Grand Committee
(11 years, 5 months ago)
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Arrangement of Business
(11 years, 5 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, 5 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, 5 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, 5 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, 5 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
Health: Atos
(11 years, 5 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, 5 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
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, 5 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]
Child Support Management of Payments and Arrears (Amendment) Regulations 2012
(11 years, 5 months ago)
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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
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, 5 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, 5 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, 5 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, 5 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, 5 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