Grand Committee
Enterprise and Regulatory Reform Bill
The Deputy Chairman of Committees (Lord Bichard)
My Lords, welcome to the Grand Committee on the Enterprise and Regulatory Reform Bill. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Clause 1 : The green purposes
Amendment 1
Baroness Worthington
“(b) the advancement of initiatives with the purpose of facilitating significant improvements in natural resource efficiency and energy savings;”
Baroness Worthington
My Lords, we should remind ourselves why these green purposes are so important. This bank has been set up in order to facilitate investment into green projects and to help the UK to move to a low carbon economy. The definitions set out in the Bill will be the guiding principles by which the bank operates. The bank could definitely be sold off in the future; there are provisions in the Bill to enable this to happen, so these governing principles are very important and must pass the test of time.
The amendment would introduce two changes to the Government’s proposed wording in Clause 1(1)(b). First, a test of significance would ensure that projects showed a significant advancement in resource efficiency or energy saving. We believe that this is important not because we do not trust the bank but, as I say, because of how it may change and develop in the future. The test of significance would prevent projects qualifying legally for support from the bank which deliver only a very marginal improvement in any project. It is not beyond the imagination to see that under these definitions of purpose you could secure support and funding for a very marginal improvement in the efficiency of a coal-fired boiler, for example. That is not the sort of investment I think the Government are seeking; therefore, this part of the Bill needs tightening for the avoidance of doubt.
It might be argued that this is illogical and that we will not see a bank that is called the Green Investment Bank investing in coal-fired projects. I have an example of how things can go quite illogically wrong when dealing with climate change and greenhouse gases. The global carbon market has an investment facility called the clean development mechanism, under which it is perfectly legal and possible to invest in slightly more efficient coal-fired power stations in India to allow for European coal-fired power stations to carry on emitting. When we get into the world of sustainability, climate change and emissions reduction, things can get a bit illogical. It is important that a lot of attention is paid to these definitions and that we get them right.
The second change proposed in the amendment is to add a specific reference to energy savings. A very strict interpretation of natural resource efficiency might preclude energy efficiency from electricity. Electricity is not a natural resource, it is manmade. Again, we want to make sure, for the avoidance of doubt, that the bank is set up to focus on electricity and energy saving. We know that this is true because, of the five areas identified in the bank’s objects, two are about energy efficiency—one for commercial entities and one to support the Green Deal. They are very important for electricity efficiency, and we are not convinced that the provision fits well with this definition. So we encourage the Government to reconsider the wording of subsection (1)(b) on natural resource efficiency, because we do not think that it does what the Government want it to do.
Finally, I have two questions for the Minister: what is his definition of,
“efficiency in the use of natural resources”?
Secondly, will he undertake to amend the wording to make sure that energy saving, in particular electricity savings, are included under these purposes?
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)
My Lords, here we go. We have nine days in Committee— I work it out at 36 hours—and what a way to start. What a pleasant surprise it is for me that the noble Baroness, Lady Worthington, is dealing with this amendment. I moved department to get away from her incisive grilling, but it has come back to haunt me. Nevertheless, I welcome very much seeing her opposite me as she is much better looking than the noble Lord, Lord Adonis.
As always, this Bill will leave this House much better for the great interrogation that this House will give it, and I want to say in advance how grateful I am to all noble Lords for the time that they are about to dedicate to this. I also thank the Opposition for their co-operation throughout this process, the officials who are in serried ranks behind me and of course my noble friend Lord Attlee and others who will be in his place and will have to listen to this response.
The noble Baroness poses an extremely reasonable question and I compliment her on her great knowledge in this field, almost unrivalled in many ways. We have obviously had discussions on this issue with the chairman, the noble Lord, Lord Smith of Kelvin, and I would like to read out his views on it from the Second Reading debate because I think that it sets a framework for what we are going to talk about today. He said:
“We know that we are going to be held to very high standards on green issues in both the investments and our own operations. We welcome the requirement to report on carbon emissions and the positive impact that our investments should have on reducing UK emissions. We will go further than the requirements of quoted companies by reporting in detail on our portfolio. We will also take the long-term view and have regard to the work of the Committee on Climate Change. I ask noble Lords for support for the Government's broad definition of ‘green purposes’. Waste and recycling—for example, anaerobic digestion—can have a positive impact, and it would make the Green Investment Bank’s task more difficult if there were changes in our mandate by a narrowing of the green definition”.—[Official Report, 14/11/12; cols. 1528-29.]
I think that I could stand here all night and make a case for this, but I could not do it better than the chairman himself, who has been appointed to run this independent bank. On that basis, I ask the noble Baroness to withdraw her amendment because I think the noble Lord has said everything that needs to be said.
Baroness Worthington
I thank the Minister for his response. I am slightly perplexed as I do not think that the quote from the noble Lord, Lord Smith, really address the questions that I have raised. We would agree with his point about not wanting to narrow the definition. It is important that we give ourselves flexibility, not least because we hope that this bank will be around for a long time. Things will change during the time that it is around and we do not want to overly constrain it. We are suggesting not to narrow the definition but to make it slightly more specific in its wording. I hope that that can be taken on board. If it is narrowing, it is only to add a test of significance, which, I think, is a legally important word that we should not dismiss lightly. So I am happy to withdraw the amendment, but on the basis that perhaps we could think about these two questions a bit more carefully. I beg leave to withdraw the amendment.
Lord Mitchell
“(3) In undertaking investments in accordance with the green purposes outlined in subsection (1), the UK Green Investment Bank will identify opportunities in which small and medium-sized enterprises may be awarded contracts.”
Lord Mitchell
My Lords, I stand here in some trepidation, having heard the comments that the noble Lord, Lord Marland, made to my noble friend. I dread to think what he will say about me. Even before I had the position of shadow Business Minister, I have spoken consistently on the subject of SMEs, on how important they are to this country and on how they require certainty, clarity and consistency. That is very important as regards their ability, in the future, to make a contribution to the growth of this country.
By way of a statistic, the UK has slipped from third position to seventh in world green technologies and I hope, with the introduction of the Green Investment Bank, if it is properly constructed, that we will be able to do better in this vital industry. The Green Investment Bank should be an opportunity to help SMEs explicitly. I shall come back to that a little later but it is really important that SMEs—not just large companies—are helped in this. In addition to its green obligations, it is important that there are investment obligations that are vital to its work. A key part of its remit is boosting growth and creating jobs in the UK economy. Time will rightly be spent talking about the policy and the fact that large companies need to make investments in our transition to a large green economy.
That was evidenced by the letter from seven of the world’s largest energy and engineering firms to the Prime Minister, the Chancellor and the Secretary of State for Energy and Climate Change, a couple of months ago—companies such as Siemens, Alstom UK, Mitsubishi Power Systems, Areva, Doosan, Gamesa and Vestas. However, the importance of SMEs to economic growth cannot be underestimated. According to the European Commission, 85% of net new jobs in the EU, for example, between 2002 and 2010, were created by SMEs, with 23 million SMEs accounting for 75 million jobs in the EU. The Bank of England has recently released figures on funding for lending and today there are a few quotes in the Financial Times, one of which came from Mark Swift who is a spokesman for EEF, the manufacturer's trade body. He said,
“The challenge remains for UK lenders to re-engage with SMEs and support them with their investment plans in challenging economic times”.
John Walker, chairman of the Federation of Small Businesses has said,
“What is needed is more competition and choice for small businesses to access finance”.
Time and time again, it is made clear that support for SMEs is key. We would like to see the Green Investment Bank have SMEs in forefront all the way through.
More investment in SMEs could lead to a significant saving in capital investment costs. In the case of offshore wind, recent research suggests that capital expenditure costs could fall by more than a third during the course of the next decade if more of the components were made in the UK. SMEs face considerable start-up costs, but an active Government, working with the private sector, could remedy that. The Green Investment Bank has the potential to enhance green supply chain possibilities, opportunities and capabilities. As we have discussed many times, SMEs are struggling for investment in the current climate, with negative net lending to such companies since the second quarter of 2011. While demand is down due to the depressed economy, there is clearly a problem with SMEs not getting access to credit. A particular bugbear of mine is that perhaps the Green Investment Bank could insist that everyone it deals with and everyone it invests with has a clear mandate for prompt payment of invoices. Nothing is better for an SME than knowing that it will get its money.
Last year’s Lords Science and Technology Committee report on public procurement as a tool to stimulate innovation also made it clear that SMEs still face difficulties when government contracts are put out to tender. We should ensure from the outset that the GIB has a responsibility to help SMEs be part of the new green economy. This amendment encourages the Green Investment Bank to support investments that offer clear opportunities for British SMEs to be awarded contracts. Does the Minister share our support for the promotion of SMEs? I beg to move.
Baroness Turner of Camden
My Lords, I support what my noble friend has just said in relation to Amendment 2. It is often contended that I do not care about SMEs and that I care only about employment rights. That is not true. From the standpoint of the provision of employment, it is important that SMEs are protected. The Government ought to support this amendment as it offers SMEs protection and support. One of the reasons why they are not always able to offer employment is because they do not get the money—they do not get the contracts. This provision seeks to ensure that everything possible is done to make sure that SMEs get the money and the opportunity to play the part that many of them want to play in the provision of employment. They can do that only if they have the necessary contracts and support indicated in Amendment 2. I hope that the Government will accept the amendment.
Lord Cotter
My Lords, I also support the thrust of the amendment of the noble Lord, Lord Mitchell, particularly as regards SMEs. I welcome his comments regarding SMEs’ concerns around the payment of debts. The Minister will know that I and others have often raised this issue. It is important for SMEs to be directly involved but, where contracts are awarded to large contractors, small businesses have an important role in supplying those large contractors. To follow on from the point the noble Lord made about late payment, will the Minister once again renew efforts to ensure that main contractors pay their bills to SMEs on time and in due order?
Lord Bates
I, too, welcome this amendment but I have some questions about it on which I would like to put down some markers to which I hope the noble Lord, Lord Mitchell, and the Minister will respond. My questions concern the use of the term “SME” and how we define a small and medium-sized enterprise. That definition differs in different parts of the world. For example, the European definition of a small enterprise is one comprising between10 and 50 employees and a medium enterprise is one comprising between 50 and 250 employees. It would be useful to know what definition the noble Lord is using to define small and medium-sized enterprises, particularly when we discuss clauses further down the track. The businesses that I call micro-enterprises, which are defined in European terms as having below 10 employees, are the ones that really need help in accessing finance and are struggling at present. Therefore, it would be helpful if the noble Lord told us the parameters and the definition of enterprise that he is using when he is talking about SMEs.
Secondly, I wonder whether the amendment achieves the ends that the noble Lord, Lord Mitchell, seeks. We are talking here about incredibly capital-intensive investments. I know from one of the first of these businesses that was established in my home area in the north-east of England—an anaerobic digestion plant—that you are talking about a capital investment of £100 million. These are huge sums which would be outside the reach of most businesses. Yet, as a result of the investment through the Green Investment Bank announced just a couple of weeks ago, the project will go ahead and there will be many jobs for micro-enterprises and SMEs in the supply chain, particularly in the construction and operation of that plant.
Those are two questions that I hope that the noble Lord will take as being not at all critical of his amendment, which seeks to help SMEs and have correct in asking for a definition of who it is that we want to help.
Lord Marland
My Lords, of course the Government are very committed to SMEs, and I know that the noble Lord, Lord Mitchell, who I can say lots of nice things about, is a committed and good advocate for their cause. The noble Lord, Lord Bates, put his finger on the pulse—it is about definition. However, I do not want to get too deep into definition, thereby tying the hands of the bank too early on in its endeavours.
It is clear that the great challenge for any Government at the moment is to get the SMEs going. I know this first hand, given that I am not only the Prime Minister’s trade envoy but chairman of UKTI’s Business Ambassadors Group. This is our challenge—the beating heart of Britain—getting the SMEs going. Therefore, in the context of SMEs, we have to look at what the Government are doing as a wider initiative, rather than be tied down. That is why we have established the Funding for Lending scheme, Capital for Enterprise, the Business Growth Fund, the Regional Growth Fund, and the Enterprise Finance Guarantee fund, which has already helped 18,000 SMEs. To a certain extent, it is working, because we have had the highest amount of new businesses established since records began. Some 460,000 start-up businesses have registered at Companies House in the past 12 months.
However, I completely agree that this issue is an enormous challenge. In fact, my noble friend is committed to this cause, as he is on late payments—an issue that is fundamental to SMEs. He tells me that his maiden speech was about late payments and commercial debt. He has a record of support for that case.
The noble Lord, Lord Cotter, has raised this subject a number of times in the Chamber. Therefore, do not get me wrong. The Government are completely committed to helping SMEs. That is why, for example, in procurement—one of the issues that I am involved with in government—we have insisted that 25% of government contracts should go to SMEs. An awful lot of work is going on. I do not want to be too prescriptive in this area of the Green Investment Bank, but it is totally focused on this issue and looks at each opportunity on its merits. Already, the bank’s smaller-scale funds for waste and non-domestic energy efficiency are already delivering investment for SMEs, such as the £8 million announced last week alongside a Teeside-based SME. Work is already going on to support SMEs.
With that in mind, I hope that the noble Lord will agree to withdraw his amendment.
Lord Mitchell
I thank the noble Lord for his statement and, indeed, I thank all noble Lords for their contributions to this debate. I take it as being broadly supportive of what we are trying to do. That will come out in further stages of the Bill, but I take great heart from what is being said.
I want to make two quick points. First, I cannot emphasise enough the importance of certainty, not just for SMEs but in the whole business environment. Certainty must be there. People are making decisions and, in the green area, these decisions are for longer periods than normal, particularly as regards the payback period and the intensity of those decisions. We must be clear on this, and I will address that issue later when I talk about borrowing powers for the bank. Secondly, of course we cannot tie the Government’s hands too much, but a definitive statement in the Bill on the need to invest in SMEs is important. I beg leave to withdraw the amendment.
Baroness Worthington
“(3) The Bank shall set out annual targets for the reduction in greenhouse gas emissions achieved by its investments.”
Baroness Worthington
My Lords, I am afraid that I am going to continue the theme that I started with the first amendment. These amendments are designed to make the purpose of the bank unequivocal. The amendments create a duty to assess the impact of the Green Investment Bank’s decisions on the Climate Change Act 2008.
The rationale for this is that, as we just discussed, the stated purposes under Clause 1 can be widely interpreted. That is not to say that they will be, but they can be. We are writing law and we ought to try to make it as future-proof as possible. We believe that, given that at the moment the scope includes a provision that the bank can fund increased efficiency of natural resources, we need something that is much more specific about the impact of the bank as a whole on our climate change targets. It would still be possible for the bank to go down an investment path, which would be taking us out of line with the trajectory of emissions reductions required under the Climate Change Act. That is the purpose for tabling the amendments.
Specifically, Amendment 4 makes an explicit link between the bank and provisions under the Climate Change Act. It sets out the context within which the bank operates. Yes, the Bill already states that one of the purposes is to reduce emissions, but it then goes on to water that down by talking about investment in natural resource efficiency. So for the avoidance of any doubt, we want a link created that makes it absolutely clear that the bank and our climate budgets are linked.
It is very important that we have that wider context because, if you look at this very narrowly, emissions reductions at the scale of a project or single investment are one thing, but then when you look at the totality of what the bank is doing, there ought to be an explicit link to the broader context. That broader context is the need to reduce our emissions, our legally binding targets and carbon budgets.
These are challenging targets and they require government as a whole and all government instruments to work in tandem to deliver them on time. Making this link with the bank helps fully to align the bank’s purposes with the meeting of those legal objectives.
The specific reference in the amendments requires a link to be taken into account of the advice from the Committee on Climate Change. This is important. Greenhouse gas reduction is a complicated business. It is very technical and we do not want the bank to have to reinvent wheels. There is a body of experts there and it would be wise to create a link between the two. For example, the bank may be thinking of setting itself greenhouse gas reduction targets, as was mentioned in a Guardian article recently. The CEO of the bank, Shaun Kingsbury, was quoted as saying he was going to introduce “transparent” measures for measuring CO2 and the impact that the bank is having on CO2. This is an area which will require quite a lot of technical understanding of various aspects of how you account for greenhouse gas emissions. The Committee on Climate Change is the leading source of advice on this and it would strengthen the bank’s position if it had an explicit link to that committee and had a duty to consider the advice created by the committee.
A specific example might be where we are trying to untangle whether investments are generating emission reductions that are additional or not under the terms of how you account for greenhouse gas reductions. Many of our sectors in the UK are covered by existing caps and existing regulations. Counting of those is not straightforward and we believe that there would be a great deal of merit in the advice that the Committee on Climate Change provides to the Government on these technical and quite complicated issues being made available to the Green Investment Bank and its board. I know that one of the concerns that the Government may have in accepting these amendments is that it might increase the likelihood of judicial review, but we do not believe that it is a genuine concern. Obviously, judicial review on procedural issues can be taken irrespective of these links here, and introducing the requirement for the bank to co-ordinate itself with the Climate Change Act would reduce the risk of JR. It would give the bank a clear procedure that it can follow and should give it good comfort that it is on the right track if it follows this procedure. So we hope that the risk of JR will not be the primary reason why the Government might seek to oppose the amendment. If the Minister does not believe that the amendments are needed, would it not be good to align the Green Investment Bank with the Climate Change Act? Perhaps he could say a bit more about that, because it is at the heart of the matter to align our legislation so that ultimately we achieve our objectives.
Lord Teverson
My Lords, before I speak to Amendment 4, I should say that it is a great pleasure to deal with a Minister who understands the area of energy and climate change, which part of this Bill deals with. He knows the area well, so I am sure that our debates this afternoon will be extremely productive. I also welcome the fact that the Green Investment Bank comes at the beginning of the Bill, because it is an important part of making growth really happen in this country.
I also commend the list of green purposes; individually, they are excellent in terms of greenhouse gas emission reductions, natural resources and natural environment, biodiversity and environmental stability. I could not write a better list myself. However, what we are trying to do here is to get absolute clarity over whether this is a list that includes them all or whether you can pick one off for investment, and ignore the rest. I very much interpret this—and I presume that this is how the Bill was drafted by the Government—as a way of ensuring that at least one is met, but not necessarily all the others. To have the whole list as obligatory would be unrealistic.
What I and the other co-sponsors of the amendment are trying to do is to tie it into the climate change elements—the carbon and other greenhouse gas reductions—as being a necessary part of the investment programme. I refer not to individual investments, but to the investment strategy and programme of the bank as a whole. That is why the amendment places a legal duty on the board to assess the impact of the bank’s investment strategy on the Climate Change Act, which is an absolute anchor point for all this work, and a mission of this Government and the previous Government in terms of that global challenge. It is also to ensure that there is a duty on the board to have regard to the advice and reports of the Committee on Climate Change. My noble friend Lord Deben is not here today, but I am sure that he would like the fact that we wish to pay particular attention to this independent body that was set up specifically to advise government in this key area. Furthermore, it is to prevent the board from adopting or amending an investment strategy unless it is satisfied that the implementation of the proposed investment portfolio will increase the likelihood of UK carbon budgets and targets being met.
I apologise to the Minister for the fact that the proposed new clause has so many subsections and is so long, but it anchors the bank and legislation not just to the advice of the Committee on Climate Change and its work but to the real area of greenhouse gas emissions and the Climate Change Act, which has broad consensus of all parties—as it did in the last Parliament and does in this one. I hope that in that way we can ensure that this legislation is absolutely fit for purpose.
My noble friend the Minister mentioned the remarks made by the noble Lord, Lord Smith of Kelvin, at Second Reading. I have huge respect for the noble Lord, Lord Smith, and I commend and congratulate the Government on his appointment; he is exactly the right person to do this. I would just suggest that perhaps post-appointment he might be rather keener to make sure that his board is not inhibited in any way in the decisions that it would like to make. I think that one looks at this in a slightly different way post-appointment, as chair of an organisation, from pre-appointment and as a member of the legislature. It is beholden on us to look independently, from a bird’s-eye view, to make sure that we have our purpose right. I am sure that the noble Lord, Lord Smith of Kelvin, is right in the vast majority of his remarks, but I think that here there is a need for a little more future-proofing of how operations might work, as I am sure that at some point in the long and glorious career of this bank there will be chairmen other than the noble Lord.
Lord Marland
My Lords, I have a sense of deja vu, thinking that I am still in the Department for Energy and Climate Change—where, of course, the Green Investment Bank was largely initiated, so I am extremely keen that it gets off on the right footing for that reason alone. I believe that my noble friend Lord Teverson, who always speaks so eloquently on the subject, actually answered the question that he posed himself. We could not have written a better list if we had tried. My concern is that we would get into definition overkill as we take this Bill through the House.
My noble friend mentioned that the reduction of carbon is not relevant on the individual investments, but it is at the top line. I would respectfully—I emphasise that word for the noble Lord—point out that it is the fundamental investments that will reduce carbon emissions. It is only at the top level—I see the noble Lord, Lord Oxburgh, sagely nodding his head—that you will achieve the carbon reduction. The Government are very heavily committed to this. It is no accident that the noble Lord, Lord Stern, was on the advisory board that set up the bank and that was advising at all levels. As a result of that, the noble Lord, Lord Smith, has made it clear that the bank will have a very high regard—as it should—for the Energy and Climate Change Committee because it is fundamental for the Government and for the future of the business. However, I exercise a word of caution, because there are important activities that are clearly green but do not necessarily reduce greenhouse gas emissions—for example, recycling and improvements in water quality. We would want this bank to invest in such activities, I am sure, but that would not necessarily reduce carbon emissions.
I have not mentioned a judicial review in my line of inquiry because I think it is far more important that this Committee gets this into the right shape rather than for it to be directed by a judicial review. However, the bank’s board has agreed—across the board—that the bank will voluntarily report on greenhouse gas impacts on its investments. This is in addition to the requirement for the bank to report on the greenhouse gas emissions associated with its own activities. So it comes as no surprise to all of us, after discussions with the noble Lords, Lord Adonis and Lord Smith of Kelvin, that it is absolutely at the heart of what the bank is doing. I hope that that gives confidence to noble Lords and I therefore respectfully ask them to withdraw their amendment.
Baroness Worthington
My Lords, I thank the Minister for his response. We do not doubt that many parts of government are fully on board with the need for investments to deliver low carbon economy to meet our Climate Change Act 2008 targets. However, it will not have gone unnoticed that this certainty is not shared by everyone in the Government. Unfortunately, there is an atmosphere of uncertainty about policy and direction of travel. There is a great deal of difference between taking strategy A or strategy B to meet our targets. We could go through a whole host of investments and incremental technologies or incremental shifts in fuels that we use, or we could go down a different path and take a far more innovative and cleaner route. The trajectory of emissions would be very different as a result.
Choices are available and the body that we have created to advise us on that is the Committee on Climate Change. We believe that there will be a great deal of benefit in having closer ties between the Green Investment Bank, which I hope will be a delivery agent and will start to get pounds spent and concrete poured, and the legal structures that we have in place that help us to determine the path that we shall take. That is the purpose of the amendment and I am happy to withdraw it.
Lord Stevenson of Balmacara
My Lords, Amendment 5 stands in the name of my noble friend Lord Adonis who is unable to be present this afternoon for personal reasons. He will return for later stages of the Bill.
This is a probing amendment and it is one of a number of amendments in which we seek to engage the Committee in thoughts about how the public-facing aspects of the new bank can be best discharged, particularly in relation to Parliament. The aim of this amendment is to argue that, prior to designation, Parliament should have an appropriate opportunity to scrutinise the articles of association of the bank. It further makes the point that the scrutiny that needs to be done should be done by Parliament, and not simply by the Secretary of State, who is identified in the Bill as having responsibility. After all, we are talking about the document which sets out the various contentious issues in the management of the company, vis-à-vis the interests of the shareholders.
The main purpose of the clause that we seek to amend is to ensure that two key governance constraints are imposed on the bank in a way that is consistent with its status, which, as we know, is that of a Companies Act 2006 company, albeit one whose shareholding is currently owned 100% by the Government. Once those two conditions have been met, the Secretary of State may designate the bank by order. Designation will trigger the application of Clauses 3 to 6, including the power in Clause 4, for the Government to then fund the bank over the long term.
The first condition required for designation is that the Secretary of State should be satisfied that the bank’s statement of objects in its articles of association is drafted in terms that will ensure that the bank engages only in activities that contribute to the statutory green purposes that we examined when debating Clause 1. As is usually the case with a Companies Act company, the bank’s statement of objects frames the duties of the bank’s directors. The specific issue raised in this amendment is that as well as making a statement that the Secretary of State is content that the bank’s green objectives are being met in full, the articles themselves are laid so that Parliament can see them and discuss them.
I accept that the Companies Act structure is flexible and indeed it has allowed the Bank to be established even though the enabling legislation is far from complete. The chair, the noble Lord, Lord Smith, spoke about the bank and his role during the Second Reading debate in your Lordships’ House so we are aware that he is in place, and the bank was launched recently in Edinburgh.
So we have a rather complicated piece of constitutional positioning to get right. On the one hand, the operations of the bank have to be done under the Companies Act, and the institution will have a well understood operational framework to guide it. On the other hand, the body could not exist without government support and government funding, and with that surely comes accountability to Parliament. In effect, our amendment provides a constitutional limitation on the purposes and the range of the company’s activities, which allows Parliament its say, so that directors are directly aware of what the shareholders think. However, I have a few questions for the Minister on the implications that this amendment has for the rest of this clause.
Lord Brooke of Sutton Mandeville
My Lords, I have a short technical question for the Minister and, conceivably, for the noble Lord, Lord Stevenson. It is concerned with the final word in Amendment 5: “she”. My recollection is that when we moved to having Secretaries of State as the title of those people who headed departments, it was so that “Secretary of State” in legislation could be interchangeable between departments. My interest is whether if you use the word “she” you run the risk of fracturing that particular arrangement or whether there is a convention contained in the use of the words “Secretary of State” that allows the gender to be circumscribed in that way.
Lord Marland
I thank noble Lords, especially the noble Lord, Lord Stevenson of Balmacara, for their words. The Government agree that there must be parliamentary scrutiny of the bank’s statement of objects and particularly in terms of its green purposes as part of the process of designation of the bank. That is why in another place we tabled an amendment to that effect. However, we do not believe that there is a need to separate out the statement by the Secretary of State. I will try to respond to the question asked by my noble friend Lord Brooke on the Secretary of State in a minute because with his years of experience in government—I am playing for time now—he knows far more about this particular thing than I would ever dream of knowing, but I will come to that in a minute.
The Secretary of State is satisfied that the bank’s objectives are consistent with the green purposes because Clause 2(2) already provides that he cannot lay a draft order before Parliament unless he is so satisfied. I am also happy to give noble Lords the commitment that the Government will make available to Peers and to Members of the other House a copy of the bank’s articles of association when the draft order is laid so that all can be made transparent.
The noble Lord, Lord Stevenson, asked about the sale of shares. This Government are committed to not selling the relevant shares but, unfortunately, this Government cannot legislate for a Labour Government, for example, if they wished to sell the shares. I am sure the noble Lord knows that better than I do. It would therefore be wrong to try to impose things on future Governments. We will be in power for a very long time, but just in case we are not, the Opposition may choose to change the law if they come to power.
As a general point on outside investment, one of the things I have noticed as I have travelled the world is the clear desire of international companies to come in alongside the Green Investment Bank as co-investors because the integrity of the board that has been set up, its skills and knowledge and the leadership Britain has shown under this Government and the previous one in terms of green credentials and green expertise has meant that we are seen as a centre of excellence. If the noble Lord, Lord Smith of Kelvin, were standing here, I know he would say that there is huge scope for involving international companies to invest in the bank. I really do not think that that is a problem.
I have no idea what the response to the noble Lord, Lord Brooke, is, so, if I may, for once, I shall request the pleasure of writing to him about something which is not to do with cricket. I hope that with that explanation—
Lord Stevenson of Balmacara
Before the noble Lord sits down, I should make it clear that I was agreeing with him, as he has played it back to us, that the present Government cannot tie the hands of future Governments. However, my question was deeper than that. It was: why is there so much in this designation clause about the way in which the shareholding is to be managed going forward? The noble Lord has not dealt with that particular point. That was the purpose of my remarks on this section. We have a situation where currently this is a 100% owned company. The Government have made a great virtue of the fact that that is the case and, indeed, we welcome that. In his latest remarks, the Minister has alluded to the fact that the reason that investment may flow into the bank is precisely because it is owned by the Government and the investor community, for whatever reasons, is supportive of the view that it is the Government leading this that gives them the security and the risk reduction that they are looking for. We may come back to this on a later amendment. So why all this stuff about what happens below a shareholding of 50%? We are told in a later clause that the Government are not able to fund the bank if their own shareholding drops below 50%. Does that imply that there is a plan that we have not been told about, or is it just a precautionary measure in the event that terrible things might happen and other decisions are taken?
Lord Marland
I can deal with that immediately. It is a very good point. We have no current intentions to sell this—I absolutely underline that fact. We have no current intentions to do so during this Parliament as long as we are in power. I hope that that very clear statement satisfies the noble Lord. I readily understand that that has to be clear.
Lord Stevenson of Balmacara
I thank the noble Lord for those additional remarks and for saying earlier in his response that he would lay copies of the articles of association in both Houses when it comes to reviewing the designation process. We look forward to seeing them because they will help considerably.
I am afraid that I cannot respond very positively to the former Secretary of State, the noble Lord, Lord Brooke. I did not pick up this point when I was reading, but I am so completely gender-blind in these matters that I simply read the word as one that described, in a personal way, the Secretary of State for the time being. However, he will have noticed, as we all did, that throughout his response the Minister referred to the Secretary of State as “he”. Perhaps we have a problem that we should all reflect on.
Lord Jenkin of Roding
Perhaps I can help with this question. Since the 1880s, it has been a matter of interpretation of statutes, and I was certainly taught at law school that the male embraces the female. It has therefore always been said that you used the term “he”, which meant, in the appropriate context, “he or she”. The result is that statutes and, presumably, amendments do not need to use the words “he or she” each time. My noble friend will find when he takes advice on this later that it is a well established principle of statutory interpretation, if I may repeat it, that the male embraces the female.
Lord Marland
I am grateful to my noble friend Lord Jenkin of Roding for explaining that. In fact, it coincides with a note that has just been passed to me affirming it. There are two issues, of course. First, our current Secretary of State is a he, and, secondly, we refer to each other as, “My Lords”. I hope that that means I do not have to write to the noble Lord, Lord Brooke, on the subject—although I am always delighted to do so.
Lord Brooke of Sutton Mandeville
My Lords, I am most grateful to my noble friend Lord Jenkin of Roding. I was, in fact, previously aware of that. I was raising the question of why the word “she” had suddenly appeared. I did not wish to embarrass the Official Opposition by directing the question at them, so I directed it at my noble friend.
Lord Stevenson of Balmacara
My Lords, I agree that this is now a score draw. With that, I beg leave to withdraw the amendment.
Lord Teverson
“(f) a proportion of proceeds due to the UK Government as a result of the auctioning of emission permits under the European Union Emissions Trading Scheme.”
Lord Teverson
My Lords, I shall speak also to Amendment 11. Here, I am trying to be as helpful as I can be to the Minister in trying to find ways in which we can make this investment bank even more effective in finding ways of providing finance. We will come later to the arguments about lending.
There are two obvious areas where we could assist the Government and the board of the Green Investment Bank, when appropriate. I absolutely agree that the worst thing that we could do is try to shovel out through this bank too much money too quickly and allow it to lose its reputation in terms of investment appraisal and doing the right thing. It should build up that reputation over a sensible period. However, given the need in the United Kingdom for investment in green matters and energy, we know that £3 billion, although it is a lot of money to all of us, will not last indefinitely. We therefore need to start thinking ahead now. Two areas should be considered.
My first amendment refers to the European Emissions Trading Scheme. I remind the Grand Committee that there is a list in subsection (3), which states:
“It may in particular be given by way of …”.
We are not therefore talking about hypothecation of the ETS revenues. We are saying that this is one of the areas where the bank and the Government may look to facilitate funding of this bank. It is an extra piece of the armoury for the bank and the Government that could be, but not necessarily has to be, used—although I think it would be a very good idea. I remind noble Lords that the EU-ETS is coming to the end of its second phase. In fact, at the end of this month that phase will end and we will move into phase three. In phase two, the Government have already raised some £1.3 billion-worth in sales of so-called EUAs, or units of European Union—forgive me, I have forgotten what the A stands for.
Lord Teverson
Thank you very much indeed. In fact, last month the Government already had their first auction of phase three allowances. They made £34 million and sold 6.5 million EUAs at €6.62 per unit—a terrible price in terms of carbon pricing but not a bad price, given some of the other prices that have been found. Unfortunately and regrettably, since then the price has fallen below €6. The German Government have sold some as well more recently and that price fell. There is an intention to auction in excess of 50% of these allowances in phase three and once auctioning starts, it seems that will be one of the ways in which the price will go up because the free issue has ended.
I would also hope that the Government’s intention to raise the bar on 2020 carbon reductions to 30% will be successful. That would also mean that the number of these allowances would decrease in the market. This seems to be an obvious revenue stream, some of which could be used towards reinvestment— I am not saying that it must be—of those carbon reduction revenues into green growth and into making sure that that whole process is reinforced.
I must apologise to the Grand Committee in that Amendment 11, on a second area, has a mistake in it. In subsection (3), at the very end, it should say Clause 1 instead of “section 1” and I apologise to noble Lords for that. I have been looking for a way in which, when the time is right, we could lever extra money into the Green Investment Bank without having all the effects of increased public debt, which is why the current £3 billion comes from asset sales. It means that there have to be other ways of finding that money, with all the borrowings, but the debt is not changed. As I understand it, it would be absolutely the same as for the Nuclear Liabilities Fund, which is currently worth some £8.6 billion. Again, this is a way in which the firepower of this bank could be increased quite substantially without the effect on public debt that other forms of fundraising might have. It would not require outside borrowing by the bank and would take over the trustees’ functions.
I do not know how many of your Lordships have read the excellent report by Professor Gordon MacKerron, Evaluation of Nuclear Decommissioning and Waste Management, which came out earlier in the year. I am sure that my noble friend the Minister was closely associated with it, given his responsibilities in that area. Very importantly, it makes the point that at the moment the vast majority of that £8.6 billion has to be invested in the National Loans Fund for a very low return. I would be interested to learn from the Minister whether he or his officials know what that current rate of interest is. Professor MacKerron was clearly particularly concerned at the low rate of return. On understanding the net present value of the fund’s existing liabilities, he said,
“though its current rate of accumulation is significantly less than the discount rate applied”,
which was 3% . He went on:
“Whether the fund will be able to meet all the … liabilities will depend on a range of factors (in addition to whether the current approach to its investment regime are maintained)”.
He questioned whether putting that cash into the National Loans Fund would maintain a sufficient value for the decommissioning costs of the existing nuclear fleet. There is a simple solution to that as well: the purpose of the Green Investment Bank is not only to invest in green infrastructure but to create a proper commercial return from its investments, so we have a double-win situation here. We increase the firepower of the Green Investment Bank quite substantially and also make it far more certain that the NLF will be able to meet its liabilities and not put the liability back on taxpayers, as would happen otherwise in future. So we have a double success. I beg to move.
Lord Jenkin of Roding
My Lords, I have some doubt about the proposed new clause of which my noble friend has just spoken. The Nuclear Liabilities Fund very properly seeks to avoid the situation that the country got into over many years when large numbers of nuclear installations of one sort of another were left to be decommissioned and their radioactive materials dealt with, and there were no funds available. One is always astonished at the huge amounts of money that have to be set aside to satisfy the obligations that are now being discharged to decommission these nuclear plants safely and effectively. My noble friend Lord Teverson may contradict me on this, but I believe that it is intended entirely to be confined to that purpose; it is intended to be there when it is needed and nuclear establishments come to be decommissioned. When my noble friend says that this increases the firepower of the Green Investment Bank, what does he mean? Is it intended that the fund should be invested in other green projects, which may or may not achieve the return expected when the fund was invested? I would have thought that that would risk defeating the purpose of the Nuclear Liabilities Fund.
The question of the rate of interest that should be earned on that fund is something that the Minister may wish to look at. I had not refreshed my memory of Professor MacKerron’s report, and I was grateful to my noble friend for reminding me what was in it. Of course, it is a very low rate of interest, as he has rightly said. But the fact of the matter is that this is a hypothecated fund; it is there for a particular purpose, and the idea that it could be used by the Green Investment Bank to invest in something else that might produce a higher return risks prejudicing the absolute and essential purpose for which it has been set up—namely, to meet the costs of decommissioning nuclear plants when they are available. I hope that the Minister will give some indication that he will look at this proposal in the proposed new clause with some suspicion, because I believe that it might be misconceived. I apologise to my noble friend Lord Teverson for putting it in that form, but I feel very strongly about this.
One of the best things that the previous Government and this Government have done is to make sure that future nuclear liabilities will not fall on the taxpayer but are regarded as a proper cost of those who invest in nuclear installations, power plants and so on. That is what it is intended to do. It is a very wise thing to do, and I hope that it will not be prejudiced by diverting it to some of the other purposes of the Green Investment Bank that noble Lords have talked about this afternoon.
Lord Wigley
My Lords, I apologise for coming in rather late, but I am in good time for the amendment that I wanted to catch up with, Amendment 11, and to follow on from the question regarding nuclear decommissioning. I live in a part of north-west Wales where there are two nuclear power stations. Trawsfynydd nuclear power station stopped generating two decades ago. It now employs some 600 people on decommissioning, more than it ever employed when it was generating electricity. The message that comes home from that is the uncertainty with regard to the cost of decommissioning and the length of time, and the need, therefore, to have financial cover for that.
This becomes particularly relevant with regard to the new reactor that is likely to be forthcoming with Hitachi at Wylfa in Anglesey. There is considerable support in Anglesey for the renewal of the nuclear power station. But the one reservation that people would have is if there were uncertainty as to the eventual decommissioning and the resultant costs arising from that station, particularly if in the private sector the company running it were to go out of existence. There needs to be a cast-iron guarantee with regard to funding for that purpose in order to maintain the good will towards the building of that new reactor at Wylfa. It is needed in energy terms and in terms of investment in the local economy in north-west Wales.
Therefore, the amendment goes to the heart of some very important aspects of nuclear power. Whereas I have a considerable amount of sympathy with the amendment in terms of the green bank and developing green alternative sources of electricity, that has to go on side by side with the nuclear dimension. Whatever settlement is finally reached it has to encompass both sides of that equation.
Baroness Worthington
My Lords, I welcome the amendments tabled by the noble Lord, Lord Teverson, if for no other reason than that they encourage us to have a wider debate about how this bank can operate and gain access to finance. This is important in the context that we need to see a huge upscaling of investment into the UK’s low-carbon infrastructure. It is estimated that between £220 billion and £330 billion is needed over the next decade, and historic levels of investment have been very low at only £6 billion to £8 billion. We need to be thinking creatively about how we can massively increase the available revenues for the bank. It is unfortunate in that context that the Government have set out on this path with at least one arm tied behind their back by preventing borrowing. We will come on to talk about that as we move through the amendments.
In the context of having set up a bank and putting a relatively low amount of money in to start, then putting in a hurdle against borrowing further, it is important for us to think creatively. In fact, it forces us to think creatively so I very much welcome the amendments of the noble Lord, Lord Teverson, which raise two very interesting ideas.
The EU ETS is a complex piece of legislation, but it creates a new asset class in that it creates allowances that have a financial value. I am not sure how they are managed because maybe that falls between DECC and the Treasury, but I suspect that we are not managing them as well as we could be. In addition to thinking about the revenues that we have gained directly from the auctions, how about thinking about the allowances themselves as assets that can be used to secure loans? They clearly have a financial value but as the noble Lord, Lord Teverson, suggested, sadly their value at the moment is low because we simply have an overabundance of these allowances.
I welcome the creation of the Green Investment Bank if for no other reason than it now means that we have a smart set of individuals drawn largely from the private sector—from banks and financial institutions—who I am sure can, if they put their minds to it, come up with various clever mechanisms for raising finance. I urge the Minister and his department to say to the noble Lord, Lord Smith, and his board, “Let’s think creatively and open up this debate. We have an emissions trading scheme that creates this asset class. How could we use it to increase the level of investment into the things that we want to see built?”.
On the second suggestion regarding the Nuclear Liabilities Fund, I share some of the concerns of the noble Lords, Lord Jenkin of Roding and Lord Wigley. But again, it shows we are thinking creatively. I understand that a financial fund needs to be available for the time of decommissioning, but the nuclear profile of our stations is fairly clear. We may have life extensions and we all know in advance when that money is needed. I do not see any danger therefore in using some of that to raise more finance and create wealth in the interim as long as we are managing it correctly. So I welcome the amendment; it opens up an interesting debate about how we currently manage money in government. Now that we have created essentially a Government-owned bank, I hope that over time and, as the noble Lord, Lord Teverson, was very keen to stress, when the right moment occurs, we will see this bank stepping into much more interesting territory. We look forward to the Minister’s comments on that point.
Lord Teverson
My Lords, as we are in Committee, perhaps I could come back on my noble friend Lord Jenkin’s important areas. I can reassure him on both those items that we would be better off if this amendment was passed. First, the MacKerron report is quite clear that the current rate of investment going into the National Loans Fund almost certainly will mean that its liabilities cannot be met, so we have to find another way to do this. The Green Investment Bank is not a fund to give away money; it is there to commercially invest, alongside other commercial investors. It could be perceived as being a greater risk perhaps—I will come on to why it is also a lesser risk—but also as providing a sensible return with a very sound government-backed institution to do the investment, and I think that is good. Furthermore, this fund has to invest its money in the National Loans Fund. That is a euphemism; what it actually means is that it has to give it all to the Treasury. So the Nuclear Liabilities Fund at the moment is similar to unfunded state pensions. It goes in there, but to take the money out will have the same impact as paying pensions into the future. While it is a discrete amount that is accounted for, it just reduces the national debt. That is all that it does on the current terms.
In fact, how secure is that? Yes, there is an accounting mechanism, and my noble friend is absolutely right that the sins of the past are huge in terms of those funds having been lost during the process of changes in the nuclear industry and its ownership over the past couple of decades. First, this amendment would make it far more certain that this fund will be able to meet its liabilities in the future. Secondly, we, as taxpayers and as citizens, would know that that money is in a place where we can actually see it, see its value, see that it is different and separate out of the Treasury from the national debt and, as the noble Baroness, Lady Worthington, said, we can predict decommissioning of nuclear plants far enough in advance to craft the investment and our exit strategies around those financial needs.
Lord Jenkin of Roding
As we are in Committee, I hope that I can say a couple of words about this. The nuclear industry is, of course, building up this fund as part of the Government’s policy to make sure that the liability for decommissioning does not again fall on the taxpayer. It has recognised this, and it follows the same pattern as one has seen increasingly in the offshore oil and gas industry, where funds now have to be put aside so that when the oil rigs are decommissioned, again that does not fall on the taxpayer but is part of the cost that has to be built into the supply of the oil or gas and therefore met by the investor. I think that my noble friend Lord Teverson may be confusing two matters. I use the phrase again: this is a hypothecated fund. It is not like the pension fund. There never was a separate fund for that. It is simply that the pension contributions from, for instance, the teachers’ pension fund have been paid to the Government, and the obligations are met, of course, by the taxpayer out of the fund. There has never been any question of trying to balance the one against the other. This is quite different. This is a fund that is being set up and funded by the industry. It has to be built up while plants are operating—not just when they are commissioned—so that, at the end, when they come to be decommissioned, which may be 50 or 60 years ahead, the fund is there. They have invested in it so the cost will not fall on the taxpayers. It is a separate, hypothecated fund. It may make the green bank look bigger because it will have more money but it cannot do anything with it other than get a rate of interest. My noble friend shakes his head, but if they are going to start investing in green industrial ventures and so on, it seems to me that that would be a breach of trust to those who have built up the fund. It may be that they can hold it and, as it were, guarantee the payment, but the minute that they start investing it themselves, it seems to me that that is risking the whole purpose for which the fund has been set up.
A separate issue is whether there is an alternative method of investing in the Nuclear Liabilities Fund that might get a slightly more realistic rate of interest. That is a separate matter, but it seems to me that to make it part of the loan capital of the UK Green Investment Bank would be a breach of trust, as I suggested, against the firms that are building this up perfectly properly. They agree, they recognise it, and they know that they do not want to go back to the previous position, but they want the fund to be available to finance the decommissioning of the plants when the time comes.
Lord Marland
My Lords, perhaps I can deal with this quite swiftly. Both the ETS and the NLF, the Nuclear Liabilities Fund, reported to me in my previous department so I have a rough idea of what is going on. Let us deal with the EUAs and the ETSs first. I also sit on the government assets committee and we looked at selling some of our EUAs. We drew the conclusion that the price was not right, the market was not big enough and we would not be able to get a substantial figure into the market. However, as the noble Lord, Lord Teverson, rightly says, an opportunity may come along later.
Clause 4 permits financial assistance to be provided in any form,
“as the Secretary of State, with the consent of the Treasury, considers appropriate”.
If we were able to do it and if—that is a big “if”—the Treasury agrees, the Secretary of State could divert funds into it. Amendment 6 permits the Government to use a proportion of revenues from auctioning emission permits to fund the bank. There is already provision within that.
This is creative thinking and I am very grateful to my noble friend for that because he is a great creative thinker. I turn to the Nuclear Liabilities Fund. Clearly, as the noble Lord, Lord Jenkin, quite rightly said, two things are going on here. One is that this is a fund that is committed to nuclear liabilities; it is committed to the nuclear industry and, therefore, it has a range of opportunities in the nuclear industry in which it could invest. The noble Lord, Lord Wigley, referred to Wylfa and other investments in new nuclear. I had discussions with the chairman of the NLF about developing the fund into nuclear investments, including, for example, a MOX plant, which is something that we were committed to when I was in the department and, indeed, new nuclear. That is entirely for the NLF to decide for itself.
The problem I have with the NLF diverting funds here is that this is an investment bank and it is what it says. There is no such thing as a guaranteed investment. Some investments go up and some investments go down and if the NLF lost money, co-venturing with the Green Investment Bank on things that it did not understand, of course the liabilities would not be met. Despite the fact that we may consider it a very boring return on the investment at the moment, it is planned to match some of the liabilities. But I do not want the noble Lord, Lord Teverson, to go away thinking that actually the NLF is enhancing its investments, but think that it has enough on its plate with the nuclear industry.
Therefore, given the commitments that I have made on Clauses 4 and 6, I hope that, despite the fact that two very important points have been raised—and I am grateful to my noble friend Lord Jenkin of Roding, who has expertise in this field—the noble Lord will withdraw the amendment.
Lord Teverson
I thank my noble friend the Minister for his response. I fully accept that the EU ETS money route is not precluded by the Bill as it is, and I suppose that it would be nice to have it on the list as a nudge or a reminder to the Treasury that it was a possible flow. That was all that the amendment did, but it would tie in well with the philosophy of the carbon market and trying to recycle money into helping the greening of the European economy and the UK even more.
Baroness Worthington
It struck me that the revenues from the EU ETS auctions would be considerable, even at this depressed carbon price. How much money will the auctions raise in the next few years, and how does that compare to the £3 billion that has been put up as a stake for the bank?
Lord Teverson
I read an estimate somewhere of about £1.3 billion a year. But it all depends on the carbon price. That is the key thing, and we do not know that.
Lord Marland
Perhaps I can help. It depends on the market, which is not there at the moment to buy it. We investigated and got a lot lower offer than £6.62 for the price. That is six months ago, and I cannot remember what figures were involved. I am sure that we could invite the Department of Energy and Climate Change to provide some information in the normal course. It depends on a willing buyer and the price at which they are sold.
Baroness Worthington
I have done some back of the envelope calculations, and at about 100 million tonnes it will be in the region of £1 billion or £1.5 billion. That is not an insubstantial amount of money, and it will rise in time, which would mean that the bank’s initial deposit was paid back by those auctions in less than three years. That is an important context for the discussion.
Lord Teverson
I thank the noble Baroness for her comments. It is certainly an area that I would like to come back to. I agree with my noble friend that putting all the Nuclear Liabilities Fund into the Green Investment Bank might not be the best way in which to spread the portfolio, although it would be even worse to put it back into the nuclear industry itself. That would be a bit like the Mirror Group reinvesting the pensions funds in itself, or whatever it did. The area needs looking at, and a broader investment strategy for the NLF that included a sensible investment in a bank like this would be a good way forward.
I will continue to look for opportunities to help the Government and hope that we can have further conversations about this—but I beg leave to withdraw the amendment.
Baroness Worthington
“(3A) The Secretary of State shall consult on additional forms in which the Bank may raise investment funding, including the issuance of bonds.
(3B) The Secretary of State shall consult the Bank of England granting the Bank access to the Quantitative Easing programme.
(3C) The Secretary of State shall report to Parliament on the results of a consultation under subsections (3A) and (3B) no later than 12 months following enactment.”
Baroness Worthington
This, as noble Lords can see, is a probing amendment but continues on the theme. We are trying to address a market failure in the creation of this bank. There has been a financial crisis and, as we emerge from it, it is clear that commercial bank lending is going to be further constrained. The Basel III requirements will mean that the recapitalisation of banks will discourage them from holding longer-term loans on their balance sheets, which will potentially increase costs. That means a reduction in loans, just at the time when we need to see more money flowing into these solutions. Things are getting much more difficult.
In that context, it is important that we have a bank that can help to compensate for the increased constraints coming in the private sector. Yet, as I have mentioned, we have created a bank that, sadly, is constrained because it has a relatively small amount of starting capital. I am not saying that it is easy to spend money, and we should not just be seeking to spend it rapidly and not wisely. However, we must weigh up the scale of the challenge with what we are creating. It also forces us to think about how we are going to increase the leverage of that finance and ensure that it is seen to grow to the kind of levels that we need.
Our amendment is along similar lines to the amendment of the noble Lord, Lord Teverson, and talks about two other ways in which finance could potentially be raised. We would encourage the Government to consult on these. We are not saying that we have a final, detailed position on this, but these are fertile areas for exploration. The bond market is huge, as I am sure that noble Lords are aware. As yet, the bond market is largely untapped for low carbon investment because, by its nature, it is fairly conservative and seeks out asset classes with a long track record of delivery. Time is needed to develop new assets, and that requires expertise.
This is exactly what we hope is being created in the Green Investment Bank—a new set of experts who could help to create the sorts of asset classes that enable private-sector bond market participants to come in behind and start to invest in them. That is why we have tabled the amendment. There is no shortage of private sector investment looking for safe and credible investment vehicles. The fact that the bank is, under this legislation, a wholly owned non-departmental body is attractive, so this is an important area for it. There is a good fit here as regards bond issues; they tend to have a long lifespan, which is exactly what some of these infrastructure projects will have. By their very nature, it is infrastructure that will be here for a long time.
We therefore encourage the Minister to think about bonds as a mechanism for raising finance. In particular, I have learnt a reasonable amount today about covered bonds. This is an interesting mechanism that could help to raise finance without adding to the public debt. In effect, we would create a new class of covered bond, which would give comfort to investors by providing a double security on the loans. The UK’s covered bond legislation could be examined to see how it could be adapted to encourage investment in green and low carbon technologies.
The other matter on which we would like to consult is quantitative easing. That is also an obvious way in which we potentially could create mechanisms for a greater flow of finance into this bank. We understand that it is not the Government but the Bank of England that controls it, but we also know that there are close ties between them, and this area could also be very fertile and is definitely worthy of consultation. This is why we have tabled amendments on these important issues. I beg to move.
The Deputy Chairman of Committees (Baroness Pitkeathley)
Amendment proposed:
“Page 3, line 10, at end insert”,
the words as printed—but not quite as printed, because there is a typo in the fourth line. After:
“The Secretary of State shall consult the Bank of England”,
we need to insert the word “on” before,
“granting the Bank access to the Quantitative Easing programme”.
Lord Teverson
I had not noted that. Perhaps I should change my whole speech because of it.
The whole area of bonds issuance is important. In fact, it was looked at in some depth by the Environmental Audit Committee in the other place, together with green ISAs. It is a method, which I know the Government and the Treasury are very keen on, to use money from pension schemes in particular to invest in the UK and in areas of quick growth. Although I am sure that my noble friend the Minister will go through the whole question of whether these would be government-guaranteed bonds and the effect that would have on the public accounts, I believe that this is an important area of fundraising. It is one that could, with the length of investment in these sorts of projects, appeal very much to the pension industry and pension funds, which have large amounts of money, as we know, to invest successfully. This would be a good way of moving forward and I am sure that the Government have considered it a great deal.
I would like to ask the Minister whether the Government have thought further about the area of green ISAs and about involving not just fund managers and corporates, as one would do with bonds, but ordinary people to support the purposes of this bank. I note that some 18 million people have ISAs at the moment. That is one in three adults. Some £220 billion is invested by individuals in ISAs, which clearly have all sorts of tax breaks that are attractive to individual savers. Both these financial instruments could really make a difference in terms of the Green Investment Bank and green ISAs. You could get a public and personal commitment to this cause and create extra employment and growth in the UK.
Lord Brooke of Sutton Mandeville
My Lords, I have a small technical question. The Official Opposition indicated, in the noble Baroness, Lady Worthington, a clear understanding that it was the Bank of England that was consulted on quantitative easing, but I have a question for my noble friend. If he were so minded as to grant this amendment, would we need a consequential amendment in the context of the reference to the consent of the Treasury in subsection (4)?
Lord Marland
I am very grateful for this probing amendment, which goes back to the creative thinking on how we can get more money into the Green Investment Bank. The point is that we have committed to invest £3 billion up to 2015. That is a set figure and we have set out our stall. It has been agreed by the Commission and any change would require state aid, which is a pretty significant process and which would take time. So the allowance of bonds or ISAs, which are incredibly valuable things, will not, I am afraid, be achievable within the timetable up to 2015. For the purposes of clarity, however, we are interested in exploring this—and why would we not be? We will be looking at this and debating it further. Clearly, we are not going to get investment into this bank unless it starts to get a track record, which most bond and ISA investors would want to see. When the bank has its track record up and running, we will carry on with this.
Of course, we would need another amendment in terms of Bank of England quantitative easing and so forth. We would need an awful lot more than that, let us be fair, because it is way beyond my pay grade to start discussing such figures and such immense subjects of finance. I am grateful for the suggestions. We recognise that they are constructive and we would like to carry on the dialogue over time. With that, I hope that the noble Baroness will withdraw her amendment.
Baroness Worthington
I thank the Minister for his response. A consultation would certainly help to flesh out some of these ideas and may bring forward even more. I would encourage the department to really think about how we can start a creative dialogue about such mechanisms. We have had four in front of us today, which are worthy of discussion. They are big topics in themselves, so a formal process would help us to understand some of the issues.
It slightly worries me when I hear that quantitative easing is above the Minister’s pay grade. We are not doing a marginal thing here; we are talking about investment in UK infrastructure. We have seen government announcements about a £40 billion stimulus of investment into infrastructure. If it is £40 billion, why can only £3 billion of that be put into the Green Investment Bank? We should not treat this as marginal. It should be centre stage in our stimulus package and in getting our economy back on track. That is why £3 billion is not enough and why we need to think about ways of getting it to be a much larger sum. A consultation would be very welcome, thank you. I beg leave to withdraw.
Lord Teverson
“(7) It is the duty of the Secretary of State to provide the European Commission with State aid notification concerning the intention to allow the Bank to borrow, including borrowing from the capital markets.
(8) The duty in subsection (7) must be fulfilled no later than 31 December 2013.
(9) In the event the European Commission approves the State aid notification concerning borrowing, it is the duty of the Treasury and of the Secretary of State to permit the Green Investment Bank to begin borrowing from the capital markets no later than 30 June 2015, or, if State aid approval has not been received by that date, no later than one month from the date of approval.”
Lord Teverson
My Lords, now we get on to one of the core issues around the Green Investment Bank, which is its ability not just to lend its own capital or funds but to be able to multiply them up, perhaps in different ways, and to use that as leverage to enable it to be a bigger investor than it would be from its own resources. Of course, this rather comes back to that cliché of whether the Green Investment Bank is actually a bank or a fund. We know that any corporate plc can borrow money—that is its function—but what it cannot do without going through a further procedure is to borrow it and then lend it out as well, because that gets it into the area of financial services and the Financial Services Authority’s authorisation there.
This amendment seeks to recognise that there is a period during which this bank has £3 billion and has to earn respect through having a track record and credibility in its functions. My noble friend the Minister was absolutely correct on this. That is enough for it to get on with in the first couple of years. Yet we know, through the amount of time that it has taken to get to where we are on the Green Investment Bank, that decisions take a long time. To get state aid takes a long time. To get authorisation under the Financial Services Authority and its successors as they will then be—that may be the Prudential Regulation Authority for a bank—takes a number of years, so we have to prepare by thinking about those issues now. We cannot do that once we get to 2015. In this amendment, we are saying that by 2015 we need to start going through those procedures, many of which will not be in the Bill. Lots of other preparations will need doing as well, apart from state aid, to make sure that by 2015 the bank can take on extra firepower—I apologise to my noble friend Lord Jenkin if he does not like my using that word.
This is about the bank’s ability to invest and to change the economy; to get this green growth that we want and know to be available; and to deliver jobs, growth and carbon reductions. It will be able to do this only by being able to leverage extra investment, apart from the investment it will have from its co-investors of £3 billion in the first three years. I do not see how it will be able to fulfil its mission and proper function without being able to increase its ability to lend beyond the likely Treasury resources.
I realise and understand entirely the Government’s concern about the public balance sheet and public debt. The Chancellor has said that this borrowing cannot take place until the proportion of debt to GDP has started to decline. It is a fundamental mission of the coalition to do that. However, getting to the fundamental question, I would ask this particularly. When the Green Investment Bank was launched on 28 November, which was last week, I received a statement saying that it will make £3 billion available for green technology and become a valued and integral part of the UK’s financial infrastructure—absolutely. It goes on to say that it is similar to Germany’s own development KfW Bank. We hope so, although the KfW Bank has a €400 billion asset value. The big difference between the two is that the borrowing of the KfW does not appear on the public balance sheets, whereas it is envisaged that the borrowing of the Green Investment Bank, as it is currently structured, will.
Lord Skidelsky
I support the amendment proposed by the noble Lord, Lord Teverson. I would have put my name down on it if I had had the upfront certainty that I would be able to be here. The noble Lord has hit the nail on the head; the bank will not be allowed to borrow until the national debt is a declining proportion of national income. The Government’s debt reduction target is already three years off, so on current plans the earliest date at which the bank would be allowed to borrow would be not 2015 but 2018—and it may not be 2018 either. We are faced with the prospect of a bank that will not be allowed to borrow in any foreseeable future, and that borrowing restriction will undermine the bank’s ability to support the targets for reducing greenhouse emissions as stated in the Climate Change Act 2008.
We are setting up a public bank uniquely without the ability to borrow, and the noble Lord, Lord Teverson, is right in saying that that is not the model for KfW. According to the Deputy Prime Minister, it should be able to attract about £15 billion of co-investment. In other words, the bank would pay 20% of a project and the co-investors stake the remainder without the bank itself having to borrow. That would be a way round the borrowing restriction.
If the Green Investment Bank were allowed to borrow now at a conservative leverage, it would be able to leverage its £3 billion up to £18 billion. If the Deputy Prime Minister is right, that £18 billion would in turn be able to attract up to £90 billion in private sector co-investment, so these are the possibilities that would be opened up by easing that borrowing requirement. There is a huge difference between an investment of £18 billion over five years and an investment of £90 billion.
The problem this amendment is designed to address is that the debt may not fall for a long time, so the Green Investment Bank may not be allowed to borrow. It is not just a question of the problems of start-up, to which the noble Lord, Lord Teverson, rightly alluded; the problem is that the Government’s policy is not well designed to reduce the national debt. I have argued this point for a number of years because a policy of deficit reduction is not the same as a policy of debt reduction.
To conclude, the amendment would enable the Green Investment Bank to borrow by 2015, irrespective of what is happening to the national debt, and potentially earlier if there were a need to boost growth. This means starting the EU state approval process as soon as possible. For that reason I give my enthusiastic support to the approach of the noble Lord, Lord Teverson.
Baroness Ford
This is a really interesting amendment, which also touches on the previous amendment. I am not sure that I support the amendment of the noble Lord, Lord Teverson, but not because I do not support its intent. I think it is hugely important that the Green Investment Bank, if it is to have any attraction, is better capitalised than the Government are proposing. However, allowing the bank to borrow is one thing, but you have to ask, who would lend to it?
Before I came into your Lordships’ House, I spent many years in the capital markets. The capital markets will not lend to this bank unless one of two things happens: either it is guaranteed by government—plainly, that is behind the Government saying that they have to wait for a certain period—or it has a strong balance sheet of its own. No one will lend to it just on the basis of thinking that it is a great idea in the same way that no one will buy a bond unless it is backed by a cash flow. That is what the bond market buys; it buys cash flows. It does not invest in speculative infrastructure, however worthy. Therefore, it is really important that we do not get carried away by just wishing that things were different, and that we push the Government to come forward with practical propositions about increasing the funding available to this bank. Until there is a track record there and until there are infrastructure projects that are capable of securing a rating from the rating agencies, there will be no bond issuance, and until it has a very strong balance sheet or the Government give a guarantee to underpin that balance sheet, there will be no lending from the capital markets either. I hate to pour cold water on this but we have to connect with reality here.
Lord Teverson
I thank the noble Baroness very much for that contribution. I should point out that the borrowings of KfW, which is owned by the German länder and the federal Government, are guaranteed by that Government and still manage to escape public sector classification. I thank the noble Baroness very much for bringing up that point, which I forgot to mention.
Baroness Ford
KfW is covered by the covered bond regime, which we do not have in the United Kingdom.
Lord Oxburgh
My Lords, I, too, support the amendment. I shall not detain the Committee by repeating the points that have been excellently made by previous speakers. It is simply worth pointing out that, because we are signatories to a variety of European constraints on emissions reduction and because we have our own Climate Change Act, inevitably there has to be massive investment in green infrastructure in this country over the coming decade. We managed to lose out almost completely, if you like, in the previous phase, when we saw significant investment in, for example, onshore wind in this country, where virtually all the high-end technology came from abroad. We really have to be ready to cope with this requirement for capital internally and in time.
I am sure that by the Minister’s bed he has a copy of the current, recently introduced Chinese five-year plan, in which he will remember that no less than a third of the objectives relate to energy management, energy efficiency, investment in renewables and low emissions technology. There will be a massive world market here, and we can drag our feet again or we can participate in it. I see this amendment, taking on board entirely the point made by the noble Baroness, Lady Ford, as simply facilitating and making sure that we are there in time. Brussels has many virtues, but speedy reaction is not one of them. Getting on with this now will not only begin to manage that problem but will indicate again to the capital markets that the Government are serious.
Lord Skidelsky
Perhaps I could reply to the noble Baroness, Lady Ford. Her point is absolutely right, but it is irrelevant. The purpose of the amendment is to allow the bank to borrow; it does not guarantee that the bank will be able to raise the money.
Lord Bates
Can I dissent from the amendment? I think that it goes against the whole point of the legislation. Indeed, it goes against the whole point of the Green Investment Bank, which is to stand in the gap of market failure within the capital markets in order to get projects up and running and off the ground. Where that is not possible, it provides a bridge or an intervention, but only so that private sector capital can come in. As an example of that, I mentioned earlier the first investment that had come in to Earthly Energy, the anaerobic digestion plant in Teesside. As I recall, the Green Investment Bank invested £8 million there. Immediately that attracted matched private sector investment of £8 million. The total value of the project is £100 million. That seems to be a classic example. To go from zero to £100 million, clearly they would not have been able to get the project off the ground, but that measured intervention of £8 million unlocked a project worth £100 million, which is exactly what the amendment proposed by the noble Lord, Lord Teverson, is trying to achieve. I am simply saying that it is already happening under the present regime.
Lord Mitchell
My Lords, we have had some very good contributions. In fact, my Amendment 9 just leads on from what the noble Lord, Lord Teverson, said, and we have a few additional points to make about it. First, I refer to what my noble friend Lady Ford has said on this subject; she has a lot of experience in this area and we should listen to her. We should also listen to the noble Lord, Lord Oxburgh. He has shown a lot of passion for green technology in this country and has said how important it is that we stop sitting around and get on with it. I hope that that is taken on board by this Government.
I suppose that what we are saying more particularly is that this Green Investment Bank has to be a real bank and not a sham. I do not think that it is going to be a sham, but it has to be a real bank with all the attributes of a real bank. Probably the most important issue before this Committee today is its borrowing powers. Without the capacity to borrow from the capital markets for investment, the bank is no more than a government fund. In fact, Transform UK has said:
“A bank that is not allowed to borrow cannot be described as a Bank, and investors will notice this”.
However, the amendment represents a compromise and takes into account the strain on public sector funding, and we would not therefore support reckless and irresponsible levels of borrowing.
Lord Marland
My Lords, I say to the noble Lord, Lord Mitchell, that handwritten notes such as those that we old fogies use would be useful instead of modern technology. I am grateful to noble Lords for exploring this area. Clearly, those who have been in government and those who have read the papers know that we are in very deep financial straits. This Government have decided to start a bank against all odds, investing £3 billion in it in the next period, which is a tremendous achievement. We have been told to get on with it. We have done so and it is here before you now, with a chairman and chief executive in place who are getting on with it. On that point, I would like to quote what the noble Lord, Lord Smith of Kelvin, has said about the state of affairs. I am very grateful to the noble Baroness, Lady Ford, for her very constructive and practical comments. The noble Lord said:
“We need to show government and private capital markets that we are a well run organisation with a good track record worthy of the injection of more capital or, indeed, borrowing money in capital markets”.—[Official Report, 14/11/12; col. 1529.].
That is absolutely fundamental. No one is going to lend to this bank or provide borrowing unless it can show a track record of prosperity. I can promise noble Lords that if we feel the need to borrow, we will approach the stakeholder well before 2015.
On that point, the Government have given a commitment that we will seek state aid approval from the European Commission in respect of borrowing before the end of this Parliament. The noble Lord, Lord Skidelsky, very appropriately raised this. We have only just got this thing going but already we are starting to move forward. As the noble Lord, Lord Oxburgh, rightly says, it takes a long time to achieve these things in Europe but we are playing that game; indeed, we are ahead of it.
However, I mention a word of caution, as, indeed, did the noble Lord, Lord Smith. I think that the original budget of investing the first £775 million over the next five months will be difficult to achieve. However, I am confident that we can do it. It is not as if there is a whole load of stuff piling up to be invested in at the moment. Of course, we know there are investments out there, but the budget will be difficult to achieve in the first period. That shows that these things take time; it takes time to build up a track record; it takes time to build up confidence in the markets; and it takes time to build up co-investors, which will be the initial endeavour of the bank.
The noble Lord, Lord Teverson, asked about KfW. Rules are rules and the noble Baroness, Lady Ford, mentioned that we cannot do it in this country. I thank her for that. The UK’s boundary for public finance covers the whole of the public sector, including central and local government and public corporations. That reflects the approach of this Government and that of previous Governments. It is not something that we can suddenly do and in this piece of legislation we are not going to change the rules of engagement.
Lord Teverson
This is covered in European accounting standard 95. I do not see why we should put ourselves at a disadvantage in that interpretation compared with other nations within the European Union who are competing for the same capital. That seems to me to be tying our hands behind our back. We could use the example of changing the rules in terms of Lloyds and RBS as regards public balance sheets and how, with those banks, we made exceptions. I accept that this is rather different, but we have a track record that says that we can change things. I do not understand why it is possible for our competitors to be unchallenged by the European Court of Justice or the Commission in terms of state aid where we risk being seen as being subservient rather than proactive. I would not accuse the Minister of this—quite the opposite—but we do ourselves down by appearing to be supine in this area.
Lord Marland
I do not think that it is a question of being supine. This is a government decision that has been made by the coalition of which the noble Lord is a member. There are many things that people do not understand. The noble Lord, Lord Skidelsky, does not understand or agree with some of the policies of this Government, but that is government policy.
Lord Marland
I apologise. It is good that my noble friend understands it, because then he will not disagree with it. That is the way that the Government have set out their stall. We have inherited a very substantial national debt, but not in the same way in which the Germans have inherited the same problems. We have inherited a grave financial situation and, quite rightly, the Treasury decided that it will not enhance that by further borrowing against our balance sheet. The evidence produced by the noble Lord, Lord Smith of Kelvin, would suggest that he does not feel under any pressure in terms of funds at this point. Of course, we must set out our stall, as I have said. We intend to seek European Commission approval for borrowing and we intend to follow that process as soon as possible. I think that is a very good sign and I am delighted that there is some agreement in the room that we are doing that. I invite the noble Lord to withdraw his amendment.
Lord Mitchell
Does the Minister have any thoughts about when this borrowing will come to pass?
Lord Marland
We have made it very clear that it will not come to pass before the end of this Parliament. That is what prudent people do. They say, “I am going to buy something and I am going to spend this amount of money”. We have said that we will spend only that amount of money, but we have said that we will spend $3 billion on this project, which three years ago did not exist.
Lord Teverson
My Lords, I thank my noble friend for going through this. Can I just say what I am not saying? I am not for a minute saying that we should immediately rush into this. I said in my opening address that the bank needed to have a track record and credibility. It needed to prove that it was good at what it does. However, one thing that we all know, whether you have been in business or, as the noble Lord, Lord Oxburgh, said, you are involved in the EU, you have to plan well ahead and start making provisions for the longer term. There is no better time to do that than when you lay down legislation.
I was being very understanding in terms of the debt problem. I am not talking about changing policy: I am talking about testing rules. All Governments try to get around rules, whether you call it PFI, PPP or whatever to get round public sector borrowing ceilings. I accept that. That is one of the reasons that we went into the coalition and I am delighted to have done so. However, that does not mean that we then accept everything that we are told to accept, although I know that that is not in my noble friend’s nature either.
This is fundamental to making this bank work. My noble friend mentioned matched funding. Yes it is true that there is already a considerable leverage, but that is a fund; the Regional Growth Fund does exactly that. That is why this would then be a green growth fund. However, it is not that: it is a Green Investment Bank. That is why, to get to our goal, we all need to find a way around this. This will be a really important area to explore constructively between now and Report. In the mean time, I beg leave to withdraw the amendment.
“(7) The Bank shall set out as part of its investment strategy a target for the leveraging of additional private sector investment by 31 March 2015 and annually thereafter.”
Lord Stevenson of Balmacara
My Lords, we have just heard an interesting discussion about what the overall financing arrangements for the bank will be. I was struck by the comments made by the noble Lord, Lord Skidelsky, who is not in his place, that effectively the leverage on acquiring some form of loan finance will be about six times and the subsequent leverage by bringing in third-party investment would be a further five times. We are talking about a gap between the funds available within the bank of £3 billion, which is a huge sum, and we are grateful to the Government for finding that cash, but at a cost of £90 billion in terms of growth, jobs and SME support, which one has to bear in mind. So the amendment focuses on what seems to be the only possible way that we will fund support for the bank in terms of its investment by getting co-investment from third parties who might wish to join the bank, having signalled that these were investments that they wished to make.
Our attention was drawn to comments that were made when the bank was opened in Edinburgh the other day, which has also been referred to by other speakers in this debate. Speaking at the opening of the bank’s headquarters in Edinburgh, the Business Secretary said that the Green Investment Bank,
“will leverage private sector capital to fund projects in priority sectors from offshore wind to waste and non domestic energy efficiency, helping to deliver our commitment to create jobs and growth right across the UK”.
The Secretary of State for Energy and Climate Change, Edward Davey said that:
“The Green Investment Bank will help attract the capital required to allow the green economy to blossom, encouraging investors to market and kick-starting low-carbon and energy efficiency projects”.
So the aspirations are certainly there for this to be a very successful operation.
In the wake of the global financial crisis, it is obviously right that any financial institution now has the highest possible levels of transparency, accountability, scrutiny and banking ethics, so this amendment also aims to encourage the bank to publish a strategy in this area and hence to encourage others to add their investments with the bank.
Lord Marland
I am grateful for that landscape of the new bank and the large elements of agreement from the noble Lord in drawing his conclusion. To cut to the quick, this is obviously about how we are going to attract co-investment. In meetings with the noble Lord, Lord Smith—and with the noble Lord, Lord Adonis, who sadly is not with us but we have discussed this—he was very clear that this will not be a problem, as indeed I am because of a number of countries that I visited. There is a huge market out there. We had the Kuwait Investment Authority over last week, which was celebrating being in the UK for 60 years. It readily indicated that it would like to invest alongside us in the future.
On the timetable, I refer to the noble Baroness, Lady Ford, who indicated that she would agree that this is very much a matter of track record. No fund can set up shop and on day one expect to be deluged with investment, even if the board and chief executive are very well recognised.
Baroness Ford
There are two concepts here and it is important to get clarity. Track record is important for co-investing. The noble Lord, Lord Teverson, is absolutely right. At the moment, we have a green investment fund. The way to get additional leverage from that fund is by co-investing, and there have been lots of good examples in the past 25 years of different types of bodies doing that in the United Kingdom. However, track record is important for co-investing. However good your track record, unless you have established cash flows to sell in terms of a bond or balance sheet with government underpinning, you will not get borrowing. There are two slightly different concepts.
Lord Marland
I could not have put it better myself. In fact, I could not have attempted to put it as well as the noble Baroness did. It is absolutely clear, and it sets a clear mandate. We have already discussed this issue, and it will come up again, but I am confident that there will be co-investment. At this point, I see this as an enabler for co-investment. There are plenty of opportunities for green investment. I therefore invite the noble Lord, Lord Stevenson, to withdraw the amendment.
Lord Stevenson of Balmacara
I thank the Minister for his comments and I share the support shown for the success of the bank. However, I remain puzzled as to how it will make the transformation from the little duckling that is alone to the wonderful swan that I am sure the Minister has in his mind as sailing calmly across the seas of international finance, sucking up investment from wherever it goes, flying off into the sunset with a raft of projects carefully tucked under its wings, and therefore being successful. I do not see that, and we will return to this matter.
Lord Teverson
Perhaps I may ask the noble Baroness about one matter. One of the things that I understand investment banks often do is raise bonds against projects. It is not a question of the recourse of liabilities to them; they raise bonds on the asset value of the project. There are ways of doing it in that way.
Baroness Ford
There are ways of doing it. I do not wish to detain the Committee and perhaps I should have a cup of coffee with the noble Lord to explain; I mean that in a helpful way. Bonds are raised against the cash flows from projects. They are raised against an infrastructure project only if the Government underpin it—hence, PFI.
Lord Brooke of Sutton Mandeville
I encourage the Minister to try to turn not a duckling, but a cygnet, into a swan. A cygnet, in banking and legal terms, would have a greater significance than a ducking.
Lord Stevenson of Balmacara
Perhaps I may respond. Since I joined your Lordships’ House, I have always been impressed with the noble Lord’s grasp on literature. I am a little surprised that he did not pick up my allusion to the Ugly Duckling.
Lord Bates
Perhaps the noble Lord, Lord Stevenson, would agree with me that given that this is one of the last chances we will have to discuss Clause 4, in the range of investment criteria or investment classes that can be made through the bank, whether they be grants or loans, if the objective is to achieve leverage, it would seem sensible for more emphasis to be placed on lending money at a given rate, rather than giving it away in the form of grants. Again, a preference should be given to equity finance because it would also be of potential benefit to funds in the long run as those investments come to fruition.
Lord Stevenson of Balmacara
My Lords, the noble Lord makes a very good point and, in an early start-up arrangement, the last thing you want to be doing is dissipating your hard-earned capital. You should be using it to recycle. However, that relates to the point we have been making, which is that leverage of about 30 times the investment is achievable, but we do not seem to have the support of the Government in that. However, I beg leave to withdraw the amendment.
“(2) The UK Green Investment Bank must ensure that—
(a) all studies or assessments conducted in the preparation of a business plan, and their accompanying terms of reference,(b) all written correspondence exchanged between the Government Shareholder and the Board, and(c) all key operational documents, including internal working documents of the Bank relating to investment decisions,are made available on a website maintained in accordance with the requirements of this section, subject to the exemptions specified in subsection (3).(3) Information contained in documents required to be disclosed by subsection (2) may be withheld or redacted by the Bank where in the reasonable opinion of a qualified person—
(a) its disclosure would prejudice the commercial interests of any person (including the Bank),(b) its disclosure would, or would be likely to, inhibit—(i) the free and frank provision of advice to or within the Bank,(ii) the free and frank exchange of views within the Bank for the purposes of deliberation,(c) its disclosure would otherwise prejudice, or would be likely otherwise to prejudice, the effective conduct of the Bank’s business,(d) a claim to legal professional privilege or, in Scotland, to confidentiality of communications could be maintained in relation to it in legal proceedings, or(e) its disclosure—(i) is prohibited by or under any enactment, or(ii) would constitute or be punishable as a contempt of court, and in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.(4) The documents specified in subsection (2) must be made available on the Bank’s website or a website that is maintained by or on behalf of the Bank.
(5) Access to the documents specified in subsection (2) on the website must not be—
(a) conditional on the payment of a fee, or(b) otherwise restricted, except so far as necessary to comply with any enactment or regulatory requirement (in the United Kingdom or elsewhere).”
Lord Stevenson of Balmacara
My Lords, the purpose of the amendment is quite straightforward. I spoke under the last amendment about the need for transparency, accountability, scrutiny and banking ethics, and the importance that these now have, particularly after the last crisis. This is something that should apply to the green bank. It is the first public bank to be created in modern times, but it may not be alone, because we are aware that a British Investment Bank, or whatever it is to be called, is starting up. Therefore, we should be setting precedents for how it should operate as we go forward.
We suggest that the Green Investment Bank has the highest standards of transparency both for the shareholders and the general public, which means that we can have meaningful debate; assessment and scrutiny as to how the bank is being managed; its success in achieving its green purposes; the manner in which it arrives at investment decisions—and all subject to the important point of commercial sensitivities and considerations.
The amendment would ensure that all working papers and studies undertaken in the preparation of the bank’s business plan, as well as all written correspondence exchanged between the Government and the board, were made available on a website that was freely accessible by the public. We do not want to do anything that compromises the bank’s ability to make investments and consider matters of a sensitive and commercial nature; that is why the amendment is couched in those terms, to make sure that a full and frank discussion of views can still take place between the Government and the board, and that the bank can fully undertake its activities. I stress that we want the Green Investment Bank to have the highest possible standards of transparency, accountability and scrutiny to the public and other stakeholders.
It is true that the bank falls under the Companies Act 2006, and is registered at Companies House as a company with proper articles of association and so on, but our concern is not so much with historic reporting, because often these reports can be delayed for six to nine months, but with allowing debate and discussion. A good example of this would be the rules that the Government are putting in place to ensure that inappropriate bonuses and executive pay will be restricted. As the Committee will be aware, this Bill will change the powers of shareholders in deliberations on executive remuneration, although we do not think that it goes far enough, as we will come to later. This amendment will ensure that the bank will be different from other Companies Act companies in the sense that debate about appropriate pay and the Government’s role in that would be flagged up on the website, and there permit a wider debate before the mechanisms proposed in this Bill kick in. I beg to move.
Lord Marland
My Lords, this is an interesting amendment, but of course it goes way beyond the Freedom of Information Act 2000, which permits a great level of self-disclosure and obligations that the bank must apply to because it is wholly owned by the Government. So the information will be readily accessible as to bonuses and all the other things that the noble Lord reasonably requests. It is important that there is transparency in our current world of bonuses and directors’ pay, but we do not want to put an extra burden on an organisation that is already within the Freedom of Information Act. I hope that the noble Lord understands that and will perhaps withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I do understand that and thank the Minister for pointing out how the Government are approaching this issue. I still regret that in some senses we are not taking advantage of how one could use a more engaged discussion with those who have responsibilities in this area, notably Parliament. Having said that, I will read carefully what the Minister has said. I beg leave to withdraw the amendment.
Baroness Worthington
“( ) The Bank shall publish in its annual report what proportion of investments made in accordance with the green purposes outlined in section 1(1) shall be allocated to proven technologies, and what proportion shall be allocated to innovative technologies; and shall make a proposal for these proportions over its forward plan for the next three years.”
Baroness Worthington
My Lords, this amendment is designed to try to elicit a few more comments from the Government on where this investment will be targeted—perhaps on the spectrum of entirely safe commercially proven technologies towards the more innovative end of the spectrum. It is prompted by a report about the launch of the bank from the CEO, Shaun Kingsbury, who, I suspect, in an effort to try to begin the process of creating a track record for being a sensible investor, said that only safe and proven technologies would be invested in.
We are not critical of that as it makes sense, but in much of the literature about the setting up of the bank there is a discussion of the desirability of investing in late-stage innovation. We think that is important because it is about ensuring that this bank is doing something that is not currently done in the market: it is addressing a market failure. The balance between investing in already proven technologies and more innovative solutions is crucial to the bank’s identity and to its success. Obviously it should not operate in the realms of risky investment and venture capital investment but it ought to operate in a space that has perhaps been overlooked by traditional investors. In that way, it would be adding value to the existing market.
We have tabled an amendment which is designed to try to tease out this area of the bank’s operations to make the policy much clearer so that there is more transparency. It is worth saying a few words about where late-stage innovation might occur. It is clear that the Government are seeking to create a crowding-in effect rather than a crowding out effect. That is an interesting phrase and one that we should definitely seek to achieve. We do not want to be competing with existing private investments, but beating a path down which other investors can follow. That crowding in is linked with the concept of what is a late-stage innovation. The current list of technologies that the bank will be investing in is broad. There will be room for innovation among those categories that have already been selected, but there are other technologies that are perhaps not on the list, which is slightly regrettable. I mention wave and tidal technologies because that is an area where the UK could have a great potential to lead globally. We have exactly the right geography for these very important technologies, which are not yet commercially viable. We know that the policy is coming and we look forward to contracts for different mechanisms that might bring these technologies on. It would seem a shame to preclude those sorts of technologies from the list that the bank is looking at.
The amendment is asking for further clarity about where the bank will position itself compared with tried and tested technologies and more innovative aspects, which might play more to the UK’s strengths. We would welcome the Minister saying a few words about the bank’s attitude to that. Perhaps he could also talk about wave and tidal technologies as I think those are hugely important for the UK. I beg to move.
Lord Brooke of Sutton Mandeville
I assume that the noble Baroness’s proposal is born of previous literature. Could she tell the Grand Committee what proportion has been given to innovative technologies as against existing ones? We are an inventive nation. In other words, what kind of percentage does she envisage will emerge out of this plan?
Baroness Worthington
I do not have a number in mind. This is a newly created facility, which we have to explore. As there has not been a previous example of a bank like this being created in the UK, there is no precedent on which to draw. Perhaps we could look overseas. We have had examples cited from Germany; there are similar banks in Portugal, Spain and Holland; and the Australians are in the process of setting up their own investment vehicle. I do not have an answer, but I am sure that, with some study, the department could provide us with some guidelines or some examples from overseas.
Lord Marland
I am sure that the noble Baroness would agree that 20% would be a reasonable part of the bank’s investment. That is the right number because, as part of this agreement, the bank is permitted to make 20% of its investment in other sectors, a key one being marine energy, which I know is of great interest to the chairman. It was also of great interest to me in my previous department and is of great interest to the noble Baroness. It uses our great attributes of tides and waves. There is a lot of activity going on there. We have created marine parks, and I see this as a key future. As I said, the bank has 20% of its funds allocated to this area.
This is an interesting probing amendment. But where I would resist movement in this direction, other than giving confidence to the noble Baroness, is that if we start using words like proven technologies, I am not sure that we can create the right definition. We all understand what the noble Baroness means. Going back to the core of what the bank is set up to do, it is to demonstrate the ability to make both a positive return and a green impact. All those areas that the noble Baroness and I know well would certainly fit into this exciting new development. With that, I hope that she will withdraw her amendment.
Baroness Worthington
I thank the Minister for his comments, which were reassuring. I think that 20% sounds about right, but who knows? The most important factor, which should not be overlooked in our desire to create this pedigree and track record is that there will be times when we need to cut a path through otherwise unexplored territory. There is a market failure out there that this bank can address. By having a targeted, focused remit, I hope that it will find investment opportunities that others have overlooked. I welcome the comments from the Minister and I beg leave to withdraw the amendment.
“(2) The Secretary of State must prepare and lay before both Houses of Parliament a report on the activities and investments of the UK Green Investment Bank.
(2A) The Secretary of State must lay a report before Parliament as provided for under subsection (2) within 12 months of the coming into force of this Act, and annually thereafter.
(2B) The report under subsection (2) must, in particular, include or contain information about—
(a) the investments undertaken by the UK Green Investment Bank during this period,(b) how the UK Green Investment Bank is achieving its green purposes as set out in section 1,(c) a value-for-money and efficiency statement,(d) the identification and management of risk in respect of UK Green Investment Bank objects and investments,(e) how the UK Green Investment Bank is not duplicating investments made in the markets, and(f) how the UK Green Investment Bank has applied the Main Principles as set out in the UK Corporate Governance Code.”
Lord Stevenson of Balmacara
My Lords, the main aim of this amendment is to firm up how and in what form the Secretary of State must prepare and lay before both Houses of Parliament a report on the activities and investments of the UK Green Investment Bank. The amendment is largely self-explanatory, but it may be for the benefit of the Committee if I raise one general and a couple of specific points.
As I mentioned before, relying on the reports generated under the Companies Act 2006 introduces significant timing problems, as these reports will be generally arranged for an AGM often some months after the year end. A report for Parliament, if it were different, can be much more up to date and therefore more relevant to those who have to discuss it. The focus of Companies Act reports are the stakeholders, mainly in conventional companies. These would be the dispersed institutional and private shareholders and not the public interest represented by Parliament. It is therefore sensible to recognise that, although initially the Crown interest will be the only shareholding interest, that will not be identical with the public interest, and different reporting might therefore be required.
Proposed new paragraphs (a) and (b) in the amendment would give Parliament a feel for the activity that the bank has been undertaking on the ground, and bring the reality of the bank's operations to life. It would be unusual for Companies Act reports to deal with specific investments in this way.
Paragraph (c) would assess the way in which the bank is achieving value for money for its investments, and draw parliamentary attention to value for money and efficiency—again an approach that would not commonly be found in company reports.
Unusually for institutions in the public sector, the bank will have to be familiar with risk in all its forms and across its investments, and the wider economic climate will also need to be referred to as well as the appetite that individual investors will have for risk. This is an important area that we think the report should deal with.
It would be of considerable concern if the Green Investment Bank were to displace investment already available in the market, which we have already touched on in our debate this afternoon. So a specific report in that area would be helpful in understanding how the bank was progressing, and in assessing how successful it was in the marketplace.
The final point brings us back to corporate behaviours, and assisting Parliament to judge whether the bank was addressing concerns on such matters as pay and bonuses and ethical behaviours more generally.
I hope that the Minister will accept that with this amendment we are trying to be helpful. We have some common ground in assisting Parliament in getting material which is better suited to its particular role. I do not think that that will necessarily come out of the companies’ reports and I hope that the amendment will stimulate those who have to prepare them to come up with more appropriate solutions for the reporting that is necessary. I beg to move.
Lord Marland
The noble Lord, Lord Stevenson, probes again—quite reasonably, if I may say so. I just want to make it clear that the Government, as the main shareholder—indeed, the only shareholder—will be holding it to account at every angle. Also, Clause 5 treats the bank as if it were a quoted company. Therefore it is subject to the Companies Act, which imposes three quite important criteria. First it will be required to produce a directors’ remuneration report, about which there will be more later in this Bill. It will be required to publish its annual accounts and reports on a website. It will be required to produce an enhanced business review, under which the directors must report on matters such as main trends and factors likely to affect the company’s business and environmental matters. We believe that that has enhanced transparency, public transparency, in addition to the watchful eye of government in terms of getting return on our investment. I hope that satisfies the noble Lord on what I consider a very important probing amendment.
Lord Stevenson of Balmacara
I thank the Minister for his comments. It is nice to see that my rating has risen from being interesting to being quite reasonable in what I am suggesting. I will look for an A probably in sitting seven or eight, and perhaps even get an A+ at the end. I look forward to that. In the interim, I withdraw this amendment.
“(5) The Secretary of State must make provision for an independent expert review of the performance of the UK Green Investment Bank.
(6) A review under subsection (5) must be prepared every five years following the commencement of this Act.
(7) An interim review shall be prepared no less frequently than every two and a half years.
(8) A review under subsection (5) must, in particular, include or contain information relating to—
(a) an assessment of the UK Green Investment Bank’s environmental performance in fulfilling the green purposes as set out in section 1,(b) an analysis of the main trends and factors likely to affect the future development, performance and investments of the UK Green Investment Bank,(c) macro-economic analysis, including assessments of demand in the UK economy and international factors likely to affect green investment and skills within the relevant industries,(d) assessment of the competitiveness of the UK Green Investment Bank in securing competitive advantage for the UK in green and low carbon economies relative to other countries, and(e) recommendations to improve the UK Green Investment Bank’s impact in fulfilling its green purposes in section 1.(9) A review conducted under subsection (5) must consult—
(a) The Secretary of State for Energy and Climate Change,(b) The Secretary of State for Environment, Food and Rural Affairs,(c) The Committee on Climate Change,(d) Ministers from the devolved administrations,(e) investors and interested parties, and(f) members of the public.(10) The Secretary of State, in the capacity of shareholder, must provide such information as they consider reasonable to enable the person or body undertaking the review to fulfil the requirements of this subsection.
(11) A review under subsection (5) must be published and laid before both Houses of Parliament.”
Lord Stevenson of Balmacara
My Lords, Amendment 15 brings to the attention of the Committee the suggestion that if the reports that are being received by Parliament are those which are mainly being generated within the Companies Act register of reporting requirements, there may be some gaps in terms of independent review. So the main purpose is to require such a review every five years following enactment, and also to have an interim report.
I am sure that the Minister will again argue that the bank will have sufficient to do under the Companies Act, and that, as a public company falling within the Freedom of Information Act, there is already a sufficiency of reporting requirements for the bank. He may argue that requiring any more might be regarded as otiose, but there are some reasons why I think the export report would be of value.
The rationale for setting up the bank is to bridge a gap in understanding between the investor community and those who wish to manufacture, develop and trade in the green technologies. Surely a periodic report of what the bank has been doing and how successful it has been in fulfilling its purposes, a check on its competitiveness and a review of the main trends and factors likely to affect its future performance would help bridge that gap and help improve the sector as a whole, leading to greater investment.
In a similar way the preparation of an external expert report would surely help the bank sharpen its performance and help improve its knowledge and understanding of the sector. It may well be that it has collected the best and the brightest to work within the bank, but, even so, whenever there is an external report, there always is more that is achieved because of the preparation for that reporting requirement than there is perhaps by actually going through the process. So in that sense it would be an assistance to the company itself.
Thirdly, the existence of such a report would surely assist those who would otherwise only be able to rely on the standard output of the bank under the Companies Act. With that, I beg to move.
Lord Marland
My Lords, this is an A+ amendment, without any doubt at all, something that I have never achieved myself. So much was I taken with this amendment that I invited my officials to contact the noble Lord, Lord Smith of Kelvin, as chairman, to consider this because I felt that it was such an A+ amendment, from an A+ man and an A+ male, that it was worthy of consideration. I hope it will satisfy the noble Lord that the noble Lord, Lord Smith of Kelvin, has made it clear that the board will undertake an independent review of its own performance each year from the end of its first full financial year in 2014. I hope that that satisfies what I thought was an excellent amendment, and I encourage the noble Lord to withdraw it.
Lord Stevenson of Balmacara
It is embarrassing to be praised so quickly, and so young. Of course, to be the very best of our universe you now have to go above A+ to A*+, at the risk of suggesting that there might be a further grade to which I might aspire.
Lord Marland
If the noble Lord is not satisfied, I can big it up even more.
Lord Stevenson of Balmacara
I shall play my cards slowly and see how we get on. The simple point that I was going to make was that the answer is exactly as I would like, and this will satisfy us in that respect. It is just a question of what will happen to the report in terms of public arrangements. Perhaps the Minister could reflect on having a further exchange with the chair of the bank to see whether it would be something that could be laid before Parliament. I do not think that it would need a formal discussion or debate, but it would be useful to have it in the Library at least, so that it is available. If he could confirm that at some point, we would be grateful. I beg leave to withdraw the amendment.
“General disclosure requirements
(1) The Freedom of Information Act 2000 is amended as follows.
(2) In Part VI of Schedule 1, after “The Great Britain China Centre”, insert “The UK Green Investment Bank”.”
Lord Stevenson of Balmacara
This is my last appearance in the Committee on this occasion. I have risked the Minister’s wrath by suggesting that we need to think further about reporting, but I do not think that this one will be as well received—but I will have another go.
The Green Investment Bank is already covered by the Freedom of Information Act, and I accept that. It was discussed in another place, and I have read that discussion. But it stuck in my mind that there were two reasons why we need to revisit it. In the discussion in the other place, the Government said that they believed that the Freedom of Information Act, together with Clauses 5 and 6, ensure that the bank will be subject to appropriate, extensive obligations to disclose information and to report on its activities, which will ensure full transparency and accountability. I accept that, because the bank already qualifies as a publicly owned company under Section 6 of the Freedom of Information Act, which means that it is subject to the disclosure obligations that apply to public authorities. We also accept that, unlike most public authorities, not only is the bank subject to the Freedom of Information Act but it has additional, proactive reporting obligations under the Companies Act 2006, which will be enhanced by Clause 5. However, things may change. We had a discussion earlier on in Committee today at which the remote prospect of changes of ownership in the bank were raised. If those changes of ownership were such that the proportion of the bank owned by a future Government dropped below 50%, I doubt that FOI legislation would still apply. So this is to future-proof something for which there is a particular responsibility. At the moment, it is going to be wholly owned by the Crown, and the sole shareholder is the Government, so it is appropriate that the questions that may be put in terms of FOI will be answered.
This bank is being set up in the wake of the biggest financial crisis the world has seen in modern times. That should, even if for no other reason, mean that we should try to ensure that the new bank should have the highest possible standards of accountability and reporting. I remind the Committee that the Secretary of State, in his examination before the Environmental Audit Committee on 2 February 2011, said:
“As Secretary of State in BIS, my ambition is to … develop and deliver a GIB that is effective and transparent and affordable—those are our key criteria”.
Love or hate the FOI Act, it is here to stay, and is proving very effective in ensuring that the Government respond to legitimate requests for information from citizens of the UK. We should do what we can to promote that view, and we should do nothing which sets up barriers or creates uncertainty about whether information is retrievable or not. In our view, therefore, there should be no objection to recording in the primary legislation that it is quite clear that, as well as the class of institution it is, the bank itself, as long as it is retained, will be subject to FOI. I beg to move.
Lord Marland
My Lords, we have trodden this ground quite a lot so far. I think that the FOI is a very significant and far-reaching incumbence on a company, and on individuals in a country, as we have found out. There will be more later, but as I have said in the past under previous amendments the FOI Act is a very strong regulatory thing. I am not going to play “what if” scenarios, such as what if the bank is sold by a Labour Government in 10 years’ time, or another coalition in five years’ time, because it is our task to operate within the current government schemes and not to tie the hands of future Governments if they wish to carry on with other things. But I totally accept the sentiment and look forward to further debates on the subject. In the light of that, I hope that the noble Lord will withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I simply note that perhaps in 10 years’ time, when we are on the other side and are debating similar issues, I will remind the noble Lord of those points. However, I beg leave to withdraw the amendment.
Lord Gardiner of Kimble
My Lords, this may be a convenient moment for the Committee to adjourn until Wednesday at 3.45 pm.
House of Lords
Iran
(12 years ago)
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Lord Wood of Anfield
To ask Her Majesty’s Government what legal advice they have received on whether a pre-emptive military strike on Iran would violate international law.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, the Government do not believe that military action against Iran is the right course of action at this time, although no option is off the table. We believe that the twin-track approach of engagement with Iran and pressure through sanctions is the best way to resolve the nuclear issue. We do not comment on legal advice and will not speculate about the legality of various scenarios.
Lord Wood of Anfield
I thank the Minister for that Answer. I have asked this Question because of a report in the Guardian which suggests that the Attorney General’s Office has argued internally in government that providing assistance to forces that could be involved in a pre-emptive strike would be a clear breach of international law. Will the Minister clarify the Government’s understanding of the principles that should inform any decision about assisting forces in a pre-emptive strike on another country?
Baroness Warsi
I can inform your Lordships’ House that we are not advocating military action against Iran. We continue to believe that the twin-track process of pressure and engagement offers the best hope of resolving the Iranian nuclear issue. In relation to legal advice, the noble Lord will be aware that it is not practice to inform this House or notify parliamentarians of specific legal advice, if any, that we may be obtaining.
Lord Ashdown of Norton-sub-Hamdon
My Lords, leaving aside the legal considerations, given that a pre-emptive all-out strike on Iran would almost certainly be militarily unsuccessful, unite Iranian opinion behind the leadership and scupper any diplomatic talks, would not such a move be militarily inept, politically unsuccessful and diplomatically disastrous?
Baroness Warsi
My Lords, my noble friend comes to these matters with great experience and expertise, and it is important that voices such as his are heard. However, I can assure him, as I can assure the House, that there is no plan whatever to take military action against Iran, although of course all options are on the table. We fundamentally believe that the best way to deal with this matter is through pressure and engagement, and that is the process that we have adopted.
Baroness Deech
My Lords, does the noble Baroness agree that there is something that is perhaps slightly upside down about this Question and that what we should be worrying about is the legality of the preparation of nuclear weapons by Iran? No country should have to face the choice between obliteration and self-defence.
Baroness Warsi
The noble Baroness raises an important point. We have concerns and it is because of those concerns that there have been successive United Nations resolutions on this matter over a number of years. It is why the international community wants Iran to be much more transparent and why we continue to engage and push for that transparency. We would all like to come to a negotiated solution.
Lord Tomlinson
My Lords, is the Minister aware that, in her reply to my noble friend Lord Wood, she said that a pre-emptive was not justified “at this time”? Can she tell us when she envisages that such a strike might be justified?
Baroness Warsi
As I said at the outset, all options are on the table. It would be inappropriate for me to speculate on what scenarios may come forward in the future, and of course it would depend very much on the scenario we faced at the time. However, I can be clear that the Government are certainly mindful of their legal obligations within international law.
Lord Hannay of Chiswick
Does the Minister not agree that there would be no doubt whatever about the legal situation if Iran developed nuclear weapons? It would be illegal under the nuclear non-proliferation treaty, which was signed and ratified. However, rather than having the argument this afternoon about the legalities, is not the top priority, with the new American Administration, to revive the second of the two tracks—not the sanctions track, which must be kept up, but the track to talk to the Iranian regime? Would it not be worthwhile for the Government to take the view with the United States Administration that they should have some kind of bilateral contact with the Iranians before matters get to the point where they cannot be retrieved?
Baroness Warsi
Discussions about these matters are ongoing in a number of different ways. The noble Lord will be aware that the E3+3—Russia, China, the US and ourselves, France and Germany—have had four meetings since the beginning of this year; I think since February. Indeed, the noble Baroness, Lady Ashton, is in the process of taking forward a further meeting, possibly before Christmas. We are absolutely committed to negotiating our way out of this matter.
Lord Anderson of Swansea
Does the noble Baroness agree that, while the centuries-old legal principles in respect of pre-emptive strikes remain valid, they have been transformed in practice by the speed of warning and response in the nuclear age? Although we, along with much of the security establishment in Israel, may be highly critical of a possible strike, should we not at least acknowledge the dilemma of the Israeli Government, who are faced with President Ahmadinejad, who has said he intends to destroy Israel and may very well soon have the capability to do just that?
Baroness Warsi
Iran’s development of military nuclear power is a matter of concern for many more countries than just Israel. It is why we have United Nations Security Council resolutions in relation to this matter and it is why we have tried to negotiate with Iran over a number of years. It is important to continue those negotiations and discussions. These are concerns that we in this country have too.
Baroness Williams of Crosby
Does the Minister agree that only a few weeks ago Mr Soltanieh, the Iranian ambassador to the IAEA, specifically indicated that Iran was now open to the possibility of bilateral discussions with the United States, and that President Obama has reflected this in his recent views expressed within the United States? Finally, according to recent polling by the Knowledge Forum, a clear majority in the United States is now clearly in favour of discussions and diplomatic relations between the United States and Iran, beginning as soon as possible.
Baroness Warsi
Of course, we raise this matter in discussions with the United States but it has to be for the United States to take these discussions forward with Iran if it feels that that is the right way forward. As we do with a number of countries, we encourage it to take all opportunities to have these discussions. The findings of the poll that my noble friend refers to very much reflect the opinion of all of us in this House, and indeed the public, that the better way to resolve this matter is not through military action.
Lord Wigley
My Lords, are there any circumstances whatever where a first strike with nuclear weapons could be morally justifiable?
Baroness Warsi
I am not enough of a military expert to start making these decisions. I do not think that this is a matter for moral judgment; it will be based on any scenario that presents itself at the time, and it would be wrong for me or the Government to speculate at this stage.
Baroness Afshar
My Lords, should there not be the same kind of sanctions against all countries who have nuclear weapons? Is it not the case that these sanctions hurt the poor in Iran while the elite are totally unaffected?
Baroness Warsi
The noble Baroness raises a very important point. When we look at sanctions, we are extremely aware of the need to have appropriate exemptions in place that cover humanitarian assistance, including medicines. It is important to remember that what we are concerned about is the development of nuclear weapons. We have concerns about the regime but not about the Iranian people. They are not the people we want to suffer as a result of these sanctions.
European Council: December Meeting
(12 years ago)
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Lord Liddle
To ask Her Majesty’s Government what are their priorities for the December meeting of the European Council.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, the December European Council will cover economic policy, including economic and monetary union and banking union, as well as defence enlargement and foreign policy. The UK will seek to ensure the integrity of the single market in relation to banking union and economic and monetary union. We will press for further progress on growth and work to ensure that the defence strategy reflects UK priorities. Enlargement is dependent on the December General Affairs Council.
Lord Liddle
I thank the noble Baroness for her Answer. Why have the British Government adopted a completely different approach to a banking union from that of a fellow euro-out, Sweden, which is run, we are told, by David Cameron’s favourite conservative European Prime Minister? Sweden has engaged with the negotiations on a banking union, whereas Britain appears to be trying to reintroduce, for the first time since the introduction of the single market, some kind of veto on financial services legislation. Does the noble Baroness think that that strategy is likely to meet with more success than it did in the negotiations on the fiscal treaty last December, or are the Government once again shouting from the sidelines to try to appease the unappeasable?
Baroness Warsi
The Government’s strategy on this matter is one that reflects the best interests of Britain. I am sure that noble Lords on the other side of the House agree that it is important that when the Prime Minister goes to Europe, he acts in the best interests of this country and negotiates on the basis of that strategy. The UK does not use the euro, and we have been clear that the UK will not be part of any banking union or fall under the jurisdiction of the ECB. However, that does not mean that we do not continue to push for further liberalisation of the single market.
Lord Roper
Does my noble friend the Minister agree that one of the priorities of our right honourable friend the Prime Minister should be to ensure that any discussions or negotiations about institutional changes should take place at the level of the 27, even if they concern the eurozone, in order to maintain the integrity of the single market?
Baroness Warsi
My noble friend makes an extremely important point, and the Government are with him on this matter. We are not part of the euro, but it is important that structures are not put in place that allow the euro countries to effectively exercise a block vote and therefore make decisions that could impact on us within the single market.
Lord Soley
Although the economic issues just discussed are probably the most important, can the Government also look at the way in which these international companies use the different tax regimes within the European Union to avoid their responsibilities in individual countries, and also perhaps at the semi-monopolistic practices of such companies? It is fairly easy—indeed, one might say pleasant—to boycott Starbucks, but Google and Amazon are a lot more difficult and are semi-monopolistic. It is something the EU should take a look at.
Baroness Warsi
The question goes beyond the immediate Question but I am sure the noble Lord will agree that the Government have been deeply committed to making sure that those who should pay tax do pay tax. We have invested more in HMRC to make sure that those who should pay tax in this country do pay tax in this country.
Lord Stoddart of Swindon
Should the Government not tell the European Union that they are in favour of a much looser arrangement between the countries of the European Union, and less centralisation? While the Prime Minister is over there, perhaps he could also have a word with the Prime Minister of Poland, who seems to imagine that the average cost of the EU budget paid by British people is only £35 a year, whereas it is actually £156.
Baroness Warsi
I will certainly feed that fact back in. I agree with the noble Lord about less centralisation. Of course we believe in power being nearest to those who are affected by those decisions. However, I think the noble Lord would agree with me that in relation to the European Union, we want a trade area but it is also important to be part of the group that makes the rules in relation to that trade area.
Lord Foulkes of Cumnock
My Lords, will the Minister take the opportunity to ask the Prime Minister to raise at the European Council the way in which three private companies—the credit rating agencies based in the United States—have such an undue and malign influence over the economy not just of the United Kingdom but the whole of Europe? I hope she will take some advice from her Treasury colleague on this. It is about time that we took collective action so that we in Europe are not dominated by these American private companies.
Baroness Warsi
The EU is engaged in ongoing discussions on work in relation to better regulation of those very institutions.
British Transport Police
(12 years ago)
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Lord Faulkner of Worcester
To ask Her Majesty’s Government whether they will recognise the British Transport Police for the purposes of the Firearms Act 1968.
Earl Attlee
My Lords, the Government recognise the need to amend the Firearms Act 1968 to address the anomalous position of the BTP in relation to firearms licensing. We are continuing to seek a suitable legislative vehicle to make the necessary amendment to the Firearms Act 1968. We hope that it will be possible to do so during the third Session Bill programme.
Lord Faulkner of Worcester
My Lords, there is widespread admiration in your Lordships’ House and elsewhere for the work that the British Transport Police do, particularly in tackling metal theft, as we heard in the debate on Friday. In May last year, the Secretary of State for Transport announced that the British Transport Police could arm its officers. However, for the reason the Minister mentioned—because the definition of “police” in the Police Act 1996 does not include the BTP—its officers are not regarded as Crown servants under the Firearms Act 1968. Is he aware that, as a result, BTP officers do not enjoy the legal protection afforded to other police officers and that they have to apply for firearms certificates individually as if they were members of the public? The Minister referred to legislative opportunities—
Lord Faulkner of Worcester
I will finish very quickly. The Minister referred to legislative opportunities. Will he look at a late amendment to the Crime and Courts Bill or the introduction of a statutory instrument under the Railways and Transport Safety Act?
Earl Attlee
My Lords, the noble Lord is absolutely right in his analysis of the problem. Unfortunately, we cannot make any suitable amendment to current legislation going through your Lordships’ House. I am advised that other routes, such as a regulatory reform order, are not suitable, so we will have to wait for a suitable slot in the primary legislation. However, the noble Lord’s point about legal uncertainties is extremely important.
Lord Berkeley
My Lords, how many BTP officers carry firearms? As my noble friend said, it seems odd that they do not have the same legal position as other police officers around the country who are able to carry firearms. What is the legal position of BTP officers who carry firearms? Are they at risk on a personal level in a way that the other police officers are not?
Earl Attlee
My Lords, in answer to the noble Lord’s first question, we are talking about only 53 police officers, so the bureaucracy load is manageable, although extremely inconvenient. The weakness in the legislation on the protection of officers who are involved in an incident, alluded to by the noble Lord, Lord Faulkner of Worcester, is an extremely important point.
Lord West of Spithead
My Lords, does the Minister agree that although metal theft is a heinous crime and has caused damage to war memorials and danger to hospitals and railway lines, shooting those involved might be a little over the top?
Earl Attlee
My Lords, in the case of a war memorial, I am sure that the noble Lord and I would have some doubt over whether that would be over the top. Police officers have a range of options. It is important to note that British Transport Police armed officers have not only a firearm but a Taser and other weapons, such as pepper sprays, so they do not need to resort to the firearm immediately.
Immigration: Home Office Meetings
(12 years ago)
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Baroness Smith of Basildon
To ask Her Majesty’s Government when Home Office Ministers last met the Chief Inspector of Borders and Immigration; and how often such meetings are held.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)
My Lords, Home Office Ministers have regular meetings with officials and others as part of the process of policy development and delivery. As was the case under previous Administrations, it is not the Government’s practice to provide details of all such meetings.
Baroness Smith of Basildon
My Lords, I am none the wiser after that Answer than I was before I asked the Question. There was a serious reason for asking, because it is clear that there are serious problems in the UK Border Agency. Even the recent fall in net migration is due to British citizens leaving the country and the fall in student numbers. Time and again, the chief inspector has found problems but, despite commitments to his recommendations to make the system more efficient and fairer, it just does not happen. We now even have the Mayor of London accusing the Government of turning a blind eye to long-term illegal immigrants.
Is part of the problem cuts that have led to 5,000 fewer UK Border Agency staff? Can the Minister give a commitment to your Lordships’ House today that the Government will act, not just promise to act, on the chief inspector’s reports?
Lord Taylor of Holbeach
The chief inspector has published two reports recently, and I thank John Vine, the chief inspector, for them. He will be appearing before the Home Affairs Select Committee tomorrow. I totally accept the view that the UK Border Agency has not performed as strongly as this House would expect, but it is improving, and that is the right direction of travel. The question we have to ask ourselves is: for how long does this go back? I fear that it goes back to 2006, when there was a huge backlog of cases, and that has taken an awful lot of clearing up. The current situation is greatly improved.
Lord Naseby
Does not the number of bogus students mentioned in one of the reports indicate how right it was that Her Majesty’s Government, first, allowed the London Metropolitan University students who were bogus to be dealt with; and, secondly, decided to keep student numbers quite separate from other immigration statistics? Can my noble friend assure us that a firm notice has gone out to all the many agencies scattered around the world looking to bring students to the UK, and through our embassies and consulates, that good, genuine students will always be welcome in United Kingdom but that bogus ones will be sent home?
Lord Taylor of Holbeach
That is exactly the message that the Government are sending. In fact, as has been shown in the most recent reports, university numbers are holding up very well. UCAS acceptances of international students are up by 4%, showing that our policies are having the right effect. There was a 1% increase in visa applications for students attending universities. The university sector now accounts for three-quarters of sponsored visa applications, up from about half in the equivalent period last year.
Lord Dholakia
My Lords, at my noble friend’s next meeting with the Chief Inspector of Borders and Immigration, will he insist on records being kept of cases of domestic violence where there is evidence that judicial decisions on permanent settlement have been overridden by the Executive?
Lord Taylor of Holbeach
I have recently written to the noble Lord because he asked a similar question last week on this issue. Obviously, it is important that we have a regime that is capable of ensuring that people who come to this country are fit and proper persons to be here.
Lord Hannay of Chiswick
My Lords, does the Minister agree that the considerable number of students who were threatened with expulsion following the action at London Metropolitan University were not bogus at all? That presumably was why the Government forked out £2 million to find them new places. We should not shelter behind figures that do not really prove what the Minister tries to make them prove. This sector is enormously competitive. We should be increasing it by much more than the figures he gave and would be so without the chilling effect of the Government’s Minister for immigration going out and beating his chest and saying how jolly well he had done to keep all those students out.
Lord Taylor of Holbeach
The noble Lord is perfectly right. The university sector is very important, as is the contribution made by international students to this country and the economy. I reiterate to noble Lords that there is no limit to the number of students who can come to the UK. Put simply, if they can speak basic English and have sufficient funds and the necessary qualifications, they can come.
Baroness Brinton
Does the Minister agree that it is extremely unfair to class the international students at London Metropolitan University as bogus simply because of the mistakes made by the university? The vast majority of errors were found to be in the registering of students and in the systems to monitor them. It is appalling that we should even contemplate saying that the majority of international students there are bogus. Does the Minister agree?
Lord Taylor of Holbeach
I do not think that I used that word. In fact, I agree with the noble Lord, Lord Hannay. The Government made funds available to ensure that students could continue their studies because we understand that the problem lay with the university, not with the students there.
Lord Morgan
Is the Minister aware of the appalling damage done to graduate studies at our universities, both academically and financially? The figures that we saw last week indicate very clearly that tens of thousands of graduate students have not come to this country, not because they are bogus but because of other qualifications—including financial—imposed by the Border Agency, whose policies have proven to be crass and philistine.
Lord Taylor of Holbeach
I do not agree with that description. The arrangements for graduate students are that they can come, but they have to show that they have an appointment that is capable of earning £20,000 a year. That is a reasonable expectation that we should have for people coming in as graduate students.
Lord Avebury
My Lords, who is accountable for the false statement made by the UKBA last spring that the legacy cases had all been resolved when it now emerges that there were still 147,000 in the queue?
Lord Taylor of Holbeach
As we know, there is a huge number of legacy cases. This was referred to in the Question we tackled last week. It is a matter of concern that these legacy cases were not cleared up promptly; they are being cleared up now and are being tackled so that those students who have been discovered to be here improperly are being sought and obliged to leave.
Lord Brooke of Alverthorpe
Do the legacy cases not cover other people as well as students? Is the fundamental problem not the one which the Minister spoke about last week: the inadequacy of our ability to search and locate these individuals to try to get them out of the country? Is it not true that the department is currently cutting the number of staff it engages by around 5,000, yet claims that it is going to be able to perform better? Will the Minister please tell the House how it will do that?
Lord Taylor of Holbeach
Identification of people who have overstayed is a clear technical problem which requires the application of all the resources of the UKBA. The UKBA is confident that it can achieve this and has given assurances that it will do so.
Lord Forsyth of Drumlean
My Lords, could the Minister possibly answer the question of my noble friend Lord Avebury when he asked who is being held accountable for the fact that we were misled about these legacy cases?
Lord Taylor of Holbeach
There have been a couple of incidences where staff of the UKBA have indeed apologised to the Home Affairs Select Committee for mistakes that they have made. That was done orally last week and, indeed, before then in writing by the head of the UKBA.
Baroness Tonge
My Lords, is the Minister aware that in this country the age of marriage is 16 if that marriage takes place with parental consent? Is he also aware that this is used for some girls to be taken out of the country against their will to be married so that they can then bring their husbands back here? What is his department doing to stop that practice, and when will we bring our age of marriage up to 18 in line with other countries?
Lord Taylor of Holbeach
This House has frequently debated forced marriages. The Government are bringing forward legislation to criminalise them.
The Countess of Mar
My Lords, for 21 years I was a lay member of the Immigration Tribunal until I resigned in 2007 because I thought my job was not worth while. I have heard noble Lords at that Dispatch Box reiterating over and again what the Minister has iterated today. What guarantees are there this time that the Government’s measures will work?
Lord Taylor of Holbeach
The Government’s resolution to deal with this problem is the one thing that I can assure the noble Countess of.
Lord Winston
My Lords, is the Minister aware that at a recent Select Committee when the UK Border Agency was giving evidence, the members of that agency were completely incapable of giving accurate statistics on students, particularly regarding the courses and universities that they were attending? Do we not think that, rather than a ball-park figure, it would be appropriate to know exactly the quality of the students and which universities they are going to?
Lord Taylor of Holbeach
Indeed. I am sure that that information is available. The question is how it is collated.
Baroness Sherlock
My Lords, the Minister told the House that the Government’s resolution is all that they need to solve the problem. Would a little humility not be in order? Maybe if the Minister spent some time looking at why previous solutions have failed, there might be more chance that the Government will succeed. Does he agree with me?
Lord Taylor of Holbeach
I am always prepared to learn. Indeed, I have asked for a meeting with John Vine as a result of the report that I received the other day.
Medical Innovation Bill [HL]
Mental Health (Discrimination) (No. 2) Bill
Prisons (Property) Bill
Marine Navigation (No. 2) Bill
Presumption of Death Bill
Mobile Homes Bill
Disabled People’s Right to Control (Pilot Scheme) (England) (Amendment) Regulations 2012
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stowell of Beeston
That the draft Regulations laid before the House on 24 October be approved.
Relevant documents: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November
Electoral Registration Data Schemes (No. 2) Order 2012
(12 years ago)
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Lord Wallace of Saltaire
That the draft Orders and Regulations laid before the House on 30 October be approved.
Relevant documents: 10th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 November
Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2012
Baroness Verma
That the draft Order and Regulations laid before the House on 30 October be approved.
Relevant documents:10th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 November
Canterbury City Council Bill
Lord Bilston
My Lords, I should first explain the three minor amendments to this Bill, which I shall move formally at a later point. All I can say about these amendments is that they are in the nature of tidying up. One of them alters an incorrect reference to the “Kent Valley Police Force”, which appears to be something of a hybrid of Kent and Thames Valley, no doubt caused by the fact that Reading Borough Council is promoting one of the other Bills that we are discussing this afternoon.
I begin by paying tribute to those noble Lords who considered the Bill in Select Committee just over a year ago. The noble Baroness, Lady Knight of Collingtree, chaired the committee most ably, and was supported by the noble Lord, Lord Blair of Boughton, the noble Viscount, Lord Eccles, my noble friend Lord Glasman and the noble Lord, Lord Strasburger. All the members of the committee took a very strong interest in the Bills, and that is evidenced not only by their attendance here today but by their detailed special report which I, and I am sure other noble Lords, have read with interest.
Over three days the committee heard evidence from all four councils, and from pedlars who had presented petitions against the Bills. I am told that the committee was not only fair and even-handed with all the parties, as we would expect, but took a truly active and interested role in the proceedings, questioning the witnesses forensically in some detail. The committee decided to amend the Bills substantially, and highlighted a number of points in its special report, which I will try to summarise now.
First, there was a concern that the Bills were disproportionate, in the way that they restricted people’s ability to exercise their rights legally to trade as pedlars. The committee was particularly concerned to protect the rights of those pedlars—genuine pedlars, as they have become known—who play by the rules, who move around when trading and who do not use oversized stores to display their wares. These mirrored concerns raised by the noble Lord, Lord Lucas, at Second Reading, and the committee addressed them by amending the Bills in the way that it did. The Bills now contain provisions that restrict the size of stall that can be used by pedlars, but they are otherwise able to continue to trade as they did before.
Secondly, the committee was concerned about the use of piecemeal, incremental modification of national law by private legislation. As I mentioned at Second Reading, pre-empting points that were made by the noble Lord, Lord Lucas, the Bill’s promoters have real sympathy with his concern. They would have preferred not to promote these Bills to deal with these local issues, but the problems that they were encountering meant that they felt that they had to, particularly as there was, at the time that the Bills were deposited, no real appetite on the part of the Government to address the issues nationally. Things have changed on that score, and in a somewhat timely manner. Only last Friday, the Department for Business, Innovation and Skills published a consultation paper on regulations to amend street trading legislation on a national basis. I will return to that topic a little later.
The committee also questioned the motivation of the councils in promoting the Bills. It accepted the councils’ primary concern, about the need to ensure safe passage on the highway and to prevent obstruction, but was unconvinced by the council’s evidence on the need to protect the urban environment. Again, the committee’s views chimed with those of the noble Lord, Lord Lucas, at Second Reading, when he expressed his views about some of our streets lacking character.
The committee was also concerned about what it saw as an attempt to protect licensed street traders from unfair competition from pedlars. The councils presented evidence to show that licensed street traders sometimes paid hundreds of pounds annually for their licences, compared to the £12.50 paid by pedlars. They also demonstrated that, in many cases, traders who were trading under the authority of a pedlar’s certificate were often doing so from stalls that gave the impression of being permanent. I have some sympathy for those street traders and, in that respect, I am glad to say that, as I mentioned earlier, the committee amended the Bill in such a way that the use of larger stalls will be subject to control.
The next point that the committee dealt with was enforcement. All four Bills would have allowed the councils to seize items from unlawful street traders. The committee thought that this was a step too far and removed the seizure provisions. The councils were naturally disappointed, but were pleased that the committee was content to leave in the fixed-penalty provisions.
Finally, the committee was concerned to ensure that the new restrictions on pedlars did not operate throughout the whole area of each council. It is fair to say that a happy medium was reached in that regard, with the committee deciding that the new restrictions on the size of pedlars’ stalls should apply only in those parts of the authorities’ areas which are designated by councils on the basis that the controls will be necessary to ensure road safety or prevent obstruction of the highway.
Having mentioned the committee and its decisions, I turn briefly to the Government’s position. The Department for Business, Innovation and Skills has, while the Bills have been progressing through Parliament, been developing its own policy on street trading, particularly in the light of the European services directive which, since the introduction of the Bills, has been recognised as applying to the retail sale of goods and, therefore, to street trading. The department submitted the report to the Select Committee and appeared before it, expressing some concerns about the compatibility of the Bills, as they then were, with the directive. During proceedings, the councils drafted amendments which satisfied the department in that regard. As I have mentioned, the committee went somewhat further with its amendments, noting importantly that it was satisfied that the Bills before us now are compatible with the directive.
The Government have also recognised the need to deal on a national basis with the issue of compatibility. After a long wait, they published a consultation and a draft regulation just 10 days ago. It would not be appropriate to dwell on that consultation for too long today, but there is some similarity between what the Government are proposing on a national basis as regards the equipment that a pedlar may trade with and what the Bills now provide. The councils will need to examine the consultation document carefully and will no doubt provide detailed responses in February when the consultation closes. What seems clear, and will no doubt come as something of a relief to your Lordships, is that if the Government make their proposed regulations there are very likely to be no more local pedlars’ Bills. We should all give three cheers for that; we have been waiting for this consultation for a long time.
I conclude by saying that, after their long gestation in Parliament, these four Bills are now in a form that I hope your Lordships will find acceptable. The councils will be able to exert much needed control over those who abuse the pedlars legislation and, as a result of the committee’s amendments to the Bills, those who are now commonly referred to as genuine pedlars will be afforded protection. I therefore hope that your Lordships will allow the Bills to pass today and agree to the amendments that I shall propose to the Canterbury City Council Bill. I beg to move.
Baroness Knight of Collingtree
My Lords, we are all indebted to the masterly summary from my old friend and parliamentary neighbour for some years, the noble Lord, Lord Bilston. We had another guardian angel, and that is the noble Lord, Lord Lucas; I am delighted that we shall hear from him in a little while. When one is told one is to chair a Select Committee set up to examine a case put forward by quadruplets—three cities and a borough—it sounds like rather a dull old chore. That is wrong—in fact, it turned out to be a fascinating, educative, challenging and rewarding experience and I would not have missed it for the world.
I will put a slightly different complexion on what has been said by the noble Lord, Lord Bilston, from the heart of the Select Committee, as it were. I would like to make it clear to the House that the team of colleagues I worked with could not possibly have been better. From all political corners of this House, we worked in happy unison. I begin with my heartfelt thanks to every one of them for their expertise, wisdom, patience, judgment and, may I also say, their friendship.
Basically, as the noble Lord, Lord Bilston, has said, these local authority Bills were seeking the total eradication of pedlars from their streets. The supporting counsel said that pedlars caused unacceptable congestion. The members of the committee asked for evidence and they produced photographs of their streets, which of course were very crowded. We scrutinised them carefully and asked questions. We concluded that nothing we had been shown, or told, proved the case that the local authorities were making.
We reached the conclusion, as the noble Lord, Lord Bilston, has touched on, that the local authorities were at least partly motivated by a desire to protect licensed street traders who pay a lot more for their licences than the pedlars pay for their permits. We did not accept the claim that pedlars should be banished because the quality of their goods might be inferior to that being sold in the shops or on the fixed stalls. We felt rather outraged by this; it has never been the business of local councils to set up as experts on what is unfair or fair trading, as regards the quality of the goods. So that claim went by the wayside.
The representatives of the councils then assured us that the public were much against pedlars, that they could not stand having pedlars in their streets and that we really should listen to what the public said. The committee asked for evidence on that issue. They could not produce a single letter or newspaper campaign in support of their contention. However, the pedlars gave us acceptable and valid reasons to say that there was good evidence of public approval.
The members also reflected that pedlars had been on the streets of England prior to Shakespeare. Even Chaucer mentioned pedlars and we saw no reason to go to war with them or to change history. However, as has been said, we felt that some changes should be made in the way in which pedlars operate. Some of the pictures submitted by the promoters showed that the small trolleys that pedlars are allowed to use to carry and display their wares were sometimes very much extended. The base was small with four little wheels, rather like those that we all wheel about when we come to London for the week. But enormous adjuncts, including poles, were put on and where the trolley started quite small, it finished up yards wide with, for example, pashminas and scarves hung all along it. We felt that those were not acceptable and could cause obstruction.
Therefore, the committee suggested amendments. We have heard a little about the changes but I have the exact measurements. The trolley used to carry the goods must not be more than 0.75 metres in width; 0.5 metres in depth; and 1.25 metres in height. The overall size of the trolley also is constrained. We gratefully accept the small amendments, which were necessary, on different subjects, about which we have heard from the noble Lord, Lord Bilston. Clearly, great care has been exercised on the whole of these applications by the councils.
However, we had several other concerns. So great was the interest of the members of the committee that one brought a pedlar’s base to the Committee Room. We had it on the desk where we gazed at it, walked around it and figured out how it would look when it was dressed. We really concerned ourselves with how things were to work.
I am delighted to receive the news that other changes are to be made, because we felt that the four Bills presented would undoubtedly have given councils a disproportionate power in relation to suspected street trading offences. The pedlars were very worried about that, particularly the suggestion that almost at the drop of a hat all their goods could be confiscated for such a period of time that many would be useless when that time was up—they would have gone past their sell-by date by a long way. We have reduced these powers to the issuing of fixed penalty notices and we have made it a requirement that councils train all officials who exercise the remaining powers. We decided it would be best to put in place a statutory duty on councils, rather than just relying on an undertaking given under private Bill procedures.
The most important change of all is the piecemeal modification of national law by scores of individual little bits of private legislation that has gone on until now, but is now—thank heaven—to be changed. It really is extremely unsatisfactory. There are people who very much support the right of local authorities to put forward their own Bills—and long may that continue—but here we have a silly situation where the same objective has so far been put forward by 40 local authorities through their own legislation. There are some 300 others waiting around the corner to see when they are going to have their chance. These Bills would have come to this House, causing more time-wasting and money-wasting for the local councils, who have to employ counsels to put forward their case.
We heard a little about the arrests that this has led to, which are quite wrong and totally unfair. If a pedlar gets his certificate to trade, say, in Newcastle, that gives him the right to trade just as legally in Brighton, Bodmin, Birmingham or anywhere else; he can use the one certificate. However, a certificate in one place gives powers that are quite different from those in another place which has brought in its own rules. This is very confusing, and I am glad that we now see a light at the end of that tunnel and that this, too, will be altered. Incidentally, we heard evidence from a woman pedlar who had received her certificate quite legally, but who was arrested by the police in a town other than the one which had granted the licence and taken her money for it. She had no idea that she was breaking the law. That really must stop, and I am delighted that it will not be long before we see the change that we have all asked for.
It may be worth throwing in another point. We understand that there have been at least four other occasions when this House has held a Select Committee on very similar Bills. None of those committees came to the same conclusion that we did. They thought that the local authorities were right. That will have to be sorted out: they came to totally different conclusions, and those conclusions were wrong. Suffice to say that all the Bills were after the same thing: getting rid of pedlars.
Only a few weeks ago the Government published a consultation paper on repealing the Pedlars Act 1871 and the Pedlars Act 1881. The paper appeared after our committee had sat, but during our deliberations we warned that repealing the requirement on pedlars to obtain a certificate to trade would take away the exemption for certified pedlars from other street-trading restrictions. To do this without putting in its place a clear national exemption allowing pedlars to exercise their right to trade would be wholly unacceptable.
For more years than anyone wants to count, Peers have paid their tributes and uttered their thanks to the magnificent staff who serve us all in the Private Bill Office and the Public Bill Office. All of us on the committee wish to do so unreservedly. Nothing was too much trouble for the staff who worked with us. The bounty and quality of their help was absolutely endless. I will mention specifically the wonderful Kate Lawrence, whose expertise as clerk to the committee we relied on completely and endlessly, and Chris Bolton, who bears the impressive title Examiner of Private Acts. She, too, must be a very busy lady. Between them, these two ladies know absolutely everything and are a huge asset to the House.
Lord Blair of Boughton
My Lords, it gives me great pleasure to speak after the noble Baroness, Lady Knight, and to thank the one person whom she did not thank—namely, her. I am sure that I speak for all my colleagues on the committee when I say how marvellously she chaired it and how enjoyable the experience was.
I shall speak extremely briefly. Having heard from the noble Lord, Lord Bilston, and the noble Baroness, Lady Knight, I am not sure that there is much more to say. The crucial issue is that we cannot go on having private Bills on the same subject for the next 300 councils. The intellectual experience of trying to combine the provisions of 19th century legislation with the EU services directives of 2010 or 2012 should not be imposed on any other committee.
I urge the Government, when the consultation is over, to go back to the existing legislation and other councils. We are now in a position where the four councils whose Bills we examined will have a regime that is more restrictive of them than is the case, for instance, in London, which is much harsher towards pedlars.
Our real triumph was to look at the trolley, decide what size it was, look at the photographs of ones that looked like small cars being pushed round the streets of Leeds and decide that enough was enough.
Finally, in a period when city centres are under such pressure and there are too many closed shops, why would we wish to close down the seed corn of the pedlars who bring some brightness to those streets? I commend the Bills.
Viscount Eccles
My Lords, I, too, will say a great thank you to my noble friend Lady Knight. The witnesses who came before the committee were very varied. It was not particularly easy to give them the opportunity to say what they wanted to say. Some of the representatives and the pedlars were quite overawed by the Pugin experience. Of course, the evidence coming from the local authorities was very different. They were very well schooled, they knew what they were going to say, and they also knew what they were not going to say. Our chairman did a brilliant job of bringing out the evidence that came out during our inquiry. Certainly it was because of that that the members of the committee became so intrigued by and involved in what was going on in front of us.
I want to talk briefly about fixed penalties. I think that in principle fixed penalties are undesirable. They may be necessary but, when they are, they are a necessary evil. The problem is that many people acquire the power to impose fixed penalties. We try to offset that by training and I hope that that works, but I think your Lordships will all recognise that power corrupts. One can go on to absolute power but power does corrupt—there is absolutely no doubt about that. In some fixed penalty regimes, there are people who take advantage of the power that they have and they impose the regime in a very unfriendly way. The necessity for these regimes may arise from the courts being overloaded, but one has to ask why they are overloaded. The conclusion is that Parliament must have some responsibility for that.
In the exercise of these powers, which are in some of the Private Members’ Bills that have become Acts, I think that my noble friend is entirely right that there is a culture of chasing pedlars about. I am not sure about removing them altogether—it is more fun to chase people who are still there—but they do it to make pedlars’ lives more difficult. I am very grateful that in the Bill the Secretary of State has the power to look at the penalties and, if necessary, to restrict them.
As for the new regime which we have been told about, I hope that it is a liberal one—that is, liberal with a small “l”. I have always thought, and continue to think, that one of the great advantages of democracy is an acceptance of difference and diversity, and not a wish to make everybody look and behave the same while living by a great welter of rules. I very much hope that the 4,000 pedlars are not reduced in number under the new regime but are able to trade and to live their lives in the way that they want.
Lord Glasman
My Lords, I also pay tribute to the committee, and particularly to the noble Baroness, Lady Knight, who gave me incredible instruction on how to chair. It was a genuinely excellent experience. There are two things I should like to share with the House. First, the balance between kindness and severity was very well judged. The pedlars and their representatives were occasionally speechless and sometimes cried in the committee. They were scared and I thought that the noble Baroness dealt with them beautifully. Towards the legal counsel, the proposers and the pedlars’ legal representative, who tended to go on a little, I thought that she showed the appropriate degree of, let us say, sternness. Secondly, I should like to share with the House what the noble Baroness said to me. When I asked her a question, she said, “Being in committee is as much about the work you do between the meetings as the work you do in them”. That was taken on board. It was a very good experience indeed and I think we came to the right judgments.
There are two concerns that I should like to share with the House. First, I asked the representative from Leeds council whether she could name one world-class institution that came out of Leeds. It was obviously not the football club. She could not quite put her finger on it. I tried to prod her, telling her that Marks & Spencer was the institution and that Simon Marks started off as a pedlar. The idea that pedlars—poor people coming to this country, moving around and showing some enterprise—would be stamped on here was astonishing to me. I completely echo what the noble Viscount, Lord Eccles, said about the desire to homogenise the shopping experience and shopping centres. There was quite a whiff of local enforcement going on against the pedlars that came through from the witnesses, and I found that quite unpleasant and disturbing.
My second concern is a constitutional one. “Pedlar” is from the Latin for feet—as we said in the committee—as in pedalo. It is true that pedlars were pushing their bags rather than walking them in some cases, due the size of the things that they had, and we originally based it on Simon Marks’ bag, which we looked at in the Marks & Spencer museum. That was an appropriate size for a pedlar’s bag, we thought. There has to be enforcement in bringing that down to size and getting it correct.
One finds references to pedlars even before Chaucer, going back to accounts from Roman times. There have been pedlars taking their wares from town to town and from city to city for as long as there have been records in the country, so it is a status that has existed from time immemorial. There were references to pedlars before 1191. It is not customary practice; it is practice from time immemorial. It was recognised in the 1871 Act; it was not created in the 1871 Act—that is a very important distinction. In other words, it is not clear that the status of the pedlar can be abolished. It seems to me that it is an ancient status in the realm and that there have been very ill thought out and incoherent attempts to limit that freedom of movement, as was manifest in the Bills that came before.
I looked at the BIS consultation document. BIS’s legal evidence seemed to suggest a lack of historical awareness about pedlars. It was taking EU directives and applying them in a very flat and straightforward way. I asked BIS how it could account for the fact that Germany has enormous differences in craft status that are still consistent with the EU. Its reply was, “We take a different view of enforcement”. BIS is taking a very straightforward, unhistorical view that pedlars will interfere with new services. We have to resist that, refute it and absolutely assert that pedlars have been part of our kingdom and part of the realm for many thousands of years. They play a role in taking things from town to town and in bringing people together in many ways, disrupting stable, corporate markets. We really should defend them. I commend the report and I commend the committee.
Lord Lucas
My Lords, I am absolutely delighted to be able to praise my noble friend’s committee. It is an extraordinary example of the Lords at its very best and I cheer to the echo what it says in its report. It is wonderful to see the Lords standing up for the unregarded, which is something which, when we pay attention, we do very well. I echo my noble friend’s praise for Chris Bolton, who is one of the great anchors of this House. I am also going to praise the European Union, which I do not always do—it seems to me that it has got the services directive right—and I am going to praise my noble friend on the Front Bench in his role with his department, because the consultation that it has produced is a very fine example of a consultation. It is clear about what it sets out to do; it is clear about the reasons that it is adducing for that; and it is open as regards the responses that it is looking for. It clearly anticipates that people will disagree and it encourages disagreement. It is a very fine piece of work and I look forward to the legislation if it carries on in that spirit. It would have been nice, too, to be able to praise the Local Government Association, but its reaction to the consultation was immediate, negative and silly.
As the noble Lord, Lord Sugar, often reminds us, we are going through tough economic times. It looks as though those will be with us for some time to come. We really have to make it easy for people to start out in business, whether they intend to found Marks & Spencer or whether they intend just to make a living. If that is some minor inconvenience to us, we jolly well have to put up with it. The high streets are difficult places to break into now. It would be very difficult for the noble Lord, Lord Sugar, to do what he did in founding a business because so many businesses are now chains. How can a little guy starting out get a chain store to take up his product? It is very difficult. A lot of the empty premises in high streets are not for rent except at very high figures because the landlords are desperate to keep up the fiction that they still have a high-value property on their hands. That makes it very difficult for people who are just starting out to obtain space on the high street. The attitude shown by the consultation and by my noble friend’s committee seems to me entirely praiseworthy.
When one walks around the streets of Westminster, one sees that Westminster Council is very much in favour of sterility when it comes to its streetscape. I feel ashamed because there is so much money in Westminster and so many opportunities to start businesses. I hope that the result of the determination of my noble friend on the Front Bench’s department to open up the legislation on street trading and pedlary will be that we start to see that, as a community in Westminster, we give many more people the chance to start out in life.
Lord Strasburger
My Lords, I, too, was a member of the Select Committee that considered these Bills and I will start by thanking the noble Baroness, Lady Knight, who chaired the Select Committee with great patience and skill.
Most pedlars are itinerant and often go where the business takes them, selling hats, scarves, other items of clothing, key rings and balloons. They are true entrepreneurs, adapting their products and location to what their customers want and where the market is. They add colour and diversity to our increasingly uniform shopping streets. The fact that they can make a living as pedlars suggests that they provide a useful service and, so far as the committee could tell, they appear to do no one any harm at all.
The Bills as drafted sought to end the pedlars’ exemption from street trading laws so that they would not be able to operate on the street in areas designated by the four local authorities that are pushing the Bills. The Bills as presented to the Select Committee also introduced fixed penalties and a power for officials to seize pedlars’ goods. The committee spent a lot of time trying to discover why the four local authorities wanted these powers. We were told that pedlars sell sub-standard goods, but no evidence whatever was offered to prove this allegation, and we have no reason to believe that their goods are any better or worse than those sold by licensed street traders. It was alleged that pedlars create a situation that attracts pickpockets, but again, no evidence was offered. It was also said that pedlars cause obstruction of the highway. Little evidence for this allegation was offered apart from a small number of cases where wide and expanding trolleys had been used.
The witnesses who spoke for the local authorities were somewhat unconvincing. We heard evidence from pedlars that many council officers and the police are ignorant about the 1871 Act, and we also heard much evidence of a bullying culture on the part of council officials towards honest and hard-working pedlars. I concluded that the real reason why these councils wish to exempt themselves from the 1871 Act is that they are control freaks who resent the freedom that pedlars enjoy. I also suspect that there is pressure from licensed street traders, who compete with the few pedlars in their area and who pay considerably more than a pedlar’s licence for their trading pitch. However, for the extra fees that licensed street traders pay, they get the benefit of a fixed pitch where they can trade all day without having to move on. If they think that pedlars get an unfair advantage, there is nothing to stop them applying for a pedlar’s licence themselves.
The committee made several important amendments to the Bills. Pedlars will still be able to operate on the street in the designated areas provided that their trolleys do not obstruct the highway. The amendments set maximum dimensions for the trolleys to bring clarity to this issue. The amendments reduce the number of reasons that a local authority can use to designate an area. We deleted the seizure powers, which we thought could easily have been abused by council officials. We added a requirement for better training of council officials on trading laws and a requirement for local authorities to make their rules and designated areas clear on their websites. We also constrained the value of fixed penalties. Therefore, we have turned what I believe to have been four bad Bills into four not so bad Bills. We have removed or neutered their most repressive aspects.
I have to say that, if it had been down to me alone, I would have made only one amendment to each Bill, and I would have done that with the help of the nearest shredder. But in deference to my more experienced colleagues on the committee, I have agreed to a set of amendments that reduce the detrimental impact of these Bills, and it is the amended Bill that is before the House today.
Lord Gardiner of Kimble
My Lords, perhaps I may acknowledge at the outset the considerable efforts of the noble Lord, Lord Bilston, and pay tribute to his determination to see these Bills make progress. The noble Lord’s patience is remarkable. I should also say that your Lordships’ House is indebted to the committee for its extremely thorough work, and it is very clear that my noble friend Lady Knight of Collingtree has been both kind and firm. The result of the committee’s work is that the Bills are in better shape.
My understanding is that the Government do not normally seek to intervene in private legislation, but on this occasion they have done so in order to take full account of the impact of the European services directive. As many of your Lordships will know, the services directive aims to make it easier for services businesses of all types, including retailers of goods such as street traders and pedlars, to set up and trade anywhere in the European Union. Restrictions on trading must be the minimum necessary and can be allowed only where necessary to defend overarching public interest objectives such as public safety and public order. This means that licensing and registration systems must be justifiable on the evidence and effective in securing the public interest. Blanket bans will not be allowed if there are less restrictive ways of achieving the desired objective and there must be no discrimination in favour of UK-based or local traders.
The Government are currently consulting on changes to the national legislation on street trading and pedlary in order to take account of the directive. The same constraints apply to local legislation. I should say at this stage that this is not a case of the UK being obliged to introduce onerous new regulations against its will. The services directive is fundamentally a pro-enterprise measure designed to build the single market and successive Governments have supported this kind of deregulation.
In October 2011, during the Committee stage of these Bills in your Lordships’ House, the Government raised their concerns about the compatibility of the Bills with the services directive, in particular Clauses 4 and 5 of the Bills. As a result of the concerns raised both by the committee and the Government, Clauses 4 of the Bills were totally removed and Clauses 5 were adequately amended. As the Government’s concerns have been addressed, the Government have no objection to the further progression of the Bills through this House.
If your Lordships will permit, I would like to say a few words about the Government’s further plans in this area, and I am reassured that noble Lords have already welcomed much of what has already been said in this regard. As has been mentioned, the Government’s consultation on draft regulations to amend the national street trading regime and repeal the UK-wide Pedlars Acts of 1871 and 1881 was published on 23 November and will run until 15 February next year. On conclusion of the consultation period, the Government will fully consider the views of the respondents before a final set of draft regulations is laid in Parliament. The Government are open to amending local legislation through these regulations at the same time, if the relevant local authorities so wish. Referring to the point made by the noble Lord, Lord Blair, the Government have asked in the consultation that local authorities ensure that they screen their legislation. If they identify provisions which require amendment, they can use the Government’s regulations to make the changes. I will also refer to the point made in different ways by the noble Lord, Lord Glasman, and by my noble friends Lord Strasburger and Lord Lucas, about the historic—indeed ancient—role of pedlars. In my view as a rural man, this relates to the analogy of acorns growing into oaks of commerce. My noble friend Lord Lucas referred to founding businesses and we must surely encourage this.
The Government will watch carefully to see if the new legislation creates particular problems for local authorities and if they emerge, the Government are open to considering further changes to national legislation, if appropriate. However, on this occasion I think the balance has been struck correctly and I reiterate the Government’s continued thanks to the noble Lord, Lord Bilston, and to the committee for their work in getting this matter right.
Lord Bilston
My Lords, I sense that the House wishes my reply to be brief. I can be brief, in the sense that a great deal of the meat of this important question has been dealt with by the members of the committee. Every member of the committee made the point that I made at the outset: that it is due to the able chairmanship of the noble Baroness, Lady Knight, and the integrity and wisdom of the committee in bringing forward the points and amendments that it made, that a fine and fair balance has been struck between the needs of pedlars and those of legitimate market traders and local authorities. I entirely accept the stricture of the noble Lord, Lord Blair, that there is a long way to go. However, it is not for the want of people like myself urging previous Governments to take hold of this issue and deal with it, as we did at Second Reading. We now understand consultation will take place in order to have a national solution which will be dealt with in a national way, rather than with these private Bills.
As we have heard, anomalies will now arise, because Bills have been passed giving greater powers to local authorities in this matter than are being given in the four Bills we are debating today. The way that these Bills have been dealt with creates anomalies and that is why we always wanted a proper national solution from the Government of the day. I hope this will be forthcoming. I again thank the noble Baroness, Lady Knight, and all the members of the committee for working in B-flat harmony to bring about this happy conclusion for the four local authorities for which we are moving these Bills and for the pedlars who will have a sense of fairness and justice awarded to them. I commend the Bill to the House and thank all noble Lords for their participation.
Amendments 1 to 3
Lord Bilston
Leeds City Council Bill
Nottingham City Council Bill
Reading Borough Council Bill
Draft Cumbria (Electoral Changes) Order 2012
Lord Liddle
That this House regrets that the draft Cumbria (Electoral Changes) Order 2012 has been produced with inadequate consultation with the County Council and other interested parties; without a simultaneous review of the district council ward boundaries with the consequence that the electorate will be confused as to their local representation; and with serious flaws in the process conducted by the Local Government Boundary Commission for England (LGBCE) that specifically contravene the requirements of the Local Democracy, Economic Development and Construction Act 2009 that the LGBCE base their recommendations on population forecasts for five years after the Order comes into force, given that the LGBCE admit they do not have the legally required information for 2017.
Lord Liddle
My Lords, I beg to move the Motion of Regret in my name on the Order Paper. I apologise to the House for having to raise this matter on the Floor, but it is an important one because the Local Government Boundary Commission for England has behaved, I am afraid, in what I consider to be a bureaucratic and insensitive way and has not obeyed its own rules. On all sides of the House, there is support for the principle that boundaries of constituencies, county divisions and borough wards should be set by a process that is independent of party politics and that those boundaries should be reviewed periodically to ensure broad equality of representation. However, the contention of this Motion of Regret, and my reason for moving it, is that there were very serious flaws in the way that the Local Government Boundary Commission for England acted in relation to the boundaries of Cumbria County Council.
There are two points about Cumbria that need to be stressed. First, you are dealing with a very sparsely populated county, with very stable communities with very strong local identities which need to be respected in any review of local boundaries. In my own home town, Carlisle, which particular part of it you were from—such as Denton Holme, where I was from, or Stanwix—defined what kind of person you were. These local identities are very important.
Secondly, and this is a more important point about the process, it is a part of the country where there is two-tier local government. Personally, I regret that and am in favour of a single-tier authority, but I know there is debate about that. If you have two tiers of local government, it is important that they marry together. The problem that we have with two-tier local government is that for most of the public, the districts are the focus of local representation and democratic voice, but it is the county council that has the money and the powers and provides most of the services. There is already confusion about who is responsible for what in this two-tier system and it greatly adds to the confusion if, in revising boundaries for the county council without at the same time revising boundaries for the district, you end up with different bases of representation.
This could have been done differently. The order we have before us also considers town council boundaries, and there is absolutely no reason why the district and the county could not have been considered together. Instead, what appears to have happened was a mechanical, computer-driven process of equalising the wards by drawing lines on maps—which, incidentally, no local people can actually read when they try to print off those maps—but also a process that was without regard for local community ties.
Again, I cite an example from the city that I know best. Ever since my childhood there has been a ward on the west side of Carlisle round the area of the Brunton Park football ground, called St Aidans, and this has completely disappeared. The area where my parents lived for most of their lives, which is called Currock, is being split in two and half of it is being amalgamated with another part of town that is quite distinct from this area. These are bureaucrats who have applied computer principles; they are not people who have looked at local communities.
It also seems strange to introduce a wholly new set of boundaries within four or five months of the elections for the county council next May. People will discover that councillors who have represented them for decades no longer represent them. This simply adds confusion for confusion’s sake. This was a rushed job, in my view, and also did not comply with the legal requirements that the Boundary Commission is supposed to take into account when it revises boundaries.
There is a requirement to take into account population forecasts for five years for each of the wards. The Local Government Boundary Commission for England did not have that information available. It had information for the population forecasts for the districts only up to 2016, when the law requires it to have forecasts up to 2017. It used those population forecasts pro rata to each ward rather than looking at the circumstances on the ground in each ward. Of course, that information would have been available to the Boundary Commission if it had done the district boundaries at the same time because the district councils, as the planning authorities, hold the detailed information about what developments are likely in the coming period.
I am moving this Motion because I believe that the Boundary Commission has behaved with a lack of common sense. It has exceeded its authority and refused to admit its error. While it is right that the Boundary Commission should be independent in its judgments of boundaries, it cannot be independent of the statutes that govern its operation, nor can it be independent of scrutiny if it behaves in an arbitrary and bureaucratic way. I hope that this Motion will give the Boundary Commission an opportunity to think again. I beg to move.
Lord Campbell-Savours
My Lords, I only wish that the Government could have rejected the product of this review before bringing this before Parliament. The truth is that no one anywhere in the county of Cumbria asked for this review at district, town or county level. Indeed, I quote the Conservative leader of Cumbria County Council in his letter to the Commission on the 8 September 2010:
“I am concerned that the review of Cumbria County Council’s divisional boundaries is to take place in the next few weeks. That there is a need for such a review … I do not contest”.
He goes on to express his “considerable reservations” as to the limited nature of the review, the lack of a full consultation with the county council about the nature of any meaningful review that should take place.
There was one small problem in the county, one ward—Dalston and Cummersdale, near Carlisle—which has led to all this public money being spent, and it could have been resolved by some minor decisions being taken in the structure of county council wards. The county has provoked an anomalous position with overlapping district boundaries, which will probably provoke an equally unnecessary district boundary review, which no one wants and on which no one wants to spend public money, leading to the further use of district and county authority resources.
Lord Judd
I am glad to support my noble friend Lord Liddle in bringing this Motion before the House. It is difficult to think of a county in which there is a stronger sense of tradition and community than Cumbria. It is very deep indeed—partly, of course, because it is right out there to the west of the country and not part, perhaps, of the mainstream of the United Kingdom, but very much a county with its own sense of identity. That sense of community in the county is built on a strong sense of community in the local communities of which the general community of Cumbria is comprised.
When I look at what has happened and listen to my noble friends, with all their experience—much longer than mine—of the county of Cumbria, it is clear that, if one had set out to try to disrupt something which is good, healthy and robust in the life of Cumbria, one could not have done much better than to introduce the ill considered and insensitive proposal before us.
It is impossible to speak to this subject without making reference to what has been going on with respect to constituency boundaries as well. People are in a real state of muddle about where they belong, where their loyalty is, who is representing them and for what. For democracy to succeed, it is essential that people are absolutely clear about who they are holding to account and who is representing them in the local authority, the county and nationally.
I believe that the Motion and the passion with which it has been introduced are related to the heart of democracy. It is an illusion to think that one can have a healthy democracy made up simply of individuals going to the polling station and voting. A healthy democracy is made up of individuals finding their place in the community, discussing with fellow members of that community what the issues are, making relationships and making strong representations together. The heart of democracy lies in that community life and, on the basis of that life, on then being able to hold people meaningfully to account, not just on election day but throughout the periods between elections.
I am certain that we need to think very carefully about what is being done on boundaries in so many different contexts; the measures are destroying the sense of community that is an essential element in a healthy, thriving democracy. These proposals certainly do not put that right.
I am glad to see that a Liberal Member of the coalition is going to reply to this debate. If the Liberal Democrat party prides itself on anything, it is its history of involvement in the community and its activity in community politics and the rest. I am sure that the noble Baroness will have listened to every word that has been said and will cheerfully and willingly undertake to ensure that this entire serious matter is reconsidered.
Lord Clark of Windermere
My Lords, I shall not detain the House for more than a couple of minutes; I just want to participate in this debate that my noble friend has initiated. I agree very much with him about the strength of community in the county—not only in Cumbria, though, but in other countries as well— while starting from the opposite end: I am not in favour of a unitary authority covering such a vast area as Cumbria. However, I am in favour of a two-tier system of local government. Because of that, I am concerned about this recommendation from the Local Government Boundary Commission for England, which seeks to address only the issue of the county electoral boundaries, not the local ones. We all know that one of the problems of democracy at the moment is the identification of individuals with their council. This just adds another area of confusion where there are different boundaries for the two-tier system of government.
I submit that these proposals were made too late for the election beginning next May; they were laid on 31 July this year. There has been practically no publicity whatever in the county of Cumbria. I doubt whether 1% of the electorate know anything about them, and they are going to get quite a shock when the election comes next May.
Lord Harris of Haringey
My Lords, this is a living Chamber and I believe that procedure evolves all the time among your Lordships. I therefore find myself in a rather strange position—because the Local Government Boundary Commission for England, set up under the 2009 Act, is independent of the Government—of having drawn the short straw in responding both to my noble friend’s Motion of Regret and to the comments made by my noble friends Lord Campbell-Savours, Lord Judd and Lord Clark. A quadrumvirate of people I respected more would be extremely difficult to find, but it is important for your Lordships to understand the context in which these changes have been put forward by the Local Government Boundary Commission for England.
The commission was set up with the specific and sole remit to review electoral arrangements of councils against statutory criteria of electoral equality, giving fair weight to the votes of all electors in a council area; community identity and interests; and effective and convenient local government. It carries out its functions by relying on a mixture of analysis and judgment.
Lord Campbell-Savours
Did it have an obligation to carry out a review of the whole county on the basis of a single complaint about Dalston and Cummersdale?
Lord Harris of Haringey
My understanding is that you cannot make a small change without there being repercussions elsewhere, but in any event the difficulty arises because of the nature of the dialogue between the council and the commission.
As I said, the Act gives the commission the power to conduct the review whether or not the council concerned wishes it to happen. One can understand the reasons behind that. Clearly, a council might want to maintain the status quo because it suited the members of that council so to do. I accept the comments that have been made that this is not the circumstance in these areas. The Act lays down that the council “must” assist the commission by supplying necessary information.
However, I am informed that in resisting the review, the council has in practice failed to comply with its duty to supply information. Clearly, one way in which the council could have moved forward is what happens very frequently with reviews of local government divisions: the county council or the council concerned puts forward its own set of proposals, which the boundary commission then measures against those criteria to see whether or not it applies.
Lord Campbell-Savours
I am sorry to correct my noble friend, but I understand that the county council was more than helpful. The problem was at district level, so I think that he has been badly briefed by his commission.
Lord Harris of Haringey
As I have said, I am in the position of so many Ministers before the Dispatch Box in that I have not got access to the primary material. However, I am told that, universally in these circumstances, the county council provides the information on population projections because it has the material across the county area. When the districts were asked whether they had comments, they were not able to comment on this because, they said, all the information on the projections was held by the county council. So we have this information, and we have to make the best of what we have before us.
Of course, the commission would have been ready to contemplate the much bigger and more complex review necessary to consider the district councils as well, but only if there had been a reasonable consensus on that being the way forward. Within the individual districts, there were not the same electoral disparities. There has never been that consensus. As I said, the district councils do not present electoral inequalities to merit the review in their own right.
A number of noble Lords have criticised the quality of the consultation. As a matter of course, the commission proceeds carefully through public consultations on council size. The quality of the maps has been criticised. My understanding is that the council was given the full mapping in electronic form, which would have enabled the council, had it so wished, to disseminate and generate local maps in whatever form and as flexibly as it wished.
My noble friend has suggested that the commission was unstoppable in its approach. The reality is that, as a result of the representations made by the county council, the commission extended its usual consultation periods, allowing in total 32 weeks, or eight months—a very generous definition of consultation for those of us who are used to systems of government consultation. It allowed six weeks’ consultation on the total number of councils required; 12 weeks of inviting submissions on electoral division patterns, which would of course have been the point at which the county council could have come forward with a proposal that would have dealt with the single anomalies; and then a further 14 weeks on draft recommendations for new electoral boundaries. By most normal definitions, that is ample opportunity for people to have their say. My advice—again, it may be challenged—is that the county council did not contribute. Its representations were directed only to challenging or delaying the review.
The council has also challenged the adequacy of the electoral projections used in the review, yet these were the projections that it supplied. It complained that because electoral registration is a district council responsibility, it could not be expected to do better. The commission responded that in no previous case has a county council insisted, like Cumbria, that it cannot or will not supply the requested information. That said, I am advised that the commission recognised that questions might be raised on the council’s figures, and took steps to mitigate any ill effects. It judged the council’s overall growth projections reasonable, and not indicative of unusual volatility in the number or distribution of electors over the coming years. It adjusted for known developments. Above all, in drawing electoral divisions, it secured high levels of electoral equality on current registration figures. That is important. If there were subsequent variations, the fact that there was this high level of accuracy at this stage would mean that it would be very unlikely that, over time, the imbalance would become too great.
The council says that the final recommendations will be defective because it had no worked projections for 2017. The commission has the council’s own projections for six years to 2016, which would normally have covered the five years from the completion date set in the Act. The only reason for the delay in completing the review was the extension of the consultation as a result of the county council’s own resistance—meaning that, in this case, the commission had no specific projections for the final year. However, the Act says that the commission,
“must have regard to any”
likely changes, and the commission has explained how it has done so.
Projections are necessarily inexact and the commission resists the council’s attempt to import into the Act the specific requirement to project figures for each year. My understanding is that if the council had persisted and wished to challenge it, it could have made a legal challenge. Indeed that would be the only normal remaining mechanism left to it. It chose not to, maybe because it could not afford to do so or maybe it received advice that the case was not as strong as it should be.
My noble friend Lord Campbell-Savours listed a series of questions, most of which, in terms of the specific costs, I am not in a position to answer. In his powerful contribution about the nature of democracy, my noble friend Lord Judd made some very valid points. Democracy is based on local representatives elected by local communities where there is an affinity between those communities and those who represent them. However, to achieve that affinity and electoral fairness requires a dialogue at local level and it is clear from the discussion that we have had in your Lordships’ House this afternoon that in this instance that dialogue was not as successful as it normally is in other cases.
I hope that on the basis of what has been said with regard to the commission’s rationale and the extensions to the consultation it provided, my noble friend Lord Liddle will feel able to withdraw the Motion in his name. I also hope that the commission will read very carefully the comments that have been made and reflect on their implications both for the way it conducted itself in this case but also in the way it conducts itself in future boundary reviews.
Baroness Garden of Frognal
I thank the noble Lord, Lord Harris, for his contribution, and clarify and confirm that these are matters for the Local Government Boundary Commission for England. It is normal procedure in such cases that the Government do not take a position.
Lord Liddle
My Lords, I thank my noble friend Lord Harris of Haringey for his robust reply to our Motion of Regret. He has done the Local Government Boundary Commission for England proud; I am only sorry that there does not appear to be anybody from the commission here to have listened to it. Before I sit down, there are a couple of points that I wish to correct.
There is nothing political about this. There was unanimity between the Conservative and Labour members on Cumbria County Council that they did not want this boundary review to proceed. They were not trying to stop it for reasons of party advantage but because they thought it was a completely unnecessary exercise at a time of great austerity when vital services are being cut. They did not want to have to waste their time on it. Frankly, the boundary commission could have dealt with the problem of the overexpansion of the electorate in one ward by simply making some marginal adjustments, such as putting the 1,500 voters into adjacent wards, without having to go through the whole process of a full-scale boundary review, which no one in the county really wants and which, on the eve of an election, has had disruptive effects in terms of local representation and community identity.
I thank my noble friend Lord Harris very much for making the case for the boundary commission; I only hope that the boundary commission listens to this debate and will in future take note of what has been said about how it should proceed. I hope it will accept that responsibility. On that basis I am prepared to withdraw my Motion of Regret.
Civil Legal Aid (Merits Criteria) Regulations 2012
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McNally
That the draft Regulations laid before the House on 29 October be approved.
Relevant documents: 10th Report from the Joint Committee on Statutory Instruments
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, in moving the draft Civil Legal Aid (Merits Criteria) Regulations 2012, I shall speak also to the draft Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Amendment of Schedule 1) Order 2012. The Civil Legal Aid (Merits Criteria) Regulations 2012 set out the merits criteria both for applications within the scope of the civil legal aid scheme, which are described in Part 1 of Schedule 1 to the Legal Aid, Sentencing and Punishment of Offenders Act 2012, and for exceptional funding cases that fall outside that schedule.
The merits criteria are those that the director of legal aid casework must apply in deciding whether an individual qualifies for civil legal services. When the director delegates his functions under the regulations to providers or his employees, they will also be required to apply these criteria. The criteria include both general merits criteria and specific merits criteria. Specific merits criteria are applied for particular types of case where the general criteria are considered to be too strict or where bespoke criteria are appropriate for particular types of case.
Noble Lords may be aware of the funding code created under Section 8 of the Access to Justice Act 1999. These regulations replace that funding code. The funding code criteria are based on a list of factors set out in Section 8 of the Access to Justice Act 1999. These include the importance of the case to the client, the prospects of success and the likely costs. The regulations before us are based on a list of similar factors set out in Section 11(3) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.
The criteria must also reflect the principle that, in many disputes, mediation and other forms of dispute resolution are more appropriate than legal proceedings. I hope that this is a principle we all share. Our approach in making these regulations has been broadly to retain the existing merits criteria. In our consultation on legal aid reform we consulted on one significant change to the current funding code criteria; namely, that legal aid will be refused for any individual case which is suitable for a conditional fee agreement or CFA. That is reflected in Regulation 39(b).
At present that funding code requirement is disapplied for judicial review cases, claims against public authorities and claims for clinical negligence. We have removed these exceptions. We believe that our limited resources should not be focused on cases where alternative options for funding exist. The Legal Services Commission, or the Legal Aid Agency as it soon will become, has significant experience in determining whether a CFA is likely to be a real alternative. If funding is refused on this basis, an applicant can ask for a review of that decision. If they still are not satisfied, they can seek an independent appeal.
The noble Lord, Lord Pannick, has tabled a regret Motion regarding Regulation 53(b). This states that the regulation will substantially reduce the availability of legal aid in public law cases because the word “reasonable” has been omitted in relation to other means of challenging the relevant decision. I am assuming that this is in comparison to Regulation 39(d), which raised concern in the House of Commons.
Let me first explain what this regulation provides. Regulation 39(d) concerns alternative dispute resolution, such as complaints systems which might allow the client to resolve the dispute without issuing proceedings. The director has a wide discretion to decide whether such alternatives are reasonable in the circumstances. This criterion applies to public law, as well as other claims.
By contrast, Regulation 53(b) is about alternative routes to address the problem predominantly through proceedings. No concept of reasonableness is needed here because if there is an alternative route to resolving the problem in proceedings, that should be taken. This is because judicial review should be a tool of last resort. We recognise that the equivalent provision in the current funding code may on its face appear wider. However, in accordance with its published guidance, the Legal Services Commission has in practice applied this provision so that if there is an alternative appeal or procedure that addresses the problem, legal aid will not be granted for judicial review. Regulation 53(b) therefore reflects current working practice.
The Government made clear in Committee in the House of Commons that if pursuing an administrative appeal or other procedure meant that the individual could not obtain the remedy they needed, the director of legal aid casework would have the flexibility to fund. This is because the regulation specifically refers to alternative routes that “are available”. The director would need to interpret this in a realistic way. Where the director of legal aid casework found that alternative proceedings could not provide the remedy that the client needs, funding for a judicial review would not be refused under this criterion. I stress that this point would be put beyond doubt in published guidance.
However, the noble Lord, Lord Pannick, and others have expressed concerns about this matter, and others have expressed very strong anxieties about how we have framed this provision. I am not convinced that such anxieties are justified, but I will listen to what noble Lords have to say and see if, in my reply, I can move further to meet those anxieties and concerns.
I turn now to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Amendment of Schedule 1) Order 2012. The noble Lord, Lord Bach, will speak to his Motion shortly, but I would like to explain first what the order does. This order makes legal aid available in relation to a review by the First-tier Tribunal where it has identified an error of law in its own decision on a welfare benefit appeal. It also brings into scope certain applications as required by the 2007 Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance. Finally, it addresses a technical issue in relation to legal aid for judicial review.
The first aspect of the order makes available advice and assistance in relation to a review by the First-tier Tribunal where it has identified an error of law in its own decision on a welfare benefit appeal. This follows a commitment made by the Government during Commons consideration of Lords amendments of the then LASPO Bill to explore whether there was a way for independent verification to be used to identify any First-tier Tribunal welfare appeals which involved a point of law.
Of course, appeals to the First-tier Tribunal on welfare benefits matters are appeals against an administrative decision of a public authority. This is quite different from an appeal to the Upper Tribunal, where one must identify an error of law arising from the decision made by the First-tier Tribunal in order to bring the appeal. To appeal to the First-tier Tribunal, the appellant need only set out their reasons for disagreeing with the public authority’s decision in plain language. I understand that many appellants will wish to question whether the public authority has applied the law correctly. But this is precisely the job of the tribunal: to decide what the correct facts are and how the law should be correctly applied to them.
The Motion of the noble Lord, Lord Bach, against this order suggests that the Government have not fulfilled the undertaking given during the passage of the then LASPO Bill in this area. The then Lord Chancellor said at that time that he would “explore the options” available for a system of independent verification. I repeated the same assurances to this House, stating that we were,
“committed to doing further work to see how we might provide funding for those appearing before the First-tier Tribunal whose case also turns on a point of law”.—[Official Report, 23/4/2012; col. 1557.]
That is exactly what we have done. We have given very serious consideration to the various options for independent verification. We have come to the conclusion that imposing an additional task of verifying whether a case involved a point of law on either the judiciary of the First-tier Tribunal, the successor to the Legal Services Commission or the Department for Work and Pensions would be unworkable. This is because it would have resulted in significant extra administrative and cost burdens. We do not consider it right to impose these burdens in the current economic climate.
It is also important to remember that legal aid will not be limited to welfare benefit cases in this area only. We have retained legal advice and assistance for appeals under the Equality Act 2010. We have retained legal advice and assistance for reviews before the First-tier Tribunal, as I indicated. We have retained legal advice and assistance for applications for permission to appeal to the Upper Tribunal. We have retained legal advice and assistance for substantive appeals in the Upper Tribunal. We have retained legal advice, assistance and representation for onward appeals to the Court of Appeal. We have retained legal advice, assistance and representation for onward appeals to the Supreme Court. We have retained legal advice, assistance and representation for welfare benefit judicial reviews. It is important to stress that at no point in progressing our legal aid reforms did we say that it was our intention for all welfare benefit First-tier Tribunal appeals to receive legal aid. The Government’s position throughout has been that in these economic times we need to target legal aid at cases of the highest priority, where it is needed most. That was what the LASPO Bill was about. This is what we have done.
I turn briefly to the second aspect of the order, which brings into scope certain applications to meet our international obligations under the Hague Convention 2007. The convention sets out certain requirements for the provision of legal aid in relation to the recognition, enforcement or establishment of a decision in relation to maintenance, and there are reciprocal arrangements for signatory countries. We expect it to come into force in April next year. The convention is broadly equivalent to the EU maintenance regulations for which services are already made available under Schedule 1 to the LASPO Act. Most countries that have signed up to the convention will already be covered by the EU maintenance regulations—with a few exceptions, such as Norway.
The third part of the order addresses a technical issue in relation to legal aid for judicial review. In our consultation response on legal aid reforms, we confirmed that legal aid would be available for judicial review subject to a few specific exclusions. That remains our position. It is reflected in paragraph 19 of Part 1 of Schedule 1 to the LASPO Act, which puts within scope legal aid for judicial review in almost any area bar the exclusions debated and agreed by Parliament. However, an arguable effect of how the LASPO Act is drafted is that judicial review may be in scope for any area of law listed in Schedule 1, despite the exclusions in paragraph 19. This order simply makes a technical amendment to ensure that judicial review is governed exclusively through paragraph 19, and that the specific exclusions have the intended effect. I hope that this explanation has been helpful and I commend the orders to the House. I beg to move.
Amendment to the Motion
Lord Pannick
As an amendment to the above Motion, at end to insert “but that this House regrets that Regulation 53(b) will substantially reduce the availability of legal aid in public law cases because the word ‘reasonable’ has been omitted in relation to other means of challenging the relevant decision”.
Lord Pannick
My Lords, I tabled a Motion of Regret because the Civil Legal Aid (Merits Criteria) Regulations will very substantially restrict the availability of legal aid in public law cases, particularly judicial review. In his very helpful speech, the Minister indicated that he would listen very carefully to this debate and that he might be able to move further in his reply. Therefore, I will explain the problem in the hope that he will be moved if not by me then by the many noble—and noble and learned—Lords who are limbering up to express their concerns on this issue.
The problem is caused by Regulation 53(b), which states that legal aid for a public law claim will be available only if the director of legal aid casework is satisfied that the individual has exhausted all administrative appeals and other alternative procedures which are available to challenge the decision before bringing a public law claim. Therefore, the director will have no discretion. Alternative procedures must be exhausted before legal aid is available to bring the legal challenge. The problem is that in many of these cases—whether they are judicial reviews, housing appeals or habeas corpus claims about people in detention—it is simply not reasonable to expect the litigant to exhaust other procedures and appeal mechanisms before going to court. The other procedures may take months and sometimes years to arrive at a conclusion. They may involve no power to grant an interim remedy to protect the position of the claimant—for example, if the claimant is challenging the removal of housing provision in the services provided or the removal of services which have been given to him or her to address a mental health problem. The courts themselves recognise the force of this point. If you want to bring a judicial review in the High Court, you must exhaust other remedies except if the court is satisfied that the alternative procedures are less effective or less convenient.
Lord Bach
My Lords, I rise to support the noble Lord, Lord Pannick, in the amendment that he has just moved, and also to speak to my Motion which I will move at the appropriate place. Before I speak to my amendment, perhaps I may say that I support unreservedly the amendment in the name of the noble Lord, Lord Pannick, to the Civil Legal Aid (Merits Criteria) Regulations. All noble Lords who have had the benefit of listening to his speech will have seen the logic and force of what he had to say. I suspect that there is no serious argument but that he is correct. I look forward, if it is necessary, to supporting him in the Lobby later on.
What I am doing with my Motion is to ask the Minister to withdraw the order that I have prayed against—namely the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Amendment of Schedule 1) Order 2012—so that it can be reconsidered as a fresh order when it is laid again. I am not seeking to go behind the Act of Parliament. I still believe that many parts of it are entirely wrong and an enormous mistake, but whether I like it or not, Parliament has passed it. It will come into force on 1 April 2013 and we will have to see what the consequences are, but that is not the point today.
Lord Mackay of Clashfern
My Lords, I will speak in relation to both these matters; not in order of importance but in the order in which they were taken, so I will speak first to the amendment of the noble Lord, Lord Pannick.
As I understand it, what the noble Lord, Lord Pannick, finds difficult is Regulation 53(b), which requires that the director whose job it is to decide such matters has to be satisfied that,
“the individual has exhausted all administrative appeals and other alternative procedures”,
which are available to challenge the act, omission or other matter,
“before bringing a public law claim”.
That is not just judicial review; it is quite a wide area of law, including habeas corpus jurisdiction, as the noble Lord, Lord Pannick, mentioned. However, this is not the whole of this matter. It is interesting that it is Regulation 53, because I think that the original rule of the Supreme Court that brought in judicial review was Order 53. It is a strange coincidence, but not particularly important. What is important is that, apart from what I have just read, the beginning of Regulation 53 requires that,
“the Director must be satisfied that the criteria in regulation 39 (standard criteria for determinations for legal representation) are met”.
So Regulation 39 has to be met before you come to this regulation at all.
The noble Lord, Lord Pannick, briefly referred to Regulation 39. It includes this provision at sub-paragraph (d), requiring that,
“the individual has exhausted all reasonable alternatives to bringing proceedings including any complaints system, ombudsman scheme or other form of alternative dispute resolution”.
I understood my noble friend Lord McNally to suggest that that only applied to a limited number of alternative procedures—but it says “all reasonable alternatives”. I cannot see how it is possible to have Regulation 39, with that provision in it, and Regulation 53(b), which requires that that regulation is accepted, and also adds this. The two seem to be contradictory. It is not just the point that the word “reasonable” is used in Regulation 39; it is incorporated into Regulation 53 at the beginning. It simply does not make sense. That is the short and long of it.
Lord Bach
With the greatest of diffidence, I rise to try to explain the situation as I see it. The respect I have for the noble and learned Lord is well known. My understanding is that what the Government propose comes at the end of the First-tier Tribunal hearing. Therefore, leading up to the First-tier Tribunal, whether or not on a point of law, there would be no advice at all to the appellant. During the tribunal hearing there would be no advice to the appellant. Only if the appellant after the event decides to ask for facts and reasons and, after that, puts in a notice of appeal, will there be the slightest chance that he might get legal aid at that stage.
Lord Mackay of Clashfern
With great respect, the noble Lord’s own explanation shows that what happens is that the First-tier Tribunal makes a decision and that is one in a very large number of decisions. If somebody wants to make a representation against that decision, asking for a review, the tribunal can invite representations at that stage; if it does, the applicant, as long as he was the original appellant, can get legal aid. If, on the other hand, the tribunal decides, “We do not want representations, we know that we are right”, it goes ahead with the review and comes back to the same decision; because an application has not been opened with right of representations at that stage, the second branch of the regulation gives legal aid. That is how I understood it but I may be wrong.
Lord Bach
I am sorry to come back, but it is only if the tribunal finds an error of law. An error of law has to be found by it first; then a review takes place. It is only in those circumstances, which are very rare indeed, that legal aid could be available at post First-tier Tribunal level. The other thing they might do is appeal to the Second-tier Tribunal, when other considerations would arise. However, it does not and cannot happen in every case. As I understand it, an error of law has to be found by the First-tier Tribunal after it has made its decision.
Baroness Doocey
My Lords, I support the amendment proposed by the noble Lord, Lord Bach, because I believe that the Government’s present proposals will be catastrophic for many thousands of people. During the passage of the Bill, provision for legal aid funding and advice for assistance in welfare benefit appeals made to the Upper Tribunal on a point of law was included in the legislation. The Government also conceded that the same point of principle should apply to the consideration of points of law by the First-tier Tribunal. The Lord Chancellor said, in reference to First-tier Tribunals:
“We are quite open to the argument for ensuring that we have legal representation when there is a legal issue that we cannot expect a lay person ordinarily to argue”.—[Official Report, Commons, 17/4/12; col. 226.]
However, the Government have honoured neither the spirit nor the letter of that commitment. The conditions they have laid down for legal aid to be available require so many planets to be in conjunction that, in practice, it is doubtful that the vast majority of claimants could ever meet them.
My prime concern is the needs of disabled people, who will be disproportionately affected by the removal of welfare benefits from the scope of legal aid. By not considering whether a point of law is involved other than when a further appeal is being pursued, the Government are effectively denying legal help to a significant proportion of disabled people whose appeal cases could nonetheless be considered to raise a point of law.
According to the Government’s own impact assessment figures, restricting legal aid to cases where the First-tier Tribunal itself identified that it erred in law would keep legal aid to just 696 welfare benefit cases in lower tribunals. That represents only a tiny proportion of the 135,000 welfare benefit cases each year. Of those 135,000 cases, 78,000—nearly 60%—involve disabled people who currently rely on legal aid for welfare benefit appeals.
What makes the situation worse is that the Government are in the middle of a major overhaul of the welfare benefits system. Millions of claimants will be reassessed and moved on to different benefits. During the transition period, disabled people will increasingly need expert legal advice to challenge inaccurate decisions about their benefits. The lack of legal aid to pursue an appeal in the first place will mean that disabled people are unlikely to reach the stage where they can get legal aid, as the vast majority of claimants are unlikely to recognise a point of law.
Legal aid for welfare benefit claimants costs an average of £150 a case. There can be significant consequences if disabled people do not receive the benefits to which they are entitled, causing considerable financial strain and pushing many of them into poverty. Their long-term costs in terms of demands on the health and welfare system are likely to be an awful lot higher than £150 per head.
As I have argued on previous occasions, the removal of legal aid from welfare claimants is fundamentally unjust. The paltry savings will prove to be a false economy. The Government’s latest proposal has made a bad policy worse. I urge the Minister to reconsider.
Baroness Lister of Burtersett
My Lords, I am very happy to follow the noble Baroness, Lady Doocey, who has contributed so much to our discussion of previous legislation on this issue. I shall speak to the amendment to the Schedule 1 order, but I also strongly support what the noble Lord, Lord Pannick, said on the other amendment.
My noble friend Lord Bach made a powerful case. He speculated on why the Government have reneged on their commitment. The only answer that we have received is that the Government say that it is not feasible. I wonder why not. Today, the Minister has argued that it is because of administrative costs, but in my book, administrative costs and feasibility are not the same thing.
Citizens Advice has proposed a number of options to make a reality of the Government’s commitments and made representations on them to the Government. Are those options among those which the Government have reviewed—the Minister referred to a review in passing? Were they considered not to be feasible? If so, why not? Was the suggestion made by the noble Lord, Lord Pannick, considered not to be feasible? If so, why not? Unfeasibility is a vague response. Citizens Advice referred to the Government’s proposal as “irrational”. It criticises the fact that there has been no consultation on it. Can the Minister explain why has there been no consultation?
I finish by referring to an e-mail that I received this morning from a member of the public. She does not stand to be affected by the measures. She calls herself an ordinary woman, “nothing special”, but she is motivated by concern for her fellow citizens—in particular those who are sick or disabled. She refers to the fear that many such people now feel. She writes:
“I am pleading with you … to be fair and just when you ‘discuss’”,
the regulations. She finishes:
“I have never felt so strongly about anything before so forgive me if I am departing from normal protocol. All I know and believe is that this is wrong and it needs to be stopped”.
How right she is.
Lord Woolf
My Lords, I been trying to limber up, and I hope that I am now able to follow what has been said by my noble friend Lord Pannick and my noble and learned friend Lord Mackay of Clashfern. I agree with every word that they said with regard to the amendment to the Civil Legal Aid (Merits Criteria) Regulations, which are the subject of the regret Motion.
In order to understand the context, it is necessary to know that judicial review is, of course, subject to principles which have been judge-made. Judicial review, in the form that it is now, is a judicial invention of which we are extremely proud. We are proud of it because the object of the exercise is to ensure, in particular in relation to public law proceedings, that the appropriate procedure is adopted, having regard to the issues raised.
At one time, it was thought—again, by decision of the House of Lords in the well known case of O’Reilly v Mackman, that it was always necessary to use judicial review in public law proceedings. It was then found in practice that that led to satellite litigation over whether the right procedure had been used or the wrong procedure. The courts sought to produce watertight compartments. Fortunately, that was only a temporary stage in the development of judicial review. The next step was to adopt a much more sensible and realistic approach, which involved proceedings being dealt with in the most sensible and reasonable way. Although the phrase that judicial review should be used only where there was no alternative remedy was retained as a simple method to identify one of the principles, the law had developed beyond that. It was made clear by authority after authority that that was subject to the requirement that it should always be reasonable to adopt the procedure which was proposed: judicial review.
Regulation 53(b) contains the statement that is in accord with the general principle of exhausting alternative procedures, but does not refer to the fact that that is not a rigid limitation, but reflects the nature of the procedure, which requires the court to adopt a reasonable course in considering the matter. As has been pointed out by both my noble and learned friend, Lord Mackay, and my noble friend Lord Pannick, that approach of the courts is almost impossible to adopt as a matter of interpretation because of the language of Regulation 39(d). An additional reason to those which have been given for accepting my noble friend Lord Pannick’s Motion and amending Regulation 53(b) is that if that is not done, the procedures in the courts and the procedure for granting legal aid will be out of sync; they will be in conflict. That cannot be a sensible position. Litigants will be forced not to do the reasonable thing, which is what the Civil Procedure Rules require, because they will not have legal aid if they do that, but to adopt an unreasonable course and bring proceedings by judicial review and then get legal aid. That cannot be a sensible course.
I hope the Minister, having heard the argument before the House, will accept the invitation which has been made to consider the matter again. I would be very happy to adopt the amendment suggested by the noble and learned Lord, Lord Mackay, but would, perhaps, suggest that if it is thought preferable to amend Regulation 53(b), what was intended, I believe—or what, at any rate, it should state—could be achieved by inserting into paragraph (b), “the individual exhausted all administrative appeals and other alternative procedures which it would be reasonable for him to adopt to challenge the act, omission or other matter before bringing a public law claim”.
I should have said that my noble and learned friend Lady Butler-Sloss intended to speak and asked me to indicate that she supports the arguments advanced by the noble Lord, Lord Pannick, and those which I have just advanced.
Lord Goldsmith
I want briefly to support both amendments. So far as the amendment moved by the noble Lord, Lord Pannick, is concerned, it is not necessary to say very much after a former Lord Chancellor and a former Lord Chief Justice have both criticised the order as it stands because of the way it operates in different ways. I can summarise my view in relation to it very briefly. This order already recognises that there may be “reasonable” and “not reasonable” alternative procedures. It does that in Regulation 39. However, if one then reads Regulation 53(b), it is very clear that the word “all” must be read as meaning “all”. Therefore, if one expands the meaning, what is being said as it stands is that there will not be legal aid unless the individual has exhausted all reasonable and unreasonable alternative procedures. As soon as one poses the question that way, it becomes absolutely plain that it must be wrong to impose that obligation. I do not think it is necessary to say anything more than that to summarise why the noble Lord, Lord Pannick, and the noble and learned Lords, Lord Mackay of Clashfern and Lord Woolf, are absolutely right.
Let me turn to my reasons for supporting my noble friend Lord Bach in his amendment. I recall very well the clear and powerful way in which the noble Baroness, Lady Doocey, moved the amendments which led to this particular issue. They were strong and supported by a majority of this House. I have read the debate—though I did not listen, as my noble friend Lord Bach did, to the debate itself—which took place in the other place. It seems clear to me that what was being said was that a way would be found to enable legal aid to be provided in the first tier where there were points of law. The concern expressed by the Government was that they did not want that to be a point of law just because it was so stated by the claimant or the claimant’s lawyer. That is clear in column 266. However, the Government have not ended up with that at all. They have ended up with something which appears—if my understanding of the way the procedure works is right, and it follows that of my noble friend Lord Bach—to mean that legal aid does not come into the picture until after the event. That may be appropriate in certain other circumstances, but not here.
What one needs in these circumstances is the ability to identify a point of law which will be relevant and necessary for a particular applicant—particularly a claimant of the sort to which the noble Baroness, Lady Doocey, referred—to be able to put that point of law before the tribunal. I fully endorse her point that most claimants do not recognise a point of law when they see it. I suppose that as a practising and paid lawyer, I am quite pleased, on the whole, that that is the case, although I do not actually practise in this area. The point is this, however, and I ask the Minister to answer this question: why could the way the Government limit this not be by the chairman of the tribunal identifying the point and certifying it at the outset rather than waiting until after the event?
There is one point which connects these two amendments, and it is what drives me to want to persuade the House to support them. In LASPO, we were faced with changes which, for many of us, were very difficult to accept. The Government put them forward on the basis of economic necessity. However, there was a strong belief that there were cases where justice required that there should still be some opportunity for legal advice to be taken and used. In these particular cases—public law and cases involving claimants with disabilities, for example—the Government are failing to give effect even to that limited, modest exception that they were prepared to allow. I very much hope that the Government will think again in the light of this debate.
Lord Phillips of Sudbury
In the light of what I am going on to say to my noble friend Lord McNally, I would first like to say that the whole House well understands the exigency that led to the LASPO Bill. However, as my noble friend Lady Doocey forcefully pointed out, and it cannot be repeated enough, in the realm of social welfare law, there is a singular obligation on us as parliamentarians to will the means of accessing those benefits. Unless we do that, everything that Parliament does is a charade or a sham; because it is cynical on our part not to give the people most in need in our blessed country—the poor, those lacking in self-confidence, those without a scintilla of understanding of the law and those who can scarcely read a Bill and understand it—the real opportunity to access the benefits we are proud to bestow on them. It puts this realm of public expenditure into a special bracket. There are very few areas of expenditure, I suggest, that really come within that narrow purview.
It was interesting to hear the noble and learned Lord, Lord Goldsmith, talking about lawyers looking forward to these rather nuggety issues in social welfare—it was a joke of course—but the reality is that no lawyer goes into the realm of social welfare law to line his or her pockets. I can tell the House that only the most socially minded lawyers subject themselves to practising in this field.
I hope my noble friend Lord McNally will accept my next point. In all the fields of law, there is nowhere more complex than the forest of social welfare legislation. It runs to hundreds and thousands of pages. It is utterly futile to pretend that the ordinary bloke can begin to put together the grounds for going to the director to ask for support to launch an appeal if he or she has got to understand the legal background and legal prospects, because that is way beyond the capacity of all but a very small number.
My final point is this. When the noble and learned Lord, Lord Mackay of Clashfern, was five minutes into his speech, I wondered whether he had, by mistake, picked up my notes. Every single word he said about the clash between Regulations 39(d) and 53(b) was absolutely the same as what I was going to say. The only thing I would add to it—and this is addressed to my noble friend Lord McNally—is that, as the noble and learned Lord, Lord Mackay, made clear, Regulation 39(d) is expressly imported into Regulation 53, but the language in Regulation 39(d) and Regulation 53(b) is not consistent.
That raises further problems. If things proceed as they are, for example, it is unclear what is meant by the word “unavailable” in Regulation 53(b). It is also not apparent to me how to construe the words in Regulation 53(a),
“appears to be susceptible to challenge”,
with the word in the following subsection (b), “procedures”, which are available to challenge. The refinements in the language and, I believe, the confusion are such as to render this part of the regulations not fit for purpose. I very much hope that my noble friend will be able to give the House an assurance at the end of this debate that there will be amendments to the regulations hot on the heels of the passage of the same.
Lord Beecham
My noble friend is to be congratulated not only on bringing this amendment to the House but also on being elected Peer of the Year. At this rate he may turn into the Hilary Mantel of your Lordships’ House; she of course has won her second Man Booker prize, and it may be that next year my noble friend is awarded with his accolade again. I will speak briefly to his amendment before turning to that of the noble Lord, Lord Pannick.
The Opposition entirely support the case made by my noble friend, particularly because, embedded in the Government’s approach and reflected to some degree in today’s debate, there is some confusion between points of law and errors of law for the purpose of these regulations. The Citizens Advice briefing helpfully makes this distinction clear. It says:
“Furthermore in devising this whole policy Government appears to be confusing ‘points of law’ with ‘errors of law’. Whilst the majority of first tier welfare benefit appeals turn on ‘points of fact’ such as financial and other circumstances … many cases do raise significant legal issues over statutory interpretation (ie social security regulations), legal tests for disability”—
as referred to by the noble Baroness, Lady Doocey—
“or disputed application of … precedents etc. The tribunal making an error of law which may be subject to a right of appeal is a much narrower concept”.
We have to bear that distinction in mind when weighing the strength of the case made by my noble friend. It will be the very exceptional case, as the noble Baroness pointed out, that may qualify for that description of an error in law, which of course has to be self-certified by the tribunal itself—a peculiar process, one might think. We are certainly not in the position that the Minister mentioned in the debate in the House of Commons when he talked about 440,000 cases. That number is inconceivably large and, in my view, can be dismissed. Certainly, though, probably a good deal more than 650 cases could potentially arise if the definition were to deal with points of law. I hope that, bearing in mind the assurances given on the earlier occasion by the former Lord Chancellor, the House will support my noble friend’s amendment.
I also support the amendment moved by the noble Lord, Lord Pannick, and supported by the noble and learned Lord, Lord Mackay, as I understand him. Indeed, there is a peculiar relationship between Regulation 53 and Regulation 39, but in my view it goes somewhat beyond the matter identified by the noble and learned Lord. In addition to the potential clash with Regulation 39(d), it strikes me that problems arise in relation to two earlier parts of that regulation, paragraphs (a) and (b). I remind noble Lords that all these matters have to be borne in mind when dealing with Regulation 53. Under Regulation 39(a) the director has to be,
“satisfied that the following criteria are met … the individual does not have access to other potential sources of funding (other than a conditional fee agreement) from which it would be reasonable to fund the case”.
That is a fairly open-ended requirement. Regulation 39(b) says that the director has to be satisfied that,
“the case is unsuitable for a conditional fee agreement”.
Suppose, though, that it was suitable for a conditional fee agreement; that of course does not necessarily mean that a conditional fee agreement is available. Suitability and availability are not the same thing. That reinforces the noble and learned Lord’s point that there is an inconsistency between Regulation 39 taken as a whole, not just in relation to Regulation 39(d), and Regulation 53. I hope that noble Lords will be convinced by that element.
There is a further matter that I need to touch on. The thrust of the Government’s proposals is to reduce the reliance on judicial review. We have to be concerned about this in view of recent pronouncements about the Government’s desire to reduce substantially the number of cases that can be advanced by that method, which is of course a principal method of holding the Executive to account. This is just one potential example, but I think that noble Lords will want to pay particular attention to it, having regard to the category of people who will be most affected by it. We should not lose sight of the fact that this may be part of a process of restricting access to judicial review that will go well beyond this particular category. In my submission, that is an additional reason for noble Lords to support the amendment moved by the noble Lord, Lord Pannick.
Lord Mackay of Clashfern
My Lords, am I right or wrong in thinking that any appellant who is unhappy with the decision of the First-tier Tribunal can ask it to review the decision?
Lord Beecham
Assuming that the appellant has the knowledge of that procedure, he might ask it to review its decision, but the review will amount to nothing unless the tribunal convicts itself, as it were, of an error in law. If it makes that mea culpa then under the Government’s amendment there is a potential for legal aid to be granted, but not otherwise.
Lord Elystan-Morgan
My Lords, I support both amendments. I am sure that it is not necessary for me to add my voice to the very distinguished contributions that have already been made in this regard. Both amendments turn upon undertakings that have been solemnly given—and, no doubt, in the best faith—by the right honourable Kenneth Clarke. I accept that completely. If there has been mischief, it has probably been the mischief of mandarins thereafter in trying to release him in some way from an undertaking that he solemnly and sincerely gave.
The other feature that is common to both amendments is that they deal with situations where preliminary machinery is set up before a person can qualify for legal aid. In both cases, in my view, that machinery imposes such a burden upon the potential applicant to make his or her case virtually impossible—in other words, a total denial of what otherwise would be a fair and just application by that person.
In the circumstances, bearing in mind the weight of authority that has been projected towards the Government in this case, it would be a very rash Minister who did not concede the obvious points made in the amendment moved by the noble Lord, Lord Pannick. If the noble and learned Lord, Lord Mackay, is correct about the interaction of Regulations 39 and 53, and if it be that Regulation 53 in this regard is totally and absolutely governed by the relevant provision in Regulation 39, then that is it—the Government do not lose one millimetre advantage, because that situation has already been covered and fully determined. However, if that is not the case, then it seems that the argument put so powerfully by the noble and learned Lord, Lord Goldsmith, must have come into play. That is that the director could come to the conclusion that indeed all reasonable avenues had been pursued but that there were unreasonable avenues that had not been pursued. That would be an absurdity and a miscarriage of justice. It is either one or the other.
As far as the amendment of the noble Lord, Lord Bach, is concerned, it seems to me that there again is an irrefutable case. I am not at all clear what triggers the situation where there would be a review by the first tribunal. Would it be something entirely within the discretion of that tribunal, or would it be on application? If it is within the discretion of the tribunal, it is a very strange situation that a tribunal is invited to consider whether it is in error.
Of course, I draw the distinction that has already been pointed out by the noble Lord, Lord Beecham. There is a world of difference between a point of law and an error of law. When a judge has adjudicated in a civil case and is invited to grant leave to appeal, he is not saying, “I am wrong”, or, “I am sure that I am wrong, please appeal”. What he is saying is that there is a point of law that is properly arguable. That is a very different situation from a tribunal which says, “We are wrong”. In fact, I do not know of any other circumstance where such machinery exists in law, but I am sure I will be corrected with regard to that.
The basic principle that we are concerned with here is that legal advice on a point of law should belong to the beginning of an action, not to the end of it. So much anguish will be saved by a very modest expenditure. I believe that so much money from the public purse will be saved because there are undoubtedly downstream costs which will be massive in scale in relation to this. However, above all it is a question of miscarriage of justice.
We think of miscarriage of justice as a situation where a tribunal has come to an utterly wrong decision. It is not limited to that at all. A miscarriage of justice occurs where a person has a just, meritorious case, and on account of lack of money is unable to have that case properly adjudicated. If you ask any decent citizen of this land, whatever politics or total lack of politics he or she may have, “Do you believe in a miscarriage of justice?”, we all know what the answer would be.
Lord McNally
I heard that as well. I am very grateful for the contributions to this debate and not least for all the free legal advice I have been given. It has been a useful debate and I have listened very carefully to the points made. A number of noble, and indeed noble and learned, Lords have raised the issue of judicial review. The difference is in approach between Regulations 53(b) and 39(d).
As I said earlier, the Government believe that the current drafting of Regulation 53(b) meets the concerns raised both here and in another place. However, having listened to the arguments that have been put forward today, I recognise the strength of feeling that the regulation has provoked. I make it clear at the outset that it has never been our intention to cut off legal aid for all judicial reviews. The noble Lord, Lord Beecham, was just setting a hare running about other plans for judicial review. In our view, this provision has been misunderstood.
That said, I have heard the anxieties that have been forcefully expressed about this provision. In the light of that, I believe we should put the situation beyond doubt by setting it out in the regulation. Therefore, having listened carefully and having consulted with colleagues, I can tell the House that, once these regulations are made, the Government will bring forward as soon as practicable, and in any event well before April 2013, amending regulations to revise Regulation 53(b). These regulations will introduce discretion into Regulation 53(b) so that the director of legal aid casework will have the express power to grant legal aid for public law claims, even if the alternative routes have not been exhausted, if he none the less considers that such an appeal or procedure would not be effective in providing the remedy that the individual requires. This would clearly address the situations that are causing noble Lords concern. It would, for example, put beyond doubt that legal aid for judicial review would be available where the claimant required urgent interim relief and this could not be provided in any other way.
I hope this will meet the concerns of the noble Lord, Lord Pannick, my noble and learned friend Lord Mackay of Clashfern, and others. Indeed, we will have the time to consult noble Lords about the wording of the amending order that I will bring forward in the new year. I hope that in the light of that the noble Lord will not press his regret Motion.
Lord Reid of Cardowan
My Lords, for those of us who have experienced neither legal training nor legal practice but who have listened to the very articulate and understandable critique by many noble and learned friends, can the Minister answer this question for me? I very much welcome what he has said. Is it implicit in what he says that, whatever discretion is given, it will not only come into effect if the First-tier Tribunal decides that it has made an error in law? That was explicit in many of the critiques which have come out. Is that conditionality now removed?
Lord McNally
My Lords, I, too, am not a lawyer. I think that the noble Lord is asking what comes next, and that relates to the second order, not the first one, which the noble Lord, Lord Pannick, asked about. I will try to cover the point which he has raised when I get to that.
As I said, there was never any attempt on our part to change the rules as far as judicial review was concerned. However, when a former Lord Chancellor, a former Lord Chief Justice and a former Attorney General tell you that it needs clearing up, I think it is only wise to see whether it can be cleared up, and that is what we will do.
Moving on, I have explained in detail how we have listened to the concerns of this House—in particular, in extending legal aid in welfare areas. I have never hidden the fact that the LASPO Bill was a very difficult Bill involving some difficult choices. I can remember answering questions at this Dispatch Box two years ago, when we first launched the consultation. I said then that, if you have a system which is targeted to help the poorest and most disadvantaged in your society and you are forced to make cuts in that system, you are going to affect the poorest and most disadvantaged in your society. I have never hidden that fact.
The idea that LASPO was nothing other than a very difficult Bill is again before this House. Many of the arguments that have been deployed tonight were deployed during the passage of that Bill. However, I remind this House that the LASPO Bill is now an Act that went through both Houses of Parliament and carries with it financial implications that have to be considered when discussing any changes to it. There is no infinite pot of money available and we have to think very carefully about how taxpayer-funded money is spent. The Bill was therefore designed to ensure that public funding remains available for the most serious cases and for those who need it most. In making hard decisions and tough choices, we have listened to the concerns of some of the very same Peers who have spoken today, and we made changes during the passage of the LASPO Bill.
Not for the first time, the noble Lord, Lord Bach, claims that the Government have not listened. I take this opportunity to set the record straight. I remind the House of the Government’s original proposal following the consultation on Proposals for the Reform of Legal Aid in England and Wales. Our response to the consultation stated that,
“it remains the Government’s view that legal aid should be removed for welfare benefits cases, as proposed in the consultation. However, it will be retained for judicial review of welfare benefit decisions, and for claims about welfare benefits relating to a contravention of the Equality Act 2010 that are currently funded, as proposed in the consultation”.
That was our starting point. Since then, we have moved considerably from that position in response to arguments deployed in both Houses. During ping-pong on the LASPO Bill, having listened carefully to the arguments, we agreed to make available legal aid for advice and assistance for welfare benefit appeals on a point of law in the Upper Tribunal, including for applications made to the Upper Tribunal for permission to appeal. In addition, we agreed to make legal aid available for advice, assistance and representation for welfare benefit onward appeals in the Court of Appeal and Supreme Court. The order before us today makes a further concession which is not insignificant.
It may be helpful if I illustrate how this will work. An individual will make an appeal to the First-tier Tribunal against an administrative decision of a public authority. If the appeal is unsuccessful, the claimant can request a statement of reasons for the decision. The appellant can then apply to the First-tier Tribunal for permission to appeal to the Upper Tribunal. At this point, the First-tier Tribunal must consider whether to review its own decision if it considers that it has erred in law, and legal aid for advice and assistance will now be available in relation to that review. If the tribunal decides not to review, the next step is for the First-tier Tribunal to decide whether to grant or refuse permission to appeal to the Upper Tribunal. Where the tribunal refuses permission to appeal, the appellant can then apply directly to the Upper Tribunal for permission to appeal. Again, legal aid will be available for an application for this stage of the process. If permission is granted by the Upper Tribunal, then legal aid is again available for the substantive appeal before the Upper Tribunal.
Therefore, it is wrong and misleading to suggest that we are not making legal aid available in respect of points of law. As I mentioned in my opening remarks, we considered this matter in great detail following the debates during the passage of the Bill. We have explored every possible option to find a workable solution. Our considered assessment is that other methods of independent verification would have proved unworkable. We did consider the CAB proposals but we felt that they would create unreasonable cost and administrative burden. The cost is important. We have never tried to hide the fact that part of the exercise was for legal aid to make a contribution to the cuts in the spending review for the Ministry of Justice, a department which spends money only on prisons, probation, court services and legal aid. The proposals would have placed burdens on the successor to the Legal Services Commission, the tribunal judiciary and the Department for Work and Pensions.
In the Government’s impact assessment we identified that, in 2009-10, we funded 135,000 instances of welfare benefits legal advice. If the judiciary had to consider up to 135,000 interlocutory applications for legal aid, the impact on the tribunal service would be severe, and it could lead to serious delays in the resolution of other cases. Similarly, if the Department for Work and Pensions or the successor to the Legal Services Commission had to consider that large number of cases before they could be funded, it would result in a significant extra administrative and cost burden. We do not believe it right to impose these additional burdens in the current economic climate.
We have therefore decided on the approach set out in the order. This would impose no additional burdens on the tribunal judiciary because it must already consider whether to conduct a review on receipt of an application for permission to appeal against a finding of the First-tier Tribunal. The tribunal can conduct a review only if it is satisfied that there has been an error of law in the First-tier Tribunal’s decision.
Baroness Mallalieu
If the position is, as we have heard during this debate, that the noble and learned Lord, Lord Mackay, a former Lord Chancellor, and my noble friend Lord Bach, a Queen’s Counsel, cannot agree on the interpretation of the wording of Article 3 of this order, is it not clear that people who have no legal qualification and are going to have to look at it to see whether they can obtain legal aid are going to be completely mystified? Whatever the merits or otherwise of the order which the Minister is addressing now, this is badly drafted, unclear and needs to be looked at again.
Lord McNally
I do not accept that. I accept that the lawyers may have glossed the patch a little, as the noble Lord, Lord Reid, acknowledged. We are discussing various complex matters of its operation. I go back to the point that our initial intention was to take welfare out of legal aid—something that the noble Lord, Lord Bach, has opposed from the very beginning; I understand and appreciate that. That does not take away the fact that we have argued our case through both Houses of Parliament and put an Act on to the statute book. This is about implementing that Act.
It is clear that the Government have listened. We have compromised. However, we can go no further with concessions which impact the fundamental objectives of our reform: to focus legal aid on the highest-priority cases while delivering the essential savings needed to address the deficit which is threatening this country’s stability.
I was at a conference the other day where the noble Lord, Lord Bach, used a term which he may have been saving up for his final remarks. He said that next year we face a “perfect storm” in terms of welfare, in that we are indeed carrying through the LASPO reforms and the welfare reforms at the same time. That is going to introduce strain. However, the perfect storm would be if we lost control of our currency and economy, and if we lost markets. That is when the people whom we have heard about today, whom people want to protect, would really feel the full blast of economic problems. We are trying to—
Lord Howarth of Newport
I am grateful. The noble Lord used to tell the House that taking welfare benefits out of the scope of legal aid would save £25 million, but we know also that his department is dumping all kinds of costs on other departments through the health consequences and the damage to vulnerable children living in circumstances of great poverty. What is the noble Lord’s assessment now of the net contribution to reducing the deficit made by his policy of removing access to justice for some of the neediest people in our society? Does he still think that it is £25 million? Does he think it is less? Does he think that that is the crucial difference that is going to avert fiscal disaster?
Lord McNally
I do not believe that these matters remove access to justice. I notice that an organisation called MyLegal put out quite a long briefing, the interesting bit of which was on the last page, where it said that Ken Clarke had said these measures would cost £25 million. The briefing said that that was wrong and that it was £14 million. The noble Lord, Lord Bach, said that it would cost only £5 million. What I do know is that it will have a cost. When I am carrying out my other responsibilities in the Ministry of Justice and I am suddenly told by this House, which has no responsibilities in the Ministry of Justice, that I have to find £5 million, £15 million or £25 million, there are decisions that must be made. I sit on boards where people lose their jobs and where the management of these changes is extremely difficult. I have never tried to hide that but I ask this House to have a sense of responsibility. We came up with a concession after a lot of exploration and talks with departments and various boards. It is a narrow concession but it comes on top of a whole range of other concessions which we believe retain legal aid in a vast swathe of the process of welfare and which we think is in keeping with the promises we made to Parliament.
I ask this House not to go further in voting on this. I must make it clear that, if the amendment is carried and this concession is lost, the Act is still an Act of Parliament and will still be implemented in April but without this concession. I would consider that a rather pyrrhic victory.
Lord Pannick
My Lords, I am very pleased that the Minister has agreed to bring forward amending regulations that will deal with Regulation 53(b) and I thank him for considering the points that have been made in the debate. He mentioned that the regulations would focus on whether the alternative remedy is effective. I hope that when he and his officials read the record of this debate, they will see that the concern is that the criterion should state that the issue is whether the alternative remedy is a reasonable one to use in all the circumstances. It is not just a question of efficacy; it is also a question of speed and convenience, for example. The Minister indicated that he would consult noble Lords who have expressed concern about this. I very much hope that he will take further advantage of the free legal advice available from, in particular, the noble and learned Lords, Lord Mackay of Clashfern, Lord Woolf and Lord Goldsmith. I would be very happy to act as their junior in this respect. On that basis, I beg leave to withdraw my amendment.
Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Amendment of Schedule 1) Order 2012
(12 years ago)
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18:41 - Division on Lord Bach’s amendment. - Ayes: 201 / Noes: 191 - Amendment agreed.
Lord McNally
That the draft order laid before the House on 29 October be approved.
Relevant document: 10th Report from the Joint Committee on Statutory Instruments
Amendment to the Motion
Lord Bach
As an amendment to the above Motion, leave out from “that” to the end and insert “this House declines to approve the draft Order laid before the House on 29 October as it does not fulfil the undertaking given by Her Majesty’s Government on 17 April; and will mean claimants, including a disproportionate number of disabled people, will not receive legal help on a point of law in first-tier tribunals relating to welfare benefits thus denying them a fair hearing on point of law cases”.
Lord Bach
My Lords, I spoke to my amendment earlier in the debate and the House will be relieved to hear that I have very few words to say at this stage. My case is this: how can it be right that there is automatic legal aid for any client who gets to the second-tier or upper tribunal—the Court of Appeal and the Supreme Court—on a welfare law case but no automatic right to legal aid for first-tier tribunals? You can get to the second-tier tribunal or the Court of Appeal or the Supreme Court only on a point of law. If that is the position, how can it be right that at a first-tier tribunal, when a client has a point of law, they should not be allowed some legal advice before the first-tier tribunal commences—in other words, before the first-tier tribunal or during it? It is no use being able to get it at the very end of the first-tier tribunal in very remarkable and odd circumstances.
The Government seem to believe that was appropriate logic because that is the concession they were generous enough to make in the House of Commons on 17 April 2012. But they have not kept to that concession. They have come up with something much more vague; something that will happen in very, very few cases.
I am very grateful to the Minister for the time he has taken with this and to all noble Lords who have spoken on my amendment. When the Minister answered a question from me the other day he said:
“I want to make sure that we maintain a legal aid system that will remain one of the most generous in the world and focus it on the most needy”.—[Official Report, 27/11/12; col. 90.]
Can noble Lords think of anyone who is more needy than the sort of person that the noble Baroness, Lady Doocey, was describing—a disabled person who has undergone some of these tests in order to get her or his benefits, who is not happy with the result, thinks something has gone wrong and wants to appeal? What the Government are intending is that that person should not have the ability to get legal aid in order to appeal to the first-tier tribunal even when the matter is a point of law which they cannot be expected to know or understand. It defies logic and fairness to suggest that kind of process should continue.
All we are asking is that the Government withdraw this Motion, which they are clearly not prepared to do tonight. If they will not withdraw it, I shall ask the House, in a completely non-partisan spirit, to decline to give approval to this Motion tonight and invite the Government to come back with a slightly more generous order that looks after the type of person the noble Baroness, Lady Doocey, was telling us about earlier in our debate.
Lord McNally
My Lords, we are almost on the verge of another financial Statement by the Chancellor. I have made it clear that the noble Lord must not lure the House into an idea that following him into the Division Lobby will produce a better offer because it will not.
Lord McNally
It is not a threat. I just do not want the House to make a decision on such an idea. This is not the Committee stage of a Bill. The order relates to what is already an Act of Parliament. If we do not bring forward another order in this area, the Act simply will go through. I want the House to be aware of that fact.
Lord Bach
There is a framework Act of Parliament, passed by Parliament, which I have never sought to go behind. These orders add flesh to those bones. This is a very important order. In any event, the Government would have to have some kind of order on these matters. On this occasion, the Government have, in effect, not kept with the intention that they certainly had in the House of Commons. By announcing what they did in the Commons, they managed not to lose a vote and to get the Bill through. As a consequence, it is a serious matter.
Lord Phillips of Sudbury
I am grateful to the noble Lord, Lord Bach—I almost said “my noble friend”, which he is. My noble friend Lord McNally has not commented on the noble Lord’s fundamental assertion on which, for me, the strength of the case rests; namely, that the former Lord Chancellor made a clear undertaking which is now not being kept. Would it not be helpful to the House for the noble Lord, Lord Bach, to ask my noble friend Lord McNally for his comment on that?
Lord McNally
I will answer it—I answered it in my remarks. The Lord Chancellor said that he would take the matter away and use his best endeavours. I have seen the exchange of papers with the DWP, the Legal Services Commission and the Administration on whether this could be done. We have come back with our best endeavours. This casual throwing around of betrayal fires the troops up for voting but it simply is not true.
Lord Bach
I would not dream of using the word betrayal as regards this matter. The noble Lord misunderstands me completely. It is not a betrayal. The governing party in the House of Commons said that it intended to do something and, in that way, managed to get an adverse amendment withdrawn. It has come up with a solution but the solution is not the concession that it made in the House of Commons. That is the fact of the matter. It is a much narrower solution and it is deeply unsatisfactory for those who are interested in how the poor, the disabled and the vulnerable are looked after in our society and their rights to access to justice.
For that reason, I ask the House to decline to approve this order, so that the Government can think again and come back with an order which we can all accept. I beg to move.
Palestine: United Nations General Assembly Resolution
(12 years ago)
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Baroness Royall of Blaisdon
To ask Her Majesty’s Government what discussions they have had with the Palestinian Leadership in the light of the outcome of the debate on the Resolution on the status of Palestine within the United Nations at the United Nations General Assembly on 29 November.
Baroness Royall of Blaisdon
My Lords, like all Members of this House, I believe that the two-state solution is and must be the solution to the Israeli-Palestinian conflict; that is, a safe and secure Israel living alongside a viable and sovereign Palestinian state based on 1967 borders, with agreed land swaps, with Jerusalem as the shared capital of both states and with a just, fair and agreed settlement for refugees.
However, as both the Foreign Secretary Mr William Hague and my right honourable friend Mr Douglas Alexander have said countless times over the past few weeks:
“Time is running out for a two-state solution”.
The news that Israel has seized more than $120 million of the tax revenues it collects on behalf of the Palestinian Authority has made the situation much more dangerous, as has the announcement that Prime Minister Netanyahu has authorised the construction of 3,000 new homes and settlements and the speeding up of 1,000 existing planning permissions. Indeed, the UN Secretary-General has said that this could be,
“an almost fatal blow to remaining chances of securing a two-state solution”.
Last week, there was a massive vote at the UN General Assembly in favour of Palestine moving from an observer entity to an observer state at the United Nations. There were 138 nations in favour, including France and Spain; nine against; and 41 abstentions, including the United Kingdom. This was a strong global signal in favour of an independent Palestinian state. It also happened to reflect the views of the British people: 72% of respondents in a recent YouGov poll said that they were in favour of recognising the Palestinian state, and only 6% were against. Ephraim Sneh, a former Israeli Deputy Defence Minister, said before the vote that,
“Abbas’s statehood bid can be a game-changer if the American and Israeli governments respond prudently. Or it can be another missed opportunity—and a potentially disastrous one at that—if they respond punitively to a remarkable Palestinian achievement at the UN General Assembly”.
Sadly, prudence has been abandoned by the Israeli Government.
We strongly believe that the British Government were wrong not to support the Palestinian resolution. It is one of the steps to achieve and negotiate a two-state solution. The fact that we abstained was an abdication of responsibilities to both the Israeli and Palestinian people, most of whom wish to live in peace. The vote was also an important means of demonstrating support for President Abbas, crucial at any time but especially in light of the most recent conflict in Gaza, in which the power and influence of Hamas were enhanced. The Palestinians not only wanted Palestine to be recognised as a state—a prerequisite, I suggest, for a two-state solution that is impossible when only one side is recognised as a state—they also wanted a strong leader. They, like the world, wanted tangible proof that diplomacy works better than rockets.
In the House of Commons last week, Mr Hague said that Government relations with President Abbas were excellent. Indeed, I hope that they are. However, I wonder what the Palestinians think of our position now that the feared retributions have begun. I have no doubt that the Middle East will be a priority for President Obama in his second term of office. However, the UK’s abstention will not have helped—quite the contrary—and it will have diminished our position as a global leader in the eyes of the world.
Before the vote, the Foreign Secretary said that recognition at the UN risked paralysing the peace process, but for far too long there has been only paralysis and no process. There has been continued settlement building, and continued rocket attacks, but no process. I utterly condemn the rocket attacks from Gaza. Like many parliamentarians, I have visited Sderot and spoken with the Israelis whose lives are blighted by rocket attacks—and constant fear. However, I have also seen the settlements, which I utterly condemn and which are against international law. Each house built entrenches the Israeli occupation of Palestine and makes Israel and its people less, rather than more, secure.
Last week’s announcement that some of the new construction would be in E1 has alarmed the global community. E1 is a five-square mile controversial development on the outskirts of Jerusalem that would partly divide the West Bank and would hugely complicate efforts to create a contiguous Palestinian state. Former Israeli Prime Minister Ehud Olmert has called it,
“the worst slap in the face of a US President”.
I welcome Mr Hague’s comments that:
“Israeli settlements are illegal under international law and undermine trust between the parties. If implemented, these plans would alter the situation on the ground on a scale that makes the two-state solution, with Jerusalem as a shared capital, increasingly difficult to achieve”.
Mr Hague is absolutely right. I understand that Israel’s ambassador has been called to the Foreign Office for a meeting with Alistair Burt, the Minister for the Middle East. Clearly this is the right thing to do, but it will not undo the damage done to Britain’s standing on this issue as a consequence of its misguided abstention. The Minister will know that there has been much press speculation today that our ambassador in Tel Aviv could be withdrawn. I would be grateful for clarification. What discussions has the Foreign Secretary had on this issue with the noble Baroness, Lady Ashton, the EU’s High Representative?
It is said that Mr Netanyahu is taking these actions with one eye on the elections in January. I suggest that the crisis in the Middle East is too important for the area to be used as a political football. Indeed, it is terrifying. Then, of course, there are the tax revenues, collected by Israel on behalf of the Palestinian Authority, which Israel has refused to hand over and which it will review on a monthly basis. This punitive action is intolerable and again exacerbates tensions and frustrations rather than enhancing the safety and security of Israel. In the past, when Israel has frozen the monthly revenues of the Palestinians it has resulted in the late payment of salaries for thousands of public servants in the West Bank and Gaza.
I wholeheartedly condemn violence but is it any wonder that the level of anger is heightened when men and women can no longer provide for their families? These tax revenues are not gifts to buy treats; they are moneys owed to the Palestinians on which they rely for their day-to-day existence. I would be grateful if the Minister would say what representations the Government have made to the Israeli Government on this critical matter, and what discussions they have had with Secretary of State Clinton.
I have no doubt that the Saudis and other friends of the Palestinians in the Arab world will do what they can to assist financially. This would be an understandable and welcome short-term solution for the Palestinians, but it cannot be sustainable for any of the parties concerned, including Israel. I wonder what the British Government will do on the issue. For the past four years there has been a near-total cessation of terrorist activity in the West Bank, partly as a result of co-operation between the Israel Defence Forces and the Palestinian security forces, organised by Lieutenant General Keith Dayton’s team. However, if the Palestinian economy collapsed as a result of external economic pressures, the situation could easily be reversed and Israel would become even more vulnerable.
The vote in the UN last week demonstrated that the world wants a solution to the Israeli-Palestinian conflict: a two-state solution in which both states live in security and with dignity. Whereas recognition of Palestine as a state by giving it observer status at the UN is a positive step forward, the subsequent announcements by the Israeli Government are a deeply worrying development that could jeopardise hopes for peace. The UK’s ill judged abstention at the UN was supposed to secure continuing influence with Israel, but there is little evidence of that strategy working. I now urge the Government to co-ordinate their actions with European partners so that further steps can be taken to help ensure that Israel complies with international law and demonstrates a commitment to peace. Most urgently, I trust that all efforts will be made to ensure that Prime Minister Netanyahu hears this message loud and clear when he meets Chancellor Merkel in Berlin on Wednesday.
Lord Alderdice
My Lords, I commend the noble Baroness for securing a debate at this time on an issue that transcends all party differences. On 29 November 1947, the United Nations voted in Resolution 181—with 33 for, 13 against and 10 abstentions: in other words, voted very powerfully—for the establishment of the State of Israel. It also wanted to see the establishment of a Palestinian state. On 29 November 2012, the United Nations voted again, and 138 out of the now 193 member states voted for the possibility of moving towards a new member state. They did not declare that it was a state, only that it was moving towards being a state.
Who voted against? Panama, Palau, Nauru, Micronesia, the Marshall Islands, the Czech Republic, Israel, the United States and Canada. How is it possible that the State of Israel, which was brought into being by an overwhelming majority vote in the United Nations, has contrived over the subsequent years to so lose the confidence of other member states that it finds itself with so little support in its opposition to the perfectly reasonable demand for a Palestinian state?
The peace process has been paralysed for years. There has been no peace process for years. I speak as someone who spends a considerable amount of time working on this issue and on events in the region. Huge changes are taking place—and they are not for the better. The world has changed. I do not think that some of our colleagues in this country, in Israel and certainly in the United States realise that the world has already changed. It is the kind of change that took place in the run-up to, and after, the First World War. The balance of power is different. Changes take place because of changes in technology. Having massive military power in the old sense no longer cuts it. It no longer stops or starts major political change.
It is said by many in the Israeli establishment that there is no partner for peace. Therefore, what is the objection to recognising a nascent state that can become a partner for peace? If there is to be a partner for peace, and if the complaint is that Palestinians are fragmented, surely this creates the opportunity for the various elements in the Palestinian state to come together—for Hamas, Fatah and others to become a partner for peace. However, I think that we have gone beyond all of that. It is no longer clear that a two-state solution is possible. If it is not, there are only two other obvious possibilities that I can see. One is a single state, which manifestly cannot be a Jewish state if it is democratic. The other is some form of chaos and war in the region. It is wholly possible that that is what we are looking at: we are sliding into a regional war.
What is the alternative? It is that we look to a regional process to create stability in the region. Noble Lords will not be at all surprised that I speak about such a process because I have been banging on about it for years. I have not for years seen the possibility of Israel and the Palestinians negotiating an outcome, and I do not any more see the United States providing a particularly useful role in achieving it. There was a time when it could have. There was a time when the European Union could have played a role of this kind, but it is so intent on focusing on its internal problems that it has not been able to provide any kind of useful contribution to the peace process. There is a great urgency about the development of a regional process to save us from regional chaos and to give the possibility of the establishment of a Palestinian state living in peace and stability alongside the State of Israel.
In this regard, I say with great sadness that our country this time is on the wrong side of history. This is a serious error of judgment. This was an opportunity to rescue the reputation of this country in a region that has not been impressed by the military adventures of the past 10 or 15 years. It was an opportunity for our country to say clearly that we support our friends in the State of Israel but that we do not give them a veto on our policy, or who we talk to, or who we are prepared to engage with. I do not expect my friends to tell me who I can and cannot talk to; I expect them to come along with me to talk to people. If my friends say they want a partner, I try to establish a relationship with that partner. Instead, we as a country find ourselves closing in, in a way which—whatever our Israeli Government colleagues say—is not good for Israel, never mind for this country.
I spent the past weekend organising two international conferences in London. At the second was a very senior Israeli—a senior, very Jewish, very Israeli Israeli. His commitment to his country, in diplomatic, political, academic and security terms, had been, he said, “my whole life”. I asked him what he thought of the vote. He said: “Israel should have supported the vote. It should have made it clear that it wants a partner for peace and wants to give Palestinians an opportunity to get together as a state to be a partner for peace”. Recognition of a developing Palestinian state does not define its boundaries; that is part of the problem. It does not describe its population; that is part of the problem. It does not tell us how we are going to relate the various different Swiss-cheese parts of its territory; that is part of the problem. However, it does give a partner with whom to engage in a peace process.
It saddens me greatly, and frightens me greatly, that we face such dangerous times in that region, from which we will not escape. On this occasion our Government did not do the right thing for the country. I hope that they can review their approach, not in terms of the vote, as the vote is past, but in terms of how we engage to ensure a regional process towards stability. Otherwise we will, I fear, observe a regional descent into chaos.
The Lord Bishop of Guildford
My Lords, I am very grateful to the noble Baroness, Lady Royall, for raising this urgent, peace-threatening question. Your Lordships may be aware that the right reverend Prelate the Bishop of Exeter, together with the Roman Catholic bishop, Bishop Declan Lang of Clifton, had written to the Foreign Secretary in some regret at the UK’s abstention from the UN vote on Palestine’s non-member observer status. They—and all of us on these Benches, irrespective of our views on voting or abstention—urge Her Majesty’s Government to do everything possible to revitalise the stalled peace process in the Middle East.
I am particularly grateful that the last speech highlighted the importance of a regional peace discussion. We understand the desire to urge all parties to desist from actions—such as a Palestinian appeal to the International Criminal Court—which would make a restart of discussions, whether completely international or more regional, more difficult. Yet is there not a desperate need to signal that there must be a way forward through international law, which the new Palestinian status surely indicates, lest despair of a two-state solution, or any other solution, lead to the resumption of violence such as the firing of rockets from Gaza, which has already been alluded to? That could slide into the regional war to which the noble Lord, Lord Alderdice, has just alerted us.
My stress on a solution grounded in international law is a point which the right reverend Prelate the Bishop of Exeter would have made had he been in his place. He is in fact visiting some of his flooded churches today. This stress enables me warmly to welcome today’s news from the Foreign Office of the summoning of the Israeli ambassador to meet the Minister with responsibility for Middle East affairs. Afterwards a spokesman mentioned the Government’s potential “strong reaction” to Saturday’s announcement of Israel’s building plans between east Jerusalem and the West Bank. These plans seem, to my judgment, an absolute roadblock to the resumption of any progress and any new negotiations. There are many things on either side which could threaten the only real option for peace—the resumption of discussions, which is the only real option for security for Israel, as has already been mentioned. Continued building on the wrong side—the wrong side in international law; the wrong side of the green line—is, in my view, the most serious threat of all.
Lord Janner of Braunstone
First, my Lords, I apologise: I did not realise that the debate was going to start so very early. However, I am honoured and delighted to be here.
During my career and personal life I am proud to have worked, and continue to work, for both Jews and Arabs who are in Israel and the neighbouring countries. I have spent much of my time building bridges between their communities—working together on our similarities and differences, discussing how we live, and, more importantly, discussing how they can live happily together. That is why I believe it is essential that we work to support both Israel and Palestine to reach a two-state solution where the Jewish have their state—Israel—and the Arabs have their own state: Palestine. The Palestinians’ win at the United Nations General Assembly shows how many countries also agree that they deserve to have their own state. However, the remaining number of noes and abstentions demonstrates how the resolution still needs to be both discussed and developed.
Our Government did not vote yes. Last Thursday in the United Nations they abstained, showing how we in Britain do not completely dismiss the Palestinians’ rights but acknowledge that there are a number of issues that must be spoken about in order for our Government to agree wholly to the increase in Palestine’s status at the United Nations.
The shadow Foreign Minister, Douglas Alexander, spoke in the other place in a debate last Wednesday before the UN vote. He said:
“what I believe will be an overwhelming majority of the 193 members of the UN General Assembly in voting for enhanced observer status for the Palestinians. That vote can, and must, send a powerful signal to the Palestinians that diplomatic efforts and the path of politics, not the path of rockets and violence, offer the route to a negotiated two-state solution”.—[Official Report, Commons, 28/11/12; col. 230.]
That is what we must all hope will occur.
As this House knows, only a week before this vote, Gaza and Israel were in conflict with rockets flying from both sides, and, sadly, there were casualties on both sides. Since Israel left Gaza in 2005 countless rockets have been fired from Hamas-run Gaza, and Hamas uses innocent citizens to hide behind. We must all acknowledge Israel’s right to defend its own country. We cannot ignore that Israel, like Palestine, has a right to exist. Hamas saw the results on 29 November as a victory. It is important for the Palestinian people but Hamas is not there to benefit its people. It is not the Government; it is a terrorist group that uses its own citizens as shields to hide its operations. It is a group which publicly announces the annihilation—the annihilation—of the State of Israel.
Whether you say shalom or salaam, it is this word—which means peace—to which we must always return. We must all work together for peace in that area. How do the Government consider the UN results on the status of Palestine will encourage them to go back to the negotiations when they have refused to take part in the past two years?
Before I finish, I would like to tell a fable of a London man who once went to a law society and asked to be recommended to a one-armed solicitor. “Why one-armed?”, asked the official. “Because,” the man replied, “I am sick to death of lawyers saying, on the one hand this, and on the other hand that”. That was a perfectly good reason for wanting somebody with one hand. On the one hand, if you do not recognise that others have a case, you will lose yours. On the other hand, if you do not put your case firmly, then you will not be an advocate for long. And without any hands, you certainly cannot clap. One Hand Alone Cannot Clap is the name of a book that I wrote some years ago about Israel and the Middle East. It is important that we acknowledge that you cannot base arguments or work for peace with only one side. No one would argue against the rights for the Palestinian people to have their own home, and this is also so true for Israel. We must all learn to clap together and to live happily and peacefully side by side.
Lord Palmer of Childs Hill
My Lords, the noble Baroness, Lady Royall, asked a very important and interesting Question. My noble friend Lord Alderdice referred to the United Nations vote in 1947. Many people seem surprised that the UK abstained in the vote to upgrade the status of Palestine at the UN. However, students of history will appreciate—this has not yet been pointed out—that this abstention follows the precedent of Britain abstaining in the 1947 vote on the UN partition plan leading to the creation of the State of Israel. Some things do not change. It has always been a foregone conclusion at this time of the United Nations that a large majority of nations, including the Islamic and non-aligned states, would vote in favour of the UN’s de facto recognition of Palestinian statehood. Some things have changed since 1947.
We can achieve the desirable result of a Palestinian state alongside a secure Israel only by joint negotiations between the two parties. I quote from a newspaper this weekend, which stated:
“Mr Abbas has said he will not return to talks, which were broken off in 2010, without a freeze in settlement building, ignoring Israeli calls for a resumption of negotiations without preconditions”.
I am against the expansion of settlements. However, even an amateur prophet could have predicted that the Israeli reaction to the UN vote would be to announce the approval of construction of new settler homes. The E1 proposed area which the noble Baroness, Lady Royall, referred to only has preliminary zoning and planning. Although that is bad enough, it is not actually in the building stage.
I hope that Her Majesty's Government will stress to the Palestinian leadership—which is the point of the noble Baroness’s Question—that if it wants to stop the building, it had better get to the negotiating table as quickly as possible. Surely Mr Abbas does not want the same said about him as was said about Mr Arafat: that he lost no opportunity to lose an opportunity. The man who said that, Abba Eban, an Israeli Foreign Secretary, also once said that if Algeria introduced a General Assembly resolution that the world was flat and Israel had flattened it, it would pass 100 to 10 with about 50 abstentions.
President Abbas is requesting recognition for a state half of which he does not even control. Since Hamas took power in Gaza in 2006, Mr Abbas, as far as I know, has not visited there even once. The resolution pushes further away the prospects for peace. The only way to achieve peace is through direct negotiations, and I hope that my noble friend the Minister will stress this to both sides. Unfortunately for ordinary Palestinians, they will see little gain from the UN achievement. The Gaza Strip will remain under the rule of Hamas. The move seems more likely to undermine prospects for reviving the peace process, as described eloquently by my noble friend Lord Alderdice, except for one redeeming feature; namely, improving President Abbas’s reputation on the Arab street. Not negotiating with Israel has been Mr Abbas’s choice in recent years, whether due to his distrust of Israel or due to his own unwillingness to make compromises. The move to the UN looks more like a continuing strategy to avoid negotiations and not a way to revive them.
When Mr Abbas first laid out his ambitions 18 months ago in the New York Times, he made it clear that he would use Palestine’s new status to try to confront Israel in international legal forums. That is not exactly conducive to peace. More than ever, Mr Abbas needed a domestic political win. This has only been heightened since the recent conflict between Israel and Hamas. The Palestinian Authority had become largely irrelevant in the international theatre until the UN vote.
It must be noted that, in the past, the quiet co-operation between Israel and the Palestinian Authority has led to some genuine progress—not enough by a long way but some at least. What is needed is a de-escalation of tensions and a period in which each side commits, publicly or privately, not to take steps which antagonise the other, whether it is expanding settlements, which I disagree with absolutely, on the Israeli side, or unilateral moves in international organisations or legal bodies on the Palestinian side—and of course a cessation of hostilities from either side of the border.
If I was a public adviser to the Israelis, I certainly would not have advised them to announce the building of more settlements and a holding-back of taxation revenues. Perhaps I would have advised them to concentrate on what Israel does internationally in helping with world relief. When a massive earthquake struck Haiti, Israel was one of the first and most effective responders, using its undoubted technological know-how and experience for the benefit of others. Perhaps noble Lords have forgotten that, during Israel’s stay in Haiti, the medical delegation treated more than 1,110 patients, conducted 319 successful surgeries and delivered 16 births including three in Caesarean section. The IDF search and rescue force also performed very well. On irrigation projects around the world—the noble Lord, Lord Alderdice, spoke about the conference that he organised the other day—Israel is a world leader in water technology to develop new water sources, use the water that we have most efficiently and recycle waste water. We need more desalination plants around the Middle East and not just in Israel. On aid or advice to other regimes, according to MASHAV, an Israeli organisation, Israel has used its expertise to transform agriculture from traditional subsistence to sophisticated market-oriented production. It is for this reason that many countries in the developing world have sought partnership with Israel in addressing their agricultural challenges. Since 1958, MASHAV has trained in Israel and abroad almost 200,000 course participants from approximately 140 countries and has developed dozens of demonstration projects worldwide in fields of expertise.
If I were one of those mythical public relations consultants, perhaps I would also talk about the life-saving technology which has emanated from Israel. It is hard to know where to start. Hadassah University and the Weizmann Institute have produced scientists and Nobel laureates responsible for the research and development of important medical advances and life-saving techniques. Israel leads the world in stem cell research, with important breakthroughs in repairing tissues and organs damaged by Parkinson’s disease. Teva Pharmaceutical Industries, headquartered in Israel, is the largest generic drug manufacturer in the world and has made an incredible effort in helping to combat diseases such as multiple sclerosis and Parkinson’s disease. Israel has broken ground in fertility treatment. There is the neuromedical electrical stimulation system, a glove-like device that can help paralysed people; there is imaging technology; and there is help for cancer patients and nanotechnology.
The responses from Israel on settlement expansion and tax revenues do not help, but they must be seen in a context where the Palestinians refuse to sit and negotiate and have taken a unilateral step which aggravates the situation. Israel has said time and again that it wants a two-state solution, as referred to by the noble Lord, Lord Janner. I ask Her Majesty’s Government and all parties to do as my noble friend Lord Alderdice said and work to a regional solution where all parties get people to the negotiating table. It is not too late to do so. There is a chance for a two-state solution, but it is up to us, Her Majesty’s Government and other Governments to help by getting the two sides to that table to negotiate before it is too late.
Lord Judd
My Lords, it is obviously a time when we should all turn our minds to how we take things forward. However, in our concern about how we take things forward, it is also important to have some historical context for what has happened, and it is a long story.
We have special responsibility in this country towards Israel because we were one of the principal powers that played a key part in bringing Israel into existence and we must therefore not betray our responsibility in that context. It is also important to remember that, historically and objectively, no people paid a higher price for the creation of the State of Israel than the Palestinian people. It is important therefore to see both sides of the argument in history, because it is not just a current crisis that we face but a deeply rooted history.
I do not happen to believe that the West and our own country under successive Governments have been even-handed in their approach to this situation, when, if any issue in the world demanded even-handedness, it was this one. We have been pro-Israeli, and history will read the message very clearly. We may try to persuade ourselves that we were not letting down the Palestinians but we were, repeatedly. Where has our voice been on the blockade, on the screwing of the economy of Gaza? In two or three years’ time, the one remaining aquifer in Gaza will collapse, because spare parts have not been allowed in through the blockade to maintain it. Ninety per cent of the water in Gaza is not fit for human consumption. The schools, the health, and the economy of Gaza have been screwed.
Almost exactly a year ago I was in the West Bank and Jordan, and up until then I had not realised quite what the settlements meant. They are not just a few nice settlements—Israeli suburbs in the West Bank and Gaza—but fortified encampments with security gates. Palestinian life is absolutely distorted. People are humiliated day after day as they pass through the security gates, where they are treated rather brusquely, to say the least. Farmers are able to get to their land and back again only at certain specified hours. I asked what would happen if a farmer had a heart attack. The UNRWA people told me, “Well, somebody would have to get on to us, and we’d have to try to negotiate an arrangement with the Israelis so that the gates were opened to allow the people back”. We have not faced up to the realities of what is going on.
Another issue worries me very deeply. I recall how in 1967 I was in Israel for the duration of the war. I talked to Israelis then, who said to me, as they listened to militant, pro-Israeli language being broadcast into the country in the excitement of everything that was going on, “It’s all right for these people, but we’ve got to make a future with our neighbours and all the people in the region”. Israelis said that to me. Since then Israelis have refused to serve in the armed services, because they will not be part of what is going on, and other Israelis have made brave stands against these policies. Our absence of even-handedness has let down those brave and courageous Israeli people who have tried to advocate an alternative policy for their country.
We have to look to the future. We must not suddenly switch from our responsibilities. History will not allow us to do that. But it is because we have special responsibility for the creation of the State of Israel that we must always speak honestly and bluntly about what really matters for Israel’s survival. The truth of the matter is that the present policies of Israel—and we all know this—could not be better designed to undermine the future prospects of the people of Israel. They prolong the danger and the threats that will accumulate.
How will we approach the future? Reference has been made to the need for a regional approach, which I am sure is right. We must have a regional approach to secure the future. However, a regional approach cannot impose a solution. No one can impose a solution. The solution will have to be generated by the Palestinian and Israeli people. That is where it will come from. We have an example in our own history, that of Northern Ireland. If it is to work, it must have the commitment of the key parties, which will mean a readiness to talk to people with whom it may not be very easy to talk, just as we learnt that we had to talk to the political wing of the IRA if we were to make progress. That was critical.
However, we also learnt something else in that process in Northern Ireland: that we must keep any preconditions to an absolute minimum because they will only distort everything, and they will not be owned by the participants. Some of the things that as outsiders we see as obviously essential must come from the participants in the negotiations, who have to come to those conclusions themselves. They must go through a process of learning in the negotiations that go on. I am sure that the noble Lord, Lord Alderdice, would agree with me that that is exactly what happened in Northern Ireland.
We should also be encouraging and supporting them in practical co-operation. The conference on water organised by the noble Lord, Lord Alderdice, which I was so glad to be able to attend, was a very interesting example of this. It demonstrated how we can help them to get into practical situations in which they see their mutual interdependence.
The most important point of all is that a negotiated, lasting, enduring solution will have to be inclusive. It will have to draw in the widest possible cross-section of people. It is nonsense, and stupidity, to refuse to see that Hamas has to be part of the solution. This can no longer be tolerated, because of course it becomes a self-fulfilling prophecy. It undermines any chance of emerging moderate or more enlightened leadership in Hamas, and plays right into the hands of the extremists, who are there, and who will use Hamas for their own irreconcilable ideological religious—or other—objectives.
This will take a lot of imagination. What is tragic—and I use the word in the real Greek sense—about the vote last week is that we marginalised ourselves. I hope that my noble friend, who introduced the debate with a particularly good speech, will not mind my saying that the Question refers to talks with the Palestinian leaders since the vote. I cannot imagine that we are very high on the Palestinians’ list of priorities for talks at this juncture.
Lord King of Bridgwater
My Lords, I have not previously been involved in the debates on Israel and Palestine and the issues arising from them. I am extremely grateful to the noble Baroness for introducing this debate, because I wanted to express simply, as somebody who is much more of an observer than many of the experts who have spoken already, the great concern that I have about the situation.
I am progressively more alarmed about this region, which has already been referred to being in turmoil at the present time. This situation does not threaten merely continuing bitterness and violence between Israel and the Palestinians but threatens the region, and may threaten ourselves, in terms of world peace and stability, the possible involvement of the United States, and the consequences of events in Iran. A number of developments here pose the greatest danger to us. I have always supported the State of Israel and its existence. However, the current actions of the Israeli Government imperil the State of Israel itself. Voices of concern and friendship have a duty to speak out at this time.
The New Statesman had a headline this week, that Mr Netanyahu risked condemning Israel to perpetual war. The awful thought, in such a dangerous world, of the risk of continuing and escalating conflict of this kind, must concern us all. This is a time when Israel needs support. The noble Baroness referred to the vote in the United Nations, which was 138 to nine. Of the nine, as the noble Lord, Lord Alderdice, quoted, I had to look up who two of them were. One of them was Palau, which has a population of 20,000; another was Nauru, which has a population of 10,000; and the Marshall Islands came swinging in with a majority vote of 68,000. That is three votes in the United Nations with a smaller vote than the Isle of Wight in a constituency election. France, Italy and Spain came out against Israel, supporting the adoption of observer status for the Palestinians, while Germany, Holland, Australia and the United Kingdom abstained. I must say to my noble friend that I was disappointed that we abstained. I understand why the Foreign Secretary made that decision, but the Israeli reaction since has been a real slap in the face for him and others who had hoped for a more moderate response.
I say to the many noble Lords who express strong support for the State of Israel: does anyone in Israel still care about what the rest of the world actually thinks? It is deeply depressing at the present time. We have seen Mr Netanyahu going to America, snubbing the American President and marching straight off into a meeting of AIPAC, where he got a heroic reception, as he would. Against that background, it is deeply worrying. The Israelis are losing the support of countries that would have supported them strongly in the past. I had these thoughts even before the announcement of the disastrous reaction to the vote in the United Nations. Although the noble Lord, Lord Palmer, rather glossed over the decision to go ahead with preparations for E1 and the impact these have had on East Jerusalem, along with tax withholding and going ahead with more settlements, I certainly understood why Ban Ki-Moon said that it would be an “almost fatal blow” to hopes of peace. I am not sure that the present Israeli leadership under Mr Netanyahu actually has any intention of ever going forward with a two-state solution. I am afraid that that is the impression he gives outside the country. Everyone goes along with it, saying “That’s our policy”, but I am not sure whether he is ever going to move on it.
I much appreciated the speech of my noble friend Lord Alderdice. He and I know very well the old cry, “Not an inch and no surrender”, which I had shouted at me often enough in Northern Ireland, along with people trying to hit me over the head, but we knew that it was not the way out of the problem. Progress had to be made on both sides and, as the noble Lord, Lord Judd, said, it had to involve the people on both sides. They have to understand their best interests. No sensible Israeli wants to be in a state of perpetual war. The Israelis cannot want to be in that continuing situation, and no Palestinians want to find themselves in the present miserable situation.
Against that background, the scale of change that is taking place in the world and in that region cannot be overstated. I have seen, and no doubt so has Israel, the visits that are now being paid to Gaza. The Prime Minister of Egypt has been to Gaza, as has a senior representative or perhaps the Emir of Qatar. Senior representatives from Bahrain have been there, and now I see that Mr Erdogan of Turkey is talking about going as well. These developments are profoundly significant. Whether these decisions and the reactions to them are to help the election campaign of Mr Netanyahu in January—we are promised the election of an even more hawkish coalition—is not known, but one does weep very seriously, not least because we still have the elephant in the room in the shape of Iran and its nuclear weapons. One wonders what kind of approach a more hawkish coalition might take to that.
I will just add this. I used to visit America on behalf of Northern Ireland, and I found that many of the expat Irish—the Irish lobby—were much more inclined to scream “No surrender” or “A united Ireland at all costs”, and then I would talk to the Irish-American politicians like Ted Kennedy, Daniel Moynihan or Tip O’Neill, and they were the sensible ones. Charlie Haughey used to be picketed when he went over because the Irish lobby there thought he had sold out on Irish independence. The British ambassador to the United States would say to me, “The green lobby, the united Ireland lobby, is jolly strong over here, but it is not a patch on the Jewish lobby”. The truth is that the Jewish lobby in the United States has done no service to Israel and it has done no service to the standing of the United States in the region. Let us think back to when President Clinton could stand between Mr Rabin and Mr Arafat. He was seen as an impartial assister towards peace. America is now seen to be one-sided, voting against the Palestinian resolution and no longer commanding confidence. A nation of the power and scale of the United States could easily be a tremendous force for good in the region.
I believe that we are in a serious and rapidly developing situation, one that makes the world more dangerous. For all who care about the future of Israel and its continuing existence, and not least providing a civilised life for all those in the region, it is desperately important that they realise that a change of course must be undertaken. They must get rid of all the conditions, sit down and try to find a genuine approach towards a two-state solution, or I fear for where the future may go.
Lord Phillips of Sudbury
My Lords, I had something of a conversion experience, I suppose it might be called when, like many, I went to Israel, the West Bank and Gaza for the first time in 2001. Up to that point I had read of the declining circumstances in Palestine, but I was and remain inexorably concerned about the security of Israel. For my whole adult life I have been an inveterate supporter of that country. I am a huge admirer of Israel in all sorts of ways, just as I am of the Jewish community in this country. It was not necessary for my noble friend Lord Palmer of Childs Hill to remind us of the philanthropic tendencies of Jews. In this country they have an unrivalled record of philanthropy. The tragedy is that a great country and a great people have so demeaned themselves and behaved in a manner that is not just contrary to international law but contrary to simple morality and decency that I genuinely believe that they are now on a suicide path. They are losing former friends and, I suspect, ordinary citizens across the world in droves. That is a tragedy.
I was so committed to the survival of Israel that the only time I have ever offered to fight for anyone was in 1973. I wrote to the Israeli embassy here, but fortunately for me the state of Israel was rather effective at rebutting the attack and I was not called up. When I first went to the region I could not believe my eyes. Anyone in the House who has not been there and who doubts the horrors of both the West Bank and Gaza should go. I am always surprised at how many of my Jewish friends have not been to either of those places, but in a sense I do not blame them because I think they realise how unhappy it would make them to do so. I have been four or five times over the past decade, and I always work with Jewish charities and marvel at how brave and brilliant they are. I would mention Ir Amin, B’Tselem, Machsom Watch and a number of others. Machsom Watch is comprised of 500 middle-class Jewish women who go out on rota every day to stand at the checkpoints and observe the conduct towards the humiliated and harassed Palestinians, and at night they put what they have seen on the web. What a restraint that is. A woman who took me to a checkpoint said that she was called in by one of the commanding officers. He said, “We are both Jews and we should not be arguing about this”, but then she noticed on the wall behind his head a sign that read, “Our task is to make life as impossible for the Palestinians as we can”. That about says it all.
I turn to the circumstances prevailing in Gaza. We hear a lot about Israel getting out of Gaza and the Gazans messing up their opportunities. Well, for the majority of those concerned, getting out of Gaza was very much a utilitarian decision. Maintaining 8,000-plus settlers in Gaza was simply beyond the scope of the state of Israel and was counterproductive. Today, the situation is appalling. I will read out some statistics that I have dug out. According to UNWRA, 38% of Gazans are poor, 44% are food insecure, and 80% depend upon food aid. Gazan poverty is the world’s worst, but the only one created deliberately. The blockade has caused 17% more Gazans to be in the poorest category since 2005. More than a third of them—and more than half the young people—are unemployed. Hundreds of factories stand idle and they produce exports only at the rate of 3% of the level before the trouble. Eighty-five per cent of their fishing grounds and 35% of their agricultural land cannot be accessed because of restrictions. Eighty-five per cent of schools are run on double shifts, because others have been bombed. Ninety per cent of the water is contaminated. It is rather ironic that my noble friend talked about the prowess of Israel in water production when it has decimated the water supply in Gaza. As a result, over 50% of children have chronic diahorrea. Gideon Levy, in an article in Haaretz in July, told of the way water is used in the West Bank as a tool of colonisation. He wrote this dreadful account:
“The Civil Administration is supposed to take care of the people's needs. But it does not stop at the most despicable measure—depriving people and livestock of water in the scathing summer heat—to implement Israel’s strategic goal: to drive them from their lands and purge the valley of its non-Jewish residents”.
One needs at this point to repeat—and go on repeating—that Israel is split from top to bottom. One quarter to one-third of Israelis, by other people’s calculations, are totally opposed to what is going on in Palestine. Would that they were sitting here and speaking on the side of all, or most, of the speakers tonight. I have met some of these people, and they are brave, because they are subject to huge pressure. They are called self-hating Jews, I believe.
The noble Lord, Lord Judd, said—absolutely rightly—that our Government have employed double standards towards Israel for decades, and it has got worse, not better. Thank goodness that after this latest scandal of, I think, 3,000 new colonists in East Jerusalem cutting East Jerusalem off from the West Bank by the E1 block, the Foreign Secretary has at last come out with a firm statement. I have been in this House since 2008, and I cannot tell you the number of times that we have had statements from spokesmen from Governments of all persuasions which add up to nothing. There is never any action. My feeling is that action is not just in the interests of the Palestinians or of peace in the Middle East, let alone in the wider world, it is in the interests of Israel itself. That is what drives me on this issue and makes me unwilling to hedge about and avoid the charges of anti-Semitism which always follow plain speaking on this subject, I am afraid to say.
I feel passionately that our Government, having made a start at what I call plain speaking in relation to plain facts, should pursue that path and if necessary be independent of the United States, which is in a particular relationship with the huge and powerful Jewish community there, as the noble Lord, Lord King, vividly explained. We must be independent and do what we think is right for Israel, the Palestinians, the Middle East and the peace of the world. If we do that, a lot of people in Palestine will listen to us.
In 2006, I had a meeting with Dr Ismail Haniyeh, one of the hate figures, who is the leader of Hamas in Gaza. I have to say I was immensely impressed by the man. Unless I have lost all my touch for understanding the reactions of people, I was impressed. I spent an hour with him man to man. He is dying for an opening and for some encouragement because he never gets a dividend for anything Hamas does, except more colonisation and more repression. There is hope to be had if we as a country can be brave with our policy, and I hope that the Government will carry on from where they now are.
Lord Williams of Baglan
My Lords, I welcome the opportunity to speak in this debate. I declare an interest as a former British official in the Middle East and as a UN Under-Secretary-General in that region. The noble Lord, Lord Palmer, referred earlier to the great Israeli diplomat Abba Eban, who once noted that the Palestinians never missed an opportunity to miss an opportunity. Now the boot is on the other foot. The Israeli Government have elevated a significant diplomatic setback in the UN—one in which it was supported by only one out of the 27 members of the EU—into a significant regional and international crisis. I fear that the hard-line stance of the current Government is resulting in a haemorrhaging of support for Israel itself. The noble Lord, Lord Palmer, referred to support for the resolution from Islamist and third world countries. The fact is that all the democracies of the world, with three exceptions—the United States, Canada and the Czech Republic—voted against Israel or abstained. That in itself is a stunning development in the history of diplomacy in the Middle East, and one that Israel needs to take careful note of. Never has its isolation been so marked.
It says a lot of Israel and of the Israeli press that these developments are followed closely and in a critical way. The newspaper Haaretz this morning is more scathing of the Israeli Government than many of the remarks made by noble Lords. Even the centrist newspaper, the Yedioth Ahronoth, is critical of Prime Minister Netanyahu’s policies and where they are leading Israel. Many noble Lords, including the noble Lord, Lord Alderdice, have referred to the regional element of peace. Where do we stand on that? Israel has peace treaties, of course, with two Arab countries: Egypt and Jordan. Those peace treaties are being sorely tested these days. It is very difficult for a democratically elected President of Egypt, Mohammed Morsi, to stand up and argue to his people that this peace treaty is right and must be adhered to. Jordan, wisely guided by King Abdullah, is also suffering great strains, and I fear there is no doubt that the majority of Jordanian public opinion is quite critical of those peace treaties.
We have heard much about Gaza. Where have Israeli policies led there? I will tell you: next week, Khaled Meshaal, the leader of Hamas, will enter Gaza, and he will enter as a victor in the eyes of Palestinians. I do not think Abba Eban would recognise Israeli diplomacy today. Israel must rescind the actions announced by its Government in the last 48 hours: namely the declaration of more and more settlements—another 3,000 dwellings—and that planning will begin for settlement in E1, the land block between East Jerusalem and the heart of the West Bank. Everybody knows what that means. It is meant to be the end of the possibility of a Palestinian state. If that were not enough, $120 million—£75 million—of taxes owed to the Palestinian Authority have been seized by the Israeli Government in the past few days. Prime Minister Erdogan—a strong critic of Israel—will also visit Gaza soon. This is not diplomacy, and it is not diplomacy that is serving the state of Israel. Time, in my experience, is running out for a two-state settlement. We would all bitterly regret that and, most of all, it would cause great pain for the state of Israel.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, I am grateful for the opportunity to respond for the Government to this debate, brought by the noble Baroness, Lady Royall, about the discussions that we have had with the Palestinian leadership in light of the Palestinian resolution at the UN General Assembly last week. It is an important and timely debate and I welcome it. I know the Israeli-Palestinian conflict is a matter of great interest to the House and, as always, involves great emotion and sincerity of views on all sides. Achieving a two-state solution to the Israeli-Palestinian conflict is one of this Government’s top international priorities.
The UK has long been clear that we support a negotiated settlement, leading to a safe and secure Israel living alongside a viable and sovereign Palestinian state, based on the 1967 borders with agreed land swaps, with Jerusalem as a shared capital of both states and with a just, fair and agreed settlement for refugees. That is the only way to secure a sustainable end to the conflict, and it has wide support in this House and across the world.
However, there has been a dangerous impasse in the peace process over the past two years, as referred to by my noble friend Lord Alderdice. The pace of settlement building has increased, and we have seen new and concerning reports of this in recent days. Continued rocket attacks on Israel and continued settlement building have resulted in frustration and insecurity deepening on both sides and the parties have not been able to agree a return to talks.
We are grateful to Egypt, the United States and the UN Secretary-General for their role in bringing about a ceasefire in Gaza last month. We now need to build on this to bring about a lasting peace, including, as my noble friend Lord Phillips of Sudbury said, the opening up of the blockade in Gaza for trade as well as for aid; and, of course, also an end to the smuggling of weapons. The crisis in Gaza and tragic loss of Palestinian and Israeli life show why the region and the world cannot afford a vacuum in the peace process.
The frustration felt by many ordinary Palestinians about the lack of progress in the peace process is wholly understandable. We condemn illegal settlement activity in the West Bank and East Jerusalem, because it threatens the very viability of the peace process and a two-state solution that we all support. After many decades, the Palestinians still do not have the state they aspire to. That is why we have consistently asked Israel to make a more decisive offer to Palestinians than in the recent past, and have also called on Palestinians not to set preconditions for negotiations.
We agree with my noble friend Lord Palmer that the parties must get back to the negotiating table. Only today, our consul-general in Jerusalem conveyed this view to the chief Palestinian negotiator. The only way to resolve the dangerous impasse in the peace process is a rapid return to credible talks. This is the Government’s guiding principle, and it was this concern that determined the Government’s approach to the Palestinian resolution at the UN General Assembly last Thursday. Nevertheless, we respect the course of action chosen by President Abbas. There is no doubt that he is a courageous man of peace. Let me be clear: we want to see a Palestinian state and look forward to the day when its people can enjoy the same rights and dignity as those of any other nation. That is why we stress the urgency of negotiations leading to a two-state solution.
Noble Lords, including my noble friend Lord King of Bridgwater, raised questions and concerns about the assurances that the Government sought from President Abbas and the position we took in relation to the vote. The Government, I suppose, judged that these assurances would help facilitate a return to negotiations. However, our priority now is to try to restart those negotiations. We call on all parties to show the political will necessary to achieve this. We will redouble our efforts to restart the peace process and continue our strong support for the two-state solution. As I have said to this House on many occasions, and indeed only recently, 2013 will be a crucial year for the Middle East peace process. We have urged Israel to avoid reacting to the resolution in a way that undermines the peace process and a return to negotiations. The Foreign Secretary spoke to the Israeli Foreign Minister on Friday and the Israeli Defence Minister on Saturday. He made clear that we would not support a reaction that sidelined President Abbas or risked the collapse of the Palestinian Authority.
We are therefore extremely concerned by the decision of the Israeli Cabinet to approve the building of 3,000 new housing units in illegal settlements in the West Bank and East Jerusalem. This Government, along with our European partners, have consistently made clear that settlements are illegal under international law and undermine trust between the parties. If implemented, these plans would alter the situation on the ground on such a scale that it would make the two-state solution, with Jerusalem as a shared capital, increasingly difficult to achieve, if not impossible. The right reverend Prelate the Bishop of Guildford was right to raise settlements as a pivotal issue. Such plans undermine Israel’s international reputation and create doubts about its stated commitment to achieving peace with the Palestinians. We need urgent efforts by the parties and by the international community to achieve a return to negotiations, not actions that will make that harder.
In all the conversations that the UK has had with Palestinian negotiators, and those that the Deputy Prime Minister and the Foreign Secretary have had with President Abbas in the past week, relations have been excellent. That deep friendship will continue. The financial and political support that the UK gives, with very strong cross-party support, to the Palestinian Authority, which is among the foremost in the world, is understood well by the Palestinian Authority and will, of course, continue. We want the Palestinian Authority to succeed and we believe that President Abbas is the best interlocutor that Israel will have to bring about peace. We continue to be in regular contact with the Palestinian Authority, and officials in our consulate-general in Jerusalem had meetings in Ramallah today to reinforce the UK’s firm commitment to and support for the Palestinian Authority. My right honourable friend Mr Burt is planning, possibly this evening or tomorrow, to speak to the Palestinian chief negotiator.
We have been clear that we deplore the recent decision of the Israeli Government to build 3,000 new housing units and to unfreeze development in the E1 block, and the confiscation of this month’s clearance revenues. This threatens the viability of the two-state solution. On Saturday, the Foreign Secretary publicly called on the Israeli Government to reverse this decision. In common with steps taken by other European partners, including France, the Israeli ambassador to London was formally summoned to the Foreign Office this morning by my right honourable friend the Minister for the Middle East, who set out the depth of the UK’s concerns about the recent Israeli decision.
The noble Baroness, Lady Royall, asked what representations had been made to Israel on the confiscation of customs revenues. The Minister for the Middle East conveyed our serious concerns about this decision to the Israeli ambassador this morning. The national security adviser, Sir Kim Darroch, reinforced this concern to his Israeli counterpart when they spoke this afternoon. The noble Baroness, Lady Royall, also raised the question of what consultations we have had with the noble Baroness, Lady Ashton. We have had a number of consultations with key international partners since Friday, including with the office of the noble Baroness, Lady Ashton, and with the US Administration. We note the strong statements of the noble Baroness, Lady Ashton, and Secretary of State Clinton on these issues.
My noble friend Lord Alderdice raised important points based on greater experience. I am grateful for his contribution and also for the tone of his contribution. It is of course right that a regional initiative is important. Egypt’s success in relation to the Gaza ceasefire is just one great example of this, but I am sure my noble friend will agree with me that the US must now step up to the mark, as real progress will be made only with its positive involvement.
The noble Lord, Lord Janner, is right when he says that the future has to be agreed through diplomacy, not rockets. The recent conflict in Gaza left 160 Palestinians and six Israelis dead. That is not the way forward. The noble Lord, Lord Judd, raised important issues, noting that in order to lay the foundations for future agreement, we must understand history. I agree that an even-handedness in this matter is as much in the interests of Israel as of the Palestinian people. The noble Lord, Lord Williams of Baglan, also raised the issue of settlements. I hope he feels that I have dealt with that already.
Palestine is now a non-member observer state at the United Nations but, sadly, the situation on the ground remains the same. The only way to give the Palestinian people the state they deserve, and the Israeli people the security they are entitled to, is through a negotiated two-state solution. That requires both parties to return to negotiations, Israel to stop illegal settlement building and Palestinian factions to reconcile with each other.
The past month has highlighted the fragility of the situation in the Middle East and the coming year will prove crucial if peace is to be achieved. Urgency is required to ensure that we grasp the opportunities that will be presented. We encourage the US, with the strong and active support of the UK, the EU and the international community, to show decisive leadership and do all it can in the coming weeks and months to drive the process forward.
If progress on negotiations is not made next year, the two-state solution could become impossible to achieve. That is why the Foreign Secretary has said to the US Secretary of State, Hillary Clinton, that such an effort would need to be more intense than anything seen since the Oslo peace accords. We are ready to throw our support behind this to find a solution to the conflict before it is too late.
Legal Profession: Regulation
Baroness Deech
To ask Her Majesty’s Government what assessment they have made of the efficacy of the regulation of the legal profession.
Baroness Deech
My Lords, I declare an interest as the chairman of the Bar Standards Board and as a non-practising barrister. I have regulated several enterprises in my time, but I have been fortunate in only ever regulating those which I am convinced do good and with which I am familiar and well briefed. This House spent many hours last year debating the merits of and need for public bodies, and the principles aired then are ones that we need to be reminded of tonight.
The background to regulation of the legal profession is simple to grasp, and it is quite different today from the situation that prevailed when the governing statute, the Legal Services Act 2007, was conceived and passed. Simply, it is the lack of legal aid and affordability. That is no problem for those who go to the thriving commercial side of the Bar, but the average wage earner often finds the expense of legal advice beyond his means, in part because of the built-in cost of regulation. The effect on the profession is dire too, for the very large numbers of the Bar who do, arguably, the most socially valuable work, in criminal and family law, are seriously affected, because payment for regulation has to come out of their own pockets. This works against mobility and diversity, for the altruistic young people who qualify and want to come to the Bar cannot earn the modest living they once relied on without the legally aided work, at the very time when their higher education debts have peaked.
The Legal Services Act, which governs my work, is grounded in the 2004 report by Sir David Clementi on the regulatory framework of legal services. He was concerned with the then over-complex existing regulatory frameworks and with complaints handling, although, to be fair, that was more relevant to the solicitors’ branch than the Bar. He was trying to reconcile liberalisation, allowing competition and access to flourish, with protecting the public, with special focus on complaints handling. His report led to the Legal Services Act 2007.
Consumerism was the other motivating factor behind the Act, but that policy was formulated in 2000, in an entirely different economic climate, following the Office of Fair Trading report about competition in the professions. This was all before the crash of 2007-08 in the financial world and its dreadful results. That demonstrated the failure of financial regulation, which, with hindsight, might have affected the principles behind the Legal Services Act. It was once thought that the division between clearing banks and merchant banks should go, and that there should be a free market of unfettered competition and deregulation. I am no economist but I would not be alone in pointing out that the meltdown and bank collapses resulted, and the Financial Services Authority seemed to have no power to prevent any of this or stop any innocents from losing. Indeed, that super-regulator is about to be dismantled. Legal regulation was developed without regard to this history and its risks have yet to play out.
Under the 2007 Act, the profession is overseen by the Legal Services Board. Its powers are devolved to some extent to the front-line regulators—for these purposes, the Bar Council and the Law Society, which have separated out their regulatory and representative functions. Therefore, the Bar Council represents barristers and the Bar Standards Board regulates them; the Law Society represents solicitors and the Solicitors Regulation Authority regulates them—not to mention six other regulators. For the purposes of this debate, I will concentrate on the Bar and the solicitors, of whom there are 10 times as many, and I am married to one of them.
Proper regulation, in the public interest, is absolutely vital but it needs to be balanced against cost and existing resources, and performed efficiently. It does not take much to see that, rather than sorting out the maze of regulation, the statute adds to it; there may be over-regulation, duplication of regulation and competitive regulation, none of it cost-capped. The cost of the Legal Services Board and its demands are serious issues, for the practitioners have to fund it, as well as the other projects it has required—quality assessment of advocacy, an education review, diversity data collection and the Office for Legal Complaints. More than that, it is arguable that the Bar was caught up in the slipstream of the criticisms that were levelled at the handling of complaints by solicitors, and the heavy structure of the 2007 Act is not suited to as small a profession as the Bar.
When the Legal Services Bill was introduced in 2006, the regulatory impact assessment calculated the annual running costs of the Legal Services Board, which is the super-regulator overseeing the specialised ones, at £3.6 million. However, the total borne by the entire legal profession up to now is £19.5 million, with another £50 million for the Office for Legal Complaints. The cost falls on clients and, in the case of legally aided clients, on practitioners. That is due to duplication of work through micro-management of regulators and the pursuit of objectives more akin to a market regulator than an oversight public interest regulator, as was mandated by Parliament.
I echo the fears of Sir Sydney Kentridge when regulation of the legal profession was first advanced a few years ago. He feared an increase of power of the Government to control the legal profession through a government-appointed body, but he was confident that the Lord Chancellor would ensure that the Bar was protected. Sadly, as I have learnt at international conferences, the outside world sees the independence of our legal profession as diminished by regulation.
The 2007 Act laid down eight regulatory objectives in no particular order. Some conflict with others in practice. Therefore, a margin of appreciation clearly must be left to front-line regulators to decide what steps to take. It is not clear from the statute whose view would prevail in case of disagreement between the Legal Services Board and the front-line regulators. Nevertheless, history has shown that one objective, that of promoting the interests of consumers, has been elevated above the others by the super-regulator, and in so doing it sees it as its task to “direct” rather than “assist” —the word chosen by Parliament—the front-line regulators.
Excessive focus on the consumer interest may be to the detriment of the professional interests and standards upheld by the lawyers. Commercialism is not everything, although one wants legal advice to be available and affordable. Certain services, such as education, health and the law, are beyond market value. The public interest must prevail. It does not seem to me that the public will be well served if there is authorisation for a new category of partly qualified or underqualified providers of legal services who offer only one service—for example, will writing, which cannot really be confined to a small area.
Too many new projects are being imposed by the super-regulator on the front-line regulators without due regard to cost, need and effort. For example, outcomes-focused regulation does not work well for the rules of conduct of the Bar, because court litigation is a process-driven system, where the rules are not merely means to an end but an end in themselves and intrinsic to the rule of law itself.
Let us take referral fees. They are seen by the entire Bar as unethical, restricting competition between lawyers and denying the client freedom of choice. They are likely to be illegal under the Bribery Act 2010, but the front-line regulators are being told to retain them except where specifically banned by law, in the face of evidence that they are a bad thing.
Another example is that the members of the Bar have been told that, when they first meet a criminal client in the cell, they must give that client on a piece of paper directions as to how to complain. There could not be a worse moment at which to do it. Now there is required detailed collection of barristers’ equality and diversity data, which go beyond the Government’s recommended approach, in that they require data on sexual orientation and socio-economic status. They are to be collected chambers by chambers, yet many chambers have fewer than 10 members, which makes collection of such data very sensitive, because anonymity may easily be breached. The Bar’s preference for aggregate collection of such data across the profession was rejected.
The Bar Standards Board does not dispute the need for proper regulation, but it should be proportionate, affordable and effective. We were disappointed that the Ministry of Justice’s triennial review of the Legal Services Board did not address those concerns directly. The opportunity will present itself again in the quinquennial review of the 2007 Act.
The noble Lord, Lord Carlile, who cannot be in his place this evening, has said, in support of what I am saying, that the regulation of the legal profession is cluttered and bureaucratic. It may not have gained the confidence of the profession or the public.
At this stage in the implementation of the Act and the introduction of alternative business structures, there remains a role for the Legal Services Board, but not many more years should pass without an overhaul of the complications introduced by the Act in establishing a super-regulator. I hope that the Lord Chancellor and the Ministry of Justice will start a discussion with the profession and identify a simpler, cheaper and more balanced future.
Lord Faulks
My Lords, I begin by declaring an interest. I am a practising barrister. I was a head of chambers for nearly a decade until relatively recently and I am a former chairman of the Professional Negligence Bar Association.
I shall make a few observations about the position of the Bar. My noble friends Lord Gold and Lord Phillips of Sudbury will no doubt speak about the solicitors’ profession. When I started to practise, the Bar was lightly regulated, the profession was much smaller, chambers were much smaller, circuits had more power and influence, and most senior barristers proceeded to some form of judicial post. The standard of ethics was extremely high, but there were undoubtedly some restrictive practices which needed to change. Those practices, together with the considerable increase in the size of the profession and the way it functioned, called for examination.
Following the report of Sir David Clementi, the Bar Council carried out his central recommendation: that there should be a split between the regulatory and the representative elements of the Bar Council’s work. It therefore established the Bar Standards Board. The members had extensive experience of regulation and corporate governance and were appointed on Nolan principles.
It would be inaccurate to say that the Bar, a still small and independent profession, universally welcomed the arrival of the board but, since it has been set up, there has been a growing respect for what it does. There have inevitably been increasing demands on chambers in terms of record-keeping, compliance with regulation and a variety of measures that the board has imposed on the profession to secure high standards and ensure that the Bar functions in a way that reflects the public interest.
The key to the respect that the BSB commands is the evidence-based approach adopted by the board and the sense among barristers that it has taken the time and trouble to understand the Bar and the way it practises, both its weaknesses and its strengths. The need for a super-regulator, or oversight regulator, to oversee the approved regulators such as the BSB has not been seen by the profession to have any obvious justification—to put it mildly—particularly when it seems to involve sets of chambers duplicating many of the obligations placed on them by the BSB and increasing still further the cost of compliance.
What is the proper role of the Legal Services Board? As the Legal Services Bill was going through Parliament, a number of parliamentarians expressed the fear that the LSB might be heavy-handed and would not allow approved bodies such as the BSB, once they were operating effectively, to get on with the job. Reassurance was provided by the then Government. For example, on 13 June 2007, Bridget Prentice MP, the Parliamentary Under-Secretary of State in the Department for Constitutional Affairs, said:
“It is important that the oversight regulator does not micro-manage and second guess the actions of the approved regulators, as Members on both sides of the Committee will agree”.—[Official Report, Commons, Legal Services Bill (Lords) Committee, 13/06/07; col. 95.]
This is a reference to the work of the Joint Committee on the Draft Legal Services Bill, to which Sir David Clementi had said in evidence that there should be “minimal interference” by the LSB in the work of the approved regulators.
I have had the opportunity of reading the Bar Council’s response to the triennial review of the LSB by the Ministry of Justice, together with the LSB’s response. To the disinterested observer, I recommend reading these two documents. The arguments of the Bar Standards Board are compelling. Those of the LSB are rich with regulatory language, not easily understood by the general reader, and include a great deal of self-justification. They also indicate a desire to play an increasing role in the regulation of the legal profession. The response concludes with an observation about a review of the 2007 Act:
“Any significant change to the current settlement in advance of such a review will divert effort unnecessarily from the current challenging delivery agenda”.
This does not sound very much like what Parliament had in mind for the Legal Services Board.
I will give the House an example of where the LSB clearly wishes to have a significant involvement in the way the legal profession functions, which is in relation to legal education. The chair of the LSB observed in his Lord Upjohn Lecture in 2010 that the current framework for legal education and training was,
“simply not fit for purpose”.
In his own 2012 Lord Upjohn Lecture, Lord Neuberger, the president of the Supreme Court, made this observation about David Edmonds, the chairman of the LSB, and the Legal Education and Training Review:
“I cannot share the view which David Edmonds was reported in the Guardian as expressing in March this year, namely that he would be ‘extremely disappointed’ if the LETR only made minor recommendations. That suggests a conclusion that major reform is both necessary and proportionate, reached in the absence of any evidence and analysis. But surely we should wait for the evidence, the analysis of that evidence, and the conclusions drawn from that analysis before we start talking of disappointment or the nature of the appropriate recommendations. We should all be surely approaching the Review and its outcome with an open mind”.
No doubt the observations of the chairman would be said to be consistent with one of his goals in the LSB’s draft strategic plan for 2012 to 2015, which was,
“to reform and modernise the legal services market-place in the interests of consumers, enhancing quality, ensuring value for money and improving access to justice across England and Wales”.
The LSB clearly has very significant regulatory ambitions.
Who pays for the increasing regulation? The cost falls on practitioners and very harshly on those who are starting and who depend on the publicly funded fees which are steadily reducing in their true value. Smallish sets of chambers with a high BME quotient are particularly hard hit. For those not dependent on publicly funded work, the cost of regulation—much of which, in my view, is unnecessary—will ultimately fall upon the consumer of legal services, who will have to pay more for the increasing infrastructure that is necessary in chambers in order to comply with the burden of regulation.
Barristers are, frankly, bewildered by some of the requirements imposed by the LSB. The inept requirement by the LSB that barristers should inform their lay clients at the point of first instruction of their right to make a complaint to the chambers and, as necessary, to the legal ombudsman, shows very little understanding of the way barristers actually practise and an insensitivity of the circumstances in which a client sees a barrister. Similarly, the requirement by the LSB that quality and assurance should extend to practitioners’ advisory work reveals a complete ignorance of the way in which the profession works—not to say a failure to grasp fundamental principles of law in relation to the privilege which attaches to instructions given to barristers. These examples and many more illustrate the perils of having a non-expert lay regulator attempting to devise rules of conduct for practice by members of the legal profession.
Barristers understand the need for regulation and for public confidence in the legal system. However, it should not be forgotten that the legal profession is held in high regard throughout the world, as is our system of justice, and results in considerable benefit to the economy of this country. We should take considerable care before ripping up the model.
I am sure that the Minister will accept, as do the Government, that regulation needs justification and that our economy generally has been overburdened by unnecessary and inappropriately onerous regulation. I urge the Minister to support post-legislative scrutiny of the effectiveness of the Legal Services Act, particularly the scope of the LSB’s activity.
I congratulate the noble Baroness, Lady Deech, for bringing forward this important question to your Lordships’ House. I applaud her contribution to the raising of standards at the Bar and endorse all that she has said so ably in today’s debate.
Lord Phillips of Sudbury
My Lords, I, too, thank the noble Baroness, Lady Deech, for bringing this subject before the House. I confess that I received her e-mail warning us of all this only this morning, so my contribution may be lacking in coherence, but I will make a few points if I may. I started full-time in a solicitors’ office—admittedly, as an office boy—55 years ago, and have seen an astonishing transformation over that time in the regulation and, I believe, the ethos of what is still called a profession. When I started there was a maximum of 20 partners; you could have only partnerships, not limited liability; there was no advertising and no conditional fee arrangements; referral fees were not permitted; and, above all, there were no such things as “alternative business structures”, that charmingly denominated abortion that we now have among us.
Sadly, I must be honest and say that I do not actually think that solicitors are any longer members of a profession. I think that we are just another business. Thank the Lord, integrity is still largely to be found within the solicitors’ branch of the profession, but I do not see it long maintaining itself because the structures within which we now function have become so commercialised and driven by bottom-line considerations that it is unreasonable to expect integrity to survive organically—in rather the same way, I am afraid, as the City, little by little, has lost its values base. I agree with what the noble Baroness said about the big bang and its consequences
I feel that we are going down a blind alley in thinking that more and better regulation can maintain the essential integrity without which we are no longer officers of the Supreme Court and handmaids to justice but something a great deal less and, in some ways, quite threatening. I say that with great reluctance but cannot avoid it. I was the only solicitor member of the committee set up under Sir Sydney Kentridge, and he had a very lively belief in the ethos of the profession—a set of values, if you like, autonomous to each practitioner, without which the whole structure could not survive.
The truth now is that we are deep in regulation—I would say, as have others, overregulation or inappropriate regulation. I looked at Halsbury’s Laws of England this morning and found to my amazement that there are two volumes on the professional regulation of lawyers—1,196 pages of stuff about it. When I started, I doubt that there were 60 such pages. The life of the lawyer today—I can speak only of the solicitors’ profession—is unbelievably bureaucratic. There is somehow a belief that if you are forced to write a six-page letter to a client before you start work, that will somehow improve the work, or that some of the forest of internal bureaucracy that now prevails in big firms can maintain those essential elements without which there can be nothing.
I look to the regulatory objectives of the 2007 Act. I may say that I was one of the very few Members of the House of Lords—in fact, I may have been the only one—who was flat-out opposed to the part of the 2007 Act that set up the alternative business structure. But as has already been remarked, the eight regulatory objectives are not entirely internally consistent. When you think that the eighth of them is,
“promoting and maintaining adherence to the professional principles”,
of which there are five, it all adds up to a not entirely clear set of guidelines for the young person entering the profession. Above all, integrity should surely trump everything. I do not think the word appears in the eight regulatory objectives.
I leave my few remarks at that. I warn against the bureaucratisation that attempts to set the values for the practitioners. Up to a point, of course you have to have a complaints mechanism; of course you have to have somebody who can strike down the few bad apples and maintain that integrity. But I believe, as had been said by the two previous speakers, that we are not at the point where we are doing the regulatory process the best we can. In fact, going back to the drawing board—as I think was the phrase of the noble Lord, Lord Faulks—might well be what is needed.
I have not embarked on the alternative business structure, except to say that if anybody thinks that you can have a law firm 70% or 80% owned by whoever the hell you like and that that is not going to impact directly on the ethos of that enterprise, they are living in cloud-cuckoo-land. There are 120-plus applications now for ABS status and it is already observable that these big combines are going to be driven first, secondly, and thirdly by profit, profit, profit. It is all about the bottom line, just as in the City. Everything else can go hang. The notion of informal pro bono work is, I am afraid, inconsistent with the values that will bring into existence the vast majority of these alternative business structures. I would like a re-examination of them as soon as is feasibly possible, because they are a real nail in the coffin of professionalism.
Lord Gold
My Lords, I start by thanking the noble Baroness, Lady Deech, for bringing this debate forward this evening. Perhaps like the noble Lord, Lord Phillips, I was somewhat sceptical of the Legal Services Act and what was intended by it, but I was not here then. Maybe I would have joined in voting against it. But we are where we are, and we must have a properly regulated legal profession that ensures that all providers of legal services meet high standards of competence and behaviour. This is even more important now as the first alternative business structures start providing legal services. I share the concerns of the noble Lord, Lord Phillips, about where that takes us, but we will see.
The present system reflects the proposals in Sir David Clementi’s 2004 report, as we have heard from earlier speakers, for which there was general parliamentary support on all Benches as well as support from both the Law Society and the Bar. High on Clementi’s recommendations was the separation of representative and regulatory functions.
The Legal Services Board was created to provide oversight of a variety of different regulators to ensure that the right regulatory objectives are achieved and to secure some independence from the Government. The current regulatory framework has been in place only since 1 January 2010, when the Legal Services Board took on the majority of its powers under the Legal Services Act. In a review published in July this year, the Ministry of Justice was supportive. It concluded that the LSB should continue to deliver its functions in its present form. Recommendations for some improvement to its corporate governance were made but, by and large, it was to carry on operating as before.
Despite the endorsement from the Ministry of Justice, there has been some criticism of the LSB. We heard some this evening. The noble Baroness, Lady Deech, identifies criticisms made by the Bar Standards Board, notably that there is overregulation and duplication, leading, among other things, to unnecessary cost which inevitably is being picked up by the consumer. While generally supportive, the Law Society, representing 120,000 solicitors in the UK, is also critical. It believes that the LSB has not got the balance right and that the objective to promote competition in the provision of services is given greater emphasis than improving access to justice, encouraging an independent, strong, diverse and effective legal profession and promoting and maintaining adherence to the professional principles.
The regulatory arm of the Law Society, the Solicitors Regulation Authority is a bit more supportive, but also believes that the balance is not quite right at the moment. The SRA approves of the LSB’s emphasis on putting the consumer and public interest at the heart of regulation and its role in the appropriate co-ordination of standard setting across the various front-line regulators. The SRA also considers that the Legal Services Board has made significant progress in achieving its objectives, including making the market more diverse, as seen in the licensing of ABSs, and developing a regulatory regime that is both independent and transparent. However, the SRA believes that the LSB now needs to work closely with regulators to develop a common understanding of its role. It considers that the LSB must focus on properly developing its oversight role and, in doing so, reduce its approval, enforcement and investigatory functions. However, the SRB acknowledges that there have been improvements.
The main thrust of the complaint against the LSB is whether it is truly performing the role of oversight regulator, which was what was intended, or whether, in the words of the Bar Council, there has been “mission creep”, with the LSB now duplicating and overlapping the work of the front-line regulator, micro-managing the activities of those regulators it is meant to oversee. Front-line regulators, such as the SRA, are much more in touch with the profession, so why should we defer to something much more remote, where I do not believe that there are any legal practitioners involved? Critics claim that this duplication and the LSB’s micro-management have greatly increased the cost burden. It seems, from other speeches this evening, that that is indeed supported. Although it might be said that the fact that there is some tension between the LSB and the regulators over which it has oversight, or at least some of them, is not a bad thing—it might keep both sides on their toes—the extent of the serious criticisms that are being made suggests to me that we really need to look again at the balance.
I have spent the past two years immersed in the world of corporate governance. This has demonstrated to me that finding the right balance is key. While businesses must adopt a proper governance regime, it is essential that governance does not take over and damage the very business that the organisation is promoting. So those responsible for regulation must be practical and sensible in their outlook. Regulation for regulation’s sake cannot be right. Any regulation that is put in place must be appropriate and proportionate to achieve the required result. Its purpose must be understood and supported by those being regulated.
I am also sure that, if at all possible, finding the right balance should be achieved through greater dialogue and perhaps compromise between the relevant parties. Those concerned may need to demonstrate that they understand the issues raised by the other parties and are willing to be flexible. In the perfect world, by working in partnership and accepting that each side may be making valid points, the LSB and the regulators will be better able to deliver excellence in the regulation of legal services. This is far better than seeking to impose a solution on the regulators or the LSB. However, I understand there has been considerable dialogue between the LSB and the regulators and that little progress has been achieved. That is unfortunate and harmful to the legal profession and the administration of justice.
Under the circumstances something more is needed; it has been suggested that even late on there should be post-legislative scrutiny of the effectiveness of the Legal Services Act in order to test whether the original objectives have been achieved. I suggest to the Minister that this is something that should now be looked at seriously. The Bar Council wants such a review, and I do not think that the solicitors’ profession would have much difficulty in supporting it. Despite this, I think that the LSB has a continuing role, particularly as we have alternative business structures coming into place. Until we see where that actually takes us and how these new bodies operate, the LSB should remain, but I think the sort of review I have mentioned is necessary.
Lord Mackay of Clashfern
My Lords, it seems a long time since Burns Night 1989 when I introduced Green Papers about the reform or control of the legal profession. Your Lordships who are old enough will remember that these Green Papers provoked a certain ripple of interest from the judiciary and others. There have been great changes since then. In formulating the Green Papers we were principally, although not entirely, dealing with what looked like anticompetitive practices in the legal profession. To what extent a particular practice is anticompetitive is quite a difficult question. For example, it was thought that preventing the legal profession advertising was anticompetitive; I am not sure that the legal profession is better today with the kinds of advertisements you see on the television and in the newspapers. What one characterises as anticompetitive may, in fact, be something to do with the quality, independence and integrity of practitioners. If I am a reasonable member of a legal profession, I surely do not need to make my way forward by criticising my fellow practitioners. Relationships created in the course of professional work should, in my view, be the principal recommendation for a professional person.
Matters have since moved quite a distance. In my final proposals, which went through as an Act of Parliament, judges were given an important role in the control of the legal profession, which worked pretty well for a time. Gradually, the influence of judges was reduced until it disappeared altogether from the formal aspects of the regulation and eventually new standards were set up. I believe that the late Lord Nolan was the first to point out the need for a division in the Bar between its regulatory and representative functions, particularly in relation to the charges levied by the Bar Council for being a member of the Bar. If it was regulatory, it could be compulsory, whereas if it was representative, it should be voluntary. “No taxation without representation” might be an adapted expression for what he said.
It is also important to remember education in this connection. It was important in my judgment, and I remain of the view that it was probably correct, that a reasonably efficient system of education was required to maintain the professional quality of the Bar and of the solicitors’ profession.
It seemed to me, and I still take this view, that the different branches of the legal profession have different challenges to face. Therefore, I am glad that the Bar Standards Board, the Solicitors Regulation Authority and the other regulators which exist now in the legal profession have independent existence. I remember discussing the need for differences with Sir David Clementi. I think he did not fully agree with my point of view, which was why he suggested this overarching supervisory body for the legal profession as a whole. He thought that the legal profession should be regarded as a whole, and I could see the force of that. I also think that overspecialisation in the legal profession is detrimental to its success as a proper organ in the general affairs of our country.
We must recognise that it is important that the legal profession should be independent. In recent days, we have heard a little about regulation in relation to another independent part of our economy with a fairly heated argument on one side and on the other. That was part of the burden of the debate that we had on the Green Papers on that marvellous Friday, which I certainly remember with great—what should I say?—anxiety as to whether I was doing the right thing.
As I have said, education is important. In this connection, I would be glad if the Minister would comment on a report that I have recently read that the College of Law has been transformed, no doubt with the authority of the Privy Council, into the University of Law. I always thought that a university was supposed to be an institution which had perhaps not absolute universality but at least covered a few disciplines, including medicine and the like. But the University of Law seems to have only one discipline as its subject matter.
Lord Phillips of Sudbury
Is it not also true that the university which emerged from the College of Law is a profit-making entity? I rather think that it is.
Lord Mackay of Clashfern
I am just about to come to that point. I understood that the something or other—I am not sure exactly what—of the College of Law has been sold to a commercial organisation, which I assume has a profit motive in it. I do not think that it is a charity. However, the university would be a charity, at least under the ordinary definition of charity which prevails as an institution for the advancement of education. I would be glad to know a little about the Government’s policy in relation to having the legal profession taught, and a university financed, by a profit-making organisation. I am not against profit for profit’s sake at all but, hitherto, universities have not been regarded primarily as institutions set up for profit, except for the profit of those who profit from them.
The noble Baroness, Lady Deech, has led the Bar Standards Board with tremendous distinction. I sensed a certain amount of frustration in her remarks this evening about the way in which really efficient standard-setting for the Bar can be damaged by unnecessary and sometimes overcomplicated interventions by those who do not quite share the same objectives as the Bar Standards Board. I feel that the same may be somewhat true in the solicitors’ branch of the profession.
I hope that the Government will take very seriously the suggestion that this whole area should be subject to post-legislative scrutiny. The Joint Committees of this House and the other place have shown themselves to be very valuable in scrutiny of legislation. Post-legislative scrutiny of this legislation, which is so fundamental to the success of our free legal profession, is now due.
Lord Goldsmith
My Lords, I shall speak briefly in the gap and have alerted both Front Benches to this. It is a pleasure to speak after the noble and learned Lord, Lord Mackay of Clashfern, because it was probably as a result of the innovations and reforms that he has referred to that I first became involved in questions relating to the regulation of the legal profession. I have now been involved in this for more than 20 years, both nationally and internationally. I was chairman of the Bar during the first year that it faced competition from solicitors in terms of rights of audience and when it for the first time had to succeed on the basis of its merits and not on the basis of restrictive practices.
I want to spend two minutes underlining a very important point raised by the noble Baroness, Lady Deech. It is not the question of whether there should be regulation for the legal professions; of course there should. It is not the question of whether the regulation should be for the public interest; yes, it should. It is not the question of whether regulation should be carried out purely by lawyers—the body which the noble Baroness, Lady Deech, heads has a majority of non-lawyers on it. Those are not the issues. Rather, the issue is: what is it that the Legal Services Board is doing? This came about when I was fulfilling a different role as a member of the Government who introduced the Legal Services Act. I did not have direct responsibility for that; that was the Lord Chancellor. However, obviously I knew well what was going on and expressed my views at the time. We tried to make clear to both sides of the legal profession, and indeed to the other legal bodies, that the Legal Services Board was not going to be an alternative regulator. It was to be an oversight regulator which had to be there as a backstop in case the regulators themselves—the Law Society, the Bar Council and the two bodies that they set up—were not doing their job.
I am still involved in the regulation of the legal profession as a bencher at Gray’s Inn and a member of its management committee—a constituent part of the way in which the profession operates. I have a growing concern about whether the Legal Services Board is micromanaging and suffering from mission creep, which is almost inevitable whenever a body is set up. I know, because I have seen the operation, that the noble Baroness is not a pushover as far as the Bar is concerned; absolutely not. I have seen her berate—very nicely but still enormously effectively—Lord Justices of Appeal who were quivering, not realising what they had done wrong. When she does that it is very good for the profession and for the public. What is not needed alongside that is a body which thinks that it has the same responsibility—it is not there in the background but is forward. The Bar Council said in a briefing that on the important public issue of the extension of direct access the Legal Services Board sent 14 points that it wanted to see addressed in any submission on this question. If that was the case, it was over egging the role.
I have a single question and a single proposition for the Minister. Will he say, having heard from the noble Baroness, that the Government will take on the question of having a proper review of what the Legal Services Board is doing? Many people with experience, from inside and outside the profession, will be able to assist in relation to that. It is important. As the noble and learned Lord, Lord Mackay, said, what matters at the end of the day is the independence of the legal profession. That needs to be safeguarded as well as the public interest, efficiency and the other things that noble Lords have referred to.
Lord Hunt of Kings Heath
My Lords, this has been a very interesting, although short, debate. At the moment we are thinking very much about regulation of the media. Whatever the outcome of the current debate, in most sectors of the economy it is generally accepted that there should be statutory regulation of the affairs being conducted within them—and, where the professions are concerned, by the individuals who practise in that sector. However, there is much less consensus about the right regulatory approach.
The noble Baroness, Lady Deech, said that circumstances had changed considerably in the past decade since the architecture of the 2007 Act was formed—and, indeed, many years after the noble and learned Lord, Lord Mackay, first put his mind to these rather difficult subjects. She was right to say that the economic climate is different, both in the country and for the profession; and she was surely right, too, when she pointed to some of the experiences of regulators in other sectors. She mentioned financial services. I will mention the health service sector, where the existence of the long-standing—almost long-running—inquiry into Mid-Staffordshire has moved on from what happened in the hospital to look at the role of the various regulatory bodies, and at whether collectively they did the right thing or whether there were gaps, shortcomings or tensions between them.
It is absolutely right for us to have this debate and to discuss regulation within the legal profession. I am sure that the Government will welcome the opportunity to state their views and perhaps to reflect on some of the comments that have been made about the need for them to think in the next two or three years about how to take their views forward. I listened with great interest to the comments of the noble Lord, Lord Phillips, on ownership structure in the profession. I readily recognise that there have been huge changes over the past decade. However, in my experience of the National Health Service, doctors in particular as well as other parts of the profession are able to maintain professional standards within a large organisation. I am not persuaded that it is impossible within new ownership structures for there none the less to be a strong ethos that will be very much underpinned by the principles set out in the 2007 Act, and by the regulatory framework that comes from it.
Lord Phillips of Sudbury
Does the noble Lord not have concerns that an organisation that buys lots of law firms is likely to be interested only in what it can screw out of them? That is not consistent with any view of professionalism.
Lord Hunt of Kings Heath
Of course, in the development of the kind of organisations to which the noble Lord refers, profit will be a core concern. However, one could look to other sectors where people are involved in seeking profit and point to professionals who practise to the highest quality, usually underpinned by regulatory functions. I do not subscribe to the noble Lord’s view that ownership structure per se will change the professional ethos of people working in the sector. I understand his concerns on the matter, but surely he will recognise that even if you are working in a sector where the objective clearly is profit, it is still perfectly possible to act in a responsible and ethical way. Even before the ownership structure changes, it was my understanding—although I am a novice in these matters—that barristers none the less would seek to earn good income if they could.
Lord Phillips of Sudbury
I am most grateful to the noble Lord for seeing that I was hovering. Lawyering is a very particular business. It is not like manufacturing tins of beans. It has all sorts of social and ethical issues at the heart of it. Unless you can allow a lawyer to give full vent to his or her social purpose, the position of the lawyer as the gatekeeper to justice is impeded.
Lord Hunt of Kings Heath
Having been a Member of your Lordships’ House for 15 years, I now recognise the special characteristic of lawyers, and I rejoice in it. I have only five minutes left and perhaps I ought to press on.
Clearly it is important to ensure that professional regulation works effectively. It should not be overly bureaucratic and it should uphold the independence and integrity of the profession. We should be very proud of the whole legal services profession in this country, the fact that it is recognised globally and that legal services are a huge export for this country. Clearly we should do nothing that undermines the strength of the legal services industry in that regard.
I supported the passage of the Legal Services Bill in 2007. Although the Legal Services Board has come in for some criticism in your Lordships’ House tonight, we should recognise the progress made by the board under the chairmanship of David Edmonds. We should also recognise that the board will be publishing its inaugural assessment of the effectiveness of each of the approved regulators, including the Solicitors Regulation Authority and the Bar Standards Board. It might have been better if this debate had been timed after we had seen the outcome of these arrangements.
The triennial review to which the noble Lord, Lord Gold, referred has suggested that there is a continuing role for both the Legal Services Board and the Office for Legal Complaints. The next review will take place in 2015. The suggestion by the Bar Council and a number of noble Lords for post-legislative scrutiny, which I would always support as a matter of principle, might be better timed to coincide with the next triennial review around the 2015 mark so the two might run concurrently.
I have noted noble Lords’ concerns, and particularly the Bar Council’s concern and criticism of what they describe as mission creep by the Legal Services Board, citing micromanagement, duplication and overlap of regulatory activities and unnecessary cost. These have to be guarded against. I understand the total cost of the LSB start-up and first three years’ running costs of just under £20 million is not insubstantial, although it is modest compared to many other regulatory bodies. The noble Baroness, Lady Deech, commented on examples of where the LSB is considered to have gone overboard, and mentioned equality and diversity data collection. My understanding is that the LSB—as it saw it—gave best practice advice on how that collection could be done anonymously and made it clear that there should be no compulsion on individuals to take part. The consultation was explicit that the reason for going beyond the blanket survey was so that clients and potential employees could see the diversity make-up of individual firms and chambers. I am not going to argue one way or the other, but it is important that we also hear the viewpoint of the Legal Services Board. We have tended to hear from one side.
Baroness Deech
My Lords, perhaps I might explain in response to the noble Lord. There is obviously no objection to collecting diversity data across the entire profession of 15,000; the Bar has done it for a while. It was difficult to collect data from chambers where there were perhaps only 10 people. Even if it is anonymous, identifying someone by ethnicity or sexual orientation would of course be very easy. Because a unit is so small, that encourages people not to participate. I am afraid that our practical arguments in that respect were simply rejected, with the outcome, I believe, that rather fewer data are collected than might have been the case if we had been able to organise it ourselves.
Lord Hunt of Kings Heath
My Lords, I am sure that the House is very grateful to the noble Baroness for that explanation. As I said, I do not seek to argue one way or the other. However, I suggest that in any debate on these matters, it is important that the views of both bodies are heard by your Lordships’ House.
Lord Goldsmith
My Lords, in those circumstances, I wonder why my noble friend does not agree that when you have the sort of comment that has come from a regulator—from the noble Baroness, Lady Deech—saying there is a problem, he does not now support a review to see whether there is a problem or not.
Lord Hunt of Kings Heath
I am most grateful to my noble and learned friend for that remarkably helpful intervention. We have just had the triennial review by the Ministry of Justice. Another one will take place in three years’ time. The Bar Council has put forward the proposal that there should be post-legislative scrutiny, and again, I have no doubt that your Lordships’ House will want to give that every consideration, because most noble Lords strongly support the concept of post-legislative scrutiny. The question is when it would be best done. I suggest that it might be best done in parallel with the 2015 triennial review, which would allow a little more time for both these bodies to see if they can meet together and work out a more constructive relationship. That ought to be the outcome of both tonight’s debate and discussions between the two bodies.
Lord Ahmad of Wimbledon
My Lords, I begin by thanking the noble Baroness, Lady Deech, for securing this debate. The excellence of the UK’s legal profession is well recognised worldwide, and rightly so. The regulatory framework is a key factor in ensuring that these high standards are maintained. I would add—looking towards the noble and learned Lord, Lord Goldsmith—that we meet once again at a late hour. However, the quality rather than the quantity of speakers is an important issue when it comes to the legal profession.
Before addressing many of the interesting points made by the noble Baroness and other noble Lords, I would like to talk briefly about the regulatory framework for lawyers in England and Wales and the reforms introduced in the Legal Services Act 2007. I would simply highlight, as the noble Lord, Lord Hunt, so rightly said, some of the positive elements that we have seen, accepting the challenges that we have faced since the introduction of the Legal Services Act. When we talk about regulation, let me assure you that, as someone who spent 20 years in the City of London and in financial services, the word “regulation” resonates quite loudly in my ears.
The Legal Services Act 2007 had three key aims: a more effective and simplified regulatory framework; a more effective and independent complaints-handling system; and more effective competition within legal services. I turn to the first of those. In January 2010 we saw the new regulatory framework become operational, with the Legal Services Board—which several noble Lords have mentioned this evening—getting up and running. The role of the Legal Services Board is set out in statute. It is an independent body providing—this is the crucial word—oversight regulation of the frontline approved regulators. The approved regulators remain responsible for the day-to-day regulation of their members unless, of course, they are found to be failing in their regulatory duties, in which case the Legal Services Board has a number of powers to intervene to ensure that effective regulation is maintained.
The second key reform is the creation of the Office for Legal Complaints which administers the Legal Ombudsman scheme. Last year it dealt with over 80,000 inquiries, and of those some 7,455, close to 10%, were directly resolved. It acts as the single point of contact for consumers unhappy with the service they have been provided by a lawyer. I would add that there is an informal resolution procedure which sees around 35% of cases handled in this way.
The third and final key reform is the new alternative business structures regime which allows different types of lawyers to work together with other professionals and to accept external investment and ownership. This should allow them to explore new ways of structuring their businesses to be more cost-effective, efficient and innovative. We hope that it will lead to more choice, improved standards and more competitive costs for consumers. While we are happy to see a diverse range of alternative business structures emerging, we are not saying that you need to be an alternative business structure; we are saying that we have given you the flexibility to practise as a sole practitioner, traditional law firm or alternative business structure. So far, over 40 firms have taken the opportunity to become alternative business structures, and it is particularly encouraging to see the diversity of firms involved, ranging from a simple husband and wife partnership to the Co-op.
So much change in such a short space of time means that this has been a steep learning curve for all involved, and this has inevitably led to challenges which several noble Lords have talked about in the debate. Let me address first the issue of proportionate regulation. My noble friends Lord Gold, Lord Faulks and Lord Phillips all alluded to it in their contributions. What is important is that the Legal Services Board and the approved regulators work together constructively to ensure that regulation is proportionate, ensures that consumers receive excellent standards of service, and that the opportunities provided by the Act in terms of competition and innovation are realised. Indeed, the issue of being proportionate to the role of the Legal Services Board was a point well made by the noble Baroness, Lady Deech. The Legal Services Board has been one of the key drivers of the reforms, partly driven by its statutory duties. I appreciate that the pace over the past two years has meant that, as with most new frameworks, there has been a lot of consultation and change, and while the benefits of all of these changes have yet to be realised, we are well on our way to seeing the more competitive and innovative sector that the Legal Services Act first envisaged.
My noble friend Lord Phillips talked about the eight objectives and said that he was not sure whether his contribution was going to be coherent and clear. I can assure my noble friend that he certainly was both coherent and clear. Perhaps I may draw his attention to one of the objectives, which is,
“to promote and maintain adherence to professional principles”,
which are defined in subsection (3)(a) as,
“that authorised persons should act with independence and integrity”.
The complexity of regulation is always an issue, and a key part of the new framework has been the separation of representative and regulatory functions as required by the Act. This led to the introduction of new bodies in addition to the Legal Services Board, the Solicitors Regulation Authority and the Bar Standards Board, which in turn has led to a comment made by several noble Lords that the new framework, rather than simplifying things, has actually added to the complexity. It is vital that consumers have confidence in the legal profession. To that end, regulation of the profession should be effective and not unduly influenced by its representative role. Without that, there is the risk of accusations of lawyers protecting their own. So while we have seen new regulatory arms emerging, that has been an important step in maintaining—that word again—the integrity of the profession. Also, before the new regime was established, a number of different organisations were involved in the regulation of the profession. While I take the point made by the noble Baroness, Lady Deech, about self-regulation, there was still some oversight. My noble friend Lord Phillips of Sudbury also mentioned this point. The Lord Chancellor used to approve rule changes, and in some cases rule changes had to be approved not only by the Lord Chancellor, but by other bodies, leading to the criticism that the length of time taken to process such changes was unduly long.
The new regime streamlines this system by making all rule changes the responsibility of the Legal Services Board. Rule change applications must be dealt with in a timely manner and the Legal Services Board has the power to exempt certain rule changes, fast track rule changes and in more complex changes seek additional views. The latter is not aimed at redoing the work of the approved regulator, but rather at looking at the changes objectively and providing helpful and constructive feedback.
Baroness Deech
I appreciate what the Minister says, but he must accept that there is need to investigate this. Rule changes now go through an even more tortuous process than was the case before. If the front-line regulators have responsibility, then their rule changes ought to be accepted without the imposition of ideology and various approaches which are not necessarily seen as the right way forward for a branch of the profession. Examining the way that rule changes are approved or held up is really important and I am not sure we can wait three years for that.
Lord Ahmad of Wimbledon
I thank the noble Baroness for her question and I agree with her. It is important that those in the profession contribute to the effectiveness of how these rule changes are implemented. I take on board what she says and I hope that some of the proposals we are putting forward will address the issues. I note the concerns expressed by my noble friend Lord Faulks and the noble Lord, Lord Hunt, about mission creep on the part of the Legal Services Board. As I said at the outset, the important issue is about the terms of reference: what was the Legal Services Board set up to do? Earlier this year, the Ministry of Justice conducted a triennial review of the Legal Services Board and the Office for Legal Complaints. Based on this, let me assure your Lordships that, on the responses received—including those from the approved regulators—the review concluded that, while it is still relatively early to assess the full impact of the Legal Services Board, its functions are still needed and should continue to be delivered in their current form.
This was a view supported by the Bar Standards Board and the Bar Council. We must remember that the Legal Services Board is independent of government and it is not for us to dictate how it operates. Its functions are clearly set out in the 2007 Act. However, it is clear that there has been a real need for an oversight regulator to drive the reforms set out in the Act. In doing so, it has fulfilled the important role that only an oversight regulator could have. Those who responded to the triennial review recognised the value it has brought. Following the feedback we have received, the chairman of the Legal Services Board wrote to the Ministry of Justice confirming that his board is also considering the responses made so far.
I am conscious of time, but turning to specific questions, my noble friend Lord Gold raised the issue of micromanagement and corporate governance. The Legal Services Board recognises that important challenges are emerging from the triennial review and accepts that there are things it needs to address. These will include more detail on its draft business plan for 2013-14, and proposals will include reviewing the approach to requests for changes to regulatory arrangements and designation processing, and refining the approach to research funding. Priorities will be included in the draft business plan. Increased understanding of the cost of regulation, not just the cost of the LSB but the full cost of practitioners, will also be looked at. A further issue was raised regarding the value for money of the Legal Services Board. Since the board became operational, it has recognised the need to keep its costs proportionate, and we have seen its running costs reduced year on year, from just over £5 million in 2009-10 to £4.5 million in 2011-12. The combined running costs of the Legal Services Board and the Office for Legal Complaints were approximately £22 million, somewhat less than the cost of the complaint handling regime that was previously in place.
Various issues and questions have been raised in terms of accountability and the post-legislative review. We are confident that for the here and now, the regulation of legal services is appropriate, but that does not mean it will remain so indefinitely. Given that the new regulatory framework was implemented only in 2010, we still believe that it is in its infancy. The next triennial review is due in 2015 and will provide another opportunity to assess how the regulatory framework is performing and whether the LSB’s functions are still needed in an evolved legal services market.
In conclusion, it is important to remember that the new regulatory regime and governance arrangements are still in their early stages, a point acknowledged by respondents to the triennial review. I assure the noble Baroness, Lady Deech, my noble friend Lord Faulks and other noble Lords that the Government are fully engaged with the legal profession and other interested parties in carrying out that triennial review. During that process, we not only conducted a call for evidence but held round-table events and one-to-one meetings. We will continue to engage openly with interested parties as part of that. I also assure noble Lords, including my noble and learned friend Lord Mackay, the noble and learned Lord, Lord Goldsmith, and my noble friend Lord Faulks, as well as the noble Baroness, that we will carry out post-legislative assessment of the Legal Services Act. That will look at the original aims of the reforms and how far we have come in implementing them, and we will be seeking further stakeholder views. Finally—
Lord Faulks
Before the noble Lord concludes his remarks, can he help the House by saying whether one possible outcome of the review will be that the Ministry recommends that the LSB does not have any further function at all?
Lord Ahmad of Wimbledon
I thank my noble friend for the question. That is a matter that will come up. As I have already alluded to, this organisation is in its infancy and came about only in 2010. It is right that we look at this again at the time of the review in 2015.
Finally, I also assure my noble and learned friend Lord Mackay, who talked of his Green Papers—and being green in your Lordships’ House, he was my very own personal parliamentary Companion—that I heard what he said about the importance of education and his particular question about universities and the College of Law. I shall certainly refer that to my right honourable friend the Universities Minister.
The reforms enabled by the Legal Services Act have provided a proportionate and effective regulatory regime that remains, currently, fit for purpose. All those with an interest in the legal services market have an interest in ensuring that this continues. I thank the noble Baroness—and indeed all noble Lords—for their contributions this evening, with the assurance that we will continue to look at this particular function and its effective regulation, with all interested parties contributing to future reviews.