Grand Committee
(11 years, 10 months ago)
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The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)
My Lords, I remind your Lordships that if there is a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division Bell.
Companies Act 2006 (Amendment of Part 25) Regulations 2013
(11 years, 10 months ago)
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Lord Popat
That the Grand Committee do report to the House that it has considered the Companies Act 2006 (Amendment of Part 25) Regulations 2013.
Relevant document: 16th Report from the Joint Committee on Statutory Instruments
Lord Popat
My Lords, I am grateful for the opportunity to debate the proposed regulations to reform and modernise the system for the registration of company charges. For many years I worked as a business and finance consultant, and I cannot stress enough the importance of a clear, transparent system that enables companies to access the finance they need and lenders to provide finance with confidence. This is particularly important in the current economic climate.
These regulations intend to modernise the system for the registration of company charges—a system which is more than 100 years old. The changes to this system of registration are intended to retain the fundamental principle of the current system, which is internationally well regarded, while making those critical changes that will allow this system to continue in a way that is effective and efficient.
Secured lending is vital to support economic growth. It allows companies to access the finance they need to grow and enables lenders to invest in a company with greater confidence. In fact, the World Bank, in its report Doing Business 2012: Doing Business in a More Transparent World, considered the laws relating to collateral to be crucial to supporting economic growth and transparency. The statutory schemes for registration of company charges contribute to the UK being rated equal first, with Malaysia, in the section on getting credit.
In the early 1900s, a system was conceived which required companies to register debt secured against their assets. This allowed lenders to see clearly whether assets were already encumbered and to offer finance with confidence. The fundamentals of this system remain and have been the subject of further reviews and consultations, including the Crowther report in 1970, the Diamond report in 1989, the 2001 recommendations of the Company Law Review and the most recent consultation led by the Department for Business, Innovation and Skills in 2010 on reforms to the system, based on the considerations of these earlier reviews.
Over the past 10 years there has been ongoing engagement with legal practitioners and academics as well as credit reference agencies and investors to determine what reforms should be made to this system. These stakeholders have generously offered their time and expertise to support our reforms and to test out how these may work in practice. This is vital in preventing unintended consequences later on.
The proposed system will deliver benefits to business of around £21 million every year through a reduction in unnecessary bureaucracy as well as a simplification and modernisation of the system.
I will now take a few moments to outline the key elements of the reforms. First, we have amended the regulations governing the system for the registration of company charges to take advantage of modern technology. Companies, legal advisers and accountants will now be able to submit the charge for filing electronically and will be able to pay their £13 charge electronically too. This has the twin benefit of reducing the time and bureaucracy of filing a charge, while also allowing the registrar to operate a more efficient system.
Secondly, the regulations set out a far simpler model for determining whether a charge is registrable. Lenders and companies want to be able to register charges so that they can invest or attract investment, but the complex list of types of registrable charges had led to confusion and wasted effort in simply ascertaining whether a charge could be registered. The new regulations place the onus rightly on the presenters of the charge to make this commercial decision, subject to a few clear exemptions where the registration of the charge was not in any way useful to the public, investors or companies.
Thirdly, following on from my previous point, the system recognises that the incentive on investors is to register their charge rather than risk it being void against a liquidator or administrator. In the rare instances where a company itself registers the charge, it is commonplace for investors to require the company to submit the charge for registration as part of the financial agreement. The existing criminal sanction is therefore entirely unnecessary and these regulations repeal it.
Fourthly, the system will deliver far greater transparency around financial arrangements as, due to the technological advances, the whole charge instrument or deed will now be available electronically in addition to the summary information. Of course, the regulations also include sensible safeguards against fraud and allow personal information, bank account numbers and signatures to be redacted.
Finally, the proposals will for the first time create a system that fits around the different property laws and processes that operate in different parts of the United Kingdom. Many lenders and companies operate across the UK and now they can take the same approach to the registration of the charges, regardless of where they are. I hope that nobles Lords will support these important reforms.
Lord Stevenson of Balmacara
My Lords, I hope it is in no way a measure of the interesting comments made by the Minister in his introduction that the only other noble Lord who was present has fled quickly from the room and is therefore not in a position to respond to his kind invitation to speak, but that leaves the burden on me. I appreciate the way in which he introduced this change and want to make it clear from the start that we broadly welcome it. It is a good idea, but possibly rather later than perhaps it could have been, as the Minister hinted at in his introductory comments.
This has obviously had a troubled background in the sense that, as we discovered, the original consultation was in March 2010 and had to be reissued for further consultation a couple of years later before the department was able to come forward with a modified proposal. Therefore, my first question to the Minister is whether we ended up with a situation in which we have the least worst solution rather than the best solution. Just to amplify that, most people seem to want—and the majority of the responses within the impact assessment suggest this—a fully operable system, with all the detail. There were, however, a significant number of people who felt that that was going to be burdensome and difficult, so the compromise is neither one thing nor the other. I would be grateful if he could make a few remarks to illustrate what he thinks is the end result and how it meets the benefits specified in the documentation.
Secondly, I was having difficulty following the figures, possibly because there were two different consultations and two different levels of issuing comment. The summary document which accompanies the impact statement says that the impact on businesses is expected to be a reduction in the burden on those filing charges, generating a net savings of £21 million a year. However, the impact assessment itself says that the net cost to business will be about £21 million as well; I may have misread that, but I would like a comment on that from the Minister. It seems like a modest reduction, given the amount of effort that goes into registering charges. As the Minister said, this is at the heart of all business transactions involving inter-business acquisitions and sales; any lending going on will always require some sort of assessment of the overall capacity of the organisation to which it is being lent. Therefore, we are saying that this is a very modest change.
However, costs are not symmetrically based; they will fall on those who have to prepare and generate the new input documents which the document says will be recouped through efficiency savings over an estimated period of four years, but no evidence about that is given. I just want to be sure that these are really modest savings and would like it on the record that that is correct.
My third point is about the costs burden arising from moving to a new electronic system. We are all sceptical about the claims that are often made for these systems but this is by all accounts a rather simple one. It is a register that is not capable of doing very much more than simply holding data. Can the noble Lord give a bit of context for how much testing of this new register has been done and whether he is confident that it will be up and running and ready? Quite a lot of time has been spent preparing for it, after all, so I hope that it will be but I would like to be confident.
Finally, I trained as an accountant in Scotland, where one of the things that was drummed into me early on in my studies was the difference between the charging register system in Scotland and that in the rest of the country. In Scotland, it is not necessary to register all charges. There is very little mention of that in the Explanatory Memorandum while there is some comment on it in the impact statement. It would be for the benefit of the Committee if the Minister could simply mention what exemptions there are for Scotland and how they will be accommodated given that the overall aspiration of this move, which I do not dissent from, is to try to provide a simple system for the whole of the country despite the differences in responsibilities between the various territories.
Lord Popat
I thank the noble Lord for a number of the issues that he has raised on these regulations. First, let me explain the cost versus the benefits side. Currently, to register a charge the fee is only £13 but there is a huge cost to the businesses and companies when it comes to dealing with a large number of forms through their accountants, solicitors or agents for registration. Electronic transmission will be much easier, as when we do our tax returns and VAT returns electronically. A company can in fact register electronically a director or company secretary. Having business knowledge and a business background, I suppose that this is something that should have been done many years ago.
This is a welcome move for a number of organisations, in particular credit reference agencies, lawyers and accountants but, most importantly, the lenders themselves. It gives a lot of security to lenders because we can register a charge electronically within one day. Currently, the system takes as long as eight days. Lenders will be pretty well secured on day one of release of the money to the companies to which they are lending, so it is a much safer system than we have now.
In the old days, I remember that we used to rush to Companies House in London. Now, Companies House is based in Cardiff and there is also a 21-day time limit, so in that respect the cost saving to the companies is quite huge. Even if it takes roughly half an hour for the lawyers and their secretaries to do the necessary paperwork for company registration, that half an hour is charged as a cost to the client so that will be a saving. That is what the £21 million saving is all about. With regard to the cost of putting it in practice, which is something like £750,000, if you can imagine the time saved by Companies House staff in Cardiff in processing manual applications compared to electronic applications, I would guess that that £750,000 will be recouped in four years’ time. A lot depends on the number of applications going through electronically, which is currently about 90,000. If the numbers go up, recouping the cost will probably take less than four years.
This was taken to be a compromise on future lenders’ requirements and to simplify the particular archive held in their own system. I will explain what I mean by that. When their auditors come, companies are required to do company registration, with its charges. The auditors can actually get information electronically and that screen saves audit fees for the companies, so there is that advantage too. I am afraid that it was not a compromise.
On why this took so long, we obviously had a number of reports on this and took the necessary time, as it is a complex area. We engaged all the stakeholders, who are now largely satisfied, including the Law Society and firms of chartered accountants.
With regard to Scottish companies, this provision will apply to the United Kingdom throughout. The system is not different for Scotland in this respect. I believe that I have answered most of the noble Lord’s questions.
Lord Stevenson of Balmacara
My Lords, I do not think that the Minister quite got the grasp of what I was saying about Scotland. Scottish law does not require the automatic registration of all charges. In England and Wales you have to register them automatically. Therefore, given the Government’s drive for simplicity, I was asking whether the Minister could say a little more about how there can be a very simple and universal system, yet also allow Scotland the discretion to not register where that is appropriate. For instance, unincorporated companies do not need to register charges in Scotland.
While I am on my feet, I might add that the Minister did not answer my question about whether the system had been tested and to what extent he felt that it was fit for purpose and ready to implement.
Lord Popat
The draft form has been tested with the stakeholders and other learned registrars and the system works well.
The Deputy Chairman of Committees
My Lords, I think that the clerk is indicating, very sensibly, that we might need a moment to pause for officials to change but if that is not necessary, we will proceed.
Parental Leave (EU Directive) Regulations 2013
(11 years, 10 months ago)
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Lord Popat
That the Grand Committee do report to the House that it has considered the Parental Leave (EU Directive) Regulations 2013
Relevant document:15th Report from the Joint Committee on Statutory Instruments
Lord Popat
My Lords, these regulations give effect to the 2010 parental leave directive. It is a revised directive, which repeals the 1996 parental leave directive. As the UK has fully implemented the 1996 directive, the regulations under consideration today are confined to giving effect to the changes arising from the revised directive. Before I elaborate on the legislative effect of the Parental Leave (EU Directive) Regulations 2013, let me state the purpose of the revised directive. It is to lay down minimum requirements designed to help working parents balance their work and family commitments.
The 2013 parental leave regulations do three things. First, they increase the number of weeks of parental leave for all parents from the current 13 weeks to 18 weeks. This transposes the requirement in the revised directive that parental leave should be granted for a period of four months. They make no other changes to the amount of parental leave available. Parental leave will continue to be available per parent per child but an employee will be entitled to 18 weeks rather than 13 weeks. Similarly, there will be no change to the age limits of a child whose parents are entitled to take parental leave—that is, five years old or 18 years old for a disabled child. They make no changes to the arrangements governing the use of parental leave—namely, the 12-month continuous employment qualification, notice requirements and the limit on the amount of leave which can be taken in a 12-month period.
In November, the Government announced a package of changes to leave for parents following the modern workplaces consultation during the previous year. As part of this broad sweep of changes to maternity and adoption leave, and the creation of shared parental leave, we will make parental leave available to all parents of children up to the age of 18.
The Government intend that these changes will be introduced in 2015. However, we are required to increase the number of weeks from 13 to 18 now so as not to be in breach of our EU obligations. We have decided not to make other changes to the age limit at this time but will raise the age to 18 years as part of the broader sweep of changes in 2015. The reason for raising the age later is that we understand from the business community that having the change in age as part of the creation of shared parental leave and pay will be easier in terms of familiarisation costs.
Secondly, the revised parental leave directive requires that parents returning from parental leave must have the right to request flexible working. Many employees who are parents and carers already have this right, but employed agency workers are currently excluded from the right, and this is not permitted by the new directive. The effect of Regulation 2, therefore, is that employed agency workers will have the right to request flexible working on return from a period of parental leave.
Finally, the regulations introduce a review clause and a duty on the Secretary of State to review and report on the workings of the regulations which implement the directive, five years after the regulations come into effect and at least at five-year intervals thereafter. This is not required by the directive but this Government consider that a duty to review the effectiveness of, and ongoing need for, regulations is central to good government and good law.
As part of the review, we will seek views from business and family groups and look to the research on family leave conducted by the Department of Business, Innovation and Skills. We will place copies of this report in the Library. I commend these regulations to the Committee.
The Earl of Listowel
My Lords, I welcome this order and am particularly grateful that it includes adoptive parents, assuming that I have understood it correctly. Having worked in the past with children who are in the process of being adopted, I recognise that these are often children who have had very bad early life experiences and who can be very challenging for parents to care for. We know that one in five adoptive placements, unfortunately, fail and one can only try to imagine how awful that may be for the children involved. Any support that can be given to adoptive parents to make the best go of that placement is very much to be welcomed, which I do as vice-chair of the All-Party Parliamentary Group for Looked after Children and Care Leavers.
I welcome all policies which support the family. Our human capital is often overlooked. At a time when we are so concerned about the future growth of this country, it is important to think about investment in bridges, new train systems and better communications. However, we need also to bear in mind that our families and children are a vital component for future growth and that investing in human capital, and investing early in families, is an important means to seeing that we are a vital and competitive nation in future. I welcome this measure.
Lord Stevenson of Balmacara
My Lords, I am pleased to welcome this proposal. It is exactly what the Government should be doing and seems to do what is required. As the Minister said, it has been welcomed by those who have been consulted in the round. However, there is one caveat. The Minister explained why certain measures had to be brought forward at this point because of an EU directive requirement, but the general thrust of the approach to parental leave and to regularising the broader position is based on doing them at the last rather than the first possible moment. I do not need a response on that but I would like to record that it is obviously a matter of some regret that some of the good things that we see in this change to the regulations are going to be delayed, to the disbenefit of those who will be affected by them.
Will the Minister rehearse the timing of the extension to the age of 18? I ask that because the matter was raised when these regulations were considered in another place; there was an exchange about this of which I am sure the Minister is aware. I quote the Minister on that occasion, who said in response to a question from a Labour Member:
“The hon. Gentleman posed a fair question about why we are not raising the age to 18 at the same time”,
as the rest of the regulations which were going through with this order. The Minister said that the reason was straightforward—although it may be to the benefit of the Committee if it listens hard, because it is not at all straightforward to me—and that,
“we understand from the business community that having all the changes on shared parental leave and on pay and leave for parents in one go is easier in terms of familiarisation costs. For this small, discrete change, there is an earlier European Union deadline, and we want to make sure that massive changes do not happen at various times”.
That seems clear, and I understand its logic. She continued:
“However, I give the hon. Gentleman the firm commitment that the Government’s policy is to raise to 18 the age at which the regulations apply”.—[Official Report, Commons, First Delegated Legislation Committee, 28/1/13; col. 7.]
Although she said that it was not going to happen at this point, the guarantee which the Minister wished to give was that the Government would move this forward. This has been repeated by the Minister again today.
Why have these things not been brought together? If the Government wanted to minimise the impact of familiarisation costs on business, it would seem more sensible to do all these, and apply them, at the same time, yet they chose not do to so. Perhaps the Minister could respond on that point.
Lord Popat
I thank noble Lords for their comments. I thank, as always, the noble Earl for his comments on children who are being adopted. Adoptive parents will be entitled to 18 weeks, as is everybody else, with leave to be taken within five years of the date of adoption; others would be from the date of birth. If somebody adopts a child of six years, the right will expire five years thereafter or when the child is 18, whichever is sooner.
The noble Lord, Lord Stevenson, asked why we did not bring the 2015 date forward. Consultation was done on a range of time limits: five, eight, 12, 16 and 18 years were proposed. Around 30% of the respondents called for no change, whereas 31% called for the age limit to be increased to 18. There was not much support for eight, 12 or 16 years. We therefore made the age 18. In order to minimise the cost to business, this change will only be introduced alongside the other changes in the system for maternity, paternity and shared parental leave. The change will therefore not be made through these regulations. Primary legislation is required, and will be included in the Children and Families Bill. I trust that I have responded to the noble Lord’s questions.
Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013
(11 years, 10 months ago)
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Lord Popat
That the Grand Committee do report to the House that it has considered the Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013,
Relevant document: 15th Report from the Joint Committee on Statutory Instruments
Lord Popat
My Lords, this is a short but not insignificant order that will enable the effective enforcement of the Consumer Protection (Payment Surcharges) Regulations 2012. The regulations implement into UK law Article 19 of the European Union consumer rights directive. They prohibit traders from charging consumers above-cost payment surcharges. The Government have had concerns about the level of card surcharges that exceed the real costs in several sectors of the economy. Such surcharges are typically employed as a form of drip pricing, whereby the consumer does not see the final transaction cost until after completing several forms. That can make it more difficult for consumers to shop around. Under the regulations, surcharges for using a particular form of payment will become cost-reflective.
The provisions of the directive need to be implemented in UK legislation by December 2013 and brought fully into force by June 2014. Given the concerns that have been raised about these practices—notably by Which? and in a report by the Office of Fair Trading—the Government have decided to implement this part of the directive early. The payment surcharges regulations were made and laid before Parliament on 19 December last year under the negative resolution procedure. As with this order, they come into force on 6 April 2013. They are not of course the subject of the Motion today but they are directly related.
Article 2 of the order provides for the enforcement framework in Part 8 of the Enterprise Act 2002 to apply in relation to the regulations. This enables the relevant enforcement bodies to apply to the courts for enforcement orders against traders that have engaged, are engaging or are likely to engage in conduct that breaches the regulations, if that conduct harms the collective interests of consumers in the United Kingdom. Taken together, the regulations and this order will provide an effective enforcement regime in fulfilment of the directive’s requirements that adequate and effective means exist in national law to ensure compliance with the provisions of the directive and that penalties laid down for breaches of the directive are effective, proportionate and dissuasive.
Although the payment surcharges regulations implement an EU directive, Article 2 of the order specifies them as a domestic infringement rather than a community infringement for the purposes of the 2002 Act. This is because the obligations in the regulations take effect from April 2013, whereas the EU directive requires them to take effect only from June 2014. The order does not therefore strictly relate to infringements of EU law in the period up to June 2014. For this reason, and unlike the regulations, the order is subject to approval by both Houses of Parliament. I beg to move.
Lord Stevenson of Balmacara
The noble Lord’s fluency in so many matters suggested that he wanted to make a contribution. I am sad that he will not do so.
We on this side welcome the regulations. They are a good step in a direction that many noble Lords will recognise has been a source of considerable annoyance and concern to consumers over many years. In that sense, I want to understand better the approach that the Minister is taking here. He quite rightly explained that there are requirements because of the European Union directive to move in this direction. In many senses today is interesting because the earlier order that we considered also relates to a European Union directive. The choice there was to do something at the latest possible moment whereas the choice here is to take forward the timing of the European Union directive and use it to solve a problem that is, as he said, a domestic rather than a European one. That aside, it is still a good decision.
Underneath this is a history that the Minister touched on but is worth recording. This comes from a civil complaint from Which? that was referred to the OFT, and the OFT generated the momentum behind this. Yes, it could have happened because of the European Union directive but there is sufficient pressure internally. That also shows that the measures brought forward under the previous Government to try to provide for more active consumer protection in this area have been successful. As a result of that, we are seeing these changes today.
In the impact statement, to which the Minister referred, the assertion is made that these drip-pricing approaches—you do not know the full cost of what you are buying online until you get to the final screen and suddenly some additional charges are put in—are, of course, a frustration and an annoyance. It is interesting, however, that the impact assessment is quite coy about whether it will be to the long-term benefit of consumers. It is effectively saying, if you read between the lines, that while the changes in the regulations and the consequences of what is being proposed mean that companies will not be allowed to add these additional charges, or drip charges, to the price that they are quoting and we will therefore be able to compare prices better and get more for our money, in fact, the money that is being taken out of the system through drip pricing will probably re-emerge as additional charges within the main cost. The impact assessment says that,
“the overall price level may fall; however this is considered unlikely”.
I wonder whether the Minister has any more information on that. I looked carefully through the impact assessment and I could not see much documentation about what will happen to prices. Does he think that my assertion is overstated or about right?
My final point is that the CRD—and the regulations implementing it—covers most retail sectors, but does not include some. Will the Minister please explain what is going to happen in areas which are not covered by the CRD or by these regulations? What measures are the Government considering to bring forward in future years to deal with those?
Lord Kennedy of Southwark
My Lords, I thank my noble friend for that. I should have jumped in before him, so I apologise for not getting this right. I wanted to ask one question about the impact assessment and the opt-out for small businesses. I do not believe in extra burdens and regulation for businesses, but it seems odd to me that we seem to be saying that, by allowing business with fewer than 20 people to opt out, they can carry on overcharging customers. It seems odd and unfair that they will still be able to make these charges, but generally I think that this is a great order and I am delighted that it is being brought in.
Lord Popat
I thank the noble Lord. He is quite correct that this order will prohibit traders from charging consumers above-cost payments; in other words, the charges will not exceed the real cost of the goods or services bought from the trader. We are implementing this in December 2013, largely due to our own research and that of Which? magazine, which brought this to our attention. The European directive will be enforced in 2014, so it will be good for consumers. The European Commission is looking at the payment separately under the financial services regulations. We will obviously get this information in due course. It is our policy to exempt microbusinesses from the new regulations until 2014. They are small businesses that employ probably fewer than 10 people, but they are crucial for growth and we have to support and encourage them. That is my response to the questions about small businesses.
Lord Kennedy of Southwark
May I push the Minister a little further on that? It just seems very odd to me; I want to see small businesses and the economy grow, but if I am running a small business, I do not see why I should overcharge my customers. That does not seem like good practice and we should not allow it because it is not fair. I hope he will explain the point he is making. Why should small businesses be able to overcharge when big businesses cannot?
Lord Popat
As I said earlier, microbusinesses are crucial to growth. As a small businessman myself, I want to give value for money to my customers and do not want to make them pay any unnecessary charges, because I want to make sure that I get my repeat business. It is our policy is to exclude microbusinesses. The regulations will apply from June 2014 and not from December 2013.
Earl Attlee
My Lords, the Committee has made rather better progress than perhaps one noble Lord anticipated. I therefore suggest that the Committee break for five minutes.
Publishing Industry
(11 years, 10 months ago)
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Lord Dubs
My Lords, I am grateful to all Members of the Committee who are going to speak in this debate. I also express my thanks to the ALCS, the Publishers Association and the Society of Authors for the help that they have given me and, I hope, colleagues in preparing for the debate.
People who are brought up with books in the home are lucky and privileged, and life must be very difficult for those who, in their childhood, never saw a book in the house. I am reminded of a book which I read many years ago by Brendan Behan, called Borstal Boy, about a teenager in a juvenile prison allocated, I believe, two books a fortnight. He loved books so much—or developed such a liking for books while he was in jail—that he rationed himself to only so many pages a day, to make sure that his two books lasted the fortnight before he got new ones. One day the prisoner allocating books gave him a seed catalogue as his non-fiction book. As Brendan Behan says, he was almost in tears, with nothing to read for part of that period. Let us also remember that in the last century, books were burned by people who saw books and publishers as the enemies of freedom and democracy.
Books and publishing are of enormous value to the UK economy. The publishing sector is estimated to be worth some £5 billion a year, of which book sales amount to £3.2 billion. The United Kingdom is one of four countries that produce 100,000 new and revised titles a year. The UK book market is the fifth largest in the world, and 41% of the sector’s sales come from exports; a larger proportion than that from any other country. Moreover, successful books often lead to film rights, another benefit to the UK creative industry. However, a large barrier to growth is the difficulty most authors have in finding a proper return for their professional work. The figures for what many authors earn show how little they get in return for their professional work. One or two authors scoop the pools and make a fortune, but for many it is a very hard job indeed to make a decent living.
I turn specifically to publishing and the publishing industry. Publishers are of course the guardians of an author’s copyright, without which authors would hardly be able to make progress; they invest in authors, and give advances and royalty payments; they identify good-quality writing and research; and they help in the distribution of books. Publishers and retailers work together to encourage reading, for example in bookshops with World Book Day and many other such schemes.
However, one of the key factors on the scene is the growth of electronic publishing. I understand that in 2011 electronic publishing increased by 366%—an enormous increase. There is no VAT on printed books but electronic books published in this country attract a VAT rate of 27%. In some of our competitors on the continent, such as France and Luxembourg, there is a much lower rate of VAT. Britain is at an economic disadvantage with our e-books, and may well suffer even more as other countries impose lower rates of tax. If books are more expensive, Britain will fall behind. We only have to look at the music industry and the recent decline of HMV to see how bits of our economy can fall behind very rapidly if they are not able to compete in a world market.
On the positive side, digital books help in self-publishing, so they open the door for some authors. But nobody can predict the way in which e-books will go. All we can say is that the digital market has grown dramatically of late and I believe that it now poses a threat. I do not want to be a Luddite or act like King Canute and say we do not want e-books because of course they are here. What is important is that printed books will not fall behind too much and can live in this new digital age.
I think it was Jamie Byng, the managing director of Canongate, who said that one of the things that bookshops do is encourage discovery. The same applies to libraries. There can be few things more exciting than for a young person to be let loose in a bookshop or library and see the wealth of books available there for his or her reading. That applies entirely to libraries. Yet we have seen recently a dramatic decline in the number of bookshops. The growth of e-books will encourage that decline. I really feel that bookshops are one of the values in our society. If we lose bookshops, something valuable will be gone.
I love going to book festivals. I have been to the one in Edinburgh frequently. In the Lake District, there is a superb book festival at Keswick that I go to most years. Yet, if we all had only digital books, how could there be book festivals? They would not mean very much if the output of a book festival was just a pile of Kindles and no books themselves. Yet the public lending right should be extended to e-books and audiobooks. That is important to get balance, but we have to be careful. We have seen the problem with Amazon, which scoops the pool in terms of electronic books at the moment but is based abroad and pays very little tax in this country. The whole thing is unbalanced and makes it very hard for British electronic publishers and above all for books to compete.
On the national curriculum, changes to that are being phased in very quickly and it is important that the publishing industry is given a chance to provide the necessary and appropriate books so that the national curriculum can work. That is one of those areas where more co-operation between government and the publishing industry would be appropriate.
Open access has been an important point. There was a report by Professor Finch about open access for future academic publishing. I am not certain that the Government have responded to that but it would be useful were they to say where they stand on this.
We have in books and publishing one of the most important creative industries in the country. We are renowned for having good creative industries. We are a world leader, as I showed earlier. It is important that, in their general approach to publishing and books, the Government should be aware that our leadership cannot be sustained automatically. They need to make sure that they support publishing.
It is important in terms of detail that we have a reasonably successful copyright regime, which should not be weakened in any way. If we do that, we weaken the economic success of our publishing industry and our books. There has been some talk about developing educational exceptions. However, we have to be careful. If an educational establishment can photocopy something that is appropriate for teaching purposes for 50 or 100 students, that of course will severely impact on the income of authors, which would be a retrograde step. Of course, one wants educational institutions to be able to work freely and easily but we also have to protect copyright in that respect.
I have already mentioned the difficulties of VAT and electronic books. I am in two minds about this. It would be fair that VAT on electronic books should be on a level playing field with printed books. I am also concerned about the impact of e-books. I should like to repeat what I have said earlier. I must admit that I have a Kindle, although that was before I discovered how little tax Amazon is paying. I now feel a little guilty every time I use my Kindle and it is useful for travelling. However, we should be careful. Anything we can do to sustain hardback books, bookshops and the publishing industry can be only for the good. We have a vital creative industry in this country, which the Government must support as fully as they can.
Lord Black of Brentwood
I declare an interest as a director of the Telegraph Media Group. The noble Lord, Lord Dubs, is to be congratulated on securing this important debate. Publishing is the lifeblood of a free society. It forms the basis of democracy, our education system and our creative industries; yet its future is uncertain because of the massive impact of digital. Every publisher is faced with the central challenge: adapt your business model or die.
However, in order to find time to adapt, traditional publishers need two things; namely, as little regulation as possible and as much protection for the absolute right to copyright as possible. Both are under attack. I want to flag up three ways in which the Government can help. I agree with everything that the noble Lord, Lord Dubs, said about VAT. As printed material in the UK rightly attracts a zero rate, it is wrong that the electronic equivalent attracts the full 20% rate, which leaves UK publishers at a real commercial disadvantage. Given the rapid development of this market, there is now an urgent need to remove or reduce VAT on electronic publications. I would ask my noble friend if he would talk to his very kindly friends at the Treasury on this point.
As regards music publishers, I should declare an interest as a member of the Royal College of Music Council. Music publishing is an incredibly important business because it is at the core of our creative industries and certainty about copyright is crucial for it to flourish. Of specific concern therefore is the Government’s plan to water down copyright protection—again, the noble Lord mentioned it—which is of fundamental importance to its existence through extending the exceptions for educational use by introducing a so-called “fair dealing exception” which will be available to “all organisations and individuals”. This will increase exemptions in this area to include one-to-one music lessons, Saturday music services and music clubs, and could lead to a proliferation of photocopying of sheet music, which would be a real loss for the UK music publishing industry at a time when it is trying to make life easier for schools which want to copy musical work. I ask my noble friend to ensure that any scheme is sufficiently carefully drafted to protect small, specialist providers of educational material. Perhaps he could write to me to explain how the fair dealing exception will work.
Finally, I come to newspaper and magazine publishing, where the internet has been fiercest. Here we need to ensure that the press in the UK is not subject to any form of statutory content controls which would hugely disadvantage it with global competition. But proposals from the EC High-Level Group on Media Freedom and Pluralism would usher in a draconian European system of controls, including proposals to force media councils to ensure that newspapers comply with European values. These proposals would push the EU into an information dark age and the Government must do everything that they can to stop it. I ask my noble friend for his support on my three points.
Lord Howarth of Newport
My Lords, the impact of digitisation on the book industry has been seismic, and one might say, with Gramsci,
“in this interregnum a great variety of morbid symptoms appear”.
Swirling in the maelstrom, the publishing industry is, however, resilient and adaptable. So, too, are books. The codex was invented by the Romans. It has been refined in every century since, and it remains a technology that will be hard to beat.
What, then, is the role of the Government in supporting this important industry and the place of books in our national life?
The Government should create a fair tax regime. There should be zero-rating for e-books. Google and Amazon should pay their fair share. Meanwhile, Amazon might care to consider presenting a Kindle to every child, of whom 4 million in Britain do not own a book.
The Government should support publishing exports and deal firmly with trade barriers, piracy and infringement of copyright. They should ensure that their regime for intellectual property is coherent, fit for purpose and appropriately balanced as between the rights of creators and users. They should enable Parliament to consider, closely and carefully, any proposed changes to the legislation.
The Government should nurture reading within the national curriculum, working with the Publishers Association, allowing time in the school day for reading and putting libraries back at the heart of schools. They should support the charities which support books and reading. I single out the Reader Organisation, a charity which organises groups to read nothing but high-quality literature: groups of patients in mental health trusts, prisoners, substance abusers and looked-after children. It works in every case. The market for serious literature outside classrooms and middle-class homes can be developed.
The Government should enable local authorities to give decent support to libraries and literary festivals, and to help independent bookshops compete on price. The Arts Council should provide sustained security for serious non-commercial literary publishing, particularly poetry. They should implement the extension of PLR to e-books and audiobooks.
In a letter in the Times on 1 January 1942, TS Eliot, EM Forster, JB Priestley, Bernard Shaw, Rebecca West and others wrote:
“Unless authority suffers a change of mind, the condition of letters in this country will be quickly past prayer … Books and the book trade are not merely another industry. They are the daily food of our mental and spiritual life”.
They went on to quote the Prime Minister, Winston Churchill, who had said:
“Books in all their variety offer the means whereby civilization may be carried … forward”.
The Minister is a civilised man, and he will endorse all that we have said. May we hope that our Prime Minister, too, will affirm the high importance of books and the publishing industry in our culture and economy?
Lord Wills
My Lords, I, too, congratulate my noble friend Lord Dubs on securing this debate. I draw your Lordships’ attention to my declaration of interests.
This is a timely debate. As we have heard, digital technologies are disrupting the business models that have sustained the industry for so long. They are redistributing power within publishing, between publishers and retailers and between different sorts of retailers. However, as my noble friend Lord Dubs so eloquently set out, there is no existential threat to publishing in the way that canals, for example, were replaced by railways. Millions will continue to derive huge pleasure from reading and, as long as they do so, there will be a publishing industry.
However, these new technologies are potentially disruptive for what is available to read. For all the growth of self-publishing which has been enabled by these new technologies, and it is welcome, publishing is for the most part still a fragile ecology, where a wide range of talents and skills remain critically interdependent. Creative artists, whether writing fiction or non-fiction, rarely, if ever, create on their own in a garret. They are supported by agents and publishers, all striving together for that elusive creative and commercial success which underpins not just publishing but all the creative industries which do so much for this country. Those support systems depend, above all else, on effective intellectual property rights.
This is a complex area of public policy, as the Government have recognised. Rightly, they are trying to balance the interests of rights holders, creators, consumers and users, and this has always been a difficult balance to strike. However, it has been made all the more difficult by the extraordinary developments in digital technology over recent years. In the light of this rapid change and the inherent difficulty of the task, no one can be certain that the Government have got the balance right. If they have not, there could be serious consequences for publishing and all the creative industries.
I was therefore dismayed to see the Government reject amendments to the Enterprise and Regulatory Reform Bill in Committee, which unfortunately I was unable to attend, which sought to provide mechanisms to protect against such uncertainty—particularly the proposal for a new office to keep the interests of intellectual property rights holders in the forefront of public policy which, in such a rapidly changing world, and in which their importance has been overlooked in the past, seems simply prudent. To rely, as the Government seem to wish to do, on the existence of, in Sir Robin Day’s immortal phrase, here-today and gone-tomorrow Ministers seems to defy all the experience of recent years when the development of public policy in this area has painfully failed to keep pace with the implications of rapid technological change. I hope the noble Lords who proposed these amendments—I am glad to see that the noble Lord, Lord Clement-Jones, is down to speak in this debate—will submit them again on Report and that the Government will then reconsider their approach.
More generally, it is likely that the publishing industry will change even more in the next 10 years than it has done in the previous 10 years. Its customers—readers—will determine those changes, but public policy cannot stand aside. I look forward to the Minister setting out what the Government are going to do to support this vital industry.
Lord Dobbs
My Lords, I must declare my interest as set out in the register, which reflects 25 years of earning my living as a writer. I add to the thanks expressed to the noble Lord, Lord Dubs, not only for introducing this debate but for doing it so splendidly. He gave us a fantastic tour d’horizon.
The publishing industry faces grave difficulties, but I want here to concentrate on the plight of authors—academic, literary and others. Without them, there would be no industry. Incomes are falling; the future is filled with uncertainties; the essential nurturing of creative talent that allows authorship to reach its peak is disappearing; and the internet age believes that it has inalienable right to read everything online and for free. There is an urban myth that anyone who has ever written a book that anyone else has ever heard about must be a multimillionaire. The chilling truth is that the average annual income for a full-time author is around £12,000 a year.
I want to make two specific points. The first echoes the point made by the noble Lord, Lord Dubs, about the public lending right. It is a scheme whereby authors get a token payment when their works are lent out by public libraries. The PLR supports 23,000 authors every year. Those payments are limited and typically very small, but they are vital. It is not a subsidy; it is a payment in return for authors and publishers agreeing to allow their works to be loaned out through the library system. Yet the Treasury has cut PLR. It amounts to less than £7 million a year, but it has been cut. Still worse, it is refusing to extend PLR to audiobooks and e-books. It is a little like the Government commandeering a taxi and then refusing the fare.
My second point, about intellectual property rights, has also been referred to by the noble Lord, Lord Dubs, as it was by the noble Lord, Lord Wills. The Government are preparing to move us into the digital age by making it easier to access and copy authors’ works, particularly in schools. Cut through the language and what that means is that schools will be able to copy an increasing amount of work without paying the authors. It is of course vital that we support education, but I do not see the Government asking dinner ladies or the suppliers of desks and dusters to come to their rescue. But authors are, sadly, easy targets.
I trust, and I am sure, that the Minister will go away and think about all these matters. I do not need to bore him any more than I bore him in the Bishops’ Bar about some of these issues and I know that he is well aware of them. I hope that he will take on board, if not always necessarily agree with, the advice of the Society of Authors, the Publishers Association and other relevant bodies. It would take very little to correct some of the problems that have arisen—a little more care, a little more understanding and a little more vigour in protecting authors’ intellectual property rights. If that is not done, I fear that there is a real possibility that we will turn around in 20 years’ time to discover that those who should have been the cream of our literary talent, the lifeblood of British creativity, have cast their pens aside and found themselves other jobs.
Shakespeare did not write for posterity—
Lord Dobbs
I beg your pardon. Let me then sum up very quickly by saying that it would be a terrible pity if the book industry were to be left with little but celebrity memoirs, chick lit, TV spin-offs and books of such pale shades of grey that they were all but invisible. That would surely be the saddest tale that we could have written.
Baroness Rendell of Babergh
My Lords, I thank my noble friend Lord Dubs for introducing this much needed debate on the future of the publishing industry. I declare an interest as someone who next year will have been a published author for the past 50 years. The publishing industry is a vital component of the creative economy and employs 33,000 people across 2,500 companies. In addition, there are a large number of professional writers working full or part-time who create works on which the industry relies. The quality and range of British writers is recognised around the world, and 40% of publishing industry revenues are derived from exports—a bigger proportion than in any other country. The UK book market is the fifth largest in the world and the largest e-book market in Europe. Despite this, the Society of Authors is concerned that several of the Government’s current policies are creating barriers to growth and hindering the development of the publishing industry.
The largest obstacle to growth for most authors is financial. In a 2006 survey, the Authors’ Licensing and Collecting Society concluded that writing was a very risky profession, with median earnings of around £4,000 for all authors. Most authors earn very little and cannot live by their profession alone. In principle, the public lending right increases their income. The Digital Economy Act 2010 extends PLR to audiobooks and e-books, but these payments have never been implemented. This is patently unjust. That provision should be brought into force and extra funds should be made available to cover PLR payments for such lending.
Print books attract a zero rate of VAT, but their electronic equivalents are subject to a rate of 20% in the UK. Some other EU countries have reduced the VAT rate on e-books, so that the UK is now at a competitive disadvantage, as my noble friend Lord Dubs pointed out, as e-books sold in the UK are more costly than those sold elsewhere, making it doubtful that they have ousted printed books as reading matter. The Spectator recently carried a cartoon in which two women and a child are sitting on a park bench. One of the women is reading. The mother says to her little girl, “Look, darling, she’s holding something called a book”. I hope we have not got to that point yet. I have a Kindle but do not much like it. There is an urgent need for removing VAT on e-books to avoid the UK falling behind European competitors.
Authors would benefit enormously from an educational and general environment from primary level upwards that emphasises the value of culture and the importance of copyright. Intellectual property rights are lucrative to the UK economy. Knowing that they own copyright in what they have written and what that means can be a cause of excitement and pride in students and generate an understanding of the harm done by piracy.
School libraries should be compulsory, and reading and writing for pleasure encouraged; but in general, they are not. How many times have I been told, “I do not have time for reading”? How many homes have I been in, often beautifully furnished and decorated, but where there are no books? High street bookshops, local theatres and libraries all underline the importance of books, culture and learning and should be supported. The habit of culture should be as much a fundamental aspect of the environment as, for example, the country’s architectural and historical heritage.
I will finish on an optimistic note for the publishing industry. When I was first published, there were only two or three literary festivals a year in this country. Now, every county, city and town holds one. The large number of books sold at these events and the enthusiasm shown for reading by those who attend them must be a sight for sore eyes for publishers. The Edinburgh Festival is a large bookstore in itself, and the village of Hay-on-Wye has more bookstores in its streets than anywhere else in the world.
Lord Smith of Clifton
My Lords, I, too, thank the noble Lord, Lord Dubs, for this timely debate. Over the years, I have had a range of experiences in the world of publishing. I was on the board of the weekly magazines New Society and, later, the New Statesman, and was also a director of Gerald Duckworth & Co book publishers. I must declare an interest in that I am currently on the editorial boards of two learned journals—Government and Opposition and Public Policy and Administration, both of which posts are unpaid. The introduction of open access, as recommended by the Finch report and aggressively promoted by the advocates of STEM subjects, raises serious concerns in academia among specialists in the arts, humanities and social sciences. Both the Royal Historical Society, of which I am a fellow, and the Political Studies Association, of which I am vice-president, have made representations to BIS and its Universities Minister, David Willetts, and to the House of Commons Science and Technology Select Committee.
As proposed, open access will require authors to pay fees of up to $1,000 to the publishers of learned journals to cover the costs of expert reviews as to worthiness and of editing, which will have to come from already squeezed research budgets. This will have a deleterious effect on young, aspiring academics. In the arts and social sciences, articles are usually single-authored. By contrast, STEM articles are almost always multiauthored and half the average length of those in the humanities and social sciences. Up front publishers’ fees will be cheaper and more widely spread for STEM authors. The effect of this differential costing may well influence university departmental heads to allocate publishers’ fees disproportionately to senior, already tried and tested, academic authors rather than to risk the possibility of greater rejection of younger ones.
Secondly, there is the whole question of copyright, to which other noble Lords have alluded, and ownership of intellectual property. Open access will accord free use of UK research that has been funded by the UK taxpayer to all and sundry all over the world. Thirdly, it adds to the operating profits of publishers of learned journals, who make no financial contribution to sustaining scholarship and research; they simply enjoy harvesting it.
Those who undertake research in the humanities and social sciences are not opposed to some form of open access. However, they are concerned that the proposed scheme is being adopted without full consultation, is too STEM-compliant and will enable scholarly intellectual property to be plundered. Her Majesty’s Government and, particularly, Mr David Willetts need to think again. It seems that Mr Willetts and Dame Janet Finch, a distinguished social scientist, have been too easily seduced by the blandishments of STEM interests and forgotten those of their original university training. In winding up, will the Minister say whether Her Majesty’s Government are open to further consideration?
Lord Lucas
My Lords, I am a publisher but take a very bleak view of the future of publishing if Amazon goes unchecked—not that it will harm me, but it will kill most of the rest of the industry.
Amazon is an amoral monopsony in its growth phase. It is using extremely low margins to drive market share. It is using aggressive tax avoidance to afford those low margins. It is not just us that it does not pay tax to; it does not pay tax to anybody. It is being allowed by Governments to do this because it is seen as a nice, friendly company to consumers. Indeed, in the days when I shopped with Amazon, I found it a comfortable place to shop but it is coming to dominate the book industry. It is clear that it will soon have over half of all the book trade, physical and virtual. It is causing taxpaying businesses to die. One has just to look at what happened to HMV, which has died largely because of tax competition. A lot of that came from the likes of TheHut out of the Channel Islands but a good deal of it was mediated by Amazon. We now have nowhere to shop on a large scale. The internet retailers have control and the internet retailer that will have control above all is Amazon.
Suppliers will then become dependent on the one retailer. It is clear where Amazon intends to go after that: it intends to take out the publishers. It is already doing that in the States, forming its own relationships with authors and publishing its own exclusive-to-Amazon books. At the end of the day, what need has a company with three-quarters of the book trade of independent publishers? It can do everything itself.
It will continue to use a wide range of predatory tactics to do that. Amazon trawls the web to make sure that it always offers the lowest price on anything. It compels suppliers to charge it less than they do anybody else, on pain of being dropped—either individual projects or entirely. It runs this thing called Amazon Marketplace, where little traders can go, but it knows everything that happens in that marketplace: all communications between a business and its customers, what is being sold and at what price. When it sees a good opportunity, it goes to the supplier and undercuts the trader.
If you use Amazon fulfilment, it will clean up your complaints file so that bad notices will not remain for others to see. If you do not use Amazon fulfilment, it will not. It provides a home for people who are breaching copyright by importing books from outside the appropriate area. It provides a home for people who are running VAT scams. In one way or another, if we do not do something as a Government to remove the tax bias that benefits it, to enforce our existing laws and to put it through the Competition Commission, we will find that we have been steamrollered by Amazon.
Lord Giddens
My Lords, I, too, congratulate my noble friend Lord Dubs on his excellent introduction. I declare an interest as founder and director of Polity press.
Publishing is an industry in absolute turmoil. I am not sure that even the contributions to the debate thus far have brought this up strongly enough. This is true not just in the UK but in the US and other countries, too. One can say that absolutely no one knows where these trends will lead. Many people have their best guesses, but nobody actually knows.
There are three intertwining factors in the transformation of the publishing industry. First, as has been said by other noble Lords, e-books have arrived with a bang after several years in which they made little or no headway. It is important to recognise how massively popular they are in some sectors. In the United States, for example, among more popular titles, more than 60% are now produced as e-books. Will the traditional book survive? Will the e-book survive? One should not think that the e-book is the cutting edge here. E-books themselves are being transformed by all sorts of multilayered devices; you can hold conversations with authors and so forth. The e-book is certainly not the end of the story.
Secondly, the publishing industry here and in many countries is becoming hollowed out, with ever fewer large conglomerates at the top and an array of small publishers at the bottom—all of them, in a way, following a precarious existence. The rise and rise of Amazon, as has been mentioned by the noble Lord, Lord Lucas, is one main factor in this. Publishing is not really about the production of books but about marketing and distribution. Because of its massive size, and its mainly automated warehouse and delivery system, Amazon absolutely cuts prices to the bone.
Thirdly, a trend which overlaps with these is the emergence of self-publishing on the internet, where an orthodox publisher might not be needed at all. There is lots of experimentation going on here. For example, one publisher invites prospective authors to pitch their book proposals on its website. If sufficient people pledge to buy it, the author can then go ahead and write it, reversing the traditional relationship. It is not clear that this will succeed. These are overlapping trends, but they are creating something fundamentally new after centuries of domination by traditional book publishers.
I have three brief questions for the Minister. Often, technological innovation is followed by a “back to the future” reaction; for example, when nylon was invented, people went back to wool and cotton. The same thing might happen to traditional books. For this reason, I hope that the Government will not take too big a scythe to public libraries.
Secondly, as other noble Lords have asked, what is the latest position on open-access publishing? Many publishers, as well as academics, are quite worried about that and the Government’s endorsement of the Finch report. What will it do to traditional journal publishers?
Thirdly, apart from the issue of taxation—following on from what the noble Lord, Lord Lucas, so eloquently said—are the Government happy with the dominant position that Amazon has taken in the book trade? In conclusion, I hope that no noble Lords will be caught reading a Kindle in a Starbucks.
Lord Stevenson of Balmacara
I thank my noble friend Lord Dubs for initiating this debate and all noble Lords for their contributions, which have been of a very high standard indeed. As my noble friend Lady Rendell said, this is a very timely debate, and we appreciate that. My noble friend Lord Giddens warned us that this is an industry in which conditions are worse than we think. They may get much worse before they get better, if indeed they do. We need to bear in mind also that this is a complex industry, like all creative industries. With some notable exceptions, we have focused today mainly on the creative side—the agents and publishers—but we also have to think about the retailing end: the designers, the marketers, the logistics and, of course, the concept of electronic publishing, which is an underlying thread here.
This debate has really been about whether the current leadership that this country’s publishing industry deservedly has can be sustained and whether there will be growth. There have been a very large number of questions for the Minister and I do not intend to cover them all. I hope that he will be able to give a particular mention to them all but, if not, that he will write to us about them. I think that there will be too many, even for the time that he has been allocated. However, from the questions that were raised, the first was on this vexing question of the public lending right, which is so important to authors and publishers. Of course, it does a much wider job by raising people’s interest in books and writing and, more generally, in education. Will and can that be extended to e-books?
On VAT, the differential between the printed and electronic versions is obviously a major issue. What approach are the Government taking on this? I know that the Minister will say the usual thing when he comes to reply: that taxation is a matter for the Chancellor of the Exchequer. Of course it is but, six weeks out from the Budget, surely budget submissions will have been made. Can the Minister confirm that DCMS has raised this issue with the Chancellor and is making the right sort of noises, along the lines that he has heard today?
On copyright, the issue that comes up time and again is whether the Government have got their approach right, along with the question of who is actually in the lead on this issue. In debate on the Enterprise and Regulatory Reform Bill, the noble Viscount, Lord Younger, confirmed that he was the Minister for Intellectual Property and therefore has, within BIS,
“a role to champion the IP system as a whole”.
Indeed, he was proud of the fact,
“that no other country has such a post”.—[Official Report, 28/1/13; cols. GC414-16.]
He felt that that solved the problem. However, what then is the role of DCMS in relation to copyright? Perhaps the Minister could say a few things about the approach that he is taking in this matter and how the department gets its point of view, which we note to be significantly different in terms of discourse from that which is currently being led by the IPO. There is much more sympathy with some of the points that have been made today. It would be a pity if that was being boxed out by government structures.
On the key issue of education and the circularity of the approach that has to be taken across libraries and supportive reading, and about the role of English more generally—but particularly on reading and writing and on creative work in the EBacc—it would again be useful if the Minister could explain what DCMS’s role in that has been, whether meetings have been taken and whether it is making progress.
Finally, can the Minister say a bit more about the general role of the DCMS in this industry? Many of the issues that we have discussed today are, as I have said, largely in the gift of BIS and not that of DCMS. Can he therefore explain a bit more what its role is?
Lord Gardiner of Kimble
My Lords, I, too, thank the noble Lord, Lord Dubs, for securing this debate. It is certainly true to say that I have learnt a great deal today from the expertise of all your Lordships. I have listened and it is indeed a privilege to reply. Perhaps I might say that there were quite a number of questions and I hope that noble Lords will be tolerant if I write a general reply wherever I have not dealt adequately, as I would believe, with their questions.
Without doubt, the UK’s creative industries make a vital contribution to national life but they also have a key role to fulfil in helping our economy to grow and helping the people of the UK to compete globally. Employment in the creative industries has grown at double the rate of the economy as a whole, and 1.5 million people are currently involved in creative employment. They are, in many respects, British culture and I was very much taken by what the noble Lord, Lord Howarth of Newport, said about culture. I am sure that the Prime Minister is very keen and that he champions British culture too.
The entire publishing sector is the largest of our creative industries. It contributes £11.6 billion a year to the UK economy and employs some 244,000 people across 9,700 companies, which cover books, e-books, academic journals, national and local newspapers, magazines and print music, to name a few. Our publishers are the largest exporters of all the creative industries. With 40% of the sector’s revenues coming from export—the noble Lords, Lord Dubs and Lord Howarth of Newport, referred to this—that is a bigger proportion than in any other country.
However, as noble Lords have mentioned, it is not limited to print alone. UK consumer e-book sales grew by some 366% in 2011, as the noble Lords, Lord Dubs and Lord Giddens, referred to, making the UK the largest e-book market in Europe. The UK is a market of early adopters. Consumers in this country are quick to take up new products, services and channels, particularly in entertainment. In publishing, this appetite on the part of consumers has been matched by the willingness of publishers to explore new opportunities, in spite of the challenges that new technologies undoubtedly present, as the noble Lords, Lord Wills and Lord Giddens, referred to. I reaffirm my personal support for bookshops and the many happy hours I continue to spend in them. I have to admit that I have never bought a book from Amazon.
The Government are committed to fostering an environment that will stimulate world-class content creation. We want the current level of success and investment not just to continue but to increase. I am very conscious of course that the noble Baroness, Lady Rendell, and my noble friend Lord Dobbs, whose work is so widely admired at home and abroad, are in their places. Indeed, I very much hope that there will be many more generations of their like in British culture.
The issue of VAT was raised by my noble friend Lord Black, the noble Lords, Lord Dubs and Lord Stevenson, and the noble Baroness, Lady Rendell. As has been pointed out, Luxembourg and France at present operate a reduced rate of VAT on e-books. Under existing law, e-books are electronically supplied services and therefore should be taxed at the standard rate. The European Commission has launched infraction proceedings at the European Court of Justice against Luxembourg and France on this matter, the outcome of which is awaited.
My noble friend Lord Black of Brentwood raised a point about the recent EC report on pan-European press regulation. The Government have noted the contents of the report on media freedom and pluralism and await with interest any resulting debate and the response from the European Union. However, the Government have no intention of allowing European institutions to regulate the British press. The Government believe that this is a matter for individual member states and will resist any European legislation in this area.
Many noble Lords referred to copyright, including my noble friend Lord Lucas, the noble Baroness, Lady Rendell, and the noble Lords, Lord Dubs and Lord Howarth. It is vital that the publishing industry is supported in addressing copyright issues. I am mindful of the difficulties the music industry has suffered in its own digital transition, which my noble friend Lord Lucas specifically referred to. The Government are acting in a number of areas to ensure that the UK copyright framework meets the demands of the digital environment while continuing to maintain the success of sectors such as publishing. An appropriate regime is vital for copyright in the UK. The Government are very well aware of the range and strength of views and interests, which is why the Hargreaves review of intellectual property and the development of government policy since then have included broad and deep consultation.
Last December, the Government outlined a number of ways to support efforts by creative industries to protect copyright, in particular: action to educate consumers about the importance of respecting copyright and paying creators; launching a superfast patent processing service; a campaign for smaller businesses; and looking at enforcement. The Government are exploring with the City of London Police and the content industries what more can be done to bring to book the criminals who make a living from counterfeiting and piracy, particularly online. Protections for the interests of property rights owners and creators must be built into the revised framework. The noble Lord, Lord Dubs, mentioned that in particular.
The Government have sought to increase the number of options available to rights holders looking to protect their intellectual property online—the noble Lord, Lord Wills, referred to that—in particular, by ensuring proportionate responses are available at every level, from court action to a voluntary response. The Government have supported collaboration between industry and law enforcement and a regular round table for those involved is now held at the Department for Culture, Media and Sport under the chairmanship of my honourable friend the Minister for Culture, Communications and Creative Industries. The noble Lord, Lord Stevenson, in particular raised that. The round table has seen several successes, including an agreement with internet advertisers to cut off payments and advertising to illegal sites.
On exceptions, noble Lords raised in that connection the potential impact of changes to copyright law on business, for example the impact on exceptions to copyright rules on music publishing for educational use. The noble Lord, Lord Dubs, and my noble friends Lord Black of Brentwood and Lord Dobbs mentioned that. I will write to my noble friend Lord Black about the particular matter he raised. The Government want teachers to be able to use creative materials in the classroom without copyright being an obstacle but—I emphasise “but”—this should not be done at the expense of our educational publishing sector, on which our schools depend. We will give teachers more flexibility to use copyright works in new and creative ways but they will not be given a free pass. It is important that we strike the right balance. Copyright is the means to reward creativity; it generates investment, stimulates wider dissemination and delivers balance.
The noble Lord, Lord Dubs, mentioned the national curriculum. The Secretary of State for Education is due to announce the statutory consultation on the new national curriculum shortly. Publishers will therefore be able to consider the proposals for all national curriculum subjects. Again, the matter of young people was raised by the noble Lord, Lord Howarth of Newport. I entirely agree that reading and libraries are a great source of inspiration for young people—and adults. Next week, I am due to answer a Question in the Chamber on libraries. Libraries come under the budgets of local authorities and I am sure that we will have a full discussion in the seven minutes permissible on that next week. Again, I am personally a staunch supporter of open access to libraries. There are many exciting opportunities. New libraries are being opened and communities are coming together to ensure that reading and the opportunities that it provides to young children are well understood and recognised.
The Government also recognise that there are significant potential threats and opportunities with regard to how, for instance, text and data mining may be affected and how these technologies are used. I think we would all agree that the priority must be to develop the best environment for scientific and medical research. That has to include a successful research publishing sector. I am very mindful of what my noble friend Lord Smith of Clifton and the noble Lord, Lord Giddens, said. I will write to all noble Lords on the Finch review because I would like to consider the matter and then write in full detail. It is fair to say that the Government will proceed carefully in this sector.
The Government are supporting the industry through the expanding intellectual property attaché network abroad, which is already in China, Brazil and India. There is a new one now in south-east Asia. Progress on the EU patent front is a major step forward.
I appreciate that the sector faces many challenges. Noble Lords today have raised them in full and I am mindful of them.
Lord Giddens
Would the noble Lord care to say one or two words about Amazon and its industry dominance?
Lord Gardiner of Kimble
I should like to finish my few words. My commentary on Amazon is already on the record. However, many opportunities can be seen by the way in which the sector is embracing the digital revolution. The Government recognise the sector’s importance for cultural and economic reasons, and are working closely with the publishing industry to create an intellectual property environment which sustains success and rewards creativity.
PACE Trial: Chronic Fatigue Syndrome/Myalgic Encephalomyelitis
(11 years, 10 months ago)
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The Countess of Mar
To ask Her Majesty’s Government what assessment they have made of the effects of the PACE trial (Pacing, graded Activity and Cognitive behaviour therapy: a randomised Evaluation) on provision of health and social care and welfare benefits for people with chronic fatigue syndrome/myalgic encephalomyelitis.
The Countess of Mar
My Lords, I declare my interests as chairman of Forward-ME, a vice-chair of the All-Party Parliamentary Group on ME and a patron of a number of ME charities. The PACE trial was funded by the MRC, the Department of Health, the Scottish Chief Scientist Office and the Department for Work and Pensions to the tune of £5 million. The researchers, led by chief principal investigator, Professor Peter White, have consistently and confidently advised medical professionals and the Government of the success of cognitive behavioural therapy, or CBT, and graded exercise therapy, or GET. The PIs’—the principal investigators’—objective was to reverse the behavioural and cognitive factors which they believe to be responsible for the perpetuation of symptoms and disability. Despite the extensive biomedical evidence base of peer-reviewed papers which undermines their belief and despite the fact that the MRC now states that there is evidence of,
“inflammatory mechanisms in the brain and spinal cord”,
their view has prevailed.
Throughout the history of medicine there has been a predominance of doctrine over science and currently there is a similar conflict between the doctrine, which asserts that CFS/ME results from a disordered psyche, and the scientific view that it is a devastating organic disease. We do not know what disorder was being studied because in March 2011, the chief PI wrote to the editor of the Lancet. He said:
“The PACE trial paper ... does not purport to be studying CFS/ME but CFS defined simply as a principal complaint of fatigue”.
To whom, then, can CBT and GET be safely applied? The Minister cannot answer because on 17 January her right honourable friend Norman Lamb confirmed that no assessment of the PACE trial has been made. Furthermore, the PACE trial results have not been presented transparently. This is not uncommon and Dr Ben Goldacre, known for his “Bad Science” column in the Guardian, has initiated a campaign calling for publication of all results of all trials, not just selective results. Already more than 7,000 signatures have been collected, including from high-profile organisations such as the MRC, the Cochrane Collaboration, the Public Library of Science and the BMJ. It calls for all universities, ethics committees and medical bodies to recognise that under-reporting of trials, as occurred in the PACE trial, is misconduct. Misreporting of clinical data leads to harm, wastes money and prevents scientific progress.
As regards the PACE trial, a recent Science Media Centre press release states that,
“the authors worked hard to define recovery based on the data available from the PACE trial”.
Investigators must define their primary outcomes before a trial begins and abide by them, not define recovery based on the trial data. Once the PACE trial was under way, the PIs changed the outcome measures so that the very same score on physical functioning—the SF-36 scale—represented both eligibility to enter the trial and “normal” function at the end of it. Indeed, according to the Lancet, a participant could have achieved a worse score at the end of the trial yet still be classed as “recovered”.
When funding was granted and ethical approval agreed, a participant had to score 85 to be considered recovered but by the time of publication in the Lancet, this “recovery” score had dropped to 60, which was five points lower than that required to enter the study. This illogical situation resulted from departure from the published protocol. To overcome this, the chief PI created his own meaning of terms; for example “recovery” does not mean recovery as the world understands it, and a return to “normal” does not mean a return to normal health. The chief PI does, however, concede that,
“improvement and not reaching research criteria are different from recovery”.
We do not know how many patients reached the initial target for recovery because the PIs have refused requests to release that data. Instead, they introduced significantly lower measures of improvement and abandoned an objective measure, the wearing of an actometer. The results of the subjective reporting in the six-minute walking test after graded exercise therapy were very poor, placing participants below the performance of patients awaiting heart or lung transplant. Had the PIs achieved their anticipated level of success, a level consistent with their claims over many years and a major factor in the award of research grants, they would have achieved international acclaim.
What hit the headlines was the Lancet “Comment” claiming a 30% recovery rate, yet the best that has been shown from CBT and GET is a maximum 15% improvement rate. A recent paper by the PACE authors, published on 1 February and purporting to show recovery rates, is a masterpiece of obfuscation. The authors have substituted “recovery” for “reversal” of CFS without any explanation, yet they admit that,
“although many patients improved, the question of how many patients recovered remains unanswered”.
As one of the members of the Forward-ME Group said:
“It really is quite bizarre that there is absolutely no data whatsoever in this paper on what most people would regard as markers for recovery … a return (or ability to return) to full time employment or education … no longer claiming any DWP sickness or disability benefits”.
The original claims made for recovery made it into the media and into the minds of GPs, DWP officials, social care providers, private insurance companies and even the National Institute for Health and Clinical Excellence. Professor Trudie Chalder, one of the PACE trial PIs, said that,
“twice as many people on graded exercise therapy and cognitive behaviour therapy got back to normal”.
This was widely but incorrectly interpreted as “recovery”.
The fact is that, as opposed to the spin that accompanied the publication of selective results, only 15% of patients improved with CBT and GET, leaving 85% with no benefit from those interventions. Furthermore, of the combined CBT/GET groups of 321 people, 91% experienced adverse events, and only those who were well enough to attend regular hospital appointments were included in the trial; the severely affected and housebound were excluded. This is not mentioned when the “recovery” rates are discussed. From where have the PIs derived the figure of 22% for recovery in their latest paper?
Where does that leave us? The only information, published in A Cost-Effectiveness Analysis of the PACE trial, shows that there was no significant improvement after CBT and GET in the average number of days lost from work or the number of participants who lost days at work. In fact, claims for income-related benefits, illness and disability-related benefits, and from private pensions and income protection schemes, increased across all intervention groups during the trial.
As it is cheaper for CFS/ME to be dismissed as a behavioural problem, patients are denied access to diagnostic facilities by NICE guidelines, and very few medical consultants specialise in anything but the supposed “behavioural” aspects of the disease. ME charities are inundated with cries for help as their members struggle with the benefits and social care systems. Bed-ridden and housebound claimants are put into the WRAG for ESA and are too ill to appeal. If they manage to get to an Atos assessment, they feel that they are not listened to and are told that they are fit for work. The DWP part-funded the PACE trial because it was assured that CBT and GET would get people off benefits and back to work, but the promised return-to-employment figures have still not been provided by the PIs.
I am relieved that the Medical Research Council’s expert group, under the chairmanship of Professor Stephen Holgate, is launching a UK chronic fatigue syndrome and myalgic encephalomyelitis research collaborative on 22 April. It recognises that in light of the,
“magnitude of the disease burden on those affected and their families involving both adults and children, there is an urgent need to increase research effort in the field”.
Some £1.6 million has already been allocated by the MRC. There is an equally urgent need to assess the effects that the outcome of the PACE trial has had upon people with ME. However, how can the Government act responsibly in assessing them when the results have not been presented transparently?
It is widely accepted within the ME/CFS community that the PACE trial PIs changed the primary outcome measures with the intention of artificially inflating the success of CBT and GET—treatments they promoted for more than 20 years—and that, consequently, they are guilty of scientific misconduct. They believe that White and his colleagues have shown that they are not responsible guardians of the valuable data collected in the trial. It is therefore a matter of great importance that they are re-analysed by an independent group, using the original criteria for recovery and the positive outcomes described in the published protocol. This would enable healthcare commissioners to make decisions based on data that they know have not been misrepresented.
I know that the Minister understands the problem and ask that she and her colleagues from the other affected departments order such an assessment so that we do not consign thousands of people to the shadows. To quote Orwell, we must not allow the PACE trial to,
“give an appearance of solidity to pure wind”.
Lord Winston
We are all very grateful to the noble Countess, Lady Mar, for introducing this debate. I will be very brief and I apologise to her for missing the first minute of her speech. Very surprisingly, we were much earlier than expected and, unfortunately, the name of the previous speaker, the noble Lord, Lord Gardiner of Kimble, was still on the screen when I came into the Moses Room.
This syndrome causes persistent fatigue for more than six months, as well as various other symptoms. It is not relieved by rest, which is and has been puzzling for a long time. It is not the case that there has not been a lot of research. I have looked, for example, at MEDLINE, where we can see that there are 5,874 research papers on this condition. It was not only the Medical Research Council that funded the PACE survey; it is very clear that extensive work has been carried out and many countries have been involved.
Recently, I made a list of papers published in the past year. I will not bore your Lordships with all of them but we know of, for example, Moss-Morris at King’s, Dr White at Barts, Dr Lehmann in Bavaria, Dr. Fjobback in Denmark, Fukuda in Japan, Jackson in Australia, Lewis in Bethesda, Maryland—part of the NIH funders there—Wibourg from Hamburg, Bleijenberg from Amsterdam, Newton from Newcastle, Brooks from Huddersfield, Wessely from King’s and Vincent from the Mayo Clinic in Minnesota. There are many other names, but these are very prestigious departments of medicine. Effectively, they all come to the same conclusion; namely, that at the present time, the best treatment is almost certainly along the lines of cognitive behavioural therapy.
What is different about the PACE study is that it is a detailed, controlled study which has extremely rigorous entry into it. Unlike most previous studies, I think I am right in saying that—perhaps the noble Lord, Lord Alderdice, will correct me if I am wrong—there was only one drop-out, which is fairly remarkable. It means that it is extremely comprehensive, so there are very good data. It looked at a series of issues about treatment and it seems pretty clear to me that cognitive behavioural therapy is effective in something like one-fifth of patients, which is a bit more successful than the noble Baroness claims. I do not think we should underestimate that. They go some way to explaining that were cognitive behavioural therapy to be used perhaps on a slightly more financially secure footing with rather more sessions, it would be likely to be of more benefit, particularly toward the end of the treatment.
One issue is that far too frequently, we see that many of our colleagues have been vilified. Simply because they are psychiatrists does not mean that they are not doctors. That is a real issue, and it is not only psychiatrists who have been vilified. For example, Myra McClure, who was sure that there was not a viral causation for this disease, was absolutely vilified and decided to give up her research. This is also true of Esther Crawley, who even went so far as to report her vilification to the press and changed her telephone number. As some noble Lords will know, Dr Simon Wessely claims that he had death threats, which is very serious.
The problem, of course, is that to say that these vague conditions appear almost certainly to have a psychiatric basis is not to say that they are less important, or that the person who is suffering from them is in some way to blame. It means that we must find rational ways of treating them.
I commend this study. It is an example of really excellent research done in a very difficult phenotype and done very well indeed. The authors are to be congratulated on demonstrating clearly that cognitive behavioural therapy and, to a certain extent, some exercise in addition, is a real improvement on what has happened for these patients before.
Lord Alderdice
Like the noble Lord, Lord Winston, I am grateful to the noble Countess, Lady Mar, for giving us an opportunity to look at this question, although I have some doubts as to whether your Lordships’ House is the best place to evaluate scientific evidence and do the exploration. I think that repeated research by other colleagues and demonstration within the scientific community is the way forward. I declare a previous interest as a consultant psychiatrist in the NHS, where I treated a number of patients with these types of symptoms.
The history of medicine is that we have tried to clump together groups of symptoms which appear relatively regularly together, and seem to have indication of possible outcome, and maybe of management and treatment. However, these are temporary constructs. It is perfectly possible that they are a whole bunch of different disorders which overlap in various ways. Even to talk about it as a condition seems to be making certain presumptions. Certainly, to conclude that there is a definite organic basis, other than to say that in every disorder there are organic and psychological elements, does not mean that we dismiss the psychological—on the contrary. When we think, we can only do so because some things are going on in our brains, which are a physical substrate.
My own position would have to be that we really do not know what we are dealing with. We are dealing with a whole range of symptoms and complaints. We do not know the etiology. The prognosis is variable with different people. We must continue working as best we can.
In the mean time, it is terribly important that we try to evaluate how to manage the problems that people come along to us with. We do not properly understand the schizophrenias; that is a group of different disorders. Yet we still have to manage the large numbers of people with these problems. That is the case with these people who come along with post-exertional fatigue, memory difficulties, pains and so on.
When we try to do that, it is not uncommon for patients to tell us that such and such a thing helps and that such and such a thing does not. I am not a particularly strong advocate of CBT, as some colleagues know, but I remember when I was using CBT with some patients suffering from depression. They would come along and I would ask them to write a diary of what they were doing every half hour and evaluate it. They would say, “I do not feel like getting up in the morning. I am too depressed and I cannot get out of bed”. I would say, “Look, I know that you don’t feel like it, but please try to get out of bed, structure some activity for the day, do it on an hourly basis and let’s see how you are”. Hey presto, when they did that, the thing that they felt would not make them better actually did. They were surprised about this.
That is one of the dilemmas about what patients think will help. Sometimes they are intuitively right and sometimes they are intuitively mistaken. The only way that you can understand this is to do some work in a scientific way. That is what these colleagues in this paper have tried to do. Some of them will have had particular notions about etiologies, but the point is that they were simply looking at what worked and what did not. What is the outcome? The outcome is that CBT and graduated exercise training are helpful for some people to some extent, and more helpful than the other things which have been suggested. It is not helpful to everybody and it is probably not completely helpful to almost anybody but it is better than doing nothing and better than the other things that have been suggested. There are a lot of scientific tables and graphs but that is the basic outcome.
To me, that is good news because it gives us some indication of things that might be helpful. It also tells us that an awful lot more work is necessary to find out what we are dealing with. If somebody came along and said, “There are such things as chest diseases, we should treat them in such and such a way, and the cause is this”, we would say, “Yes, that is true but there is a difference between asthma and cancer”. They might say, “Oh, really? Well, let’s explore that”. We are at that kind of level with this set of symptoms.
It is really important that when people give themselves to scientific enterprise in this area that we do not pillory them for their efforts. They may come up with some outcomes that people do not want to believe or that are not very welcome. We psychiatrists are quite used to the idea that often people would rather have a physical explanation for things than a psychological one. It is dreadful if we encourage that by saying, “Well, of course it is not psychological”, as though somehow it is a smear on a patient to have psychological difficulties. We must be very careful about that. I do not suggest that Members of your Lordships’ House would do that but it is something that happens out there in the community and about which we must be careful.
I am glad that we have had the debate. I trust that we understand the very early stage we are at. It is good that there is some indication here: the paper demonstrates that CBT and GET are helpful, and probably more helpful than other things, but there is a lot more to do. We should encourage people to get into the research work, not just for the ideology issue but to find what helps, and we should not pillory people who come in because that only drives people out of the research. That is the last thing we want to see.
Baroness Meacher
My Lords, I thank my noble friend Lady Mar for tabling this Question for Short Debate concerning the PACE trial. I must declare an interest as former chair of East London NHS Foundation Trust. Professor White, a leading researcher in the PACE trial, works as a consultant in that trust in addition to his research post at Queen Mary, University of London.
CFS/ME can be a seriously disabling syndrome. I like to refer to it as a syndrome because it seems to be not one but a number of diseases. NICE compares the physical symptoms of CFS/ME with those of multiple sclerosis, systemic lupus erythematosus—if I can pronounce that correctly—and rheumatoid arthritis, probably three of the most fearsome illnesses one can think of. To make matters worse for sufferers, as the noble Lord, Lord Alderdice, so rightly said, the causes and disease processes of CFS/ME are not yet understood. That must be a deeply frightening thing for any patient.
Doctors can misdiagnose sufferers or, worse still, dismiss them as not really physically ill at all. I understand that for some, some psychological aspects may be important and for others they may not. I am aware of people who have had major viruses and suddenly been struck down, having led very active lives, getting on with things and being fine. We have to be very careful about any assumptions, whether physical, psychological or whatever.
CFS/ME is all too real. Of course we need much more research. I await the outcome of Professor White’s cytokine research later this year, for example. We look to the MRC and others to prioritise this distressing syndrome. Thankfully, the MRC has two boards—it probably has others, too. One funds studies such as PACE and the other funds studies into the immune system, and viral and genetic considerations. The PACE study did not in any way affect funding for organic CFS/ME research. That is terribly important because there are fears that it may have done.
As the noble Lord said, the experts believe that in time a number of distinct diseases will be identified that currently fall within the CFS/ME label. In the mean time, NICE recommends CBT and/or graded exercise therapy for people with mild or moderate CFS/ME because these are the interventions for which there is the clearest evidence of benefit to patients. No doubt in time treatments that attack the causes and achieve better and faster results will be developed but in the mean time it is a great step forward that, as in the PACE trial, 22% of patients recover—I agree that there is debate about the word “recovery”—after only 13 sessions of CBT or graded exercise.
Meanwhile, 60% of patients achieve significant improvements in both fatigue and exercise levels after the same period, according to the PACE study, which certainly fits with my experience of the limited number of people—about half a dozen—who I know. A meta-analysis showed a 50% recovery rate after one year. These results are very significantly better than spontaneous recovery rates or those following alternative available treatments. From our most helpful discussion on Monday, I understand that my noble friend Lady Mar respects the PACE study but, very reasonably in my view, has grave concerns about the spin put upon the results. People have to be very careful. We all know what happens once things get into the media but the spin that is put on these things is really important for patients. Things can be very hurtful.
I understand that the DWP may treat people as workshy if they have not undergone a CBT/GET treatment regime. At least a quarter of PCT areas do not have any specialist services for these patients. Others have nothing but grossly inadequate services at a pathetic level. It is essential that the DWP and, indeed, insurance companies take account of the non-availability of such services in many areas. Will the Minister pass on this concern to the noble Lord, Lord Freud? The DWP also needs to be aware that CFS/ME patients can take time to improve. I am not an expert but out of the people I know, several have needed much longer than one year to recover acceptable levels of functioning.
In terms of returning to work, the PACE trial had no effect whatever on the numbers of CFS/ME patients in work. I would not expect it to have done. These people have been, on average, out of work for two and a half years before they entered the trial, and from all the work that numbers of us have done over many years, we know that it is incredibly difficult to get people back into work if they have been out of work for two and a half or three and a half years. However, the social care costs and the need for family support were reduced. People were much better—not necessarily completely better but an awful lot of them were much better.
I now want to address a few other issues arising from the PACE study, including the fact that 10% of patients deteriorated during the trial. I understand that all these deteriorations resulted from life events or other infections during the trial period. We know well that serious life events or further infections do—or can—cause relapses in this horrible set of illnesses or this syndrome. Secondly, there is the question of whether ME patients benefited from the PACE trial. I am reliably informed that 51% of the patients in the PACE trial had been defined as having ME. I know there are all sorts of debates about that definition, but there was no significant difference in the outcome of treatment for patients who had been deemed to be suffering from ME relative to patients who had been given the CFS label.
Concerns have been expressed about the 11 serious adverse reactions to treatment. The 10 “possible” adverse reactions were equally distributed across the four treatment types. There is no indication that CBT or GET caused any problems. There was one “probable” serious adverse reaction, which was in the medical treatment group and was a reaction to an anti-depressant. Some of us are very familiar with the fact that people can have reactions to anti-depressants, but there is no evidence that CBT or GET can be dangerous.
The PACE trial is the largest ever trial of treatments of this debilitating set of conditions and has received acclaim from clinicians and scientists across the world. Some have wanted to criticise it for changes to the protocol, but those were made before the analysis and were approved by the independent trial steering committee; they were not fixes. The changes were minor and did not affect the results or conclusions in any significant way. Any potential conflicts of interest were published alongside all the papers, and none applied to the statisticians who did the analysis.
It is very encouraging that the Association of Young People with ME accepts that the NICE guidelines are useful for patients and healthcare practitioners. They are right. In conclusion, will the Minister give the Committee an assurance that the Commissioning Board will, in future, give equal priority to the specialist services needed for CFS/ME to that which they give for rheumatoid arthritis and MS?
Lord Layard
My Lords, I too greatly welcome this debate. This is a terrible condition and we are talking about hundreds of thousands of people who are suffering from it. While it is clear that although there have been many studies relative to the seriousness and pervasiveness of this condition, there is far too little research into what is causing it. I want to focus on treatment, as there have been terrible misunderstandings and misconceptions put about on that score.
I want to make just four points. First, the issue of what causes the condition is often quite different from how we can best treat it. This is such a basic point but it is not fully understood by many of the people suffering from this condition. Coronary heart disease may be caused by cholesterol but we treat it with a stent. In the same way, chronic fatigue may be caused by a virus yet the best treatment available at the moment may include psychological therapy. This form of treatment implies nothing about what we believe to be the cause. People who suffer from CFS, and who in almost all cases feel that it is not psychological in origin, are surely making a mistake when they reject psychological support for their condition on the grounds that this implies something about its cause. In their own interest, they should focus on what is the best possible treatment available on the evidence.
Secondly, we have quite a lot of evidence about which treatments work. More will surely be discovered in future and some of them will surely be biological. In the mean time, we have a large amount of evidence that both CBT and graded exercise therapy enable many more people to recover than if the only treatment they have is standard medical care. My main point here is that this is so, whatever the definition of recovery. It is wrong to suggest that this all depends upon that definition; you can put the cut-off for recovery in many different places and you will always find that people who get CBT and graded exercise therapy do better than people who have only standard medical care. There are many studies preceding PACE to show this. Of course, that is the main finding of PACE, which I would say is a fine piece of work by all normal standards. Some of the criticisms are really misleading but some of them have been answered already.
I come back to this question of the change in the protocol to stress that this was made before any analysis was done of the results. It was not that they looked at the results and said, “Let’s change the recovery criteria”. The changes were made because of discussions affecting the whole research world and agreed by the trial steering committee. What is very interesting is that a separate paper has been written simply on the recovery issue, which uses five or six different criteria of recovery. Again, in the PACE study it is shown that whatever cut-off you use, you get the same difference between the outcome of CBT and graded exercise therapy. There really is not a conjuring trick going on here and it is wrong for this impression to be given to the community of people who are suffering, if that leads to them not receiving help which they could really benefit from. Instead of criticising the study, we should be rejoicing that we again have more evidence that something can be done which is better than standard medical care.
My third point has, in a way, been made before but given the strength of this evidence that we have these treatments which work, it is shocking that they are so little available. This is part of a wider story of the non-availability of psychological therapy. The survey that was done by Action for M.E. found that a large number of PCTs were providing no specialist treatment clinics for this condition—or were not providing any kind of care, let alone this most evidence-based care. That is a disgrace and I hope that the Minister can say something about that.
The treatments are not unsafe, a claim that is often put about due to the fact that, of course, some people get worse during treatment. The only argument against the treatment, if it were the case, would be if people who did not receive it were less likely to get worse. Again, the statistics are absolutely clear: the proportion of people who get worse in treatment is no higher than that for people who get worse who are not in treatment. There is no argument whatever that this is unsafe.
My fourth point is about how we can get a better deal for this large group of sufferers. Obviously, the worst possible way to get it is to turn the area into a battleground. It gives the commissioners the perfect excuse for doing nothing and gives people of good will, who might come in and try to help people with this condition, a serious disincentive for getting into this field. As we know, and has already been said, many—or certainly some—of the people who work in this area have received repeated insults and even death threats. I pay particular tribute to Sir Simon Wessely at King’s College London, who has led the field for many years in this area and has stuck to it, despite all this harassment. He and his colleagues—
Lord Wallace of Saltaire
My Lords, the noble Lord is in his seventh minute. We are very tight on time and I am worried that the Minister will not have time to reply.
Baroness Hollins
My Lords, I also thank my noble friend Lady Mar for raising such an important topic. I have read the research very carefully in preparing my short contribution.
We know that some patients who develop symptoms of CFS/ME will recover fully but that the majority go on to have a fluctuating long-term condition. I agree with the noble Lord, Lord Alderdice, that there is no single cause for this condition. Some 10% to 12% of people who have glandular fever develop the symptoms of CFS/ME, but there are many other precipitants, too. It is a very distressing condition for people to have and is confusing and difficult for families, friends and employers, particularly because the condition may fluctuate in its effects so dramatically and vary in its severity. It is not surprising that people with CFS/ME may feel that they are not believed and that their family and friends are unsympathetic at times. Imagine living with an illness that fluctuates, recurs after mild exertion and is associated with what people describe as brain fog? As it stands, a very limited range of therapies are available and, understandably, this patient group has ended up feeling overlooked and neglected.
The greatest weapon against illness and disease is robust, peer-reviewed research. Research into both causation and the factors that sustain symptoms is important, as is research into effective interventions. I am particularly pleased that current biomedical research funded by the MRC is trying to understand some of the mechanisms at play, including by looking at mitochondrial function, autonomic dysfunction and sleep disturbance. It is essential that we continue to look at the best possible treatments.
I will speak briefly about the PACE trial, which of course most noble Lords have spoken about and which enrolled 640 participants. Just last week, the follow-up study, looking at recovery after one year, was published in the journal Psychological Medicine. Noble Lords may know that the trial showed that an average of only 13 sessions of CBT or graded exercise therapy, over just six months and as a supplement to good specialist medical care, had rates of recovery of 22%. My understanding is that, by “recovery”, the researchers included the fact that after a year these patients no longer met the criteria for CFS/ME. This would be heralded as a fantastic outcome for the treatment of MS, Parkinson’s disease or cancer. Only 8% of those receiving adaptive pacing therapy and 7% of those receiving just specialist medical care achieved the same degree of recovery. In other words, the successful treatments were three times more likely to lead to recovery than the comparison treatments. Of course, that was after just one year, but follow-up is continuing, and I look forward to hearing whether these results will be sustained. I hope the Minister will agree with me that it would be very useful for this study to be funded for follow-up for five years, particularly given the fluctuating nature of the condition.
Better outcomes are achieved for all illnesses, from heart disease and cancer to schizophrenia and depression, when the overall well-being of the patient—biological, psychological and social—is taken into account. That is not to say that there is no physical reason behind the onset of illness, or that physiological effects are not continuing to maintain or modify the disease process. My noble friend’s debate today is concerned with both health and care, including access to benefits. It is yet another reminder of the importance of a holistic approach to care, an intertwining of body and mind. This complex interaction has been acknowledged since ancient times but somehow, over the past 100 years, with the elucidation of many physical causes for illness, the mind-body connection has been somewhat forgotten. Thankfully, this connection has again been brought to the fore by the Government’s welcome commitment to parity of esteem between physical and mental health. The Royal College of Psychiatrists, of which I am a former president, has long been concerned about the physical effects of psychological stress and the psychological effects of physical stress. Interdisciplinary research—which brings together, for example, the neuropsychiatrist with the immunologist—is vitally important.
Could the Minister clarify whether the arrangements being made to ensure that evidence-based treatments, such as those tested in the PACE trial and recommended by NICE, are commissioned and that they do not fall through any gaps caused by what has been called an orphan status for this condition? To explain what I mean, CFS/ME can be classified under both neurological and psychiatric disorders for clinical purposes; it is not clearly claimed by any one specialist group as being its primary responsibility. This means that many people diagnosed with CFS/ME will not be referred to a specialist centre and that the treatment they need will just not be available. Research will shine more light on this condition and begin to distinguish whether subgroups of patients will be more responsive to different new treatments being evidenced and introduced.
Research is needed into all aspects of the illness so that more effective treatments can be found. This must include both biological aspects and any psychological factors that may sustain or lead to the further deterioration of the illness such as, for example, major life events, which are known to cause a relapse in CFS/ME patients. Thankfully, the MRC has recognised the past underinvestment in this poorly understood condition—or set of conditions—by highlighting it as a priority area for research. Through the particular efforts of Professor Stephen Holgate, the CFS/ME research collaborative mentioned by my noble friend will be launched in April, bringing together researchers from all relevant disciplines with patient groups and charities. This is so important. The future is looking brighter for people with CFS/ME and the constructive collaboration of people with different perspectives and contributions will, I hope, prove to be a major step forward.
Baroness Wheeler
My Lords, I, too, welcome this debate and acknowledge the work of the noble Countess, Lady Mar, on CFS/ME as chair of Forward-ME and vice-chair of the All-Party Parliamentary Group. Although a last-minute stand-in in this debate for my noble friend Lord Hunt—he is due shortly in the Chamber for the Statement on the Mid Staffs report—I am not new to this issue. As the noble Countess regularly contributes on CFS/ME to health debates I have participated in, most recently our extensive debate last November on neurological diseases, initiated by my noble friend Lady Ford. What is new to me is the focus on the PACE trial and the opportunity to hear from our expert medical and psychiatrist colleagues about the wider issues and perspectives, and about the trial itself: what it covered, who was involved, its findings and results and the wider, extensive research that is currently being undertaken across the world.
As we have heard, the PACE trial was the largest-ever randomised controlled trial of treatments of CFS/ME, primarily funded by the Medical Research Council following competitive peer review, with its main findings concerning efficacy and safety published in the Lancet. It was designed to compare improvements in safety after CBT and GET with outcomes after ADP and SMC. The patients were recruited from hospital clinics in England and Scotland, and were able to travel to clinics to receive treatment. The trial was not designed to test treatments in patients with severely disabling illness. As a non-expert, it seems to me that some of the criticisms and disappointments levelled at PACE do not fully recognise this.
As we have heard from noble Lords in this debate, the trial provided clear evidence that both CBT and GET were better than ADP or SMC in improving both symptoms and disability. In fact, all the treatments were found to be safe without any serious reactions to treatments in any of the treatment groups. I understand that a paper published last week showed that CBT and GET are three times more likely to bring about recovery than any other treatments.
Like other speakers, I want to underline the importance of looking to the future. On the NICE guidelines, I support noble Lords who stress that the key issue about them is making sure that they are actually implemented, so that patients can receive effective treatment and care wherever they live in the UK.
In the debate on 20 November, the noble Baroness, Lady Northover, assured the House that all the neurological and specialist conditions would have “equal priority” under the new NHS commissioning arrangements, and that this would mean that the Cinderella conditions should be improved. Can the noble Baroness outline the steps that the Government are taking to ensure that the commissioning arrangements provide appropriate and adequate specialist care for patients suffering from illnesses such as CFS and ME which are not easily classified under normal commissioning arrangements? To help this, will the Government give CCGs guidance on which illnesses should qualify under special commissioning arrangements? Can she reassure us that this guidance will include ensuring that guided exercise training is provided by qualified and trained specialist therapists?
Baroness Northover
My Lords, I thank the noble Countess for initiating this debate. I apologise for the fact that my noble friend Lord Howe cannot be here, as he is in the Chamber making the Mid Staffs Statement. I, too, am a last-minute replacement.
I know that the noble Countess has a particular and personal interest in the subject and I pay tribute to the way in which she continues to raise issues of concern in your Lordships’ House, as well as her unswerving commitment to improving the experience of people living with CFS/ME. I recognise how distressing and debilitating the condition can be for individuals, their carers and their families. Equally, I recognise the difficulties that many patients face in getting the treatment and care they need to help them manage their illness and, where they can, make a recovery; we have heard that this afternoon. I am sure that we all agree that the most important thing is to ensure that patients receive the treatment and care that they need.
At this point it is worth acknowledging that, while many patients feel let down by the system, many patients have had a positive experience and have worked with health and social care professionals to manage their care effectively. It is also important to acknowledge that doctors and other professionals working in this field are highly committed to providing the best possible care for their patients. We want to see people with CFS/ME being listened to when it comes to decisions about what type of treatment and care may best meet their individual needs and, across the country, many doctors are working with their patients to achieve this. I hear what my noble friend Lord Alderdice says on this.
There is no doubt that there is widespread uncertainty surrounding this condition; that has shone through in this debate. There is controversy, disagreement and divided and often polarised opinion about its causes and the best way to treat it. The kind of issues raised by the noble Countess today have surrounded the debate for many years. We have seen how passionate but how often opposed are those seeking to address these problems in the debate this afternoon.
It is an unfortunate fact that despite a great deal of worldwide research—the noble Lord, Lord Winston, made clear how extensive this is—we do not yet know definitively the cause or causes of CFS/ME: whether it is a disease; a condition, as the noble Baroness, Lady Hollins, described it; or a syndrome, as the noble Baroness, Lady Meacher, described it. The noble Lords, Lord Winston and Lord Layard, surely are right that it is concerning if researchers are in any way intimidated as they seek to clarify these problems.
CFS/ME is not alone in being mystifying. We do not know the causes of most cancers and other diseases such as Alzheimer’s. That lack of knowledge, however, has not stopped us from seeking the best forms of treatment. Many of these diseases are treated well even though we do not know their causes. I quite agree that more research is needed. In the mean time, patients want access to the best treatments that are available. So far, the only treatments that seem to have shown any benefit in clinical trials have been cognitive behaviour therapy and graded exercise therapy, but I have heard what noble Lords have said in regard to those.
This brings me to the PACE trial that has prompted today’s debate. The MRC’s decision to fund this trial was based on the fact that there was a lack of high-quality evidence to inform the treatment of CFS/ME and, in particular, on the need to evaluate the treatments that were already in use and for which there was insufficiently strong evidence from randomised controlled trials to support their effectiveness. The decision to fund this trial was based on the MRC’s usual rigorous peer- review process for clinical trials, as noble Lords have emphasised. The experts who reviewed the application were satisfied that the design put forward was of high quality, would provide useful evidence to help doctors and patients decide whether any of the four treatments to be evaluated was likely to be worth pursuing, and would help to inform decisions on the provision of treatment by the NHS. The noble Lord, Lord Winston, and others argued that this was a controlled and rigorous study. All agree that research is needed.
I shall try to address the challenges that were raised by the noble Countess, Lady Mar. She expressed concern about the selection method for participants. I assure her that having neurological symptoms, such as memory difficulties or muscle weakness, did not exclude anyone from taking part in the trial since these symptoms were medically recognised symptoms of the condition. While researchers used the Oxford definition to define the condition in the PACE trial, participants were also assessed to see whether they met the international Centers for Disease Control and Prevention criteria to see whether the effects of treatments were different in those who met this alternative definition. The independent members of the trial steering committee reviewed and agreed the plans for secondary analysis.
The noble Countess, Lady Mar, also expressed concern about the recovery statistics and other areas in relation to the protocol. As for all MRC-funded studies, it is the responsibility of the investigators and the relevant journals, guided by peer reviewers, to determine how findings are published and when. The investigators’ first paper on the outcomes of the PACE study was published in the Lancet in March 2011. A later paper was published in August 2012, which dealt with the cost-effectiveness of the interventions. Further papers will be published, including papers showing a long-term follow-up after two and a half years. The noble Baroness, Lady Hollins, made a very important point about follow-up, and no doubt the MRC will bear that in mind and will look at this debate. Follow-up in all these trials is very important.
The noble Countess, Lady Mar, asked about severely disabled patients being excluded from the trial. Patients had to be able to attend hospital for treatment, but a number needed mobility aids and others received treatment by telephone when they were too unwell to attend a clinic once they had been recruited. She also asked whether the trial data could be reanalysed. As she will know, there are ethical and legal barriers to releasing data to a member of the public without consent when these data contain medical information that might identify the patient. The main outcome data have already been independently analysed by a Cochrane Collaboration group and a paper is being prepared for publication. I know that she will look at that with interest.
An often voiced criticism is that the money spent on the PACE trial would have been better spent on research into causes. As the noble Baroness, Lady Meacher, indicated, the two are not mutually exclusive. While understanding the cause of the condition is obviously important, if potential treatments are available, it is equally important to test their effectiveness so that they can be introduced into service. Of relevance to this is that the PACE trial tested adaptive pacing therapy, which had not previously been tested in a large trial and which is supported by patient organisations. Various noble Lords have paid tribute to the quality of the research, even though the noble Countess, Lady Mar, was more sceptical.
As the noble Countess is aware, the findings of the PACE study reflect the recommendations in current NICE guidance. I understand that concerns have been expressed that patients may have their choices about care restricted because the PACE trial supports their non-recommendation by NICE or that patients may be forced into treatments they do not want because they are recommended. I assure noble Lords that clinical guidelines published by NICE help to promote consistency but recognise that patients are individuals who may require different forms of management. Clinicians are therefore free to adapt the guidelines when deciding, in consultation with their patients, the most appropriate treatment. NICE routinely reviews the need to update its guidance in order to take account of the latest available evidence. As the noble Countess is aware, CFS/ME is currently a highlighted area and a high priority for the MRC. The high-quality research stimulated by the MRC’s recent call will add to the future evidence base.
Concern has been expressed that the findings of the trial will be used to reduce the number of people with CFS/ME on state benefits. That was flagged up briefly by noble Lords. I should like to dispel straight away the idea that CFS/ME is not recognised by the Department for Work and Pensions as a potentially serious condition. For example, there are no targets for finding individuals fit for work in the work capability assessment process. The noble Baroness, Lady Meacher, raised this particular issue and asked whether patients who do not comply with the CBT or take the treatment recommended to them might have their benefits withdrawn. I can assure her that that is not the case. Entitlement to employment support allowance is not based on compliance with specific treatments and anyone claiming ESA will undergo the work capability assessment. That assessment is founded on the premise that eligibility should not be based on a person’s condition or the treatment regime for it but, rather, on the way that that condition limits their functional capability. I am happy to flag this debate to the DWP, as the noble Baroness asked me to, in regard to the availability of services.
The noble Baroness also asked me about the NHS Commissioning Board and whether it would give equal weight to a number of other diseases. I can assure her that the mandate to the NHS Commissioning Board will ensure that improvements are made to the quality of life for all people living with long-term conditions, including this one.
The noble Lord, Lord Layard, asked me about specialist treatment provided by PCTs. In the new system, clinical commissioning groups will be responsible for commissioning specialist CFS/ME services. As he knows, they comprise front-line clinicians. We certainly hope that they will therefore have a good understanding of their local communities, including patients with these problems. The NHS Commissioning Board will hold those CCGs accountable for the services that they commission, as well as providing support—for example, through the development of commissioning guides. I understand that Martin McShane, long-term conditions lead at the NHS Commissioning Board, has already met with the CFS/ME patient groups to discuss their concerns. Those discussions will inform the board’s work as things move forward.
The Government’s aim is to help individuals who are suffering from these problems both to receive appropriate treatment and to get back to work where they can do so. They also seek a better understanding of the situation that these individuals are in. The PACE trial was funded to respond to the concerns of patients, carers and doctors that more research into CFS/ME was required. Of course, we all hope that health research results in people becoming healthier and fewer suffering from these kinds of problems. This is obviously a major focus for the MRC in making its individual funding decisions.
In conclusion, I hope that the noble Countess will agree that we are sympathetic to the needs of patients with CFS/ME. I appreciate, as do other noble Lords, her many concerns. I hope that I have reassured her that we are investing in improved services for CFS/ME patients and in an expanded research programme—noble Lords have emphasised the importance of research moving forward in this area—and that this should make a difference to the lives of the many people affected by this condition. That is the Government’s priority.
House of Lords
(11 years, 10 months ago)
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Children: Obesity
(11 years, 10 months ago)
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Lord Sharkey
To ask Her Majesty’s Government what assessment they have made of the factors contributing to the rise in childhood obesity.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, obesity is a complex issue, and there are many factors that contribute to children becoming obese. We are committed to tackling obesity in children. Our call to action on obesity sets out the actions that everyone needs to take. For our part we will continue investing in the Change4Life programme, the national child measurement programme, and the School Games.
Lord Sharkey
My Lords, one-third of our children are already obese, and the fact is that cheap fast food can be a major contributor to obesity. The Government’s responsibility deal for calorie reduction has signed up 31 companies, which have promised to reformulate their products to make them less fattening. However, according to the Department of Health’s website, not one of these signatories is a fast-food operator. Does this not suggest a failure of the voluntary approach and that we need regulation, as the BMA says, to make food companies play their proper part in reducing obesity?
Earl Howe
My Lords, I am grateful to my noble friend. In fact, the responsibility deal has led to a number of very important gains and benefits, not least from food companies: food retailers as well as food manufacturers. Calorie labelling, for example, has expanded rapidly in out-of-home settings; we now have labelling in around 9,000 outlets across the country, which is to be welcomed. As my noble friend said, 31 companies, some of them household names, have signed up to the responsibility deal calorie reduction pledge. However, this is an area that we continue to work on, and I think my noble friend’s comments are well placed.
Lord Wigley
My Lords, will the Minister accept that in Wales the figures for childhood obesity in those aged between 2 and 15 are three percentage points worse than those in England? As responsibility for some aspects of these matters is devolved and for others is not, can his department take up with the Government of Wales in Cardiff how a coherent plan can be undertaken to tackle this?
Earl Howe
My Lords, the noble Lord will understand that we tread warily when it comes to interfering in the affairs of the devolved Administrations. However, I take his point, because on serious public health messages such as this we need to have a co-ordinated approach. Members of my department are in regular contact with their counterparts in Wales.
Baroness Massey of Darwen
My Lords, the Minister mentioned sport. Beneficial as it is, does he accept that obesity is caused overwhelmingly by overeating and eating foods that cause obesity? Are there any media initiatives to direct young people to what is healthy to eat and to foods that cause less obesity, as well as to sports programmes?
Earl Howe
I completely agree with the noble Baroness that for children especially, exercise and sport are vital, which is why there are a number of initiatives in that area. She asked about media campaigns. Change4Life continues to support families to make simple changes to adopt a healthier diet and increase their physical activity levels. We are currently planning a summer campaign to encourage physical activity in children. The campaign remains subject to formal approval but is very much in our minds. Change4Life, I would just add, uses the full range of communication channels, including TV advertising, press, and local supporter activity. It is a well known brand and we intend to stick with it.
Lord Eden of Winton
My Lords, does not the Answer to the first Question on the Order Paper really depend upon the plans that the Minister will deploy before the House in his Answer to the second Question?
Lord Collins of Highbury
My Lords, I am going to take two bites of the cherry because I shall also briefly address the second Question. The noble Lord, Lord McColl, constantly reminds me that eating too many calories, not simply not exercising, is what causes me to be overweight, although I do exercise. However, when I pick up and eat a tub of low-fat yoghurt, which I have been doing for the past few years, thinking that I am eating healthily, I have not been able to read the very small print that states that this “low-fat, healthy” tub of yoghurt is packed full of sugars and calories. Actually, just before Christmas, I stopped eating low-fat yoghurts and I hope that noble Lords will appreciate the effect it has had on me. However, my specific question is: when will the noble Earl take the necessary statutory steps to ensure proper food labelling?
Earl Howe
My Lords, as the noble Lord will know, food labelling is largely governed by EU law and, at the moment, the EU directive is permissive about front-of-pack labelling. However, I take his point that it is very important that consumers are properly informed about what they are eating, and we are working with food manufacturers and retailers to ensure that there is much greater transparency in this area, across the piece, whether it relates to sugar, fats or salt.
Baroness Trumpington
My Lords, perhaps I may ask the Minister two questions. First, does he not agree that cheap food has become far more delicious than it was in the youth of most people in this Chamber? Secondly, children like to copy their heroes. Could not the media be persuaded to make greater use of physical heroes, such as footballers, tennis players or any kind of sporting hero, in order to promote less obesity?
Earl Howe
My noble friend makes a very good point about role models. To a certain extent, that has been tried and tested in the past with some success. As regards food and its taste, I would say each to their own, but she is right that we are encouraged in all sorts of subtle ways to eat more than we used to in years gone by. The responsibility deal calorie reduction pledge specifically enables businesses to contribute to our challenge to the nation in this area, which we issued as part of the call to action on obesity in 2011, to reduce total calorie consumption by 5 billion calories a day.
Health: Sugar Consumption
(11 years, 10 months ago)
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Lord Rennard
To ask Her Majesty’s Government what plans they have to help people reduce their sugar consumption.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, we have challenged business, through our responsibility deal calorie reduction pledge, to take action to help people eat fewer calories. This can include helping reduce sugar consumption. Businesses are already taking action; for example, soft drinks manufacturers which are signed up to the calorie reduction pledge are reducing sugar and calories in their drinks, and we are looking to others to join force.
The Government are also helping consumers to reduce their calorie intake by providing practical advice through NHS Choices and via the Change4Life campaign.
Lord Rennard
My Lords, does the Minister agree with the Secretary of State for Health that legislation may be required in this area if other measures do not succeed? In the mean time, does he think consideration needs to be given to changing tax regimes so that the tax may be rather higher on very sugary soft drinks, and rather lower on drinks that are less full of sugar? Does he also think that we may need to restrict the amount of sugar provided in some products, such as breakfast cereals targeted at children, so that parents either as consumers themselves or watching their children can see how many spoons of sugar are going on to their cereal, rather than simply accepting the amount of sugar already produced by the manufacturers?
Earl Howe
My noble friend asks a number of questions. I am sure he will have welcomed, as I did, the announcement a few days ago by two major manufacturers of sugary drinks that they were substantially reducing the sugar content of their drinks. This is in part a result of the engagement that we have had with the food industry, which, in public health terms, is taking on responsibility for the products that it makes.
While there are advocates for taxation, in 2012 my department reviewed the international evidence of the effect of taxation on people’s consumption of food and drink. There is very limited empirical evidence, certainly from literature, but also in practice that that has an effect on body weight or health outcomes. There is a range of possible unintended consequences, including swapping for other foods which may be even less healthy than the ones that we are trying to cut out.
Lord McColl of Dulwich
My Lords, is the Minister aware that the overeating habits of pregnant women can be programmed into the foetus, so that when born the children will not stand a chance unless people accept that the answer to the obesity epidemic is to eat less? Although exercise is important in reducing cholesterol, for well-being and so on, it has very little to do with the control of the obesity epidemic.
Earl Howe
My noble friend makes a good point, but in healthy children exercise is very important as a preventive measure for obesity and diabetes. The central point he makes is absolutely right. We look to healthcare workers, not only health visitors but also midwives, through programmes such as the Healthy Child programme and Start for Life, to get families and children off to the right start, so that they eat properly and live healthy lifestyles.
Baroness Masham of Ilton
My Lords, does the Minister think sweeteners are a good substitute for sugar or do they have side effects?
Earl Howe
My Lords, we are clear that artificial sweeteners are safe if taken as intended. That is the advice of the European Food Safety Authority and we take that advice. However, encouraging people to take low-diet fizzy drinks, for example, in preference to sugary drinks is problematic because all fizzy drinks have an adverse effect on tooth enamel. We need to be balanced in our messages but we think that artificial sweeteners have a role in a proper calorie-controlled diet.
Lord Berkeley
My Lords, are the Government aware of a study by the Dutch Government which links obesity with exercise—in particular, walking or cycling—in inverse proportion? Given that the same study says that we are the most obese country in Europe, will he encourage cycling to be taken up by more children and persuade the Department for Transport to take this a bit more seriously by get moving in encouraging more children to cycle to and from school and for leisure?
Lord Roberts of Llandudno
My Lords, we have already heard mention of the importance of the proper labelling of foods. Could that labelling be such that even the youngest child, perhaps with type 1 diabetes, would be able to understand it without having to go into some mathematical equation to decide exactly what is good for him to eat?
Earl Howe
My Lords, my noble friend may know that a UK-wide consultation on front-of-pack labelling was held last year. We published a formal response to it at the end of January. The responses identified a number of issues which we need to consider further and officials are working on those. However, my noble friend is absolutely right that not just the calorie content but the clarity of the messages around calories need to be clear not only to adults but to children.
Lord Brooke of Alverthorpe
Does the noble Earl know that drinking alcohol is a big factor in introducing sugar into the body? The drinks industry is totally exempt from any requirement to show the calorific effect of alcohol, or indeed its energy factors. Is the Minister happy that the partners in the responsibility deal within the drinks industry are taking no action on that issue, or is he prepared to say that the Government will push through the responsibility deal to try to bring about some change?
Earl Howe
My Lords, our alcohol strategy includes a commitment for the Responsibility Deal Alcohol Network to seek to make further progress on including energy information as part of the responsibility deal alcohol-labelling pledge. We have already secured provisions in recent EU labelling legislation that will enable companies to provide this information on a voluntary basis. The pledge on improving information for consumers in the off-trade area already includes a commitment to raise awareness of the energy content of alcoholic drinks, and we will continue along those lines.
House of Lords: Reform
(11 years, 10 months ago)
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Lord Howarth of Newport
To ask Her Majesty’s Government whether they intend to proceed with any reforms to the composition of the House of Lords.
The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)
My Lords, as noble Lords know, the Government have no further plans for legislation to reform this House in this Parliament.
Lord Howarth of Newport
My Lords, given that the House of Commons has made it absolutely clear that it will not tolerate the challenge to its primacy of an elected second Chamber, given the Deputy Prime Minister’s sensible acknowledgement that the best is the enemy of the good and given the undesirability in the interests of good government that the question of Lords reform should overshadow the next Parliament, will Ministers introduce legislation in this Parliament to enable us to resolve the issues of how Members are to be appointed to the House of Lords, the future size of the House, how the balance between the political parties, the Cross Benches and the Lords spiritual is to be determined, the future of hereditary membership and life peerages, and provision for retirement and disqualification, all of which need to be resolved and upon which sufficient consensus could be achieved?
Lord Hill of Oareford
Having picked my way around this landscape over the past few weeks and having had the chance to talk to and understand the concerns of many noble Lords, I am not sure that it would be as easy to secure consensus as the noble Lord, Lord Howarth of Newport, suggests. He is clearly a great optimist if he believes that that is the case not only in this House but between this House and the other place. I obviously understand the points that many noble Lords raised about some of these issues that we discuss but, in the light of last year’s debate and the views that the Deputy Prime Minister has made clear, there is no prospect of further legislation for those issues that would require legislation.
Lord Laming
Bearing in mind the financial situation and the concerns expressed all round about the impact of that on the poorest people in our society, does the Leader of the House agree that it would not enhance the reputation of this House for public funds to be used to encourage people to give up the privilege of serving in this House?
Lord Hill of Oareford
I agree personally and in principle with the point raised by the noble Lord, Lord Laming. When the rest of the country is facing huge economic challenges, as the noble Lord said, to spend taxpayers’ money in such a way would be difficult, but I also agree with the underlying point of principle, which is that it is an honour and a privilege to serve in this House, and the idea that if one ceased to want to fulfil that honour and privilege, one would need to be compensated financially, sits oddly with the principle it serves.
Lord Forsyth of Drumlean
My Lords, in his role as Leader of the House and as the representative of this House in Cabinet, will my noble friend take the opportunity to draw to the attention of the Prime Minister the article in today’s Times by the Lord Speaker, and impress on him that it represents the feelings of the vast majority of people in this House? Further, will he talk to the Deputy Prime Minister and say to him that his refusal to allow the Steel Bill to go forward is unacceptable, given the strength of feeling shown in both Houses about the size of the Houses of Parliament and the importance of getting value for taxpayers’ money?
Lord Hill of Oareford
My Lords, I am sure that all the points that have been raised in this debate are being seen by my colleagues in the Cabinet, including by my right honourable friends the Prime Minister and the Deputy Prime Minister. I understand the points raised about the size of this House. It is important to have the ability to refresh the House, bring in new talent and draw on the expertise for which this House is rightly renowned. One of the reasons why I was particularly keen to do this job is because I saw as a Minister the difference between this House and another place in terms of the quality of the scrutiny that this House provides, and it is extremely important that we should carry on having the Members to enable us to do so.
Baroness Hayman
My Lords, will the Leader reconsider the pessimism implicit in his original reply? It is intolerable that the failure of the Government’s plans for an elected House should stand in the way of progress on a reform agenda that is widely supported and which is urgently needed for the reputation of this House. The noble Lord could do the House a great service by championing that reform agenda, as the noble Lord, Lord Forsyth, said. Will he undertake so to do?
Lord Hill of Oareford
My Lords, I hope that I can always be a champion of this House, about which I feel extremely strongly. On the point about me being a pessimist, I like to think that I am an optimist. I am optimistic about this House, about its future and about the contribution that it makes to our national debate. I have, though, to be realistic about the consequence of the debate and the votes that took place. We know that the other place said at some point that it was in favour of an elected House; it did not then will the means for that to happen. Given where we got to last October, I am not a pessimist but I am realistic.
Lord Steel of Aikwood
Is the Leader of the House aware that following consultations with the Chief Whip, and as he rightly advised me, I postponed the Motion that I was to bring forward stopping further introductions until 28 February, which is the day before my Bill is next due to be blocked by the government Whips in the House of Commons. It would helpful if he, I and others could use the intervening time to try to persuade the powers that be at the other end that this is really a housekeeping measure purely affecting the Lords that we would like them to be nice enough to send back to us.
Lord Hill of Oareford
I understand that point. I have great respect for the noble Lord, Lord Steel, and am glad that I have already had the chance to discuss his proposals with him and others. I would be happy to do so again. He, I am sure, can use his powers of persuasion with colleagues in his own party, including the Deputy Prime Minister. I know that he will try and we will then see how we get on.
Lord Hunt of Kings Heath
My Lords, I would like to take him back to his first Answer. He suggested that it would be difficult to get a consensus in your Lordships’ House on interim changes. Why does he not put it to the test? There are various groups meeting at the moment in this House discussing these matters. There is a great deal of consensus. Why does he not call those groups together, or have a Leader’s Group, to see if we can make progress when there is a clear and huge majority of your Lordships’ House in favour of making sensible interim changes?
Lord Hill of Oareford
Again, the noble Lord says there is a lot of consensus around this. The conversations I have had with people so far do not bear out that optimistic gloss. I am keen to talk to Members of this House who have views, and that is something I will continue to do.
Taxation: Avoidance
(11 years, 10 months ago)
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Baroness Gardner of Parkes
To ask Her Majesty’s Government what proposals they have to deal with any abuse of charitable status for the purposes of tax avoidance.
The Commercial Secretary to the Treasury (Lord Deighton)
My Lords, an organisation must be a charity, under the law of England and Wales, and meet certain other conditions in order to qualify for UK charity tax reliefs. Whether an organisation established in England or Wales is a charity in law is a matter for the Charity Commission. The Government are considering the proposals of the noble Lord, Lord Hodgson, on updating charity law following his review of the Charities Act 2006.
Baroness Gardner of Parkes
I thank the noble Lord for that Answer. I notice that when you complete your tax return, one section asks you to say whether you are a member of a tax avoidance scheme. I am always amazed by that. That makes me wonder whether certain tax avoidance schemes are recognised and approved by the Treasury. Can the noble Lord tell me whether the Cup Trust, which is the one that has been so widely accused in the recent press, is known and approved by the Treasury, or whether it is unknown and that it has come as a shock to the Treasury to have this revelation in the press?
Lord Deighton
My Lords, I cannot comment on the tax affairs of individual taxpayers but what I can do is speak generally. Schemes that abuse the gift aid rules with a view to enabling individuals to avoid tax do fall within the disclosure of tax avoidance schemes rules. That means that anyone who uses such a scheme must disclose it on their tax return. HMRC can then identify those individuals and challenge the reliefs claimed where appropriate.
Lord Davies of Oldham
My Lords, are not the charities that most significantly avoid tax on dubious grounds the public schools? Many of them were granted charitable status when they educated the poor or those of middling incomes. They now clearly educate, overwhelmingly, the children of the wealthy and the privileged, as evidenced by the Conservative Front Bench in the Commons.
Lord Deighton
As I said in my original Answer, the issue of whether an organisation qualifies as a charity is for the Charities Commission. The review of the noble Lord, Lord Hodgson, which reported in the middle of 2012, was given an initial response by the Government just before Christmas. The Public Administration Select Committee is also looking at this and will report, I think, in March. At that point the Government will give their further recommendations on the regulation of the charities sector. That will deal with the issue of which organisations qualify as charities, including public schools.
Lord Strasburger
My Lords, can my noble friend tell the House whether alleged tax avoidance schemes, such as those operated by the Cup Trust, are likely to be caught by the general anti-avoidance rules when they are introduced? Can he also confirm that the general anti-avoidance rules are still scheduled to be introduced in this year’s Finance Bill?
Lord Deighton
I thank my noble friend for giving me the chance to shed further light on this issue. HMRC is extremely clear that circular schemes which are designed to exploit gift aid do not work in tax law. It will challenge and litigate enthusiastically against any scheme that it believes does not work in tax law. As the schemes do not work in tax law, the anti-avoidance provisions are not necessary and the schemes should fall at the first hurdle of not being legally acceptable. However, I can confirm that it is the Government’s intention to include the general anti-avoidance rules as part of the Finance Bill 2013.
Lord Richard
My Lords, does the Minister agree that it is a principle of English law that that which is not forbidden is permitted? Do not the Government recognise that merely to go on bleating from the sidelines and telling people that they should not avoid tax will have absolutely no effect whatever? Clever lawyers will be able to devise ways of continuing to avoid tax. If the Government want to deal with tax avoidance, they will have to legislate to deal with tax avoidance and stop preaching from the sidelines.
Lord Deighton
The Government are prepared to legislate against tax avoidance in the area of charities law. In both 2004 and 2010, Governments legislated to do precisely that. I see this as two distinct areas. On the one hand, we need to create a tax regime which encourages an enterprise economy and giving to charity. On the other hand, the quid pro quo for that kind of positive environment is that people pay their taxes. I can assure the House that HMRC will pursue diligently those who seek to avoid tax.
Lord Lexden
In relation to the Question from the Labour Front Bench, will my noble friend note that independent schools provide far more in bursaries and means-tested scholarships than they receive in benefits through their charitable status?
Lord Deighton
I thank my noble friend for that important addition to the debate. I was not aware of that but I am delighted that he has been able to share it with the House.
Lord Empey
What is the role of the Charity Commission in this? If an organisation pays out to good causes only less than 1% of its revenue, does an alarm bell ring somewhere?
Lord Deighton
In this particular case, as I understand it, the Charity Commission, which works closely with HMRC, investigated the trust but found that it did not have the legal basis to make a challenge. In that context, I refer to the review of the noble Lord, Lord Hodgson, the follow-up from the Government and the announcement made in the other House this morning that the focus of the new chairman, Mr Shawcross, should be on its role as a regulator.
Hereditary Peers By-Election
(11 years, 10 months ago)
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Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2012
(11 years, 10 months ago)
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Lord McNally
That the draft Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2012 laid before the House on 26 November 2012 be approved.
Relevant Document: 13th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 8 January.
Prisons (Property) Bill
(11 years, 10 months ago)
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Lord Ramsbotham
My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.
Growth and Infrastructure Bill
(11 years, 10 months ago)
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Lord Pannick
“(d) the conditions regulating the agreement contained in subsection (12) are satisfied.”
Lord Pannick
My Lords, Amendments 81D and 92 are in my name and that of the noble Lord, Lord Adonis. They are in the first of a series of groups of amendments which address Clause 27. As your Lordships know, Clause 27 allows employers to buy off employment rights otherwise enjoyed by employees. Under this clause, employees can agree to receive shares worth at least £2,000, in return for which they will lose the right to claim unfair dismissal, the right to claim statutory redundancy pay, the right to request flexible working and the right to request time off for training.
What is so objectionable about Clause 27 is that these employment rights were conferred by Parliament over the past 50 years and have been protected by Governments—both Conservative and Labour—precisely because the inequality of bargaining power between employee and employer means that freedom of contract is quite insufficient to protect the employee or the prospective employee. Therefore, to allow these basic employment rights to be traded as some form of commodity frustrates the very purpose of these entitlements as an essential protection in the employment context.
The concept contained in Clause 27 is especially bizarre when there appears to be no demand whatever from employers for such protection and when responsible employers are introducing genuine share ownership schemes. I can think of only one precedent for Clause 27. It is in Genesis, chapter 25, where Jacob refuses to let his famished brother Esau eat some of the broth he has made until he sells him his rights as the first born. Esau agrees because he is famished and says, “What use is my birthright to me?”, compared to the mess of pottage of which he has immediate need. Your Lordships will come in due course to consider whether the correct response from your Lordships’ House to this mess of pottage is to reject it in its entirety—for all the reasons so powerfully outlined at Second Reading by the noble Lord, Lord Adonis, in particular.
Amendments 81D and 92 seek to ensure that if we are to have Clause 27 at all, the employee and the prospective employee must at the very least be given the minimum necessary protection to understand what it is that they are giving up. The minimum necessary protection that Amendments 81D and 92 would provide is that the statutory rights could be lost only if the agreement satisfied three essential conditions.
The first is that any agreement in this context must be in writing and must set out the rights being traded and the value of the shares that are to be received. One of the surprising features of Clause 27 is that it does not even require the agreement to be in writing—an invitation to subsequent litigation if ever I saw one. Secondly, the individual must receive legal advice on the consequences of the agreement from an independent lawyer. These matters are surely too important for Parliament to allow employees and prospective employees to give up those basic rights without the legal implications being fully explained to them. The third essential protection is that the individual must have received financial advice from an independent adviser—who must be a regulated person—as to the value and the prospects of the shares that he or she is about to receive and for which they are giving up those basic employment rights
The detail of Amendment 92 is modelled on Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 288 is a vital provision. It makes an agreement void if it purports to contract out of the employment rights that Parliament has conferred. At the moment, employees and employers simply cannot contract out of employment rights. Clause 27 conflicts with that basic and fundamental principle. However, Section 288 allows for compromise agreements to settle specific employment disputes in individual cases in employment tribunals. That is a very different concept and entirely acceptable in principle.
Section 288 states that one of those compromise agreements in the context of an individual employment dispute is valid only if it is in writing and if the employee who is settling the case has received independent advice on the terms of the agreement by which he or she is settling the claim—advice from a lawyer, a trade union official or an advice centre worker. Clause 27 involves an agreement much more fundamental in its implications for the individual, who is not just settling an individual employment claim in the tribunal but is generally giving up important employment rights for the future. Therefore, in the Clause 27 context—if we are to have Clause 27 at all—the procedural protection that Parliament confers on the employee must be at least as strong as that which Parliament itself has conferred on the employee who is settling a specific employment claim.
The Equality and Human Rights Commission has helpfully addressed that very issue. It has expressed concern that Clause 27 may indirectly and unlawfully discriminate, contrary to EU law, against those workers and prospective workers whose first language is not English, those with learning disabilities or young workers. Therefore, the commission says that a proper justification is required and that depends, in its view, on safeguards such as the receipt of informed and independent advice.
I emphasise that Amendments 81D and 92 would not make Clause 27 acceptable. Clause 27 would remain a provision that knows the price of statutory employment rights but ignores the value of those rights. However, because the amendments would make Clause 27 marginally less objectionable, I beg to move.
Baroness Brinton
My Lords, on Second Reading I expressed my concerns about the whole concept behind this clause. Various Ministers have suggested that only a small group of companies are likely to be interested in these proposals: new, high-technology, rapid-growth, micro and small companies which might want to encourage employees into more commitment and endeavour by offering them shares in their company. So far, so good. However, many employers already do this in this sector, especially those running fast-growing, leading-edge, high-tech companies, because they know that they are going to grow much faster than many other companies and they want to commit their staff to working for them, to share the benefits in the longer term and the hardship of trials that most companies face in their start-up phase.
I declare two past interests. First, I have a foster son who has recently been employed by one such firm, joining it from university. He has received a share package as part of his employment. I have talked to him and some of his colleagues about the benefits and whether they would be prepared to talk about giving up their rights. I will come to that later. My second interest is that I advised St John’s College, Cambridge, as it created the St John’s Innovation Centre in the late 1980s and subsequently was a non-executive director at the centre until 2010. The centre works with entrepreneurs and academics spinning their ideas out of Cambridge and other universities, offering them short-term leases and, very specifically, business, legal and technical advice that is the envy of many other science parks and innovation centres that have developed in the intervening 25 years.
These companies are the exact target audience that Ministers tell us will be interested in the proposals in Clause 27. Having talked to the directors of these small but high-growth companies, I know that many already offer shares, as I mentioned. They, as directors, do not understand why an employer would want to do so in return for a reduction in employment rights. One of their key issues as the company grows is to keep the morale of the staff going during the difficult times. It is very rare for a new company to have an entirely smooth journey to success and reward. Proposing that staff should give up their rights to redundancy pay is an issue, as not all early-stage companies survive and so redundancy is a real possibility. They are also concerned about training. This is absolutely vital in the leading-edge technology sector, where the skills of your workforce are likely to make all the difference against your competitors, particularly the business skills that technical staff may not have had when they arrived at the company. They need those skills in order to progress in their market. Losing part of paternal leave is also a concern, as many of their staff are in exactly the age group likely to be beginning their families.
So if the stick—that is, the loss of rights—is not attractive either to employers or to staff, what about the carrot? The carrot of capital gains tax exemption sounds very exciting but I do not believe that the Government have really understood the two likely outcomes for these high-tech companies. The first, sadly, I have already alluded to. Not all of these companies are a success. Probably one in 100 is. There is a chance that the company will not succeed and that the shares will be worthless.
The second is the unlikely event that the company will do well enough to make those shares really worth something in the future. However, even this route is fraught to those coming in on the ground floor. Let us assume, for the sake of argument, that the group of employees who joined the company in its first two years were given shares at the then face value. It would not be unusual after their issue, as the company grows and faces all the typical excitements of launching in the market, for those shares to become worthless. But our fledgling company is taking off, and in order to become a really effective player, it will have to take on finance. It often needs to seek that finance when the company is not attractive. So, some business angels or venture capitalists invest in the company, and all the original shares are diluted substantially by this investment. We are only talking about round two of investment at this stage.
Well, the rubric goes, it is better to have a small share of something than a larger share of nothing at all. Often, though, there are three or four subsequent rounds of financing, and those employees are likely to find that their small share becomes a minute one. This is a really risky business. Would many employees understand the risks that they were taking? Would they honestly be prepared to wait 10 years or more for the carrot of the CGT exemption for the one company in 50 to 100 that starts to make a return for its shareholders? I doubt it. I also doubt that many employees would understand the nature of the process that I have just outlined.
That is why my noble friend Lord Tope and I have tabled Amendments 82A, 82B and 91 in this group. For people working in the financial services sector, such as venture capitalists and bankers, the process of growth and new share issues, with the consequential dilution for longstanding shareholders, is common knowledge, but for a young software engineer, perhaps fresh out of university, it is an area that they are likely to know nothing about The amendments in my name and that of my noble friend address this. We believe that employee shareholders under Clause 27 should have access to independent legal advice. More than that, we think that the employer should have a duty to ensure that the employee has a right to receive the appropriate legal advice and that the employer should make a contribution towards that legal advice.
I am reminded of the small print in the public shares issues of the 1980s: shares can go up as well as down. The noble Baroness, Lady Thatcher—I am astonished to find myself praying her name in aid—felt that it was appropriate for the ordinary man or woman in the street to have that advice then, so I am sure that it is right to be provided in these circumstances for employees who are unlikely to have had training in the finer points of share prices and rounds of investment in high-growth companies.
Amendment 92, in the names of the noble Lords, Lord Pannick and Lord Adonis, takes my proposal one stage further, and in a new subsection (12) demands much more specific types of advice as well as a written agreement for individuals being offered the opportunity of employee shares and specifies the nature of that advice in much more detail. Not only do I think that is more useful but I am sympathetic to it.
Amendment 82B would then put the onus for paying for that advice on to the employer. I am sure that this is correct and only fair. If you are giving up your rights as an employee in return for shares that may, though probably may not, increase in value and will certainly be diluted out of sight in the future, that is a complex decision that needs specialist advice and careful consideration by the prospective employee shareholder.
When we come to discuss clause stand part I will return to some of the principles of the clause in general, but I want to conclude on these amendments by saying that all the evidence that I have heard from both employers and employees, in the sector that Ministers say is the one most likely to take this up, is that it just will not be attractive. I hope that the clause will wither on the vine, but if it does not then we must have protection for the employees who are going to be faced with this sort of proposal.
Lord Vinson
My Lords, I declare an interest in that for many years I was chairman of the Industrial Co-partnership Association. I also happen to be fortunate enough to have floated a company on the stock exchange when we had 1,000 employees, and we gave 10% of the company to our employees.
I am deeply committed to the concept of wider share ownership but I am concerned about Clause 27. I shall give the Committee an example of quite what ownership means to some people. One of the older women in our company came up to me about a month after we had floated it and said, “Guvnor, you just don’t know what it means to me to feel I am part of this company. It has made my life”. That just brought tears to my eyes. People want to belong, and in smaller businesses they can belong and feel that they are names, not numbers.
However, the whole point of wider industrial shareholding is to try to create a sense of common purpose. I fear that the unnecessary obstacles and quid pro quos put into Clause 27 go in exactly the opposite direction; they negate trust rather than increase it. With great reluctance, therefore, I have to speak against the Government, who I am sure are right to encourage wider share ownership. If you wrap it up in complexity, cover it in advisers and make it all too difficult, it simply will not happen, but it is fundamentally the most attractive and important thing to create a wider capital-owning society in which everyone feels they have a stake.
Baroness Turner of Camden
My Lords, at Second Reading I opposed these provisions. In my view, this is yet another attempt by the Government to remove employment rights which have been hard fought for by previous generations. In my view, it is a backdoor means of introducing the Beecroft proposals which were recently condemned not only by trade unions but by many employers as well.
The Government maintain that the new status of employee shareholder is voluntary. Really? Are these proposals voluntary in situations where there is already high unemployment, where people are desperate for any sort of employment? A number of the issues have simply not been thought about. What about mergers? Do employee shareholders take their shares with them or do they have to give them up? What happens to TUPE—the Transfer of Undertakings (Protection of Employment) Regulations—which gives protection to employees? According to an opinion provided by the Equality and Human Rights Commission, an employee shareholder is legally still a worker and therefore still has employment rights—hence the Government’s insistence on the voluntary nature of this new status, so that the worker voluntary surrenders rights.
Of course, while the employee shareholder may have a right to benefit from shares, he or she also shares the risks involved. For this reason, many people—including the movers of Amendments 82A and 82B, and even Amendment 92—have said that before entering this arrangement, the employee must have access to legal advice of an entirely independent kind. It has even been suggested that the employer should pay for this. These are, of course, modifications on a quite unacceptable set of proposals.
I still oppose the whole arrangement. It is one of a series of arrangements in which the Government are seeking to weaken or remove employee rights. We have already discussed the Enterprise and Regulatory Reform Bill in this House, which has a section on employment which is designed to make it as difficult as possible for employees to access employment rights and to take cases to tribunals. It also includes provisions in relation to health and safety at work, making it more difficult for workers to claim.
The LASPO Act, discussed before, also made it clear that legal aid would not be provided in employment cases. It is already becoming clear that the minimum wage is inadequate, and there is talk of a living wage instead. In April this year, cuts will begin to affect a whole range of people on benefits, particularly housing benefits. The Government claim, however, that much of this legislation is meant to assist small and medium-sized employers—SMEs. However, employers are already benefiting from low wages, which are in many cases subsidised by the taxpayer through the benefits system. Clause 27 is yet another attack by the Government on employment rights and on ordinary workers. It should be opposed for what it is.
Lord Martin of Springburn
My Lords, I support all those who have spoken, especially the noble Baroness, Lady Turner. She is right when she says that these rights were hard fought for. In my working life, I recall a time when people lost their job and went out of the door with a week’s wages and, if they were lucky, maybe some holiday pay. It gave dignity to people who were very loyal to their company that, if they were unfortunate enough to lose their job after a decent period of time, they at least got something to tide them over, because redundancy payments are not all that big.
This is an insult to the companies which already give shares to their workers. There is a famous heating company—it is not fair to mention its name—whose owner decided that, because he did not have any direct heirs, he would give the shares to his workers. He did not put any strings on that arrangement; he gave the shares to the workers.
This is bad legislation. We are bringing in a situation where we are saying, “Give up your rights and we’ll give you shares”. We are giving a financial incentive which, at the end of the day, as the noble Baroness said, is not necessarily a financial incentive because shares go up and down.
I remember being in Committee on the famous Tebbit Bill. The noble Lord, Lord Tebbit, is now a fellow Peer. He and many others argued that the trade union movement had been given too much in the way of rights by the previous Labour Government. One of the things they said was that you could not apply for unfair dismissal unless you were employed for a full, consecutive two years. Under the Labour Government, it was a year. The argument was that you had to show loyalty to the company that you were with.
Under this arrangement, workers who are prepared to show loyalty are giving up their rights on the day that they walk in the door and sign them over for shares. They still have to be employed for two years before they can apply for redundancy, and that proves that they are loyal people. The noble Lord, Lord Tebbit, would recognise that. He said that we want loyalty. Employers are getting that loyalty, but the Government are now saying that they want a facility where people give away their rights.
I can see a situation in places of employment where you will turn worker against worker because some will accept this deal but others will say, “No, I would rather keep my statutory rights”. It could be that pressure will be put on them. I bring the Committee back to Sunday working. During the passage of the legislation on Sunday working it was stated that anyone who had deeply held religious beliefs would not have to work on Sunday. That held for a while, but when new employees came in they were told that if they wanted the job, they had to work on Sundays whether they had deeply held religious beliefs or not.
The Bill states that employers will have to respect workers’ right to say they do not want shares and that those workers will be entitled to their rights under legislation. But what the Government have not considered is the new employees. People coming in the door will be told: “You must accept the workers’ shares, and if you don’t like it then you don’t get the job”. This is bad legislation.
Baroness Afshar
My Lords, I have worked for a long time with minority groups who employ their women in a system that is very similar to what is proposed. They have an interest in the business, they are committed to the business, they have kinship ties, and they have absolutely no rights. They work right through the day, and they share the losses and the gains.
In my long experience, the children of these minorities, who are some of the best educated children because the families use education, grow up and wish to use their education to get out of the informal sector into the formal sector. They wish for a different experience from that of their parents. They want to be workers with rights, entitlements and the possibility of progress. In fact, many of them would work in these new companies without realising that by doing so they were returning to where their parents were. That is not because they are not educated but because of the complexity of the contract. They are happy to have a contract. They sign it, which means it is formal and official. They do not have a lawyer at their side to warn them of every point. It would be a matter of great regret to lose these intelligent people, who, I think, are footloose and fancy free. They may well move on to other countries where they are better paid for having poor contracts. We are losing the confidence of our minorities and possibly the prospect of some very well-educated young people.
Lord Strasburger
My Lords, I declare an interest. Before I joined this House I was a serial entrepreneur. I have started many businesses from scratch. The most recent one employed 200 staff after being in business for four years. I am a big fan of giving employees a stake in the success of the business so that their goals are aligned with those of the founders. It never crossed my mind that my staff should need to forfeit their employment rights in exchange. Snatching these rights is hardly the best way to win their hearts and minds. Managers who feel they need to diminish the rights of their staff to get their full commitment to the success of the business are bad managers and will almost certainly fail. This idea is complete nonsense.
Lord Flight
My Lords, when these proposals were announced, I was somewhat lukewarm towards them, for some of the reasons that other noble Lords have spoken about today. However, as I thought about the proposals rather more, it seemed to me that there is some sense to them. They are not proposals for everybody. They are not for individuals who work for the public sector or for large companies; they are relevant to individuals who are by nature high risk-reward in their approach. They are willing to be high-risk takers to build up capital for themselves and their families. The proposals are, as has been articulated, for small and medium businesses, and are certainly not appropriate for larger businesses.
The proposals at present are really rather simple and straightforward and may be capable of improvement but not, I hope, of too much embellishment or the whole point of the principle would be undermined. People have the option whether to participate. If you wish to be an employee entrepreneur, here is the chance to benefit with equity on an extremely tax-attractive basis, but you are going to be taking risks just like the entrepreneur himself. One of the problems with small-company share schemes, as I have experienced in my own career, is that they are very limited. Where options have to be used they end up being taxed at nearly 60% and are not particularly attractive. The carrot of tax-free capital gains is attractive.
The subsequent amendment that I will address shortly suggests a template for and guidance on the new scheme. Particularly as it is new and untried, that is needed. The principle of requiring advice I can go along with to some extent, although requiring barristers seems perhaps to be jobs for the boys. The principle of the scheme seems pretty straightforward. It does not require anyone of huge intelligence to understand the quid pro quo.
Moreover, some of the potential problems have already been addressed via amendments in the other place. There are measures intended to stop any form of coercion. Employees also retain the great majority of their employment rights. Partly paid issued shares cannot be used, so people would not be left with a liability if a company went bust. If shares are inappropriately valued, the deal returns employees to their normal employment status. I am not sure how far one should really go to spoon-feed the principles. If someone is not a natural risk taker, this is clearly not for them, and they should not look to accept a job with this sort of deal.
Lord Morris of Handsworth
My Lords, the issues in this debate on Clause 27, and the other amendments, have not changed. I take the view that the objectives of the clause and the conditions attached to wider share ownership were wrong then and remain wrong. The issues that British industry faces today are not to do with wider share ownership. Of course, it is to be welcomed if we can provide greater security, commitment and skills; it is very much part of a process of commitment and evolution within the workplace.
At Second Reading, I said that I was no stranger to the concept. I worked in my company for 18 years and was awarded employee preference shares. I welcomed them, and they caused no harm. But I have to tell noble Lords that they did not influence my loyalty, commitment or motivation in that company. I gave of my best because it was a decent company, with its terms and conditions as well as security. Everything that went with it could be described as a model experience. I did not even give the shares a thought. I could not find my share certificate when the time came to dispose of them. That is how little they meant to me. I was no exception in that regard among the more than 3,000 people employed in that company because the company culture was right and the company met the needs of the industry.
We really ought to look at the deficiencies of Clause 27. It does not address training, productivity or investment, be it investment in people, community or the wider concept of society. I do not see too many words about skills in the clause and do not begin to understand how it could be deemed necessary to bring it forward to secure the loyalty and overall commitment that industries need. Indeed, it could be argued that Clause 27 will have a perverse effect on employee relationships within the workplace, because if the workplace is about anything it is about unity, working together and equity of treatment and approach. What we are doing here will possibly sow the seeds of a divided workforce operating in small units where some people are shareholders and some are not. The legislation does not provide equity of security because at the outset your legal rights have to be forfeited. I am old fashioned enough to think that workers’ rights cannot be bartered for sale on the stock market because that brings nothing back into a company.
I say to the Government that sooner or later we will need to address the wider concept of industrial partnership but from a totally different perspective. We are discussing a “buy today, sell tomorrow” concept. If your shares are tradable, do you have any loyalty once you have disposed of them? You certainly do not have any rights because you gave those up at the start point, but do you have any real security? I do not think so. Therefore, I believe that the points that were made at Second Reading and the points so ably made today by the noble Lord, Lord Pannick, in respect of the legality of the issues involved in the different statutes lead to the necessity to rethink this clause. The clause really needs to get back to considering what industry needs, what is required and what will increase productivity, not just a “buy today, sell tomorrow” culture.
Lord James of Blackheath
My Lords, it would be extremely helpful if the clause contained a clearer definition of “profit share” and “equity participation”. That is where the confusion will arise and cause the greatest difficulty. Profit share is relatively clear, straightforward, simple and very motivating. I wholly agree with the noble Baroness who talked about that earlier. That is fine, but profit share does not carry with it any of the risks that go with equity. I disagree with the noble Lord; you do not just buy your shares today and sell them. If you are a locked-in minority, especially in a quoted vehicle, you are stuck, you have no way out, and you never will have.
Further, and worse, I have seen this work to the total detriment of the shareholders. I had a company that had a number of ships—we were opening the North Sea oilfields—that were bought and each put into a separate company. It looked like a good, straightforward, long-term profit opportunity, so we had a lot of participation by Scandinavian banks, which would buy a ship and put it into a purpose-built company. The captain might be offered the opportunity of 20% of the equity in that company, meaning 20% of the ship he was going to sail. If that company did not get the contract work, did not make the money and could not service the debts of that bank, the banks in Scandinavia came at those shareholders and took their homes as a condition of their putting in the extra money.
These hazards are not anticipated in what we have here. There are some fearful risks in inviting people to become locked-in minorities, especially in SMEs where you have nowhere to go if there is a problem. Profit sharing does not have any of those problems, so we should be going down the profit-share path, not the equity-participation route, especially where it is given free into unquoted vehicles.
Lord Adonis
My Lords, first, I congratulate the noble Lord, Lord Flight, on being the first speaker in more than 50 on the Bill so far to defend this shares-for-rights proposal. His reward will no doubt be substantial hereafter.
I also welcome the noble Viscount the Minister to our debates on the Bill. The noble Baroness, Lady Hanham, is looking mightily relieved that she has an afternoon off. Her time will return only too soon. The noble Viscount has the thankless job of defending the indefensible—another practice that, if I may extend the analogy used by the noble Lord, Lord Pannick, goes back to the Book of Genesis, where Adam had to explain why he had misbehaved in the Garden of Eden. We are rather hoping to expel the entire Clause 27 from the Garden of Eden, but we are first debating some mitigating measures and inviting the noble Viscount to respond.
We start with the issue of coercion. The noble Lord, Lord Flight, said that the issue of coercion had been dealt with, but I contend that it has not. One of the reasons why Clause 27 is fundamentally wrong and flawed is that, contrary to the Government’s own statements and assurances, it is coercive in that it in effect requires individuals to accept jobs without fundamental employment rights. The coercion involved in these shares-for-rights jobs comes in two ways. First, individuals will in some cases have no option but to accept such jobs. We will come to that issue in respect of benefits claimants in the next group of amendments.
Secondly, these shares-for-rights jobs are in all cases potentially exploitative, because there is no requirement for independent advice before an individual signs up. It is therefore likely that individuals, particularly the more vulnerable and low paid, will not be properly aware, or even aware at all as they will not be as informed as the noble Lord, Lord Flight, of the rights they are forgoing in return for shares worth as little as £2,000 at the time they are issued. As the noble Baroness, Lady Brinton, said, these shares could be worth even less or nothing at all if the employees want to sell them at a later stage.
A whole succession of noble Lords, starting with the noble Lord, Lord Pannick, have made a compelling case for there to be protections, including independent advice before shares-for-rights contracts are entered into. The amendment in my name and that of the noble Lord, Lord Pannick, proposes that there should be legal advice on the rights forgone and financial advice on the valuation and prospects of the shares it is proposed to offer in lieu of employment rights. Without such advice, the scope for exploitation is considerable. Such advice should be paid for by the employer, and there should be an explicit agreement between employer—
Lord James of Blackheath
Will the noble Lord draw a distinction between the legal advice to be given in the potential sale of a listed company, where the majority shareholders have a separate set of interests and the minority shareholders—the working shareholders possibly have a very different set of interests? Are we to have two separate and parallel sets of lawyers to avoid a conflict of interest between those types of shareholders? That would seem necessary. How is it to be funded?
Lord Adonis
My Lords, we are talking about individual employees who are seeking to take jobs, which is a different situation from the one that the noble Lord has described. We are not talking about the takeover of companies, which is the issue he raised. However, the noble Lord is right to point out that two different sets of interests are involved. As the noble Lord, Lord Pannick, said, we have these rights purely because of an imbalance of power in the relationship between employers and potential employees. If the noble Lord is saying that we need two lots of lawyers on the job, I understand the point he is making but it makes the proposal even less workable and even more unaffordable.
Lord James of Blackheath
The noble Lord is correct; that is what I am saying—you need two sets of lawyers in any case.
Lord Adonis
The noble Lord therefore proposes a system that is even more complex and onerous than is envisaged. Such advice should be paid for by the employer, and there should be an explicit agreement between employer and employee stipulating the employment rights that are being foregone and the value of the shares being allotted.
When similar amendments were debated in the Commons, the Minister, Michael Fallon, said that they would impose,
“an unnecessary cost and burden to the employer”.—[Official Report, Commons, Growth and Infrastructure Bill Committee, 6/12/12; col. 484.]
However, this is not a new principle. As the noble Lord, Lord Pannick, said, it is, in fact, a principle accepted by previous Conservative Governments. The great noble Lord, Lord Tebbit, was Secretary of State when this principle was enshrined in law. Under the legislation of the previous Conservative Government, there are minimum independent legal advice requirements on the surrender of unfair dismissal rights in what are now called compromise agreements—a key element of which is a written agreement upon which the employee has received advice from an insured independent legal adviser or other specified and qualified person.
The noble Lord, Lord Pannick, also quoted the advice and recommendations of the Equality and Human Rights Commission, which could not be clearer. Let me read the recommendations to the Committee. They state that,
“the mere fact of a choice having to be made on which type of employment status to accept could indirectly discriminate against those less likely to be able to make a properly informed or truly ‘voluntary’ decision. This may include those whose first language is not English, those with learning disabilities, or young workers”.
The commission’s recommendations continue:
“In order for objective justification to be established, it is likely to be necessary for the individual to have a right to receive appropriate advice and for the employer to be required to draw this to his or her attention”.
We agree entirely with the Equality and Human Rights Commission’s recommendation. It is now up to the noble Viscount to say why it is wrong.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
Noble Lords will not be surprised to know that I was expecting a somewhat lively debate on this general issue of shares for rights. I very much appreciate noble Lords’ contributions. Before I turn to the amendments in the group—Amendments 81D, 82A, 82B, 91 and 92—I should take this opportunity to inform the House about the clause. I will have the chance to expand on this during a stand-part debate, but the House might like to understand why the Government are creating the new employment status and what it is aimed to achieve.
The Government are creating a new form of employment contract that companies limited by shares can use. This new status will be known as “employee shareholder”. The employee shareholder will be granted shares in the employing company or the parent company but will not have all the rights of an individual with employee status. The Government are taking this action to offer companies and people more choice, and are giving choice to companies on how they structure their workforce to ensure maximum growth and flexibility, more choice for people in the type of jobs that are on offer to them and new opportunities to benefit from growth and meet their long-term aspirations.
This Government, from the outset, have committed to reforming employment laws, and are doing so through the employment law review. Establishing the employee shareholder status is different. With this change, the Government are creating a new type of employment relationship. It is an employment relationship where both the company and person share the risk and rewards for business more than any other employment type.
I now want to address the amendments tabled by my noble friend Lady Brinton and the noble Lords, Lord Adonis and Lord Pannick. This clause is not about making a new employment status compulsory for all. It is about adding to the employment statuses that already exist. It sits alongside existing employment statuses such as employee and worker.
Employment law does not stipulate that individuals should have legal or financial advice before accepting a job with the employment status of either employee or worker, or taking up share ownership possibilities. It would be anomalous to impose these requirements for the new employee shareholder status. Neither do we want to stipulate that employers must pay for legal advice. Noble Lords will appreciate that legal expenses can be high, which would be a burden both in administrative and cost terms, in particular for the type of fast-growing company to which this is most likely to appeal.
There is nothing in the clause that prevents individuals from seeking independent advice. This is about creating a new voluntary employment status and not about creating additional burdens for employers.
As for employment contracts, it is important to leave these to employers and individuals to negotiate, discuss, and agree to, although employees are entitled to receive a written statement of employment particulars within two months of the start of their employment. Government are committed to reducing burdens arising from regulation and therefore wish to keep administration requirements to a minimum.
The status, as we have already said, will be most attractive to fast-growing businesses, which will spend time looking for and investing in the right people to help their business grow, and will be willing to give fully paid up shares to the right candidate. These employers will have to invest in employee shareholders by giving them shares, which is a cost to them. It is likely that they are exactly the type of employers who would then struggle to find the additional cost and time to fulfil the amendments my noble friends and the noble Lords are suggesting.
Lord Flight
Just before my noble friend passes over this matter, I would like to raise one issue that is not clear to me. When the grant of shares is given, is the value of them treated as taxable income? If so, I certainly think that it should not be part of the deal as something that is tax attractive.
Viscount Younger of Leckie
I thank my noble friend for that question. The shares are treated as taxable income, although they are shares, so there would be tax at whatever level payable on the shares received.
I should now like to answer some questions that have arisen. The noble Lord, Lord Pannick, stated that there was no demand for this new status. I can understand his concern from other comments made this afternoon. This new employment status will not be appropriate for all companies or be taken up across the board. It simply adds to the options and flexibility available to companies and individuals in determining their employment relationships.
My noble friend Lord Flight has eloquently mentioned this particular issue in his speech. The new status will probably appeal mainly to fast-growing and small start-up companies and individuals as this is the level where employment rights are seen to impact the most.
I would like to address directly the points raised by my noble friend Lady Brinton to say clearly that this particular employment shareholder status will not suit the examples that she cited in or near the Cambridge area. My noble friend Lord Strasburger also cited some example and I suspect it would not suit—
Baroness Brinton
Does my noble friend accept that this is exactly the group of companies that Ministers in another place were citing were perfect for exactly this sort of scheme?
Viscount Younger of Leckie
Indeed, it may well be the case, but it is not my position to stipulate exactly which particular companies would be right for this particular scheme; only to say that we are offering this as an incentive and an opportunity for business to help the company grow. If it is not suitable for particular companies, that is absolutely fine—it is not suitable.
My noble friend Lady Brinton also asked why we were removing the statutory right to request time to train. The Government recognise that training in the workplace is important and acknowledge the concerns raised. There is currently no reason to suggest that removal of the statutory right to request time to train, which at present is available only to employees of large organisations—that is, those with more than 250 people—would result in employee shareholders being unable to access training or request it if needed. Larger employers tend to have established appraisal and development processes. On that basis, we do not believe that this proposal will adversely affect future employee shareholders. Employee shareholders can still make non-statutory requests for time off to train.
Lord Adonis
Did I understand the Minister to say in response to the noble Lord, Lord Flight, that these shares, including the first £2,000-worth, would be taxable? That is quite an important change in the policy announced in the other place.
Viscount Younger of Leckie
Yes, indeed, I can confirm that the shares that are received are taxable, so tax would be payable in the first available pay—
Viscount Younger of Leckie
Yes, it would be in the month following receipt of the shares.
Lord Adonis
Is the noble Viscount aware that he has made quite a significant change in government policy in the past few moments?
Viscount Younger of Leckie
I shall come back to the noble Lord very quickly if what I have said is incorrect, but I am pretty certain that it is correct.
Baroness Brinton
My Lords, I apologise for intervening again but this point is absolutely critical to the Government’s intended success of the clause, or otherwise—that is, a carrot needs to be available to the employee at the time of the share issue, as well as later when there might be some fruition in terms of the investment. This seems to remove the only carrot at the time of the initial employment.
Viscount Younger of Leckie
As promised, I will revert to the noble Lord, Lord Adonis, as quickly as possible to confirm what I said.
Lord James of Blackheath
Will the noble Viscount please also assure the Committee that there will be an absolute bar on companies lending individuals the money to pay that tax? They will be in enough trouble already.
Viscount Younger of Leckie
I would like to think that I could say yes to that. However, it is up to the company to decide, and it is something that I cannot stipulate or guarantee.
I should like to address the question raised by the noble Lord, Lord Adonis. I can confirm that the shares are taxable, but the Chancellor is considering making the first £2,000 tax-free.
Lord Adonis
My Lords, with great respect to the noble Viscount, he is trying to say that the shares are and are not taxable. Which is it? Is the first £2,000-worth of shares taxable or not?
Viscount Younger of Leckie
I think that I have made the position very clear. The Chancellor is looking at this but I have said that it is taxable.
Lord Stoddart of Swindon
I have to say that the noble Viscount has not made the position clear to me. It may well be that everybody else is clear about it but, as I understand it, he is saying that the £2,000 will be taxable, and he appears to be saying that it will be taxable as income. If that is so, the value of the shares in real terms could very well be reduced by 40%. Is that right?
Viscount Younger of Leckie
First, it depends on whether the employee shareholders are 40% taxpayers, but I can confirm that tax is payable on the shares that are given.
My noble friend Lady Brinton expressed concern surrounding the share dilution, particularly when small businesses have additional investment. Additional investment shows that a company has potential and this should benefit the shareholders in the long run. We envisage that it will. Minority shareholders already have some protection under company law, and employee shareholders would be able to make appropriate representations under these rules.
I now turn to a question raised by the noble Baroness, Lady Turner, concerning TUPE. She asked whether TUPE will be affected by employee shareholders. Exactly how TUPE would apply would depend on the precise details of the transfer, but there is nothing in the employee shareholder clause as it stands that would require an interpretation incompatible with TUPE. It is important to realise that any employee transferred under TUPE cannot be forced by the transferee into becoming an employee shareholder. The employee will still have a right not to be unfairly dismissed or suffer a detriment as a result of refusing an employee shareholder contract. There is nothing to stop business arrangements being made in such a way as to provide that a person who is an employee shareholder in one company becomes an employee shareholder in another company. It is also possible to agree that the employee shareholder would no longer have employee shareholder status and become a full employee. I also want to clarify that if an employee has bought shares privately in a company, and he has transferred to that company under TUPE, he is not deemed then to have become an employee shareholder of the company by virtue of holding shares in that company. That is because the shares were not given to him as part of the employee agreement to become an employee shareholder.
The noble Baroness, Lady Turner, also raised the issue of Beecroft. I think she said that this was Beecroft by the back door. I reiterate that it is certainly not. The new employee shareholder status is different from the no-fault dismissal proposal because individuals become shareholders of the company at the start of the employee relationship. That is an important benefit conferred by the employee shareholder status. Unlike no-fault dismissal, the employee shareholder status will be freely agreed between employers and individuals in contractual negotiations. Employers will also be free to offer improved contractual terms, such as contractual redundancy payments, as raised earlier, in an employee shareholder contract. After reviewing the evidence, the Government found no compelling reasons to implement the no-fault dismissal proposal.
My noble friend Lord James of Blackheath was concerned that shareholders might be locked in and subsequently would have to pay the debts of the company. The shares must be fully paid up by the company. No financial liabilities are attached to the shares. No personal guarantee can be demanded from an employee shareholder as a condition of the particular status.
Lord James of Blackheath
Can the noble Viscount please explain what would happen in the event of a rescue rights issue?
Viscount Younger of Leckie
I will certainly have to come back to my noble friend with a full answer to that question.
I shall conclude by agreeing in part with the noble Lord, Lord Pannick, on a particular point. There is indeed a large number of sources of quality legal and financial advice available. The Government do not need to stipulate where people should seek advice, nor would it be appropriate to oblige people to seek such advice when they may not need or want it. The best approach is to provide guidance, which we will do, to ensure that people enter into contracts with their eyes open. That is the approach that we are taking. With those reassurances I hope that the noble Lord will withdraw his amendment.
Lord Pannick
I am very grateful to the Minister and, indeed, to all noble Lords who contributed to this valuable and, as described by the Minister, lively debate. It confirmed, as many noble Lords suggested, that this is an ill thought out, divisive and unnecessary provision that ought to be put to sleep as soon as possible.
The Minister suggested that Clause 27 simply creates a choice, and asked what was wrong with creating choice? The whole point of employment rights is that they are needed because the bargaining power of the employee is so limited that statutory protection is required. The noble Lord, Lord Flight, suggested that these proposals might be appropriate for some types of employee in some types of employment. There are two difficulties with that defence. First, Clause 27 is entirely general in its terms; it is not confined to particular types of employment and particular types of protection. Secondly, the employees and the employers for whom the noble Lord, Lord Flight, suggests Clause 27 might be appropriate—entrepreneurial employees in high-tech companies—are not operating in a context where the rights to protection against unfair dismissal and redundancy are of particular significance. It does not inspire a great deal of confidence in Clause 27 that the best point that can be made in its defence is that it will not be used very often.
This amendment is about legal and financial advice, particularly legal advice. The noble Lord, Lord Flight, said that legal advice is not needed in this context because the legal implications are very clear. I have to say that they may be clear to the noble Lord, but I can assure him that the implications of signing away one’s basic employment law rights, and what one will receive in return, will not be clear to the ordinary working man and woman who may be invited to sign away these essential protections.
The Minister then said that there was nothing in Clause 27 that would prevent the employee seeking advice. As a judge said in the 19th century, it is rather like saying there is nothing to prevent the employee from staying overnight at the Ritz hotel. Statutory protection is required to ensure that in reality, advice is made available for those who will not otherwise obtain it. The Minister did not address this. I cannot understand why legal advice is—rightly—required by Section 288 of the Trade Union Act in the context of a compromise agreement, but is not required under this clause when the employee gives up his or her employment rights generally.
I hope the Government will listen to the noble Baronesses, Lady Brinton, Lady Turner of Camden and Lady Afshar, and to the noble Lords, Lord Vincent, Lord Martin, Lord Strasburger, Lord Morris of Handsworth and Lord James of Blackheath, all of whom speak from their different perspectives with an enormous range of experience. The Minister and noble Lords will know that there are many other noble Lords who are not here today who are equally concerned by Clause 27. I hope that the Government will listen and do what must be blindingly obvious that they ought to do, which is to withdraw Clause 27 so that we do not need to spend—I will not say “waste”, because it is not a waste of time—any more time on this on Report. In the mean time, I beg leave to withdraw the amendment.
Lord Adonis
“( ) Any individual who declines to enter into an agreement under section 27 of the Growth and Infrastructure Act 2013 shall not suffer any consequential reduction or withdrawal of any state benefits to which they are entitled to by virtue of their current employment status.”
Lord Adonis
My Lords, the purpose of Amendment 82 is the same as that of the amendment in the name of the noble Lord, Lord Tope, and the noble Baroness, Lady Brinton. I hope that we can unite across the House on the simple and fundamental proposition that shares-for-rights contracts should be voluntary, and that individuals on benefits should not be forced to accept them for fear of losing their benefits if they do not.
Before getting to the substance of the amendment, I will raise with deep concern a point of procedure fundamental to the issue of what benefit claimants will or will not be required to do, which is the guidance given to DWP decision-makers where appeals are made against the docking of benefits in cases where a claimant has failed to accept an appropriate job or attend an interview. The Government have said repeatedly through the passage of this Bill through the other place and the earlier stages of our debates in this House that they will amend the guidance so that it is fair. This revised guidance is vital to understanding what will or may happen in practice. I have repeatedly asked that noble Lords see the revised guidance or at the very least a draft of it before we consider this clause. We cannot properly consider it without the revised guidance because the issues at stake are so fundamental. For example, will carers be able to decline to take shares-for-rights jobs, or to attend interviews for them, because they may want to request flexible working? Will a youngster with few or no qualifications be able to decline a shares-for-rights job or an interview for one, since under these contracts they will not even have the right to request to undertake study or training?
I wrote to the noble Baroness, Lady Hanham, about the guidance on 9 January. By the time the Committee started I had not even had the courtesy of a reply. I raised this issue on the first day in Committee and the noble Baroness apologised for the absence of a reply—she did so very graciously—and, when I asked whether we would have the guidance by today, she said that she would seek to make sure that we did. We still have not got it. Instead, I have since had a letter from the noble Viscount which is wholly unsatisfactory. He wrote:
“Where necessary, revisions will be made to the guidance. It is important that the guidance is clear and fit for purpose—
it is, indeed, important; it is absolutely vital that it is clear and fit for purpose—
“and this task is ongoing. I will share it with the House when it has been drafted but undertake to keep you informed of progress”.
However, we need the guidance today. I took the noble Baroness to be undertaking that she would at least seek to ensure that we had it today. In view of the fact that we have not had it, I now take the noble Viscount’s letter to me to be intended to resile from the commitment to give us the guidance before we debate this clause.
When are we going to see the guidance? Do the Government really intend that we should debate this clause without seeing it? The noble Viscount owes the House an explanation of what is going on and, before I proceed with my speech, I invite him to give us one so that we know the basis on which we are intended to proceed in debating this clause. Is the noble Viscount not intending to explain to us why we have not had the DWP guidance?
Viscount Younger of Leckie
I will be speaking at the usual moment. I would like to hear the speeches of other noble Lords first.
Lord Adonis
My Lords, I note that the noble Viscount is not even defending the fact that the guidance was not sent to us before this debate started. The first issue he needs to address is why we have not had the guidance before us in Committee even though we were given assurances that the Government would seek to get it to us; and we need to know precisely when the guidance will be forthcoming. I give him notice that if we do not have that guidance by Report there will be significant arguments about the way in which the Government have treated the House. I have been on that side of the Dispatch Box and I regard it as wholly unsatisfactory that we should be expected to debate a fundamental change in the way benefits claimants are treated without knowing what it will mean in practice.
Viscount Younger of Leckie
The noble Lord makes a very good point. I stick by the words in my letter that further guidance will be forthcoming. We have some guidance already but we are working hard to improve and expand it. I will come back to the noble Lord as soon as I can to explain when it will be available.
Lord Adonis
My Lords, I am grateful to the noble Viscount, but can he tell us whether that will be before Report, when we will debate and, I suspect, vote on the substance of the matter before us?
Viscount Younger of Leckie
I will obviously need to return to the noble Lord with a clear answer on that. Right now I cannot give him that answer, much as I would like to.
Lord Adonis
My Lords, the House needs to be aware of the situation that we are in at the moment. The defence that the Government make in respect of the proposal that benefits claimants will not be treated unfairly is that the DWP guidance will be redrafted. That is what the Minister, Michael Fallon, said in the other place and what the noble Baroness, Lady Hanham, said at earlier stages of our debate. We are now being told that the Government are not even prepared to undertake to allow your Lordships to see that guidance before we debate amendments which go to the heart of whether or not claimants will be required to take jobs.
Viscount Younger of Leckie
To be fair, I did not precisely say that. I said that I would get back to the noble Lord as soon as possible: I did not say that I would not get the guidance to him before Report. I stick by what I said, both in my letter emphasising that the guidance notes are extremely important and are being worked on at the moment, and, secondly, that I will come back to him as soon as possible—possibly even this afternoon—to give him a time for when the guidance notes will be available. I hope that it will be before Report.
Lord Adonis
My Lords, with each intervention the noble Viscount is more forthcoming. Now it is possibly later this afternoon. I know the Box is working hard and I hope that “possibly” later this afternoon becomes “definitely” later this afternoon.
Viscount Younger of Leckie
That is not a guarantee. I am saying that I am hopeful that the information will be available this afternoon.
Lord Adonis
My Lords, I spoke too soon. The noble Viscount has now moved back again and now we are not even at “possibly” this afternoon. However, I think he has got the message.
The provision before us is completely contradictory and wholly indefensible. On the one hand the Government say—the noble Viscount said it again this afternoon—that this is about creating a new voluntary employment status which, therefore, potential employees have the right to choose. When the Bill was first before the House of Commons, Michael Fallon said:
“No one wants to see employees pressurised into making a choice that may not be in their own best interests”.—[Official Report, Commons, Growth and Infrastructure Bill Committee, 13/11/12; col. 9.]
He later added, for good measure:
“With regard to the new status being voluntary … people will choose to apply for and accept employee owner contracts”.—[Official Report, Commons, Growth and Infrastructure Bill Committee, 6/12/12; col. 497.]
This principle, however, is then flatly contradicted by not allowing benefit claimants to make such a choice. On the contrary, if benefit claimants decline to apply for or accept shares-for-rights jobs, they stand to lose their benefits or have them docked. This is a fundamental point that goes to the heart of this debate. Michael Fallon was explicit about this in the House of Commons. He said:
“The Government believe that jobseeker’s allowance claimants must actively seek and be available for work … it is right that employee-shareholder jobs should be as much a part of that consideration as any other”.—[Official Report, Commons, 17.12.12; col. 649.]
He went on to say that in cases where there is the offer of a job without employment rights—an employee-shareholder job—the unemployed person should “normally accept the offer”. Those were his words.
It is simply impossible to square that statement with the Government’s commitment that acceptance of jobs on such contracts would be voluntary. It is clear that benefit claimants will be pressurised into accepting contracts that may be against their own best interests, unless the guidance with which the noble Viscount is unable to provide the House makes it clear that that is not the case. This amendment and that of the noble Baroness, Lady Brinton, will bring the Bill into line with the Government’s own statements that accepting shares-for-rights jobs should be voluntary and not compulsory. I beg to move.
Baroness Brinton
My Lords, these two amendments are trying to achieve the same objective. I commend the noble Lord, Lord Adonis, on the wording of Amendment 82. My Amendment 90 echoes those sentiments. We have already discussed, in the previous group, the complex decision required of an individual being asked to become an employee-shareholder, who must take account of current employment rights versus the slim chance of future capital gains. However, there is a further and even more worrying aspect for one particular group of individuals: those who are currently unemployed and in receipt of jobseeker’s allowance.
What will happen to those offered a position in a company on the condition that they become an employee-shareholder and give up some of their rights? I am aware of people who find themselves being made redundant, through no fault of their own, not once but twice, or even more frequently. I am reminded of a friend in Luton who, following the closure of Vauxhall, moved from one company to another in the supply chain and was made redundant four times in the short space of a year. For people with that sort of history, the idea of giving up the right to future redundancy pay will be horrifying and would make the job extremely unattractive. This is not a run-of-the-mill job offer and I would be extremely concerned if an individual turned down a job and share ownership opportunity, and then discovered that his or her JSA was to be cut.
The Minister in another place said:
“The Government believe that jobseeker’s allowance claimants must actively seek and be available for work … and it is right that employee-shareholder jobs should be as much a part of that consideration as any other. If a claimant applies for an employee-shareholder job and is offered a position, they should normally accept the offer”.—[Official Report, Commons, 17/12./12; col. 649.]
It is this quote from the Minister that underlies the concern that the noble Lord, Lord Adonis, has laid out in some detail. I echo that because we have to see the guidance and information to make it exactly clear where the boundaries lie. I will not go back through the timescale of this, but it is essential that all sides of the House—all sides of the House have concerns about this clause—have time to consider the very serious implications for jobseeker’s allowance for people who are sent off for that type of post.
In addition, some people may send off hundreds of job applications but receive only one reply; some may get one interview; some may even get one offer. A job offer for shares-for-rights is a job: do the Government seriously think that someone will turn it down after months of searching? Many people cannot pick and choose jobs, even if they are worried about the reduction in rights, especially in the current climate, with many businesses folding. I cite Paul Callaghan from the legal fund Taylor Wessing, who suggests that shares-for-rights contracts will be optional to the extent that eating and drinking are optional.
The amendment would write into the Bill a statement that makes it absolutely clear that the Department for Work and Pensions and Jobcentre Plus will not penalise an individual who makes the difficult choice to turn down a job. Should they accept it, they must have access to the same legal and financial opinion that we discussed under the previous group of amendments. That needs to be written into the Bill to ensure that protection and to provide Jobcentre Plus with clear and unequivocal direction.
Lord Pannick
My Lords, I share the concerns expressed by the noble Lord, Lord Adonis, and the noble Baroness, Lady Brinton, about the absence of the guidance that the Government are eventually to publish. The whole point of Committee on a Bill is that we can debate in detail the implications of the Government’s proposals. By not publishing the guidance at this stage, the Government are preventing the Committee discussing the essential detail of their proposals. For my part, I do not find it satisfactory, even if the noble Viscount produces answers this afternoon. It should have been done in time for noble Lords to debate the matter today.
In the absence of any guidance, we can proceed only on the basis that Clause 27 does not at all protect the prospective employee from being denied welfare benefits if he or she refuses to take up a job offer which involves the absence of employment rights. Even if there were adequate guidance, I share the view of the noble Baroness, Lady Brinton, that guidance is in principle inadequate. The Bill must state clearly the legal position in order to protect the prospective employee.
Clause 27 is bad enough in its implications for employees, as we explained in a previous debate. It is even worse for the prospective employee. Under Clause 27, the employer can refuse to offer employment to applicants who decline to enter into one of these agreements giving up statutory employment rights. The irony is that the worse the job market, the more willing prospective employees will inevitably be to take the job, even if employment rights are lost. However, the poorer the job market, the greater the employee’s need for the statutory protection against unfair dismissal and redundancy that the employee will be giving up. It is a vicious circle indeed.
Amendment 82 and the amendment of the noble Baroness, Lady Brinton, each address a particular vice of Clause 27 in that respect. The vice is clear. It is that the prospective employee who wishes to maintain his or her statutory employment rights—during the previous debate, the noble Viscount emphasised that this is a matter of choice—and refuses to be bought off, is at risk of losing welfare benefits. That is indefensible for a simple reason. Clause 27 can only be based on a theory of equal bargaining power. It is a wholly unrealistic theory, but that is the theory. That is the fig leaf which shelters the substance of Clause 27. Even the fig leaf—the theory of equal bargaining power—is removed by the fact that the prospective employee’s bargaining power is wholly removed if he or she is going to lose welfare benefits if he or she does not agree to take the job in the absence of the statutory protection of employment rights. Therefore, the absence of protection against losing welfare benefits for the job applicant inevitably means that, in practice, Clause 27 does not simply provide for a choice, it imposes an obligation.
Viscount Younger of Leckie
My Lords, Amendments 82 and 90 seek to add protections for jobseekers, should they refuse to apply for a job or accept a job offer that is on an employee shareholder contract. I understand the concerns that my noble friend Lady Brinton and the noble Lords, Lord Adonis and Lord Pannick, have expressed here and at Second Reading, that jobseekers could be coerced into accepting the new employment status and that jobseekers could lose their benefits.
Jobs that will be offered on an employee shareholder basis will not be better or worse than any other job offered on an employee or worker basis. These jobs are as good as any other and should not be treated differently. It follows that the Government do not believe that a blanket ban on mandation is the right way forward. The different terms and conditions on offer for different jobs do not in themselves make it acceptable for a jobseeker to turn a job down. They are still good jobs.
There are circumstances where a job offered under the employee shareholder scheme would not be suitable for an individual because of their particular circumstances or perhaps because of the particular terms and conditions on offer. Please note that the following is a non-exhaustive list, as all reasons cannot be captured and are dependent on the individual case, but I will list a few circumstances where a job might not be suitable for an individual: if a claimant is not capable of doing the job through a lack of suitable qualifications or experience; if a claimant is not physically capable of doing the job due to a physical or mental impairment; if a claimant has an agreed pattern of caring that is not compatible with the job; if a claimant is unable to get to the place of work by their normal mode of transport in time to start work; or if the expenses incurred by working would be an unreasonably excessive proportion of a claimant’s pay. I believe that the noble Lord, Lord Adonis, brought up the issue of carers. If a claimant is a carer or is doing voluntary work they will have good reason for refusal or failure if the job requires them to start within less than one week. If a claimant has caring responsibilities for a child and is permitted to take up employment and been given 28 days’ notice, they will have good reason for refusal or failure if the job requires them to start within 28 days. I could go on.
The Government believe that there are already strong safeguards in place that ensure that a benefit claimant will not be forced into an unsuitable role. The sanction will only be applied if a claimant refuses to apply for or accept an offer of employment, including for an employee shareholder’s position, after that claimant has been mandated to apply for a job by a jobcentre adviser. The decision whether to mandate claimants will be considered on a case-by-case basis by jobcentre advisers. Advisers will seek to ensure that the job is suitable for the claimant; for example, that it fits within the hours a claimant is available, taking into account any caring responsibilities, as mentioned earlier, in particular for young children.
There is now guidance for advisers that is publicly available—and I will revert to this issue in a moment. We will supplement that guidance to cover any particular issues that may arise with employee shareholder jobs. I am able to update the Committee on the guidance. First, the guidance document is 3,000 pages long, so it is not a light piece of work. The noble Lord, Lord Adonis, is aware that I have already written to him on the issue of the guidance and he has cited parts of my letter. The guidance is for decision-makers and we have made it clear that the Government are reviewing the existing guidance to ascertain where it needs revisions. This must be done thoroughly and cannot be rushed, and I hope that the noble Lord will understand, despite the fact that it is not ready today, that this will take time, given the size of the document and the important decisions that need to be taken.
Baroness Brinton
Does the Minister accept that even if the Government say that it is likely that very few companies will be offering this type of employee share ownership, having a couple of points of guidance buried in 3,000 pages, or even 300, would mean that the average member of staff at a Jobcentre Plus would probably be unlikely to find the relevant information straight away? Does this not argue for the need to put this very special interest in the Bill?
Viscount Younger of Leckie
I would like to pick up only one of the points made by my noble friend. It is important, and I am sure that the officials are working hard on this, to ensure that the guidance that is offered is simple, and that there is a way that those involved who need to go to the guidance can do so quickly and effectively, despite the fact that it is 3,000 pages long.
Lord Pannick
Does the Minister agree that the simplest way for the guidance to address the matter would be for it to state in one sentence that it was reasonable for the prospective employee to refuse to accept a job because he or she did not wish to give up statutory employment protection rights? Is that what the guidance is going to say or is it not?
Viscount Younger of Leckie
I have not seen the guidance but I do not believe that it will say that.
There are two further safeguards for jobseeker allowance claimants. Should a claimant refuse to apply for a job after mandation, a sanction will be imposed only if the claimant does not have good reason. A decision-maker within DWP will be responsible for making that determination. In reaching a determination, they will take into account the claimant’s circumstances, the specific job and the terms and conditions on offer. Again, the Government will supplement the DWP decision-makers’ guidance around any particular issues with the employee shareholder scheme that need to be considered.
Lord Adonis
Several times the Minister has said that the guidance would be updated with regard to any particular issues that arise from employee shareholder contracts. The particular issue that arises is precisely the issue raised by the noble Lord, Lord Pannick, which is that these rights are being withdrawn. If that is not the issue that arises, could the Minister tell the Committee what the issue is that arises which the Government are going to seek to address in the revised guidance?
Viscount Younger of Leckie
As I explained earlier, I am not in a position to give the Committee that information just at the moment. The issues will be outlined when the guidance is available. That is the only answer that I can give at this stage.
Lord Adonis
My Lords, the Minister has come to the Committee to tell us that he cannot begin to tell us the basis on which the guidance is going to be revised, which is his own defence in response to the arguments that the guidance itself will not be reasonable in the circumstances.
Viscount Younger of Leckie
I can only reply to the noble Lord that I am not in a position to explain the guidance because I have not seen it because it is being revised. That is the only answer that I can give at the moment.
Lord Pannick
I am grateful to the Minister for his patience in giving way. Will he deal with this point? If the guidance does not make it clear that the prospective employee is entitled to refuse a job offer because that offer involves sacrificing employment protection rights, the prospective employee does not have a choice. The defence that the Minister has put forward to Clause 27 is therefore simply inapplicable.
Viscount Younger of Leckie
On that particular point, it is important again to emphasise that each case involving an employee shareholder or a would-be employee shareholder will be looked at on a case-by-case basis. I hope that I have set out the process by which that will be undertaken by the jobcentre in negotiation and discussion with the potential employee shareholder. That is where we are at the moment. However, the guidance—which, I repeat, is coming—will go much further towards setting out the details and indeed the guidance for that process to work.
The Government do not believe that the right way of providing the protection sought by the noble Baroness, Lady Brinton, and the noble Lords, Lord Adonis and Lord Pannick, is through amending this clause. As I mentioned earlier, the jobseeker’s allowance system works on a case-by-case basis, with all decisions made on the merit of the case. The system is sufficiently flexible and robust, and jobseeker allowance decision-makers, with the support and guidance which we have committed to providing, will be able to understand the new employment status. With these reassurances, I hope that the noble Baroness, Lady Brinton, and the noble Lords, Lord Adonis and Lord Pannick, will not press their amendments.
Baroness Warnock
I wish to raise one question. How can a case-by-case examination of a claimant’s refusal determine whether or not it is reasonable for an employee to be asked to give up his employment rights? This is nothing to do with a case-by-case basis, but an absolutely universal principle that would apply to everybody. If a would-be employee decides that he does not want to give up his rights, this is nothing to do with his particular case, but a general principle. Can the noble Viscount respond?
Viscount Younger of Leckie
I can only re-emphasise that when a case is taken on a case-by-case basis, this means that, if an individual is seeking a job and an employee shareholder position comes up, the Jobcentre Plus and the officials within the system will be looking at the individual’s case. It is their job to determine the way forward in relation to the employee shareholder position that has arisen.
Lord Adonis
My Lords, the noble Viscount ended by saying that he hoped that I would withdraw the amendment in light of the reassurances that he had given. With great respect to the noble Viscount, he gave no reassurances whatever. Though I am not intending to press the matter today, the Committee will have to draw its own conclusions from the total absence of reassurance which the Government have provided so far. Not only have they not provided any reassurance, but they have not even given the Committee the basic information that we need to be able to make a judgment as to whether there is any validity in the statements that the Government have made to the effect that issues relating to the new employee shareholder status will be taken account of by DWP decision-makers.
The noble Viscount has a disarming manner, and we commiserate with him for having to defend this proposal to the Committee—I would not wish to have to do so myself. However, when he says that we need to be sympathetic to the Government’s position because this guidance is 3,000 pages long, I feel bound to point out that it is the Government who are seeking to change the law; it is not Members of your Lordships’ House who are seeking to do so. The fact that the guidance is 3,000 pages long is not a defence for the Government not having prepared for changes which they are proposing to inflict on the country and declaring them to Parliament before we change the law. They say that changing 3,000 pages of guidance is a laborious job. I am sure that it is: I spent a good part of this morning trying to read the guidance and to make sense of it. Goodness, even legal eminences of the height of the noble Lord, Lord Pannick, would struggle with the complexity of the guidance which the DWP issues. If the Government are saying that they need more time, your Lordships would be very happy to give it to them if they wish to withdraw Clause 27 from the Bill and then bring it back when they have got their guidance in order so that we can then look at it with the clause to which it refers. There would be a generally warm reception to such a proposal from the noble Viscount.
Viscount Younger of Leckie
I just want to re-emphasise what I was trying to say about the document being 3,000 words long. I wanted to reiterate that this is no small task. One may well say, “You should’ve done it before Committee stage today and certainly before Report”, but as the noble Lord knows, I cannot at the moment give a guarantee that it will be ready by Report. I simply wanted to state that this is a major document, a lot of detailed work is going on, and it will come.
Baroness Brinton
My Lords, I apologise for intervening on an intervention, but I just wanted clarification on this. The noble Viscount just said that the document was 3,000 words long, but I understood that we had been told earlier that it was 3,000 pages. There is some difference.
Viscount Younger of Leckie
I stand corrected—it is indeed 3,000 pages long.
Lord Adonis
My Lords, I repeat: it is the Government’s responsibility to prepare the changes to the law and the guidance that they wish to make and to present them to the House before we change the law. The fundamental point is the one that the noble Lord, Lord Pannick, made—the difference in respect of these contracts is that employment rights are being withdrawn. The fundamental question, on which we need to see the guidance, is whether the withdrawal of these rights is itself a reason why unemployed people are permitted to decline to attend interviews or accept jobs. If it is not a reason then nothing has changed. This clause therefore flatly contradicts the assurances that have been given to Parliament that the new employee shareholder status is voluntary. I think that that is a very significant point which your Lordships will wish to take into account when we get to Report. I beg leave to withdraw the amendment.
Lord Adonis
Lord Adonis
My Lords, I shall speak very briefly at the beginning of this debate because I want to comment on the noble Viscount’s contribution. In the amendments in my name in the group, I simply specify all the rights that it is proposed should be withdrawn through the new employee shareholder status so that the Government will have an opportunity to defend their decision to withdraw them in each case and to provide a longer notice period for early return from maternity and adoption leave. As the noble Viscount knows, we are opposed to each of the withdrawals of rights in Clause 27. The Government have not had the opportunity before your Lordships to explain their justification for the withdrawal of each of these rights. By putting these amendments down, I am giving the Government the opportunity to do so. I beg to move.
Lord Strasburger
My Lords, when I spoke to the first group of amendments I declared my interests as an entrepreneur. I forgot also to declare that in a former life I used to play cricket with Mr Adrian Beecroft, who is a very charming man and a very fine opening bat and cover fielder. However, to my knowledge he has no personal experience of starting or running a business. It strikes me that the authors of this clause have about the same amount of experience as Mr Beecroft in that area but are probably not as good batsmen.
I have two specific questions to address to the Minister. First, which of the rights that this clause requires employees to forfeit is going to enhance their business’s chances of success? Secondly, which of those forfeited rights do the Government think will improve the motivation and commitment of these second-class employees?
Lord Deben
First, I apologise for the fact that I have been abroad and therefore not able to follow that part of the Bill that has gone through since I last spent time on it.
On these amendments, I also declare an interest as the founder of a successful small business and as having worked in other successful small businesses. I have to say to my noble friend that I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life. One of the problems with government is that not many people who run businesses are in it. I can genuinely say that in 16 years as a Minister, I was one of the few people who had run a big business. Since ceasing to be a Minister, I have run a number of small businesses which are happily getting larger. That is the right way round.
I hope that the Government will take this opportunity to explain in detail why these changes, which are now open to businesses, will be of help. I have not found any businesses that thought that they would be of help. Having explained that, perhaps my noble friend would be kind enough to explain why, if the changes are good in these circumstances, they are not done for everybody. If there really is a huge advantage that would make lots more new jobs, perhaps the proposal is rather limited. I do not think the Government think that, otherwise they would not have limited it in this way.
Lord Deben
The noble Baroness, Lady Turner, speaks from her seat, but she has put forward some opinions that I have not heard since 1945. I am not on that side but I still do not see this. I hope that the Government will help those of us who are naturally on their side to get out of this miasma—this difficulty of understanding the connection of the two halves. I have great sympathy with the question asked earlier by the noble Baroness, Lady Warnock. What is the connection and how will it improve things, one by one? I am very ready to be converted but at the moment I am finding it rather difficult.
Lord Pannick
The noble Lord, Lord Deben, posed a series of questions about the benefits of Clause 27. Perhaps I may add to the burdens on the Minister, who is playing a very straight bat—he would be a credit to the cricket team of the noble Lord, Lord Strasburger. I will put these questions to the Minister in the hope that he can explain whether the Government have taken account of two very troubling legal consequences that will follow from the current contents of Clause 27 and which are relevant to the amendments in my name and that of the noble Lord, Lord Adonis.
First, some of the rights that the employee or prospective employee is being invited to sell are concerned with issues that are particularly sensitive in anti-discrimination law. There is the right to request flexible working, which is obviously of particular importance to working mothers—as is the eight-week notice period that would be imposed for the return to work after maternity leave. These are very sensitive matters. It is inevitable that employers who seek to rely on an agreement which purports to override rights in this context will face legal challenges under EU law, the expense of which will far exceed the amounts that they would pay to employees for giving up those rights. Have the Government taken that into account in deciding on the merits or otherwise of Clause 27?
I would be grateful if the Minister would comment also on a second legal implication. If the law allows for the sale of unfair dismissal and redundancy rights, it is inevitable that aggrieved employees, when they are dismissed or made redundant at some stage in future, will not go quietly. Having sold their unfair dismissal and redundancy rights, they will formulate their grievances by reference to whatever legal avenue has not been sold. Nothing in Clause 27 affects—and because of EU law nothing in Clause 27 could affect—their rights of protection under anti-discrimination law. So instead of claiming unfair dismissal, or seeking compensation for redundancy, the aggrieved employee will contend that the dismissal or redundancy was based on a prohibited ground. Therefore, my second question to the Minister is whether the Government have really taken into account that any employer that enters into one of these agreements—and it seems highly unlikely that there will be many of them—will not be protecting themselves against the litigation that will result when an employee is dismissed or made redundant in future.
Baroness Brinton
Clause 27 requires employees to give up a range of rights. Many of these rights are ones that the Beecroft report recommended should be removed from employees more generally. The Secretary of State, Vince Cable, hit out at Beecroft’s unfair proposals. He said:
“One of Mr Beecroft’s recommendations was a suggestion to bring in no-fault dismissal. In my daily conversations with businesses, this has very rarely been raised with me as a barrier to growth. Businesses are much more concerned about access to finance or weak demand than they are about this issue”.
Given that the clause is in the Growth and Infrastructure Bill and that the Secretary of State does not believe that giving up the right to claim unfair dismissal is a barrier to growth, why should we ask workers to give it up under this new status? In fact, Mr Cable went even further and stated that it would be counterproductive. He said:
“At a time when workers are proving to be flexible in difficult economic conditions it would almost certainly be counterproductive to increase fear of dismissal”.
I never thought that I would support Mr Beecroft, but he recommended a compensated no-fault dismissal. The Government are going one step further and do not even provide compensation for no-fault dismissal under the employee shareholder status. Given how controversial Mr Beecroft’s proposals were in the first place, and the Secretary of State’s protest, does this not give us further reason for the removal of subsections (2)(c) and (d)? Beecroft also recommended the removal of the right to request flexible working—another of his recommendations that the Government are trying, perhaps, to sneak in by the back door through this status for certain employees. However, I have to say that this directly contradicts the coalition agreement and the mid-term review, which states that the Government will extend,
“the right to flexible working to all employees”.
How can the Government fulfil that pledge when they will be removing the right from employee shareholders?
Viscount Younger of Leckie
My Lords, Clause 27 is about providing further choice to the range of employment statuses that employers can consider and choose. I want to take this opportunity to explain to the House the difference between “employee shareholder”, “employee” and “worker”. This will help us understand the context of the noble Lords’ amendments.
People and companies already have a choice in how they wish to work and how they structure their workforce. The choice is usually between hiring someone as a worker, an employee or on a self-employed basis. The difference between these employment statuses is the level of obligation and mutuality to provide and carry out work, and the rights associated with the statuses. I hope that the following explanation goes a little way to answering some questions that my noble friend Lord Deben raised.
Workers have limited rights such as the right to be paid the national minimum wage, protections against unlawful deductions from their pay, paid annual leave and rest breaks, and protection against discrimination, which includes on the ground that they work part time. Employees who meet the relevant conditions have the following additional rights: a general right not to be unfairly dismissed after two years working with the same employer; automatically unfair dismissal rights; statutory redundancy pay; statutory minimum notice period; statutory collective redundancy notice period; TUPE, which was mentioned earlier by the noble Baroness, Lady Turner; the statutory right to request flexible working; and, finally, if they work in a large business of more than 250 employees, they have the statutory right to request training.
The self-employed have limited employment rights linked to discrimination and health and safety. The new employee shareholders will have more rights than someone taken on as a worker, but not all those of an employee. They will not have: first, the right to unfair dismissal except for automatically unfair reasons or on discriminatory grounds; secondly, the statutory right to request flexible working or certain statutory rights to request training; and, thirdly, statutory redundancy pay.
I turn to employee shareholders wishing to return to work earlier than originally planned from maternity, additional paternity or adoption leave. When returning early from these types of leave, employee shareholders will need to give 16 weeks’ notice, compared to six weeks for employees returning from additional paternity leave or eight weeks for employees returning from maternity leave or adoption leave. The noble Lord, Lord Pannick, proposes with Amendments 83 to 89 to take out the employment law references in Clause 27, where it states what rights the employee shareholder will have that are different from those of an employee. This includes removing the distinguishing features of the clause and therefore it will remove choice from the options that employers can consider when taking on staff. The amendments would create an employment status that is essentially the same as that of “employee”, but where the employee shareholder would be given fully paid-up shares. In effect, we would be regulating for an additional employment status that essentially already exists in that of “employee” in order for the individual to be given shares. As the noble Lord, Lord Pannick, knows—he is supported in this by the noble Lord, Lord Adonis—employee ownership, either through direct employee share holdings or shares held in trust on behalf of and for the benefit of employees, is already a well known concept that is in use in the labour market. Companies are already free to offer shares to their employees.
My honourable friend Jo Swinson, the Minister for Employment Relations and Consumer Affairs, is chair of the implementation group taking forward the recommendations of the Nuttall review which is promoting the employee ownership agenda. The Government do not want to create an additional burden by regulating for something that can already take place in the labour market and that an employer can already offer. Such action would not help growth.
I should like to answer some questions that were raised by noble Lords. First, my noble friend Lord Deben stated that, as he saw it, there was no support from business. I have listened very carefully today to the comments made by other noble Lords. It might be helpful for noble Lords to know that Neil Clifford, the chief executive of Kurt Geiger, the shoe retailer, has stated that this measure would,
“provide a massive boost to innovation and enterprise”.
Becky McKinlay, who runs Ambition, a marketing communications company, is cited as saying that,
“she would have welcomed such a scheme when she started her marketing communications company, Ambition, six years ago because she could not afford to outbid her peers on wages”.
I could go on.
The noble Lord, Lord Pannick, raised the issue of why we think there is a statutory right to request flexible working and why it is unnecessary for employee shareholders. The statutory right to request flexible working creates a structure for conversations between employees and employers about changes to ways of working that will be mutually beneficial. Employee shareholders will have a greater interest in the performance of their employer as it is linked to the value of their shares. We consider that employee shareholders are more likely to request flexible working if they think it will help them and the company and do not need the statutory right to request. Employee shareholders can still make non-statutory requests for flexible working.
My noble friend Lord Strasburger raised the issue of which rights will increase motivation. As we see it, this new employment status will increase motivation as the employee shareholder will own shares from the outset and capital gains on these shares of up to £50,000 will not attract capital gains tax.
Lord Strasburger
I thank the noble Viscount for giving way. That was not my question. My question was: which of the removed rights is going to increase the motivation of the employees and therefore improve the performance of the business?
Viscount Younger of Leckie
The overall package of the employee shareholder, with the extra risk as well as the extra reward, is designed to ally the employee with the employer more readily. The motivation will be there because the employee will feel more aligned to the objectives of the company and will help more towards building and growing the company. That is one of the clear objectives behind this scheme.
The noble Lord, Lord Pannick, raised the issue of the legal consequences of selling rights. A full equality impact assessment has been done and no significant discrimination issues were identified. On the European law issues, I can reassure him that no European guaranteed rights have been affected.
My noble friend Lady Brinton asked whether we can ensure that an employee shareholder is treated fairly and not sacked just because their employer does not like them or has argued with them. An employee shareholder would still retain the majority of protections such as, as I mentioned earlier, automatically unfair dismissal rights and rights underpinned by EU law and discrimination legislation. If an employee shareholder was dismissed in any other circumstances, they would not be able to claim unfair dismissal at an employment tribunal, which we understand. Employees do not get the general right to protection against unfair dismissal or to statutory redundancy pay until they have been with their employer for two years, so there are already employees who currently do not have these rights.
In conclusion, Clause 27 creates a new employment status that gives companies and people more choice. This new status is a creative scheme for companies and people who wish to use it. It gives them a new opportunity to better share the risks and rewards of the business. I hope noble Lords realise that this new, innovative status is a force for good in the labour market, and that they will withdraw their amendments so that companies and people can benefit from this additional choice.
Baroness Brinton
I was slightly confused by some of the Minister’s earlier response on the employee status for employee shareholders. I would welcome clarification on whether they are actually regarded as employees, generally, or whether the only respect in which they are not employees is where those rights have been specifically removed by the Bill.
Viscount Younger of Leckie
I can confirm that it is an entirely new status, so the individual who agrees with their employer to a contract to be an employee shareholder is not the same as an employee.
Lord Deben
Could my noble friend help the House, before we come to Report, by giving some estimate of how many businesses the Government think will take up this proposition? Given that many of us feel there will be few, it would be helpful to know why we need this big piece of legislation if we do not think many people will take it up. How many employee shareholders of this kind do the Government expect to have in two years’ time?
Viscount Younger of Leckie
I thank my noble friend for that question. It is extraordinarily difficult to ascertain a precise figure. It can be only a guesstimate, and I hope that the House will respect that. However, from the figures that we have ascertained, we think that around 6,000 companies will look at this seriously and take up this issue. However, that is, as I say, a guesstimate.
Lord Strasburger
I am sorry to keep jumping up and down, but I still have not heard from the Minister how the withdrawal of all or any of the rights will improve the performance of any business.
Viscount Younger of Leckie
I believe that I have answered my noble friend’s questions, and it is possible that I would not satisfy him, even if I gave him the same answer.
Baroness Turner of Camden
The Minister has just said that it is not clear whether an employee shareholder is an employee. I remind him of the advice that we have received from the Equality and Human Rights Commission, which looked at this situation in some detail. It came to the view that an individual who is an employee shareholder was nevertheless a worker, so workers’ rights would normally be applied to that individual. The Government have tried to get over that by saying that because this is all voluntary, the employee voluntarily gives up their rights. During the course of our recent discussion, it has become clear that that is certainly not voluntary. In a situation in which people face either unemployment or the possibility of loss of employment support from the state, it is not really very voluntary, is it?
Viscount Younger of Leckie
It may help the noble Baroness if I state again that the employee shareholder agreement between the employer and employee is a specific new contract for a new employment status. However, if, for example, the employer has not fulfilled the basic criteria for ensuring that the employee is properly included and for meeting the criteria for that employee to be an employee shareholder, there is a default position whereby the employee shareholder would revert to being an employee or worker, whatever is applicable. There is a safeguard in place for them.
Lord Pannick
The noble Viscount said a few moments ago that it is the Government’s estimate that up to 6,000 companies might wish to take advantage of Clause 27. Would he kindly undertake to publish before Report the evidence upon which that assessment has been made?
Viscount Younger of Leckie
I would be delighted to furnish the noble Lord with whatever information I can find, but I remind him—he may well know the statistic—that the total estimated number of businesses in the UK is 4,794,000. Therefore, breaking down the figure to 6,000 perhaps re-emphasises that this employee shareholder status is not for every company. It is aimed at a particular type of company, and it is important to round off this debate by emphasising that this is not as big a deal as some noble Lords are making it out to be.
Baroness Brinton
I apologise for intervening again. Can the noble Viscount explain what niche group of companies this provision would interest, given that in our discussion on the first group of amendments, when I outlined the problems facing high-tech, leading-edge companies going through rapid growth—which Ministers have told us was exactly the audience the clause was aimed at—the Minister said that it was probably not appropriate for them? Perhaps he could cite the type of company it is appropriate for.
Viscount Younger of Leckie
I re-emphasise that the Government stick by their idea and plan that the provision will suit small start-up companies, but not exclusively those. However, from my noble friend Lady Brinton’s comments, it certainly does not seem to suit the companies that she has been in touch with, and I thoroughly respect that. I say again that this will not suit every company, but I have given quotations from individuals who seem to think that this is a good, innovative new scheme, which I very much welcome. I hope that it will take off, despite the fact that it is obviously quite contentious.
Lord Adonis
My Lords, we are full of admiration for the way the noble Viscount seeks to defend these proposals before the House. However, I am afraid that I find myself with the noble Lord, Lord Deben, who said that this was a mystifying moment in a mystifying Bill. The mystification gets greater the longer the Government seek to defend the proposal, and does so in three respects. The first is the figure of 6,000, which is in the impact assessment and which the Minister has undertaken to write to noble Lords to defend. However, I have read the impact assessment and the figure appears to be simply plucked out of the air. There seems to be no justification whatever for a figure of 6,000, as opposed to—
Viscount Younger of Leckie
I apologise for interrupting and thank the noble Lord for giving way. I made it absolutely clear that this was a guesstimate. When pressed by the noble Lord, Lord Pannick, on the figure, I felt it appropriate to give a figure to the House, and I am quite prepared to come back to the House on it. That figure may indeed change, but I reiterate it and suggest that it is not worth going further on this particular issue.
Lord Adonis
My Lords, all I need to do to let these proposals collapse is allow the noble Viscount to carry on speaking because, proposal by proposal, his case disintegrates. It turns out that the 6,000 figure is indeed a mystifying figure that has no basis in fact. I am thinking of why he might have chosen that figure—it appears to be twice as long as in the guidance for DWP decision-makers. Perhaps that is the basis on which the figure has been devised. We look forward to hearing the justification for it, and therefore whether this measure is incidental or fundamental.
The truth is that the Government cannot possibly know. However, so far as your Lordships are concerned, we have a responsibility not to put on to the statute book provisions that could be seriously detrimental to the health of the nation. No part of the health of the nation is more significant than people at work and their rights there. It is not satisfactory simply to proceed with the provisions on the basis of figures that have been plucked out of the air.
The second thing that has become clear is that the Government suffer from two fundamental problems of schizophrenia. They want more entrepreneurial zeal in the economy, as we all do, but almost none of the entrepreneurs to whom it looks to generate new companies, new ideas and new ventures supports the proposal and believes it will have the effect that the Government state. A number of noble Lords with a great deal more experience of business ventures than me have made that point. I think I quote the noble Lord, Lord Deben, correctly as saying that he could not imagine “any circumstances whatever” in which he would seek to offer these contracts to employees in a small start-up company as a way of motivating them.
The fundamental problem that the Government have with the proposal—the basis upon which it has been put forward is that it will stimulate in the context of the lack of growth new, vitally needed entrepreneurial zeal and companies—is that the entrepreneurs and companies to which he is looking to provide that energy do not believe that this proposal is necessary. On the contrary, almost all of them are critical because they believe that the reputational damage that it will create may undermine the cause that the Government are seeking to promote.
However, a third big tension that has come through clearly from the noble Viscount’s remarks is that the Government speak with two voices. One part of the Government celebrates the extension of employment rights and says that that is a fundamental objective of the coalition Government established in 2010, at the very same time as another part of the Government celebrates the withdrawal of those rights as being necessary to stimulate the economy in a period of economic downturn. I have a view on these matters, but surely the Government should make up their mind which is true. Is the extension of employment rights essential to stimulate the economy to provide greater flexibility and protection for those at work, or is the withdrawal of those rights necessary to spur economic growth? At the moment, one Minister comes here on one day and says that it is the withdrawal of rights, and another Minister comes here on another day and says that it is the extension of rights.
The noble Baroness, Lady Brinton, referred to the Deputy Prime Minister. At the very time the Bill was going through the House of Commons, he made a speech entitled, “Greater equality for a stronger economy”. That was the title on his website. He said:
“I can also confirm today that the Government will legislate to extend the Right to Request Flexible Working to all employees”.
At precisely the same time, this legislation was brought forward: legislation that withdraws the right to request flexible working from employees who are on these employee shareholder contracts.
Are the Government not aware that there is a fundamental problem when one Minister says one thing and another Minister says another, and the two are totally at variance?
Baroness Brinton
That was indeed why I asked the noble Viscount about employee status and whether this was a new form that would circumvent that. On our Benches, we welcomed the Deputy Prime Minister’s comments about increasing flexible working rights to all employees. I remain concerned that this is under threat for the employees of perhaps around 6,000 firms that may or may not take up this particular option.
Lord Adonis
My Lords, I note what the noble Baroness has said. I strongly support the extension of the right to request flexible working. I think what the Deputy Prime Minister said in that respect was a very positive step forward. I am seeking to reconcile what the Deputy Prime Minister said from the Benches 45 degrees away from me from what the noble Viscount has said, as I understand it, representing the same Government. This is about how we put together the different parts of the Government and understand what position is being presented to the House.
Finally, I will comment on what the noble Viscount did not say. He did not respond to the point about the Beecroft report. The Beecroft report is of some significance and has been referred to by other noble Lords. My understanding of the genesis of this employee shareholder proposal is that, having sought to implement the Beecroft report and having been stopped from doing so by our colleagues on the Lib Dem Benches, in particular by the Secretary of State for Business, Innovation and Skills, the Chancellor of the Exchequer then sought to bring back the proposals in a watered-down form in return for the award of shares valued between £2,000 and £50,000. Vince Cable probably now regrets having done that deal, but he did so because he believed it would be niche and insignificant, although 6,000 is on the large side, if that is the figure the Government are now putting forward. He thought that if nobody took it up, this was a deal he could just about live with.
However, the acute irony of the proposal before the House is the one which the noble Baroness, Lady Brinton, identified: that in respect of one of the fundamental rights being withdrawn—the right not to be unfairly dismissed—the Beecroft proposal for almost all employees who are likely to suffer under this scheme is significantly more generous than the shares for rights proposals encompassed in the Bill. The Beecroft proposal, as she said, required a tax-free payment related to the employee’s salary up to a maximum of £12,000. I took Beecroft to be proposing that that would be the figure for the no fault dismissal fee: £12,000. The offer that employers who are seeking to recruit employees with minimal rights need to make is £2,000. That is, £2,000 in shares, the value of which may be significantly less when they come to trade them in.
Given the choice between a firm contractual requirement to offer £12,000 for no fault dismissal, and £2,000 worth of shares that may be worthless by the time an employee comes to exercise them, Beecroft might actually turn out to be preferable. I beg leave to withdraw the amendment.
Lord Adonis
“(7) This section shall only come into operation after an independent assessment of the revenue implications for HMRC, conducted by the Office for Budget Responsibility, in respect of each financial year from 2014 to 2030, is laid before both Houses of Parliament.”
Lord Adonis
My Lords, we are now on the issue of the cost of these proposals to the Exchequer. I would like to invite the noble Viscount to explain more fully to the House what he believes the revenue implications would be as a result of the proposals. The independent assessment by the Office for Budget Responsibility suggests very large figures might be at stake, which is why we are asking for figures to be made available in respect of each financial year up to 2030.
I quote from the policy costings document published by the OBR alongside the Autumn Statement:
“There are a number of uncertainties about this costing”—
that costing being the figure of £80 million over the current spending review period—
“The static cost is uncertain in part because of a lack of information about the current amount of CGT arising from gains on shares through their employer. The behavioural element of the costing is also uncertain for two main reasons. First, it is difficult to estimate how quickly the relief will be taken up; this could make a significant difference as the cost is expected to rise towards £1 billion beyond the end of the forecast horizon. Second, it is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning”.
I would like to invite the noble Viscount to expand on what the OBR said so that we have a better basis for understanding the potential costs of what could be an extremely expensive proposal once the tax planners get going on the opportunities available to them.
Baroness Brinton
My Lords, I apologise for referring again to the coalition agreement, but I am concerned that the tax loopholes proposed under the CGT allowances for employee shareholders conflict with the coalition agreement because the shares that a company gives to employee shareholders will not be liable to CGT.
Paul Johnson, the director of the IFS, has said:
“Just as government ministers are falling over themselves to condemn such behaviour, the same government is trumpeting a new tax policy which looks like it will foster a whole new avoidance industry”.
He refers to it as a “£1 billion lollipop”. I am prepared to negotiate the billion with Paul Johnson on the understanding that it is only likely to affect a small number of companies. Or perhaps not, because we know that advisers to companies, if they find a loophole will find a way of making it apply to everyone.
The Government have pledged in the coalition agreement to clamp down on tax loopholes and tax avoidance. The agreement says:
“We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals”.
These include exactly what I have cited earlier. Why do the Government in the draft Finance Bill 2013 create this loophole where shareholders can avoid paying capital gains tax? I quote:
“Legislation will be introduced to exempt all gains made on disposals of up to £50,000 worth of ‘employee shareholder’ shares from capital gains tax”.
The coalition agreement also says:
“We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income”.
We have pledged, as a Government, to raise capital gains tax and yet we are removing it for shares related to employee shareholders. I support the amendment because we need to understand the cost to the Treasury. I would welcome an explanation from the Minister why it is acceptable for one small group of shareholders to be exempt from CGT when the Government are moving in the opposite direction for all others.
Lord Deben
I hope that my noble friend will be very careful in his response to this because underneath there are two falsities. The first is the schizophrenia on the side of the Opposition. On the one hand, they say that no one will be taking it up, and on the other hand they say that it might be very expensive. I do not think that the noble Lord, Lord Adonis, should get away with that argument.
I also do not want him to take too seriously the comments about exempting people from capital gains tax. I declare an interest as the chairman of a number of small companies, which are, I hope, growing. I have the feeling that there is a kind of nastiness abroad on this issue, because capital gains tax is very much a destroyer of value and of enterprise. One problem in this country is that many people do not like other people being wealthy as a result of hard work and employment. I dislike that kind of attitude very much. If that is part of the coalition agreement, it is a bad part, because we need a society in which people are encouraged to put their lives into businesses and to gain some of the benefits of that. One reason the United States is so much more successful than other countries is that it has been more sensible about that bit of its taxation. It is very stupid about a lot of other taxation, but on that bit at least it has said that there is a real reason for encouraging people to create businesses. One way of encouraging them is by giving them a lower rate of tax on capital gains and dividends than they would have elsewhere. That seems perfectly right, and one problem that we have is that we have not taken that seriously.
I am not worried about this proposal because I do not think that anyone is going to take it up and so they are not going to lose any money. However, I hope that my noble friend will be kind enough to suggest that the Government will do a great deal more to enable people, through employment, to create wealth and to take some of that wealth in a way that we do not allow them to do at the moment.
It really is sad that we have a society in which it is perfectly proper to say, “We’ve really got to stop people possibly gaining from the creation of jobs”. That is what we mean when we say that we want to make sure that nobody benefits. That is not what I want to happen—and it will not happen—but I hope that in his answers my noble friend will make sure that he does not commit the Government to not taking some pretty radical steps to remove and reduce taxation in a number of areas that will encourage job creation.
Baroness Brinton
I should like to clarify the point that I was trying to make about finding a tax loophole that provides a source of employment for many industry experts. We need a capital gains tax system which is fair and which certainly encourages growth. I do not think that we would suggest anything other than that from these Benches. The concern arises when, on the one hand, the Government say that they want to make a clear, open and transparent level playing field but then, on the other, they create a category that appears to have a built-in loophole.
Lord Deben
I am sorry if I misunderstood my noble friend, and of course I accept what she has just said. I find it very hard when the guns are turned on this issue because of the loose use of the words “tax loophole”. This is not a tax loophole; it is a decision—a mistaken decision, I think—to encourage people to do something through a tax concession. I repeat: it is not a tax loophole. I shall tell noble Lords what a tax loophole is. It is Amazon organising itself so that it runs people out of the high streets of Britain by ensuring that it does not pay proper taxes. A tax loophole—I declare an interest as being concerned with the business of packaging recovery—is when Amazon can put packaging on the marketplace and not pay the proper price of so doing. That is what a loophole is. It is not a loophole if the Government specifically say that in particular circumstances people will pay a lower rate of tax. That is a proper use of the taxation system. For goodness’ sake, do not let us use the term “loophole” in this instance. There are some very big loopholes which we ought to be stopping and, for me, Amazon is the biggest example of a company that does not pay proper tax wherever it operates.
Baroness Brinton
I apologise for intervening again and I thank the noble Lord for his contribution. There is absolutely no doubt that we agree about Amazon. Perhaps I may give an illustration from the early 1990s of the sort of loophole that I was alluding to. The Conservative Government of the day created generous tax facilities for investors in the business expansion scheme. When the scheme was originally devised, it was intended for small high-growth companies—where have I heard that before in this debate? Investors would get those tax benefits because they were investing in something that carried a slightly higher risk. I confess, as the bursar of a Cambridge college, that within two or three years every Oxbridge college, and subsequently every university in the country, used the business expansion scheme, and that tax benefit was quickly closed down by the Government, who described it as a tax loophole.
It is exactly that sort of loophole that I want to avoid. I absolutely understand the Government saying that it is supposed to be a niche group of companies that will apply for this, although I still wait to hear which ones they are. However, I would not want to see some sort of tax provision that suddenly made this proposal attractive to the majority of companies in this country. That was not the intention and it certainly has not been the tenor of the debate.
Lord Deben
I do not disagree with that. However, I think that this proposal is going to be so unattractive to so many companies that that particular problem will not arise.
Viscount Younger of Leckie
My Lords, first, I am most grateful to my noble friend Lord Deben for extolling the virtues of employee ownership, which is very much part of the debate today.
This amendment stipulates that the clause should come into effect only once an independent assessment, conducted by the Office for Budget Responsibility, is laid before both Houses setting out the impact on the Exchequer for each financial year between 2014 and 2030.
The OBR’s role is to provide independent scrutiny and certification of the Government’s policy costings ahead of the Budget and the Autumn Statement. The OBR certified the costing of this measure submitted by HMRC using the methodology set out in the policy costings document published at the Autumn Statement, which is available on the HM Treasury website.
The main duty of the OBR is to examine and report on the sustainability of the public finances. The OBR performs this duty independently, with complete discretion to determine the content of its publications and its work programme of research and analysis.
The Government do not publish annual breakdowns of the cost of operating specific tax measures beyond the end of the forecast period, and this has been the case for some time. This will apply to the employee shareholder status in the same way as it applies to the cost of operating any other specific tax measures.
The noble Lord, Lord Adonis, is understandably concerned about the need to support the Government’s agenda for fiscal sustainability. I emphasise that we believe that investment in policies such as this one—aimed at reducing costs on business and increasing productivity —is exactly what is needed at this time. Strong, sustainable and balanced growth is the key to long-term fiscal sustainability. However, I assure the noble Lord that if further provisions are needed to limit its overall costs, we will have the opportunity to include these at a later date.
At this stage, I think it is worth picking up some points that the noble Lord, Lord Adonis, raised concerning the OBR. The OBR, with its responsibility, is right to note that predicting the take-up of new policies such as this one is very difficult. We recognise that, but its comments need clarification. First, the OBR refers to tax planning and not avoidance. Encouraging take-up of this targeted employment policy should not be misconstrued as encouraging avoidance. Secondly, any rise towards £1 billion is estimated to occur well beyond the end of the forecast period—in fact, beyond the 2020s, when national income is likely to be more than twice as high in today’s money. Finally, the draft legislation published on 11 December includes a number of anti-avoidance provisions. If further provisions are needed to address particular avoidance risks, we will have the opportunity to include them at a later date with a view to ensuring that this policy does not become disproportionately costly to the taxpayer.
Lord Adonis
Could I ask a specific question? The OBR said that it expected the cost of this policy to rise towards £1 billion beyond the end of the forecast horizon. Is that a figure that the Government accept?
Viscount Younger of Leckie
It gives me the opportunity to answer the noble Lord’s question by saying that the OBR has stated that in the long term this policy could cost up to £1 billion. That figure relates to the future period beyond the 2020s. However, there are uncertainties associated with costs so far into the future and I am sure that the noble Lord will appreciate that. The Government expect that the new employee shareholder status should help to stimulate business and entrepreneurial activity by affording businesses greater choice on the contract that they can offer to individuals while ensuring that appropriate levels of protection are maintained. If the policy achieves this aim, the cost, which is expected to reach £8 million in 2017-18, is proportionate. The draft legislation published on 11 December sets out a number of anti-avoidance provisions to prevent the manipulation of the capital gains tax exemption on shares received under the status. If further provisions are needed to address particular avoidance issues, as mentioned earlier, the Government will have the opportunity to include these at a later date with a view to ensuring that this policy does not continue.
My noble friend Lady Brinton raised the issue of whether the tax incentives were in effect a tax avoidance scam, if I can put it somewhat indelicately. She did not put it in that indelicate way. The Government have already included provisions to deal with various types of possible abuse in the draft legislation on capital gains tax exemption. If other forms of abuse come to light, the Government will make the necessary changes to combat that with a view to ensuring that the policy does not become disproportionately costly to the taxpayer.
Some concern has been raised, notably by my noble friend Lady Brinton about the capital gains tax exemption. This relates particularly to people taking up this new employment status, and although I touched on it slightly earlier, I shall address it directly. We believe that employee ownership is a good thing. We want people to become employee shareholders and to benefit from the exemption provided. Where it is used properly it should be seen as a measure of success and people should take advantage of this particular exemption. However, the draft Finance Bill published on 11 December takes a robust line on the potential misuse of the exemption and provides several measures that would prevent the misuse of employee shareholder employment status. There are rules to prevent those who control a company, such as company directors, holding exempt employee shareholder shares if they control 25% or more of the voting power in the company. Similarly, rules will prevent people connected to those who control the company, such as spouses or children, benefiting from the exemption. We will prohibit employees from benefiting from multiple £50,000 limits by entering into multiple consecutive employee shareholder contracts with related companies. Instead when related companies are involved, an employee will have a single £50,000 limit applying to all shares received by related companies. We will also ensure that those looking to get around the limit by using company liquidations to dispose of and then receive new exempt shares cannot do so. We will require two years to pass between the liquidation of the company and the employee receiving further exempt shares. This treatment strikes the right balance between preventing abuse and ensuring that genuine entrepreneurs are not unfairly hit.
Finally, the legislation will prevent the manipulation of share values, for example, by placing restrictions on them so that an employee can receive shares that are in fact worth more than £50,000. For the purposes of the capital gains tax exemption the value of shares will be based on an unrestricted market share. Taken together the measures and the safeguards outlined in the draft legislation will ensure that the tax benefits of a new employment status can be misused. I hope that that goes some way to satisfying the noble Baroness, Lady Brinton.
Lord Deben
Is not the fact that if this works, arguing about how much it costs the Treasury is not sensible? If it works, it will create jobs and make wealth, and the cost to the Treasury will be nil. If it does not work, nobody will take it up and the cost to the Treasury will be nil. It seems to me that this is not a necessary discussion. The only thing that we do not want is for it to be misused. The noble Viscount has explained how the Government intend to do that. No doubt they will do their usual thing of bringing in some more measures to stop it if that were to happen. The real fact is that this is one part of the argument that really does not hold water. We have to accept that if it does not work we have wasted a bit of time, which is not terrible, but if it does work we will have been proved wrong and I will be happy about it. The Treasury will not lose out because there will be jobs, people employed and money being made, which is really worth while.
Viscount Younger of Leckie
I am grateful to my noble friend for clarifying that and, of course, he is absolutely right. I felt that it would be helpful to the House to outline the safeguards and to reiterate that the Government have thought very carefully about these issues. Taking up some of the comments made by my noble friend Lord Deben, I emphasise again that it is a risk-reward status as the employee shareholder. The award is: yes, the opportunity is there to be given from between £2,000 and £50,000 and to be aware that if it is £20,000, £30,000, or whatever the figure might be, and the share price happened to double, the total amount, including the doubling would be free from capital gains tax. That is the reward bit, but equally, I am also realistic enough to say that it is possible that the shares might indeed be worth nothing. That is the risk, and it is best to be quite straight and open about that particular issue. With that in mind I hope that the noble Lord is willing to withdraw the amendment.
Lord Adonis
My Lords, I do not intend to press the issue today. Let me be brief in response to the noble Viscount. We face a straightforward case of schizophrenia here. One part of the Government tells us that the biggest problem facing the country is debt and another part of the Government produces a proposal, which we are debating today, for a new tax break for substantial shareholders that the Office for Budget Responsibility estimates will ultimately cost up to £1 billion a year. When we debate the entirety of Clause 27 on Report, this latest example of schizophrenia will be one of the reasons why we will seek to delete it. I beg leave to withdraw the amendment.
Lord Adonis
My Lords, I have put down a Motion that Clause 27 should not stand part of the Bill to stimulate a last, wider debate on the issue. I note that the noble Viscount has gone over the same ground several times and I feel for him at having to do it yet again. Perhaps our remarks before he speaks will encourage him to make some new points that will help inform the Committee.
There are three essential points to be made on Clause 27, the first of which relates to the extension of employee share ownership. This is an objective that noble Lords in all parts of the House support. Indeed the Government had an official review—the Nuttall review—which reported last year on the extension of employee share ownership. That review made some 30 recommendations. I have the report here. Most of them were excellent recommendations, some of which the Government accepted and some of which they were unable to accept. I simply note that not one of those recommendations of the review that the Government set up specifically to promote wider share ownership related to the creation of an employee ownership scheme akin to the one that we are debating today, involved issuing shares in return for the giving up of employment rights.
The question I want to ask the noble Viscount is: if this is such a good idea, why was it not recommended by Nuttall? Secondly, I want to reiterate all the specific problems relating to the scheme, which have become very clear in our debates this afternoon. There is the problem of compulsion in respect of benefit claimants and the opening to discrimination claims, which the noble Lord, Lord Pannick, highlighted. That could mean that there will be an explosion of very expensive and difficult cases before employment tribunals because of the removal of essential rights that will leave employees with no other recourse than discrimination when they believe that they have been badly treated. There is the problem of cost which we have just debated in the previous group of amendments, and a whole set of issues that we have not debated but which were debated in the House of Commons about the status of the shares themselves, such as the voting nature of the shares and how the shares will be tradable, given that most of them are intended to be among the 6,000 companies that the noble Viscount has highlighted. There are start-up companies whose shares will not be listed, so we must ensure that there is a market in which they can sell shares and terms under which they sell them, given that they may have to sell them back to their own companies when those companies are under some stress. There is a whole set of issues relating to the working of the scheme which makes it highly problematic and which may leave small shareholders, in particular, who do have not much money themselves without resources to take independent financial and legal advice. They could be very seriously exposed.
The noble Lord, Lord Flight, told the Committee earlier that if he was 40 years younger, he would relish the opportunity to take advantage of the status and that it would have spurred him to the creation of new companies and new employment. If they were the groups we are talking about, that would be one case. But, as legislators, we are concerned that substantial numbers of employees who do not have access to financial and legal advice will be straightforwardly exploited by these provisions.
The third point I make on the clause as a whole is that almost nobody to whom this proposal is targeted welcomes it. The Government’s own consultation showed that an overwhelming majority of those who responded, including those who responded from within the business community, either thought that this proposal was irrelevant or were actively hostile to it. The noble Viscount cited a few instances earlier of individuals who support it. However, of the 219 consultation responses, only five welcomed the proposal. Five out of 219 is about the same ratio of supporters to opponents as we have seen in your Lordships’ House as this proposal has been debated. That seems to me a compelling reason why the Government would be wise to withdraw the proposal before we debate it again at Report. I beg to move.
Lord Pannick
My Lords, I agree with all that has been said by the noble Lord, Lord Adonis. Clause 27 is wrong in principle. It contains inadequate safeguards both in relation to the loss of welfare benefits for those prospective employees who do not wish to give up their statutory employment rights, and also in respect of the need for legal and financial advice for those who are prepared to give up those rights. Clause 27 will also be expensive to the Treasury if there is a take-up, or there is going to be very limited demand. I note that the noble Viscount has attempted to provide the evidence on which the Government estimate that 6,000 companies may be interested in Clause 27. I look forward to seeing that material. I, too, very much hope that the Government will listen to the debates that we have had this afternoon, and take the wise step of withdrawing Clause 27 before we come to consider it again at Report.
Lord Flight
My Lords, although I welcome the suggestion that the Chancellor might allow there to be no income tax on grants of up to £2,000, as I understand it, the spirit of the provision is more about the go-getter employee shareholders. I would suggest that if there is income tax on amounts over £2,000, this scheme will not get anywhere because the amount of tax that people pay will be quite disproportionate to the risk they are taking on their equity and to the values—as the noble Lord, Lord Pannick, pointed out—of what they are giving up. It is important to sort out by the time we return on Report precisely what the income tax position will be.
Baroness Brinton
My Lords, I am grateful for the comments of the noble Lords, Lord Adonis and Lord Pannick. I will not repeat the detail but there are three or four brief points that I would like to make.
I remain concerned about the clause in principle. After our debate today I am even more concerned about the confusion surrounding jobseeker’s allowance recipients going for job interviews and about some of the details of the eligible tax benefits. It is also clear that employers do not want it: the estimate of 6,000—given the response to the consultation to which the noble Lord, Lord Adonis, referred—really says it all. Very few employers want it.
The noble Viscount referred to the balance of the risk and reward but there is another “r” in the equation that he did not mention. He omitted reduction—the reduction of rights for employees certainly seems to counterbalance the risk/reward of a long-term holding of shares. That remains one of the most worrying elements of this clause.
Finally, I want to reiterate the point about breaching the coalition agreement specifically in relation to flexible working. I believe that the coalition agreement talks about flexible working for all employees, not excluding one particular small cohort who may have shares that may be of value at some point in the future, but also in relation to any compensation for unfair dismissal where the proposals of the Government are worse than Beecroft.
I hope the Minister will take on board the comments that were made this afternoon. I would prefer the clause to be removed, but it will certainly need substantial amendment at Report if it is to be anywhere near fit for purpose.
Baroness Donaghy
My Lords, I have not spoken to the other amendments to the Bill although I did refer to this issue on Second Reading. Rather than repeat what has already been said extremely eloquently by previous speakers, I just want to remind the House what the Employee Ownership Association has said about this clause. They are the people who are most close to this subject and have the most interest in making sure that this area flourishes, which I think we would all want to happen. The association said:
“Our Members have three main concerns on this matter.
Firstly, proposed legislation has appeared in a Bill before the Government consultation on the possibility of deploying this model of employee ownership has finished. Indeed it has only just started.
Secondly, our Members are very aware that there is no need to reduce the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost the number of employee owners. Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of employee owners.
Thirdly, the appearance of this measure in the Growth and Infrastructure Bill appears to our Members to be completely disconnected”—
as my noble friend Lord Adonis has said—
“to the recommendations in the Nuttall Review. That Review contained a series of recommendations on how to grow employee ownership and none of those recommendations suggested the dilution of worker rights”.
I think that that says it all.
Viscount Younger of Leckie
My Lords, we have heard many opinions about this clause. The Government are taking this action to offer flexibility and choice for both companies and people, and this is the right thing to do. The Government know from their engagement with employer organisations and business that there is concern about facing weak or vexatious claims in employment tribunals. This new employment status will address some of these concerns especially in new and fast-growing companies. Importantly, this new status gives people the opportunity to own part of their company and benefit from any growth with favourable tax treatment, which was mentioned earlier in our debate today. Employee shareholders will receive at least £2,000 of shares in the employing company or its parent company. Gains on the first £50,000-worth of these shares will not be subject to capital gains tax. Employee shareholders will have different employment rights compared to employees and workers.
Before a company offers a person an employee shareholder contract, they will need to think carefully about the implications of offering equity in their company. There are many possible implications, but the current owners will first need to be comfortable with diluting their shareholding, an issue which was raised by my noble friend Lady Brinton earlier. If the shares being offered are part of a fresh issue of shares, this will result in each existing shareholder holding a smaller share in the company. This may not be something that the existing shareholders would be willing to do, particularly if they worked hard to build the company up and invested time, money and know-how in that company.
It is important to recognise that an owner of a company, when giving shares to an employee shareholder, is giving away not only the value of the shares issued but possibly a share in the future profits and some of the control. Offering shares to employee shareholders could in some circumstances lead to a shift in the balance of power in the company. Companies will also need to consider if they can afford to issue shares to potential employee shareholders. If they can, it could impact on the dividends of existing shareholders or entail reserves being reduced.
The rewards for both parties could be significant. Let us remember that companies will have completed an extensive recruitment and selection process, ensuring that any new personnel have the right mix of skills and knowledge. Therefore they will not offer this new status of employee shareholder lightly. A growing company may consider that by offering this new status it is demonstrating a long-term commitment to that person. In turn, the employee shareholder will be able to reap the rewards of a successful company.
I reiterate that this status will not be suitable for all, just those where it makes commercial sense for both parties. We envisage such companies to be those that want to encourage a culture of engagement and shared ownership and—this is the most crucial point—where they expect significant growth and want to use this incentive to attract and retain high-calibre individuals.
Similarly, a person being offered an employee shareholder contract will need to consider the implications of being an employee shareholder. This is a most important point to emphasise. They will need to consider carefully the terms and conditions of the employment on offer and decide whether it is suitable for them in both the long and short term, as we all know that the value of shares can go both up and down. Some potential employee shareholders may not disclose at interview their long-term career plans. Perhaps they expect to stay in the role for only a short time. It may be that they are moving abroad in the future or expect to undertake further studies—that is their own business—and they may not want to invest their time in a company to realise long-term rewards. Equally, someone looking only for short-term work may consider that this is exactly the right kind of contract as they could benefit from any short-term growth in the share value.
To ensure that this new employment status is suitable for both the company and employee shareholder, both will need to be confident that the status is right for them. This means that the company may have to sell its growth prospects to the potential employee shareholder as both a viable investment as well as a potential employer.
It is important that we take time to understand how this new status will work in practice and I am sure that doing so will allay some concerns that have already been raised. Clause 27 establishes three clear qualifying criteria, all of which must be fulfilled before a person can be considered an employee shareholder. The first criterion is that the person must agree to become an employee shareholder—it is their choice. Secondly, the person must receive at least £2,000-worth of shares in the employing or parent company that are fully paid up at the commencement of the employment. This means that these shares will have no debts attached to them. Finally, the individual must not make any payment, in money or in other form, for the shares given. If any of these criteria are not fulfilled and the person is still taken on by the company, they are likely to be legally considered an employee. This, again, addresses the question raised by the noble Baroness, Lady Turner, earlier. This means that they will have all the employment rights of an employee.
I recognise that there have been some concerns that existing employees will be coerced into accepting a change to their employment contract that would make them employee shareholders rather than employees. The Government do not want people to be coerced into the new employment status. This is why Clause 27 establishes clear protections for existing employees. The clause creates two new employment rights—the right not to be unfairly dismissed and the right not to be subjected to a detriment if an employee turns down an employee shareholder contract. This means that if an employee chooses not to sign an employee shareholder contract and is then overlooked for promotion or disadvantaged in any other way, that person could present a claim to an employment tribunal. Secondly, if an employee does not sign an employee shareholder contract and is dismissed for refusing to do so, it would be automatically unfair.
It is clear that all parties will need to consider carefully whether this status is right for the company. Giving away equity is not to be done lightly and many will not think that this is the right course of action for them. Potential employee shareholders will need to consider whether they want to have shares in the company. To help both parties, the Government will be offering guidance on what both individuals and companies will need to consider before entering into a contract of this type. The House will not need any reminder that we discussed guidance earlier today.
Clause 27 stipulates that the minimum value of shares is £2,000 in the employing or parent company. The clause does not stipulate the type of shares that a company can issue, nor does it stipulate the type of shares issued. We believe that this is best decided by the companies in order to suit their commercial situation. The shares may have varying rights, but it is up to them to decide what is right for both parties. Some companies may want to offer significantly more than the £2,000 minimum value of shares. In some companies, new employee shareholders will want to be fully involved as the company grows and take an active role in the progress of the company.
The Government have considered what happens to the shares when an employee shareholder leaves the company they work for. We expect that employers and employee shareholders will agree sensible terms for the disposal and buyback of shares. These terms should normally be part of the contract that the employee shareholder signs. However, many different scenarios might result from an employee shareholder holding shares. The shares’ value may change; the shares may have been traded; in other cases, the employee shareholder may want to keep hold of the shares on leaving the employment and the company may agree to this. The Government do not want to make rules that tie the employers’ hands; they want to give them flexibility in what they and the employee shareholder decide is the best way to dispose of shares at the end of the employment relationship.
However, the Government recognise people’s concerns that employee shareholders could be at a financial disadvantage if companies decide not to offer a fair way of realising the value of their shares. The Government amended the clause in the other place to include a provision to provide power to regulate buyback where the company has undertaken to buy back shares.
Lord Flight
“Guidance on employee shareholder status
The Secretary of State shall, within two months beginning with the day on which this Act is passed, set out in guidance—(a) the preferential tax treatment applicable to employee shareholder status including illustrative examples;(b) the respective rights of—(i) employee;(ii) employee shareholders; and(iii) worker employment status;(c) an explanation of how employee shareholder status gives individuals a share in the risk of companies; and(d) a model employee shareholder contract for early stage companies.”
Lord Flight
My Lords, the amendment was intended to be part of the debate on Clause 27. Given that the employee shareholder status is new and that there are still differences of view about its structure, it is obvious that there will be a need for guidance and, in particular, a need for a model employee shareholder contract for early-stage companies. I beg to move.
Viscount Younger of Leckie
My Lords, in Amendment 95 my noble friend Lord Flight proposes a new clause relating to the publication of guidance on the new employment status. He makes a good point on the need for guidance. The Government agree that guidance should be available to help companies and employee shareholders fully understand all the implications of offering or accepting these contracts. It has always been our intention to publish guidance on the new status. The issue of guidance is an important one. Good, clear and accessible guidance will be vital to both companies and employee shareholders. We want to ensure that people enter into these contracts with their eyes open.
I will outline what the Government propose to publish by way of guidance and explain what that guidance will cover. The .gov.uk website is the new centralised place for publication of government services and information. The website already has a number of pages that provide an overview of the different types of employment status—such as worker and employee—and list the rights that are attached to them. We will provide an equivalent page on the new employee shareholder status.
Within these overview pages there are links to more detailed information on each individual employment right, and these pages will also be updated to take account of the new employment status. People who look for information on employee shareholder contracts will be very clear which rights they are entitled to and which rights do not apply to the status. This will help them to decide if an employee shareholder position is suitable for them.
Changes to these pages are being revised at the moment and we will be in a position to share draft copies with you before this clause is debated on Report. The Government will also update guidance on the tax treatment of shares and capital gains tax to make it clear to employee shareholders what their obligations are and to set out how the associated capital gains tax exemption and other relevant tax treatments will work.
Any contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. We believe that contracts work best when people and companies are free to decide the terms that best suit their business needs, and to attract the right people to their companies. We will provide guidance for companies to enable them to understand the new status. Companies would do well to take note of the comments of my noble friend Lord Flight on the importance of drawing up good employment contracts that apply equally to the statuses of employees and workers.
While I understand my noble friend’s intention behind this amendment, we believe it is not necessary to legislate on this matter. To state this in the Bill would just introduce more legislation, which in turn would create more red tape for businesses. As the Government have already committed to publish guidance, I hope that with these assurances my noble friend will be willing to withdraw his amendment.
Baroness Brinton
I apologise for intervening. I am grateful for many of the points the Minister raised about guidance and other things that will come forward to us, I hope, before rather than on Report. On a technical point, I wonder whether those who raised issues in this debate could be copied into any correspondence rather than it just going to the single noble Lord who raised the point.
Viscount Younger of Leckie
My noble friend makes a very fair point. Of course I will copy in all noble Lords who should or would like to be copied in.
Lord Flight
I thank the Minister for his response. I am pleased to find that the matter is in hand. I therefore beg leave to withdraw the amendment.
Mid Staffordshire Foundation Trust Inquiry
(11 years, 10 months ago)
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Lord Campbell-Savours
My Lords, will the Minister make it clear that brief interventions are required? Otherwise not everyone will be heard.
Lord Hill of Oareford
My Lords, with the leave of the House I will now repeat a Statement made earlier in another place by my right honourable friend the Prime Minister. The Statement is as follows:
“Today Robert Francis has published the report of the public inquiry into the Mid Staffordshire NHS Foundation Trust.
Mr Speaker, I have a deep affection for our National Health Service. I will never forget all of the things doctors and nurses have done for my family in times of pain and difficulty. I love our NHS. I think it is a fantastic institution and a great organisation that says a huge amount about our country and who we are. I always want to think the best about it. I have huge admiration for the doctors, nurses and other health workers who dedicate their lives to caring for our loved ones.
Nevertheless, we do them—and the whole reputation of our NHS—a grave disservice if we fail to speak out when things go wrong. What happened at Mid Staffordshire NHS Foundation Trust between 2005 and 2009 was not just wrong, it was truly dreadful. Hundreds of people suffered from the most appalling neglect and mistreatment. There were patients so desperate for water that they were drinking from dirty flower vases. Many were given the wrong medication, treated roughly, or left to wet themselves and then to lie in urine for days. Relatives were ignored or even reproached when they pointed out the most basic things which could have saved their loved ones from horrific pain or even death. We can only begin to imagine the suffering endured by those whose trust in our health service was betrayed at their most vulnerable moment. That is why I believe it is right to make this Statement today.
There was a healthcare commission investigation in 2000; a first independent inquiry from Robert Francis in February 2010; and, long before that, the testimony of bereaved relatives such as Julie Bailey and the Cure the NHS campaign. They all laid bare the most despicable catalogue of clinical and managerial failures at the trust. But even after these reports, some really important questions remained unanswered. How were these appalling events allowed to happen and how were they allowed to continue for so long? Why were so many bereaved families and whistleblowers who spoke out ignored for so long? Could something like this ever happen again? These were basic questions about wider failures in the system—not just at the hospital but right across the NHS, including its regulators and the Department of Health. That is why the families called for this public inquiry and that is why this Government granted one. I am sure that the whole House will want to join with me in expressing our thanks to Robert Francis and his entire team for all their work over the past three years.
The inquiry finds that the appalling suffering at Mid-Staffordshire hospital was primarily caused by a “serious failure” on the part of the trust board, which failed to listen to patients and staff and failed to tackle what Robert Francis calls “an insidious negative culture involving a tolerance of poor standards and a disengagement from managerial and leadership responsibilities”. But the inquiry finds that the failure went far wider. The primary care trust assumed that others were taking responsibility and so made little attempt to collect proper information on the quality of care.
The strategic health authority was “far too remote from the patients it was there to serve, and it failed to be sufficiently sensitive to signs that patients might be at risk”. Regulators, including Monitor and the then Healthcare Commission, failed to protect patients from substandard care. Too many doctors “kept their heads down” instead of speaking out when things went wrong. The Royal College of Nursing was “ineffective both as a professional representative organisation and as a trade union”, and the Department of Health too remote from the reality of the services that they oversee.
The way Robert Francis chronicles the evidence of systemic failure means we cannot say with confidence that failings of care are limited to one hospital. But let us also be clear about what the report does not say. Francis does not blame any specific policy; he does not blame the previous Secretary of State for Health; and he says we should not seek scapegoats. Looking beyond the specific failures that he catalogues so clearly, I believe we can identify in the report three fundamental problems with the culture of our National Health Service.
The first is a focus on finance and figures at the expense of patient care; Francis says that explicitly. This was underpinned by a preoccupation with a narrow set of top-down targets pursued in the case of Mid Staffordshire to the exclusion of patient safety or listening to what patients, relatives—and indeed many staff—were saying.
Secondly, there was an attitude that patient care was always someone else’s problem. In short, no one was accountable. Thirdly, he talks about defensiveness and complacency. Instead of facing up to and acting on data which should have implied a real cause for concern, Francis finds, all too often, a culture of explaining only the positives rather than any critical analysis. Put simply, managers were suppressing inconvenient facts in favour of looking for comfort in positive information.
That is one of the most disturbing findings. It is bad enough that terrible things happened at that hospital, but this inquiry is telling us is that there was a manifest failure to act on the data available not just at the hospital but more widely. As Francis says:
“In the end, the truth was uncovered … mainly because of the persistent complaints made by a determined group of patients and those close to them”.
The anger of the families is completely understandable. Every honourable Member in this House would be angry—furious—if their mother or father were treated in this way, and rightly so.
The previous Government commissioned the first report from Robert Francis and, when he saw that report, the former Secretary of State, now the shadow Health Secretary, was right to apologise for what went wrong. This public inquiry not only repeats earlier findings but also shows wider systemic failings, so I would like to go further as Prime Minister and apologise to the families of all those who have suffered for the way that the system allowed such horrific abuse to go unchecked and unchallenged for so long. On behalf of the Government—and indeed our country—I am truly sorry.
Since the problems at Mid Staffordshire Hospital first came to light, a number of important steps have been taken. The previous Government set up the National Quality Board and the quality accounts system. This Government have put compassion ahead of process-driven bureaucratic targets and put quality of care on a par with quality of treatment. We have set that out explicitly in the mandate of the NHS Commissioning Board, together with a new vision for compassionate nursing. We have introduced a tough new programme for tracking and eliminating falls, pressure sores and hospital infections, and we have demanded nursing rounds every hour, in every ward of every hospital.
However, it is clear that we need to do more. We will study every one of the 290 recommendations in today’s report and respond in detail next month, but the recommendations include the three core areas—patient care, accountability and defeating complacency—on which I believe we should make more immediate progress. Let me say a word about each.
The first is how we put patient care ahead of finances. Today, when a hospital fails financially, its chair can be dismissed and the board suspended, but failures in care rarely carry such consequences. That is not right. We will create a single failure regime where the suspension of the board can be triggered by failures in care as well as failures in finance, and we will put the voice of patients and staff at the heart of the way that hospitals go about their work.
In Mid Staffordshire, as far back as 2006, there was a survey in which only about a quarter of staff said that they would actually want one of their own relatives to use the hospital they worked in. During the following two years, bereaved relatives produced case after dreadful case and campaign after chilling campaign, but those voices and horrific cases were ignored. Indeed, the hospital was upgraded to foundation trust status during that period. We need the words of patients and front-line staff to ring through the boardrooms of hospitals and beyond to the regulators and the Department of Health itself.
From this year every patient, every carer, every member of staff will be given the opportunity to say whether they would recommend their hospital to their friends or family. This will be published and the board will be held to account for its response. Put simply, where a significant proportion of patients or staff raise serious concerns about what is happening in a hospital, immediate inspection will result and suspension of the hospital board may well follow.
Quality of care means not accepting that bed sores and hospital infections are somehow occupational hazards and that a little of them is somehow okay. They are not okay. They are unacceptable—full stop, end of story. That is what zero harm means. I have asked Don Berwick—who has advised President Obama on this issue—to make zero harm a reality in our NHS.
Francis makes other recommendations. Today, you can give hands-on care in a hospital ward with no training at all. Francis says that that is wrong, and I agree. Some simple but profound things need to happen in our NHS and our hospitals. Nurses should be hired and promoted on the basis of having compassion as a vocation, not just academic qualifications. We need a style of leadership from senior nurses which means that poor practice is not tolerated and is driven off the wards. Another issue is whether pay should be linked to quality of care rather than just time served at a hospital. I favour this approach.
Secondly, there is accountability and transparency. The first Francis report set out clearly what happened within Stafford hospital. It should have led to those responsible being brought to book by the board, the regulators, the professional bodies—and, yes, even by the courts. But this did not happen.
Most people will want to know why on earth not. We expect hospitals to take disciplinary action against staff who abuse their patients. We expect professional regulators to strike off doctors and nurses who seriously breach their professional codes, and, yes, we expect the justice system to prosecute those suspected of criminal acts, whether they take place in a hospital or anywhere else. In Stafford, these expectations were badly let down. The system failed. That is one of the main reasons we needed this inquiry.
Now that the recommendations about systemic failure are public, the regulatory bodies in particular have difficult questions to answer. The Nursing and Midwifery Council and the General Medical Council need to explain why, so far, no one has been struck off. The Secretary of State for Health has today invited them to explain what steps they will take to strengthen their systems of accountability in the light of this report, and we will ask the Law Commission to advise on sweeping away the Nursing and Midwifery Council’s outdated and inflexible decision-making processes.
The Health and Safety Executive also needs to explain its decisions not to prosecute in specific cases. Indeed, Robert Francis makes a strong argument that the executive is too distant from hospitals and not the right organisation to be focusing on healthcare and criminal prosecutions in such cases. We will look closely at his recommendation to transfer the right to conduct criminal prosecutions from the Health and Safety Executive to the Care Quality Commission.
Thirdly, we must purge the culture of complacency that is undermining care in our country. This requires a clear view about what is acceptable and what is not. In our schools, we have a clear system of deciding whether a school has the right culture and whether it is succeeding or failing. It is a system based on the judgment of independent experts, who walk the corridors of the school and analyse more than just statistics. The public therefore know which schools near them are outstanding and which are failing. They have a right to know the same about our hospitals. We need a hospital inspection regime that does not just look at numerical targets but examines the quality of care and makes an open, public and explicit judgment.
So I have asked the Care Quality Commission to create a new post—a Chief Inspector of Hospitals—to take personal responsibility for this task. I want the new inspections regime to start this autumn. We will look at the law to make sure that the inspector’s judgment is about whether a hospital is clean, safe and caring, rather than just an exercise in bureaucratic box-ticking. In the mean time, I have asked the NHS Medical Director—Professor Sir Bruce Keogh—to conduct an immediate investigation into care at hospitals with the highest mortality rates and to check that urgent remedial action is being taken.
Complacency in the system has meant that all too often, patient complaints have been ignored. I am today asking the honourable Member for Cynon Valley and the Chief Executive of South Tees Hospitals NHS Foundation Trust, Tricia Hart, specifically to advise how hospitals in the NHS should handle complaints better in future.
I have talked today about some of the systemic failures, but at the heart of any system are the people who work in it and the values and vocation that they hold. As Francis says early on in his report, and it is worth me quoting in full:
‘Healthcare is not an activity short of systems intended to maintain and improve standards, regulate the conduct of staff, and report and scrutinise performance. Continuous efforts have been made to refine and improve the way these work. Yet none of them, from local groups to the national regulators, from local councillors to the Secretary of State, appreciated the scale of the deficiencies at Stafford and, therefore, over a period of years did anything effective to stop them’.
What makes our National Health Service special is the very simple principle that the moment you are injured or fall ill, the moment something happens to someone you love, you know that whoever you are, wherever you are from, whatever is wrong, however much you have in the bank, there is a place you can go where people will look after you and do everything they can to make things right again. The shocking truth is that this precious principle of British life was broken in Mid Staffordshire. We would not be here today without the tireless campaigning of the families who suffered so terribly, and I am sure that the whole House will join with me in paying tribute to their incredible courage and determination over these long and painful years.
When I met Julie Bailey and the families again on Monday, she said to me that she wanted the legacy of their loved ones to be an NHS safe for everyone. That is the legacy that together we must secure. I commend this Statement to the House”.
My Lords, that concludes the Statement.
Lord Hunt of Kings Heath
My Lords, I thank the noble Lord the Leader of the House for repeating the Prime Minister’s Statement and also for the tone that he has adopted in repeating the Statement. I remind the House of my health interest in the register.
The NHS represents the best values of this country, but what happened at Stafford was an appalling betrayal of those values. We all place trust in the National Health Service. We expect hospitals to be places of the utmost compassion and the highest standards of care. However, at Stafford patients became victims, left lying in soiled sheets, with untreated bedsores, desperately calling for help, but with no response. Relatives who pleaded for assistance were ignored or even made to feel intimidated. I join the noble Lord the Leader of the House in paying tribute to all those former patients, relatives and staff who came forward to speak out, including those who gave evidence to this and to previous inquiries. I also thank Robert Francis for his work on this and his previous inquiry.
What happened at Stafford was not typical of the NHS. Day in, day out, the vast majority of those who work in the NHS deliver great care to patients up and down the country. They are as horrified at all of this as we are. When the first investigation laid bare the facts in 2009, the then Prime Minister apologised on behalf of the Government and the NHS to the patients and families who suffered so badly at Stafford hospital. He was right to do so. I reaffirm that today and our thoughts are with all the victims and their families. What happened has no place in any NHS hospital. We must ensure that it does not and cannot happen again.
Today’s report makes clear that primary responsibility for what happened lay with the board of the hospital. However, there are wider lessons that politicians on all sides must learn, including a lesson for all parties about the dangers of frequent reorganisations of the NHS.
I should like to ask the noble Lord the Leader of the House some specific questions. First, regarding the voice of the patients, effective regulation is essential, but regulators cannot be everywhere, spotting every problem. Patients, their families and staff are everywhere, so we must ensure that they are properly heard. The challenge is to change the culture of the NHS and to support rather than to shut out people who complain. The NHS constitution offers protection for whistleblowers and we support moves to strengthen that. However, the report also highlights criticisms and concerns about both previous and current arrangements for patient bodies. Does the noble Lord agree that, whatever bodies we choose to represent patients, they need to be independent and to have the powers to be an effective voice and challenge to the system. I am sure the noble Lord will have had reported to him last night’s debate on the regulations in relation to local Healthwatch and concern that, as they were drafted, they restrict the activity of local Healthwatch to campaign. I wonder whether, as part of the consideration of the recommendations of the Francis review, the Government would agree to look at the remit and powers of local Healthwatch in order that we might consider strengthening them.
I move to the question of staffing. The basic requirements of any NHS hospital are that there are sufficient staff to look after patients and that they act with compassion. In too many cases at Stafford, this did not happen. Compassion should always be at the heart of nursing, and it needs to be at the heart of nurse training. We support moves to make this more central to nurse training. As Robert Francis has previously said in explaining what went wrong,
“the overwhelmingly prevalent factors were a lack of staff, both in terms of absolute numbers and appropriate skills”.
Does the noble Lord accept the report’s point that we need to consider benchmarks on staff numbers and skills? Can the noble Lord comment on any resource implications that follow from such agreement? Noble Lords will be aware that many NHS trusts are facing severe financial challenges at the moment. Do the Government consider that the NHS has enough resources to ensure that it has the right number of staff in place? This morning the Prime Minister assured the other place that funding is there, but I wonder whether we can be so confident.
My third question relates to regulation. The problems at Stafford should have been picked up much earlier. Monitor and the Healthcare Commission should have worked together much more closely. The Francis report recommends that the two should come together or evolve into a merger. I was rather surprised to read on the Health Service Journal webpage tonight that the Secretary of State has already rejected this recommendation. I was very surprised because in the Statement that the noble Lord has just repeated he said that every recommendation would be studied fully. Can he confirm whether a decision has been made that a merger of Monitor and CQC will not take place? That is a very important matter.
In his Statement the Prime Minister also said that a chief inspector of hospitals would be appointed in the autumn. Can the noble Lord confirm that legislation would be required for that, or is there to be an instruction to CQC to make such an appointment? Is it intended that the remit of the chief inspector of hospitals should cover other parts of the National Health Service? Will there be a chief inspector of primary care? Will there be a chief inspector of social care? Is it intended that the chief inspector will become in effect the boss of CQC, or is this to be a separate appointment? If it is to be a separate appointment, will this person hold independent office, or will he or she be part of the managerial hierarchy of CQC?
Robert Francis rightfully made a great deal of the importance of patient safety. He also referred to the functions of the former National Patient Safety Agency with regard to incident reporting. He said:
“More could be made of this important source of information”.
The noble Lord will be aware that the Health and Social Care Act abolished the National Patient Safety Agency. As part of their consideration of the recommendations of Francis, I ask that the Government consider re-establishing the National Patient Safety Agency as a wholly independent organisation.
I come to the question of healthcare assistants, who do so much important work in our hospital wards and communities. Does the noble Lord agree that we need training and registration to improve standards and safety? In paragraph 1.194 of the summary of Robert Francis’s findings, he makes the point that,
“healthcare support workers … are not subject to any system of registration”.
He says firmly:
“A registration system should be created under which no unregistered person should be permitted to provide for reward direct physical care to patients currently under the care and treatment of a registered nurse or a registered doctor or who are dependent on such care by reason of disability or infirmity in any hospital or care home setting”.
I am sure the noble Lord will have been briefed that in our debates on the Health and Social Care Bill as it went through your Lordships’ House we argued strongly for there to be regulation of healthcare assistants. The Government resisted that. In their consideration of the Francis inquiry recommendations, will they now give sympathetic consideration to the registration of healthcare workers?
I come to my fourth question, which concerns foundation trusts. I am the chair of a foundation trust. I am enthusiastic for them, as I think are many noble Lords on both sides of the House. The journey to foundation status has been a beneficial process for many trusts, but in the case of Stafford it was not. Has the noble Lord made any reassessment of the current timetable for a trust to achieve foundation status and whether more flexibility is needed? Can he assure me that no pressure will be put on the NHS Trust Development Authority to speed up the authorisation of foundation trusts?
The original government intention was for all NHS trusts to become foundation trusts by 2014. I understand that that has slipped. I should be grateful if the noble Lord would confirm that the essential requirement is that a trust is ready to become a foundation trust, not having to fit a timetable that would lead to the kind of pressures that the Mid Staffordshire trust clearly felt itself under.
That brings me to targets. It was suggested, in the briefing before the report was published, that targets themselves were to blame. However, today’s report does not support that. It says that,
“it is not suggested that properly designed targets, appropriately monitored, cannot provide considerable benefit to patients”.
Does the noble Lord accept, as Francis’s analysis suggests, that the problem at Stafford was how the A&E target was managed by the hospital, and that many hospitals up and down the country have delivered excellent care while meeting the accident and emergency target? We must never go back to the bad old days when people were left waiting for hours on trolleys and 18 months for an operation.
I turn to integration. The ageing society is bringing a whole new set of demands on to the NHS: a group of elderly and infirm patients who require not just physical treatment for their immediate illness but much greater care and attention for their basic needs. As Francis says, we must address this new challenge that the NHS faces and ensure that we avoid a repeat of what happened at Stafford. Does the noble Lord agree that in every hospital we need to put in place the right support for the whole of a person’s needs, including for our elderly population? Does he agree that that means breaking down the barriers between healthcare and social care? Does he also agree that the cultural change that the Prime Minister referred to in relation to hospitals applies as much to community, primary and social care?
The number of noble Lords who are here at this time of night to listen to the Statement indicates that many noble Lords have a great deal of interest in this. I ask the noble Lord to pursue through the usual channels the opportunity for an early and lengthy debate on the Francis report. That would be very much appreciated by noble Lords.
We cannot turn back the clock and undo the damage at Stafford but we owe it to those who have suffered, to the people of Stafford and to the country as a whole to work together to act on this report and prevent a scandal like this from happening elsewhere. We on this side of the House will play our part in making that happen.
Lord Hill of Oareford
My Lords, I am grateful for the way in which the noble Lord, Lord Hunt of Kings Heath, put his questions and responded. I agree with what he said at the outset about the NHS representing the best values of our country, his important point that these awful things are not typical of everything that goes on, and that there are many hundreds of thousands of people delivering great care. He is right to remind us of that but also right to be clear, as he was, that together we need to face up to the problems that this extremely important report from Mr Francis has uncovered. I also take the noble Lord’s point, which the Francis report mentions, about the dangers of over-frequent reorganisation. All parties need to be conscious of that, and I think that all politicians are sometimes guilty of it. One of the great lessons of all systems is that the simpler and more stable one can keep them, the better the framework in which people have to operate.
I agree with the noble Lord about the importance of patients having a strong and independent voice. I think that is the way he put it. I certainly know from the world of education that it is hugely important to find ways to ensure that parents and those who care and have to use the services can plug into the system and can help to hold those services to account, and the findings in the Francis report underline the effort that we need to make to ensure that that happens.
On the noble Lord’s specific question about Healthwatch, I know that my noble friend Lord Howe spoke yesterday evening about some of the ways in which we are trying to strengthen the role and voice of patients and the public through local Healthwatch. We are determined to ensure that local Healthwatch can act as an independent and powerful voice for patients in local areas, and we are creating Healthwatch England so that there is a national voice for patients as well. I agree with him about the importance of that.
I also agree with the noble Lord’s emphasis on having compassion at the heart of medicine. Again, that point came out of the Francis report.
On the question of skills, numbers and finances, the noble Lord is right to say that that question was put to my right honourable friend the Prime Minister by the Leader of the Opposition earlier on. My right honourable friend said that he believes that the resources that are going into the health service, which are increasing, are in place. I agree that we have to ensure that every ward has the right mix and number of doctors, nurses and healthcare assistants so that staff have the time and the skills to ensure that they are providing safe and effective care. I believe that the recent nursing vision, Compassion in Practice, set out new measures to help to ensure that locally, but I know that my right honourable friend the Health Secretary will study the report to see whether there are other steps that may need to be taken.
On the subject of the chief inspector, again there is an analogy with schools. Having a figure that we can identify as a champion of standards is going to be a good step forward. He or she will be part of the CQC. The precise process by which they operate will need to be sorted out in detail over the days and weeks to come, but obviously we will share that with the noble Lord and other interested Peers.
On the noble Lord’s question about the National Patient Safety Agency, I understand that that was merged into the Commissioning Board to try to make safety integral to the commissioning of care. We need to ensure that happens.
On the merging of Monitor and the CQC, another important question, the noble Lord asked for reassurance that a decision on that has not already been taken. I can say to him that it has not. We have already made clear that we aim to create more generally a single failure regime under which organisations can be held accountable for failures in care, as well as with their finances. Francis’s recommendation to merge those two organisations is one that we will consider. There are clearly questions about the balance between making sure that quality is high and money.
On the noble Lord’s important question about the registration and training of healthcare assistants, we are certainly committed to supporting healthcare assistants and support workers to provide proper, compassionate and safe care. We will take Francis’s recommendations seriously, but the report in another place also points out, rightly, that compulsory statutory regulation does not necessarily prevent poor care, and that cultural issues—one of the recurring themes of the report—are indeed central.
The noble Lord asked about the effect on the quality of care of the process of moving to foundation trust status. Like the previous Government, we believe that foundation trusts can make our hospitals more accountable and responsible and better able to take decisions. However, the move to trust status for Mid Staffs was at the expense of patient care, and that was clearly wrong. I agree with the noble Lord that it is a move that must not be rushed and that patient care must come first. In answer to his question: yes, there will be no pressure. The essential requirement is that they be ready.
In response to the noble Lord’s question about targets, I accept—and this is clearly the case in all sorts of areas—that there is a place for sensible targets. We also know and accept that if we have the wrong targets, or too many of them, there is sometimes the danger of perverse incentives and confusion as well. As the noble Lord said, getting that balance right is extremely important.
On integrated services, it is important to make sure that we are able to look across the piece, and that there are not the barriers that he described. Of course I recognise the amount of interest in the subject. I know how much expertise there is here, and I am very happy to see whether we can find an opportunity for a fuller debate through the usual channels, which I think would be well received by noble Lords.
Earl Attlee
My Lords, I remind the House of the benefit of short questions in order that my noble friend the Leader of the House can answer as many questions as possible, which I am sure he is very keen to do. If necessary, I can help.
Baroness Jolly
My Lords, we, too, welcome the Francis report, and the many recommendations that we believe will strengthen the whole NHS. In particular, we welcome Francis’s recommendation of a statutory duty of candour: the duty of a clinician to explain and apologise when things go wrong. When and how does my noble friend see this being implemented?
Lord Hill of Oareford
As my noble friend said, Robert Francis certainly recommended a statutory duty of candour, and my right honourable friend the Secretary of State will give full consideration to that. So far, he has said that he will work through all 290 recommendations in the report, and that the Government aim to give an initial response within a month. Precisely what the timeframe will be on all these elements, I cannot say. As my noble friend will know, in the interim we created legally binding rules that require the NHS Commissioning Board to insert a contractual duty of candour into the NHS standard contract in 2013-14. That means that NHS hospitals will be required contractually to tell patients when they have been significantly harmed by a patient-safety incident during their care. Otherwise, I take my noble friend’s point on board.
Lord Campbell-Savours
My Lords, the Statement says:
“every carer, every member of staff will be given the opportunity to say whether they would recommend their hospital to their friends or family. This will be published … where a significant proportion of patients or staff raise serious concerns about what is happening in a hospital immediate inspection will result and suspension of the hospital board may well follow”.
That is a very radical proposal. My question is very simple: will a member of staff making such a report have their name published, or will their contribution be anonymous? If it is not anonymous, this system will not work.
Lord Hill of Oareford
I understand the noble Lord’s point. Like many things in this report, we will need to consider exactly how the details of the system will work. Generally, on whistleblowing and giving people the opportunity to make their views known, we have already taken steps to try to protect and support whistleblowers. We are funding a helpline to support them, we are embedding rights in their employment contracts, and we are issuing new guidance. We will be studying the report to see whether there are any further procedural or legal measures, and I hope that we will be able to provide more information to the noble Lord in due course.
Baroness Knight of Collingtree
My Lords, would that it were only the Mid Staffordshire hospital that was guilty of the kind of wrongdoing that we have been talking about tonight. My noble friend has made a wonderful, genuinely caring, speech about what has been happening and his determination to stop it. However, I feel very strongly about this, because I have tried for years and years, from 2002 onwards, to bring cases to this House. We should sometimes listen to people, here and in the other House, who bring cases before their House to be considered.
As many Members know, I produced a long document of 26 cases of the various bad treatment of patients. I went to endless trouble to make absolutely certain that every fact I put forward was correct, and that each patient for whom I pleaded had given me full permission to raise his or her case. The noble Lord, Lord Hunt, might remember the occasion when I went to him with a long and detailed dossier of these cases. It was certainly not his fault, but a number of those 26 cases were never investigated at all, and I never got an answer. I even tried to get through this House a parents’ protection Bill, which was quietly squashed at the time. My plea to my noble friend is that he also lets Members of Parliament, in one House or the other, be heard. They do not raise cases for fun but because of their feeling for the patients or relatives who have contacted them. I ask him please to listen in future, because what they say is of crucial importance.
Lord Hill of Oareford
I very much agree with the broad point that my noble friend is making. One of the recurring themes of the report is that whomever complaints came from—family or whoever—they were not being listened to. I am sure that my noble friend will have noted the part of my right honourable friend the Prime Minister’s Statement that announced that there will be a complaints review, which will be jointly led by Ann Clwyd MP—that makes the point about Parliament being involved in this process—and Professor Tricia Hart, chief executive of South Tees Hospitals NHS Foundation Trust. We need to make sure that we have these proper mechanisms and that where there are concerns, they are raised and listened to.
Baroness Emerton
The report calls for NICE to devise tools to calculate safe staffing levels, which have already been mentioned this evening. The evidence is growing. A group of senior nurses has come together to collect the evidence. The evidence base determines that safe and cost-effective care is determined by the safe levels of trained staff—registered nurses—to support workers. Will the noble Lord the Leader of the House be taking from this report that NICE will be devising tools to determine safe staffing levels as an urgent requirement because until we get them right, we are not going to see safe care delivery?
On the registration of support workers, one reads in the report that patients were suffering appalling neglect and mistreatment. Hundreds of people suffered from being given the wrong drugs because support workers were not trained. Please will the noble Lord take away the recommendation on the registration of support workers as a matter of urgency?
Lord Hill of Oareford
As I think I said in my earlier response to the noble Lord, Lord Hunt of Kings Heath, the registration of support workers is something that the Government will consider as part of their response to the Francis recommendations. We need to have well trained staff at all levels.
On the noble Baroness’s other point about ratios, I am sure that my colleagues in the Department of Health will reflect on what she said. Ultimately, decisions about staffing levels and so on need to be made locally, but I know that as part of this whole debate the department will be thinking in every way it can to try to make sure that all these sensible points are acted upon.
Lord Harris of Haringey
The noble Lord the Leader of the House has referred to the fact that there is now to be a contractual obligation of candour on healthcare organisations. Presumably Robert Francis was aware of that in framing his recommendations, feels that it is inadequate and is advocating a statutory duty of candour, which, so far, the Government have resisted. I hope that policy will change. The noble Lord the Leader of the House also talked about the importance of an independent voice for patients. Given the suggestion that has been made about merging Monitor and the CQC, will he accept that it is therefore inappropriate that Healthwatch England, the national voice of patients, should be subordinate to that monster new body? Secondly, does he also accept that it is inappropriate, if you are to have an independent voice, that local Healthwatch is subordinate to local authorities, some of the organisations that they are supposed to monitor?
Lord Hill of Oareford
On the duty of candour, I said in my response to the noble Lord’s noble friend that the suggestion about a statutory duty of candour is something that the Government will consider in their response to Francis. I pointed out that there is already a contractual duty in place, but I understand the point that he makes.
So far as Healthwatch England is concerned, I understand that that was debated at length. My noble friend Lord Howe is sitting here, and I am sure he will have heard the points that the noble Lord has made.
Baroness Williams of Crosby
My Lords, like many others, I am sure the House would like to ask the noble Lord the Leader of the House to pass on our appreciation of the very restrained and moving Statement by the Prime Minister which in many ways reflects his own experience of the National Health Service in respect of his son, which I shared in respect of the death last year in an NHS hospital of my son-in-law. One could not have asked for better treatment.
In some ways, the tragedy of Mid Staffs is precisely that it is one of the few things that have lowered trust in the NHS, and that is a very serious outcome. The many relatives who waited for month after month and year after year for some kind of justice—there are echoes of Hillsborough in that—felt that they were not being listened to, despite the agony that they were going through.
Let me very quickly say just a word about accountability. My only criticism of the Francis report, although I have not had the opportunity to read every word of it, revolves around that word “accountability”. Accountability has to go to the very top. It cannot stop half way. I need to say quite loudly that two gentlemen have something to answer for, if only to comment on the recommendations and see if they meet the difficulties that have arisen in Mid Staffs. The first is Sir David Nicholson, the chief executive of the NHS Commissioning Board, who was present in a very senior capacity. I am not trying to blame him, but to say that I think his advice on how to avoid what happened then would be very valuable. The other person was Secretary of State in the last year of the period which the Francis report covers and is the right honourable Mr Andrew Burnham. Many of us—
Baroness Williams of Crosby
Many of us during the course of the debate were obliged to listen to a very great deal of what I might call Twitter propaganda, and I think it is only fair to say that Mr Burnham has a responsibility to respond to this report.
Baroness Williams of Crosby
I am going to continue, so noble Lords had better get used to it.
Earl Attlee
My Lords, I think the sense of the House is that we would like to hear from the noble Lord the Leader of the House.
Lord Hill of Oareford
I agree about the theme, which I think we have all accepted, that there is a common responsibility. One of the themes of the report is that we should not seek to single out individuals or particular organisations for risk of not seeing the bigger picture which, as my noble friend said, is that there is a common responsibility.
Lord Cormack
My Lords, for some 35 years, my constituents in South Staffordshire had good healthcare from Stafford hospitals. It was only in this very bad period that we had these appalling stories, and we all feel ashamed. It is important to recognise that there was good healthcare before, and there must be after. In that context, will my noble friend assure me that all those appointed to boards of hospitals will receive adequate training about what their true responsibilities and powers are?
Lord Hill of Oareford
That is an extremely important point, and it is part of what the Government need to do in their response in ensuring that boards accept their responsibility and understand what it is. It is not just to do with running hospitals economically and efficiently; above all, it is to do with patient care.
Lord Patel
My Lords, I have questions relating to two areas in the Statement on which a decision has already been made. The first relates to the Prime Minister asking Sir Don Berwick to advise on zero harm. The noble Lord the Leader of the House did not answer the question asked by the noble Lord, Lord Hunt, about whether it is now the Government’s intention to re-establish the National Patient Safety Agency. I declare an interest as I was chairman of the National Patient Safety Agency for four years. I have worked with Sir Don Berwick in my hospital. The implementation of zero harm is possible in patient care in certain areas, but to implement it requires an organisation in every hospital and a national organisation to monitor it. How is it intended that that will happen? The second decision was to ask Sir Bruce Keogh, the medical director, immediately to investigate hospitals that have high mortality rates. That implies that we know which hospitals they are. Will the noble Lord the Leader comment on that? I hope that investigation will also include all higher mortality rates including still births, neonatal deaths and infant deaths.
Lord Hill of Oareford
My Lords, perhaps I responded elliptically to the noble Lord’s first point about whether we had plans to reintroduce the agency by saying that it had been merged. We do not have plans to reintroduce it. On his second question about Sir Don Berwick, it is for him now to work out how he will carry out his review and come back to us with his recommendations. On his third question about the immediate inquiry being carried out by Sir Bruce, mortality rates are the factor he will take into account in identifying the cases that would most benefit from his urgent attention.
Lord Wills
My Lords, I welcome the Minister’s emphasis on the importance of involving patients and their relatives more centrally in decisions about their own care. Does the Minister think that principle should be extended throughout the NHS, including the new policy on value-based pricing for new medicines?
Lord Hill of Oareford
I certainly take the point that that principle is one we need to apply in our response. As regards the specific question, my noble friend Lord Howe will follow up with the noble Lord.
Lord Willis of Knaresborough
My Lords, Francis quite rightly recognises the contribution made by healthcare support workers. He makes seven recommendations about how they should be included within a reinvigorated National Health Service. The report makes the claim that healthcare support workers have to be properly trained to appropriate standards. I want to ask the Leader of the House two questions. First, will those standards be set independently, by the NMC or another body, and not the department? Secondly, will he guarantee to the House tonight that, whatever those standards are, the training will be mandatory, not an optional extra?
Lord Hill of Oareford
My Lords, at the moment I cannot give the specific assurance my noble friend would like because the Secretary of State for Health has to look at all the recommendations, working out how to respond to them and the most sensible way forward. However, it is clear that the standards would need to carry weight and be recognised as doing so. I know my right honourable friend the Secretary of State will reflect on that and that my noble friend Lord Howe will have heard the points the noble Lord has made.
Baroness Masham of Ilton
My Lords, can the Leader assure me that there will not be bullying and that there will be kindness? Kindness does not cost money. Nurses should be kind and treat patients with dignity.
Lord Hill of Oareford
My Lords, I could not agree more. One of the things that are most distressing when one strips away everything to do with structures is the lack of common humanity. That is the most extraordinary thing. I agree very much with the noble Baroness about the importance of compassion.
Council of Europe: Local and Regional Democracy
(11 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text
The Earl of Dundee
To ask Her Majesty’s Government, following the United Kingdom’s recent chairmanship of the Council of Europe, what plans they have to assist local and regional democracy in Europe.
The Earl of Dundee
My Lords, in my remarks today I would like briefly to connect together three themes. The first is the huge importance of local democracy—its obvious and immediate relevance; its scope for enhancing national and international democracy; and conversely regarding the latter, its ability to reduce or remove what to some extent has lately become alienation or even mistrust. Secondly, there is the role of the Council of Europe in promoting local and regional democracy. Thirdly, there is the opportunity which our Parliament and Government now have to assist, to guide, to lead initiatives of good practice and to nurture and encourage progress.
The European Court of Human Rights was able to sharpen our focus upon local democracy. For its recognition of the right to individual petition puts state and citizen on an equal footing. However, it took the devastation of two world wars for that notion to be adopted. Previously, it had been assumed that the state would always come first even if that precedent infringed the rights of the individual. Then after European Union expansion in 2004, there was the Warsaw Summit declaration in 2005. This calls for the reinvigoration of democracy, both nationally and internationally, through its strengthening at local and grass-roots levels. Not least, therefore, have those two interventions helped to revise political theory and how we view the Council of Europe’s affiliation of 47 states. For now we evaluate the worth of political delivery much more in terms of the well-being of families, communities and people in their daily lives. To those priorities we believe governments and institutions should play second fiddle; yet at the same time we know perfectly well that thereby the role and sovereignty of nation states need not be in the least undermined or diminished.
National democracy is never short-changed by local democracy. In fact, the reverse is the case. For more often than not its quality and validity reflect a combination of local results in the first place. It follows from this that the advance of local democracy or active citizenship is no longer speculative or part of some new political advocacy. Instead, it has become a consensual matter for all of us to see how best to put it into practice within Europe’s present stage of development.
This leads to the role of the Council of Europe. Already that institution has made a wonderful and unprecedented contribution to stability, human rights and the rule of law. Its membership now includes most of central and eastern Europe. We are enormously grateful. However, its current dealings with local democracy should be changed in certain respects. Within the Council of Europe itself there should be a common agenda. This is lacking. Such a common agenda ought to seek to implement the Chavez report—agreeing priorities annually, undertaking activity competently and transparently and adopting administrative structures which correspond to the new approach.
Here I pay tribute to my noble friend Lady Hanham. During the United Kingdom’s six-month chairmanship of the Council of Europe last year, she was the Minister responsible for local democracy. A very good start was made in drawing attention to these prescriptions. As a result the Committee of Ministers has recently agreed to the case for much better internal co-ordination and has referred matters arising from the Chavez report to an expert group. For the reforms he encouraged I also pay tribute to Keith Whitmore, who retired last year as President of the Council of Europe’s Congress of Local and Regional Authorities.
Yet the Council of Europe’s two main branches, the congress and the parliamentary assembly, still do not work enough together. They should do so, and there ought to be an annual procedure for that. Will the Committee of Ministers call for this? What predictions this year does my noble friend make for the progress of the Chavez report itself? In what ways will she and her department be able to help that process?
Then, started in 2006, there is the Council of Europe’s Centre of Expertise for Local Government Reform. Already to states within central and eastern Europe it has provided much useful guidance on the nuts and bolts of local government systems and methods. This year it starts a new venture and facilitates a working programme between parts of the United Kingdom and parts of Croatia, a country about to become the 28th member of the European Union this July. Within the programme certain regions and cities directly work together. The agenda includes mutual trade, education and cultural exchanges and those on good practice for sustaining stable communities. It is a great pleasure for me to assist this programme as Scottish consul for Croatia, as well as in my capacity as chairman of this Parliament’s all-party group for that country. Thereafter, and between different cities and regions elsewhere in Europe, the centre aims to encourage further working synergies. Clearly, those expedients serve to strengthen local and regional democracy. What plans therefore have the Government to support them?
Germane to the quality of local democracy in Europe, there are also inquiries and policies currently embarked upon by the Government for the benefit of the United Kingdom. Two such include the well-being of communities and the promotion of active citizenship. Both considerations lie at the centre of effective local democracy. What intentions on these subjects have the Government to use, once information is available, our own United Kingdom analyses and recommendations to assist Europe? During an economic crisis some might possibly object that it is wrong to spend time and effort on local democracy at all. However, the complete opposite is surely the case. For improved local democracy reduces costs and facilitates growth, initiative and creativity. At the same time it is also what is needed to protect values and rights. The United Kingdom has much experience in this field. Last year, our Council of Europe chairmanship pointed the way. That direction we must now follow with confidence and vigour.
Lord Judd
My Lords, I am sure that the whole House is grateful to the noble Earl for introducing this debate tonight. He has great experience and tremendous commitment to the Council of Europe, and it is good to hear him speak on the subject. There will be other speakers in this debate and in the gap who will bring a great deal of intimate knowledge and commitment to our proceedings.
Looking back on my own time, some years ago in the Council of Europe, I am convinced that it has a potentially huge contribution to make in strengthening democracy across Europe, not least in some of the former Soviet bloc countries. At the end of the Second World War, the founders of the Council of Europe—indeed, those behind the whole European initiative, including the whole European Union—not only saw democracy as key to the future stability of the continent but also saw that if democracy was to work it was not simply parliamentary institutions and elections but all the other infrastructure that was so necessary, including the rule of law and, of course, human rights. They had a searing experience of a denial of human rights that led to, and was involved in, the Second World War and saw that as absolutely basic to stability and an effective democracy. So the European Court of Human Rights, to which the noble Earl made reference, was an essential part of this.
I want to concentrate my short intervention on one very significant member of the Council of Europe—Russia. The extent of its pervasive corruption, the weakness of the courts and legal procedures at national, regional and local level, with a penal system that is appalling and enshrines some of the most barbaric treatment of prisoners possible, and the carefully neutered political role of the Duma itself, have significance for the quality of democracy and, of course, for the countries on Russia’s borders. Here I turn to the north Caucasus. I was very much involved there as rapporteur on the conflict in Chechnya to the Parliamentary Assembly of the Council of Europe. Some people say now that things are better because there is order. We have to understand that, in so far as there is an appearance of order, it is the order of tyranny, oppression and fear.
It is essential to recognise that extrajudicial killing still takes place on the say-so of those who hold power. Still intimidation of witnesses happens, and of the relatives of those who are being pursued. There is harassment across the whole nature of society for those who would wish to generate independent thinking.
In the midst of all this, there are, of course, very brave and courageous people who are trying to put things right. There are lawyers, academics and professional people who make their stand. There are, of course, voluntary and non-governmental organisations—and I think particularly of Memorial, one of the most courageous organisations that I have ever encountered, with a tremendous degree of professional competence and excellence that it has built up over the years. These organisations make civil society and are absolutely essential to a functioning democracy, but they are being deliberately curbed within Russia and places such as the north Caucasus.
With the quality of democracy at local, national or regional level, it is terribly important to be able to bring cases before the European Court of Human Rights. Memorial and others have done this. There are an impressive number of judgments by the court that uphold the complaints that have been brought. Those complaints go to the Committee of Ministers to see to the follow-through and the implementation by Russia of the findings of the court. For year after year the performance of the Committee of Ministers has been lamentably weak; it goes through the formalities of reprimanding or criticising Russia, but it has really not put the muscle or force of argument as it is essential that it should have done. I ask the Minister for a specific assurance that, if we are to make democracy work in these areas, we must recognise the importance of the European Court of Human Rights, which needs to be properly resourced for its work, but also make sure that the Committee of Ministers follows through and does not let Russia off the hook in its failure to implement what is recommended by the judges.
Lord Greaves
My Lords, I feel a little bit out of place, in that I am not expert at all in the matters of the Council of Europe and local and regional government in Europe, or indeed the Congress of Local and Regional Authorities, although I have spent a lifetime reading about their activities of interest. I was very grateful for the extensive briefing from the House of Lords Library, which alerted me to all kinds of things.
I shall speak very briefly about these matters, to echo the generous commendation of the noble Earl, Lord Dundee, of my Liberal Democrat colleague, Keith Whitmore, for the enormous amount of work that he has done on these areas over many years, and in particular for his work as chair of the congress last year. I have a note here from the secretary-general of the congress, which says:
“First of all the tremendous work of Keith Whitmore should be mentioned … he does not seem to be appreciated enough in his home country”.
That may be so. I remember Keith when he was a bright leading light of the Young Liberals in Manchester, and a very important person in the resurrection and regeneration of liberalism in that historically very great Liberal city.
I shall say no more about that, because I am taking part in this debate as an excuse to say a few words about the north of England as a very important region in this country and in Europe. In general, the larger countries of Europe have regional governments. The systems vary a lot. In Germany, with the very strong länder, there is a fully fledged federal system entrenched in the constitution of the country. Spain is constitutionally a unitary state, but it has extensive though asymmetric devolution to autonomous democratic regions. The strongest of these, particularly Catalonia and the Basque country, approach something akin to the status of regions within a federal system.
In France and Italy there are democratic regional authorities that are more akin to very large local authorities in their constitutional status and some of their functions. Nevertheless, they are important bodies within their spheres. Here we have a real constitutional mess. We have devolved elected bodies in Scotland, Wales and Northern Ireland. In Scotland in particular, regardless of what happens in the forthcoming referendum, the Scottish Parliament and the Scottish Government are approaching the status and powers that they would have in a fully federal system.
In the rest of England, apart from Greater London, we have nothing at all. In Greater London, we have a sort of city region with the Greater London Authority, the mayor and the London Assembly, but in the rest of England there is zilch, so our system is a bit like that of Spain except that throughout England we have nothing at all. I would argue that the north of England is a distinctive region. Anybody who visits it knows that it is a distinctive region within both this country and Europe. Socially, culturally, environmentally and economically it is regionally distinctive and forms a regional unit.
In the three subregions of the north of England—the north-east, the north-west and Yorkshire, although they may have slightly wonky boundaries at the moment, but never mind—regional bodies have developed on an ad hoc basis over the past few decades, which resulted in the regional development agencies, which had considerable influence and finance but were not democratically accountable. Regional assemblies were set up in these regions which, if they were democratic at all, were not directly democratic. They were indirectly democratic and they included representatives of business, trade unions and so on. Nevertheless, they met and they represented the regions, although it is fair to say that they did so in secrecy—not of their own volition—because nobody noticed them. I should say that I was a member of the North West Regional Assembly for a while.
In November 2004, there was a referendum in the north-east to set up a formally elected north-east regional assembly. The proposal was thoroughly trounced by some 696,000 votes to 197,000 on an almost 50% turnout. That really killed off the idea of elected democratic regional assemblies or government in the north of England for quite some time. The Conservative spokesman for the regions at that time was Bernard Jenkin—at least they had a spokesman for the regions at that time, so they must have recognised that regions existed. He said that,
“the whole idea of regional government has been blown out of the water”,
and that what was being proposed was a “toothless talking shop”. Both those statements were effectively true. The scheme that was put forward was flawed, the proposals were feeble and the Government at the time failed to put it in the context of what they wanted for the country, or at least for the north of England.
I argue that it is time to start talking about regionalism again in the north of England. I remember that back in the 1960s a group of Liberal candidates in the north-west, of whom a leading light was my noble friend Lord Tordoff, produced a report on regional government in the north-west. That started the ball rolling as far as our party was concerned and had considerable influence.
A body which has been founded fairly recently—it is not a Liberal body—is the Hannah Mitchell Foundation, which is based in and around Huddersfield, the general-secretary of which is Professor Paul Salveson, who is not a political colleague of mine but is a friend. The body has as its first aim,
“influencing the political agenda to support elected regional government for the North”.
Its second aim is that of developing,
“a distinct ‘Northern’ politics based on Labour, Co-operative, Radical Liberal and other progressive traditions”.
I can associate with at least three of those descriptions. Although Professor Salveson is a socialist, and says that he is, I think that a lot of his views, and the views of his foundation and of his campaigning, are ones with which radical Liberals will go along.
A serious debate has to begin again in the north of England. In particular, we need to think about the future and whether, if Scotland is to be an autonomous unit—I do not use the word “independent”—in whatever form, and if it is to have considerable financial powers and influence, effectively the people of Scotland will be running their own affairs to a very large extent. Whatever happens in the referendum, in the coming years it seems that the north of England will have to look at itself and ask, “Are we actually three subregions comprising the north-west, the north-east and Yorkshire, or should we get together as the north of England and say that we are twice as big as Scotland in population, and that if Scotland can do this, why cannot we in the north of England do it?”.
Perhaps that is the future. That is the thought I want to put in the minds of your Lordships this evening. Then we can join in with all the Europeans who talk about regional government and talk to each other from regions in Europe. We can be one of them. At the moment, we have more and more direct rule from London and it is not satisfactory.
Baroness Wilcox
My Lords, I am delighted to speak tonight, albeit briefly, in support of my noble friend Lord Dundee and his championing of local democracy, the role of the Council of Europe in promoting such local democracy and the opportunity which our Parliament and Government now have to assist local democracy in Europe and to guide and lead institutions and good practice initiatives and to encourage progress.
I am a very new delegate to the Parliamentary Assembly of the Council of Europe. For the past few years—certainly for the past two years when I was the Minister for Business and Intellectual Property in this House—I seemed to be in the European Community every week. I thought that it was the biggest show in town. We worked very hard to achieve a single patent and eventually got it after we had been at it for 41 years.
Before that, when I chaired the National Consumer Council, I worked with DG11 in the European Community on consumer empowerment and rights. During that time, things happened in Russia—the noble Lord, Lord Judd, referred to them. I went there several times in connection with the European Community programme for the democratisation of Russia. Therefore, I felt that I would be perfectly okay when I got to the Council of Europe. However, I have been there only once and have already realised that I do not know a thing. It is enormous. Forty-seven countries are involved in it, from the Russian Federation to Iceland, Georgia, Turkey and Azerbaijan. The range, size and shape of the countries involved, which represent 800 million people, is extraordinary.
As we have heard, the work of the Council of Europe concerns human rights, the rule of law and democracy. I took great pleasure in reading Winston Churchill’s speeches and learning how this all started and how we got to where we are today. It is a great honour and delight for me to speak on this matter tonight. I have a lot to learn.
Following the UK’s recent chairmanship of the Council of Europe, the priorities of the current chair, Andorra, are very much the same: that is, improving local democracy and building people’s capacity to participate in grass-roots democracy, which chimes with our Prime Minister’s vision of a big society. Andorra wishes to ensure that democratic principles are established at the lowest level as a solid foundation for national-level democracy and the rule of law. Improved local democracy reduces costs and facilitates growth. It protects values and rights. We in the United Kingdom have much experience in this field and we can certainly lead the way in this work. What plans do the Government have for all this to happen within the area of which we are speaking?
The reason I wanted to speak tonight was not only to support my noble friend and colleague because I believe that what he is saying is absolutely right, but because I believe deeply that we need stable markets and stable economies with which to trade. We need to trade our way out of recession and this is a wonderful way for us to do it. We have the talent, the background and the knowledge to help them bring forward local and regional democracies. If we are able to do it, we will prosper. Our small and medium-sized businesses will feel safe to trade in some of the 47 countries where, at the moment, they would be terrified to trade. This is really important. The Local Government Association’s idea of a team-UK approach to the Parliamentary Assembly of the Council of Europe is a very good one. We have a wonderful opportunity which we should not miss.
Lord Kirkhill
My Lords, I rise with considerable pleasure to thank the noble Earl, Lord Dundee, for introducing this debate. We do not talk about the Council of Europe often enough in this Chamber. Indeed, we do not talk about external organisations often enough. The debate gives us an opportunity to say something about this important body. I emphasise at the outset that the Council of Europe does not, as such, have a statutory authority, but it is the guardian of the Convention on Human Rights and there is, of course, the court in Strasbourg.
A glance at the recent history of the Council of Europe gives an indication of its place in the scheme of things today. In 1989, which is going back a bit, President Gorbachev made his first major European speech. He made the speech in Strasbourg and his theme was that the Council of Europe could become Europe’s common home. What prompted him to develop that theme? Simply put, Europe’s new democracies were a considerable distance from membership of the European Union which was, without doubt, their ultimate aim. It still is, although most have now been able to join. It therefore fell to the Council of Europe to monitor their political and legal aspirations, to keep in touch with the new development and to attempt to assess the legal difficulties some of these new democracies faced, to which end the Committee on Legal Affairs traversed most of Europe much of the time, perhaps for too many months in my own case.
I am getting past making relevant contributions in your Lordships’ House and I forgot to say that the noble Earl, Lord Dundee, has played a significant role in attempting to develop within the European framework a prison system that is tolerable and humane. He has pushed very hard for change in certain areas. It is correct publicly to state that and to commend the noble Earl for those endeavours.
The recent UK chairmanship of the Council gives an opportunity to decide on future regional and local initiatives. Does the Council envisage an association with the Maghreb states? Do the Government envisage the geographic delineation of the Council to move further eastwards than it presently extends? Does the Council feel that its local government—that is to say bringing together the difficulties envisaged by some local authorities and placing the question to others for amelioration—has always been rather cumbersome and not likely to achieve any positive result? These matters should be discussed.
The Council of Europe now finds itself in a position where most of the aspirant states that were young democracies have now been able to join the European Union, which was always their principal aim. They are now much more interested in supporting initiatives of the European Union than they are of the Council of Europe. This diminishes the current role of the Council and its European responsibilities, other than maintaining and underpinning the court in Strasbourg. It is important to understand that the Council of Europe today is more criticised, rather than supported, than was ever the case in the past. These are defining days for the Council of Europe and I await with interest the Minister’s response to these few remarks.
Lord Sheikh
My Lords, I thank my noble friend Lord Dundee for securing this debate. Winston Churchill was the first to speak about the benefits of creating a Council of Europe, so it is fitting that the Council was established by the treaty of London. The Council of Europe was founded upon the principles of upholding democracy and civil liberties. Since its creation, the Council has continued to adapt and expand as a means of tackling the common challenges facing the continent. The streamlining of the Council of Europe’s activities in support of local and regional democracy was one of the priorities of our Government’s recent chairmanship. This included efforts to reach a consensus on the establishment of a single programme of the Council of Europe’s activity on local and regional democracy, to be overseen by the Committee of Ministers. The Congress of Local and Regional Authorities has an important role to play in achieving this aim. It represents a distinct and unique form of grass-roots democracy. It also represents local authorities across all 47 member states.
In 2010, a British councillor was elected as president of the congress. It is the first time that this position has been held by a Briton. This branch of the Council of Europe, in conjunction with increased co-operation with the parliamentary assembly and with Governments, can improve the lives of citizens in member states. The priorities for each year concerning local and regional democracy should be agreed upon in an open and transparent way.
The 2011 Chaves report correctly stated that due to the challenges in an ever-changing world, the level of interrelation between local, regional, national and international institutions must be strengthened. This suggests that multi-level governance is vital for Europe to meet the global challenges facing the continent.
The Reflection Group, chaired by Felipe Gonzalez, previously stated that,
“in a multilevel governance system, each level of authority—European, national, regional and local—exercises its powers according to its own legal responsibility”.
Each decision-making body should act within its powers. The promotion of local and regional democracy should be considered as an essential priority, thereby enhancing its key role in the consolidation of democratic processes in Europe and bringing good practices to other regions of the world. I should be grateful if the Minister could inform your Lordships’ House of any recent dialogue Her Majesty’s Government have had concerning this issue with the current Andorran chairmanship of the Council of Europe.
The Chaves report also stated that the elevation of local and regional democracy in Europe is a fundamental part of the democracy pillar and highlights the synergies required between the Committee of Ministers, the Conference of Ministers responsible for local and regional authorities, and the congress. It is for these reasons that the Chaves report should be fully implemented.
The reforms instigated and continued under the British chairmanship of the Council of Europe with regard to local and regional democracy aim at avoiding duplication, suppressing red tape and maximizing the utility of resources. The Kiviniemi report recommended budget austerity as a result of the current economic crisis. The report also called for greater visibility of the Council of Europe’s work on local and regional democracy. Greater transparency will lead to citizens having increased confidence in the workings of the Council of Europe.
It is important that an annual report be published recording the allocation of funds and the priorities for the coming year. This will lead to greater value for the taxpayer and more efficient spending. I am pleased that the Department for Communities and Local Government regularly publishes transparency reports on its website, showing how and where any sum of more than £250 is spent.
In order to strengthen local democracy and give value for money to European taxpayers, efforts to reform the Council of Europe’s work on local and regional democracy must continue. Achieving strong local governance is vital to the Council of Europe’s democracy agenda. The Council’s support for improving local democracy is in accordance with the European Charter of Local Self-Government and the “Twelve Principles of Good Governance at Local Level”. It follows that reinforcing local democracy will lead to the reinforcement of the local economies of Europe. It is therefore vital to continue the process of streamlining the Council of Europe’s activities in support of local and regional democracy. I look forward to learning more on the progress of the single programme as proposed by Her Majesty’s Government.
Finally, I support the comments of my noble friend Lady Wilcox regarding more trade with European countries.
Lord Prescott
My Lords, I congratulate the noble Earl on securing this debate on the Council of Europe, in which we have had some activities in the past. He referred to his concern about democracy in its national context, and I, as he knows, have been actively involved in the national democracy in one particular country, Armenia. He will recall that the elections were held for the President of that country. I was the leader of the Labour delegation and appointed to be the rapporteur for Armenia for one of the committees of the House. I went to that country during those elections to observe. I have to tell the noble Earl that the result created a riot; 10 people were killed and 130 were thrown in jail, under the threat that they were usurping the powers of the state. I was sent by the Council of Europe to see what had happened and what we could do about it.
My main influence related to the fact that Armenia had entered into an obligation under the human rights convention to observe the democratic process. I could see, on a very quick visit there, that most of those rights had not been observed. It was an eastern European country coming out of being a communist state and wanted a kind of social democratic European stature. It was therefore concerned to make the changes. I also found that I had to convince the President and the rest of Armenia’s Parliament to rewrite the laws on public protest. I got the 130 people out of jail. The election law was rewritten, as were the laws regarding the press and freedom. Even the judiciary was changed in that process. I congratulate the Parliament in that country for seeking to do those things very quickly.
What was the power and influence that enabled that to happen? It happened largely because the country had signed up to an agreement, and I was able to say, “You have an obligation under your membership of the Council of Europe, and you must observe them, or I will have to report back to the Council that you are not observing them. The Council of Ministers would have to take some kind of action”. When European rights were being used to bring about a more democratic framework, there was a stupid argument going on in the other House about whether prisoners should have the vote and whether, therefore, we should withdraw from the convention on human rights.
What may be different in this country is certainly different there. Funnily enough, in Armenia they do not give prisoners the vote, but on the prisoner issue a number of routes can be pursued. It is the people who want to make the issue to leave Europe. Most of them thought they were in the European Union. It had to be pointed out to them in the debate that this was not the European Union but the Council of Europe, and it was different. Those circumstances are a very important part of maintaining democratic accountability.
What is the position now? We have gone through all sorts of manoeuvres and changes and the Court still accepts that we have got it wrong and wants to hear an alternative from us. What is the alternative? What are the Government doing? Are they going to observe the convention on human rights? If not, they can leave the Council of Europe, because the obligation is on Britain to observe human rights. I do not know where the Government stand on this at the moment. Perhaps the noble Baroness can tell us.
Next week I return to Armenia with a delegation to observe the new presidential elections. I certainly hope that it will go much better. I certainly have more confidence that these changes will make the election more democratic than it was on the last occasion. I am encouraged by the independent group of observers at last year’s election, who reported a 62% turnout—a pity we could not get that here, but let us leave that aside—and a quiet and peaceful, vibrant election. Fabulous. I hope that will happen when I observe the presidential election. Unfortunately, one of the presidential candidates was shot in the shoulder last week, but he has insisted that the election takes place. I am waiting to see, since it will be a cold part of the year. I hope it will be a very colourful and peaceful election.
The Council of Europe can play an important part in the democratic process. Sometimes we forget that, but they have obligations, particularly in eastern Europe, to measure up to the democratic accountability that they promised. Any of us who have had influence and been to these eastern European countries—I will leave Russia out of it for the moment—know that accountability is definitely needed. The Council of Europe can fulfil that role; it is a centre of democratic accountability. It can be used effectively, as it was in Armenia. There is still a lot of work to do, but it is not going to phase itself out and is desperately needed if we want democracy to continue in all parts of Europe.
Lord Liddle
My Lords, this has been a very interesting debate. It is always an education as well as a pleasure to listen to the noble Earl, Lord Dundee. This was true on this occasion as it has been on other occasions when I have heard him speak in this House. I join my colleague, my noble friend Lord Kirkhill, in commending him for his work in the Council of Europe.
The Council of Europe is one of the great achievements of the post-war settlement. It was the first immediate product of Churchill’s great call for Europe to unite. We have had many references to Churchill in the discussion tonight. “Europe unite” is still a very relevant call, not on the basis of conquest, as people such as Hitler and Napoleon had tried, but on the basis of democracy and human rights. In that cause, the Council of Europe has played a vital role. I wish the noble Baroness, Lady Wilcox, well in her new role at the Council. Strasbourg is a lovely place to go to, but this is also a very important role, as I think several speakers tonight have demonstrated.
The Council of Europe has gone through several cycles in its life. It was very important right at the start, in the post-war era, then lost importance with the process of European integration through the coal and steel community and then the European Community. At that time a lot of cynics talked about it as a talking shop for superannuated politicians, and like all international organisations there are always problems of efficiency in the way they are run.
The Council never lost its relevance, particularly because of the convention and the European Court of Human Rights. It is good that all we have heard in this debate is praise for this role. So often in our national life, all we get are brickbats thrown at us. It is important that while there is always a case for looking at how we can do things better and reform them, the essential principles are vital for the future.
As my noble friend Lord Kirkhill reminded us, in the period when communism was beginning to collapse and Gorbachev made his great speech about the Council of Europe being Europe’s common home—incidentally, I do not think my noble friend’s speech was the speech of a man who does not have a lot more speeches to make in this House; it was a wonderful speech to listen to—that was a turning point in the Council’s life. It had a very important role post the fall of communism. I saw it when I was an adviser at No. 10 and went to the Baltic states and saw the vital role that the Council of Europe was playing in helping the Russian minorities in Latvia and Estonia to establish their human rights. Without the Council’s intervention, that would have been much more difficult.
With the enlargement of the European Union, there are questions about what the Council’s role now is. Of course, even with an enlarged EU, there is still a lot of Europe beyond the Council, and therefore it has an important and crucial role for the future. My noble friend Lord Judd reminded us—this is relevant to the post-communist world in that part of the globe—that democracy is not just about holding elections but about human rights and the rule of law. As part of that, the promotion of local government and local democracy is crucial.
In many of these countries, local government is seen not as a democratic organ but as an instrument of the central state—an instrument of central administration to keep control, to sustain a political machine with jobs and favours, and to make sure that, when the elections come round, they go the right way. I saw that at first hand in some of the countries that I visited a decade or so ago.
We have to be insistent that local government is not administration; it is about democracy and about communities deciding their future for themselves. Sometimes, to be frank, I think we should remember that in our own country as well. Democracy is not just about majority rule. It is important that the protection of minorities is pursued. On a visit to Ukraine, I saw the way in which the Tartars are treated in the Crimea. It is very important that these minorities are protected.
I wish to make a couple of points on what noble Lords have said and I should like the Minister to expand on them. What is her view of what my noble friend Lord Judd said in his eloquent speech about the role of the Council of Europe in the North Caucasus?
The noble Lord, Lord Greaves, made a very interesting speech, with which I totally agreed. I endorse his compliments on Keith Whitmore’s role but I think that the rest of his speech is for another day.
My noble friend Lord Kirkhill made an important point about the Council of Europe and the Maghreb. This will be one of the biggest challenges facing Europe in the future. The question is: what relationship could we have with those states?
The noble Earl, Lord Dundee, posed questions about the implementation of the Chavez report, about whether the way in which the Council operates at present is internally coherent, and about promoting the work of bilateral exchanges. Those seem to be very relevant questions.
At the end of the debate, we heard from my noble friend Lord Prescott about the real value of what the Council does. I suppose that its real value can be seen in situations such as that in Armenia, with my noble friend turning up on the doorstep to make sure that things do not go too awry. I do not mean that as a joke; I mean it seriously. That is one of the Council’s values—that people of great distinction can give advice and hold people to the standards that they say they adhere to. That is absolutely crucial.
This has been an excellent debate, and we look forward to the Minister’s reply.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I hope that I shall be able to give your Lordships a reply. I think that I am going down with a parliamentary bug. I shall do my best but if I squeak at noble Lords, I hope they will forgive me.
First, like other noble Lords, I thank my noble friend Lord Dundee for tabling this debate. It has, as usual, been a really good debate, with contributions from people who know what they are talking about and who have been closely involved in this subject. My noble friend is a significant member of the Council of Europe and the parliamentary assembly. I am enormously grateful to him because he provided me with great support during our chairmanship of the Council of Europe, when I tried to streamline—as my noble friend Lord Sheikh said—Council of Europe elements.
An effectively operating local democracy is an essential feature of every modern democratic state. Good democratic governance is a foundation on which can be built prosperous and stable societies where there is respect for fundamental freedoms, human rights and the rule of law. The issue of human rights is very germane to the Council of Europe.
It is for each individual state to decide its own governance arrangements, taking into account its own circumstances, traditions and culture. Across Europe there is, rightly, a wide diversity in the form that local and regional democratic governance takes, but throughout there are common principles at heart. This is the context in which states can work together to improve, strengthen and update their own democratic governance. All speakers today have demonstrated why that is important.
As noble Lords know, and have said, the Council of Europe is potentially well placed to provide a framework and mechanisms to support this development of democracy. We referred to the Government’s chairmanship of the Council of Europe. There were two main areas in which we wanted to achieve success. Our top priority was to reform the European Court of Human Rights, the importance of which we recognise. We successfully agreed measures to improve the working of the court.
The second was to streamline the Council of Europe’s activities on local and regional democracy. As the noble Lord, Lord Sheikh, said, the great thing about the Council of Europe is that its three elements managed to work entirely separately, not coming together at all. In many cases, these elements were doing exactly the same thing without joining together. It was becoming really important, to get the best out of them, to try to bring them together. Their usefulness was seriously impaired through a lack of co-ordination and collaboration between the three elements: the Committee of Ministers, the parliamentary assembly and the congress.
As noble Lords have heard, these weaknesses were not straightforward. As has been said, there are now 47 member states in the Council of Europe. To try and get 47 member states to agree wholeheartedly to anything was not the easiest thing that we have ever done. In fact, the most we could do was to try and ensure that streamlining took place and that there was far more co-ordination and co-operation between them. The noble Lord, Lord Sheikh, made a powerful speech about what we were trying to do to ensure that everything came together.
Tribute has been paid to Keith Whitmore, who was president of the congress. He was particularly well regarded and helpful when we were trying to do what we wanted to do. Bearing in mind that he was president of the whole congress, he was not able to do anything politically, but he helped us sensibly and sensitively with what we were trying to do. We cannot underestimate what he did. Keith never lost sight of the big picture and that is very important. I also want to put on record how we were helped by the UK delegation to the parliamentary assembly, particularly my noble friend Lord Dundee, and by the contribution of the honourable Member for Mansfield in the other place.
Concerns were raised by the noble Lords, Lord Prescott and Lord Kirkhill, about where we go from here. I accept that there is still considerable room for improvement in the way in which congress and the Council of Europe work together. All the elements are now in place to make things better. The noble Earl asked about the future. The 47 states, through their ambassadors and after more than a year of discussion, agreed in November the programme of intergovernmental work on local and regional democracy. That implements much of the substance of the Chavez report, which was set in train by the Council of Europe precisely to see how it could work better. We have been co-operating with that, and there is now the prospect of Committee Ministers co-operating better in the future. With our influence still there in congress, I believe that we can continue to make progress.
There have been so many stirring speeches. The noble Lord, Lord Judd, strongly drew attention to the lack of democracy in some parts of eastern Europe. I say to the noble Lord that one of the elements of the work of the Council of Europe is to educate emerging nations in democracy. The fact that they are sucked into the Council of Europe is becoming absolutely essential, because it gives them confidence and security not to be blown off-course and sucked back into the communist system. That is really important for us all for the future.
The noble Lord, Lord Liddle, referred to the Baltic states; they all need their confidence boosted, they all want to be part of Europe, and they all want to have the same sort of democracy. One of the roles of the Council of Europe is do just that and to provide that support. Many things have happened in Europe over the last 50 years which we would all prefer had not happened, and that we can never forget about. If the Council of Europe and the European Union help with that, they are making a major contribution to our future.
We intend to continue to assist in Europe by supporting the work of the Council. We are still working with Andorra. The chairmanship passed from Ukraine to us, and from us to Andorra, and there is a sort of seamlessness about it which I hope will continue.
The new congress president, Mr van Staa, has also decided that he wants a better arrangement in the congress. One of our Belgian friends, Mr Lambertz, is committed to improving the structures, but the structures are only important because of the work that the congress and the Council of Europe does. That is going to affect all the things that people have talked about. The noble Lord, Lord Kirkhill, mentioned President Gorbachev’s role, and he asked about the widening of the geographical area of Europe. It is probably as wide as it can go and we cannot take it too much further, but it does not mean that the Council cannot be encouraging.
I was very interested in the influence of the noble Lord, Lord Prescott, in Armenia. That is not somewhere I would have connected with him, but it is good that it was there. He asked for my views on prisoner voting. It would be fair to say that we are still considering our position on that, and I am not going to be able to give him a firm answer to that question today.
Lord Prescott
We in this country have been in breach of our human rights obligations; it has been confirmed twice by the courts. Are we not doing anything about it?
Baroness Hanham
We will consider it, my Lords. There we are. I will just say to the noble Lord, Lord Kirkhill, that there are no plans at present to extend the Council of Europe further east or south, but I can tell the noble Lord that the congress and the Council of Ministers and the parliamentary assembly are all considering how they can contribute to the democratic processes in those parts of the world.
I look forward to the outcomes of the better collaboration in the Council of Europe and the quality of the programmes which are going to be run. I know that congress is seeking to improve its preparation of the work that it undertakes and what it does in monitoring other states. We in this country are due to be monitored in the not-too-distant future and I understand that is to be done by Russia. So that should be interesting.
Lord Judd
I warmly endorse what the noble Baroness says about the importance of some countries in eastern Europe and Russia being involved and the part that that can play in building democracy. However, it all will be negated if, when it comes to the point, the Committee of Ministers does not rigorously pursue the matters indicated by the court as being wrong.
Baroness Hanham
My Lords, I agree. The Council of Europe has to grip the fact that it has to do things.
We are very supportive of the European Court of Human Rights. After all, it was this country and Winston Churchill who set it up. We have always supported it and believe that there is a great strength in it. Although the changes that we managed to make were only administrative, the noble Lord is right that there is no point in just talking. People have to do things, otherwise we might just as well all save the fare of going to Brussels and Strasbourg.
I am grateful to everyone who has taken part in the debate. I have tried to cover the points raised by everyone who has spoken but I am not sure that I have done so. I value the appearance of the noble Lord, Lord Liddle, and what he said. My noble friend Lady Wilcox will, I am sure, be a great contributor to the parliamentary assembly. She has a great deal of experience and is quite capable of putting it in its place, which is just as well.
My noble friend Lord Greaves has taken the opportunity to “Christmas tree” into this debate, if I can put it that way, the subject of regions. He and I will never quite agree about that but, as I said in the House the other day, whatever you call it, the northern part of England is beginning again to become dynamic; there is plenty going on. I occasionally go to see what is happening up there. It is a lovely part of the world and it deserves to be brought out of its dormancy because it has always been a very important part of this country. Whatever we call it, whatever the noble Lord, Lord Greaves, calls it, we all love it.
My noble friend Lord Dundee has done us a great service by enabling this debate today.