of vocational education.
The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)
My Lords, we commissioned the Wolf review and have reformed vocational qualifications in order to restore rigour to them. We have announced reforms to post-16 funding for vocational education and work experience. We have increased the number of apprenticeships by nearly two-thirds. We have significantly expanded the UTC and studio schools programme. We will continue to open new UTCs, technical academies and studio schools, and will work to raise the quality of vocational education and the esteem in which it is held.
Baroness Jones of Whitchurch
I thank the Minister for that reply. Does he agree that it is vital that vocational education has the same status and funding as the purely academic education provided for those working towards a university place? Does he further agree with the recent report of the CBI that the raising of the school leaving age to 18 provides an ideal opportunity for a rethink on the curriculum and examination systems, which could then include a gold standard vocational qualification for those less suited to academia? What lessons will the department take from other successful countries, such as Germany, which offer all young people a mix of academic and vocational education according to their individual talents and abilities?
Lord Hill of Oareford
I strongly agree with the noble Baroness about the importance of making sure that vocational and academic qualifications have equal esteem, are held in equal regard and have equal funding. That is one of the reasons why the reforms to post-16 funding, which we brought forward in the summer, will make sure that young people at colleges and schools after the age of 16 will be funded on the same basis for both vocational and academic qualifications. That will also leave more money for work experience, which is important too. We can always learn from other countries but the underlying point is that there is broad agreement that we need to treat vocational and academic qualifications with equal weight. The Government are trying to do that.
Baroness Brinton
My Lords, given that employers, parents and students find the proliferating and bemusing qualifications a complete maze, does the Minister agree that the status of vocational education would be helped by a simplification of the qualifications framework, such as in Holland?
Lord Hill of Oareford
It is not just parents and employers who find them a maze, it is Ministers as well. They are extremely bewildering. My noble friend is right that simplification is called for. She will know that the Wolf review called for a great deal of simplification and a thinning out of qualifications. In terms of the value of those qualifications, it is important that we have effective and clear destination measures so that people can make judgments fairly and openly about the quality of the education being offered in different institutions.
Baroness McIntosh of Hudnall
My Lords, will the noble Lord consider expanding the notion of vocational education just a little bit to include those people whose vocation is in the arts, particularly those who wish to take up careers in the performing arts, for which they have to undertake very long and always very demanding training? Does he think that their needs are being served by the fact that the EBacc does not contain any reference to their subjects?
Lord Hill of Oareford
I agree very much with the noble Baroness about the importance of those subjects and disciplines and the rigour that they entail. In terms of the EBacc, I think she knows my view that the concentration on the small number of subjects leaves plenty of space for other important subjects that are not those six core subjects. I certainly agree that art, drama and music are important subjects which one would want to see children learning and thriving at.
Lord Roberts of Llandudno
My Lords, how alarmed is the Minister by the announcement that there has been a reduction in quality careers guidance in schools and colleges? What are the Government doing to rectify this essential provision, which we need if we are to have good vocational instruction?
Lord Hill of Oareford
I agree with my noble friend about the importance of good careers guidance. He will know that the Government have made a change by placing a duty on schools and colleges to make sure that young people have good-quality careers advice. Our funding reforms will also help to drive the take-up of good-quality work experience, particularly after the age of 16. The more that we can bring employers into the classroom and into colleges, and get them to help to shape the curriculum and qualifications, the better it will be in terms of helping those young people get good jobs.
Lord Reid of Cardowan
My Lords, given that we live in an increasingly cyberdominated world where digital and electronic communications will determine the future of this country and employment for many people, what particular efforts are being made to underpin the subjects of science, mathematics, electronics and engineering in the generation who will equip this future for the challenges of our economy in the next generation?
Lord Hill of Oareford
The noble Lord is absolutely right about the importance of those subjects in underpinning those disciplines and the increasing role that they will play in the economy. In order to encourage the skills to which the noble Lord referred: we are driving the take-up of maths and science in schools; recruiting excellent teachers of those subjects and paying them bigger bursaries to get them into teaching; taking forward the programme of university technical colleges, led by my noble friend Lord Baker, which have an emphasis on engineering skills; and my right honourable friend the Secretary of State has brought forward proposals to change the IT curriculum to make it much more open and led by people who know what they are talking about.
Baroness Falkner of Margravine
My Lords, given that the German system was mentioned, is my noble friend aware that German schools are highly selective academically and that it is also possible to move between the vocational and academic sectors within the German framework? The system is very different and the selective part is not, I believe, a route that this country wants to go down.
Lord Hill of Oareford
What we are increasingly seeing in some of our own institutions—for instance, the UTCs to which I referred—is that it is possible in those where non-selective entrance is open for young people to study both academic and rigorous technical qualifications.
Apprenticeships
(11 years, 10 months ago)
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Baroness Healy of Primrose Hill
To ask Her Majesty’s Government what funding they will make available to help young people with special educational needs to enter apprenticeships.
Baroness Garden of Frognal
My Lords, government funding is available for training apprentices of all ages, with full funding for those under 19 and partial funding for adults. We recognise that it may take longer for some learners with special educational needs and learning difficulties or disabilities to be ready to commence their apprenticeship, and enhanced funding is therefore available for some apprentices up to the age of 24. Additional learning support and access-to-work payments can also help with practical support. The Government have recently published an action plan to increase participation in apprenticeships by those with special educational needs.
Baroness Healy of Primrose Hill
Can I seek an assurance that the Government will amend their draft Children and Families Bill, which currently states that local authorities should no longer maintain an education, health and care plan for a young person if they are receiving training as part of an apprenticeship? Given the welcome proposal to replace the statement of special educational needs with the new EHC plan to cover young people up to 25 to help enable them to achieve their full potential, it would be wrong if the Government at the same time created a significant disincentive for young disabled people to enter an apprenticeship, if by doing so they lost essential support to live independently.
Baroness Garden of Frognal
The noble Baroness raises important points and she will be aware that we recently commissioned Peter Little to carry out a review of the accessibility of apprenticeships for disabled people and that we will be introducing the education, health and care plans in 2015 to help monitor the progress of young people on apprenticeships. We will also monitor the situation as we go on to make sure that those young people do not fall between the cracks.
Lord Addington
My Lords, does the Minister agree that there has been a great deal of confusion around apprenticeships? I refer in particular to the status of dyslexics and whether they are allowed to take the final qualification. I draw attention to my interests here. Will my noble friend give an assurance that any examining body that fails to make reasonable adjustments will ultimately lose its ability to become an awarding body?
Baroness Garden of Frognal
I pay tribute to my noble friend, who for many years has been a doughty champion particularly of those with dyslexia, and who has raised awareness of the difficulties that they face. If there is a problem with access to assessment, as he described, it should be taken up first with the centre but also with the awarding body. There is a duty on all awarding bodies to make sure that access to assessment is appropriate to whatever the learning disability is. Certainly the final penalty that the body would pay would be to lose awarding-body status. However, one would hope that the duty it had to its students would kick in long before that happened.
Lord Young of Norwood Green
My Lords, will the Minister confirm whether her action plan includes government departments? Have the Government monitored the number of apprenticeships in government departments that are held by people with disabilities? If this is in the action plan, will the requirement be extended to public procurement contracts?
Baroness Garden of Frognal
My Lords, there is certainly an action plan to increase the number of apprentices with a disability throughout the workforce through all sorts of employers. Certainly, government employers will be included in that plan.
Lord Touhig
My Lords, further to the Answer that the Minister gave to my noble friend Lady Healy, on 6 November Mr Edward Thompson, the children’s Minister, speaking at the Education Select Committee about allowing health and education care plan funding to be used to help youngsters with special educational needs into apprenticeships, said:
“I think a strong case has been made for inclusion of apprenticeships. I am minded to include them in the scope of the Bill”.
Will the Minister say whether this is now government policy?
Baroness Garden of Frognal
I am not sure whether we have got to the point of making it government policy in the Bill, but the noble Lord will know that the Government have committed to take on board the action plan and the recommendations that have come from the Little report. We are looking at them at the moment and hope to implement them, which should make a great difference to the way in which employers are able to give apprenticeships to those with different forms of disability and also to the young people seeking to go down those pathways.
EU: United Kingdom
(11 years, 10 months ago)
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Lord Dykes
To ask Her Majesty’s Government what discussions they will hold with the Government of Germany regarding the future role of the United Kingdom in the European Union.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, Ministers will meet their German counterparts for the third time in January as part of the process of building bilateral co-operation between the cross-departmental European Affairs sub-committee and its German equivalent. We maintain regular bilateral contacts and discuss a wide range of EU-related issues. Noble Lords may be aware of the Foreign Secretary’s speech on the future of the European Union, which he made in Berlin alongside the German Foreign Minister and in which he underlined that the UK has played a leading role in forging EU policy and will continue to do so.
Lord Dykes
My Lords, I thank the Minister for that very positive Answer. She will have noticed in recent days that Germany—a very successful country that does not have our old-fashioned hang-ups about pretend sovereignty—seems to want us to be full-hearted members of the European Union. Does she not agree that there is a marvellous opportunity now for us to reach a sensible accord with Germany and with other leading member states—indeed, with all the member states of the Union—on the future of the extensive budget negotiations, allowing for a blend of financial discipline and important investment in infrastructure, without the Government worrying too much about a small number of Conservative MPs who have old-fashioned views on these matters, and about some UKIP candidates as well?
Baroness Warsi
My Lords, I know that there is a wide variety of opinions in this House, including on my Back Benches. All opinions in the House are valid in their own right. In relation to the budget negotiations, the Prime Minister will soon make a Statement about last week’s meeting. The Leader of the House of Lords will repeat the Statement later today, so it would be inappropriate for me to deal with that. On our relationship with Germany, I agree with my noble friend; we have a strong relationship. Germany is the UK’s second largest export market worldwide. The UK is Germany’s sixth largest trade partner. Great Britain is the first investment destination for German companies. Almost one in six of all foreign companies in Germany are British. There is a strong relationship that continues to grow.
Lord Clinton-Davis
Does the Government’s strategy of aligning Britain with the far right members of the EU alienate or befriend Germany?
Lord Clinton-Davis
What I asked is whether the Government’s strategy of aligning Britain with the far right members of the EU alienates or befriends Germany.
Baroness Warsi
I thank the noble Lord for the question but I disagree with the statement he makes; the Government are not aligning themselves with the far right in Europe.
Lord Dobbs
When my noble friend next has the opportunity, will she take one of her German colleagues to Athens, or indeed to any large city in Greece, to one of its hospitals where patients are not getting medical treatment? Or will she take them to one of its schools, where young children are fainting because of lack of nourishment? Or, even better, will she take them to the ports and airports of Greece where a huge queue of young, ambitious, successful people are desperate to get out of that poor country? Does she accept they are not getting the peace and prosperity they were promised but are instead seeing the death of democracy? There are some people on this side of the House who still take democracy as being a very important asset.
Baroness Warsi
I agree with the noble Lord, democratic legitimacy within the EU is absolutely crucial. A number of polls have shown a fall in contentment about being close to the decision-making within Europe. The noble Lord raises important points and this is why we must continue to play our role within Europe, continue to reform Europe and continue to make it relevant for today’s economies.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, we have time. Perhaps we should hear the noble Lord, Lord Liddle, and then the noble Lord, Lord Pearson?
Lord Liddle
My Lords, all sides of this House want to see a very strong relationship with Germany and regard it as one of our leading partners in a European Union in which we want to play a leading role. However, does the Minister seriously believe that our ability to be taken seriously by Germany is enhanced by all the talk of renegotiation, looser relationships and referenda—maybe now two referenda, one before and one after the general election? When will the Government put a stop to this nonsense on their own Back Benches?
Baroness Warsi
My Lords, I do not believe the Government should ever step away from acting in what is Britain’s national interest. It is important that the UK sets out very clearly, with its German counterparts or any other member state within the EU, those areas on which we agree. With Germany we agree on the need for further competitiveness, the need to further the single market and the need for more free trade agreements. However, the coalition Government must also be bold and brave enough clearly and loudly to set out Britain’s national interest within the EU.
Lord Pearson of Rannoch
My Lords, has the noble Baroness read yet another respectable analysis, this time from Professor Tim Congdon, which finds that our EU membership is costing us about 10% of GDP or £150 billion per annum? Is it not now obvious, even to Her Majesty’s Government, that our prosperous future lies outside the EU and free of control from the bloated octopus in Brussels?
Baroness Warsi
The noble Lord makes an important point but I do not intend to trade academic reports from the Dispatch Box. However, if he has the time, I shall be happy to give him a briefing on the economic importance of our continued membership of the EU.
Lord Phillips of Sudbury
My Lords, does my noble friend the Minister accept that the EU is hugely complicated and that by and large the citizens of this country have only a very partial understanding both of its status quo and of the arguments that now go on in this place? Can the Government do anything about reducing that gap in understanding?
Baroness Warsi
It is important that there is further and better understanding of Britain’s role in the European Union as well as the role of the European Union in the interests of Britain. However, there are certain matters that the public are entirely clear about. They were raised by all the political parties during the last general election, and they were that no further powers should pass to the European Union without the say-so of the British people. The coalition Government took that on board and it is why we introduced a referendum lock as part of the European Union Act passed last year.
Lord Tomlinson
Does the noble Baroness agree that far from making an important point, the noble Lord, Lord Pearson, made a point that would amount to the economic destruction of this country? Does she further agree that there is no future for Great Britain as a trading nation in the isolationism which she seems to support on her own Back Benches?
Baroness Warsi
My Lords, the coalition Government are clear that we believe that the best interests of Britain’s economic future will be served by being a member and part of the European Union, but I would also say that even though I may not agree with some of the points made by noble Lords, it should be said that they are important points which further the debate. That is why I have said that I am more than happy to put the contrary view to the noble Lord, which I hope he will take up.
Lord Stoddart of Swindon
Is it not odd that we should have a Question in this House asking whether the Government will hold discussions with the Government of Germany regarding the role of the United Kingdom in the European Union? I would have thought it would be very much better if the Government had a discussion with the voters of this country and let them say what they would prefer the future of Britain to be, either in or out of the European Union.
Baroness Warsi
Various discussions are taking place at different levels. It is important that we should have a discussion with the people of this country and they made that clear before the last election in relation to what they expected this Government to do. That is why we introduced a referendum lock and why we are doing an audit of which powers should stay within the European Union and which competences we should fight to bring back. It is also why they wanted us to enter into tough budget negotiations, which the Prime Minister continues to do. However, I think that it is also important for us to have honest, frank and open conversations with other members of the European Union to ensure that we get the best reform possible so that the European Union acts in the best interests of all the member states, including Britain.
European Union (Approvals) Bill [HL]
(11 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text
Child Support Management of Payments and Arrears (Amendment) Regulations 2012
(11 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stowell of Beeston
That the draft regulations laid before the House on 15 October be approved.
Relevant document: 8th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 20 November.
Prisons (Interference with Wireless Telegraphy) Bill
(11 years, 10 months ago)
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Lord Laming
My Lords, I understand that no amendments have been set down to this Bill and that no noble Lords have indicated that they wish to move a manuscript amendment or to speak in Committee. Unless therefore any noble Lord objects, I beg to move that the order of commitment be discharged.
Financial Services Bill
(11 years, 10 months ago)
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Lord Sassoon
“137DA Rules requiring participation in benchmark
(1) The power of the FCA to make general rules includes power to make rules requiring authorised persons to take specified steps in connection with the setting by a specified person of a specified benchmark.
(2) The rules may in particular—
(a) require authorised persons to whom the rules apply to provide information of a specified kind, or expressions of opinion as to specified matters, to persons determined in accordance with the rules;(b) make provision about the form in which and the time by which any information or expression of opinion is to be provided;(c) make provision by reference to any code or other document published by the person responsible for the setting of the benchmark or by any other person determined in accordance with the rules, as the code or other document has effect from time to time.(3) Rules making provision of the kind mentioned in subsection (2)(c) may provide that the code of practice or other document is to be capable of affecting obligations imposed by the rules only if specified requirements are met in relation to it.
(4) In this section—
“benchmark” has the meaning given in section 22(6);
“specified” means specified in or determined in accordance with the rules.”
Lord Eatwell
Lord Sassoon
“(4) “The relevant exemption provisions” are the following provisions of the Financial Services Act 2012—
(a) section (Misleading impressions)(9)(b);(b) section (Misleading statements etc in relation to benchmarks)(4)(a).”
Lord Sassoon
The Commercial Secretary to the Treasury (Lord Sassoon)
There was a lot of approval for those amendments but not so many people are staying to listen to the fascinating start of today’s discussion on the important issue of financial promotions. The regulation of financial promotions may seem relatively minor in importance and impact when compared with some of the other major and systemic issues covered by the Bill but, in fact, the appropriate regulation of financial promotions to ensure that they are clear, fair and not misleading is absolutely vital. It is a first and essential step on the road to preventing consumer detriment happening in the first place.
The fundamental shortcoming of the current financial promotions regime is that in most cases the FSA is not able to publish the fact that it has asked a firm to withdraw a misleading promotion. The Government are committed to ensuring both that the regulator can and does take action in relation to inappropriate promotions and that the regulator is seen to be taking such action. However, as I said when we last discussed this power on 8 October, there may be circumstances when it is not necessary or appropriate to publish the information about a direction. For example, where the firm is able to explain to the FCA why the promotion is not in fact misleading, there is little purpose in the FCA being required to say, “We thought there was a problem with this promotion and required the firm to withdraw it in the short term, but we discussed it with the firm and were persuaded that the promotion was in fact acceptable”. This does not necessarily help the FCA, the firm in question or consumers.
In our discussions on 8 October, the noble Baroness, Lady Hayter of Kentish Town, expressed her support for the new financial promotions power but cautioned:
“We would not want to see it diminished in any way”.—[Official Report, 8 October 2012; col. 880.]
I share her view, and would like to reassure her that changing “must” to “may” here does not in any way undermine, diminish or weaken the power for the FCA to step in and require promotions which the FCA considers may be inappropriate to be withdrawn. It simply gives the regulator some helpful discretion as to how it approaches disclosure. I can confirm that we do not expect this amendment to result in any change of policy in how the regulator exercises the power to direct firms to withdraw inappropriate promotions. I hope that my explanation of the Government’s thinking in this area has been helpful to the House. I beg to move.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for what I think he thought was reassurance on this amendment. Nevertheless, he will not be surprised to know that I still find it regrettable that it makes permissive, rather than obligatory, the publication of names and details where a firm has been obliged to withdraw a misleading advertisement rather than withdrawing it voluntarily.
At the very least we seek an assurance from the Minister that the default is publication, with non-publication being the exception, rather than each finding of misleading ads having then to consider whether publication of the fact should proceed. Otherwise, it is a complete reversal of what I think the Government seek to do. Had the Government accepted my amendment earlier, which would have introduced a code of conduct for financial services, we may have had to rely much less on this, because there would have been fewer ads to withdraw.
I will take only two seconds here. I was very interested to read on Thursday that the Chancellor of the Exchequer accepted the need for professional standards to keep banks’ behaviour in check. It is a shame that he did not tell his noble friends beforehand, otherwise perhaps the Minister could have accepted our amendments. Perhaps, in compensation, the Minister will take a moment when replying to indicate what sort of organisation the Chancellor envisaged should be set up to ensure professional standards in the banking industry.
This is of course relevant to the Bill because it is about preventing bad behaviour, whereas the amendment that the noble Lord has just moved is about dealing with something after the event. For the moment, will the Minister assure the House that the default position will be to publish the findings on misleading promotions, with details being withheld only in exceptional circumstances?
Lord Peston
Partly because of the noise I did not quite get all the argument that the noble Lord was putting forward. Is his argument that the FCA thought there was a problem, got involved, then heard some cogent reasoning from the firm concerned and therefore felt that there was no need for this to become public knowledge? That, I think, is the noble Lord’s argument, but there is one bit that troubles me. Would firms—and consumers, for that matter—not benefit if they knew about the problem and discovered that there was a good case for not proceeding with it? In other words, one of the things that we lose from not making what happened public is that, outside of this, no one gets to learn anything from what happens. Can I persuade the Minister just to respond to that?
I agree with my noble friend on the Front Bench, of course, that if we had had a code of conduct in the first place, along the lines that she suggested, we would not have a problem anyway.
Lord Hodgson of Astley Abbotts
I understand that my noble friend on the Front Bench is saying that you would not need to publicise it because there was no problem. All you would be doing is raising concerns in the minds of the consumer about a problem that in fact did not exist, because the regulator was satisfied by the explanation it had received from the firm in question. It would be entirely inappropriate to raise questions about a firm’s probity and behaviour when there was no problem in any case and the regulator was convinced of that fact.
Lord Peston
That is totally—going back into the history of economic thought—to misunderstand the most fundamental contribution that Adam Smith made to economics, which is that it is the consumer who matters and not the firm. The noble Lord and several other noble Lords on that side have spent a large part of the debate on this Bill deciding that the firm was what mattered. The fact is that the consumer is what matters, and the consumer needs to know that there was a problem in principle even though it turns out that there was not a problem in fact. I think the noble Lord is also arguing that one is not allowed to speak twice because we are on Report—I thought he was shaking his head when I got to my feet again—but I had not yet finished. However, I am finished now.
Lord Sassoon
It did go through my mind to ask my noble friend Lord Newby to assure me that we were back on Report—because we went back into Committee mode for a bit last week—so I am grateful to the noble Lord, Lord Peston, for confirming that we are indeed on Report.
As I said in our previous discussion on professional standards, and as the noble Baroness knows full well, the Joint Committee of the two Houses is working away on this—indeed, I think it is sitting again this afternoon; I am looking around to see who is here and who is not in their place—and it will come forward with its suggestion as to what would be the appropriate body for professional standards.
Sadly, although professional standards are enormously important and they absolutely need to be raised in the industry, that does not mean that we do not need the construct that we are talking about in this clause. However, I can confirm to the noble Baroness that I expect that the default will be to publish and that there will be only limited circumstances, of which I have described one—although I cannot think of many others—in which it would wish not to publish. Indeed, other provisions in the Bill require the FSA to have regard to the desirability in more general terms of publishing as a back-stop.
Lord Barnett
Initially, I understood the Minister to say that the policy is the same after this amendment as before. I find that difficult to understand—if that is what he said. We are back to this “must” and “may” again. Saying that the FCA may publish such information is very different from saying that it must publish it. How does the Minister explain the fact that it is now only “may” and it is no different in policy?
Lord Sassoon
My Lords, as we have discussed before—and perhaps we will come back to it in other amendments over the next couple of sessions—the mere fact of putting in the Bill a statement with a “may” in it actually carries much more than the common-sense connotation of “may”; it holds up a presumption that something is going to happen in this area. Here, we are merely allowing a small amount of room for what my noble friend explained as circumstances in which we would all agree it was patently absurd to give the full decision, if in fact it was based on a misunderstanding and the problem has gone away and we are just seeking to do a bit of tidying-up based on reflection on a discussion of this very point in October.
Lord Flight
“137S Limitation
Neither regulator may make rules that require any person to review, take action with regard to, pay compensation for or otherwise effect redress in relation to any transaction, sale, provision of advice, exercise of discretion or other act or omission where an action based on that event would fall outside the time limits prescribed under the Limitation Act 1980.”
Lord Flight
My Lords, I raised the issue of the 15-year longstop in Committee. The Minister gave me some comfort that the Treasury was looking at this.
I have always thought it unreasonable in principle that financial advisers should be picked on as a group not subject to the statute of limitations. A second-hand car dealer is subject to the statute of limitations, as are all sorts of other people who might sell people other products. It is particularly important right now because with RDR, there will be a large number of smaller financial advisers going out of business and wanting to close down their businesses. As long as the statute of limitations does not apply, those businesses have an open-ended possible liability.
A survey was done a while back by the Association of Professional Financial Advisers, which found that 75% of consumers thought there should be a limit applying to financial advisers. Interestingly, as many as 23% felt that all liabilities should cease once someone ceased to be a client of an adviser.
I am hopeful that the Minister may have something a little more explicit to tell the House today but my strong request is that this matter should be addressed now. If it is, it will make what is going to happen next year in terms of the impact of RDR a great deal more manageable. I beg to move.
Lord Phillips of Sudbury
Can I now intervene, as I intended to, before the noble Lord, Lord Flight, sits down?
Lord Phillips of Sudbury
I thank my noble friend. I withdraw the sedentary remark. The noble Lord is experienced in these affairs, so can he assure the House that the situation will not arise where somebody with no financial sophistication whatever enters into arrangements with one of the agents about whom he is talking—for example, in respect of a pension—only to find 15 years later that there has been a gross failure of propriety?
Lord Flight
I do not entirely understand the circumstances that the noble Lord envisages. Someone may have been advised to take out a pension with one of the life companies through their financial adviser. It is possible that the individual’s circumstances, the law or the economic circumstances will change and that, with hindsight, the individual might have taken out a different sort of pension. At the end of the day, the life company is the provider of the pension and it is that company with which the individual will be dealing in their retirement. I think that a 15-year period is fair for a financial adviser, as it is for any other occupation in which an individual is engaged.
Lord Phillips of Sudbury
Very often a person taking out a pension, in particular, is wholly dependent upon the advice of the financial adviser.
Baroness Garden of Frognal
I remind my noble friend that on Report one may speak only once to any amendment.
Lord Flight
My Lords, the biggest contributors to messing up pensions over the past 15 years or so—making them so complicated—have been Governments. I was looking into my own pension arrangements and found that I could not understand them.
Baroness Garden of Frognal
I think that the rule applies also to the mover of the amendment.
Lord Peston
I am sorry; I am a bit lost on the procedure here. I was under the impression that if someone was moving an amendment he could be asked any number of questions and reply to them. When did we invent a rule that said that we could not ask questions and ask the person moving the amendment to answer them? I am not convinced that we are not making a new rule here. By the way, that is not my speech, which I am about to make.
Baroness Garden of Frognal
My Lords, on Report the mover may reply to any questions at the end but does not reply individually in the course of the debate.
Lord Peston
I hate to prolong this but I am not certain that that is right. How are we to conduct the clarification of the amendment if we do not get an answer to an early question in order to ask a later one? I am totally lost as to how we are handling this. We should not forget that this is an immensely complicated Bill and many of us have had great difficulties dealing with it. I have a question for the noble Lord, Lord Flight, just to clarify matters and it may be that someone else will build on that, but we are being told that we cannot do that. That does not seem to be a very helpful way of dealing with this Bill.
Baroness Garden of Frognal
I am sorry to intervene again on the noble Lord, Lord Peston, who has many more years of experience of this House than I do, but this is not the form that Report stage takes. The mover may reply to questions at the end of the debate, but the debate does not go backwards and forwards in the way that it does at other stages of the Bill.
Lord Stewartby
My Lords, I must be very brief and I shall speak only once. I want to say something in support of my noble friend Lord Flight, who made a very strong case. I have never been able to understand why financial advisers alone have no longstop for their potential liability in future years. I hope that this opportunity of having legislation which is relevant can be taken to set that right.
Lord Peston
Perhaps I could just ask my question now, please. When the noble Lord, Lord Flight, talked about financial advisers, was he talking only about people who advise and receive a payment for their advice, or does his amendment cover those who give advice without payment?
Lord Flight
I think that I was interrupted right the way through, as a matter of fact.
Lord Eatwell
My Lords, the government Front Bench should calm down and allow us to conduct this discussion broadly under Report mechanisms but in a way which takes us forward on what, as my noble friend has said, is an enormously complicated Bill.
I am afraid that I think the proposal of the noble Lord, Lord Flight, is unfortunate and I cannot support it. It is unreasonable to provide this sort of protection to financial advisers, who should take full and appropriate care in the advice that they give. If they have taken full and appropriate care, they will be able to defend themselves at a later stage against the problem that the noble Lord, Lord Phillips, raised a few minutes ago, but I think it inappropriate that they should not be sensitive to potential comeback for advice which is inappropriate and misconceived.
Lord Newby
My Lords, when we debated this issue in Committee, my noble friend Lord Sassoon made it clear that this was an important issue for the regulator to review. The FSA has now committed to consider whether to investigate the case for a longstop as part of its business planning for 2014-15.
The amendment deals with the Limitation Act. It is important to be clear about both the nature of the issue and why I do not think that requiring the regulators to apply the Limitation Act when making rules provides the solution.
First, it is important to be clear that time limits apply for consumers bringing complaints to the FOS. These are: six years from the event that the consumer is complaining about, or, if later, three years after the consumer became aware, or ought to have become reasonably aware, that they had cause for complaint. The question which we are now debating is whether there should be a further absolute or overriding limit, possibly of 15 years. This is an extremely important question for the regulator to review and it is clear that it needs to take into account the particular features of financial services and financial service products in doing so.
When the FSA considered the issue previously, it noted that the long-term nature of some financial services products means that it can take many years for consumers to be made aware that they may have suffered detriment. An example from recent years includes inappropriate pension advice to switch from one investment or one type of pension to another. Consumers did not necessarily realise that this advice was inappropriate until many years later and as they approached retirement. This kind of advice was the subject of the FSA’s pensions review covering the period 1988 to 1994, and concerns about advice given in this period came to light only some years later. Advice from this period is still the subject of consumer complaints now.
It is important to realise that many of the matters that the FCA or PRA, or indeed the FOS, which is also relevant here, will be dealing with will not be subject to the Limitation Act at all. The Act applies to certain causes of action in private law, such as actions for breach of contract or negligence, but the FOS is required to determine cases by reference to what is,
“fair and reasonable in all the circumstances of the case”.
In some cases, there will be no private law course of action and so nothing for the Limitation Act to apply to.
It is also worth remembering that the Limitation Act is very context-specific legislation. Time limits vary considerably according to the nature of the claim; for example, the time limit for libel is one year whereas for negligence it is six years. The time limit also varies on the facts of the case. For example, it is extended in certain cases involving fraud or where the claimant has a disability. Even the 15-year, longstop period that applies in cases of negligence has exceptions—for example, for claims involving personal injury. Therefore, it would be particularly inappropriate as a guide for the FCA in its rule-making powers. It would be next to impossible for the FCA to know how the Limitation Act would apply to all the cases that could be subject to any proposed rule. Far from bringing the financial services into line with other sectors, we would, in our view, be failing to acknowledge that in financial services, as in other sectors, there are many claims to which the Limitation Act does not apply.
Having said that, the regulator will look again at the case for a longstop. In view of my arguments and this commitment by the regulator, I hope that my noble friend will feel able to withdraw his amendment.
Lord Flight
My Lords, the key point here is that, in setting the rules for the Financial Ombudsman Service, the FSA decided that no reasonable limit would be provided and that complaints should be brought for an unlimited period of time. This is effectively where the financial adviser industry does not, therefore, have the protection of the statute of limitations.
This area needs to be looked at urgently. I repeat that looking at it in Section 204 is not urgent enough because, assuming that the RDR reforms are not changed, a large number of financial advisers will be going out of business in 2013. For their clients, the best hope is that it will be possible to sell those businesses on to somebody else, but obviously none of them can be sold if there is an unknown exposure to complaints down the line. For better or worse, it is well known that the industry feels extremely upset about the fact that it is picked on in this particular way.
I can see that I will not be able to persuade the Government to do anything immediately and that what we have is at least better than nothing. However, I repeat my exhortation that the Government should consider working with the FSA for a greater urgency in this matter so as it might be addressed coincidently with the RDR. I beg leave to withdraw the amendment.
Lord Newby
Lord Hodgson of Astley Abbotts
My Lords, I shall speak also to Amendments 84B and 116A. This issue has arisen since we went through this part of the Bill in Committee. I seek some ministerial reassurance. It concerns common investment funds and common deposit funds. These provide means by which charities—particularly smaller charities—can access financial expertise that they could not do on their own, in essence by entering into some form of pooling arrangement. The advantage, therefore, is that they can hire a more sophisticated and expert manager than they might be able to do on their own because they are small and, by pooling, they can also possibly obtain reduced fees.
I declare an interest as chairman of the Armed Forces Charities Advisory Committee, which is a common investment fund with some £200 million under management and acts for several hundred small, individual service charities from the Army, the Navy and the Air Force. In part, I am the author of my own misfortune because the investment activities of these groups are undertaken by FSA-regulated firms but the actual vehicles are regulated by the Charity Commission. In my review of the Charities Act, I recommended that they should be transferred to the Financial Services Authority, because they are clearly investment vehicles and, although the Charity Commission is a splendid body of men and women, it is not equipped to undertake financial regulation. I have concerns about the future of those groups in our brave new world.
Briefly, common deposit funds are often seen as money market funds, but they are not, because they are not unitised. Each depositor has an aligned deposit for the individual charity. They do not pay out all the interest; they can therefore accumulate modest reserves over time. The amendment enables them to lend at longer maturities; they do not have to lend it all at very short maturities. In consequence, because they always have a leaner operating structure, they can offer better rates of interest to their participating charities. For example, at the end of September 2012, the average common deposit fund interest rate was 1.075%, compared to general availability of 0.627%. That is an improvement of about 0.5%, which is obviously valuable to charities in these days of very low interest rates. They are widely used; there are 160,000 registered charities, but there were 44,000 depositors in those funds at the end of September, and 93% of them have less than £100,000 as the deposit.
What is the problem? The problem is that it is a very small group indeed. There are only four deposit funds and no more will be created. The reassurance I seek from my noble friend is that the FCA will be sympathetic to that group amid all the other pressures that it will face after it becomes empowered. Will it be prepared to consider innovation even-handedly, or will one size fits all be the default option? If it were to impose one size fits all, which would probably be to treat them as money market funds, the funds would have to unitise. They would have to pay out all their reserves and therefore not be able to offer the improved interest rates that they can now.
These three amendments are an attempt to fly some air cover over common investment funds and common deposit funds. The amendments apply to both CIFs and CDFs. They would require the FCA or the PRA to consult on any rule which applies to CIFs and CDFs, to have regard to any representations made and to carry out an impact assessment considering the differences between CIFs, CDFs and CISs. Amendment 116A gives the Treasury the power to exempt CIFs and CDFs from any relevant provisions made under FiSMA 2000. The effect of inserting a consultation clause at the bottom of page 102 is to oblige the FCA to consider the particular features of those two instruments and to empower the Treasury to exempt them from rules that the FCA and the PRA may wish to make under the alternative investment fund managers directive, where it is willing to do so.
As I said, they are modest amendments for a small group of funds, but they are designed to protect them because they are performing a very useful service. I regard how they are in fact treated in the brave new world as a true test of all the FCA’s fine words about facilitating innovation. I look for my noble friend’s reassurance on that, and I beg to move.
Lord Phillips of Sudbury
My Lords, I support, dot and comma, everything that the noble Lord, Lord Hodgson, said. The three amendments in this group are couched in prudent terms that give discretion to the FCA to recognise the fact that, to use the adage, one size does not fit all. If there is in this world one great gulf, it is between some of the more sophisticated, City-type deposit funds and, at the other side of the sea, those of charities. The discretion is confined expressly to charities, or funds, I should say, established under the Charities Act 1960, the Charities Act 1993 or the Charities Act 2011, which, in my view, provides the necessary reassurance that this cannot be a horse that runs wild. I hope, therefore, that the Government will feel free to accept this group of amendments.
Lord Newby
My Lords, I have just discovered that I need to declare an interest in relation to these amendments. I have been looking at the small number of existing CDFs, and I see that one of them is the Church of England Deposit Fund, which I suspect is a significant part of the Church of England’s investment. This almost certainly means that my wife’s pension depends on this fund doing well. So, speaking personally, I have every incentive to ensure that these funds are appropriately regulated. In any event, I was minded to declare an interest.
I shall take the amendments in turn. In his report on the review of the Charities Act 2006, my noble friend recommended that:
“Regulation of Common Investment and Common Deposit Funds should pass from the Charity Commission to the FSA, as the Commission does not have the expertise to regulate what are primarily financial products (albeit only available to charities)”.
He has set out today why he has concerns that the regulatory approach by the PRA or FCA may not be appropriate for these very specific structures. The amendments would require the regulators to set out, as part of their consultation, where they see rules or requirements having a particular impact on CIFs or CDFs, and gives the Treasury the power to disapply requirements that apply to collective investment schemes. I will briefly set out why I think that these amendments are not appropriate or necessary, while agreeing absolutely with the thrust of my noble friend’s sentiments about them.
First, we do not believe that they are appropriate because they pre-empt the decision on whether the regulation of CIFs and CDFs should be transferred to the FSA, and later the new regulators. The Government have not yet responded to my noble friend’s report, and I do not want to use this debate on one of his proposals to pre-empt the full and proper response to the report as a whole which the Government will publish soon. In addition, in his report my noble friend notes that the Treasury,
“is already considering how best to reform the regulation of CIFs and CDFs as part of their work to implement the Alternative Investment Fund Managers Directive (AIFMD), and as part of this are considering possible legislative opportunities”.
That is, of course, correct and the Government will therefore set out their position on this matter when they consult on their approach on implementing the AIFMD early in the new year and respond to my noble friend’s report at that point.
I do not think that these amendments are necessary or appropriate even if the regulation of these funds moves across to the FCA. They are not necessary because the regulator already has to take a proportionate approach, sensitive to the needs and goals of different types of financial institutions and the needs and objectives of different consumers. Earlier on Report we debated and approved two government amendments requiring the FCA to have regard to the differing expectations of different consumers and to the desirability of exercising its functions in a way that recognises the differences in the nature and objectives of different businesses. While we were talking at that point principally about various social investment vehicles, the thoughts and principles which underlay our tabling of those amendments apply equally to these amendments; namely, that this is a specific small sector that needs to be dealt with differently from the rest of regulation and that the FCA needs to know from the start that it is expected to show sensitivity and proportionality in dealing with these different and rather unusual categories. That is what our amendments seek to achieve and we are confident that they will have that effect.
The regulators will have other tools to consider the needs of individual institutions, such as the ones that we are talking about under these amendments. For example, they can issue a waiver from a rule, meaning that a particular firm does not have to comply with a requirement, or issue a modification to a rule that enables the applicant to comply with an amended rule that better fits its own circumstances. All applications for waivers or modifications are considered on their individual merits, and there is no reason why rules that apply appropriately to other, larger and different sorts of funds should necessarily apply to the funds that we are discussing now, because the waiver can be brought into effect. There is therefore no need to give the Treasury the kind of power envisaged by Amendment 116A, which would cut across the independence of the regulator. I hope that I have been able to persuade my noble friend that we are sympathetic to what he is seeking to achieve and that we believe that the amendments we have put into the Bill will achieve the objectives that he is seeking. I hope that, in the light of that, he will feel able to withdraw his amendments.
Lord Hodgson of Astley Abbotts
My Lords, I am grateful for that extensive and full reply, and I appreciate its sympathetic tone. I also recognise that we have had two amendments from the Government in Committee and on Report, broadening, and better addressing, the issue of social investment. My concern remains that, in the heavy-hitting consultation on things like the alternative investment fund managers directive, small battalions will get lost. However, the Minister has said that the Treasury and the FCA will be sensitive and proportionate, and I suppose that is as far as we are going to get today. I am grateful for that small step, and we shall be watching to see how sensitive and proportionate they are. In the mean time, I beg leave to withdraw the amendment.
Lord Sassoon
“140CA Co-ordination with FCA on exercise of functions to promote competition
(1) The FCA and the competition authority must coordinate the exercise of their functions to promote competition in financial services.
(2) The FCA and the competition authority must prepare and maintain a memorandum of understanding which describes the role of each regulator in relation to promoting competition in financial services markets.
(3) The memorandum of understanding should make clear the OFT will only conduct a market study into a financial services market within the regulatory remit of the FCA in exceptional circumstances.
(4) The regulator must publish in such manner as it thinks fit the memorandum of understanding.”
Baroness Hayter of Kentish Town
My Lords, in moving this amendment standing in my name and that of my noble friend Lord Eatwell, I can hardly do better than quote directly from the Association of British Insurers. The association supports the new rule for the financial services regulator to promote competition in financial services because it believes that properly functioning, competitive markets can deliver good outcomes for consumers. However, the ABI urges further consideration of the practical implications of the FCA’s enhanced role in ensuring such competition. Given that the OFT, and later the CMA, will retain general competition law powers and the right to conduct market studies in financial services, there is, says the ABI, a risk of duplication and/or a lack of co-ordination between the two bodies. Uncertainty about the expected role of the two organisations is unlikely to lead to good regulation either for the industry or consumers. The ABI therefore thinks that the FCA and the OFT should be subject to a statutory duty to co-operate and to produce a memorandum of understanding. While the FSA and the OFT have voluntarily published an MoU, this will become a “must have” when the FCA receives its enhanced competition remit. The MoU should be a statutory requirement and should make clear that the FCA would normally take the lead on competition matters in financial services, with the OFT undertaking market studies only in exceptional circumstances. While the OFT and the Competition Commission and, later, the CMA would lead on enforcing the Competition Act—for example, over cartels—it would be the FCA, as the specialist regulator, that would be best placed to conduct analysis of financial services markets and pursue any necessary regulatory changes. It is for these reasons that the ABI has supported Amendment 86A.
Those in this House who are also following the Enterprise and Regulatory Reform Bill, which will bring about the merger of the OFT and the Competition Commission into the CMA, will have been struck by the comments in government briefings on financial services. The BIS papers on the ERR Bill stress the FCA’s stronger role in promoting competition compared to the FSA at the moment. It notes that both the CMA—the Competition Markets Authority—and the FCA will regulate financial services, with the FCA being the lead regulator and the roles of the two bodies therefore complementary. BIS goes on to state that the FCA will have a mechanism to make sure that the CMA’s powers and expertise are brought to bear in financial services. The CMA will have a mechanism to review competition in financial services and to recommend that the FCA takes action. Indeed, the FCA will have a power of referral to the OFT which will not prevent the FCA taking the lead in addressing competition issues where it is better placed to do so. I hope that noble Lords are all following this.
The FCA will also be required to respond to any recommendation given by the competition authorities. Furthermore, under the Enterprise and Regulatory Reform Bill, the CMA will be able to appoint a third party to monitor the implementation and compliance of remedies. Within financial services, we assume that the FCA could be one such third party where this is deemed appropriate by it and the CMA.
As must be clear from the briefings from BIS, which I assume noble Lords from HMT have also read, there are major competition issues within the financial sector, yet the ERR Bill regrettably makes no mention of the uncompetitive nature of the banking sector, which is highly damaging to our economy. We are all aware of the denial of access to finance being experienced by SMEs. We need a more diverse and competitive banking system, and the PRA, FCA and CMA simply must address this if the financial sector is to serve the wider economy. Neither the Bill before us today nor the ERR Bill indicates how this issue will be tackled, but tackled it must be. It must be crystal clear, as BIS says in its note, that the FCA and CMA will need a memorandum of understanding.
It is not enough for such a vital document to exist on a voluntary basis. It should be a requirement. Equally important, it should be visible to all with an interest and should therefore be published by both parties. In due course, I will seek to lay this responsibility on the CMA under the ERR Bill. Today, we seek to lay it on the FCA in this amendment. Similarly, I will in due course propose that the CMA has an obligation to co-ordinate its work with the FCA. Today, we ask the equivalent of the FCA. I beg to move.
Viscount Trenchard
My Lords, I support the amendment because I believe that there is too little in the Bill about the maintenance of competition. It is too confused. I personally regret that the PRA has no need to have regard to the maintenance of the competitiveness of the market place. The co-ordination between the FCA and the CMA, as the amendment would require, would help to concentrate minds on exactly how important competitiveness is and to increase awareness among consumers as well as firms and participants. That competition is extremely important and must be maintained and, where possible, enhanced. The amendment would help in that regard and I am inclined to support it.
Lord Peston
My Lords, Report is a very late stage of a Bill. I must confess that one of the benefits of my noble friend’s amendment is that I realise yet again that I do not understand a vital section of the Bill. Before elaborating on that, I will say that I entirely agree with the noble Viscount, Lord Trenchard, that competitiveness in this area, as in virtually every other area, is of the essence. If we are interested in protecting the consumer, the best way of doing that is with competition between the suppliers of whatever is being supplied.
My noble friend’s amendment is about co-ordination of the FCA and the competition authorities. My difficulty—and I am sure that I am at fault, and not the drafters of the Bill—is that this whole section of the Bill does not seem to be specifically about the relationship between, in this case, the regulator and the competition authorities, or about the provision of financial services. I am puzzled, and so the Minister replying from the Front Bench could help me a great deal if he explains why subsection (5), lines 33-35, refers to,
“the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom”.
In other words, it looks as if this is a directive to I do not know who, to do with competition throughout the economy. It does not say “through the acquisition of financial services”, let alone my noble friend’s additionally vital point: financial services and banking services. I therefore make a plea for clarification of what this is about.
The central question is that although we favour competition, the one area we do not favour is competition between the regulators and the competition authorities. If there is one area where competition would not be appropriate, it is that one. They need to get their act together and decide who does what. What bothers me is that, even within the context of my noble friend’s amendment, it is not clear what the memorandum of understanding would have as its basic principle. Wearing my economics hat, I am inclined to say that when it comes to competition the dominant authority should be the competition authority. I am not sure whether my noble friend took that view, or whether he left it as an open question, but it is certainly something on which we need to take a view.
I can find no other way of interpreting the Bill, because it is all about advice to the regulator. My reading of the Bill is that the role of the competition authority is to warn the regulator that what you are doing may distort, limit and damage competition generally. In other words, the lead body in this is the competition authority. I put these as statements, but they are meant to be put interrogatively. In order to understand this section of the Bill, I would like to know the answers to my questions. Who is to take the lead on this? Who has most responsibility to promote competition, and who must therefore take heed of the other if what they are doing will damage competition?
I am sorry that this is all a bit convoluted, but I am not to blame for that. What is to blame is that this Bill is a mess, as my noble friend Lord Barnett and I keep pointing out. It was drafted too quickly, it has not been thought through, and there is no better example of that than this section.
Lord Phillips of Sudbury
My Lords, I understand why this amendment has been brought forward. My concern is that the FCA has three operational objectives under new Section 1B(3) to be inserted into FiSMA; namely, consumer protection, integrity and competition. I am not entirely satisfied that Amendment 86A necessarily protects the integrity objective. I have been concerned throughout the Bill that, as between these three objectives, integrity is the absolute necessity of any financial market and has been woefully lacking in recent years. If the Minister has a view on whether Amendment 86A respects the integrity objective, I am sure that the House will be grateful to know the Government’s view. Otherwise, I am concerned on that basis.
Lord Borrie
Perhaps I may intervene for a moment to indicate that I feel that the basic principle—the opening words—of this amendment is extremely sensible and well worth while because it is concerned with the co-ordination of functions of two separate bodies which might otherwise conflict. Therefore, the notion that they should devise a memorandum of understanding seems very sensible.
I have to say to my respected and noble friend Lady Hayter that I am not sure that she has explained why, under new Section 140CA(3) to be inserted into FiSMA under Amendment 86A, it should be only in “exceptional circumstances” that the OFT should conduct a market study into financial services. On the face of it, that seems a sensible matter. It must be based on the notion that the Financial Conduct Authority has the greater experience, the greater expertise and the greater knowledge of matters affecting its remit.
However, in some cases where there is a need for an inquiry, known as a market study, into an anti-competitive practice of some sort, the greater experience may rest with the competition authority rather than with the FCA. It may not have come across, let us say, predatory pricing, cartels or some other aspect of anti-competitive activity, whereas the OFT might have a lot of experience on the matter.
In summary, co-ordination of the two authorities seems a sensible way of working and a memorandum of understanding is a sensible way to deal with it. But I am not sure why only in “exceptional circumstances” should the lead be taken by the FCA.
Lord Barnett
My Lords, this whole section implies that the regulator is not necessarily the OFT. I thought that the regulator of the Competition Commission was the OFT. I am now totally bemused as to whether the OFT or the FCA is the main regulator.
Lord Barnett
The FCA is the regulator but the OFT is referred to throughout this section of the Bill. Now, under new Section 140A, we have the FCA as well. This new section is headed, “Interpretation”, which should be interpreting for us—although I am blessed if I am interpreted in that sense. Consultation between the bodies must be sensible. I assumed that that would happen and I assume that the Minister will tell us that this amendment again is unnecessary and therefore should not be in the Bill. The officials should reply to this debate because only they understand what is being talked about because they drafted it. I assume that the Minister was not responsible for the drafting: he has enough to do without drafting a Bill of this size.
Who is the regulator here? If it is the FCA, what is the OFT doing? Perhaps the Minister will tell us. Who is the lead regulator? Is it the FCA, as is implied here, or the OFT? I am totally confused but, no doubt, he will be able to explain everything because it is written there in front of him.
Lord Newby
My Lords, perhaps I may deal first with the amendments and then come on to some of the specific points that noble Lords have made about them.
The amendment and Amendment 106ZB would require the FCA to put in place a statutory MoU with the competition authority. Amendment 86A would additionally restrict the competition authority to carrying out market studies in financial services markets only in exceptional circumstances.
Amendment 106ZA seeks to provide for market investigation reference powers for the FCA. There are differing views on whether the FCA should have market investigation powers. The Government accepted the recommendation of the Treasury Select Committee that the case for MIR powers had not yet been made and that the issue should be reviewed when the FCA had bedded into that new role. The Bill instead gives the FCA a power to make a reference to the OFT or, in future, the Competition and Markets Authority, which would be very similar to a market investigation reference power but would leave the decision over whether to launch a second phase of investigation with the OFT or the Competition and Markets Authority. The OFT may choose to make an MIR without carrying out a further market study of its own, thereby avoiding duplication and delay.
However, before the FCA has fully bedded into its new role, it is important that the OFT, which has established competition experience and a track record of making MIRs, does not step back from competition scrutiny of financial services markets. It will of course be important that the FCA and OFT co-ordinate closely. We obviously agree with Amendment 106ZB in that respect. The FSA and OFT already have an MoU in place and are working to put in place a new MoU for the FCA. There is therefore no need for statutory provision to make this happen. There will be an MoU that deals with the issue of co-ordination on all these matters. We think that that amendment is unnecessary, because it is happening already.
Amendment 86A goes further than merely requiring an MoU and seeks to restrict the competition authority to carrying out market studies only in exceptional circumstances. However that is too rigid an approach. The underlying focus should be on the promotion of effective competition in the interests of consumers, and tying the competition authority’s hands is not the way to achieve that.
In terms of who takes the lead and is best qualified to do so, the comments of the noble Lord, Lord Borrie, answer that question. There will be some areas where the competition authority is simply best placed to take the lead, when compared to the financial regulators, because the competition authority has had decades of experience of that. We do not want to throw away all that experience by being too prescriptive about who takes the lead.
As to the specific comments that noble Lords have made, I was extremely grateful to the noble Baroness, Lady Hayter, for referring to the clear BIS advice, which not all noble Lords will have heard before. I am sure that she will agree with me, and they will agree with her, that it was very helpful.
In terms of competition and making sure that there are more new entrants into the financial services market, not least in banking, we have had this debate at every stage of the Bill. The Government have made it clear that they are extremely keen to see greater competition, not least in banking, but that is not done by putting detailed rules into the Bill, other than a general rule to promote competition; it is something for the regulators to reflect in changed rule-making powers of their own.
The noble Viscount, Lord Trenchard, reinforced the view that we need to promote competition. This is an example of how we are trying to make sure that the legislation goes far enough in this area. The noble Lord will be aware that under a government amendment debated last week, the PRA will be required to have regard to competition as one of its objectives. This has been a long-discussed point: will the PRA be so risk averse that it chokes off competition or will it not? We hope that by agreeing the amendment a few days ago, we made it clear that competition is absolutely central, and that everybody in the regulatory environment, including the PRA, will have to take it seriously.
The noble Lord, Lord Peston, asked about the reference in new Section 140B(5) on page 107 to the,
“acquisition of any goods or services”.
It does not say “financial services”, but the subsection relates to new Section 140B(4) above it. These matters all relate to the actions of the regulators, who have powers only in relation to financial services. The whole context of the subsection relates to financial services.
Lord Peston
I am having great difficulty remembering what the rules are. If the Government meant that, why did they not say it? The subsection refers to “any goods or services”, not “any financial services” or “only financial services”. I assumed that it had a meaning, but the Minister is now telling me that it does not. Is he sure that he wants to give the answer that he is giving?
Lord Newby
My Lords, I am sure that the phrase has a meaning, and I like to think that it is the meaning that I just ascribed to it. I will look at it again, and if I find that I have misled the noble Lord and the House, I will write to him. As with so much of the Bill, this is an extremely technical section. However, I am assured and believe that it relates only to the financial services sector.
I referred to the comments of the noble Lord, Lord Borrie, about the importance of allowing the competition bodies to take the lead in certain cases. That in part answered the question of the noble Lord, Lord Barnett, about who was the main regulator. The main regulator is the body that is best capable of dealing with each issue. In some cases that will be the FCA, and in others, it will be the OFT or its successor. For the time being, the OFT and its successor and the FCA will have powers in this area. The logical thing is to let them exercise those powers in the way that will use their experience most effectively.
Lord Peston
The Minister does not seem to have answered my other main question. The title of the new section is,
“Advice about effect of regulating provision or practice”.
It refers to advice that the competition authority gives to the regulator; that is what the section is about. Am I right in my interpretation that the section is about the activities of the regulator in damaging competition, rather than about the activities of financial services providers? I sought clarification from the Minister on whether the words in the new section mean what clearly they say about advice from the competition authorities to the regulator. That is what it says.
Baroness Hayter of Kentish Town
My Lords, I thank the noble Lord, Lord Newby, for making my case. He said that who the lead regulator is will depend on the issue. The bodies will have to work closely together. The one thing that he did not explain was why on earth we should not write into the Bill that the two regulators should co-ordinate and have a memorandum of understanding. It seems a simple point.
I thank the noble Lords, Lord Trenchard and Lord Phillips, and my noble friends Lord Peston and Lord Barnett, for their support. I also thank my noble friend Lord Borrie, whose advice, given that he was director general of the OFT, I take seriously. The last of the three amendments does not touch on the difficult issue he raised, that is, laying down who does what. It basically says there should be a MoU between these two very important issues. The Minister says not to worry, that there is one and they are working on it, but in the interests of transparency, I would have preferred to see it statutory and therefore published. However he is clearly not going to give way on that, so I fear I must. I beg leave to withdraw the amendment.
Bank of England
(11 years, 10 months ago)
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Lord Eatwell
My Lords, I thank the noble Lord, Lord Sassoon, for repeating the Chancellor of the Exchequer’s Statement, and I commend the Chancellor and the Government on their choice of the new Governor of the Bank of England, Mr Carney. Perhaps the noble Lord could let us know why the Government have brought forward the announcement of this post, which we were told on several occasions by the Treasury would be included in the Autumn Statement. What motivated the decision to bring the announcement forward?
We have been discussing the role of the Governor of the Bank of England extensively during the passage of the Financial Services Bill, which is before your Lordships’ House right at this moment. One of the issues that have dominated our discussion of the role of the governor is the extraordinary number of responsibilities which are going to be heaped upon him by this Bill. The Chancellor has said that Mr Carney will maintain his position as chair of the Financial Stability Board, which is also a very onerous job at the very centre of international financial regulation, especially innovation in financial regulation. Are the Government really content that it is appropriate for all these tasks to be heaped upon one individual or have they received assurances from Mr Carney of plans to spread the load somewhat among his deputy governors when he actually assumes these very heavy responsibilities?
In this respect, I wonder what commitments the Governor-elect may have given with respect to the future organisation of the Bank to ensure that it is properly accountable in a way that the Financial Services Bill, which is before us, does not ensure? For example, have the Government examined the structure of accountability of the Bank of Canada? They would find that there are much more rigorous procedures in place than those that we are currently putting in place for the Bank of England.
We on this side are delighted that Mr Carney has requested that he have a pre-commencement hearing before the Treasury Select Committee. Do the Government now recognise that this should be a standard form for senior appointments of this type at the Bank and, indeed, at the major regulators being put in place by the Financial Services Bill?
The Government will be aware that in August Mr Carney was asked whether he was a candidate for the governorship of the Bank of England. He replied, “No, never”. Can the noble Lord, Lord Sassoon, enlighten us as to what led Mr Carney to this fortunate change of mind?
Finally, I am delighted that the Chancellor took the opportunity to pay suitable credit to the current Governor, my former colleague and friend, Mervyn King. I, too, look forward to the opportunity of thanking him in an appropriate way when he retires from his position. However, in the mean time, I return to my first comment and congratulate the Government on the appointment they have made.
Lord Sassoon
I am very grateful to the noble Lord, Lord Eatwell, for commending the appointment. I am pleased that he recognises what a great catch Mark Carney is for the Bank and the country. To answer the noble Lord’s last question first, he ought to ask Mr Carney directly about his change of mind. However, as the noble Lord says, we are very fortunate that he did change his mind.
On the other questions, there was no question of bringing the announcement forward. My right honourable friend the Chancellor has always said that he sought to complete the appointment process by the end of the year. I do not believe that there was any statement to say that the announcement would be made in the Autumn Statement or at any time; people may have been speculating on that, but it was pure speculation.
The noble Lord, Lord Eatwell, asked about Mr Carney’s role as chair of the Financial Stability Board. At the moment, Mr Carney combines being chair of the Financial Stability Board with being a central bank governor, so he is quite used to doing the two things. The main thing is that, subject to his term on the FSB being renewed—as I would expect it to be—it is very good news for the United Kingdom that we will have a Governor of the Bank of England who is also taking this lead central role through the Financial Stability Board in the G20’s leadership of the future shape of financial regulation globally.
The first time I had the pleasure of working with Mr Carney was when, in earlier lives, he and I sat on the predecessor body, the Financial Stability Forum, so I know from my own direct experience going back over 10 years what a contribution he has made over a long period. He will, of course, be very well supported by three deputy governors in the Bank of England on the important and wide-ranging responsibilities that he will have. One of the things that the interview panel will have looked at is Mr Carney’s management experience, which is unquestioned in his present job. I believe he will be able to combine his responsibilities.
As for accountability, the key thing is not so much how other countries do it but whether we have got the right accountability for the Governor and the Bank in the new structure. We have spent many hours, quite rightly, in the heart of the Financial Services Bill, that we are considering again this afternoon, to get that right. Most importantly, partly as a consequence of the debates in your Lordships’ House, we have introduced the oversight committee of non-executive directors, which introduces an important new strand of accountability that has not been present hitherto in the Bank.
Lastly, the important thing is that for the first time a Governor of the Bank of England will go through—has volunteered to go through—a pre-commencement hearing with the Treasury Select Committee. That is a major step. I am not going to offer thoughts on what other cases it may be appropriate for, but in this case, it is breaking new ground and totally appropriate. However, the main thing here is that I am very grateful to the noble Lord, Lord Eatwell, for confirming, as I am sure the whole House will agree, that this is an extraordinarily good appointment of the best available person.
Lord Sharkey
I thank the Minister for repeating the Statement and congratulate the Government on the appointment of Mr Carney. I send congratulations from these Benches, and perhaps commiserations too, to Mr Carney.
I note that two weeks ago, in a speech to the Canadian Club of Montreal, Mr Carney addressed the question of whether we have ended “too big to fail”. He concluded by saying that it is not yet clear that it has been ended. He said, quite explicitly, that each “global systemically important” financial institution,
“ must have mandatory recovery and resolution plans”
in place. I look forward to discussing Mr Carney’s views on this subject with the Minister when Report stage of the Financial Services Bill resumes later this afternoon.
Lord Sassoon
I am grateful to my noble friend and look forward to our further discussions on that important topic later this afternoon.
Lord Cormack
My Lords, does this prove that “never” is a short time in politics?
Financial Services Bill
(11 years, 10 months ago)
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Lord Sassoon
“(2) Subsection (1) does not affect references to “the competent authority”.”
Lord Sassoon
Lord Tunnicliffe
Will the Government please consider the timetabling? It is unreasonable to call the next amendment when Members are expecting the House to be in the middle of the second Statement, which should have started immediately after the first one. The only sensible option is to adjourn during pleasure.
Baroness Garden of Frognal
I beg to move that further consideration on Report be adjourned during pleasure for 10 minutes.
European Council
(11 years, 10 months ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, this might be a convenient moment to repeat a Statement on the European Council made a few minutes ago in the House of Commons by the Prime Minister. The Statement is as follows:
“Last week’s Council was unable to reach agreement on a seven-year budget framework. This Government rejected a proposal that would have risked UK taxpayers paying for unaffordable increases in the EU’s annual budgets. We did so together with like-minded allies from a number of different countries. As net contributors to the EU, these countries—like Britain—write the cheques. Together, we had a very clear message: we are not going to be tough on budgets at home and then sign up to big increases in European spending in Brussels.
Let me explain to the House the proposal we rejected, why a deal is still doable, why it is still in our interests to work to achieve that deal, and why throughout these negotiations I will continue to protect the UK’s rebate.
Our objective for EU spending in the seven years to 2020 is clear: we want to see spending reduced and will insist on at least a real-terms freeze. As the House knows, the actual EU budget is negotiated annually. What we were negotiating in Brussels last week—and will return to again next year—is the overall framework for the next seven years, which includes the overall ceilings on what can be spent.
During the previous negotiation, which covered the period 2007-13, the previous Government increased the payments ceiling by 8%. The commitments ceiling was effectively set at €994 billion—well above the level of actual spending. It was a bit like having a credit card limit far above what you can afford. It was an open invitation to the EU’s big spenders to push for higher and higher spending every year, and we are still paying the price for that decision.
This year, 2013, the Commission and European Parliament are attempting to grow the annual budget by another 6.8%. I am determined to get these ceilings down in line with what we can afford. Prior to the Council, the Commission produced a ludicrous proposal for increasing the commitments ceiling still further to over €1 trillion. We said no. The Cypriot presidency produced a slightly lower proposal. Going in to the Council, the President of the Council, Herman Van Rompuy, produced a new proposal: this time, a ceiling of €973 billion.
As you can see, we were making progress in getting the ceilings down. But as I and other leaders made clear, it was not enough. We set out a number of very reasonable ways in which the seven-year ceiling could be reduced even further, by tens of billions more. What was disappointing at the Council was that, having heard these proposals, the President offered a new proposal that failed to reduce significantly the previous total, and simply redistributed money to buy off different countries.
In a seven-year budget of almost €1 trillion, the idea that there are no real savings to be found is simply not credible. For example, when it came to the bureaucratic costs of the European Commission, not a single euro in administrative savings was offered—not one euro. We need to cut unaffordable spending. The deal on the table was not good enough and that is why we—and others—rejected it.
However, we believe that a deal is still doable. There is absolutely no reason why we should not be able to reduce the seven-year ceiling down to the level needed. There is plenty of scope for significant savings in the common agricultural policy and the structural and cohesion funds, but there are savings to be had in the rest of the budget as well. For example, freezing the ceilings for security, justice and external spending would allow €7.5 billion of additional savings. There are some programmes, like Connecting Europe, which have enormous proposed increases in their budget that can be radically scaled back.
As I have said before, there is simply no excuse for not taking a much tougher approach towards the EU’s administrative costs. The EU institutions have simply got to adjust to the real world. A 10% cut in the overall pay bill would save almost €3 billion. Relaxing the rules on automatic promotion at the European Commission would save €1.5 billion. Reducing the extraordinary generosity of the special tax rules for Brussels staff—the levy—could save around another €1 billion. Changes to pension rights could save another €1.5 billion. These are all perfectly reasonable proposals. That is why a deal is still doable, and we will push hard for these reductions when negotiations resume next year.
Briefly, let me be clear about why we want a deal. If no deal is reached, the existing ceilings are simply rolled over and annual budgets are negotiated on a year-by-year basis, taking account of those ceilings. Crucially, we would not get the reduction that we need in the seven-year budget ceilings negotiated by the previous Government. The credit-card limit would stay beyond what is affordable, tens of billions of euros higher than the deal that we actually rejected at this council. It is in our interest to get a deal. That deal must not come at any cost. We must not lock in unaffordable ceilings for the next seven years. If necessary, we may have to galvanise a coalition of like-minded countries to deliver budgetary restraint through annual budget negotiations each year.
Finally, let me say a word about the UK’s rebate. As well as ensuring fairness in terms of the overall size of the EU budget, it is also essential to ensure fairness in the net contributions to that budget that each country makes. At this council we faced, as ever, determined pressure from many sides for our rebate to be slashed. The changes on the table in the proposal in front of us would have cost the UK more than a billion euros every year, but I was clear that all of this was completely unacceptable.
Britain more than pays its way in Europe. On a per capita basis Britain is the 11th richest nation and yet as a share of our national income we are the third largest contributor and that is with the rebate, or what remains of it after so much was given away by the previous Government. Without it we would have the largest contribution in the European Union, double that of France and almost one-and-a-half times as large as Italy’s or Germany’s. That would be completely unfair. It is why Margaret Thatcher was right to fight so hard to win the British rebate. It is why the previous Labour Government did this country such a disservice in agreeing to give part of it away. It is why no Government that I lead will ever put that British rebate back up for negotiation.
We have put a marker down at this council. We stood up for the taxpayer. Together with like-minded allies we rejected unacceptable increases in European spending and we protected the UK’s rebate. We are fighting hard for the best deal for Britain and that is what we will continue to do. I commend this Statement to the House”.
My Lords, that concludes the Statement.
Baroness Royall of Blaisdon
My Lords, I am grateful to the noble Lord the Leader of the House for repeating the Statement give to the other place by the Prime Minister. Clearly this is not the first EU budget negotiation to go into a second round and it will not be the last. However, the most important question is the deal that is eventually delivered. I would like to ask the noble Lord three main questions about the budget level, what the budget is spent on and the Government’s negotiating position.
On the budget level, we on these Benches were surprised by one omission in the Statement? Somehow the Prime Minister seemed to forget to thank the Members of the other place for sending him into the talks with the strongest negotiating mandate. The Government now say that there is a widespread support in Europe for a tough settlement. Can the Leader of the House say what proposals there are for meeting the call in the other place for a real-terms cut? Does the noble Lord the Leader of the House agree that the truth is that the Government should have been starting to build the alliances for a real-terms cut in spending a long time ago? The Government should have spent the last two and a half years building alliances rather than alienating our partners.
In relation to the deal that still needs to be done, can the Leader of the House confirm in precise terms what the Government mean by a real-terms freeze? We have the Government’s definition, set out by the then Economic Secretary in her memo of 16 July 2011, that is to say a European budget of €885 billion in actual payments over the seven-year commitment period. Will the Leader of the House confirm that that remains the Government’s position?
Then we have the composition of the budget, which is as important as the budget level itself. We need to reshape the budget so that it supports jobs and growth with investment in infrastructure, energy, and research and development, which would be of real benefit to the people of this country and of Europe as a whole.
The Prime Minister has in the past called for major reform of the Common Agricultural Policy and as he arrived in Brussels for this Council meeting, he said that this is not “a time for tinkering”. Indeed. The Prime Minister said at his press conference on Friday:
“Already being contemplated is a big cut in agricultural spending … Our point has been you don’t have to go beyond that”.
Will the Leader of the House explain what the “big cut” is that the Government are talking about? Will he confirm that the proposal on the table sees agricultural spending remaining on average at 38.3% of the European budget over a seven-year period—almost exactly the same level as it is now? Do the Government really believe that this is the major reform required? Does the Leader of the House agree that, what is even worse, in order to keep agricultural subsidies high, money is being taken from much needed investment in energy and other infrastructure? Will he say whether the Prime Minister objected to this part of the proposal?
As we anticipate the further negotiations in the months ahead, the wider stance of the Government towards the EU will clearly have an impact. The Prime Minister says that he is in favour of us remaining a member of the EU, which I of course welcome, but, last month, the Education Secretary briefed that he was open to leaving the EU. The Work and Pensions Secretary is said to be of the same view, while only on Saturday the chairman of the Conservative Party said that we should threaten to leave. Today, we have the new vice-chair of the Conservative Party touring the studios not about a budget deal but about doing a deal with UKIP. Do the Government believe that these divisions help or hinder our national interest in delivering a budget deal? Why at this time of continuing negotiations is the Prime Minister allowing members of his Cabinet openly to undermine his own position on membership of the European Union?
It is no wonder that everyone, from British business to our European allies, believes that we are drifting towards exit. As we look ahead to the next round of the budget negotiations, the reality of the position seems to be that the Prime Minister has a divided party on Europe and that, instead of confronting the issue, he is just letting the problem get worse.
A good part of the Statement was spent talking about the deal that the Prime Minister did not do, but it is what the Government deliver for Britain which really matters. I believe that, as long as the Prime Minister allows his party to drag him towards the exit door, the Government will find it harder to build lasting alliances and far harder, therefore, to deliver for the national interest.
Lord Strathclyde
My Lords, I am increasingly at a loss to understand the noble Baroness’s party’s position on our great European home, particularly given her background in the European Commission. What did it do when it was in government? The Government in whose Cabinet she sat waved through above-inflation hikes to the previous EU budget; they gave away £7 billion of our rebate; they failed utterly and completely to get CAP reform in return; and they would not even use the veto to protect Britain’s interests. All that goes on top of the promise in 2005, let us not forget, of a referendum on the Lisbon treaty. As soon as they got in, they forgot all about that.
The noble Baroness, speaking on behalf of the Labour Party, said that we do not have an alliance. The only reason that we are having this kind of Statement today is that we have a strong alliance. We have the Dutch, the Swedes, the Danes, the Finns and the Germans all backing our position. I would rather be with them on this issue than with the Labour Party. One might well ask where Labour’s alliance is on all this. It seems to be muddled, with its leader in the European Parliament asking for more money in stark contrast to the leadership demonstrated by—
Baroness Royall of Blaisdon
My Lords, I should point out that Labour MEPs in the European Parliament, led very ably, voted together with the Conservative Members of the European Parliament against an increase and in favour of a freeze.
Lord Strathclyde
My Lords, it is amazing how quickly policy changes in the Labour Party when it is in opposition, but its leader in Europe called for us to contribute £1 billion more to the EU. Its MEPs voted against freezing last year’s budget at 2010 levels and its group in the Parliament has called for a 5% budget hike and new EU taxes. And then to our rebate—
Baroness Royall of Blaisdon
My Lords, that is not true. The leader of the group of European Socialists may well have voted in that way, but the leader of the British Socialists in the European Parliament, Glenis Willmott MEP, voted against, together with all British Labour MEPs.
Lord Strathclyde
My Lords, I now wholly understand why I was confused. It just depends what kind of European Parliament socialist you are talking about. The noble Baroness also asked me about the real-terms freeze. We are of course in the middle of what will clearly be protracted and complicated negotiations. It is not possible for me to follow the noble Baroness into the detail of the numbers but we have said that we believe there is scope to reach agreement on a real-terms freeze, which would be a commendable objective to achieve. Furthermore, on the composition of the budget, if you look at the figures on agricultural policy, we were happy to go along with a cut from €336 billion to around €270 billion, which, with an added contribution from the Commission’s administration savings, would have been sufficient. However, for some other European colleagues, that was a cut too far on the CAP and it was not accepted.
I finish by dealing with the conclusions of the noble Baroness. She accused us of trying to do backdoor deals with UKIP. I can confirm that there are no backdoor deals with UKIP or indeed with anybody else. As for the Prime Minister being undermined by members of the Cabinet, I absolutely assure the noble Baroness that he does not feel in the least bit undermined by anything that anybody has said because we have a completely united view that we should operate with British interests and in the best interests of the British taxpayer. That is what happened at the end of last week in the European Council budget negotiations and it is what we will continue doing in the future.
Lord Dholakia
My Lords, I thank my noble friend for repeating the Statement in your Lordships’ House. Does he accept that under no circumstances should we deviate from a real-terms freeze and that we cannot support a real increase in EU spend at a time when there is deep fiscal tightening in the United Kingdom and indeed across Europe, with British taxpayers seriously feeling the pinch? Does he also agree that this is not the time for political opportunism? Government figures show that the UK household is, on average, up to £3,300 a year better off as a result of increased UK trading with the EU through the single market. There are 3.5 million more UK jobs and the cost of living is some £480 a year cheaper per person as a result of EU-wide competition driving down the cost of goods and services.
Lord Strathclyde
My Lords, it is always good to hear my noble friend and his reiteration of the case for us being a member of the European Union, with the benefits that being part of the single market gives the British economy and indeed European consumers right across the Union. I also agree with what he said about our negotiating position. It is extremely important to get a message over to the European Commission that the days of continual increases in the budget have to come to an end. It is no longer possible for Governments to argue for reductions in their own national budgets while agreeing to extend those budgets in the European Union.
Lord Williamson of Horton
My Lords, I declare an interest in that I spent a good part of my career on European affairs in the British Government and some part of it in the European Commission. It is difficult to comment decisively on a negotiation that is not finished but will apparently be resumed in January in order to seek to agree on a multiannual budget framework for the EU. I know of course that, if agreement is not reached, we shall have annual budgets, so there will not be a deadlock. There will, however, be high costs, so we have to be attentive to that. There has also been talk about the British rebate—and there always is whenever there are EU financial negotiations. Can the Minister once again confirm that the UK rebate is subject to unanimity, that it cannot be changed without our agreement and that it is indeed an intrinsic part of the financial arrangements of the European Union?
The two key points of the negotiation of the noble Baroness, Lady Thatcher, in which I participated, was that the UK would receive a substantial amount of money—by the end of 2010, the British taxpayer had received £68 billion, which is well worth having—and that the rebate could not be taken away by qualified majority. My view is that we can sleep easy on that point.
Lord Strathclyde
My Lords, it is always good to hear from the noble Lord, Lord Williamson, who brings to this House a good deal of experience and knowledge from having held such a senior position within the Commission. I agree that it is very difficult to comment decisively at this stage, as we do not have the normal conclusions that we would have at this time, and the negotiations are to continue. The noble Lord is also right to point out what happens if we end up with an annual budget, annual negotiations and annual rerating. I can confirm his understanding—I expect that that is his understanding because he was there when it was originally negotiated—that the UK rebate can be changed only if everyone agrees. In other words, I can confirm that it is subject to unanimity.
Lord Grenfell
My Lords, one question that has not been answered needs answering. Where are the Government’s red lines in the next negotiations? We do not know; perhaps the Government do not know. If at the next round in January, or whenever it is to be, no compromise can be found, or it is a compromise that does not match what the Government feel they can accept, what are the Government going to do? Will they veto the whole thing or what? We do not know—perhaps the noble Lord does not know—but let us at least get an idea of where those red lines might be.
Lord Strathclyde
My Lords, I do not think it is sensible to go into every negotiation with a public view of what your ultimate red line might be. We have been clear that what is needed is, at best, a cut—
Lord Grenfell
I am sorry, but on the Lisbon treaty we went into negotiations with red lines; they were very firmly laid out.
Lord Strathclyde
My Lords, if I may revert to a sad period in our history, that negotiation was subject to the agreement of the British people. As soon as the Labour Party won the election, it reneged on that arrangement. The noble Lord himself voted against giving the British people a choice. If they had had a choice, we may have ended up with something rather different.
Going back to the noble Lord’s original question, we feel that what is needed is, at best, a cut and, at worst, a real freeze to actual payment levels. Of course, we are still in negotiation. We will continue to have those negotiations until we start discussing it again. Noble Lords would not expect us to get into specific figures.
Lord Howell of Guildford
Does my noble friend agree that this firm line from the Prime Minister has opened up an extremely healthy and much-needed debate on the future structure of the European Union—the so-called overall framework, which, as presently deployed, creates constant upward pressure on spending, which all parties deplore? It appears that we have many allies in taking the view that European reform is needed. Does my noble friend therefore agree that, if we can develop a view about how the European Union’s overcentralised and outdated structure can be reformed, not only will we begin to have many allies throughout Europe but we ought to have the support of all sensible people in this House and elsewhere who want us to play a leading part in a modernised Europe that is fit for purpose in the 21st century?
Lord Strathclyde
My noble friend reiterates a position that he has held for some time. Indeed, he has been very much in the vanguard of this thinking. I agree that there is a lot wrong with the centralised, bureaucratised and expensive European Commission and how it operates that needs to be sorted out. The EU itself faces its own internal crises, not least within the countries of the eurozone, but all that is an opportunity for those who think like my noble friend to come forward with proper modernisation, as he called it—proper reforms that I believe would command a great deal of support within both Houses of Parliament and throughout the rest of Europe. He is right in saying that my right honourable friend the Prime Minister is dealing with these negotiations in entirely the correct manner.
Lord Davies of Stamford
My Lords, has the noble Lord ever considered that our national influence in Brussels on this and other subjects would be enhanced—and therefore the national interest would be advanced—if the Government occasionally displayed some real, positive commitment towards our membership of the European Union, or even actual enthusiasm for it, rather than constantly carping, complaining and often threatening to leave? Would not such a more positive attitude better reflect the interests of the British people? Almost every subject on which the people of this country feel most strongly—whether it is prosperity within the single market, the future of world trade negotiations, our ability to respond to the challenge of climate change, our ability to cope with the threats of organised crime and terrorism, or the future peace and stability of our own region and regions around us on this planet—depends for its resolution on a cohesive and successful European Union. That must be part of the solution, not part of the problem, as the Government keep trying falsely to represent.
Lord Strathclyde
My Lords, I think that the noble Lord is unduly pessimistic and that he exaggerates. There is no threat to leave; not from the Prime Minister, not from the Foreign Secretary, not from me—
Lord Strathclyde
Nor from anybody else. There are those who suggest that at some stage there might need to be a referendum, and there may, but we will need to see what that will be about. On the contrary, I think that the noble Lord has completely misunderstood: we are very positive about the European Union, but a Europe which is cohesive and successful does not need to be bureaucratic, centralising and expensive. One needs only to hear my noble friend Lord Howell of Guildford talking with such enthusiasm about what a reformed Europe could look like to know the truth of that. I think that the noble Lord, Lord Davies, has exaggerated the position of the Government.
Lord Stoddart of Swindon
My Lords, I have read the Statement and it seems to me to be an interim Statement. The Prime Minister is saying, “Not a penny more and, if possible, a lot less”. I raise two points. The first concerns the position of the European Parliament, which seems to have a lot to say about expenditure but of course has no power to raise the money. I believe that the Prime Minister should be pointing out that those who raise the money—in other words, the nation states—should have the most say. My other point concerns the rebate and the report that sets out very clearly what a reduction in the rebate would mean for British taxpayers. I hope that the Leader of the House can promise that the Prime Minister will not do what his predecessor did and give away some £1 billion of our rebate for nothing tangible in return.
Lord Strathclyde
My Lords, I totally agree with the noble Lord’s concluding remarks. The Prime Minister has made it absolutely plain—if the noble Lord, Lord Grenfell, wanted a red-line issue, here is a red-line issue—that he will not surrender any part of the rebate. The rebate is absolutely crucial. There is a good reason for doing so: the last time a proportion of the rebate was surrendered by Mr Blair, he got absolutely nothing in return. It was a very positive act by the then Prime Minister, but it did not help the relationship or the further negotiations with the EU; quite the contrary.
I also agree with what the noble Lord said about the nation states. There is increasingly a division between the net contributors and the net benefactors within the EU, and it must be right that those who pay the most are listened to very carefully during these negotiations, which is why the UK finds itself not isolated over the course of the weekend but with some good friends who agree that these issues need to be debated and discussed in full and that reform needs to come.
Lord Lea of Crondall
My Lords, many of us have savoured the vision of Mrs Merkel swooning at Mr Cameron’s feet—as they say in Manchester, “A likely story”. I have two questions. The first is whether there is still some debate about what a freeze actually means. Where is the wriggle room in this debate? Is it to do with the price indices or the distance between the median amount in the present seven years and in the next seven, presumably with some prediction about price increases, or is it a freeze on where expenditure has now got to in 2012?
The second question is this: on the contrast in the Prime Minister’s Statement between the freeze that he is looking for in Brussels and the “big cuts” in Britain, is it not the case that in Britain there is a balance and, while the cuts are certainly very damaging, part of the result of the zero or very slow growth is that with rising unemployment and expenditure on social security, disappointing returns to the Treasury from corporation tax and so on, the OBR and the Red Book both state that in real terms we are now on a plateau, absolutely level, and will be for three or four years, and in money terms we are creeping up? If I am wrong on that, could the noble Lord write to me and put a copy in the Library, or does he accept that in real terms a freeze is actually roughly where we are in Britain as well?
Lord Strathclyde
My Lords, I am not entirely certain where the noble Lord is coming from. I am very happy to write to him, but we are fully supportive of the EU growth agenda. We want the single market to work; we want to extend it to make it deeper with better enforcement and better implementation. We want to increase the scope for the digital single market and e-commerce, and we want a far more ambitious programme of deregulation, which we believe will help growth. We are fully in favour of the EU’s stance on free trade and trade with countries in the world, particularly with South Korea, Canada and Singapore. All this is in large part due to the influence and pressure that we in this country have exerted
We can get ourselves in a terrible pickle over what we mean by a real-terms freeze and which figures we are looking at, but we have been clear that we would like a cut and, at worst, a real freeze to actual payment levels—it is those levels that count; we want to protect the rebate; and we want no new taxes to finance the MFF. These are the key issues, but if I can clarify any of that in a letter to the noble Lord, I will certainly do so.
Lord Elton
My Lords, the Statement came across as though the Government regarded a real-terms freeze as the best possible option. Given that, across Europe, Governments are actually having to reduce expenditure, could one not expect something rather better than that: a real-terms reduction?
Lord Strathclyde
My Lords, that would be very attractive and definitely worth going for. However, I expect that while we might go for, at best, a cut, we may need to settle for, at worst, a real freeze to actual payment levels.
Lord Pearson of Rannoch
My Lords, I press the noble Lord on two agreeable exchanges he had with his noble friends, the noble Lords, Lord Howell and Lord Dholakia. The noble Lord, Lord Howell, agreed that reform of the EU would be a wonderful thing. Does the Leader of the House agree that to get any reform of the European Union, to retrieve a comma from the treaties of Rome, requires unanimity among all 27 members? Secondly, on the claim of the noble Lord, Lord Dholakia, that 3 million jobs depend on our membership of the European Union, I thought that we had killed this old chestnut some years ago. Does the Leader of the House agree that we do indeed have 3 million jobs, making and exporting things to clients within the European Union, but they have 4.5 million jobs making and exporting things to us and we are in fact their largest client? Were we to leave the European Union, there is no prospect of any of our jobs being lost. On the contrary, millions of jobs would be created because we would be set free from the clutches of this corrupt octopus.
Lord Strathclyde
My Lords, I do not think that the noble Lord has slain this particular chestnut, if that is not mixing my metaphors too much. The fact is that an enormous amount of jobs in this country are linked to our membership of the EU through exports to the EU. However, the noble Lord may wish to take heart that, despite tough conditions, British exports of goods have increased in the past two years to China by 72%, to India by 94% and to Russia by 109%. So we can get the best of all worlds: we can have rising exports, better trade within the single market and better trade with the rest of the world.
I think that my noble friend—I am sorry, the noble Lord, Lord Pearson—
Lord Strathclyde
I will get to my noble friends in a moment. The noble Lord was trying to create an artificial difference between my noble friends Lord Dholakia and Lord Howell of Guildford, of which I think there is none. In the coming months, we will find that the British Government are forceful in looking at ways in which some of the competences that are currently held in the EU could be returned to the United Kingdom.
Financial Services Bill
(11 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
18:39 - Division on Amendment 101A - Ayes: 126 / Noes: 187 - Amendment 101A disagreed.
Lord Whitty
Lord Whitty
My Lords, here we return to an issue which I raised in Committee. It is what I refer to as the “Tesco amendment”, dealing with a situation where large companies outside of the financial sector are becoming involved in providing financial services and are, increasingly, the parent companies of new entrants to the financial sector. It might just as well have been called the “Asda amendment” or possibly the “Virgin amendment”. The point here is that the welcome provisions in this part of the Bill on extending regulation to cover issues relating to the parent company then go on to be restricted to those parent companies that are financial institutions already. I have yet to hear from the Government a logical explanation as to why that should be the case.
As I said, I welcome the general extension to cover the possibility of regulation in this area. I also welcome the entry of many non-financial institutions—of appropriate competence—into this area to provide a degree of competition that is much needed. Of course, the Government recognise that at some point they might have to extend this to non-financial parent companies. Why not do it now? I do not see a reason for the distinction at this point. Therefore, my Amendment 90 would exclude from the Bill that restriction and make all parent companies equal, and Amendment 91 would therefore logically remove the ability of the Treasury to change those rules at a later stage.
When we proposed the extension to cover parent companies the Treasury had a very logical reason to do so. In presenting the principles behind the draft Financial Services Bill, it said that,
“during severe stress, the different priorities and responsibilities of the board of a parent undertaking relative to the regulated company … can be exposed … the FSA does not have legal powers to require action at the level of the parent undertaking”.
That would mean that a number of options were closed. It therefore planned the extension. It is not difficult to see why the same should not apply to a parent company that is a non-financial institution in the terms of this Bill.
Lord Eatwell
My Lords, I support my noble friend Lord Whitty. He has clearly hit on something that is very real in the development of consumer financial services today and is very beneficial to the expansion of competition in the provision of financial services. It seems peculiar that, in the drafting of this clause, the Government both include the condition, in subsection (4), and then say, a few lines later, “We may leave this condition out”. Surely there is already enough evidence of the importance of non-financial parent institutions developing financial services. Why, then, as my noble friend has so clearly described, do we not recognise it now?
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, new Part 12A of FiSMA, as inserted by Clause 26, extends and strengthens the regulatory framework by giving the regulators powers to act in relation to a parent entity, which is itself not regulated, but controls and exerts influence over a regulated entity. As we have heard, Amendments 90 and 91 seek to make significant changes to the scope of the powers over parent undertakings. We have not heard new arguments this afternoon, and regret that I probably will not advance any significantly new ones either—as is often the case. However, let me go through the argument as clearly as I can.
The Government are extending and strengthening the regulatory framework, so it is important that these new powers, which are untried and untested in the UK, have safeguards in place to ensure that they are used in a targeted and proportionate manner. I stress the new powers; they are not powers that previous Governments have sought to put in place, so we will put an important additional series of safeguards in place. However, their untried and untested nature is principally why the Government have proposed limiting the power to financial institutions of a kind prescribed by the Treasury in order to keep it within reasonable bounds.
As has already been identified today and on other occasions, if your main business is owning or managing authorised persons, you are caught, but if your main business is making or selling bread, then you are not. That is what the Government intend at this stage. We do not wish, at this stage, to give the financial services regulators powers of direction in relation to parent undertakings whose main business is not related to financial services. However, the Government are very much alive to the concerns raised by the noble Lord, Lord Whitty, which is why we propose to take a power to remove the limitation to financial institutions. We accept that it may be appropriate to widen the scope of Part 12A powers to catch a wider range of parent undertakings but the Government remain unconvinced that now is the appropriate time for these new powers to apply to parent undertakings which are not themselves financial institutions. It is a developing area of financial services industry practice. We need to watch it closely and the noble Lord, Lord Whitty, is right to remind us of that. The provision future-proofs the powers and ensures that the Treasury has the flexibility to respond if circumstances change and firm structures evolve, such that parent undertakings are no longer captured within the scope of the power.
I know that in both Houses there has been interest in strengthening the application of the powers over unregulated parent undertakings. Government Amendments 91A to 91E seek therefore to improve the usability of the powers. Amendments 91A, 91B and 91C lower the trigger for use of the power against parent undertakings and make the power more usable. Amendments 91A and 91B clarify that the regulators can give a direction if it is considered desirable in order to advance the FCA’s operational objectives or any of the PRA’s objectives, or if the giving of the direction is desirable for the purpose of the effective consolidated supervision of the group. Amendment 91C is a related consequential amendment.
As a result of these amendments, the FCA and PRA, would no longer have to demonstrate that,
“the acts or omissions of the … parent … are having or may have a material adverse effect on the regulation … of one or more … authorised persons … or the effectiveness of consolidated supervision”.
After reviewing the powers in light of statements made in this House about the imperative need for the regulators to have effective powers over the parent undertakings of authorised persons and consulting with the authorities, the Government consider the previous threshold was set too high, which would have made the power difficult to use in practice. The high threshold may also have hindered and sometimes prevented the regulators properly supervising complex financial groups.
These amendments will mean that the powers can be used effectively by the regulators to address difficulties within the group as a whole. That will better fulfil the Government’s objective of ensuring that the regulators have the tools they need to conduct suitably robust supervision of unregulated holding companies.
Amendment 91E would make similar changes to the power of direction that the Bank of England has in relation to the parent undertaking of a recognised clearing house. Amendment 91D would remove the requirement that a direction must specify the period during which each requirement remains in force. This ensures that, in appropriate cases, the regulator can give a direction of an indefinite duration. It better aligns the new Part 12A powers with the provisions in new Sections 55L and 55M to be inserted into FiSMA, which provide for the imposition of requirements on authorised persons by the FCA and PRA of an indefinite duration.
While we think that directions in relation to unregulated parent undertakings should generally be of limited duration, we can conceive of cases—for example, in connection with structural reform of the kind envisaged by the Banking Reform Bill—where it would be appropriate for a direction to have an indefinite duration. Amendment 91D therefore provides the regulator with the flexibility to give a direction of an indefinite duration.
Viscount Trenchard
Will my noble friend explain more about government Amendment 91A? I do not understand why the reference to the FCA is different from that to the PRA. As regards the FCA, the amendment refers to,
“one or more of its operational objectives”.
I am not quite sure which of its objectives is non-operational. As regards the PRA, the amendment refers to, “any of its objectives”. I think that “any” means one only. Why is the drafting different between the two?
Lord Sassoon
I do not think that there is any material significance, other than that it tracks the wording of the different form of objectives which relate to the two bodies. It now escapes me because it is a few hours since we discussed the form of the objectives but I do not believe that there is any substantive point that relates to what we are doing here to change the power over holding companies. If it is all right with my noble friend, I will write to him to confirm why this links into the slight different wording used.
Lord Whitty
My Lords, the Minister is right that there is not a lot new under the sun to be said about this clause and these amendments. I find it slightly odd that, in advocating his own amendments, he is looking for flexibility and usability, whereas in relation to mine, he is retaining a high degree of rigidity. In a situation where there is exactly the same behaviour by a parent company which is a financial institution and another which is not, when the regulator decides that it would need to intervene on the former but not on the latter, the Government may be open to a situation where there is a problem of equality of treatment and, therefore, one of effective competition. I suspect that my learned friends would be brought in if those two things were to happen simultaneously.
I therefore think that the Government are digging themselves a bit of a hole in resisting what I had hoped was a fairly common-sense amendment. However, they appear to be adamant that they have powers to bring in the kind of change for which I am seeking. Therefore, at this stage, I will not pursue my amendment.
Lord Sassoon
“(2) The general condition is that the appropriate regulator considers that it is desirable to give the direction in order to advance—
(a) in the case of the FCA, one or more of its operational objectives;(b) in the case of the PRA, any of its objectives.”
“( ) A requirement imposed by the direction may be expressed to expire at the end of a specified period, but the imposition of a requirement that expires at the end of a specified period does not affect the power to give a further direction imposing a new requirement.
( ) The direction—
(a) may be revoked by the regulator which gave it by written notice to the body to which it is given, and(b) ceases to be in force if the body to which it is given ceases to be a qualifying parent undertaking.”
Lord Sassoon
“(a) the general condition in subsection (2) were that the Bank considers that it is desirable to give the direction for the purpose of the effective regulation of one or more recognised clearing houses in the group of the qualifying parent undertaking,”
The Deputy Speaker (Lord Brougham and Vaux)
I remind the House that if Amendment 92A is agreed, I cannot call Amendments 92B to 93 inclusive.
Amendment 92A
Lord Sharkey
“296A Additional power to direct UK clearing houses
(1) The Bank of England may direct a UK clearing house to take, or refrain from taking, specified action if the Bank is satisfied that it is desirable to give the direction, having regard to the public interest in—
(a) protecting and enhancing the stability of the UK financial system,(b) maintaining public confidence in the stability of the UK financial system,(c) maintaining the continuity of the central counterparty clearing services provided by the clearing house, and(d) maintaining and enhancing the financial resilience of the clearing house.(2) The direction may, in particular—
(a) specify the time for compliance with the direction,(b) require the rules of the clearing house to be amended, and (c) override such rules (whether generally or in their application to a particular case).(3) The direction is enforceable, on the application of the Bank, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
(4) The Bank may revoke a direction given under this section.
(5) In this section “central counterparty clearing services” has the same meaning as in section 155 of the Companies Act 1989 (see subsection (3A) of that section).
296B Additional power to direct UK clearing houses (No. 2)
(1) The Bank of England shall ensure that each authorised Clearing House draws up and maintains a recovery plan providing, through measures taken by the management of the clearing house or by a group entity, for the restoration of its financial situation following significant deterioration.
(2) The Bank of England shall ensure that the clearing houses update their recovery plans at least annually or after change to the legal or organisational structure of the clearing house, its business or its financial situation, which could have a material effect on, or necessitates a change to the recovery plan; and the Bank of England may require authorised clearing houses to update their recovery plans more frequently.
(3) Recovery plans shall not assume any access to or receipt of extraordinary public financial support but shall include, where applicable, an analysis of how and when a clearing house may apply for the use of central bank facilities in stressed conditions and available collateral.
(4) The Bank of England shall ensure that authorised clearing houses include in recovery plans appropriate conditions and procedures to ensure the timely implementation of recovery actions as well as a wide range of recovery options; and the Bank of England shall ensure that firms test their recovery plans against a range of scenarios of financial distress, varying in their severity including system wide events, legal-entity specific stress and group-wide stress.
296C Additional power to direct UK clearing houses (No. 3)
(1) The Bank of England shall require authorised clearing houses to submit recovery plans to it for review.
(2) The Bank of England shall review those plans and assess the extent to which each plan the following criteria—
(a) the implementation of the arrangements proposed in the plan would be likely to restore the viability and financial soundness of the clearing house, taking into account the preparatory measures that the clearing house has taken or has planned to take;(b) the plan or specific options could be implemented effectively in situations of financial stress and without causing any significant adverse effect on the financial system, including in the event that other clearing houses implemented recovery plans within the same time period.(3) Where the Bank of England assess that there are deficiencies in the recovery plan, or potential impediments to its implementation, they shall notify the clearing house of their assessment and require the clearing house to submit, within three months, a revised plan demonstrating how those deficiencies or impediments have been addressed.
(4) If the clearing house fails to submit a revised recovery plan, or if the Bank of England determines that the revised recovery plan does not adequately remedy the deficiencies or potential impediments identified in its original assessment, the Bank of England shall require the clearing house to take any measure it considers necessary to ensure that the deficiencies or impediments are removed; and the Bank of England may, in particular, require the clearing house to take actions to—
(a) facilitate the reduction of the risk profile of the clearing house;(b) enable timely recapitalisation measures;(c) make changes to the firm strategy;(d) make changes to the funding strategy so as to improve the resilience of the core business lines and critical operations;(e) make changes to the governance structure of the clearing house.”
Lord Sharkey
My Lords, Amendment 92A would require the Bank of England to ensure that UK-authorised clearing houses have in place a recovery plan. The amendment sets out the features of a recovery plan and requires each clearing house to submit a recovery plan to the Bank for assessment. The amendment also gives the Bank the power to require changes to recovery plans that it finds deficient against well defined criteria. In the case of continued deficiency, it gives the Bank the power to require the clearing house to take any measure that it considers necessary to remedy these deficiencies. The overriding purpose of the amendment is to put in place statutory provisions to make catastrophic clearing house failure less likely.
I know that the Government are entirely alive to the possible failure of clearing houses, and I am grateful for the discussions that I have had with the Ministers’ officials on the subject. I think that it is almost universally acknowledged that when the G20 proposals for putting almost all derivatives trading through clearing houses are in place, these greatly enlarged clearing houses will be the focus of greatly enlarged risk.
One of the immediate consequences of the huge enlargement of business through the clearing houses will be a huge increase in the demand for high-quality collateral. The IMF believes that this shift will boost demand for high-grade assets by between $2 trillion and $4 trillion. The question is, of course, where will these high-grade assets be found? It is entirely possible that there will not be enough of them to backstop the $700 trillion derivatives market. In fact, in the US at least seven banks plan to let customers swap lower-rated securities that do not meet clearing house standards in return for a loan of treasuries that do—a process which is known, rather alarmingly, as “collateral transformation”. We saw what happened with the collateral transformation of sub-prime bonds, and we can see where this new collateral transformation might lead.
On 7 November, in his evidence to the Banking Standards Commission, in response to a question from my noble friend Lady Kramer, Andy Haldane of the Bank of England said that,
“many people are fearful that the next crisis may be in the infrastructure and particularly in the central counterparty space. For all the reasons you say, these will be entities that are too big to fail, on steroids”.
He was talking about clearing houses.
The Bill already contains a partial response to the fear that the failure of a clearing house would produce an even worse financial crisis than the one we are enduring. The Government have introduced in the Bill powers of resolution to deal in an orderly way with the failure of a clearing house. However, there is a stage before failure that is vital to consider if the chances of avoiding collapse are to be as high as possible—the stage that deals with recovery.
I am certain that all clearing houses already have in place detailed recovery plans aimed at preventing outright failure, allowing some continuation of trading and preventing infection spreading pervasively throughout the financial system. I am certain that these plans will have been discussed with the Bank. The Government may think that these discussions are sufficient. After all, there are only five recognised UK clearing houses and seven recognised overseas clearing houses under supervision.
The Government may also feel that the Bill already gives the Bank power to do pretty much as it sees fit, in the widest possible sense, if it sees a crisis developing. However, this assumes that it can see a crisis developing, which was obviously not true in the recent past. It also assumes that informal discussions are better than a clear, well defined statutory obligation. It places a higher value on informal contact than on an open, clear, regular and disciplined system of review. That attitude did not work too well with LIBOR. The Government’s Statement this afternoon about the new Governor of the Bank of England rather bizarrely stated:
“The role the Bank of England plays in our economy cannot be underestimated”.
It does not seem satisfactory essentially to say that because there are only 12 recognised clearing houses, the Bank can and will keep a very close eye on them. I am sure that the Bank already keeps a close eye on them, and its gaze will be even keener when the clearing houses’ risk to the entire financial system is enormously magnified. However, an eye, no matter how closely applied, is no substitute for a formal, disciplined, well defined and transparent supervisory process.
In a very real sense, the whole Bill is based on the premise that formal, disciplined, well defined and transparent supervisory processes are critical to the proper functioning and stability of the financial system. The EU also takes this point of view. An EU draft directive on recovery and resolution was published earlier this year. It requires a specific, formal and disciplined process for clearing houses to draw up recovery plans, maintain them and have them assessed and gives the appropriate regulator power to assess and to intervene. The language of the amendment comes almost directly from the draft directive. However, at the moment, the draft directive is not making much progress. It is still waiting for First Reading in the European Parliament.
The Government had anticipated that it may take time for European legislation to emerge. In their response to the consultation opened by the document, Financial Sector Resolution: Broadening the Regime, which covers central counterparties as a key group and closed on 24 September, the Government stated:
“In due course, the Government would therefore expect to see European legislation brought forward. However, the timing of any European legislation is uncertain at this stage. Even the Recovery and Resolution Directive, which is more advanced than other proposals, does not have a date that is certain for its adoption. The Government is therefore minded to develop the UK’s domestic regime in advance of the European process”.
This is exactly what the Government have done regarding the resolution half of the proposal. The question is why they have not done this for the recovery part of the proposal. Warding off collapse is every bit as important as dealing with collapse. The risks involved in the failure of a clearing house have the potential to make the current financial crisis look almost trivial. Why not take every precaution we can, and why not take them now?
The new Governor of the Bank of England is also of this mind. He said two weeks ago in a speech to the Canadian Club of Montreal that it was not yet clear that the “too big to fail” situation had been ended, and added, quite explicitly, that each global systemically important financial institution must have mandatory recovery resolution plans in place. I hope that the Minister will agree with Mr Carney and might reconsider the importance of having in place a rigorous recovery plan regime for clearing houses, rather than relying on informal supervision while we wait for the EU to regulate. I beg to move.
Baroness Cohen of Pimlico
My Lords, I draw attention to Amendments 92B and 92C in my name. I must declare my interest as a director of the London Stock Exchange and, for that matter, as vice president of the Borsa Italiana—and, as such, the owner of a clearing house in Italy. Subject to all the regulatory requirements, I have a 60% shareholding in LCH.Clearnet, a London-based clearing house.
London Stock Exchange Group supports recovery and resolution powers for the financial markets and believes that these will be best delivered in clear and consistent legislation. We expect to come under close scrutiny. The amendments in my name help with elements of proposed new Section 296A of the Financial Services and Markets Act, which gives the Bank of England additional powers to direct UK clearing houses that were introduced by the Government in Committee. That is why we have not heard quite so much about them until now.
I am grateful to the Minister for the assurance he provided to the House on 15 October that the Bank of England would not use these powers to require shareholders, members or clients of clearing houses to recapitalise or otherwise fund a failing clearing house. This is vital because owners of a clearing house need to know their maximum possible liabilities in order to manage and control their funding. Following helpful discussions with HM Treasury and the Bank of England, it is understood that the circumstances in which the power of direction would be exercised fall somewhere between the day-to-day powers and the other powers provided by the Banking Act. Again, I am grateful to HM Treasury and the Bank of England for their willingness to engage in dialogue on all this. I am sure that we all want effective regulation of clearing houses, but we need clarity and certainty around the scope of the powers and the circumstances of their use.
The amendment seeks to put in the Bill the government description of the circumstances in which the powers would be used, as is the case for the existing crisis powers, and when they are to be used. This should also include a requirement to consult the other regulators and the clearing house, as suggested in the amendment.
My amendments would bring clarity and would, to some extent, future-proof these powers in three key ways. First, Amendment 92B would clarify that the powers would be used only if “necessary”, rather than “desirable”, which is an objective and appropriate test.
Secondly, Amendment 92C seeks to characterise the new powers in proposed new Section 296A of the Financial Services and Markets Act more clearly as sitting between the day-to-day powers and the Bank of England’s crisis powers. My amendment seeks to introduce conditions on the Section 296A power, while stopping short of requirements provided for under the Banking Act powers, which have much stricter trigger conditions and consultation requirements. This would allow the Bank a clear ability to use the different sets of powers. If Government can improve on this wording to give greater clarity on exactly when the powers would be used, I would welcome that. I hope at this stage only to highlight the issue and seek closer definitions.
Thirdly, Amendment 92C would place a consultation requirement on the Bank before using the powers—and takes account of the changes being made to Section 298 of FiSMA—that would allow the Bank to waive consulting the clearing house, if necessary. This would ensure that the relevant authorities considered the wider market consequences of a proposed direction, while allowing flexibility for the Bank.
Taken together, these amendments would achieve the Government’s objectives and support the legitimate interest of clearing houses. The amendments would retain full flexibility of the Bill as drafted, while offering greater clarity and certainty for market infrastructure operators, which we all need.
Lord Flight
My Lords, Amendment 93A to some extent overlaps with Amendments 92B and 92C, tabled by the noble Baroness, Lady Cohen. However, its thrust is slightly different. It has the support of ICE Clear Europe, which I believe has raised its concerns directly with the Minister. The starting point is that, given the systemic importance of clearing houses, it is self-evidently appropriate for the Bank to have powers to direct them in certain circumstances.
The powers granted to the Bank of England by Section 296A of FiSMA are extremely wide and broad—arguably too wide and broad—and could be counterproductive to achieving financial stability. My case is that Section 296A should be subject to specific, transparent and predictable trigger conditions. My amendment seeks to address the issue by setting out the trigger conditions and scope for action and intervention by the Bank of England under Section 296A. Other amendments have been tabled that address the issue in a different way. Amendments 92B and 92C in particular are there to achieve clarity and certainty, with less concern about the absolute extent of the Bank of England’s powers.
The key principle of the trigger conditions and scope that my amendment proposes is that Section 296A should be used only in the event that without such direction the clearing house would fail or would be likely to fail. Secondly, a particular concern is that the Bank of England could use the broad powers granted by Section 296A to direct a viable clearing house to take on business that could be severely damaging to its interests. Section 296A should not be used in this way. Directions should relate only to the existing business of a clearing house. Finally, Section 296A should be used only in consultation with relevant bodies, including the clearing house itself. The noble Baroness, Lady Cohen, made the same point.
If the principles set out in Amendment 93A were adopted, they would allow the Government’s objective to be achieved. They would tailor the regime to circumstances in which the Bank of England would need to intervene in the market to maintain financial stability, and they would reflect the appropriate interests of the clearing houses.
Lord Sassoon
My Lords, the Government note the concerns expressed about the additional powers of direction to be conferred on the Bank of England. Some of these concerns are reflected in Amendments 92B and 92C, tabled by the noble Baroness, Lady Cohen of Pimlico. These amendments seek to impose more stringent conditions on the Bank of England’s ability to exercise the Section 296A power. I will say at the outset that in response, the Government are minded to bring forward amendments at Third Reading to address some of the concerns raised by the industry.
Before bringing forward amendments at Third Reading, I will reflect further on the debate we have had today. However, I am happy to confirm that the Government are considering amendments to raise the threshold of the trigger for the power of direction to a “necessary” rather than a “desirable” test; to more clearly set out how the power is to be used, including specifying procedures with which the Bank should comply prior to issuing a direction, whether on a routine or an expedited basis; and, finally, to set out in statute the assurance that I have already given the House that the additional power of direction cannot be used to compel a clearing house to accept the business of a competitor.
I will now address the amendments in this group. Amendment 92A, tabled by my noble friend Lord Sharkey, seeks to introduce a requirement for clearing houses to draw up and maintain recovery plans. The appropriate place for a requirement for clearing houses to prepare recovery plans would be in Part III of the recognition requirement regulations made under Section 286 of FiSMA, not in primary legislation.
The Government have already outlined their intention to build on the positive developments around loss allocation arrangements that are being introduced by some clearing houses of their own volition, and will also consult on proposals to make changes to the recognition requirement regulations, which are the operating conditions under which clearing houses are licensed to operate in the UK. The changes would have the effect of requiring all UK clearing houses to have in place loss allocation rules. As part of the consultation exercise, the Government will also seek views on proposals to change the recognition requirement regulations to make mandatory the preparation and maintenance of recovery plans by clearing houses. We are on the case and certainly are not waiting for EU legislation. However, we believe that the recognition requirement regulations are the appropriate place for these conditions, and we will take action to that end.
Amendment 93A, tabled by my noble friend Lord Flight, would impose further preconditions on the exercise of the power, would limit the scope of any direction given under the power and would apply various provisions of the special resolution regime provided for in Part 1 of the Banking Act 2009 to any direction given. It would not be appropriate for the Bank of England to wait until the financial position of a clearing house had deteriorated to the extent that it posed a serious threat to financial stability or failed to meet its recognition requirements before exercising the additional power of direction. The additional power of direction is a supervisory power, not a resolution power. It will allow the Bank of England to manage the considerable risks that may be posed by the actions of a clearing house which do not constitute a breach of its recognition requirements or its obligations under FiSMA 2000. If Amendment 93A were agreed, the Bank of England might be unable to give a direction that would safeguard the solvency of a clearing house, forcing the use of resolution powers as a last resort in order to minimise the impact of the failure of the clearing house on wider financial stability.
It would also be inappropriate to limit the scope of any direction that the Bank of England might give in the way suggested by Amendment 93A. The additional power of direction is intentionally wide-ranging. The Government feel that this is essential in order to build in sufficient flexibility to enable the Bank to manage and respond to new and unusual risks that may require regulatory action that goes beyond the purposes specified in Amendment 93A. The Government also believe that requiring a court order to be obtained before any direction could be given by the Bank could undermine successful regulatory intervention in instances where there was a need to act with alacrity in the event of a crisis. The court may not necessarily be well placed to make judgments on whether action is necessary having regard to the relevant public interest criteria.
Finally, it would not be feasible to apply the provisions of the special resolution regime provided for in Part 1 of the Banking Act 2009 to this power of direction. The additional supervisory power of direction provided for by Section 296A is separate and distinct from the stabilisation powers, exercisable in respect of UK clearing houses, provided for by Amendment 193G. In contrast to the power of direction, which is a supervisory tool, the stabilisation powers are resolution tools that would be deployed to minimise the impact of the failure of a clearing house on wider financial stability. Given that alternative, specific resolution powers exist, it would be unreasonable for the Bank of England to use the power of direction to effect “partial property transfers”. Such an action would be contrary to the constraints under which the Bank operates as a public authority.
With those explanations and assurances about what we intend to come forward with at Third Reading, I hope that my noble friend will feel able to withdraw his amendment.
Lord Sharkey
My Lords, I seem to have put my amendment in the wrong place, but I think I heard the Minister say that recovery plans would be made mandatory in any case but by other means. Given the risks involved, it would be nice to have some sense of when that may actually happen, but in the mean time I beg leave to withdraw the amendment.
Lord Sassoon
Lord Sassoon
“(a) after the definition of “applicant” insert—““central counterparty clearing services” has the same meaning as in section 155 of the Companies Act 1989 (see subsection (3A) of that section);”, and
(b) ”
Lord Sassoon
“(2) If the Treasury consider that it is in the public interest to do so, the Treasury may by order—
(a) amend section 391 of FSMA 2000 by substituting for subsections (1) to (1ZB) the following—“(1) Neither the regulator giving a warning notice nor a person to whom it is given or copied may publish the notice or any details concerning it.”, and(b) repeal section 395(1)(d) and (2)(b) and (c) of that Act.”
Lord Sassoon
My Lords, we return now to the issue of warning notices and procedures for decision-making within our regulators. We have had lengthy debates on these issues in Committee, and rightly so as they concern important matters relating to fairness and natural justice. I shall return to Amendments 97A and 97ZZA when my noble friend Lord Flight and the noble Baroness, Lady Hayter of Kentish Town, have spoken. For now, I shall focus on the group of government amendments concerning warning notices.
The new power for the regulators to disclose the fact that a disciplinary warning notice has been issued constitutes a real departure from the regulatory regime up to this point and a bold move towards more transparent, effective and open regulation. The power has been welcomed by many, including of course by the noble Baroness on behalf of the Opposition. However, concerns have been raised by members from all sides of the House. These concerns fall broadly into two categories: first, that the power will be used irresponsibly; and secondly, that there should be a greater degree of independence involved in reaching a decision to disclose the fact that a warning notice has been issued. The Government have tabled amendments that I hope will address both these issues.
Amendment 94A provides for a power for the Treasury to repeal the warning notices power,
“If the Treasury consider that it is in the public interest to do so”.
As I noted in Committee, this provision is intended as a useful backstop against irresponsible use of the power. The Treasury would expect to use its power to repeal if it felt that the way in which the power was being used did not serve the wider public interests. I hope that noble Lords are reassured that this will pose a substantial and clear check on the power being used in a way that is damaging or irresponsible.
In Committee on 15 October, the noble Baroness, Lady Hayter, quite rightly noted that the power to repeal is a substantial one and that such a decision should involve parliamentary scrutiny. I fully agree with her and that is why Amendment 117A makes the use of this power subject to affirmative procedure. I hope that the noble Baroness is reassured by that.
Amendments 97ZA and 97ZB are intended to address some of the concerns expressed by a number of Members of this House, including my noble friends Lord Flight, Lord Deben and Lord Hodgson of Astley Abbotts, and the noble Baroness, Lady Hayter of Kentish Town. This is about the process by which a decision is taken to disclose the fact that a warning notice has been issued.
The concern expressed was that there was a lack of independence in the decision to disclose, with the effect that the regulator would be judge, jury and executioner when it came to a decision to disclose that a warning notice had been issued. Amendments 97ZA and 97ZB bring the decision to disclose that a disciplinary warning notice has been issued into the list of matters subject to the procedures set out in Section 395 of FiSMA. The amendments set out the criteria with which the process for deciding to disclose a warning notice must comply, noting that the decision must be taken either by a person other than the person by whom the decision to disclose was first proposed, or by two or more persons not including the person by whom the decision to disclose was first proposed. This is intended to deliver a degree of independence in the decision-making process and mirrors the conditions set out in relation to the decision to issue a warning notice or decision notice. I hope that this addresses some of the concerns expressed in our debates in Committee on the issue.
Lord Flight
My Lords, Amendment 97A seeks to require each of the two regulators to establish an independent committee to determine whether to publish a warning notice relating to any individual whom it plans to discipline and to whom that individual may then make representations. The RDC, as we know, has no statutory basis so cannot usefully be referred to, hence the formulation of the last paragraph of my Amendment 97A. This amendment does not preclude a regulator publishing a warning notice against an individual for market abuse or for acting without individual approval when required, matters which I think are different in nature and would distract from the key principle at stake if they were not thus excluded.
It seems to me that government Amendments 97ZA and 97ZB achieve that which I sought to argue for both in Committee and today—that is, a fair process of taking a decision and a fair process of deciding to publish. Via a somewhat tortuous route, the Government seem to have it exactly right for the FCA. The RDC will be the body taking the fair tribunal and then taking the decision on the warning notice. What is still lacking is what will happen at the PRA. There is no indication whether it is considering using the RDC or having any sort of sensible judicial body. If it does, then it will apparently be bound by Amendments 97ZA and 97ZB, if enacted. I would therefore hope that the Minister can give the House some comfort that the PRA is intending to mirror broadly the intended arrangements for the FCA; Amendments 97ZA and 97ZB seem to achieve what is wanted for both regulators. It is appropriate that for both regulatory bodies there should be a fair due process, both out of principle and fairness; we should not forget the other stakeholders, the pension funds that hold the shares of institutions that may be badly damaged by the reputational damage of a warning notice.
Lord Hodgson of Astley Abbotts
My Lords, I wonder if my noble friend could deal with one aspect of his explanation of government Amendment 94A. It may be that I misunderstood what he said. Is this to be a general removal of power—that is, a backstop—or is it going to be available in individual cases? It is not clear from his explanation whether it will be gone for ever or if an individual case could say to the Treasury, “We are going to be unfairly treated. Please step in”. At the moment, the former is a very blunt instrument and a lot of eggs could be broken before you get back to a more satisfactory situation if you felt that the regulator was using the power unwisely, unfairly and disproportionately. Could he explain the point when he comes to wind up the debate?
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for introducing these amendments and I hope I am right in understanding that the backstop power is for the whole thing and not for individual cases. I see that the Minister is nodding in agreement that I have the interpretation right. I thank him for that now being an affirmative order if it was to be changed. I am confident that the public interest will not bring it back to this House, so I am quite relaxed about it.
The other amendments aside from the first one relating to the backstop power are about ensuring some independence on the issue of warning notices, or in the case of Amendment 97ZA in the name of my noble friend Lord Eatwell and myself, on the whole disciplinary process. This amendment would ensure that a properly constituted and independent determinations panel would be responsible for dealing with all cases presented by the FCA or indeed by the PRA. As I explained in Committee, that is in effect the procedure introduced for the Pensions Regulator in 2004. It is seen as robust and independent, and it has indeed turned down some of the cases that have been taken to it. I would have to say, of course, since I was a member of it, that it was effective. It has been a useful way of ensuring that there is confidence that when cases are brought by staff, they are well scrutinised.
As the Minister has said, the government amendments in this group other than the first one on the backstop go some way to answering our concerns. However, I do not think that they go quite far enough, although I guess that we should be grateful for some movement. They introduce a degree of independence to the consideration of a case brought by FCA or PRA staff, but they fail to ensure the continuance of the RDC to give its statutory backing. We hear what the Minister says about the statement of the current FSA on what the future FCA will voluntarily choose to do, but I hope that the Government do not at some point in the future rue the day that they failed to protect the RDC’s existence and independence. For the moment, however, perhaps the noble Lord could confirm the Government’s commitment, not just that of the FCA, to the continuance of the RDC.
Lord Sassoon
My Lords, I think that I can probably be briefer than I had intended in responding to these amendments. I will confirm again that the backstop power is, as my noble friend has characterised it even though it may not be what he would like to see, a “gone for ever” backstop. However, I hope it will give comfort that we will keep under review the way this important new power is operated.
On Amendment 97A, I am grateful to my noble friend Lord Flight for saying in terms that he is reassured by the effect of Amendments 97ZA and 97ZB, to which I spoke at some length, so I will not go over that ground again. The issue about the difference between the FCA and the PRA here is a simple one. We see the FCA as being the regulator that would issue these types of warning notice and to which the new power applies, and we do not actually see the PRA doing it. That is why we have constructed things as they are and we can rely on the approach of the RDC continuing as we have discussed. But if the PRA were to get into the warning notices business, which we do not anticipate, there are provisions in the Bill that would cause it to look at how it would construct an independent process that might take it down an RDC-type route.
I am not sure whether the noble Baroness, Lady Hayter, was expecting me to say more about Amendment 97ZZA because we have agreed that we went over this ground on 15 October. I am grateful to her for what she said about the government amendments, so unless she would like me to go on at some length, I think that we have probably done it justice. However, I am grateful for this short debate.
Lord Sassoon
“(4) For subsection (2) substitute—
“(2) A contravention within subsection (1) or (1A)—
(a) does not, except as provided by section 23(1A), make a person guilty of an offence,(b) does not, except as provided by section 26A, make any transaction void or unenforceable, and(c) does not, except as provided by subsection (3), give rise to any right of action for breach of statutory duty.””
“( ) After subsection (3) insert—
“(4) Subsections (1) and (1A) are subject to section 39(1D).
(5) References in this Act to an authorised person acting in contravention of this section are references to the person acting in a way that results in a contravention within subsection (1) or (1A).””
“2A (1) Section 23 (contravention of the general prohibition) is amended as follows.
(2) After subsection (1) insert—
“(1A) An authorised person (“A”) is guilty of an offence if A carries on a credit-related regulated activity in the United Kingdom, or purports to do so, otherwise than in accordance with permission—
(a) given to that person under Part 4A, or(b) resulting from any other provision of this Act.(1B) In this Act “credit-related regulated activity” means a regulated activity of a kind designated by the Treasury by order.
(1C) The Treasury may designate a regulated activity under subsection (1B) only if the activity involves a person—
(a) entering into or administering an agreement under which the person provides another person with credit,(b) exercising or being able to exercise the rights of the lender under an agreement under which another person provides a third party with credit, or(c) taking steps to procure payment of debts due under an agreement under which another person is provided with credit.(1D) But a regulated activity may not be designated under subsection (1B) if the agreement in question is one under which the obligation of the borrower is secured on land.
(1E) “Credit” includes any cash loan or other financial accommodation.
(1F) A person guilty of an offence under subsection (1A) is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the applicable maximum term or a fine not exceeding the statutory maximum, or both;(b) on conviction on indictment, to imprisonment for a term not exceeding two years, or a fine, or both.(1G) The “applicable maximum term” is—
(a) in England and Wales, 12 months (or 6 months, if the offence was committed before the commencement of section 154(1) of the Criminal Justice Act 2003); (b) in Scotland, 12 months;(c) in Northern Ireland, 6 months.”(3) After subsection (3) insert—
“(4) Subsection (1A) is subject to section 39(1D).
(5) No proceedings may be brought against a person in respect of an offence under subsection (1A) in a case where either regulator has taken action under section 205, 206 or 206A in relation to the alleged contravention within section 20(1) or (1A).”
(4) In the heading to the section, at the end insert “or section 20(1) or (1A)”.
2B After section 23 insert—
“23A Parliamentary control in relation to certain orders under section 23
(1) This section applies to the first order made under section 23(1B).
(2) This section also applies to any subsequent order made under section 23(1B) which contains a statement by the Treasury that, in their opinion, the effect (or one of the effects) of the proposed order would be that an activity would become a credit-related regulated activity.
(3) An order to which this section applies may not be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House.”
2C After section 26 insert—
“26A Agreements relating to credit
(1) An agreement that is made by an authorised person in contravention of section 20 is unenforceable against the other party if the agreement is entered into in the course of carrying on a credit-related regulated activity involving matters falling within section 23(1C)(a).
(2) The other party is entitled to recover—
(a) any money or other property paid or transferred by that party under the agreement, and(b) compensation for any loss sustained by that party as a result of having parted with it.(3) In subsections (1) and (2) “agreement” means an agreement—
(a) which is made after this section comes into force, and(b) the making or performance of which constitutes, or is part of, the credit-related regulated activity.(4) If the administration of an agreement involves the carrying on of a credit-related regulated activity, the agreement may not be enforced by a person for the time being exercising the rights of the lender under the agreement unless that person has permission, given under Part 4A or resulting from any other provision of this Act, in relation to that activity.
(5) If the taking of steps to procure payment of debts due under an agreement involves the carrying on of a credit-related regulated activity, the agreement may not be enforced by a person for the time being exercising the rights of the lender under the agreement unless the agreement is enforced in accordance with permission—
(a) given under Part 4A to the person enforcing the agreement, or(b) resulting from any other provision of this Act.”3 In section 27 (agreements made through unauthorised persons) for subsection (1) substitute—
“(1) This section applies to an agreement that—
(a) is made by an authorised person (“the provider”) in the course of carrying on a regulated activity,(b) is not made in contravention of the general prohibition,(c) if it relates to a credit-related regulated activity, is not made in contravention of section 20, and(d) is made in consequence of something said or done by another person (“the third party”) in the course of—(i) a regulated activity carried on by the third party in contravention of the general prohibition, or (ii) a credit-related regulated activity carried on by the third party in contravention of section 20.(1A) The agreement is unenforceable against the other party.”
4 In section 28 (agreements made unenforceable by section 26 or 27)—
(a) at the end of subsection (1) insert “, other than an agreement entered into in the course of carrying on a credit-related regulated activity”,(b) in the heading to the section, at the end insert “: general cases”.5 After section 28 insert—
“28A Credit-related agreements made unenforceable by section 26, 26A or 27
(1) This section applies to an agreement that—
(a) is entered into in the course of carrying on a credit-related regulated activity, and(b) is unenforceable because of section 26, 26A or 27.(2) The amount of compensation recoverable as a result of that section is—
(a) the amount agreed by the parties, or(b) on the application of either party, the amount specified in a written notice given by the FCA to the applicant.(3) If on application by the relevant firm the FCA is satisfied that it is just and equitable in the circumstances of the case, it may by written notice to the applicant allow—
(a) the agreement to be enforced, or(b) money paid or property transferred under the agreement to be retained.(4) In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the FCA must—
(a) if the case arises as a result of section 26 or 26A, have regard to the issue mentioned in subsection (5), or(b) if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).(5) The issue is whether the relevant firm reasonably believed that by making the agreement the relevant firm was neither contravening the general prohibition nor contravening section 20.
(6) The issue is whether the provider knew that the third party was (in carrying on the credit-related regulated activity) either contravening the general prohibition or contravening section 20.
(7) An application to the FCA under this section by the relevant firm may relate to specified agreements or to agreements of a specified description or made at a specified time.
(8) “The relevant firm” means—
(a) in a case falling within section 26, the person in breach of the general prohibition;(b) in a case falling within section 26A or 27, the authorised person concerned.(9) If the FCA thinks fit, it may when acting under subsection (2)(b) or (3)—
(a) limit the determination in its notice to specified agreements, or agreements of a specified description or made at a specified time;(b) make the determination in its notice conditional on the doing of specified acts by the applicant.28B Decisions under section 28A: procedure
(1) A notice under section 28A(2)(b) or (3) must—
(a) give the FCA’s reasons for its determination, and(b) give an indication of—(i) the right to have the matter referred to the Tribunal that is conferred by subsection (3), and(ii) the procedure on such a reference.(2) The FCA must, so far as it is reasonably practicable to do so, give a copy of the notice to any other person who appears to it to be affected by the determination to which the notice relates.
(3) A person who is aggrieved by the determination of an application under section 28A(2)(b) or (3) may refer the matter to the Tribunal.””
“( ) In section 130 (guidance), in subsection (1)(b), for “section 397 of this Act” substitute “Part 6A of the Financial Services Act 2012”.”
“( ) After subsection (1) insert—
“(1A) Each regulator’s policy with respect to the imposition of penalties, suspensions or restrictions under this Part must include policy with respect to their imposition in relation to conduct which constitutes or may constitute an offence by virtue of section 23(1A) (authorised persons carrying on credit-related regulated activities otherwise than in accordance with permission).””
“(i) which is imposed by or under this Act or by a”
“(i) which is imposed by or under this Act or by a”
Lord Sassoon
“30A In section 400 (offences by a body corporate etc) after subsection (6) insert—
“(6A) References in this section to an offence under this Act include a reference to an offence under Part 6A of the Financial Services Act 2012 (offences relating to financial services).””
“( ) For subsection (1) substitute—
“(1) In this section “offence” means—
(a) an offence under this Act,(b) an offence under subordinate legislation made under this Act, or(c) an offence under Part 6A of the Financial Services Act 2012 (offences relating to financial services).””
“32A In section 403 (jurisdiction and procedure in respect of offences), in subsection (7), at the end insert “or an offence under Part 6A of the Financial Services Act 2012 (offences relating to financial services).”
Lord Kennedy of Southwark
“( ) The Treasury or the Secretary of State may by order amend Schedule 17 to FSMA 2000 to require a scheme operator acting under the Schedule to make rules relating to the behaviour of a person who has entered into an agreement with a complainant to represent the complainant with respect to a complaint under the compulsory jurisdiction, the consumer credit jurisdiction or the voluntary jurisdiction pursuant to which any fee has been, will be or may be paid by the complainant.”
Lord Kennedy of Southwark
My Lords, in moving Amendment 101A as one of the three amendments tabled in my name on the Marshalled List, I hope that all noble Lords will agree that something now needs to be done. Whenever I raise the issue of claims management companies in the House, I always say that many of them act responsibly and fulfil an important role. If people want to use them, that is their prerogative. On the mis-selling of payment protection insurance, it was the banks that mis-sold these products to their customers, not the claims management companies. It is also true to say that if the banks were more upfront about what they had done, then the room for these companies to operate would be greatly diminished and more money would end up in the pockets of consumers who had been mis-sold the products rather than in the hands of the CMCs, which can take up to 30% of someone’s successful claim.
My amendment states:
“The Treasury or the Secretary of State may”—
I emphasise the use of “may”—
“by order amend Schedule 17 to FSMA 2000 to require a scheme operator acting under the Schedule to make rules”.
If the amendment is accepted we would not be forcing the Government to do anything that they do not want to do themselves. We are merely giving them the power to do something in the future if they want to do so. Amendments 101B and 101C are more prescriptive and in both cases use “must”. I would be delighted if the Government would accept them, but today I am offering them a version using “may”.
The amendment using “may” could be all that is needed. It would give the Government another string to their bow so that they could say even more forcefully, “Look, we believe in self-regulation in this sector, but there is considerable concern about the practices of some CMCs. As an industry, you need to get your act together, clean up the bad practice and deal with those who are making the industry look bad for all of you. If you do not get a grip, we are going to make sure that regulations are in place to ensure that you all act responsibility. So let us be clear: we have taken the required powers to enable us to do this, and we can act quickly if your industry fails to do so”. That may be all that needs to be done if the industry regulates itself properly.
Why is this amendment needed? It is simple. What is in place at the moment is not robust enough. The part of the industry that needs to get its act together will presently breach guidelines on cold-calling, text messages and email messages, it will fail to disclose properly the amount of compensation, and the consumer will have to pay if the claim is successful. We have all had the nuisance calls and text messages. I have seen firms at my local shopping centre telling people that they will get them thousands of pounds in compensation. When I asked a question recently on text messaging, the noble Lord, Lord McNally, accepted that the range of bodies involved on different aspects may be part of the problem in ensuring effective regulation.
Other types of bad practice include companies that bombard a whole raft of financial institutions with PPI claims on behalf of the customer, not even bothering to check whether the consumer ever had dealings with that particular institution before submitting the claim. What does that do? It wastes the time and money of the financial institution concerned and it diverts resources away from dealing with the genuine complaints so that consumers have to wait even longer to get their cases dealt with. After dealing with the financial institution, or in some cases not even bothering to go to the financial institution, all claims are submitted to the Financial Ombudsman Service, which again wastes time, costs everybody money except the CMCs concerned and makes genuine complainants wait even longer to get their complaint dealt with.
In conclusion, I hope that the Government will accept this amendment. As I said at the start, it should cause them no problems whatever. It compels them to do nothing they do not want to do themselves. It just says “may”, and that may be all that is required. I beg to move.
Lord Eatwell
My Lords, I support my noble friend’s very sensible amendment. I loved his last line: that “may” may be what is required in this respect. The amendment does two things. First, it is future-proofing—something on which the Treasury is usually very keen. Secondly, in an area where we know—and the Government have acknowledged—that abuses are taking place, it preserves the potential for self-regulation but is a shot across the bows, which should make those who are behaving improperly take much greater care. It preserves a spirit of self-regulation, if self-regulation is seen to work effectively. Given that the Treasury or the Secretary of State may by order amend Schedule 17 in the manner set out by my noble friend, I would like to commend this amendment to the Government.
Lord Hodgson of Astley Abbotts
I rise briefly to support these amendments. They seem extremely sensible. I do not want to repeat what the noble Lord, Lord Eatwell, has just said. I like the idea of “may”; I like the idea of self-regulation; and I like the chance for the industry to be able to put its house in order. That is clearly very sensible. The only point I would add is that we now have a situation where a substantial proportion of claims coming forward are fraudulent, semi-fraudulent or unjustified. In each case, the firm about whom the complaint is made must pay £850 to have the case investigated. That is a staggering sum of money and it ends up being paid by the consumers. We really need to find a way to short-circuit that, so that where the claims are fraudulent, something can be done to ensure that the claims management companies, rather than the firm, end up with some of the costs—and, indeed, to ensure that the costs are not passed on to the rest of us. There is a good idea here. I hope that the Government will give the amendments a sympathetic hearing.
Lord Newby
My Lords, clearly there are serious conduct problems among a minority of claims management companies. Nobody denies that. We are all too well aware that the reaction of the claims industry to the mass mis-selling of payment protection insurance has also brought with it a fall in compliance standards and an increase in poor practices, to some of which the noble Lord, Lord Kennedy, referred. He said that something needs to be done. Something is being done. The claims management regulator is taking forward a programme of reforms which are due to be implemented next year. These include a ban on claims management companies offering financial rewards or similar benefits as an inducement to make a claim; tightening the conduct rules so that the requirements of authorisation are made clearer and protection for consumers is strengthened; and extending the role of the Legal Ombudsman to act as an ombudsman for consumers with complaints about claims management companies, which I think deals with some of the points that were made about the ombudsman.
However, we will continue to require a robust and co-ordinated approach from both the claims management regulator and the FCA in responding to risks of detriment. That starts with the financial services regulator. Lessons have been learnt from PPI. The FCA will have an objective requiring it to intervene earlier to prevent detriment arising and, where mass detriment is occurring, use its powers to establish or agree redress schemes so that affected customers are proactively contacted and compensated. We have seen the FSA already moving much more quickly to agree redress schemes with the major banks in relation to the interest rate hedge mis-selling.
However, where CMCs have a role to play, consumers already seeking redress need to be protected against further detriment. So we will see the claims management regulator stepping up its approach and resources devoted to tackling the underlying problems that exist in the conduct of some CMCs. We have already seen the establishment of a specialist PPI compliance team at the claims management regulator. To ensure that the regulator is sufficiently funded going forward, the MoJ is proposing to increase fees levied on CMCs, particularly those operating in the financial products and services sector.
However, I am not convinced that institutional reform is necessarily the answer. At the moment, it could represent a distraction from the task at hand, particularly given everything else that is happening in changing the financial sector regulatory architecture. It is important to remember that CMCs operate in a number of sectors, not just financial services. In fact, personal injury remains the largest sector. PPI is a very significant sector currently, but the next wave of activity and potential detriment may come from another sector. As I have said before, we do not think that it is appropriate for the FOS to act as a quasi-regulator, as the amendments propose. That would detract from its role as an independent ombudsman. It is simply not what an ombudsman does. That is why it does not matter whether the clause says “must” or “may”. Our objection is not about that; it is that an ombudsman is not the right person to act as a quasi-regulator. The regulators do that. The ombudsman looks at particular claims of mistreatment.
Amendment 101A would simply provide an enabling power. However, it is making a proposal in terms of institutional change which we think is inappropriate. That is not to say that the Government are complacent in any respect about the need to do more in terms of the regulation of CMCs. The range of activities that I have mentioned gives us cause to believe that we will see a very significant increase in the effectiveness of regulation in the period ahead. In the light of that, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Kennedy of Southwark
I thank all noble Lords who have spoken in this short debate. I thank my noble friend Lord Eatwell and the noble Lord, Lord Hodgson of Astley Abbotts, for their support. The Minister’s response was very disappointing. He knows that I have pursued this matter for some time now. Yes, some action may be taking place, but the problem is that the rules in place are inadequate and are not properly enforced. Nothing that the noble Lord has said today in his response has convinced me otherwise. In that case, I should like to test the opinion of the House.
Lord Sassoon
“( ) In subsection (2)—
(a) in paragraph (a), for “or 397” substitute “or under Part 6A of the Financial Services Act 2012”, and(b) after paragraph (b) insert—“(ba) an authorised person may have contravened section 20 in relation to a credit-related regulated activity;”.”
Lord Sassoon
“(h) for paragraph (k) substitute—”
Lord Sassoon
“1A In Part 22 (auditors and actuaries), before section 340 (and the italic heading immediately before it) insert—
“General duties of PRA339A General duties of PRA in relation to auditors
(1) The arrangements maintained by the PRA under section 2K (supervision of PRA-authorised persons) must include arrangements for—
(a) the sharing with auditors of PRA-authorised persons of information that the PRA is not prevented from disclosing, and(b) the exchange of opinions with auditors of PRA-authorised persons.(2) The PRA must issue and maintain a code of practice describing how it will comply with subsection (1).
(3) The PRA may at any time alter or replace a code issued under this section.
(4) If a code is altered or replaced, the PRA must issue the altered or replacement code.
(5) When the PRA issues a code under this section the PRA must—
(a) give a copy of the code to the Treasury, and(b) publish the code in such manner as the PRA thinks fit.(6) The Treasury must lay before Parliament a copy of the code.
(7) “Auditor” means an auditor appointed under or as a result of a statutory provision.””
Lord Sassoon
My Lords, the government amendments in this group place new duties on the PRA to engage with auditors of PRA-authorised persons.
We had a useful debate in Committee on the role of auditors in the financial crisis. In particular, I welcomed the insightful and constructive comments made by my noble friends Lady Wheatcroft and Lord Lawson of Blaby. I committed to consider their points further and to bring back an amendment designed to address their concerns. Before I come to the detail of the amendments, I will set out briefly the work that is being done across the board to strengthen audit—and not just of banks.
First, there is the work of the Financial Reporting Council. On 28 September the FRC amended its code to require boards to state that their annual reports and accounts as a whole are fair, balanced and understandable. It also requires audit committee reports that set out the key judgments taken, and requires auditors to ensure appropriate communication between the audit committee and the board, reporting if they have evidence that the board’s overall assessment is inappropriate.
The FRC will be consulting on implementing the Sharman report recommendations, which, among other things, would require boards to report the risk and uncertainties that would affect the entity as a going concern, and would require auditors to comment if the disclosure was inconsistent with their understanding.
As noble Lords may already be aware, BIS has recently published a draft of new narrative reporting regulations that would replace the existing business review with a concise, stand-alone report focused on strategy and the organisation’s business model. This will mean that shareholders can easily find out about a company’s strategy, the risks it faces, how it is performing and the direction in which it is heading. The auditors would have to opine on the consistency of that report with the accounts.
These are all positive developments, directly addressing concerns about ensuring that audited accounts give a more complete view of the position of the firm, and what we are proposing needs to be seen against that background. As has been pointed out, there are particular issues with financial services firms. For PRA-authorised persons, questions of risk are often complex, and coming to judgments about the proper valuation of financial assets is a specialised task. In the Government’s view, the right way into this is to ensure that there is a flow of information between the auditor and the regulator to ensure that each can be informed by the judgments of the other. One example, noted in the recent PRA approach document, is that the PRA,
“will share relevant information, for example where it views a firm’s valuations of less liquid assets or its approach to provisioning to be significantly out of line with peers”.
Amendment 105A inserts a new Section 339A into FiSMA. The new section will require the PRA, as part of the arrangements it must maintain under Section 2K for supervising PRA-authorised persons, to have arrangements for sharing information and opinions,
“with auditors of PRA-authorised persons”.
The PRA must make a code of practice setting out how it will comply with this duty; it must publish the code and give a copy of the code to the Treasury, which must lay the code before Parliament. To ensure that this is a reciprocal arrangement, Amendment 105B will require the PRA to make,
“rules imposing duties on auditors of PRA-authorised persons”
in relation to co-operation with the PRA in its supervision of those persons.
The government amendments would mean that there will be an expectation, set out in law, that the PRA’s judgments about firms will be shared with the auditors. Coupled with the reforms that are being put in place by the Department for Business, Innovation and Skills and the FRC, the Government believe that this is a useful step forward.
I stress to my noble friend that while the FSA should and could have been doing these things, the PRA approach document goes further in setting out a new level of intent, and enshrining what could and should have been best practice into the code of practice to be published and laid before Parliament puts a very helpful spotlight on this issue, which I am very grateful to her for drawing to the attention of the House. This now means that those responsible, particularly on the PRA side, cannot shirk their duty. I beg to move.
Baroness Wheatcroft
My Lords, I am very grateful to my noble friend for taking up the issue of auditors. Clearly, auditors did not emerge well from the financial crisis. The clean audit reports that they delivered on banks that were on the verge of bankruptcy, as later became apparent, were evidence of deep failings in the system. Much as I am grateful to my noble friend for attempting to address that, I am not entirely convinced that these amendments go far enough.
I am unclear about what these amendments might achieve. As far as I can see, they do not go much further than reiterating what is already in the Financial Services and Markets Act but failed to deliver. I hear what my noble friend says about the approach being much harsher but I am not sure. Section 342 of FiSMA contains a power for the Treasury to make,
“regulations prescribing circumstances in which an auditor or actuary must communicate matters”
to the FSA. Equally, there are provisions allowing the FSA to communicate matters to the auditors. These amendments may contain a subtle increase in the duty that is imposed, but I am not convinced that they go far enough.
My original amendment was intended to heighten the duty on auditors to report on the risks they found. I continue to believe that it is essential that they should not be able to give a nearly bust bank a clean bill of health. The Financial Reporting Council takes that view and has made changes to its corporate governance code that increase the duties on directors and auditors. It remains to be seen whether these will be effective. The FRC is also launching a consultation into changes on the interpretation of “going concern” and “liquidity risks” following the Sharman inquiry. Directors would be required to give greater disclosure on the risks in their business and how they were being addressed, and auditors would be required to report on whether they concurred with the directors’ report. On past performance, I am not sure we should be confident that auditors will take issue with directors, who, after all, pay their fees.
We should be putting more of an onus on auditors to voice any doubts that they might have about the risks being taken by any business, but particularly by a bank. The FRC says that it is keen to encourage what it terms “professional scepticism”. I hope that the Minister will forgive me if I remain somewhat sceptical about these changes and I hope that he will at least undertake to keep under review the effectiveness of the amendment that he is now proposing.
Baroness Noakes
My Lords, unfortunately I was not able to be present when my noble friend’s amendment was debated in Committee, but I read Hansard and noted that my noble friend had undertaken to take the issue away and bring an amendment back. I was surprised when I looked at the amendment and saw what it was trying to deliver. It seems to me, as my noble friend has just pointed out, that there are already provisions in FiSMA, which covers the relationship between auditors and financial institutions. In addition, the Minister said that these are things that could and should have been done—but they are being done.
I have a copy of the code of practice for the relationship between the external auditor and the supervisor. This was refreshed after the financial crisis and is dated May 2011. It sets out a number of principles. Principle one states:
“Supervisors and auditors shall seek an open, cooperative and constructive relationship”.
Principle two is that they should “engage in regular dialogue”. Principle three states:
“Supervisors and auditors shall share all information relevant to carrying out their respective statutory duties and in a timely fashion”.
That code is already in existence and governing the dialogue between the FSA and auditors. Under the current legislative framework there is no reason for this not to continue when the PRA takes over its functions. I am struggling to see what it is that adds any substance to the current arrangements. The Government have brought forward an amendment, which is—and I hate to use this term—window dressing.
Lord Sassoon
My Lords, I assure you that it is not window dressing. I am not sure how much I can add for the benefit of my noble friend other than what I have said already. It is important to think about these amendments in the context of what the FRC and BIS are doing, and also to recognise that hardwiring the code of conduct into legislation in the way that I have described does considerably more than window dressing. Over time, we will be able to prove the scepticism of my noble friends to have been misplaced. I agree that this is a matter that will not go away, and we should and will, as Treasury and Government, keep these matters high on our list of things to be watched.
Lord Sassoon
“(4) For subsection (3) substitute—
“(3A) The PRA—
(a) must make rules imposing on auditors of PRA-authorised persons such duties as may be specified in relation to co-operation with the PRA in connection with the supervision by the PRA of PRA-authorised persons, and(b) may make rules—(i) imposing such other duties on auditors of PRA-authorised persons as may be specified, and(ii) imposing such duties on actuaries acting for PRA-authorised persons as may be specified.(3B) The FCA may make rules imposing on auditors of, or actuaries acting for, authorised persons other than PRA-authorised persons such duties as may be specified.””
“( ) In subsection (5), for “(3)” substitute “(3A) or (3B)”.”
“( ) In subsection (6), for “(3)” substitute “(3B)”.”
Lord Whitty
“234GA Complaints and proceedings: collective actions and redress
The Treasury and Secretary of State shall within three months of the passing of this Act shall bring forward proposals—(a) to introduce provisions for collective proceedings before the court in respect of financial service claims made by consumers; such proceedings to provide for both ‘opt in’ or ‘opt out’ procedures;(b) to introduce provision for collective proceedings before the court in respect of financial service claims made by small and medium sized businesses; and such proceedings to provide for both ‘opt in’ and ‘opt out’ procedures;(c) to introduce provision for complaints made by or on behalf of consumers or by or on behalf of small and medium sized businesses to the FCA that a feature, or combination of features, of a market in the United Kingdom for financial services is, or appears to be, damaging to the interests of small business or significant groups of consumers.”
Lord Whitty
My Lords, with most of this Bill being about regulators and the whole structure of regulation, I am returning to a proposition which would in due course return some power and leverage to consumers directly. As we just heard from my noble friend Lord Kennedy of Southwark and others speaking on claims management companies, it is often the case that in widespread abuse by financial services operators a common issue between a number of consumers, often a very large number of them, is that the process of seeking any redress is lengthy and complicated if conducted on an individual basis. It is also open to the intervention of the rougher end of the CMC market, which manages simultaneously to exploit the consumers and the providers.
In Committee, I tried to do the Government’s work for them and offered them an easy way of taking on board a system of collective action and redress by consumers. I proposed a fairly detailed set of amendments, which were almost precisely the same as those that were included in the 2010 Bill, that were dropped without debate in the wash-up prior to the general election. At that time, I proposed that various amendments should immediately be adopted by the Government. They had cleared the Treasury hurdle. They had cleared the hurdle of parliamentary counsel and could have been adopted.
The Government resisted that, and I am suggesting that we push it back to the Government to come up with an alternative version. I am giving them more flexibility to draw up their proposals, so this amendment would require them to come up with secondary legislation which would effectively give collective redress and action provisions for consumers in the financial area three months after the passage of this Act. To give them more time would probably not be sensible, given that had these provisions existed before the great PPI scandal, a lot of it would have been resolved by now.
In the last debate in Committee, the Minister referred in rather Delphic terms to a more general approach to collective redress for consumers, which was being considered by his sister department, BIS, in its approach to consumer affairs. He did so in a way which implied that it was probably going to act on that in the near future. It is true that BIS has included collective action and redress in its consultation paper on the consumer landscape. Now, we have before this House a Bill from BIS dealing with enterprise and regulatory reform, which has not a word about consumer protection and certainly none about the ability of consumers to engage in collective redress. This is in marked contrast to the determination rapidly to reduce protection for employees in that Bill. Consumers hardly get a look in.
I come back to the need for particular provisions in this Bill for the financial sector. There is an additional point in this amendment, which was not in my previous amendment, but was in an amendment proposed at that stage by my noble friend Lady Hayter. It is that this provision for collective action should also apply to small businesses. Like individual consumers, they are often faced with mis-selling or other misbehaviour by financial services, which affect a large number of small businesses, but which would be expensive and time-consuming for any individual business to pursue. If there were a framework, whether on an opt-in or opt-out basis, for small firms to take action against the financial institution or institutions, again their detriment could be met much more rapidly. Hence, I am proposing that the Government cover them within this review, with the requirement to report back and present regulations in three months’ time.
I hope that the Government at the very least accept a need to move in this direction either individually in respect of the financial sector, which has some peculiarities, or more generally. If it is to be done solely on the financial services front at this stage, then perhaps they could accept my amendment as it stands and we will in due course receive the regulations. If they want to move more broadly, I would welcome that, but I have received no indication as yet that the Minister’s colleagues are proposing in any very near-time dimension to bring such broader provisions forward. I hope that either the amendment can be accepted or that we will have a firm commitment to broader action in the near future. I beg to move.
Baroness Hayter of Kentish Town
My Lords, I support the amendment moved by my noble friend Lord Whitty. To some extent, the third arm of this amendment has been partially agreed by the Government, in that their proposed criteria for designating super-complaints to the FCA include representatives of SMEs—although they wisely exclude authorised bodies from this category. I have two questions to pose.
First, what is the timescale for the designation of SMEs as super-complainants? In his response in Committee, as my noble friend Lord Whitty has just reminded us, the Minister, Lord Newby, said that the Government hoped,
“to publish their response”—
to the consultation—
“before the end of the year”.—[Official Report, 15/10/12; col. 1351.]
Unless the Minister is to forego his Christmas holiday altogether, this is going to stretch even his capabilities, as responses to the super-complaint issue are due only on Christmas Eve. Amendment 106 adds a timescale to the exercise. Perhaps he could either give a definite date or accept the timescale suggested by my noble friend Lord Whitty. There is some urgency to this. The FSA estimates that more than 40,000 interest-rate swaps were mis-sold to small businesses. It is silly for each of them to have to take individual action over this, so only collective cases will satisfy. We see no reason why each individual or firm must make a separate claim. I cannot see why the onus should not be on the banks, which are the major mis-sellers, to write to those to whom they have mis-sold and repay the monies due to them. We understand that some banks have now agreed to do this, but faster action is required. We hear that ominous noise of foot-dragging. Small businesses simply cannot carry this unwarranted expenditure; they need a more rapid remedy.
My second question relates partly also to Amendments 105E, 105F and 105G, which deal with super-complaints with profits. As the Government have moved some of that oversight to the jurisdiction of the FCA, our original request was superfluous and we shall not press those amendments. However, the question remains how either individuals or SMEs can pursue, through their representatives’ use of a super-complaint, market failures where these relate to the bit of the banks’ activity that is under the PRA’s remit.
As noble Lords will recall, the Government have resisted our attempts to have any channel of communication between the Financial Services Consumer Panel and the PRA. Nor will they have access to super-complaints to the PRA and the collective action suggested by my noble friend Lord Whitty. It rather smacks of the banks’ regulator being deaf to alleged failures in any of the banks serving the needs of their customers.
Hitherto, the Government have suggested that all such representations can be made through the FCA, even though it will have no responsibility for PRA areas and even though it will have a wider remit than just the interests of one group of clients. It will anyway be very much at arm’s length from actual consumers. The issue remains of how collective action can be taken, particularly with respect to banks. Can the Minister therefore offer some reassurance that the PRA, in its regulation of banks and with the new Governor in place, will keep the interests of consumers central to its thinking and policy, so that further consumer detriment does not arise?
Lord Newby
My Lords, we of course accept that consumers, including small to medium-sized enterprises, should have appropriate access to redress in respect of financial services as much as to everything else.
On collective proceedings in the financial services sector, we are as we said in Committee awaiting the outcome of the BIS consultation on private actions in competition law, which considers introducing an opt-out collective actions regime for competition law. We shall see what the implications may be for the financial services sector. The Government are hoping to publish their response to that consultation around the end of the year.
If the Government conclude that it is appropriate to legislate more specifically for financial services, any proposals must be the result of evidence-based analysis, taking into account the conclusions of the consultation into private actions in competition law, and they must also be subject to proper consultation.
On super-complaints more generally, which were covered by the amendment, I remind the House that the Bill already provides for designated consumer bodies to make complaints to the FCA. This may include representatives of business consumers provided that they are not authorised persons. The Government are already consulting on the criteria that the Treasury should apply when designating consumer bodies for this purpose and have made clear their intention to designate bodies which represent primarily the interests of retail consumers or SMEs as super-complainants. There is no further provision to allow this.
The noble Baroness, Lady Hayter, asked when SMEs would be designated, to which the answer is: by 1 April next year. She also asked about dealing with complaints relating to the banks in respect of PRA matters. The FCA is the lead body. One makes one’s representation to the FCA. As we have discussed many times, there is a raft of areas where the FCA and the PRA have joint responsibility, and MoUs will deal with that. It therefore seems much more logical to have just one body which is responsible for this kind of complaint and then deals with it as it would deal with other complaints, working closely with the PRA as necessary.
The Government agree with everything that has been said about the importance of the issue. We do not reject outright the idea of collective proceedings in the financial services sector; what we do reject is the proposal that we should legislate now on this matter without considering fully the evidence as to what the implications of changing the law would be. The Government have already committed to consider the implications of the BIS consultation for the financial services sector and we do not want to pre-empt that. In the light of that, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Whitty
My Lords, I am tempted to reflect that in the difficult, dying days of the previous Administration, the Treasury—contrary to its previous history—was prepared to go ahead of the game in relation to consumers’ rights. Under Alistair Darling, it was prepared to propose in the 2010 Bill, which was attenuated in view of the general election, very substantial provision for collective redress. It is a pity that, under new management, the Treasury is being more diffident and unusually deferential to BIS in this respect. Under BIS and its predecessor departments, all of us who have been involved in the consumer movement know that this issue of collective redress has been kicking around for at least 20 years under various guises and that the department has still not yet come up with a very firm proposition.
Nevertheless, I am glad that the Minister is now saying that we will see the result of BIS’s considerations before Christmas. I hope that we will therefore see these if not in the enterprise Bill that is already here, which would be a very convenient vehicle, then in an early Bill from BIS. Also, because of the—if you like—scandals in the financial services area, it might have been better had the financial services and their regulators moved more rapidly.
I will not take this to a vote tonight. However, I suspect that, if they are not careful, Ministers might regret not having these provisions on the statute book at an earlier date. However, if this is the situation, I beg leave to withdraw and, with this one, wish the Government luck.
Lord Newby
“(2) For subsection (2) substitute—
“(2) If the administrator thinks that the company or partnership is carrying on, or has carried on—
(a) a regulated activity in contravention of the general prohibition, or(b) a credit-related regulated activity in contravention of section 20,the administrator must report the matter to the appropriate regulator without delay.””
“( ) in paragraph (b), after “prohibition” insert “or a credit-related regulated activity in contravention of section 20””
“18 For section 370 substitute—
“370 Liquidator’s duty to report to FCA and PRA
(1) If—
(a) a company is being wound up voluntarily or a body is being wound up on a petition presented by any person, and(b) it appears to the liquidator that the company or body is carrying on, or has carried on— (i) a regulated activity in contravention of the general prohibition, or(ii) a credit-related regulated activity in contravention of section 20,the liquidator must report the matter without delay to the FCA and, if the regulated activity concerned is a PRA-regulated activity, to the PRA.””
“( ) in paragraph (b), for the words from “carried on” to the end substitute “carried on—(i) a regulated activity in contravention of the general prohibition, or(ii) a credit-related regulated activity in contravention of section 20”,”
Lord Newby
“( ) after that definition insert—““credit-related regulated activity” has the meaning given in section 23(1B);””
Lord Newby