Grand Committee
The Deputy Chairman of Committees (Lord Colwyn)
My Lords, welcome to the Grand Committee. We have a minor water leak in the corner so if Mr Evans appears with a bucket during the opening speech, that is what it is all about. Now we have the usual housekeeping: if there is a Division in the House, the Committee will adjourn for 10 minutes.
Somalia: Piracy (EUC Report)
(11 years, 9 months ago)
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Lord Teverson
That the Grand Committee takes note of the Report of the European Union Committee on Turning the Tide on Piracy, Building Somalia’s future: Follow-up report on the EU’s Operation Atalanta and beyond (3rd Report, HL Paper 43).
Lord Teverson
My Lords, we have a bucket filling up with water and this debate is all about turning the tide. I do not know whether it will also solve the leak problems here in Grand Committee.
It is not often that a committee looks at a subject comprehensively, as we did in 2010, and then decides to revisit it two years later because it feels it of sufficient importance that a number of lessons needed to be learnt and to see how an operation has moved forward. This is what we did with regard to Operation Atalanta and the other problems regarding Somalia.
I shall remind the Committee of the reasons for Operation Atalanta to begin with. It was not just about commercial shipping, which we most know it for. It was about protecting the World Food Programme, which was keeping vast numbers of people alive and away from starvation in Somalia itself, and getting that product to the port of Mogadishu was quite a challenge. It was also technically about protecting Somalia’s fisheries and has actually been pretty successful at that, but not of any great help to the Somalis. It was also about helping the commercial shipping side in terms of repulsing piracy on one of the world’s most important trade routes. Atalanta itself is one of three organised operations; Atalanta is the European Union one and there is NATO’s Ocean Shield, while Combined Task Force 151 is a coalition of other countries. There are also a number of independent operators as well, which we will come back to.
I shall set the scene by coming back to the 2010 report, in which we made a number of specific observations and recommendations. We had the World Food Programme leasing ships that were probably the slowest that ploughed the oceans anywhere on the globe. Why? Because they were the cheapest. However, that meant they were the most vulnerable and, because of the way that the charter agreement was, they did not allow military contingents on those vessels so they had to be shadowed by very expensive and scarce warships from the areas of issue right the way through to port. There was a lack of tanker refuelling, which meant that the best naval vessels had to go backwards and forwards to port in order to refuel, wasting a lot of time. If pirates were captured, there was often nowhere to send them or try them, because western navies were reluctant to bring those pirates back to their own shores. The insurance companies seemed to be oblivious to the problem or not to care about it. As far as they were concerned, it was a loss, they got their income and there was an occasional “hit” in terms of ransoms that had to be paid out, but there was no responsibility on the part of the insurance industry.
The Indian Ocean and the Gulf are a vast ocean, yet there is very little air surveillance. In fact, Luxembourg had to rent a private plane on behalf of Atalanta, which was used as surveillance out of the Seychelles, and that was about all there was to begin with. There was an undisciplined merchant fleet, which is still a problem to some degree, and many masters did not pay attention to the convoy systems or the various other ways of repulsing or at least putting off piracy attention. We also encountered the issue that the European Union and NATO seemed not to be managing to get on very well operationally, as always.
What was the result of that? In 2010 there were 174 attacks and 47 pirated ships. More than that, however, through this effort we managed to displace this problem from the Gulf right out to the Indian Ocean as a whole, so it became a far more difficult problem. Somali piracy, which is part of the private sector and private entrepreneurship to a large degree, found new ways of modifying the model through mother ships and all sorts of other ways, so that it could be more successful over that broader area. That brought major economic issues—we often forget this—to those littoral states in east Africa, whether it be Somalia itself, Tanzania, Kenya or the Seychelles. Because people feared to transit those waters or go to port in those areas, there were direct economic consequences. Tourism was also affected. The one area that did benefit, I am told, is the fisheries stocks. No one dared go there, so the fisheries did well. Unfortunately, the Somalis themselves probably did not benefit much from that.
What is the situation now? In 2012 the attacks decreased from 174—in 2010—to 36; instead of 47 pirated ships in 2010, we only had five. In 2013 so far—these are early days, admittedly—there have been only two attacks and no pirated vessels whatever. During that whole time, the World Food Programme has not suffered one loss. So, in some ways, the prime reason for Atalanta has been successful.
Why has this happened? My colleagues and fellow noble Lords will no doubt go through this. However, the reasons include very strong international co-operation, not just between those three forces but also between independent nations. This includes China, which for the first time has operated outside its regional area; India, Russia and even Iran—although that is one country where the co-operation has not been so great. The international effort has led to success. There has also been real practical working at sea, even at a practical level between the European Union and NATO, which must be a first. Merchant fleet behaviour has become much better through the work of Northwood. Surveillance and intelligence using the Seychelles as a base has worked well; air surveillance has been far more effective and consistent; and intelligence has been shared.
The committee also recognised that there has been a more robust approach. We are regularly reminded that this is a constabulary operation, not a military one, and that the use of force therefore has to be proportionate and used carefully. However, we generally regarded the raid on the coast as a successful instance of putting down a marker to show that the European Union force was serious in terms of its intent regarding pirate bases. Also, armed guards are now allowed on most of the merchant fleet. Our own committee was against this originally but we have changed our mind on that. However, I would be interested to hear the Government’s view on how the programme has worked. Perhaps most significant of all, in his evidence to us Alexander Rondos, the EU special representative, described Somalia and its cities as having bustle and growth, although he saw it as an economy without a state.
What are the lessons we learnt? The obvious ones are that there is disorder where there are weak states and where the rule of law does not go to the borders; and that regardless of whether that is due to religious militancy or, as here, private sector entrepreneurship, it is very bad for nationals and for the international community. We have seen a different sort of piracy in west Africa as well and we will need to tackle that over time, too. We also know that it is good to have a comprehensive policy. We now have a much more comprehensive one in terms of the European Union’s Horn of Africa policy in Atalanta, the EU trading mission for Somali troops and increasing the coastal capabilities of all those states through the EUCAP NESTOR operation. We felt that the Gulf states should be more involved, but we know that until we solve problems onshore in Somalia, those operations will have to remain.
I congratulate a number of actors on their work, the Seychelles in particular. The Foreign Ministry of the Seychelles came and gave us evidence. It worked strongly and very responsibly with the community. At Northwood, we saw a most professional operation which was hugely international in its scope. We felt great confidence in it and it has clearly been a major part of success. However, I commend perhaps most of all the international co-operation between all those forces; for example, between the UK and France—one of the French warships, FS “Surcouf”, has a UK Lynx helicopter on it. I also commend the Seychelles, Kenya and Mauritius on the trial and imprisonment of pirates. However, I remind my fellow Members of this House that four vessels are still being held; that is, 108 human beings are still being held as hostages in those conditions. We have a ready business model that can be used elsewhere in the world. I believe also that we have failed to see the needs and the hopes of the Somali people in judging this operation. Perhaps looking inland, as well as out to sea, is something that we need to learn from this otherwise successful operation. I beg to move.
Lord Jopling
My Lords, I want to begin with a complaint. I find it absolutely intolerable that a committee such as ours sits for a number of weeks or months, takes evidence and brings a lot of people kindly to give evidence before us; we produce a report in August; the Government respond shortly afterwards; but we cannot find time for the House to debate it until the following March. I find this quite intolerable. We have a government Whip who is kind enough to be with us—it is nothing to do with him—and I hope that he will pass on to the usual channels and those who organise our business that we really must treat Select Committee reports in a better way than this. I find it very unsatisfactory indeed. I say no more about it.
I should like, secondly, to express a number of thanks. I thank the noble Lord, Lord Teverson, who has been chairman of this sub-committee, ably supported by the staff who help us enormously—I thank all of them.
The next thing I want to do is to welcome the reduction in incidents of Somali piracy during the past year or so. This is a very significant fall and reflects great credit on the various military and naval forces which have helped to bring it about. I suppose that it has been helped particularly by the fact, referred to by the noble Lord, that a great number of merchant ships now have armed guards on them. We heard evidence that this has had a salutary effect on potential pirates, who find that there is a certain amount of fire directed towards them when they start attempting to board merchant ships.
As the chairman said, the committee changed its mind over this matter. In the earlier report, I think that a number of us were a little anxious lest we moved into a situation where oil tankers with a huge amount of inflammable material aboard started being attacked by rockets fired by pirates. There is a danger that, over months, as a response to armed guards on ships, the pirates might start using much more lethal weaponry which could lead to a major attack on a ship causing it to catch fire. So far, however, having armed guards has been a big success.
The chairman did briefly refer to another success—that 1,000,000 tonnes of food has been brought into Somalia under the World Food Programme. This is a wonderful record in an area where there is a great deal of belligerence. Many people would say that they did not deserve it, but of course starving people always deserve it and we should salute those who have taken in this 1,000,000 tonnes of food under considerable difficulty.
Another salutary episode which has helped to reduce the number of incidents was the single land attack on one of the harbours used by the pirates. I am glad that Admiral Potts said that we would do it again. There has been a certain amount of criticism about attacking a land target but it was quite right to do it and I think the committee agreed with that. When we went to Northwood I suggested that it would be a good idea to have another one just to show that it was not a one-off. I may sound rather belligerent but it did have an enormous salutary effect and another attack should not be ruled out.
When the Minister responds, I hope he will speak about the political progress that has been made in Somalia itself. From our committee’s report and from the comments of virtually everyone who has spoken about the crisis in Somalia and in the seas around it has been agreed that, on the ground, the long-term solution is a political one. This is very important and I hope the Minister will talk about it.
I am very disturbed indeed to hear that the newly elected president has decided to release 959 pirates by way of amnesty. Again, I hope the Minister will explain this because, from the brief I looked at which said that the president had given an amnesty to 959 pirates, I am not sure whether they were convicted, or that they were held and awaiting trial, or that they were known to be pirates to the civil authorities, such as they are in Somalia. I am interested to know quite what the basis of this amnesty is. We are told that the amnesty does not extend to what I would call the godfathers—the evil plotters who have been organising these attacks and who have been receiving vast amounts of money in ransoms. I am glad to know that the godfathers have not had amnesties but it would be helpful to know about it.
I turn now to the future. It seems to me that those 959 pirates who have received an amnesty are now free to get up to their monkey tricks again. The godfathers are presumably still there, ready to organise such things. Again, I hope the Minister will talk to us about the future. As the number of attacks has been so significantly reduced, there will be a temptation on the part of NATO, the Americans, the European Union and others who have been involved to say, “Oh well, it is much less now—we can relax our presence”. I am sure that there will be political pressure, particularly given the pressure on all the militaries around the world, to say that they are going to reduce the military and naval presence there. Having done so, however, there is a danger—because the pirates have received an amnesty and the godfathers are still there—that it will all start up again using the assets which have been used previously. I hope that the Minister will speak about this.
Another matter which I very much hope the Minister will speak about—I will try to fill in for a moment until the Minister has got his brief; I quite understand that one has to do that—is the fact that we said in our report that it was important to enthuse the Gulf states about attacking the pirates and causing the incidents to be reduced. Quite honestly, however, the Government’s response to our suggestion that the Gulf states should be encouraged to take a much more active part was pretty wishy-washy. I will not read aloud the Government’s response but they gave us four answers to that: we have a headquarters in Bahrain; there are port facilities in Oman; there is co-operation in Dubai; and a whole lot of countries came to a conference in London. With great respect, that is not at all what we meant. These Gulf countries are earning monumental amounts of money for their hydrocarbon exports. As far as I know, their physical assistance in all of this is not as great as it might be. I hope the Minister will look into this and say whether a much more positive approach can be made to our suggestion, in paragraph 87 of our report, to get those states much more actively involved.
Finally, I was concerned that we were told during the inquiry that quite a few convicted pirates were going to be returned to Somalia from Kenya, the Seychelles and other places. It seemed to some of us that to send them back to prisons in Somalia was not very clever because one could not be sure of the security around those prisons. We were told that the United Nations was building a prison and that it would be properly supervised. Given that 959 pirates have received an amnesty, does that mean that the United Nations prison will be redundant and not used? I do not know who these 959 pirates who have received an amnesty are, but it seems to me rather a strange decision that the prisons within Somalia are secure enough to hold convicted pirates. It would seem to me to need a great deal of expert outside supervision to ensure that those prisoners could not be freed. I look forward to hearing what the Minister has to say.
Lord Davies of Stamford
My Lords, it is a pleasure to follow the noble Lord, Lord Jopling, and I think I agree with everything that he said on this subject. I learnt from him—no doubt there is something wrong with the way that I get information on these kind of incidents but I had not heard about it—about the 950 pirates being amnestied by the Government of Somalia. I totally share his anxiety, indeed his horror, at that news and put it to the Government that it should have consequences. Unless there was consultation with the EU in advance of that decision being made by the Somali President then consequences really ought to flow, because it is quite inconsistent with the kind of collaboration and mutual confidence which one had understood had been developed over the past few months between the EU on the one side and the Somali Government on the other. The consequences should be in terms of aid or other forms of support which will be felt, in measured degree, by the Government of Somalia. If we just allow this incident to go uncommented on and unsanctioned, we shall be encouraging similarly bad behaviour in the future and shall lose that sense that we need to act as a team and keep in close co-operation with the Somali Government—we need to consult them about things but they need to consult us as well, and we expect their support. The cost of capturing these pirates is very considerable and the idea that they should be released in this way is quite horrific.
I will make three points, two of which will be approving—indeed congratulatory—points about the report and one of which will be more hortatory, or perhaps slightly critical. First, although there are other very good examples which I will not mention but which we all have had before our eyes, this seems to be an extraordinarily and particularly good example of the success of the European common foreign and security policy. We have managed to make considerable progress—the figures have already been mentioned—in dealing with this great threat and have managed to do so with tremendous leverage in the case of this country. We have almost not contributed any military units at all. We have contributed one of Her Majesty’s ships, a Royal Naval vessel, for a few months and of course contributed very importantly by providing command and control and logistical management of the exercise from PJHQ. We have obviously done an extremely good job there, and I add my own words to the words of congratulation that have already been spoken. I am of course very familiar with PJHQ—it is a wonderful body and a superb organisation, and it is not surprising to me that it has done such a good job. On top of that contribution, we have got all these vessels together. It would have been nice to have even more resources but we have contributed very considerable resources. It is an example of the leverage that can be generated by the common foreign and security policy and of the success that we can have.
Eurosceptics tend to say that we do not need an explicit EU policy and that we can just have a series of ad hoc coalitions where a lot of countries agree in their assessment of the problem and are prepared to do something about it. That is a very inadequate answer indeed. If you do not have a common foreign and security policy, you do not have the mechanisms and the tried and tested procedures there for, first, evaluating the threat, which is very important, and then for managing the response. You do not have the long-standing commitment and sense of solidarity; everybody just starts off saying, “Is it really in our national interest to do this? Do we really want to do it? How much will we be compensated by allies if we do it?”. You have to start afresh again, negotiating all these things from scratch, and every operation has the weaknesses and dangers of an experiment rather than being an ongoing, tried and tested policy where people have the confidence, know the procedures will work, and are familiar and happy with the decision-making process. This is a very good example of how we need a common foreign and security policy. I do not know that the Government are particularly interested in my contribution to their balance of competences review—they would probably dismiss me as a Europhile and anyway a member of the Labour Party, and so would not be interested in what I say—but I hope that the point gets included in the evaluation of the balance of competences review when it comes to the European common foreign and security policy. In fact, it would be monstrous if this was not taken into account as one of the examples of the success of that policy.
The second point I wanted to make, which is again very much approving, is to congratulate the committee on having been pragmatic enough to review its original position on two matters. One was the attack on the pirates’ land bases and the second was on having armed guards on ships passing through the pirate zone. The committee reviewed its original position in the light of evidence and experience and came up with absolutely the right policy solution. It strongly supports—as do I—the initiative taken to deal with some of the land bases. I agree with the noble Lord, Lord Jopling, that it may be necessary to take further action. If it is, I hope that the authorities concerned will be encouraged to do so.
Equally, armed guards have proved their worth. It is not necessary to carry heavy armament for this purpose: a couple of general-purpose machine-guns, one on the port side and one on the starboard, will be enough effectively to deter the sort of pirates with whom we are dealing in the Indian Ocean. The committee was very good on that. It did not just come up with an initial response but looked carefully at the developing situation, and its report is the stronger for it.
On my third point, about ransom payments, I take issue with the committee. I have spoken on this in the Chamber, so noble Lords may be familiar with my views, which have not changed. The committee’s recommendation comes in paragraph 51 on page 18, which states:
“We reiterate our previous conclusion in our 2009 report that those involved in assembling ransoms in the United Kingdom have a duty to seek consent for its payment and that not to do so, if necessary by filing a Suspicious Activity Report, may result in the commission of a criminal offence. We request that the Government now respond substantively to this recommendation”.
This is woefully inadequate and thoroughly pusillanimous. It does not even begin to address the reality of the situation, which is that these are criminal payments. They are rewards to criminals for criminal activity that endangers life.
They are also very substantial—not that that makes a difference to the principle—and run into tens of millions of dollars on a regular basis. It has become something of an industry and is now a regular feature of the insurance market in London. Lloyd’s makes ransom payments that are transported by all sorts of dramatic means to the pirates in Somalia. This is simply not a situation about which we as legislators should be complacent. It is quite clear that these are criminal offences. They are payments to criminals for criminal purposes and they should be illegal. It should not be a question of reporting the matter through a suspicious activity report. The payments should be seized by the Serious Fraud Office or whichever arm of the police is responsible for monitoring illegal payments of this kind, and we should make sure, if the law is not robust enough to deal with the matter in this way and does not make it a criminal offence to make ransom payments to terrorists, pirates or any other form of criminal, that we change the law to make sure that it does exactly that.
I am very disappointed and very sorry that the committee did not come to that conclusion. It does not explain why it did not, and in its report did not even examine the suggestion that I am making—unless I missed it, and I hope I did not. I would be very interested during the rest of the debate to hear from Members of the Committee about why they feel that the present legal situation is adequate, and why a suspicious activity report is the furthest they envisage going in dealing with this matter—which after all, if it is not dealt with effectively both by the physical measures about which we have been talking and by measures controlling flows in the financial markets, will become a criminal industry affecting commerce throughout the world.
Lord Jay of Ewelme
My Lords, I, too, greatly welcome the opportunity to discuss this report by Sub-Committee C. As I am about to be rotated—perhaps in this context I should say helicoptered—off the committee, perhaps I may also pay tribute to the stewardship of the committee by the noble Lord, Lord Teverson. I say “stewardship” because I am not sure that Liberal Democrats accept the concept of chairmanship. I also welcome the chance to comment—as did the noble Lord, Lord Davies—on a European Union activity that is working well, and to which the UK has made an important and perhaps even determining contribution. I will come back to that general point at the end of my speech.
I welcome, too, the way in which the effectiveness of Operation Atalanta today draws on the lessons from its own operations at the start. I think that there is a lesson here perhaps for other European Union operations and policies too—that there needs to be a constant rethinking in the light of experience. The first example which strikes me in particular is the stronger co-operation between Atalanta and NATO and others including India and China. I think that the way in which this has become a much more international anti-piracy operation is very impressive. The second example is the inclusion of security teams on board ships. The committee did indeed have reservations about this at first but, in the light of experience, it, too, changed its mind. It is clear that having security operations on board has proved itself in the past couple of years or so. Finally, as the noble Lord, Lord Teverson, pointed out, persuading the World Food Programme to provide larger and quicker ships to reduce their vulnerability to piracy, which has had a very marked effect on the ability of the programme to deliver food to populations in Somalia and elsewhere who really need it, is something which I greatly welcome, too. However, I welcome in particular the realisation that piracy is largely the result of chaos and instability within Somalia, which has effectively for the past 20 years or so, with a slight improvement recently, been a failed state.
We need to see Atalanta as part of a broader EU approach to the Horn of Africa, not just an operation in its own right. The Horn of Africa strategy adopted at the end of 2011, including the training mission in Uganda for Somali security sector training and the mission to strengthen coastal defence capabilities through the region—the horribly named EUCAP NESTOR—have not only been very worth while but add up to an overall approach by the EU to the Horn of Africa that is admirable. At the same time, it is encouraging that some economic and political stability is emerging at least in and around Mogadishu and that the influence of al-Shabaab is at least for now—and let us hope for longer than now—on the decline. Ensuring that that continues must be the main aim of EU and our own policy from now on. This should largely be an African task, not just an EU or western task, although it is very hard to see how EU and western help will not be necessary in the foreseeable future.
It seems to me that the African Union will have a key role to play here. It has huge challenges at present, and it has weaknesses, but it is far more effective than it has been in the past. I hope that the European Union and the UK will continue to do what they can to strengthen it. It would be very helpful if the Minister could say something about that.
At the same time the EU must focus its development on capacity building in Somalia. I declare an interest here as the chair of a medical aid charity, Merlin, which operates in Somaliland, Puntland and Somalia itself. Britain, like the EU, has an important role to play in helping with education and medical aid both through its own funds and through the help that it gives to non-governmental organisations.
I should like to branch out just slightly from Somalia and look at two other African issues that have arisen since our report was produced—as the noble Lord, Lord Jopling, said—some months ago. The first is Mali and the second is piracy in the Gulf of Guinea. Sub-Committee C has expressed great concern about the destabilisation of Mali and the impact that that could have on Britain and on wider European interests since the break-up of the country two years ago. The attack on the oil refinery in southern Algeria and the recently—alas—proven murder of hostages, including a British hostage in northern Nigeria, show only too clearly how developments apparently remote from us can affect us and damage us directly.
I would not accept the argument that these attacks are the result of western action. We have a role to play in supporting west African countries in countering al-Qaeda, Boko Haram and other terrorist groups, but I do not underestimate the difficulties in doing it. I greatly welcome the help that we are giving the French in what could still be a long and unpredictable campaign in Mali. I believe that our contribution there really matters and is important.
More related perhaps to the debate on Somali piracy is the growth of piracy in west Africa, in the Gulf of Guinea. In some ways this seems to be of a different kind of piracy from that in Somalia, including attacks in port—for example, in Abidjan in the Ivory Coast—and it is centred more on stealing cargo for money than on kidnapping ships and crews for ransom. The effect of piracy in west Africa can be particularly dramatic on fragile economies, increasing insurance rates but, much more than that, reducing revenue—by up to 70% in the case of Cotonou, the only port in Benin. That has had a pretty dramatic impact on the state of a fragile economy.
From the recent Parliamentary Statement in another place by the Foreign Office Minister, Alistair Burt, I am glad to see that the Government are taking the growth of west African piracy seriously. I am also glad that the Royal Navy is deploying at least one ship in the Gulf of Guinea and is working closely there with the French. When the Minister responds could he say whether that deployment has been stepped up in the light of the growth of piracy in the Gulf of Guinea?
I would make one final point in drawing some of these threads together. We see a mixture of piracy, conflict and terrorism in Somalia, Mali and the Gulf of Guinea—all of these seem a long way off but this can affect our interests directly. As a nation with global interests and, as a member of the UN Security Council, of NATO and of the European Union, with global responsibilities too, we cannot stand aside from nor ignore instability of this sort. Nor, given budgetary pressures of which I am sure the Minister is only too aware, can we respond to them on our own. We also need to recognise that political influence, development and military intervention where necessary need to be looked at together—as has been the case in Somalia—and not as separate activities. As we have seen in Somalia, the European Union is uniquely able to do this, by bringing together actions through its defence policy and its common foreign and security policy. All those are important for the African countries themselves, for the EU and, I would argue, for Britain as well. None of those policies is perfect; all would be better with the full engagement of the United Kingdom, and British interests would be well served too. In the context of common foreign and security policy and of bringing together policies in Somalia, that argument is relevant to our policy towards the European Union in a wider sense where critical, constructive engagement can be in our interests and can make a real difference to the policies of the European Union itself.
Lord Radice
I agree very much with what the noble Lord, Lord Jay, has just said. I would like to congratulate the chairman, my colleagues and the staff on what is an excellent report. It is a tribute to the chairmanship of the noble Lord, Lord Teverson, and I would like to pay him a general tribute as he is stepping down. He has been an excellent chairman of this committee and we have produced a number of very good reports in recent years.
I turn to the report. Operation Atalanta has been a success, as has the EU’s foreign policy—there is no question about that. This is due partly to the efficiency of the operation under UK leadership, which I hope people will focus on. We saw that leadership in operation at the command and control centre at Northwood, which we visited as a committee and very much admired. It is an amazing place and it was quite spectacular to see it in operation. Of course there has also been the co-operation with the other international organisations: the US-led combined maritime force; the NATO-led Operation Ocean Shield; and with other countries such as Russia, China and India. All that has obviously been very helpful, too.
Then, of course, we have the game-changer of putting armed guards on ships, which has been backed by a regulatory system that is becoming increasingly effective. As colleagues have noted, the committee changed its mind on this. The facts changed and so we changed our minds—that is a sensible thing for a committee to do. The truth is that having armed guards on ships has proved a highly effective deterrent. So far, no ships carrying armed guards have been successfully pirated. That in itself speaks for that idea.
I should also mention the building-up of a judicial system to deal with culprits. There are 101 in prison in the Seychelles and 147 in Kenya. I hope we are going to hear something from the Minister about this. I am not saying that he is responsible for what the Somali President has done, but it is important. It ostensibly drives a coach and four through the whole policy. If the Somali President comes along and gives amnesty to 959 pirates, what are we to say about the rest of them in prison elsewhere? This will clearly have to be looked at rather more carefully.
The most important point in the report is that the mandate of the operation should be extended beyond December 2014. That is an important signal that the EU and the international community are not going to walk away from their obligations to clear the Indian Ocean and the Gulf of Aden of piracy. Interestingly, there was a meeting of the European Economic and Social Committee on 24 January, attended by the shipping industry and seafarers generally. They very much endorsed the position in our report. The noble Lord, Lord Jay, made strongly the point about the importance of attending to the political development in Somalia and of getting rid of the conditions in which piracy can flourish.
Our report also strongly supports the Horn of Africa strategy: the combination of diplomatic, financial and operational tools which provides some opportunity for a sensible and coherent response to all the awful crises facing the region. Alongside Atalanta, you now have NESTOR—the EU’s training mission for Somali security forces—as well as the appointment of the special representative for the Horn of Africa, which we welcome in our report.
Like the noble Lord, Lord Jay, I turn to the west African issue. The trouble with piracy, particularly if it is successful, is that it is very infectious. Although the background is different, Somali piracy is increasingly mirrored in what is happening in west Africa. Armed hijacking is on the rise in the Gulf of Guinea, the waters of Nigeria, Benin, Togo and Ivory Coast. It is interesting that many of these incidents involve vessels transporting petroleum products. The UN Office on Drugs and Crime explains this by the booming black market for fuel in west Africa. Clearly, this is a rather sinister situation growing up here and it needs watching very carefully indeed. It is essential that there should be a response not only by the region’s Governments but by the international community so that west African seas do not become as dangerous as the Indian Ocean has been, but—fortunately—now is not.
I want to ask the Minister several questions. What are the UK Government and the EU doing to meet the threat? Can the Minister—I share the point made by the noble Lord, Lord Jay, here—confirm that the Royal Navy is deploying units to west Africa and working in conjunction with France and the United States? Is there a case for applying some of the lessons that have been learnt in Somalia and the Indian Ocean in west African waters? Can the strategy and models that have been used successfully in this area be used also in west Africa? I know that it is a different situation but we ought to learn some lessons.
As a last point, we must not forget the cost of piracy. At the European Economic and Social Committee meeting which I was referring to, Dr Anna Bredima, who is vice-president of the Employers’ Group, said that piracy costs the global economy $12 billion a year. She went on to say:
“Piracy is not only a maritime problem. It is also a humanitarian, trade and global one, affecting consumers and taxpayers around the world”.
I also saw in a paper for Nautilus International, the seafarers’ organisation, a rather graphic description, drawn from the Times of India, of 23 crew members who were taken hostage from the cargo ship “Iceberg”—this is the human cost—and held for three years by Somali pirates. One died of malnutrition, and the Times of India told how the rest spent,
“four months next to a freezer with a body inside”,
and how officers were,
“hung upside down and tortured and the ears of a senior officer [were] … chopped off”,
for failing to move the ship. Pirates would beat or whip crew members if aircraft passed overhead. It is not surprising that these men are haunted by such memories. It serves as a reminder to us when we write our reports of why the pirates have to be fought, pursued and prosecuted.
Baroness Young of Hornsey
My Lords, I joined Sub-Committee C, on external affairs, just in time to see the Turning the Tide report through to its conclusion, although I missed direct involvement in the original inquiry that preceded it. This was my first inquiry with Sub-Committee C and, along with other noble Lords, I thank the noble Lord, Lord Teverson, for his chairmanship, and also note the expertise of the staff and the warm welcome offered by noble Lords who were already on the committee.
Before I joined Sub-Committee C I was, along with many others, all too aware of Somalia’s recent troubled history and in particular its notoriety as the launching pad for numerous acts of piracy in the Indian Ocean. I therefore welcome the opportunity today to address some of the issues raised by the report. I should say from the outset that I agree with many of the points that have already been made by other noble Lords on the committee but want to go into some other areas.
Naval patrols, armed personnel on vulnerable ships and the military operation on land-based criminals have all, as we have heard, contributed to diminishing the threat of piracy in the region. However, none of these activities represents a viable, or indeed a desirable, medium to long-term strategy. Political, economic and social stabilisation is the key to reducing piracy and other high-stakes criminal activity. If the root causes are not addressed, such crimes will continue to flourish.
As we reported, the EU has now formulated a strategy for the Horn of Africa and appointed a special representative, Alexander Rondos, who has already been referred to. It has also launched two missions: a training mission to Uganda—EUTM Somalia; and, crucially, the newish mission to strengthen the maritime capacity of the coastal states of east Africa—EUCAP NESTOR. As my noble friend Lord Jay said, that is not a very pleasant sounding title, but none the less we hope that it will be effective.
Alexander Rondos told us of the need to build up coastal communities if piracy was to be countered. He believed that extending stabilisation and investing in coastal areas was essential and absolutely key in offering an alternative incentive to those who feel that they need to tolerate piracy or allow it to operate from within their communities. The evidence from the Council of Somali Organisations supported this assertion and made the additional point that coastal communities had,
“persistently lobbied donors for small scale support to help them develop local mobile marine cadres”,
to patrol their coastline and provide a security presence that would disrupt and deter pirate groups and al-Shabaab activity.
To counter the argument that the EU presence represents yet another hostile foreign military force, as some see it, the EU needs to make a commitment to protect and monitor fishing in Somali waters. There has been a call for the mandates to be revised to protect Somali waters from illegal fishermen and those who transport toxic and other dangerous materials. When we received the evidence, we considered recommending that Operation Atalanta should undertake greater protection of Somali fishing grounds, but we concluded that a naval mission was not in a position to undertake this additional role as well as protecting shipping, and that the task should be taken up by another organisation.
To some extent, the newly established civilian mission EUCAP NESTOR goes part of the way towards addressing some of the concerns. The mission aims to train a coastal police force and judges with expert advice on legal, policy and operational matters concerning maritime security. Giving more resources and support to the countries of the region to build capacity would make further improvements and ultimately cost the EU less in the longer term. The FCO told us that the setting-up phase of EUCAP NESTOR was going well. I hope that the Minister will be able to tell us that the initiative is on track.
The focus on a military solution to Somalia-based piracy, and conventional approaches to aid and development, should not prevent the EU addressing real concerns about fishing and the historic dumping of toxic waste by multinational organisations. A recent Italian investigation concluded that around 35 million tonnes of waste had been exported to Somalia, leading to the assertion that its inland waste dumps were among the largest in the world.
The Somali people have been caught up in a dreadful vicious circle. With the likelihood that the country will achieve just one of the eight millennium development goals by 2015, weak governance structures at all levels, an underdeveloped civil society, the constant threat of armed conflict within and between clans and extensive corruption, it is no wonder that some companies feel able to take advantage of the situation and act with impunity, dumping nuclear and other hazardous waste in Somali coastal waters.
I emphasise that this is not put forward as an excuse for piracy—not in any way. However, the issue must be addressed if the EU is to maintain confidence in what it is doing. European multinationals, the Somali Government and local clan warlords have all been implicated in these activities. Arms have been traded for the right to dump hazardous materials. The ships bringing the cargo into Somalia then become trawlers when they leave the area, with their holds full of tuna fish. These illegal activities must be robustly monitored and the consequences addressed if there is to be a long-term solution to piracy in the region.
Recently, pirate gangs have turned to land-based criminal activity such as kidnapping aid workers, tourists and journalists in Somalia and Kenya and holding them for ransom. That is why military interventions need to take place alongside strategic local and regional political initiatives supported by international collaboration. As the noble Lord, Lord Jay, said, the involvement of organisations such as the African Union and ECOWAS is crucial to that operation.
In Somaliland, which is relatively stable, unemployment among young people stands at approximately 75%. One strategy to help keep young people from the grasp of criminal gangs would be to capitalise on the influx of foreign aid agencies and other NGOs into the area by ensuring that these organisations provide opportunities for local young people to learn skills, undertake internships and gain paid work. EU development aid should also be directed towards providing alternative livelihoods for the Somali people. Somehow, as the noble Lord, Lord Teverson, mentioned at the beginning, the vast majority of the Somali population are not involved in these criminal activities yet they seem to get punished whichever way things go.
As the Africa Research Institute points out, the EU needs to demonstrate its willingness to address the issue of European-owned companies that have been dumping toxic waste off the Somali coast for years. Robust action on this matter would help to underline the legitimacy of the EU endeavours in the region. I wonder if the Minister, or indeed the Government, has a view on this matter.
There are some positive signs emerging from Somalia, some of which have already been referred to. We heard from witnesses that there was less hostility from the Somali population to the African Union’s mission in Somalia, a greater spirit of optimism and more talk of nation building. The EUCAP NESTOR mission will be a significant development in combating piracy from the land.
What happens over the next few years will be crucial to the settled future of the Somalian peoples. I very much hope that the sub-committee will somehow find a way to revisit these issues and have another follow-up report at some point in the future.
The Earl of Sandwich
My Lords, I congratulate the noble Lord, Lord Teverson, and the sub-committee on the report. I missed the debate of the noble Lord, Lord Luce, last year, so this is a valuable opportunity for me not just to speak today but to inform myself on an important area of foreign policy. This policy, as the Minister knows very well from his experience of Africa, ties defence priorities closely to those of international development. The unexpected release and safe return of the chemical tanker “Royal Grace” last week brought welcome relief to the operation as well as to those on board. I hope that we shall soon learn the fate of the other tanker MS “Smyrni”. These welcome facts further suggest that Atalanta, while not resting on her laurels, should already be rated as a major success of international co-operation alongside the remarkable military and political turnaround in Somalia itself.
The noble and learned Lord, Lord Howe of Aberavon, said memorably in the last debate that the name Atalanta gave it a NATO benediction. It is true that, provided that there are no golden apples or false rewards, the name implies great rapidity from a defence point of view. It has been a spectacular demonstration of our own naval command and control over the past four years. I am personally enthusiastic about the Navy—perhaps not quite as gung-ho as the noble Lord, Lord Jopling, about a land operation but I think that we have done magnificently. For the EU, as the noble Lord, Lord Davies, has mentioned, it should mean a feather in the cap of the EEAS for its solid support of the operation. It should also get a mention in Sub-Committee C’s new report about to be published.
There are, of course, always dangers ahead. Last December, the Piracy Ransoms Task Force called for greater co-ordination among the countries and agencies involved. I am surprised that the committee has not pronounced more on the question of ransoms. There remains a widespread concern that while the incidence of piracy has come down, the amounts of ransoms are increasing. There are also fears that complacency may set in, armed guards will be reduced and the cycle may begin all over again. The trend of kidnapping in the region, notably in west Africa, has recently been upwards.
As for Somalia itself, the noble Lord, Lord Hannay, said in October that the priority should now be the re-establishment of stability and the rule of law. Nobody could disagree with that. He expressed the hope that the international community,
“will not allow that task to fail through lack of resources and lack of political will”.—[Official Report, 24/10/12; col.280.]
I agree with that aspiration: there is an upward trend of political will but no easy path ahead—as the noble Lord, Lord Jay, has expressed, and the noble Baroness, Lady Young, has already brought home to us.
Somalia is,
“possibly the toughest place in the world to be a child”,
according to the CEO of Save the Children when he returned from that country. The number of people in urgent need of humanitarian aid is expected to exceed 2.1 million in the coming months. The figure is down from last year but it is still large. Again, success is relative. Recurrence of the 2011 famine has been largely averted in rural areas, but there is still an imperative to plant crops and avoid food dependency while encouraging the return of traders and small businesses to towns. Here, I strongly agree with the noble Baroness, Lady Young.
I am glad to say that one of the most effective programmes is the SEED employment programme, funded by the UK, which works alongside the FAO in Puntland and south-central Somalia. It generated 56,000 jobs and has trained nearly 4,000 women and young people in livestock and agriculture. This is exactly the kind of programme that must revive the economy. When extended to coastal areas, it will provide alternatives to piracy, which everyone knows is a side-product of the civil war and of anarchy over the past decades. Employment, small business support and trade should feature prominently at the London conference that will be held on 7 May. Somalia is making a rapid recovery. We in this country are host to many Somali refugees and should be well placed to encourage the return of business leaders and professionals who will help rebuild their communities.
On the rule of law, there are many gaps to be filled, as we all know. I hope that the Minister will bring us up to date with the work of EUCAP NESTOR, notably in Puntland and Somaliland, and tell us whether there has been any progress in setting up the new land-based coastal police force. The committee report states that,
“Nestor could and should be the gateway to a permanent solution”.
The name “Nestor” is familiar to me because it is the name of my grandson, whom I took to see HMS “Belfast” yesterday afternoon. I hope that everyone will see him as a figure of wisdom in the future.
I am not familiar with the intricacies of Somali politics. The noble Lord, Lord Avebury, who came to the previous debate but who unfortunately is not here today, pointed out in October that until last summer the Puntland maritime police force had been very effective in closing bases and arresting pirates. Then it fell foul of other recognised authorities, including the UN, and even of its own South African trainers, one of whom was shot dead. Where food and commodities are scarce, clan loyalty and corruption easily turn into police connivance with the enemy—the pirates. Now that the new federal Government have greater confidence and are earning international recognition, will the Puntland police force be allowed to resume its former effectiveness? What will AMISOM and IGAD contribute to this exercise? Tributes are paid to them in the report. The government response to the committee mentioned training in Uganda but was silent on the calibre of the police forces in Somalia.
Finally, I hope that the Minister will congratulate Kenya and the Seychelles. They have expanded their courts and prisons over the years to accommodate hundreds of detained and convicted pirates. Perhaps he will update us on the attitudes there. In the context of what the noble Lord, Lord Jopling, said, will the Minister say to what extent and on what terms the pirates and prisoners are being returned either to civilian life or to face judgment in Hargeisa prison, which we have helped to rehabilitate, or elsewhere in Somalia?
We must be grateful that greater stability in Somalia will have valuable consequences over the border with Kenya, at a time of uncertainty following elections there. I hope that the world’s largest refugee camp will empty, that refugees will return home and that the acute conditions of poverty, malnutrition and ill health that we have seen so often on our TV screens over the past 20 years will disappear. Whether or not Atalanta is extended, the mission will have played a major role in this—largely, let us admit, for the benefit of the Gulf states and developed countries such as our own. Internal political stability can rarely be guaranteed by outsiders. Ultimately, it must depend on the Somali people themselves.
Lord Rosser
My Lords, I add my thanks to the noble Lord, Lord Teverson, and the European Union Committee for the report that we are considering today, which is a follow-up to the 2010 report on the European Union’s naval operation Atalanta. The noble Lord, Lord Teverson, gave us a comprehensive introduction on the present state of play, the key issues involved and progress made since the previous report. I do not, therefore, intend to refer to all the issues which he so ably addressed and which are referred to in the report.
The report indicates an improving situation as far as the levels of Somali piracy are concerned, with a significant reduction in the number of pirated vessels and hostages in June 2012 compared to June 2011, as well as much greater practical co-operation between organisations and nations. However, the report certainly does not suggest that the problem has been solved. The committee welcomed the EU Atalanta attack on the pirate land base and, in their response, the Government agreed with that. The committee also reported that it had changed its view on having armed guards on ships, in light of the fact that no ship carrying armed guards has been successfully pirated and violence has not apparently escalated.
Evidence was given to the committee, though, that those involved in piracy were increasing their activity on land, including kidnapping on shore, and that the smaller number of successful attacks had led to an increase in the level of ransom demands and greater violence. Indeed, the view appears to be that piracy will never be eliminated except, hopefully, in the longer term and that the realistic objective must be to make sure that it is contained. As a key part of that objective of containment, Operation Atalanta’s mandate was renewed in 2012 until the end of 2014.
I should like to raise a few points of relative detail about the report and the Government’s response. I note that, when the previous report was discussed in this House in November 2010, the response was given by the Foreign Office Minister. Today, the response to the European Union Committee’s follow-up report is being given by the Defence Minister, the noble Lord, Lord Astor of Hever. I am not sure whether the change in department responding to the debate represents any change in the Government’s priorities and approach to the issue of Somali piracy, Somalia and the EU’s Operation Atalanta, or whether it is simply an issue of the availability—or flexibility—of government Ministers. It would be helpful to have that small point clarified.
Paragraph 26 of the report states:
“We were, however, surprised to hear from the Minister that only one Royal Navy ship was allocated to Operation Atalanta for three months in a two year period”.
While the committee was surprised to hear this, it was not concerned, unlike the Chamber of Shipping, as the committee felt that there were financial constraints and considered that our command role from Northwood Headquarters was compensation for our limited contribution of vessels.
As the noble Lord, Lord Jopling, said, the committee’s report was completed last summer—over six months ago—and the government response was written last September, so could the Minister tell me whether our allocation of Royal Navy ships to Operation Atalanta remains as indicated in the report and the government response? I ask that also in the light of a recent article in the House magazine about HMS “Westminster” and her crew, which referred, among the other roles that they have, to the proud contribution made,
“to the international naval effort which has seen piracy attacks off the Horn of Africa reduce by 75% in the last 12 months”.
It may be that HMS “Westminster” has been involved in one of the other operations in the area, rather than in Operation Atalanta.
In its report, the committee expressed the view that any reduction in effort would quickly result in a renewed upsurge of pirate activity and that the mandate of Operation Atalanta should be extended beyond December 2014 to send a clear signal that the EU would not walk away from confronting piracy in the Indian Ocean. Rightly or wrongly, I rather took it from that that the committee may not wholeheartedly share the view that a decision on the renewal of the operation’s mandate should wait until the middle of next year, as appears to be the intention. The Government’s response to the report did not specifically address the issue of whether and when the mandate should be renewed, so it would be helpful if the Minister could say whether, on the basis of the situation on piracy as it is at the moment, the Government would or would not support renewal of Operation Atalanta’s mandate.
When the committee’s earlier report was discussed in 2010, there was general agreement that the long-term elimination of piracy would be secured only through addressing the underlying causes of instability affecting Somalia. That clearly remains the view. The committee’s report and the Government’s response set out the developments that have occurred and the steps that have been taken since the earlier report by the EU, the UN and the international community to help to improve the prospects of stability in Somalia. As the Government’s response says, fundamental to the EU’s efforts is the principle of encouraging greater African ownership, including by the African Union.
The committee is to be congratulated on the thoroughness of its work, including the follow-up report, which has highlighted the considerable progress that has been made and the reasons for it. Let us hope that that progress proves to be soundly based and that, despite some of the information that we have been given in the debate today about the release of those involved in piracy, it will ultimately lead not only to the eventual end of piracy but to a safer, more secure and more prosperous future for Somalia and its people in particular and for the region in general.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, I begin by acknowledging the quality of the contributions to this debate. Noble Lords have demonstrated a keen and impressive grasp of this very complicated issue. I praise in particular the excellent work of my noble friend Lord Teverson and the other committee members in compiling the report on Operation Atalanta.
Operation Atalanta has successfully contained, constrained and deterred acts of piracy. None the less, the UK’s longer-term aim is to eradicate the underlying causes of the instability that affects Somalia and gives rise to acts of piracy, and several noble Lords have made that point today. This can be achieved only by addressing the root causes of the problems in Somalia. EUTM Somalia and EUCAP NESTOR, launched as part of the EU’s contribution to an overall strategy for the Horn of Africa, aim to provide a comprehensive solution to Somalia’s problems. In time these missions, alongside AMISOM, will create a secure and stable Somalia, remove the incentives for piracy and develop the capacity of coastal states in the region to police their own coastlines.
The UK remains fully supportive of Operation Atalanta’s mandate and is committed to the continued command of Operation Atalanta from Northwood for the current mandate, which expires in December 2014. International pressure on the pirates must be maintained in order to prevent a significant resurgence of activity. While any formal decision to extend Operation Atalanta’s mandate beyond 2014 is unlikely to be taken in the immediate future, the EU has demonstrated a firm commitment to its counter-piracy efforts, including through enhancing the mandate with agreement on the use of autonomous vessel protection detachments and the disruption of pirate logistics dumps. Additionally, the launch of EUCAP NESTOR and a growing EU diplomatic role send further strong signals of increasing EU engagement.
The degree of maritime co-operation between the three core international counter-piracy forces—the EU’s Operation Atalanta, the US-led Combined Maritime Forces Combined Task Force 151 and NATO’s Operation Ocean Shield—is among the best that we have ever seen. The three operations provide a variety of effective framework opportunities for third-state contributions to anti-piracy efforts to further enhance international co-operation, evidenced recently when Royal Thai naval forces commanded a Combined Maritime Forces task force from a UK vessel. The shared awareness and deconfliction mechanism has also helped to ensure that military efforts in the region are effectively co-ordinated between international partners.
The threat from piracy remains a serious problem, but results and trends suggest that Operation Atalanta, in conjunction with other measures to counter piracy, is proving effective. For example, as of 7 March this year, two vessels and 60 hostages were being held off the Somali coast, the lowest levels held by pirates since September 2009. I hate to correct my noble friend but two vessels and 48 hostages were released over the weekend, so the figures that I have quoted are the accurate ones. This compares favourably with May 2011, when 23 ships and 503 hostages were held. Attacks and pirating of vessels are down by over 75% during the past 12 months. However, I emphasise that these gains remain reversible and it is vital that we do not relieve any of the considerable pressure that is currently being brought to bear on the Somali pirates.
The ability to prosecute and detain convicted pirates is an important element of our strategy to combat piracy and is an effective deterrent. Over 1,200 suspects or convicted pirates are being held in 21 states across the world. The Seychelles currently holds 101, representing some 20% of its prison population, while Kenya holds 147. We continue to support regional partners in developing local prosecutorial capacity.
Capacity-building assistance is being provided to the Seychellois justice sector by the international community. For example, the UK has provided funding to the UN Office on Drugs and Crime for the work of its counter-piracy programme, which has included work with Montagne Posée prison in the Seychelles. A new 60-cell block was opened there in September 2011 to help with the detention of suspected and convicted pirates. The UK has provided assistance to the Attorney-General’s Office by seconding two prosecutors from the Crown Prosecution Service to assist with the prosecution of suspected pirates.
A longer-term solution to develop Somali capability and ownership of the piracy problem is being implemented by the UNODC’s post-trial transfer programme, which returns pirates convicted in regional jurisdictions to Somalia to serve out the balance of their sentences. The programme has so far transferred 59 convicted pirates from the Seychelles to Somaliland under the terms of a bilateral memorandum of understanding, the agreement of which was facilitated by the United Kingdom at the London conference on Somalia. Further transfers from the Seychelles are anticipated this year.
I turn to the specific questions asked by noble Lords. The noble Lord, Lord Jopling, asked what political progress had been made in Somalia. Real political progress has been made there in recent months. The transitional period concluded on 10 September with the election of a new president, Hassan Sheikh Mohamud. This was a significant moment in Somalia and an important step towards a renewed political process. The London Conference on Somalia in February 2012 brought the international community together to support this process and, for the first time in years, it was run in consultation with the Somali people through their elders. They led a process to draw up a new constitution and formed a new parliament which elected a new president.
It is clear that, after two decades of conflict and instability, the people of Somalia want to usher in a new era of peace, security and democracy. Recent political progress marks a new chapter in their history. The end of the transition is the best opportunity in years to make progress towards peace and stability. Already, people are rebuilding their properties and businesses; confidence is increasing; and the diaspora is returning.
My noble friend Lord Jopling and the noble Lord, Lord Radice, mentioned the 959 pirates who were released. They asked what was the basis of the amnesty and why did this not apply to the “godfathers”. This amnesty referred to the boys who had committed acts of piracy at sea but did not apply to the financial backers or the senior leaders of the pirate action groups. My noble friend Lord Jopling asked for the Government’s response to the committee’s recommendation for an increased contribution from the Gulf states. We are working closely with a number of the Gulf states, particularly the UAE, Bahrain and Oman, and organisations such as the Organisation of Islamic Cooperation. The UAE has commanded the Combined Maritime Forces Combined Task Force 151 and Bahrain, Oman, Kuwait and the UAE all provide bases for Royal Navy ships. They all share information with coalition forces.
My noble friend Lord Jopling also asked whether, as the number of attacks reduces, there is a temptation to relax our presence there. Military response must remain proportional to the threat until the root causes of piracy have been addressed ashore. This is now occurring via EUCAP NESTOR and other capacity-building initiatives. Meanwhile, Operation Atalanta, NATO and the CTF 151 continue their deterrent patrols which deliver the time and space to allow development activity to take place ashore.
My noble friend asked whether pirates would be returned to Somalia. The committee did not consider this to be sensible given the level of prison security. He asked would the UN prison remain unused. The UN has refurbished a prison in Somaliland which is currently housing convicted pirates returned from the Seychelles. Work is on the way to building additional penal facilities. This is crucial to Somalia’s ongoing development. Building justice and the rule of law is a priority for the new Somali president.
The noble Lord, Lord Davies, pointed out that the example of success on Operation Atalanta should be included as part of the balance of competences review. Operation Atalanta will be part of a case study on common security and defence policy activities in the Horn of Africa. The noble Lord said that the committee’s conclusion in respect of ransom payments was wholly inadequate because these are criminal payments. Companies assembling ransoms in the UK must seek consent from the Serious Organised Crime Agency prior to payment. The Government do not make or facilitate substantive concessions to hostage-takers, including the payment of ransom. I would point out that it is not against UK law to pay piracy ransoms.
Lord Davies of Stamford
On that point, do the Government believe that it is a satisfactory situation that these payments are not illegal?
Lord Astor of Hever
We agree with the noble Lord that it is not a satisfactory situation.
The noble Lord, Lord Jay, asked whether the United Kingdom continued to strengthen the African Union in Somalia. Support through the EU training mission will continue. The UK continues to support AMISOM in Mogadishu, which is the military arm of the AU in Somalia and was critical to the recent successful retaking of Kismayo that forced al-Shabaab out of one of its key strongholds and away from a key source of revenue. I am very grateful to the noble Lord, as a former ambassador to Paris, for his encouraging words on our support to the French over Mali.
The noble Lord also mentioned west African piracy. The situation there is much more maritime criminality than piracy—the theft of cargo, illegal bunkering et cetera—and should not be seen as similar to that in Somalia. As such, it is clearly the role of national police forces to deal with it. The Royal Navy is taking action where it can, predominantly in terms of training and capacity-building: HMS “Dauntless”, HMS “Edinburgh” and HMS “Argyll” have all recently worked in this area. The noble Lord asked what effect the destabilisation of Mali might have on wider UK interests. It would allow ungoverned space from which terrorists could operate, plan and launch attacks with impunity, and could also destabilise other parts of Africa such as Nigeria and Sierra Leone.
The noble Lord, Lord Radice, asked what the United Kingdom and the EU are doing to meet the threat in west Africa, whether the Royal Navy will deploy assets to west Africa and whether we will apply the lessons from Somalia to west Africa. Lessons are being learnt from Somalia and applied to west Africa. The UK is supporting the industry initiative to create a regional maritime trade information-sharing centre. The Royal Navy deployment has helped build capacity aboard vessels and it is helping to train maritime law enforcement officers and develop maritime legal frameworks to prosecute maritime crime. Corruption locally is the biggest threat.
The noble Baroness, Lady Young, and the noble Earl, Lord Sandwich, asked how EUCAP NESTOR is progressing. The answer is: as well as can be expected. Building capacity where none has existed for 20 years is a great challenge. It involves preparing assessments of what is required, identifying key leaders who will have to drive forward development on behalf of the Somali Government and people, working in conjunction with various institution-building initiatives and prioritising where EU funds need to be spent.
The noble Baroness asked what the Government’s view is on dumping toxic waste off the coast of Somalia. Historical reports of toxic dumping in the early days of piracy cannot be denied, but it has reduced significantly owing to the naval presence in the area. Recent reports to the UN Security Council have failed to provide evidence of toxic dumping off the Somali coast. This Government remain committed to working with international partners to tackle all the reasons used to justify committing acts of piracy.
The noble Earl, Lord Sandwich, asked me to congratulate Kenya and the Seychelles on their efforts and asked what the Government’s attitude was towards Operation Atalanta. Regional partners are an essential part of the UK’s counter-piracy strategy. The Seychelles are leading the effort, having recognised the threats from piracy to tourism and their fishing and maritime industries. We commend their continuing efforts and those of Kenya.
The noble Lord, Lord Rosser, asked whether there was a change in the department responsible, as I am responding to this debate, and whether it reflects a change in the Government’s approach to piracy. There is no change in the department. The Ministry of Defence led the written response to this committee, and it is therefore fitting that I attend this debate now. This Government remain committed to countering the threat of piracy in the Indian Ocean and to working with our international partners.
The noble Earl, Lord Sandwich, asked whether the Puntland maritime police force would be allowed to resume its activities. The Puntland maritime police force is a local militia trained by a private security company and it received weapons in breach of the UN sanctions regime in force for Somalia. The decision to employ or allow the activities of the PMPF rests with the new Government of Somalia.
The noble Lord, Lord Rosser, asked whether the Government’s allocation of ships to Atalanta remains as per the report. The answer is yes. We allocate ships on a case-by-case basis, and it may not be the most effective use of ships to allocate them to Atalanta rather than to other coalitions. This is kept under constant review and plans made accordingly. A Royal Navy helicopter is currently assigned to Atalanta, working from a front ship. The noble Lord asked whether, given the current situation, the Government would support extension of Atalanta’s mandate. The EU is beginning a strategic review of Operation Atalanta, and we remain committed to supporting this mission.
The piracy threat cannot be dealt with through military means alone. It will require a sustained international effort that addresses not only the threat from pirates but institutional incapacity. The UK is ultimately seeking greater coherence between EUTM, Atalanta and Op NESTOR within the overall EU Horn of Africa strategy but also with other international and UK unilateral activity. All the symptoms—terrorism, piracy and migration—are a result of the causes of instability in Somalia. EUTM does not currently link directly to the other CSDP missions but rather to the wider EU strategy as part of the comprehensive approach to Somalia. Linking missions with diplomatic and developmental tools should enable the EU to take a lead internationally in seeking to bring stability and governance to the country and wider region.
Lord Teverson
My Lords, I thank my noble friend the Minister for his response and particularly for the good news—I am delighted to be corrected—that we are down to two vessels and 60 hostages. That has to be very good news for the families and the people who are involved. I hope that we can bring those figures down to zero before too long.
When I mentioned World Food Programme vessels coming into Mogadishu, I meant Djibouti. Clearly, they could not go into Mogadishu because it was not under any sensible control.
Perhaps I may respond briefly to what the noble Lord, Lord Davies of Stamford, said about ransoms. We considered this in our first report but not in our second. I recognise that this is a hole in the report. In fact, the bit that was put in was really from another EU Committee report through the noble Lord, Lord Hannay. Perhaps we can look at this further.
Will the Minister ask his officials to do a broader note on pirate release? This is of concern to the committee and is an important context. It is not for further debate now, but if his department could give us more background, particularly on how it was done with the EU and contributing nations, we would find that very useful.
It is important that the pirate community, if we can call it that, knows that this operation will go on until the situation is resolved on land and the rule of law comes back right across Somalia.
I thank noble Lords for having participated today, particularly those who are not members of this committee. It has been a huge privilege and pleasure for me to be chair of the committee over four years—although all committee members have put me under great pressure most of the time, quite rightly—but this will probably be the last report that I present within this Committee Room. I thank the staff of the committee. I am trying to remember who was a part of the team back then, but I know that one of them was Kathryn Colvin. I thank her in particular for having put this report together and for having brought all those witnesses in front of us as well as she did. I commend the report to the Grand Committee.
Government’s New Approach to Consultation: “Work in Progress” (SLSC Report)
(11 years, 9 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Goodlad
That the Grand Committee takes note of the Report of the Secondary Legislation Scrutiny Committee on The Government’s New Approach to Consultation: “Work in Progress” (22nd Report, HL Paper 100).
Lord Goodlad
My Lords, I greatly welcome the opportunity to open this debate on the Secondary Legislation Scrutiny Committee’s report. The committee was grateful to the many organisations and individuals who responded to our call for evidence; to the Minister for Government Policy, Oliver Letwin, who gave evidence to us; and to the clerks—Kate Lawrence, who is now on a well earned sabbatical, Jane White and Paul Bristow—for their invaluable work.
The main issues in our recommendations reflected the concerns expressed in the very large number of submissions that we received in response to our call for evidence. The Government did not ask for evidence, so I hope that the responses to our call for evidence will have been helpful. We urge the Government to ensure that the review of the consultation principles that were announced last July reflects the concerns expressed in the evidence, in particular a widely expressed preference for a 12-week standard duration of consultation. We ask the Government to recognise that six weeks is regarded as the minimum feasible consultation period, except in exceptional circumstances; to ensure that consultation periods do not clash with holidays or peak periods of activity for the target group of consultees; and to engage with key interest groups prior to launching consultations, so as to reach agreement with those groups on the broad outlines.
We recommended that the review should be started in January—we are now in March—and that its findings should be published by Easter. There are no plans to add to the evidence, which is already to hand. We recommended that the review should be carried out by a unit independent of government and that a stakeholder reference group should be convened, containing members from across civil society, to provide input for the review team. We also asked the Government to recognise that a “digital by default” approach to consultation was very likely to exclude a large proportion of our society, and in particular vulnerable groups. We asked the Government to demonstrate that wider engagement with vulnerable and so-called hard-to-reach groups was being delivered in practice.
In its evidence to us, the organisation Disability Rights UK voiced concern on behalf of the 42% of disabled people who live in households without internet access. The Disability Charities Consortium asked,
“How does the Government expect the proposed new approach to consultations to impact on its obligations to involve disabled people in policy development and decision-making under the UN Convention on the Rights of Persons with Disabilities?”.
A large number of the elderly, and indeed other people, who are not disabled will also be affected by the predisposition to digital communication. The noble Earl, Lord Lytton, who I am glad to see in his place, submitted evidence on this matter, and I hope that he will say more about that later in the debate.
We asked the Government to introduce as soon as possible a single website listing open consultations in the order in which they close, for the benefit of the many organisations that respond to invitations to give evidence to consultations. We further recommended that the new principles should explicitly commit departments to publicising timely responses to consultations and to strengthening the role of the Cabinet Office in the co-ordination of consultations. We also recommended that it should be clarified to stakeholders what redress is available to them if the consultation does not comply with the published principles.
The Government’s response to the report covered the format of the proposed review, its timing and its content. We were disappointed that a more leisurely timetable is proposed for the review than we had recommended, and that the proposed membership of the external advisory panel appears small in number. It is to be hoped that the disquiet and suspicion expressed in the responses to our call for evidence will be allayed by the findings of the review and by the Government’s subsequent actions.
Our recent history is littered with examples of government action where successful consultation could have averted enormous wastes of parliamentary time, government time and money, the time and money of other people, embarrassing government climbdowns, reversion to the drawing board and so on. Most recently, my noble friend Lady Thomas of Winchester, in the debate last week on the Delegated Powers and Regulatory Reform Committee’s report on strengthening statutory procedures for the scrutiny of delegated legislation, cited the lack of consultation on a crucial part of the Social Security (Personal Independence Payment) Regulations, which had to be changed by the DWP at the last minute and for which the Minister apologised. More or better consultation would have averted that.
A successful example of consultation, on the other hand, was the Department of Energy and Climate Change’s handling of the Nuclear Decommissioning and Waste Handling (Finance and Fees) Regulations 2013, where the consultation persuaded the Government that the regulations needed to be looked at again. In 2012, they invited views on a revision to the 2011 regulations, and the issue of workability in relation to reporting and verification requirements was thereby resolved in the most recent statutory instrument, thanks to proper consultation.
Over the past five years, an average of just over 900 statutory instruments per year have been scrutinised by your Lordships’ Secondary Legislation Scrutiny Committee, formerly the Merits Committee, each accompanied by an Explanatory Memorandum, including a section on the policy background of the instrument and a section on the consultation outcome.
The importance of effective consultation to the process of government appears before your Lordships’ Committee every week. It is clear that a willingness to listen to the views of interested parties sometimes gains support for a Government’s work, and that encouraging interested parties to comment on proposals before they are finalised and implemented usually means that the policy, which has been conceived within Whitehall, can be adjusted to the reality of the outside world.
Whitehall can never foresee all the detailed impacts of policy proposals. Those at the receiving end usually can, and may thereby contribute to the avoidance of mistakes. In our experience, some departments struggle to understand the use—the validity, even—of parliamentary scrutiny as a disinterested process rather than an unwelcome but necessary interference in the project management of an item of secondary legislation, far less the intrinsic value and necessity of consultation. As always, the extent of hoisting in this necessity depends on who you are dealing with. Some departments get it better than others; some learn it faster than others.
All who have worked in government have been impressed from time to time by feelings of profound frustration. Why can we not simply get on with the job when it is so obvious what needs to be done in the public interest? Why does the car not move forward when we press the accelerator? Why is the system so furred up, obstructed by endless consultations, reviews, inquiries, inquiries into inquiries, judicial review, human rights and so on? Conversely, we all, when at the receiving end of government activity that we do not like, sometimes feel that the world is being run by people in Whitehall who have descended from Mars, speaking only Martian, and have not the slightest knowledge of or interest in the concerns of ordinary people upon whom their whims and diktats are arbitrarily inflicted without a by-your-leave. To govern by consent in a modern democracy requires for success a resolution of those two conflicting states of mind. I hope that the committee’s report and this debate will make a small contribution to enhancing that success. I beg to move.
Lord Hart of Chilton
My Lords, I, too, am a member of your Lordships’ Secondary Legislation Scrutiny Committee, whose 22nd report for 2012-13 on the Government’s new approach to consultation we are considering today. The report was published in January this year and responded to by the Government in February, and here we are debating the matter in early March. Unlike in the previous debate, there can be no complaints about tardiness in that respect; on the contrary, compliments, not brickbats, are due to the usual channels. I am in complete agreement with the speech by our chairman, the noble Lord, Lord Goodlad. I pay tribute to his distinguished chairmanship of the committee, not just on this occasion but throughout his tenure.
Accordingly, I simply wish to emphasise and repeat some of the key issues that have arisen. First, I was very surprised that the Government, in bringing forward what they called new principles of consultation, failed to carry out any consultation themselves. In my view, the importance of the proper process of consultation in initiating new or revised policy cannot be underestimated. Much of my earlier career was spent reading and responding to consultations so I suppose I have a special interest, but proper consultation, in my view, is the essential oil for the engine of government. It test-beds the underlying principles with those most likely to be affected. It checks the support or opposition that will be forthcoming. It affords the opportunity to discover mistakes in assumptions, methodology or technical background. Last but by no means least, it forms part of a healthy participatory democracy; its presence strengthens confidence in government and its absence weakens democracy itself.
It follows that the process of consultation must afford sufficient time for views to be obtained, analysed and, in certain cases, responded to. Any perceived short cuts risk confidence being eroded or lost altogether. So, in the absence of any prior consultation exercise, the committee carried out its own by calling for evidence and, as the noble Lord, Lord Goodlad, has said, we were gratified by the extensive and constructive response. There was certainly no doubt about the importance that witnesses placed on consultations, but there was some scepticism about whether the Government shared that view. In particular, there was criticism over the time allowed to participate. There was a preference for 12 weeks for issues of importance or complexity, with a minimum of six, and the period selected should not fall over bank holidays, summer holidays or periods of peak activity for the target groups.
Prior consultation was something that the Government should engage in with key stakeholders to seek a consensus on the broad outlines of the matters to be consulted upon. With a significant percentage of the public not connected to the internet, the approach of “digital by default” left some excluded and others constrained. There was a feeling that the Government sometimes failed to realise the complexity of some of the issues being consulted upon and the capacity of organisations to respond with speed. There was often a lack of response to consultations once they had taken place, leaving an impression that the consultation process was just an exercise to be got through as quickly as possible.
Our recommendations to the Government recognised the strength of many of these issues, and suggested ways in which the principles could be improved. Our conclusion was that the new principles, in many respects, were failing to provide the consistency and transparency that the public are entitled to look for in consultation exercises. Accordingly, we urged the Government to launch an independent external review of their new approach to consultation without delay, meaning a start in January and the publication of findings by Easter this year. Although the Government have accepted the principle of a review, they are not treating the matter with the urgency that we recommended and that it deserves.
For my part, I have misgivings about whether the Government, even now, have really appreciated the important part that consultations play in the formulation of policy and in winning the confidence of the public, which was one of the avowed intentions in forming the coalition and embarking upon office. Speed is not the prerequisite hallmark of good governance; full and proper consultation most certainly is.
Baroness Hamwee
My Lords, some people might wonder why the Secondary Legislation Scrutiny Committee has given so much attention to the issue of consultation. With the unremitting tide of secondary legislation—except that tides go out as well as keep on coming in—almost invariably the question is prompted, “What has been the response to consultation on this?”. If the answer is not apparent, then the question is asked, “What consultation has there been?”. Our splendid advisers, for whom my admiration grows weekly, have extraordinarily sensitive and alert antennae to this.
It is important for the committee to know the response to consultation in order to fulfil its own remit. We have some specific roles and are also required to look at,
“general matters relating to the effective scrutiny of secondary legislation”.
It is obvious also that a House asked to approve—or at any rate not object to—an instrument needs to know how it has been received. Our chairman, the noble Lord, Lord Goodlad, gave a very comprehensive account of our report. I thank him for his chairmanship. Perhaps I may say that his conclusion was all the more devastating for being delivered so quietly.
The noble Lord referred to the report of the Delegated Powers and Regulatory Reform Committee, chaired by my noble friend Lady Thomas of Winchester. I am glad that she is here but sorry that she felt that she had to take her name off the list this morning because of the weather. I believe that she is waiting for updated weather reports to see how long she can stay. The debate reminded us that it is often secondary legislation that has the greatest impact on individuals. We hardly need reminding of this since so much contentious legislation bites through statutory instruments. We might think that as the amount of primary legislation grows, the amount of secondary legislation would diminish, but that seems not to be the case. The issue is inseparable from that of the House’s narrow and rigid powers explored by the DPRRC and by the Leader’s Group, chaired by the noble Lord, Lord Goodlad. This has been thrown into sharp focus by the high public expectations that fill our in-boxes about what the House can do in response to secondary legislation.
I agree with the proposition that was the starting point of the Government’s exercise: namely, that consultation should not be a matter merely of ticking boxes. However, it fails to recognise that tick-boxes have a place as aide-mémoires. We do not need to abolish tick-boxes to avoid being ruled by them. Consultation is important not just because, like everything government does, the instruments need to be seen from the point of view of those affected—for all the reasons explained by the noble Lord, Lord Hart of Chilton—but because Whitehall does not always know quite how things work in a variety of specialised areas. One may come from Maidenhead or Manchester, not just from Mars, and fail in that regard.
Last week, the regulations on health service commissioning were withdrawn. Our committee had received a huge amount of evidence, including from many professional organisations that understood how the regulations before us would or would not work. They gave very powerful evidence about the practical impact.
Baroness Hamwee
My Lords, I was making the point before the Division that the content of instruments and consultation are not simply technical matters. Our committee received a great deal of evidence on the subject when we put out a call. I shall quote a comparatively small amount—although I am going to quote quite a lot—from the large bundle of evidence that I am holding. The first points come from an individual who wrote:
“The new Principles have retained all of the previous authority of the Government while reducing the scope for individuals and groups to prepare useful submissions. Yet, within the latest incarnation of the No. 10 website, the message is positive and encouraging, and the linked site Inside Government is clear and easy to follow … The contrast between the Principles and the No. 10 site is glaring - Governments must not create difficulties designed to deter the public. In turn, the public has a responsibility to understand the policy and explicit questions asked within a consultation … Individual members of the public generally struggle to be heard as the collective forces of lobbyists, media, and protest groups set about their respective quests. It is understandable that single-interest groups are forming as a response to perceived indifference, often spawning other groups holding alternate opinions. The internet enables such groups to form quickly and at low cost, perhaps inspiring the media … to provide their online readers with facilities to comment directly on articles, swiftly followed by site moderation: give the public a stick and anonymity and they will use both”.
The use of digital media came up a great deal, as did problems of capacity and timescales, which have already been referred to. I shall quote from a small part of the evidence, this time from an organisation. We were told that,
“communicating the consultation questions to all the relevant affected groups: we understand that the Government would do its best to notify all the groups whom it believes would be affected by a particular proposal, however, part of the reason for consultation is to be able to identify any unintended consequences. These may well come from groups whom the Government has not foreseen will be affected by the proposal in question. A two week consultation period will be unlikely to reach them … Many NGOs operate on a consensus basis and would have difficulty in meeting much shorter deadlines. For example, the Women’s Resource Centre”—
which was the witness—
“like many similar organisations, needs its members’ consent before making a response on issues of policy and this cannot be done within a fortnight. Smaller NGOs that have few if any professional staff are likely to find it particularly difficult to respond quickly”.
It is not only NGOs that have problems with short timescales. For some organisations—local government is an obvious example—there are formal processes which have to stick to a formal timetable. We were given evidence by a number of organisations about the burden of consultation. They were complaining not simply about the number of issues which the Government keep throwing up—all Governments do that—but about the burden of being asked to give a quick turnaround. The Bar Council was one of those.
The Women’s Resource Centre went on to state, of the Government’s proposals:
“This approach seems to be based on receiving a ‘yes’/‘no’ response from trusted insiders rather than being ‘a more proportionate or targeted approach’”—
it was quoting from the Government’s comments—
“and it has some obvious adverse impacts”.
“Digital only” or “digital by default” was referred to. The centre then stated:
“Additionally, on-line responses tend to allow less flexibility in the way respondents can answer the questions”.
That rang quite a bell with me. I have often been frustrated by online consultations where it has been very difficult to include any sort of nuance or spectrum of response. I was horrified to hear or see—I am not sure whether it was in the debate on my noble friend’s committee’s report or in the evidence—the suggestion of making a response by Twitter. I hope that we do not come to that.
I understand the Cabinet Office’s wish to ensure that consultation is effective and not wasteful of resources. Although those are entirely benign intentions, the very reaction must have prompted some doubt. As we have heard, there is to be a review, with the involvement of an external advisory panel, not a stakeholder reference group, to “inform the review”. Can my noble friend the Minister give us more information on who will take part in the panel and the review group, on how it will operate, and on anything else that he is aware of that might help your Lordships assess the whole situation?
The Government announced their consultation principles as,
“a new approach to consultation”.
It seems not very long ago that in another capacity, as a scrutiniser, I was being informed of a new approach to consultation which put in place formal processes, a formal 12-week period and so on. I fear that, in seeking efficiency, we may find ourselves on a path back to some of the old ways of doing things, and not in a brave new world.
Lord Bichard
My Lords, I have experienced consultation from several different perspectives during my long years. I have experienced it as a local authority chief executive, as a senior civil servant, as a quango chair, a chair of several major voluntary organisations, and as a non-exec of a private sector organisation providing services for the Government. These experiences have taught me some important lessons.
This first is that, as a rule, and with some honourable exceptions, civil servants instinctively do not much like consultation because it rather slows down the process of implementing their favoured proposal and can throw up some inconvenient but valid objections which even—heaven forbid—Ministers might find convincing. For many of the same reasons, some Ministers and quango chairs are sometimes inclined to circumnavigate the consultation process while, in contrast, voluntary organisations and private providers much value consultation because they often feel that the frequent changes to government policy and operating procedures could and would benefit from more, not less, consultation.
From these various experiences, I have been convinced that policy can be greatly improved as a result of effective consultation. There are many examples of that having happened. It has not yet been mentioned that consultation is also much more likely to ensure that legislation and policy changes are introduced with public support rather than in a hostile environment.
Consultation matters, as the chairman of the committee of which I, too, am a member, so eloquently said. This is a serious and important matter. It is not arcane. It is not just a matter for the nerds, or something that can be swept into the long grass. Not only does it matter, it needs to be regulated to ensure that it is conscientiously and thoroughly undertaken.
Strangely, before the Government introduced these new guidelines, there was, as has already been said, advice in place. It had been agreed with the voluntary sector and other interested stakeholders, and seemed to be working rather well. Although it set a uniform 12-week period for consultation, common sense accepted that sometimes a shorter period would be needed, and that happened when necessary. But perhaps, without having time to look at the statistics which demonstrated that this was being operated sensibly, Ministers were convinced by their officials that this was all taking up too much time, was excessively bureaucratic and was delaying the implementation of vital government policy, and so the new guidance was issued.
Oddly, since it was about consultation, it was not felt necessary to consult those affected. Nor was it felt necessary to prohibit commencing consultations at the start of holiday periods when those affected might not be available. Surely no one would do that deliberately. However, it has happened rather a lot to be a coincidence. It was not even felt necessary to require departments to publish a response to consultations so that respondees could at least see that their views had been considered rather than peremptorily ignored. Of course, if people cannot see that their views are taken note of, they very quickly decide that it is not worth being involved in a consultation at all. A commitment, as has been said, was made to digital consultation as the norm, with no attempt to identify groups for whom this would cause serious problems. No commitment was made at publication for an independent review of how these new arrangements were working.
It has been said that when the Minister appeared before the Select Committee, he appeared to concede significant ground on all these points. Perhaps it would have been helpful to make clear that consultation during holiday periods was not desirable; perhaps it would have been useful to publish some analysis of responses; and maybe an independent review would have been helpful. But the Minister’s later, more considered response suggested that all these matters would merely be looked at as part of the review; not now to be undertaken independently and externally but by the Cabinet Office—which is not perhaps entirely dispassionate on the matter—with advice, it seems, from an advisory committee. At this point I am trying to recall which episode of “Yes Minister” contained this storyline, because I am absolutely certain that there was one. I have been away and I have not had a chance to research that.
The final irony is that these changes have been made to inject a sense of urgency into the policy process and to reduce bureaucracy. So far their introduction has provoked widespread opposition and criticism. It has caused the Secondary Legislation Scrutiny Select Committee to discuss the proposals on at least four occasions, with the Minister attending one of those; it has led to the establishment of a review; and it has led to the establishment of an advisory board and the likelihood of many further debates when the review is published.
Perhaps most important of all, it has suggested that the Government’s commitment to the big society and listening to the voice of civil society is more about rhetoric than a genuine desire to listen to the views of interested parties—especially, I am sad to say, if their views are inconvenient. I suggest that it would be better, even now, to revert to the previous guidelines and, if not, to have a properly independent review carried out with greater urgency than we have seen so far.
The Earl of Lytton
My Lords, I was a late addition to the speakers list, having struggled manfully over the weekend to address the reasons why I could not enter my username and password on the Government Whips website. Eventually I had to e-mail late last night, asking if they would do it on the basis of an e-mail rather than either appearing in person or having filled in the form. This highlights that even those who think they know what they are doing on information technology sometimes fail to unlock the key to the relevant bit they want to get at. I will return to that theme.
Apart from the noble Baroness, Lady Smith of Basildon, and the Minister, I am the only speaker who is not a member of the committee. I am very glad to support the committee because I receive its regular bulletins and I find them extremely useful and the most valuable guide. I would like to mention that in passing.
I congratulate in particular the noble Lord, Lord Goodlad, and his committee on what is a very lucid and well reasoned document. The Government would have done well to accept it without demur or delay; the evidence certainly seems to me to speak for itself very cogently. I agree with him and the other committee members on the importance of the basic issue; efficient secondary legislation and engagement with the public through the medium of consultation is, in my view, the very bedrock of an effective and inclusive parliamentary democracy. It is important that it is respected as a process both by the public and by the Government.
Changes introduced in 2008 were necessary to restore confidence because in some respects the issue of consultation had become a music hall joke in which the “departmental book of dirty tricks” would have indicated such things as a 10-week consultation period starting on 25 July, or a six-week one starting in the first week in December. I have come across both in years gone past. So glaring have some of these examples been in the past that it was quite impossible to believe that the timing was an innocent accident as opposed to being the fruits of calculated design aimed at circumscribing the practicability of any response. I agree entirely with the noble Lord, Lord Bichard, and some of his comments. Having myself been a regular consultee, involved in consultation processes such as those that we are talking about, I know what it is like to find myself thoroughly disillusioned. Even without any realistic outcomes to consultation, as has sometimes happened, and this has already been mentioned, the body language of the whole process was really quite evident to anybody who chose to look at it in the round.
I do not say for one minute that brief consultation periods are wrong. I can think of one last summer that concerned the matter of signatures necessary for parish councils to make payments and the impediment that the previous rules presented to electronic payments—I declare an interest here as president of the National Association of Local Councils—where the consultation on the solution involved a very limited pool of interests. The participants had already sought resolutions that their national body lobby the Government to revise the regulations and make the necessary changes. It was important, particularly in the context of local government finance, to do something sooner rather than later, so arguably a short consultation in the summer holiday period was reasonable in that situation. Even there, though, a two-week consultation would, frankly, have been a complete nonsense. There must be a minimum, as suggested by the committee.
In evidence to the committee, I referred to the practicalities more generally concerning consultations that involve parish and town councils, with their customary cycle of meetings and the customary holiday periods that interpose into those. I do not want to make a meal about it because I am sure that noble Lords are entirely au fait with exactly what that means: in short, it is impossible, under a very curtailed consultation period, to make a proper response. Eventually, it falls probably to one person—either a clerk or the chairman—to try to knock something out for themselves and hope that it actually meets with the general view of the committee. It is not a satisfactory way of doing things and leaves people feeling that they are exposed; on the one hand not being able to consult their members, and on the other hand having to make a consultation of some sort or miss the opportunity. We need to guard against doing things that are administratively convenient but are apparently done without assessing the impact on those whom we are trying to consult. To put it another way, the process at the moment is not sufficiently proof against the proper role and function of consultation being overlooked, so this report is timely.
I noted that one of the consultees, the Consultation Institute, set out a sort of subdivision between short, medium and long-term consultations. I think we need a more elaborate and more sophisticated approach than that crude subdivision but the idea of a simple impact assessment, assessing the gravity of effects multiplied by the numerical instance, seems to be along the lines of a risk assessment and that type of approach that is now well understood in government and outside. There are always going to be cases where the matter is urgent but I do not think that we are ever going to be dealing with emergency measures by way of consulting the world and his boy. However, where the consultees are a small and identifiable group of, say, specialist manufacturers, I can see that a very short and targeted consultation might well be fine in that situation.
Consultation must be an intrinsically organic and human-scale exercise. It has to operate at a reasonable speed for the typical consultee, having regard to their characteristics. Those include their age, their ability to absorb technical detail and their educational attainment, as well as competition for their valuable time.
The noble Lord, Lord Goodlad, referred to my comment in the consultation about the “digital by default” approach. There are a number of issues here. First, taken at face value, that is not the answer. Significant numbers of people do not have digital access. Secondly, many of those who have such access do not have more than basic computer skills. Thirdly, not everyone is comfortable filling in a form online, regardless of their ability with a computer. Fourthly, it is very easy to limit the utility and type of response that one can get from a consultation process by the manner and design of the electronic consultation form, and in particular the space allowed for certain types of answer. Some consultations specifically ask for answers to particular questions that the consultor wants answered. The answers are not necessarily the comments that the consultee wishes to give.
It is very important that we get this right. It will be damaging if the public once again feel that they are being short-changed by the process, by over-short timescales, by artificial limitation of the type and range of issues that can be raised, by the matter not being set in its proper context or by the issue being too complex because it has not been unpacked sufficiently. All those things militate against good consultation. I share the committee’s view that the Government’s response lacks urgency. If we are not careful, there is the risk that the momentum of a very considerable and beneficial piece of work will be lost.
Lord Scott of Foscote
My Lords, I congratulate the noble Lord, Lord Goodlad, on securing this debate. Formally, it is a debate on the report of the Select Committee of which he is the very efficient chairman and of which I have the honour to be a member—as does practically every other noble Lord in the Room. I agree with everything that has been said about the report and the importance of consultation, but I will say a few words of my own.
The purpose of consultation must be to improve the quality of proposed legislation, whether primary or secondary. It is much more important in relation to secondary legislation than to primary. With primary legislation, a Bill will have gone through the House of Commons and will go through its stages in the House of Lords. It will become public property. From time to time there will be comments in the newspapers. Members of the House will receive letters from interested persons, sometimes expressing support and sometimes expressing misgivings. They will be fully informed in that way about the merits and demerits of the proposed primary or secondary legislation before the matter comes to a head.
With secondary legislation, what is the opportunity for members of the public to make those sorts of observations—of support or criticism, as the case may be? If an affirmative resolution of the House is required, in due course the legislation will come before the House. Either it will start in the Moses Room and go to the Chamber or it will be dealt with entirely in the Chamber. However, the notice might not be sufficient to alert interested members of the public to what is afoot. With secondary legislation that requires a negative resolution to prevent it coming into effect, there will be no notice to the public at all. Every now and again, a regret Motion may be tabled. In that way a debate of which the public may become aware will take place, but that is a relative rarity. Secondary legislation that is going to come into effect without any express resolution, and which requires a negative resolution to prevent it coming into effect, is much more common. How, without prior consultation, are defects in secondary legislation of that negative character going to become apparent and be acted upon? Prior consultation, in my respectful opinion, is essential in all cases where the statutory instrument in question is going to come into effect unless there is a successful regret Motion preventing it coming into effect.
The importance of that is obvious and does not need overstating. The importance of the consultation is, first, that defects not necessarily apparent to the Minister or civil servants who have drafted the statutory instruments in question can be brought to their attention and revisions can be made before it is too late for them to be made. The pros and cons of the proposed secondary legislation can be brought to the attention of those who will be affected by the legislation. They may be affected because their interests will be involved by what is proposed. They may be affected simply because they are very knowledgeable about the subject matter of the proposed legislation. In either case, they are people whose comments may be very valuable to the Government for the purpose of obtaining the effective and sensible legislation that must be the aim of the Executive.
The importance of consultation cannot be overstated. However, effective consultation requires that there be communication with the right people. As I have said, they will be people with a particular knowledge of the subject in question and whose interests are likely to be affected by the proposals that will be embodied in the statutory instrument that is under review. They are the people who the Government should consult with before drafting and putting forward the proposed secondary legislation. There is no reason why that cannot be done but, if it is going to be done, it must be done effectively, and if it is going to be done effectively then it must be done with sufficient time for two things to happen. First, there must be sufficient time for the persons who are being informed of the proposals—the persons with whom the consultation is taking place—to think about it and draft a response. Secondly, there must be time for the Government to consider the responses and to act on them as they may think appropriate.
The proposition that there can be a consultation in two weeks is absurd. That suggestion is no more than a request, perhaps, for a fig leaf of consultation that can be held up for public relations purposes as being a consultation when in fact, because of the absence of any time adequate for a proper consultation, it will be nothing of the sort. It will not deserve the description of a consultation. The proposition that two weeks might be adequate is, in my respectful opinion, laughable. It demeans a Government who put it forward as sufficient.
The proposal that there be a flexible time limit is of course acceptable in principle. Twelve weeks as the norm has been satisfactory, but maybe there are cases where that could be abridged, or shortened to some extent. A minimum of six weeks appears to me to be a sensible limit to place on the abridgement possibilities.
Subject to those requirements of genuineness in the consultation process, consultation might be described as being plainly a good thing. However, it is not a good thing if inadequate time is allowed for responses to be given or for thought to be given to them. If insufficient time is allowed, what purports to be a consultation becomes no more than a public relations exercise in hypocrisy. That, plainly, cannot and should not be supported by the House.
I respectfully endorse the suggestions in the report of the committee—of which, as I have said, I have the honour to be a member—of a minimum period of six weeks. I urge the Government, if not to adopt the number of weeks in question, at least to adopt the principle of the essential requirement of time for response and time for thought for anything that is going to be an adequate consultation.
Lord Beecham
My Lords, I congratulate the chairman on his appointment. I take particular pleasure in the fact that I think he is now the only Member of your Lordships’ House from the north-east to occupy such a position, and I am very glad on that account. I also congratulate the noble Lord, Lord Goodlad, and the committee on the report.
Before I joined this House nearly three years ago, I spent 50 years in politics in one form or another, 43 of them as a local councillor. In my innocence, though, I was quite unaware of the degree to which the scrutiny conducted, particularly at the other end of the Palace of Westminster, was so inadequate. It is undoubtedly better in your Lordships’ House. Having said that, though, it is clear that the process of scrutiny is not as good as it should be, and that is partly a function of the consultation process. This first came to my attention when we discussed the changes that were to be made to the Public Bodies Bill. It was quite clear that decisions had in fact been made and that the consultation, to the extent that it did occur, was something of a sham.
I think that I coined the term “pre-legislative implementation” for some of what happened under the aegis of that Bill, and I am glad that the Constitution Committee is looking into that. I recall particularly the noble Lord, Lord Taylor of Holbeach—I do not blame him personally for this—giving constant assurances that there would be consultation in connection with the regional development agencies, and that each would be considered on its merits. In the event, there was no consultation at all and they all went. I do not blame the noble Lord for that; the decision was clearly taken somewhat above his pay grade.
The noble Lord, Lord Goodlad, referred in his speech to contributions from Mars. I can reassure him about that; one item that has been subject to consultation is the reform of the Outer Space Act. On page 26 of the committee’s report it will be seen that 14 weeks were devoted to possible consultation on that, in contrast to four weeks for the statutory instruments concerning the delivery of structural funds—a matter of more immediate concern, it might be thought, to all save those particularly interested in astronomy and the like. Equally, when looking at the Department of Health, one sees some strange discrepancies. Page 32 of the report points out that making nursery milk schemes more effective had an 18-week consultation whereas consultation on the membership of Healthwatch England, a matter that itself particularly concerned scrutiny, took only five weeks. Clearly, something is amiss with all this.
I respectfully differ somewhat from the noble and learned Lord, Lord Scott, on the assumption that we should deal only with secondary legislation. Experience of the Crime and Courts Bill in particular underlined that consultation took place very late; indeed, material was introduced into your Lordships’ House halfway through the passage of the Bill on the basis of consultation that had taken place after the Bill had been launched. In another context, on transforming bailiffs, months elapsed between the end of the consultation and a government response being provided, well into the course of the Bill. So while in many respects secondary legislation would be the prime area, it is not the only one about which we should be concerned.
The difficulty that many of us see is that there is an increasing reliance on secondary legislation to fill in the details not included in primary legislation nor debated during the passage of what, too often, is in effect becoming enabling legislation. I strongly support the committee’s recommendations and hope that they can be implemented in relation to consultation at whatever point it is initiated.
Baroness Thomas of Winchester
My Lords, I, too, applaud the committee’s report and strongly endorse its recommendations. I will just say a very quick word about why consultation is so important, particularly for disabled people. I absolutely accept that there are many sorts of disability, but let us take the disability of somebody such as me, with mobility problems. No one except a disabled person, or their carer or helper, can know what it is like to be disabled. That is why consultation, for this group of people, is so important. People have their eyes opened when they either go round with a disabled person or when they put themselves in a wheelchair. I know a lot of MPs have done just that to see what conditions are like in their constituencies. I note that many of the responses that the committee has highlighted are from charities with a lot of disabled people in them. I will not speak about the PIP regulations again but they are an absolutely classic example of why consultation is so important.
The other thing I will highlight is that a single website for publicising government consultations would be invaluable. At the moment they are all over the place and it is quite a scandal that the Government are expecting some organisations to respond in a very short timeframe. After all, the people in these organisations are usually paid very small amounts, because the organisations are funded by voluntary donations, with no state support. To make these people look all over the place for consultations from the Government is ridiculous. I thoroughly endorse the robust language of the report and hope that the Government are listening.
Baroness Smith of Basildon
My Lords, I first thank the noble Lord, Lord Goodlad, and his committee for a welcome and extremely useful report for your Lordships’ House. This is the second debate on a Secondary Legislation Scrutiny Committee report in the past two weeks to which I have responded on behalf of our Benches. If I am honest, my first reaction on looking at the reports was, “This could be a bit dry”. However, it actually goes much deeper than that. Not only have I have enjoyed participating in, and learnt an enormous amount from, these two debates, but they go right to the heart of our democracy and our role in your Lordships’ House as people who scrutinise legislation. It shows the House of Lords at its best: it is looking at the process of government not in an academic or remote way but in a very practical way and examining the impact of these proposals on parliamentary scrutiny. It has also—I cannot overstate this—given a voice to those who had serious concerns about the changes that the Government have made to the principles of consultation but who had not been given an opportunity to express their concerns or to be consulted in any way, to try to influence that policy before it came in. The House owes a debt of gratitude to the committee for providing that opportunity for a proper consultation on this issue.
I have been quite eager to hear today’s debate and the Minister’s response. The main reason is that, having read through the Government’s statement from July, the reports and the appendices, and the government response, I am still not totally clear what problem the Government are seeking to address by changing the rules and having this new statement of principles on consultations. I hope that we will hear from the Minister today what the problem is that the Government feel has to be addressed and what the evidence base is for the change that has taken place. The Minister’s statement in July is quite clear as to the Government’s stated objectives: that consultation must be proportionate, in terms of time, scale and type; that there should be real engagement rather than just a bureaucratic process; and that thought should be given to with whom Ministers should seek to engage so that there can be a targeted consultation.
However, all Governments would say exactly the same about those processes. In 2008, when the Labour Government brought in the Code of Practice on Consultation which this Government have now replaced, my noble friend Lord Hutton of Furness who was then Secretary of State for Business, Enterprise and Regulatory Reform, wrote in the foreword:
“This Government is committed to effective consultation; consultation which is targeted at, and easily accessible to, those with a clear interest in the policy in question. Effective consultation ... which the Government can use to design effective solutions”.
That 2008 code of practice, which laid out seven criteria for consultation, was a widely respected and very welcome document. Noble Lords here today have asked why we do not just go back and use that 2008 document. Why the change?
In its report, the committee acknowledged that that document was produced for consultation and engagement with those parties who had an interest in such matters. From looking at the way in which these new proposals have been put forward and handled and, from reading the report, the Minister’s first response has led to considerable suspicion that the Government’s priority is to curtail consultation and accessibility to it. The proposals for two areas of the process were announced in a Written Ministerial Statement issued on the last day before the Summer Recess. The Statement made clear that these were now to be the principles, though the Government would have a post facto look at them if they received any representations. That sounds very mealy-mouthed. Of course there would be representations. The Secondary Legislation Scrutiny Committee was overwhelmed with responses when it asked for views on this matter.
As to content, the headline measure was that the 12-week default timescale for consultation was to be dispensed with in pursuit of proportionality and flexibility. That Statement overlooked the fact—as the committee has rightly pointed out—that the 2008 principles already contained such scope for flexibility. In the wider context, when the Prime Minister spoke to the CBI in November 2012, suspicions were then roused about the real intention behind the Government’s changes. What is the Minister’s reaction to the Prime Minister’s comments that,
“we are going further, saying, if there is no need for a consultation, then don’t have one”?
Here are the Government making the decision as to whether or not there is any need for consultation on a government policy. I think we would all agree that the Government do not have a monopoly on wisdom; genuine, meaningful, effective consultation is very important. At that time, the Prime Minister also said:
“When we came to power there had to be a three month consultation on everything and I mean everything, no matter how big or how small”.
Clearly that was not the case, as the committee outlines in its report.
So how does the attitude of the Prime Minister square up to other stated aims of this Government, to foster a new politics of citizen engagement and to promote localism? What has happened to those principles of the big society? Democracy and the big society are about more than casting a vote once every five years in a general election. They are about engagement, and consultation is the opportunity for engagement with the wider community.
I would welcome comments and assurances from the Minister here today, because the Government will have to show by practice and example that suspicions that they want to curtail consultations are unfounded. Failure to engage on process and content before it was introduced will mean that assurances alone will not be enough to allay the fears of those who have raised concerns.
There is much in the statement the Government made in July with which we can all agree. The first purpose of consultation should always be to use the knowledge, skills and information from consultees to improve policy formulation or implementation. I appreciate that no amount of consultation is going to change a key manifesto commitment or policy aim of the Government. But there are few consultations that fulfil those criteria. Many seek the views of those with expertise; the committee used the expression “expert critique”, which seems very apt.
One concern regarding the new principles is the removal of the requirement to provide feedback to participants. Both the Centre for Public Scrutiny and the Association for the Conservation of Energy expressed concerns, and the committee raised this with the Minister. In his response when he met with the committee, the Minister accepted that the feedback would be “very reasonable”, but he failed to make a specific commitment. The committee is right to highlight this as a recommendation. There should always be a timely response with feedback, otherwise the whole process of consultation becomes flawed.
As a slight aside, there is a serious point about the credibility of consultations. There is a great danger that consultation, in itself, is losing credibility with the public. A large proportion of the public now feel that many consultations, not just those of central government but of local government and other organisations, are a sham. The reason is that, too often, nothing significant changes as a result of consultation. We will all know of examples where a majority oppose an issue being consulted on, and yet it goes ahead. In my local area there is a consultation as to whether blood tests conducted at two local hospitals should be bussed up to Bedford for the testing to take place. I have not found anybody in favour of it yet, but it seems to be going ahead, which is quite wrong.
A Guardian article today—I am sure that the Minister is a Guardian reader; he has that look about him—which the Minister’s laugh tells me he has probably read, says that parents have criticised academy conversion talks as a farce. It states:
“Parents at a popular primary school threatened with takeover by an academy chain have labelled a promised consultation a farce after the main questionnaire failed to even ask them if they wanted the school to change status”.
This is a consultation that the DfE has instructed the company wanting to set up the school to undertake. A parent quoted in the article says:
“To not even ask us initially if we wanted the school to be an academy, it’s just indicative of a whole attitude … It really doesn’t seem that they want our views at all. It’s as if the decision has already been made—which we think it has. It’s a bit of a farce”.
I worry about that because consultation is extremely important, as the committee highlighted in its report, in helping the Government produce good legislation. Any Government should welcome that. If the whole process of consultation falls into disrepute, the Government will not get the support, the “big society”, the buy-in or the participative democracy that any true society or Government needs.
We are less likely to see changes in key policies from consultation than we would from consultations on implementation. There is often a reluctance to make significant changes, especially when preparatory work has already been undertaken during the consultation period. It is clear that pre-legislative scrutiny has been useful in ironing out potential difficulties and problems, but when such scrutiny or consultation is inadequate we see the kind of problems that we saw even last week: the Government had to revoke a key order which formed part of the Health and Social Care Act. Adequate scrutiny could have avoided that taking place.
True scrutiny, true consultation, has to be genuine and not a process or exercise. If a Government have no intention of listening or making any changes, then it is frankly irrelevant whether it is two or 12 weeks; it is wasting everybody’s time. Yet the losers there will be the Government and legislation, through the loss of support.
I recall a specific incident when I was a Minister for a devolved department in Northern Ireland. There had been a consultation exercise for the standard 12 weeks. It was brought to me with the original consultation responses and the response that we should make—not a single thing having changed in response to that consultation. When I asked about it, there were clearly two or three significant points. However, as the noble Lord, Lord Bichard, said, when work has been undertaken and a report has been prepared, there is a reluctance to change. I am pleased to say that, on that occasion, we did respond to the consultation and make some fairly significant changes as a result. Good consultation makes for better legislation and better implementation.
I will emphasise four points and ask for the Minister’s comments. First, what is the problem that the Government are seeking to resolve? In its report, the committee is very clear about the amount of consultation that takes place. The Prime Minister’s comment that everything had to be consulted on for three months was not the case. The committee looked at statutory instruments between November 2010 and November 2012 and found that there was a 12-week consultation in only around 25% of cases. Clearly it was not the case that everything was consulted on for three months.
Further evidence was provided to the committee by Oliver Letwin, showing that it was not the case that everything was consulted on for three months, even though there was quite a lot of change. That led to the committee to observe that,
“it would be helpful to the wider public debate if the Government were to recognise more explicitly that Departments have always had, and applied, flexibility over the conduct and timing of consultations”.
The Government do not give their case any credibility by failing to acknowledge that. I would welcome the Minister’s comments on what the problem was and why this had to be brought forward, given the comments made by the committee on that point.
The second point is about “digital by default”. We all know that it is cheaper and easier for the Government to consult via the internet. However, as we have heard, not everyone has internet use. The committee’s report identifies that 23% of people do not have any access to the internet. Last year I received several very neatly written letters from a young man who was highly intelligent but had a form of autism. He was a savant. His letters were very detailed and had drawings attached. He had wanted to be part of a government consultation, but his contribution had been sent back because he had not put it on the appropriate form and had not replied via the internet. It is inappropriate when somebody who wants to respond is prevented from doing so in such a way.
The committee made a number of helpful recommendations. Unfortunately, they were not addressed in the Government’s response. It would be helpful if the Minister would say exactly what is meant by “digital by default”. There is a lack of clarity, particularly when there has not been a response to the points made by the committee.
The committee also made very helpful suggestions on engagement. It is clear from those who responded to the committee’s consultation that a lot of people want to respond, to engage and to be helpful and useful to the Government. Many made very valid points about why the consultation should be 12 weeks. I draw the Minister’s attention to the submission from the Institution for Occupational Safety and Health, which makes the point that as a key stakeholder it can provide invaluable information and suggestions that consulting bodies may otherwise fail to consider. Its members come for practical health and safety input and for help in determining what is workable, effective and enforceable. The institution states that it needs 12 weeks to get that kind of information together in order to be helpful and comprehensive in its approach to government.
The CBI makes a similar point on page 10 of the report. It states:
“How not to do it: employee-owner status ... The consultation opened on 18 October 2012 and closed just three weeks later”,
despite the complexities of the issues raised. Does the Minister think that those organisations raised valid concerns about the nature of the consultations to which they responded? Will he confirm to the Committee that the points raised by those organisations and others will be taken into account and addressed in the review?
I agree with the point of the noble Baroness, Lady Thomas, that there should be a central point for consultations that people can access. Just last week I had to telephone the Home Office because the link I had been given to respond to a government consultation did not work. The department had been helpful in sending the link, but it was not available. A central point for all information would be useful.
I agree with the committee on both review and oversight. I thought that the Minister’s response was trying to be helpful in terms of the content of the review, though I entirely agree that, given the nature of the Government’s principles and the response that there has been, an earlier date would be preferable. I do not think that the points that Oliver Letwin made about the reasons were unreasonable, but they seemed to be taken account of in the committee’s recommendation. If the Minister could explain why there has to be a delay in getting this review under way and reporting back to your Lordships’ House, that would be helpful.
I hope that the review itself will also be subject to consultation. The great error highlighted in the report is that it has not been subject to consultation and has caused problems as a result; it would be useful to have buy-in from consultees. The committee said in its report:
“We recommended an early review because of the strong evidence we had received that a very wide range of interested parties saw the new Consultation Principles as having a detrimental effect on the development of good legislation”,
and said that it had,
“the superficial attraction of speeding up consultations”,
although that is contradicted by the Minister’s own figures that have been passed to the committee.
The committee made some very valid criticisms of how the Government intend to implement the external advisory panel. I am interested in why the Government are rejecting the point.
I think that I have spoken long enough on this issue. I hope that the Minister is taking this debate seriously and understands the real concerns that have been voiced. A lot of weight will be attached to the response that he gives today and to the Government’s review, and I hope that he is able to address the real concerns and worries we all have in the interests of good legislation.
Lord Wallace of Saltaire
My Lords, I am tempted to speak at double speed in the hope that we may finish before we have the next Division. This is for me also the second debate in two weeks on machinery issues, as it were—how we go about things. I started on both thinking, “This is very dry”, but I think that this shows the House of Lords very much at its best—looking at, in the previous instance, how we handle secondary legislation and, in this instance, how we handle consultations.
I intend to answer this not by defending the current Government, because I am aware that these are structural problems of government and of the way in which the Executive deal with the legislature and vice versa. I am conscious, as I think back, that I first used to worry about Henry VIII clauses when I was in opposition many years ago. In reading back to the 2007-08 consultations, I come across phrases like “consultation fatigue” and “the struggles of the Better Regulation Executive”. Indeed, I have a dim memory that my wife was on the Better Regulation Advisory Council at the time, and would come home very frustrated with some of the problems that it was facing about all the different contradictions in attempting to improve regulation and consult with the widest number of parties but nevertheless to reach an end to it.
The noble Lord, Lord Hart, rightly said that speed is not the universal hallmark of good government, but of course delay over extended periods is not the universal hallmark of good government either. If one looks back at some of the other areas in which successive Governments consulted most—airports policy in south-east England, for example—one could not say that one ever cut short consultation on that process. Over the past 30 years, the occasional decision by a Government, whichever Government it was, to override one or two of those consulted parties might have been a good idea. Consultation does not necessarily lead to consensus. I have been involved in consultations over House of Lords reform over the past 20 years, and we have not quite reached consensus on it yet through each successive process of consultation.
One of the starting points for the current Government on consultation is to say to departments, “The earlier that consultation is engaged in, the better”. A process in which you more or less decide what it is you want to do and then, when you have decided, you carry out a 12-week consultation process in which you ask everyone what they think about what you have decided is actually a very bad thing. It would be much better and more constructive—this is part of what the Cabinet Office has been saying to departments—to engage with your stakeholders as early as possible, before things have hardened into a consensus within Whitehall, so that you learn where the obstacles are likely to be and you can actually have a worthwhile exchange of views. That of course means that the Government are likely to consult first with the visible stakeholders and that there is always the problem of those who might be excluded or those who want to be involved. A later-stage consultation in which you allow others who you might not have thought of in the first instance to come in nevertheless is there to be added at the later point. Late consultation risks being a formal allowance for objections to be made; the earlier it is, therefore, the better.
My noble friend Lady Hamwee rightly talked about the burden of consultation on both sides. That came back in some of the evidence submitted to the committee —the number of occasions on which the Government are asking for consultations.
Looking back into some of this, I was struck when I came across the phrase, “the consultation and engagement community”; the professionals who were out there doing their best to catch each consultation as it came through. I am conscious of how far this industry—in a sense, this community—has grown. Coming back on the train—
The Deputy Speaker (Viscount Simon)
My Lords, a Division has been called in the House. We will adjourn until 6.56 pm.
Lord Wallace of Saltaire
My Lords, I was saying when we broke that much of this is about the tension between the Opposition and the Government, legislature and Executive, and that we have a range of long-running problems in how government consults.
I will try to answer the four questions that the noble Baroness, Lady Smith of Basildon, has raised as a focus for dealing with this extremely broad subject. After all, when one talks about consultation, one is covering a very wide range of subjects. What you need to do when consulting about, for example, the patterns of dog ownership and how to address identification of dogs—on which, on a digital consultation, some 27,000 individual replies came in very rapidly—is very different from when you are discussing an issue on land planning, the school curriculum or even perhaps on caravan sites. We have to have different sorts of consultation patterns to some extent for different sorts of issues.
The problem that the Government are seeking to resolve is how to make consultation more effective as government becomes more digital—the digital revolution provides a great many opportunities for us—and as the Civil Service gets leaner and therefore, unavoidably, slightly meaner. We note that a number of people have remarked that government has not been good at responding to consultations. Certainly that is part of what the review will need to take into account: how do we ensure that if you are consulting—and the formal consultation processes, which often come very late in a policy-making process, are the ones which really matter here—government is able to take the consultations into account and to provide a timely response?
On the “digital by default” issue, the Government are moving to a single gov.uk website. One of the things I am most excited about within government is the whole government digital proposal; how far we are beginning to transform the way in which government relates to the citizen as we go through the next digital revolution.
When I first began to be involved in this, I did not believe the DWP statistics about how many benefit claimants were interacting with government digitally. It is of the order of 25% and is expected to go up to about 70% within the next six to seven years. I found this very difficult to believe, but I now understand that we are all beginning to move along the digital corridor much more rapidly than we expected. People who do not see themselves as computer-enabled nevertheless have complex mobile phones through which they are beginning to interact with government. Part of what we hope we are able to do as we make government more open, and make access for the individual and for particular groups more available, is to make the process of consultation easier. There will be a single website, which will list all available consultations. This comes out of the whole governmental “digital by default” proposals.
The question of what is meant by “engagement” takes us into a broad set of issues, in which my noble friend Lord Goodlad raised the question of what we meant by “government by consent” in a modern democracy. I am conscious that part of the problem of how consultations are organised is that consultation now means dealing with a wide range of lobbies and interested groups, which perform the function that 30 to 40 years ago was often performed by political parties, which sorted out the range of political priorities and began to crunch through how you reconciled different priorities. Now that political parties are very much weaker and smaller, we have masses of single-issue groups, volunteer organisations, advocacy bodies, lobbies, interests and protest groups. Travelling back on the train from my party’s spring conference yesterday, I found myself sitting opposite a leading member of a major advocacy group who said that his biggest problem was “all the lobbies”, by which he meant the interested groups with which he competes and for which he wants to see, as do others, a statutory register of lobbyists, which will control their interactions with the Government. We all understand now that the battle over consultation and access to government, which will come up in a further discussion when the Government produce proposals for a statutory register of lobbyists, would take us yet again into this question of transparency, access, government response and so forth.
The noble Lord, Lord Scott, talked about the need for the Government to communicate with the “right people”, but consultation probably also has to be communication with the wrong people as well as the right people. At least, one has to be prepared to listen to the wrong people from time to time, although of course we recognise that communication and consultation early in the process has to start with the most logical stakeholders. However, we do not have to communicate only with them. We have to be careful not to communicate simply with the loudest people, or the best organised or funded.
The Government are therefore committed to open policy-making, as far as possible. The consultation principles say:
“Increasing the level of transparency improves the quality of policy making by bringing to bear expertise and alternative perspectives”.
How we manage that will also depend on how far the groups with which we are dealing are prepared to engage in a much more active consultation process from the beginning through to the end.
On hard-to-reach groups, when we are dealing with major aspects of aviation policy there are a few vulnerable groups about which one has to worry. Clearly, if you are dealing with disability policy, a Government have to make particular arrangements. Similarly, if you are dealing with caravan sites, there are different vulnerable groups and you have to make a particular effort. The Government are well aware of that. It will also come into the review.
The noble Baroness, Lady Smith, remarked critically on the Prime Minister’s comments that, if there is no need for a consultation, we should not have one. Oliver Letwin, in his evidence to your Lordships’ committee, talked a good deal about the principle of proportionality: some very minor and technical changes, such as a change in the name of an authority, do not need lengthy, expensive consultation. However, there are other areas with widespread consultation.
The noble Baroness, Lady Hamwee, talked about small organisations struggling to respond quickly, especially NGOs and local authorities. I emphasise that the consultation principles explicitly protect the compact with the voluntary sector, and we are well aware that the voluntary sector is one of those that are most actively concerned to be included in the consultation process. I reassure the noble Lord, Lord Goodlad, that the evidence presented to the committee will be taken into account in the review that the Government are about to undertake.
I say to my noble friend Lady Hamwee that the membership of the external advisory panel is currently being finalised, and will most likely include a representative from the National Audit Office. We will also take into account the committee’s recommendation that members should be drawn from the charity sector, from industry and from academia to represent a wide range of interests. As members of the committee will know, the review will begin after Easter and the panel will be announced then.
We take all the points made about avoiding holiday periods and the Christmas period into account. I am sure that the gamekeeper turned poacher that we have with us is well aware of occasions in the past when civil servants, and possibly even Ministers, have wished to use those sorts of expedients as ways of minimising the reality of consultation while going through the motions. Again, I suspect that that is a universal and secular habit of all forms of government, and it is part of what good legislatures should always be on the lookout for.
Baroness Smith of Basildon
I am sorry to interrupt. The Minister has made a great effort to answer the many questions that have been raised but, just before he sits down, there is one that I asked him a couple of times: what is the problem that the Government are seeking to address by changing from the 2008 principles to the ones that they brought forward in July?
Lord Wallace of Saltaire
I was saying that as we move towards greater interaction between government and citizen through digital means, the characteristics of consultation will change. I was also remarking that Governments have not been good enough—departments have not been good enough—at consulting with stakeholders at an early enough stage in the process. A formal consultation after you have taken the principal decision is itself sometimes bound to lead to disappointment for those who come in. We are trying to move towards a more flexible and faster system of consultation where appropriate. I hope that that provides an answer.
The review panel that will now be meeting will take fully into account everything that the committee has said and the evidence submitted to it. The panel will be reporting by the summer, and I expect and hope that, as a good legislative committee, this committee will then return to the subject and look at how satisfied it is by the review panel’s conclusions.
Lord Goodlad
My Lords, this has been an exceptionally interesting debate. Your Lordships’ House, as the Minister has indicated, is a veritable revolving door for poachers and gamekeepers, who are well represented here today.
Lord Chesterfield, in a letter to his son on the subject of women, wrote:
“A man of sense only trifles with them, plays with them, humours and flatters them, as he does with a sprightly and forward child; but he neither consults them about, nor trusts them with, serious matters”.
A bit later, when it was suggested to Arthur Balfour that he might consider the views of the Conservative Party conference on a particular matter, he said that he would rather consult his valet. However, times have moved on. There is now experience, custom, practice and indeed jurisprudence. I am grateful to the noble and learned Lord, Lord Brown, who was in his place until some time ago, for reminding me that the jurisprudence is summed up in the statement of the basic requirements for consultation originally formulated by counsel and adopted by the judge in R v Brent London Borough Council, ex parte Gunning in 1986, which was accepted and approved in courts thereafter. It says, first, that consultation,
“must take place at a time when proposals are still at a formative stage”.
Secondly, it says that,
“the proposer must give sufficient reasons for any proposal to permit of intelligent consideration and response”.
Thirdly, it says that,
“adequate time must be given for consideration and response”,
and, lastly, it says that,
“the product of consultation must be conscientiously taken into account in finalising any statutory proposals”.
That is the building block in the jurisprudence that no Government can afford to ignore. There is experience, custom, practice, jurisprudence, the 2008 code and, now, the review.
I am extremely grateful to all noble Lords who have participated in this debate and to the Minister for what he has said and the assurances that he has given. I have to say that what he said about the digital revolution did not encourage me. I hope that it resonates with the Government that there are an enormous number of people in our society, however many more come on to the web, who are not joining up to the digital system and never will, and they are going to live for a very great deal longer. Unless the Government understand that, they are going to get into a tremendous muddle, and so is everybody with whom the Government deal. I really hope that they will look at that a little bit more carefully.
We wish the Government well in their aspiration to improve consultation. As the Minister said, people throughout the country will join us in scrutinising their efforts and the committee will certainly join them in doing so. The proof of the pudding will be in the eating.
House of Lords
Inequality: Income and Wealth
(11 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Commercial Secretary to the Treasury (Lord Deighton)
My Lords, fairness underpins the Government’s plans to reduce the deficit. Universal credit will allow people to keep more of their income as they move into work, while the personal allowance increases announced by this Government will benefit 25 million individuals. As a result of this Government’s actions, the richest pay more tax on capital gains, more stamp duty on their homes and more tax on their pensions, and they are less able to avoid or evade tax.
Lord Dubs
Listening to that Answer, one would not be aware that the disparities in wealth and income in this country have reached record levels. Will the Minister confirm that 1% of the top earners earn 10% of income? The Government are being criticised on the grounds of their inequality policies by everybody from the bishops to the anti-poverty lobby—people who know what is going on. Further, does he not agree that when inequalities in a country get beyond a certain level, as they have here, our social cohesion is seriously damaged?
Lord Deighton
With respect to the 1% of the top taxpayers, the first point I would make is that actually they are responsible for paying 24% of income tax. The top 10% pay just under 50% of income tax—I think it is 44%—so their contribution to our revenues is the greatest in proportion. As for the development of inequality since this Government came into office, the commonly accepted measures of income inequality have in fact decreased.
Lord Forsyth of Drumlean
My Lords, will my noble friend confirm that the substantial increase in the capital gains tax levied, which was forced through the coalition by the Liberals, has led to a dramatic reduction in the revenue from capital gains tax?
Lord Deighton
I thank my noble friend for that question. I am not aware of the initial revenue yields. I asked the department earlier, and it said that it did not break it down that way. My noble friend clearly alludes to the importance in tax management of understanding the ultimate yield on a tax, rather than simply assuming that when tax rates are changed people will continue to behave the same.
Lord Peston
My Lords, is the Minister aware that, apart from me, the leading researchers in this subject all agree that there is far more inequality in our society than is required for the efficient working of the economy? Therefore, it follows that the inequality is totally unjustifiable.
Lord Deighton
There is clearly a relatively academic debate about the impact of equality and inequality on efficiency. All I can tell noble Lords is that this Government and their policies are focused on ensuring that, at the top end, those in receipt of large incomes and with significant wealth have been by far the major contributors to the consolidation of our deficit.
Lord Howarth of Newport
My Lords, given the view of employers that business competitiveness requires the replacement of British jobs by new technologies at home and by low-paid jobs abroad; given the Government’s view that the rate of income tax paid by the wealthy should be cut, public services for us all should be cut and the incomes of the poor should be cut; and given that, taking these together, the effect is a reduction of demand in our economy and widening inequality in our society, how do the Government foresee growth and the fruits of that growth being shared equitably among all our people?
Lord Deighton
There are a significant number of issues in that question. At the heart of this Government’s economic policy is that until we are able to balance our public finances, it is extraordinarily difficult for us to grow this economy in a sustainable way. All our policies are devoted to making sure that we can consolidate our fiscal position and that the contribution to making that happen is appropriately distributed, with by far the most significant contribution coming from those who can afford most. At the bottom end of society, we have a welfare system that works on the basis of incentivising people to get back into work. I absolutely agree that jobs transform lives. The 1 million-plus private sector jobs that have been created are a welcome development in the economy.
Lord Waddington
My Lords, may it not be more sensible for the Government to concentrate their efforts on trying to increase the overall wealth of the country, rather than rabbit on about how they might divide a perhaps declining cake?
Lord Deighton
My Lords, I absolutely agree—I am sure everybody does—with the sentiment that it is much easier to argue over the slices of an increasing cake than to divide one up that is static or shrinking.
Lord Barnett
My Lords, on the noble Lord’s major point about increasing personal allowances as a factor, does the greater relief go to somebody on £50,000 a year or somebody on £15,000?
Lord Deighton
What I can tell the noble Lord about the increase in personal allowances is that it is a highly progressive change in the tax system. It applies to about 24.5 million or 25 million taxpayers, who will enjoy a benefit of about £400 from it in 2013-14, and it takes just over 2 million people out of the tax system.
Lord Avebury
Has my noble friend studied the evidence published by the Equality Trust, which shows that across all the OECD countries, and similarly across all the states of the United States, there is a strong correlation between income inequality and indices of social malfunction such as crime, alcoholism, and teenage pregnancies? Considering that we are the second most unequal state in the whole comparison, does he not think that the Government’s policies should be strengthened to deal with those inequalities?
Lord Deighton
I thank my noble friend for pointing out that the causes of some of these social challenges are broader than those that will be tackled by our tax policy. It is much more important to get to the root causes and deal with issues such as education challenges, other public services, alcoholism and the breakdown of family life. That is extremely important.
Lord Eatwell
The noble Lord has made much in his Answer of the proportion of taxation paid by the highest earners. Is not the reason for this that their gross incomes are excessively high compared to those of others in our society?
Lord Deighton
The noble Lord is correct that it is a simple question of arithmetic. At equal changes, they will make the greater contribution. However, if one looks at the distributional analysis—it is to the Government’s credit that at each fiscal event we lay out the distributional analysis, which is a great step forward—it shows that their increase is proportionally greater than the amounts they have.
Justice: Legal Advice
(11 years, 9 months ago)
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The Minister of State, Ministry of Justice (Lord McNally)
My Lords, these matters were assessed as part of the impact assessments, which were published alongside the Legal Aid, Sentencing and Punishment of Offenders Act 2012.
Lord Bach
My Lords, I thank the Minister for his reply as far as it goes but I do not think it is very full on detail. It is now only 21 days until civil legal aid effectively disappears, affecting access to justice for perhaps hundreds of thousands of people every year. What do Her Majesty’s Government think will happen to the disabled person, for example, who wants to appeal his or her Atos decision, or the person who needs housing advice but cannot get it because the local Shelter housing advice centre has been forced to close, as today’s newspapers report? What are the Government’s contingency plans when unadvised and unrepresented clients flood courts and tribunals? No one can say the Government have not been warned, all the way from the very top of the legal system to small charities that are at breaking point. What will the Government do when it all goes wrong?
Lord McNally
My Lords, we are working on some of these issues. We are working with the judiciary to improve guidelines for people representing themselves in court. We are developing a new online information service to help people find out if they are eligible for legal aid or signpost them to other services. We are giving £65 million of funding to help not-for-profit social welfare advice providers to adapt and transition over the next two years. We are also encouraging innovations in the legal services market, such as the provision of lower-cost advice services to help people in resolving their problems.
Lord Naseby
My Lords, how can anybody make a useful assessment in such a short time as there is from now to the changes? Should we not recognise that great trouble has been taken over these proposed changes? In a very tight financial situation, has not the time come to see what happens and then, if necessary, make changes one way or the other?
Lord McNally
I thank my noble friend for that question. It is true that the noble Lord, Lord Bach, has made something of a cottage industry of—
Lord McNally
He continually talks about what is going to happen. As my noble friend has just said, let us see what happens. As I indicated, we are making a number of changes. Of course I understand that there are difficulties for organisations such as Shelter and the CAB. We have tried to give assistance in those adjustments. It is extremely difficult to give precise responses to predictions of catastrophes that may or may not happen. I can say to my noble friend that we will keep these matters under review. As noble Lords on those Benches will remember, on their instructions we inserted into LASPO a clause that allows review of the impact of the changes that we have made.
Baroness Butler-Sloss
My Lords, I will not ask the Minister about legal aid, but is he aware of the increased importance of law centres and citizens advice bureaux advising unrepresented litigants, of which there will be an enormously increased number come April? What are the Government going to do to help them advise unrepresented litigants?
Lord McNally
Yes, my Lords, I am aware of that, but one of the points I have made continually through this is that the CAB and the law centres will have to adjust to a situation where the amount they have at their disposal is a lot less, just as my department and local authorities have had to do. That is a fact of life. As I have said on a number of occasions, we are a lot poorer than we thought we were four years ago. Citizens Advice has been extremely successful in lobbying and, as I have indicated, we have made more funds available. For example, my right honourable friend the Lord Chancellor has announced today that we will be giving further aid to the CAB at the Royal Courts of Justice to help with the particular work it is doing in this area.
Baroness Hollis of Heigham
My Lords, in three weeks’ time the bedroom tax will kick in—and I use the phrase “kick in” advisedly. Some 660,000 families, two-thirds of them including someone with a disability, will lose between £14 and £25 a week from their benefit. Given that, despite the noble Lord’s answers, CABs are losing—locally, certainly—some 40% of their funding because the Lord Chancellor’s money has dried up, where does he expect those 660,000 families to go for advice?
Lord McNally
The Opposition continue to preach gloom and doom about this. They will be entitled to bring to our notice how these impacts take place, but we have put a number of measures in place to try to deal with this new situation. We have put on a new online information service, we have given Citizens Advice and other advice centres transitional money and will continue to do so, and we are looking for innovations in legal services from other parts of the legal profession. We will see what happens.
The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)
My Lords, we are now into the 17th minute, so I fear we must move on to the next Question.
Railways: Reopenings
Lord Faulkner of Worcester
To ask Her Majesty’s Government what plans they have for future railway reopenings.
Lord Faulkner of Worcester
I beg leave to ask the Question standing in my name on the Order Paper and remind the House of my railway interests declared in the register.
Lord Popat
My Lords, the Government recently announced a £20 million new stations fund to support the development of new stations promoted by third parties in England and Wales. The Government have also allocated funding for the reopening of a key part of the strategic east-west rail route in Oxfordshire and Buckinghamshire. We believe that local authorities are best placed to consider whether a rail reopening is the best way to meet local transport needs.
Lord Faulkner of Worcester
My Lords, I welcome the Minister to the Dispatch Box for his first transport Question. He has given the House a positive Answer, which I hope indicates that the pro-rail consensus in this House is in good order. The Beeching report was published 50 years ago this month. Its implementation cut off a third of the network and deprived many parts of the country of access to the railway. Does the Minister agree that one of the most shocking parts of the Beeching legacy was the indecent haste with which so many closed lines were sold off and the land built over, which made their restoration expensive and often impossible? While the Minister’s support for reopenings is good news, will he take a particular look at schemes which run across local authority boundaries and which would bring major benefits, such as the Lewes to Uckfield route and the suburban lines around Bristol?
Lord Popat
I thank the noble Lord for his Question and I know he has considerable knowledge of this area. I had the pleasure this weekend of flicking through Holding the Line, his excellent book on Britain’s love of railways, and it touches on the Beeching report. With the benefit of hindsight I do not believe anybody feels that the Beeching report’s legacy is all positive. The noble Lord raises some of the most frequently expressed concerns. Regarding the Lewes to Uckfield line, I know that this is a long-standing campaign supported by many local residents. Network Rail has agreed to carry out a study into the capacity of the nearby Brighton line and the reopening of the Lewes to Uckfield line is one of the options being considered. The department is unaware of any work comparing the benefits of investment in rail schemes and road schemes in this corridor. In instances where proposed schemes go across local boundaries, we will, as always, encourage the authorities to work together.
To sum up the noble Lord’s response to the Beeching report, I had the privilege of looking at the report this weekend. It is fair to say that the author could not foresee how the country would change in the subsequent 50 years. Different times require different responses.
Lord Bradshaw
My Lords, will the Minister take into account the variations in cost between opening a line that has been closed, opening a station that has been closed and putting money into services such as Nottingham to Lincoln, where a small amount of money would greatly enhance the service and utility provided?
Lord Popat
My Lords, it is for the local authorities and PTEs working with the local enterprise partnership to determine whether a new railway line, train service or station is the best way to meet local transport needs and the wider strategic objectives of economic growth, housing growth and carbon reduction. With regard to the cost, if there is a good business case, I am sure the local authority will look into it.
Lord Davies of Oldham
My Lords, I, too, welcome the noble Lord to his new responsibilities and look forward to our future exchanges. I will begin with a very gentle question. Given that capital investment in Network Rail has been slashed by more than a £1 billion by the Government since they came to power, does not £20 million to local authorities look like a flea bite?
Lord Popat
My Lords, I thank the noble Lord for his compliment. The £20 million that has been allocated by the Government is for the 14 new bids that we have recently received. With regard to the investment of £1 billion, one must look at the McNulty report where the study recommends a review of a number of things. One of the recommendations, if implemented, will bring efficiencies and savings of between £2.5 billion and £3.5 billion.
Lord Spicer
My Lords, does my noble friend accept that before privatisation all the talk was of the closure of railway lines and that after privatisation it is all about reopening them? Nowhere is this more true than on the line to Worcester that the noble Lord, Lord Faulkner, champions.
Lord Popat
My Lords, the council has submitted a bid for funding a parkway station on the Worcester to Oxford line. While the bids are being considered, it would be inappropriate for me to comment on the merits of this scheme. Since privatisation the number of passengers travelling on our railways has gone up by 60%.
Lord Snape
My Lords, in this spirit of co-operation, I ask the Minister on his first appearance at the Dispatch Box to consider paying tribute to Mr Tony Speller, the former Conservative Member of Parliament for North Devon, who died recently, whose amendment to the Transport Act did so much to help to reverse some of the disastrous decisions that were taken following the Beeching proposals 50 years ago.
Lord Popat
My Lords, I agree with the noble Lord; we must pay tribute to him. I also pay tribute to my noble friend Lord Fowler, who, when he first became the Secretary of State in 1979, was the one who put a stop to the closure of railway stations.
Armed Forces: Reserve Forces
(11 years, 9 months ago)
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Lord Rosser
To ask Her Majesty’s Government what progress is being made towards achieving the projected increase in the size of the United Kingdom’s reserve forces.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, the first year of the Future Reserves 2020 programme has been about stabilisation and understanding. The number of inquiries about reserve service has increased, and early indications are that strength is stabilising. We recently conducted a public consultation to ensure that the right relationships were established between reservists and their families, their employers and the Armed Forces. We intend to publish a White Paper in the spring that will set the conditions to deliver the reserve force strength we require.
Lord Rosser
My Lords, the future strength and capability of our Armed Forces is dependent on increasing our Reserve Forces to 30,000 by 2018, yet the Territorial Army has declined by 1,000 over each of the last three years. In the year up to this March, it looks as though the number of recruits will be well below target. A Federation of Small Businesses survey showed that even among members who are open to employing reservists, two out of every five believe that the Government’s future requirement that reservists serve and are away from their civilian jobs for one year out of every five would negatively impact their business. What action do the Government intend to take to accelerate recruitment to our reserves; what incentives will be given to employers to hire reservists; and what protection will be given to reservists to prevent them being discriminated against in respect of both hiring and promotion?
Lord Astor of Hever
My Lords, we acknowledge that this is the start of a challenging programme to reshape our Armed Forces. We inherited Reserve Forces that were in decline and not being used in the most cost-effective way. What we are setting out to do is sensible and achievable, and the planned strengths are well within historic levels. However, we are not complacent, and we are already running a major recruiting campaign for the TA. This has already resulted in over 6,650 inquiries since it started on 17 January. The Government are fully committed to delivering Reserve Forces that are integral to and integrated with the Regular Forces, and we are investing an additional £1.8 billion over the next 10 years.
Lord Trefgarne
My Lords, is my noble friend aware, in his reference to the historic situation with Reserve Forces, that I stood at that Dispatch Box and announced the increase in the Territorial Army, not to 31,000 but to 83,000, and that I announced the formation of 607 City of York Squadron, Royal Auxiliary Air Force, to be deployed in support of 2nd Infantry Division, then commanded by Major-General Peter Inge, now of course the noble and gallant Lord, Lord Inge? Is he also aware that I stood at that Dispatch Box and announced the purchase of 11 River class minesweepers, exclusively for the Royal Naval Reserve, assisted on that occasion by the then Commander Alan West, now of course Admiral Lord West, the noble Lord, Lord West?
Lord Astor of Hever
My Lords, I remember well when my noble friend was a very distinguished Minister standing at this Dispatch Box, and I believe I lobbed the odd question at him. My noble friend mentioned the figure of 83,000. That is why we are very optimistic that we can get up to a figure of 30,000 by 2018.
Lord Dannatt
My Lords, when the noble Lord, Lord Trefgarne, was announcing the things he has just referred to, I was a mere Lieutenant Colonel working as a military assistant to the Minister of State for the Armed Forces. Therefore, we are all aware of the aspirations for our Reserve Forces and the way it has worked out. We are all committed to making this policy work in the interests of the security of the realm, the safety of our citizens, and the well-being of the Armed Forces. However, as this Government think about the next defence review, are they also thinking of an alternative if we are not able to recruit Reserve Forces of the size that we currently need? Might we think about increasing the size of our regular Army in particular?
Lord Astor of Hever
My Lords, we are thinking optimistically. I quote General Monro, who is head of the Territorial Army, and who is very focused on its success. He said:
“There is a mission, and we have to achieve the mission. I am confident that we will get there.”
We intend to maintain appropriate force level to meet our planning assumptions. If necessary, mitigation strategies are in place to ensure that we can take early action to maintain an appropriate force level.
Lord Anderson of Swansea
My Lords, is it not the truth that the Government are currently below their projected targets? Is not the Government’s failure to estimate the number of SMEs, because employers and employees within SMEs are more reluctant to join and co-operate with the Government’s targets, part of the problem? Will the projected and likely decrease in recruitment centres have an adverse effect on recruitment?
Lord Astor of Hever
My Lords, we have always recognised that reversing the long-term decline in the Reserve Forces and increasing their strength would be challenging, which is why an additional £1.8 billion is being invested in them and why we have recently conducted a public consultation to ensure that the right relationships are established in future between the reserves and their families, their employers and the Armed Forces. As I said earlier, the number of inquiries has increased and early indications are that the strength of the reserves is stabilising.
The noble Lord mentioned SMEs. We aim to tailor our approach, adjusting our working practice to reflect the different opportunities and impacts of reserve service for different employers—public and private, large, medium and small—as well as by sector.
Lord Palmer of Childs Hill
My Lords, can the Minister tell us how, in the rush to increase our Reserve Forces, we will ensure that the relevant skills are available from the new reserves so recruited?
Lord Astor of Hever
My Lords, all three Armed Forces are recruiting reservists against defined military trade requirements. Some reservists seek to use their civilian skills in their military role, and we encourage them to do this, but many do not, and training will be provided in the required military trades. In future, we seek to achieve greater accreditation of training and increased mutual recognition of civilian and military qualifications between the Armed Forces and civilian employers.
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2013
(11 years, 9 months ago)
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Lord Newby
That the draft orders and regulations laid before the House on 28 January be approved.
Relevant documents: 18th and 19th Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 4 March.
Renewables Obligation (Amendment) Order 2013
Baroness Verma
That the draft order laid before the House on 4 February be approved.
Relevant document: 19th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 6 March.
Lord Gardiner of Kimble
My Lords, I beg to move the Motion standing in the name of my noble friend on the Order Paper.
Legal Deposit Libraries (Non-Print Works) Regulations 2013
Lord Gardiner of Kimble
That the draft regulations laid before the House on 28 January be approved.
Relevant document: 18th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 6 March.
Enterprise and Regulatory Reform Bill
Baroness Whitaker
“( ) in Schedule 1, paragraph 6;”
Baroness Whitaker
My Lords, I support the amendments of my noble friend Lord Stevenson of Balmacara in this group, but I will speak to the ones in my name. I tabled these amendments in Committee and will not repeat what I said at that time. The reason for their reappearance is that in his reply on 28 January the Minister said that I had raised an interesting point which deserved further consideration. He went on to say,
“we shall have the opportunity to consider these very specific issues more carefully”.—[Official Report, 28/1/13; col. GC 443.]
At a subsequent meeting that the noble Lord helpfully held with us and his officials, I was assured that my points were taken and that they were working on a solution. Now is the time, I hope, to hear it.
I briefly remind noble Lords that Amendment 84ZBA applies the new copyright protection to works of art made prior to June 1957 and brings the UK back into compliance with European legislation. Amendment 84ZEB is pretty much consequential to Clause 66 to make sure that regulations apply to copyrights which were never protected under previous legislation but will be now, again bringing the UK into compatibility with the decisions of the European court. Amendment 84ZEA allows a short transition period, with a possible extension for third persons who manufacture or hold stocks of copies of design works within the European Economic Area.
I also remind noble Lords of the present situation for our many talented designers who contribute sizeably to economic growth. Because sufficient protection has been lacking, the UK has become a safe haven for the sale of replicas of designs which breach copyright. Only two other countries in Europe behave in this way—Estonia and Romania. Criminal prosecutions are pending against UK-based suppliers in other countries. We should not allow this damage to the reputation of our design market, potentially one of our great strengths. No British jobs are at stake if we implement these amendments and fair competition, as well as our international reputation, will be improved. Our brilliant design businesses will have more security to develop, so I very much look forward to the Minister’s reassurance.
Lord Clement-Jones
My Lords, I would like to speak to Amendment 84ZC in this group. I come from a slightly different perspective from that of the noble Baroness, Lady Whitaker, because there is particular concern among publishers that the giving of full copyright protection to three-dimensional artistic works will impact on those who create two-dimensional images of such works, including publishers, museums, educational establishments and filmmakers, and that designers taking inspiration from existing works will be penalised.
There is particular concern that this clause will have an adverse effect on the publishers of books that include images and description of artistic works. This consideration was wholly absent from the impact assessment. Where such books currently include copyright material, they may possibly come to be in breach of copyright as the images and descriptions being used will have had their copyright term lengthened. Furthermore, implementation of the clause will have a serious negative effect on the future ability of publishers to produce such books.
In Committee, the Minister responded to a debate on an initial amendment, and said:
“The amendments seem to be intended to create special cases for particular uses of works. It is not clear that there is a compelling reason for some artistic works to be treated differently in that way”.
However, the Minister further said that exceptions being proposed as part of the modernising copyright programme could cover the situation. He said:
“These will include, for example, an amended quotation exception, which will permit the use of photographs of artistic works in situations that the courts determine to be fair, and new exceptions for education. Those could cover some uses envisaged under the amendment”.—[Official Report, 28/1/13; col. GC 437.]
This amendment is designed to elicit a more detailed statement from the Minister about the expected exceptions, such as quotation, education and fair dealing. It is important for him to clarify issues about the retrospectivity of the clause where legitimate copies have been made of a work after the expiry of the design protection and before the new extended term of copyright protection has arisen under this clause. Can existing photographs, for example, be used in newly published works? What is the position of reprints?
The Government also need to give details of the impact of this clause on publishing and other sectors and to give assurances about the formulation of the transitional provisions accordingly. In that respect I support, and have added my name to, the amendment tabled by the noble Lord, Lord Stevenson, about when this clause might come into effect.
Government Amendment 84A is also in this group, which I very much welcome. We debated the former Clause 66, which is now Clause 67. I may get my retaliation in first in terms of welcoming the clause. It is a good omen for going forward in further discussion on Part 6, and a good omen for discussion on the exceptions when we come to them later this year. I am delighted with the Government’s very clear statement about the use of Clause 67, and I know that it will be widely welcomed.
Baroness Brinton
My Lords, I want to add my support to the comments that have been made so far this afternoon, but perhaps from a different sectoral perspective. There are certainly a number of concerns about how this clause will affect designers and manufacturers. In particular, universities and colleges want to draw attention to the fact that it will substantially affect teaching, research and design. The ability to display photographs of designs is essential to the teaching of design. The change in copyright terms for these articles would mean that in future, any academics seeking to do this in a way which is not covered by the existing exemptions—including any digital reproductions such as displaying Powerpoint slides during a lecture—would have to seek a licence to do so. This will also apply to publishers reproducing photographs of industrially produced articles, or museums which may wish to display such articles.
We share concerns that this will frustrate the development of the creative sector in the UK, and the teaching of subjects associated with it. As has already been mentioned, the impact assessment focused very much on the commercial uses of designs, such as manufacturers of replica furniture and household goods. I believe that it should consult with non-commercial users of designs which are currently covered by Section 52 of the Copyright, Designs and Patents Act 1988, such as academics, museums and publishers to ensure that its appeal does not have an unduly negative effect. To this effect, I support Amendments 84ZC and 84ZE.
Baroness Buscombe
My Lords, I support my noble friend the Minister in his Amendment 84A to Clause 67. It is a sensible amendment that recognises that the IPO’s original Henry VIII wording was not fit for purpose. If I may say so, it skilfully overcomes legal and parliamentary complexities to meet this stated aim of the Government since this clause was first introduced in another place. As I understand it, the clause now maintains criminal penalties for copyright infringement without inadvertently giving this or future Governments power to introduce copyright exceptions.
Lord Jenkin of Roding
My Lords, I have some sympathy with the amendment moved by the noble Baroness, Lady Whitaker. The protection of designs is a hugely important part of the whole question of intellectual property. I am not convinced that the Bill as drafted adequately protects this, and I shall be very interested to hear what my noble friend on the Front Bench says. I understand the points that have been made by my noble friend Lord Clement-Jones and others about the desire of the people who might want to use this for other purposes, but I feel very strongly that it is necessary to protect the property rights of those who were responsible for the original design. As I understand the amendment of the noble Baroness, Lady Whitaker, that is the intention that she has put forward.
When I spoke on this Bill before, both in Committee and at the previous Report sitting, I was initially given the impression that this issue was not sufficiently high on the Government’s agenda. However, by the time we had finished the Committee stage, and in the light of the amendments which my noble friend has tabled and to which reference has already been made, I have been reassured. However, I still feel that those who are responsible for creating the designs—they may be designs of all sorts of artefacts and artistic works—should have their rights properly protected. Having heard the noble Baroness, Lady Whitaker, and having read some of the briefing on this from bodies that represent designers of all sorts, I am not wholly satisfied that the individual’s rights are properly protected. I shall be interested to hear what my noble friend has to say when he replies to this debate.
I should add that I am very much in favour of and welcome government Amendment 84A in this group. That seems to be a considerable improvement and reinforces my view that my noble friend is doing his best to try to hold the balance fairly. However, on this question of design, on which the noble Baroness, Lady Whitaker, laid emphasis, and on which I have seen some of the representations that have been made, I still require reassurance. I hope that my noble friend may be able to provide it.
Lord Howarth of Newport
My Lords, I should like to enter a dissenting note in relation to what was said by the noble Lord, Lord Jenkin, and my noble friend Lady Whitaker on this specific question of designs—for example, of furniture. It is not clear to me why it would be an improvement to extend the period of protected copyright in a registered design from the 25 years that has prevailed for a long time past to the proposed “life plus 70 years” period. The effect would be to perpetuate monopolies held by designers and their assignees, and by those who purchase intellectual property from them.
It is of course essential that there be a proper period of protection for intellectual property and that designers and other originators of intellectual property are able to enjoy a proper return and reward for their investment. However, it is not clear to me why the prices of the items that they designed—tables and chairs, for example—should be kept artificially high beyond 25 years, for perhaps 100 years and more.
Let me quote to my noble friend William Morris, a pioneer of English socialism and of English domestic design, whose general injunction was:
“Have nothing in your house that you do not know to be useful, or believe to be beautiful”.
He also said:
“I do not want art for a few any more than education for a few, or freedom for a few”.
We must reward and incentivise our designers, but we must keep a balance that will enable people to have beautiful things in their homes. It is not clear to me why the price of a Charles Eames chair or an Eileen Gray table should be kept very high for long periods beyond 25 years, thereby preventing ordinary people having beautiful things in their homes.
I wonder also whether the proposed extension would prove to be policeable. I do not know what the noble Lord and my noble friend anticipate the intellectual property regime will be that will successfully police the manufacturing of furniture by, for example, 3D printing. The pace of change in the digital economy and its extent is so vast that we may need to think in more radical terms about how we find ways to protect the legitimate interests of individual and private rights holders while extending the benefits of digital design that are capable of being replicated at virtually no cost as rapidly and extensively as possible. I wonder whether it is sensible to try to continue to shore up this decaying edifice of traditional copyright, or whether Governments and possibly charities should not be finding ways to give the rewards to the designers but, at the same time, allow the maximum number of people to have the benefit of those designs as early as possible.
Baroness O'Neill of Bengarve
My Lords, the noble Lord, Lord Howarth, has put his finger on the real difficulty for designers. It is not that the period of copyright protection is too short; rather, it is too ineffective. What is needed for our designers is some method of ensuring that their designs are not ripped off extremely rapidly so that they have no effective period of protection. I have heard it said that new fashion designs that appear on the catwalks of London or Paris are copied within a very few weeks, and the copies are then retailed in our shops. If we wish to protect our designers, as we surely should because they are so talented, it seems to me that that is the direction in which we should look. Rather than extending the period of copyright protection, it should be made an offence to sell something that was designed within a shorter but reasonable period of time, and such goods should be seizable if they appear in the retail markets here.
Lord Stevenson of Balmacara
My Lords, as has already been said, all of us around the House can welcome Amendment 84A. This has been a troubled point that has caused difficulty in another place as well as in Committee and here, so we welcome what has now been drafted. We think it does the trick, given what it was intended to do, so we are happy to put our weight behind it. However, it will be obvious from the short debate that we have already had on this rather complicated set of amendments on a rather complicated part of the Bill that not everybody is happy with the direction of travel here. It is important to reflect for a second on why that is.
The debates are really all about whether the Government are right to delete Section 52 of the Copyright, Designs and Patents Act and whether, by so doing and so ending the current regime of registered designs, which, as has been said already, has lasted for a good number of years, the Government have really and fully considered all the issues that flow from that decision. Implications would arise for products that are or are about to be put out of rights protection under the present registered design period of 25 years, and that will in future be copyright for a period of 70 years after the death of the designer. That is a substantial change.
As the noble Baroness just said—and I have a lot of sympathy for this—there is growing concern that the whole approach, which is reflected by this proposed change, goes against where good sense would suggest the issues are going to go in the future. Some countries have very little legal protection for copyright, and what there is is very weak, and others are moving in different directions from us. What is the point of trying to tie down longer periods during which protection could be offered if you cannot also put forward the necessary arrangements under which that protection is to be guaranteed?
There is of course a case, and a very good one, to be made for letting industrial designers have the same protection for their efforts as are available to composers, writers and the like. However, there are still some very real questions on this issue, which have led me to put down the amendment, which would delay the implementation of Clause 66 and give us time to consider two very different and rather important issues. The first is whether this is the right decision, and if so how and on what basis it will be introduced. We have not been given the detail here, we have not seen the draft regulations, and we are not aware of the timescale that the Government have in mind.
Secondly and more importantly, a lot of what is being argued, or will I think be argued by the Minister when he comes to respond, relates to the exceptions and changes that have been forecast by the Hargreaves review to the way in which copyright and copyright exceptions are organised. This point was made by the noble Lord, Lord Clement-Jones, in relation to 2D design representations of 3D designs. So much of what is going to change could, with the right sort of regulatory framework brought in under the Hargreaves exceptions, allow some guarantees and support for those involved. However, we simply do not know enough about it, so surely it would be better to see those regulations, take them through the due processes in this House, agree them in their original form or as modified if that is thought appropriate, and then consider whether Section 52 should be changed and the new regime brought in.
I will give a bit more detail on this. I asked the Minister in Committee, although I did not get much of a reply and he has not included any further detail in the letters I have received so far, why this proposal was not preceded by a consultation with stakeholders and why the impact assessment that has been published has very little detail about the impacts that will be implemented by its changes.. The impact assessment, although it is not complete, admits that the reform of Section 52 will harm consumer welfare, as classic designs—those that are more than 25 years old—will be remonopolised. Replicas that are currently available at some 15% to 20% of the price of an original will no longer be available, but no opportunity has been taken to consult consumers. Moreover, there are those who argue that the impact assessment significantly underestimates the other costs that will arise, partly because of its focus on furniture and three-dimensional design, and because it fails to acknowledge that section’s immunising effects on certain secondary uses.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, I start by thanking noble Lords for their helpful contributions to this debate. I very much recognise their detailed knowledge of these issues.
I should like to begin with government Amendment 84A. During Grand Committee, in response to very helpful interventions by my noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson, I made a commitment to look again at the wording of what was Clause 66 and is now Clause 67. The purpose of the government amendment is to limit the clause so that when the Section 2(2) power is used to amend copyright exceptions, the limitation on criminal penalties does not apply. The new clause no longer operates a separate power. It is now a way of removing the undesirable consequences which flow when Section 2(2) is used. With this amendment I believe we have responded to the concerns that were expressed in Grand Committee by my noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson.
I should like to deal with Amendments 84ZBA 84ZC, 84ZD, 84ZE, 84ZEA and 84ZEB together, but shall deal first with Amendments 84ZEA and 84ZE. The Government understand the real concerns about the repeal of Section 52 of the Copyright Act. We want affected groups to have adequate time to adapt but we also take seriously the fact that rights owners are pressing us for early implementation. That is why the Government have committed, as I said in Grand Committee, to consult all interested parties on the timing of the change. To decide those timings now would prejudge the consultation, and any transitional period will allow appropriate time to implement changes to copyright exceptions.
I will just answer a question that was raised by the noble Lord, Lord Stevenson, on the economic effects on consumers and those who use 2D images. I can reassure him that the Government will consult on traditional provisions and publish another impact assessment.
On Amendment 84ZC, the Government have met with publishers and the Publishers Association, representatives of replica furniture manufacturers and academics. We have heard from others, such as the British Screen Advisory Council and the Victoria and Albert Museum. We will continue this productive engagement and helpful exchange of information through the consultation.
Copyright exceptions will go some way towards moderating the impacts of the change. The forthcoming changes to copyright exceptions, announced in December, are particularly important for this. For example, fair dealing exceptions relating to teaching and the use of quotation are likely to be relevant to the use of two-dimensional images of artistic works in the teaching of design or related subjects. My noble friend Lord Clement-Jones raised the issue of the amended quotation section. He wanted, I understand, a more detailed statement from me concerning retrospectivity and the impact on the publishing sector. I hope that what I have said has gone some way towards answering his particular query.
It may be helpful to focus more in an answer on film makers, photographers, picture libraries, designers and publishers. The Government understand that film makers, picture libraries and photographers who use images of certain artistic works, and designers who use motifs from existing designs, could be affected if there is copyright in the underlying work. For example, a wallpaper that has been inspired by a design from the 1950s by Lucienne Day has been cited to the Government as a follow-on design which could be affected by the changes. Further consideration will be given when the Government consult on how and when to implement the repeal. Moreover, in December 2012, the Government announced changes that will be made to copyright exceptions. It is possible that these will address many of the concerns that have been raised about the use of images of artistic works.
Turning to Amendment 84ZD, I note concerns about the ability to use artistic works as features in new designs. This sort of follow-on design plays a useful role in the thriving UK design culture. However, it is not clear that it would be lawful to provide a copyright exception permitting follow-on designs. There are concerns about what happens to copies of an artistic work made after the expiry of the 25-year design protection but while Section 52 remains in force. I can confirm that any copy made, distributed or imported into the UK or communicated to the public while Section 52 is in effect will be unaffected by the change in the law. However, if, for example, a book containing photographs of artistic works is reprinted after Section 52 is repealed, permission will need to be sought from the relevant rights owners unless a copyright exception applies.
On Amendment 84ZEB, I have heard concerns about imposing an obligation on the owner of a revived work to grant a licence, even if they would prefer not to. The points raised will be given careful consideration in the consultation.
I will deal now with Amendment 84ZBA. Some are concerned about the revival of copyright in works of artistic craftsmanship created before 1957. A work protected by copyright in any other EU member state on 1 July 1995 would also be protected in the United Kingdom. In the circumstances, I hope that my noble friends will agree that an amendment is not needed, as provision already exists under the current law.
I will answer a couple of points raised by the noble Lord, Lord Howarth. He emphasised the need for balance, and was concerned about the overly long term of copyright. The term after the abolition of Section 52 will be the same as for most other copyright holders. It will thus put furniture designers of classic works in a position to be incentivised, as is the case for any other creator. He also raised some concerns about the benefits of design classics not reaching the greater public. Some people see the availability of cheap replicas as good for consumers who cannot afford the originals. However, designers argue that replicas damage the integrity of the design industry and make British companies less willing to support long-term investment in design than their European competitors. Supporting British designers and offering greater choice to consumers are not mutually exclusive and the Government hope that the repeal of Section 52 should lead to UK designers developing new designs in markets which become less dominated by copies of artistic work. That would benefit consumers by offering them greater choice and variety. In the light of what I have said, I hope that the noble Baroness will withdraw her amendment.
Lord Clement-Jones
The Minister said he hoped that what he had to say would be reassuring about retrospectivity. However, I did not pick up exactly what he had to say about retrospectivity; he talked a lot about fair dealing and the educational exemptions. Specifically on retrospectivity, can the Minister give a little more clarification? I understand that if copies of those three-dimensional works are made after the new extended term of copyright has come into effect, clearance will need to be obtained for those existing works.
Viscount Younger of Leckie
I thank my noble friend for that question. The best thing would be for me to get back to him in due course, as I have done on many occasions, with a focused letter on the specific question of retrospectivity.
Baroness Whitaker
My Lords, I am grateful for the authoritative support of the noble Lord, Lord Jenkin of Roding. In response to my noble friend Lord Howarth of Newport, I remind your Lordships’ House of the double damage done by undervaluing individual creativity in design: the disincentive and loss to a significant sector of our economy on the one hand, and the simple, yet common, injustice of yet again failing to recognise that the,
“lifeblood of a master spirit”,
is not just the written word but other unique manifestations of the human spirit.
I agree with the noble Baroness, Lady O’Neill of Bengarve, about the importance of effective implementation and enforcement. I also welcome the Minister’s arrangements for consultation. That will be helpful on the dilemmas that we have been exploring in my amendments, but I shall want to check the exact application of the law as he quotes it before Third Reading. In the mean time, I beg leave to withdraw my amendment.
“Penalties under provision amending exceptions: copyright and rights in performances
Paragraph 1(1)(d) of Schedule 2 to the European Communities Act 1972 (limitation on criminal penalties) does not apply for the purposes of provision under section 2(2) of that Act amending—
(a) Chapter 3 of Part 1 of the Copyright, Designs and Patents Act 1988 (acts permitted in relation to copyright works), or(b) Schedule 2 to that Act (rights in performances: permitted acts).”
Lord Clement-Jones
Lord Clement-Jones
My Lords, I shall also speak to Amendments 84AB, 84AC and 84AD.
Amendment 84AA straightforwardly addresses a specific aspect—that is, the duration of copyright in existing anonymous or pseudonymous works. The amendment is designed to clarify the scope of the application of Clause 68. Rather more importantly, the effect of Amendments 84AB and 84AC would be to prevent the Secretary of State being able to curtail the period of protection in respect of unpublished pre-1988 Act films and pre-1956 Act photographs, and in respect of other unpublished pre-1988 Act works whose authors are known and who died in the period from 1900 to 1989. This means that the copyright material covered by the amendment will, unless published in the mean time, fall into the public domain at the end of 2039, which is the position under the law as it stands.
I thank the Minister for his correspondence on Clause 68; that correspondence has now extended to quite a number of letters, which I have found extremely helpful. However, no one would object to this clause if it simply solved a problem about copyright protection attaching to centuries-old, unpublished manuscripts and private charters. As regards works created more recently, such as unpublished minutes of meetings and correspondence from the 20th century, being within the scope of Clause 68, the Minister is clearly of the view, as he said, that these provisions are part of the solution to the orphan works problem. In the discussions about the copyright clauses in Grand Committee, I pointed out that one of the difficulties was that the Government’s policy had such an insubstantial evidence base. The Minister has now in correspondence referred to the Seeking New Landscapes study by Barbara Stratton. However, without going into great detail, there is doubt as to whether generalisations can be drawn from that study. It would be helpful to know what proportion of the material held by archives and assessed as orphan is pre-20th century, and what proportion of the 20th century material post-dates 1960. That, at least, would give some indication of whether Clause 68 will in fact make a significant contribution to reducing orphanage.
Baroness Buscombe
My Lords, I have added my name to this group of amendments, which, as my noble friend has already explained, are to deal with the situation where the Bill as drafted would permit a number of unintended consequences, including permitting the publication of confidential family papers and destroying the value amassed in archives of works.
Clause 68 contains a particular quirk of historic definitions in copyright law that means that films and photographs are defined as published only when they are first hired, sold or made available for hire. As most films are broadcast and photographs appear in newspapers or magazines, they are not as such published and therefore would fall under the scope of the clause. Although on the one hand, the Government want to use the clause to allow organisations such as the British Library to publish medieval manuscripts, it will also enable millions of commercially valuable films and photographs to be put into the public domain. We believe that that loophole can easily be fixed by including in the Bill that unpublished photographs and films should fall outside the scope of that power. The amendments solve that problem in a clean and simple way and will give surety to concerned rights holders but not impact on the valuable contribution that the clause can make to organisations such as public libraries. I urge my noble friend to accept them.
Baroness Brinton
My Lords, I shall speak against Amendment 84AA and the other amendments in the group. I refer back to the point made by my noble friend Lord Clement-Jones about the scope and size of the problem of unpublished works and grey literature. A study by the British Library found that 43% of potentially in-copyright works published between 1870 and 2010 were orphan works. The figure for unpublished works, including letters, diaries, photographs and memos is far higher, and grey literature produced by charities, societies and associations but not for any direct commercial purpose, also contain high concentrations of orphan works. One example of that is a study of sound recordings of political debates in the 1960s, which identified 350 performers, of whom only 100 could be traced, meaning that more than 70% of the content was orphaned; 350 hours were spent trying to clear the rights to use the material; and the success rate—permissions received—was only 4%. That shows us the size of the problem, which is why I am grateful to the Government for the clarifications in the Bill and why we need to oppose the amendments.
Bringing copyright for unpublished work into line with the existing copyright duration would release much valuable historical data into the public domain and would not affect unpublished works created shortly before the 1988 transitional arrangements. As we have discussed in previous stages of this Bill, works of these kinds are, of their nature, orphan works. The copyright holders are incredibly difficult to identify. The British Library notes that it still has material from the 7th century in copyright. As a result, a large amount of material currently in copyright due to the transitional arrangements would be difficult or impossible ever to obtain a licence for.
Viscount Younger of Leckie
My Lords, I turn first to Amendments 84AA, 84AB and 84AC and thank my noble friends for raising the important issues in them. At the outset, I will answer questions raised by my noble friend Lord Clement-Jones, supported by my noble friend Lady Brinton, about the voices concerned about the evidence for the clause and for the orphan works, and especially asking how much is pre-20th century. That is probably a slight paraphrase of the questions raised by my noble friend Lady Brinton.
We do not know the exact amount, but the National Archives estimates that around 12 million—or 42%—of the 30 million archival items held in English and Welsh public archives predate 1891, which is over 120 years ago. Therefore we are now likely to be 70 or more years past the date of creation. The vast majority of these are thought to be unpublished and would therefore remain in copyright under the current law until 2039. The law relating to the transitional provisions of the Copyright, Designs and Patents Act 1988 is complex. The various points that have been raised through these amendments and in debate underline that complexity. These are important points, and it is right that we should take time to debate them properly.
The Government’s overriding policy objective has always been to enable use of historically important unpublished material which has over-long copyright protection. Prior to 1998, copyright on such material was perpetual, and from 1998 it ran until 2039 at the earliest. Because of the way the 1956 and the 1988 copyright legislation interact, it appears that it may be possible for a film to remain unpublished, even if it has been commercially exploited by showing it to the public in a cinema or on television. This is because it can be shown to the public by various legal routes which do not technically constitute publication; for example, public performance, exhibition or communication to the public.
To become published, a film would need copies of it to be issued to the public, such as on DVD or through online sales. It may be necessary to recognise this in the treatment of films in the regulations. Before they exercise this power, the Government recognise that it will be important for the impact assessment accompanying the regulations to assess whether there are costs to specific rights holders or industry sectors. The regulations would allow the Government to treat different works in different ways.
However, my noble friend has raised a good point about the impact on commercial film and photographic archives. My noble friend Lord Clement-Jones today raised concerns about business expectations in relation to unpublished works. I will therefore commit to looking in advance of Third Reading at how this should be addressed. I hope that in the light of this assurance, my noble friend will not press this particular amendment.
Finally, Amendment 84AD relates partly to the provisions to reduce over-long copyright in some unpublished works—which we spoke about earlier—and partly to the orphan works licensing scheme. I can confirm that where there is any doubt about whether an unpublished, anonymous or pseudonymous orphan work is still within copyright, an orphan works licence could be applied for. This would be under the scheme proposed in Clause 69. Therefore I believe that there is no need for this amendment.
If the user of an orphan work chose to proceed without gaining an orphan works licence, they would be open to possible legal action if a rights holder reappeared and the work turned out to be still within copyright. That might be described as a risk-based approach to the problem of copyright infringement. However, the courts would be likely to take a dim view of such infringement when there was a lawful means of using such a work through the orphan works licensing scheme. In the light of the assurances that I have provided, I hope that my noble friends will not press their amendments.
Lord Clement-Jones
My Lords, I thank the Minister for his reply. In the light of it, I suppose that I should be grateful that I do not have to trade discussion with my noble friend Lady Brinton about the study instituted by the British Museum. There are many of us who do not believe that Barbara Stratton’s report, Seeking New Landscapes, comes to conclusions that can be generalised about in the way that some people have done by extrapolating from it in a way that is not necessarily helpful, although I do not think that the British Museum has done that.
That said, the way that the Minister has tied together Clauses 68 and 69, in his undertaking that the orphan works provisions would come together with unpublished works which were in copyright, is extremely helpful. I am not quite sure how that is achieved by the actual wording of the clause. One may wish to be rather clearer about when the duty of diligent search applies, certainly in regulation, because it may not be obvious from the outset that these works are orphaned and in copyright. Some further probing may be necessary on that.
I very much welcome the Minister’s undertaking on news film and so on, and his recognition that films have not necessarily been published even when they have been exhibited. That is one of the absolutely fundamental issues that the organisations which I mentioned earlier have been labouring under. However, their point has come across and I am grateful to the Minister for recognising it. I look forward to seeing what he will come forward with on Third Reading. In the mean time, I beg leave to withdraw the amendment.
DfID: Tied Aid
(11 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Northover
My Lords, I will now repeat the Answer to an Urgent Question asked in the other place earlier today. The Answer, given by my right honourable friend the Secretary of State, is as follows:
“I am delighted to update the House on my speech today. There is no change on Her Majesty’s Government’s policy on tied aid. I was clear in my speech on 7 February, and again this morning when I said:
‘I am not talking about tied aid. I do not believe that is the way to achieve good, sustainable development … It’s the wrong way to go about things’.
That answers his first point. DfID contracts are awarded in line with EU procurement regulations. The vast majority are subject to competitive tender. The evaluation process for large contracts includes an assessment of technical and commercial criteria, which are published at the outset of the tender. That answers his second question.
In relation to today’s speech on pursuing poverty reduction and an end to aid dependency through jobs, it is clear that economic growth is critical. Wherever long-term per capita growth has been higher than 3%, we have also seen significant falls in poverty. Sustainable public services in the developing world, as here in the UK, need a funding stream of tax receipts and that means a thriving private sector.
DfID will be putting an increased emphasis on economic development, including: reducing overall barriers to trade and investment; unlocking the ability of entrepreneurs and business people in developing countries to drive economic growth through their own businesses; and fostering greater investment by business in developing countries. I want to see more businesses, including those in the UK, joining the development push with DfID. We all have the opportunity to help build up responsible trade with developing countries.
Finally, I welcome the positive response from organisations like CARE International and the Overseas Development Institute, with the former saying that,
‘It’s no longer an option for development agencies to view business as operating in a parallel universe’”.
That concludes my right honourable friend’s Statement.
Lord Collins of Highbury
My Lords, we also welcome UK companies seeking access to growing markets across the developing world. However, from the media reports at the weekend, the Government’s policy was not clear. We are vehemently against tied aid, trickle-down economics, and growth that has no focus on either inequality or sustainability. I have two specific questions for the Minister. Can she tell the House what steps her department will take to ensure private sector-led projects by DfID will be required to meet decent work and labour standards? Secondly, under what circumstances does she believe it right that a British company should be awarded a contract in a developing country without having to compete in a fair and transparent tendering process?
Baroness Northover
My Lords, I thank the noble Lord for his acceptance that economic growth through the expansion of businesses and so on is very important for developing countries, as it was in the United Kingdom. As we have seen in China and India, it obviously has a transformative effect. I reassure noble Lords that DfID remains poverty focused. That underpins everything that we do. Therefore, we are trying to ensure the development of the private sector, it is so that those long-term aims of relieving poverty are addressed. On how British companies would be awarded contracts, as I said in the Statement from my right honourable friend, contracts awarded to British companies by DfID go through the EU procurement regulations. However, the focus of DfID is always on the relief of poverty.
Lord Laming
My Lords, I, too, am grateful for the Statement repeated by the noble Baroness. Could the noble Baroness reassure the House that actions are always in place to ensure that when these decisions are made the beneficiaries receive the benefit—I am expressing this badly but noble Lords know what I mean—that the money goes to the right place for the right purposes, that it is properly monitored and that we are reassured that it is not being diverted into other means?
Baroness Northover
I thank the noble Lord for that question. I assure both noble Lords that DfID supports responsible business standards, which are very relevant here, through various schemes such as the Ethical Trading Initiative, the UN global compact, OECD guidelines for multinational enterprises and so on. One striking thing about the United Kingdom’s potential help for developing countries is what we can offer by way of our law and justice system. I was struck in meeting the Minister responsible for mines from Afghanistan the other day to learn how initially they found that in dealing with Chinese companies the benefit was probably not for Afghanistan so much as for the Chinese companies, but that now they are rooting it very much in British law guided by British companies. That is an instance where it is of mutual benefit. Of course, it is of benefit in business to the British companies working in this area, but you can see immediately the effect in terms of the poorest in Afghanistan. That is where the greatest benefit is. Therefore, these things can be looked at as of not exclusive but mutual benefit.
Lord Elystan-Morgan
My Lords, I am left with the very clear impression from the Minister’s Statement that there will be no difference as far as the future is concerned in the total amount of aid that is disbursed at every level and in every way. If that be so, I heartily congratulate the Government. It is all very easy when the going is benign and happy to be charitable, but it is in situations of difficulty such as this that the true test of a community’s charity is put to the proof.
Baroness Northover
I appreciate what the noble Lord has to say, and I hope that he continues to say such things loud and clear, because in a time of austerity there is a clamour of voices asking whether this is the right thing to do. As we meet the 0.7% commitment, which we have built to and kept to, we have a moral obligation to address the difference in the levels of need around the world. There is also the interest in terms of greater stability. If you are addressing the most abject poverty around the world, that helps to stabilise things for everybody, whether in that region or in our own.
Lord Tugendhat
Does the Minister agree that Africa is now one of the fastest growing regions in the world and that we should all be very pleased about that? Aid is now a relatively small proportion of the disbursements that go from the developed world to what used to be called the developing world. Remittances and direct investment have grown enormously, and the role of aid is far less significant than it used to be. It is not a question of this Government cutting back on what they have been giving; the extraordinary thing about this Government is that, at a time when they are cutting back on almost everything else, they have been increasing the overseas aid budget by 30%. I find that barely explicable.
Baroness Northover
If the noble Lord listens to Bill Gates, for example, he will hear how small contributions looked at globally can leverage an enormous effect. The noble Lord is right that remittances are coming in and there is more inward direct investment and so on, and that is very welcome. We have to make sure that, as the noble Lord, Lord Laming, indicated, the poorest are included in that benefit and that there is the health and education provision to make sure that there is a skilled workforce to benefit from this, because it is in nobody’s interest to have countries with the instability and inequalities that that lack of provision would ensure. It is extremely important that we retain our commitment in this area, but at the same time we must make sure that these other areas, such as direct investment, grow as well and that they are to the benefit of the poorest in these countries.
Lord Kerr of Kinlochard
I thank the Minister for repeating the Statement. I was very pleased to hear her strictures on tied aid and her support for competition. Will she confirm that the same applies to consultancies? The only thing that worried me in her Afghan homily was the interjection that investors in mining in Afghanistan were advised by British companies. When such advice from consultancy firms comes from the aid programme is it subject to the same degree of open competition? In developing countries, one sometimes hears that rather a large share of the British aid programme does not go into projects on the ground but into consultants in London.
Baroness Northover
The Afghan Government chose to gain their legal advice in the way that I indicated. Consultancies are subject to open competition, so the noble Lord can be reassured in that regard.
Lord Fowler
I agree with what my noble friend set out as her department’s general policy. I have a specific question about the statement by the former Secretary of State that new money, extra money, would be going to the global fund for HIV and other diseases. Will that pledge be kept?
Baroness Northover
I am going to have to write to my noble friend to clarify that. I know that the Global Fund had some problems, with which he will be extremely familiar. I also know that DfID was working extremely closely with the Global Fund, because it had been so effective in the past, to bring it back to that position. I have not had the most recent update. I will make sure that he gets it.
Enterprise and Regulatory Reform Bill
17:32 - Division on Amendment 84AG - Ayes: 194 / Noes: 214 - Amendment 84AG disagreed.
18:46 - Division on Amendment 84AHAZB. - Ayes: 174 / Noes: 221 - Amendment 84AHAZB disagreed.
Lord Clement-Jones
Lord Clement-Jones
My Lords, I will also speak to Amendment 84AEA. We had a very good debate in Grand Committee about orphan works, and the Minister gave some very useful assurances about how the orphan works regime would operate. However, there are one or two loose ends, and I want briefly to raise them.
Amendment 84AE is essentially a retabled amendment designed to establish definitively the nature of diligent search. I was slightly disconcerted by the way the Minister replied to this amendment last time. Surely diligent search must cover each work involved, and I hope the Minister can demonstrate how such search should be undertaken. There is no amendment to this effect, but I should say in passing that many of those who have debated this subject believe that it is very important that orphan works cannot be sublicensed. The argument is clear that to permit sublicensing would risk the distortion of the market through, for example, enterprises that sought orphan works licences and then resold them to all comers, circumventing the safeguards promised in the regulations. I do not know whether that is a loophole or simply a fear that will not be realised.
Amendment 84AEA relates to an objectionable feature of Clause 69, which is found in the new Section 116A(6) of the Copyright, Designs and Patents Act 1988. This states:
“The regulations may apply to a work although it is not known whether copyright subsists in it, and references to a missing owner … are to be read as including references to a supposed owner and a supposed right or interest”.
The objection to this is that if copyright does not subsist, the work or performance is in fact in the public domain and there is no rights owner who could reappear.
It seems rather unsatisfactory to introduce what I believe is called the domaine public payant in this surreptitious way. If there is going to be an orphan works licensing scheme it should surely be confined to orphans. If it cannot be determined whether a work is still in copyright, surely an orphan licence should not be available. It should be plain in the Bill that this should not extend to works that may be in the public domain. It would be helpful to have a ministerial assurance on this point. I beg to move.
Baroness Buscombe
My Lords, I support my noble friend in relation to diligent search. I think the amendment speaks for itself, and I echo the words of my noble friend Lord Clement-Jones.
Lord Howarth of Newport
My Lords, I speak to Amendment 84AE only. The noble Lord, Lord Clement-Jones, referred to it as a loose end. It is an issue of fundamental importance. The effect of the amendment would be to require a diligent search to be made for each individual orphan work. It is true that the European Union orphan works directive requires the same. We have not yet incorporated the directive in our own law, nor should we. It is unfit for purpose in this and in other respects. We had some discussion about aspects of it last Wednesday and previously in Committee. The requirement that there should be a diligent search for each individual orphaned work is totally and utterly unrealistic. If it were to be legislated it would scupper the Government’s orphan works project.
The success of the project depends upon the regulations being proportionate and manageable. They should, of course, have a proper regard for the legitimate interests of all rights holders, and certainly for the interests of the publishing and entertainment industries. Equally, however, they should have regard for the wider public interest in enabling as full access as possible—for educational, research and cultural reasons and reasons of public enjoyment by the mass of our people—to the enormous collections of orphan works in our great public cultural institutions.
Carrying out a diligent search to establish the intellectual property rights in orphan works is a time-consuming and laborious business. It is significantly easier when we are speaking of commercially published books. Reference was made in an earlier debate to the British Library’s study, the results of which were published under the title Seeking New Landscapes, which demonstrated that it took on average about four hours and cost some £80 to establish where the intellectual property rights lay in the case of a single book. The noble Lord, Lord Clement-Jones, says that you cannot generalise from that study, but it does demonstrate that this is a laborious, arduous and expensive process.
In the case of a single postcard, perhaps sent in 1916 by someone who simply signed herself “Betty”, copyright resides in the design of the postcard, in the design of the postage stamp on the postcard, and in the words Betty inscribed on the postcard. If you were to be required to investigate to establish where the intellectual property in each aspect of that particular picture postcard now lies, you would spend a lot of time.
There are vast quantities of such items in our public archives and collections. The impact assessment at pages 7 to 11 gives some indication of the scale of orphan works in our public institutional collections. It mentions, for instance, that the BBC has some 5 million photographs and the British Library has 112.5 million newspapers. Inevitably, in an age of mass digitisation we have to think of how we can satisfactorily legitimise digitising en masse this kind of material in public collections.
Extended collective licences already provide for the mass licensing of the use of large numbers of works where it has been recognised that individual negotiations would be impossible because of the volume of the material: for example, in the fields of educational photocopying or musical broadcasting. Extended collected licences are provided for in the other directive—the European copyright directive—so there is some tension between the two directives.
Where market failure means that it would otherwise not happen, public access will be lost unless we have streamlined procedures for rights clearance, so a generic approach is essential. The licensing authority will need to verify that the approach to the search by the cultural institution and its methodology have been appropriate: that it has been reasonable in regard to the nature of the works-whether for example they were originally commercially published or unpublished. It should have regard to the proposed use of these orphan works; to whether access to them would be provided free of charge for educational or cultural research purposes and for the benefit of the general public, or whether they would be charged for; to what the risks might be to rights holders in this particular category of works; and to the feasibility of tracing the present rights holders.
We need to establish under the regulations that the generic approach has been diligent. If we were to insist that there should be a diligent search, item by item, for every orphan work, it would be impossible, and access would continue to be denied to great swathes of our public collections in the Bodleian Library, Cambridge University Library, the British Library, the BBC, the British Film Institute, and many other institutions. If modern copyright law is to be respected, people must feel that it is proportional and rational and sensibly balances the private and public interest.
Baroness Brinton
My Lords, I, too, oppose these two amendments and support the points that the noble Lord, Lord Howarth of Newport, has made, to which I briefly add two further points.
The rights holders of apparently orphan works very rarely come forward at a later date. This makes court action unlikely in most cases, particularly where use of the works was manifestly for the purposes of teaching or research. However, using works in these ways would require institutions such as universities and libraries to operate outside the law in order to make legitimate use of this material. This is not a satisfactory long-term solution.
It is important that what constitutes a diligent search is sensitive to the intended use and the kind of material. Searching for the author of a commercially published book, where the intention is to republish for commercial gain, should require a higher level of diligence than for the digitisation for preservation purposes of an archive of non-commercial material. It is very important that the Bill is flexible enough to allow regulations to account for these differences. Unfortunately, these two amendments would take it in the opposite direction.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, I begin by thanking my noble friends for their amendments. They raise important issues.
Turning first to Amendment 84AE, in Grand Committee there was a full and productive debate, as has been mentioned, on the issues around diligent search. I have also subsequently written to the noble Lords who spoke in that debate. I can confirm that, before a work qualifies as an orphan, a diligent search for the all the rights holders in the work must be undertaken. If as a result of an initial UK search there are indications that the rights holders may be overseas, there will be a requirement to expand the diligent search to include relevant overseas territories. However, a balance must be struck between protecting rights holders and making the system cost-effective for users. That is why the orphan works working group is undertaking detailed work to ensure that diligent search requirements reflect current best practice across all sectors. These requirements will be set out in regulations that will be subject to both consultation and the affirmative procedure.
I will answer some questions raised by my noble friend Lord Clement-Jones and the noble Lord, Lord Howarth, about the provision of more detail on the requirements for diligent search, although I am not sure how far I can reassure the noble Lord, Lord Howarth. Diligent search should find rights holders when works are not really orphaned, and it is important to find the right balance between protecting rights holders and making the system cost-effective. Extensive thought has already been given to what should be done in a diligent search for different sectors, including by the European digital libraries initiative. Existing industry databases and registries and bibliographic publications are just a couple of examples of sources of information that could be searched. It is likely that searches would differ across the various sectors, and therefore sector-specific guidance may need to be developed. To that extent, this may help to answer some of the concerns of the noble Lord, Lord Howarth.
Diligent search is being considered with stakeholders through the orphan works and ECL working group. Diligent search guidance will cover the scenario where the work may have originated outside the UK. The noble Lord, Lord Howarth, may know that the Canadian orphan work scheme licenses works, provided that they have a strong connection with Canada. They may be of foreign origin, but with an orphan work this will not necessarily be known.
In relation to Amendment 84AE, my noble friend Lord Clement-Jones was concerned that there might be a loophole regarding sublicensing. The answer to this is that the Bill does not permit sublicensing, if that is a help to my noble friend.
I may well have touched on this earlier, but for clarity, the noble Lord, Lord Howarth, again raised the issue of diligent search and made a fair point about the need to cover every orphan. I believe that he used the analogy of the postcard. I do not think that we can avoid the need to look for a legal owner, but we do not want a search regime that is too obtrusive and costly. This is a matter of achieving balance, and that is why these matters are best dealt with in regulations, where the needs in different sectors can be properly addressed.
Amendment 84AEA would remove the option of licensing a work under the orphan works scheme where it was not known whether copyright subsists. Establishing whether a work is still in copyright will of course be a key part of the diligent search process. Indeed, it is in the applicant’s interest to establish this fact, because if the work is out of copyright they will be free to use it and will not need to apply for an orphan works licence. However, it may not always be possible to establish definitively whether a work is still in copyright. This will particularly be the case with unpublished works, where often key information such as the date of creation or the date of the creator’s death is not known. Having to establish definitively whether a work is still in copyright could, therefore, exclude very many works.
This practice of allowing a licence where there is uncertainty about whether copyright subsists is followed in Canada, which I mentioned earlier, where a scheme has been running for nearly 25 years. In doing so, it provides legal certainty for the user of the work. If we do not include such works within the scope of the orphan works scheme, we could exacerbate the very problem that the proposals are designed to address. I hope that in the light of the assurances that I have provided, my noble friend will not press his amendment.
Lord Clement-Jones
My Lords, I thank the Minister for that reply. I am reassured by his statement in at least three respects. He made the distinction between the requirement to have an individual search and the requirement to be proportionate in the way the diligent search is carried out. That is the distinction that I would make. I found the statements of the noble Lord, Lord Howarth, rather bloodcurdling in many respects. The proportionality lies not in whether each individual work is looked at but in the nature of the search. I hope that the regulations focus very much on that.
I of course agree that if one is to have an orphan works scheme, it has to be economically viable and has to work for all those taking part in it, but at the same time it must protect genuine rights holders and make sure that searches uncover works that are not orphan but may appear on the face of it to be so. Therefore, I look slightly askance at measures that say “streamline procedures” when individual rights holders, if they exist, are to be ignored. I think that we have common ground on proportionality, but the question is where that lies. It will be useful to refer to the Minister’s words generally when the regulations are drawn up. We may have a chance to debate them in this House in future. I very much welcomed what he had to say on the sublicensing point; that was a very helpful statement. Those who are concerned about Amendment 84AEA will also be reassured. I beg leave to withdraw the amendment.
Lord Clement-Jones
Lord Clement-Jones
In moving Amendment 84AEB, I wish to speak also to Amendments 84AEC to 84AEG and Amendment 84AF.
I will speak first to Amendment 84AF as it falls outside the scope of the other amendments. Clause 69 as drafted does not factor into the opt-out of ECL the situation where the rights holder is not the creator. A firmer commitment from the Government in the Bill is necessary to give more reassurance to rights holders on the ECL provisions in Clause 69 before the legislation completes its passage. This amendment was tabled as Amendment 28X in Grand Committee. An opt-out is available to copyright owners in the Bill as it stands. The amendment would extend this opt-out to exclusive licensees and authorised representatives.
In Grand Committee, the Minister committed the orphan works and extended collective licensing working group to look into this issue as part of its deliberations. While this commitment is welcome, there needs to be certainty that any regulations for extended collective licensing will include such provision. Since ECL has the effect of exercising property rights, potentially against the will of the rights owner, the ability to opt out under subsection (3) of what will be the new Section 116B must be as straightforward and easy to implement as possible. To effectively administer the repertoire they have invested in, music publishers will need to make catalogue-wide arrangements applicable to hundreds, thousands, or potentially, millions of separate works. The grant of rights and arrangements between creators and music publishers are very often not exclusive assignments of copyright; grants can also be made by way of licences, both exclusive and non-exclusive.
It will be unworkable to have an opt-out which is exercisable only by the copyright owner or exclusive licensee. This would require a publisher to go contract by contract, checking the nature of each grant of rights and, where necessary, asking composers to sign opt-out documentation to be sent to the body seeking to operate the scheme. If the opt-out could be operated by the composer’s authorised representative, this would give a publisher or other representative the right to seek the permission from its composers to exercise an opt-out on their behalf, which could then comprise one repertoire-wide opt-out from a rights owner in a manageable way.
Practical experience abroad is that, in the absence of this possibility, ECL provisions can be manipulated by bodies operating schemes to make it impossible for right owners to opt out in any manageable way. I am informed by representatives from music publishing that one example of this is the operation of the extended collective licensing provisions enshrined in Hungarian copyright law in relation to the performing right. In Hungary, one reason for the failure of being able to rely on the opt-out came from the requirement of Artisjus that the rights owner—not any representative—provide due diligence evidencing ownership of each title in question. In relation to a repertoire of many thousands of works, this represents a huge barrier to successfully exercising the opt-out in terms of tracing the title back to its source. It is often via a complicated chain, redacting and copying documents to comply with confidentiality restrictions and then shipping these across to Hungary.
This example of abuse of proprietary rights provides ample evidence that, in the context of ECL, the burden of challenging any opt-out must sit with the entity operating the scheme and not with the individual rights owner. I believe that it is not the intention of this legislation to create such problems but it is important to guard against potential abuse. Can the Minister give assurances on this?
At the end of the day, I cannot see any downside to giving composers a choice in being able to elect to have their trusted authorised representative act on their behalf in this context. I am also not aware of a prevailing view that would be opposed to creating such a modest requirement. Indeed, in Grand Committee, the Minister stated that the Bill does not rule out such a provision.
With the experiences of ECL in other territories in mind, I hope that Report stage is an opportunity for the Minister to clarify responsibility for overseeing due diligence in an opt-out process. I hope that the Government will use this stage of the Bill to clarify that regulations will be clear that the burden of proof for the due diligence in an opt-out will be on the body applying for ECL.
On Amendment 84AEB, copyright licensing bodies are indispensible in many circumstances. For example, no composer could keep track of all the playings of his or her song on television, radio, the internet and in concerts, pubs, hairdressers, department stores and so on; PRS for music does this collectively. However, this kind of licensing is voluntary, meaning that the rights owner gave his or her permission to PRS to license his or her works for use in broadcasts and public performances. Extended collective licensing means that the licensing body can also license works whose authors have not given permission.
Therefore, ECL—and we have debated this in Grand Committee—is potentially dangerous to rights owners. A rights owner may not know about extended collective licensing and find that his or her work has been licensed without their permission. Perhaps they would not have wanted it in that particular publication, or perhaps they had given another publication an exclusive deal. Perhaps they would have charged a different fee; if they had given permission direct, their fee would not have suffered deduction of the licensing body’s commission. Foreign composers in particular may not be aware of the licence at all and may grant conflicting rights or may not collect their fee.
The Government’s explanations always described ECL as “voluntary extended collective licensing”, but the fact is that ECL allows the licensing body to license its rights without their prior authorisation. It is government policy that the author can opt out, but this acknowledges that the licensing body has permission to license his or her rights in the first place. This permission is ultimately given by the Government by authorising the organisation to license rights that it does not in fact hold, not by the author who must withdraw by opting out.
To their credit, the Government have acknowledged the dangers inherent in ECL, and in Grand Committee on 31 January, the Minister explained the Government’s policy regarding safeguards for rights owners. However Clause 69, which enables ECLs to be created by statutory instrument, only very minimally reflects the safeguards as the Minister has now enunciated them. The Government have claimed that the Nordic ECLs provide a strong precedent. However, the safeguards are set out in the Nordic primary legislation. By “Nordic”, I mean Sweden, Norway, Denmark, Finland and Iceland. Setting out the safeguards in primary legislation is clearly an aspect of the Nordic precedent that the UK Government should follow.
My amendments are essentially translations of the Nordic statutory provisions, adapted to the Copyright, Designs and Patents Act. The safeguards usefully include a requirement on licensing bodies to qualify, the need to explain the type of licence being granted, the need for the authorised body to be representative, the adoption of a code of conduct, the ability to refer to the Copyright Tribunal where a claim is being made that the body is not representative or that licences go beyond scope of existing copyright licences, a limitation on the term of authorisation to five years, and clear provisions about the ability to give notice of exclusion of a work.
The Minister has said that there must be flexibility, but he has been fairly detailed in his description of what the secondary legislation will consist of. Flexibility is not therefore necessarily an argument for excluding safeguards for rights holders from the Bill, and there can be no reasonable argument against including those safeguards. I beg to move.
Baroness Buscombe
My Lords, I should like to speak to Amendment 84AF, to which I have added my name. I spoke at some length in Committee on the extended collective licensing measures in Clause 69, and I made it clear then that I do not like the principle of ECL. I cannot see how it materially benefits the UK and it will bring uncertainty by not being truly voluntary.
I believe—and I have said so previously—that such a scheme should be opt-in, rather than opt-out, whereby rights holders who want to license their content through others can do so. However, I welcome the Minister’s assurances thus far that safeguards to such a scheme are vital, but—I echo the words of my noble friend Lord Clement-Jones—the safeguards should be included in the Bill, not left to secondary legislation. If the Government are backing ECL because it works in the Nordic countries, why not follow the Nordic lead and put the necessary safeguards in the primary legislation? Whoever may benefit from such a scheme can then benefit, and whoever feels threatened by it will have some comfort in knowing that the Government have protected the rights of rights holders.
As I said on an amendment on Report last week, China has just announced that it will implement ECL in its copyright law and has said that the details will be in regulations yet to be published. Where have we heard that before? The UK Government will not be in a position to demand appropriate safeguards for licensing of UK copyrights by ECL in China if we do not have them in our own legislation, as the Nordic countries do, nor will UK rights holders or their representative bodies be in a strong position to safeguard UK rights abused by ECLs in foreign countries if the UK’s own statute lacks the necessary safeguards. My noble friend Lord Clement-Jones and I have tabled a series of amendments to this clause which does just that, putting into statute the very safeguards that the Minister himself has articulated.
Again, I urge my noble friend the Minister to accept these amendments, and avoid a situation in which companies can seize the intellectual property of others and license it on their own terms.
Viscount Younger of Leckie
My Lords, this group of amendments is designed to incorporate in legislation a series of safeguards regarding extended collective licensing. The Government have publicly committed to many of these safeguards in some form or other. I thank my noble friend for his continued positive engagement with ensuring ECL is a fair system. The Government share those aims, and I seek to reassure my noble friend that we have met them.
As there are a large number of amendments in this group, I will respond to them by reference to a set of themes. Amendments 84AFA, 84AFB, 84AGA, 84AGB, 84AGC and 84AGD are essentially consequential in nature, and so I will not deal with them directly. Amendments 84AEB, 84AEC, 84AED, 84AEE and 84AEF seek to provide clear safeguards against an unwanted extension of the scope of collective licensing, and to define the characteristics of a body which can be authorised to operate ECL schemes.
The need for safeguards is absolutely beyond dispute. A working group which includes creators of photographic, audiovisual, literary and musical works is helping us to develop these safeguards into draft regulations. I gave commitments during Grand Committee on some of the issues the working group would be asked to consider, such as those raised by Amendment 84AED. The Government will consult on these draft regulations before asking Parliament to approve them. The Government feel that regulations can more easily be adapted to keep safeguards effective in the light of market changes. Such adaptability ensures that the scheme continues to protect creators’ interests. Regulations can also more easily be adapted to emerging best practice; this better prevents abuses. The Government’s approach will still allow for a comparable level of safeguards to those found in primary legislation in other jurisdictions.
My noble friend Lord Clement-Jones raised the issue of the Nordic protections which are in primary legislation, a topic also alluded to by my noble friend Lady Buscombe. The UK proposals include similar safeguards, such as the right to opt out and a test of representation, and a different legislative route that has been used to provide future-proofing. However, not all Nordic ECL provision is for specific uses. For example, the Danish Act includes provision for a “general” ECL. Some vital safeguards are on the face of the Bill: the right to opt out and the requirement that ECL can be authorised only for specific types of works and rights. Applications to operate ECL would be authorised only on the basis of significant, demonstrable support for collective management in relation to the specific licence. This would need to include evidence that the applicant—a significantly representative licensing body—has the consent of its members to apply for the authorisation.
My noble friend Lord Clement-Jones raised the issue of ECL. If I have him correctly, he described ECL as potentially dangerous and questioned the description of it as voluntary. Noble Lords have queried our description of our proposals as voluntary, but they are voluntary because the Government will have no power to impose ECL on a sector. This is not compulsory collective licensing; it will be for a relevant licensing body which will require the explicit consent of its members to choose whether to apply. For non-member rights holders, I accept that ECL, where it applies, shifts collective management from opt-in to opt-out. This is why the Government are committed to a series of safeguards to ensure ECL is authorised only when there is a demonstrable case for it, and to make sure that rights holders have the opportunity to exercise their opt-out.
In relation to the advertisement of ECL schemes prior to authorisation, the Government have proposed that an application should be publicised to allow comments from interested parties before a decision is taken. The Government do not propose that new regulations should be laid in relation to each proposed authorisation. With regard to Amendment 84AEF, I confirm that authorisations will apply specifically and solely to the licensing scheme which was the basis of the application.
In relation to Amendments 84AEE and 84AEG, the Secretary of State will decide whether to grant or reject an application and to set the conditions of any authorisation. We therefore consider it appropriate to provide in the regulations that the Secretary of State should also have the power to revoke an authorisation, should that prove necessary. The Government believe that this may be a more efficient process than a referral to the Copyright Tribunal. Following discussions with the working group, I can confirm that the Government intend to make ECL authorisations subject to renewal.
I turn now to the question of the opt-out, and I hope that my subsequent comments on the subject of exclusive licensees will be helpful to my noble friend Lord Clement-Jones. Amendment 84AF focuses on the right to opt out of ECL schemes. In Grand Committee, I made a commitment that the working group on extended collective licensing would be asked to consider whether the right to opt out should be extended to exclusive licensees and their representatives. The Government take the opt-out protection seriously. If it becomes clear that an extension of the provisions to cover exclusive licensees and representatives is necessary, the Government will act on that basis. However, I do not want to pre-empt the work of the working group, given my Grand Committee commitment.
I know that my noble friend Lord Clement-Jones also has concerns regarding due diligence in relation to opt-out. I can confirm that the Government’s intention is that the burden of proof should favour the party seeking to opt out. That seems to us the right and fair thing to do.
My noble friend Lord Clement-Jones raised his concern that the opt-out would be too burdensome for rights holders. However, the responses to the consultation make it clear that rights holders expect to be able to opt out entire collections of work or individual works quickly and with minimal or no cost. It will be the responsibility of the collecting society to operate opt-out schemes which meet the needs of effective rights holders. They will need to demonstrate how they intend to do this when they apply to operate an ECL scheme.
On Amendment 84AEH, the Government believe that licensing bodies rather than users, who may be individuals or small businesses, should accept and process opt-outs. Licensing bodies will be required to publicise any ECL scheme before it comes into effect, giving rights holders every opportunity to opt out in advance.
Subsection (b) of the amendment presents some practical difficulties. “Reasons to believe”, for example, could prove to be a very subjective judgment. It would seem more practical for licensing bodies to address issues of exploitation that the “author would oppose” on a scheme-by-scheme basis through, for example, licence conditions.
On fair treatment and remuneration for non-members, I reiterate my support for the principle. However, I do not feel that it would be appropriate to give non-members of licensing bodies recourse to the Copyright Tribunal that members do not have. I also feel that it is unlikely to be cost-effective.
Codes of practice will require fair treatment for non-members, and ECL will not be authorised unless a suitable code is shown to be in place. If a dispute fell within the scope of a code, a non-member would be able to use the licensing body’s complaints procedure, with appeals going to an independent ombudsman. The Secretary of State would have the power to revoke an ECL authorisation if a code was not complied with. This is in addition to the proposed wider backstop powers and code review system, which includes the ability to impose other sanctions.
Amendment 84AGE would mandate that the regulations provide for a creator’s moral rights to have been assumed to have been asserted. I am happy to confirm that the orphan works regulations will indeed provide for this.
In relation to ECL, the principle is that the licence conditions applicable to the use of member’s works would also apply to the works of non-members. Amendment 84AGE would, however, also remove references to other safeguards. These include the various rights and obligations once a work ceases to be orphan, and the right to withdraw from an ECL scheme once it is up and running. The fact that these matters are specifically referenced in the Bill is an indication of their importance.
My noble friend Lord Clement-Jones and others have made some valuable points, but I can reassure the House that the Government understand the importance of getting the detail right. Fixing the detail in regulations will allow for expert input from the working group, further consultation and parliamentary scrutiny via the affirmative procedure, and will help the Government to keep safeguards up to date and effective. While I appreciate the intention of these amendments, I am concerned that they would hinder us in getting the detail right now and in the future. I therefore ask my noble friend to withdraw his amendment.
Lord Clement-Jones
My Lords, the Minister has been so forthcoming that I almost do not know where to start in thanking him for the assurances that he has given about the nature and content of the regulations in terms of the safeguards that will be similar to those in most of the Nordic legislation—that is, the way in which licensing bodies will need to demonstrate significant support, the way in which the Secretary of State will set out the requirements, and the powers of the Secretary of State in relation to codes of conduct. These schemes will be subject to renewal, which is extremely important. The way in which the Minister expressed these assurances was extremely important, first, in terms of meeting the expectations of rights holders, which is crucial in meeting some of the concerns. Secondly, even more important is what the Minister said about the onus of proof in terms of the ability of rights holders to withdraw from collective licensing schemes. Above all, that will provide more assurance than almost anything else.
I shudder to think how long some of the regulations following on from Part 6 of this Bill will be, since we are putting huge emphasis on secondary legislation following on from the clauses that we are agreeing. However, the Minister has given a very useful route map of what those regulations relating to extended collective licensing are, and to that extent it is extremely welcome. I beg leave to withdraw the amendment.
Lord Howarth of Newport
Lord Howarth of Newport
My Lords, this amendment arises from conversations that I have held with the British Library, with Universities UK and with the Wellcome Trust. They all endorse this amendment, as do the Chartered Institute of Library and Information Professionals—CILIP—the National Museum Directors’ Conference and the British Broadcasting Corporation. The issues at stake are important for our universities, our libraries, our archives, our museums, our galleries and our broadcasters, as well as for our culture and economy.
The purpose of the amendment is to create some flexibility in respect of a requirement that fees should be paid up front for the use of certain in-copyright works, known as orphan works. Orphan works are works whose rights holders, following a diligent search, remain unidentified or untraceable. The amendment would ensure that there is no absolute requirement in the statute that fees for the use of orphan works should be paid up front.
Let us remind ourselves of the benefits of being able to license the use of orphan works, provided that it is done with appropriate safeguards. I strongly support the Government’s policy of making orphan works accessible.
Baroness Blackstone
My Lords, I support my noble friend Lord Howarth of Newport. In doing so, I declare an interest as chairman of the board of the British Library. I will not repeat all my noble friend’s arguments, which were made at some length and extremely cogently. Nobody could have made the case better. However, on behalf of the great cultural institutions, of which the British Library is one, I want to say how important this amendment is. As my noble friend said, it is absolutely right that more than 40% of the in-copyright collections at the British Library are orphan works. I can confirm that.
My noble friend made a plea for flexibility and this is an example of legislation where flexibility should be built in. Clause 69 is an important clause in this Bill and I congratulate the Government on bringing it forward. However we need to make sure that it leads to the maximum use of orphan works for research, scholarship and other public uses. I fear that without this amendment, maximum use will not take place and many of the benefits of Clause 69 will we lost, as my noble friend has said. I cannot believe that the Government would want that to happen.
It will be extremely damaging if there is a requirement to pay upfront for orphan works in the way that the Bill requires. It is also quite unnecessary. I can see no downside to making this small change; otherwise it will end up—as my noble friend has said—as a tax on the very public institutions that both the Government and all parts of this House want to support. I ask the Minister to respond positively to this amendment. It is extremely important and will make a great deal of difference to this Bill.
The Earl of Erroll
My Lords, I support the noble Lord, Lord Howarth, in this amendment. It is extremely sensible, very simple and allows for flexibility, which is what we want. The concept of licensing for orphan works and for extended collective licensing is important if we are to disseminate things that we want to do and see. More and more programmes, books and so forth now dwell on our recent past. In this case, “recent”, when it comes to copyright, means the lifetime of the author plus 70 years.
The situation gets confusing. First, if one of your Lordships were to send someone a postcard, the copyright—wherever that postcard ends up and whoever buys and sells it and owns it later—would subsist for their lifetime plus 70 years. The next confusion is the assumption that copyright resides with the person who wrote the document. Let us suppose that someone tries to produce a study of an incident that happened between the wars. Indeed, a similar issue arose the other day when someone asked whether they could use a letter from my great-grandfather and whether I would grant copyright. There is a certain technical problem. I presume that they had looked at all the wills between my great-grandfather, my grandfather, my mother and myself to find out that I was the residual legatee; or that each was the residual legatee of each will; or that the copyright in this particular case had not been assigned to someone else. How on earth would you prove that? It would be totally impossible. For things that were never designed to be commercial, the concept of trying to trace the person who owns the copyright is ridiculous and is just a non-starter.
A clampdown will mean that a whole raft of things will not be able to be published by people in public office, because one cannot say to a public servant, “Just break the law because nobody is going to sue you”. You are telling them to act illegally. You can possibly do that as a private person and say, “They are not going to dare to sue me”, but you cannot expect people in libraries, universities, other such public bodies and charities to break the law. It is the wrong way to treat the law. As a result, we need something more sensible. That is why this entire clause is there, to try to solve the problem. But think of the millions of pounds involved if we charge even one penny per potential orphan work. We heard the figures a moment ago from the noble Lord, Lord Howarth. I do not believe that there should be a presumption of an upfront payment unless it is a small administrative charge. There should be no payment that tries to reflect the number of orphan works that might be involved, particularly if it involves lots of little individual things going from A to Z.
I am also worried about what happens to the money. If it goes into general taxation, I am not sure that is a very good use of it. I tend to think that the great institutions probably know how to spend the money better than central government, but maybe I should not say that. I certainly feel that most taxpayers think that they know how to spend their money better, so for this to be a covert tax is not a good idea. I also find the concept of government departments taxing and fining each other absolutely ridiculous, as it just circulates money around.
I would disagree with the noble Lord only about the copyright on digital photographs. If, because there is a technical challenge with some people stripping out metadata, exclusions are made for one class of item, exceptions and exemptions will be created because there are many ways around it. What happens if you take what is an analogue photograph and digitise it? At that point, it is going out there digitally. Is it now digitised so that the copyright rule does not therefore apply to it, or whatever? We should keep it simple and include everything within the orphan works scheme. Apart from that, very soon there will not to be many photographs that are not digital, so by excluding them the law will take some time to catch up. In any event, this amendment is sensible and it would be madness to refuse it. Please will the Minister look on it kindly?
Lord Howie of Troon
My Lords, I want to make a very brief observation with regard to orphan works. The existing definition of an orphan work is not terribly satisfactory. The matter came before the previous Government in their last weeks—I see my noble friend Lord Young nodding over there—when I was successful in persuading them to accept a new definition of what an orphan work actually was, so that people would be in no confusion as to what they were dealing with. Unfortunately, this was the declining days of that Government and that part of the legislation disappeared in the wash-up. I wonder whether the Minister might look back to the Hansard of that period for the redefinition of orphan works and, perhaps at a later stage of this Bill, bring it back in.
Lord Stevenson of Balmacara
My Lords, this has been a very powerful debate. In contradistinction to what have been discussing in the immediate run of amendments, this seems to be a situation where the Government are trying to be a little too definitive in primary legislation. My point would be, to support the comments made on this side, to suggest that the Minister might wish to review that.
We have heard that we are talking about hundreds of millions of works, which are—in the words that my noble friend used—underused, understudied and undercelebrated. There is no contention that the repositories in which these works lie are happy to pay for the cost of the administration of the scheme that is to be used to provide access to them. The concern is that by providing a very inflexible approach to this, these institutions will effectively have been taxed to provide funds which will go to the Crown under the bona vacantia rules. This seems extraordinarily unfair and I urge the Government to think again about this issue. I am aware that it has already been the subject of some discussion and debate but, given that we have at least another 10 days until the final stages of this Bill, perhaps there is still time for the meeting or discussion that I might encourage the Minister to have. We would certainly be very willing to meet his timetable in order to progress this.
The point must surely be that there ought to be a way round this that would accept the overall architecture of the structure of the orphan fees arrangement but would not penalise or tax those who have to operate it for the benefit of the public good. We have already had some suggestions that would perhaps include something to do with digital photography, which will always be a difficulty in this area. That might be a step too far. However, there are other ideas around, such as that the escrow account might be not returned to the Crown but made available for cultural work or, more particularly, returned to the original institution if the money is not claimed by a bone fide rights holder.
There might be a case for trying a pilot scheme, which would allow us to test out a number of options. Whatever there is, there is certainly a willingness on our side to see if we can get this right. This scheme is a good scheme. It is one that we on this side want to support, but we find it very difficult to see the right way forward if the Government insist on the present wording of the Bill.
Viscount Younger of Leckie
My Lords, I begin by thanking the noble Lord, Lord Howarth, for his amendment. I do not underestimate the strength of his views on this particular issue and the remuneration for orphan works. I have listened very carefully today to his argument. As he well knows, I listened carefully in Grand Committee and, indeed, outside the Chamber to his views, which are well known.
It is one of the core principles of the Government’s proposals that remuneration is payable for the use of an orphan work. Making payment discretionary would risk undercutting the market. It would also risk rights holders not receiving the remuneration that they would otherwise be due. Therefore, to avoid unfair competition, it should not be cheaper to use an orphan work than a non-orphan work. Where cultural institutions are acting commercially, it seems only fair that they do not receive preferential treatment to other parties licensing in the market.
I can assure the noble Lord that in setting the tariff of remuneration the Government will ensure that, as far as possible, it reflects the appropriate tariff for the same type of use of a similar non-orphan work. Where an orphan work is not being used commercially the licence fee will reflect that. In such cases, the fee could be minimal. My officials are consulting the competition authorities about how tariffs are determined.
I will address a number of questions raised by noble Lords, in particular the noble Lord, Lord Howarth. First, he suggested that excluding digital photographs from the orphan works scheme might be a possibility. A stakeholder working group will be considering the possibility, at least initially, of excluding from the scheme photographs without an analogue context—so photographs merely taken from the internet would not qualify for an orphan works licence.
The noble Lord, Lord Howarth, suggested removing the principle of upfront payment and his views were very clear on that basis. We cannot, however, expect cultural institutions to ride over the rights of creators even in the interests of the public good. Of course we hope that there will not be returning rights holders. We hope that diligent search will identify any such people. However, the principle of upfront payment is an important one. Abandoning the principle of upfront payment is a guarantee to creators that even if their works are missed in the search, they will not be deprived of an income. The fact that rights holders may be content to allow their works to be used is not a reason for trying to reduce their legal rights. In many cases, the payments may be minimal, indeed nominal.
The noble Lord, Lord Howarth, also raised unclaimed licence fees—an issue alluded to by the noble Earl, Lord Erroll. The authorising body will hold unclaimed licence fees in an escrow account. Unclaimed fees could be used to subsidise the cost of running the orphan works scheme, or to pay for preservation costs in public institutions or industry training. There will be further consideration of these options with the input of stakeholders.
The noble Lord, Lord Howarth, raised the issue of a renewable term and the fact that he was not in favour of it. To allow for business certainty, there will need to be some limit on how long an orphan work can be used before a new authorisation would be required. Any returning rights holder would receive remuneration for this period of time and would be able to stop further use at the end of the period if they so wished. The metrics for determining the durations of licences have yet to be decided. In some cases, it might be a period of time; in others, it might be something else such as a print run. Therefore, there will be further consideration of how charges are determined but licence fees will be appropriate to the type of work and use proposed. I hope that, with those reassurances, the noble Lord will not press his amendment.
Lord Howarth of Newport
My Lords, the novelist Edith Wharton has a character in one of her early stories, a woman novelist, who discusses with her former lover what should be done with their love letters. She says:
“A keen sense of copyright is my nearest approach to an emotion”.
Noble Lords may be feeling rather similar by this stage of the proceedings. I am grateful to all noble Lords who have spoken in the debate—my noble friends Lady Blackstone, Lord Howie of Troon and Lord Stevenson of Balmacara, as well as the noble Earl, Lord Erroll—for their very helpful contributions.
Lord Clement-Jones
“Greater protection for authors when assigning or licensing copyright
In paragraph 1(c) of Schedule 1 to the Unfair Contract Terms Act 1977 (scope of sections 2 to 4 and 7), omit “copyright”.”
Lord Clement-Jones
My Lords, there is currently in many cases an imbalance in economic power between the creator and those with whom they are dealing on copyright. I moved an amendment similar to this in Grand Committee, and at that time the Minister said that the Unfair Contract Terms Act is intended to regulate only business to consumer relations. Of course that is correct. The Minister has, however, agreed to see what can be done by way of review within the Department for Business, Innovation and Skills of this type of issue.
The amendment is designed to elicit from the Minister an assurance that this work will be undertaken. I have sent the Minister a paper suggesting how such a review might take place. It would be an independent review of copyright contracts for creators and would explore how copyright contracts could be made fairer to ensure that creators receive a fair share of the money that consumers pay for copyright content and that the purpose of copyright in stimulating and sustaining creativity is met.
The kinds of contracts that such a review might consider are those with publishers, broadcasters, record labels and film studios; creator’s contracts with, and mandates to, collecting societies; and contracts with internet platforms such as Flickr. Some possible solutions for the review to explore—I am not going to go through them all—might include whether the doctrine of undue influence that applies when a person in a dominant position uses that position to obtain an unfair advantage for himself or herself could be codified in statute law; or whether, for instance, a right to equitable remuneration for creators is a necessary underpinning to fair contracts for creators; and whether model licences and codes of conduct could extend the benefit of collective negotiations through professional bodies to a wider range of creators, particularly new entrants to the entertainment industries and consumers-turned-creators. I very much hope that the Minister can indicate how a review might take place and who would be responsible for it. I beg to move.
Baroness Buscombe
My Lords, I support this amendment, to which I have added my name. I support everything my noble friend Lord Clement-Jones has already said. This amendment would go some way to mitigate risks to the individual creators, without whom there is no creative economy. We have here more risks of unintended consequences of the government proposal for extended collective licensing. Already before the passage of the Bill, there is renewed pressure on individual creators to sign away to publishers all their rights, including rights to income from extended collective licensing. While creators are vulnerable to the take-it-or-leave-it approach in contracts offered by powerful organisations, the likelihood is that creators will thus be deprived of the compensation for the use intended by the drafters. I should add that we have had so much correspondence in this regard that we are looking to my noble friend the Minister for strong reassurance.
Lord Jenkin of Roding
My Lords, I support this amendment. As I understand it, there has been a presumption in some way that the Unfair Contract Terms Act applies only to dealings between business and the consumer. Of course, there are in the field of copyright—indeed, I suspect in many aspects of intellectual property—areas where there is a substantial imbalance between the negotiating power of the intellectual property owner and the prospective licensee.
I understand that the Department for Culture, Media and Sport has been impressed by this argument. I have been told that there are discussions currently going ahead with my noble friend’s department to see if there is some way in which this imbalance could perhaps be recognised in the law. It might well not be possible to do it in this Bill, and on that I wait to hear my noble friend’s argument. I would like to be assured that the discussions going on within government—I understand this may be between the two departments—will continue so that there can be a proper examination of whether this extension can be made in some way. There is no doubt about it; someone has to deal with what at the moment looks, to many of the people in the creative industries, like a very unfair balance. It is part of the duty of government to see that that is put right. I hope my noble friend will be able to give us that assurance.
The Earl of Erroll
My Lords, we need to move somewhere in this direction, so I support this amendment. The unfairness of copyright law recently came home to me. Someone wanted to publish a book involving some of my ancestors, and asked whether they could use some material that I had at home. I replied, “Certainly, I would be delighted”. Then they said, “We need a release document”. They put a contract in front of me that said that they would have total rights to this material throughout the universe, known and unknown, in media not yet developed, incorporated and not incorporated—this, that and the other. The only thing it did not include was parallel universes. The contract said that I would have to defend the copyright whenever and wherever required, at my cost. I was not receiving anything for this; I was simply trying to be kind and helpful to someone who was making a documentary. I asked someone legal about it who said, “Oh, they probably couldn’t enforce it because it’s an unfair contract”, but apparently it is not because unfair contracts do not apply to copyright. I therefore asked whether other people had signed this, and was told, “Oh yes, they’ve signed them. Don’t worry, I’m sure nothing will happen”.
It is madness for people to sign these things. Something will come home to roost. You have only to look at the chancel repair bills that some people receive as a result of things signed long ago, which come home to roost generations later. This copyright thing would, if I had signed it, presumably have burnt my heirs and successors as well for the period of that copyright. This is potentially quite serious—something that people are ignoring. They think that it will go away and that it does not matter because it is so over the top. I struck through all the relevant clauses in the contract and said, “Right, you can have whatever rights you want to it, but you defend it and look after it”. I never heard any more and they never used the material, which is sad.
This is all part of the previous discussion on orphan works and extended collective licensing. So much is locked up that could help the future, help current understanding of the past and help to disseminate things, yet the big rights holders are so bullying in holding on to this material that they are preventing its dissemination. We have to open up and start being more reasonable, particularly in the digital age. On this amendment, therefore, I definitely support the noble Lord, Lord Clement-Jones.
Viscount Younger of Leckie
My Lords, I start by answering a question that my noble friend Lord Clement-Jones raised at the beginning. Well, it was more of a point, really. He said that he had sent a paper to me on how the issue of unfair contracts could be addressed. I confirm at the beginning that I have received this paper and that we will consider his suggestions very carefully. It is a little early to talk about this as a formal review, but I reassure him that we will certainly discuss this and take it forward.
However, I thank my noble friends for this amendment. I understand that individual creators can be at a disadvantage when negotiating contracts with intermediaries and large organisations. However, I believe that amending the Unfair Contract Terms Act in this way, as intended by this amendment, would not address these concerns. My noble friend Lord Clement-Jones is aware that we have had discussions on this outside the Chamber. This is because the provisions of this part of the Act are limited in scope. Section 3 applies only where one of the parties is a consumer, or is on the other party’s non-negotiated standard terms of business. However, we should also consider the overarching point. Successive Governments have maintained the principle that businesses should be able to contract freely with each other, and that the Government should not unduly fetter or circumscribe this freedom.
My noble friends have raised valid concerns about individual creators. Although I do not consider that the Bill needs amendment in this respect, I would be happy to meet creators to explore these issues further. I hope that in the light of what I have said, my noble friends will not press their amendments.
The Earl of Erroll
Will the Minister clarify something? It sounded as though this amendment would cover the situation in which I found myself. If a creator is a sole trader, will he be covered as a business to consumer rather than business to business? Would that help?
Viscount Younger of Leckie
The noble Earl raises an interesting point. This is very much a technical issue. As noble Lords will be able to imagine, a number of lawyers were involved before I was able to stand at the Dispatch Box today. On that point, I ask the noble Earl to allow me to get back to him with a specific reply.
Lord Clement-Jones
My Lords, I thank the Minister for that reply. I also thank the noble Earl, Lord Erroll, for his comments. He rarely supports one of my amendments, and I have learnt more about his ancestors today than on many previous occasions, so I thank him for his support.
The issue is not whether or not to amend this particular Act. As the Minister says, the Unfair Contract Terms Act does not apply to copyright or business-to-business transactions. Therefore, the essence of this is that, where many of these small creators are small businesses, we need to find a mechanism that will create a more level playing field with some of the larger contractors with whom they want to do business, and to find some way in which those transactions can be reviewed in the way that I suggested.
The Minister did not go quite as far as I would have liked and commit to a review. I think he said that he would meet to discuss how a review might take place. I will take that for what it is. I very much hope that I will be able to persuade the Minister, especially with the paper I sent him, which I confess was drawn up by the Creators’ Rights Alliance, which represents smaller creators and feels very strongly about these issues. I am sure that its members will be only too delighted also to meet the Minister. In the mean time, I beg leave to withdraw the amendment.
Lord Clement-Jones
“Diligent search
(1) The Copyright, Designs and Patents Act 1988 is amended as follows.
(2) In section 97(2)(a), after “infringement” insert “, in particular whether in respect of any work or group of works the defendant has carried out a diligent search in accordance with the requirements of inserted section 116A.”
(3) In section 191J(2)(a), after “infringement” insert “, in particular whether in respect of any work or group of works the defendant has carried out a diligent search in accordance with the requirements of paragraph 1A of Schedule 2A.”
Lord Clement-Jones
My Lords, I am afraid that this House will get rather tired of my voice over the next few minutes. I beg to move Amendment 84AHA. This amendment seeks to clarify the matters to be taken into account by a court in exercising its discretion to award additional damages in certain cases of copyright infringement. The power to award such damages for copyright infringement is contained in Section 97 of the Copyright, Designs and Patents Act 1988, and Section 191J covers infringement of performers’ rights. As the provisions are identical in form, I will speak only to copyright infringement.
Additional damages are a form of damages that are intended to have a punitive or deterrent effect on the infringer, and are awarded in exceptional cases, in addition to the compensatory damages based on a reasonable royalty that are the usual remedy for copyright infringement. They are often referred to as “flagrancy damages”. Some kinds of copyright infringement are carried out with such flagrant disregard for the rights of the copyright owner that it is appropriate to have a sanction available to the civil courts that both contains an element of punishment of the infringer and which, more importantly, acts as a deterrent to others who might consider doing something similar. The sanction is not often used, but has been applied, for example, where the defendant has already been found to have infringed and then repeats the infringement.
This amendment will bring the provision up to date to reflect the changes being made by this Bill in relation to orphan works. Your Lordships will recollect that it is proposed that before any work can be declared an orphan it must be subject to a diligent search for its owner. There is considerable disquiet in some parts of the creative community about how conscientious all those who wish to use orphan works will be in carrying out such a search. Of course, we expect that in due course there will be some detail, which the Minister has described in detail, of the requirements set out in the relevant regulations. They will be designed to minimise the possibility that people will take inappropriate advantage of this provision.
None the less, given the enormous potential commercial benefits, it is entirely likely that some organisations will seek to test how little they have to do by way of diligent search. In particular, one of the concerns raised with me is that a potential user may argue that, as they have carried out a search in relation to one item in a group of works, they should be permitted to assume that the result will be the same for the others, and that they are relieved of the need to carry out separate searches. We debated this only a few groups ago.
The protection that this affords to people is that before their work can be declared an orphan and used without their authorisation, there must be a diligent search. This simple amendment deals with the temptation to use the orphan works provisions in a manner that is clearly not intended by the Bill. It spells out that failure to carry out a diligent search will be one of the considerations that the court takes into account when deciding whether or not to award additional damages. It will not be definitive of the question, just one factor to be taken into account.
This would send a clear message that the new freedoms provided by these provisions are not to be abused, especially not at the expense of creative individuals who do not have the resources of large corporations standing behind them to enforce their rights. This is an important aspect and one that is entirely consistent with the policy direction behind these measures. I beg to move.
Viscount Younger of Leckie
My Lords, Amendment 84AHA returns to the subject of diligent search, something that was discussed in one of the earlier groupings. I understand and sympathise with the intention behind this amendment. However, the Government are not convinced that a failure to obtain an orphan works licence legally should be treated as an aggravating factor over and above any other form of copyright infringement. There are already provisions in the 1998 Act for special damages, but the general principle of law at issue is that civil redress is about compensation rather than punishment. The Government feel that the courts should be in the best place to determine damages in the light of the circumstances of each case. I hope that in this light my noble friend will not press his amendment.
Lord Clement-Jones
My Lords, I thank the Minister for that. I will need to consider some of the points that he has made. I am not sure whether I agree that it should be a matter of pure compensation and not damages, but I am sure that his words will be worth looking over again in the light of day. In the meantime, I beg leave to withdraw the amendment.
Lord Clement-Jones
“Right of identification
(1) The Copyright, Designs and Patents Act 1988 (the “1988 Act”) is amended as follows.
(2) For section 78 (requirement that right be asserted) substitute—
“78 Moral rights
(1) The rights conferred by this Chapter (moral rights) are—
(a) exercisable without formality in unpublished works,(b) exercisable without formality in works made available to the public after this section comes into force.(2) There shall be no cause of action for omission of attribution in re-publication of a work that was legitimately made available before the commencement of this section, unless the rights conferred by this Chapter were asserted at the time.”
(3) For section 205D (requirement that right be asserted by performers) substitute—
“205D Moral rights
(1) The rights conferred by this Chapter (moral rights) are—
(a) exercisable without formality in unpublished works,(b) exercisable without formality in works made available to the public after this section comes into force.(2) There shall be no cause of action for omission of attribution in re-publication of a work that was legitimately made available before the commencement of this section, unless the rights conferred by this Chapter were asserted at the time.””
Lord Clement-Jones
My Lords, I beg to move Amendment 84AHAZA. The labelling of the amendments gets more and more complicated as time goes on.
The requirement that the moral right be asserted is widely agreed not to be a particularly useful concept. Discovering whether a right has been asserted is in many cases, for practical purposes, impossible. It was noticeable that the Minister confirmed in our previous discussion of orphan works that it would not be necessary in certain circumstances that a right be asserted. In the case of a photograph, for example, it may be necessary to refer to the invoice for payment for the licence for first publication. A consultation held following the debate on the Digital Economy Act could find no reason to retain the requirement to assert the right of identification, and I am aware of no body that is strongly attached to retaining this requirement.
I believe that the Intellectual Property Office has indicated that it is proposed that a right shall be treated as being asserted, and this was confirmed today, in respect of orphan works in the regulations proposed under Clause 69. This amendment therefore makes an important amendment to the Copyright Act and makes the situation uniform. All authors and performers having the right to be identified is an essential precondition for measures to permit licensing of orphan works and to help to prevent the creation of new orphans. More will be required to strengthen this right and to protect the metadata that contains the identification of authors and performers, but this is an important start. It would remove a serious barrier to the ordinary citizen having a right to be identified in the first place, since they are very unlikely to be aware of the requirement to assert. I beg to move.
Lord Jenkin of Roding
My Lords, I very much support this. I believe that it is a very worthwhile amendment. I cannot understand why somebody who is claiming the right to be the copyright owner of an orphan work should have to assert his right from the beginning. He will not know about this, as it is a requirement that will be hidden in the legislation. I cannot for the life of me understand why he has to do this in advance, as it were. It is an unnecessary restriction and requirement to be placed on the shoulders of an individual, perhaps an artist, writer or musician, who says that they are the author and owner of an intellectual property, only to be told that they have not asserted their right from the beginning. I do not believe that that is right.
I hope that my noble friend will look on this amendment sympathetically and, even if he cannot accept the words, undertake to have a good look at the issue and perhaps meet some of the people concerned, with a view to having something put into the Bill at Third Reading. I think that my noble friend Lord Clement-Jones has made a very sound point in moving this amendment.
Viscount Younger of Leckie
My Lords, the noble Lord’s proposed amendment would make automatic the right to be identified as the author of a work. Currently Section 78 of the Copyright, Designs and Patents Act 1988 provides that moral rights, including the right to be identified or attributed, must be asserted to take effect. The Government appreciate that there is a legitimate debate around the issue of moral rights, particularly the right to attribution. Some stakeholders would like to see the moral rights of creators strengthened further. The Government acknowledge that there are creators who would like to see the right of attribution become automatic and some who would also like it to be unwaivable. We are also aware, however, that other creators take the view that moral rights, such as the right of attribution, can have an economic value. These creators argue that they should be free to decide whether to exploit that value.
As can be seen, this is a complex area on which creators hold strong and often differing views. The economic question of the cost of using works is an important one. Changing the law on moral rights would affect many groups in different ways. It is not an insignificant question and would require a full consultation. I hope that these words help to answer some of the questions raised by my noble friend Lord Jenkin and that, in the light of what I have just said, my noble friend Lord Clement-Jones feels able to withdraw his amendment.
Lord Clement-Jones
My Lords, I thank the Minister for that response, and I thank the noble Lord, Lord Jenkin, for his very valuable support. I appreciate the Minister saying that there is a legitimate debate. There are, of course, a number of aspects of moral rights that are debatable, not only the automatic right stated in this amendment but also the issue of waiver, the question of the economic value of moral rights and so on. This amendment was a way of putting a marker down that this is an area that is somewhat archaic. If we are going to move on, especially when the new exceptions come into play, we must look at further aspects of reform of copyright law, such as the way in which contracts are made with creators, aspects of moral rights and metadata. This is an area that the IPO could very usefully focus on and, in the next round of legislation, look and see whether we can get rid of something that I believe is now not required and is rather out of date and unnecessary. In the mean time, however, I beg leave to withdraw the amendment.
Lord Mitchell
Lord Mitchell
My Lords, in moving Amendment 84AHAZB, I will also speak to Amendment 84AHBA, which is consequential. These would give shareholders an annual binding vote on executive remuneration.
Last year, my noble and very dear friend Lord Gavron tabled a Private Member’s Bill on the subject of executive pay. Sadly, he cannot be with us today. In the next few days, he is due to have a very serious operation. I know that I speak for the whole House when I wish him a very safe and speedy recovery. It was the noble Lord who first stimulated my interest on this issue when he asked me to support his Bill. Of course, I was pleased to do so. Since then, I now find myself on the Front Bench and fortuitously in a position to lead the opposition position on this issue. It must also be said that the noble Lord, Lord Gavron, is also a generous supporter of the High Pay Centre, which has conducted a great deal of important research on this subject. Based on discussions that the noble Lord had with the noble Lord, Lord Marland, and others, he felt that the Government had taken his points on board and in consequence he withdrew the Bill. To their credit, the Government have indeed incorporated some of the points made in the Gavron Bill, but I believe that this Bill can still be improved on. That is what we are seeking to do.
At the heart of the matter lies the empowerment of shareholders. Just in case noble Lords question my position in speaking on this subject, I add a little personal background. From 1972 to 2006, I set up numerous businesses. Some were very successful, some were total disasters. I will make no further reference to the Soho restaurant that vanished without trace. I lost a packet and there were several others like that. On the other hand, I have had my notable successes. I have been in the IT services business most of my adult life. I created three businesses from scratch, built each of them over 10 or more years and then sold them. Each company became a market leader and two of them were international operators. Not surprisingly, I dwell upon my successes these days although it must be said that the failures made me a better man. I learnt one golden rule: stick to what you know.
I am a senior entrepreneur in tooth and claw. I know that success is wonderful and failure is painful. I understand the rules of the game. I have made this personal statement to put it all in context because the series of amendments I have tabled, and which we are about to discuss, centre around the rights and powers of the shareholder, with whom I have a strong personal sympathy. The shareholders are the owners. If the company does well, their share price goes up. If it fails, they can lose the lot. Executives can move on; shareholders are left with a loss. The board of directors is accountable to the shareholders and the management reports to the board of directors.
In many small private companies, the management, the board and the shareholders are often one and the same, but in quoted companies this is seldom the case. That is one of the reasons why these amendments refer solely to quoted companies. There are, of course, other stakeholders in all companies, first and foremost, the employees, but also the customers, the suppliers and the community where the company is located. They are important but just for now we are concentrating on the shareholders and their rights to know and to control. When we address executive pay, we are saying that this subject is so important that the shareholders of a publicly listed company should not only be consulted but should also vote on the policy and the actuality of the pay packages that senior executives are to receive.
Much today is said about the shareholder spring—the hope that shareholders will assert themselves more and, of course, we agreed wholeheartedly with this. If we look around the world, shareholders are flexing their muscles in all sorts of ways. In the United States, the Dodd-Frank enactment of 2010 has significantly tightened shareholder scrutiny on executive compensation. This is referred to as “say on pay”. In the EU a couple of weeks ago, strong recommendations were announced with respect to bankers’ pay and bonuses. It will not have escaped noble Lords that just over a week ago, the Swiss, of all people, held a referendum on curtailing bankers’ bonuses. The proposal received 67% support among Swiss voters; 1.6 million of them turned out to vote; and all 26 cantons approved it. Were we to have such a referendum here, one wonders what the result would be, although we can get some idea by looking at the attitudes of the British public. Only 7% of those polled say that they think that the CEO of a large company should receive compensation of more than £1 million and only 1% think that they should be paid more than £4 million a year. Is that any wonder when profits for failure feature so heavily in the news? For example, last week, HSBC announced that 204 of its global staff were to receive £1 million in bonuses and compensation—this in a year that has seen the bank fined £1.2 billion for laundering Mexican drug money. RBS has made it clear that a £5.2 billion loss was no barrier to paying out more than £600 million in bonuses.
Lord Wills
I am very grateful for that, but I just hoped that before my noble friend sat down he could address one particular issue that is of concern to me. He has put forward a compelling case for these amendments, and I hope that the Government will consider them extremely carefully. In his closing remarks he put his finger on one of the main problems with this whole area; it is not just that shareholders find it difficult to hold companies to account for their remuneration policies but that those shareholders are for the most part, as he has identified, large financial institutions. They are not as accountable as they perhaps should be to those whose savings they manage. Has my noble friend given any thought to making those institutions give an account of their policies on remuneration to those whose savings they manage, and why they have taken a particular stance on a company’s remuneration policy—to making those institutions more accountable—which might make them even more activist than they already are?
Lord Mitchell
I thank my noble friend for that comment. I think it is a really good idea. They should be accountable. They manage so much money, and I think it is a very important factor.
Lord Blackwell
My Lords, I am sure that all of us who are directors of public companies agree with the spirit of the Bill: that directors have an obligation to carry shareholders with them and to win their support for policies on remuneration as on other matters. However, the noble Lord’s particular point about having a special resolution to approve remuneration policy I found very difficult to follow. I am not sure that that argument was well made.
The special resolution requiring a 75% vote to approve a remuneration policy in effect biases any vote of shareholders against approving the director’s recommendations. I do not quite follow why, if 51% of voter shareholders believe that the remuneration policy is to the advantage of shareholders and 49 % believe it is against, the 49% should hold sway over the 51% who agree with directors. I could argue that there might be a case for biasing the vote the other way: that there ought to be presumption that the director is acting in the interest of shareholders and not necessarily that the majority voted the other way. However, I am perfectly happy to go along with a majority vote one way or the other. I just do not think that the noble Lord made any case for requiring a special resolution.
Lord Tugendhat
My Lords, I would like to address the noble Lord’s point about annual approval. I spoke in favour of annual approval on Second Reading, and I am a little surprised to be speaking on it again on Report. I gained the very clear impression from the wind-up speech of the then Minister the noble Lord, Lord Marland, that there would be annual approval. In referring to the noble Lord, Lord Gavron, Lord Marland said:
“He also asked me the frequency of the new binding vote on remuneration policy. The binding vote on future pay policy will happen annually, unless companies choose to leave their pay policy totally unchanged. I think there will enormous shareholder pressure on companies that continue to leave their policy unchanged”.—[Official Report, 14/11/12; col. 1608.]
I strongly agree with the noble Lord, Lord Mitchell, that this matter, like other important issues that come before the AGM, should be dealt with annually. Indeed, it would be eccentric to suggest that any other proposition be put forward. If the Minister really wants us to agree to triennial agreements, he will have to make a powerful case that has not yet been made in this Chamber.
It would be preferable if the Minister cast some light on how he interprets the undertaking of the noble Lord, Lord Marland. If the Minister is saying that any change whatever in executive remuneration is subject to a vote, we will, in practice, have annual votes because it is inconceivable that you would have a group of executive directors whose pay would remain completely unchanged for three years. Indeed, it is pretty unlikely that you would have a group of executive directors who themselves remained completely unchanged for three years. The overwhelming likelihood is that there would be changes in the pay packages and the composition of the executive group. If the Minister can assure me that any change whatever, either in an individual package or in incorporating the arrival of a new executive director, will mean that the matter has to come before an annual vote, I would be able to follow my noble friend. However, if he cannot do that and if he is saying that unlike the report and accounts and all kinds of other things, executive pay should be given special status and subjected only to triennial review, he is diminishing the value of the Bill.
I said on Second Reading that I commend the Government for tackling this issue, and I hold to that position. It was not tackled under the previous Government and it is good that it should happen now. The Government have established the principle that the issue is a matter of public interest, but if that is the case, as is the case in other important areas such as the appointment of auditors and the annual report and accounts, why on earth should it not be dealt with on an annual basis? Or is the Minister going to suggest that the appointment of auditors should be made triennial, quinquennial or at some other interval? He must either try carefully to explain why he puts executive pay into a special category—not just tell us about investors saying something but actually make a reasoned case—or he must convince us that any change whatever will trigger an annual approval.
Viscount Younger of Leckie
My Lords, I wish first to follow on from the comments of the noble Lord, Lord Mitchell, concerning the noble Lord, Lord Gavron. I am sure that everyone on this side of the Chamber would agree that we wish him a speedy recovery. Secondly, I take this opportunity to acknowledge the considerable experience of the noble Lord, Lord Mitchell, in the management of companies and on the ups and downs of fortune. It was helpful to hear about his background.
Lord Lea of Crondall
I am grateful to the noble Viscount for giving way. I would like to check that I have understood. He referred to the words “pay policy”, and an amendment is coming up shortly on the question of top to bottom ratios. If this is now an acceptable form of words, why do the Government not think there is now a need for a top to bottom pay policy, which we will come to in a minute?
Viscount Younger of Leckie
I will come to this in a minute. If the noble Lord will forgive me, I think it is best that we continue with this rather than move on to that particular subject. We can then focus on the noble Lord’s comment during the debate on the next amendment.
I should reiterate that throughout our consultation shareholders with considerable experience in investments research and analysis consistently expressed concerns about the downside effects of annual votes and special resolutions. This was acknowledged by my noble friend Lord Tugendhat. It is a fact, and it is the main point I want to make. Stakeholders have expressed their support for the Government’s proposals. For example, the Association of British Insurers stated that it is,
“pleased the Government has decided to proceed with this with a 50% voting threshold”.
The noble Lord, Lord Mitchell, raised some questions. First, he asked to which year a policy would relate if it were renewed annually. Well, he did not raise precisely this question, but it was alluded to. It is important to provide companies with the flexibility to decide themselves how the timing of the pay proposals will best work for them. Whether a pay policy relates to the current financial year or the following one is a decision for companies and shareholders to take together.
The noble Lord, Lord Mitchell, also raised the issue of the Cox review. I acknowledge this review, and the Government welcome its publication. The review raises some key issues about directors’ pay. I reassure the House that we will consider the recommendations made in the Cox review in the context of the Kay report. The Kay report provides a framework to restore relationships of trust and confidence, and to realign incentives throughout the investment chain. I remind noble Lords that the Government are fully committed to taking forward the recommendations made in Professor Kay’s review that investment in equity markets supports UK companies to deliver sustainable growth.
To conclude, my noble friend Lord Tugendhat raised the matter of annual votes, on which some fairly strong comments were made. I stress that in the end this is about giving companies and shareholders the flexibility to do what is best for them. However, the noble Lord is correct that a vote would be required in the event of any change in policy, so annual changes would lead to an annual vote.
Lord Tugendhat
The noble Viscount used the words “any change in policy”. Am I right to understand him to mean that if there was a change in the remuneration of two or three directors, or even of just one director, during the course of 12 months, the total pay package would have to be put to the AGM that year and could not be held over for two or three years, or whatever was left? Would it have to be voted on immediately or at the next AGM?
Viscount Younger of Leckie
I can confirm that it would have to be voted on immediately, because the change had happened in that particular year, so there would be that trigger for year two, in effect. If I have failed to do so already, I ask the noble Lord to withdraw his amendment.
Lord Mitchell
I thank the Minister for his comments and all other noble Lords for their contributions. I will deal first with the 75% special resolution issue, which was raised by the noble Lord, Lord Blackwell. As my noble friend Lord Wills was saying, it is important for the shareholders to hold the executives’ feet to the fire in some respects. This is a crucial issue. I know there is a difference in this between the ordinary and the special resolution, but that was why we went for the 75%.
The main issue is the annual point. You only have to read any newspaper in this country, and indeed around the world, to see what a vexatious issue this is at the moment. The population is disturbed, and the financial press is disturbed. Not only the popular press but leading newspapers in this country and throughout the world bring up this issue of executive pay. It has got out of kilter. We are going for the annual situation rather than the triennial situation because it should be an automatic consequence and is just as important as the selection of auditors and the approval of the accounts. Three years just seems to us to be too long for such an important issue. I have listened to what the noble Lord has said, but I would like to test the opinion of the House.
Lord Mitchell
“(2B) The regulations must require the inclusion of information regarding the 10 highest paid and 10 lowest paid employees in the company outside of the board and executive committee.”
Lord Mitchell
My Lords, Amendment 84AHAA speeds right to the heart of the matter in hand. The disparity in pay between top and bottom earners has informed much of the public outrage about remuneration, and it no doubt lies behind the polling figures that I mentioned previously. Had the minimum wage kept track with executive pay since it was introduced, it would now be worth in the region of £19 per hour. Instead, we see a very pronounced wage discrepancy. It is felt particularly acutely here in London, where many FTSE 100 companies and our financial sector are based. In 2010, the top percentile here received 16.5% more than the bottom percentile. The ratio between top and bottom pay has gradually grown over the past 30 years to the point that in both the Lloyds Banking Group and Barclays top pay was 75 times that of the average employee in 2011. By way of comparison, in 1979 the difference was only 14.5 times.
Put simply, too many are being left behind. This is certainly not the one-nation economy that this country needs. Therefore, shareholders should have more power to hold to account the companies they invest in, as we argued with regard to the previous amendment. Greater transparency about levels of pay at the top and bottom of the company would give shareholders the tools they need to make informed decisions on how they vote. This amendment gives shareholders those tools by requiring companies to disclose the top and bottom 10 earners outside the boardroom.
There are corresponding moves to increase transparency on pay, so it is worth going over why we consider there to be a need for this amendment. Most of the moves to get companies to release more information on pay to their shareholders cover only banking. The Treasury’s current consultation proposal is that the top eight highest-paid earners beneath boardroom level in banks are to have their salaries disclosed. Although it is difficult to know the details at present, it appears as though the European capital requirements directive IV will opt for a different disclosure proposal, whereby the figures for those earning more than €1 million a year are to be collated and sent to the EBA, which will then produce the numbers in a common format. It is possible that in some institutions this could produce less information than the Treasury proposal.
Both these proposals from the Treasury and in the European capital requirements directive IV differ from ours in several important ways. First, they concern only the banking sector, but this issue is not limited to that industry. Let us consider the top pay at BP. In 2011, it was 63 times that of average employee pay, whereas in 1979 the difference was only 16.5 times. However, these proposals had nothing to say about the severe problem of low pay, which, as my noble friend Lady Turner of Camden pointed out in Grand Committee, produces many difficulties in our society. I think we could all agree that pay at the bottom of a company should be considered when pay at the top is set.
The initial Private Member’s Bill of my noble friend Lord Gavron contained a similar provision. Clause 2 said:
“A company’s annual report must prominently feature details of the remuneration ratio between the highest remunerated director or employee and the average remuneration of the lowest remunerated 10% of employees”.
This amendment is slightly different but would have the same effect, introducing a measure of transparency as to the ratio between the highest and lowest paid workers.
Yesterday, Secretary of State Vince Cable pledged to support a push for openness about what tax businesses pay in different countries. This amendment is a similar push for transparency. I hope that the Government will find that they are able to support it. I beg to move.
Lord Lea of Crondall
My Lords, I strongly back this amendment. I know that it is not for here and now with the present Government, but in two years’ time it will be very interesting to see how a Labour Government get the architecture together to relate the income distribution of the rest of the enterprise to the incomes at board level. That is what they have in the most successful European societies—I include Germany, Holland and Scandinavia, and I do not think that anyone would draw up a very different list. In answer to the notion that these economies are not competitive, their place in growing world market share is far superior to that of Europe generally and certainly to that of Britain.
The point has just been made that the banking sector is a rather special sector. I can tell you one respect in which it is very special: people get paid enormously more at the top than in any other sector. That is what is special about it. It is not special in the sense that there has not been a huge growth in the disparities in all the rest of the sectors. Anybody close to industry will know that two things happen when pay at the top gets to 30, 40 or 50 times that at the bottom. The first is that there is a crossover effect in the rest of the sectors—in construction, mining or any other sector. Banking does not live in a world of its own, although in some respects, of course, it does. Some people say that the banking industry is Britain’s biggest industry. When we were young, to say that banking was Britain’s biggest industry would have been thought a rather risible thing to say. Yet that is infecting the rest of the economy. A lot of the best talent used to go into the Civil Service. Now, not as much of the best talent is going into the Civil Service. Not as much of the best talent is going to many of the sectors that had their share of the best available talent years ago.
While we are on the subject of top people and talent—and what you might call inherited wealth, which is part of this question—the fact is that we are failing to bring out the best of the talents and opportunities of everybody else in society. So when one talks about 1%, one immediately says, “What about the 99%?”. I think that for this Government to ally themselves ideologically with the interests of the 1% at the top is going to prove a fatal mistake.
The clock is ticking, and those of us who now believe what this side of the House believes, in the challenges that we will face in two years’ time there must be some connection between our policy of worker representation on boards and what is happening in the rest of the company. You do not need to be Einstein to figure out that if there is some new structure of boards, there has to be some substructure. You cannot have a superstructure without a substructure. Whether it is through information and consultation bodies or any other way, it will be a major challenge to get it right this time under the next Labour Government. It is rather academic from the point of view of Members opposite in the Conservative Party, but it is a very interesting pointer to the future that this is one of the elements in the architecture that will be built.
Lord Blackwell
My Lords, I have listened very carefully to the speeches of the noble Lords, Lord Mitchell and Lord Lea of Crondall. While they made some interesting points, I did not find that either of them had any compelling rationale for this particular amendment.
We have all agreed that the remuneration policy for those at the top of companies has to be transparent and has to be voted on and agreed by shareholders; that is only proper. As for the low-skilled workers on the minimum wage, that is a matter which is voted on by Parliament in setting the minimum wage. However, I am not sure that to juxtapose those two things in a company’s annual report provides any useful information. Let us consider company A, which, we hope, does a great job for the community in employing lots of people, including low-skilled workers, on relatively low wages. Offering them employment helps them to come off benefits and thus creates a great benefit to society. Company B, operating in the same sector, decides to ship all those jobs off to India. Which company would shareholders—or, indeed, society as a whole—think is doing a better job? I do not think that juxtaposing how many people a company successfully employs at the lower end of the skill level compared to the top end, and comparing that with other companies, gives any useful information about whether those at the top of the company are being rewarded appropriately.
Lord Lea of Crondall
The noble Lord asked a direct question about the connection, because of the minimum wage, between the bottom and the top. One phrase that gives a clue to the connection is, “We are all in it together”. Does that not give any sort of clue to the noble Lord?
Lord Blackwell
That is precisely my point. I would have thought that the company that successfully employs lots of people at all skill levels, including those on the minimum wage or at a low-skill level, is helping society and helping us all to prosper together.
Another example is a company in a consultancy that employs only PhDs. The ratio between the top and the bottom in that company may be relatively small. Is that a better company than one that employs lots of people on the minimum wage? I think that this information is almost entirely irrelevant to any judgment about whether the pay at the top of the company is appropriate. That is a relevant question, but this information is potentially misleading and potentially encourages those viewing the annual report to take a misguided view of the appropriateness of the pay policy within the company. I do not think a case is being made for it.
Lord Kerr of Kinlochard
My Lords, I understand the general points made the noble Lord, Lord Mitchell, and I have considerable sympathy for them. However, I do not understand their relevance to Clause 71, which is about remuneration reports. The problem with remuneration reports is that the degree of detail now required in them means that they have become rather long and complex. An additional requirement to include a comparison between payments made to two categories of staff, neither of which is within the scope of the remuneration report, would add further complexity without the justification of relevance. Remuneration reports are about the remuneration of directors and senior executives. The amendment calls for the inclusion of factual material on individuals who are neither directors nor senior executives.
Such complexities have costs. Take two plcs with 70 and 100,000 employees across the world in, say, 50 to 85 countries. I am thinking of two examples which I know well. Is it really necessary, for the purposes of the remuneration report, to require them to establish with each of their businesses in each country where they operate which are the lowest pay rates paid, presumably to the most junior, temporary staff of that country, then take appropriate exchange rates and try to work out the unluckiest 10 in any of their operations anywhere across the world? The remuneration report is about the directors and senior executives. The purpose of a remuneration report must surely be to explain to shareholders the company’s remuneration policy and the result that it has produced for the senior individuals that the report is required to cover, and to do so as simply and clearly as possible. Would this amendment assist that? I do not think so.
Viscount Younger of Leckie
Amendment 84AHAA seeks to require that companies report on high and low pay outside the board. Taking high pay first, the issue of high pay outside the boardroom is most relevant in the financial services industry, as was mentioned earlier, where poorly designed remuneration structures can incentivise excessive risk-taking. We remain committed to having the most transparent financial centre in the world and we have already taken significant steps forward. During ongoing negotiations with Europe over new regulations for the banking sector, we have argued strongly for further improvements to the disclosure of pay below board level. As a result, the current EU proposals would require banks to disclose the aggregate pay of senior managers and material risk-takers in bands, as well as further information about how much is paid in total in fixed and variable pay. We await the outcome of these discussions before deciding whether additional UK regulation is necessary.
The noble Lord, Lord Mitchell, raised the issue of disclosure of pay below board level in banks and asked why the UK does not regulate. We argue that it does not make sense to proceed with UK regulations until we know the precise details of the European rules. Once this is confirmed, we will decide whether we need to go further. It is not a major issue in other sectors. In our consultation on this, shareholders were clear that requiring all companies to report on high pay below board level would create an unnecessary regulatory burden and so we will not pursue this. The noble Lord raised the issue of pay below board level in non-banking sectors, which we acknowledge is an issue. In the end, pay reports are produced for shareholders, so they should be designed to include information that they want. We should not clutter them with information that they do not find useful. Shareholders and the Government share the view, however, that high pay below board level is not a major issue in other sectors. In our consultation, shareholders were clear that requiring all companies to report on high pay below board level would create an unnecessary regulatory burden, so we will not be pursuing it. That point was made eloquently by the noble Lord, Lord Kerr of Kinlochard.
One matter that shareholders are increasingly interested in is how board pay relates to that of the wider workforce. That is why companies will have to say more about how they have considered pay across the whole of the company workforce. They will also be required to publish the percentage increase in pay of the chief executive officer compared to that of the workforce. I can directly answer the question raised under the previous amendment by the noble Lord, Lord Lea of Crondall. It is something that investors are asking for and is comparable across companies, but we have no plans to mandate that companies adopt a standardised ratio for top to median pay because it is clear that this measure has limitations. It is difficult to compare between different companies and sectors. For example, an investment bank with many highly paid staff will have a much lower pay ratio than a supermarket.
New regulations will implement these proposals. Noble Lords will have the opportunity to debate these regulations later in the year. I conclude by making an overarching general point about trends in pay. It is pleasing to note, although I acknowledge that there is still much work to do, that in 2012 several firms, including Aviva, WPP, Centamin, Pendragon and Trinity Mirror failed to win majority backing for their pay reports, with several senior executives stepping down in the face of shareholder opposition. Voting results from AGMs in 2012 suggest that the average vote against the remuneration report was 8.9%, up from 6% in 2011. So, there is more work to be done but the trends are going in the right direction. I therefore ask the noble Lord to withdraw his amendment.
Lord Mitchell
My Lords, I shall come first to the Minister’s final point. These are good pointers that he draws to our attention. Much of what we have been trying to do is to accelerate the process, and to encourage shareholders to become much more involved so that we get even further results on this.
My noble friend Lord Lea of Crondall made an eloquent speech about working people working for companies and the fact that it is useful to see these disparities in black and white. Indeed, it is usual for countries in the north of Europe to do it, and they seem to be doing very well in the world economy. The noble Lord, Lord Blackwell, again made a useful contribution. I am not sure that I agree with his position but it was useful and not dissimilar to that of the noble Lord, Lord Kerr of Kinlochard. Our position is that it is information that some investors would like to know about companies: what is the disparity in those companies? I say to the noble Lord, Lord Kerr, that I had not really thought about it, but it must refer only to the United Kingdom. It had not occurred to me that we could be looking at the pay that somebody in a call centre in India gets compared with the senior executive of, say, a bank in this country. I have listened closely to everything that has been said, and I beg leave to withdraw the amendment.
Viscount Younger of Leckie
84AHB: Clause 71, page 67, line 36, leave out from “which” to “, and” in line 38 and insert “the company becomes a quoted company”.
Viscount Younger of Leckie
My Lords, the majority of these amendments are minor and technical and designed to improve the clarity of the legislation. Amendment 84AHH is substantive and I shall make the case for it first. It amends new Section 226E of the Companies Act 2006, which would be inserted by Clause 72. New Section 226E imposes a potential liability on directors who authorise an unapproved remuneration or loss of office payment. This amendment will ensure that, as is consistent with other provisions in the Companies Act 2006, a director who acts honestly and reasonably may be relieved of this liability if a court, taking into account all the circumstances, decides that it is appropriate to do so.
Noble Lords will understand the need for there to be legal consequences in the event of a company making a payment to a director which has not been approved by shareholders. In the first instance, the company may seek to recover the unauthorised payment from the director who received it. However, if this is unsuccessful, the directors who authorised the payment can be held liable for any losses incurred as a result. The company or its shareholders may take action to recover these losses from them. These consequences will act as a deterrent to the minority of directors who might deliberately try to pay more than shareholders have approved. However, the Government recognise that directors may make honest and reasonable mistakes, either through misinformation or misinterpretation of the remuneration policy. This is recognised in other parts of the Companies Act, which deal with unauthorised payments and under which directors who act honestly, or take reasonable steps to ensure compliance, are not subject to liability.
Unless we make a similar provision with respect to remuneration payments the risk of liability could hang over remuneration committees and affect the pay-setting process. This risks making remuneration committees heavily dependent on lawyers and overly keen to agree broad, vague policies. More worryingly, there is a real risk that this could deter good people from taking up important and challenging roles on remuneration committees. Case law shows that the courts apply a rigorous test when assessing whether a director has acted honestly and reasonably, particularly when the director concerned is one of a large public company. As such, we are confident that this provision will ensure that those directors who should rightly be relieved may be, while ensuring that those who should be held liable, are not.
We have also proposed a handful of minor and technical amendments which will clarify the legal drafting of the Bill on three issues, which I will speak to in turn. Amendments 84AHB, 84AHC and 84AHK clarify how and when Clauses 71 to 74 affect companies that become quoted after these provisions come into force. Amendments 84AHE, 84AHF and 84AHK make clear the different procedures that should be followed in the event of unapproved payments in the form of shares, property and other undertakings of the company. Finally, Amendments 84AHD, 84AHJ, 84AHL, 84AHM and 84AHN tidy up the drafting by moving some of the provisions in Clause 74 into other clauses so that they may appear alongside the sections to which they apply. I hope that noble Lords will support this. I beg to move Amendment 84AHB.
Lord Mitchell
My Lords, we are very supportive of this amendment. It is clearly needed. I have only one question about whether the words “reasonably” and “honestly” are strong enough. A lot of lawyers would have a field day with this. I just ask the Minister to go away and think about whether we can perhaps have something a little more assertive, which would leave less latitude for a lot of lawyers to make lots of fees.
Viscount Younger of Leckie
I thank the noble Lord, Lord Mitchell, for that, and also for his contribution on this important issue. The proposed amendment to Section 226E ensures that those who should be rightly relieved of liability can be, while those who should be held liable will be. To answer his question about how one can define or further improve on the definition of “reasonable”, the concept of reasonableness has been thoroughly tested by the courts, which are very rigorous in judging directors. A court might take into account what advice a director had sought, what conversations had taken place, and what records were kept. Of course, it remains up to the court to decide and it will vary in each case. The court will take into account, for example, the full context of the situation. Therefore, the expectations of a “reasonable” director of a FTSE100 company with a strong compliance function and ease of access to professional advisers will be much higher than those of a director of a smaller quoted company. I hope that that takes matters forward and helps answer the noble Lord’s question. I also thank noble Lords for their understanding of the need for various minor and technical amendments.
“( ) Subsection (2) does not apply in relation to a quoted company before the first meeting in relation to which it gives notice under subsection (1).”
“(5A) Nothing in section 226B or 226C applies in relation to a remuneration payment or (as the case may be) a payment for loss of office made to a person who is, or is to be or has been, a director of a quoted company before the earlier of—
(a) the end of the first financial year of the company to begin on or after the day on which it becomes a quoted company, and (b) the date from which the company’s first directors’ remuneration policy to be approved under section 439A takes effect.”
(a) subsection (2) does not apply, and(b) the payment”
“( ) subsection (2) does not apply, and( ) the payment”
“(5) If in proceedings against a director for the enforcement of a liability under subsection (2)(b)—
(a) the director shows that he or she has acted honestly and reasonably, and(b) the court considers that, having regard to all the circumstances of the case, the director ought to be relieved of liability,the court may relieve the director, either wholly or in part, from liability on such terms as the court thinks fit.”
“( ) In relation to a company that is a quoted company immediately before the day on which section 71 of this Act comes into force, section 439A(1)(a) of the Companies Act 2006 (as inserted by section 71(4) of this Act) applies as if—
(a) the reference to the day on which the company becomes a quoted company were a reference to the day on which section 71 of this Act comes into force, and(b) at the end of the paragraph (but before the “, and”) there were inserted “or at an earlier general meeting”.( ) In relation to a company that is a quoted company immediately before the day on which section 71 of this Act comes into force, section 226D(5A)(a) of the Companies Act 2006 (as inserted by section 72 of this Act) applies as if the reference to the day on which the company becomes a quoted company were a reference to the day on which section 71 of this Act comes into force.”
Lord Mitchell
“Pre-packs
(1) The Secretary of State shall commission an independent review into pre-pack administration.
(2) Such a review shall report on but not be limited to the following—
(a) the adequacy of existing requirements in relation to transparency of arrangements;(b) compliance with existing requirements by pre-packs including Statements of Insolvency Practice;(c) adequacy of existing enforcement mechanisms in relation to compliance;(d) rules relating to the continuation of supply to businesses on insolvency.(3) A review under this section shall report to the Secretary of State no later than 12 months following the day on which this section comes into force.
(4) A copy of the report under subsection (2) shall be laid before both Houses of Parliament.”
Lord Mitchell
My Lords, I speak to Amendment 84AHNZA, which calls for the Government to commission an independent review into pre-pack administrations. Noble Lords will see that this amendment represents the recommendations of the BIS Select Committee report to the Insolvency Service, released on 29 January this year.
It might be helpful if I attempt to define a pre-pack administration. I find many people do not know what it is, and I am not surprised. It is where the directors of a failing company seek to preserve its continuing existence after administration by lining up replacement owners and finance before the administration takes place—in effect, relaunching the company with many of its creditors and minority shareholders stripped out, while effectively continuing the existing business in another name. It gives the business a second chance, but often at the expense of these creditors and shareholders. My contention is that it is often unprincipled and unfair. Usually, there is no creditors meeting and no consultation with the court before this takes place. The sale may be to individuals who were directors of the firm before the pre-pack administration, and the new firm may have a similar name. As I say, the only difference is that the new company is shorn of its debt and maybe its smaller shareholders. Effectively, it is cooking the books. Such firms have sometimes been known as phoenix companies, having risen from the ashes of the old insolvent company.
My interest in pre-packs arose when a company in which I had a minority shareholding interest wanted to restructure its financing to my detriment. To do this, it needed me to sign off on a revised deal. I refused. It threatened me with a pre-pack, a term that I had not heard of before, but about which I learned pretty quickly. I still refused and, fortunately, it backed down. However, I saw how that could be used as a negotiating tactic. More to the point, I saw how the small people can get hurt. Despite that, I am prepared to concede that pre-packs can have a very important function. They can allow a company to continue and the administrator to move quickly to preserve the business and, most importantly, jobs. That is what all of us want.
Viscount Younger of Leckie
Noble Lords will be aware that the administration procedure is the primary mechanism for effecting business rescues. It is important to recognise that the objective of administration, if the rescue of the company is not feasible, is to provide the best return for creditors. A pre-pack sale is merely a means of achieving that outcome and should therefore always be in the interests of creditors. I am most grateful to the noble Lord, Lord Mitchell, for his helpful description of pre-packs for the benefit of the House.
As the noble Lord said, pre-packs can be an effective way to the best outcome for creditors, enabling businesses to be rescued and preserving jobs, but we recognise that there can be scope for abuse. That scope is greatest where pre-pack sales are to connected parties, such as the directors or their families. Again, I am grateful for the anecdotal evidence given tonight by the noble Lord, Lord Mitchell. That is when most concerns are expressed, and it is vital that everyone involved has confidence that such sales are at fair value. We have been listening carefully to concerns expressed about the use of pre-packs, and Ministers have met with stakeholders to discuss the issue. I am aware that, as the noble Lord, Lord Mitchell, mentioned this evening, he recently met with the Minister for Employment Relations and Business Affairs, Jo Swinson, to discuss the issue. We have also invited those who have complained about the procedure to provide evidence of abuse, so that that can also be pursued.
I reassure noble Lords that work is already under way to improve the transparency about pre-pack sales. There is a statement of insolvency practice, SIP 16, setting out the information that has to be provided to creditors by insolvency practitioners. That is being strengthened to ensure that more information will be disclosed and that creditors will receive that information at an earlier stage. Insolvency practitioners will also have to confirm that a pre-pack sale is in the best interests of creditors. That should provide greater confidence that the pre-pack sale is justified. The Insolvency Service is proactively monitoring information disclosed under SIP 16 reports to establish whether there has been any abuse. Where there is evidence to suggest abuse, it is reported to be relevant regulatory body for action to be taken. Such action can include fines, sanctions and, ultimately, loss of the insolvency practitioner’s licence. The Insolvency Service will report on its findings in this regard.
We therefore already have measures in place to protect against abuse, and continue to monitor the pre-pack process to ensure that it is being used appropriately. However, I share many of the concerns raised by the noble Lord, Lord Mitchell, which I know have been expressed on other occasions in both this House and the other place.
I agree that an independent review into the issue would be beneficial. For that reason, I confirm that we will commission an independent review into pre-pack sales in late spring, once the strengthened SIP 16 is in place and after the Insolvency Service has reported on the findings from its monitoring.
On the review issue surrounding continuation of supply to insolvent businesses, this is now the subject of a Government amendment being debated shortly. We propose to consult on the issue prior to implementing reforms and I am satisfied that this will address the concerns in this area. In view of this assurance to commission an independent review into pre-pack sales, I hope that the noble Lord will agree that it would be unnecessary to introduce a statutory requirement to do so, and will therefore withdraw his amendment. I conclude by thanking the noble Lord, Lord Mitchell, for raising this important issue.
Lord Mitchell
My Lords, I thank the Minister for his words. I remember when we were in Grand Committee, he too had an anecdote on this same subject. I suspect that many other people have as well. I thank him for what he has said and for the Government’s plans for a review of this area. I beg leave to withdraw the amendment.
“( ) Regulations under subsection (1)—
(a) must make provision requiring all regulated persons to be members of an approved redress scheme for dealing with complaints in connection with the supply of customer data under this section, and(b) may also require a person authorised to receive data under subsection (1)(b) to be a member of such a scheme.”
Lord Stevenson of Balmacara
In moving this amendment, I apologise that my noble friend Lady Hayter is unable to be present and has asked me to speak on her behalf. I will also speak to Amendments 84AHNB, 84AHNC and 84AHND. I start by making it clear that we on this side support the broad thrust and intent of Midata, which is to give consumers increased access to their personal data in a portable, electronic format so that they can use this data to gain insights into their own behaviour, and make more informed choices about products and services. However, to make Midata work and to build consumer confidence in it, there are concerns which we raised in Committee and which our amendments seek to address.
Confidence is key, here as in many other places, and a smart way to ensure that users can trust the use and care of their data is through a redress scheme. Not only does this give comfort in itself—people know where to go if they have a complaint about the provision, cost or use of their data—but it serves two other functions. One is that any regulated person using the logo of a particular redress scheme also signifies some assurance of quality and regulation to the user. The second, more significant function, is that a body of evidence accrues via such a complaints scheme of the sorts of problems or the particular regulated persons which are causing concerns. Given that the Information Commissioner uses a risk-and-evidence-based approach to his work, he is highly reliant on evidence—both of the extent and detriment of any problems—and these are best captured by an accessible and effective complaint or ombudsman scheme.
I start with Amendment 84AHNA, which would require regulated and possibly authorised persons to join a redress scheme. This would not entail setting up a whole new redress body, as there are plenty of other high-quality ombudsmen covering a range of sectors who could be approved under this Bill. Without our amendment, the Bill covers high-level enforcement, but with customers able to bring an action for breach of regulations only before a court or tribunal or, under Section 13 of the Data Protection Act, to claim compensation through the courts. That is a pretty unrealistic hurdle for individual consumers. Hence our call for a redress scheme for individual complaints. Knowing a redress scheme is available if things go wrong would give consumers the confidence to harness the empowering potential of Midata.
Amendment 84AHNB deals with the costs of complying with requests. At present, the charges reflect costs to the data supplier. Our amendment is about costs to consumers: after all it is their personal data that they want released. Charges must not dissuade consumers from engaging in the Midata programme. The EU data protection directive uses the phrase “without excessive ... expense”, but given that not everyone is familiar with that directive, it should be added to the Bill.
Amendment 84AHNC deals with strengthened consumer protections. There are risks from Midata, especially as combining datasets into a whole-person view poses risks to privacy and identity. Secondly, because Midata will see multiple parties including the consumer assume responsibility for data at different points, liability becomes complex, with the risk that consumers will be left exposed. Thirdly, legitimate businesses offering third-party services could incentivise consumers to provide data which might otherwise not be accessible.
Fourthly, there is the risk of misuse of data. Businesses and third parties might, for example, sell on and share data with their affiliates or engage in uninvited cross-selling and marketing. Finally and pervasively, there is security. ID fraud is a real risk as it would be easy to build a picture of an individual, drawing on different information sources. Given that data protection is already of huge concern for consumers, an assurance of security is essential for Midata to succeed and benefit consumers, who will need to be confident they are sharing their data only with trustworthy service providers. We ask the Secretary of State to consult widely to develop protections to ensure that the consumer interest is represented alongside those of regulated and authorised persons. We know that the Information Commissioner would welcome being included on this list.
Viscount Younger of Leckie
My Lords, as I explained in Grand Committee, the idea behind the powers and Midata is simple: to give consumers the right to request their existing consumption and transaction data back from their suppliers in a portable, electronic format. I remind the House that are data already exist. We are not talking about collecting new data here.
In addressing Amendment 84AHNA, I reassure the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, who is speaking to this amendment, that I agree with them both that customers need to be protected from data misuse. Service providers under Midata must comply with all existing data security and protection rules. There are well-established complaint and redress schemes through the Information Commissioner’s Office in the core sectors where ombudsmen already operate. Data controllers must notify the Information Commissioner of data processing under Section 17 of that Act. Failure to do so is an offence.
However, there may be a need for further measures. This is why a consumer protection and trust work stream has been established under the Midata programme. A number of working groups made up of privacy experts, business, regulators and consumer groups are looking at a wide range of consumer issues. They have been tasked with identifying and recommending existing best practices and, where appropriate, new approaches that may be needed to ensure the security of individuals’ data. The groups are due to report in summer and any recommendations that they propose may need to be reflected in enforcement provisions made under these powers.
The role of third parties is important. Where citizens choose to provide data to a third party, or provide authorisation for a third party to request data on their behalf, the Data Protection Act applies. Under that Act, data controllers do not need to comply with a request for data unless they are satisfied that the requesting party has authority to access it. The consumer protection and trust working groups are looking at a wide range of issues that could emerge in a new Midata world and the Government will want to take their advice before acting. Their recommendations might include kitemarks, accreditation processes and complaint handling and redress schemes, as well as other proposals. The Government do not want to pre-empt any recommendations by setting out detailed protection measures in the Bill.
Turning to Amendment 84AHNB, I reassure noble Lords that the aim of our provision is to make data more accessible. We believe that Clause 75(5)(b)(ii) will have much the same effect as the limitation put forward by the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson. The Government expect data to be provided back to consumers cheaply, and ideally for free, but businesses may initially incur additional costs in making data available electronically and the power allows businesses to charge to recoup their only cost. Noble Lords may be reassured to know that data that have been so far released under the Midata voluntary programme have been provided to customers free of charge.
On Amendment 84AHNC, I would like to deal with proposed new subsection (6A)(a) first. As I have said, businesses do not need to comply with a request for data unless they are satisfied that there is a valid claim of access under the DPA. Mechanisms that might enable this are being considered in the working groups, so this is still a matter under consideration. However, it is clear from our discussions with data controllers that they will not be willing to release data to third parties unless fully satisfied that it represents a legitimate request from an authorised party. The methodology may vary by sector but the additional measures proposed in this amendment do not appear necessary at this time.
In her proposed new subsection (6A)(b), the noble Baroness, Lady Hayter, has raised an interesting point but the Data Protection Act already affords protections in this area. I recognise the concerns in this respect, particularly around the possible actions of nefarious or rogue operators. However, access to Midata would not alter the current data protection law and any criminal activity could be dealt with appropriately, as it is now. In relation to proposed new subsection (6B), we are working with privacy experts, businesses, regulators and consumer groups in the working groups that I have mentioned. Legislation would be introduced only after a period of public consultation. Scope will exist in any regulations to place conditions on accessing data by authorised persons. Therefore, I believe the specific provisions set out in the amendment to be unnecessary.
Finally, Amendment 84AHND would extend the Information Commissioner’s powers of compulsory entry and audit to the private sector for the first time. This is primarily a matter for the Ministry of Justice and I am not convinced that such a major departure from current policy can be justified here. Its most likely effect would be to stifle innovation. As a result, services that help people to analyse their data will not be developed or may be withdrawn. The ICO already has investigation powers to require information from the private sector; we believe that these are sufficient in this case.
I would like to come back to the noble Lord, Lord Stevenson, on his assertion about claiming compensation through the courts. I think he deemed that to be unrealistic, but the power does provide for a non-court redress route. This could include empowering the ICO to address Midata complaints, if that helps the noble Lord. In the light of my responses, I ask the noble Lord, Lord Stevenson, on behalf of the noble Baroness, Lady Hayter, to withdraw the amendment that she tabled.
Lord Stevenson of Balmacara
I thank the Minister very much for that full response. I am glad that he recognises the issues we raised. We are probably pulling in the same direction on this. In particular, the work streams to which he referred are obviously very helpful and seem to be widely inclusive. I am glad to hear that they will report in the summer, at the point where they can inform any regulatory steps that are to be taken in consequence of this Bill. I think we were very glad to see a couple of other points but I will read them in Hansard and come back if there are any further points we need to make.
My concern is that there were a couple of times in the Minister’s response where he made great play of the fact that he felt that the companies to which requests for access to data are being made would have sufficient ability to determine whether the request was bona fide and therefore to be relied on, without having to have any other cross-regulatory approvals. I hear what he says on that but would like to read it in Hansard to be sure that I am right on it. At this stage, I would say only that that sounds a slightly unlikely premise on which to run what will be a very large amount of personal data, if this works, and be very widely spread across a number of possible providers and users. In that sense, it will therefore raise all the sort of concerns that the public have about how their data are being kept and looked after. At this stage, I would not like to push the amendment any further and I would like to withdraw it.
“(3) A statutory instrument containing (whether alone or with other provision)—
(a) regulations under section 75 which make provision by virtue of section 75(2)(d), or(b) regulations under section 76,may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.(4) A statutory instrument which—
(a) contains regulations under section 75, and(b) is not an instrument to which subsection (3) applies,is subject to annulment in pursuance of a resolution of either House of Parliament.”
Viscount Younger of Leckie
My Lords, I now turn in more detail to the Government’s own amendment in this area by addressing Amendment 84AHP. I am grateful to have received the advice of the Delegated Powers and Regulatory Reform Committee. Following that advice, I have put forward an amendment to Clause 77 so that any enforcement measures made under the power provided in Clause 76 would be subject to the affirmative resolution procedure. I have also made changes to allow provisions relating to core sectors under Clause 75 to be introduced using the affirmative resolution procedure. This would apply only when regulations under Clause 76 or those applying to non-core sectors are simultaneously proposed. I have undertaken this because there will be times when instruments tabled under both clauses will probably be necessary. Enabling the instruments to be considered together and using the same procedure—the affirmative procedure—ensures efficient use of parliamentary time.
Having these provisions in the Bill will help to progress the Midata programme and deliver economic benefits in terms of consumer empowerment and growth. We continue to seek progress on a voluntary basis. However, we are continuing to discuss the potential enforcement regime and appropriate levels of funding with the Information Commissioner and other relevant regulators so that should the power in the Bill prove necessary, we will be in a position to provide protection to consumers. We believe that the Government’s amendment strikes the right balance between providing the flexibility to tailor enforcement appropriately and ensuring adequate parliamentary scrutiny.
“Power to add to supplies protected under Insolvency Act 1986
(1) The Secretary of State may by order amend section 233 of the Insolvency Act 1986 so as to add to the supplies mentioned in subsection (3) of that section any of the following—
(a) a supply of gas, electricity, water or communication services by a specified description of person;(b) a supply of a specified description of goods or services by a specified description of person where the supply is for the purpose of enabling or facilitating anything to be done by electronic means.(2) The Secretary of State may by order amend section 372 of that Act of 1986 so as to add to the supplies mentioned in subsection (4) of that section any of the following—
(a) a supply of gas, electricity, water or communication services by a specified description of person;(b) a supply of a specified description of goods or services by a specified description of person where the supply is for the purpose of enabling or facilitating anything to be done by electronic means.(3) The power to make an order under this section includes power to make incidental, supplementary, consequential, transitional or saving provision, including doing so by amending any enactment.
(4) An order under this section must be made by statutory instrument.
(5) A statutory instrument containing an order under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(6) In this section—
“enactment” includes—
(a) an enactment contained in subordinate legislation (within the meaning of the Interpretation Act 1978),(b) an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament, and(c) an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales; and“specified” means specified in the order.”
Viscount Younger of Leckie
My Lords, these amendments respond to points raised by the noble Lord, Lord Stevenson, in Grand Committee. I am most grateful to him for raising this important issue. It is relevant to this Bill because it will help businesses, especially those needing to be rescued, and as such supports the Bill’s themes. The amendments contain powers that, when exercised, will assist businesses in insolvency procedures by increasing the chance of business rescue. Alternatively, where there is no chance of a rescue they may help to achieve a better return for creditors than would be delivered by an immediate liquidation or bankruptcy.
Amendments 84C to 84E contain powers to render void contractual terms that allow an essential supplier in the utility and IT sectors to withdraw supply from an insolvent business. These powers would also prevent suppliers in these sectors taking advantage of the insolvency by unfairly and unreasonably increasing charges for that supply. Some have described such demands as “ransom payments”, saying that where they are made, that supplier gains an unfair advantage over other creditors in the insolvency. They can act as a barrier to rescue and may force businesses to close down, causing unnecessary job losses.
Amendment 84B provides an enabling power relating to IT suppliers and those that provide or sell gas, electricity, water or communication services that are essential to business. By communication services, we mean services such as telephone, fax or broadband access that may be provided to a business. The amendment would add such supplies to an existing list of essential suppliers who must continue to supply and who may not demand payment of a pre-insolvency debt as a condition of that supply. They may, however, seek a personal guarantee from the insolvency practitioner as a condition of continuing to supply the insolvent business.
“( ) omit subsection (2)(a), and”
Lord Stevenson of Balmacara
I start by warmly welcoming the amendments tabled by the Minister, which respond in a very positive fashion to the amendment that I moved in Committee. I had no idea I was being so persuasive. That was a trick I should learn in other places. I clearly have something that I did not know I had. The points that the noble Viscount went on to make are also well taken. Even so, there are a couple of things that we would like to suggest are also taken into account.
For the reasons outlined, the necessity of IT equipment to the continuity of a business in difficulty cannot be overstated. Frankly, without this, there is no chance of any continuation, or of selling on, and thus of maintaining economic activity and jobs. IT is today as central as supplies of water and utilities. Therefore we also welcome the Government’s amendments to add on-sellers of utilities to the list of supplies that must continue. Given our desire to enhance business rescue, especially in these difficult times when banks are less than helpful, this change to prevent certain suppliers withdrawing services to struggling businesses is a significant step forward. We are delighted that the Government heard this plea.
The one area that we wish to raise, covered in the amendments that have been tabled, is the new mandatory requirement for a personal guarantee from the office holder—the insolvency practitioner—to cover essential supplies. Subsection (3) of government Amendment 84C permits the supplier to terminate the supply unless an insolvency office holder personally guarantees any charges arising from the continuation of the supply. This is a move away from the current legislation, which provides for an optional personal guarantee.
Although Section 233 of the 1986 Insolvency Act contains an optional guarantee in subsection (2)(a), when the Bank of England, FSA and HMT introduced equivalent provisions to protect financial institutions, this optional guarantee provision was removed, and there are now no provisions for such personal guarantees. This position for financial institutions is right, as we see no case for a personal guarantee from an office holder, since an insolvency practitioner should not be subject to personal liability when acting as the agent for the company.
Contrast the situation affecting directors, who are not mandatorily subject to such personal liability even though they have a similar relationship to their company. Such a requirement for a personal guarantee appears particularly inappropriate in respect of certain types of insolvency, such as for a supervisor in a voluntary arrangement who has no control over the business. The mandatory guarantee requirement in the government amendment is therefore a backwards step, and our amendments are to align the provisions with the recent regime for financial institutions, by removing the requirements for mandatory personal guarantees from office holders.
Our first two amendments also take this opportunity to amend the 1986 Insolvency Act to remove the optional guarantee from Section 233(2)(a) so that the provisions for essential services in the 1986 Act are brought into line with the protection regime for financial institutions. It is hard to understand the requirement for a personal guarantee, as there is no reason why insolvency practitioners should be subjected to personal liability when acting as the agent of the company. There is a real danger that such a requirement would reduce use of this tool with a real threat, therefore, to business rescue.
The existence of a mandatory personal guarantee would be particularly detrimental in CVAs where the management retains control of the business with the insolvency practitioner acting as supervisor. Given the limited control insolvency practitioners have over the business, with no control over the assets, they would be exposing themselves to significant risk by providing a personal guarantee. It is very unlikely that any insolvency practitioner would, in fact, go down this route. I should add that the proposed 28-day maximum credit period in subsections (2)(c) and (3)(c) of the new clauses is a reasonable compromise. Thus the demand for an additional personal guarantee seems excessive. We know the Government share our desire to maximise company rescues—often with the role of an insolvency practitioner as key. We trust they will not undermine their otherwise welcome amendments by the introduction of this counterproductive measure. I beg to move.
Viscount Younger of Leckie
My Lords, these amendments seek to amend the powers being introduced by the government amendments, to remove an important protection for suppliers. That protection is provided in the Government’s amendment by allowing suppliers to require a personal guarantee from an insolvency practitioner where they are prevented from exercising a contractual right to terminate supply. Not only does the amendment put forward by the noble Lord remove the protection provided by the government amendment, it also seeks to take away the right of a supplier to a personal guarantee in situations where it already exists in legislation.
I should make clear that essential suppliers who may be required to supply the insolvent business are very likely to be owed money within the insolvency. They are most unlikely to be repaid any more than a small proportion of that claim through realisations within the insolvency. Therefore the Government think it is only right that where such suppliers are obliged to continue supplying the insolvent business, they do so knowing that they will be paid.
The new powers do include other safeguards for the supplier, but none of these guarantees payment of the post-insolvency charges. We do not expect that a supplier will always require a personal guarantee, but we do think that, as is the case as the legislation currently stands, they should be entitled to one where they feel it necessary. It should be noted that the right to request a personal guarantee from the insolvency practitioner is a protection that utility providers have had since 1986, where they are requested to continue supplying the insolvent business.
Removing this right at a time when we are extending the requirement to provide supplies may send the wrong message. However, noble Lords will be aware that the powers do contain the ability to provide for exceptions to the right to request a personal guarantee. While it is anticipated that this would only be exercised in certain limited circumstances, it does provide for some flexibility in the matter.
There is a balance to be struck here. The powers provided by the government amendments will prevent essential IT and utility providers making ransom demands upon insolvency professionals. This can only help the chances of insolvency practitioners being able to rescue struggling businesses. However, they do interrupt normal contractual rights and, as such, we believe it is right to provide safeguards, of which the right to a personal guarantee is one of the most important.
I thank the noble Lord, Lord Stevenson, for his contribution. I am grateful for his comments and reassure the House that the Government take these issues very seriously. The government amendments demonstrate that the Government are committed to seeking improvements to the insolvency regime where there are clear reasons for doing so. However, the Government consider that the amendments suggested by the noble Lord would unfairly remove necessary protections for suppliers. I therefore hope that the noble Lord will agree to withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I agree that the Government are making good steps in this area. I do not want to in any sense take away from them the change that they are introducing through their substantive amendment. I agree that the insolvency processes in the UK generally are very good. They may be slightly better in Scotland, which is moving ahead with another Bill, and I hope that the lessons that Scotland is going to teach us are learnt in the processes in England and Wales.
It is really a question of whether it is appropriate to expose those who are trying to help companies get back on their feet and continue to operate to having to give a personal guarantee. On a very superficial level, it seems to be completely at variance with the overall process that we are trying to introduce. The fact that it may exist in legislation at present does not make it right. Given that the Government have legislated to make sure that these personal guarantees no longer exist in financial companies, it seems slightly odd that we are requiring them for SMEs and smaller companies, which often go into voluntary administration or some other form and then come out again. To hamper that by curtailing the willingness of an IP to get involved does not seem to be right.
However, there is a balance to be struck. I ask the Government to think very carefully about this and to look at it again. I am very happy to have further discussions if that would be helpful. At this stage, I beg leave to withdraw the amendment.
“Corporate insolvency: power to give further protection to essential supplies
(1) The Secretary of State may by order make provision for insolvency-related terms of a contract for the supply of essential goods or services to a company to cease to have effect where—
(a) the company enters administration or a voluntary arrangement under Part 1 of the Insolvency Act 1986 takes effect in relation to it, and(b) any conditions specified in the order are met.(2) The order must include provision for securing that, where an insolvency-related term of a contract ceases to have effect under the order, the contract may be terminated by the supplier if—
(a) an insolvency office-holder consents to the termination,(b) a court grants permission for the termination, or(c) any charges in respect of the supply that are incurred after the company enters administration or the voluntary arrangement takes effect are not paid within the period of 28 days beginning with the day on which payment is due.(3) The order must include provision for securing that, where an insolvency-related term of a contract ceases to have effect under the order, the supplier may terminate the supply unless an insolvency office-holder personally guarantees the payment of any charges in respect of the continuation of the supply.
(4) The order may provide for exceptions to the right of a supplier to terminate a supply under provision made by virtue of subsection (3).
(5) The order must (in addition to the provision mentioned in subsections (2) and (3)) include such other provision as the Secretary of State considers appropriate for securing that the interests of suppliers are protected.
(6) A contract for the supply of essential goods or services is a contract for a supply mentioned in section 233(3) of the Insolvency Act 1986.
(7) An insolvency-related term of a contract for the supply of essential goods or services to a company is a provision of the contract under which—
(a) the contract or the supply would terminate, or any other thing would take place, because the company enters administration or the voluntary arrangement takes effect, (b) the supplier would be entitled to terminate the contract or the supply, or to do any other thing, because the company enters administration or the voluntary arrangement takes effect, or(c) the supplier would be entitled to terminate the contract or the supply because of an event that occurred before the company enters administration or the voluntary arrangement takes effect. (8) In this section, “insolvency office-holder” means—
(a) in a case where a company enters administration, the administrator;(b) in the case where a voluntary arrangement under Part 1 of the Insolvency Act 1986 takes effect in relation to a company, the supervisor of the voluntary arrangement.”
“Individual insolvency: power to give further protection to essential supplies
(1) The Secretary of State may by order make provision for insolvency-related terms of a contract for the supply of essential goods or services to an individual to cease to have effect where—
(a) a voluntary arrangement proposed by the individual is approved under Part 8 of the Insolvency Act 1986, and(b) any conditions specified in the order are met.(2) The order must include a condition that ensures that an insolvency-related term of a contract for the supply of essential goods or services to an individual does not cease to have effect unless the supply is for the purpose of a business that is or has been carried on by the individual or with which the individual has or had another connection of a kind specified in the order.
(3) The order must include provision for securing that, where an insolvency-related term of a contract ceases to have effect under the order, the contract may be terminated by the supplier if—
(a) the supervisor of the voluntary arrangement consents to the termination,(b) a court grants permission for the termination, or(c) any charges in respect of the supply that are incurred after the voluntary arrangement proposed by the individual is approved are not paid within the period of 28 days beginning with the day on which payment is due.(4) The order must include provision for securing that, where an insolvency-related term of a contract ceases to have effect under the order, the supplier may terminate the supply unless the supervisor of the voluntary arrangement personally guarantees the payment of any charges in respect of the continuation of the supply.
(5) The order may provide for exceptions to the right of a supplier to terminate a supply under provision made by virtue of subsection (4).
(6) The order must (in addition to the provision mentioned in subsections (3) and (4)) include such other provision as the Secretary of State considers appropriate for securing that the interests of suppliers are protected.
(7) A contract for the supply of essential goods or services is a contract for a supply mentioned in section 372(4) of the Insolvency Act 1986.
(8) An insolvency-related term of a contract for the supply of essential goods or services to an individual is a provision of the contract under which—
(a) the contract or the supply would terminate, or any other thing would take place, because the voluntary arrangement proposed by the individual is approved, (b) the supplier would be entitled to terminate the contract or the supply, or to do any other thing, because the voluntary arrangement proposed by the individual is approved, or(c) the supplier would be entitled to terminate the contract or the supply because of an event that occurred before the voluntary arrangement proposed by the individual is approved.”
“Sections (Corporate insolvency: power to give further protection to essential supplies) and (Individual insolvency: power to give further protection to essential supplies): supplemental
(1) The power to make an order under section (Corporate insolvency: power to give further protection to essential supplies) or (Individual insolvency: power to give further protection to essential supplies) includes—
(a) power to make different provision for different cases;(b) power to provide for a person to exercise a discretion in a matter;(c) power to make incidental, supplementary, consequential, transitional or saving provision;(d) power to make any provision that may be made by the order by amending the Insolvency Act 1986 or any other enactment.(2) An order under either of those sections may not be made so as to have effect in relation to contracts entered into before the order come into force.
(3) An order under either of those sections must be made by statutory instrument.
(4) A statutory instrument containing an order under either of those sections may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
(5) In this section, “enactment” has the same meaning as in section (Power to add to supplies protected under Insolvency Act 1986).”
NHS: Mid Staffordshire NHS Foundation Trust
(11 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Patel
To ask Her Majesty’s Government what plans they have to implement the recommendations of the Francis report into the Mid-Staffordshire Hospitals NHS Foundation Trust.
Lord Patel
My Lords, even though the hour is late, the weather is inclement and the speaking time allocated to each noble Lord is short, I am grateful to all noble Lords who are to take part in this debate. I recognise that, although the Minister will have to reply to the debate on behalf of the Government and that the Government will eventually respond to the Francis report, the report spans several previous years. I hope the Minister can tell us when the Government will produce their full response and what form it will take. Will they make a financial assessment of the implementation of the recommendations?
Compassion, care and co-operation are the magic of the NHS; so said the leader of the Opposition at, I am led to believe, a Labour Party conference. The report by Robert Francis on Mid Staffs Hospital suggests that that magic is gone, not only from Mid Staffs, but, judging by the daily reports from more and more hospitals of poor quality care, from other hospitals too. The culture that brought about the disaster at Mid Staffs may well be more widespread. At the same time, there are hospitals that provide excellent, high quality, compassionate care, and we must not forget that.
None the less, Francis has to be right when he says that a cultural change is required. We need a culture that cares for patients and puts the quality of patient care and safety first, with a shift from compliance to targets and from financial probity to patient care. The words “patient safety” appear on virtually every page of the report. That such a degree of harm and suffering was inflicted on patients and that doctors and nurses were part of the culture is hard to comprehend. As a doctor who worked in the NHS only, I recognise the words of another clinician, the noble Lord, Lord Darzi, who wrote in the Times on 4 March that for doctors, nurses and other clinical professions, professional pride defines who they are. That clinicians had become part of a culture of bullying, secrecy and gagging is difficult to fathom. To change this culture, the Francis report, which extends to 1,800 pages, makes 290 recommendations covering the spectrum of the regulation of healthcare, including patient and public involvement and complaints handling. If the recommendations are implemented in full, what effect does the Minister think it will have on the reforms in the Health and Social Care Act?
One of the key recommendations of the report, which the Government rejected from the outset, is to merge the financial regulator Monitor and the quality regulator CQC, both of which failed in Mid Staffs. Experience has been that the two organisations have not been able to work together in a co-operative way, so why have the Government been so quick to reject the Francis recommendation? Francis expects that all organisations, including the Department of Health, should report annually on progress towards implementing his recommendations. Will the Minister say who in the Department of Health will have the responsibility of making sure that that happens? I cannot help but feel that patients and the public will expect the Government to take the lead.
In the Statement that followed publication of the report the Government announced the establishment of a post of chief inspector of hospitals. The CQC in its response added a chief inspector of social care. Does this fundamentally change the function, nature and the management of the CQC? What is the role of its board and chief executive vis-à-vis the chief inspector and his army of inspectors?
The Secretary of State is inviting other regulators to inform him how they will make the processes and system of accountability more stringent. From the many briefs your Lordships have received in advance of today’s debate, all the regulators and the so-called quasi-regulators see themselves as having a key role in making sure that high-quality patient care is delivered and is safe. They all also suggest that they may carry this out by inspections. If they and their managers now see the Francis report and its recommendations as the new targets, then they miss the point. I hope the Government do not. No amount of inspections by expert inspectors and regulators on their own will provide the safeguards needed, nor improve patient care. The culture change that is required will allow well trained health professionals to provide the patient care that the majority of them are capable of providing and let others provide the support that enables them to do so. Of course their performance should be monitored and their shortcomings dealt with.
On a personal note, last week I came across brilliant, compassionate, world-class quality care when I had surgery to restore my sight. Now I can see noble Lords in their full glory—some of it is a pleasant sight. All the professionals and non-professionals I came across in that hospital—I do not mind naming it; it was Moorfields Eye Hospital—were world class and brilliant. The culture that was exposed at Mid Staffs does not exist everywhere else and the response therefore must be proportionate. I did not see any of the Mid Staffs culture in that hospital.
I would be concerned if all the regulators, commissioners and others—I counted 21 organisations whose briefs I read as a response to the Francis report—now wish to monitor and inspect hospitals. Bureaucrats only increase bureaucracy. Does the Minister agree that a clear direction is required from the top as to the role of each organisation in the implementation of the recommendations of the Francis report?
I come now to the patient safety recommendations in the report. Two words appear frequently. Francis felt failures at Mid Staffs were a result of systems failures. Others have agreed, if only to absolve themselves or their organisations from blame. Other industries such as the airline, nuclear, transport and offshore industries are familiar with the concept of systems failures. They also know that the same system is operating throughout the industry and if it fails in one place it is likely to fail elsewhere too. For example, the 787 Dreamliner was grounded because two planes showed faults. The next step in any systems failure is to carry out root cause analysis, implement the learning and make changes to make the system safer. If the Francis report is a root cause analysis of a systems failure, then a systems change is required.
Francis also recommended establishing a national system of reporting and learning from patient safety incidents. Who will be responsible for making sure that this is done? The Government are also asking Sir Don Berwick to advise them on the implementation of a strategy of no harm in the NHS. Sir Don Berwick, previously administrator of US Medicare and Medicaid, is a friend, and we worked together previously. Can the Minister confirm or say otherwise that the advice Sir Don Berwick gives will be published in full and will be implemented?
The Francis recommendations are far reaching with very wide implications. Unless the Government take a lead and give clear direction on the way forward, we run the risk of chaos reigning. I look forward to the Government’s studied and considered response in due course and hope that then we will have a longer debate at an earlier time.
Viscount Eccles
My Lords, it is a great pleasure to follow the noble Lord, Lord Patel. Of course, I must defer to him, as he knows far more about the National Health Service than I do. I have been a patient but do not have anything like his depth of knowledge.
There is not much that we do not know about Mid Staffs. A lot of it dates back a fair number of years. The Francis findings were amazing, and the taking and recording of the evidence was truly a wonderful job done. There was a complete failure of management. Nobody had any confidence in anybody else there. However, time has gone by and things have been done since, and I feel quite cautious about how much we should generalise out of the experience of one hospital. I think we should treat this with caution.
Much has been done since. There have been changes in the management and governors of the trust. It is well recorded that there have been significant improvements from a very bad position. Of course there is always more to be done, but that is a condition of all our lives; there is no end to continuous improvement and never will be.
This takes me to the 290 recommendations in the Francis report. I do not feel at all capable of dealing with those. As the noble Lord said, we await the Government’s response. In fact, there are rather more than 290 recommendations, if you add in the bullet points. There are some 10 bullet points within some recommendations. To me, the trust’s most important decision and most important choice is who to appoint as its chief executive, with the necessary knowledge and the team-building skills that go with that knowledge. Hospitals are complicated and continuous operations. No two patients present in the same way. Mid Staffs provides 48 distinct services.
The new chief executive has her chairman and his governors, six executive directors and four heads of clinical directorates: 10 people in executive positions. Of these 48 services, 40 are medical and the other eight finance, administration, and so on. I must be careful to point out that the trust and Mid Staffs are not exactly the same thing. The trust employs close to 3,000 employees, so the 48 services, with the 3,000 employees, are the management responsibility of the 10: the executive directors and the heads of the clinical directorates. Clearly with that number of employees and that number of services, there is a need for a detailed and well understood middle management structure. After all, there are 120 consultants, all professionally qualified and all of a certain seniority.
I will end with one example of how one needs to look at the middle management—the 800 in admin and estates—and the person within that system who is responsible for bed linen. That person needs to hold a budget, and needs to be sure that the supplies of bed linen are as they should be, that the laundry works as it should, and that the linen is available. If one looks back to the Francis report and tries to find how the reports that have been done have tackled these very detailed problems of middle management—MRI, ultrasound, X-ray, or what you will—there is not much to be found. I therefore urge us to concentrate our minds on the management, the staffing, and the leadership of individual hospitals, and not to widen our look too greatly.
Lord Turnberg
My Lords, I, too, thank the noble Lord, Lord Patel, for introducing this debate with his usual panache.
As Roy Griffiths said in 1983, when he was looking to change the management structure of the NHS,
“if Florence Nightingale were carrying her lamp through the corridors of the NHS today she would almost certainly be searching for the people in charge”.
I think she would have been more concerned today about finding someone in charge of the care of the patients in the corridors of the Mid Staffs hospital. She would have been looking for anyone able to explain what had been happening to the patients for so long and would have found no one.
The Francis report outlines a huge number of recommendations that include changes in the culture and much about policing the service to detect poor behaviour, but to my mind, beefing up the complaints system, while very important, comes a bit too late. We need to think more about preventing the need for the complaints, and there is one crucial omission; while there is a strong focus on the responsibilities of the managers and the board, none of these people, try as they might, can be on the wards all the time, every day of the week. They visit from time to time. The doctors, too, come and go as they rush to their clinics or operating theatres. The people on the wards all the time are the nurses, and this is where we have to focus hard.
I am in no position to criticise the nurses themselves—they do a fantastic job, and I have personal reasons for being enormously grateful for what they do. My aim in pointing at the nurses is much more to do with the way in which nursing careers are organised. This is where I believe some changes are needed. We need to bring back the old-style career-grade sister who was in charge of the ward. Many years ago when I was a young doctor—I am sorry that I sound like an old fogey—the sister in charge really was in charge. She was usually a mature woman—there were few men in those roles—and she ran her ward with a rod of iron. Both the patients and the doctors ran scared and were loath to cross her, but she knew everything about every patient, and the doctors relied on her implicitly. She would not have countenanced the sorts of behaviour that were described so vividly in the Francis report.
What has happened to that post? Now the role of ward sister is not regarded as a career post at all. It is simply a rung on a ladder, and after a year or so they are promoted to teaching or more managerial roles. It is just a stepping stone to bigger and better things that are not so closely engaged with the patients.
Consultant friends tell me that it is unusual for them to find a nurse, let alone the sister, to accompany them on their ward rounds, or indeed to find anyone to tell them what has been happening to their patients. The solution, to my mind, is not the heavy hand of top-down monitoring and punitive complaints procedures, but the placing on each ward of sisters or charge nurses in clinical career posts—I stress clinical posts—who are given full responsibility for what goes on in their wards and are awarded accordingly. My view is that they should be given exactly the same salary as a consultant, since that would be commensurate with their level of responsibility. It would be a post that commands all the respect that you would expect of someone in such an important position. I recognise that this idea might not meet with the approval of the nursing professional bodies, but I ask the Minister to consider this proposal sympathetically. It seems to me to be the only way in which Florence Nightingale and her lamp may be able to find someone in charge of the patients’ well-being.
Baroness Jolly
My Lords, I, too, thank the noble Lord, Lord Patel, for bringing this important issue to the attention of this House, and for so eloquently outlining all the areas of concern shared by all noble Lords.
The negligent treatment of patients at the Mid Staffordshire hospital is inexcusable. To an extent, we are all culpable, as we let a culture develop across the NHS that fails to keep the patient central. I know that, as noble Lords have said, this is not the same everywhere, but there are certainly quarters in some hospitals where one can identify this still. We are now obliged to build a system to prevent its repetition. Given the time restrictions, I will limit my comments to a specific viewpoint. I am taking the perspective of the patient.
Our systems should be more proactive in seeking out patient perspectives and more responsive in addressing their complaints. At Mid Staffs, the patients were speaking out about the abusive environment and many warning signs were apparent, yet no one was listening, these signs went unnoticed and any criticism was oppressed. Not only was the abuse suffered intolerable but it is unacceptable that this inquiry would not have happened without significant public pressure over several years. The inability of the hospital and the Government to act swiftly when presented with these conditions of appalling care must be reflected upon.
Putting patients and their needs at the core of our health service is one step that we can take towards correcting this. Many changes need to take place. We must stop designing our patient safety systems on what fits well with our institutions. Instead, the core of how we protect patients should be built around the patients themselves. Three areas of focus are needed to make this happen.
We need to ensure that patients, families and carers are empowered to speak out when they receive negligent care. I support the swift adoption of the recommendations to create an accessible complaints system. I note the point made by the noble Lord, Lord Turnberg, that we should not need a complaints system, and I hope to goodness that we will soon be in a position in which we will not need one, but until that time I believe that we do. Every patient should know how they can have a voice and should be secure in knowing that there will be recourse for any problems that they raise. I ask my noble friend the Minister to commit to a complaints system that is responsive and responsible, that all patients are aware of, and where complaints are thoroughly investigated and will be received by the board. Will the Minister confirm that such a system could be implemented anywhere that NHS money is spent: private, not-for-profit and NHS trusts alike?
Patients should automatically be given all information regarding the level of care that they have received, including information about any lapses in the quality of care or mistakes made. I therefore welcome the recommendation of the establishment of a statutory duty of candour. Health workers, be they senior consultants or junior nursing assistants, must feel that they can talk with their patients if something goes wrong. This creates an open dialogue between patients and their carers and ensures that mistakes are addressed in an open, well informed manner. Will the Minister confirm that there will be a statutory duty of candour?
In addition, patient organisations must be listened to and action taken. Local Healthwatches should use the tools they have been given to work on behalf of patients to make sure that negligent care is caught early and corrected. They need to ensure that Healthwatch England and the CQC are informed immediately where systemic abuse and intolerable care are identified.
Even if every one of the 290 Francis recommendations were to be instituted immediately, a more fundamental culture change must happen throughout health and social care facilities. Noble Lords have already referred to this cultural issue. Solutions, as seen through the perspective of patients themselves, should be core to the strategy. Through efforts to give patients information about their care, empowering them to speak out and then listening to their voice, we will be able to help prevent these tragedies in care repeating themselves.
The Earl of Listowel
My Lords, I am most grateful to my noble friend Lord Patel for calling this timely and important debate. As vice-chair of the parliamentary group for children and young people in care and leaving care, I am aware of some of the issues around caring for vulnerable people.
Indeed, in reading the Francis report, I recalled another report by my noble friend Lord Laming at the beginning of the past decade into the death of Victoria Climbié. A member of staff of Haringey social services said that they were providing a conveyor-belt service for children and families and were overwhelmed. The principal social worker for Victoria Climbié, Lisa Arthurworrey, was a young, inexperienced, newly qualified social worker with an excessive case load who was poorly supervised. Alas, she and her colleagues were not able to take the necessary steps to prevent the death of that eight year-old child.
In my experience, particularly of child and family social work and of staff in children’s homes, it is vital to value those who work directly with such vulnerable people and to provide them with the training and support they need to do the right job. If one wishes to create a culture of care, many factors are involved. However, a crucial element of that is providing a caring environment in which one takes care of and values one’s workforce. One needs to select the right people and offer good continuous professional development, including training and supervision, and ensure that the voice of that workforce is listened to. I was particularly pleased to see the Francis report emphasise this need for a strategy for the workforce. I was also pleased to note the detail regarding the regulation of healthcare assistants. I would be grateful to the Minister if he could say a little about progress towards registering these assistants. It is encouraging that there is now talk about registering staff in children’s homes. This has already happened in Wales and Scotland and plays an important part in protecting vulnerable people in those settings.
As for the vital necessity of caring for the workforce, I would be grateful if the Minister would indicate what more might be done to make more public the state of morale within the NHS workforce, including, for instance, easily accessible information on staff turnover and sickness and absence rates. Having read the Francis report, if I go into hospital the first thing I will try to find out is the state of staff morale in that hospital. In discussions on the Health and Social Care Bill, we were given information from the King’s Fund or the Nuffield Trust indicating the wide disparity in workforce morale in different trusts. This needs to be addressed if we are to change the culture to one of more consistent care.
Finally, and I say this hesitantly, my sense of what is sometimes the most dispiriting thing for people working in the health service, having spoken with them over the years, is the sense that there is another huge reform coming through. It can seem that each time there is a new Government or a new Secretary of State, there is a new transformation of the health service. Respectfully, therefore, I request that the Minister perhaps encourages his colleagues to think twice before embarking on any major new reforms of the health service. I would respectfully say the same thing to the opposition Front Bench. Given that experience of the concerns expressed in the past, I would be grateful if they would attend to that.
Lord Cormack
My Lords, I am particularly grateful to the noble Lord, Lord Patel. For 40 years I was a Staffordshire Member of Parliament, and for the first 27 of those years, the Stafford Hospital looked after a large part of my constituency. It was a good hospital; I do not remember receiving a single serious complaint in those 27 years, and I visited regularly. In 1997 we had boundary changes, and from then on only a handful—relatively speaking—of my constituents went to Stafford; the others went to Wolverhampton, Walsall and Dudley.
I was devastated when I, as chairman of the Staffordshire MPs, took colleagues whose constituents had been affected, to see successive Secretaries of State. The terrible, tragic stories would have moved the stoniest of hearts. It is an indictment going far beyond Stafford that in his report, Mr Francis had to put at the top of his list of recommendations what we should all automatically take for granted: that it is the duty of the health service to put patients first. We should not need to be told that.
In his report, Mr Francis makes a number of comments about leadership. He recommends that there should be a staff college—I hope that my noble friend will agree that that will happen. He also talks about governors being given proper training. He is not quite so explicit when it comes to board members, and I did raise that subject when we had a brief question and answer when the Statement was given a few weeks ago. Everyone concerned with the running of the hospital, and with being part of the leadership needs to have proper and adequate training for that role.
I have to touch on a rather contentious matter, because the fact is, if leadership is going to be effective, it has to command confidence and respect, and it has to enjoy the support—not merely official, but explicit and implicit—of all those people over whom leadership is being exercised. There is, of course, a famous phrase that the buck has to stop somewhere. One has to recognise that during part of this terrible period, Sir David Nicholson was in charge in the Midlands. We have to accept that he is the chief executive of the National Health Service now. I have to ask the question, and I think it would be wrong if this question was not raised in the Chamber this evening: can we have trust and confidence in Sir David Nicholson to deliver a health service that is truly worthy of our great country? I believe that he should be examining his position very carefully. This happened on his watch. We are told that 1,200, or thereabouts, died unnecessarily. Somebody, Charles Moore I think it was, wrote in the Telegraph the other day about the Prime Minister going to Amritsar where fewer than 400 people were killed; 1,200 died during that period. I have to say to your Lordships: is this really the man to carry forward our health service for the next few years?
Lord Rea
My Lords, I had not originally intended to take part in this short debate but on Friday I was encouraged to do so by the Royal College of Physicians—incidentally, after I had gone away for the weekend without any briefing material. As the noble Earl knows, that college has made detailed comments and recommendations related to the inquiry, along with a number of other professional bodies, including the BMA, the Royal College of Nursing and many others, as the noble Lord, Lord Patel, said.
I want to consider just a few ways in which the blatant failures of care at Mid Staffs might have been prevented or at least brought into the public domain much earlier. These suggestions relate mostly to points made by the professional organisations that the noble Lord, Lord Patel, has just mentioned, as well as by the Francis report itself. First, GPs could be more involved by listening to their patients or their relatives, and thus be more in touch with their in-patient experience. GPs can act as strong advocates for their patients through their contact with consultants and managers. If they are aware of the reality of patients’ experience, clinical commissioning bodies will be more discriminating.
Secondly, clinical and managerial staff with concerns should be encouraged to come forward and not be intimidated. Whistleblowers should be encouraged to speak out at regular open meetings where innovative ideas by NHS staff could also be put forward and discussed. There is a wealth of ideas waiting to be tapped among staff at all levels, which could be used to improve patient experience and outcomes, and often cut costs at the same time.
Thirdly, auxiliary staff should be registered. This would mean that they had to receive training of a set adequate standard. This would improve not only the quality of their work but their morale, and give them vocational pride and recognition. Those who wished should be given the opportunity of career advancement through gaining further qualifications.
Fourthly, the best features of community health councils should be brought back. Current arrangements through the CQC, or its equivalent in 2008, for voicing patient concerns clearly did not function in Mid Staffs. An up-to-date CHC-like organisation would give patients and their relatives ready access to a representative, truly independent, body where they could freely voice any concerns that they had about their hospital experience. CHCs had the right to speak directly to NHS authorities, to visit any NHS entities and attend trust meetings. CHCs’ own meetings were open and transparent, and were often reported in the local, and sometimes national, press. CHCs were of course of uneven quality and received barely adequate funding. However, they could prove to be an embarrassment to NHS administrators when unwelcome truths were openly discussed. Perhaps it is understandable why they were abolished by the previous Government in 2003. As the noble Earl will remember well, I strongly opposed their closure at the time. I remind him that he also opposed their abolition. As I recollect, we were then in agreement, although from opposite sides of the House.
Lord Willis of Knaresborough
My Lords, I, too, thank the noble Lord, Lord Patel, for introducing this debate and for the measured way in which he did so. It behoves us not to begin a blame game but rather to pick up the recommendations of this superb report and act upon them. It is far more profitable. A few of us who were sat in another place during the time that this was going on raised the sorts of concerns that are now being raised with hindsight.
In the time available, I should like to concentrate on recommendations 185 to 213, which affect nursing and healthcare support workers. What concerns me about this report—and indeed these recommendations—is how we can prioritise and implement them, because trying to prioritise and implement 290 at the same time is, quite frankly, an impossible task. As was said by the noble Viscount, Lord Eccles, time has not stood still since Mid Staffs. The Nursing and Midwifery Council has produced new standards for pre-registration nursing training, which are widely welcomed by patient groups, by the higher education institutions, by professionals and by providers.
As we move to a fully graduate nursing profession, I trust we will not waste time re-opening the issue of a graduate nurse workforce, as indicated by Ann Clwyd in another place. Francis quite rightly recommends a greater emphasis on recruiting caring as well as intelligent students, but believing these two qualities to be mutually exclusive is disingenuous. With less than 25% of current nurses being graduates, it was not graduate training that caused a lack of care at Mid Staffs. The quality of the placements where nurses receive their practical training requires urgent attention, as does the quality of mentorship they receive.
The 50% practical placement is fundamental to the development of a well trained workforce, yet far too often students are dissatisfied with the quality of the experience they receive on their placements. Fewer placements are now in hospital settings, particularly acute hospital settings, and staff are often too busy to give of their time. Learning is not seen as a corporate activity and, more worryingly, core competencies are sometimes neither practised or observed before being signed off. At the core of this problem is the outdated view that all registered nurses can be good mentors, and that somehow mentorship can be added to very busy schedules with little training or additional time. That must change. If we want our nurses to be inspired to be more patient-centred, then the practical learning settings must be of the highest possible standard. Mentors must care for their students, and be valued by their employers.
Francis also recognised that throughout our health and care system more and more care is delivered by untrained and unregulated healthcare assistants. Regulation 209 is perhaps the most powerful statement made by Francis, stating that,
“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”.
We do not in fact allow anyone to work on a gas fire without proper training, yet we allow people to work on those who are in the greatest need.
The first step—I hope the Minister would agree—is to have mandatory training by the end of this Parliament, with standards for all healthcare support workers who provide direct physical care approved by the NMC, or another body which the Secretary of State approves. Without mandatory training, it will be unlawful for employers to engage these workers. To the Minister, who is worried about registration, I suggest that an immediate step toward independent registration would be that by the end of this Parliament every employer who provides direct physical care will be required to keep a register of all their employees who deliver care. Their training records should be available for inspection by the CQC, Monitor and Healthwatch England, or its regional equivalents. Surely patients and their families have the right to know at least that those who care for them are at least appropriately trained, and that their employers will be held responsible for their deployment.
Lord Kakkar
My Lords, I join other noble Lords in thanking my noble friend Lord Patel for having secured this important debate. I declare my own interest as professor of surgery at University College, consultant surgeon at University College Hospital, and a member of the General Medical Council. There can only be one north star guiding the way we operate in the National Health Service and the way we deliver care, and that must be our patients. In his report, Sir Robert Francis refers to a deterioration in cultures and values. We must find ways to ensure that the cultures and the values that must attend the delivery of healthcare are rapidly restored in our healthcare system.
One way that this may be achieved is by revisiting the question of professionalism. All of us in the health service today work in multidisciplinary teams and, quite rightly, those teams are comprised of clinicians, nurses, other therapists, healthcare assistants and indeed managers who help us to utilise effectively the resources available for healthcare. Those teams can work only if there is mutual respect, but there must also be professionalism.
With regard to clinicians—and I talk here particularly about consultants in hospitals—we need to move to a position where once again consultants are accountable for the management of, and delivery of care for, the patients for whom they have responsibility. They must have the authority to deliver that responsibility for care, and with that responsibility and authority they must be held accountable for the outcomes of their patients. That is very clear. Ultimately, it is vital that patients and the public generally recognise, and are able to have confidence in, the fact that when they are admitted into hospital they will be managed and be under the care of a named healthcare professional—a consultant—who will take that responsibility, have that authority and be held accountable.
In terms of the management of the ward environment, it seems sensible to return to the ward being under the leadership of a named senior nurse—a sister or a charge nurse. Their name might appear at the entrance to the ward, and the name of the consultant responsible for the individual patient’s care might appear under the name of that patient at the head of the bed, so that there is no doubt about who has responsibility for both the ward setting and the individual care of the patient.
In the Francis report, we also see reference to broader questions of culture and values. Part of restoring professionalism will be revisiting once again the contract of employment for healthcare professionals—both consultants in hospitals and general practitioners in primary care. We need to move away from the consultant contract being principally one of contractual obligation and take it back to a place where it is one of vocational commitment, where patients can be absolutely certain that there will be continuity of care and that those with named responsibility for their care will be available to ensure that that is discharged.
The other important area for restoring the culture and values in our healthcare system is leadership. In this regard, in his report Sir Robert Francis has paid attention to the possibility of the staff college model. At University College London Partners, where I have an involvement, I am patron of the UCLP staff college. There, we have taken a model built on the Army staff college at Shrivenham, and we have a faculty from that institution attending our staff college to help to develop the leaders in our healthcare system. The model is simple. It focuses, first, on the self-reflection of those offering themselves for leadership positions so that they might question whether they have the ability to do that, and it then develops a leadership culture that puts at its head responsibility for those whom one is leading to ensure that they are developed to deliver the necessary care for the patients.
The development of leadership, culture and values must also attend the entire period of postgraduate training for all healthcare professionals. In this regard, I should like to ask the Minister what role the local education training boards will play in particular, in conjunction with the medical royal colleges and the General Medical Council, in ensuring that the curriculum for postgraduate training includes appropriate emphasis on culture, values and the development of leadership.
Baroness Masham of Ilton
My Lords, I thank my noble friend for securing this debate but I have to say that, with such an emotive and tragic subject, the time given is totally inadequate.
Some time ago, I had the honour to chair a meeting in your Lordships’ House of some of the next of kin of those who had died in Mid Staffordshire hospital in such distressing circumstances. They were honourable people, who told us of their experiences. The Patients Association, of which I am a member, was involved in organising this meeting. I hope that the Members of your Lordships’ House who attended were as convinced as I am that hospitals should not be places of fear and bullying but that patient safety should be the top priority, with patients being the focal point and with enough trained staff to care for them with understanding and compassion.
With the ongoing system of cruelty for so long a period at Mid Staffordshire, I wonder what the hospital chaplains were doing. They should be a support to both patients and staff. Why did they not notice the inadequate patient care and speak out? Perhaps they, too, were silenced and shunned.
The Francis report states the need for a “duty of candour”. There should be transparency, the need to report wrongdoings, and communication with patients and their next of kin when things have gone wrong. I brought amendments concerning this during the passage of the Health and Social Care Bill. Now, with the recommendation in the Francis report, I ask the Minister: what is going to happen about this? The report must not become just a talking exercise; action is needed. The NHS, throughout the country, must have the highest standards for all patients.
Sixteen babies and two mothers died at University Hospitals of Morecambe Bay NHS Foundation Trust. As stated in the Sunday Times,
“In both cases”—
of Stafford and Morecambe Bay—
“managers are accused of covering up patient deaths as they chased the prize of foundation trust status”.
Many people have lost confidence in the NHS. Patients should be treated with dignity, kindness, compassion, courtesy, respect, understanding and honesty. In addition, they want safety and clean hospitals at all times.
I ask the Minister: is the NHS in safe hands? There is much to do to restore the public’s confidence in the NHS so that it can flourish. We need it.
Lord Ribeiro
My Lords, like other noble Lords, I express my gratitude to the noble Lord, Lord Patel, for introducing this debate so eloquently. I would like to address some of the recommendations in the Francis report that relate to education and training.
Recommendation 155 requires the General Medical Council to set out a standard requirement for routine visits to acute hospitals that train doctors. It asks for postgraduate deans to assume responsibility for managing the process, for royal colleges to support visits and provide relevant specialty expertise, and for the presence of lay and patient representatives on visits—something that the Royal College of Surgeons has done since 2006. Such visits should be co-ordinated with the work of the Care Quality Commission.
There is a sense of déjà vu about some of these recommendations, because before 2005 hospitals were visited regularly by colleges—some would say too regularly. None the less, the purpose of visits was to inspect and accredit training posts. After each inspection, the visiting team met with the chief executive, the medical director and the clinical tutor and talked about any deficiencies that it had found on its visit and the impact that these would have on service provision. Where problems were discovered the trust was advised that a follow-up visit would be required to ensure that the recommendations were implemented.
I was president of the Royal College of Surgeons in 2007 when the college was asked by Mid Staffordshire NHS Trust to undertake an invited review of its surgical services. Our report did not offer “false assurances” to the trust, as it suggested. Rather, the report identified a lack of leadership, an absence of essential protocols, and issues around attitude and the competence of at least one surgeon. These were all issues likely to impact on patient safety and were just the sort of concerns that could have been picked up in the old-style college visits, where face-to-face interviews of trainees were carried out, with the assurance of confidentiality. The trainees were thus able to speak freely about their training and to flag up any concerns they had. That process did not prevent the tragedy of Bristol, but we have learnt lessons since then.
In his evidence to Francis, Mr John Black, my successor as president, said:
“In the course of such a visit the nature of the service would be investigated as much as the training, because we cannot provide a high standard of training unless there is a good service”.
One junior trainee in his final year in accident and emergency medicine, Dr Turner, said that the pernicious effect of the four-hour waiting target created substandard care in the A&E department. Nurses were bullied into moving patients before they breached the four-hour target, often transferring patients to inappropriate wards and some without their medication. Reports of nurses emerging from management meetings in tears were all too common. Dr Turner’s complaints to his educational supervisor in the trust got nowhere. He identified a lack of commitment to education in a department which had only one consultant despite a college recommendation for four. The ability to express concerns to an external visiting body in confidence is essential if whistleblowing on substandard care is to have any effect.
Restoration of properly structured and co-ordinated college visits are long overdue and I welcome recommendation 155, which seeks to link the regulation of hospitals using professionals and the quality assurance of education and training. Triangulating data about the quality of education and the quality of care would help to paint a fuller picture of the patient’s experience in hospital. The first report of the Royal College of Surgeons on Mid Staffordshire in 2007 mentioned a lack of leadership. In his evidence to the House of Commons Health Select Committee on the Francis report on 5 March last week, Sir Bruce Keogh made this observation:
“I have been on the council of the RCS on two occasions and I have watched the leadership organisations of various tribes...and interest groups slowly feeling that they have been relegated to the position of commentators rather than participants”.
My question to my noble friend is: what steps do the Government propose for bringing these leaders back into the mainstream of NHS delivery and how can we ensure that the doctors and nurses rediscover their voices and act as advocates for patients?
Baroness Tyler of Enfield
My Lords, I also pay tribute to the noble Lord, Lord Patel, for raising this critical issue. What happened at Mid Staffs was a terrible violation of the trust that the public invest in our NHS. Appalling accounts of patients being left to lie in soiled sheets for long periods of time, unable to reach their water or feed themselves, and being denied privacy and dignity even in death, reveal a frightening gulf between what we have the right to expect from our NHS and what patients there were exposed to. What underpins this disgraceful treatment of patients is the failure of the Mid Staffs foundation trust board which, in Robert Francis’s words,
“failed to tackle an insidious negative culture involving a tolerance of poor standards and disengagement from managerial and leadership responsibilities”.
Focusing on finance, figures and top-down operational targets, the trust board neglected its patients’ well-being and overlooked its most basic duty. In the short time available I would like to focus on the issue of governance and the critical role that it plays in bringing about the change in culture so desperately needed.
First, to outline very briefly the failings of the trust and the trust board, despite clear warning signs, the board and other trust members did not take in the severity of what was happening and gave little attention to the concerns coming from patients and staff. On top of a poor complaints system, those in charge ignored issues and were slow to react to matters, if they reacted at all. According to the report—I find this one of the most damning and chilling phrases—the trust’s culture was one of,
“self-promotion rather than critical analysis and openness”.
The perverse values and priorities of the senior leadership resonated throughout the organisation, generating a culture characterised by a lack of openness to criticism, a lack of consideration for patients and defensiveness.
The trust board and trust members had a responsibility to cultivate and uphold a positive culture that places patient care, high clinical standards and quality of practice as paramount priorities. Their blatant failure to do so is a clear signal that action must be taken and I give my full support to the recommendations in the Francis report. In particular, I highlight the importance of ensuring that governors receive proper training and guidance in their roles, with greater emphasis on their personal accountability. Quality accounts, which Francis talks about, with complete and accurate information on a trust’s level of compliance with the fundamental and enhanced standards of care should be made openly available on its website, be audited by the CQC and be accompanied by a signed declaration of all directors certifying the accounts’ validity.
I will draw very briefly on my own experience of chairing a public body. What I have learnt to be critical to effective corporate governance is that all board members should go out, be curious, ask questions and above all listen. All board members should go out on visits, talk directly to front-line practitioners without the management being present, ask to see service-user feedback, and ask what has been done about the issues raised which fall short of expected standards. The board recently reviewed all the service-user feedback to assess its adequacy, and looked at all the complaints, their nature as well as their number, how they were dealt with and how they were being fed in to a cycle of continuous improvement. I make this point simply to emphasise that this is not an add-on or a nice to-do. This is at the very heart of effective corporate governance. An interesting article from the King’s Fund, which was published just before the Francis inquiry report, looked at the way in which boards operate in the NHS. It concluded that behaviour in the boardroom is key to the effective management of quality.
It is only through efforts to create an open, transparent and accountable system of governance that a sustainable and fundamental change in culture will come about. I urge the Government to accept the report’s recommendations, and to take urgent action to instigate these much needed changes.
Baroness Hayman
My Lords, like others I congratulate my noble friend Lord Patel on initiating this debate. I declare an interest as a member of the General Medical Council, like the noble Lord, Lord Kakkar. That interest, of course, translates into a responsibility. So many organisations, including the GMC, have a responsibility to study Francis, to understand what went wrong, and to play their part in putting it right for other parts of the National Health Service. In particular, the GMC needs to consider its own leadership role in driving standards up; it must be not just the policeman but the coach of professionalism and high standards. It must address that tremendously dangerous disengagement from management that we saw illustrated and which defines professionalism, not as the noble Lord, Lord Kakkar did, but very narrowly as care of one’s own patient rather than responsibility for the whole clinical environment. One of the chilling things about Francis was how many people who were not bad people felt either disempowered or “aresponsible” in terms of what they could see going on elsewhere in the hospital.
The noble Lord, Lord Willis, said that as parliamentarians we had some responsibilities, too, in not having discussed the issues of values and cultures. We may not have spent many hours on that. However, we have certainly spent many hours on structures and funding systems—thousands of hours of debates in both Houses. I contend that much of the energy that has gone into reorganisations has sapped energy from the absolute fundamentals of what the NHS is about. Francis gives us the opportunity not to turn this into 290 new boxes to be ticked, but to look at the fundamental purpose and values of healthcare that need to be subscribed to, understood by and championed by those responsible for governance and professional leadership and those responsible as managers. I was brought into the NHS 30 years ago by a hugely talented and committed NHS manager, Alasdair Liddell, who died tragically and suddenly on New Year’s Eve last year. The commitment of managers to the values of the NHS, as well as to cost-effectiveness, efficiency and everything else, is hugely important.
There are other two things that I will say quickly about my first experience in the NHS in Bloomsbury. One is to echo what has been said about complaints. I chaired a complaints panel that looked at every complaint that came into those hospitals. It was a goldmine in improving service and efficiency. To ignore that goldmine is hugely damaging. There are very few heroes in the Francis report, but the complainants are heroes. They gave the opportunity to put things right beforehand.
Secondly, of course we have to look at death rates, but we have to look, too, at those doctors and whether they would recommend a hospital to their colleagues. We had a unit at UCL with pretty well the highest death rates in the country. It was the unit in which every doctor in London would have wanted their family treated, because it took the patients who would otherwise have gone to a hospice.
Lord Walton of Detchant
My Lords, my noble friend Lord Patel opened this debate with a characteristically thoughtful and compelling contribution highlighting many of the recommendations of the Francis report.
In the early days of the NHS, the administrative responsibilities in major hospitals were often undertaken by the hospital secretary, with a small but dedicated staff, reaching decisions based on the advice of senior medical, clinical and nursing staff, including matron. Do any of your Lordships remember when matrons, respected and admired, visited each ward in the hospital at least weekly?
Plainly, massive technological developments in medical and nursing care, the problems of an ageing population and the escalating cost of new effective drugs and procedures have imposed heavy financial, administrative and clinical burdens on hospitals, so that costs have risen exponentially. Hence, consecutive Governments have introduced increasing numbers of managers to the service in the hope of promoting efficiency and financial control but, sadly, some of them have treated the NHS as if it were a business, which it is not.
I have worked with some very able NHS managers. Many in the higher echelons have been individuals of vision, merit and exceptional capability, but at lower tiers, I have met with some unfortunate management-speak, leading to circumlocution, obfuscation and confusion, with failure to identify and promote clinical priorities. The Francis report plainly showed that managerial pressures, in efforts to obtain foundation status and to meet targets, gravely diluted standards of care.
Clearly, some clinical staff failed to fulfil their primary professional responsibilities, and their standards must have been gravely eroded. Who knows, perhaps the obsessional managerial virus pervading at higher levels infected some of the doctors and nurses. The accumulated evidence of much unacceptable—indeed, disgraceful—performance is compelling. A critical message to emerge from this inquiry is that the safety of patients and the maintenance of fundamental standards of care are obligations that must transcend particular policies and must permeate all activities within the system.
Would things have been different with a powerful, respected and authoritative chairman of medical staff and a matron able to bring the managers into line? Clearly, too, the public were never adequately consulted. Community health councils, widely respected, were abolished for obscure reasons, to be replaced by failed local patient and public health forums, and then by LINks, which were even less effective.
Will Healthwatch be any better? Would Healthwatch have prevented the horrors that we learnt about through the Francis inquiry? Somehow, in Staffordshire, obsessional managerial attention on artificially generated governmental targets betrayed patients and, perhaps, clinical staff, confounding the hallowed founding principles of the NHS.
How I agree with other noble Lords who have said how crucial it is to have the authoritative role of the nursing sister and well qualified nurses, but also how necessary it is to have qualified and properly trained supporting staff carrying out nursing services under the supervision of nurses.
Does the Minister agree that the overriding principle of the service must be to provide high-quality, medical investigation, treatment and care, delivered with skill, competence, compassion and full personal support, with competent management, even when in times of financial constraint, insistence upon such fundamental principles leads to a failure to achieve targets? Whenever, for pressing financial reasons, services need to be reduced or withdrawn, such changes must be achieved with the informed consent of healthcare professionals, so that the overriding principle of providing high-quality healthcare is maintained. This is the most important recommendation at the core of the splendid Francis report. Our patients, their families and the nation deserve nothing less.
Lord Warner
My Lords, I recognise that Robert Francis performed an important public service in his first report by identifying appalling failures at the Mid Staffordshire trust. However, as others have said, things have moved on since then. Frankly, I found Francis’s second report much more of a curate’s egg. His call for candour and more transparency in the NHS deserves our support, as does identifying board members and managers who are not fit and proper persons. The CQC needs to improve its effectiveness, especially in its use of provider registration, but I hope the Government will see the 290 recommendations as an à la carte menu from which they can select judiciously.
I want to raise three key questions. First, is there good evidence in this second report that the behaviour at Mid Staffordshire was widespread? I have read very carefully the 115-page executive summary—probably the largest executive summary I have read in my life. I did not find in that summary compelling evidence about the widespread failings that have been identified across the NHS. After the expenditure of £13 million on producing this second report, I would have expected to be more convinced than I was. Without appearing complacent, we must avoid tarring 1.3 million NHS staff with the Mid Staffordshire brush, particularly if we do not have the evidence to do so.
Secondly, is it right to concentrate such huge new efforts on monitoring and regulating hospital care? We know that too many people in acute hospitals should not be there. The estimates vary from 25% to 40%. The NHS operating framework has identified this problem for some time. I found nothing in the Francis report touching on this issue. If we now put huge amounts of regulatory effort into hospital care, presided over by a new, shiny chief hospital inspector, we miss a critical point for the future sustainability of the NHS. If we really want to hold David Nicholson to account, we should concentrate on what is being done to change the commissioning of services so that many fewer elderly people are admitted to and moulder in the medical wards of acute hospitals. That is the real systemic failure.
Lastly, I would like us to question whether the answer to failed regulation is more regulation. I question the good sense of new criminal sanctions for staff and board members. We already struggle to get good board members for what can seem a rather thankless task. Will there really be more whistleblowing if staff think they might send a colleague to jail? We need a better rating system for hospitals, but also for GPs and community services, with more publicly available standardised comparable data for the NHS service providers. This is a topic that the Government rejected amendments on during the passage of the Health and Social Care Bill. Perhaps they might like to think again on this issue.
The case for merging the CQC and Monitor has not been made out. Let us use the bits of this report that improve the NHS for patients and their families, but avoid a political virility contest on how many of the 290 recommendations are accepted.
Baroness Emerton
My Lords, I, too, thank my noble friend Lord Patel for raising this debate, especially for the way in which he introduced the positive side of his recent care to show how it is possible to have a patient pathway that results in high-quality care.
The 294 recommendations demonstrate the depth of the inquiry that has taken place, which must provide some comfort to the relatives and friends who witnessed the very distressing care that was given. The Government now have the responsibility to respond as to how these recommendations are to be met. The relatives, public and professions will be interested in the outcomes, for nobody could wish the same situation to happen again. This is said after any inquiry, of course, but this in-depth report requires commitment to meet the recommendations and necessary changes that will result in safe, high-quality care being given with compassion and respect. It is true that the nursing profession has emerged under a cloud, which means that the 20-plus recommendations relating to nursing require intense scrutiny and consideration for implementation.
My first point is to focus on a patient-centred culture. Having researched previous inquiries, very little or nothing is mentioned about culture. However, as has already been said this evening, unless everyone from the top of the organisation—the chairman and the board—to the ward sister who is in charge of the ward, is aware of the values and standards that are set, and unless they are open, transparent and activated, we will have another Mid Staffs. To avoid this, there must be strong cultural leadership. Do the Government intend to grasp this specific recommendation, which requires more than written codes and standards? It requires practical, behavioural and experiential learning in a multi-professional context within bespoke learning environments.
High-quality and safe care delivery is dependent on nurses who are well prepared, in theory and in practice, with enough time to deliver holistic care with compassion and respect. This is possible only if the workforce plans are such that there are sufficient numbers of registered nurses to supervise the non-registered support workers, as the report clearly shows. Recognising that workforce planning has to be contained within budgetary constraints, it would nevertheless be helpful if minimum staffing ratios of registered nurses to non-registered nursing support workers could be established, along with, I hope, the recommendation that NICE be charged with the responsibility for assisting in this development. I trust that the Government will agree.
It is a long overdue recommendation that every person giving personal care should be trained, which was also taken up by the noble Lord, Lord Willis, in his report. Work in progress for the training of healthcare support workers, which is soon to be published for consultation, will be a welcome step towards, I hope, mandatory training programmes that will lead to registration.
The report also recommended the regular updating through post-registration training following appraisals for registered nurses, which is a necessity. While examining the recommendations from this report, we must also remember that there is an army of excellent nurses, midwives and health visitors spread over the country who are delivering high-quality and safe care, day after day, to the satisfaction of those for whom they care. However, it is vital that there is regular updating though post-registration training, as this is of such importance in this time of rapid developments in medical science. Moving into the integration of health and social care requires understanding the patient pathway from the beginning to the end, with nurses playing a vital part in that smooth transition from one part of the service to the other.
Lord Hunt of Kings Heath
My Lords, this has been an excellent debate. No one reading this report or its predecessor could be in any doubt about the suffering caused to many patients and their families by neglect and the lack of a caring attitude. I want to use my brief four minutes to make one plea to the Government, which is for a considered response. Mr Francis has produced a very large report, which I suspect in reality will be read by very few people, with a huge number of recommendations. I am afraid that he has fallen into the trap of so many inquiries, where instead of going for a few focused recommendations we have this huge canvas to consider.
Like the noble Lord, Lord Patel, my great fear is that we may be in danger of creating a massive bureaucratic edifice in dealing with what essentially was a failure in one trust. It is worth repeating that Mr Francis said that what happened in Mid Staffordshire was caused by a serious failure on the part of a provider trust, which did not listen sufficiently to its patients and staff or ensure the correction of deficiencies brought to the trust’s attention. Like my noble friend Lord Warner, I find it difficult to see the threads between what happened in Mid Staffordshire and the general attack that seems to be taking place on the NHS.
I understand the points made about whether the target-based performance approach impacted on quality of care and, indeed, on the involvement of clinicians in their organisation. I defend targets. I remind noble Lords that in 1997 we had the spectre of very long waiting lists. There was a patient charter that said patients should be treated within 18 months—even that was not being met. The result of the target approach has been to reduce waiting time limits to 18 weeks. When one had long waiting times, patients suffered and some people died. I do not think we should ignore it.
Equally, I have listened to the very eloquent speeches made by noble Lords tonight, who have spoken of the changes that need to be made in the NHS. They are valid comments. However, I am struck by the fact that noble Lords have really rather ignored the reality of everyday life in the NHS at the moment; the imposition of another massive structural change and an unprecedented squeeze on resources.
I declare an interest as a foundation trust chair and can say that, seen from the front line at the moment, we have a system under extraordinary pressure. Patient numbers are up, primary care accessibility is problematic and cuts in local government services reduce their ability to take patients out of hospitals and into their homes or care homes. Everywhere systems are under huge pressure. I think it is grossly unfair to ignore those pressures while, as the Secretary of State has consistently done in speech after speech, pointing out to the NHS its alleged deficiencies, without acknowledging the impact of the resource cuts or the uncertainties of the changes being brought about. As my noble friend Lord Warner pointed out, they will do nothing to deal with the big issue we all face, which is the number of frail elderly in our hospitals who ought not to be there.
Therefore, my plea to the noble Earl, Lord Howe, is that rather than thinking that the Government have to respond to each of those recommendations, they think seriously about the essential leadership they can give to allow for caring attitudes to be free in the health service, and to ensure that impossible pressures are not put on the system, from which it can only fail.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, in thanking the noble Lord, Lord Patel, for his excellent and incisive introduction to the debate, it is right for me to begin by reiterating the Government’s apology to the patients and families of Stafford Hospital for their suffering and for the way that the system allowed such horrific events to go on unchecked and unchallenged for so long. It is also right to remember that the vast majority of staff in the NHS are dedicated and committed to providing high-quality and compassionate care for patients. I, for one, have much admiration for the work that they do.
We are very grateful to Robert Francis QC and his team for their hard work. It is now our responsibility to use these findings to improve the NHS and the way that we work. We are currently giving careful thought to the key messages in the report and reflecting deeply on what we need to do. I regard this debate as an important ingredient in that process. I listened particularly to the salutary warnings from the noble Lords, Lord Warner and Lord Hunt of Kings Heath, in this area.
The overriding theme of the report is about culture and the need for everyone across the health and care system to reflect on the report’s findings and recommendations and act to challenge and change the culture of the NHS to place patients and compassionate care at its heart. We are absolutely clear that this report needs to be a catalyst for change. We need to ensure that the quality of a patient’s care is given as much weight as their clinical treatment.
We are also in a far better position than before to prevent the sort of catastrophic failures of care seen at Mid Staffs because we now have a system which is working together to protect the patient in a way that did not happen before. Francis’s report outlines the serious consequences that occur when regulators do not communicate with each other properly and work in silos rather than in partnership. The reforms will enable us to allow for stronger and better regulation. From April 2013, Monitor will be the sector regulator for healthcare in England, and with the Care Quality Commission it will jointly license providers of NHS-funded care. Both have new duties to work more closely together and promote the interests of people who use healthcare services. The Care Quality Commission will have a new chief inspector of hospitals with powers to ensure that the system acts quickly to tackle unacceptable care. We are currently considering Francis’s specific recommendations on regulation in more detail, including their legal and financial implications. I say to the noble Lord, Lord Patel, that we have not rejected Francis’s recommendations to merge Monitor and CQC; that is still being considered.
We intend to provide an initial response to the report by the end of this month. The intention is that it will be a collective response across the system to demonstrate that we are working together with partners about the way in which we are doing that. It will focus on themes rather than being a line-by-line response to each of the recommendations. It will reflect the importance of the focus on culture and patient voice. It will begin to demonstrate that national partners, including the Department of Health and arm’s-length body partners, are acting together and taking action to ensure a greater focus on quality of care as well as quality of treatment, greater clinical input into policy making and a closer connect to patients. The whole system needs to put patients at the heart of what it does above all else.
In Francis’s letter to the Secretary of State, he states that the failings at Mid Staffs were,
“primarily caused by a serious failure on the part of a provider Trust Board”.
My noble friend Lady Tyler was right that the role of the trust board should not and cannot be underestimated. The board is key to ensuring that staff have the right support to be able to provide the very best care for patients. Board members need to provide good leadership and be able to model compassionate care so that it can be felt throughout the organisation. Members of the board therefore have an integral and challenging role in making sure that quality and safety is at the forefront while ensuring the care is patient-centred.
It is not surprising that the theme of safety has been prominent in this debate. Patient safety is paramount, but managing safety and developing a culture around this is a real challenge given the number of people the NHS treats on a daily basis. We are looking at how we need to do things differently. The patient safety expert Don Berwick will review our approach to patient safety and advise on how we can create the zero-harm safety culture that Francis was talking about and indeed, Cure the NHS, the patient group instrumental to ensuring that Mid Staffs was looked at in the first place, has also championed ideas on this.
It is clear from this report that during previous times of change in the NHS patient care and safety have suffered. What is also clear from the Francis report is that the system needed to be restructured precisely because patient safety was falling through gaps. I take the point made by a number of noble Lords about regulatory burdens, and we have commissioned a review by the NHS Confederation to consider how bureaucratic burdens on providers of NHS care can be reduced. The focus of the review is to consider how to reduce the burden of inspection and data collection on the providers of care so that they can focus more on the delivery of safe and effective compassionate care. That is why one of core objectives for the NHS Commissioning Board, as set out in the mandate, is to ensure the NHS provides safe care for patients, and it will be developing a new patient safety strategy to deliver on this.
The noble Lord, Lord Patel, talked about safety to a large extent and referred to Don Berwick’s work. The national reporting and learning system, as he knows, is now owned by the NHS Commissioning Board and allows the board to fulfil its legal duty in the 2012 Act to establish and operate systems for collecting and analysing information relating to the safety of the services provided by the health service. I think that is integral to its role. Don Berwick will review our approach to patient safety and the Francis report, and his job is to advise the NHS on the delivery of a sustained and robust patient safety culture.
The noble Baroness, Lady Hayman, to whom I listened with great care, spoke very appropriately about people recommending a hospital to their relatives. That was a point well made. The friends and family test, which has been designed, is a simple and comparable test that provides a mechanism to identify poor performance. It is designed to encourage staff to make improvements where services do not live up to expectations. It should prove a useful mechanism.
The noble Lord, Lord Patel, asked in what respect the work of the chief inspector would impact on the CQC. The CQC has already said that it will move to a differential approach to inspection, with the better use of experts and with more attention paid to what patients say. The chief inspector post will focus this work so that performance is better understood and more easily identified and then acted upon quickly, which is particularly important.
The noble Lord, Lord Rea, spoke about whistleblowing. The Government’s reforms will deliver an emphasis on local clinical leadership and oversight, clinically led commissioning, greater transparency on outcomes, and oversight by local health and well-being boards and local Healthwatch. These reforms will make it much less likely that trusts will either want or be able to behave in a way that does not promote the highlighting of concerns or issues by staff, patients or the public. In turn, that should promote a culture where concerns are not just raised but acted upon.
This theme was picked up by my noble friend Lord Ribeiro. We recognise that there is work to be done to ensure that all staff are empowered to speak out and protect patients without the fear of victimisation for doing so. The noble Baroness, Lady Masham, reminded the House of her championing of a duty of candour. We are looking very carefully at that recommendation.
My noble friend Lady Tyler made the very good point that board members have to be engaged on this and to the fullest extent. My right honourable friend the Secretary of State has written to all trust chairs highlighting the seriousness of the report and asking them to hold listening events with all staff to talk about the lessons that we can learn from Francis.
The noble Baroness, Lady Hayman, emphasised the important role of managers, and I listened with equal respect to my noble friend Lord Eccles on that score. The Professional Standards Authority for Health and Social Care recently published national standards of behaviour and competence and a code of conduct for top NHS managers. I believe that patients and the public expect them to embrace those standards and indeed to live by them.
The theme of leadership was picked up by many noble Lords. Good leadership in the NHS embraces many things such as compassion and care and places quality and safety at the heart of all decisions. Leaders are needed at all levels. We are doing more to ensure that all staff have the opportunities to become leaders or to demonstrate leadership skills in their existing roles. The government reforms will deliver an emphasis on local clinical leadership and oversight, as I have mentioned.
My noble friend Lord Cormack and the noble Lord, Lord Kakkar, also picked up the theme of leadership. The Leadership Academy is one organisation that has been established to train and develop new leaders and to run a number of core programmes to support clinicians, nurses and managers in leadership roles. I hope the noble Baroness, Lady Emerton, will take comfort from the fact that, as we consider Francis’s 290 recommendations, we are engaging with a range of key stakeholders, including the professional bodies, such as the royal colleges, to identify what more we need to do in response to Francis, including the values that pertain to good leadership.
We will consider very carefully the recommendations of the inquiry in the area of nurse training. We are particularly keen to establish whether more vocational ways of becoming a nurse can enrich the nursing workforce while maintaining the high academic standards that modern nursing requires. I say to my noble friend Lord Willis that we want to be guided by the profession. The country’s top two nurses, Jane Cummings and Viv Bennett, will do two things in this area: they will make sure that recruitment to university undergraduate programmes is based on values and behaviours, as well as technical and academic skills, and will work with national organisations to agree stronger arrangements to ensure effective training and recruitment.
My time is up, although I have much more to say. If noble Lords will allow, I will follow up this debate with letters to those noble Lords whose points I have not had time to address. Meanwhile, once again I thank all speakers for some extremely important contributions, which will in form the Government’s thinking over the weeks ahead.