Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Gibson of Market Rasen)
My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.
Financial Restrictions (Iran) Order 2012
(12 years ago)
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Lord Newby
That the Grand Committee do report to the House that it has considered the Financial Restrictions (Iran) Order 2012.
Relevant document: 12th Report from the Joint Committee on Statutory Instruments
Lord Newby
My Lords, the Treasury laid the Financial Restrictions (Iran) Order 2012 before Parliament on 20 November under the powers of Schedule 7 to the Counter-Terrorism Act 2008. The order contains a direction requiring UK credit and financial institutions to cease business relationships and transactions with all banks incorporated in Iran, including their branches and subsidiaries, wherever they are located, and the Central Bank of Iran.
The direction came into force on 21 November 2012 and is in the same terms as that contained in the Financial Restrictions (Iran) Order 2011. The Treasury considers that the conditions required to give a direction under the Act are met. I propose to set out the reasons for this action and provide details of the restrictions and what their impacts are, including what measures have been undertaken to ensure that the UK financial sector can comply.
On the rationale for the order, the Government are clear that activity in Iran that facilitates the development or production of nuclear weapons poses a significant risk to the national interests of the United Kingdom. The order was given in response to this risk. The Government continue to have serious concerns about Iran’s proliferation-sensitive activities and these concerns are shared by the international community.
Recent reports of the board of governors of the International Atomic Energy Agency, the UN body charged with monitoring Iran’s activities, reported evidence of Iran’s nuclear programme being used for non-civilian purposes. A report issued on 16 November this year set out the agency’s concerns about the,
“possible existence in Iran of undisclosed nuclear related activities involving military related organisations, including activities related to the development of a nuclear payload for a missile”.
Information available to the International Atomic Energy Agency in 2012 further corroborated analysis indicating that Iran has carried out activities that are relevant to the development of a nuclear explosive device.
A statement issued by the IAEA to its board of governors on 29 November 2012 raised a further concern, setting out that Iran is not co-operating with an investigation into its nuclear activities. The Government view this with the utmost concern.
In response to the November IAEA report, the board issued a resolution stressing that due to a lack of co-operation from Iran it was unable to,
“conclude that all nuclear material in Iran is in peaceful activities”.
Despite intensive efforts throughout 2012 by the IAEA to seek to resolve issues relating to Iran’s nuclear programme this has been without concrete results. The board urged Iran to abide by its international obligations and called on Iran to engage seriously on the nuclear issue. These are concerns of the most serious nature, with far-reaching consequences for the UK’s interests.
The case for UK action is underlined by continued calls from the Financial Action Task Force—the global standard-setting body for combating money-laundering and the financing of terrorism—for countries to apply effective countermeasures to protect their financial sectors from money laundering and financing terrorism risks emanating from Iran. These calls were renewed with urgency on 19 October 2012 and noted FATF’s particular and exceptional concern about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system. The FATF has not expressed such serious and ongoing concerns about any other country.
It is clear, therefore, that activities in Iran pose a threat to UK interests and in particular a threat to the UK financial system. Iranian banks play a crucial role in providing financial services to individuals and entities within Iran’s nuclear and ballistic missile programmes, as companies carrying out proliferation activities will typically require banking services. Many Iranian banks have been sanctioned by the UN and EU for their role in Iran’s proliferation-sensitive activities. Unfortunately, experience under existing financial sanctions demonstrates that targeting individual Iranian banks is not sufficient. Once one bank is targeted, a new one can simply step into its place.
Over the past year the Financial Restrictions (Iran) Order 2011 restricted the options available to Iranian banks in accessing the global financial system by removing the option of utilising the UK, which is an important global financial centre.
The 2012 order will ensure that the Iranian banking sector continues to have its access to the UK financial system restricted. This will make it more difficult for Iranian banks to utilise the international financial system in support of proliferation-sensitive activities. This action also protects the UK financial sector from the risk of unwittingly being used to facilitate activities which support Iran’s nuclear and ballistic missile programmes.
This action is in line with the Government’s dual-track strategy of pressure and engagement with Iran. The aim of the pressure track is to encourage Iran to begin serious and meaningful negotiations on the issue of its nuclear programme. It is also in line with action taken by the UK’s international partners. The US, Canada and the EU have all implemented new financial sanctions against Iran in the last year.
Importantly, the EU has announced steps to mirror the UK’s action. The UK strongly supports the decision made by the EU in October 2012 that announced its intention to implement a prohibition on financial transactions between EU credit and financial institutions and Iranian banks. This will see the key elements of the UK order mirrored throughout the EU. When this EU-wide prohibition enters into force, Ministers will review whether it is appropriate to have both the EU and UK prohibitions in place.
I would now like to explain the specifics of the order. Like the 2011 order, this order was made under Schedule 7 to the Counter-Terrorism Act 2008, which provides the Treasury with the power to give a range of directions to UK credit and financial institutions in response to certain risks to the UK’s national interests. The power under Schedule 7 enables the Treasury to respond to proliferation risks, as we have done in this case, as well as money-laundering and terrorist-financing risks, or where the FATF calls for countermeasures.
The restrictions apply requirements to persons operating in the UK financial sector, which includes FSA-authorised firms, credit institutions, money service businesses and insurers. Firms are required to establish whether any current or future business relationships or transactions are affected, and to take steps to comply with the requirements of the restrictions. Although the restrictions are only given to the financial sector, they will continue to make it difficult for other companies to trade with Iran.
The UK Government actively discourage trade with Iran. The value of UK trade with Iran has declined by 39% in the period between November last year, when the 2011 order was introduced, and September 2012, when the most recent figures became available, compared to exports in the same period in the previous year. Companies affected by the restrictions can apply to the Treasury for a licence of exemption. We will examine each licence application on a case-by-case basis. The restrictions contained in the order sit alongside the existing sanctions measures imposed against Iran by the UN and the EU. However, the restriction goes further than current existing sanctions, because it prohibits certain activities that would otherwise be permitted under those sanctions.
I will now provide some further information on the operation of the restrictions. The order was laid in Parliament on 20 November, and came into force on 21 November. The Treasury published a series of documents on its public website that notify the financial sector about the restrictions and provide detailed guidance on their implementation. These documents were also e-mailed to more than 13,000 subscribers to our e-mail alert system.
The documents published on the Treasury website on 21 November included six general licences that exempt certain activities from the restrictions. These general licences permit credit and financial institutions to provide financial services for humanitarian purposes, and personal remittances between individuals here and in Iran. Where outstanding business relationships or transactions remain, they also permit credit and financial institutions to manage the cessation of business in an orderly and controlled way. A general licence will ensure that all the transactions or business relationships authorised under the 2011 order will continue to be licensed under the current order. The Treasury may grant further specific licences to manage the impact of the order on third parties. This approach is similar to that exercised under last year’s order.
As the direction is in the terms contained in the 2011 order, there are no additional requirements on financial sector firms as a result of this year’s order. Firms will already have in place procedures and systems to comply with the 2011 order and obligations relating to EU financial sanctions and anti-money-laundering measures. This should assist in minimising the burden of compliance with the restrictions. As a result of the 2011 order, since 21 November last year firms have been unable to undertake new transactions or business relationships with banks incorporated in Iran. The UK financial sector will need to continue to ensure that it does not undertake new transactions or enter into new business relationships with any bank incorporated in Iran, including the central bank, and branches or subsidiaries of banks incorporated in Iran. Supervision of the financial sector’s compliance with these restrictions will form part of the existing supervisory regime of the FSA and HMRC.
I conclude by emphasising that this direction was given by the Government to respond to the continuing and severe risk that Iran’s nuclear activities pose to the UK’s national interest. Iran’s proliferation-sensitive activities are a serious and ongoing concern for the UK and the international community as a whole. It is vital that we continue to take steps to increase pressure on the Iranian regime and encourage Iran to begin serious and meaningful negotiations on the issue of its nuclear programme. For these reasons, I commend the order to the House.
Lord Tunnicliffe
My Lords, I will speak very briefly. I thank the noble Lord for repeating this speech, which at least gave me the opportunity to read it beforehand. The key questions here are whether this order is necessary and whether it is effective. The speech refers to a report issued on 16 November to the board of governors of the International Atomic Energy Agency and I have taken the trouble to read through it. It is, as the noble Lord suggested, quite chilling in nature. There is the reference to potential missile capability, to which he has already alluded, but there is also reference to things that have happened in the past year, particularly at Parchin where,
“information provided to the Agency by Member States indicates that Iran constructed a large explosives containment vessel in which to conduct hydrodynamic experiments”.
I have a passing understanding of how to make a bomb, and the one thing you need is the uranium we all talk about; the other is very clever explosives to make the uranium go critical and create the bomb. The existence of this facility is indeed chilling since it is very difficult to believe that it had any non-military use.
Since then, there has been considerable activity during 2012 which seemed to be either trying to hide or dismantle the facility. As the report says:
“In light of the extensive activities that have been, and continue to be, undertaken by Iran at the aforementioned location on the Parchin site, when the Agency gains access to the location, its ability to conduct effective verification will have been seriously undermined. While the Agency continues to assess that it is necessary to have access to this location without further delay, it is essential that Iran also provide without further delay substantive answers to the Agency’s detailed questions regarding the Parchin site”.
I quote those parts of the report merely to emphasise that, in our support of this order, we are sensitive to the fact that the situation with Iran has sadly not improved over the past 12 months, and therefore the continuation of the order is essential.
In his speech, the Minister said words to the effect that the continuation of the order was in line with the Government’s dual-track strategy of pressure on, and engagement with, Iran. He said that the aim of the pressure track was to encourage Iran to begin serious and meaningful negotiations on the issue of its nuclear programme. I wonder if the noble Lord has had any reports of any progress that has been made on the dual-track approach over the past year.
Lord Newby
My Lords, I am extremely grateful to the noble Lord for his support of the order. I am not sure what to make of the fact that he knows how to make a nuclear bomb.
Lord Newby
On balance perhaps I should be reassured rather than alarmed. The noble Lord asked about the dual track. What is happening is that on the one hand there is active diplomacy that is being led within the EU by the noble Baroness, Lady Ashton. Since April there have been four meetings between the international group and Iran to discuss its nuclear programme. The pressure has been on Iran to take concrete steps to build international confidence around its nuclear intentions. It is hoped that we will have another meeting. I think that it is fair to say that the meetings have not produced a satisfactory conclusion, but they are ongoing.
The other element of action against Iran definitely is bearing fruit. The economic sanctions seem to have brought the Iranians back to the negotiations that I have just described. Iran’s leaders are increasingly concerned about the prospect of instability driven by economic decline, caused by a combination of sanctions and economic mismanagement. Iran’s oil exports have dropped by about 1 million barrels a day, which in real terms means that almost £8 billion in revenue is being lost every quarter. We are talking about very serious amounts of funding.
On the question of leakage and whether other countries are trading with Iran, the pressure on Iran is tightening, not just from the EU and the US but more generally. We are trying to make sure, as far as we can, that the UK financial sector is not inadvertently used to facilitate proliferation-sensitive activities. Iran will not be able to channel funds through overseas subsidiaries of its banks, as those are also subject to the restrictions. We continue to use all our ongoing close contacts with international partners to ensure that Governments of other countries are aware of our concerns and of the risk that moneys intended to facilitate proliferation-sensitive activities might be channelled through their financial sector, having been denied access to ours.
Finally, the noble Lord asked whether any firms in the UK have been found to be in breach of the restrictions. I am pleased to be able to say that no firms were felt to be in breach of the requirements under the 2011 order and that none has been found in breach of the 2012 order. It is fair to say that there is pretty considerable support across the financial services sector for the line we are taking and considerable willingness to keep very much to the letter and the spirit of the order.
Nursing Quality and Compassion: The Future of Nursing Education
(12 years ago)
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Baroness Emerton
To ask Her Majesty’s Government what is their response to the recommendations of the report of the Commission established by the Royal College of Nursing Quality and Compassion: the future of nursing education.
Baroness Emerton
My Lords, I am grateful to have this opportunity to seek the Government’s response to the commission looking at quality with compassion in the future of nursing education. First, I pay tribute to the Royal College of Nursing for commissioning this independent commission at such a critical time in the life of the nursing profession and congratulate the noble Lord, Lord Willis, as chairman, and his team of commissioners. I also thank those who gave the evidence that resulted in such a clear, comprehensive report with 30 recommendations, all pointing to urgent action being required of the profession it if it is going to be equipped to deliver high-quality care with compassion. It is so desperately needed today and will be very much needed in the future with growing demographic trends and the increase in the elderly population with increasing healthcare needs and, at the same time, rising costs of treatment. Within the last week, we have had the example of an MP describing the terrible treatment her dying husband received from nurses. At the other end of the spectrum, the NHS Commissioning Board’s chief nursing officer, Jane Cummings, introduced her vision of nursing with a culture of care, compassion, courage, commitment and competence for the future.
I declare an interest, as recorded in the register, but in particular as someone who has been closely involved in developing the profession’s move into higher education, and the introduction of Project 2000, as a chair of the regulatory body, the UKCC. The Willis report clearly sets out the time taken since the Briggs report to reach the point we are at 41 years later, on the eve of a graduate programme being fully implemented in September 2013. When introduced, Project 2000 produced many adverse comments, as the report says, due to inadequate preparation of all concerned, in the universities and the providers. By not working together, we are experiencing adverse comments as to whether it is necessary for graduate training to give compassionate care. This report demonstrates that registered nurses, educated at degree level, are more than equipped to deliver high-quality compassionate care. It says:
“The public needs to know what it can expect of registered nurses educated at degree level. Stakeholders should scale up recruitment campaigns and other measures, including dialogue with the media, to promote better understanding of contemporary nursing and nursing education and dispel the myth that better educated nurses are less caring”.
Perhaps I and colleagues have not had the courage to stand up and be counted to ensure that the 41-year gap did not exist. The document goes on to identify the urgent need to supply an academic nursing workforce and guarantee its future quality. The NHS Commissioning Board, the CCGs, Health Education England and the local education boards hold the responsibility for commissioning the right number of students to fill the right number of places to deliver the patient care pathways for well-being, public health, hospital care, and community care through the health and social care services, not forgetting the voluntary services.
The mandate to the NHS from the Secretary of State does not include Health Education England. This is funded directly by the Secretary of State but there does not appear to be a mandate, only an outcome measurement. This is but one of the 30 recommendations. My question to the Minister is: how will the Government ensure that what is necessary will be provided to enable the responsible bodies to adopt the recommendations of the report? We cannot afford a further delay in implementing these recommendations, as has been the history of Project 2000 and graduate training. We should not forget that the initial graduate registration is not the end; there must be provision for professional development and postgraduate development, with investment in research to allow evidence-based practice and innovation.
I have listened to a number of recent briefings and the evidence to date is that the medical professions—I exclude the medical professionals present—have little or no recognition of other professions’ contributions to delivery of care, research or innovations. Again, this is probably the professions’ fault for not speaking loudly enough to be heard and included or providing the evidence to support their case. It may also be a reflection of the status of the nursing profession as viewed by other members of the health teams which is now beginning to erode the public’s view. The answer surely must rest in the hands of the members of the professions.
The serious current economic situation presents many challenges. However, the evidence to date is that the delivery of high-quality care is cost effective in reducing complications, early discharge and reduced mortality—in other words, high-quality care is not only cost effective but safe and acceptable to the public. The recommendation relating to workforce planning describes the need to address skill mix. It states that there is an urgent need to revisit the workforce policy and skill mix and suggests:
“A planned programme of regulation should begin with the mandatory registration of all staff who deliver patient care”.
This, of course, includes support workers. It is a false economy not to follow this recommendation. Although the Skills for Care and Skills for Health bodies are due to report in January, it is a requirement of the Act to have a voluntary register.
The report recommends that there should be mandatory training and registration for support workers. Can the noble Earl please give an assurance that this issue will be revisited? At Third Reading of the Health and Social Care Bill it was said that the costs would be too high. Is it possible for a more recent up-to-date analysis of the cost to be carried out, as the one quoted was taken from a 2009 cost of a housekeeping scheme which does not equate to the work of the healthcare support workers? There is a growing awareness within the profession and among the public that there are insufficient registered nurses in some parts of the health service, more especially on wards for the elderly. However, there is a higher ratio of registered support workers where most in-patients have multiple conditions and require the skills of registered nurses. Action is required to produce a more accurate and sensitive workforce plan.
Time does not allow me to explore more of the report and its recommendations, but it is essential to note that, despite all the recent bad press and the criticism of the nursing profession, there is evidence of excellent care being given by dedicated, caring and compassionate nurses and support workers. It is also encouraging that the students interviewed showed great enthusiasm for the profession they had chosen, and were determined to hold high the traditions. Where this is obvious, it reflects good leadership of the profession and an organisational culture that fosters high-quality, compassionate care within the framework of the NHS constitution. I hope that Her Majesty’s Government will take on board the recommendations so ably set out in the commission’s report.
Baroness Cumberlege
My Lords, this House is impoverished; we do not do ourselves justice. We have a paucity of Peers who are nurses. We have some splendid surgeons, physicians and Fellows of the Royal Society but, of course, we have the noble Baroness, Lady Emerton. Noble Lords will know that she is not only a very remarkable person but an extremely distinguished and highly respected nurse. However, it is unfair to expect her to carry the burden of the profession on her own. Therefore, my first question to my noble friend—I suspect that I know the answer—is: will he do all he can to influence those who make the decisions on membership of this House? Yet again, we are very indebted to the noble Baroness not only for securing this debate but for her knowledge, expertise—and courage, because she has left her sickbed to come here today. She exemplifies so much that we know is superb in nursing.
If the noble Baroness, Lady Emerton, is the heroine of the hour, the noble Lord, Lord Willis, is the hero. The noble Lord has written one of the best clear, concise, informative, authoritative and action-packed reports that I have read. It is a model for others to follow. I pay tribute also to the RCN and to Peter Carter, who commissioned this report and who exercised a self-denying ordinance not to interfere. It must have been tempting. The fear that we all have is that, like other excellent reports, this will sit on a shelf and there will be insufficient political will to implement it. Therefore, my second question to my noble friend is: what can he do to ensure that the report lives?
The noble Lord, Lord Willis, pulls no punches in destroying the irrational idea that kindness and intelligence are incompatible with an all-graduate nursing profession. He states that this is not simply desirable but essential—and I so agree. The concept that a nurse must be a professional among equals, a leader of teams and, in some cases, the head of a very large organisation, is not new. However, those in positions of great authority have been appointed against enormous odds.
A good education is never wasted. It brings with it not only knowledge but the confidence to hold one’s own in vigorous debate and argument. The debate is all about maintaining and improving compassionate care. That care has to be underpinned by professionalism, which depends on values, behaviours and relationships that can be inculcated at an early stage. They can be taught but in practice, with restricted budgets, they have to be defended, cherished and fought for. A well educated, confident nurse leader is essential to maintaining staff and improving the quality of care.
District nursing has always been the unloved cousin who is forgotten, does not receive presents and does not even qualify in this context for any specialist community training. I declare an interest as a fellow of the Queen’s Nursing Institute and of the Royal College of Nursing, and I am a patron of the Association for Nurse Prescribing; all my interests are in the Register of Lords’ Interests. The Queen’s Nursing Institute is one of the few champions of district nursing. Commenting on the Willis report, the QNI made the point that there is currently no requirement for district nurses to have any specialist community training. They do not even have to have experience of working outside of hospitals, despite recognition that care provided for patients in their own homes is unique; it is different. Universities are reducing, and in some cases, have ceased altogether to run courses.
I know that the commission was tasked with looking at pre-qualification training, but our policy is to keep people at home, which is where they want to be. That depends on ensuring that there are enough nurses with the right qualification and training. My third question to my noble friend is, would he consider a further report, akin to the Willis report, to look at post-registration training.
The number of community nurses, particularly district nurses, is falling. In 2009, we saw, for the first time, the number of qualified district nurses in England fall to below 10,000, which represents a 23% reduction in the past 10 years. The most recent figures available, for the year up to September 2011, shows another fall of almost 10%. Furthermore, the community nursing workforce tends to be older, and some figures claim as much as 59% of current community nurses plan to retire in the next decade. I believe that this is a crisis in the making, and it will thwart the Government’s current plans to see fewer patients admitted to hospital. However, the Government are to be congratulated on their recent focus on the recruitment of health visitors. They have a clear plan, complete with measurable targets; they have provided a useful, recent example of a concentrated recruitment effort. My fourth question to my noble friend is, therefore: will he explore a similar commitment to district nursing?
I want to address the subject of healthcare assistants, but I appreciate that I am running out of time, and I have not got time to do that. However, I must say to the noble Baroness—and I regret having to say this—that I am not yet truly convinced that registration is the answer for healthcare assistants. Ultimately the employers must be accountable for the training, competence, supervision and performance of their own staff.
With the report of my noble friend Lord Willis, and the powerful strategy launched last week, referred to by the noble Baroness, Lady Emerton, we can see a real change for the better, a brighter future for nursing and a comprehensive return to compassionate patient care, which is, after all, what we all want.
Lord MacKenzie of Culkein
My Lords, I am grateful to the noble Baroness, Lady Emerton, for putting down this question to the Government today.
It is apposite that we should have an opportunity to discuss the matter of care and compassion in another week when issues have again been raised about the quality of care, not least by the awful story told by Ann Clwyd MP at Prime Minister’s Questions last week. There is a very similar on the comment page of the Nursing Times of 4 December, written by a senior lecturer in the Faculty of Health and Wellbeing at the University of Cumbria. It has not been a good week for the nursing profession, not least with the release of the final report on Winterbourne View yesterday.
As a nurse, and as someone who has worked for nurses and nursing for most of my working life, I feel deeply saddened by the adverse publicity that my profession is now getting. This stuff will run and run; it will take a lot of time and hard work to mend the damage that has been done.
The question before us today is about the report of the Willis commission. The noble Lord, Lord Willis of Knaresborough, deserves our thanks for undertaking this very important piece of work. I would disagree with little, if anything, in the report. In the introduction to his report the noble Lord, Lord Willis, said that,
“there has been insufficient political or professional will”,
to implement past recommendations. He expresses the hope that that will not be the fate of his report. I sincerely share that hope. As has already been asked of the Minister, I hope that he will tell us that this time we will go down the right path.
The nursing world has in many respects changed out of recognition since the days long ago when I commenced my training. However, some things have not changed. It is not new that there are brilliant nurses, good nurses, some who are less good and some who are not suited to the profession. In my student days, when most started training at the age of 18, many of these were eased out during training.
Neither is the debate new about whether nurses are the finished article on registration. I can remember nurses who thought they had arrived and done it all on the day they completed their training. I much preferred the view that one really started to learn only after one qualified and took some measure of responsibility and accountability.
The issue of fitness to practise on registration is often discussed, but it must depend on the appropriateness and quality of education and the quality of teaching on placements followed, after graduation, by good preceptorship and clinical supervision. I have a relative who is a lecturer in a school of nursing and midwifery in a university. She tells me that they are not allowed to go into hospitals and wards to see what their students are doing, although I understand that teachers in some other universities can; indeed, I know they can because one used to appear at my bedside in uniform, complete with Barts badge to supervise what her students were doing and procedures. However, I gather that some not being allowed to supervise any work is something to do with universities and vicarious liability. That underlines my view that we need a return to clinical teaching. Pressures on ward sisters and mentors are such that there is a gap here. It is not necessarily the case, as some academics argue, that clinical teaching disrupts the natural process and flow of care.
I will touch briefly on workforce planning and commissioning. The Willis report underlines the difficulty in getting good statistics and the risks of workforce planning being left to local employers. I endorse the commission’s view that there must be a well developed UK oversight. The future cannot be left to short-termism and localism.
My union, the Confederation of Health Service Employees, supported the Project 2000 proposals to move away from apprentice-type training and into the higher and further education sector. We also supported the ending of enrolled-nurse training, as it then was; I still have the scars on my back from trying to further that argument with many enrolled nurses, including my own daughter. What we did not support was that there should be no other form of regulated training for staff that would in the future carry out much hands-on care—what I still prefer to call nursing care.
I spent many months travelling the country addressing meetings on Project 2000 and the ending of enrolled-nurse training, and advocating COHSE’s policy of an entirely new second level that did not have the problem of confusion of roles between the first and second levels as there then was. We wanted a new second-level support nurse trained to an agreed standard of about a year or so. Apart from the support of a couple of regional nursing officers, we ploughed a lone furrow. There was no real support from the leadership of the profession at that time.
The quite proper drive to enhance the status of the nursing profession has left us now with a plethora of support workers of varying training, or little or none, together with a multitude of job titles, delivering a great deal of nursing care. As the commission of the noble Lord, Lord Willis, puts it, that care is delivered with greater or lesser supervision. We need to do something now about the training of support workers. In reality, with the demographic pressures and financial pressures that there are going to be, there will be fewer degree-level nurses and more support workers. That much care is not going to be delivered by nurses themselves.
It is not part of my purpose to rubbish support workers. Many, in my experience, are excellent, but they need to be trained to an agreed standard, and they need to be regulated and registered. Some progress is being made—I have no doubt that the Minister will reinforce that—but it is not enough. I know that he has heard me on this subject before, but it is wrong and unconscionable that nurses have to accept responsibility for staff whose abilities and competencies cannot be relied upon.
There are a number of issues facing us. Some of these are cultural, although I personally find it difficult when I hear of curtains not being drawn around a bed. The noble Baroness, Lady Emerton, will well remember that we were taught to do no procedure without having first pulled the curtains around the bed and telling the patient what we were going to do. Nobody ever did anything without that ringing in their ears. It is not difficult to do, and not difficult to teach.
My final plea is that the ward sister should be supernumerary and accountable, and that senior management should be accountable because it is not always the staff at the sharp end who should carry the can. We need to get the education, the training and the skill mix right, and must not leave everything to localism. There has to be some national responsibility and accountability. I hope that nurse leaders will continue, as I know that they will, to fight to restore the image of our profession. If not, there will be more inquiries, more scandals and, perhaps, a royal commission. I hope that we do not get that.
Lord Willis of Knaresborough
My Lords, I congratulate the noble Baroness, Lady Emerton, on securing this debate and I echo the comments made by the noble Baroness, Lady Cumberlege, about her efforts in the House. The fact that only four out of 788 Peers have a nursing background is a sad reflection on how important this profession is and how little it is regarded in terms of our debates and our work. I also thank the noble Baroness, Lady Cumberlege, for her very kind comments, particularly referring to district nurses—my mother was a district nurse and I remember only too well sniffing her bag.
The appalling events at Winterbourne View, which we discussed last night, and the disturbing revelations by Ann Clwyd about her husband are graphic reminders that care by nurses, or indeed other healthcare professionals, is not always what it should be. That has to be a starting point, rather than believing that everything in the garden is absolutely rosy.
This short debate does not allow us to look at the complex reasons why sometimes care breaks down but, no matter how difficult it is, I share the view of the general secretary of the RCN that poor practice has to be exposed. It has to be understood why it has happened, it has to be rectified and there should never be an excuse to patients or their carers about a lack of compassion.
I was privileged to be asked by the RCN to lead the independent review, which was about pre-registration nursing in the wake of changes to the Nursing and Midwifery Council standards and indeed to the growing media criticism that nurses were “too posh to wash” and “too clever to care”. Those descriptions were absolutely appalling to apply to any professional. Such comments were predicated on the assumption that the move to an all-graduate education programme for nurses would result in the recruitment of less caring and less compassionate students.
Today the vast majority of nurses are not graduates. If poor care is occurring today, it is not because we have graduates. In fact it will not be until 2013 in England that all entrants as registered nurses will be graduates. Making the bland assumption that by expecting higher educational attainment from nurses means you will get less care and compassion is absolute nonsense.
More than 100 organisations gave evidence to us, from every strand of opinion. We interviewed 29 witnesses, from the RCN to Health Education England; from charities to the NMC; from the Council of Deans to patient groups. I went over to Belfast and to Dundee, Cardiff, Oxford and Huddersfield to interview patients and to look at what was happening. Not one produced a shred of evidence to support the idea that raising academic standards would lower care and compassion, so we need to knock that on the head. We want the brightest and best of our young people, and indeed our mature entrants, to come into the profession. We want them to include care and compassion as part of those qualities.
Central to our report was the belief that patients must be at the centre of the education of tomorrow’s nurses. Universities must also do far more to ensure that patients and their representatives are central to recruitment and to programmes. If nursing is not about patients, quite frankly it is not about anything. We too often get tied into structures and to organisation rather than the root causes of what we are trying to do. I make a plea, too, for research to be placed right at the heart of training. I met students who saw the research component as an addition. You tick that box to become a graduate. I argued that that was not what graduateness is about. Graduateness is about developing critical thinking. It is about leadership. It is about challenge and if you are not building research right into the heart of it for nurses to ask: “Why am I doing this? Is there a better way of doing it? Can I be involved in a project to look at doing things better?”, then I think we are missing a trick.
I will finish, because of time, with the issue of healthcare support workers. The vast majority of patients I met did not understand the difference between a nurse and a healthcare support worker. Having a chart at the front of the hospital, showing people wearing fancy uniforms of different colours, really does not tick the box; when you are brought into an emergency ward, the last thing you want to do is say, “Stop, can I just have a look at the chart to see who everybody is?”. It is an absolute nonsense. I share the view of the noble Lord, Lord MacKenzie, that the vast majority of these people are hard-working, diligent and want to do a very good job. However, there is not a single care home in the United Kingdom that does not rely virtually entirely on this brilliant and dedicated workforce, which often performs tasks, including dispensing medicines, without any training or background and without there being any way of registering or regulating its members.
How can it be—I say this to the noble Earl, who I know is the most caring of Ministers—that the most vulnerable patients in the United Kingdom, often in their own homes and at the latter stages of life, are cared for by an underqualified and unregulated workforce? How can we allow that? We recognised, as a commission, how difficult it will be to move to a regulated and fully trained workforce. It cannot be done overnight, and to pretend that it can is fanciful. However, we should be making a start, which is what the commission recommended.
The idea of a voluntary register is perfectly okay for good providers—but they do not need a voluntary register, because they do it already. A voluntary register would not have made the slightest difference to Winterbourne View. I make a plea to the Minister that I would like to see all 29 of our recommendations referred to by the Minister in a proper report back. Ultimately, I am enormously grateful for having this opportunity to place the report before this Committee.
Lord Kakkar
My Lords, I join in thanking the noble Baroness, Lady Emerton, for securing this important debate and in congratulating the noble Lord, Lord Willis of Knaresborough, on his excellent report. I declare my own interests as professor of surgery at University College, a practising surgeon at University College London Hospitals NHS Foundation Trust and a member-elect of the General Medical Council.
The report that we are considering today is both reassuring and worrying. It is reassuring because it speaks with great optimism about the talented, dedicated and committed people who are still attracted to the vitally important profession of nursing. However, it is worrying because in describing the background that resulted in the necessity for this report, it highlights a worrying deterioration of organisational culture and values that have allowed patients to be characterised as statistics and consumers rather than as vulnerable and anxious human beings coming into our healthcare system and look at healthcare in terms of episodes of delivery of care rather than the delivery of healthcare in terms of compassion and dignity.
This report, rightly, identifies that providing an undergraduate basis for initial training in nursing is not attended by any inability either to develop the clinical skills and standards necessary for this important profession or to ensure that nurses qualify with the appropriate level of commitment and compassion that is vital to delivery of this important profession. The evidence available in the published literature from the United States and Canada shows that for every 10% increase in the number of nurses on the workforce who have reached a bachelor’s degree standard there is a 5% reduction in overall institutional patient mortality. If you look, for instance, at outcomes in surgical practice, the larger the proportion of highly educated nurses, the lower the perioperative mortality. In Canada, there is evidence looking not at surgical patients but acutely ill medical patients: those with heart attacks, strokes and acute respiratory problems. A similar pattern is demonstrated—the greater the level of nurse education, the greater the overall improvement in outcomes, with lower mortality. If one looks specifically, again in Canada, at discharges from acute medical wards, one sees that for every 10% increase in the number of nurses on staff having achieved a baccalaureate or higher level of education, so there is an improvement in survival, with nine fewer deaths per 1,000 patients discharged.
There are four issues in this important report on which I would like to seek further guidance from the Minister. First, preceptorships are very much like the original one year of house jobs prior to full registration with the General Medical Council for doctors, now reflected in the foundation year 1. It has been suggested that these preceptorships should potentially be extended from the original recommendation of four months. However, as is the case with newly qualified doctors, should it be necessary for the dean of the nursing school to have to sign off the graduated candidate at the end of this period of preceptorship before they can achieve full registration with the Nursing and Midwifery Council? This would ensure that those being delivered from the undergraduate programme could demonstrate that they have all the skills necessary to continue to full registration, having had to perform in a potentially stressful clinical environment for a period of time after immediate qualification.
The second area is one of graduate training to ensure that the most able and talented leaders in nursing can rapidly move through their period of post-qualification training and development to take up leadership roles such as those at ward sister level, while still being in a position to deliver front-line clinical care throughout that process.
At University College London Partners, where I chair the quality outputs, we have developed a programme called Excel which does exactly that. It takes the most talented nurses across the organisations within the partnership through a programme of development that will shorten the time from an average of seven years to just four years, in which they can take on senior nursing positions within our organisations, while continuing to maintain a strong clinical focus. Will Her Majesty’s Government support similar programmes across other academic health science networks when they are established, to ensure that we fast-track nurse leaders, helping them to continue their professional development, while maintaining a focus on the compassion and kindness which is ultimately the fundamental basis for all healthcare delivery?
In this debate we have already considered mandatory registration for healthcare support workers. This is a vitally important requirement. As we start to look at teams delivering care, with teams of different skill mixes, it is vital that all members of that team have to perform to a similar level and are able to command the same confidence from members of the public coming into hospital. It does not seem right that only some members of the team are subjected to statutory registration and not others. Have Her Majesty’s Government changed their mind on this? Are they now in a better position to recommend and provide a statutory basis for such registration?
Finally, on revalidation for nurses, as we move to a graduated profession it will be vitally important that, as we see with revalidation for doctors, nurses are also subjected to revalidation to ensure that the skills that they have developed early in their career are maintained throughout it. At the moment, registration requirements are reflected in 450 hours of practice in a specialist area over three years, and 35 hours of continuing professional development on an annual basis. But revalidation means much more than this. Will Her Majesty’s Government provide a statutory underpinning for revalidation of the nursing profession?
Lord Patel
My Lords, I realise that my time has been cut down; I was running the risk that I would be completely eliminated in a minute. However, I will try to cope with the three minutes that I now have.
First, I thank the noble Baroness for initiating this debate. I am sorry to hear that she is feeling unwell, but if she will kindly tell me what might be the best treatment, I will write a prescription. This is why I have always been used to taking advice from nurses first.
It is interesting that in this debate we have two nurses, two doctors, three former Health Ministers and a former teacher, who wrote the report on nursing education; and no doubt the current Minister will be the one to reply to it.
I had intended to concentrate on three issues: workforce planning, which the Willis report mentions; the education of nurses; and the registration of support workers. I will come to the last first.
I support what the noble Baroness, Lady Emerton, and the noble Lords, Lord Willis, and Lord MacKenzie, had to say. We have had this opportunity to discuss the large number of nursing support workers who are currently unemployed, and their training and registration. We will keep coming back to this until it is resolved. It is unacceptable that the Government still seem to think that employers should be responsible for whether these workers should be registered or not, and whether or not they should have training.
It is quite clear that the training of health workers who provide front-line healthcare should be mandatory. There should be a curriculum and an assessment, and they should then be registered. I understand that it is not possible to have a compulsory register straight away. However, we need to have a road map that will enable us to leave voluntary registration and move to proper registration.
I have no doubt that the Minister will not agree, but I am sure that we will keep coming back to this, and I look forward to a day when one of the political parties, when in government, will introduce registration. I hope that that will be the current Government.
I refer to two reports, both from the Royal College of Nursing. One, the Willis report, was commissioned by it, and the other was the Royal College of Nursing report, Overstretched. Under-resourced. The UK Nursing Labour Market Review 2012, which was published in October. Both of them highlighted the issue of what will happen to the workforce planning of nurses.
Experience in the 1990s showed that cutting student numbers led to a year on year reduction of new entrants, from 18,980 in 1990-91, to 12,000 in 1997-98. This contributed to an acknowledged nursing shortage later in the decade. The report highlights that there is a risk of repeating this funding and planning, for in 2011-12 there were approximately 22,640 places across the UK for nurse training, compared to 24,800 in 2010-11. Next year, there will be another 1,260 fewer places, with a total of around 23,000.
Workforce planning will be left at the local level, first of all with the local education and training boards, which will work with the commissioners to define how many training places there should be. Health Education England will then be charged with funding the numbers, and the national Commissioning Board will be responsible for providing oversight. The whole thing, therefore, will be left, with all due respect, to the managers, without any reference to the professionals who provide direct patient care.
In the report of the noble Lord, Lord Willis, the managers, NHS employers, felt that they,
“have confidence that through a co-operative and collaborative approach between service and education providers, the future workforce will not only continue to deliver quality care but will also be equipped to develop and deliver new and dynamic services for patients”.
I come back to my first point about support workers. The result of this will be more support workers, because costs will be cut, and there will be fewer graduate nurses. I declare an interest as the chancellor of the University of Dundee, where I have graduated several hundred nurses, the last occasion being on 14 November. I was also pleased to award several PhDs, so nursing is developing as an academic profession as well. I am therefore totally signed up to nurse graduates. I therefore plead with the Minister to look again at the training and registration of support workers.
Lord Hunt of Kings Heath
My Lords, I, too, must declare a number of health interests that are on the register—principally as chair of the Heart of England NHS Foundation Trust. I also thank the noble Baroness, Lady Emerton, for initiating this debate. In fact, only two weeks ago she presented badges to some of our nurses who had passed the trust’s intensive internal examinations. I am particularly indebted to her for doing so. I am also glad that my noble friend Lord MacKenzie, the other nurse speaking in this debate, spoke so eloquently and provided a background to some of the issues that laid the foundation for some of the concerns about the quality of nurse education.
In discussing the concerns, I hope that we acknowledge the tremendous strides the profession has made in the past 20 years. Nurses have taken on a lot of specialist skills and are looking after a much higher proportion of frail elderly patients with comorbidities. They have taken on other responsibilities as well. The noble Baroness, Lady Cumberlege, was very much responsible for that. I think of the work that she has done as regards childbirth and nurse prescribing. However, as the noble Lord, Lord Kakkar, suggested, we have this irony that at the same time as we have seen the huge potential of nurses there is concern about neglect of basic standards of care. We have all heard Ann Clwyd MP’s moving and distressing description of her husband’s last days and what he described as the indifference of some nurses.
The noble Baroness, Lady Emerton, referred to Project 2000, at which many point the finger of blame. However, I am glad that in his excellent report the noble Lord, Lord Willis, endorsed the ambition of a graduate nursing profession. I am sure that that is important, but I hope that the Minister will reflect on problems regarding the education of nurses within our universities. Clearly something is wrong. I believe that the monitoring of the curriculum has been left in the main to HR people in the health service and to the universities themselves, and that that has often led to major problems. HR people do not know about standards of nursing care—they are not in a good position to make decisions about these commissions—and universities are concerned with academic issues. They are not concerned with practical nursing standards on the ward. I believe that the answer—I am biased—is to allow the NHS to have much more involvement in the training and selection of nurses in the future. I am not suggesting that we go back to the old hospital nurse training schools, but NHS trusts need to be much more involved in future. My own trust is in discussions with the university hospital in Birmingham and the University of Birmingham about a tripartite approach to nurse training. That must be the way forward. I hope that the new regional structures will not get in the way of that.
My understanding is that the Nursing and Midwifery Council intends to deal with revalidation in about 2015, after clearing up the problems that it has. I very much welcome its approach. I also welcome the current leadership of the NMC, who show every sign of getting to grips with the many problems that they have inherited. I hope that the noble Earl agrees with the comments made on research. It is so important that we give more emphasis to nursing research.
My noble friend Lord MacKenzie spoke about the importance of supernumerary status. I agree, but I say to him that there is an issue of resources—I need to come back to that—and of being able to afford it. The noble Lord, Lord Patel, spoke about workforce planning. I urge the Government not to not leave it to local people to decide the number of commissions. We know that that will be a failure. I remember appearing before the Health Select Committee about five years ago to explain why education commissions had been reduced. I endured two not very happy hours doing so. I assure the noble Earl that his ministerial team will have the same problem. I gather that doctor commissions are also being reduced. This will prove to be a major mistake which the NHS will pay for one way or another in about five to 10 years’ time.
I will not repeat what other noble Lords have said about healthcare assistant regulation. The Government have been wholly unconvincing on this as, frankly, has the central health regulatory authority. We have to have the regulation of healthcare assistants; patient safety demands it. There is a clear consensus, and the only people opposed to it are the central regulator, which for some bizarre reason seems to cling on to this idea that you can do it through voluntary accreditation, and the Government. The intellectual argument against regulation seems very weak indeed.
Finally, before we put all responsibility for lapses in care in the hands of nurse education and the lack of regulation of support workers and of nurses themselves, we cannot ignore the huge nursing challenge posed by the increasing number of frail elderly people in our hospitals who are suffering from multiple chronic conditions. It is also grossly unfair not to recognise the financial pressure on the NHS at the moment. Nurse to patient ratios are being squeezed, and the reduction of the number of nurses in employment is an indicator of that. The Government must own up to the fact that they themselves are creating some of the pressures that are making it harder for nurses to do the job they want to do. I believe that we will come back constantly to these issues until we are able to resolve nurse education training, sort out the regulation of healthcare assistants and create the conditions in which nursing care can thrive.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the noble Baroness, Lady Emerton, has been a tireless champion of the values and standards that underpin good nursing. This debate, on which I congratulate her, is therefore no surprise. Listening to her excellent speech reminds us once again of her long-standing expertise and wisdom in the field of nurse education and the regulation of the nursing profession.
My noble friend Lord Willis published his very comprehensive and helpful report into the future of nurse education in November. The report was the result of deliberations by his independent commission, which was established by the Royal College of Nursing under his consummate chairmanship. On publication, the report was handed to the chair of the RCN for her consideration. It was not a report to the Government and we will therefore not be formally responding to it. However, I recognise that its 29 wide-ranging recommendations are important and, as this debate has shown, need to be given due weight and consideration by leaders of the nursing profession.
As part of government changes, a new Secretary of State for Health was appointed this year. He has clearly stated that he has four priorities for his term in office: to improve the general quality of care, including nursing care; to rise to the challenge of caring for people with dementia; to improve the management of long-term conditions; and to reduce avoidable deaths from the major diseases. These priorities, importantly, impact on nursing care and nurse education and come as national nursing leaders have also changed significantly during the year. As part of the Health and Social Care Act, which passed through your Lordships’ House earlier this year, the NHS Commissioning Board was established, alongside the separate creation of Health Education England, both of which have prominent nurse leaders.
The noble Baroness, Lady Emerton, asked for some assurance that these bodies will take full account of the Willis report. Jane Cummings has been appointed chief nursing officer for England on the NHS Commissioning Board and Lisa Bayliss-Pratt is director of nursing for Health Education England. Both have significant leadership roles in the education and training of nurses, and I can tell the noble Baroness that they are looking at the Willis report in detail. Health Education England takes over the Secretary of State’s duties for ensuring an education and training system fit for purpose, and the chief nursing officer for England and the director of nursing for Health Education England will collaborate very closely in that regard.
My noble friend Lady Cumberlege asked what would make the report really live. It has a high degree of resonance across the profession already, with nurse leaders in the vanguard who will help ensure that it does not gather dust. Earlier this month, Compassion in Practice, a vision and strategy for nurses, midwives and care staff in the NHS, public health and social care, was published jointly by the chief nursing officer and the director of nursing in the Department of Health and lead nurse for Public Health England, Viv Bennett. Compassion in Practice articulates the values and behaviours expected of nurses, midwives and care staff. These values and behaviours are expressed as the “six Cs” of care, compassion, competence, communication, courage and commitment, each of which resonates with findings and recommendations of the Willis report.
This is not a vision without action. One area for specific action will be to ensure that the NHS, public health and social care services have the right staff with the right skills in the right place. This means that staff will be recruited for their values and behaviours as well as their capability to be lifelong learners. This point was made by a number of noble Lords. Importantly, the Willis report recognises how demanding and rewarding the practice of nursing is. It states very clearly that it found no evidence that revealed any major shortcomings in nursing education that could be held directly responsible for poor practice or the perceived decline in standards of care.
My noble friend and his commission are unequivocally supportive of degree-level registration for new nurses. This commitment by the Nursing and Midwifery Council will be fully implemented by September 2013. I am aware that the noble Baroness, Lady Emerton, too, is fully supportive of that. When it comes to achieving this change to nurse education, my noble friend Lord Willis rightly emphasised that educating nurses is a partnership between the NHS and universities. The noble Lord, Lord Hunt, was right to emphasise that. Student nurses cannot qualify and register if they have not satisfied both the university and, in practice settings, their NHS mentors, who formally assess them for their practical skills and knowledge as well as for their values, behaviours and ability to give care with compassion.
The compulsory state regulation of currently unregulated health and social care support workers in England is a topic that has arisen throughout the debate. It is a live issue in the nursing profession. We recognise the need to drive up standards among health and social care support workers, and have commissioned Skills for Health and Skills for Care to develop a code of conduct and national minimum training standards by January 2013. In addition, the Professional Standards Authority will have powers to accredit voluntary registers from this month. The Skills for Health and Skills for Care work will, for the first time, set clear national expectations about standards for these workers.
Health and social care assistants already work in environments that are subject to regulation by the Care Quality Commission. The Independent Safeguarding Authority can take action to bar them from working in regulated activity. Further, the work they do should be delegated to them and managed by staff—usually nurses—who are themselves subject to professional regulation and should not be asked to undertake a task for which they are not trained. The care given by health and social care support workers is at the heart of NHS-funded services. We plan to keep this under review in the light of the findings and recommendations in particular of the Francis inquiry, which is due to be published in the new year, to ensure that the system and process remain fit for purpose. I will repeat what I said yesterday at the Dispatch Box. The Government’s mind is open but we need to ensure that there is a good, evidence-based case before proceeding with mandatory regulation.
The noble Baroness, Lady Emerton, asked whether there had been a more recent cost analysis than the 2009 data of registering healthcare support workers. The answer is, not to my knowledge. Clearly, the cost of regulating 1.8 million health and social care support workers would be significant, but the basis of our decision not to regulate was not cost. Those who advocate regulation of support workers sometimes speak as if regulation were a panacea. I do not believe it is in any way a substitute for performance management. The duties of a support worker are always delegated from a responsible registrant, usually a nurse, as I have mentioned, and that fact could not, and should not, change.
If the concern is that we are somehow exposing patients to unacceptable risk by not regulating, then again, I do not think the assumption underlying that suggestion—that regulation would be the answer—is valid. It implies that support workers are inherently dangerous, which I do not accept at all. If a support worker were to be seen as a danger then, as I have mentioned, the Independent Safeguarding Authority has a vetting and barring scheme which can prevent unsuitable support workers being employed.
My noble friend Lord Willis asked about research as part of a nursing degree. I absolutely agree with what he said in that regard. It is already, in fact. Nurses, as undergraduate nurses, will be able to critically appraise research. Some will wish to become researchers and there are nationally funded clinical academic training schemes to support this.
A number of noble Lords, including the noble Lords, Lord Hunt and Lord MacKenzie, spoke about nurse education. Planning the number of nurses and the size and shape of the workforce has to be based on the needs of the people in our care. Services must be properly designed around the care and treatment that people need and these decisions could result in the need for nursing numbers to change, and very often they do.
At present, SHAs work with local employers to determine nurse training commissions. From April next year, Health Education England assumes national leadership for a new system of planning and developing the entire healthcare and public health workforce. HEE will ensure that the shape and skills of the future health and public health workforce evolve to sustain high-quality health outcomes in the face of demographic and technological change.
From 2013 all nurse education programmes will need to meet the new education standards set by the NMC and we support the NMC’s decision, as I have mentioned. It is the right direction of travel if we are to make all nursing degree level and if we are to fulfil our ambition to provide high-quality care for all.
Time is against me, so I will endeavour to cover just a few more questions but I will write to noble Lords with answers to other points.
The noble Lord, Lord Kakkar, asked me about preceptorship and I listened to his remarks with interest. Preceptorship is a development framework for newly qualified practitioners which, as he outlined, aims to ensure the smooth transition from student to qualified, accountable practitioner through a programme of bespoke support. It is predominantly administered through employment. We plan to develop the preceptorship framework further during 2012-13 within a clinical leadership framework. Work has commenced on that project and should be delivered by next April.
The noble Lord asked about deans of nursing schools signing off candidates after a period of preceptorship. That is an interesting idea which I do not believe has been fully discussed across the profession. I will ask officials to test the proposal with the Nursing and Midwifery Council and the Council of Deans of Health.
Will we support schemes for the fast-tracking of nurse leaders? That idea is most definitely supported and we have committed to £40 million in 2013-15 for leadership development that will assist aspiring and talented nurse leaders. Unfortunately, time prevents me from expanding on that, which I would like to have done.
The noble Lord, Lord Hunt, asked about monitoring standards of care by students. It is right that nurse education is a partnership between the NHS and universities, as I have mentioned, and it is true that the NHS must be more involved with the selection of students. Health Education England will work on that.
I think my time is now up. I thank noble Lords for a very rich and rewarding debate which, as I have mentioned, I will follow up in writing to all noble Lords who have spoken.
Empowerment and Responsibility: Financial Powers to Strengthen Wales
(12 years ago)
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Lord Wigley
To ask Her Majesty’s Government what is their response to the first report of the Commission on Devolution in Wales, Empowerment and Responsibility: Financial Powers to Strengthen Wales.
Lord Wigley
My Lords, this is the first occasion I have had to sponsor a short debate. I am glad to have the opportunity to focus on the recommendations of the Silk commission’s first report, published last month, and, through my Question on the Order Paper, to invite the Government to spell out how they intend to take forward the commission’s recommendations.
The Silk commission was established by the UK Government in October 2011, with a double remit. The first is:
“To review the case for the devolution of fiscal powers to the National Assembly for Wales and to recommend a package of powers that would improve the financial accountability of the Assembly, which are consistent with the United Kingdom’s fiscal objectives and are likely to have a wide degree of support”.
Secondly, the commission is now considering the National Assembly’s non-financial powers. However, Silk was specifically asked to report on part 1 by autumn 2012 and the Government, as far as I know, have indicated no intention to await the completion of part 2 before implementing part 1 recommendations.
It may be worth reminding ourselves that the National Assembly has no tax-varying powers. Llanwnda Community Council, where I live, has greater taxation powers than our National Assembly. It was surely short-sighted to create such a body without adequate financial powers. It makes it far too easy for a Welsh Government, of any party, to blame Westminster when they do not have the resources they feel they need to fund portfolios such as health, education and roads. The Assembly should, as a matter of principle, have taxation powers so that it can be truly answerable to the people for the way in which it spends their money.
This is a totally different question to whether the Assembly is currently receiving adequate finance to maintain services to a standard comparable to those obtaining in England. Successive reports suggest that there is a shortfall of some £400 million per annum, and all parties in the Assembly believe that the Barnett formula should be replaced by a needs-based formula. The previous Secretary of State, Mrs Cheryl Gillan MP, stated categorically that,
“we all recognise that the Barnett formula is coming to the end of its life”.—[Official Report, Commons, 11/5/2011; col. 1146].
It is suffering a slow and painful death and it is high time it was put out of its misery.
The second reason for new powers is that if the Welsh Government want to change strategic priorities and spend more, say, on our schools or hospitals, or want to introduce more enterprise zones or extend the business rate relief, they should have the capacity to do so provided that they accept responsibility for raising additional resources to undertake those tasks.
Thirdly, the most significant issue facing Wales is that of economic regeneration. Wales has the lowest GVA per head of any nation or region in the UK, standing at 74% of the UK average. We must await updated figures which will be published tomorrow, but the UK Commission for Employment and Skills forecasts that Welsh economic growth will continue to lag 0.5% behind the UK as a whole. This would mean that, by 2020, the Welsh GVA per capita will be less than 70% of the UK average.
Currently, places like Kensington and Chelsea enjoy a GVA per head 10 times higher than that of Anglesey, Merthyr Tydfil or Blaenau Gwent. This is frankly intolerable. The Assembly has devolved responsibility for economic development, yet it has virtually none of the necessary tools to do the job. In particular, it has no borrowing powers which would enable it to launch capital investment programmes to stimulate economic growth. If it uses its powers under the Welsh Development Agency Act, it loses a pound of its DEL limits for every pound it borrows. Similarly, the Welsh Government have no power to issue bonds, something which would be available to regional Governments in many overseas countries.
Devolving material taxation and borrowing powers to the National Assembly would change the mindset of political parties in Wales. They would have to consider the impact of proposed policies on the tax base. Political parties would offer the voters of Wales different approaches to taxation at election time, giving voters a wider choice of policies. As things stand, the Welsh Government are a spending agency. They need to be a more rounded and responsible form of government. All these issues were carefully considered by Silk. Unlike the Calman commission in Scotland, the Silk commission consisted of representatives of all four parties and produced a unanimous report that has been widely welcomed. This was a remarkable feat and I congratulate the commission on it. It reflects a single-mindedness of purpose on these issues across party lines in the National Assembly.
What are the recommendations that should now be implemented? They include the devolution to the Assembly of business rates in totality, stamp duty land tax, landfill tax, the aggregates levy, long-haul air passenger duty, powers to provide enhanced capital allowances at an increased number of sites and enterprise zones, the right—already conceded to Scotland—to raise new taxes with Treasury agreement, the right to borrow above DEL limits to fund capital projects with Treasury agreement, and the power to issue bonds. The Silk report also recommends that income tax raised in Wales should be shared between the Welsh and UK Governments. The Welsh Government should be able to change the basic, standard and additional rates of income tax independently, with the Assembly bearing the consequences of such changes. The income tax proposals would not be implemented until the fair funding dispute had been resolved.
Such unanimous recommendations from a body set up by the UK Government demand a positive response. In the debate of 27 November in the National Assembly on the Silk report, First Minister Carwyn Jones said that he was happy to accept the report as the basis for future funding reform and that he expected the UK Government to publish a White Paper in the new year. Plaid Cymru leader Leanne Wood stated that the recommendations,
“should be accepted in full and pushed forward”.
Conservative spokesman Paul Davies AM formally placed on record his party’s support for the Silk report and its recommendation, and Liberal Democrat leader Kirsty Williams called for early legislation at Westminster to implement the report. On the same day, I was heartened to hear the Minister say in our Chamber that the Government intended to respond to the report with all due speed and in a timely manner. Might a start be made today?
On the issue of income tax, I do not see why all income tax on earned income should not be transferred to the Assembly, so that taxpayers will be clear where responsibility lies for their income tax bills. Some colleagues seem to fear Wales taking responsibility for income tax because of our lower average-income levels. However, provided that—as recommended by Silk—there is agreement on fair funding, that a needs-based equalisation mechanism is introduced before responsibility is transferred, and that there is an agreement on the method by which the block grant is reduced to reflect the changes in taxation arrangements, there is no reason to fear the taking over of income tax by the Assembly.
I also believe that corporation tax should be devolved to the National Assembly. It is one of the tools with which we can tackle our economic problems. The Silk report was ambivalent about corporation tax. On page 84 it states that,
“it is clear that corporation tax is a potentially useful policy tool”.
However, it continues:
“We do not recommend devolving corporation tax to Wales”.
But then it adds:
“However, if the UK Government were to agree to devolve corporation tax to both Scotland and Northern Ireland, we would recommend the same powers be given to Wales”.
Will the Minister ensure that, if corporation tax is devolved to Scotland and Northern Ireland, the Wales Office will fight to secure the same powers for Wales?
What has been recommended by the commission is no more than common practice across the member states of the OECD. Silk’s first report pointed out that, on average, sub-state Governments in OECD countries are responsible for raising a material proportion of their budgets. Silk recommends a figure of about 25% of total devolved spending, which is in line with international practice.
The commission recommends that changes that do not need legislation should be implemented without delay, and that a new Wales Bill should be introduced in this Parliament to devolve tax and borrowing powers. The commission specifically states that this should not wait until the completion of part 2 of Silk. In the foreword to the report, Paul Silk pointedly states that he is proud to recommend the package of his recommendations to the Government “for early implementation”. From this it is clear that the commission expects the Government not to cherry pick the report but to implement it quickly in its totality as a balanced package of measures.
In conclusion, will the Minister confirm, first, that the Government accept the Silk recommendation that, in order to empower the National Assembly and to improve its answerability, it is necessary to give it the right to finance a material proportion of its budget, and that the most effective way of doing this will be by sharing responsibility for income tax between the UK and Welsh Governments? Secondly, will he confirm that if a referendum is to be held on the income tax issue, it can take place meaningfully only after the fair funding issue has been resolved? When do the Government intend to announce their proposals for fair funding for Wales? Thirdly, will the Government commit to implement the Silk recommendations during this Parliament?
I hope that the Government can now make a clear statement of their intentions, and I look forward to the Minister’s response.
Lord Morgan
My Lords, the Silk commission indirectly draws attention to a fundamental weakness of the devolution settlement, with Wales consistently subordinated for what are said to be historical reasons but which are in fact quite unhistorical reasons. It is an asymmetric settlement that has in some respects undermined the Welsh Assembly. As we know, it had no primary or legislative powers until 2006. As the noble Lord, Lord Wigley, said, the Barnett formula is persistently unfair. You can see it as a stop-gap created a long time ago, based on archaic and now quite unfair calculations, and it has been shredded, first by the Holtham commission in Wales, and more recently by an extremely powerful Lords Select Committee, which included at least one former Chancellor of the Exchequer.
Above all, the Silk commission points out the inadequacy of representation without taxation. The democratically elected Welsh Government do not have the resources either to promote their objectives or to achieve accountability with the Welsh elector when they spend money that they do not raise. The Silk commission addresses this, and I hope that the Government will respond. So far we have heard the sound of silence, particularly from Conservatives. I notice that no Conservatives are speaking in this debate, so I hope that the Liberal Democrat Minister will be more communicative.
The Silk commission underlines the weaknesses of the present situation in key respects. First, it shows that, almost uniquely in Europe, Wales has a democratically elected Assembly that does not have taxing or borrowing powers. It is fundamentally undermined by being denied that basic authority, which has been fundamental to many of the great upheavals in the history of the world; not only, as everyone knows, to the American Revolution but to the Civil War in this country and the coming of the French Revolution. We have representation without taxation, which is no basis for a democracy.
Secondly, the Silk commission shows that the baseline of the block grant is determined in an arbitrary fashion, and that this has led in practice to its being reduced in size year by year.
Thirdly, as we have heard, the discredited Barnett formula complicates matters, and we await a settlement on that. We have had discussions about the Barnett formula for many years. The coalition has replied with speeches of total irrelevance, claiming that it is a problem of the debt, which is not germane to the issue. The Labour Party replied with unmitigated waffle. We heard waffle in debate after debate, which did not advance the argument.
Finally, the Silk commission shows that the borrowing powers that the Welsh Assembly has are, in effect, not under its control but under the control of the United Kingdom Treasury, which sets those powers against the block grant in such a way that Welsh resources do not increase overall. Again, therefore, authority in financial matters does not lie with the Welsh Assembly. The formula encapsulated in the famous phrase, “For Wales, see England”, is still being played out.
The Silk commission makes two major proposals, as the noble Lord, Lord Wigley, explained. First, it proposes that the Welsh Assembly should have the power to raise its own taxes. It lists, as we heard, a variety of taxes such as stamp duty, landfill and air passenger duties, but the most important is income tax. The devolution or transfer of income tax to the Welsh Assembly would be central, and would enable the Welsh Government to do things that they cannot do now and to have a clearer horizon in terms of economic planning. Furthermore, the prospect is raised—although not, as the noble Lord, Lord Wigley, said, with total clarity—of the ability to vary the rate of tax at the top, standard and bottom ends of the tax scale. The Silk commission is cautious about this, but it is a principle that is bound to grow and extend. Rightly, the Silk commission states that there has to be engagement on these matters between the Welsh and United Kingdom Governments, but it seems clear that this is the way we are moving in terms of devolution being implemented in a much more complete way.
It is interesting that the Silk commission for Wales is more radical in some respects than the Calman commission for Scotland, in that it raises the issue of varying taxes. Secondly, it raises the issue of the power to borrow for capital purposes. There would be a stronger case for borrowing if the Welsh Government could vary the size of its budget through taxation to meet the repayment of loans. It is, as the Welsh First Minister said, a very strange system under which Welsh local authorities can borrow on the open market, say from the European Investment Bank, but the Welsh Government cannot. This greater power to borrow would give the Welsh Government the flexibility to meet variations in income and would make them more accountable.
Silk points the way to a more pluralist United Kingdom. It affects the whole of the United Kingdom—which may need a codified constitution—but its proposals cannot be put into effect until Barnett is dealt with. At the moment, the Welsh Assembly is locked into an unjust system that gets more unfair every year. Therefore, the Silk commission proposals cannot be implemented immediately. I hope that the Minister will tell us that the Government will find the will to deal with both the matter of raising more resources for Wales and securing a more honest and honourable system for their distribution, which is lacking today. Above all, I hope that the Government will communicate and tell us what they are going to do.
Lord Roberts of Llandudno
My Lords, I appreciate very much the opportunity to speak again on these matters; as we have heard, this is one of a series of debates we are holding. The Silk commission is the natural progression of what has been happening in Wales over the past century. It is a natural development, not an explosion, in Wales; perhaps it is because we are a more reasonable people that we act in such a way. You could go back to the century before last—although perhaps I should not in a time-limited debate. However, you can go back to ET John, a century ago, with his first Bill for a Welsh parliament, and then on to all the developments that we have had in education, such as the University of Wales, and with health boards and the setting up of the county councils. There have been myriad developments over the past century and the previous one as well. The former Secretary of State for Wales, Jim Griffiths—whom we admire whichever party we are from—did a tremendous amount. Others have had a hand in developments such as the setting up of the Council for Wales and Monmouthshire, with Huw T Edwards as its chairman, and the setting up of the first Welsh Office, in its embryonic sense; before Jim Griffiths of course, the Home Secretary shared the responsibility of being in charge of Wales.
However, these are different days. We have our own, very vibrant, television channel, which has done so much to safeguard the Welsh language, and the Welsh school movement. It is gradual but certain development, and last year of course we had the referendum that gave us more authority in 20 defined areas. We are on our way. We are not going as fast as some would like us to go but I think we are going as fast as it is possibly wise to go. Some might not agree with me, but we are on our way to having more responsibility and authority over our own affairs.
There is a great deal of unfinished business. I brought up three things with financial implications in a debate a wee while ago, which we have to look at again. What is the future of the television services in Wales? When will the DCMS and the BBC lose their grip and the Welsh Assembly Government take responsibility and have financial responsibility? We have problems there, and there are strong financial implications.
Then we have Welsh Water. I and others remember the great outburst when the Welsh valley, Tryweryn, was drowned and Liverpool took our water without any payment or anything. How are we now going to have authority over the water supplies, the rivers and the reservoirs, of Wales? There are great financial implications there.
I have worried about cross-border issues many times in the Chamber. The Welsh border with England is about 160 miles long. The Scottish border with England is only 96 miles. The problems of border responsibility are much greater for Wales than they are between Scotland and England.
The health service is another issue. It is much easier for us in north Wales to go to Liverpool or Manchester than to go to Cardiff or Swansea. Whatever happens, we have to keep these links with the north-west of England in a healthy state.
Then there is transport in Wales. The Welsh border is woven with railways and roads from the north to the south. You could never dig Offa’s Dyke again because the transport system would go berserk. The border issues mean that, whatever decision we take, in Wales we must always keep that link, in a healthy and positive way, with those on the other side of it.
We need the wisdom of Solomon or the magic of Merlin to be able to resolve some of the border issues, but they all affect Welsh revenue. How much revenue we are going to have, how we are going to dispense it and what taxation systems we bring in under the auspices of the Welsh Government are all involved.
I make one plea. I do not see independence for Wales as our final destination. I see a more federal establishment where, as now, the devolved issues in Wales—education, health and so on—remain entirely under the authority of the Welsh Assembly Government. Things such as defence would remain the responsibility of the Parliament of the United Kingdom: the four nations represented here at Westminster.
Where are we going with our devolution? I worry about the result of the Scottish referendum in a year or so. If Scotland, with 59 Members of Parliament, withdrew from the UK Parliament, you would have here what amounted—to some people’s delight, but not to mine—to a permanent Conservative majority. If that happened, the people of Wales would be very, very unhappy. At the moment, we have only seven Conservative Members for Wales—more than the Liberals, we admit—with a majority of Labour Members. The people of Wales would find life pretty intolerable under a permanent Conservative Government. I plead with the people of Scotland to vote no in their referendum for Wales’s sake.
We will have to tackle these issues, and not always by ourselves. Some things we in Wales can do, but for other things we are dependent on what happens in Europe, in the world and in financial circles. So we advance with care and with a wide vision, saying and realising that we are not absolute masters of our own destiny.
Lord Elystan-Morgan
My Lords, I, too, congratulate my noble friend Lord Wigley on achieving this debate. Few people in the past 100 years have contributed as honourably and richly to the cause of Welsh devolution as he has.
The referendum of March last year gave Wales limited but nevertheless very wide-ranging primary legislative powers. It seems to me that the Silk report gives the opportunity to complement those very considerable constitutional rights with fiscal power. Those twin sinews of authority would essentially give Wales a home rule Parliament, something which Thomas Edward Ellis and Lloyd George cherished over a century ago and, indeed, the noble Lord, Lord Roberts of Llandudno, referred to.
I reiterate everything that has been said about the Silk report being very much in the track of history in this context. One should see it in the context of the establishment of the Welsh Office in 1964, the Richard Commission, the 2006 Act, the Holtham report of 2010 and to some extent—we cannot be isolated or insulated from this—the Scotland Act 2012. It is in that devolutionary track that one should see the Silk report. The momentum that has been created is very considerable. I argue that it is a dynamic movement that cannot now be stopped, nor, indeed, essentially decelerated.
I wish to confine my few remaining remarks to the Barnett formula. Barnett, as we know, was a stopgap measure, intended to last perhaps only a year or two. It was a crude mathematical division which was calculated as follows: for any moneys that were invested in England, a sum would be allocated to Wales based on the percentage that the Welsh population bore to the population of England. It was crude and took no account of need. As we know, the Holtham commission clearly proved that as a result of that formula we have lost massive sums of money year by year. The estimated loss by now is £350 million. Indeed, today we have heard a figure of £400 million from the noble Lord, Lord Wigley. I am prepared to accept that figure. That, of course, is what we lose purely on the question of need. Our situation is very different from that of Scotland. In relation to Scotland, we lose more like £700 million per annum. Once Scotland gained a Secretary of State in 1885, the Goschen principles were applied. By various subterfuges all manner of weighting considerations were applied to Scotland, with the result, of course, that it was given massive subventions which Wales does not enjoy.
The First Minister of Wales has made it very clear that any question of varying income tax rates should depend first on the reform of the Barnett formula. That is the heart, core and kernel of the whole situation. It is an annual swindle to which Wales has been subjected for very many years and it must be brought to an end. How do we do that? We do it by exploiting this new feeling of unanimity and unity that has shown itself in relation to the creation and acceptance of the Silk commission. Mewn Undeb Mae Nerth—in unity there is strength. That is our prospect and our salvation. For too long we in Wales have been blighted by the curse of disunity. Now we have a chance to put that right. In relation to the Barnett formula, we must realise that justice delayed is justice denied. A stop has to be brought very quickly; there must be a concentrated campaign in Wales to bring it about.
Lord Rowlands
My Lords, I support a number of findings of the Silk commission. I support the proposed transfer of stamp duty land tax, of minor taxes and of business rates, as mentioned by the noble Lord, Lord Wigley. I also support the idea of additional borrowing powers. It is absolutely absurd that a Welsh Assembly Government cannot borrow when almost every other authority can. Apparently to do that one needs to service the debt. I assume and hope—perhaps the Minister will confirm this—that if you transfer the range of minor taxes, plus stamp duty land tax, it will bring in sufficient income to service any borrowing power. If that is the case, the package will be easy to introduce immediately. I also agree with all noble Lords who stated that it would be impossible to introduce major tax-varying powers unless the Barnett issue was addressed. There is little or no point in having tax devolution if such underfunding has not been addressed.
I will confine my remaining remarks entirely to one issue that I have raised before: my concern about the effect on low-income communities such as those I represented of raising tax rates by 3 percentage points or more. I hoped that the Silk commission would tell us what the impact would be on those communities of exercising such a power. I found the answer on two very difficult—in fact, almost incomprehensible—pages on estimates of the impact of income tax changes in Wales. There is a very complex equation and the introduction of the notion of the elasticity of taxable income. I hope that the Minister will translate those two pages into language that I can understand. It is essential to understand the impact the changes would have. If we will the power to a Government to raise the basic rate of tax by, say, 3p or whatever, we should understand the consequences for communities.
The most interesting in a wealth of tables in the report is that on income and income tax in Wales in 2009-10. It shows that of the 1,390,000 individuals who paid tax, 900,000—nearly two-thirds—had an annual income of between £10,000 and £20,000. Nearly 1.4 million people fell into that income tax bracket. I suspect that the percentage was bigger in Merthyr because the percentage of those on lower incomes will have been even higher. That substantial group of 900,000 or more would carry the additional tax burden if we raised the basic rate of income tax. Therefore, I am concerned that if we go down this path, it could lead to a regressive form of taxation. In constituencies such as the one I represented, we would be swapping—in fact, converting—beneficial public expenditure into a tax burden. That would be the effect of implementing additional rates of income tax. We must be honest. Politically it is highly unlikely that a future Welsh Assembly Government of any complexion will substantially reduce income tax and cut expenditure. The whole ethos of political life, among almost all parties now, would be against such a proposal.
If we will the power, we have to accept the consequence of it. I am not convinced, as the people on whom the burden of this would fall are those who should least expect to carry that burden. I keep an open mind, and am very supportive of all the other range of taxes, but I remain sceptical until I can find out exactly what the impact would be on the communities I represented of raising the basic rate of tax above the standard rate. We are not only talking about raising it 1p, 2p or 3p but, at this moment, have a very unfair tax anyway. The moment you come into tax and use up your personal allowances, which will eventually be around the £10,000 mark by the end of this Parliament, the tax on every pound then leaps from 0% to 20% because there is no middle band. I deeply regret the previous Administration’s abolition of the 10p band and have not been able to work out whether Silk recommends that a Welsh Government could actually introduce one. That would at least make an easier tax progression, if that was possible. I am sorry to end on a discordant note but, although it is now 10 years since I represented my former constituency, I still sense and feel that an injustice could be perpetrated if we started to raise the basic rate of tax on low-income communities and low-income families of the kind I represented.
Baroness Gale
My Lords, I thank the noble Lord, Lord Wigley, for giving us the opportunity to debate this important matter, and all noble Lords who have taken part in this short debate. I wish we could have had longer, but the contributions show the wisdom and the knowledge that we have in Wales, particularly with our Welsh Peers. Before giving our response to the report, I will ask the Minister two procedural questions.
First, why is the Wales Office limiting debate on such a vital constitutional matter to meetings of the Grand Committee in your Lordships’ House and the Welsh Grand Committee in the other place? The Minister will know that my honourable friend, the shadow Secretary of State for Wales, has written to the Wales Office asking that a debate be held on the Floor in the House of Commons. In his letter, my honourable friend urged the Secretary of State to hold a full debate so that Members from all parts of the United Kingdom would have the opportunity to participate. No reply has been received, but at Welsh Questions on 28 November in another place, the Secretary of State appeared to suggest that such a debate would not be held until legislation was introduced, which could possibly be two years away. Does the Minister agree that this debate should not be confined or restricted in this way and does she agree that the recommendations of the report are constitutionally significant enough to warrant a full debate in both Houses? I look forward to her comments on those points.
The second procedural point I will raise is the speed of the Government’s response. In a previous answer to me, the Minister said that the Wales Office was,
“committed to dealing with this with all due speed”.—[Official Report, 27/11/12; col. 88.]
However, since then, we have heard that the Government may not respond formally until spring next year. Can the Minister explain why it seems to be taking the Government longer than anticipated to respond to the report?
The Silk report is an important publication, which has wide-ranging recommendations for Wales and the rest of the United Kingdom. We welcome the report and congratulate the commission on its work. We agree with the list of taxes that Silk suggests should remain under the full remit of the United Kingdom Government and should not be devolved. We welcome the recommendation that certain taxes, such as stamp duty land tax and the aggregates levy, should be devolved to Wales and the recommendation that the devolution of these taxes should pave the way for borrowing powers for the Welsh Government, which would enable Ministers in Cardiff Bay to offset the impact of the 45% cut to their capital budget and allow them to further invest in jobs and growth. Can the Minister confirm that the devolution of these taxes would constitute an income stream against which the Welsh Government could borrow? What discussions has she had to this effect?
Furthermore, does the Minister accept that enabling the Welsh Government to borrow against this income stream—in addition to the devolution of the taxes in their own right—would be to the benefit of people in Wales? When it comes to the devolution of income tax-varying powers, the commission has recommended what my honourable friend the shadow Secretary of State described as a triple-lock test. Such devolution should be to Wales’s financial benefit and, to test as much, a nominal amount of Welsh income tax receipts—Silk suggests £2 billion—should be assigned to the Welsh Government without the ability to vary rates.
Proceeding with a test case is a sensible approach because Silk’s evidence suggests that it is far from clear that such devolution would be in Wales’s financial interest. Whether or not it would prove to be so would depend on the change in Wales’s income tax receipts and on the change in income tax receipts from the rest of the United Kingdom. If the Welsh change is higher, Wales will stand to benefit. However, Silk alludes to the fact that Wales was hit particularly hard by the recession and so, if this approach had been in place from the time the global financial crisis hit in 2008, Wales would now be worse off.
Since the Government took the United Kingdom into a double-dip recession, it could well be the case that Welsh income tax receipts have decreased by more than income tax receipts in the rest of the United Kingdom. In other words, Wales is being hit disproportionately hard by the Government’s failing economic policies. That is why the first test is crucial; there is no guarantee that the multiplier will be positive over the next few years. Is the Minister aware of any analysis or modelling that has been forecast regarding this first test? Does she acknowledge that Wales may be disproportionately hit by the Government’s failing policies?
The second test set by Silk concerns reform of the UK’s wider funding formula. Before devolving income tax, a funding agreement needs to be reached that is fair to all of the UK. Silk’s view is that that the Barnett formula would need to be revisited before income tax-varying powers were devolved. I would welcome the Minister’s comments on whether this view is shared by the Government.
The third of the triple-lock tests is that before income tax-varying powers are devolved to the Welsh Government, there should be—I believe that there must be—a referendum. Silk accepts this principle and we share the view expressed in the report that there,
“is a special nature to income tax”,
which necessitates approval from the Welsh people. These three tests would allow for the devolution of income tax-varying powers on the provisos that it would be in Wales’s short and long-term financial interests and that it would speak to the will of the Welsh people.
This debate has given an opportunity for the Minister to shed some light on the Government’s thinking and to inform your Lordships of the progress that the Wales Office has made on this report. I would be grateful for the Minister’s comments on the triple-lock test, as well as on the other questions that I raised. I look forward to her response.
The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson)
My Lords, I thank noble Lords, in particular the noble Lord, Lord Wigley, for proposing this debate, which has provided an opportunity to consider the recommendations of the Commission for Devolution in Wales—the Silk commission—on fiscal devolution and financial accountability. The noble Lord has rightly taken a keen interest in the Silk commission’s recommendations since they were published on 19 November and clearly recognises the importance of the report for Welsh devolution and for improving the financial accountability of the Assembly and the Welsh Government. I agree wholeheartedly with his comments in this regard.
The Government gave a clear commitment, in our programme for government, to set up a Calman-like process for the Welsh Assembly, depending on the outcome of the referendum on law-making powers for the Assembly last year. Following that vote in the referendum on Assembly powers, there was a clear need to examine Welsh devolution in a methodical way and to ensure there was no repeat of the case-by-case, drip-by-drip approach to devolution that typified changes to the Welsh settlement during the “LCO years”, as I call them. Our commitment to a Calman-like process for Wales did just what was needed.
The Secretary of State set up the Silk commission in October 2011, with, as the noble Lord, Lord Wigley, has emphasised, cross-party support. That support was reflected in the commission’s membership, which included representation from all four parties in the Assembly. Since then, the commission has gathered evidence and criss-crossed Wales to hold public meetings to inform its work on improving the financial accountability of the devolved institutions in Wales. The fruits of that labour, in the form of a nearly 200-page report, were published three weeks ago.
I take issue with the idea put forward by the noble Baroness, Lady Gale, that in some way three weeks is too long to spend analysing a complex package and a complex set of tax proposals, with 33 recommendations. I believe that noble Lords would expect the Government to take that seriously, as we are. Discussions on this are already well under way between Cabinet colleagues and between the Welsh Government and the Treasury. I assure noble Lords that we are taking it so seriously that there will be a response, we hope, in the spring, which I believe is timely for a report of this importance.
There is no doubt that the report is detailed and thorough. It relates to the financial accountability of the Welsh Government and the National Assembly, and how that can be improved through the devolution of tax and borrowing powers. I pay tribute to the commissioners for their hard work.
First, the commissioners recommend that the Assembly should be able to take tax decisions in order to better empower it to deliver policy objectives in devolved areas. To achieve this, the commission’s proposals include the devolution of smaller-yielding taxes, as set out here today.
Secondly, they suggest that to improve financial accountability, the Welsh Government should be responsible for funding a material amount of the money they spend. The commission recommends that responsibility for income tax should be shared between Cardiff Bay and Westminster, and that the Welsh Government should be able to set income tax rates within the UK income tax structure. The commission recommends that income tax devolution should be subject to a referendum, which the noble Baroness has indicated she supports.
Thirdly, it suggests that the Welsh Government should be granted borrowing powers; an issue that was raised very powerfully by the noble Lord, Lord Wigley, and others. That recommendation fits well with the announcement, already made before the publication of the report on 24 October, in which we agreed the principle of borrowing powers for the Welsh Government to fund infrastructure investment, subject to an appropriate independent revenue stream being put in place. In answer to the question of the noble Lord, Lord Rowlands, in general terms the minor taxes that are suggested would be considered to be a sufficient income stream to support borrowing, along the precedent set for the Scottish Government. Indeed, the UK Government have indicated that they will be prepared to anticipate the establishment and devolution of those taxes in order to enable more rapid progress to be made on infrastructure development in Wales.
Taken together, the package of measures recommended by the commission would make the Welsh Government responsible for raising about a quarter of their revenue. That is a significant change, and both the Government and Parliament need to scrutinise the implications in detail. In response to the noble Baroness, I say that my right honourable friend the Secretary of State for Wales has indicated his willingness and keenness to have a debate as soon as possible in the other place. Of course, there will be further opportunities when the Government officially respond to the Silk report.
That brings me on to where we go from here. As I have said, these recommendations would represent a fundamental change in Welsh devolution—perhaps the most fundamental change since it was established in 1999. That requires careful examination. As we announced in last week’s Autumn Statement, the Government plan to publish an initial response in the spring. It is a clear demonstration of our commitment to progress this work seriously, but in a timely manner. There is a significant amount of work to assess. Clearly, the Scotland Act sets a precedent for fiscal devolution, but we need to consider the Silk commission’s package for Wales on its own merits. As I have already said, discussions have already started.
The noble Lord, Lord Wigley, talked about the importance of economic regeneration. I feel that the Silk report neatly linked the policy objective of economic regeneration with its recommendations on specific taxes. The noble Lord also raised the issue of corporation tax. Of course, corporation tax is a very specific area for Northern Ireland in particular, because Northern Ireland shares a land border with the Republic of Ireland, where the rate of corporation tax is particularly low. Corporation tax is a particularly tricky issue if you are to avoid a “race to the bottom”. It is important to bear in mind that if you are on the wrong side of that border in that race to the bottom, you get the flight of businesses over the border. That is a difficult issue to be considered. The Silk commission certainly did not have a clear recommendation on that at all.
The proposed timetable is very tight, but I understand the issue. The Silk commission put forward a package of measures. Fair funding is also a package of measures, and there are ongoing discussions between the Welsh Government and the Treasury, with the agreement announced on 24 October that there would be discussions at the start of every spending review period. It would take into account whether there was likely to be convergence within that period.
The noble Lord, Lord Morgan, raised the interesting concept of representation without taxation. I felt that that was a neat way of referring to the problems that the Welsh Assembly has experienced. He drew attention to the weakness of the devolution settlement. He also spoke about the ability to vary the rate of income tax, and rightly says that Silk is more radical than Calman on this issue. He also rightly said that Silk affects the whole of the UK. However, I point out to several noble Lords who referred to the unfairness of the Barnett formula that it is a pretty blunt instrument because it does not take into account need, but it is also important to place on record that the discussions between the Welsh and UK Governments have led to an agreement that there is no longer convergence occurring. Indeed, in the past couple of years there has been divergence. In other words, Wales is doing rather better than it was a couple of years ago in terms of the Barnett formula. Indeed the figures show—and these are figures agreed between the Welsh and UK Governments—that we are within the rough area that the Holtham commission stated in its report was the fair level of funding for Wales. It is important to bear in mind that there has been that agreement.
Finally, I will, of course, review the record and will take the opportunity, with their permission, to write to noble Lords about any issues of substance that have been raised that I have not been able to address in my response.
The Deputy Chairman of Committees (Lord Brougham and Vaux)
My Lords, that completes the business in Grand Committee this afternoon.