Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Harris of Richmond)
My Lords, if there is a Division in the House the Committee will adjourn for 10 minutes.
Immigration and Nationality (Fees) Regulations 2013
(11 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Taylor of Holbeach
That the Grand Committee do report to the House that it has considered the Immigration and Nationality (Fees) Regulations 2013.
Relevant documents: 20th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)
My Lords, I am sure the Committee will recall that after discussion in Grand Committee I came to the House on 28 January and obtained approval to amend the Immigration and Nationality (Fees) Order 2011, which provides powers to charge for visa, immigration and nationality applications and services. I indicated at the time that I would return to debate the specific fees charged for the applications and services within the scope of that order.
These fees are set out in regulations made under Section 51 of the Immigration, Asylum and Nationality Act 2006. A subset of those fees set above costs is then set out in accordance with the powers granted in Section 42 of the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004, as amended by Section 20 of the UK Borders Act 2007. Noble Lords will have seen the Immigration Minister’s Written Statement of 25 February, and I am happy to take points on any of the fee proposals here today, whether contained in these regulations or in those that will be laid shortly for fees set at or below the cost of processing.
We have sought to limit most increases to 3%, which is in line with recent measures of inflation. The fees that have increased by more than 3% include the following. First, the indefinite leave to remain fee is increasing from £991 to £1,051. The right to stay indefinitely in the UK is the most valuable entitlement provided by any product offered by the UK Border Agency. It is right that the fee for this product should not be exceeded by that for any products for migrants staying temporarily in the UK.
Secondly, for dependants applying to extend their leave in the UK at the same time as the main applicant, their fees were previously set at half the main applicant’s fees. We are reducing the concession on these fees so that those dependants will pay 75% of a main applicant’s fees. This is consistent with our policy to better align fees for applications made in the UK with those made overseas, where all dependants pay the full fee. It also reflects that each individual on an application may receive an independent set of entitlements, which will result in additional administration costs.
Thirdly, on registering for British citizenship, different fees currently apply to applications for naturalisation and those for registration, even though 99% of registration applicants receive the same status: namely, British citizenship. It is fair that those who receive the same entitlements pay the same fee. The fee for applying to register for citizenship will therefore increase to £673 as a first step towards alignment with naturalisation fees.
The fees for some applications have increased to reflect unit costs. These include those for reissues of or corrections to nationality certificates, nationality status and non-acquisition letters, and sponsors’ fees for tier 5 certificates of sponsorship and the tier 4 confirmation of acceptance for studies. It should be noted that some fees have also reduced in line with unit costs, including those for the transfer of conditions, renunciation of nationality and settlement visas for refugees’ dependent relatives.
We are also introducing some new fees. As I said when we debated the fees order, we are amending the way in which fees for applications made in person are structured. The main changes are as follows. A single uplift fee of £375 is payable, in addition to the relevant standard fee for applications made in person. This replaces a large number of public enquiry office fees in the existing regulations. The £375 in-person fee includes £100 payable for the arrangement of an in-person appointment. The fee is being introduced to tackle abuse of the public enquiry office booking system by organisations and individuals who have been making speculative appointments but then failing to attend. Such actions deprive genuine applicants of the opportunity to attend a PEO and damage a legitimate revenue stream for the UK Government.
A priority service fee of £275 for the expedited processing of standard applications via some routes will also be charged within the UK. Initially, this will be offered to selected tier 2 in-the-UK applicants, although we intend a phased rollout of the service to remaining temporary and permanent migration routes in future. In response to requests for such a service from universities and colleges, we are introducing, following a successful pilot, an extension of optional premium services to education sector sponsors in tier 4. Sponsors will pay £8,000 per year for an enhanced level of customer services.
A further £55 charge will be made for applications for documentation from EEA nationals and their non-EEA family members who are exercising free movement rights in the UK. Charging for these documents is common across Europe, and £55 will help the UK Border Agency to cover some of the administrative costs of this facility. Further, an extended-validity visa will be charged at £80 for those involved in the preparation of the Commonwealth Games, which are being held in Glasgow next year.
We have also taken the opportunity to split the fee for the tier 1 exceptional talent route to encourage more people to apply. As a result, migrants will know whether they are considered talented by the competent bodies before making and paying for a leave application. Following recent policy changes and a significant fee reduction, we also expect to see more applications via the graduate entrepreneur route.
The latest published data on UK Border Agency processing show that 91% of all applications received by the agency are processed within service standards. The majority of those applications are for visas for people coming to the UK, and we are exceeding our service standards for non-settlement visas. Where issues have arisen, particularly in the UK, the agency has taken steps to address them and expects that most of the affected application routes will be back within service standards by spring 2013.
Legal migration brings economic, cultural and social benefits to the UK. We shall continue to ensure that fees for immigration and nationality send a clear signal overseas that this country welcomes genuine visitors and the brightest and best migrants. These proposals support that message. We shall continue to monitor the economic, equality and diversity impacts of our changes. We shall ensure that our fees continue to be priced at competitive levels when compared with those in other key countries. These regulations provide a basis for a sustainable immigration system that will command public support, and I commend them to the Committee.
Lord Eatwell
My Lords, I shall refer to the applications-in-person fees that the Minister mentioned in his introduction. The idea that an efficient service is being provided in this case will, certainly in Cambridge, generate hollow laughter. I refer him to the case of a colleague of mine who, as a tier 1 applicant in person, has made a consistent series of applications for a personal appointment in order to secure an extension of tier 1 permission in good time so that she can attend important international conferences that are fundamental to her career and to the performance of her high-quality services here in the UK. Despite numerous telephone calls, hanging on for over an hour on one occasion, she was unable to obtain an appointment for a month. However, she was offered an appointment by a person in Turkey for £3,000. The Minister referred to the abuses that there have been in respect of applications in person, but I ask him why we are imposing a fee of £375 on such applications in person when the person making a profit of £3,000 will regard this as a perfectly good bet.
Why are we not improving the service? One thing that the Minister did not mention in his entire presentation was value for money. The service provided is lamentable. The British public, and indeed people resident here from overseas, are not receiving value for money. He described the fees as competitive with other countries. So what? Why do we not provide a basic service?
Eventually my colleague got an appointment in Cardiff. She went there to have her permission to stay renewed. The UK Border Agency office in Cardiff was deserted, although she had not been able to obtain an appointment. The reason, of course, was that the appointments had been jammed up by those who were illegally making appointments in order to jump the queue, because of the sheer inefficiency of the border agency in managing this process. Can we not say about applications in person that within the UK, for people who as tier 1 applicants are so important for the future of our economy, we will provide a decent service, which we are not doing at the moment, instead of imposing a higher fee upon them?
Lord Rosser
My Lords, I thank the Minister for explaining the effect of the regulations in what appears to be more detail and greater depth than was the case with the Minister in the other place. However, I am sure he will be relieved to know that I still intend to be brief, despite his very thorough explanation.
As we know, the UK Border Agency first conducted a full public consultation on charging for immigration and nationality applications in 2006, and that consultation led to the principle being established that the UKBA should operate a flexible pricing approach to setting fees for immigration services, to take account of wider policy objectives while reducing the contribution made by the taxpayer. As the Minister said, the regulations that we are considering today, which are pursuant to the Immigration and Nationality (Fees) Order 2011, come into force on 6 April and replace similar regulations that have been effective since April last year. They set out the changed fees to be paid for immigration and nationality applications or services, which will also enable a significant part of the costs to be recouped.
We support the principles involved, including premium services that the Government intend to introduce. However, I am sure the Minister will wish to respond to the specific point made by my noble friend Lord Eatwell, which certainly deserves a considered response, about what appears to be a far from satisfactory situation.
Beyond that, I do not intend to say anything further about these regulations. I would simply comment that in the light of a recent Written Answer that I received from the Minister, it appears as though the Home Office might not be having as much success as it would wish in reducing or containing the number of orders and regulations in existence. I had understood that to be a government objective in pursuit of their objective to reduce what they have described as unnecessary regulation. No doubt at some stage in the future we will have the opportunity to consider that question in greater detail.
Lord Taylor of Holbeach
I thank both noble Lords for their contributions. Although different, both were very valuable. I say to the noble Lord, Lord Rosser, that the complexity of immigration rules and regulations is a matter of concern. I am fairly certain that we will have opportunities to discuss these matters in full.
This is a little like Topsy. Successive Governments have tried to deal with the complex issues raised through immigration rules and regulations. They need dealing with. I hope that Parliament can play its part in ensuring that this matter is made much easier to manage. That is no excuse, however, for the situation described by the noble Lord, Lord Eatwell, and there are aspects of the UKBA that are of concern to the Home Office and to the Government in general. While I cannot comment on the specific case in point, I hope that I made it clear in my introduction that we were aware that there was abuse in this area and that false appointments denied people the opportunity of having a personal appointment to deal with their case. It is important to emphasise the value of such personal appointments. They enable key people to make sure that their application is dealt with and to have a face to face encounter.
Much of this is designed, as I think noble Lords will see from the university sponsor’s fee of £8,000, to try to make the UKBA much more consumer focused. The UKBA exists to serve the process whereby people can move in and out of this country and contribute to our economic, cultural and social life, points that I made at the beginning.
Perhaps I may ask the noble Lord whether he would mind documenting for me the case that he described. Government and opposition have a joint interest in making sure that the UKBA achieves, at least in governance terms, what I think we across the House and in this Committee would wish to see. It would be very helpful if the noble Lord could take the time to do that for me.
Lord Eatwell
My Lords, since I was very critical of the border agency in my earlier remarks, I should say that when my friend arrived at the deserted office in Cardiff, she received an excellent service.
Lord Taylor of Holbeach
That is very reassuring. I think that the individual staff members of the UKBA are determined to turn the body around. I am satisfied that the organisation is heading in the right direction, but it is very useful to know where the pinch points are.
As noble Lords will know, we will consolidate regulation because we review the fees on an annual basis. It is right that we review the fees, but primary legislation requires them to be affirmed by Parliament. I hear the concerns expressed by noble Lords, both those of the noble Lord, Lord Rosser, in the generality and those of the noble Lord, Lord Eatwell, in the particular. Meanwhile, I commend the regulations to the Grand Committee.
Guardian’s Allowance Up-rating Order 2013
(11 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Guardian’s Allowance Up-rating Order 2013.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I shall also introduce the Guardian’s Allowance (Northern Ireland) Up-rating Order 2013 and the Tax Credits Up-rating, etc. Regulations 2013. It is the Government’s view that the regulations and orders are compatible with the European Convention on Human Rights.
The regulations and orders before the Committee put into effect a number of reforms to tax credits and child benefit announced at the spending review 2010, the June Budget 2010 and the Autumn Statement 2012. In the spending review 2010, we announced that the basic and 30-hour elements of working tax credit would be frozen for three years from 2011-12. The regulations confirm that policy for 2013-14.
At the June Budget 2010, we announced that the rates of child benefit would be frozen for three years from 2011-12. We also announced that the income disregard, which is the amount by which a family can increase its income within a tax year without a recalculation of its tax credit award, would decrease from £10,000 to £5,000 in April 2013. At the Autumn Statement 2012, we announced that the child element of child tax credit, and the couple and lone-parent elements of working tax credit, would be uprated by 1% for three years from April 2013.
Benefits that help with the extra cost of disability have been protected. The regulations increase the disability elements of tax credits—that is, the disabled child and severely disabled child elements of child tax credit, and the disabled worker and severely disabled worker elements of working tax credit—in line with CPI. The rate of guardian’s allowance will also be uprated by CPI.
The Committee will be aware that the decisions on uprating contained in these regulations are part of a wider package of uprating measures. My noble friend Lady Stowell has already presented the Social Security Benefits Up-rating Order for 2013-14, which increases certain working-age social security benefits by 1%. The Welfare Benefits Up-rating Bill, which confirms the 1% uprating decision for 2014-15 and 2015-16, including for certain elements of tax credits and child benefit, is now entering its Report stage in the House.
I will start by saying that tax credits and child benefit provide valuable support to millions of families, so the decisions to freeze child benefit and tax credit rates or to increase them by less than CPI were difficult. They will mean that the rates will reduce in real terms. However, they are necessary decisions that should be considered in the context of the exceptional fiscal challenge that we inherited: namely, the largest deficit since the Second World War.
The Government are committed to reducing the deficit. Around four-fifths of the total consolidation in 2015-16 will be delivered by lower spending. This is consistent with OECD and IMF research that suggests that fiscal consolidation efforts that are focused on spending are more likely to be successful.
Tackling the unsustainable welfare budget is a key part of addressing our fiscal challenge. From 1997 to 2010, spending on welfare increased by some 60% in real terms, which is equivalent to an extra cost of £2,900 per household in Great Britain. It is an increase from 11% of GDP in 2007-08 to more than 13% today. Welfare now accounts for £1 in every £4 of public spending. Tax credits have significantly contributed to this increase. Under the previous Government, spend increased by an extraordinary 340% compared with the benefits it replaced. Tax credits will cost around £30 billion this year, and child benefit costs a further £12 billion. Together, they make up over 40% of working-age welfare spend.
Freezing the basic and 30-hour elements for three years will save almost £1 billion in 2013-14, while uprating the child, couple and lone parent elements by 1% saves £320 million, and decreasing the income disregard will save £125 million in 2013-14. The three-year child benefit freeze will save an additional £1.25 billion. If these savings were not delivered, this could clearly put additional pressure on spending on public services. While they are tough decisions, they are necessary and will be implemented through these regulations.
I assure noble Lords that while we are taking these tough and necessary decisions on welfare, we are also ensuring that high earners pay their share. The top 20% of households continue to make the greatest contribution towards reducing the deficit. This is true both in cash terms and as a percentage of their income and benefits in kind from public services. Overall, the richest will pay more tax in this Parliament than under the previous Government’s plans. As a result of this Government’s actions, a high earner pays an additional £10,000 on a £100,000 capital gain; pays an extra £60,000 on the purchase of a £3 million house, and an extra £300,000 if purchased via a corporate envelope; loses up to £4,500 a year in entitlement to tax reliefs on annual pension contributions, for an individual previously claiming the maximum annual tax-free pension allowance and paying the additional rate; can no longer benefit from tax relief on contributions to pension pots over £1.25 million in value; and will no longer be able to use income tax reliefs to reduce their tax bill excessively year after year.
These measures clearly affect benefits that are designed to support families with children. I am conscious that there has been much discussion, both in the House and through the media, about the impact that this might have on child poverty. The Government are committed to tackling child poverty and focusing on interventions that transform lives rather than push up benefit incomes to lift people just above a relative income line. We already know that focusing on the relative income line alone yields perverse results. In 2010, 300,000 fewer children were said to be in poverty because the recession had caused median incomes to drop. In other words, people were said to be pulled out of poverty not because anything changed in their lives but because the rest of society had got poorer.
The Government are consulting on a better measurement that includes income, which is of course an important part of tackling child poverty, but goes beyond income to tackle the root causes of poverty, including worklessness, educational failure and family breakdown. I re-emphasise that one of the most important things that we can do to support children is to tackle the nation’s debt and restore economic growth. In doing so, we can create a future of prosperity and opportunity. I simply disagree that what is best for children is to continue spending unaffordable amounts on welfare while building up debts to pay for it.
The Government are prioritising our resources into reforms that really help families with children. We have invested £2.5 billion in the pupil premium for disadvantaged pupils. We have put £1.2 billion into capital investment in schools. We are investing in making work pay through universal credit, sending out a clear signal that we believe that work is the best route out of poverty for parents and their children. As part of universal credit we are spending an extra £200 million to support families with childcare costs, and for the first time this support will be made available for families who work fewer than 16 hours per week. This will mean that 100,000 more working families will be helped with their childcare costs. Of course, we also provide significant support to families through the National Health Service and schools, which, even in these difficult economic times, we have protected the budgets for.
Lord Eatwell
My Lords, I am grateful to the Minister for introducing these statutory instruments. He concentrated, as indeed I will, on the uprating of tax credits. He said little about the guardian allowance uprating, which is the only issue that gives rise to the traditional debate between RPI and CPI, which I shall certainly leave aside. Enough has been said about that to expose the Government’s use of that device to extract money from the welfare system.
The noble Lord pointed out in his introductory remarks that the measures that he described were withdrawing a total of £2.7 billion, I think it was, from the pockets of the poorest in this country. These contemptible measures represent a fundamental economic failure and a fundamental misunderstanding of the role of tax credits and of the security system in our economy. He referred extensively to the idea that this was somehow fair. In particular, when addressing the issue of working tax credits he justified what is being done by referring to the personal allowance change, from which the noble Lord himself benefits; from the fuel duty change, from which the noble Lord himself benefits; and from the freezing of council tax, from which the noble Lord himself benefits.
My point relates not to the motivations of the noble Lord but to the fact that these benefits benefit everybody in the economy. The changed personal allowance benefits 24 million people, which is just about every taxpayer, including the noble Lord and me. These measures are no justification whatever for withdrawing support from those who are on the lowest incomes and who need support the most.
I was struck by the table of the decline in benefits that was attached to the Explanatory Memorandum for these measures. The basic element of tax credits is down by £45 in real terms. The second adult element is down by £25 in real terms. The lone parent element is down by £25 in real terms. For child tax credits, the family element is down by £15, the child element is down by £30 and the disabled child element is down by £30. These may seem trivial sums, but for families who are absolutely on the edge of survival they are absolutely fundamental. The £2.7 billion that the Government are extracting from this part of our community in order to attempt to reduce the deficit is a direct attack on targeted benefits that were actually associated with the poorest in our community.
The Government have also, perhaps unintentionally, weakened a fundamental aspect of the Chancellor’s economic policy. The Chancellor has referred on several occasions to the fact that his measures are designed to attack the structural deficit and not the deficit as it occurs from year to year, as it may be affected by fluctuations in economic activity. There, the Chancellor has pointed out, the effects of any decline in activity are mitigated by what are called the automatic stabilisers: the fact that benefits rise automatically as people become more impoverished and are reduced automatically as the economy grows, although the Chancellor has of course not experienced that. Now we are weakening the automatic stabilisers.
Have the Government calculated the effect on the overall multiplier consequences on government expenditure of the weakening of social security payments that we have before us? Can the noble Lord tell us what the overall impact will be of this reduction in spending for the poor on the level of activity in the economy, now that we know, by virtue of the IMF, that the multiplier consequences of reducing government expenditure are much higher than was contained in either the Treasury’s or the OBR’s calculations? Can he tell us the impact of this on the overall level of activity and the consequential impact on the increase in the deficit that these spending changes will bring about? It is a trivial economic error to look at first-round effects and not to look at subsequent consequences on levels of activity and revenue.
We have before us the first step in a steady attack on the welfare system, which is to be progressed year after year over the next three or four years. I find it a dispiriting image of our country that we are prepared to do this in the most dire economic circumstances, attacking those who are the weakest while simultaneously, from this April, reducing the top rate of tax for those with the highest levels of income, over £150,000, from 50% to 45%. The noble Lord referred to this group, telling us that the top 20% are contributing a major share of tax revenue to the reduction in the deficit. Does he not realise that, arithmetically, that arises because they are so darn rich compared with everybody else?
The distribution of income in this country has deteriorated and become so skewed that the higher tax revenues contributed by those on higher incomes are a direct function of the extraordinarily high pre-tax incomes observed in the top portions of our society. The Minister’s references to the proportion of revenues now being derived from the purchase of £3 million houses, or from the impact on £1.25 million pension pots, will seem like a Hollywood fantasy to the people with whom we are dealing in these measures.
Will the Minister also confirm that the reduction in real incomes of the lowest two deciles in the economy is greater in proportion than that of the top decile, once one takes out the tax increase introduced by Alistair Darling, which the Government always put into their calculations in order to produce the spurious argument that the top decile has contributed most? Once one strips out the measures taken by the previous Labour Government in the March 2010 Budget, the proportionately larger contribution of the top decile disappears.
These measures directly attack the weakest members of our society and reduce the overall welfare budget at a time when it is needed more than anything else. It is not only inequitable but economically illiterate, because it reduces the transfer of funds to that section of society that provides the overwhelming economic benefit of spending every penny it gets, thereby helping to sustain activity in the overall economy. These are vicious measures from an economically illiterate Government.
Lord German
My Lords, I had hoped that we would not have a second round of our debate in the Chamber about the welfare uprating Bill, but clearly we have just had it. It slightly disappoints me because we will be re-rehearsing similar arguments. However, I must say to the noble Lord, Lord Eatwell, that I support interventions that help people in their lives. I support very much the pupil premium, and investing heavily in helping young people, particularly young children, to find a better way of life. I also support the uprating and raising of tax thresholds, because we can raise the bottom tax threshold and adjust other tax thresholds in a different direction.
I note also, by way of a second round in this debate, that I heard no answer to the question about savings, except the £100 million according to the OBR, which was the only example that we heard of another way of saving money. In order to get this concretely in my mind, I would be grateful if my noble friend would say, for the year 2013-14, what the savings will be from the freezing of tax credits and from the elements that are before us in these regulations when they are added together. We can then compare them with the £100 million offer that we have just heard.
I have two further small questions. First, the Government are obliged under the Tax Credits Act 2002 to review the level of tax credit payments. They have done so for 2013-14, but while the review may have been made public it is not very easy to find. Perhaps my noble friend would either point me in the direction of the report or send me a link so that I can have a close look at it. I should add something in response to the noble Lord, Lord Eatwell, who talked just now about the freezing of council tax benefits. I live in a Labour-run authority and my council tax has gone up. It does not benefit me at all. It is also managed by a Labour-run administration.
The second part of my question relates to the guardian’s allowance. I can understand why it has been excluded, given that the majority of people who are guardians will tend to be of an older age. I wonder whether that is the only logic or whether there is another logic behind uprating fully by CPI. I welcome the move, but I just want to understand why it has been taken.
Lord Freud
It is worth just reminding noble Lords that we have to take pretty urgent action to tackle the situation left by the previous Government, which was an unsustainable welfare bill that has been rising and that continues to rise, as I said, from 11% in 2007-08 to more than 13% today.
Lord Eatwell
That is a good point, which I forgot to bring up. Could the noble Lord tell us whether that rise is due to the change in the rate of benefits or to the recession?
Lord Freud
That is a complicated and rather interesting question, so if the noble Lord will accept this I would like to reflect upon it and write to him. One thing is that in the past couple of years we have in effect held level the number of people on out-of-work benefits. It is really quite a complicated question, and I shall go away and try to come back to him with a proper answer.
My noble friend Lord German asked about the 2013-14 savings. The three-year freeze of the basic rate and the 30-hour element of working tax credit have saved £975 million from 2011-12. The three-year freeze of child benefit saves £1.25 billion from 2011-12, and uprating certain elements of tax credits by 1% saves £320 million for the same period.
On the automatic stabilisers, the multiplier that we use is decided by the OBR, which is using a rate of 0.6 for welfare spending. That compares with a fiscal multiplier for capital expenditure of one. Clearly, one of the attractions of moving an extra £5.5 billion into infrastructure over the next two years is that it has that larger multiplier effect. The investments for the next two years are in new roads, science infrastructure, free schools, cutting the rate of corporation tax and increasing the annual investment allowance to £250,000. The OBR has said that it expects the level of GDP to be higher as a result of Autumn Statement policies.
My noble friend asked about the location of the reports on tax credits. I shall send the link to the relevant website. I apologise that it is difficult to find.
On the point raised by the noble Lord, Lord Eatwell, about who pays and about the rich, there are very good reasons for changing the top rate of tax, not least that the analysis of the rise from 40p to 50p, which was meant to have raised £2.5 billion, found that it raised considerably less. HMRC has found that it would raise at most £1 billion, and even less than nothing when indirect effects are taken into account. Clearly, that analysis is of the rising effect; one could look at the argument the other way when one starts to reduce it.
Lord Eatwell
My Lords, can the Minister elaborate on that point? In the Treasury’s initial assessments, and despite what seemed to be the obvious impact of the cut in top-take tax from 50% to 45%, its estimates were far lower than £1 billion. It has therefore significantly increased its estimate of the take; I refer to the estimates published at the time of the announcement of that measure. Will the Treasury publish a full assessment of the impact of the change in tax rates? Will it do so on a rolling basis, because we will know much more in four years about what has really happened during the past year than we know now?
Lord Freud
My Lords, I shall come back to the noble Lord on the plans. I am reporting that HMRC has looked at the projection made at the time of the top rate being raised from 40p to 50p. The projected revenue was £2.5 billion. It is currently saying that the figure is less than £1 billion, with a warning that it could raise less than nothing when indirect effects are taken into account. As the noble Lord said, some of the effects take some time to be realised. I am not sure what the plans are for more reports. Rather than hurrying around to find an answer for what is a detailed point, I will write to him.
Clearly, the freezing and indexation of benefits is not an easy decision to take. Our rationale is that one of the most important things that we can do to support families and children is to bring down the deficit and secure the economic recovery. It is only fair that we tackle the deficit now so that future generations are not burdened with unsustainable debts, higher taxes and diminished public services. I commend the regulations and orders to the Grand Committee.
Guardian’s Allowance Up-rating (Northern Ireland) Order 2013
(11 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Guardian’s Allowance Up-rating (Northern Ireland) Order 2013.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Tax Credits Up-rating, etc. Regulations 2013
(11 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Tax Credits Up-rating, etc. Regulations 2013.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Loss of Tax Credits Regulations 2013
(11 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Loss of Tax Credits Regulations 2013.
Relevant document: 19th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, these regulations were laid on 4 February 2013. I confirm that in my view they are compatible with the European Convention on Human Rights. They support the new powers introduced in the Welfare Reform Act 2012 to enable HMRC for the first time to apply a loss of tax credit penalty to fraudsters.
First I will explain why we need these regulations. Benefit and tax credit fraud has reached a level that is far too high. Around £1.9 billion a year is fraudulently claimed in benefits and tax credits, of which £0.7 billion relates to tax credit fraud alone. The Government have introduced a number of measures to reduce the level of fraud, such as working with credit reference agencies and developing screening technologies to check for potential fraudulent tax credit claims. However, we now need to move towards improving deterrents in order to stop in their tracks those who are thinking about committing fraud. We also need to change people’s perception that tax credit and benefit fraud is acceptable behaviour and worth the risk.
Research conducted by the Department for Work and Pensions shows that 41% of benefit claimants believe that benefit fraud is “easy to get away with”, and one-third thinks that the current penalties are “not too bad”’. Therefore, we need to send a strong message that fraudulent behaviour by tax credit claimants will not be tolerated by the taxpayer or by honest fellow claimants. Our aim is to provide even stronger deterrents to those who set out to defraud the tax credit and benefit systems. We are therefore introducing tougher penalties, increasing the length of penalties, and extending their scope to include tax credits.
The Department for Work and Pensions has already introduced comparable regulations that contain tougher powers to apply a loss of benefit to those making fraudulent benefit claims. These were debated and agreed by your Lordships’ House on 13 February. The draft regulations before noble Lords today support the wider joint DWP-HMRC strategy to reduce benefit and tax credit fraud, which was introduced in the Welfare Reform Act 2012. Jointly they will send a clear message to fraudsters that claiming benefits or tax credits to which they are not entitled will have severe consequences. They will also tackle the perception that tax credit and benefit fraud is too easy to get away with. We also intend to ensure that those who commit the most serious offences, such as organised or repeat offences, will receive the most severe penalties: losing their benefits or tax credits for up to three years. Most claimants are honest and abide by the rules, but to those who are not we want to send a clear message that if they try fraudulently to claim benefits or tax credits, they will face the consequences of their actions.
Noble Lords will be aware that tax credits comprise two elements: child tax credit and working tax credit. Child tax credit provides financial support for families with children whereas working tax credit provides financial support for working families. The Welfare Reform Act 2012 enables HMRC to withdraw payment of working tax credit for those who are convicted or cautioned, or who agree to pay a DWP administrative penalty as a result of a benefit offence. The 2012 Act also provides for the length of the loss of working tax credit period, and the loss of tax credits amount, to be reduced where there is an innocent party in a couple claiming tax credits. Finally, the Act prescribes what constitutes a benefit offence.
The length of time a loss of tax credit penalty is imposed will escalate depending on the number and severity of the offences. It will be applied for four weeks, 13 weeks, 26 weeks or three years. The 2012 Act also introduced provision for an immediate three-year loss of tax credit or benefit penalty to apply where a person is convicted of a relevant offence. “Relevant offence” generally means an offence of serious organised or identity fraud.
Although the loss of tax credit penalty will be applied to working tax credit, I reassure noble Lords that while child tax credit will be a disqualifying payment from April 2013, it is not a payment to which a loss will apply. In other words, although a fraudulent claim for child tax credit will count as an offence, the penalty will be applied only to working tax credit or another relevant benefit. I therefore reassure noble Lords that child tax credit payments will not be reduced or stopped for claimants who receive a loss of tax credits penalty.
On the detail of the Loss of Tax Credits Regulations being debated today, the regulations prescribe that the loss of tax credits penalty will begin from the 30th day after which HMRC is notified of the benefit or tax credit conviction, administrative penalty or caution. The regulations also provide for the payment of working tax credit to be reduced by 50%, not 100%, where there is an innocent party in a couple who have made a joint claim for tax credits. Where both partners are subject to a benefit or tax credit offence, the deduction would be 100% of the payment of working tax credit. This will include any element of working tax credit to which a claimant would be entitled, including childcare costs or disability elements. The regulations provide that the loss of tax credits will apply only to an applicable benefit offence that is committed wholly on or after 6 April 2013. It will not apply to offences committed before that date in relation to which a conviction is obtained after 6 April.
To summarise, in order to send a clear message to those who are thinking about committing benefit or tax credit fraud, we have strengthened the loss of the benefit penalty regime and expanded the scope to include tax credits for the first time. The increase in scope and the length of penalties reflect the seriousness of benefit and tax credit fraud, and aim to provide an effective deterrent. These regulations were referred to the independent Social Security Advisory Committee on 7 November 2012. I therefore seek your Lordships’ support for the regulations here today, and commend them to the Committee.
Lord Eatwell
My Lords, I am grateful to the Minister for introducing these regulations. Broadly, from this side of the Committee, we support them wholeheartedly. However, they raise a number of questions in my mind which I would be grateful if the noble Lord could answer.
On my first, broad-brush, question, the Minister referred to the scale of benefit fraud as £1.9 billion a year. Can he tell the Committee how this compares to the Treasury’s estimate of the losses due to tax avoidance and evasion? I think he will find that the estimate of losses in those areas is many, many times greater than that for benefit fraud, even though there is, quite rightly, a condemnation of benefit fraud.
The specific measure, as the Minister told us, removes benefit from those who have been fraudulently claiming it. Has the department or the Treasury investigated whether those people from whom benefit is being removed actually needed the money, and whether there are those who did not need the money? If a relatively wealthy crook is pursuing benefit fraud, taking the benefit away from them costs them nothing. They have just taken a punt on a particular scam and now they have lost out, so this measure does not really matter very much. However, if they were people who were actually impoverished but for some reason or other were not adequately covered by existing regulations and were then behaving fraudulently, they may not now have anything to live on. What are they supposed to do? Do we have an estimate, among these fraudsters who are depriving us of £1.9 billion, of those who needed the money and those who did not?
I raise this particularly because the Minister’s welcome remarks on child tax credit suggest that there is a feeling, perhaps not in the Treasury but in the department, that people may need the money; the Treasury never thinks that anybody needs any money. I am a bit puzzled as to the nature of this penalty. Of course, if somebody is fraudulently extracting funds from the Government, from the taxpayer, they should be stopped from doing so. However, if it so happens that this person will then be completely impoverished, we must ask what our society will do about them. This comes back to whether they needed the money. How many of these fraudsters are in fact quite well off crooks from whom this is a trivial change, and how many of them are people whose circumstances are so desperate that they are willing to break the law? Of course we should not allow them to break the law, but can we consider what the circumstances of such families might be once the appropriate penalty is applied?
Lord German
My Lords, I, too, welcome these regulations, but again they are a round two as they match the Social Security (Loss of Benefit) (Amendment) Regulations 2013. I have a number of questions. The first relates to what happens under universal credit to the various sets of regulations that we have been discussing today, which also have their mirror in regulations brought forward by the DWP. It may be a bit of a heresy to say this, but if we are to have separate regulations from separate departments, might it not be a little more useful if we were to back to back them in the same slot so that we could at least look at them together and perhaps save a fair bit of time and effort? Universal credit gives us that opportunity, since we will be looking at these regimes in the round.
My second question relates to the three-year sanction, which is the heaviest of all the sanctions, and the use of the words “deliberative or organised offences”. Has that definition of what is a deliberative offence and what is an organised offence been codified in the handbook and regulations given to decision-makers—both those in the Treasury and obviously those who are to be responsible for universal credit—in order that the level of understanding is of a high nature? When someone goes to court and gets a sentence, we can see that being clearly identified. However, there may be occasions when this is dealt with outside the court through an administrative procedure, in which case there needs to be a clear understanding of when these heavier sanctions will be applied.
I understand that the decision-makers will also be given a level of discretion about the boundaries between some of these sanction periods. Can my noble friend say a little more about the nature of that discretion and whether a framework will be given to the decision-makers in each of these cases, so that we have some certainty that the worst and most difficult offenders will be given the heavier sentences? Will there be any form of appeal internally, apart from the normal tribunal case, where someone has appealed against their sanction? Perhaps my noble friend could give us some idea of how that mechanism will work.
Lord Freud
My Lords, let me try to deal with the points raised. There was a rather interesting question from the noble Lord, Lord Eatwell, about the division between what I think he would call the crooks and the desperate. The best way I can approach that is to look at the way in which fraud develops. I think it is right to say that 80% of the fraud develops out of people not informing of a change of circumstance. There is a drift there that indicates that we are not talking about that many who are desperate because, in one circumstance, people were clearly functioning at a certain level of benefit or tax credit. They then got supplemental income elsewhere and kept the extra, to which they were not entitled. That is quite a typical fraud, so on balance we are talking about crooks here. That is the best figure that I can give the noble Lord. I certainly have not seen anything better, and as your Lordships can imagine I see quite a lot of data.
One of the points that my noble friend made at the end of his last question was about discretion. I must make the point that we are now talking not about the conditionality sanctions, which this can often be confused with, but about people who have committed fraud, have usually gone to court and have had a punishment laid down by the court. There is no doubt about that and it is not in the discretion of our decision-makers. That is not true at the margins, where people accept an administrative penalty, which is at a much lower level. However, as you move up the scale, with repeat offences and the serious offences that we are most concerned about, it becomes a court matter and, to that extent, is not a matter of our codification. The serious offences that I am talking about are laid down in regulations. I speak from memory but I think we are talking about £50,000 offences, serious identity fraud such as trying to pass yourself off with a different identity: that kind of thing.
On my noble friend’s last point, we are bringing the regulations on working tax credit closely together with what happens to today’s benefit system, with a view to pulling both of those into the UC sanction regime. They are being pulled together with a view to there being relatively little change in the overall approach and amount when UC comes into effect for particular people.
I think that covers all the issues that have been raised. The amount of money, £1.9 billion, is substantial, and we want to make sure that it is fully realised that this is not acceptable or safe behaviour. I do not have to hand a comparison with our estimates on tax evasion and tax avoidance. Tax avoidance, as the noble Lord, Lord Eatwell, will be fully aware, is a different matter from tax evasion, but our concern about tax evasion is at absolutely the same level—it is the same offence as defrauding the benefits system.
We need to send out a strong message that this type of fraud is not tolerated. We also believe that, although fraudsters must be promptly and severely dealt with, innocent parties should be protected, which is why this relates only to working tax credit and not to child tax credit, and why we will only reduce working tax credit by 50% in households where one member of a couple has not committed an offence.
I seek the support of noble Lords for these regulations. Indeed, I hear that I have it and I commend them to the Committee.
Neighbourhood Planning (Referendums) (Amendment) Regulations 2013
Lord Ahmad of Wimbledon
That the Grand Committee do report to the House that it has considered the Neighbourhood Planning (Referendums) (Amendment) Regulations 2013.
Relevant document: 21st Report from the Joint Committee on Statutory Instruments.
Lord Ahmad of Wimbledon
My Lords, neighbourhood planning is a vital part of the Government’s reforms to help local communities play a much stronger role in shaping the areas in which they live and work and in supporting new development proposals. For the first time, community groups can produce plans that have a real statutory weight in the planning system. Neighbourhood planning is therefore one of the most exciting innovations of the localism agenda.
We are delighted that neighbourhood planning is taking off across the country. Indeed, we are aware of more than 500 places looking to bring forward a neighbourhood plan and to shape the development and growth of their local areas. More than 400 of these have taken formal steps to have their area designated. Three plans have already passed the independent examination stage, and the first to reach a referendum was in Upper Eden, which saw 90% of local people, based on a turnout of 34%, voting in favour of the neighbourhood plan. This was a positive result for the 17 parishes of Upper Eden that are now able to deliver new homes on farms, houses for older people and more affordable housing in a way that suits their local character and needs. Other areas are hot on the heels of Upper Eden and we expect to see many more neighbourhood plans in the very near future. Regulations governing the conduct of neighbourhood planning referendums, of which Eden was the first, were considered last year.
The Localism Act also provided for some areas to be designated as business areas where they are wholly or predominantly commercial in nature. In such areas, non-domestic ratepayers will be able to vote in a business neighbourhood planning referendum. This provides the opportunity for businesses to take the lead in neighbourhood planning. We are already seeing this happen in practice in central Milton Keynes, where it is proposed to develop a dynamic city based on high-quality buildings and spaces. Businesses are also taking the lead in areas such as Trafford Park, central Ealing and Liverpool Innovation Park.
The Neighbourhood Planning (Referendums) (Amendment) Regulations 2013 amend the 2012 regulations to provide for the conduct of “business referendums”, which will be required to be held alongside a “residential referendum” where it relates to whether a neighbourhood plan or a neighbourhood development order should come into force in a designated business area.
I shall briefly summarise the main provisions of the amending regulations. Regulation 4 requires a local authority to fulfil certain publicity requirements relating to the referendum and imposes certain time limits by which notice of the referendum taking place must be given. This is 56 days where a referendum in a designated business area is required to be held, rather than the 28 days where a referendum is held in the residential neighbourhood area. This longer period was the outcome of discussions with the Electoral Commission and local authorities and was considered necessary to allow for the effective registration of non-domestic ratepayers.
In a designated business area, there will be two referendums, one for residents and one for non-domestic ratepayers. Regulation 7 therefore provides for the residential referendum to be held on the same date as the business referendum. As with referendums more generally, a register of those eligible to vote is required. In order to compile this register, a specific registration process is needed. Schedule 1 provides for the creation of a business voting register of all the non-domestic ratepayers who register to vote in a business referendum, for the purposes of that referendum only. The business voting register lists the names of all the non-domestic ratepayers who have registered to vote and the addresses of the premises within the referendum area on which they pay non-domestic rates. In practice, a local authority will send a registration form to each non-domestic ratepayer of which they are aware, and each ratepayer will nominate an individual, which may be himself or herself—the “named voter”—to vote on behalf of the business.
Schedule 2 sets out the detailed rules to be followed when conducting a neighbourhood planning business referendum. This includes the rules in relation to the content of ballot papers and other voting forms, the operation of polling stations, the counting of votes and the declaration of results.
Schedule 3 applies, with necessary modifications to existing electoral law, to the conduct of neighbourhood planning business referendums. In short, the amended regulations will put in place the rules needed to ensure the effective administration of neighbourhood planning referendums in business areas, in which the electorate can have confidence. In large part, they follow a tried and trusted practice. An external group of interested parties has been used to help develop the amended regulations in a manner that ensures that they can be effectively implemented. This particular group includes the Electoral Commission and the Association of Electoral Administrators, both of which have fed into the process and commented in detail, in particular on the business referendum registration forms. I take this opportunity to thank them for their contributions in assisting us to develop these particular regulations. In line with best practice, the registration forms have been tested with business users for design, clarity and impartiality. I am therefore confident that the amended regulations will ensure efficient and effective administration of any neighbourhood planning referendum in a designated business area. I commend the regulations to the Committee.
Lord McKenzie of Luton
My Lords, I start by thanking the Minister for a very full and clear explanation of the order we are considering today. Like the Government, we very much support neighbourhood planning and the engagement of business with that. However, it is important that we do not make the process overly bureaucratic and expensive. In introducing this, the noble Lord referred to the fact that 500 places were developing a neighbourhood plan. How many business districts have been created to date? I am just trying to see the dynamics of that. Can the Minister tell us how the timing works? If a neighbourhood plan is being developed but there is a business district component, or a potential one, how does that all work? If the plan is some way to being finalised, does that preclude a business district coming in? Presumably the idea is to get the business district there at the start. Given that nothing like 500 business districts have been created yet, how does that all work in practice?
I have one or two questions on the specifics of the regulations. It is clear that there is one vote per business, however many separate hereditaments are involved. How does that work within a group? Are separate members of a group separate voters for this purpose or is there some sort of aggregation of that for connected parties or formal group companies? What happens if a business goes into administration? Is it then precluded from participating? Presumably, that depends a little on what stage the administration has reached.
In Part 2, in Regulation 8(2)(c), there is a requirement to specify the rateable value. Why is that? Presumably that itself is not relevant to the entitlement to vote. What happens to a hereditament that is entitled to 100% relief on one basis or another? Does that still create an entitlement to vote under these regulations? I think the question has to be the same for individual voters and a voter on behalf of a business hereditament but perhaps the noble Lord could confirm that.
Obviously, we broadly support the thrust of these regulations but I would be grateful if the Minister could say a little more about the dynamics of how these fit together, how that is working in practice with all this activity in the development of neighbourhood plans and how business districts so far are fitting into that.
Lord Ahmad of Wimbledon
My Lords, first, I thank the noble Lord, Lord McKenzie, for his broad support. I am delighted that we are putting forward these particular regulations. The noble Lord asked how the two are linking up, at a very high level. It is very much the final piece in the jigsaw of how neighbourhood planning comes together, which is allowing neighbourhood planning referendums to happen up and down the country.
There were some very specific questions and I will seek to answer each one in turn. If I do not answer all of them, I will write to the noble Lord in detail on those particular matters. He raised the question of how many business districts have been created. Only three neighbourhood areas have so far been designated as business neighbourhood areas but there are a number of other neighbourhood areas that are seeking to be so designated. I believe it to be at least another seven. There is a particular measure or standard to be met for the designation—that the area is in effect wholly or predominantly commercial—so there are criteria in this regard. The regulations will also allow leading businesses and neighbourhood plans to proceed towards examination and referendum, and provide a powerful opportunity for local residents and businesses to work in partnership to attract investment and to shape the future development and growth of their local areas.
The noble Lord asked how the timing works. As I indicated earlier, I believe that the two referendums will work in parallel to ensure that the results, when they are taken in, are consistent and the decision can be based on the outcome of both together. One of the things I would raise that is linked to that, which was a question I certainly raised when looking at this, was what would happen if there was a variation between the result of the business referendum and the residential one? Bearing in mind the spirit of local neighbourhood plans, it would remain the remit of the local authority to adjudicate on the difference between the two referendums.
The noble Lord also asked about one vote for every business. That is true irrespective of size. He raised a quite specific issue of registered groups of businesses. Speaking with my business hat on—I will seek clarification if what I say is not correct—if it is a separate established entity within that local area, it would be one business, one vote. If there is a single group with a single address then, no matter how large the actual business, there would be one particular vote for that business as well.
The noble Lord raised the issue of what happens if the business goes into administration. It would depend on the exact situation and I will seek clarification on that. I am being told that as long as they are on the non-domestic rating list, they have a vote. However, that is a separate question and, coming back to the issue of whether they have gone into administration, I will clarify that point. If they are in a business that has already gone into administration at the start of that referendum process, I assume they would not be included.
The noble Lord, Lord McKenzie, also asked how companies that have 100% rate relief would be managed. As long as they are on the non-domestic rating list they have a vote as well. He also asked about how and when an area is designated. When designating a neighbourhood area, local planning authorities must consider whether to designate the area as a business area, which is a neighbourhood area that, as I have already said, is wholly or predominantly business in nature. These are areas in which an additional business referendum is required to be held alongside the residential one. He asked about the question that would be posed on the business referendum and the residential one. As far as I understand, bearing in mind that the results would need to be consistent, the question posed would be the same as well.
As I have said to the noble Lord, if there are issues that I need to clarify I will, of course, write to him. However, I think I have covered, if not all, most of the questions he raised.
Lord McKenzie of Luton
I thank the Minister, who has indeed covered a lot of the questions that were posed, but would be grateful if there was anything further that he could say about the dynamics of business districts. If there are 500 neighbourhood plans on the way but only there business districts, clearly business districts are not leading the charge on this. Where a neighbourhood plan is being contemplated by the residents of a designated area and then a business district is created as part of that, which could happen, I am trying to see how it gets its foot in the door in terms of participating in the development of the plan. Is there a risk here, or could the circumstances be such, that the neighbourhood plan is developed by the residents of an area and a business district is created later? I think that a referendum would have to take place at the same time, with the same question, but is the business district the business community’s opportunity to engage in the development of that plan? Perhaps the Minister will write if he is not able to cover that issue today. I thank him for his other answers.
Lord Ahmad of Wimbledon
I will write to the noble Lord specifically in response to that point, although I am sure that he will know from his own experience that the neighbourhood planning issue will remain, in his word, “dynamic”. Input into it, to see how neighbourhood plans can be improved for each local area, needs to be reflected and dynamic in its own nature. Based on the answers that I have given and my earlier comments, and acknowledging the noble Lord’s support, I commend these regulations to the Committee.
Non-Domestic Rating (Levy and Safety Net) Regulations 2013
Lord Ahmad of Wimbledon
That the Grand Committee do report to the House that it has considered the Non-Domestic Rating (Levy and Safety Net) Regulations 2013.
Relevant documents: 20th Report from the Joint Committee on Statutory Instruments.
Lord Ahmad of Wimbledon
My Lords, these regulations put in place the last elements needed for the operation of the rates retention scheme in 2013-14. That scheme, as we have discussed previously, is designed to deliver the Government’s objective of returning an element of business rates to local control in a way that incentivises authorities to work with their local business communities to improve economic conditions in their local areas. It does so through a partial redistribution of business rate resources, taking account of the individual authority’s needs, in order to provide a fair starting point for each local authority. That starting point is fixed until the next reset of the scheme in 2020, and any growth in business rates above this starting position is shared between central and local government and can be used by authorities to support local services and stimulate further growth.
As the Committee will appreciate from looking at these, and earlier, regulations, while the principle of the rates retention scheme can be explained simply enough, the mechanics needed to deliver it are both complex and technical. Therefore, before turning to the detail of the regulations, it may be helpful to the Committee if I first remind noble Lords of the technicalities of the scheme and the mechanics of establishing authorities’ starting positions.
The key to the scheme is the establishment for each authority of two numbers: its baseline funding level and its business rates baseline. Its baseline funding level reflects the level of resources that the authority should have under the rates retention scheme, taking account of its needs and the availability of other resources such as council tax. Its baseline funding level, together with the level of revenue support grant that it will receive, the RSG, represents the authority’s share of general government funding—the 2013-14 equivalent of its formula grant entitlement.
The second number, its business rates baseline, is the estimate of each billing authority’s business rates income in 2013-14, apportioned between that authority, central government and major precepting authorities in accordance with the shares approved by Parliament in the local government finance report. If the authority’s business rates baseline is more than its baseline funding level, it is required to pay the difference to the Government in the form of a tariff. Tariffs are then used to provide top-up funding to those authorities whose business rates baselines are less than their baseline funding levels. Because of the way in which the scheme is set-up, tariffs and top-ups sum to zero and, moreover, are fixed for the duration of the scheme. This provides the fixed starting position against which future growth can be measured and retained.
However, as we discussed during the passage of the Local Government Act 2012, while incentivising growth is vitally important, we all recognise that business rates at the local level are, by their nature, subject to a fair degree of volatility. This is a key issue. As a result, if we did nothing else, in any year authorities could see their resources fall, perhaps quite considerably, and this could leave them with less money than implied by their starting position. Reductions in income could be because of changes to commercial property. To take an example that has recently been in the news, one need only think of the impact on North Warwickshire’s business rates of the closure of Daw Mill colliery to understand the impact of such changes. I know that this is a challenge for local authorities that find themselves in similar situations. It could also be because of successful appeals against rateable values, which lead to an authority having to refund rates in respect of a number of previous years. For whatever reason, we quickly concluded that the scheme needed some way of mitigating the effect of local volatility. Having looked at this and discussed it with the local government sector, we concluded that the best way to do this was through a safety net.
Overall, the rates retention scheme provides authorities with about one-fifth of the general funding available to them through business rates, council tax and revenue support grant. The safety net works by ensuring that the one-fifth available through business rates can never fall by more than 7.5% before the authority receives assistance. The safety net is financed from a levy charged on the most highly resourced local authorities when they see growth in their business rates.
With that preamble, I turn to the regulations themselves. These give effect to the levy and safety net by reference to baseline funding levels and business rates baselines that have already been set out in the local government finance report, and which are set out for each authority in Schedule 2. Importantly, Regulation 5 provides that the baseline funding level is indexed every year so that the level of protection available through the safety net keeps pace with inflation.
The regulations provide for the calculation of levy rates and safety net thresholds in Regulation 6. The safety net threshold is set so that no local authority can see more than a 7.5% reduction from its baseline funding levels. This gives force to the policy that I have just described and ensures that authorities will have reasonable stability of income from which to deliver important local services.
The way that the levy is calculated means that only those authorities that pay a tariff—that is, those that, at the start of the scheme, have more business rates than their baseline funding levels—will ever be levied. Authorities with relatively small business rates bases will never be levied, and will be allowed to keep all of the growth that they achieve.
Regulation 7 means that authorities are able to receive a safety net payment on account during the course of the year. The payment will be based on the authority’s own estimates of the business rates income that it seeks to collect. This provision ensures that authorities do not have to wait for the final outturn figures before receiving safety net assistance, and therefore do not suffer cash flow problems through having to wait for funding.
I do not pretend for a moment that these regulations are not complex; indeed, I said that at the start. However, they have been developed with the working group that we set up to help us work through the finer details of the implementation. They have therefore benefited from the practical help and advice of those in local government finance departments who will have to work with the scheme and with the detailed regulations. We are confident that, with their input and the consultation that has taken place, the regulations will deliver the policy to which the Government are fully committed. I commend them to the Committee.
Lord McKenzie of Luton
My Lords, I thank the Minister for introducing these regulations. As the Minister said, they are quite complex. Holding concepts such as business rates base line, base line funding levels and retained rates income in one’s mind is a challenge—certainly for me—as one goes through the detail, but I think I understand the thrust of what is before us.
Clearly, we support a safety net system, but as we argued during the passage of the primary legislation, we would wish to see the threshold at a level higher than 92.5%. Just as the noble Lord raised the example of the dire consequences of particular closures on the finances of a local authority, we argued when the primary legislation was being considered that, when a local authority is faced with the prospect of the major regeneration of an area, there ought to be arrangements in place so that it would of its own volition see a significant drop in its business rate base for the specific purpose of regenerating an area, and hopefully building a much bigger rate base in the future. I do not think that those circumstances are specifically catered for here. We also anticipated the problem that a local authority might cope with a 7.5% fall for one year, but there is no additional relief should that recur year on year. This may not happen in many circumstances, but the cumulative effect is not catered for here.
What is the overall estimate of levy amounts and safety net payments to be collected next year? I think the noble Lord said that tariffs and top-ups will sum to zero, but for the provisions that are before us—the safety net and the levy—what are the separate estimates of those two amounts for next year?
I have one or two other specific questions. On the safety net, why is the schedule of payments cast in the way that it is under the regulations and what is wrong with a Friday? Apparently, when a payment falls due on a Friday, one is not permitted to send or receive it; one has to wait until the next business day. I am not quite sure why that is. Can the Minister expand a little on the types of adjustment that flow from paragraph 1(4) of Schedule 1—for example, the effect of adjustments made for amateur sports clubs and the circumstances in which deductions are permitted or not? What are the criteria that separate the different categories of arrangements? Subject to those points, I have no further issues to raise.
Lord Ahmad of Wimbledon
My Lords, again I thank the noble Lord, Lord McKenzie, for his support for what the Government are seeking to do. As a general point, I know—and I am sure the noble Lord will share my experience—that when we were looking at introducing the whole issue of business rates and the ability of local authorities to retain the 50% business rate, it was done irrespective of political affiliation. It has been campaigned for long and hard at a local authority level. I am glad that a broad level of support has been given.
The noble Lord raises some general points, particularly in relation to places that struggle to attract growth, which is indeed a driver for increasing the level of business rates. This system of tariffs and top-ups is intended to ensure a stable starting point. There may be some local authorities that fall from year to year below the 7.5%. For them there is additional funding available—for example, the efficiency support grant for those councils that face a loss of more than 8.8% in their spending power.
A few other aspects in this regard are index-linking tariffs and top-ups to RPI, which ensure that councils with low tax bases and high needs see a major part of their income uprated by RPI. Also, the concept of a safety net will ensure that public service provision does not suffer as a result of the local volatility mentioned in my opening remarks. A safety net threshold of 7.5% is the most generous level consulted upon. As the noble Lord acknowledged, this will guarantee local authorities a minimum of 92.5% of their business rates levy.
Lord McKenzie of Luton
I thank the Minister for his answers, but I do not think I asked a question that I intended to ask about the baseline funding level, which is uprated each year. I think I read that it is uprated by the small non-domestic rate multiplier. Why that metric?
Lord Ahmad of Wimbledon
This is the point where I look over my shoulder. I think the noble Lord is correct on this. There may be some elements of local government finance that during my time I sought to understand. He is correct in his interpretation.
Lord McKenzie of Luton
Why is that multiplier used? The Minister can write to me.
Defence: Procurement
(11 years, 1 month ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Dean of Thornton-le-Fylde
To ask Her Majesty’s Government what are their policies towards and priorities for defence procurement.
Baroness Dean of Thornton-le-Fylde
My Lords, this Question for Short Debate covers a huge area and we are not going to be able to cover it all in one hour, so maybe we need to come back to this issue at a future date. My work for today has been substantially assisted by the helpful report by the House of Commons Defence Select Committee dated 5 February.
Defence procurement has dogged Governments from all sides of the House for many years because of delay, cost overruns and changing capability. Taken together, all of these have often had an impact on the capability of our Armed Forces. Despite many reports from the House of Commons Select Committee, the National Audit Office and others, the problem appears to be intractable and one that Governments somehow cannot get to grips with. In 1997 the incoming new Labour Government were faced with cost overruns and delay on the Eurofighter, Merlin and Tornado programmes, to name a few. So the statement after the 2010 election about the budget deficit being so big and it being down to the previous Government entirely is not quite the full picture; it is an issue that has faced many Governments, including this one. As the Select Committee report says in paragraph 15, “The decision in 2010”— after the coalition Government were elected—
“to change to the carrier variant of the Joint Strike Fighter was … rushed and based upon incomplete and inaccurate policy development. It … led to increased costs to the carrier strike programme and a delay in the in-service date of the carrier”,
as well as,
“the early decommissioning of the Harrier”.
The decommissioning of the Harrier has, of course, attracted an awful lot of attention and, certainly, critical comment from many people who know a lot more about this issue than I do. There has been regret in the services about the early demise of the Harrier jump jet.
However, Ministers in the MoD have been extremely active. We have a report from Bernard Gray, commissioned in 2009 by the previous Government, and the Levene report, to name just two major pieces of work, as well as the National Security Through Technology White Paper. Through those, together with the Defence Committee report, I have been able to gather together information for our debate today. It is impossible to cover all the issues, as I said, but I would like to cover the transition of security and the UK-based skills requirement that it brings with it; the defence procurement structure itself; research; and the defence budget.
On transition, we are witnessing a Government who have moved from a defined list of sovereign capabilities, which we had under the previous defence industrial strategy, to the current approach in the defence and security White Paper—it appears to be reflected in government documents—for off-the-shelf acquisition where that is possible, with a less defined list of sovereign capabilities. That leads me to my first question for the Minister. What are the Government’s plans to ensure that the need for skills and for an affordable programme is met? In industry, transitional periods are always more expensive than a flat state. New skills will be required for this different type of procurement. What are the Government’s plans on that?
For instance, there is a need to ensure that decisions are made about the long-term sustainability of the complex warship build programme and the transition from the Type 45 to the Type 26 programme, which will require key skills, some of which are not there today. That brings with it questions of related affordability and how that impacts on the MoD budget. Decisions are also required on the capability of Typhoon, particularly if we want to maximise our potential for export markets in that area. Another area is the topic of unmanned systems. We are good at this in Britain—we have extremely good skills—but what is government policy in this area?
Those are merely three areas of capability, but all are resource-demanding. What priorities have the Government set across the general board of procurement? Decisions such as these have a profound impact on the defence industry and on provision, so that industry can plan and have the confidence to invest in its workforce rather than making people redundant, providing the right skills to make sure that we can manufacture defence here in the UK. It is an issue to which the Defence Committee report refers as important in its last recommendation, number 198, about the skills base.
The structure of defence procurement is a wide area. The Bernard Gray report talks about changing it. There were two possible models of procurement: an executive non-departmental public body or a government-owned contractor-operated organisation, commonly called a GOCO. At a conference in March 2011, the author of the report, Bernard Gray, said that it,
“seems extremely unlikely this idea, GOCO, will be pursued given the lack of support it received”.
Yet the Government appear to have stopped all work on any other model and are concentrating on GOCO. I thank the Minister for the briefing that we had on that at the MoD. I now ask him where government thinking is on this. What hurdles do the Government anticipate, and how do they intend to overcome them when we are talking about our international allies? How will our allies react to that change to a government-owned but contractor-operated system? Defence procurement is an expensive business, and getting more expensive. It is highly unlikely that any one nation will be able to fund its own defence in future. In fact that is already not the case today; we have to work in concert with our allies.
We have a good research base in the UK. It has worked well for SMEs, academia, the MoD itself and the defence industry. Paragraph 114 of the Select Committee report asks the Government to target 2% of the MoD budget to be spent here in the UK on UK-based research and development. What is the Government’s response to that? Do the Government agree that we should be aiming for that target?
In the Statement on 14 May 2012, the Secretary of State announced that the budget had been brought into financial balance. He also announced that, for planning purposes, it had been agreed with the Treasury that a 1% per annum real increase in the equipment and support budget would apply from 2015. Can the Minister confirm that this additional 1% in real terms for the defence budget will be new money, not money that the MoD has to find from its overall budget? Obviously, a large part of the rest of the budget is personnel spend. Will that increase apply from 2015? In conclusion on the defence budget, it seems odd logic that, whereas all our non-allies—China, North Korea and other countries—are increasing their defence spend, we in the western world are reducing ours, and doing so to an extremely concerning point.
I said that I could not cover all the points in this short debate; I hope that we can return to this topic. It would be helpful if the Minister could answer those questions. On the key issue of GOCO, will the Minister confirm that no final decisions have been taken? I look forward to his reply, and to hearing what the small number of colleagues taking part in the debate have to say.
Lord Palmer of Childs Hill
My Lords, I thank the noble Baroness, Lady Dean, for instigating the debate. We are obviously not the popular debate in this and the other House today. I thank in advance my noble friend the Minister who, as the noble Baroness has said, gives us such good briefings. I am also grateful for the briefings that we get when we have such eminent speakers, which have always been incredibly useful.
The noble Baroness, Lady Dean, has covered a wide area in her 10 minutes. I will try to add a few things, having made notes as I have listened. The sad fact is that defence procurement has for far too long been a drag on our forces’ expenditure and national expenditure. Purchases have proved sluggish and inflexible, delivering equipment and resources late and over budget. That is not only the case now; it has been in the past as well. That is why the coalition Government have been right to challenge the way in which defence procurement has operated. As the noble Baroness has just said, the Government have a full battery of reviews to consider. She mentioned a couple: the Levene review, Bernard Gray’s materiel strategy work and the procurement review of the noble Lord, Lord Currie.
The Government have also had the benefit of what is described as the,
“large number of responses with a wide variety of views”,
to their own Green Paper, Equipment, Support, and Technology. As has been mentioned, there comes a point when decisions must be made, improvements found and efficiencies delivered. One example is the question of the future of defence equipment and security examined in detail by Bernard Gray, as the noble Baroness has just said. His proposals for government-owned contractor- operated procurement created wide ripples, and the Government need to be clear, as the noble Baroness, Lady Dean, said, how they intend to take that forward. That is obviously very important.
How will the Government respond to the broader concerns about the skills required to reform our process of defence procurement: finance, engineering and project management? Above all, the skills of estimating cost, both on expenditure and available resources, must be strengthened. We are pretty weak in estimating the cost of the final bill. Overall, procurement for our forces must meet our responsibilities both to our service personnel under the Armed Forces covenant and to the British taxpayer in securing value for money. The coalition Government have much overdue work to do on both fronts.
How much value, or cost, do we have in store on the shelves, and how often are these stores called upon? Does the MoD just order from suppliers rather than look around the shelves on some stock control system to see what we have? Very often it is easier to ring up your supplier rather than take it off the shelf. What of value do we have on our shelves and would we be wise to seek a buyer, or buyers, for this equipment if it is not moved or even required for a long time?
I thought hard about an example, which came to me because I was talking to some United States Air Force colonels who came to this House a few days ago. I talked to them for 30 minutes. They use Harriers. Do we have spare parts for Harriers? The noble Baroness, Lady Dean, mentioned them when she spoke. If we have spare parts for Harriers, perhaps we should sell them off to the United States Air Force. When we spoke about parts, it said, “We need Harrier parts”. I did not initiate that; it is what it said.
Before the Government go on even a moderate ordering or buying spree, all in the correct defence of the realm, what work is done on estimating what conflicts are likely? Procurement cannot be taken in isolation; it is about estimating what is going to happen. I could give many examples but I do not think you can divorce the discussion on procurement from what is going to happen with Trident, which is a very expensive weapon. I know that a review is being undertaken, supervised by Danny Alexander MP, but the actual cost of Trident is going to weigh down on a lot of our procurement strategy, whether we have it or not and whether we have like-for-like renewal.
Do we want armoured vehicles for hot or cold climates? Should they be for coping with roadside explosive devices? The old vehicles used to get blown up because they could not cope with that. Can we think what conflicts are going to happen and where those vehicles will be needed?
The noble Baroness, Lady Dean, talked about the Armed Forces covenant. Uniforms and other personal equipment are also part of our procurement strategy. Do we need uniforms for the Arctic—there was a piece on television recently showing our forces training in Arctic circumstances—or will they be needed in the desert? We may have the horrible feeling that they are training in the Arctic, as I saw on television, but the next conflict may be on sandy terrain. Perhaps we need to know what equipment and uniforms they will need when a large proportion of them will be based on Salisbury Plain. Salisbury Plain, the Arctic, the desert—we have to make a good guess at where the conflict will be.
The noble Baroness, Lady Dean, mentioned carriers and various other warships. It is no good harking back to the past, but we have two carriers. The expenditure on them gave lots of good employment—but did we need them and do we need them? We do not have the right aircraft to fly off them at this time. Our estimation of what we need is easily exemplified by the fact that the previous Government made a decision to build carriers when we did not have the need for them, the facilities to build them or the aircraft to fly off them. The defence picture facing the United Kingdom is changing rapidly.
Lord Davies of Stamford
I am sorry to interrupt but I cannot let that remark go unchallenged. The previous Government indeed committed themselves to buying two new carriers. We would have continued to have the aircraft to fly off them—the Harriers—and we ordered the F 35s to replace them. It was an entirely coherent, responsible and balanced decision.
Lord Palmer of Childs Hill
I thank the noble Lord for his intervention, but the fact is that we have two carriers that are not well used at the moment, and there is also a story that one of them will be sold off or mothballed. That is the situation now, but I take the point that the decision on aircraft was changed. That had an effect, and the Minister may wish to reply on that point.
To conclude—which is what I was about to do when I took the intervention—the defence picture facing the United Kingdom is changing rapidly, and our Armed Forces demand and deserve equipment that is up to date and responds to the risks and challenges that they face on our behalf. Nothing is more important than working out what conflicts there might be, where we estimate that they will be, what equipment will be needed for them, whether we should buy off-the-shelf equipment manufactured in this country or use the goods we have in store, and whether we should realise the money invested in the goods in store if we are not using them.
Lord Touhig
My Lords, last July the Minister repeated a Statement in your Lordships’ House in which the Government acknowledged the MoD’s historical budgeting woes. By now, most who are familiar with defence procurement agree that the Government underbudgeted and overassigned, that the Civil Service was challenged to manage such complex programmes because of its lack of expertise and skills, and that the policies of procurement unfairly burdened taxpayers. Clearly the Government now want to correct these failings, and it would appear that their preferred option is a privatised, government-owned contractor-operated partnership, about which we have already heard.
When one remembers the G4S security contract awarded for the 2012 London Olympic Games, it would seem that the Government’s record on privatised partnerships leaves much to be desired. I wonder also whether the Olympics security project suggests that even stable private partners struggle with assignments of unpredictable scale. The history of defence procurement over recent years certainly shows that scale is unpredictable. In an interview with the Defence Management Journal on 28 January, ADS chief executive Rees Ward warned that no country, and especially no military superpower, had adopted a government-owned contractor-operated scheme for procurement. In February this year, the Defence Select Committee in the other place expressed worries about GOCO and stated that it was vital that we consult our allies to ensure that there will be no adverse impact on co-operation. This point was made by my noble friend Lady Dean. Indeed, the chairman of that committee, Mr James Arbuthnot, said:
“We expect to be given more detail about the GoCo proposals”.
If the Government pursue this private partnership, that will require aligning with a company or companies that can manage a diverse programme of responsibilities and needs including armaments, supplies, training and the welfare of our nation’s Armed Forces. The partnership will certainly require invalidating or restructuring existing contracts, negotiating new business procedures, determining the Government’s ownership stake and rethinking the role of the Civil Service.
However, the GOCO strategy raises a series of questions that few in government appear to have considered. For instance, do the Government expect to find a private partner of equally diversified expertise in infrastructure—one that can manage acquisitions for Britain’s defence system? Can one partner reasonably manage an entire nation’s defence or will the partnership mean multiple private partners? Restructuring and managing Britain’s defence procurement operations is a project of paramount scale and importance. Considering the G4S summer Olympics embarrassment and the very costly outcome it had for G4S, is defence partnership attractive to the private sector or is the task simply too risky for investment? What happens if the private partner falls short of its commitment, as G4S fell short in 2012 at the Olympics? What happens if needs outgrow the resources of the business partner or, worse, if the partner goes bankrupt? Poorly thought out schemes are risky and the Government have exposed themselves to scrutiny without supportive answers to encourage taxpayers or potential investors.
I have three questions for the Minister. Will the Government consider wealth creation and job opportunities in awarding the defence partnership? Will they maintain a golden share of ownership in any or all of the companies included in the contract to operate the partnership? Will they share a company’s financial burden in partnership, and how will they scrutinise the spending of millions of pounds of taxpayers’ money? The need to ask these questions reflects the Government’s overall indecision and unpreparedness on this matter. Until the Government prepare a more detailed position on procurement, we are simply left with many daunting and outstanding questions.
Lord Rosser
My Lords, I add my thanks to my noble friend Lady Dean of Thornton-le-Fylde for securing this debate on the important issue of defence procurement, on which there are areas of concern and uncertainty, a number of which my noble friend raised. The Government claim to have a balanced budget for defence, but it applies only to the equipment budget, which represents 40% of total Ministry of Defence annual expenditure. The recent National Audit Office report did not even cover that 40% as it did not look at equipment support costs, which make up just over half the total equipment plan cost. The report stated that,
“there is systemic over-optimism inherent in the Department’s assumptions around the costing of risk”,
and that,
“the cost of … procurement projects in the Equipment Procurement Plan has been understated by £12.5 billion”.
The National Audit Office also said:
“Achieving affordability is … contingent on savings being achieved elsewhere in the budget”,
which can only mean the non-equipment budget comprising welfare, housing and manpower.
One of the major outstanding procurement matters, as has already been said, is a decision on the future of Defence Equipment and Support, on which there appears to be some delay. The Government favour moving to a government-owned, contractor-operated organisation, but have not answered many of the points of concern that have been raised, including those raised by the Defence Select Committee in the other place. The opposition position is that private expertise should be integrated in policy-making, since a partnership delivers positive policy outcomes. We have, however, practical reservations about the GOCO model for reform of Defence Equipment and Support. Accountability to Parliament must be retained, and the reasons for outsourcing a £160 billion equipment programme must be much more explicit than is the case at present.
It is not clear with a GOCO what risk is being transferred from the public sector to the private sector. The risk lies with the body or organisation that pays the cost in either financial or reputational terms if equipment is not delivered to specification, to time and within budget. Where that risk currently lies with the Ministry of Defence in the public sector it is not going to be transferred to the contractor-operated but government-owned organisation, not least because no contractor would be prepared to take on such a risk. It is difficult to see what risk at all would be taken on by the contractor. Should the full burden of risk continue to be with the Ministry of Defence, the benefits of the GOCO model and the outsourcing of procurement decision-making become harder to see.
In order to gain or retain an advantage over potential aggressors and enemies, new defence equipment, by definition, will be at the leading edge of technology. That can increase the likelihood of overruns, since new ground is being broken, and, with it, the uncertainties that have to be addressed and the unexpected that may well occur. In that situation the risk has to be borne by the public sector since no company would be prepared to take on such a risk that could well jeopardise their very existence if it materialised.
A private contractor operating a GOCO is presumably going to achieve its return through equipment that is procured rather than through equipment that is not, even though in some cases dropping, or making significant changes to, a project would appear the better option than continuing with it. Under the GOCO proposal with the private contractor, how would the contract incentivise or reward a project manager to meet the time and cost targets of a project if it had become clear either that the costs would be well in excess of what had been estimated or, alternatively, that the specification could no longer be met within the timescale—or, indeed, adequately met at all? We need a broader new culture, with the Government being prepared to return a project to the main gate stage when forecast cost or timescales exceed set targets. Changing specifications and an acceptance of missed targets should not be the norm.
Presumably, under the GOCO, many of the same people as now would continue to be involved in defence procurement, as the TUPE arrangements would apply, with those currently involved being transferred over to the new organisation. If the argument is that a private contractor will somehow be better able to buy in and bring in talented people, then why can the Ministry of Defence not do this? We have a model of private sector management operating an activity in the defence field at Aldermaston. What exactly does the Ministry of Defence feel has been achieved from this that has been beneficial in terms of cost and performance? What experience do other countries have of outsourcing responsibility for defence acquisition? Under the government-owned, contractor-operated scheme, how would the Ministry of Defence retain overall responsibility for UK defence acquisition? Would such a development in this highly sensitive security field have an adverse impact on levels of co-operation with allies?
The greater the extent to which responsibility for UK defence acquisition is outsourced to the private sector then the less knowledge on this vital and security-sensitive area of activity is retained within the military and the Ministry of Defence. There must surely be an argument for nurturing and developing these skills within the Ministry of Defence and providing opportunities for worthwhile and satisfying careers within defence acquisition, rather than seeing defence acquisition as a step on the ladder to another career within the military field. This would help to ensure that the expertise and knowledge are acquired to work with maximum effectiveness with both manufacturers and suppliers, as well as within the Ministry of Defence and the military. We need to be able to offer a permanent professional career choice in procurement, ending two-year stints.
This is surely an area of activity where the Ministry of Defence must retain real knowledge and expertise, bearing in mind the sensitive security nature of defence acquisition, the sums of money involved and the need for a defence industrial strategy which supports appropriate national sovereignty. The House of Commons Defence Select Committee stated in its recent report that,
“the absence of a defence industrial strategy which supports appropriate national sovereignty puts the UK at a disadvantage against competitor countries”.
Procurement power should be used to provide certainty, support supply chains, increase transparency and establish an active industrial strategy in partnership with business. Since the Government seem to regard buying off the shelf as their default position, it is increasingly important to give industry greater certainty—and that means being explicit in the capabilities the Government intend to purchase off the shelf and those they regard as sovereign.
When an effective market exists, competition is the best procurement policy. The reality, though, is that there is seldom a viable market for major defence projects. There must be a case for considering how certain value-for-money tests might be taken into account, including wider employment, industrial or economic factors. Given the social and economic impact of defence procurement, it should be looked at on a cross-departmental basis. Defence decision-making could be made more transparent through the MoD publishing the cost-benefit analysis that provided the basis for awarding contracts, while respecting commercial sensitivities and any classified security issues. This would also add greater accountability, something that was exposed as necessary during the Department for Transport’s west coast main line franchising debacle.
I hope that the Minister will be in a position to provide more information on the Government’s intentions and reasoning on future defence procurement. Defence procurement is technical, and reform to Ministry of Defence internal structures is necessary, but we should surely always remember that the goal and objective for procurement is about delivering equipment when and where it is needed on the front line in order that battles can be won, lives can be saved and operations brought to a successful conclusion.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, I thank the noble Baroness, Lady Dean, for securing this debate to discuss the important issue of defence procurement. It is a privilege to wind up in such an informed debate, and I am very sorry that the noble Lord, Lord Davies of Stamford, was not able to speak, because I always enjoy hearing his contributions.
Lord Davies of Stamford
The Minister is very kind. I was not intending to intervene in his speech, but I take this opportunity to apologise to the Committee for having got the timing so badly wrong and arriving late for this debate, which I thought was going to start a little later than it did.
Lord Astor of Hever
The noble Baroness suggested that we should have another debate on this issue, and I would very much welcome that. A lot of noble Lords have mentioned the GOCO issue in particular. When the situation is clear on that, maybe we could return to it in a more detailed debate.
Today’s debate provides me with an opportunity to explain our policies and priorities for defence procurement and to set them in the wider context of our ongoing defence transformation programme. The noble Baroness has spoken many times in support of our Armed Forces and demonstrated her steadfast concern for the welfare of our service men and women and their families. I know that those concerns are also shared by other noble Lords here today, so I start by paying tribute to the men and women who serve in Her Majesty’s Armed Forces, who provide the ultimate guarantee of our security and independence. That is also why defence procurement, particularly defence equipment acquisition and support, is vital. We need to be able to adapt and configure our capabilities to address tomorrow’s threats and to build more agile forces for the future. Support operations will always be our first priority.
Our approach to defence acquisition is a key element in delivering military capability and ensuring future operational success. The Government’s strategic priority remains to bring the national deficit under control. In defence, we must play our part in meeting that objective. However, we must also meet the commitment in the 2010 strategic defence security review to deliver well resourced and well equipped Armed Forces. To achieve that, the Ministry of Defence is in the process of delivering its largest and most far-reaching transformation programme. We are reforming defence procurement to ensure that we do it better in future and derive better value for money from the defence budget in so doing. We continue to contribute to the goal of reducing the deficit by looking for ways to conduct our business more efficiently, and expect to make £13.5 billion of efficiency savings over 10 years.
As announced in May last year, we have addressed the black hole in the defence budget. Through implementing changes flowing from the SDSR, we have brought the budget into balance. That means that, for the first time in a generation, our programme is affordable within the resources that we expect to have available to us. It provides a necessary foundation for our future approach to defence procurement and the implementation of the reforms recommended by the noble Lord, Lord Levene.
Having established a core equipment programme last year, we are now concentrating on its delivery. We will spend around £160 billion on equipment over the next 10 years, covering our current commitments, the major equipment programmes announced in the SDSR, and deterrent and equipment support costs. In January this year, we published for the first time a detailed summary of our equipment plan, setting out priorities and budgets for equipment procurement and support over the next 10 years. This was accompanied by a National Audit Office assessment of its affordability, and we are delighted that, in its report, the NAO recognised the progress that we had made in putting in place the changes needed to achieve and maintain affordability.
The core programme delivers the major force element set out in the SDSR. This, with the headroom and contingency provision that we have built in to protect the programme from emerging risks, will provide us with the flexibility to determine our procurement priorities in accordance with operational priorities and not simply on the basis of immediate affordability. It will also provide the defence industry with greater clarity on which to plan for the future.
Through the equipment plan we will deliver significant enhancements to our fighting capabilities, including completion of the two Queen Elizabeth class aircraft carriers, significant investment in the Lightning II aircraft—which together will provide a high-end power projection capability for decades to come—completion of the Astute class attack submarine programme, an upgrade to our fleet of Warrior infantry fighting vehicles, continued development of the Scout and significant enhancements to air transport through the new A400M aircraft.
Our first priority for defence procurement has therefore been to establish a solid foundation from which we can deliver the necessary capabilities for our Armed Forces to do their job. We have made good progress in this and, as an ongoing priority, will continue to apply rigorous management to ensure that the budget remains in balance in the years to come.
I would highlight that the latest NAO Major Projects Report, published in January this year, stated that annual cost increases for our 16 biggest programmes in the financial year 2011-12 were only one-seventh of what was in the comparable report two years earlier. Although we have much more to do, we are moving in the right direction.
We have also sought to reform our approach to how we conduct procurement. In February last year, the Government published their White Paper, National Security Through Technology. This provides a framework for equipping our Armed Forces with the best possible capabilities that we can afford through the equipment plan and, in so doing, for achieving the best possible value for money.
We will seek to fulfil the UK’s defence and security requirements through open competition in the domestic and global market and buy off the shelf, where appropriate, to take full advantage of the competitive international market. However, where capabilities are essential to our national security, such as nuclear submarines and complex weapons, we will seek to protect our operational advantage and freedom of action. We will also maintain our investment in science and technology. In taking this approach, we recognise the important part played by the UK defence industry. Our policy, through the White Paper, is designed to provide the catalyst for making UK industry competitive and therefore able to win a large proportion of additional orders within the global market through successful exports. A healthy and competitive defence industry in the UK is able to sustain many UK jobs and thus make a vital contribution to growth and a rebalanced economy. We are also opening up opportunities for small and medium-sized enterprises. In the last financial year, some 40% of contracts by volume were awarded to small and medium-sized enterprises, and there is scope for this to increase still further.
Looking to the future, reforming the acquisition system is a key priority and a core element of our work to transform defence. We will take a major step forward in April, when the new defence operating model goes live and the newly empowered service and joint forces commands assume responsibility for setting equipment and support requirements. This is an important part of our work to implement the recommendations of the defence reform report of the noble Lord, Lord Levene.
Major structural reform of defence equipment and support organisation is also central to this process. It will ensure that we have the structures, management and skills necessary to deliver the right equipment to our Armed Forces at the right time and at the right cost. Preliminary work undertaken to date has identified a government-owned, contractor-operated entity known as GOCO as the preferred future operating model for defence equipment support. This needs to be tested further before any final decisions are made. A decision will be made shortly on whether to move into an assessment phase. If agreed, this would see the GOCO model tested against a robust public sector comparator. This would work towards producing a final business case that will recommend a future operating model for defence equipment and support. We would expect a decision to be made in 2014.
A lot of very important questions were asked. I will do my best to answer them, but I am conscious that I may not be able fully to answer all of them, so in some cases I will write to noble Lords in more detail. The noble Baroness and other noble Lords asked about GOCO and whether a compelling case had been made for reform. Proposals for an assessment phase are currently being considered. If approved, the assessment phase will involve developing GOCO options through negotiations with potential private sector partners. A robust public sector comparator will be developed in parallel. As I said, a decision will be made shortly.
The noble Baroness asked whether a final decision on GOCO had been made. The answer is no. We are currently considering whether to move into an assessment phase that will allow us to make a comparison between GOCO and an in-house comparator. It will look at how far defence equipment and support can be improved in the public sector. The noble Baroness also asked about our allies’ views on GOCO. We are working closely with our international partners to assess the impact of any potential changes and will continue to do so.
The noble Lord, Lord Touhig, asked whether one partner could cope. We envisage that there is likely to be a consortium to cover a diverse range of activities. He asked whether there was an appetite in the private sector. We have engaged with potential partners throughout, and they seem keen. He asked about bankruptcy and falling short. We will ensure that procurement activity does not collapse.
The noble Baroness asked whether there was a government plan to ensure both skills and an affordable programme, and what new skills would be required. The noble Lord, Lord Rosser, also asked about skills and apprenticeships. For defence equipment and support, we are ensuring that we have the necessary skills to ensure that safety is not compromised. We place the highest priority on filling safety-critical posts with suitably qualified people. We continue to recruit apprentices, for example in the field of engineering, to continually refresh our skills base and ensure that we will have the right skills in future to support our Armed Forces.
The noble Baroness asked about the 1% rise from 2015. This applies to the equipment part of the budget, which is 40% of the overall defence budget. It is not a 1% year-on-year increase from 2015. We have taken what we thought was adequate for the equipment budget and increased it by 1% from 2015. The equipment programme is now affordable within available resources.
Finally, the noble Baroness asked about science and technology. A White Paper, National Security Through Technology, recognises the importance of science and technology. The Government are committed to sustaining investment in science and technology at a minimum of 1.2% of the defence budget. The publication of our 10-year equipment plan will enable industry to plan future investment with greater confidence.
I have run out of time. I am aware that I have not been able to answer every question, but I will write to noble Lords.
House of Lords
Northern Ireland: Corporation Tax
(11 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Lexden
To ask Her Majesty’s Government, further to the answer by Lord Newby on 15 October 2012 (HL Deb, col. 1251) and the Written Answer by Lord Sassoon on 6 December 2012 (WA 187), when they plan to announce whether or not corporation tax is to be devolved to the Northern Ireland Assembly.
Lord Newby
My Lords, the joint ministerial working group on rebalancing the Northern Ireland economy has concluded its discussions on the potential devolution of corporation tax and reported its findings to the Prime Minister. The Prime Minister is committed to meeting the First Minister and Deputy First Minister on 26 March to discuss these findings.
Lord Lexden
My Lords, my noble friend will be aware of the deep concern that exists in Northern Ireland over this issue, which is taking so long to bring to a conclusion. I welcome very much the news that he gave us about the forthcoming meeting. Since the Republic of Ireland has a corporation tax rate of 12.5%, it is widely felt that Northern Ireland needs its own low rate to help it to compete for new inward investment. Will my noble friend confirm that there is widespread support among businessmen and employers in the Province for the devolution of corporation tax to the Assembly, and that all the main parties are in favour of it? Have their views been fully taken into account? Finally, I pay tribute to my noble friend and his colleagues for their commitment to rebalancing the Northern Ireland economy by stimulating the growth of the private sector, which the Province needs so badly.
Lord Newby
My Lords, I think that account has been taken of views expressed from many quarters. However, the complication, as the noble Lord will be aware, is that if the Northern Ireland Assembly were to cut the rate of corporation tax significantly, its own budget would have to be cut by an equivalent amount.
Lord Wigley
My Lords, will the noble Lord confirm that the Government have taken on board the recommendations of the Silk commission, which, in the context of corporation tax, recommended for Wales that, if Northern Ireland were to have corporation tax powers, so should the National Assembly for Wales? Given that the Government have welcomed the Silk commission’s first report, will he confirm that that will now happen?
Lord Newby
I am not absolutely sure what the noble Lord is asking me to confirm because no decision has yet been taken on corporation tax and Northern Ireland. The Government are sympathetic to much of what has been said on the Silk report and are now in discussion, as he is aware, with the Government in Wales.
Lord Shutt of Greetland
My Lords, bearing in mind that it is the rebalancing of the Northern Ireland economy that is the reason for people being concerned about the rate of corporation tax, and that is why the joint ministerial group gathered, were there any other ideas that came from that group that would assist the rebalancing of the Northern Ireland economy?
Lord Newby
My Lords, a number of measures were announced in the Autumn Statement aimed at rebalancing, or rather promoting, the Northern Ireland economy, including another £132 million of capital expenditure, science and technology funding for the research partnership at Queen’s University and the slightly earlier decision to give the Northern Ireland Assembly decision-making powers over air passenger duty on long-haul flights.
Lord Richard
My Lords, as I understand it, the noble Lord, Lord Wigley, was asking the noble Lord to confirm that if this happens in Northern Ireland, the Government accept that it would happen in Wales, too. Can he confirm that?
Lord Newby
My Lords, that is something that we will confirm once we have a final decision in Northern Ireland.
Lord Foulkes of Cumnock
My Lords, does the Minister agree that any decision in relation to Northern Ireland does not constitute a precedent for any other part of the United Kingdom because Northern Ireland is the only part of the United Kingdom that has a land border with another European Union country?
Lord Newby
My Lords, that is the reason why this has become such a big issue in Northern Ireland. The same considerations do not apply elsewhere in the United Kingdom, although I remind the House that the differential between the rate of corporation tax in Northern Ireland and the rate in the Republic of Ireland is now significantly less than it was when this Government came into office.
Lord Browne of Belmont
My Lords, will the Minister confirm that the Government will take steps to ensure that any reduction in corporation tax rates in Northern Ireland does not lead to a proliferation of artificial tax avoidance arrangements such as the manipulation of transfer prices and formation of shell companies, which could lead to a loss of tax revenue both in Northern Ireland and in the rest of the United Kingdom?
Lord Newby
My Lords, that is one of the issues which obviously has to be considered as part of this overall discussion. As the House knows, the Government take artificial tax avoidance schemes extremely seriously.
Lord McAvoy
My Lords, I welcome the fact that, after two years of dithering, the Government look as if they are finally coming to a conclusion and a response. However, does the Minister agree that we need action now and not just on the issue mentioned here? Will the Government support our proposals temporarily to cut VAT, give support to small businesses through national insurance breaks and bring forward major infrastructure projects—all of which will give real help to business, construction and manufacturing, get Northern Ireland’s economy moving and put young people back to work?
Lord Newby
No, my Lords. Sadly—from the noble Lord’s point of view—we will not be supporting the noble Lord’s proposals, not least because, taking just the VAT proposal on its own, it would cost about £12 billion. I am not sure where he suggests we should get that money from.
Lord Mawhinney
My Lords, is not the major but unspoken problem that there would be widespread concern that, if corporation tax was devolved to the Northern Ireland Assembly, the Scottish Government would wish to be treated in a similar fashion? If that were the case, by how much would the budget of Scotland have to be reduced from central moneys if corporation tax in Scotland was reduced to 12.5%? Would the Minister expect the First Minister of Scotland to demand that the Scottish budget not be reduced by that amount?
Lord Newby
My Lords, it would not really be at the discretion of the First Minister of Scotland because the Azores criteria mean that if there is a differential cut of tax the region or nation that bears that cut has to take the full fiscal consequences of doing so. I do not have the figure on the cost of such a cut to Scotland. However, bear in mind that the estimate of such a change in Northern Ireland is that there will be a cut in its grant of between £300 million and £400 million. I think that the noble Lord can scale that up for Scotland.
Park Homes: County Court Judgments
Lord Graham of Edmonton
To ask Her Majesty’s Government whether they monitor the resolution of county court judgments, especially in the case of the park homes industry; and, if so, how.
Lord Ahmad of Wimbledon
My Lords, we recognise that there are issues within the park homes industry, and the Government have supported the Mobile Homes Bill to ensure that home owners are better protected and that local authorities can enforce against breaches of site licences. On the resolution of county court judgments, these are not monitored and the civil courts only provide a forum in which individuals can resolve their disputes. However, the Government believe that an effective enforcement system is important and reforms have been made to strengthen these methods.
Lord Graham of Edmonton
My Lords, I am grateful to the Minister for his reply, as far as it goes. Is he aware that last year a park home owner admitted or acknowledged to the Communities and Local Government Select Committee that he had £150,000 standing against his name as unpaid? Does the Minister recall that in the West Country a family of park home owners have £150,000 against their names? Earlier this year, the Isle of Wight dealt with this matter and two park home owners, who have form, were convicted on 11 counts. They were then fined £300,000, and according to the local authority’s press release £275,000 was for compensation. Can the Minister explain why in some cases compensation is guaranteed, when in others it has to be fought for?
Lord Ahmad of Wimbledon
My Lords, as the noble Lord has acknowledged, the Government are taking steps in this regard. Again, I highlight some of the methods we have looked at. The civil courts offer several enforcement methods, including warrants of execution, attachment of earnings, third-party debt orders, charging orders and orders for sale. We have also looked at the ways by which debtors should be providing means. For example, people can apply for orders to obtain information. As I have already said, the Government recognise that effective enforcement is crucial to ensuring a successful civil justice system. However, we are not planning a return to imposing prison sentences for debtors who do not pay their debts.
Lord Marks of Henley-on-Thames
My Lords, does not the Question highlight the need for effective enforcement in many areas—of sanctions against directors of companies of dubious commercial legitimacy and, in particular, a more determined use of directors’ disqualification proceedings against directors who trade fraudulently or while insolvent?
Lord Ahmad of Wimbledon
My Lords, I agree with my noble friend. There are more than 85,000 park homes across 2,000 sites and such instances occur. That is why the Government are taking steps to tackle site owners who take advantage of tenants and then reregister themselves as another company. Through the changes we are bringing forward, we are ensuring that local authorities will issue licences to directors who apply to set up other companies, therefore giving them greater control over the issuing of such licences to people who have been found to be neglectful of their responsibility to their tenants.
The Earl of Courtown
My Lords, the noble Lord, Lord Graham of Edmonton, is well known throughout the House for his support of park home owners’ properties. What sort of protection and advice can Her Majesty’s Government give to such owners on their heating appliances? I gather that in Cornwall in the past 12 months, four people have died as a result of gases and noxious fumes from their heating appliances. Do the Government have any advice for park home owners to help them with this problem?
Lord Ahmad of Wimbledon
I thank my noble friend for his question, which raises a very important issue. Again, this comes down to the site owners, who are responsible for the provision of utilities on the sites. The Government are considering more effective enforcement and looking to work with local authorities to ensure that utility provision is effective and, as my noble friend has highlighted, specifically that the health and safety of people who often may be unable to fend for themselves is protected against unscrupulous site owners.
Lord Kennedy of Southwark
My Lords, why do the Government not monitor county court judgments? It would give them valuable information that they could use in policy development.
Lord Ahmad of Wimbledon
I have already observed that we have to strike a balance. The other side of the coin is that various options are open to people in pursuing county court judgments, which are decisions of civil courts. It remains primarily the responsibility of creditors to achieve a resolution. A range of measures is available, including warrants of execution, attachments of earnings, third-party debt owners and orders for sale, all of which can help in getting a resolution on outstanding issues relating to the obtainment of payment.
Lord Cormack
My Lords, will my noble friend try and ensure that all owners of park homes are given clear guidance on the extra protection that they will have when the Bill that is completing its stages through Parliament becomes an Act? Will he do his very best to ensure that these vulnerable people are aware of their new rights?
Lord Ahmad of Wimbledon
My noble friend is correct. The Bill to which I alluded, and with which the noble Lord, Lord Graham, was greatly involved, seeks to ensure that those with mobile park homes are made aware of their rights and that the obligations of site owners are made clear. My noble friend makes a valid point that I shall take back to the department about the effectiveness of communication across the board in ensuring that the tenants in these properties are made fully aware of their rights.
Lord Hunt of Kings Heath
My Lords, on carbon monoxide poisoning, to which the Minister referred, will he institute talks with the Health and Safety Executive to ensure that installers receive appropriate training in the heating appliances that are appropriate for park home owners? The quality of installation is well recognised to be a big problem.
Lord Ahmad of Wimbledon
I agree with the noble Lord. I remember that when I was a local councillor dealing with these issues on Traveller sites, exactly that kind of undertaking was given by the local authority to ensure the effective and safe provision of utilities. The noble Lord makes a valid suggestion that I am sure we all want to take forward.
Roads: New and Young Drivers
(11 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Gardner of Parkes
To ask Her Majesty’s Government, in view of the proportion of fatal accidents involving young drivers, whether they will introduce measures similar to those in force in Northern Ireland placing restrictions on new and young drivers.
Earl Attlee
My Lords, the Government are committed to improving the safety of young drivers. As part of the ongoing work to reduce the risk of accidents involving young and newly qualified drivers, the department is considering several options to ensure that they are properly prepared and drive safely. We continue to work with young people, insurance companies and key partners in considering any changes affecting learner drivers and those who have just passed their test.
Baroness Gardner of Parkes
Has the Minister seen the case, settled only this month since I tabled the Question, of Courtney Meppen-Walter, aged 18—a £1,000-a-week junior footballer who has played 17 times for his country—who killed two people and injured two children, and was jailed for 16 months? He was exceeding the 30 mph speed limit by 100% and it had been noted that he had been playing games with a VW Golf before the accident occurred. He has now been disqualified for three years. Does my noble friend think that this was just a case of bravado or was it a most unfortunate example of a young person whom other young people would look up to? Is not the matter very serious and should not something be done? That has been resisted by too many Governments in the past when I have moved amendments in favour of such action.
Earl Attlee
My Lords, it is an extreme case but, sadly, it is not unique. Young drivers are prone to immaturity and reckless driving. They can also be easily distracted, especially when driving while carrying other youngsters. We are seeking to reduce the risk of these very sad accidents and will carry on the work of the previous Administration in doing so.
Earl Attlee
My Lords, my understanding is that the work is concentrated on car drivers but, if I have any more information about young motorcyclists, I will write to the noble Lord. Over recent years, there has been a tightening-up of the rules for acquiring a motorcycle licence. I understand, however, that there is a problem in relation to more mature drivers starting to use motorbikes for recreational purposes, and, sadly, the accident rate there is not very good either.
Lord Bradshaw
Can the noble Earl tell the House what progress is really being made? Accidents and serious injuries among young drivers cause the largest number of deaths in that age group. I know he said that the department is considering something, but can he give us concrete evidence of any move which may reduce this toll of unnecessary suffering?
Earl Attlee
My Lords, I agree with my noble friend that a motor accident is a very high risk for youngsters—probably the worst risk for an untimely end. However, the previous Government made good progress in reducing the accident rate and we will continue that work.
Baroness Masham of Ilton
My Lords, would the Minister consider having probationary plates on the cars of young drivers until they are about 21 years of age? If he did something useful, it would be very helpful for all those parents who have lost young people under the age of 21 who were driving too fast.
Earl Attlee
My Lords, probationary plates are one of the things that we are considering in order to deal with that sort of problem, possibly linked with other measures—for instance, not allowing young or new drivers to carry young passengers.
Lord Davies of Oldham
My Lords, of course we are happy to support any measure that improves the safety record of young drivers. However, that does not mean that we support the pricing of young drivers off our roads. The increase in insurance for young drivers last year was 53%. How do we expect young people, particularly in rural areas, to be able to get to jobs, apprenticeships or even education institutions if they cannot afford to run a car?
Earl Attlee
My Lords, the noble Lord makes an important point. Some of the measures we are thinking of have a cost and could have an adverse impact, perhaps meaning that young drivers do not bother with a driving licence at all. Therefore, we have to be very careful about what measures we put in place. As to the noble Lord’s substantive point about the cost of insurance, we are well aware of this. At a previous encounter, I said that my right honourable friend the Secretary of State was shortly to have a meeting with the insurance industry. We intend to hold a further meeting with the motor insurance industry on 25 March, following the successful summits held last year aimed at tackling the high cost of premiums, especially for young drivers.
Lord Howell of Guildford
My Lords, I may be a little out of date but in my day as a Minister in Northern Ireland, which was three decades ago, Northern Ireland had the very useful practice of all drivers having a green sign for the first year after they had acquired their licence. That was 30 years ago. Twenty years ago when I was Secretary of State for Transport, we considered that idea in the department. Would it now be a little premature to reach a decision?
The Countess of Mar
My Lords, does the noble Earl agree that it is very hard to legislate for the exuberance of youths, especially when egged on by other exuberant youths, and that, even with a green plate on the back of their cars, they will test the boundaries of the law as hard as they can? I am not advocating that they should ignore the law but we have to face the facts. We were all young once and did silly things.
Earl Attlee
My Lords, experience from Sweden shows that a longer period of learner driving supervision can reduce the risk of accidents later. It is one of the things that we are looking at and we hope that it will address some of the behavioural issues.
Baroness Farrington of Ribbleton
My Lords, will the Minister ensure that in government discussions with the insurance companies, the issue of young learner drivers, particularly those on motorcycles and scooters who are working and trying to read maps when delivering pizzas, is dealt with? I understood that it was illegal to employ such drivers for deliveries. It is certainly very frightening to look at them trying to read where they are going and not being fully in control of their equipment.
Earl Attlee
My Lords, during the passage of the Road Safety Bill through your Lordships’ House, in opposition I tried to run an amendment along those very lines but it did not find favour. The reason was that a balance needs to be struck between the impact of the measures put in place and the adverse impact, including the adverse economic impact, on youngsters. It is a difficult balance but I understand the point made by the noble Baroness.
Leveson Inquiry
Baroness Boothroyd
To ask Her Majesty’s Government what progress has been made in their response to the Leveson report.
Lord Gardiner of Kimble
My Lords, perhaps I may first remark on the noble Baroness’s extraordinary sense of timing.
Lord Gardiner of Kimble
The all-party talks have been a productive process. It is appropriate to acknowledge the many hours, day and night, that all parties and interests have devoted to these discussions. As your Lordships will appreciate, the Prime Minister hopes that Mr Speaker will allow him and the other party leaders an opportunity later this afternoon to set out what has been agreed. Until then, I can say little more but I know that my noble friend the Chief Whip proposes to make a short statement after Questions about our own business today.
Baroness Boothroyd
My Lords, as we have been told by the media during the course of the morning and by leading Members of Parliament that the cross-party talks have been successful, I feel entitled to put my Question and to have an Answer from the Minister today. Therefore, will the Minister assure the House that the proposed royal charter will be protected by statutory regulation? With great respect, I ask the Minister to answer me clearly on this point: will the charter be legally underpinned against future changes without the consent of Parliament?
Finally, last week, the Prime Minister told us:
“There’s no point in producing a system that the press won’t take part in”.
How many publishers or editors were kept informed of the proposals and have agreed to them? Can they opt out if they wish to do so?
Lord Gardiner of Kimble
My Lords, I am sorry to disappoint the noble Baroness but, as I said earlier, this will be the subject of debate in the other place, and it would be unreasonable to answer now. It would be a courtesy to the Prime Minister and the other leaders if those matters were left for later this afternoon.
Lord Fowler
My Lords, perhaps I may ask a question on Leveson that is not dependent on this afternoon’s events. My noble friend will remember that there was a majority of more than 130 on the Leveson-related amendment proposed by the noble Lord, Lord Puttnam, to the Defamation Bill. He will also remember that a number of people totally overreacted to that and alleged that the Government would withdraw the whole Bill. Will my noble friend confirm that that is not the intention of the Government; that it never has been their intention; and that the Defamation Bill will go through its normal parliamentary process?
Lord Gardiner of Kimble
My Lords, I well understand the point that my noble friend raises about the Defamation Bill and its progress, and I am sure that these matters will be clarified.
Baroness Jones of Whitchurch
My Lords, first, I place on record our welcome for the cross-party agreement that was announced today. In the light of that and following the Question asked by the noble Baroness, Lady Boothroyd, may I push the Minister a little further? Does he agree that it is important that this House debates the contents of the royal charter, which was published only today so many noble Lords will not have seen it? Will he give us an indication of the scheduling of whether and when we might be able to debate the whole of the royal charter, and not just parts of it in other Bills that have already been scheduled for debate?
Lord Gardiner of Kimble
I am afraid to say that, again, this is rather above my pay grade. It is obviously a matter for the usual channels in the first place. I am not in a position to suggest business for your Lordships’ House and that is where the position will have to remain for today.
Lord Soley
I put it to the Minister that the royal charter, a draft of which I read today, is statutory underpinning. I understand the problem that he has about the timing, but we should not worry too much about that. The central message is that we need the agreement of the whole of Parliament to take this forward, if only to give the public the confidence in the press that they need. We also need to remind the press that this is an opportunity for it to change the culture that has done it so much damage over the years. I say that as someone who introduced the Freedom and Responsibility of the Press Bill 23 years—nearly a quarter of a century—ago. Much of what was in that Bill is in a combination of the royal charter and the Leveson report. Therefore, let us work together jointly and give the press the opportunity that it needs to improve its standards.
Lord Gardiner of Kimble
What the noble Lord has said is a powerful statement of a view that many will share; I certainly do. This is an opportunity for the press to change some of the practices that have occurred but should never have occurred. The important thing is not just that we think of the victims but that we ensure we have in place something that means these things do not happen again. What the noble Lord said certainly chimes with me. I am sorry that the timing of this Question is such that I am not in a position to discuss the detail. It would be a courtesy to the leaders of the two political parties in the other place—
Lord Gardiner of Kimble
Three parties—there is no guessing which two I mean. Forgive me, my Lords. It is a courtesy that I would like to retain: the leaders of the three political parties should have their opportunity very shortly.
Lord Dykes
I fully understand my noble friend’s reticence in this matter, but will he confirm at least that the Hacked Off campaign, which mainly represents the victims, has apparently accepted the outline framework of the deal, which should make it easier for all the newspaper proprietors to join in?
Lord Gardiner of Kimble
I saw some of the Hacked Off press conference and I understand that, as the noble Lord said, there is agreement all round. I hope that is the spirit in which your Lordships, and indeed those in the other place, will take this. We need to unite around the proposals if we possibly can and take the matter forward.
Draft Public Bodies (The Office of Fair Trading Transfer of Consumer Advice Scheme Function and Modification of Enforcement Functions) Order 2013
Viscount Younger of Leckie
That the draft order laid before the House on 12 December 2012 be approved.
Relevant documents:15th Report from the Joint Committee on Statutory Instruments, 24th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 12 March.
Enterprise and Regulatory Reform Bill
Baroness Anelay of St Johns
My Lords, I beg to move that further consideration on Report of the Enterprise and Regulatory Reform Bill be postponed until after the debate on the Motion of my noble friend Lady Tonge.
As my noble friend Lord Gardiner of Kimble has just said in response to the Question of the noble Baroness, Lady Boothroyd, this is when I hope to set out the procedure for the rest of today. In doing so, I make it clear that what I am about to say is against the background of very productive and constructive talks among the party leaders, but also, as is usual in this House, constructive talks with Her Majesty's Opposition. The Chief Whip of the Opposition has not only seen what I am about to say, but has been involved in agreement on that matter. Clearly, this House has a prime interest in knowing how it may contribute to the debate on the deal which is coming to fruition and has been long in negotiation over the past weeks but certainly into the early hours of this morning.
There is also a procedural background, which as a business manager I must operate within. I think my English grammar is going a bit awry here, but I will explain to the House where we are in terms of what is happening elsewhere and here, and I will then explain what it means for us today. The House is of course fully aware that my right honourable friend the Prime Minister, together with the leaders of the other main parties, has asked the Speaker of another place for an emergency debate this afternoon on the matter of the party leaders’ response to the report from Lord Justice Leveson on the culture, practices and ethics of the press. Until that debate has started, we will not know absolutely for certain what has been agreed between the party leaders. That is not saying that there is no agreement, it is saying that as a matter of practice we will give them the courtesy of being able to set out what they believe may be contained within that agreement. Until then, we simply have nothing on which we can proceed effectively.
On the timing, we expect the House of Commons to start that debate at about 4.30 pm. In procedural terms, I have moved that our further consideration on Report of the Enterprise and Regulatory Reform Bill be postponed until after the Motion in the name of my noble friend Lady Tonge. To do so will of course enable the House to hear what the party leaders have to say on the matter of the press before we then turn to it ourselves. As noble Lords will know, we have core amendments on the matter of Leveson in the Enterprise and Regulatory Reform Bill today.
I have spoken to my noble friend Lady Tonge. She is aware that we will deal with her Motion first so that she has the first debate. It is my expectation, as it is hers, that the debate on her Motion may not take the full time until 4.30 pm or 5.30 pm. In order to give noble Lords certainty about when this House will be able not only to listen to the leaders in the Commons but also to have its own debate here, I propose that the debate on the Enterprise and Regulatory Reform Bill will start at 5.30 pm. In other words, we will go from this to the Motion of the noble Baroness, Lady Tonge. If that does not take us to 5.30 pm, a Whip will adjourn the House further to 5.30 pm. This House will have full opportunity to debate the amendments on Leveson, of which there are many, at 5.30 pm. As I have said, I have discussed this with the Opposition Chief Whip, who is in agreement. Therefore, at this stage I formally beg to move that further consideration on Report be postponed until after the Motion in the name of my noble friend Lady Tonge.
Lord Hughes of Woodside
My Lords, without in any sense disagreeing with what the noble Baroness has said, is it not the case that in the other place today there will be a Statement on Cyprus and that that Statement is not being taken in this House? The decision on Cyprus is possibly the most calamitous decision that has ever been taken for Europe, for the finances of this country and for the European zone. Is it not inconceivable that the Statement is not being taken here, especially, as the noble Baroness has said, when we have plenty of time?
Baroness Anelay of St Johns
My Lords, that is, of course, a very proper question. The noble Lord, Lord Hughes, asks about things that are on the point. It is the case that whenever a Statement is to be made by the Government in another place, it is offered to the Opposition, but against the background of all the proceedings that are taking place today, I understand that the Opposition decided not to take the Statement. If there is another opportunity when it may be properly taken, we will certainly look at a way of facilitating a debate. I may be sending shivers down the spines of the business managers here who have to schedule these matters, but I understand the strength of feeling. There may indeed be other opportunities when we are able to deal with the issue, but for the moment the Opposition decided that perhaps this is not the time. I know that the noble Baroness, Lady Royall, is keen to contribute and I am happy for her to do so.
Lord Skidelsky
My Lords, I am a little unhappy about the procedure set out by the noble Baroness, which is to postpone consideration of the Enterprise and Regulatory Reform Bill until the other place has had its debate. It is always open to noble Lords in moving amendments to withdraw them in the light of any decisions reached in the other place, but that is no real reason for fiddling around with the order that has been established. It is not a sufficient reason to do that.
Baroness Anelay of St Johns
My Lords, perhaps I had better respond before the noble Baroness, Lady Royall, rises to speak. It is merely a matter of timing. The noble Lord, Lord Skidelsky, has ownership of most of the amendments in the first group. The reason it is convenient to do it in this way is that the House would not have a chance to listen to the leaders by the time that any mover of those amendments decided whether to withdraw or even to press them. Again, it is simply a matter of timing so that we all have an opportunity to listen to what the leaders set out. Just the opening remarks alone will make it too late for us to get into the Enterprise and Regulatory Reform Bill. I think it would be difficult for this House to proceed with a fair consideration of the amendments today.
Lord Campbell-Savours
My Lords, do the amended arrangements for business have implications for the deferred Procedure Committee meeting to be held at 5.30 pm today?
Baroness Anelay of St Johns
My Lords, the committee will meet at 5.30 pm as previously agreed.
Lord Fowler
My Lords, I in no way disagree with the procedure, but is it a fact that a government amendment to the Bill will be placed before the House?
Baroness Anelay of St Johns
My Lords, I have given as much information as I am able to at the moment. Clearly what the Government are keen to do is ensure that every opportunity is given to the House to discuss the agreement. I know that we are working closely with the Opposition, and particularly with the noble Lord, Lord Stevenson, because his name is attached to Amendment 84KA.
Lord Cormack
My Lords, we cannot all go to the gallery of another place to listen to what the leaders say, nor can we all crowd around television sets. Will there be a Statement before we begin the debate on the substantive amendments so that we know the background against which we will be debating them?
Baroness Anelay of St Johns
My Lords, in this House it is possible within the proper proceedings of Report stage that, when a Peer moves an amendment, the Minister can get up very shortly afterwards. It is completely within the procedure of Report to be able to set out the Government’s response. I hope that that will be the case. I do not think I have ever heard anyone complain before about a lack of television monitors in this place.
Lord Stoddart of Swindon
My Lords, perhaps I may comment further on the point made by the noble Lord, Lord Hughes, about the Statement being made in the House of Commons on what has happened in Cyprus. People’s savings are apparently going to be raided by the Government. That is a very important matter which has implications not only for the eurozone but perhaps throughout the EU and the world. Bearing in mind what the noble Baroness has said about the timing of the debate, I know the House of Commons well and I know that when it gets hold of the Statement on the press, there could be a very long debate indeed. There is no guarantee that we will get the timetable that the noble Baroness and the Government would like us to have. I have to say that I am disappointed that the usual channels on both sides of the House have agreed that such an important Statement should not have been put before this House today.
Baroness Royall of Blaisdon
My Lords, perhaps I may say two things. First, it would be an excellent idea if the Minister, at the beginning of the proceedings on the Enterprise and Regulatory Reform Bill, could inform the House by means of a Statement or whatever exactly what has been happening in the Commons. That would be extremely useful. On the Statement on Cyprus, as is usual, the Government informed Her Majesty’s Opposition that there would be a Statement on Cyprus and we were asked whether we wished to take it. Notwithstanding the importance of the situation in Cyprus, and not underestimating the importance of the Statement, it was offered to us before we knew of the changes to the procedures today, and the Statement would not have come until much later on. We deemed it important for the House to discuss and debate the issues pertaining to Leveson on the Enterprise and Regulatory Reform Bill. That is why we did not ask for the Statement to be repeated. It does not undermine the importance of that issue at all and I will support the noble Baroness the Chief Whip in ensuring that we have a debate on this issue in the very near future.
Lord Hughes of Woodside
My Lords, in view of what has been said, is it possible for the Chief Whip to rearrange things now so that we can deal with Cyprus today?
Baroness Anelay of St Johns
My Lords, in this place we work on a procedure whereby we at least have the courtesy of giving notice of such matters as Statements. We offer Statements to the Opposition as soon as they are known and we wait for a response. That response was given against the background of what was known at the time today. Negotiations were clearly in play both in this place and in another place. We cannot at this stage simply turn things on their head. However, I do understand the view of probably the majority of this House that at some stage there should be a debate on the matter. It is clearly something that is not going to be easily resolved, so it is not something that has to be done today, but I will actively look into the matter. In doing so I know that this House is keen to devote itself today to the matter in hand, which is that of the Enterprise and Regulatory Reform Bill, in which this House will play a significant part in achieving a resolution.
I do not propose to answer any other questions. We have a Motion in front of us. I have given the answers as far as I can. I feel I cannot give any more information. If other noble Lords wish to ask questions I suspect that I will not be able to help them even though I will do my best to do so.
Lord Richard
My Lords, I would like to ask a practical question which the noble Baroness may be able to answer. It is quite often the practice, in this House at any rate, that when Statements are made copies are made available in the Printed Paper Office at the same time. A very important Statement is to be made in the House of Commons. Could it not be arranged that it is in the Printed Paper Office before we start the debate at 5.30 pm?
Baroness Anelay of St Johns
My Lords, that is the normal procedure. As a former Leader of the House, the noble Lord raises a perfectly valid point. It will indeed be in the Printed Paper Office.
Lord Lucas
My Lords, I should be very grateful if the Chief Whip could confirm or deny that the Government are contemplating a manuscript amendment this evening on something as important as this, because I would like to adjust my attendance or otherwise at the House accordingly.
Baroness Anelay of St Johns
My Lords, I can go only as far as I have already explained. I have answered that question already by evasion, one of the few occasions when I evade, because clearly until an amendment may have been tabled, cleared and published, it would be wrong of me to try to second-guess what is about to happen. As I explained earlier, the Opposition have been in negotiation with the Government, and we hope to proceed. I am optimistic about proceeding in a way later this afternoon in which the whole House is able properly to play a significant part in the resolution of the debate on the Leveson proposals.
Lord Skidelsky
My Lords, before the noble Baroness sits down, perhaps I may ask one question. Can she give an assurance that the debate on the Enterprise and Regulatory Reform Bill will start at 5.30 pm?
Baroness Anelay of St Johns
My Lords, yes. The only reason I said “as close to 5.30pm” is simply in case it starts a matter of a minute or two earlier, but the House will be adjourned to 5.30 pm and I expect that the House will start on Leveson at 5.30 pm. As I explained earlier, if the Motion in the name of my noble friend Lady Tonge were to take us to 5.30 pm—I do not think she hopes it will—then we will go seamlessly into it. However, what I expect to happen is that the Motion of my noble friend Lady Tonge will take a shortish amount of time. She may find some supporters she did not expect, but after that we will adjourn. It will be on the monitors, but the House can be assured that it will not be debating Leveson until 5.30 pm.
Building Regulations &c. (Amendment) Regulations 2012
Baroness Tonge
That this House regrets Her Majesty’s Government’s decision to lay the Building Regulations &c. (Amendment) Regulations 2012 (SI 2012/3119) before Parliament, and in particular their decision to change the provisions on electrical safety in the home, which will be detrimental to public safety.
Relevant documents: 23rd Report from the Secondary Legislation Scrutiny Committee.
Baroness Anelay of St Johns
My Lords, I know that noble Lords have heard enough from me already, but I remind colleagues that the noble Baroness, Lady Tonge, is trying to assist the House by going first after Questions, so if colleagues could leave fairly quietly, we can get going on her Motion.
Baroness Tonge
My Lords, I thank the noble Baroness for bringing this Motion forward. It was delayed four weeks ago and we waited a long time for it, but now, thanks to her, it has been brought forward. I wish I could provide a little light entertainment for noble Lords while they wait for this hugely momentous Motion, Statement or whatever it is that is going to be coming later this evening, but sadly this is not light entertainment. In a lot of people’s opinions, electrical safety in the home is as important, if not more important, than regulation of the press—but maybe that is a personal view.
In placing this Motion of Regret before the House, first, I declare an interest. Nearly nine years ago my daughter was electrocuted in her own kitchen in front of two small boys aged two and four, with no one else in the house. We discovered that this had happened because of dangerous electrical work carried out when her kitchen was extended and refitted four years previously. I will not go into detail; the full story remains on the Electrical Safety Council website alongside other tragic stories of electrical accidents, including another young mother—also with two little children, also alone at the time—electrocuted in the bath of a rented holiday cottage because of faulty wiring in the bathroom. These stories remain as a warning to householders about the danger of electricity in the home and to people doing electrical work without proper training.
I was amazed at that time to find out that electricians were required to work only to guidelines and that there were no statutory regulations controlling their work. When I approached the Labour Minister at the time, Phil Hope, I discovered to my delight that his department was aware of this problem and was working on additions to the building regulations. These additions are now known as Part P, and required electrical work to be done or inspected by a registered electrician and notification to be sent to the building regulations department of the local council, to ensure that the work was done properly. I was invited to help with the campaign to introduce Part P and to publicise the new regime, which of course I did willingly. I have since become a patron of the Electrical Safety Council.
Part P regulations have been protecting us since 2005. The introduction of residual current detectors—RCDs—has been a great safety measure but, again, there is a question about how many homes are covered and whether the devices they have are adequate. A poll of 4,000 registered installers in 2011 found that 53% believed that the standard of electrical installation work had improved under Part P.
In 2012, to my dismay, the coalition Government decided in their bonfire of the regulations that Part P must go and with it the regulations for electrical installations in the home. Can the Minister tell us what pressure the Government were under to scrap Part P? Was it pressure from a few disgruntled, unqualified cowboys who did not want to be registered or have their work inspected? Some of them certainly wrote to me. Why was the decision made on Part P in particular? No one has suggested scrapping the regulations for gas fitters. They are equally dangerous, why the electricians?
After protest from safety campaigners, the Department for Communities and Local Government agreed to go out to consultation and announced last December that minor electrical work undertaken in kitchens, in bathrooms, more than 0.6 of a metre away from water, and outdoors should no longer be notifiable or subject to inspection. Work done in the very places in the home where electricity and water can be close together—and dangerously so—the Government have decided needs no regulation. Why?
Although statistics are sketchy, the impact assessment published by the department in December showed that since the introduction of Part P regulations, 2.3 deaths per year from electrocution alone have been prevented and, in addition, there have been up to a 30% reduction of mains wiring incidents. In terms of electrical fires, they are estimated to have prevented 2.6 deaths a year and cut by 15% the number of domestic incidents due to faulty electrical equipment. Twenty-seven thousand contractors have had their work inspected for safety on an annual basis in the past nine years and sales of electrical safety testing equipment have gone up by over 100%. I hope, too, that the skills and expertise required by a good electrician are now being valued more as more and more of them seek registration from an approved body so that their work does not have to be inspected. This is all a result of the Part P regulations.
Since the proposed changes to Part P were announced last December, several electrical contractors concerned have contacted the Electrical Safety Council to say that electrical alteration work undertaken by kitchen fitters, in particular, will once again go under the radar and not be inspected.
The department, in its wisdom, has concluded that it is not possible to say whether Part P has delivered health and safety benefits, and yet the Minister, Don Foster, in the Westminster Hall debate last September said that the Government do not want changes to Part P unduly to diminish safety. At an extra session of the Select Committee for Communities and Local Government two days ago, the same confused message came over, with the additional nugget of information that scrapping the regulations would save £14 million. We were also told that the building regulations challenge panel would oversee what was going on in the industry. How much will that panel cost and will it challenge shoddy electrical work? Where does the figure of £14 million come from? It all sounds a bit confused to me.
The consultation undertaken by the department, we are told, showed that of the 158 respondents, 65% supported making more electrical work non-notifiable, but that was the response to an open question. When asked about electrical work in kitchens, specifically, and low-risk areas of bathrooms, a much higher percentage opposed scrapping the regulations. It is also worth noting that although electrical contractors supported the proposals to scrap Part P, building control bodies were not supportive of reductions to notifiable work and the Which? organisation and the Trading Standards Institute were also opposed.
The House of Lords Secondary Legislation Committee has also expressed reservations about the consultation. Its report notes:
“In his Statement, Mr Foster said that the new Part P of the Regulations sought to ‘achieve a reasonable balance of risk’. The House may wish to note that the detail given in the Department’s consultation summary indicates that large numbers of interested parties may not be persuaded that this is the case”.
Can the Minister tell us how many consumer organisations, beyond those mentioned, were against reducing the scope of Part P?
This all leaves great cause for concern. Refitting kitchens is big business and very popular with householders. It often requires adjustment to electrical wiring, as happened in my daughter’s kitchen. In 2004, the year she died, an impact assessment carried out by the Department for Communities and Local Government showed that some of the worst electrical work at that time had been carried out by kitchen fitters. Recent statistics for 2010-11 on electrical fires originating in the kitchen listed 14,700 incidents. The kitchen is a dangerous area and surely electrical work there should remain notifiable, as it should in the bathroom and outdoors where water and electricity are also in close contact. There is no requirement, either, for do-it-yourself outlets, such as Homebase and B&Q, to insist or even recommend that their products should be installed by a registered and qualified electrician. I ask the Minister: why not? How do the Government intend to monitor these changes over the two-year period of the review that they have announced? Will she promise that Part P regulations can be restored if necessary?
The Select Committee for Communities and Local Government has spent a great deal of time on this issue and I thank the committee and its chair, Clive Betts MP, for its hard work and recommendations. I close by reminding noble Lords that regulations are an irritant, a nuisance and sometimes cost money, but when a much loved person is killed because of a lack of regulations, they all become worth while. I beg the department to reconsider.
Baroness Smith of Basildon
My Lords, I thank the noble Baroness, Lady Tonge, for giving the House the opportunity to debate these regulations. Her own appallingly tragic experience brings home to us how important they are.
I must admit that I gave little thought to broader regulations and the impact they have until 2006, when I moved from the Northern Ireland Office to become Minister at the DCLG and was told that I was responsible for, among other things, building regulations. If I am honest, I was not exactly overjoyed at the thought, yet my view quickly changed because it is through building regulations that we set standards. Their purpose is not rules and regulations for their own sake but for reasons of health, safety, practicality, equality in ensuring good access to public buildings and, more recently, the environment. Those are sound, practical reasons for regulations, as the noble Baroness, Lady Tonge, said.
Regulations also create a level playing field for the building and associated industries. I clearly recall small, medium and some large companies, and individuals, telling me why good regulation was important to them and their business. It sets standards and prevents good companies and individuals being undercut by cowboys reducing standards. It is important to get the right balance and to be proportionate, providing regulations which offer protection to consumers and businesses but which, at the same time, do not impose unreasonable or unsustainable costs. Whenever building regulations are introduced, that is the guiding principle, as it was in the debates leading to the introduction of Part P regulations in 2005 that are the focus of today’s debate.
My understanding is that negotiations on this regulation of electrical installation started in 1995 following a recommendation from the construction industry deregulation taskforce. That led eventually to the Part P regulations. It would be helpful, as the noble Baroness, Lady Tonge, asked, if the Minister could clarify the reason for reviewing Part P now to make the changes that we are seeing. On page 18 of the impact assessment, there is a summary of costs and benefits of the current operation of Part P that appears to show a significant net benefit of more than £75 million. The analysis also suggests that these benefits would build up over time, although that cannot be accurately measured. The Minister, Don Foster, told the House of Commons in a Written Statement that,
“we do recognise that there is scope to streamline the requirements by removing the requirement to notify smaller-scale, lower-risk electrical work to a building control body”.—[Official Report, Commons, 18/12/12; col. 83WS].
Is the Minister confident that the Government have got it exactly right where they have drawn the line between what is described in the Statement as “lower-risk electrical work” that will no longer be notifiable and electrical work that should remain notifiable? What exactly is “smaller-scale, lower-risk”?
I understand that the Government consulted on this, and in the Minister’s statement in the Explanatory Memorandum considerable support is drawn from that consultation. Indeed, following the consultation, the Government announced why they were proceeding with that rationalisation of Parts K, M and N of the building regulations. In the Explanatory Memorandum, the Government relied significantly on the consultation responses as the justification for change, saying:
“65% of respondents supported making more electrical work non-notifiable (with 27% opposed). Of those that were opposed, many had concerns that the proposed changes might undermine electrical safety. Others disagreed because they believed these areas of work were not actually lower-risk and were therefore not appropriate to make non-notifiable”.
The situation seems very clear-cut when seeing those figures. However, I am grateful to the Secondary Legislation Scrutiny Committee, as mentioned by the noble Baroness, Lady Tonge, for a more detailed analysis of those figures. When consultees were asked about specific areas of work, the consultation was far more balanced in its responses and there was not such a clear-cut divide as is implied in the Explanatory Memorandum. The scrutiny committee made it clear that:
“Of the 132 responses relating to whether electrical alteration work in kitchens should be made non-notifiable, 51% supported the proposal, while 43% opposed it. Of the 133 responses dealing with alteration work outdoors, 49% of respondents supported the proposal … with 41% opposed. Of the 133 responses”,
to lower-risk work in bathrooms,
“54% supported the proposal while 39% opposed it”.
The committee further said that,
“large numbers of interested parties may not be persuaded”,
that the regulations achieve,
“a reasonable balance of risk”.
I appreciate that the information that the Government give in their Explanatory Memorandum makes a greater case for change than does the scrutiny committee’s analysis of the results. However, it has to be accepted that there are significant concerns about the Government’s approach that the Explanatory Memorandum glosses over and does not indicate as correctly as it should. Can the Minister confirm that the consultation responses specifically on making more work non-notifiable are significantly less supportive of the Government’s position than outlined in the Explanatory Memorandum and that the Secondary Legislation Scrutiny Committee is correct in concluding that,
“large numbers of interested parties may not be persuaded”,
that these regulations,
“achieve a reasonable balance of risk”?
The scrutiny committee got it right.
One difficulty is that if there are any significant problems with the Government’s approach, they may not emerge for some time. As the Government admit in their economic assessment:
“Part P is thought to have raised the average competence of domestic electrical installers”,
and the statistics bear that out. Since Part P was introduced, more than 27,000 additional contractors have had their work inspected for safety annually, sales of testing equipment, as the noble Baroness, Lady Tonge, said, has increased by over 100%, and the coverage of life-saving residual current devices—RCDs—in homes has risen significantly. In 2009, 62% of homes had RCDs, but prior to Part P coming into effect in 2001, only 40% had them. It is that device that prevents most electrical shocks that can be fatal.
It is difficult to get accurate figures on whether that has contributed to a fall in the number of accidents, injuries and electrical fire-related incidents, because the way in which data are collected is not comprehensive and has changed over time. However, in the absence of that information, the Government’s own impact assessment says that Part P has prevented more than 2.5 deaths each year from electrical shocks, 30% of mains wiring incidents and 15% of portable appliance incidents. With that number of deaths and that number of incidents being prevented, it is a very serious matter that the Government wish to remove that protection.
Among the areas that raise the most concern is electrical work being undertaken in the kitchen, as borne out by the detail in the consultation responses. Kitchen fitters who undertake electrical works currently have notifiable work checked, but that is going to change under this order.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, like the noble Baroness, Lady Smith, I thank the noble Baroness, Lady Tonge, for bringing this debate to the House today. We all understand that a terrible tragedy occurred to her family, and I am very grateful to her for the measured way in which she has brought forward this Motion.
Building regulations play an important role in ensuring that buildings are constructed to meet reasonable standards of health, safety, welfare, convenience and sustainability. This Motion gives me an opportunity to update the House on this important issue and to deal with the many questions, or as many of them as I can, that have been raised this afternoon. Noble Lords may also wish to note the important report from the Communities and Local Government Select Committee, which was published last year in the other place and which has been referred to, and that on 11 February my right honourable friend the Building Regulations Minister discussed further matters raised in the report with the Select Committee.
There are relatively few building regulations in total. Last year the Government publicly consulted on changes to them in England and on associated technical guidance in the approved documents. Prior to that the Government asked the building industry and other interested parties to share their ideas about what needed to be improved or extended, where it would be possible to reduce the regulatory burdens, and how even better levels of compliance might be delivered. Having sought these views, and taking account of the responses to the Your Freedom consultation and my department’s Cutting Red Tape websites, a range of proposals were developed and subjected to a further, detailed consultation. I can now confirm that those consultations and changes were discussed with building control systems and local authorities. The changes are expected to deliver an even better and more cost-effective way of ensuring that buildings remain safe.
I now turn to the specific issue of electrical safety. Discussions with trade bodies within the electrical installation industry and with individual electrical contractors show that they continue to value the national minimum standards provided by the building regulations. However, where there are concerns, we ought to address them. Part P of the building regulations, which deals, as the noble Baronesses said, with electrical installation in dwellings, has come under some criticism for its procedural complexity and bureaucracy. In fact, some respondents called for the provision to be completely revoked. The question that needed to be addressed was whether Part P could be simplified while retaining the safety benefits that it has undoubtedly brought about.
Currently, home owners can face building control fees of upwards of £240 for simple electrical work, such as putting an additional plug socket in a kitchen, approved by a local authority. In practice, such fees also prove a strong disincentive to those carrying out these small jobs—including home owners, who often do it themselves—to inform the local authority that the work is being carried out in the first place. Even for the majority of work that is carried out by electrical installers who are registered to certify their own work, notification imposes additional bureaucracy, as they have to tell the local authorities about the work they have been doing. This leads to consumers, who themselves are not competent in electrical work, relying on somebody else who may not follow the notification rules. Therefore, the scope of notifiable work has been changed, but otherwise this is a reduction in the amount of red tape. By law, all electrical work must still be safe, and this is most easily demonstrated by following the British Standard for electrical installations—BS7671—and the Institution of Engineering and Technology’s wiring regulations.
The changes will see the notification requirements focused on higher-risk jobs such as the installation of new circuits or work undertaken in the vicinity of showers and baths. The noble Baroness rightly drew attention to the problems caused by mixing water and electricity. This reflects the additional technical requirements applied by the British Standard in bathrooms and the skills required for working inside a consumer unit—that is a fuse box, for novices. In kitchens, notification will be necessary only when a new circuit is provided from the fuse box. When notification is not required, we would expect the work to be carried out to the appropriate safety standard, which I have just read out. Quite simply, it still needs to comply with that.
Baroness Tonge
I thank my noble friend for giving way. I think there is some confusion because, at the moment, there are statutory requirements in regulations for electricians to do things safely. What the Minister is referring to are advisory guidelines for electricians to work, which happened nine years ago, before Part P came in. The guidelines may be there but they do not have to follow them. This is the problem: we are going back to the old days. They do not have to follow the guidelines because they are just guidelines.
Baroness Hanham
I shall pursue my speech and make sure that we cover those points when I get to the end. The previous regime of notification tended to penalise the competent, conscientious installer with additional paperwork, while the unscrupulous installer could ignore these procedures with impunity. The changes that have been made reflect a more pragmatic approach. However, while the notification requirements are being reduced, the department will work with the registration scheme providers and trade bodies to raise general awareness of the safety issues and legal requirements, and how to meet them. Promotion of the competent person schemes, to which I do not think either noble Baroness referred, is now a requirement imposed on scheme providers by my department. My officials are working with the forum of competent person scheme operators, including the Electrical Safety Council, to see how the marketing message can be improved and co-ordinated. We will monitor the impact of the changes to Part P to make sure that we are better informed about how this work is going.
The competent person schemes now have around 40,000 registered electrical installers. Professional electrical installers will stay with the register. It is still in their interest to be able to self-certify their work as compliant with building regulations and not have to pay building control charges. This should mean lower prices for the householder. Whenever a registered electrical installer is used, they also benefit from the knowledge that the work has been carried out to standards of quality and safety. The new Part P will retain the core benefits that have been achieved while keeping administrative costs and burdens to a reasonable minimum. The indicators that can help identify the impact of the changes will be kept under review.
In addition, my department will bring forward further regulations later this year. The noble Baroness, Lady Smith, asked me when. They will introduce an alternative route to demonstrating compliance with Part P by allowing for a registered third party, such as an electrical installer, to certify electrical work carried out by somebody doing DIY or an unregistered electrical installer.
It is not exact to say that safe work would rely only on the guidelines. Compliance will still be required and it is only the bureaucracy that has been removed, rather than the requirement to carry out things to safe standards.
Baroness Smith of Basildon
I apologise for interrupting the Minister, but she was addressing a point that both I and the noble Baroness, Lady Tonge, raised. In her last sentence, if I have understood correctly, she said that only the red tape has been removed and that compliance is still required. How will we know?
Baroness Hanham
My Lords, I was asked about monitoring and if I may address monitoring, I hope that I will be able to answer the noble Baroness’s question. The plan will comprise a monitoring and evaluation strategy, which will cover electrical shock incidents and fires of electrical origin. We will also be looking at statistics on the operation of competent person schemes: that is, the number of registered installers and the number of jobs notified to schemes. Other areas which we will be looking at in preparing the impact assessment will be sales of electrical test equipment and awards of electrical qualifications.
There is a number of potential sources of evidence and it is not always easy to isolate the impact of regulatory changes. However, we will keep this carefully under control and will bring forward the available evidence in two years’ time at the time of the review.
The noble Baroness, Lady Smith, also asked me what pressure had been put on the Government to scrap Part P, and where that pressure had come from. I have explained that there was a consultation to which responses were made. As the noble Baroness said, there were some differences of view, but 71% of all respondents agreed that Part P should be amended. The analysis of Part P impacts on improvements in electrical safety was not entirely conclusive. It is difficult to show that Part P is singularly responsible for a reduction in electrical accidents. However, the Government felt that it had been in use long enough to allow us to form a conclusive view on its influence. Therefore, Part P has been retained, although, as I said earlier, a number of people suggested that it should be abandoned.
I was asked about the reason for excluding kitchens. Most minor alteration work to existing alterations is already non-notifiable. The change that we are making is to make all minor alteration work non-notifiable except when it is close to baths and showers. The British standard for electrical installation work has special rules on that.
Baroness Tonge
I thank the Minister for giving way again. I feel that I must put this on record because I think she has now said at least twice that minor electrical works in the kitchen need not be inspected and are perfectly able to be done by unqualified people, if necessary. I want to put on record that my daughter’s death was caused by a plug and a cable to a cooker hood—a very simple thing, indeed—which was atrociously done and, four years later, killed her.
Baroness Hanham
My Lords, I thank the noble Baroness for that but I hesitate to go into what actually happened. We take note of what she said but that might have been considered to be more than minor works because it would almost certainly have involved work in a fuse box, which will still be covered.
I think that I have answered many of the questions that I was asked. Discussions and debates have taken place with my right honourable friend in the other place, Don Foster. We are confident that what we are doing will ensure that there is still safety within the Part P process and that householders will be clear about the requirements around electrical work and how they go about ensuring that work is carried out by someone who is registered with one of the competent person schemes. The industry has not been as successful in this regard as it could be, and this is something that new requirements for registration scheme providers will help to address.
Part P has always been based on all work being required to be safe, but only certain types of work needed notification. We have simply changed the balance of what is or is not notified and we still mean to see that there is proper safety and regulation under Part P. It is important to ensure that the building regulations regime remains current and up-to-date to ensure that regulations continue to fulfil their important role. It is also necessary to make sure that they are understood by as many people as possible, and we will ensure that there is proper publicity. I hope that, with that, the noble Baroness will be able to withdraw her Motion.
Baroness Tonge
My Lords, I thank the Minister and the noble Baroness on the Opposition Front Bench for joining me in this debate. I think that it is a very important one. I appreciate that the Government need to get rid of red tape—everyone dislikes red tape. I can well see that it may cost an individual electrician, and therefore the householder, a little bit less to do a job in a kitchen or a bathroom.
However, I, and all the people I have been in contact with over the past nine years who have had accidents in their family, would willingly have paid £200 or £300 extra on a job to make sure it was done safely and that no one died as a result. There is a balance to be had here.
Part P regulation has done an enormous amount of good for the electrical industry and could still do so. I do not see that the bureaucracy that is being introduced to replace will be any less extensive. We have not been given any figures and I do not see how the challenge panel and the monitoring will be less expensive than the existing system. I thank the Minister for her reply and I only hope that in the next two years of the review there are no fatalities as a consequence of the Government’s action. I therefore beg leave to withdraw the Motion.
Enterprise and Regulatory Reform Bill
“Royal ChartersRoyal Charters: requirements for Parliamentary approval
Where a body is established by Royal Charter after 1 March 2013 with functions relating to the carrying on of an industry, no recommendation may be made to Her Majesty in Council to amend the body’s Charter or dissolve the body unless any requirements included in the Charter on the date it is granted for Parliament to approve the amendment or dissolution have been met.”
Lord Stevenson of Balmacara
My Lords, the amendment is jointly in my name and that of the noble Viscount, Lord Younger of Leckie.
Although the words are overused almost to the point of lacking any meaning, today is, I believe, a historic one. In signing up to this amendment and agreeing to support its inclusion in the Bill, the Government are joining with the Opposition in putting in place an agreed, all-party, Leveson-compliant solution to the long-standing problem of how to regulate the press.
Taken together with the royal charter, which will recognise and certify an independent regulatory body for the press, this means that we are seeing the conclusion of 70 years of inaction, despite seven major reports. It is now up to the press to make this system work, in the full and certain knowledge that all political parties have agreed the proposals, that the victims are content and that polls continue to show that this is what the people of this country want.
In his report, Lord Justice Leveson proposed a framework that provided for the continuation of self-regulation by the press, but with a legal guarantee that self-regulation would be effective, independent and continue to meet high standards. However, the role of the law, the legal underpinning, was to be limited to setting up a body whose task would be to recognise the self-regulatory system and check it once every three years. Lord Justice Leveson said that that was essential to ensure that, despite all the protestations of a willingness to change and countless expressions of good intentions, the press did not once again slip back into their old ways, as they have done after all the other inquiries and reports.
There is no doubt that some parts of the press are attempting to derail these proposals, despite the fact that they deliver the Leveson principles, ensure that those who are wronged have an effective and cheap route to redress, and ensure a free and vibrant press. However, implementing the Leveson proposals does not censor the press. There is no recommendation for pre-publication regulation. It would not create “a slippery slope” to “a government-controlled press”. It would not restrict reporting or investigative journalism in the public interest. Quite the reverse. As Nick Davies, the Guardian investigative reporter who largely uncovered the phone hacking story, wrote after the report was published:
“From a reporter’s point of view, there is no obvious problem with the core of Leveson’s report, his system of ‘independent self-regulation’ ... There is a nightmare here, but it is for the old guard of Fleet Street. To lose control of the regulator is to lose their licence to do exactly as they please”.
The families who suffered press intrusion and gross violations of their privacy have been pressing for the changes that will in future protect people from what happened to them. The harassment and character assassinations laid bare before the Leveson inquiry were not mere technical breaches of the rules or victimless crimes. For many of the victims, appearing at the inquiry meant reliving the pain and trauma of their abuse by the press, but they did so with enormous courage and determination; and the stories they told made many people feel moved, incredulous, appalled and very, very angry. They included people such as: the McCanns who were falsely accused of murdering their missing child; the parents of Milly Dowler, who were given false hope that their daughter was still alive; John Tulloch, the 7/7 bomb survivor who was tricked into giving an interview; Christopher Jeffries, who was falsely accused of the murder of Joanna Yates; and the noble Baroness, Lady Hollins, whose daughter Abigail was hounded for stories following her tragic stabbing while out walking with her son.
It is important to remember that the voices heard in the inquiry represented just a small sample of press harassment and misrepresentation that became commonplace, week in and week out, for those struggling with tragedies in their lives who never sought to become the story. We should also remember that the public overwhelmingly support the establishment of an independent regulator, backed by law. That was borne out by a series of polls conducted prior to the publication of the report by the Media Standards Trust, Hacked Off, the Carnegie Trust and the IPPR. YouGov’s latest survey for the Sunday Times finds that 90% want a system that forces newspapers to print corrections when they say things that are not true. A smaller but still substantial majority wants to punish newspapers that opt out of a new system of regulation; and 62% want such papers to face damages of up to £1 million when they are found guilty of libel.
The sad fact is that the Leveson inquiry should never have been necessary, and the catalogue of incidents that were described and the many more that they represent should never have been allowed to happen. At the end of the day, we in Parliament have to be able to say to these victims that we have seen them right.
Your Lordships’ House has earned a justifiable reputation for keeping the recommendations of Lord Justice Leveson in the forefront of political thinking. Indeed, the former Leader of your Lordships’ House said on the occasion of the publication of the report in November 2012 that if the central recommendations of the report,
“can be put in place, we truly will have a regulatory system that delivers public confidence, justice for the victims, and a step-change in the way the press is regulated in our country”.—[Official Report, 29/11/12; col. 340.]
It has been 20 months since politicians from all parties came together to set up the Leveson inquiry. It is nearly four months since the report was published and all-party talks commenced, and here we are at the brink of introducing the results of that process. The Leveson proposals received near-unanimous approval when we debated the report in your Lordships’ House on Friday 11 January, and the House voted by a majority of 131 in favour of similar amendments to those that we are to consider at Report on the Defamation Bill.
This amendment, although it is couched in general terms, ensures that the agreed royal charter on self-regulation of the press may not be amended by Ministers through the Privy Council unless Parliament has given its prior approval to the changes. It is therefore an important entrenching measure, and I very much hope that it will receive support from Members of your Lordships’ House.
The royal charter published today creates a new, independent, voluntary system of self-regulation for the press. It is a welcome step, and the amendment ensures that this can be an enduring settlement, as it underpins the royal charter with the minimum amount of legislation needed to guarantee its success and independence over time. It is worth pointing out that while my amendment ensures that Ministers cannot tamper with the new system—for example, by watering it down under pressure from the newspapers—it also ensures that they cannot introduce new measures that would threaten the freedom of the press. There must be comfort in the fact that it works both ways.
Therefore, my amendment completes the virtuous circle of an all-party solution that is Leveson-compliant and is as entrenched in our constitutional arrangements as anything can be, requiring as it does a two-thirds majority in both Houses for change. In so doing, your Lordships’ House is fulfilling its proper role in scrutinising legislative proposals and offering the other place a chance to improve on what has been proposed. As the Prime Minister said a few minutes ago in another place:
“We stand here today with cross-party agreement for a new system of press regulation that supports our great traditions of investigative journalism and free speech and protects the rights of the vulnerable and the innocent”.
He ended by sending a message to the press. He said that, “we have had the debate” and reached our conclusions, and he added:
“Now it is time to get on and make this new system work”.
I beg to move.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, in advance of this debate, it may be for the convenience of the House if I explain the Government’s position on the amendment. Following the statement made in the other place today, I want to make it clear that the Government support the amendment. This measure is part of the announcement made by the Prime Minister, the Deputy Prime Minister and the Leader of the Opposition today in relation to proposals for a royal charter to recognise and certify an independent regulatory body or bodies for the press.
I am sure that noble Lords will join me in welcoming the successful conclusion to the cross-party talks which the Prime Minister set up following the publication of Lord Justice Leveson’s report. The Prime Minister has made it clear that the amendment before us is not statutory underpinning. The Prime Minister said all along that he wanted to avoid a press law which said what the recognition body is and what it does. That has been delivered. This is not statutory underpinning but a safeguard that says that politicians cannot meddle with this.
The clause put forward by the noble Lord, Lord Stevenson, to which I have added my name, establishes requirements for royal charter bodies established after 1 March 2013 which have functions relating to the carrying on of an industry. It will have the effect that the charter can be amended only if the terms of the charter are met and both Houses of Parliament agree. Let me be clear that this means that any royal charters created to date will be unaffected and that a royal charter created in future will be affected only both if it is a royal charter with functions relating to the carrying on of an industry and if it has requirements set out within it which require the approval of Parliament.
The press royal charter will be the only such charter in existence when it comes into force. It is the Prime Minister’s intention to submit the charter to the Privy Council for Her Majesty’s approval at the Privy Council’s meeting in May. This will deliver a new system of press regulation in this country. It is a system of tough, independent self- regulation that will deliver for victims.
Viscount Younger of Leckie
Perhaps I may be allowed to finish; I have just a few lines. It will ensure fines of up to £1 million, suitably prominent apologies, a standards code and a new arbitration service that will be free for victims. I will respond to points made in the normal way at the end of the debate, bearing in mind that this is the Report stage of the Enterprise and Regulatory Reform Bill, but I hope that noble Lords will support this important new provision.
Lord Foulkes of Cumnock
Can the Minister clarify one point in his statement? He said “this” country. Can he say whether this applies to the whole of the United Kingdom?
Viscount Younger of Leckie
I will certainly respond to that point at the end, in my concluding statement.
Lord Fowler
My Lords, I think there is something rather odd about the procedures of this House. It is no criticism of my noble friend at Question Time, but we all remember his rather cautious replies to questions. The first point to make is that all the detail was actually in the Evening Standard, which could be found in the Library. The second point is that it has now been confirmed that the Defamation Bill will be returning to the House and will go through the normal parliamentary processes. That is the point that I wished to establish when I asked about the Defamation Bill. It was totally uncontroversial and, frankly, I think that it could have been confirmed.
I should like to make the same point that was made by the noble Lord who opened for the Opposition. As he said, it is an historic day. This is a compromise solution, but it is a solution to which all three parties have signed up. We have all had to give up something, but that is what happens in compromises. Rather than one party or another making claims that they, and only they, have won, it would be much better to ensure that, by the rules set down, the scandals that have affected some parts of the press never happen again in this country.
This debate is not just about press freedom; it is also about the power of the press and the misuse of that power. That is why the News of the World was closed down, why journalists have been arrested and why dozens of victims of phone hacking have been paid very substantial damages. We now understand that even more victims have been discovered. It is a discreditable episode in the history of the British press, so it is not enough just to say, “I am in favour of the freedom of the press”, as dozens of editorials have been doing over the past months. In spite of the newspapers’ black propaganda about those of us who support Leveson, we all believe in the freedom of the press—there is no question about that. However, we are also in favour of effective measures to deal with the scandal of press intrusion that has been revealed over the past months.
Lord Soley
I do not wish to delay the House very long but I have a very long history as regards this matter. I want to make only three brief points. First, as the noble Lord, Lord Fowler, has said, this is a compromise. It was not the first that I would have come to but the negotiations have led to it being much better. I certainly do not want to make the best the enemy of the good. This is good. That leads me to my second point. It is profoundly important that all Members of both Houses give the agreement as much support as possible in order to convey to the media that this is the will of the people of this country speaking through their Parliament.
As the noble Lord, Lord Fowler, has indicated, it has been the job of the press to hold power to account. But one of the things that have gone wrong over the past 40 or 50 years is that the power of the press has been abused in too many cases. They have done some wonderful work and there are some wonderful journalists but some journalists have betrayed that trust. Some editors and owners have also betrayed it and it became the abuse of power. That abuse of power had to be held to account. I have given evidence to many committees and I produced my own Bill some 20 or so years ago, which tried to draw attention to this issue. Getting to this point has been a long, hard journey and we should all be grateful.
In many respects, my final point is the most important. I would almost plead with the press to recognise that this is an opportunity for a change in the culture of the press. What let the press down was an acceptance of standards, attitudes and values within the press that would not have been tolerated outside the press. They let themselves down in that way and not enough of them—although, very credibly, one or two journalists have been particularly outstanding—challenged it. Now, we need to put that behind us and to say that the culture of the press can change.
The press should recognise that people have rights and that the freedom of the press was an extension of the freedom of speech and the freedom of association, which allowed people to meet together and to put forward their views. That was dangerously undermined when the phrase “press barons” came in somewhere around the end of the 19th century. That was something different from the press freedom for which people had previously fought. The press barons need to be held to account. We have taken a step in the direction that allows that to happen. If the press have the right approach to this, it will be an opportunity for a new start for everyone. I for one would be willing to sign up to that.
Baroness Hollins
With freedom comes responsibility and that is what this is all about. It is extraordinary what has happened to this debate in the 100 days since Lord Justice Leveson’s rigorous report was published. For a time, the debate descended into what the Guardian last week described as,
“bipartite discussions between Conservative ministers and newspapers”.
Then it returned to public debate via the anachronism of the royal charter. But at last an agreement has been reached by all three parties recognising what has been clear to the victims of press abuse from the beginning—this is not party political but a cross-party matter.
I congratulate the leaders of all three parties on reaching an historic agreement to put the building blocks in place to enable the establishment and recognition of an independent and effective press regulator. Before Lord Justice Leveson reported, many people assumed that he would recommend a statutory body to hold the press to the standards they profess to believe in and statutory compulsion for newspapers to join it. However, Lord Justice Leveson did no such thing. Instead, he recommended that the press be given yet another chance to set up their own voluntary self-regulator. Some victims were taken aback but accepted this as the result of careful and diligent public inquiry. The only thing he did ask—perhaps it is the very least he could have asked—was for a body to be set up in law which would from time to time scrutinise whether the industry’s new body met certain tests of independence and effectiveness. He said that those news publishers that met those standards should have benefits in law to give newspapers an incentive to join. He carefully set out some recommendations to ensure that any new body was a real regulator and not just a beefed-up version of the Press Complaints Commission—a new body that would be independent of those it regulates and committed to upholding standards for the benefit of the public. These recommendations now seem to be faithfully reflected in the royal charter, as they are in the amendment in the name of the noble Lord, Lord Stevenson, and in the amendment in the name of the noble Lord, Lord Skidelsky, which may not now be needed. The issue of exemplary damages will also need to be dealt with.
Some editors have argued at every opportunity to weaken these requirements. However, as set out in these amendments, if the industry sets up a regulator that meets Lord Justice Leveson’s criteria, the recognition body would recognise it. If it does not meet the criteria, it would not be recognised. It is as simple as that. I have no doubt about the sincerity of those who said that the Press Complaints Commission was effective or of those who say that a new regulator could be established without this mild level of scrutiny. But the time for take-my-word-for-it regulation is over.
Your Lordships know that my family was deeply affected by the unrestrained power of the press to intrude and to distort. The fact is that I have been hesitant about speaking out on this issue for fear of the consequences for my family. This is some proof, if it were needed, that the issue is not about individual free speech but about institutional power—power which is so concentrated in the hands of a few that it can be used to undermine good journalism and good journalists.
I too respect Sir Harold Evans, an editor of high reputation, for having the courage to point out what he called the “amazingly gross distortion” of the Leveson report by his former colleagues in Fleet Street. There has been so much distortion and so little reason to trust. Very senior people appeared to have gone back on their word on this issue, seemingly breaking promises solemnly made to people who have been badly hurt. For all these reasons, it is essential that this amendment and the royal charter succeed. They offer a vital guarantee that Leveson will be implemented in full.
In an earlier debate, the noble Lord, Lord Alli, pointed out that sometimes leadership must come from the Back Benches. Noble Lords on all sides rose to that challenge. Speaking for myself and, I believe, for many others, I am grateful to those on all Benches who saw and acted on the need for reform and I should like to take this opportunity to thank noble Lords for supporting victims of press abuse. I would also like to place on record my thanks to Hacked Off for representing and supporting victims and for its tireless work which has helped to bring truth to power.
While the abuses of power from press companies have saddened and sometimes shaken us, the best journalism makes us all proud. I believe that the royal charter agreed today offers the best chance to ensure much more good journalism in the future.
Baroness Bonham-Carter of Yarnbury
I join in supporting this amendment. It actually underpins freedom of the press in that it stops future politicians in the form of privy counsellors interfering in the regulation of the press. I offer my thanks to my noble and learned friend Lord Wallace of Tankerness who I believe first suggested this solution in a letter to the Secretary of State. I commend my right honourable friend the Deputy Prime Minister for maintaining faith in the cross-party process and the Prime Minister and Leader of the Opposition for responding. We have achieved consensus on this hugely important matter, something both Lord Justice Leveson and the victims of press abuse particularly desired. This process has been a victory for working together and for the continued freedom of the press, as well as for the victims who campaigned so vigorously and courageously.
Lord Lipsey
My Lords, I speak as a former deputy editor of two national newspapers and perhaps I may say, straight at the beginning, that I see in this royal charter, with the backing that it will get in legislation, no threat whatever to the freedom of the press which we all cherish so much.
There is, after this good day for our democracy, just one question that we should think about. Is there a danger that what we have achieved will be undermined by large sections of the press refusing to join the new regulatory body? From where we sit, the idea that they might not may seem fantastical but—noble Lords have long memories—there was such a case in our legislative history, and in many ways it is analogous. The Industrial Relations Act 1971 was passed by a majority in Parliament but was then scuppered because the trade unions refused to register under it although they had enormous incentives—as there exist for the press in this Bill—to do so. It did not do the unions any good at all because what they got in consequence, a decade later, was Thatcherism. They would have done much better to stick with the Heath proposals. I would say the same to the press now. If they do not join up to this body, they will face something far more draconian than what we have in front of us this afternoon.
There are incentives to join—for example, the relief from exemplary damages. However, there are greater incentives to join than that. I think that newspapers that do not join risk their circulations. Just as Liverpool punished the Sun for its reporting of Hillsborough, so the British public will punish newspapers that fail to sign up to this system. If the public do that, how much more so may advertisers who do not wish to place their advertisements in journals which have placed themselves beyond the pale? The odds are that newspapers will be inclined, when they consider it rationally and coolly, to sign up.
However—and this is the true importance of today—if they do not, they will know that it is the united will of all three national political parties and of both Houses of Parliament that they are trying to thwart. If there is a confrontation between our Parliament—reflecting, as in this case it does, the will of the people—and the press, there must be only one winner.
For all those reasons, plus the fact that a number of newspapers have in recent days evolved to a much more sensible approach to these things—I pay tribute to the editors of the Financial Times, the Guardian and the Independent on this, and I think that others will follow—when they weigh this and see the united will coming from this Parliament, they will understand that they have to take part in a full and open spirit, and our nation’s life will be the better for it.
Lord Phillips of Sudbury
My Lords, I apologise to my noble friend the Minister for not raising this rather gritty little point before this debate, but of course this is all hot off the press. There could be a lacuna in this amendment. It requires the approval of Parliament for any amendment to the royal charter or dissolution of the recognition body. However, might it be possible—and one is thinking of possibly years hence—that the newspaper industry could decide not to dissolve these arrangements but simply to sidestep them by establishing a parallel and separate body? I would like to have the answer to that question, because I think it is germane.
Lord Elystan-Morgan
My Lords, I wholeheartedly applaud the intentions of those parties that have brought about this compromise and their integrity. I make that observation, however, subject to one factor. If I am indulging in a pettifogging lawyers’ argument then I apologise if it has no substance. However, if I happen to be right, it will be something that I can regale my grandchildren about for some time to come. A royal charter is, of course, a sovereign prerogative. How far can that prerogative be circumscribed, if at all, by any decision of either or both Houses of Parliament?
Let me test my doubt in this way. The creation of Peers, as we well know, is the prerogative of Her Majesty the Queen. Any decision taken by either House to circumscribe that authority to the slightest degree would be invalid. If I am correct in that submission, does it not apply to this situation equally so? In other words, any decision by both Houses of Parliament to circumscribe that absolute, sovereign royal authority will be less than valid. It may well be, and probably would be the case, that Her Majesty would graciously surrender her prerogative, but that is a different matter. I am raising this point now as a very narrow, legalistic point, and I would be grateful if I could be told exactly what the constitutional answer to it is, if you please.
Baroness Deech
My Lords, following on from my noble friend’s comments, will the Minister explain how any future Parliament could be stopped from repealing this amendment by a simple majority? There is, as far as I understand it, no such thing as entrenchment in our law because our Parliament is sovereign. Were a future Parliament to become extremely annoyed with excesses of the press in some way or whatever it might be, I cannot see any mechanism for preventing a future Parliament from simply repealing this amendment by a straightforward majority.
Lord Wigley
My Lords, I intervene very briefly to indicate that it is not just the three main parties that have taken an interest in this. To the extent that it has been possible for my colleagues in another place to be in communication with the larger parties, we are grateful to have been in on the arguments.
I added my name to the subsequent bank of amendments, which may or may not be necessary now, so perhaps I may raise two questions to the Minister. First, will any new commission or regulatory body be subject to freedom of information applications? Secondly, can we have an assurance that any arbitration service will be free for claimants to use so that ordinary people can have their opportunity to get redress against being abused by the media?
Lord Lucas
My Lords, I am concerned that the words,
“with functions relating to the carrying on of an industry”,
may introduce a lacuna into this amendment. I am not at all sure that we are dealing with an industry now, and I am certainly not at all sure that what we will have in a few years’ time can be described as an industry. The press function in society is undergoing radical changes and may well emerge in a completely different form. The royal charter, as we have it at the moment, seems to anticipate that. So I wonder why we have those words in there. It merely allows someone to argue that this thing that we are regulating is not actually an industry, it is an activity. I cannot see why those words add anything or are necessary. It seems to me that they make this amendment vulnerable to a Government sidestepping it by just saying that it does not apply because it is not an industry.
I am grateful for the advice of the clerks that I do not need to pursue this by means of a manuscript amendment to a manuscript amendment. This being a subject that has been introduced for the first time at Report, we are allowed to pursue amendments at Third Reading. At the moment, I certainly intend to take that course.
Lord Morris of Aberavon
My Lords, I add my concerns to those just expressed regarding the requirement of a two-thirds majority in both Houses. I was a little baffled when I read this for the first time. Perhaps we could have an explanation of how it will work in practice. Our understanding, gained from student days, is that no Parliament can bind its successor. If another Parliament, by a simple Act of Parliament—in Churchillian terms, by a majority of one—deletes this provision, then this cannot stand.
I am sure that greater minds than mine have considered the matter and that we can have an explanation, but the House deserves one on this point of how it will work in practice, given past practice that you cannot bind a successor Parliament.
Lord Low of Dalston
My Lords, I do not wish to delay your Lordships for long, because I imagine that the House will wish to move to a resolution on the amendment fairly speedily. Nor do I wish to sow doubts about the viability of the compromise which has been reached on grounds of high jurisprudential and constitutional matter. Instead, I raise a rather more down to earth and practical question for the Minister to respond to. I imagine that I am not the only person who has not been able to pore over the detail of the proposed royal charter, but I am aware that two of the things that Lord Justice Leveson required of any guarantee of the regulation of the press were that it should be both independent and effective. I wish to address the question of independence.
There has been much discussion in the media over the last few days of an intervention by some members of the press who sought to ensure that the press should have a veto over the membership of the regulatory body. I would like to be assured that that requirement on the part of the press has been abandoned, and that the regulatory body will be entirely independent in that sense and not subject to press interference over its membership.
Lord Jopling
My Lords, my old friend, the noble Lord, Lord Elystan-Morgan, said that he did not want to make a pettifogging lawyer’s point. I am no lawyer, but I would like the Minister to look at what may be a pettifogging point. I raise it only because this is a draft charter, and therefore, I imagine, subject, if necessary, to amendment. Schedule 1, paragraph 3.2 of the draft royal charter states:
“a) That every Member shall have:
i. senior board level experience in a public or private sector organisation, including significant leadership responsibility”.
I do not argue with that, but it then goes on to state:
“b) That at least one Member shall have:
i. legal qualifications and skills, together with an understanding of the legal framework within which the Board must operate”.
That implies that it must be somebody trained in the law who has practised, whether as a solicitor or a barrister. It rules out somebody who has qualified for the Bar but then never practised. It occurs to me that there can be relatively few people of whom one can say that they have senior board-level experience in public and private sector organisations, including leadership responsibility, as well as having practised in the law. Of course there are such people, but I would have thought it must be rather a narrow field. I do not ask the Minister to reply to this now, but I ask whether thought could be given to the possibility of moving the provision for senior board-level experience into the lower category, which requires one person on the board to have that experience. That seems to bring all the benefit, but without having to choose from a very narrow field of probably highly successful people.
Lord Clinton-Davis
My Lords, I follow the remarks of my noble friend Lord Lipsey. In this debate, many important points have of course been made. I am troubled by dissension among certain organs of the press. I am not sure that I can be as optimistic as my noble friend about the consequences of that. I think that there is every possibility that those dissenting organs will decide to ride out the views of Parliament, and I am concerned that they might succeed in that direction. I hope not. I hope that the optimistic views of my noble friend Lord Lipsey will prevail, but what happens if they do not? I hope that the Minister will reply to that.
Baroness Wheatcroft
My Lords, this compromise is to be welcomed, and I suspect that the majority of newspaper groups will take the differing interpretations being offered to enable them to sign up to it. It makes no difference whether it is underpinned by statute or by a royal charter protected by statute. Whether it is a dab or a little bit of statute, a workable compromise is being offered, and I welcome it. As somebody who spent a long career in newspapers, I have been appalled to learn—and it has been a process of learning—just what terrible things went on. We should remember that many of the worst things that newspaper groups got up to were criminal. What was wrong was not just their behaviour, but the failure of the police to deal with those crimes. What is going on now is far too late. It was the very close relationships between newspapers and some sections of the police which allowed things to fester for far too long.
It may well be that the climate has now changed, but it is not Leveson that will deal with that. Leveson—or the royal charter and the regulatory bodies that will come about as a result of that—will deal with a much greater wariness on the part of the press as to what and what not to write. That is not a bad thing; a degree of care beyond that which has been exercised in the past would be welcome. Although the damages may well be exemplary in some situations, believe me, what will frighten the press more than anything is the prospect of being directed to publish an apology or a correction with exactly the same prominence as they gave the original story. That will really make people think very hard. My question regards the internet, because what goes on in the media now, as Lord McAlpine would vouch, is far more online than it was even 10 years ago, and the trend is moving very fast. Can we expect anything to put online publishers in the same category as paper publishers?
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, this is a defining moment in the future of press self-regulation and the response to Lord Justice Leveson’s admirable report. I am most grateful to Members on all sides of this House for their positive and encouraging comments on the conclusion of the cross-party talks. The Prime Minister committed at the outset to a cross-party approach as the best way to identify a strong and durable solution to the question of future press regulation. After many hours of probing and thorough discussion we have reached the conclusion we always hoped for: a tough, new, self-regulatory model that has the support of the Prime Minister, the Deputy Prime Minister and the leader of the Opposition.
A number of noble Lords have expressed concern about the impact of these changes on the freedom of the press, but we have been clear throughout this process that any solution we implement must protect press freedom, a vital pillar of our democratic society. This clause is an additional safeguard against government interference. Its purpose is to ensure that parliamentary approval will be required before a recognition body set up by royal charter may be amended or changed. Of course, Parliament is sovereign and no Government can bind their successors, but this is an additional step. We believe that it is a constructive and workable solution, which protects press freedom.
The charter lock clause applies only to charters that are established after 1 March 2013. Therefore, it will not apply to charters that were established before that date, even if they are amended in the future. It remains the Government’s position that a royal charter is the right vehicle for the BBC, which for many good reasons was established at arm’s length from politicians. As for the origins of the royal charter, a point raised by my noble friend Lord Fowler, I suppose I am equally happy if it came from a Times letter or a man on the Budleigh Salterton omnibus. The main issue is that we are there with it. Further, it is worth noting that there was extensive parliamentary engagement on the development of the present BBC charter.
I should like to pick up on a number of points made by noble Lords, and I shall commence with those of the noble Lord, Lord Foulkes. He asked whether this applies to the whole of the United Kingdom. He may well have said it, but I would hazard a guess that he had Scotland in mind. The Government are currently discussing these issues with the devolved Administrations and we will bring forward provisions to ensure that the territorial extent of this measure is clear.
Lord Foulkes of Cumnock
My Lords, can the Minister clarify that point? Most of us from Scotland would want it to apply to Scotland, just as it will to the rest of the United Kingdom. Is that the Government’s intention?
Viscount Younger of Leckie
I think I can best reply by saying that I shall stick to my previous remark, which is that talks are happening at the moment to work out a way forward. We need to come back on that particular question when we can.
Lord Cormack
My Lords, is it within the power of the devolved Scottish Government to ignore this or is it not?
Viscount Younger of Leckie
As I say, talks are ongoing, so it is best if I respond to noble Lords on the matter raised initially by the noble Lord, Lord Foulkes.
The noble Lord, Lord Elystan-Morgan, asked whether arbitration would be free to use for complainants. I can confirm that the charter provides that a self-regulator must provide an arbitration process that is free to use for complainants. The noble Lord also asked whether freedom of information would apply. Shortly we will debate an amendment on freedom of information, but the Government do not intend to extend the Freedom of Information Act to the regulatory body or, indeed, the recognition body.
Lord Elystan-Morgan
My Lords, the real question I raised is whether the royal prerogative in relation to charters, which is utterly sovereign, can be circumscribed in any way by any decision of Parliament. Has the noble Viscount obtained specific advice and information on that matter?
Viscount Younger of Leckie
No. The noble Lord deserves a full answer to that question. I think that the best thing would be for me to come back to him in writing.
Lord Wills
Before the Minister leaves this point, can he explain a little more about the Government’s thinking on why freedom of information will not be extended to the proceedings of this new body? It seems rather curious, when transparency is such a cardinal virtue, that it should be denied in the case of this body.
Viscount Younger of Leckie
I think it would be best to address that question in the next group of amendments. As I mentioned, we have tabled some amendments there and I will address the point then.
I believe that the noble Baroness, Lady Deech, raised the issue of dissolution. I think it is best if I quote from the draft charter:
“This Charter, and the Recognition Panel created by it, shall not be dissolved unless information about the proposed dissolution has been presented to Parliament, and that proposal has been approved by a resolution of each House. For this purpose ‘approved’ means that at least two-thirds of the members of the House in question who vote on the motion do so in support of it”.
That is how I read it.
Baroness Deech
With all due respect to the Minister, what I asked him about was this: what is to prevent the amendment that I imagine we are about to pass in order to bring the royal charter being repealed by a future Parliament of a different nature?
Viscount Younger of Leckie
I believe that there are safeguards in place, but I think that the best thing would be for me to respond to the noble Baroness with a succinct answer in writing.
Lord Morris of Aberavon
The noble Baroness, Lady Deech, made the point, as I did, that surely we are entitled to have the views of the Law Officers on this very important matter. It is a matter of long standing that you cannot bind a successor Parliament. A simple majority can overturn the whole of this mechanism, requiring a two-thirds majority in both Houses. I find it very difficult to understand and I may be wrong, but I should like an explanation. Moreover, I think that the House is entitled to one.
Viscount Younger of Leckie
I am certainly not denying that the House deserves an explanation, but I should reiterate that it is better to offer one in writing where the point will be presented thoroughly. I can certainly agree to do that.
The noble Lords, Lord Phillips and Lord Clinton-Davis—
Lord Clinton-Davis
The answer given by the noble Viscount to my noble and learned friend is not adequate. He should be able to reply on this fundamental point immediately, but he has not done so.
Viscount Younger of Leckie
I admit that the answer is not here, but I have pledged to write to noble Lords. We should remember that this debate has arisen out of an amendment to the Enterprise and Regulatory Reform Bill but, having said that, I am happy to answer questions raised today about this very important matter.
Lord Cormack
My Lords, I appreciate that it is difficult for my noble friend but the House is being invited to approve this amendment this evening, and therefore letters that arrive subsequent to any vote can have no effect. This Parliament can bind this Parliament; we all understand that. If there is to be any change, it must be made by a two-thirds majority in both Houses, but after 2015 there will be another Parliament. We really must have an absolute assurance from the Law Officers that they are confident that this will hold. I do not believe it will.
Lord Stevenson of Balmacara
My Lords, I hesitate to interrupt what is a bit of a spat on this, but perhaps I may make it clear, as the prime mover of the amendment, that it was not my intention in any sense to commit future Parliaments to the amendment that has been tabled today. In other words, I hope that this amendment will be passed by this House today, and then by the House of Commons, by simple majorities. It is therefore open to any future Parliament, if it has the guts or is foolish enough to do so, to bring an amendment to repeal it on a similar basis. The effect of this is simply to safeguard that which is in the royal charter, which is protected. However, of itself, only a simple majority is required.
Lord Low of Dalston
My Lords, perhaps I may try to offer the noble Viscount a little solace. Doubt is being cast on the viability beyond this Parliament of the compromise set out in the amendment that we are being asked to support. If it is not viable beyond the lifetime of this Parliament, it is difficult to think of a better solution that would be more viable. On that basis, it seems that probably the best course would be to support the amendment and the course of action which is enshrined in the agreement between the parties that we are being invited to endorse. We can move forward in the same spirit of good will and determination to make it work that we are asking of the press in return.
Viscount Younger of Leckie
I am most grateful to the noble Lord, Lord Low, and indeed the noble Lord, Lord Stevenson, for their interventions. All I can say is that I have pledged to write to noble Lords to clarify the position further. The position at present is that Parliament cannot bind its successors. However, as the noble Lord, Lord Stevenson, said, we have confidence that this will be an enduring settlement.
The noble Lords, Lord Phillips and Lord Clinton-Davies, suggested that members of the press could side-step the self-regulatory umbrella. They could do that, but at their peril. To pick up the point made by the noble Lord, Lord Lipsey, those members of the press who chose to do so would be more likely to lose respect and therefore circulation and they would be liable to greater punitive costs.
Several of your Lordships raised the issue of entrenchment—that is the description that is used. Parliament is sovereign, so could this provision be amended in future? As the noble Lord, Lord Stevenson, rightly recognised in opening this debate, we cannot bind future Parliaments, but we have every confidence that this will be an enduring settlement, which is just a reiteration of what I said a few moments ago.
The noble Lord, Lord Low of Dalston, asked whether the regulatory body would be subject to interference from the press. As the charter sets out, the recognition panel will be independent of the press and will not be subject to any interference.
Noble lords have raised a number of points about whether this is indeed a statutory underpinning of the regulatory body. We may disagree about whether this clause is statutory underpinning, a “dab of statute” or something that avoids politicians fiddling with the royal charter, but I hope that we can agree that the agreement between the Prime Minister, the Deputy Prime Minister and the leader of the Opposition is something which we can all support and which will deliver the tough press regulation that we all want to see.
Lord Lucas
Before the noble Viscount sits down, may I hope for an answer to the question that I asked? A letter will suffice.
Viscount Younger of Leckie
I pledge that a letter will indeed be written to my noble friend.
Lord Reid of Cardowan
Before the Minister sits down, let me just say that I am absolutely sure that the questions that have been asked by noble Lords are predicated on their desire that this will be successful. However, they are also asked in the context, as the noble Lord, Lord Lipsey, pointed out, of those who may well decide that they wish to oppose applying the rules of this charter. Therefore, it is absolutely essential that this is thought through in fine detail. If we do not know whether it applies to Scotland—where, incidentally, one of our highest-selling newspapers is printed and published—if we are not sure whether we can bind successive Parliaments and if we are not sure whether constitutionally we can constrain the sovereign through a royal charter, it seems that, although we have absolute agreement on what we want to do, we may not have the nuts and bolts firmly pinned down. The reason why this is important is that, if there is any lacuna or window of opportunity through which people can remove themselves from the process, we should understand that some people will do so. I hope that, before this returns to us, the Minister will make sure that every single dot and comma is bolted down so that we have confidence not only in the will of the people and the will of Parliament, but in the fact that we have produced something that is operationally effective.
Baroness O'Neill of Bengarve
My Lords, before the Minister replies, like many other noble Lords I have been trying to clarify where we are. I think that it is the case that the detour through the royal charter, which is where the two-thirds majority is mentioned, means that an ordinary vote in both Houses of Parliament would not be sufficient. This royal charter is an instrument of the Privy Council. We are not voting to create a royal charter, as that is beyond our powers. It is the Privy Council that will create it. We are indicating, as it were, a mechanism of access to that which it is intended the Privy Council will create at a future date.
Lord Phillips of Sudbury
My Lords, I am sorry to prolong this, but it seems rather important. The Minister said in answer to my question that the industry could indeed side-step the whole of this mechanism. Therefore, what we have here by way of protection—namely, you cannot amend and you cannot dissolve—could be rendered nugatory by the industry simply saying, “We are going to set up a parallel, separate body”. I wonder, therefore, whether some of what has been said is not perhaps misleading in terms of its efficacy.
Lord Stevenson of Balmacara
My Lords, the last few comments made by noble Lords obviously need to be picked up and looked at by the Minister. He has promised several letters, so I will not try and anticipate them, but I think that several of the questions bear on a point that was made earlier, which I would like to endorse. What we are looking at today is, of course, a compromise. It is a compromise in the best interests of the country. Indeed, it led my noble friend Lord Lipsey to say that this was a good day for democracy, not just because this was a step forward in the right way but because it was something in which we could perceive, behind the appurtenances of government and opposition, a real willingness to try to work together to create something that will last and will be substantial in addressing problems that we all know are there and whose solutions have been eluding us for some 70 years.
However, compromises, although they can work, will often leave one or two things unsettled. My noble friend Lord Reid and others have pointed out one or two that we really have to address. That is something that we can do, although time is short. The rationale for attempting to amend this Bill, and hopefully successfully doing so, was such that it was too obvious for us to ignore, but it raises questions of timescale. In order to get the Bill processed and brought into law, so that it underpins the work in the royal charter, we have to adhere to the timetable. I accept the points that have been made. I think that the Minister will take them away and do what he can with them. There are simple answers to a number of the points that were raised, but it will be important for those to be available to us as we see the process of the Bill going forward. There will be opportunities for that to be done.
I would just like to say three things. First, I feel bad at not having thanked a number of people for the work that has been done in bringing forward the arrangements that we are considering today. Primary among these, the noble Lord, Lord Fowler—we should have acknowledged this when he was speaking—has been an inspiration to many of us. I pay tribute to him and the constant work that he has put in to get us to where we are today. We have learnt a lot from him and we hope that he will see us through to the end of the journey.
The noble Lord mentioned—I echo his support—the work done by Hacked Off. The organisation started off as a rather odd collection of people but it found a rationale in that it provided two things that were really important. The first was that it recognised early on that the people who had the most of a lock on this process were the victims, but that they did not have an organisation. Hacked Off has provided that for them in a positive and supportive way, which was not to shut off the words that we wanted to hear from those who had been so badly affected by this whole process but to encourage and empower them to put across their points of view in such an extraordinarily effective way—we heard a small part of that from the noble Baroness, Lady Hollins, today. Hacked Off should be given a huge amount of support for what it has done.
It is also important to mention that, although this has largely been a creature of the major parties, the minor parties, from which we heard some evidence, were a key part as well. We would not have got to where we are today if they had not registered firmly in the last 48 or so hours that they had strong views and that they needed to be part of the solution and not ignored. I say thank you to all those.
Secondly, as part of the process, we should also acknowledge the work of many journalists. The noble Baroness, Lady Wheatcroft, spoke up for many of them and I salute what she said. She also gave us a helpful insight into possible behaviours by those with whom she used to work and perhaps still does. How sad that we did not hear from or have the benefit of the advice of the noble Lords, Lord Hunt and Lord Black, who I think appeared like ghosts at the Bar and indeed in the Chamber but did not contribute to our debate. We are the worse off for that, although we might speculate a little bit as to why that was the case.
My third point is simply to say that we should recognise that in entering into this compromise arrangement all parties have had to surrender a little bit, but in particular we have committed to two things, which should be on the record. First, during the passage of the Crime and Courts Bill, the three main parties will vote together to oppose any Leveson-related amendments unless they are agreed by all three parties. There are some exceptions that have still to be dealt with, one of which was referred to by the Minister. I put it to him that, as I understand it, it has not yet been agreed that the status of the charter body should be such that it would be outwith the responsibilities of the Freedom of Information Act. That is very much a live issue and bears back to the point made by my noble friend Lord Wills that it is rather odd to try to exclude from that process a body that should be concerned with information and information flow. Secondly, in an earlier debate, we in this House imposed some amendments to the Defamation Bill and it has been agreed that the clauses relating to the Leveson report in that Bill will be removed, if necessary by all three parties voting together. That will unblock the Bill, which, sadly, has languished and has not been seen since we passed our amendments some time ago.
I conclude by thanking the Minister for his support on this amendment. I have noticed that Ministers get quite attached to the Bills that they have to deal with. The noble Viscount, Lord Younger, took over from the noble Lord, Lord Marland, half way through the Bill and therefore perhaps has less attachment than he otherwise would have. Nevertheless, he has become a bit ferocious and protective of some things and I was a bit scared that he might take that attitude to this amendment, but he has not done so. He has been more than welcoming; he has been very supportive and has spoken warmly in support of this amendment today and I am very grateful to him for it.
Lord Skidelsky
“The PressInterpretation: “the media”, “news publishers” etc
(1) In this Act “the media” means—
(a) media organisations, and(b) servants and agents of media organisations in the performance of functions relating to the activities of those organisations.(2) In this Act “media organisations” means organisations which—
(a) make broadcasts within the meaning of section 95(1) of the Wireless Telegraphy Act 2006;(b) publish, for circulation anywhere in England or Wales, a newspaper, magazine or periodical (or online content associated with a newspaper, magazine or periodical), a substantial proportion of which consists of news of, or opinion and discussion about, current affairs;(c) in the course of a business, publish content on a website, a substantial proportion of which consists of news of, or opinion and discussion about, current affairs in England or Wales. (3) In this Act “news publishers” means media organisations referred to in subsection (2)(b) and (c).
(4) In this Act “regulated publisher” means a news publisher which subscribes to a recognised regulator.
(5) In this Act a reference to “conduct” includes a reference to omissions; and a reference to a person’s conduct can include a reference to a person’s conduct after the events giving rise to a claim.”
Lord Skidelsky
My Lords, this group of amendments stands in my name and those of the right reverend Prelate the Bishop of Wakefield and the noble Baroness, Lady Kennedy.
Like the Minister and the noble Lord, Lord Stevenson, I welcome the royal charter proposed by the Prime Minister with all-party support. Noble Lords have asked what is to happen to retrenchment if Parliament chooses to overturn it by a simple majority. That is a valid question. My answer is that this is the best we can do with the constitution we have. As the noble Lord, Lord Low, said, it ought not to obstruct the progress of the royal charter. I pay tribute to the vital part that our House has played in keeping pressure on the Government to act. It has shown resolution and dignity in playing this vital constitutional role.
I am speaking to this group of amendments solely for the purpose of keeping open the possibility that further amendments may be required if the very good solution that we have all agreed on unravels. I am not going to speak any further to them.
Amendment 84FA (to Amendment 84F)
Lord Whitty
“(6) Within eight months of the Royal Assent to this Act the Secretary of State shall lay before each House of Parliament an Order setting out the specific scope and terms of operation in relation to competition, mergers and plurality of ownership of the media and news publishers under the provisions of Part 4 of this Act and relevant provisions of the Enterprise Act 2002 and the Competition Act 1998 and that Order shall amongst other things specify—
(a) a requirement that the CMA shall carry out periodic assessments of the ownership and diversity of the news media;(b) a specific threshold of ownership or potential ownership within a specific news media sector or cross ownership between media sectors beyond which competition or merger concerns can lead to an investigation;(c) procedures under which the CMA is to conduct investigations into market situations or merger proposals within news media sectors;(d) procedures as to how the Secretary of State shall deal with recommendations from the CMA relating to issues of plurality within the news media sectors;(e) procedures whereby the Secretary of State can invoke public interest criteria in relation to issues of plurality of ownership within the news media.An Order under this section and any subsequent Orders amending this section, or Orders under this section, shall be subject to a vote of each House of Parliament.”
Lord Whitty
My Lords, I put down this amendment to the amendment tabled by the noble Lord, Lord Skidelsky, simply to draw to the attention of the House, and particularly to the Government, that the royal charter—like everybody else, I greatly welcome it—does not include one major dimension of Leveson, relating to the plurality of ownership of the media. At every stage of this Bill, I and others have asked whether we were going to act on the plurality dimension as well. The noble Lord, Lord Stoneham, asked about this only the other week. He was told, as I have been told, that the Government are still thinking about it.
In view of the nature of the debate this afternoon and the fact that the noble Lord, Lord Skidelsky, is going to withdraw his amendment, I will not debate this tonight. But I would be interested—and would be grateful if the Minister could take note of this—to understand what the intentions of the Government, and indeed of other parties, are in relation to the final eight recommendations of Leveson, which deal with an equally important aspect: the plurality of ownership. In the circumstances, I will not move my amendment.
(e) an amendment, repeal or revocation made by Schedule (Abolition of Agricultural Wages Board and related English bodies: consequential provision) has the same extent as the provision amended, repealed or revoked, subject to subsection (5A).(5A) The repeals of the following provisions in Schedule (Abolition of Agricultural Wages Board and related English bodies: consequential provision) extend to England and Wales only—
(a) section 67 of the Agriculture Act 1967,(b) paragraph 32 of Schedule 2 to the Social Security (Consequential Provisions) Act 1975,(c) paragraph 10 of Schedule 4 to the Social Security Pensions Act 1975,(d) paragraph 12 of Schedule 17 to the Employment Protection Act 1975, and(e) paragraph 4 of Schedule 2 to the Social Security (Consequential Provisions) Act 1992.”
( ) sections (Power to add to supplies protected under Insolvency Act 1986), (Corporate insolvency: power to give further protection to essential supplies), (Sections (Corporate insolvency: power to give further protection to essential supplies) and (Individual insolvency: power to give further protection to essential supplies): supplemental) and 78 extend”
“( ) section (Individual insolvency: power to give further protection to essential supplies) extends only to England and Wales.”
“( ) section (ACAS: prohibition on disclosure of information);”
“( ) section (Transitional provision: consultation);”
“( ) sections (Power to add to supplies protected under Insolvency Act 1986), (Corporate insolvency: power to give further protection to essential supplies), (Individual insolvency: power to give further protection to essential supplies) and (Sections (Corporate insolvency: power to give further protection to essential supplies) and (Individual insolvency: power to give further protection to essential supplies): supplemental;”
Broadband: Communications Committee Report
Lord Inglewood
That this House takes note of the Report of the Communications Committee on Broadband for all—an alternative vision (1st Report, HL Paper 41)
Lord Inglewood
My Lords, it seems a very happy coincidence that the House will now consider the report of the Communications Committee, Broadband for all—an alternative vision, just after the debate about aspects of Leveson, not least because of the point raised by my noble friend Lady Wheatcroft about the impact of the internet on the provision of news in this country. Of course, it is broadband and the technology on it that are driving forward that particular phenomenon.
There is an old joke about the man, normally in Ireland, who, when asked for directions, replies: “If you want to get there, you don’t want to start from here”. For me at any rate, this became a recurring theme of our inquiry and I hope that my remarks will make clear why.
The first reason is historical. The UK has various legacy communications infrastructures that do not reach some areas, overlap in others, and were built by companies, often for entirely different purposes, in previously unconnected sectors such as telecoms, transport, energy and cable television. There was no overall plan; none of them was conceived and built as part of a general-purpose communications infrastructure. This means that the UK does not start from scratch, as some other countries have been able to. It has had to start from where, ideally, you would not want to begin if you were setting out now to provide the whole country with world-class, state of the art connectivity.
The second reason why the old joke chimed with me, if I might be forgiven for labouring this old favourite, is that the Government’s strategy started from the wrong place. We believe they did not ask the right questions at the outset. This may have been due partly to the context I have just described, and possibly to financial constraint as well, but in our view, the Government’s strategy lacks just that. There has been insufficient proper strategic analysis, which in particular has led to a failure to recognise the real requirements of rural and dispersed communities, which in many ways have most to gain and hence the greatest need—but more of this later.
As your Lordships will know, there is hardly an aspect of our daily lives that is not touched in some way or other by the internet. It is simply extraordinary, indeed almost miraculous, how in really quite a short time the internet has utterly revolutionised “the way we live now”. It has had a transformative effect on commercial and social transactions, creating an information world sans frontières. The possibilities seem limitless: from telemedicine to the so-called internet of things, and everything in between. In fact, I note that just today, speaking at a conference in San Jose, Cisco’s Rob Lloyd, president of sales and development, stated that the company’s predictions indicate that the “Internet of Everything” will create £9.6 trillion of value for companies over the next decade, with the number of connected devices predicted to rise to 50 billion by 2020. In this regard, I welcome the news that the Universities and Science Minister, my honourable friend David Willetts, has recently announced that £6.2 million of government money will be set aside for a competition focused on the “Internet of Things”.
To give credit where credit is due, the Government are to be congratulated on making enhanced broadband provision a public policy priority. Progress is clearly being made. Certainly it was a relief when, shortly before Christmas, the European Commission finally granted state aid clearance for the BDUK scheme. As I say, it is indisputable that, in many respects, we are moving forward and more and more of our citizens are able to access better broadband. However, we found during our inquiry that there is a very real possibility that some people and businesses are being left behind badly and a digital divide will ensue. Inadequate access to the internet and all its benefits is causing great uncertainty, anxiety and frustration that the benefits of the information revolution are not going to be available for all.
We contend that the Government have proceeded with a flawed prospectus and that some of what looks like progress may prove illusory in the longer term. As I have already said, we believe that there has been an insufficient focus on rigorously thinking through questions of first principle, and an absence of an overall vision and understanding of pervasive broadband connectivity and its implications which are an essential component of national infrastructure in the 21st century. Broadband is not an optional extra; it is not a “nice to have” luxury. It is essential and must be thought of in the same way as we think about the road and rail networks as essential components of today’s economy and society.
Government policy appears to have become preoccupied with and derailed by the almost mono-focus on the delivery of speed to consumers. The Government’s specific target is to provide superfast broadband—defined as 24 megabits per second, although that figure has seemed over time to be a bit variable—to at least 90% of premises in this country by 2015, and to provide universal access to standard broadband with a speed of at least 2 megabits per second by 2015.
In our view, this preoccupation has had a detrimental effect on policy-making and the long-term national interest. I can readily understand that committing to the delivery of certain speeds was an attractive way to badge the policy with the public. However, in our view, the delivery of certain speeds should not be the lodestar of policy. What is most important is the long-term assurance that as new internet applications emerge, everyone—and I mean everyone—will be able to benefit, be they inhabitants of inner cities or residents in the remotest areas of the country.
In our report we proposed an alternative vision for UK broadband policy which is not target driven but identifies the establishment of the national broadband network as a national strategic asset which has got to be built in a way so that everyone can connect in different ways according to their own needs and demands. This, we believe, should be the policy’s focus.
In operational terms, we believe that the Government’s strategy has focused on the wrong part of the network—broadly speaking, the outer edge and margins and not the centre. We argued that the Government should be focusing on delivering a high-specification infrastructure which is future proof and built to last. I refer, of course, to fibre-optic cable, the most future-proof technology, which has got to be driven out as close as possible to the eventual user. Once that has been achieved, as well as mandating open access on fair, reasonable and non-discriminatory terms to this optical fibre from the cabinet to the exchange, we need to ensure that there is the same open access to links between the exchanges that feed the cabinets and to the higher level links into national and global networks.
Just as there is national planning for the national, regional and local hubs of our transport network, so there should also be national planning for a communications network of local, regional and national internet exchanges, all linked by ample optical fibre that is open to use by competing providers, on which different operators can site equipment and exchange traffic and develop their own services.
The model that the Government have fixed upon for rolling out broadband has led to BT dominance: it is now effectively the only show in town. This lack of competition is a concern because competition is a driver of value for money, innovation, excellence, and consumer services. Indeed it surprised us that a partly Conservative Government have designed a scheme which has led to so little competition. In saying this I hasten to point out that I am not in any way chastising BT, which is a very effective, sophisticated, world-class business which is behaving exactly as you would expect such a business to behave. Indeed, it must be commended for the investment it is making.
Certainly it has been a bit unfortunate that our report has been seen by some as an attack on BT. This suggests that they may not have fully understood what we were saying. No, our criticism lies with the Government’s strategy and the way in which they have set up a framework insufficiently open and available for competition of all kinds and have paid insufficient attention to bridging the digital divide that is opening up.
Our report has argued that broadband policy should have three key elements. First, it should be driven, above all, by the need to arrest and ultimately eliminate the digital divide. Secondly, it should also be driven by an avowedly long-term, but also flexible view of the infrastructure’s future. Thirdly, it should also strive to reinforce the robustness and resilience of the network as a whole. The spectre of a widening digital divide is a profound source of concern. We believe that that obliges the Government to address their cause with greater commitment and vigour than we believe is currently the case.
As I have already pointed out, our alternative vision is simple. It is of a robust and resilient national network linked primarily by optical connectivity, which in turn brings open-access fibre-optic hubs into or within reach of every community. This would enable diverse providers, both large and small, to contribute to the reach and resilience of our national connectivity and allow each and every individual to benefit from services, both private and public of whatever kind, which will run over it in time to come.
In addition, in order to realise this vision, it is our view that the country’s future broadband infrastructure should deliver the following. First, every community should be within reach of an open-access fibre-optic hub. Secondly, every such hub should be fed by ample fibre-optic cable, providing open access to optical links back to the exchange, and from it back to the public internet. This, of course, will not be free, but it will be made available to all on fair, reasonable and non-discriminatory terms, allowing anyone to build their own local access networks out from the hub as long as they meet appropriate technical standards, using whichever technologies they choose. Thirdly, at the very least, we expect a hub to be able to provide backhaul for a wireless network where there is demand. In this way all premises would be able to gain access to a wireless internet service from at least one of these hubs, assuming that they can afford to do so.
The Government set their course long ago but I hope that our model will inform their plans for the future. The Government’s response to our report was a disappointment; it did not, it seemed to us, engage substantively with our arguments. I hope that my noble friend the Minister can say something more today.
A crucial point is why there seems to be more focus in government policy on so-called superconnected cities at the expense of improving broadband in rural communities. Let me make it absolutely clear: I am not claiming that the superconnected cities programme is without merit; and it is very important to recognise that there is some very poor provision in some built-up areas, just as there is in rural areas. It is, however, mystifying to us that superconnected cities appear to have trumped improving provision in our remotest communities. Let us be clear, businesses in rural communities could and would tap the enormous opportunities presented by the internet and instant worldwide communications. For many it would be a real game changer. This would in turn contribute to economic growth generally, and more particularly to the diversification and strengthening of the rural economy, which seems to many to be being marginalised.
I read with interest the recent Institute of Directors’ survey of its members about broadband, which makes for worrying reading. It found a wide and real divide between rural and urban internet services, with satisfaction rates significantly lower for IoD members in rural areas. Only 34% of members in rural areas are satisfied with the speed of their fixed-line downloads while 45% are dissatisfied; a mere 13% of rural business leaders are satisfied with mobile download speeds while 60% are dissatisfied; and 21% of IoD members in rural areas are satisfied with the reliability of their mobile internet service compared to 46% who are dissatisfied.
In a similar vein, I note that Digital Business First, a campaign group made up of businesses from Buckinghamshire and Oxfordshire, recently released a report in which it calls for,
“better broadband and mobile infrastructure”.
It states that,
“the Government’s present course is paved with good intentions, but failing too many communities”.
It argues that a 10% increase in broadband reach could generate a 1% increase in GDP per capita—a significantly better rate of return than other infrastructure projects.
As I have already said, fast, reliable internet connections are vital these days for businesses, but clearly the existing infrastructure is falling short. Of course I appreciate that there are difficulties in reaching remote areas, that everything cannot be done at once, and that the availability of public money is especially limited at the present time. Nevertheless, public spending is a question of priority and I hope that more attention can be paid to those parts of the country that are missing out. In this regard, I am particularly interested to hear the Minister’s view on the important role of fixed wireless in areas where it is very difficult to get fibre-optic cable close to people. In those circumstances, fixed wireless offers real opportunities.
As I mentioned, the Government’s specific target is to provide universal access to standard broadband with a speed of at least two megabits by 2015. To explain what that means, two megabits per second is the speed required to watch the BBC iPlayer. There is some way to go to achieve that. I urge the Government to go further as they ponder the next phase of their strategy. They must ensure that nowhere in this country becomes a broadband ghetto. The real risk is greatest to those parts that are most marginalised now in the availability of public services, and hence most vulnerable to further marginalisation. This includes making rural Britain a priority. As a final thought, I wonder about the emphasis placed on grand projects such as the HS2 high-speed rail scheme, which involves multibillion pounds of public expenditure. That might have been better spent on broadband provision. I will just leave that there for now.
Finally, I thank our specialist adviser, Professor Michael Fourman, for the expertise and enthusiasm that he transmitted to all of us, both members and clerks. The jargon used in this field is endless and utterly bewildering at times. For some of us at least, the technology is not far behind it and Michael was adept at guiding us through the jungle. I look forward to the debate and the Minister’s response. I beg to move.
Lord Haskel
My Lords, I congratulate the committee on and thank it for its report. I welcome the committee’s higher ambitions for broadband. The Government’s concentration on practical limits expressed in their reply, although understandable, is hardly inspiring. I agree with the committee that a vision for broadband is more than just speed and targets.
There is no doubt that fast broadband promises jobs, growth, new businesses and new business methods—all things that we are trying to achieve to get some life into the economy. There are also the social promises of broadband: health, education, skills, training, social and cultural elements, entertainment, and, as the noble Lord, Lord Inglewood, reminded us, news. It is the promise of this digital oxygen that makes broadband the infrastructure of the future. But I have a nightmare: a nightmare that we will build this infrastructure and then find that it is not used to its full extent, that the promise falls short not only because of the “not spots” but also because of the non-use.
I remember more than 30 years ago when we all got our first computers. Mine was a BBC Micro—a wonderful bit of technology at the time. You switched it on and there on the screen you got the “>” prompt. Then you were on your own. We had to wait for user-friendly software to come along before ITC became a real benefit. Can something like that happen again, by concentrating on the delivery of broadband without at the same time concentrating on its use and application? New uses are being discovered every day but will we take advantage of them?
Last week, I attended the Digital Business First presentation of its report on high-speed broadband for Britain. The response was given by vice-president Neelie Kroes, who is responsible for the digital agenda for Europe at the European Commission. Incidentally, we were also promised a response from the Secretary of State for Culture, Media and Sport, but neither she nor somebody from her department turned up. Vice-president Kroes told us that 98% of the population of Denmark has access to fibre, but only 10% take full advantage. She contrasted this with Estonia, where things are the other way round and the country has gone completely digital. She told us that 40% of Italians never visit the internet. I think that her message was that even if you provide the broadband, do not assume that people will automatically take it up. It needs a positive effort. I agree with her. Does the Minister agree? If so, what are the Government doing to encourage the use of broadband so that the infrastructure that we are building is fully utilised and reaches its full potential here in Britain?
Yes, I know that there are initiatives. We get a bit off our income tax if we send in our returns electronically. Farmers get their payments electronically. We can receive TV and radio broadcasts over the internet and a start is being made on smart metering, education and monitoring health. But all these things happen slowly because, as we all know, social changes take time. Meanwhile the technology is racing ahead, and so is mobile technology. Will the technology leave the users behind?
New concerns are emerging. How can we ensure that mobile technology and fixed line can work together? What will the structure of the market be to accommodate this? Vice-president Kroes told us that she hoped that we might be able to use several operators on the same equipment as we moved around. There are other concerns, such as confidentiality. It is getting more and more difficult to protect confidentiality regarding our health, personal lives and finances. People are concerned about that.
I was in the US recently and was closely questioned on the proposed European rules regarding privacy, because there is talk there of a consumer privacy Bill of Rights. I was introduced to a company that had a database of 190 million US citizens. It offered me lists of people classified by profile. There is concern about the way that the data companies access this information and market it. This ties in with concerns about big data and the use of secret algorithms that do everything from making money on the stock market to finding love. Hand in hand with this, broadband development must campaign on how to be connected, free from worry and concern. Content should encourage participation, indeed, demand it, but we must also know what our rights are when we are online.
Surely these are matters on which the state and the market have to work together and innovate together. If we are to get the full benefit from our investment in broadband, and if our ambitions for broadband connectivity are to be realised, all this has to be combined in a single vision. Do the Government have one?
Lord Clement-Jones
My Lords, first, I declare an interest as a former member of Huawei International’s advisory committee. It is a pleasure to follow the noble Lord, Lord Haskel, and his thoughtful speech. He clearly needs to join the Communications Committee.
The economic and cultural benefits of broadband are considerable, as stated by my noble friend Lord Inglewood, who was our tireless chairman during this inquiry and who continues to be tireless on further inquiries. It was a pleasure to serve under him on the committee. I congratulate him on his lucid introduction to what is a very complicated subject.
Connecting Communities, the study by Dr Tim Williams, describes in a light-hearted and amusing way the various activities that now can be conducted. He can do these, as he says in the study, all before breakfast from my living room in Hackney. He puts it in graphic ways:
“Organise a street party with people I’ve never actually talked to before”;
“Libel fellow professionals and other enemies”;
“Complain bitterly about potholes in Birmingham”;
“Watch councillors in Kent make budget-decisions live, whether wisely or not”;
“Campaign against new development anywhere”;
“Petition, in an act of ‘crowd sourcing’, national government to change the law”;
and finally, an example that demonstrates the age of this document:
“Participate in the worldwide community of long-suffering Welsh rugby supporters”.
You could not write that now.
The internet, broadband, has become indispensible for both private and public use. In certain areas there has been a great acceleration in its use, not least in the area of entertainment, where increasingly over broadband people access iPlayer, YouView, Netflix, Lovefilm and so on. Smartphones and tablets have made us demand better, faster and more reliable broadband, whether fixed line, wi-fi or mobile. However, the key aspect that the Communications Committee addresses, as my noble friend made clear, is that it is important that no one should be left out of getting the benefits of broadband.
I welcome an early success for the Secretary of State in her new role as regards the Government’s securing the consent of the EU for state aid requirements in their investment of £530 million in rural broadband deployment last November. However, of the two preferred bidders in the government scheme, only BT—as again mentioned by my noble friend—has received any money so far. However, it seems that currently some 7.5 million taxpayers are still not online. Much of the rollout of the new services will cater for them in the plan to reach 90% of homes with 24 megabits per second or greater. This is all designed, in the words of the previous Minister, to create the best superfast broadband network in Europe. However, the key question is increasingly: can we provide adequate services for the last 10% who not receive superfast broadband? Will the target of at least 2 megabits per second be enough for them? Are we creating a digital divide?
Broadband is clearly vital for communities, but even with mainstream business the temptation to be self-congratulatory should be resisted. As my noble friend mentioned, we should look at last year’s IoD survey of internet infrastructure. I welcome provisions in the Growth and Infrastructure Bill, as recommended by the Communications Committee, to ensure faster broadband infrastructure rollout with fewer planning restrictions for five years, subject to new guidelines agreed between local authorities and the digital stakeholders’ group. I also welcome the Government’s acknowledgement that speed is not the only factor; choice, coverage and price are important, too. There is also the Law Commission review of the Electronic Communications Code. When will that come to fruition?
I welcome those developments. That said, there is a difference of philosophy between the Government’s vision and the committee’s recommendations. As my noble friend made clear, the Communications Committee would prefer to focus on open access fibre optic hubs initially—cabinets, essentially—which we believe would have the best chance of eliminating any digital divide and delivering the final 10% more effectively through attracting innovative solutions to delivering higher broadband speeds to rural areas. Network access conditions do not by themselves go far enough. The Government, in their response, talk about the expectation that consumers will be able to benefit from competitors deploying competing networks using BT’s ducts and poles, but this is only an expectation. What obliges the opening up? Likewise, we believe that the opening up of dark fibre is crucial and that the adoption of common standards to allow bespoke local solutions should be adopted.
Secondly, there is the question of whether Ofcom should have the additional duty given to it of ensuring the efficient utilisation of existing capacity to provide affordable access to wholesale and retail connectivity. Is that not exactly what Ofcom should exist to ensure?
Thirdly, there are the deficiencies in the procedures for the Rural Community Broadband Fund, particularly the requirement to raise 50% of the funds up front. Surely this is a serious criticism, and communities are finding it difficult to raise the necessary funds.
Now, after the publication of the report, we see that the Government have allocated a further £300 million to be spent after 2015 on broadband infrastructure. The recent Carnegie UK Trust paper, Going the Last Mile, discusses a number of options for how this should be best spent. The options include superfast broadband rollout to the final 10%, promotion of the community enterprise approach, the provision of greater infrastructure competition and the attraction of additional investments, all of these solutions using specialist investment intermediaries.
Have the Government yet formulated how this expenditure will be allocated? Can the Minister reply on that? I look forward generally to the Government’s reply.
Baroness Deech
My Lords, in my view, we stand at a moment comparable to the start of the provision of universal electricity, water, phone lines or railways, where we have to consider the future of the whole country, a future beyond even that which we might envisage today. For so fast are the developments in the field of internet that in 10 years, let alone 100, there will be usage that could not have been envisaged today, and for that it is the duty of our generation to lay the solid foundations. We need a nationwide communications structure.
As with railways and manufacturing, we in this country risk paying the price of being one of the first in the field and commencing our infrastructure without the benefit of today’s insights. Countries that have started from scratch after us have, rather irritatingly, been able to do better. One example is our widespread use of soon to be outdated copper wire rather than fibre optic.
Anyone who has followed scientific developments in the past few decades will agree that there is no need to justify greater access to the internet and faster broadband speeds. If they are available, innovation will follow. It would be tragic if the recent clamp on blue skies science thinking—that is, government demanding instant impact if grants are sought—were to spill over into broadband provision.
The internet is as essential to a new home as electricity and plumbing, and broadband connection should be an integral part of all new housing developments, preferably fibre to the house. If we see broadband connectivity as a facet of the national infrastructure, then there must be coverage for rural communities, and coverage matters more than speed. Speed is less important than getting a national network constructed with an eye to the future. For as long as some in our community have no access to broadband at all, or the very minimum, the Government’s ambitions for speed remind one of the unfeeling remarks wrongly attributed to Queen Marie Antoinette. When told that the peasants had no bread, she said, “Qu’ils mangent de la brioche”—let them eat cake. Or one is reminded of the ancient Chinese Emperor Hui of Jin, who, on being told that his subjects had no rice, commented that they should eat meat instead. If you have no coverage at all, the availability of speed is no substitute.
The Government’s target is for the UK to have the best superfast broadband in Europe by 2015. It is now available to about 60% of households, and we are the 16th fastest in Europe. The final 10% of the population is the difficulty where they are spread thinly across a large terrain and it is not profitable for operators to install broadband. That could be 2.5 million households. Ofcom reported recently that the actual British broadband speed had risen by one third in the six months from May to November 2012 as take-up of the superfast service increased. It has trebled in the past four years from 3.6 megabits per second in 2008 to 12 megabits now.
Why does coverage, let alone superfast speed, matter? It matters for economic and social reasons. The internet economy accounts for 8% of UK GDP and a quarter of our economic growth. The internet creates 2.6 jobs for every job made obsolete, according to McKinsey. We are a nation of online shoppers: 23% of UK retail is likely to be online by 2016, so the contribution of the internet, not necessarily superfast, is very significant.
On the social front, we must take account of the needs of the deprived and of rural communities. There are the poor who never use the internet at all and rural communities which cannot access broadband. The Government themselves are a leader in placing services online, whether it is tax returns or NHS Direct, but the benefits cannot be realised if there is no fast broadband and, a fortiori, if there is no internet access at all. Many of the population who must use and need the government offerings of benefits online are those who have no access and are therefore doubly deprived. Eight million people in the UK have apparently never been online; they are the older, the disabled and the non-English speakers.
This is a good opportunity to welcome the appointment of Martha Lane Fox, the UK digital champion, to your Lordships’ House, and we look forward to the contribution she may make in elucidating the internet needs of the nation. A PricewaterhouseCoopers report undertaken for her estimated that there are 4 million adults who are digitally, as well as socially, excluded. Without internet, they are missing out on annual savings that might amount to £560 per household. Their children, who have no internet or computers at home, risk falling behind in educational performance and may fail to find jobs that are advertised only online. The whole population, but especially the less well off, need to make the savings and profit from shopping and paying online, getting educational and job opportunities and thus helping the Government to make the savings they envisage from increased internet use. Of course, there are the running costs of internet and the purchase price of computers to contend with; arguably, some of the funds set aside for superfast broadband might assist certain groups to get set up online.
The Select Committee on Communications, on which I am privileged to serve under the brilliant chairmanship of the noble Lord, Lord Inglewood, discovered that simple county and local loans are needed to enable rural communities, whose needs are so urgent, to set up superfast broadband. In Wales and Scotland, only 30% to 40% have superfast broadband. Rural communities are in particular need of broadband because travel presents more difficulties, and they can save money and journeys by going online for business and social purposes. The purely commercial approach will not work: it has to have an element of the universal and social. Our committee heard too many stories of difficulty in accessing such loan money as there is because of inflexible and arbitrary rules. It was alleged that Defra’s Rural Community Broadband Fund was confused in ambit and that it requires communities to spend on the network first and claim a refund later, which is not a practical proposition. Reaching everyone in the most far-flung corners would cost several billion pounds. There are differing estimates about how much it would take for the national provision of hubs and then on to the home. Whatever the sum, it will be too much for the public sector to bear right now, and it is not realistic to expect normal commercial providers to operate it because of the risk. Rural deprived communities offer low financial returns because of the sparse population and distances from existing fibre. If, as our report suggested, there were to be open access fibre-optic hubs within the reach of every community, local groups could access broadband in the short term by their own organising and upgrade over time to faster speeds.
Our committee was clear that superfast broadband requires fibre optic, not copper, and that what is important is not speed but getting fibre-optic hubs near every community and getting the entire nation online. We trust that the Government will agree with our recommendations and recognise the future investment value of the great infrastructure building that we have commenced.
Baroness Fookes
My Lords, I, too, want to pay tribute to my noble friend Lord Inglewood, not only for his excellent chairmanship of the Communications Committee but for the wonderful summary he gave of the work of the report we are discussing tonight.
I listened with great care to the noble Lord, Lord Haskel, particularly when he suggested—I hope I have this right—that the technology is perhaps galloping ahead but use is not necessarily following behind. I differ from that. As far as I can see, the take-up in this country—apart from in the pockets the noble Baroness, Lady Deech, mentioned of those who are not connected at all—is enormous and galloping. Our concern must be to make sure that the technology catches up with it.
I shall give one small example. I am a governor of a school in Devon. I was there for a governors’ meeting and, yet again, we were discussing electronic communications, their use in the school and how we could make sure that we had good services. In the morning, we went to two lessons. In one lesson that I went to, the electronic side was a key part. It was a history lesson looking at the rise of Nazism; the electronic part was very cleverly integrated and used, and the preparation would come in that format. That, therefore, is one example of how it might be used in education, and there are endless other ways of doing it.
I must confess that when we first embarked on this I was not a little alarmed. There was a whole range of jargon with which one had to become familiar, such as “dark fibre”—which sounded positively evil although it simply means that it is not being used—cabinets, copper wiring and fibre-optic wiring. All this became slightly clearer after we had paid a visit to a division of BT where we saw an example of a cabinet—which looked like a cabinet—copper wires and the amazing fibre-optic wires, which are the size of a human hair. What one can get through them is beyond my real comprehension, but I realised the immense capacity of this form of communication, which, even by the way in which we are now going forward with technology, looks as though it will be useful to us for decades to come.
That is why I am so keen, along with other members of the committee, that the Government should embrace the idea of fibre-optic cabling and not rely on more outdated technologies that will not be able to meet our needs, both now and certainly in the future. I share with others this desire that fibre optics should be taken as near to people’s premises or homes as possible, as a prudent way of developing broadband. In connection with that, I hope that the Government will go so far as to introduce regulations to require every new building to be given the ducts and requirements that are needed for this to be introduced. Installation in existing buildings will be difficult enough but this is absolutely essential, and I hope that when the Minister answers tonight he will be able to give us some assurance on that point.
This is an amazing new technology that represents immense opportunities for us as a nation. Others have indicated the varying uses towards which it is already put, and one cannot see that there will be any lack of new opportunities. Some of us went to what I suppose you could call the BBC’s future technologies department, where a teenager’s bedroom had been set up with all the various things teenagers like to use. It was very instructive and, for someone as old as me, exceedingly frightening. However, at least it gave an indication of the manifold uses to which all these modern tablets, televisions and interactive TV sets can be put. We are entering what the heroine of The Tempest might have called a brave new world—one that I am seeking to embrace as best I can.
Lord St John of Bletso
My Lords, I join in congratulating the noble Lord, Lord Inglewood, on his able chairmanship of this very topical inquiry, and in thanking our specialist adviser, Professor Michael Fourman. All too often, excellent Select Committee reports from your Lordships’ House get scant media coverage, but it was encouraging that this particular inquiry received extensive coverage.
While I welcome the Government’s target of having the best superfast broadband network in Europe by 2015, I fear that it is a bit of a pipe dream. It is well known, from the raft of current statistics on broadband availability, that the UK is currently 16th in Europe on average connectivity speeds, and 21st globally on percentage of connectivity above 10 megabits per second.
The noble Lord, Lord Inglewood, referred to the recent IoD broadband services report, which concluded that faster internet services would improve the productivity of companies by some 83%—a staggering statistic—and would encourage 13% of businesses to hire new staff.
Both this survey and our report concluded that there is, sadly, a very wide divide between rural and urban internet services and connectivity. I entirely agree with the recommendation in our report that if Her Majesty’s Government or indeed private enterprise are serious about providing a fast, resilient, reliable and cost-effective broadband service to consumers, including businesses, we need a long-term and flexible approach to broadband infrastructure policy. I also agree with what the noble Baroness, Lady Fookes, has just said: there is no doubt that the silver bullet to providing a long-term solution to the ever-burgeoning demand for superfast broadband, particularly as a result of increased data traffic, is the provision of a nationwide, point-to-point, fibre-optic network, ideally installed directly into homes.
Fibre-optic cables are cheap, long-lasting and have scalable capacity. Moreover, they do not suffer from the limiting primary characteristics of copper and aluminium cable. Unfortunately, our legacy communications have been designed predominantly using copper. This has proven to be ineffective for the demands of ever-increasing data traffic.
I concur with other speakers that the Government should not be too concerned about speed; they need to be more concerned about coverage. In this regard I wish to make brief mention of the importance of better utilisation of ducts. It is becoming increasingly evident that the best way to link fibre optic to homes is by using ducts, routed through a multiplexer cabinet situated beside existing PCPs, which are the green cabinets that we see on pavements. It is well known that the UK has a well established underground duct network, and BT and other utility providers also have extensive duct networks. If the Government are to have any chance of achieving their stated objective of providing the best superfast broadband network in Europe by 2015, more should be done to encourage the utilisation of these ducts for an improved rollout of the fibre network.
Clearly, the last mile provides a major challenge to the effectiveness of providing a superfast broadband network to consumers and businesses alike. Our report made reference to there being,
“no proposed technologies that can offer comparable data rates over long distances”.
It went on to say:
“The bandwidth limits of fibre are around 100,000 times those of copper”.
There is one radio frequency technology that has not been fully embraced, particularly in the remote rural parts of Britain, where there is low population density. White space spectrum was specifically referred to in paragraph 282 of the report. Extensive research was commissioned by the University of Strathclyde a few years ago, partially funded by the Westminster Technology Strategy Board and in collaboration with BBC and British Telecom, in which white space spectrum was used on the Isle of Bute using masts which could deliver, to residents who had previously had almost no broadband access, download speeds of up to 14 megabytes per second and upload speeds of 4 megabytes from a single mast with a three-mile radius. Unfortunately, this technology, which could provide a massive boost to rural communities in Britain, has not been embraced. I certainly support paragraph 282 of the report, which says:
“Loosening the reins a little could very quickly have the effect of bringing enhanced broadband capacity to the final 10%”.
I should perhaps also add that the white space spectrum broadband solution has recently been backed by Microsoft in Kenya, where there is a desperate need for broadband services, and is being installed right now. It is reliably forecast by the experts to provide up to 18 megabytes of broadband within a 10-kilometre radius from a single mast. Technology such as this should be embraced in the overall solution in this country.
I also endorse the recommendation in our report that the Government should incorporate open access to dark fibre, particularly as a feature of the framework agreement with suppliers. Clearly, as the Government’s response points out,
“a mix of technologies will be needed in the UK, given the topography and commercial challenges faced in the more rural and remote areas of the UK”.
While I appreciate the budgetary constraints of the Government, I wholeheartedly support the recommendation in paragraph 266 that the Government,
“should, as an intermediate step, aim to bring national fibre-optical connectivity”,
and, more specifically,
“fully open access fibre backhaul”—
these cabinets referred to by other speakers—
“within the reach of every community”.
This would go a long way to ensuring that the digital divide is not widened.
While much has been achieved, particularly in the past five years, in improving the plumbing and wiring of broadband infrastructure, as my noble friend Lady Deech mentioned, not enough support is being provided for the 7 million adults in the United Kingdom who still do not have the skills and motivation to use the internet and the inherent advantages therein. I should declare an interest as the past chairman of the charity Citizens Online, which has been promoting universal broadband coverage across the United Kingdom, as well as measures to bridge the digital divide. Very few of the new NGA contracts for high-speed broadband under the Broadband Delivery UK remit include any provision for digital inclusion or demand stimulation.
In conclusion, while I believe that a lot more can and should be done to provide a longer-term solution in the provision of superfast broadband across the UK, I found many of the Government’s responses to our report encouraging, although I do not feel that they have gone far enough in their long-term strategy for this crucial utility. Clearly, there needs to be a lot of collective working between government, regulators and industry. In this regard, I wholeheartedly support the recommendations of this report and look forward to the Minister’s reply.
The Earl of Selborne
My Lords, I join others in thanking the chairman, my noble friend Lord Inglewood, for the way in which he chaired the committee and introduced the debate today. From the speeches that we have heard, it is clear without doubt that the future of our economy will depend to a large extent on our ability to connect to broadband throughout all communities and sections of the population. It is not just about wealth creation and social cohesion. The ability to participate in healthcare and whole tranches of public activity will depend on connectivity. The Government must have a policy, and the Government are right to have a policy, but perhaps, as we have said in our report, they have been preoccupied by one aspect, which is to try to be the leader in Europe on superfast broadband.
The first priority has to be to achieve connectivity. If you have excluded populations, you will have a social divide and a lack of social cohesion. The Government need not worry about speed. That will follow. There are not very often market failures when it comes to cities. I therefore agree with those who have said that to spend money on improving superfast provision in cities is not something that the Government need to worry about if the market can do it itself. But there will be market failure in remote areas, where the costs of pushing out the broadband structure are too great. There will be market failure where the incumbents have an advantage, which inhibits other incomers who can help to provide some of the very many solutions that will be required to get this connectivity to all parts of the population. That is something that we are failing to harness—the undoubted innovation and enthusiasm from local communities, small and start-up companies, all of which would have a contribution to make. We go into some detail in the report. It gets pretty dense, I admit, when we talk about things such as passive optical networks and physical infrastructure access. But this is the key to it.
At the moment, we have what my noble friend Lord Inglewood called “the only show in town” for many rural areas. Whether we like it or not, because it is in the very nature of broadband to have high fixed costs, low marginal costs and great economies of scale, inevitably the incumbents will have a strong advantage. I think that we should be proud of what BT has done. It has improved enormously, by technical innovations, the ability to provide broadband on the existing infrastructure. Of course, it is rolling out broadband at great speed. It says that it hopes to achieve 90% coverage by 2017, but that immediately begs the question as to whether in national terms that is a satisfactory objective. I would certainly say, particularly as I am from a rather remote corner of the rural community and likely to be one of the 10% left out, that it is not satisfactory. So let us see what we can do to achieve that connectivity well before 2017. I do not think that anyone has mentioned yet the 4G mobile broadband technology, which is very soon to be with us and will certainly provide greatly enhanced mobile internet access to areas within adequate connectivity.
There are many different contributions to be made. The case for government involvement and public funds to be deployed rests, as I say, on achieving this reduction of the digital divide. The long-term solution will, ultimately, be fibre to the premises and the home. As others have rightly said, the cost of rolling out fibre to the home is exorbitant. We have a temporary solution, and a good one—the BT solution of fibre to the cabinet. It achieves the objective of reducing dramatically the costs. Usually, you have copper or some other connection from that cabinet. But whether BT likes it or not—it is in something like denial over this—it has the disadvantage that it does not provide open access, as I would understand it. In other words, as a local access network provider, you cannot simply move in with a compatible bit of machinery, stick it in there and do what you are trying to achieve. It is not an open access hub, as we have tried to demonstrate. That is where you come back to the technology of the passive optical network, which is a bit of a fix, as those will know who have read the report with great care. It certainly does not achieve what some of those independent service providers would have hoped for.
I think that the Government should ask quite firmly that, for the next tranche of money, which we hear will come in 2015, there should be proper open access. It is not beyond the wit of man. Clearly, there is no great financial advantage to the incumbents to roll out proper open access, but that is what is needed. If it is what is required, that is what will happen. It must be future proofed. We know that the technology changes dramatically fast. We know that some of the existing solutions, including the cabinet, will not stand the test of time for very long, but the fibre-optic cable will. Ultimately, it will be able to handle this vast amount of information. Therefore, we must make sure that as we improve the broadband infrastructure, we have the ability to upgrade and upgrade. That is why I say that, frankly, the cabinets are not very easily upgraded. You have to go back to the exchanges and think again. That is why we should look on them only as a temporary expedient.
When public money is distributed to extend the commercial network, as is happening at the moment, the Government should insist on the long-term solution. We took evidence from a particularly impressive consultant, Lorne Mitchell, who is setting up a community scheme in Goudhurst, Kent. I think he was the first to put it to me how important it was for local groups to be able to access the middle mile and to get the backhaul back into the infrastructure. He said that the key to the problem is the openness of the middle mile, which is the connection back to the internet. If this can be designed in a way that gives each community a chance to get to one of these community hubs, it would be a massive leap forward. That is precisely what the committee report has tried to promote. I think it makes a lot of sense. However, the government response simply quoted a report which said that it was unrealistically expensive to have hubs in every community, and so it would be if you were to launch it all overnight. However, ultimately, it would be no more expensive than the cabinets. It is the same technology but it is a question of making sure that when you roll out the hubs, you do what you are not doing at the moment with the cabinets, and that is making them available to all. To say that they will cost far in excess of the funds available to the Government at present, as the government response does, simply misses the point. If the Government can fund any hubs such as cabinets or exchanges, they should be accessible to the community and to other providers. This simply requires a change in specification, not a change in the scale of funding.
I hope the Minister will recognise that, however impressive BT’s record of rolling out broadband is—it has, indeed, been most impressive—the interests of the BT shareholder and of wider society, particularly the 10% in rural communities who will remain without adequate connectivity in 2017 if present policies are continued, are not always the same.
Baroness Bakewell
My Lords, this is a wonderful report and I endorse all its findings. I am very proud to sit on the committee that produced it and I commend the noble Lord, Lord Inglewood, for his wonderful chairmanship. I wish to add just a few points as I am not on the speakers list.
We think that we are in the middle of a revolution but we might just be at the start of it. It is important that we endorse what is going on at the moment because it is not always possible for a contemporary society to know where it is. I agree with what the noble Baroness, Lady Deech, said in that regard. Did the 18th century realise the significance of a few cotton mills in Derbyshire? Did Victorian society appreciate the global impact of the Stockton to Darlington railway? Things could be much greater than we believe them to be at the moment. I believe that the Government’s policy has the wrong priority. As we have heard, their priority is the speed of delivery, and there is clearly room for improvement in that regard. The numbers have been quoted before. The UK ranks 16th in Europe and 25th globally. However, the high level of internet use and its economic contribution to the UK’s GDP—up to 23% of total retail—shows that something is working very well. E-commerce activity does not need the top speeds that are recommended. It is flourishing at lower than maximum levels. As we have already heard, what matters is to bring broadband within the reach of all and to maximise the use of broadband across the country. That is crucial for the economy.
In his recent report, No Stone Unturned, commissioned by the Government, the recommendations of the noble Lord, Lord Heseltine, for regional growth emphasised the need for local infrastructure, singling out skills as one of the main areas to be covered. A major component of such infrastructure must surely be broadband for all. We know that the demand is there and is urgent. As we have already heard, the committee heard many examples of local communities eager to move in this direction. Things are already working well. For example, only last week Cornwall increased its target goal for fibre roll-out from 80% of premises to 95% of premises. Cornwall has 250,000 homes and 20,000 businesses that have purchased superfast services from more than 30 retailers. They even reach the Scilly Isles. This is a trailblazing county well aware that its tourism industry, worth many millions, receives huge benefits from such coverage.
This proposal would constitute an economic advantage. The numbers are great but the investment for the future is very important. We need a long-term, thought-through strategy that will transform the economic connectedness of the country in much the same way as our railways sprang from the Stockton to Darlington railway line.
Lord Stevenson of Balmacara
My Lords, I was briefly a member of the Communications Committee and participated in about one and a half reports. It was good to hear so many of my former colleagues speak today on this very important topic. I thank the noble Lord, Lord Inglewood, for his very helpful introduction to the debate which helped those of us who are not so expert in some of these issues to get a handle on what the committee had been up to and how it was expressing its concerns. I particularly enjoyed his jest—if it was one—about the expenditure on HS2. I secretly think that the Minister who is about to respond may also have some sympathetic thoughts in that regard, although, of course, he is far too well bred to reveal them to us today.
The committee report, which is a very good read, and the government response to it, which is not quite as good, raises some very good points on the way in which broadband will influence society in its broadest context, how coverage is perhaps more important than speed as a basic understanding of what the aims and objectives should be, on the problems of the rural divide and the very real difficulties of exclusion that may follow from that and on the sustainability of the initiatives that have been put forward, particularly whether or not there will sufficient commercial competition to maintain the drives that are required. The report also covered a question which was raised by several noble Lords, including my noble friend Lord Haskel, about whether uptake will be one of the biggest stumbling blocks. However, there is general agreement that broadband infrastructure will drive significant economic value for the United Kingdom and its economy and is obviously central to our future prospects of growth.
The projected explosion of data consumption over the next five years presents a huge challenge requiring large-scale investment to upgrade the capacity of existing networks and deliver new connectivity. As we have heard, consumers demand high definition video and audio content both inside the home and on the move and are using all sorts of devices. Those of us with teenage children will know how complicated it looks when you are able to get inside the bedroom of a 19 year-old or 20 year-old and discover what exactly they are doing on all the machines that they have. These are all consuming huge amounts of data. It is that sort of response and connectivity that this report is trying to arrive at. Clearly, consumers will be the driving force of that, and indeed have been driving about a 30% increase year on year in terms of usage, but how do we realise the demand for that and the economic value of it if we fail to allow private network operators to commit large-scale investment to increase the capacity that is required? These providers are operating in a market where the dynamics of investment are extremely finely balanced. Indeed, it is interesting that one of the larger suppliers dropped out recently.
Surely the Government’s central objective for broadband interventions in both rural and urban UK markets should be to create the conditions in which private-led investment and innovation can flourish. Yet the policy to date has suffered from what seemed to be fundamental weaknesses. The rural broadband programme, to which the committee drew attention, has failed to stimulate private, competing investment and will be awarding £1 billion of public subsidy to a single incumbent. The urban broadband fund risks critically undermining continued investment in broadband capacity by overbuilding existing networks, and not enough has been done, as we have heard, to promote usage.
It must be a real concern that the Government have failed through their rural broadband intervention to replicate the conditions of infrastructure-based competition that have served the urban market so well. Markets that benefit from infrastructure-based competition are better served in terms of innovation and penetration than those in which the incumbent is placed under no pressure to supply better, cheaper products. Across Europe broadband penetration in markets with infrastructure competition is nearly 20% higher than in countries that rely on service level competition alone. This is something that the Government must take into account.
Driving growth among SMEs is critical to the future success of the UK economy and increasing uptake of digital technologies among those businesses is central to that goal. Yet the potential benefits offered by digital technologies are not currently being realised by UK businesses. Only two-thirds have a website and only one-third sell goods and services online. The Government’s advisers suggest that the central barrier to small businesses realising these benefits is a lack of practical, digital skills and a shortage of resources to undertake digital training. This is hardly referred to in the Government’s response. Given the current economic climate, and a context in which recent EU budget negotiations have cut broadband funding by 90%, it is absolutely vital that the Government adopt a smart approach to broadband intervention that targets public finance where it can deliver the greatest economic gains.
I want to conclude by asking the Minister a few questions. The Government say that their key ambition is to have the best superfast broadband network in Europe by 2015. However, as we have heard, the latest figures suggest that we are only 16th in Europe and perhaps 24th overall. What is happening about this? Can we have some detail about the plans that will deliver the best superfast broadband in Europe within a couple of years?
The lack of broadband provision in rural areas is holding back the countryside, both economically and socially. The NFU ran a poll in 2010 regarding broadband access in rural areas. Around 40% of respondents said that they could not get broadband at all, while 90% who could access broadband did not get a reliable connection. What are the Government doing about this?
The Countryside Alliance believes it is important that there is competitive rollout of broadband services if the current problems of high prices and poor service in rural areas are to be overcome. There should not be one single technology to deliver broadband. Competition should be promoted between technologies, as we heard from a number of noble Lords. Can the Minister explain what the Government are doing to promote competition here?
Industry studies agree with the Government that the cost of putting together a superfast broadband network is probably going to be close to £15 billion. According to a recent freedom of information request, of the four pilot superfast broadband areas, which were named by the Chancellor in the Pre-Budget Report in 2010—the Highlands and Islands, north Yorkshire, Cumbria and Herefordshire—a couple of them have not spent a penny and two of the others were just moving towards finding local suppliers. Can the Minister update us on what is going on here?
Finally, as my noble friend Lady Bakewell mentioned, in the Heseltine report, No Stone Unturned, the suggestion is made that broadband for all is a critical step towards what the Government are doing. We have heard in recent press reports that the Budget will contain some details of that. Obviously no Budget secrets can be released but it would be interesting to know whether the Minister believes that the recommendations in the Heseltine report would be effective in bringing forward the proposals that have been made.
Lord Gardiner of Kimble
My Lords, first, I thank my noble friend Lord Inglewood and his committee for the report. It clearly identifies many key issues and challenges that we face in developing our broadband policies. The report is an important contribution to the general broadband debate. I agree with my noble friend Lady Fookes that dark fibre-optics and point-to-points have definitely now taken a new dimension. The report has indeed been stimulating and thought-provoking. What struck me were the many areas on which the Government and the committee agree, as my noble friend Lord Inglewood mentioned. We both seek improvements to the communications infrastructure so that the digital divide does not widen but narrows, and we need to be mindful of the longer term.
Communications infrastructure is recognised as a priority across the Government, with the Secretary of State for Culture, Media and Sport and the Minister for Culture, Communications and Creative Industries regularly meeting with counterparts in the Cabinet Office, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs, as well as with the Prime Minister, to discuss progress. I want to set the record straight because the noble Lord, Lord Haskel, mentioned that the Secretary of State and her team were not in a position to be at that conference. It was reported that they were required for parliamentary Divisions on that day. It was not a case of their not turning up; they were not in a position to do so because of parliamentary business.
Lord Haskel
I thank the Minister for that but it would have been helpful if the department had sent somebody, possibly the Minister from the House of Lords.
Lord Gardiner of Kimble
I would have been delighted to have obliged. I just wanted to say that to the noble Lord.
We agree with the committee and share the common goal that a world-class communications infrastructure is something that the UK requires and deserves. Indeed, the noble Baroness, Lady Deech, mentioned infrastructure in this connection. The overriding objective of the Government’s broadband ambitions is that the economic and social benefits are available to all, as soon as conceivably possible. My noble friend Lord Selborne mentioned these benefits.
It might be helpful, in setting the context of the Government’s response, to bring your Lordships up to date on progress with the Government’s broadband ambitions—I am particularly mindful of this because it was referred to by the noble Lord, Lord Stevenson—and why we have taken the direction that we have. This is important, as it relates directly to many of the recommendations in the report. There has been significant progress since the committee first considered the matter last year, and indeed since the Government’s response was published in October. Upgrading the communications network is essential, as the report recognises. It is massively important for economic growth, both in our cities and towns and more rural areas. The noble Lord, Lord Haskel, mentioned economic growth. My noble friend Lady Fookes mentioned education, which is clearly an area on which we need to concentrate.
The £1.2 billion investment that the Government and the 41 local authority partners, as well as the devolved Administrations, are putting in place is focused on those areas to which the market will not deliver alone—a point I want to emphasise—given the higher cost of deployment in certain locations. Through this investment, and working in partnership with industry, we will see much faster speeds, millions more homes and businesses able to enjoy these speeds and a market which boasts high competition and low prices, particularly compared to our European neighbours. Already, the Government’s strategy is seeing 100,000 more homes and businesses getting access each week and 50,000 new superfast connections taken up a week.
We have the best internet economy in the world. The noble Baroness, Lady Bakewell, referred to the use of the internet, as did my noble friend Lord Inglewood. This is worth £82 billion a year to the UK economy and contributes 8.3% to the UK economy as a whole, which is the highest proportion for any G8 country. Some 71% of the UK population bought goods and services online in 2011, more than any other country. By 2015, the UK will have achieved a transformation in broadband. By 2015, average speeds will be three times faster than in 2010, at around 15 to 20 megabits per second, and 10 million more homes and businesses will be connected—an increase of 75%.
The UK’s broadband market is in vibrant health, according to Ofcom’s European scorecard. This was published recently and showed that the UK currently benefits from low prices and a high degree of competition in the broadband market, and that the UK has the best deals in the major European economies for consumers who consider taking broadband in a package with subscription television and telephone. However, Ofcom’s survey also recognises that we need to do more regarding superfast broadband access, given that Germany and Spain are ahead of us.
Perhaps I may refer to rural Britain and declare that in another life I was a board member of the Countryside Alliance and deemed to be a champion of rural Britain. Indeed, this is a matter on which many of us who hold rural Britain dear to our hearts feel strongly about. Almost every noble Lord who has spoken has raised this matter—and quite rightly so. The more remote and rural areas must not be left behind when it comes to broadband access. Our aim is for the investment of public funds to bring superfast broadband access to 90% of UK premises, and a minimum of 2 megabits per second to everyone else. Our approach is technology-neutral, and we expect to see a mix of technologies including wireless, as mentioned by my noble friend Lord Inglewood, and satellite solutions. Indeed, satellite broadband is available now to anybody who wants to take it up, although I acknowledge that it is expensive. I am very conscious of what the noble Baroness, Lady Bakewell, said about Cornwall and the Isles of Scilly. It is an encouragement to all.
However, rapid progress is being made on the rural programme. Fifteen projects have now signed contracts and are either in progress already or about to start work. The remaining projects are entering procurements at a rate of one per week, and all should have completed their procurement phase by the end of the summer. I will indeed look at the particular counties that the noble Lord, Lord Stevenson, mentioned. My noble friends Lord Clement-Jones and Lord Selborne mentioned the £300 million of additional funding. I understand that options are being assessed, but I am extremely mindful of what both my noble friends have said.
Investment is already delivering faster connections for consumers. Indeed, in December, north Yorkshire saw its first active fibre cabinet and, at the end of February, there was the unveiling of the first cabinets in Bangor, north Wales. The devolved Administrations in Scotland, Wales and Northern Ireland will all benefit from significant central government investment in their broadband infrastructure, thereby delivering a key part of driving UK growth and investment. Similarly, our £150 million urban broadband programme, by working closely with local authorities and the private sector, will ensure that our cities can compete with the best in the world. Tech City in London shows how establishing a digital hub with world-class connectivity and expertise can be so successful. It is an example for all rural and urban Britain.
It is vital that the Government provide the right environment for investment. Our aim is to remove the barriers preventing investment and innovation, and demonstrate that Britain is one of the best places in the world to do business online. We will therefore remove barriers and red tape. We cannot allow rollout to be delayed by planning refusals, by confusion when carrying out street works or by long-running legal issues over access to private land. Our goal is to provide certainty to ensure that the money invested in rollout is used to take superfast broadband further.
Delivering consumer benefit from a competitive market was a founding principle of the Government’s intervention. To this end, they share the committee’s aim to see more reliable broadband services for a greater number of people and at affordable prices. The framework process was competitive, with 13 organisations expressing interest and nine entering submissions. It was important to identify organisations that could demonstrate the capacity and capability to deliver sustainable commercial services for the wholesale supplier market and the retail consumer services market. The framework agreement requires suppliers to meet all these conditions. In addition, Broadband Delivery UK has included price controls, clawback mechanisms and an independent audit process to ensure that the value from the investment being made by the public sector is maximised.
The regulatory framework governing the telecoms sector must be fit for purpose and competitive. While this of course sits with Ofcom, we are committed to ensuring that the market fosters competition, supports multiple innovative providers, and results in greater consumer choice. I know that my noble friend Lord Inglewood and the noble Lord, Lord Stevenson, referred particularly to competition. We are already seeing a healthy market emerging. Virgin Media has two-thirds of superfast broadband connections, while Sky and TalkTalk already provide services over BT’s network. I am mindful of what the noble Lord, Lord St John of Bletso, said about ducts, but BT is required to offer access to its network on equivalent terms, and is required to offer access to its duct and pole network. Any networks built using government funds will be required to offer wholesale access. We are therefore starting to see genuine retail competition emerging at this early stage. Ofcom continues to monitor this market and has already begun the process for the next wholesale local access market review, which will determine whether stronger action is needed to ensure greater competition. Ofcom will publish a consultation later this year on this matter.
My noble friend Lord Selborne mentioned the G4 spectrum auction, which has been successful, and the winners were announced recently. This was vital. The Government directed Ofcom to proceed with the auction and brokered agreement with the mobile operators to allow this not only to happen but to happen six months earlier than had previously been thought.
We are planning for the future by overseeing the release of significant bands of public sector spectrum to the market. This is spectrum that is currently used by the Ministry of Defence, the Department for Transport and the emergency services, among others, which may be better used for mobile broadband.
My noble friend Lord Inglewood referred to the “internet of everything”. Indeed, the pace of change in the world of mobile is very fast. We are determined to ensure that Britain is ready for the challenges ahead. My noble friend Lady Fookes mentioned new build. This is clearly extremely important. The Government have already issued guidelines on ducting for developers, and I will give careful consideration to what she said on this matter.
We cannot create a world-class connected Britain just by laying more fibre in the ground or building new base stations. It is crucial that we get as many people as possible online with sufficient knowledge and confidence, enjoying the benefits presented by better connectivity. We must also encourage British companies to expand and develop their internet-based operations. Many noble Lords—the noble Lord, Lord Haskel, the noble Baroness, Lady Deech, and the noble Lord, Lord St. John of Bletso—particularly referred to this. Ultimately, it is users who will turn infrastructure investment into growth. Many of the recommendations in the report recognise this. The noble Lord, Lord Stevenson, mentioned SMEs. SMEs utilising the internet have reported more than double the export revenue of those who do not use the internet. That in itself is a very strong story.
The noble Baroness, Lady Deech, mentioned Martha Lane Fox. Her tireless work and that of Go ON UK have been vital in getting more people online and demonstrating how people’s lives can be changed for the better by embracing the digital world. We are exploring ways to encourage high-speed take-up as part of our urban programme. Demand stimulation also remains a key focus of our local rural broadband projects, with a particular emphasis on SMEs.
We have made significant progress since the publication of the report, but there is still very much more to do. There was much in the report with which we agree, such as the reform of the planning system, to which my noble friend Lord Clement-Jones referred, which directly reflected your Lordships’ recommendations. The report provides a rich resource for government as our policy continues to evolve.
I accept that there were also areas where the committee advanced a different approach, perhaps most notably in the report’s recommendation that the long-term objective should be directed towards a specific technology—universal point-to-point fibre to the premises. The report also recognised that this was a costly solution and this was acknowledged by a number of noble Lords. Certainly, at this time it is beyond available resources.
With that in mind, the Government firmly believe that our policies and financial interventions have put us on the right track to see a step-change in broadband access right across the country in an affordable manner, without prejudging the technological solutions needed to make that happen. This will lead to greater growth for the whole economy and improve the lives and well-being of millions. The nature of the enterprise is that engineers, policymakers and the public will continue to debate the best way to get there. I am sure that many of your Lordships will also continue to do so. The UK needs and deserves the very best superfast broadband network that the private sector and the Government, working in partnership, can deliver. It is an objective to which we all aspire, and the committee’s report has undoubtedly enhanced the debate.
Lord Inglewood
My Lords, I am grateful to all the speakers in this debate who, without exception, have supported the thrust of our report and its recognition of the social and commercial significance of broadband for this country. They were not applying the same arguments; that in its own way is equally significant, because we do not advocate any single solution to the problems of the last 10%. It is horses for courses, and there are different arguments for different aspects to the general approach we are advocating. I was interested that the Minister criticised the report for advocating a single technology. I do not think that is quite fair: we are advocating a single outcome from the application of whatever technology may be the most appropriate to bring it about.
We have been talking about something that is important and revolutionary. That is why I was very pleased that a number of speakers referred to both the historical and the global contexts of what we are discussing this evening. I was particularly impressed by the noble Baroness, Lady Deech, talking about Marie Antoinette and what she might have said in France. Then she moved on to talk about the Chinese emperor. I am sure it was an oversight that she did not tell us what he would have said in his own language.
The Government are doing things, and that is good. I congratulated them on this in my opening remarks, but we must ensure that what is being done is progress and that we are not seduced or misled by averages disguising areas of deprivation in a much more satisfactory landscape. We have had a good debate this evening; I have no doubt that this subject will, in the years to come, be debated again—and so it should be. I beg to move.