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Oral Answers to Questions
(11 years ago)
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Huw Irranca-Davies (Ogmore) (Lab)
1. What assessment the Office for Budget Responsibility has made of the effects on the economy of recent changes in energy prices.
The Economic Secretary to the Treasury (Nicky Morgan)
The Office for Budget Responsibility has not published any assessment of the effects of the recent energy price increases on the economy. The OBR’s last published forecast, “Economic and fiscal outlook” was issued in March 2013, and an updated forecast will be provided alongside the autumn statement. The Government are committed to doing all we can to keep energy bills down to support hard-working families.
Huw Irranca-Davies
I welcome the hon. Lady to her post. Is she aware that last year wholesale energy prices rose by 1.7%, but energy bills by 9.1%? Is it not time that the Government stopped defending the big six energy companies and actually called for a freeze on prices while we reset the energy market?
Nicky Morgan
It is very interesting to hear what the hon. Gentleman says, but the first thing he needs to do is explain to his constituents why he voted for the decarbonisation target, which is going to add £125 to energy bills. Secondly, it was the last Labour Government who created the big six. We started off with 20; they left us with the big six. Thirdly, this Government have set out very clearly how they will help households—by reviewing green levies, by encouraging switching, which I am pleased to see the Leader of the Opposition has taken up, and by increasing competition.
Harriett Baldwin (West Worcestershire) (Con)
I, too, welcome the Minister to her post. She will know that one of the energy bills that my rural constituents have to struggle with is for petrol. Will she tell us whether the Office for Budget Responsibility has done an assessment of how much families are saving by our avoidance of the 13p fuel hike planned by the Labour party?
Nicky Morgan
I thank my hon. Friend for her question. The OBR does an assessment of all taxes and their impact on the economy. The policies that this Government are pursuing in recognition of the pressures on household budgets mean that filling up the average car is costing families £7 less at the moment, and by the end of this Parliament it will cost them £10 less.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
Does the Minister accept that the best answer to this question is to freeze energy prices? Surely that is the answer.
Nicky Morgan
I thank the hon. Gentleman very much indeed for his question, but the energy price freeze suggested by the Leader of the Opposition is actually an energy price con. It has been made very clear that the prices will go up beforehand and up afterwards, and the Leader of the Opposition has made it clear that if wholesale prices go up, he will have to stop the freeze. That is a price con; it is not sustainable; we are fixing the problem.
Mike Thornton (Eastleigh) (LD)
Will the Chancellor of the Exchequer join me in congratulating the Eastleigh Liberal Democrat borough council on the large part it has played in bringing the local unemployment rate down below 1,000?
Mr Speaker
Whatever the worthiness of the efforts of the council to which the hon. Gentleman refers, unfortunately it has absolutely nothing whatever to do with Question 1.
Paul Maynard (Blackpool North and Cleveleys) (Con)
2. What assessment he has made of the effect of freezing fuel duty on the price of petrol.
The Chancellor of the Exchequer (Mr George Osborne)
Thanks to this Government’s action, pump prices are 13p a litre lower than they would have been under the previous Government’s plans. Provided we can find the savings to pay for it, my intention is to freeze fuel duty for the rest of this Parliament.
Paul Maynard
I thank my right hon. Friend for that reply. The cost of fuel is of great concern to many of my constituents. If he can freeze the price of fuel for the remainder of this Parliament, how much cheaper will petrol be, come the next election?
Mr Osborne
If we are able to freeze petrol prices for the rest of this Parliament, the price will 20p a litre lower than it would have been if we had stuck with the plans that the shadow Chancellor advocated at the last general election. That would mean, as my hon. Friend the Economic Secretary was just reminding us, a saving of over £10 every time people filled up their average car. That is what this Government are doing; by fixing the public finances, we are able to help people.
John Mann (Bassetlaw) (Lab)
When the Chancellor became Chancellor, unleaded petrol was £1.19 a litre. Can he tell us how much it is today?
Mr Osborne
It depends, of course, where you buy it. The last price I saw at a petrol station was around £1.35, but it would have been 20p higher if we had stuck with the last Government’s plans—the hon. Gentleman voted for them—in the last Labour Budget. That is the truth, and it is because we are fixing the public finances and fixing the economy that we can avoid these disastrous Labour tax rises.
Mr Andrew Tyrie (Chichester) (Con)
The freeze on duty makes a crucial contribution to improving business competitiveness, and will have been welcomed by all our constituents throughout the country. Will the Chancellor undertake, as part of his work on the autumn statement, to publish the Treasury’s own estimate of the full amount by which both motoring and energy input costs have been increased by climate change-related measures?
Mr Osborne
Of course the OBR provides an assessment of the impact of Government policies on the economy, and I will consider my hon. Friend’s specific suggestion that we look into the impact of climate change policies on energy prices. We are currently examining the charges and levies that the last Government, among others, added to energy bills, and seeing what we can do to roll them back in order to provide relief for customers.
Mr Nigel Dodds (Belfast North) (DUP)
I welcome the action taken by the Government to freeze fuel duties, but UK taxes on petrol and other fuels remain among the highest in any country in the European Union. What will the Chancellor do to remedy that much unwanted achievement?
Mr Osborne
I looked at the plans that this Government inherited, and then cut petrol duty in March 2011. We have frozen the duty ever since, and I intend to continue the freeze for the rest of the current Parliament, provided that we can find the savings to pay for it. That is the crucial point: if we do not sort out the economy, if we are not fixing the public finances, if we do not have an economic plan, we cannot have a living standards plan.
Robert Halfon (Harlow) (Con)
Notwithstanding the excellent news of the fuel freeze, petrol pump prices are still under threat from hard-liners at Grangemouth. Does my right hon. Friend agree that extremism in the pursuit of hard-pressed motorists is no virtue?
Mr Osborne
My hon. Friend is absolutely right. The greatest threat to fuel supplies recently has been the threat of industrial action from the Unite union, led by the chair of the Falkirk Labour party. We now hear the former Labour Chancellor and the former Labour Foreign Secretary saying that Labour should open its inquiry and publish what it finds, and a Labour Front Bencher saying that Labour does not “publish internal documents”.
Mr Speaker
Order. That has nothing to do with the responsibilities of the Chancellor. [Interruption.] Order! In the name of respect for parliamentary process and the traditions of the House, I ask Ministers not to behave in that way. We deserve better.
Chris Leslie (Nottingham East) (Lab/Co-op)
I shall return to the actual question of duties. Has the Chancellor found the £750 million that is needed to pay for the freeze? At the party conferences, he also promised to spend a further £700 million on school meals, a further £300 million on his Work programme, and a further £600 million on a marriage allowance. That is £2.3 billion of promises. Let us be clear about this. Is the Chancellor going to raise taxes or cut services to pay for those promises, or is he planning simply to borrow even more? Which is it?
Mr Osborne
What a question from a Labour Front- Bench team that wants to spend £27 billion more, and to borrow every penny of it. If this is the hon. Gentleman’s debut performance as shadow Chief Secretary, I am afraid that he will have to do a lot better. His job should be to control the promises that he makes. As for our side, we are paying for the commitments that we are making to the hard-working people of this country.
Mr Osborne
I will tell the right hon. Gentleman how: by sorting out the mess that he created.
Chris Leslie
Despite all that hot air, it seems that there are still £2.3 billion of unfunded promises. Would it not be far easier if all those promises were fully costed and funded and independently checked by the Office for Budget Responsibility, just to ensure that the Chancellor’s sums add up?
We have proposed that all the main political parties should be able to submit tax and spending plans to the OBR ahead of the election manifestos. Surely we can all agree that—as the Chair of the Treasury Committee has suggested—an independent audit by the OBR for all the main political parties would be good for the democratic process, so will the Chancellor now join us in a cross-party consensus on that?
Mr Osborne
As to a cross-party consensus, I remember when I was speaking from the Opposition Dispatch Box and the hon. Gentleman’s party was in government that it opposed the creation of the OBR—opposed it time and again. I believe it is important that we preserve the independence and integrity of this new body, which is working well but is entrusted with the very important task of providing the economic forecasts for whoever is in government. That should be its primary purpose and the changes to the primary law that the hon. Gentleman is proposing are not very practical.
Roger Williams (Brecon and Radnorshire) (LD)
3. What his policy is on the issuing of Government bonds in the form of sukuk; and if he will make a statement.
The Financial Secretary to the Treasury (Sajid Javid)
The Government want the United Kingdom to become the first sovereign state outside the Muslim world to issue an Islamic bond. The Treasury is therefore working on the practicalities of issuing about £200 million of sovereign sukuk as early as next year. The Government see sukuk issuance as an excellent opportunity to promote London as the leading centre for Islamic finance.
Roger Williams
As chairman of the all-party group on Islamic finance and diversity in financial markets, I welcome the Government’s decision to issue a sukuk. It is something the group has campaigned on. I also congratulate the Government on their part in hosting the World Islamic Economic Forum in this country, the first time it has been held in a non-Muslim country. What else are the Government doing to promote Islamic investment in this country and sustain the Islamic banking sector?
Sajid Javid
I thank my hon. Friend for his continuing work in promoting Islamic finance and diversity in financial markets. London is already a global player in Islamic finance, which brings in significant investment and creates thousands of jobs. Last week I also announced that we are bringing together a global Islamic investment group. This group will have the expertise to help Islamic finance grow globally, as well as developing London as one of the leading centres for Islamic finance.
Keith Vaz (Leicester East) (Lab)
May I also welcome what the Government have done? It will make this country the first anywhere in the western world to provide sharia-compliant bonds. We do not just want people to invest from outside, however. Although the last census showed that Brecon and Radnor had 116 Muslim people, I have 21,075 in my constituency. How does the Minister intend to sell those bonds to the people of Leicester East?
Sajid Javid
I thank the right hon. Gentleman for his warm words. Britain already has 20 banks offering Islamic financial products. We also have 49 sukuk listed on the London stock exchange, valued at over £25 billion, and 25 law firms that have significant Islamic practices. We will bring all this experience together to further develop Britain as an Islamic finance centre, and I am sure that will help his constituents with their investment decisions.
Paul Goggins (Wythenshawe and Sale East) (Lab)
4. If he will introduce a time-limited exemption from air passenger duty on new long-haul routes from uncongested airports.
The Economic Secretary to the Treasury (Nicky Morgan)
The Government are always open to ideas that promote regional growth. The Airports Commission will shortly publish a report on the best use of existing airport capacity in the short to medium term and the Government will take its findings into account in our response.
Paul Goggins
I am grateful to the Minister for her answer, and I welcome her to her position. As part of the growing links between the north-west and China, Manchester airport is seeking to develop a new route to Beijing, but one of the major obstacles is the very high level of UK APD. Will she take a careful look at new research by York Aviation, which has concluded that a time-limited exemption from APD on new long-haul routes from regional airports would make the Manchester-Beijing route immediately viable?
Nicky Morgan
I thank the right hon. Gentleman for his question. The Government will always take a look at the evidence. In fact, we debated APD in the House only the week before last. In October 2012, Her Majesty’s Revenue and Customs published modelling on price differentials at UK airports, and it showed that even large price changes have a relatively small impact on total passenger demand, but I am sure he will welcome my right hon. Friend the Chancellor of the Exchequer’s announcement of the £800 million investment in Airport City in Manchester, which will create over 16,000 jobs. The involvement of Beijing Construction Engineering Group as a partner in this project is the latest in a line of new partnerships being forged between the UK and China.
Mr Nigel Evans (Ribble Valley) (Ind)
Manchester airport is second only to Heathrow in terms of airport capacity, but it is operating at under half capacity, yet Heathrow is full. Boris Johnson talked yesterday to the CBI about getting these new routes out to China and Asia, but instead of forcing people from the north-west to fly down to London in order to fly to China, why cannot we get people to come from London up to Manchester to fly out on all these new routes that we need?
Nicky Morgan
I thank the hon. Gentleman for his question. As I said, we will always look at any evidence that people want to send us. We want to encourage new links between the UK and China, and the Mayor of London made some interesting points. The point is that we have to change prices a lot in order to change passenger behaviour, and we would need to look at that further.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Is the Minister aware of the success of Barcelona airport in gaining more than 20 international routes in the past year because of a 100% APD reduction? Does she think that such a reduction would help Scotland to regain the millions of passengers it has lost owing to this Government’s APD costs?
Nicky Morgan
The hon. Gentleman will be aware that there is no APD charge from airports in his constituency. As he knows from our recent debate, APD makes an important contribution to the deficit reduction plans; we will always keep it under review, but it is a very important part of this Government’s attempts to rebalance the economy.
Stephen Gilbert (St Austell and Newquay) (LD)
APD can also have a disproportionate effect on regional airports operating lifeline routes with modest passenger numbers, such as Newquay’s. Will the Minister factor that into the discussions she is having with colleagues on the future of APD?
Nicky Morgan
I thank the hon. Gentleman for his question. We will always look at the evidence, and if cares to write to me, we will certainly take that into account.
Graham Evans (Weaver Vale) (Con)
5. What estimate he has made of the number of jobs created in the private sector in the last 12 months; and if he will make a statement.
Nigel Adams (Selby and Ainsty) (Con)
11. What estimate he has made of the number of jobs created in the private sector in the last 12 months; and if he will make a statement. [R]
The Chancellor of the Exchequer (Mr George Osborne)
In the past year, employment in the private sector has increased by 380,000, more than offsetting the fall in public sector employment of 104,000. For every public sector job lost, more than three have been created in the private sector. That confounds the predictions of those who thought it could never happen.
Graham Evans
Unemployment in my constituency is lower than it was when I became the MP. With the further good news that Waitrose is creating 140 new jobs in Northwich later this month, will my right hon. Friend the Chancellor set out how small and medium-sized enterprises will benefit from a reduction in national insurance contributions?
Mr Osborne
I am delighted by the news of the new jobs being created by Waitrose in Northwich; as my hon. Friend well knows, I represent part of that town. That will be good for the people who live in it, and I hope that some of my constituents will find work there. The employment allowance, which we debated in this Parliament this week, is going to take £2,000 off the national insurance bill of every firm, but the biggest benefit will be felt by the smallest companies; 450,000 firms will be taken out of employer NICs altogether. That is a real boost for business, and it shows how we can help to support the recovery.
Nigel Adams
Unemployment is down by almost 30% in my constituency since the last election. Given that Selby lost almost 2,000 jobs in 2004 in the mining industry, that is very encouraging. Given UK Coal’s recent troubles and its callous decision to withdraw concessionary fuel from some ex-miners and their widows, what comfort can the Chancellor give to these pensioners, who potentially face fuel poverty this winter?
Mr Osborne
I know that this difficult situation has been brought about by the failure of UK Coal. I congratulate my hon. Friend on leading this campaign to do something about the situation, and I know that my hon. Friends the Members for Sherwood (Mr Spencer) and for Nuneaton (Mr Jones) have joined him in coming to see me about it. We are looking very carefully at the case for what we can do to help those who have had their concessionary fuel allowance taken away because of the failure of UK Coal. I am personally looking at this case and I hope to have some good news shortly.
Anas Sarwar (Glasgow Central) (Lab)
Evidence shows that it is not just having a job, but having the right job and the right level of pay that lifts someone out of poverty. So can the Chancellor tell us how many of those new jobs that have been created are full-time jobs, how many do not involve zero-hours contracts and how many actually pay the living wage?
Mr Osborne
We have 1.4 million new jobs in this economy. To take on the point about part-time work, there has also been an increase in the number of hours worked in the economy, and a lot of the recent increase in employment has come from full-time employment. Let us compare that with the disastrous situation we inherited from the Labour party, where unemployment was rocketing and youth unemployment was rocketing. Unemployment is now lower than it was at the general election, and many thousands—[Interruption.] That is the fact. Many thousands of young people have come off the claimant count for youth unemployment, too.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Can the right hon. Gentleman now confirm that the number of people working part time because they cannot get a full-time job has risen over the past year to 1.45 million and is now at a record high? With prices rising faster than wages for 39 of the past 40 months, is this not just another reason why so many working people are facing a cost-of-living crisis after three wasted years under this Chancellor?
Mr Osborne
The best thing we can do for anyone’s cost of living is make sure that they have a job. Jobs are being created under this Government, after they were destroyed by the Labour Government. I am surprised that the hon. Lady did not thank us for creating an economy in which, in her constituency, unemployment is falling, and has fallen over the past year, and the claimant count is falling, when it was rocketing in the last years of the Labour Government.
Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD)
The Chancellor made some important announcements last week about the future of the Royal Bank of Scotland. Although we are absolutely right to keep pressing the bank to improve its poor lending record, will he also put on record the need for us to recognise the hugely important private sector jobs underpinned by RBS in Scotland and elsewhere, and the fact that we see a strong future for that company?
Mr Osborne
I have discussed RBS and what we can do to ensure that it supports the Scottish economy with my right hon. Friend on many occasions. The plan that the management has proposed, which we and the Governor of the Bank of England support—it is the first time since RBS collapsed in autumn 2008 that all those groups agree on a single strategy for the bank—will mean a strong, healthy future for RBS as a bank that supports the entire United Kingdom economy and, in particular, the Scottish economy. It is an important part of Scottish economic history and of Scotland’s economic future, too.
Julie Hilling (Bolton West) (Lab)
6. What recent assessment he has made of the rate of increase in (a) average earnings and (b) consumer price inflation.
The Exchequer Secretary to the Treasury (Mr David Gauke)
Disposable income increased last year at the fastest pace since 2009. In March, the Office for Budget Responsibility forecast that real household disposable income growth would accelerate each year from 2014 to 2017, reaching 2.3% in 2017. The best way to raise living standards is to stick to the Government’s economic plan and deliver a recovery that works for all. Britain is back on the path to prosperity, the economy is growing, the deficit is falling and jobs are being created.
Julie Hilling
I do not understand how the Minister and the Chancellor can think that their economic policies are a success. After three wasted and damaging years of flatlining, working people are on average £1,500 a year worse off. Is it not clear that his plan has failed hard-working families?
Andrea Leadsom (South Northamptonshire) (Con)
On the subject of the cost of living, does my hon. Friend think it astonishing that Opposition Members do not understand that this Government have done so much to keep council taxes down? If we were still subject to their policies, the average council tax cost would be £210 a year higher.
Andrew Gwynne (Denton and Reddish) (Lab)
Why does the Minister think that April 2013 was the only month on this Chancellor’s watch in which pay rose faster than prices? Does he agree with the ONS that it is because people deferred their bonus payments to make the best use of the Chancellor’s millionaires’ tax cut?
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Does my hon. Friend agree that one way of tackling rising prices is to leave people with more of their own money in their pocket? Will he confirm that the 50% tax cut we have given to those on the minimum wage has done exactly that and shows that we are on the side of hard-working people?
Alec Shelbrooke (Elmet and Rothwell) (Con)
7. What recent fiscal steps he has taken to help people who want to buy their own home.
The Financial Secretary to the Treasury (Sajid Javid)
The Government are committed to making the aspiration of home ownership a reality for as many people as possible. That is why we recently announced that participating lenders will be able to offer high loan-to-value mortgages supported by their Help to Buy mortgage guarantee schemes three months earlier than planned. I was pleased to hear that Lloyds Banking Group recently announced that the first such mortgage was taken out by a first-time buyer in Dartford, Kent.
Alec Shelbrooke
Will my hon. Friend update the House specifically on helping the hard-working people in my constituency, where there is 77% home ownership, which is increasing, compared with 65% across the UK?
Sajid Javid
Under Labour, the number of first-time buyers fell to its lowest level for 25 years, from an average of 470,000 a year in the early 2000s to around 190,000 by 2008. That destroyed the hopes and aspirations of many hard-working families. This Government’s two Help to Buy schemes will help thousands of hard-working people to get on the housing ladder, including those in Elmet and Rothwell and those throughout the UK.
Ann McKechin (Glasgow North) (Lab)
16. Is it fair for taxpayers in my constituency to subsidise a London property bubble that has already increased by 10% since the introduction of this scheme?
Sajid Javid
The hon. Lady should know, as she would if she looked at the facts carefully, that the Help to Buy scheme is priced on commercial terms; it is designed to break even and it will not cost the taxpayer anything.
Andrew Selous (South West Bedfordshire) (Con)
Does the Minister share my concern that, reportedly, some young people have actually given up saving for a deposit, and will he ensure that those of us on the Government Benches will stand with those people who have a dream of home ownership to make sure it can be fulfilled?
Sajid Javid
My hon. Friend is absolutely right. Some Opposition Members believe that only people who have rich parents that can help them meet some of the large deposit requirements should be able to buy their own home. That is not the policy of this Government, who support hard-working families.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
On the issue of fiscal steps to help people buy homes, the Chancellor of the Exchequer said last year that people buying homes through a company to avoid tax was unacceptable, and he would come down on it
“like a ton of bricks”.
Has he investigated reports that the Under-Secretary of State for Transport, the hon. Member for Wimbledon (Stephen Hammond), has avoided tax in that way, and will he come down on him like a ton of bricks?
Sajid Javid
I welcome the hon. Lady to the shadow Front Bench team. I look forward to debating with her. The Government have already taken steps to ensure that property buyers pay more in tax, by increasing stamp duty and by dealing with purchases through companies, and it would not be appropriate for any Minister to make a comment on any individual’s tax circumstances.
Jason McCartney (Colne Valley) (Con)
8. What recent steps he has taken to increase investment in infrastructure.
The Chief Secretary to the Treasury (Danny Alexander)
Investment in infrastructure is a key priority for this Government. In June, I set out a pipeline of investment in specific projects, worth over £100 billion out to 2020, including the largest investment in our railways since the Victorian era and the biggest investment in roads since the 1970s.
Jason McCartney
I welcome the support of my local Labour leader of Kirklees council for the new north-south railway, but does my right hon. Friend agree with the leader of Manchester council, who said that politicians need to stop taking cheap shots at HS2
“unless we want an increasingly disconnected North…slowly grinding to a halt”?
Danny Alexander
I wholeheartedly agree with those sentiments. My hon. Friend could have added to that list the leader of Nottingham city council, who said that the Labour Front Bench should get off the fence on HS2. The project is needed to promote growth, and connectivity outside London. I agree with that, and so should they.
Robert Flello (Stoke-on-Trent South) (Lab)
22. When the Chancellor talks about increased investment, is that what he meant to cover the £10 billion increase in the HS2 costs, which have gone up on his watch?
Danny Alexander
We set out in June the budget for HS2. We will absolutely stick to that budget. Using the excellent leadership we have brought in, with Sir David Higgins and others, we will make sure that the project is delivered under budget. The hon. Gentleman should be committed to the project because it will support growth all over the United Kingdom. It is the most significant investment in our railways for 100 years, and his party should support it.
Andrew Griffiths (Burton) (Con)
17. I refer the House to my entry in the Register of Members’ Financial Interests.I congratulate the Chancellor and his Government on their investment in infrastructure in the west midlands, which helped to deliver the Jaguar Land Rover plant, and thousands of manufacturing jobs in the process. I also draw the Minister’s attention to the A50, a key corridor in my constituency, connecting Stoke to Derby, which involves a number of manufacturing businesses that could hugely benefit from road improvements and infrastructure spending.
Danny Alexander
The hon. Gentleman is right that targeted infrastructure investment can unlock job creation in enterprise zones, including at JLR and in various places around the country. I am well aware of the particular scheme that he is promoting and I look forward to discussing it further with him to see how we can take it forward.
Mr Geoffrey Robinson (Coventry North West) (Lab)
The Chief Secretary will be aware that several conflicting and not very encouraging cost-benefit analyses for HS2 are currently in circulation. Could he not clear the air by commissioning and publishing a genuinely independent internal Treasury cost-benefit analysis of the project?
Danny Alexander
The Government have set out various cost-benefit analyses of the project. With respect to the hon. Gentleman, what is needed in this project is not more procrastination, delay and extra reports, but a commitment in all parts of the House to get on with this north-south railway and allow economic growth in every part of the United Kingdom.
John Howell (Henley) (Con)
9. What recent fiscal steps he has taken to support small businesses.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government are very supportive of small businesses. We demonstrated this support again at Budget 2013 through the introduction of the new £2,000 employment allowance for small businesses and charities from April 2014.We have extended the small business rate relief from April 2013. We have increased the small business research and development tax credit to 225% and the lifetime limit on entrepreneurs relief to £10 million. In addition, we have launched a £1 billion British business bank to improve access to finance for small and medium-sized enterprises in the UK.
John Howell
I congratulate my hon. Friend on the fact that the new employment allowance will mean that 450,000 small businesses pay no national insurance contributions at all. Is this not a positive help to small businesses such as those in my constituency as they seek to take on more employees?
Mr Gauke
I entirely agree. That £2,000 for every business will feed through by helping businesses take on new staff, invest in their business or pay higher wages. It is a positive contribution, which contrasts with the proposals that we inherited for an increase in employer’s national insurance contributions.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Why since 2011 has SME investment and lending to SMEs fallen by £30 billion?
David Morris (Morecambe and Lunesdale) (Con)
Does my hon. Friend agree that it is good news that, due to the investment in small businesses, unemployment in Morecambe has fallen by 10% in the past three months?
Sheila Gilmore (Edinburgh East) (Lab)
Why should we believe from the Minister that the present scheme for dealing with national insurance contributions will be any more successful than his previous scheme, where take-up was extremely poor and did nothing to increase jobs?
Mr Gauke
I do not know whether Labour is opposing the scheme. That was not the impression I got. This is a very simple scheme. It does not require applications or involve any of the complexities that we saw with two of the Labour national insurance contribution schemes. We are confident that the current scheme will work. It has been widely supported by business groups and I think it will make a big difference to small businesses.
Mr Dave Watts (St Helens North) (Lab)
10. What assessment he has made of the effect of his spending plans on the cost of in-work benefits.
The Economic Secretary to the Treasury (Nicky Morgan)
The latest forecasts of benefits and tax credits are available online via the website of the Department for Work and Pensions. They are consistent with the Office for Budget Responsibility forecasts and reflect the Government’s wider policy.
Mr Watts
Will the Minister explain why she is allowing companies that are making massive profits to pay poverty wages that need a subsidy from the taxpayer through in-work benefits? Why does she not stop those companies sponging off the taxpayer and adopt a Labour policy of requiring companies that can well afford it to pay a living wage?
Nicky Morgan
It seems that even the shadow Chancellor has questions about a living wage policy, saying in 2010 that he was not sure about it. I am surprised that the hon. Gentleman did not talk about the fact that in the north-west and Merseyside 306,000 people have been taken out of paying income tax altogether as a result of this Government’s policies.
Mr James Clappison (Hertsmere) (Con)
It was the case, was it not, that under the previous Government work simply did not pay because people who got into work found that a huge proportion of their extra income and, in some cases, all their extra income was clawed back by the complex benefits system? Will my hon. Friends redouble their efforts to make sure that work pays?
Nicky Morgan
I thank my hon. Friend for his question. He is absolutely right. This Government believe that work should always pay. By 2010, nine out of 10 working families had been made dependent on the state by the previous Government. This Government believe that families should keep more of their hard-earned money to spend on the things that are important to them.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
12. What recent assessment he has made of the effect of fiscal policy on the level of youth unemployment.
The Chief Secretary to the Treasury (Danny Alexander)
The UK labour market is showing some signs of recovery. Youth unemployment, excluding those in full-time education, fell over the last quarter and the number of young people claiming jobseeker’s allowance is lower now than it was in 2010. The Government are committed to supporting long-term unemployed young people, which is why we launched the Youth Contract in 2012 and why we have increased the number of apprenticeships, with over 1 million starts so far.
Bridget Phillipson
The Chief Secretary refers to the Youth Contract, but does he not accept the assessment of the Government’s own social mobility adviser that it is having a limited impact on the
“appallingly high levels of youth unemployment”?
Danny Alexander
I certainly accept that there is a great deal more that we have to do to get people off benefit and into work, but if the hon. Lady looks at the work experience programme within the Youth Contract, she will see that it is having a significant effect on the number of young people getting off benefit and into work, and at one 20th of the cost of the future jobs fund, which I think is good value for money.
George Freeman (Mid Norfolk) (Con)
Is not the single most important measure we can take to tackle youth unemployment the creation of jobs? I therefore welcome the creation of over 1.5 million new jobs and 600,000 new apprenticeships and the news that last year this country had more small businesses than ever before. Does that not show that we have a Government who are seriously tackling youth unemployment, after it rose for 13 years?
Danny Alexander
My hon. Friend is right. In fact, there are now more people in work, including more women, than ever before in our country’s history, and there are now more households in which someone works than in any year under the previous Government. There is a lot more to do, but that is a record to be proud of.
David Mowat (Warrington South) (Con)
13. What representations he has received on Yorkshire bank and lending to small and medium-sized businesses.
The Financial Secretary to the Treasury (Sajid Javid)
All meetings between external organisations and Treasury Ministers are published on the Government’s website. However, it is not the Treasury’s practice to provide details of all representations Ministers receive. Lending to small and medium-sized businesses is an important issue, and I can assure my hon. Friend that it receives the Government’s highest attention.
David Mowat
I thank the Financial Secretary for that answer. He might be aware that two years ago the owners of Yorkshire bank announced their intention to downsize in the UK and invest more money in Asia. Since then they have aggressively reduced the size of their UK loan book, despite assurances made to small businesses. That has affected many businesses across the country, including Arley Homes in my constituency, which has been forced into administration, with the loss of many jobs. Is there more we can do to make them behave responsibly?
Sajid Javid
I know that my hon. Friend raised this issue with my predecessor on behalf of his constituents, and he was absolutely right to do so. The way in which a bank structures its business is a commercial decision, as I am sure he appreciates, so I am unable to comment on it. However, if a bank decides to restructure its business in a certain way, I would expect it to pay due regard to the interests of all its customers and to treat them fairly.
Bill Esterson (Sefton Central) (Lab)
Small businesses in my constituency used to borrow from Yorkshire bank, and many have told me that they never missed a repayment, but now the bank simply will not lend to them, despite excellent credit histories. Why are the banks refusing to lend to small businesses that have a strong history of repayment?
Sajid Javid
May I give the hon. Gentleman some advice on how he can help small businesses in his constituency and elsewhere? The SME appeals process that the Government set up with the banking sector has been very successful, with 40% of businesses that appeal finding decisions overturned. He can help to advertise that, as the Government will be doing shortly to banks.
Philip Davies (Shipley) (Con)
The point of capitalism is that people who take risks should be rewarded when they are successful and should lose money when they fail. Yorkshire bank has been among the worst for penalising its good customers to try to make up for its own losses. That is an abuse of capitalism. I hope that the Minister will take steps to ensure that Yorkshire bank treats its customers fairly, because in too many cases it has been treating them terribly unfairly.
Sajid Javid
My hon. Friend has made a number of representations on this issue, and he is right to do so. As I have said, we want all banks to treat their customers fairly, and the Government are absolutely committed to that.
Mr Clive Betts (Sheffield South East) (Lab)
I agree with the comments made by the hon. Member for Warrington South (David Mowat). Following an article I wrote for the Yorkshire Post, I have received dozens of complaints about Yorkshire bank from small businesses, particularly about being locked into tailored business loans with very high interest rates and very high redemption clauses and payments to get out of them. Will the Minister look at involving the Financial Conduct Authority to see if there could be an investigation into what has been going on?
Sajid Javid
I believe that my predecessor raised this issue with the FCA, but I would be more than happy to do so again.
Steve McCabe (Birmingham, Selly Oak) (Lab)
14. What recent comparative assessment he has made of trends in real wages in the UK and in similar economies.
The Economic Secretary to the Treasury (Nicky Morgan)
This Government recognise the pressure on households, but the fall in living standards is a consequence of the economic crisis left to us by Labour. The only way to raise living standards is to stick to our economic plans and deliver a recovery that works for all. Britain has turned a corner: the economy is growing, the deficit is falling, and jobs are being created. Last year, UK take-home pay was the highest in the G7 and the third highest in the OECD.
Steve McCabe
That is a very interesting answer. Why does the Minister think that the 15% cut in wages suffered by British workers over the past five years is more than in any comparable five-year period and the second biggest in the G20?
Nicky Morgan
It is interesting to note that the main fall in wages and salaries came in 2007-09, when growth fell from 5.7% to less than 1%. Of course the Government understand that the situation is very difficult, but I am surprised that the hon. Gentleman has not welcomed the fact that the claimant count in his constituency has fallen by 11% under this Government, whereas it went up by 75% under the previous Government.
Andrew Bridgen (North West Leicestershire) (Con)
Will my hon. Friend tell the House by how much those on low and middle incomes are going to be better off because of this Government’s decision to raise the personal allowance to £10,000 from April 2014?
Nicky Morgan
I thank my hon. Friend for his question. The average taxpayer will be better off by £700 a year as a result of these changes.
Sir Tony Baldry (Banbury) (Con)
15. What recent steps he has taken to increase competitiveness in the banking sector.
The Financial Secretary to the Treasury (Sajid Javid)
The Government are driving a wide-ranging and ambitious programme of reforms to make the banking sector more competitive and to give consumers a better deal. This includes reducing market barriers, encouraging current account switching, and putting competition at the heart of the regulatory system.
Sir Tony Baldry
Will my hon. Friend commend the Church Commissioners for their investment in Williams and Glyn’s as a new competitive bank that intends to have the highest ethical standards? As well as increasing competition in banking, is it not also crucial that we have a system of banking regulation with clear accountability and responsibility, avoiding mistakes in the system designed by the previous Administration?
Sajid Javid
I congratulate the Church Commissioners on their role and the expertise that they bring. Given that my hon. Friend is a commissioner, I take this opportunity to congratulate him too. He is right to highlight the fact that the previous Government’s changes to financial regulation contributed significantly to the banking crisis in 2008. That caused misery and hardship for millions of hard-working families, yet I notice that the Opposition have yet to apologise.
Mr George Mudie (Leeds East) (Lab)
The Minister will agree that a level playing field is important for competition. Why, then, did the Chancellor make the misguided offer to the Chinese Government to give light-touch regulation to Chinese banks operating in this country? If we are going to have competition, will that approach be extended to all other banks?
Sajid Javid
The hon. Gentleman will know that such decisions are made by the independent regulators—in this case, the Prudential Regulation Authority, which has made the reasons for the decision absolutely clear.
Mr Ronnie Campbell (Blyth Valley) (Lab)
T1. If he will make a statement on his departmental responsibilities.
The Chancellor of the Exchequer (Mr George Osborne)
The core purpose of the Treasury is to ensure the stability and prosperity of the economy. Today I can also announce another step in the fight against tax evasion. This afternoon we will sign a tax information-sharing agreement with the Cayman Islands—the first ever with an overseas territory. As a result, information on UK taxpayers held in the Cayman Islands will automatically be provided to Her Majesty’s Revenue and Customs, which will use it to collect the tax that is due.
Mr Campbell
Is it still the Chancellor’s intention to withdraw jobseeker’s allowance from all young people under the age of 25?
Mr Osborne
That is not part of the Government’s programme. We are seeking to help young people into work through the Work programme and the Youth Contract. The good news is that the youth claimant count has fallen by many tens of thousands. I would have thought that the hon. Gentleman would use this opportunity to get up and point out that unemployment has fallen in his constituency over the last year, and there are—[Interruption.] Unemployment has fallen in his constituency, and every job created is one that he should be celebrating. He should remind his constituents of the enormous damage done to the north-east economy by the previous Labour Government.
Glyn Davies (Montgomeryshire) (Con)
T3. The most important financial issue in the lives of many young families is mortgage interest. Does my right hon. Friend the Chancellor agree that the best way—indeed, the only way—to keep mortgage rates low is to stick with the Government’s economic plan of cutting the deficit?
Mr Osborne
I completely agree with my hon. Friend. Of course, one of the consequences of the higher borrowing that the Labour party is advocating would be not just higher taxes, but higher interest rates, which would be absolutely disastrous for families. That is precisely why we have to stick with the economic plan that is delivering the recovery.
Ed Balls (Morley and Outwood) (Lab/Co-op)
I welcome the Economic Secretary and the shadow Financial Secretary to their new jobs, and let us not forget the former Treasury Whip, the Treasurer of Her Majesty’s Household, the hon. Member for Chelsea and Fulham (Greg Hands), who has finally got the promotion we have been urging him to get for three years.
On this Chancellor’s watch, the UK is experiencing the slowest recovery for more than 100 years, and with prices, including energy prices, rising faster than wages, for millions of people this is no recovery at all. Yet from the Chancellor’s earlier answers to the Chair of the Treasury Committee, he seems to think he can get away with cutting energy bills by simply shifting the burden of his green levies on to the ordinary taxpayer. Let me ask the Chancellor—[Interruption.]
Mr Osborne
First, I join the right hon. Gentleman in welcoming the two hon. Ladies to their new Front-Bench positions, although I think he got the title wrong of his new shadow Exchequer Secretary. By the way, while I am at it, may I welcome the fact that the right hon. Gentleman did not move in the reshuffle, because he is exactly where we want him to be?
Perhaps one of these days the right hon. Gentleman will welcome the fact that GDP is increasing, that unemployment is coming down and that today we had the best services purchasing managers index since May 1997. I believe we should roll back some of the levies and charges that have been imposed on energy bills. I am not clear whether he agrees.
Ed Balls
After three years of flatlining, people are worse off because of this Chancellor of the Exchequer. As for ordinary people’s rising energy bills, he just does not give an EDF.
Is it not the case that, over the past year, energy prices in the euro area fell by 1.7% while in the UK they have risen by a staggering 7.7%? Simply switching green levies on to the taxpayer is giving with one hand and taking with the other. Why does this Chancellor always hit ordinary families while standing up for a powerful few?
Mr Osborne
With questions like that, the right hon. Gentleman is never going to be npower, is he?
The truth is that the right hon. Gentleman created a situation in our economy whereby living standards were hit hard, because he destroyed jobs and economic prosperity. Like a bonfire on Guy Fawkes night, every single one of his economic predictions has gone up in smoke, and he has nothing credible or serious to say about the British economy.
Kwasi Kwarteng (Spelthorne) (Con)
T4. Is it not true that the only way to improve considerably our standard of living is to focus on the economic situation of the country to boost growth and pay down debt?
Mr Osborne
I completely agree with my hon. Friend that unless we have a credibly economic plan to grow the economy, deal with public finances and support business rather than tax it, we will get the reaction the shadow Chancellor got from the CBI, whose members said that the hairs on the backs of their necks stood up as they listened to all the terrible things that a Labour Government would do to them. The truth is that we are fixing the economic mess the shadow Chancellor left behind, and that is the best way to improve people’s living standards.
Toby Perkins (Chesterfield) (Lab)
T2. The Chancellor was warned that his cuts would choke off the growth that had returned to the UK economy when he took the job in 2010. Of course we welcome the fact that Britain is finally returning to growth, but does he not realise that if he had taken the advice of my right hon. Friend the Member for Morley and Outwood (Ed Balls) earlier, we would not have had three wasted years, the average working person would not be £1,500 worse off, and the talents and potential of 1 million young people would not have been laid to waste?
Mr Osborne
I remind the hon. Gentleman that the shadow Chancellor said that our economic policies would choke off the recovery in the spring of this year—the very moment when the recovery was under way. When will a Labour MP welcome the fact that our GDP has grown by 0.8% and unemployment is coming down? When will Labour acknowledge that it is our economic plan that is delivering that?
Mr David Heath (Somerton and Frome) (LD)
T5. One of the frustrations of losing ministerial office is that one cannot see through the things that one started. Will the Chancellor look carefully at the recommendations of the independent future of farming review, which I commissioned, because it has made far-reaching suggestions for changes in taxation that will benefit rural areas?
Mr Osborne
I pay tribute to the work that my hon. Friend did in government. I will make it a personal priority to ensure that his review sees the light of day and is acted on.
Chris Ruane (Vale of Clwyd) (Lab)
T7. Why has the number of the working poor doubled since the Chancellor took office?
Mr Osborne
The key thing is that people are getting into work. That is another Labour MP who has not acknowledged the fact that unemployment has fallen in his constituency. When will Labour Members acknowledge that our economic plan is repairing the mess that they left behind?
Andrew Griffiths (Burton) (Con)
T6. On behalf of brewers everywhere, I thank the Chancellor for being the man who scrapped Labour’s hated beer duty escalator and who cut beer duty for the first time since 1959. Last month saw the biggest growth in beer sales this century, with 1 million extra pints being sold and £60 million extra going to the Exchequer. I ask him to keep supporting Britain’s pubs and brewers.
Mr Osborne
This is a case of teamwork, because my hon. Friend has led a brilliant campaign involving many Members of Parliament in support of the local pub industry in their constituencies and the brewing industry, which is so important in Burton. The work that he has done has been fantastic. It was thanks to his campaign, which drew the evidence to my attention, that we were able to take the action that he has welcomed.
Mrs Mary Glindon (North Tyneside) (Lab)
T10. Will the Chancellor make a statement on why the decision has been taken to extend HMRC’s pilot of the new customer service model in the north-east by two months until the end of December?
The Exchequer Secretary to the Treasury (Mr David Gauke)
We want to look at the evidence further, so that seems to be a sensible approach; we want to see whether the model is working. The final decision has not been taken on whether to extend it. This is about improving the service for the people who need it most. We believe that that is an important objective.
Sir Edward Leigh (Gainsborough) (Con)
T8. As you know, Mr Speaker, I am of a nervous disposition. I was therefore alarmed this year—not three years ago—to hear predictions that 1 million jobs would be lost, there would be a decade of lost growth and the recovery would be choked off as a result of the Government’s plans. Will the Chancellor allay my fears and explain what has happened in the real world?
Mr George Osborne
My hon. Friend is right that there were a lot of predictions from the Opposition Dispatch Box. They said that there would be a decade of lost growth, but the economy is now growing and we have had the fastest growth in the G7 this year. They predicted that 1 million jobs would be lost, but 1.4 million jobs have been created in the private sector and unemployment is down. Above all, they advocated—indeed, they continue to advocate, because it was in the speech that the shadow Chancellor made yesterday—increased borrowing, which would lead to higher taxes and higher interest rates. The biggest threat to the British recovery is sitting right opposite me.
Ms Margaret Ritchie (South Down) (SDLP)
What progress has been made on the extension to the fuel duty rebate scheme, which is due for further implementation via a submission to the European Commission?
The Chief Secretary to the Treasury (Danny Alexander)
We have completed a call for evidence on that subject and have put forward an initial list of locations that meet the strict criteria that are required to make a successful application at the European level. Further work is needed to ensure that we have all the information that is necessary to submit the application. That will be the subject of a supplementary piece of work and we will submit the application early in the new year.
Stuart Andrew (Pudsey) (Con)
T9. I was delighted to welcome my right hon. Friend to Hainsworth mill in my constituency recently. Will he join me in welcoming the news that production output increased by 0.5% in the last quarter, and does he agree that that shows that British business is rising to the challenge of rebalancing the economy after an unsustainable decade under the Labour party?
Mr George Osborne
I was very impressed by the work being done at Hainsworth mill, which is one of the oldest textile mills in Britain and has been going for a couple of hundred years. It is now exporting textiles from west Yorkshire to China, which shows that the British economy can achieve remarkable things if we get the investment and economic policy right. My hon. Friend is right: we must stick with the economic plan that is continuing to improve the situation in his constituency and across the country.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
Every newly created job in the private sector is very welcome, but will the Chancellor tell the House how many public sector jobs have been redesignated as private sector jobs in the past three years?
Mr Osborne
I am happy to write to the hon. Lady with that number. Let us be clear: the Labour party and the shadow Chancellor said it was a complete fantasy that private sector job creation would outstrip the loss of public sector jobs required by fiscal consolidation. That is complete nonsense and we have not yet had an apology from the shadow Chancellor.
Ian Swales (Redcar) (LD)
Companies up and down the country have been investing in manufacturing capacity for the green infrastructure of tomorrow. Those in the north-east Energi Coast consortium have already invested £400 million. Will the Chancellor confirm the Government’s commitment to support the renewable energy industry?
Danny Alexander
I am grateful to my hon. Friend for the question, and I congratulate him on his new appointment in this House. I can reassure him on his point. We are, of course, looking at the range of support that exists in terms of people’s energy bills, but we will not compromise on our commitment to renewable energy and green infrastructure investment. That means we remain absolutely committed to the renewables obligations and the contracts for difference, and that will not change as part of this process.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Institute for Fiscal Studies estimates that more than 1 million more children will be living in poverty in 2020, which absolutely wipes out the number of those lifted out of poverty under the previous Labour Government.
Mr George Osborne
The best approach to lifting children out of poverty is to ensure that they live in working households. We now have the lowest number of workless households since records began, which is due to the achievements of my right hon. Friend the Secretary of State for Work and Pensions, and of the economic plan that is getting the parents of children into work.
Mr Peter Bone (Wellingborough) (Con)
Given that the cost of the EU will double in this Parliament, and the huge current account deficit with the EU, does the Chancellor agree that our current economic relationship with the EU is wrong and that we should renegotiate?
Mr Osborne
I certainly agree that we need to reform the European Union so that our entire continent is not priced out of the global economy. We must also make reforms to the European Union, and Britain’s relationship with it, so that British businesses can thrive, compete and create jobs. I point out to my hon. Friend—he knows this anyway—that the cost of the European Union would have been much higher if my right hon. Friend the Prime Minister had not secured a very good deal. [Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) says, “We did it,” but Labour gave up the rebate. The Prime Minister went to the EU battling for Britain and delivered for Britain.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Over the past six months more than 350,000 people, many of them in work, have accessed emergency food aid from a food bank. When will the Chancellor visit a food bank so that he can see for himself the impact of his cost-of-living crisis on hundreds of thousands of people across the country?
Mr Osborne
I have visited a food bank in Northwich in my constituency and seen the excellent work it does. I commend the volunteers at that food bank, and indeed across the whole food bank movement.
Sir Malcolm Bruce (Gordon) (LD)
If Scotland chooses to vote for independence next September, how will handing over control of the Scottish economy to a foreign bank, namely the Bank of England, benefit Scotland’s economy?
Danny Alexander
My right hon. Friend makes an important point. It would be very foolish indeed for anyone to vote for independence on the basis that Scotland will keep the pound. It is highly unlikely that a currency union would be workable, and therefore highly unlikely that any euro-style arrangement for the UK would be in the best interests of either Scotland or the rest of the UK. The only way to be sure of keeping the pound is to keep the UK together.
Mr Speaker
Order. I am sorry to disappoint remaining colleagues, but, as usual, we have bust the box office for Treasury questions. There is nothing unusual about that.
Points of Order
Julian Smith (Skipton and Ripon) (Con)
On a point of order, Mr Speaker. The Guardian newspaper has constantly denied sending details of UK intelligence agents overseas, particularly to The New York Times, and yet, this weekend, The New York Times published highly specific information regarding UK intelligence teams operating in the middle east. Is it in order, Mr Speaker, for a national newspaper constantly to refuse to answer questions from the House and to threaten the security of our constituents in that way?
Mr Speaker
I am grateful to the hon. Gentleman both for the fact of his point of order and for notice of his intention to raise it with me. However, the issue he has raised, though of seminal importance, is not an issue of procedure with which the Chair can deal. The hon. Gentleman is drawing attention to what he believes to be, and what I think I can probably best describe as, an equivocation by The Guardian. That is a matter he must pursue by other means. I know that he has already led a well attended debate on the subject in Westminster Hall. He may well wish to try to continue that debate by other means. He is well aware of the location of the Table Office in the House, and he is a dextrous user of parliamentary procedure. We will leave it there for today.
Huw Irranca-Davies (Ogmore) (Lab)
On a point of order, Mr Speaker. I will keep it brief. The last time we had an opportunity to debate the badger culls linked to bovine tuberculosis was in an Opposition day debate on 5 October. In that debate, the evidence on which the House made its decisions included statements from the Secretary of State for Environment, Food and Rural Affairs, in which he said:
“Evidence suggests that at least 70% of the badgers in the areas must be removed.”—[Official Report, 23 October 2012; Vol. 551, c. 836.]
I further quote:
“It would be wrong to go ahead if those on the ground cannot be confident”—
Mr Speaker
Order. I recognise and respect the hon. Gentleman’s commitment to brevity but, unfortunately, his attempted point of order was not as brief as I would wish, especially as it was an attempted point of order rather than a genuine point of order. I would say to him, in so far as he is alerting me and the House to statements that he believes to have been in any way incorrect, erroneous or partial, that Ministers and all Members are responsible for the accuracy of their remarks in the Chamber. What we cannot have is the continuation of debate by the ruse of a bogus point of order. If I did not know the hon. Gentleman better, I would think that that was his game plan, but as I know him as well as I do, and know him to be a person of the highest moral probity, I feel sure that he had some other mission in mind. We will not continue the exchange now. He will deploy the resources of the Table Office to advance his purposes. We can leave it there for today.
Benefit Claimants (Automatic Transfer to Alternative Benefits)
John Hemming (Birmingham, Yardley) (LD)
I beg to move,
That leave be given to bring in a Bill to ensure that individuals claiming state benefits are automatically enrolled onto alternative benefits to which they are entitled when a benefit ceases to be applicable; and for connected purposes.
The Bill is needed because worrying and growing numbers of people find themselves without income, stuck in a bureaucratic benefits-bungling muddle or benefits limbo for extended periods for technical reasons.
I have become aware of the problem through a number of constituency cases. Mrs N lost her entitlement to employment and support allowance on 15 March but, owing to a wholly official error, the benefit continued to be paid until 1 August, causing an overpayment of £1,431. Having approached me for help in early September, Mrs N was left with the option of appealing the appeal without any income during that time or of making a new claim for ESA from 16 September, which she did—it was once again granted. My constituent was left without income for almost six weeks, from 8 August to 16 September, and was not advised to apply for an alternative benefit at any point between March and September. She managed to keep debt collectors at bay only by borrowing money from family and friends, and was barely able to avoid the debt trap that is payday lending after she found herself in benefit limbo.
There is the case of Mrs A, whom I saw at my surgery on 12 October. When her benefit entitlement was stopped in July, she did not receive a decision assurance phone call or written notification informing her of her entitlement to claim jobseeker’s allowance. She has not received any income since July. She, too, has been stuck in benefit limbo. Her doctor advised her that she is not fit for work and provided documents to that effect, but the Government say she is fit for work, and, because of an error in the system, she was not informed of what she should do. Had she been automatically enrolled on to jobseeker’s allowance at the moment her previous entitlement ended, she would not have been left without income. She would have been entered into the system to either find work or be enrolled anew on appropriate state support. What is important about this case is that I have previously asked the Department for Work and Pensions what it does when ESA entitlement ceases, and was told that it tells people to claim JSA. That, however, clearly does not happen in all cases.
We then encounter the passporting problem. The system is efficient when it comes to people automatically qualifying for housing benefit. However, it also efficiently knocks people off housing benefit when they wrongly fall out of the support system. That means that when they finally ask for help, they are probably also facing an eviction notice. That is unnecessary. The Department could simply start them on the new benefit, which it already knows they qualify for. I have been told that the law does not allow that, for data protection or other reasons. The Bill would cut the Gordian knot.
There is significant delay in the system. I am aware of one constituent who, having been referred by the jobcentre to a local food bank, missed an appointment at the jobcentre. As a result, he was sanctioned. An appeal would take up to 10 weeks—three times longer than the sanction itself.
We should not overlook the effect on the health of those left in benefits limbo. The uncertainty, stress and choices for those without income experience do nothing to help their mental or physical health. They do not face a choice to heat or eat; they are left reliant on handouts and charity—a lack of dignity no one in this House would wish to impose on anyone.
There is the case in Westminster of child EG, who died of starvation after his mother, Mrs G, referred to in the serious case review, suffered a serious illness and died shortly afterwards. She was a survivor of domestic violence and, with her children, successfully sought asylum. After many months, however, she had still not been placed on mainstream state support. The serious case review reflected on the effect on her health, and that of her children, of ad hoc sources of income from charities and the local authority, the failure of the UK Border Agency to hand over necessary papers, the absurd requirement that she become homeless for the local authority or benefits agency to assist her, and the insecurity of her housing situation. The case review concluded that the situation was
“worrying for anyone; it must have been extremely difficult and contributed to her difficulty in managing her children and their collective health needs”.
This young mother found herself in a desperate situation. The failure of the authorities to get into gear and provide the support she needed contributed to a tragic outcome, yet in the months leading up to her death she was relatively well. I have examples of people left in similar situations—unable to pay the rent, in fear of debt collection and forced to rely on charity and food banks—because of the same bureaucratic delay and befuddlement that contributed to those deaths.
My office is authorised to hand out food vouchers for the local food bank. However, I have a case of someone who refused food vouchers, because he could not pay for the cost of cooking the food as he was destitute. Aside from the stress and anxiety an appeal causes to a person who is, in many cases—if not the majority—not fit for work and really rather ill, the Government announced in February that they were introducing a mandatory reconsideration pending appeal during which benefits were to be stopped. A freedom of information request issued in April this year revealed:
“If the claimant wishes to dispute this decision they must request that the decision maker looks at it again (mandatory reconsideration). Whilst the decision maker is reconsidering the decision, ESA cannot be paid as there is no legal basis to do so.”
ESA may not be paid, but at least the Department for Work and Pensions could ensure that people are not destitute by paying them JSA. The principle is the same when it comes to transfers from disability living allowance to personal independence payment, or indeed the payment of discretionary housing payments or other situations, such as the case of EG. At times, the Department clearly has evidence that people qualify for benefits, but does not manage to pay them and they end up destitute. I do not think that is the Government’s objective; however, the Bill is one way of resolving the issue. Another would be to introduce a legislative and regulatory reform order to remove the burden of a formal application.
It would be preferable to ensure that a claimant continued to receive regular payments and had any overpayment recovered over time, rather than leaving people at the mercy of the debt traps of payday loans or to be forced to rely on charity, food banks or emergency support. As the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Wirral West (Esther McVey), told me in a letter dated 23 October, there are stigmas and confusions associated with the system at present. As she told me, many claimants of ESA, having been found fit for work, fear making a claim for JSA because they think it might prejudice an appeal.
Although the Minister assures me that this fear is misplaced, I think it would be far better for the user if we removed that fear. Such a move should have no impact on the benefits budget, because it would be money someone is entitled to and a replacement for a benefit they would be getting otherwise. It would allow decision makers to make informed decisions in the time they need without leaving a claimant without income. Indeed, it would create a bureaucratic saving, because not having to process a backdated claim for housing benefit and council tax support would reduce the amount of effort for the state.
We need to remember that although some people have abused the benefits system in the past, there are also people who are confused about what is going on. As I have explained, that confusion can lead to tragedy, and the Government should support my Bill in order to avoid such tragedies. As I said, there are various routes towards this objective: the DWP might be able to manage it under current legislation and rules—although this is not clear—but a legislative and regulatory reform order would achieve the same outcome, and would also be quite a rapid process. As a member of the Regulatory Reform Committee, I am sure the Committee would welcome the work. Alternatively, I would be happy for the Government to take over the Bill.
Question put and agreed to.
Ordered,
That John Hemming and Jim Shannon present the Bill.
John Hemming accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 22 November, and to be printed (Bill 125).
Gambling (Licensing and Advertising) Bill
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mrs Helen Grant)
I beg to move, That the Bill be now read a Second time.
British remote gambling regulation is currently conducted on a point-of-supply basis. Only operators with at least one piece of their remote gambling equipment in Britain require a Gambling Commission licence and are subject to the required standards. This means that overseas operators offering gambling services to consumers in Britain are currently regulated not by the commission, but by the regulatory regimes in the countries in which they are based. In consequence, there are different regulatory standards and UK consumers might experience varying levels of protection, depending on the operator they are dealing with.
The Gambling Commission estimates that about 85% of remote gambling activity by UK consumers takes place with operators that the commission does not regulate. The Bill aims to regulate remote gambling on a point-of-consumption basis. With this change, all operators selling into the UK market, whether based in Britain or abroad, will be required to hold a UK Gambling Commission licence, making them subject to robust and consistent regulation, increasing protection for UK consumers, supporting action against illegal activity and establishing fairer competition for British-based operators.
Philip Davies (Shipley) (Con)
The Minister says that this is about regulation and stopping illegal activity. What proportion of people is currently estimated to bet illegally in the UK, and what will that estimate be after the Bill has been introduced?
Mrs Grant
At the end of the day, this is about establishing a level playing field. I hope that my hon. Friend will bear with me for a little while, because I shall go into that matter in greater detail.
The Bill aims to regulate remote gambling at the point of consumption. Under the new regime, overseas-based operators will be subject to the provisions of the Gambling Act 2005, its regulations and the Gambling Commission’s social responsibility and technical standards requirements. This will mean, among other things, that all licensed operators will be required to contribute to research, education and treatment in relation to British problem gambling, and to comply with licence conditions that protect children and vulnerable people.
Mr Gerry Sutcliffe (Bradford South) (Lab)
Just to help the hon. Member for Shipley (Philip Davies), may I point out that this is an important part of the licensing objectives of the Gambling Act, and that the Bill is consistent with those objectives?
Mrs Grant
The hon. Gentleman makes a good point.
The Bill will also level the playing field for the advertising of remote gambling. At present, operators based in the European economic area or in a country on the “white list” can advertise remote gambling to consumers in Great Britain. The 2005 Act allows the Secretary of State to designate non-EEA jurisdictions that have strong regulatory systems comparable to Britain, and to give them permission to advertise remote gambling services in Britain. Those jurisdictions form what is informally known as the “white list”, and they include Antigua and Barbuda, the Isle of Man, the States of Alderney and Tasmania.
The Bill will repeal section 331 of the 2005 Act, removing the offence of advertising foreign gambling and, consequently, the distinction between EEA and “white list” countries, and non-EAA jurisdictions. Instead, all operators who hold Gambling Commission remote licences will be able to advertise to British consumers, regardless of where the operators are based. As now, gambling operators who wish to advertise in Britain will need to comply with the advertising codes of practice. Overseas operators that are required to hold but fail to obtain a Gambling Commission licence will be committing the offence of providing facilities for gambling or the separate offence of advertising unlawful gambling. The Gambling Commission is empowered to pursue and bring appropriate action against the operator concerned.
The repeal of section 331 will also have an impact on Northern Ireland, where gambling is a devolved matter. New provisions creating an offence of unlicensed advertising of remote gambling have been included in the Bill to ensure that Northern Ireland continues to have the same protections for the advertising of remote gambling as we have in Great Britain. The Northern Ireland Assembly formally agreed these changes through a legislative consent motion on 17 June. Gambling is a reserved matter with regard to the devolved Administrations in Scotland and Wales. Scotland, England and Wales will all receive the same protection in relation to the advertising and regulation of remote gambling.
Mr Nigel Dodds (Belfast North) (DUP)
The Minister has kindly outlined the situation in Northern Ireland. Has she had discussions with the relevant Minister in the Northern Ireland Executive about the regulation of remote gambling in Northern Ireland? I know this is a devolved matter, but did the issue arise in the discussions on the legislative consent motion and, if so, what was the outcome?
Mrs Grant
I have not personally had any such discussions, but I am sure officials will have done so, and I know that the Gambling Commission and others will continue to liaise on this matter.
Clause 1(4) of the Bill confers a power on the Secretary of State to make provision, by statutory instrument, about
“the making, consideration and determination of advance applications”
for a remote operating licence. This will allow robust interim measures to be set up, permitting a smooth transition between the current regulatory regime on remote gambling and the proposed new regime. Similar powers were used as part of the 2005 Act.
I would like to thank the Culture, Media and Sport Committee for its thoughtful and thorough pre-legislative scrutiny of this small but important Bill, and for its support for the move to regulate remote gambling on a point-of-consumption basis.
Guy Opperman (Hexham) (Con)
I support the Bill, and I agree with its aim to ensure that there is a level playing field. Will my hon. Friend tell the House what financial benefits the Bill will bring to the Government and the taxpayer?
Mrs Grant
My hon. Friend makes a good point about the level playing field; that is certainly what the Bill sets out to achieve. However, this is about consumer protection, which is an important feature of the legislation. Taxation matters are ones for the Chancellor of the Exchequer.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Regrettably, a number of my friends have got into huge difficulties through gambling on smartphones, because the situation is so liberal. I appreciate that companies operating remote gambling will be brought onshore and regulated at UK level, but how will the Bill prevent individuals from getting into thousands of pounds-worth of debt and losing their homes, families and livelihoods?
Mrs Grant
This is exactly why we are seeking to regulate remote gambling. The process is quite circular in many ways. Unfortunately, according to the Gambling Commission, 85% of the remote gambling that takes place in Britain is unregulated. Many people are therefore not protected. The Bill will enable them to enjoy a more consistent and robust level of protection. That is exactly what the Bill is about.
Mr John Leech (Manchester, Withington) (LD)
The Bill will also ensure that remote gambling organisations are paying something towards dealing with the outcomes of problem gambling.
Mr Robert Syms (Poole) (Con)
Regarding the level playing field for domestically based businesses, the Minister will know that casinos pay tax and employ local people, yet they cannot undertake remote gambling from their premises. Will the Government look at what the Culture, Media and Sport Committee has said on this matter, and consider whether there should be changes to allow them to do so?
Mrs Grant
We will look at all the relevant information, and I am certainly happy to take another good look at what the Committee has said. The important thing for casinos is that they maintain a proper balance between table play and machine play, because we do not want them to become machine sheds, as some have suggested they might. I can confirm today that I am happy generally to review the issue of gaming machine provision in casinos.
Mr David Nuttall (Bury North) (Con)
Will the Minister tell us how the measures in the Bill are to be enforced?
Mr Laurence Robertson (Tewkesbury) (Con)
If a company set up in, say, China or America, and advertised only through the internet, would it be covered by the scope of the Bill? The Minister will correct me if I am wrong, but I do not think that it would.
Mrs Grant
I must make some progress now.
I pay tribute to my hon. Friend the Member for Weston-super-Mare (John Penrose) for his sterling work on developing the Bill and getting it to where it is now. It is fitting that he should be sitting near to me, if not quite next to me, on the Front Bench today. I also want to pay tribute to the previous Administration’s review of the remote gambling regulatory framework, and I am pleased that the Bill has the support of hon. Members on both sides of the House.
The Bill is largely a prudential measure to prevent what is currently a risk from becoming a major issue in future, especially as accessing online gambling products is becoming much easier—as has already been mentioned this afternoon—with the growth of smartphones and other portable devices.
According to the latest Gambling Commission statistics, remote gambling is very much on the increase—year after year, all year round—and increased by 10% in the last year alone. We must therefore take this opportunity to ensure that the Gambling Commission has the power to intervene if problems occur now or at some point in the future. The Bill will do just that, providing public protection for consumers based in Great Britain by tightening current legislation to ensure that all remote gambling, whether provided by UK or overseas suppliers, is a licensed activity subject to Gambling Commission standards and controls. I commend the Bill to the House.
Clive Efford (Eltham) (Lab)
I start by welcoming the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Maidstone and The Weald (Mrs Grant), to her new post, which I neglected to do under pressure of time at questions last week. I look forward to debating with her over the coming years. [Interruption.] Well, she may well keep her position in opposition.
The Bill has been a long time coming. The need for changes in the licensing of remote gambling operators was first identified by my hon. Friend the Member for Bradford South (Mr Sutcliffe) when he was Minister for Sport. Online gambling was first regulated in the UK in 2007. Since that time, in order to avoid taxation, all but one of our major online betting companies has moved offshore and they justified that by claiming that that is necessary to remain competitive. The consequence has been that these operators are outside UK regulation, which is one of the reasons why we are here debating this Bill today.
In 2009, my hon. Friend ordered a review of overseas gambling operators who advertised in the UK. In 2010, we began the consultation on extending Gambling Commission licensing to include online gambling operators offering services in the UK. Consultation responses were published after the general election in July of that year by the then Minister with responsibility for gambling, the hon. Member for Weston-super-Mare (John Penrose), whom I see in his place. It was then a full year before he issued a written statement on the Government’s plans to legislate. The draft Bill was published in December 2012, and the Select Committee published its report on the draft Bill in May 2013. Four years and four Ministers later, we have finally got the Bill, so what was all the waiting about?
James Duddridge (Rochford and Southend East) (Con)
I agree that there have been too many delays, but if the Labour party had not messed around with large-scale casinos and the accompanying shenanigans, could this not have been achieved under the last Government?
Clive Efford
As I said, the regulations on online gambling were introduced in 2007 and the issues relating to online gambling were identified in 2009 by my hon. Friend the Member for Bradford South, who then began the process of dealing with the situation, and nothing was held up at all by casino gambling. We now have before us a five-clause Bill that deals with the licensing of remote gambling operators at the point of consumption. That is not contentious. Virtually everyone, including large parts of the gambling industry, is in favour of that.
The delay in bringing the Bill forward could be understood if it addressed many of the issues that have come to light since 2007. For instance, does the Bill include clauses to introduce financial penalties for companies that breach licensing codes? Does it set out detailed methods for enforcing compliance with new powers for the Gambling Commission? Does it require all licensed operators to display a kitemark to inform consumers that they are using a UK licensed online operator? Does it introduce a whole new set of penalties for operators who fail to report suspicious activities? Does it deal with betting advertising before the 9 pm watershed? Does it include requirements on operators to contribute to research on, and treatment of, gambling behaviour and problem gambling?
Does the Bill define what a betting shop should provide before it can advertise as such? Does it deal with unmanned betting shops providing self-service betting terminals? Does it create the framework for a single form of self-exclusion across the industry for those who need help with their gambling addiction? Does it deal with the anomaly of spread betting being regulated by the Financial Conduct Authority? Does it require every operator taking bets on horse racing from UK-based customers to contribute to a horse race betting levy? Does it require the betting industry to make some contribution to all sports from which it profits yet to which it makes no contribution? Does it deal with the issue of dormant accounts, on which the Government promised to legislate? This Bill deals with matters that have been under consideration for four years and on which there is pretty much unanimous agreement, so it is difficult to understand why we have had to wait so long, when the Bill is so limited in what it seeks to achieve.
James Duddridge
What the hon. Gentleman says is completely incoherent. He started by arguing that things should have happened faster, but then raised a whole series of issues that would have delayed the Bill even further. Which of those two things does he believe?
Clive Efford
My point is that if the Bill addressed those issues, we could understand the delay, but it does not. It deals only with something we all agreed with nearly four years ago. I am highlighting a number of issues about which people who monitor the gambling industry are concerned. It is perfectly legitimate for the House to raise and debate those issues, particularly when we are intending to legislate in a very important area of gambling activity.
Philip Davies
I wish the hon. Gentleman the best of luck with all the questions he peppered with the Minister, most of which seem wholly irrelevant to me. I hope he does better than I did when I posed a question to her, which did not seem to get an answer. I wonder whether the hon. Gentleman could answer my question, which is rather important for the purposes of this Bill. Can he tell us what proportion of gambling in the UK he estimates takes place with illegal operators, and what proportion of it will take place with illegal operators after this Bill has been introduced?
Clive Efford
The hon. Gentleman will know that the chief executive of the Gambling Commission said in the evidence she gave to the Select Committee on which he sits that there was very little reporting of illegal gambling activity from 80% of the market that was unlicensed—a point for which I shall return. The gambling prevalence survey, which last took place in 2010, has been abolished, so we have very little empirical evidence on which to base our views. What we do know, however, is that people have raised entirely legitimate concerns and we should address them in our consideration of legislation.
We could understand the delay if we had had a full legislative timetable from the Government, but we have not, so why have we waited so long? We want to say that we welcome the Bill and that we particularly welcome the adoption of Labour’s policy of regulating online gambling, but we are disappointed, given the time that the Government have had to consider these issues, that a number of them have not been included in the Bill.
Guy Opperman
I have been listening with fascination to the hon. Gentleman’s great speech. Will he assist us by explaining why, given the multitude of things that he would have liked to see included in the Bill, the Labour party did not introduce any of them when they were in government?
Clive Efford
Let me explain to Government Members that the Gambling Act 2005 was a major piece of legislation that has largely stood the test of time. When the legislation was put in place, the then Government said that the issues in the Bill would be kept under review. A number of areas have subsequently come to light, such as online gambling, which has grown exponentially over the last few years, that present some challenges to Government, in respect of which regulation might be necessary.
Mr Sutcliffe
The 2005 Act was the first parliamentary legislation on gambling since the 1960s. Betting changed dramatically between that period and the Budd report of 2000. This Bill represents the first time the present Government have allowed us to discuss gambling as an issue, and it may be the last time before the next election that we have an opportunity to look at the many issues affecting the gambling industry.
Clive Efford
I am grateful for the benefit of my hon. Friend’s knowledge of this issue. As he says, the Bill has been a long time coming. The Department has few opportunities to find time on the legislative calendar, and we should not waste this opportunity to explore all the aspects of online gambling that may need to be addressed.
Gambling is enjoyed by more than 56% of the population, and the figure rises to more than 70% if the purchase of lottery tickets is included. Obviously we welcome the move to create a level playing field between operators who have remained onshore and those who have moved offshore, have based themselves offshore, or have recently entered the market and wish to trade with United Kingdom customers.
However, when we consider legislation on matters of this kind, we tread a difficult path between our wish to promote an industry from which people gain a great deal of pleasure and our responsibility to protect the vulnerable. Online gambling is of particular concern because of its very nature. It is possible for vulnerable adults to indulge their addiction without leaving their homes, and hence to suffer alone while running up debts that they cannot hope to pay. It is our duty as legislators to create a safe and well-regulated environment in which people can enjoy the pleasure that they experience from gambling.
The online industry has grown to be worth more than £2 billion a year in a relatively short time, and with that has come a relative increase in the capacity of online gamblers with an addiction to lose money before anyone becomes aware of their problem. Unlike codes of conduct in other jurisdictions, the Bill contains no requirement for licensed operators to monitor the behaviour of their customers and intervene if they think there is a problem.
Ian Lavery (Wansbeck) (Lab)
Is there not a potential for illegal sites to crop up all over the internet, left, right and centre, because of the lack of consumer protection in the Bill?
Clive Efford
I think that we shall be seeking assurances from the Government on the issue of consumer protection. We shall want to see exactly where the lines will be drawn, and where the Government feel that action should be taken if any form of illegal activity is taking place or there is no protection for vulnerable people.
Online gambling is an important issue of public concern, and we are entitled to know how the Government intend to monitor it. The Bill does not specify a point at which operators would be required to intervene, and to discuss directly with their customers whether there is a problem. Some people have expressed concern about the fact that we have a weaker regulatory framework than that which operates under the regulators in white-listed countries such as Alderney and Gibraltar. There is new technology designed to identify people who may have problems, but there has been no indication from the Government that they intend to use it to protect vulnerable consumers.
Mr John Leech (Manchester, Withington) (LD)
One of the problems of the current system is that, while the likes of Gibraltar may have a fairly good regulatory system, those of other white-listed countries may be less than desirable.
Clive Efford
I have seen no evidence suggesting that any white-listed countries have a significantly lesser regulatory system. Indeed, the position appears to be quite the opposite when it comes to protecting vulnerable people. The Bill, however, opens the market to people who currently cannot operate within the United Kingdom, and that is one of the main points of concern. What steps does the Minister expect the Gambling Commission to take, and at what stage does she expect it to intervene if operators fail in their duty to monitor gambling activity?
There is widespread concern about pre-watershed gambling advertising. Although most gambling is not advertised before the watershed, there are exceptions for betting during sports fixtures that are televised before 9 pm. Can the Minister assure us, given the amount of concern about the issue, that she will consider reviewing that aspect of advertising regulation?
Although it is welcome that every gambling operator who advertises in the United Kingdom will be required to be licensed by the Gambling Commission, the Bill will open up the market to operators outside the European economic area and the white list. In her evidence to the Select Committee Jenny Williams, chief executive of the commission, said that
“the Gambling Commission received one or two reports per month from its online gambling licensees, who handled…20% of the market, but from the 80% licensed overseas the Commission had received a total of about ten since 2007. Ms Williams suggested it was implausible there were so few suspicious transactions.”
In that context, the Bill is a giant leap in the dark. What will be the demand on the commission’s resources? No one can say for certain what the scale of the problem may be. The Government have allowed themselves scope to regulate in the future, but given their reluctance so far to act to protect the consumer, we must insist on some indication from them of what they are prepared to tolerate before they will take such action. What will be their response if the commission says that it cannot cope with money from licence fees alone, and asks for extra resources? What if it needs extra powers with which to tackle the problems presented by the opening of our market to companies that are currently excluded? The Minister must explain what benchmarks the Government will set themselves, according to which we can hold them to account. It has taken so long for them to present the Bill that we cannot pass up the opportunity to secure from them clear guidelines explaining how they expect the market and the regulators to deal with these important issues.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
I do not by any means agree with everything that is said by the Remote Gambling Association, but I do believe that the enforcement issue needs to be explored further during the Bill’s subsequent stages. According to the RGA, not only is the lack of enforcement measures problematic for the licensing regime, but the Government may experience problems in collecting the revenue that it expects to receive as a result of the change in the system overall.
Clive Efford
There is a great deal of concern about the details of the Bill. It is easy to understand why it is desirable, and, as I have said, we support it, but its application may present problems. As my hon. Friend says, during its further consideration we need to look into exactly how it will be enforced.
Any company that is paying the licence fee and doing its best to operate according to the highest standards has a right to expect the integrity of the licensing system to be rigorously enforced. There should be a kitemark on the website of every UK licensed operator to indicate clearly to the public that the company is a registered, licensed operator that is overseen by the Gambling Commission. We need to see some evidence that the Government have thought that through. Does the commission have enough scope within its powers to take action to protect consumers? What does it mean when it says that the provision of a kitemark will effectively happen? What form will the kitemark take, will it be easy to recognise, and will it provide links to information and advice from the commission, particularly information about the dangers of using unlicensed sites?
According to the Select Committee’s report, when asked why the Bill did not include measures on enforcement, such as provision for financial blocking or the blocking of specific internet protocol sites, the Government assured the Committee that “most were already available”. What does that mean? Will the commission have the power to request financial blocking? Will it be able to request an internet service provider to block an IP address? We should be expecting matters to move on considerably as a consequence of the Bill. Why should we miss this opportunity to give the commission the full range of powers? Why should we risk being behind the game and having to wait again for time in which to legislate?
It is surprising that the Bill contains no measures to ensure that spread betting is licensed in the same way as other forms of betting. It rightly requires all betting operators, wherever they are based, to comply with Gambling Commission licence condition 15.1, which means that betting operators will have to share irregular betting patterns with the commission and with sports bodies. The licence condition will then be integrated across the industry, with one notable exception. Spread betting is regulated by the Financial Conduct Authority, but it currently has no licence condition 15.1, although compliance with that code is cited—rightly—as one of the main justifications for the Bill. Just today I looked at the Sporting Index site. It offers a range of sporting spread bets, including on shirt supremacy. The specific example I looked at involved the Tonga versus Cook Islands match in the rugby league world cup. For anyone who is unclear, I should explain that shirt supremacy bets are about the difference between the totals of the numbers on the shirts of the try scorers of each team. Unlike traditional bets where people can win or lose a set amount, spread betting allows potentially unlimited losses. If I place a bet on Tonga and it loses on shirt supremacy by 23 points, I will be liable for 23 times my stake money.
Action on spread betting is strongly urged by sports bodies including the English cricket board, the Football Association, the Premier League and the Rugby Football League. They are experts in this field and work together on sports betting. Will the Minister accept an amendment to the Bill to require those who offer spread betting and who advertise to comply with licence condition 15.1, or will she give a commitment to work with her ministerial colleagues at the Treasury, who have responsibility for the FCA, to get it to introduce its own version of licence condition 15.1 as soon as possible?
Ian Lavery
Is there any reason whatever why spread betting, which is very complex and is different from any other form of betting, is regulated by the FCA rather than the Gambling Commission, and if so, should that prevent an amendment from being introduced to bring the regulation of all the gambling companies together?
Clive Efford
It is my understanding that because spread betting is seen as a financial transaction and commitment, rather than straightforward betting, it was felt it was better regulated by the FCA. However, there are requirements on those companies that are licensed to report any suspicious betting activity they identify—that is covered by licence code 15.1—and the anomaly created by this current situation is that every online gambling operator who wishes to advertise for custom within the UK will be licensed by the Gambling Commission, except for spread betting companies. The intention of this Bill is that everybody will be brought under one regime, thereby creating a system that is easily understood by the public. That intention is undermined by the lack of action in bringing spread betting into line in the same way.
James Duddridge
In terms of introducing amendments on spread betting, should we not distinguish between sports betting and, for example, foreign exchange spread bets, which may be covering an underlying financial transaction? That is materially different from betting on Southampton to win against Portsmouth.
Clive Efford
It can be difficult to draw a distinction between such transactions, and the hon. Gentleman has identified one of the reasons why spread betting is treated differently from straightforward betting. Some spread betting is provided by companies that also provide betting services, however, and therefore people might be confused about how this form of betting is regulated. We should consider how to deal with that. If the FCA is going to continue to be the regulator for spread betting, we must consider how it will comply with licence condition 15.1.
As I have said, there is a great deal of concern about problem gambling. Is the FCA able to deal with this issue? Is this a form of activity that would normally concern it? Does it have the power to require operators to have appropriate systems in place to identify individuals with problems? How will it monitor how the operators apply that?
If a scheme were introduced for people with gambling problems to self-exclude, how would it be implemented across two different enforcement regimes? If the Minister cannot satisfy herself that we can safeguard vulnerable people through the FCA, she must take steps to ensure that spread betting is regulated in the same way as all other forms of betting. In the meantime, however, will she give an assurance that spread betting operators who have a betting licence will be monitored by the commission for compliance with licence code 15.1? Should they be found to have failed to notify the FCA of suspicious activity, that must call into question whether they are fit and proper to hold a UK gambling licence, and the commission should have the power to take away their betting licence.
The European Parliament has recently passed a resolution calling on Governments to make match fixing a criminal offence. That has been taken up by Michel Platini, UEFA president, who has called for all European Governments to legislate. The request of Mr Platini is also supported by the Sports Rights Owners Coalition and David Collier, chief executive of the England and Wales Cricket Board, who, through his sport, is at the forefront of trying to ensure that every country across the world has as effective a regime as possible. So what is the response to Michel Platini’s request?
Is it possible to introduce a new clause into this Bill to amend section 42 of the Gambling Act 2005 on cheating? The Minister may be aware that the report of the Sports Betting Integrity Panel in 2010 chaired by Rick Parry recommended that the definition of cheating in the 2005 Act be reviewed. The power in that Act to tackle match fixing is too loosely defined and is not used. Indeed, it was not used in the case of the Pakistani bowlers. They were prosecuted under fraud laws, because the definition of cheating did not cover that form of match fixing sufficiently for it to be used in that case.
The Parry report also had recommendations for sports governing bodies to improve their act. The sports have done what was asked of them. We are all now waiting for the Government to act, and we have to ask why this is: why, when we are attempting to create the most robust system for regulating the gambling industry here in the UK, would we fail to introduce this specific form of sanction? Will the Government consult the sports governing bodies to address the problem of match fixing?
Given the international nature of the remote gambling industry, it is not possible to monitor how operators act in other jurisdictions when reporting suspicious activities. If they fail to notify the relevant licensing authority in any jurisdiction in which they operate of suspicious gambling activities, not just those related to UK-based sports, the commission should have the power to consider whether to revoke their licence to operate here in the UK.
The Bill proposes to amend section 33 of the 2005 Act so that a person providing facilities for remote gambling without a licence in the UK is guilty of committing an offence only
“if the person knows or should know that the facilities are being used, or are likely to be used, in Great Britain.”
Similar assumptions should apply to the reporting of suspicious activities. If an operator has been found knowingly to be providing facilities for unlicensed remote gambling in another jurisdiction, the Gambling Commission must have the power to consider that and remove a licence. Similarly, if the operator is found to have failed to notify the appropriate licensing authority in another jurisdiction of suspicious activity, in the interests of protecting the consumer, the Gambling Commission should be able to revoke the licence of such an operator.
The Minister will know that the issue of overseas betting operators paying the horse racing levy has been a cause of frustration for Government over many years. In answer to a debate on this issue on 20 January 2011, the Minister’s predecessor but one, the hon. Member for Weston-super-Mare, said:
“It is absolutely right for the House to urge the Government to come up with concrete proposals before the end of the year, and I am happy to accept that challenge, in line with the mood of the House.”—[Official Report, 20 January 2011; Vol. 521, c. 1067.]
It is now November 2013, and no Government solution to this issue is in sight.
At last Thursday’s Department for Culture, Media and Sport questions, the Minister said in answer to a question from me about whether she will review the Government’s legal advice in the light of the European Commission’s ruling on the French betting levy:
“I agree with the hon. Gentleman to a certain extent”—
so there is progress there—
“because the levy was created 50 years ago and does not completely deal with modern betting and racing practices, so, as I have previously said, I will consult. We will take evidence and look at the situation very carefully indeed, and try to find a modern, sustainable and enforceable legal solution.”—[Official Report, 31 October 2013; Vol. 569, c. 1062.]
The Bill, in effect, brings online gambling under the Betting, Gaming and Lotteries Act 1963 in exactly the same way as bricks and mortar betting shops are covered. I ask her again to review the advice on this, because a simple solution may be available. The Government rejected previous attempts to regulate for a betting levy that includes online betting, which has had the support of those from all parts of the House, on the basis that it would not satisfy European state aid rules. I believe that all parties would like betting operators to pay a levy on all bets, as the 1963 Act says they should.
We now have a rare legislative slot and we cannot afford not to get this Bill right. I am talking about a policy that the Minister’s colleagues, the hon. Member for Thirsk and Malton (Miss McIntosh) and the hon. Member for West Suffolk (Matthew Hancock), who is no longer in his place, have recently tried to pass into law, and I hope she will listen to them. There is a considerable legal view that the Bill will require levy payments automatically, as it will bring betting operators back into the regulatory environment and, de facto, within the scope of the 1963 Act. There is much concern in the industry that this should not be left to the courts to judge, as it inevitably will be.
Lady Hermon (North Down) (Ind)
May I gently take the hon. Gentleman back to one clause of the Bill and leave aside the things that have been omitted from it just for a moment? As he will know, clause 4 applies specifically to Northern Ireland. Did he take time and the opportunity to consult the relevant Department in Northern Ireland about the provisions of the clause and, in particular, about the penalties for breaching it, as six months’ imprisonment seems light indeed?
Clive Efford
I thank the hon. Lady for her question. The Government are introducing the Bill, not me. I understand that we have been given evidence sessions for the Public Bill Committee, so perhaps there will be an opportunity for people to give evidence and speak on that issue.
On the 1963 Act, it would help considerably if the Minister could make a clear statement and commitments about the levy. Alternatively, she could work with all parties to consider a simple amendment to the Bill to finally address the issue. The recent decision by the European Commission approving the French levy on remote operators gives us further reassurance that a legislative approach is valid. There is considerable good will among Members from all parts of the House, and in the other place, for such a measure. If we all work together, we should be able to ensure that this issue does not drag on too far into the future.
The Government have said that they will legislate on unclaimed winnings and dormant betting accounts held by operators—[Interruption.] I assure the hon. Member for Weston-super-Mare that I will soon be coming to a conclusion, and I thank him for his contribution from a sedentary position. The 2010 report by the right hon. Member for Bath (Mr Foster) on dormant betting accounts and unclaimed winnings said:
“It is important to be able to establish whether betting operators and bookmakers are able to accurately identify the number of dormant betting accounts and others, such as unclaimed winnings that their business creates.
Unfortunately, the Gambling Commission do not hold figures on the number and size of dormant accounts.”
I say to the Minister that we are missing an opportunity to require betting operators to record exactly how much and what they hold in dormant betting accounts and unclaimed winnings, so that when the Government come to legislate, as they have promised to do, they will be able to deal with the issue.
The Bill could also have included a definition of just exactly what constitutes a “betting shop”. The Gambling Commission definition of the “primary gambling activity” has permitted Trafalgar Leisure to introduce self-service betting terminals alongside fixed-odds betting terminals—FOBTs—in unstaffed premises, albeit against the better judgment of the commission. The commission is consulting on a new definition for the primary gambling activity test for its licence conditions and codes of practice, and anticipates being able to deal with the issue. However, it has unsuccessfully tried to interpret the primary purpose rule to require over-the-counter betting rather than move towards automated betting shops. At a time when there are concerns about single manning in betting shops, it is unacceptable that gambling organisations are seeking to remove the necessity to have staff at all. Will the Minister consider setting out in this Bill what services should be offered by betting shops if they wish to be licensed as such, and remove this loophole once and for all?
In conclusion, for the benefit of the hon. Member for Weston-super-Mare, I welcome the Bill as far as it goes, but more needs to be done. I hope that the Minister will consider the issues I have raised with her today and enter into cross-party discussions, so that we can all agree on a Bill that will protect vulnerable people and create the licensing system that is the gold standard for the world.
Mr John Whittingdale (Maldon) (Con)
May I begin by reminding the House of my entry in the register showing that I paid a visit to Gibraltar in September, at the invitation of the Gibraltar Betting and Gaming Association, to discuss the provisions of the Bill?
Mr Whittingdale
I am not sure that there is anything on that point, but I am happy to give way.
Paul Farrelly
Following the hon. Gentleman’s discussions over the summer with the Gibraltar-based companies, can he tell the House whether they are still minded to launch a last-minute legal action in Europe against these provisions? When he was there, did he discourage them from doing so?
Mr Whittingdale
The hon. Gentleman will have to ask the Gibraltar gaming authorities whether they intend to launch legal action. They have certainly expressed concern as to whether the Bill’s provisions are legal, and it is obviously up to them whether they take legal action. I made it clear to the authorities and the gaming associations that I supported the Bill, and that therefore I would certainly discourage them from doing so. They did raise some concerns, which I shall discuss in the course of my remarks.
I wish to make it clear that my Select Committee supports the Bill’s general provisions, as do I. The Committee has spent some time examining gambling. We carried out post-legislative scrutiny in 2011-12 of the entire Gambling Act 2005. Although we examined online gaming, which is obviously the most rapidly increasing form of gambling, inevitably the main focus on the 2005 Act related to casinos, the previous Government’s abortive attempt to introduce regional casinos—super-casinos—in the UK and the provisions relating to fixed odds betting terminals in betting shops. I do not propose to explore the latter issue at great length today, although it remains one of some controversy.
Hon. Members may recall that when that Gambling Bill became an Act, the then Secretary of State declared that one of its purposes was to make the UK the world centre for online gaming and that that would be of great benefit to the UK economy. Unfortunately, the then Chancellor of the Exchequer holed the then Secretary of State amidships by setting the tax rate at a level that led to almost every operator moving offshore. There is a single exception, which I am sure the hon. Member for Newcastle-under-Lyme (Paul Farrelly), my friend from the Select Committee, will mention: bet365 remains the last operator headquartered in the UK. Almost all the others have moved to offshore jurisdictions such as Gibraltar, Alderney and some European Union member states.
The system that existed at that time of operating a white list to recognise the regulatory authorities of different jurisdictions appears, in the main, to have worked reasonably well. The Government, in putting forward the arguments for this Bill, have raised one or two concerns about how the current regime works. In particular, they have said that there is some confusion about the different regimes in different jurisdictions, and that consumers may sometimes be confused as to where responsibility lies and where they should go with their complaints.
There are undoubtedly some differences between the rules applied in different jurisdictions. I agree with the Remote Gambling Association that, in general, the industry is reasonably well regulated in the white list countries. As CARE—Christian Action Research and Education—has pointed out, one or two jurisdictions, particularly Gibraltar, operate slightly stronger regulatory conditions than those in the UK. In particular, the Gibraltar rules governing the reporting of suspicion that individuals might have a problem with their gambling habits are slightly stronger. The UK Gambling Commission might want to consider whether it can tighten its licensing conditions, particularly on problem gambling, which is rightly a great concern to everybody who considers gambling and the policies governing it.
Philip Davies
I challenge my hon. Friend, who does a fantastic job as the Chair of the Select Committee, to stand there and say with a straight face that he believes that the Bill is all about regulation. Might he concede that it is more to do with taxation than regulation?
Mr Whittingdale
My hon. Friend has made his view known during the course of our debates and I shall reach a conclusion on that point very shortly. As I say, however, the Government have advanced the argument that the Bill will result in major gains in consumer protection.
Paul Farrelly
Does the Chair of the Select Committee agree that the example of Full Tilt Poker, which was licensed by Alderney but not, as we understood it, by Malta, demonstrates the scope for greater regulatory co-operation, particularly in Europe?
Mr Whittingdale
The hon. Gentleman anticipates the next two words on my notes, which read “Full Tilt”. He is, of course, correct. Something went badly wrong with Full Tilt Poker, which was regulated by the Alderney gambling control commission. It is right that there should be a review of how that happened and I understand that lessons will be learned. There have certainly been concerns about some incidents in white list countries, and for that reason there might be some advantages to consumer protection of bringing the entire remote gambling industry under the licensing rules of the UK Gambling Commission.
The hon. Member for Eltham (Clive Efford) spent some time on match fixing and licence condition 15.1. He is quite right that the Select Committee received evidence on that and there is no doubt that all the major sporting bodies support the Bill, because they have expressed concern that some of the other regulatory authorities outside the UK have not always been particularly good at reporting suspicious activities. Indeed, if we consider the statistics, we can see that there have been far more reports of potential suspicious gaming activity from UK-licensed operators than from offshore operators. If licence condition 15.1 is applied to all those offering online gambling facilities to UK customers, I hope that that will result in more attention being given to the issue.
I was also interested to hear the hon. Gentleman’s suggestion about spread betting. As my hon. Friend the Member for Shipley (Philip Davies) points out, there is difficulty in drawing a line between where sports betting stops and financial transactions begin. If it were possible for the Financial Conduct Authority to require suspicious activity to be reported to the relevant regulatory body, that would seem to be a sensible move.
Mr Sutcliffe
Would not having sports betting rights be a good idea, so that we could sort out the definition of financial transactions related to the market? If sports had their own betting rights and the ability to sell their sports to the betting operators, that would clarify any problems with the definition.
Mr Whittingdale
I think that would go rather further than defining sports betting and financial speculation and would have other implications that would need further consideration. I am not sure that I am convinced by the hon. Gentleman's suggestion, but I would certainly be happy to debate it with him later.
Let me return to the issue raised by my hon. Friend the Member for Shipley. The Government have made it very clear that the purpose of the Bill is to strengthen consumer protection and, of course, the Committee accepted the evidence given to us by the Minister on that point. It is important that that is its purpose, because if it had other purposes the Government might, as has been pointed out, be vulnerable to legal challenge. However, it seems entirely acceptable to argue that those people who sell gambling services to UK consumers should be required to pay UK tax. Although that might not be the purpose behind the Bill, if the consequence is that they come within the tax net, that would benefit the Exchequer and create a level playing field, which it is important we should have.
Some operators might even choose to return to the UK once the new licensing regime comes in. I realise that the level at which the tax is set is not an issue for my hon. Friend the Minister, but that is what will determine whether they return. Many of the remote gambling operators in Gibraltar and other jurisdictions have expressed concern that there is a danger that the tax will be set too high, which will have an impact on their operations and create an incentive for consumers to look elsewhere—to go outside the licensed operators to the black market. That is a serious threat, which I want to talk about.
Philip Davies
Is my hon. Friend aware that the Treasury has already given some estimates of the amount of money it expects from this measure? It believes that if the tax is imposed at a 15% rate, 20% of the UK market will be unlicensed, unregulated and not paying tax. That will mean that a higher proportion of people will be playing on unregulated sites.
Mr Whittingdale
That is a matter for the Treasury, but I agree with my hon. Friend that a 15% rate would have a damaging impact. The Remote Gambling Association has suggested 5% as a reasonable level, but the Treasury will obviously have to examine that and strike a balance. The Treasury will need to bear in mind the risk not only that its revenues might suffer if consumers were driven from the licensed market to the black market but that consumers would suffer, as they would have none of the protections that would result from the new licensing requirements in the Bill. That seems to be at the heart of the issue, so although it is important that we should debate all the provisions in the Bill, the critical question will be determined not by the Minister but by her colleague in the Treasury.
One or two other concerns have been raised, particularly about the fact that this is an enormous new responsibility for the UK Gambling Commission, which will have to issue licences to a huge number of operators based in all parts of the world. The Select Committee had some concerns about the commission’s ability to do that and about the resource implications. The Gibraltar betting and gaming association has raised the concern that the change could result in brass plating, with the Gambling Commission merely giving an operator a tick because it does not have the resources to go to the other jurisdictions to question the regulating authorities. The UK Gambling Commission will have to rely on other regulators in a way not dissimilar from its reliance on those on the white list, so if it is to accept the regulatory approval of other regulators in different countries it is important that it satisfies itself that those regulators are doing a good job. That might require additional resources, and we expressed some concerns about the degree of the extra responsibilities that will be placed on the commission.
Let me return to the question of the consequence of consumers being driven into the black market. The industry is highly competitive and a very small difference in cost can result in operators offering more attractive odds than the licensed operators. On those grounds, there is a risk that people will look towards the black market.
Chris Evans (Islwyn) (Lab/Co-op)
The hon. Gentleman is making a succinct point, but does he agree that online customers are more promiscuous than their retail counterparts and will follow prices more closely than those who have a loyalty to the shop and the shop manager?
Mr Whittingdale
The hon. Gentleman is almost certainly right. Obviously, people go to high-street betting shops to bet, but they also do so for other reasons. They form friendships and it becomes a social environment. None of that exists in online gambling; it is being done in bedrooms by gamblers on their own, and they will look for the site where they can get the best odds. Therefore we need to look at measures to ensure that they do not go into the black market.
Paul Farrelly
Before the Chairman of the Select Committee perhaps over-eggs fears of the black market, will he explain why, in the last year, the gambling revenues of bet365—he was right that I would mention bet365, and I will do so again later—have risen from £12 billion to £20 billion, when it operates in the UK and pays tax on its sports betting activities at 15%, rather than the near 1% in Gibraltar?
Mr Whittingdale
I am delighted to hear of the success of the company based in the hon. Gentleman’s constituency, but he will remember that when witnesses from bet365 gave evidence to the Committee they said that it was becoming increasingly difficult for them to remain in the UK, and unless something was done soon, they might very reluctantly have to follow the exodus. Happily, I hope the Bill will address that, but as I said earlier, it all comes back to the rate of tax that is levied. We want a rate of tax that is attractive to online operators, so that they license themselves in the UK, and does not drive people into the black market.
However, other measures are also required, and one or two of those who have made representations on the Bill have said that the Government must consider taking other measures to prevent illegal gambling online. There are several ways in which that could be done. They are not dissimilar to the measures that we have been looking at in order to tackle online piracy.
There are three potential ways forward. The first is to work with payment companies to ensure that unlicensed sites cannot use the payment facilities offered by credit card companies. The second is IP blocking—actually, URL blocking—preventing access via the internet to certain websites. That has technical difficulties but is certainly worth exploring. In the third, search engines have a role. I expect that my hon. Friend the Minister will be aware of the vigorous debates that have taken place with Google about the extent to which it is willing to take responsibility to ensure that illegal websites, or websites offering illegal products, do not appear at the top of their search engine results. That too is an area where more work could be done to make it harder for consumers to be tempted by illegal online operators once the new regime is in place. Those are genuine concerns, which I hope the Government will address in the course of debate.
I shall flag up one more issue. An anomaly was identified to the Select Committee, about which we had considerable sympathy. Casinos are among the safest places to gamble. They have strong measures in place to prevent money laundering, to identify those at risk of problem gambling and, if necessary, to exclude individuals and so on. They also have experienced, well trained staff on the premises. For all those reasons, a casino is one of the safer places to gamble—certainly considerably safer than in a bedroom alone, where people are able to gamble for lengthy periods without any controls and to lose a huge amount of money.
Angie Bray (Ealing Central and Acton) (Con)
I am delighted that my hon. Friend has raised this issue. Does he agree that we could usefully employ British bricks-and-mortar casinos, which have an excellent reputation for responsible gambling, to operate some of the online gambling on their premises, to allow them to monitor how it is working and, indeed, then help to frame any regulations that we might need in future?
Mr Whittingdale
That is an interesting idea, but my hon. Friend’s suggestion runs straight into the problem—the anomaly that the Select Committee received evidence about—that it still will not be possible for casinos to offer their own remote gambling facilities within their buildings. I could go into a casino and place a bet using my own iPad or iPhone or other online device, but when the Bill is passed, the casino will not be able to offer that facility through remote terminals, or by giving out their own devices. That seems an extraordinary anomaly, so the Select Committee suggested that the Bill should be amended to remove it, and to allow casinos to offer a remote gambling facility as well. I was disappointed that the Government appeared not to accept our argument, and I hope they will still think about that and perhaps allow an amendment to the Bill in the course of debate.
However, having said that, I have no doubt that the Bill is desirable because it strengthens the protection available to UK consumers who indulge in online gambling, and may have the additional benefit of resulting in some additional revenue, in due course, to the UK Exchequer. On that basis, I and the Select Committee support the Bill.
Mr Gerry Sutcliffe (Bradford South) (Lab)
It is a great pleasure to follow the Chair of the Select Committee. I refer Members to my declaration in the Register of Members’ Financial Interests. I am a trustee of the Responsible Gambling Trust, a great organisation that promotes research, education and treatment for problem gamblers. The entire gambling industry contributes to the fund on a voluntary basis. As the former Minister, I threatened that if it did not do so voluntarily, we would introduce a compulsory levy, but I am happy to report that it agreed and has raised over £5 million for research, education and treatment.
I mention that because I think the gambling industry is a very fair industry. Before I set out the context of the Bill, I notice that the deputy Chief Whip, the right hon. Member for Bath (Mr Foster), has arrived in his place, so I put it on the record that the Bill had its origins in my time as the Minister with responsibility for gambling and sport, on the prompting of the right hon. Gentleman. It was his idea to tackle the anomaly of remote gambling, so I place on record my thanks to him for his support during that time, when we were considering these issues.
I welcome the Minister to her position in the best job in government—the Minister for sport. It is unfortunate that it comes with gambling, tourism and other things on top, which is a bit of a problem. I am pleased that she has been able to get the Bill to the House today for its Second Reading; notwithstanding the comments that my hon. Friend the Member for Eltham (Clive Efford) made about the time that that has taken, at least we are here today.
We seldom have opportunities to discuss gambling in such a context. There is a lot of hysteria about fixed odds betting terminals and the proliferation of betting shops—topics that I am sure we can discuss in a quieter environment sometime soon—but gambling contributes a lot to our economy in jobs, taxation and betting companies’ support for sport. In our efforts to protect the consumer, we should not lose sight of the context of where the industry is and how good it is. Those are the principal points around the licensing objectives of the Gambling Act 2005—to protect the vulnerable, to provide consumer support, to keep crime out of gambling and to give a fair and open opportunity for the industry.
The 2005 Act came about following the Budd report in 2000. As I said in an intervention, the previous piece of legislation was in the 1960s. To those of us old enough to remember that, betting and gaming was seen as something dodgy—something associated with crime. It was illegal to advertise it. Betting shops were behind closed doors and frosted glass windows, and it was a very male-dominated environment. Gambling has changed tremendously over that period. One needs only to look at the success of the national lottery to see how gambling has become part of the psyche of people in the UK.
We need to ensure that people who have a problem with gambling are supported. The last prevalence study showed that 0.7% of people had problems with gambling. I say that to the Minister, because I remember from my time No. 10 and No. 11 saying, “Keep gambling off the front pages.” They were worried about the Daily Mail; they were worried about the anti-gambling media. Sometimes, that does not help us to have a legitimate debate about some of the issues that flow from the development of gambling.
I am delighted to be a member of the Select Committee. The former gambling Minister, Richard Caborn, was brave enough to tell the Committee that we did not get it quite right in the 2005 Act. What he meant was that the Act had got caught up in the wash-up at the end of the Session, where deals are done to try to get Bills through. The deal on numbers of fixed odds betting terminals and shops was not a worked-out formula—it is just that that was the debate at the time—so it is right and proper that we look at all the issues around the Gambling Act 2005. Although her officials will be guiding the Minister to view the detail of the Bill in terms of online issues, I urge her to look at wider issues and to try to put right some of the wrongs in the 2005 Act. The Minister will be waiting to hear the outcome of the research by the Responsibility in Gambling Trust, which will be ready next year and should give a detailed solution to the problems associated with fixed odds betting terminals.
I return to the subject of casinos, which the Chair of the Select Committee raised. The problem of the portability of the licensing of casinos has been around for a while. There are 68 licences, some of which have not been taken up, but buildings are maintained because the licence applies to the building. I hope the Minister will accept some amendments relating to casinos and the unfair treatment that casinos have received as a result of the Gambling Act. Casinos are some of the most highly regulated places in the gambling sector and consumers are well looked after by the casino operators. I hope there will be some flexibility on the issues of portability and online opportunities.
The Bill puts consumers at the heart of gambling. We considered the issue in 2008, with the support of the right hon. Member for Bath, now the Comptroller of Her Majesty’s Household. There was a need to make sure that consumers were protected. I know that the hon. Member for Shipley (Philip Davies) is concerned about taxation and he is right to be concerned about the level of that taxation, but that should not take away from the fact that the Bill needs to be enacted for consumer protection.
One of the things I did as Sports Minister was look at sports betting integrity, which is a parallel issue. My hon. Friend the Member for Eltham (Clive Efford), speaking from the Front Bench, raised the issue of the Pakistani cricketers. There have been numerous problems in relation to cheating, match fixing and so on, so we set up the sports betting integrity panel chaired by Rick Parry, which produced a report calling for education in sports for players of all age groups to make sure that they were aware of the risks from the type of gambling that could take place. Some footballers, for instance, think it is not cheating to kick the ball out to get two corners or two throw-ins, because some people bet on that, but it is cheating and we have to make sure that people are aware of that.
I hope that when we go through the detail of the Bill in Committee we will look at bodies such as the Sports Betting Group that were set up after the Parry report. Such bodies included people from football, cricket, rugby union, horse racing and many other sports, who have followed some of the recommendations of the Parry report. One of their great concerns is spread betting, a topic that has been raised. The issue of how spread betting is defined needs looking at. The Chairman of the Select Committee did not take up my offer of looking at sports betting rights, but I hope the Minister might consider including that in her discussions with the sports.
One aspect of the Bill that concerns me is the inability to pursue the online gambling organisations for a contribution to the horse racing levy. I was delighted when the Minister was able to announce the agreement reached between the betting companies and the horse racing industry on the levy. Online operators should contribute to the levy as well.
As I said, research, education and treatment are important, so I would welcome opportunities to increase support for the trust in promoting that.
The Minister should look at the European directive on money laundering. Although we are all agreed that money laundering is undesirable, the directive affects on-cost bookmakers and the limits on what they are able to pay out on bets. We require some flexibility on the directive, which went through 27-0 on its last reading. I urge the Minister to speak to the Federation of Racecourse Bookmakers about how the money laundering regulations might affect them.
The Bill is welcome. It is important that we have the opportunity to protect consumers and to do the necessary tidying-up in the gambling industry. I found the gambling sector to be mindful of its responsibilities to consumers and of its contribution to employment and our economy. I support the Bill and look forward to its Committee and remaining stages.
Philip Davies (Shipley) (Con)
I refer the House to my entry in the Register of Members’ Interests.
It is a pleasure to follow the hon. Member for Bradford South (Mr Sutcliffe), who was an excellent Minister in the Labour Government and is an excellent man. I am not saying that just because he is one of my constituents. I genuinely mean it. I do not think he votes for me, but I have not given up hope on him just yet. It is also a pleasure to follow my hon. Friend the Member for Maldon (Mr Whittingdale), who does a superb job chairing the Select Committee on Culture, Media and Sport and trying to bring a consensus to it, which is sometimes a challenge, but he does it with great skill.
I do not intend to divide the House on the Bill. I support its premise, but we are in a rather strange situation. The basis on which I support the Bill is not the one on which the Government are promoting it. It is the one basis on which the Government are desperate to pretend they are not introducing the Bill, even though it is clearly the case that the Bill is nothing to do with regulation; it is to do with taxation. I will deal with regulation in a moment.
We know what is behind the Bill and we do not need to guess: it is all about filling the Treasury’s coffers, although it probably will not fill them as much as the Treasury would like. The Chancellor made the objective clear in his Budget speech last year, when he said:
“One area where I am today making substantial changes is gambling duties. . . The current duty regime for remote gambling introduced by the last Government was levied on a ‘place of supply’ basis. This allowed overseas operators largely to avoid it, and much of the industry has, as a result, moved offshore. Ninety per cent. of online gambling consumed by our citizens is now supplied from outside the UK, and the remaining UK operations are under pressure to leave. This is clearly not fair—and not a sensible way to support jobs in Britain. So we intend to introduce a tax regime based on the place of consumption—where the customer is based, not the company—and, from this April, we will also introduce double taxation relief for remote gambling. These changes will create a more level playing field, and protect jobs here.” —[Official Report, 21 March 2012; Vol. 542, c. 803.]
It is perfectly clear what the Government are doing—the Chancellor could not have made it any clearer, and I fully support what he said. I thought there was a great deal of sense in it and I think most people here would agree with him.
The problem is that the Chancellor made no reference in his Budget speech to the need to introduce measures to improve player protection or to better regulate the gambling industry. I do not think that was accidental. It was perfectly obvious why. The Bill has nothing to do with regulating the gambling industry or improving player protection.
The Select Committee enjoyed hearing from the chief executive of the Gambling Commission and from the permanent secretary, struggling to think of any reasons why the current regime needed improving from a player protection perspective. I was slightly embarrassed for them. They were in a difficult position. They had come to argue the indefensible—that the Bill was all about regulation. When they were pressed to identify the issues that had caused all the problems and require new legislation, we did not get anything from them. The hon. Member for Newcastle-under-Lyme (Paul Farrelly) made the point about Full Tilt. If anybody can give an extensive list of all the problems that have been created by the current system of regulation, I would be very pleased to hear it, as would the other members of the Select Committee, I am sure. We did not hear much of it from the chief executive or from the permanent secretary.
Paul Farrelly
One of the main problems is the flight offshore. The hon. Gentleman referred to the 2012 Budget statement and the elimination of double taxation. Does he agree that that is extremely important if we are to encourage British firms based overseas to relocate here, because taxing their profits in Britain and elsewhere would make them uncompetitive?
Philip Davies
The hon. Gentleman is absolutely right. I intend to talk about taxation more widely a little later, because it plays a crucial role.
My understanding—I am sure that the Minister will correct me if I am wrong—is that the Bill is all about regulation because that is what is needed to satisfy the European Union and make it fit within its rules. Were the Government to admit that it is all about taxation, the European Union would be all over it like a rash and would rule that it is illegal because it interferes with tax competition and will upset other parts of the EU. That is why the Government have been desperately trying to pretend that the Bill is all about regulation, even though we know that it is not.
I am sure we all agree with what the Chancellor said in his Budget statement—I certainly do—but I am not entirely sure that it was particularly helpful to the Government more widely or to the Minister in this instance. The Chancellor talked about protecting jobs here, and I am sure that he had in mind the company that the hon. Member for Newcastle-under-Lyme represents, bet365. It should be commended not only for ensuring that it protects all the jobs in his area, but for the commitment it gives to the area more generally, because it sponsors the local football club and is involved in the local community. We should all congratulate bet365 on what it has done.
However, as my hon. Friend the Member for Maldon made clear, bet365’s representatives told the Select Committee in evidence that the company would be under pressure to leave if the current situation continued for much longer. Furthermore, they said that it was only really here because it was a privately owned company. They conceded that it would almost certainly have had to go offshore if it was a public limited company. The fact that it is a private company is what has allowed it to stay. Therefore, I do not necessarily think that we should criticise those that have gone offshore, because it was an inevitable consequence of the tax system and it would be naive to think otherwise.
I would prefer to try to allow bet365 to stay here, which of course we want, but it would be nice if our ambitions were a little grander. I would like to see some of the companies that are already offshore return to the UK, which is why the tax rate is so important. If we introduce a 15% tax rate, there is no chance of any of those firms returning. I encourage the Minister to encourage her Treasury colleagues to indulge in some negotiations with the betting companies to see what agreement can be reached, because I would much prefer us to set a tax rate that enabled them to come back or to bring back some of their operations. That would also mean an awful lot of jobs coming back here. That would be a much more sensible way forward, rather than seeing it as an immediate cash cow.
Philip Davies
My hon. Friend is absolutely right.
I want to touch on the levy, because a number of Members have suggested that we should be compelling companies that are currently offshore to pay it, just as onshore companies have to. I think that argument is a bit of a red herring. There is a perfectly clear and respectable argument for those offshore to pay the same as those onshore, including the levy, but I do not think that it would make a fat lot of difference to the money raised from the levy going from bookmakers to racing. I am delighted that an agreement has been reached between racing and bookmakers, but in my view, and that of others, including the hon. Member for Bradford South, who are better qualified than me to decide whether what I am saying is right, it seems that Ministers decide at the start how much the gambling industry should contribute towards racing—perhaps arriving at a figure of around £75 million—and then come up with a mechanism on the levy to deliver that.
If offshore companies are included in the levy, my suspicion is that exactly the same thing will take place. The Minister will think that £75 million is about right and will then change the mechanism so that it delivers that amount. Those people in racing who think that that is a way to get an awful lot more money from the betting industry are simply misguided, although I can see why they think it. It would not generate any more money; it would just change the formula by which these things are calculated.
Chris Evans
Before the hon. Gentleman moves on from that point, does he agree that horse racing makes up 23% of betting shops’ business, whereas the entire online business is 23%, and most online gambling is poker, bingo and other things, so we have to be very careful when we involve online companies in the levy?
Philip Davies
I welcome what the hon. Gentleman says. We should be very careful before going down any of these routes and should look for any unintended consequences.
I do not think that the proposal will deliver the revenue that the racing industry thinks it will. If the Government are concerned that this will entangle them in a huge legal minefield in the European Union, it seems to me to be a pointless battle to get into when it will generate no extra money for racing anyway. I therefore urge the Minister, whatever representations she receives, to resist going down that route, because I think she will be led down a blind alley, whatever the superficial attractions.
I speak as a rather modest owner of racehorses—an owner of rather modest racehorses is probably a better description, to be honest—so I am really arguing against my own interests, because in theory increasing the levy yield is supposed to benefit people like me.
Philip Davies
Yes, the levy would kick in only if my horse won some prize money, and given how rarely that happens I suppose it would not make much difference. It is a distant dream one way or the other.
I want to concentrate on taxation, because I thought that the question I asked at the start of the Minister’s speech was rather simple and got to the nub of the issue. If this is all about regulation and player protection, surely the first question the Government must have asked is how many people are currently playing on illegal betting sites. I cannot believe that nobody has looked into that, because it seems the obvious question to ask. I did not hear an answer, and I am not sure whether there is one, but I venture that it will be at least 95%. If anybody wishes to argue with that, they are welcome to intervene.
Mr Speaker
Order. For the record, that was an intervention from Mr Duddridge, but it was uttered from a sedentary position. It is better to stand up on these occasions.
Philip Davies
I very much agree, Mr Speaker. My hon. Friend’s idleness is not to be commended. I will bear that in mind in future and give priority to those who can be bothered to stand up when intervening.
The 95% figure is my hypothesis. Nobody here appears to disagree with it. If the Gambling Commission wants to supply us with information following the debate to gainsay that, I will be happy to read it, but I do not believe that anybody is seriously arguing that at least 95% of gambling takes place with people who are properly licensed and registered. The Government seem to have got themselves into a bit of a muddle. As I said in an intervention on my hon. Friend the Chairman of the Select Committee, the Government have not made it clear what they think is currently bet with illegal sites, but they have made a very good stab at guessing what will be bet with illegal sites after this Bill has come to fruition. The Treasury, which obviously has pound signs in its eyes as it sees the Bill progressing through Parliament, has already made its forecasts for the revenue it expects to get from it. The assessment of remote gambling taxation in its 2012 Budget policy costings suggests that if a place-of-consumption tax is imposed at a 15% rate, about 20% of the UK market will be unlicensed, unregulated and therefore not paying tax.
Paul Farrelly
Does the hon. Gentleman think that the Treasury really knows what it is talking about in making that stab in the dark, or does it perhaps not wish to over-egg expectations of the revenue it is going to raise, so that if it ends up at 95% it will have exceeded expectations?
Philip Davies
The hon. Gentleman may have no faith in the Treasury. I am happy to go along with the Office for Budget Responsibility, which wants to look at this to see what revenue can be expected. In fact, I am happy to look at anybody’s genuine predictions.
This is a Government Bill that is supposed to be about increasing regulation and player protection. However, the Government themselves admit in their own Treasury forecast that it will result in our moving from a situation where probably fewer than 5% of people are betting with unlicensed and unregulated sites to one where about 20% of people are likely to be betting in that way. Does that sound like a sensible strategy for a Government who are introducing a Bill to improve player protection and the regulation of the gambling industry? It is complete nonsense and it is there for all to see. This has nothing to do with regulation or player protection; it is about taxation and tax rates, as the Treasury made abundantly clear in its forecast.
Mr Nuttall
Does my hon. Friend think that the reason why the Treasury is using the 20% figure is that it accepts what I and, I suspect, my hon. Friend believe to be the case, which is that punters will seek the best odds and that this Bill will increase the costs on the operators and result in their offering less good odds than those who are not so regulated?
Philip Davies
My hon. Friend is absolutely right. As an occasional punter myself, I can speak with some authority in saying that I am very interested in which bookmaker is offering the best odds—naturally; that is what punters do. In many respects, online horse racing punters have never had it so good in terms of the competitiveness of the odds and offers such as “best odds guaranteed”, which means that if someone backs a horse at a particular price and its starting price is bigger than the price they backed it at, they will get the bigger price—a fantastic offer for punters. All those offers will probably cease once this Bill comes to fruition, when the cost base of bookmakers will go up. That will be a bad thing for punters, who will lose out on the returns they get from their gambling. That is an inevitable consequence of the Bill; it is no good pretending that it is not, and we should be open and honest with people about it. If they still think it is a good Bill anyway, that is fair enough, but at least we should be honest about its implications. There are no painless panaceas whereby everybody will get more money out of it; somebody has to lose, and the loser is undoubtedly going to be the punter.
Because of the competitive nature of the market and the fact that many punters have become used to betting with concessions such as “best odds guaranteed”, some online betting sites will obviously see an advantage in going somewhere else—in being unregulated, not applying for a licence, and hoping that the fact they are not advertising on Sky TV, or wherever it might be, will be overcome by their offering concessions that punters have come to love and that give them much greater value. That is clearly what the Treasury has factored into its predicted revenues. Because it has built its prediction on a tax rate of 15%, it is crucial for everybody concerned that the tax rate introduced when the Bill comes into being is not 15%, because the lower the tax rate, the less the chance of people using unregulated sites and of companies that are currently licensed and regulated becoming unlicensed and unregulated. I support the Bill in principle, but the key part of it is not this Minister’s responsibility but the relevant Treasury Minister’s. I hope she will keep his feet to the fire to make sure that what she intends is not undermined by the Treasury.
Mr Laurence Robertson
My hon. Friend is making some excellent points. He talked about people being tempted to bet illegally, possibly because of the withdrawal of special offers. I am sure he is aware, because he has greater knowledge of this than me, that in several countries there is monopoly betting, usually a tote monopoly, and it is illegal to bet beyond that, yet because the internet is so very difficult to control, people in those countries do bet illegally every day, all the time.
Philip Davies
My hon. Friend is absolutely right. He undersells how much he knows about this subject; he is far more of an expert than me. When the Select Committee took evidence on gambling during a visit to Brussels, where we met European Union regulators and others in Europe, it was clear that levels of illegal gambling in countries with much greater restrictions than ours were far higher. We can predict what happens if the restrictions imposed are too onerous, because we have seen it in other countries. People go on to illegal sites. As my hon. Friend the Chairman of the Select Committee explained, the efforts made to try to stop people doing that are not particularly successful, as they can be got round. If the focus is on closing down internet sites, they will immediately reopen elsewhere. If it is on blocking credit card payments, people will use PayPal and other methods to get round those restrictions too. It is a pointless exercise. People who want to get round these restrictions will do so. Other countries have proved that, because they have tried them all and they have all spectacularly failed. Nothing will change in this regard, because the Bill is not really about regulation but taxation.
I am concerned about the impact with regard to the Gambling Commission, which, like all quangos and bureaucracies, likes nothing more than a bit of empire building. I suspect that it has seen the Bill and thought, “My goodness me, all our Christmases have come at once!” Whereas before it has had to accept the licensing and regulation from the white list countries, and accept the companies that are considered to be good enough, it can now get its teeth into every single one of them. It can go jetting around the world checking out whether all these individual companies should be a given a licence. Lord knows how many extra people it will need in order to satisfy itself that those companies are fit and proper to advertise their wares in the UK and get themselves an appropriate licence. This Bill is a bureaucrat’s dream. I would be interested to hear what steps are being taken to stop any empire building by the Gambling Commission, because I am sure that would be an unintended consequence of the Bill, allowing a huge bureaucracy to grow on the back of it.
I do not know what the great problem was with the white list. During our Select Committee hearings, I was scrabbling around trying to think of examples of problems. Only one sprang to mind, which was a notorious case where the legendary gambler Barney Curley pulled off a huge coup one day when he had four horses running at different meetings around the country; I think one was somebody else’s that he used to train. The first three won and the last one, fortunately for the bookmakers, lost, but with three out of four winners he still reportedly ended up making a profit on his bets of some £10 million. He was paid out by all the British bookmakers, but the regulator in Gibraltar, I think, allowed the bookmakers based there not to pay him out, which led to a huge dispute over a long period. I think I am right in saying that the situation was eventually resolved and they paid him out.
That is the only case I can recall where the regulation in one jurisdiction was fundamentally different from that in another and the returns to the punter were materially affected. Nobody who came to the Committee ventured that particular example—I ventured it—so they did not seem to be acutely bothered about it. I am not sure, therefore, what was wrong with the old regime.
Mr Syms
My hon. Friend makes a very good point. The Gambling Commission already charges high fees on the domestically based industry. Is there not a risk not only that it will chase revenue from remote firms, but that it may have to put up the fees for the whole industry, including those that are already paying their taxes?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May I suggest to the hon. Gentleman that it is not Friday today and that, although I know he is very keen on this subject, a few more Members want to get in?
Philip Davies
You are absolutely right, Mr Deputy Speaker: it is not Friday.
Mr Deputy Speaker
My worry is that you think it is a Friday, when you usually speak for hours—that’s what’s bothering me!
Philip Davies
For once, Mr Deputy Speaker, you are quite wrong. I have been racing through my comments, which I suppose is just like a Friday, when I do the same. I am trying to go through them as quickly as possible and I do not intend to speak for hours. I was just looking at the clock, actually, thinking that I should draw my speech to a close as soon as possible.
The final point on which I want to concentrate relates to taxation and what people may wrongly associate with this Bill. There is too much focus on the big gambling companies, such as William Hill, Ladbrokes and Coral. To be perfectly honest, I do not worry too much about the effect the Bill will have on them. They are big, successful and innovative companies and I am sure they have the wherewithal to cope with the Bill’s taxation regime. I am sure it will create some pain for them, but I do not have a problem with that. The reason why I support the Bill is that there is an awful lot to be said for companies offshore having to pay taxation in the same way as small, independent betting shops in this country. I do not worry about those big companies.
What I am worried about—I hope the Minister will consider this carefully—is the Bill’s likely impact on much smaller internet companies in the gambling industry, such as innovative start-up companies. If we look at the history of the gambling industry, we see that it is often the smaller companies that have driven much of the innovation and change that have been part of improving standards in a number of areas. My concern about the Bill’s new licensing system and the Treasury’s proposed taxation rates is that those companies will be priced out of the market before they can even reach a scale that would allow them to flourish. In effect, they will be strangled at birth and that would wipe out lots of innovation in the gambling sector.
That could easily be avoided, without altering the principles behind the Bill, through the introduction of thresholds or a tiered taxation system when the tax rates are announced. Both those alternatives would mirror the current income tax system, which has tiered rates depending on the size of a person’s income, a tax-exempt threshold at the lower end and graded percentage rates. The Government should look closely at introducing a tax regime that does not involve a simple, across-the-board 15% rate, but that takes into consideration the size of the companies concerned, their ability to pay and innovate, and the investment needed for that innovation, because lots of jobs—an underestimated number—are dependent on these small technology companies in the UK.
People might say, “They’re based offshore. It doesn’t matter.” The companies are based offshore for gambling purposes, but they also employ lots of people in the UK who do their marketing and advertising and who create their TV adverts. We would lose lots of jobs in the UK if we priced such businesses out of the market.
Mr Nuttall
Does my hon. Friend agree not only that those companies employ British workers in this country, but that often, the workers based offshore are also from the UK?
Philip Davies
My hon. Friend is absolutely right. People ought to bear in mind a number of very small companies, such as Probability, NetPlay TV, Gamesys, Adobo Games and tombola, which advertises a lot on TV and is growing. Those companies employ lots of people in the UK, but if the Bill’s regime of a 15% tax rate had been in place when they started, they would never have got off the ground because it would not have been worth their while. The British economy cannot afford to lose those companies and the jobs they create. This is not about Ladbrokes and William Hill. I suspect they will survive whatever the rate of taxation. It is the smaller companies we should be thinking about.
I want to address one or two points that I do not think have been cleared up. Will software suppliers such as Oracle and Microsoft need to apply for a Gambling Commission licence, given that they are key suppliers to software providers of the online gambling and gaming industry? The Bill does not make it clear whether they will need a licence. I am not sure whether the Minister will be receptive to redrafting the Bill in order to make clear the extent to which software providers need to go down their supply chain to require suppliers to apply for a Gambling Commission licence. Italy, Denmark and France do not need software suppliers to be licensed. My understanding is that only Spain does, and that that is currently under review. I urge the Minister to consider that point and ensure that it does not happen.
Another point is the extent to which the staff and ultimate beneficial owners of applicants are required to provide personal information. With the possible exception of banks, no other industry will be required to provide so much personal detail, not just of directors but of virtually anyone in a senior position in the organisation. Why is that needed?
I support the principle of the Bill, but not for the reasons given by the Government for introducing it. Frankly, the regulation argument is nonsense and does not stack up at all. This is about taxation and on that basis I support the Bill, but only if the Government set the taxation at a sensible and affordable rate. Before we get to Third Reading, I hope the Treasury will indicate the likely taxation rates and whether it will consider tiered rates or a much lower rate. If the tax rate is too high, I may no longer support the Bill, because it could have unintended and damaging consequences.
Whatever revenue is raised will be good for the Treasury—it will get more in the future than it is getting now—so why not try the rate at 5% and see what happens? If there is no big issue, it could then increase it to 10%, and to 15% at a future date. Why go straight in at 15% and perhaps have lots of unintended consequences? It should be done incrementally: start at 5%, see how it goes and review it from there. I hope the Minister will take that on board and urge her Treasury colleagues not to damage what otherwise could be sensible legislation.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
It is always a pleasure to follow the hon. Member for Shipley (Philip Davies), who is knowledgeable and free-thinking. I usually do so on the Culture, Media and Sport Committee in order to ensure that he does not have the final word.
I broadly welcome the Bill. As my Select Committee colleague has said at length, it is clearly at the regulatory end of the welcome moves towards a major reform of the taxation system—to a point-of-consumption basis—so that companies pay tax on profits made from bets placed in the UK. The Bill is not about the appropriate level of that taxation. It focuses on other crucial aspects of the regime, namely, as it says on the tin, licensing and advertising of gambling. It is a crucial part of reforms of an industry that has hugely relocated, not only online, but offshore, principally to Gibraltar for most UK operators, and largely for tax reasons. I use the word “most” pointedly, because there is one huge and important exception, which is particularly important to my local area.
Paul Farrelly
It is bet365, which is the biggest UK operator and perhaps now the biggest operator worldwide. However, the Chair of the Select Committee will have to be patient, because I will speak about that company a little later.
Notwithstanding the delays to which my hon. Friend the Member for Eltham (Clive Efford) referred, I congratulate the Government on introducing the Bill and on sticking to the timetable that they set out in 2012 to bring the reforms into force, after careful consideration and consultation, by the close of next year.
A replication of that resolve would be welcome on the wider related issue of corporate tax avoidance by huge multinationals, both on and offline, which has gained a head of steam in these straitened times. Although gambling, both on and offline, is treated differently from general business because it has licensing regimes, the design of an effective point-of-contact consumption tax system holds lessons about what tax authorities can do for themselves, without passing the buck to the interminable renegotiation of international tax treaties, which may well take a lifetime.
The Bill and the issues to which it relates have been well scrutinised in this Parliament. The experience of the UK since the passing of the Gambling Act 2005 has been referred to at length. That was the subject of a DCMS consultation that started in 2009, before the last election, which recommended the current course. The Select Committee endorsed that approach in the report that we issued in July 2012. This April, the Committee published another report welcoming unanimously and on a cross-party basis—although perhaps for different reasons—the main thrust of the draft Bill following extensive pre-legislative scrutiny. In January, the House staged a precursor to this debate on the private Member’s Bill promoted by the hon. Member for West Suffolk (Matthew Hancock), which was introduced by the hon. Member for Thirsk and Malton (Miss McIntosh) following his move to the Government Front Bench. I recall that that Bill was intended as a parade ring for the gambling concerns of the Newmarket and Thirsk race courses, but it covered much of the same ground as this Bill.
I will be brief and will not run around the Select Committee circuit, as the hon. Member for Maldon (Mr Whittingdale) has done. Once again, he has proven himself to be Essex’s own latter day Seabreeze in the way that he has galloped around the track. However, it is worth re-emphasising the extent of the flight of most online gambling offshore and the resulting loss of tax to the Exchequer. The new regime should, if carefully designed, encourage a more level playing field for the online operators who have stayed and for the rest of the traditional sports gambling industry in the UK.
The Chair of the Select Committee has waited long enough. Chief among the online companies that continue to base their sports gaming operations in this country is bet365. It is, in many respects, a modest company with a great deal to be immodest about. It certainly does not seek the limelight, but I do my best for it.
Bet365 is based at Festival Park in Hanley in the constituency of my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt). In 1986, Festival Park was the site of Britain’s second national garden festival. The first was in Liverpool and the successive ones were in Glasgow, Gateshead and Ebbw Vale. They were a sort of biennial Olympics, or biennale as Boris would describe them, for Britain’s most deprived areas during the pain of the Thatcher era. Stoke was chosen after the closure of Shelton Bar steelworks in a north Staffordshire that was ravaged by the loss of its coal mines and many of its pottery makers.
Bet365 is a world-beating break from that legacy. It is one of the most phenomenal success stories in British business in the new millennium, having been started in 2000. With more than 2,000 highly skilled staff, it is now the largest private sector employer in north Staffordshire. It has led the local regeneration without a hand up or a handout from Government. In the last year, in a highly competitive industry, it has increased its pre-tax profits from online gaming by more than 50% to about £180 million. It has done that in just 13 years. As I have said before, £20 billion was wagered with bet365 in 2012-13, which is a 57% rise. That has happened because it is one of the industry’s most innovative and trusted players.
Unlike its online competitors in the UK, bet365 paid £31 million in corporation tax to the Exchequer last year. With betting duties and VAT, over the years it has paid hundreds of millions of pounds more. It also pumps a fortune into the local premiership football team, Stoke City, which is another source of pride and a sign of its commitment to the local area. Charities and good causes benefit from the Bet365 Foundation, the Stoke City Foundation and the Coates family themselves.
The reason bet365 remains in this country is not just that it is privately owned. It is because the Coates family—Peter, the Stoke City chairman, his daughter Denise, who was the founding force of the company, and her brother John, the joint managing director—believe in creating employment where they come from and in paying their fair share of tax.
The firm is a leading member of the UK’s Remote Gambling Association, which John Coates has chaired and which does much to promote responsible gambling and the industry overseas. However, unlike other leading members, including household names such as Ladbrokes and William Hill, bet365 supports the changes in this Bill because it is mainly based here and not offshore. If it is so successful while paying taxation, why should its competitors not do so too? I do not think that the UK’s legislative framework should discriminate between a private company and a publicly quoted company, even if publicly quoted companies are motivated by profit maximisation.
I sympathise with some of the arguments that have been made by bet365’s competitors and by the RGA during the gestation of the Bill, which we have heard about today from the hon. Member for Shipley. I also welcome the change of tone from the RGA towards these reforms, which will surely happen. I hope that there is no challenge from the Gibraltar-based companies in Europe, because that would be a delaying tactic that is all about taxation.
In Committee and in the subsequent stages of the Bill’s passage, we must have the best possible scrutiny to get the legislation right. The success of the regime will depend on British consumers choosing to gamble with licensees who have chosen to go with the Gambling Commission. There will have to be effective enforcement to deter non-licensed companies from muddying the waters with a grey or black market. There are outstanding licensing issues on which the industry is being consulted. We must remember that this is an international industry in which operators hold licences overseas in reputable jurisdictions. As the RGA says, it is in everyone’s interests that the regulators work together.
As we have heard, it is crucial that we get the level of taxation right. It is also important to get the definition of what is to be taxed right. I hope that the Treasury is listening to the arguments from the industry for a gross profits tax, rather than a wider gross gaming revenue definition, which rather moves the goalposts from what the operators were expecting.
In listening to the industry, we must recognise that other jurisdictions, notably in Europe, have successfully introduced similar licensing systems and taxation on a point-of-consumption basis. That is reaping revenue for their Exchequers. One of the most recent countries to do so was Denmark. The duty there is 20%, which is higher than the 15% gross profits tax in this country. None of the major operators—all responsible members of the RGA—have seriously suggested to the Select Committee or to anyone else that they would not apply for a licence under the new regime established by the Bill, but instead join an unlicensed or grey market. They have not done so in Denmark, Germany, Greece or Spain. Frankly, the UK is too important a market and their reputations are too important for them to do so here. I repeat: if bet365 can be so successful and supportive of these changes, that also shows what the competition is capable of doing.
To conclude, once we implement this new system—by the close of 2014, I hope, and following parallel moves by other European countries—UK operators, including bet365, will not only have a greater degree of certainty for their future investment and growth, but in co-operating with, rather than resisting, the new British system, all those who claim to be a reputable UK company will be better placed to argue, particularly at European level, for fairer access to other major markets such as France and Italy, and to ask the UK Government to help support the industry in Europe and worldwide.
Mr Robert Syms (Poole) (Con)
I rise to support the Bill, although I am a little disappointed that it is so narrowly drawn as I think that major issues need considering. Gambling is very much part of modern life in Britain. We all cheered the Olympians in 2012, and a lot of that success was built on the national lottery. One needs only to look at the various books produced at Budget time to see how much the industry generates in taxation to pay for the things we want in this country, such as health, education or law and order.
Gambling is an important industry, and it is also part of our offer as a country that many people come to visit. We need only look at casinos in London to see that a high percentage of people in them are visitors to this country who have come to take advantage of the facilities and what we have to offer. Progress was clearly made in the Gambling Act 2005, but given the way the internet is developing, it is difficult without a crystal ball to work out what the future will bring. It is clear that we have lost a large slice of the industry to abroad because of the tax system, and it is therefore perfectly sensible for the Government to look at ways and means of tempting people back to the UK to make a bigger contribution.
We ought to be aware of concerns that we might load too much on the Gambling Commission because it might then load higher fees on to domestically based businesses. Many of those businesses found that the size of the commission compared with the old gambling board, and the number of people it employs, has put their fees up substantially over several years. Many issues must be considered and this Bill is part of the solution. I suspect that the other part of the solution, as we discussed earlier, will be in the Finance Bill following the Budget.
A number of important issues have been raised, include how we tempt offshore companies to come back. Do we tempt them back by setting a competitive rate? My hon. Friend the Member for Shipley (Philip Davies) made a strong argument for that, but there are a number of competing concerns. The domestic industry is clearly upset that people offshore can set better odds and therefore take customers, but we must also consider the rate we set, as that could ensure many more illegal sites in the UK, which raises the issue of problem gambling.
I think we have a responsible domestically based industry that, as I said, generates a lot of tax. It has codes and practices that it sticks to, and it is part of our offer as a country. It also expects a degree of fairness. When we talk about a level playing field, we must take into account the millions of pounds of investment, the thousands of people who are employed, and the tax they generate. The rate we set for remote gambling operations will be important, but the Gambling Commission and Treasury must also consider whether sufficient assets are deposited in the UK, or whether any entity subject to action by UK regulators or the authorities has assets in the UK that can be picked up. They must also consider whether people from remote companies have locally based directors who are responsible for what they do—that is important.
The hon. Member for Newcastle-under-Lyme (Paul Farrelly) asked whether there ought to be sanctions against individuals or businesses that provide facilities for offshore remote gambling companies. That is a difficult area and an absolute minefield, and there are tricky issues for the Government to consider, which means setting out a balance. In reality, however, because we are not getting tax from the remote industry, the UK has probably lost £1 billion or £2 billion in revenue over the past few years, and it is an area in which any sensible Government would look for reform.
A number of other issues have been raised, including why we have to wait until December 2014 before we bring in a new rate. By some estimates, the UK may well lose £200 million or £300 million by having that delay. The issue raised by the Culture, Media and Sport Committee is also important. Someone can gamble remotely on an iPad in the street, but when they go into a casino, which is safe, regulated, taxed, and where people have a duty to look after their general welfare, they are not allowed to. I was pleased after my earlier intervention when the Minister said that the Government might consider that issue during the passage of the Bill.
A number of points in the broader industry need addressing. The hon. Member for Bradford South (Mr Sutcliffe) mentioned the portability of casinos. A lot of our—very successful—industry still runs under the Gaming Act 1968, which is nearly 50 years old. Certain issues need looking at if we are to modernise the industry and for it to continue to be a success.
Mr Sutcliffe
That is why it is important to consider issues that have been wrong for some time and put them right in the Bill—I hope the Minister will win that battle. The temptation is to get the Bill through with its core values, but not to look at the wider issues. Perhaps this will be the only time we have to get it right.
Mr Syms
The hon. Gentleman raises a good point. We are dealing with a specific problem, and as my hon. Friend the Member for Shipley said, the driver is clearly the Treasury which sees an issue it needs to deal with to raise money. That does not mean, however, that no other aspects of the whole industry need considering and modernising. When the hon. Gentleman spoke earlier he mentioned the Daily Mail test, and I suspect all of us in politics get a little wary when talking about the gambling and casino industries and all those other industries. In reality, however, if the Government cannot amend the Bill, there is a good argument for introducing, certainly early in the next Parliament, another Bill to cover the broader gambling and casino industry, to make it a little more responsive to modern demand.
I was interested in comments by the hon. Member for Newcastle-under-Lyme about how bet365 had provided regeneration for Stoke. We should not underestimate the fact that the gambling industry is a factor in regeneration. It certainly was in Atlantic City, and one needs only to look at what is happening in the United States to see that many local governments and other areas have deliberately attracted and promoted that industry because it can help local areas. A Government who want certain areas of our country to prosper and regenerate could do a lot worse than looking at the gambling industry as a potential source of regeneration for some areas that are struggling in the modern world. I broadly support the Bill. I am a little disappointed with its scope because there is unfinished business in the broader gambling industry, but I look forward to the passage of the Bill. I hope that the clever people— the bright people with towels round their heads in the Treasury—will find a good way of generating money to help the public services that we all want.
Chris Evans (Islwyn) (Lab/Co-op)
I refer the House to my entry in the Register of Members’ Financial Interests, and I welcome the Minister to her place. She is the Minister responsible for sports, and having served with her on the Justice Committee I know that she is level-headed and takes a non-partisan view on things. I think she is an excellent addition to the Department, but I caution her on one thing. I know that she loves tennis and is a bit of a tennis freak, but I hope that she looks at other sports as well.
I am pleased to speak about this Bill. Bookmaking was my family business—my mother and father were bookmakers, and in fact I am the son of a bookmaker and the son of a bookmaker’s son. Indeed, bookmaking was my first job after university, and like the hon. Member for Shipley (Philip Davies), I am sure, who also worked in betting shops, I could entertain the House with tales of the characters we would meet in betting shops. I know, however, that there has already been a warning about time, so I will limit my remarks to what is in the Bill.
In the past few years, the betting industry has suffered from an image problem. The country has a tradition of playing the football pools and of crossing its fingers each and every week in the hope of winning the national lottery, but people seem to look down their noses at the betting trade. There is a perception that there is a betting shop on every corner, and yet, when we talk about gambling, it is important that we understand the history of the industry. In the 1970s, there were 16,000 betting shops; today there are just 9,000. The idea that there are more betting shops is perception more than anything else. People can walk into any newsagent or supermarket and be offered a wide range of scratchcards and other gambling opportunities, but the bookie is blamed for so-called gambling problems in this country.
That is not all. The betting shop is blamed for the decline in our high streets. Betting shops are tarred with the same brush as the pawnbroker and the money shop. Rather than bash the betting industry, it is time to talk about our betting firms as a great British success story. The industry contributes £3.2 billion to UK gross domestic product each year and provides £1 billion in taxes. Betting shops directly employ 55,000 full and part-time jobs, which is the equivalent of 10% of the entire leisure industry. The work force are mainly women, some of whom have re-entered the workplace after having children, or students, who need flexible or part-time work while studying, as I did when I was at university.
In a world in which sadly we have seen names such as Woolworths and HMV disappear from the high street, the gambling industry has been at the forefront of innovation and technology. I want to focus my remarks on that. When I left the industry over 12 years ago, online gambling was in its infancy. If people walked into a shop at that time, they would think the industry was in decline. The punters were mainly either coming up to retirement or retiring. The only thing in the shops that kept them going was the amusement prizes machines, the forerunners of fixed odds betting terminals.
In reality, the trade was changing. It is important to realise that the industry has been forced to be innovative and adaptable. More than a quarter of William Hill online customers place bets on their mobile, smartphone or iPad. The industry is continually changing. People who bet online would probably not have taken a trip to their local bookie to bet on a horse. If anybody turns on the television tonight to watch the football, the last things they will see before kick-off are adverts for odds on the first goal scorers. The people watching the adverts are not going to run off to their local bookies to put £5 on a match result. They will instead get out their smartphone or iPad and bet from the comfort of their living room.
Frankly, bookies have to be innovative. They must keep up in an ever-changing industry, and have found ways to reach customers who previously would not have looked at them at all. When we talk about businesses in this country, it is important that we look to gain positive aspects of all businesses, no matter what our perceptions of or prejudices against certain industries.
On the detail of the Bill, I do not think any hon. Member will disagree that the priority must be to protect the consumer. We need to ensure that we do not see sites operating illegally and offering bets to UK consumers. We need an assurance from the Government that the Gambling Commission has the appropriate powers to deal with illegal operators. As somebody who has worked in the industry, I know that the one thing we do not want in the betting trade are black market operators. I am sure the hon. Member for Shipley agrees that when we worked in the betting trade we were constantly competing with illegal betting operators, whether they operated out of the pub, the side street or their houses. We—the people who played by the rules and paid their taxes, and who had betting licences—were constantly undercut. I fear that the same thing could happen as a result of the Bill.
We must ensure that strong licensing conditions are in place but, at the same time, we must ensure that licensing conditions are imposed in a timely, effective and fair way. Black market operators should be run out of business as quickly as possible. I know that the Government have already rejected the idea of internet protocol address blocking and financial transaction blocking, but if we are serious about ensuring proper enforcement, we need to look at that again. I have some sympathy with the hon. Member for Shipley. I very often do not agree with him politically, but a lot of what he has said makes a lot of sense.
The hon. Gentleman mentioned the point-of-consumption tax. I agree with the findings of the Culture, Media and Sport Committee, which warned that the Government need to be careful with how steep they make that tax. We know that the UK retail betting industry is competitive. There is a huge focus on customer service and brand loyalty. As I said in an intervention on the hon. Member for Maldon (Mr Whittingdale), the Chairman of the Committee, online gamblers are far more promiscuous. They will shop around for the best price. They will not worry. There are two sets of customers: the customer who wants to bet heavily online and shop around for the best price, and the customer who has been going to his local shop for years. The latter likes the atmosphere of the bell ringing before the dogs go off. He likes running up to the counter quickly to place his bet. That is what he lives for. He also likes the staff—he likes sitting down for a cup of tea with them. He will not go online and shop around in that way, but others will.
As the hon. Member for Shipley has said, if the tax is set too high by the Treasury, it will stifle one of the most innovative industries out there. Betting is a growth industry. My hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) mentioned the growth of bet365 over 13 years, which was down to the innovation it has shown online. However, if that tax is too high, I believe we will open a new market for, as I have said, unlicensed, illegal operators, which will not comply with the new regime and which can offer better odds than licensed operators such as Ladbrokes, William Hill, Betfred and bet365.
Modelling by Deloitte in its 2011 report “The Impact of a Point of Consumption Tax on the Remote Gambling Industry” demonstrated that a 5% rate of tax would mean that as many as 13% of UK online customers would move to the unlicensed or illegal market. At 10%, 27% of business would move to the illegal market. I would hate to see how many people would go to the illegal market if we set the rate too high at, for example, 15%. I mentioned Woolworths and HMV going out of business; I would hate to see companies that we have seen on our high streets for so long, such as Coral, William Hill and Ladbrokes, having difficulties and going out of business.
I started my career in an independent bookmakers—Jack Brown, which no longer exists. One sadness I have—anyone who has worked in the betting industry will know this—is that the independent bookmaker has disappeared from the high street. I went out on Friday night and saw an independent bookmaker. That was a novelty and a rarity, but when I was younger, it was a familiar sight. I am deeply concerned that, if we set the tax too high, the firms for which people have some sort of warmth and empathy will go out of business.
The Bill is important because, ultimately, its purpose is to protect consumers—that is what it should be about—but I would like to see more. When the Minister responds to the debate, I would like her to provide assurances that the Gambling Commission has sufficient resources to deal with the regulatory requirement it must undertake. We need to be extremely careful that we do not stifle a forward-thinking and forward-moving industry. The fact is that gambling is a growth industry. I do not want the Bill to do anything to change that. Ultimately, I believe we can learn something from the sector. It has been innovative and has responded to challenges in the market that would have brought down lesser industries. I think that Members across the House would agree that we can learn from that.
My final point—I do not want to take up too much time—is on GamCare. We see the adverts on the television and the internet. People can click on the icon and receive the help they need. We have heard a lot in the past about payday lenders; we can learn from that. We can also learn something about self-exclusion. I believe that the betting industry is almost paranoid about problem gamblers, but very often we can be proud of the industry. I will support the Bill, and I look to the Minister to give the assurances for which I have asked.
James Duddridge (Rochford and Southend East) (Con)
I thank the hon. Member for Islwyn (Chris Evans) for the timely completion of his speech, which allows me to leap to my feet. The hon. Gentleman gives my hon. Friend the Member for Shipley (Philip Davies) a run for his money as the champion of betting, and particularly of betting at bookmakers. I am not saying that out of bitterness because my hon. Friend called me idle—I should have been faster on my feet.
The hon. Gentleman makes a bid for being the champion of betting shops, rather like the hon. Member for Newcastle-under-Lyme (Paul Farrelly) made a bid for being the champion of online betting. I rise to identify my constituency as perhaps the epicentre of bricks and mortar casinos. Three of the 142 casinos in the UK are in my constituency, all within a mile and a half along the seafront. I will go on to talk in detail about a fourth that is opening up on those golden couple of miles.
Reflecting on the Minister’s introductory comments, it is brilliant to see her in her new job. I was a little worried in the first week. Most Ministers are instructed to hit the ground running, but, looking at comments from journalists, the Minister seemed to be flexing her sporting credentials in karate and throwing journalists around her private office. I am not sure how well that will work out for her in the long run, but if she ever needs me to do anything I will certainly think twice before disagreeing. Having said that, I would love to serve on the Public Bill Committee and will be in negotiations with her on one or two amendments I would like the Government to table if the Chair of the Select Committee does not table them.
I criticised the hon. Member for Eltham (Clive Efford) for the enormous list of measures he wants included in the Bill, so I hesitate to ask for more provisions—I want my little bit, but not necessarily his. The Bill is small, but I suspect that if the hon. Gentleman got everything he wanted, I would need a hand to get out of my seat and lift the Bill.
I want to focus on the interaction between online betting and bricks and mortar casinos. This is important not just in relation to deregulation or taxation—my hon. Friend the Member for Shipley hit the nail on the head; this is a much greater part of the process—but in what can be done online compared with what can be done offline in a bricks and mortar casino. As I said, there are 142 casinos in the UK, which means that 3% are in the constituency of Rochford and Southend East. While I am bragging—if you will allow me a brief diversion, Mr Deputy Speaker—I will say that 8% of UK piers, by metre, are in the constituency too. It is a wonderful place to go for entertainment, with the Genting Club, Genting Electric and Rendezvous casinos, and the soon to be opened Park Inn Palace hotel.
My hon. Friend the Member for Poole (Mr Syms) made many good points, but I picked up in particular on his comments on regeneration. At a difficult time for the economy when high streets are not doing so well, Southend high street is doing well and the seafront is being regenerated. When I arrived in Southend more than 10 years ago, there was a beautiful but derelict 19th-century hotel, the Palace hotel. The Government used it to house asylum seekers on a temporary basis, before they could be found more suitable accommodation. That made the area, to a degree, a no-go zone. It is now a four-star hotel, and the company will be opening another casino. It may even be a five-star hotel; it certainly should be, given the quality of service I received. The gambling industry can be of significant benefit to constituencies, whether in Newcastle, from betting shops or from online casinos.
Genting casinos employ more than 170 members of staff in Southend and the company has invested millions in the economy. It supports the broader community through mayoral charities. All three casinos have been fantastic on responsible gambling. Governments always ask for more and more. I often wonder what more the industry can do, but as Governments tinker with taxation and regulation they feel they should ask for more without understanding fully what that could be. There is a tacit understanding, which is in many ways false, whereby the industry says, “We are trying to do more; what more can we do?” and the Department and Ministers do not have a hit list of what they want, because so much is already being done.
Mr Sutcliffe
The hon. Gentleman will recognise that Governments can sometimes apply pressure, which is what we did with the responsibility in gambling levy. That voluntary levy—voluntary donations from the gambling industry—is now worth more than £5 million, which shows that the industry does consider the problems that problem gamblers face.
James Duddridge
Absolutely. I have had a number of discussions about individual gamblers in Southend who have put themselves on the register and, as a result, have been protected. The protections are not, as a number of hon. Members have said, in the online arena and I am deeply concerned about that. While the Government are, to a degree, looking at online and bricks and mortar together, the two are still too polarised. I can put that down only to the Government wanting to divide and conquer the industry by setting up slightly different regulations, rather than operating en bloc, but they are disadvantaging one of the more high-performing sectors and that is ludicrous.
My hon. Friend the Member for Maldon (Mr Whittingdale) described the Essex sea breeze. In his penultimate point, he talked about online gambling in bricks and mortar casinos. It is ironic that a casino is able to advertise outside the Rendezvous casino, but games cannot be played online inside it, even if one takes in one’s own iPad or iPhone. Quite how we could stop people gambling on their own devices I do not know, but it would be much better to allow casinos to have gambling online within their own premises. That would bring it into the family that has greater protection for problem gamblers and into the tax net. The current position is ludicrous.
The Minister indicated that she was sympathetic to the point. I am interested to hear, in her concluding remarks, how that sympathy will play out. Does she expect Back Benchers, on limited resource, to start tabling probing amendments, or will the Government table a new clause that we can all consider? The latter would be my preference, rather than the unfair process of the Select Committee coming up with an idea, an hon. Member pushing it forward in the Bill Committee, the Government considering it, the consultation perhaps not coming back on Report, and then, quietly, the Select Committee’s work coming out as a Lords amendment at the end of a long day, and the Government saying it is just an additional tidying-up matter. There should be a greater degree of transparency. I would like the Minister to introduce a new clause which we can all look at, rather than relying on us to write one up on the back of a fag packet—be it plain or with pictures.
It has been a pleasure to contribute to the debate. I hope to have the pleasure of being a member of the Bill Committee, where I can talk more about Rochford and Southend East and the value of bricks and mortar casinos.
Jim Shannon (Strangford) (DUP)
I congratulate the Minister on her new position and look forward to her response to the debate.
Hon. Members have referred to taxation and regulation, but I would like to focus on enforcement, in particular in relation to problem gamblers and others who are vulnerable. When I read the Bill and realised it would provide a regulatory framework for online gambling providers that are not based in white-listed jurisdictions, I was pleased that at long last we would have regulation—that had to be good. I have also received advice on the Bill and some concerns have arisen, in particular relating to those who are vulnerable.
At the moment, online gambling providers located in jurisdictions that are not on the white list can access the UK market, despite the fact that they are not regulated by the UK Gambling Commission or by a domestic regulatory regime deemed sufficiently robust to justify their being deemed a white list jurisdiction. The only thing they cannot do is advertise in the UK. The fact that companies not subject to proper regulation can access the UK should concern anyone who knows anything about the social problems associated with gambling.
Problem gambling is a desperately destructive social phenomenon that brings real suffering and economic cost. According to the Gambling Commission, 450,000 people in the UK suffer from problem gambling, the effects of which should not be underestimated: it can take families to breaking point and beyond and sometimes lead to suicide. As a modern society, it is incumbent on us to ensure that the regulatory framework for gambling provides the greatest possible protections for vulnerable and problem gamblers, and it is certainly wrong that hitherto we have adopted such a laid-back attitude to gambling websites that we deem not to be properly regulated. To this end, the Bill’s proposal to subject providers from beyond the UK and white-listed jurisdictions to UK regulation comes not a moment too soon.
In scrutinising the Bill, however, some questions arise. All online gambling providers seeking to access the UK market will be required to get a licence from the Gambling Commission before they can advertise their services, but there is no clarity on enforcement, and the claim that the Bill protects the vulnerable will completely disintegrate if companies without a licence are not prevented from accessing the UK market. If licensing is not backed up with an enforcement mechanism, the Bill will simply result in an increase in online gambling advertising. Some online providers that currently have access to the UK market but which cannot advertise here would be able to advertise, while those that cannot advertise would be able to access the UK market on the same basis as today. That is not the right step forward.
I know the Bill gives the Secretary of State regulation-making powers, which could be used for enforcement purposes, but if we are serious, as I believe the Government are, about creating a progressive legislative framework that shows proper regard to the vulnerable, why not put enforcement mechanisms in the Bill to make it clear from day one that if an online gambling provider from outside the UK market wishes to access that market, it must have a licence? It would be perfectly possible to make that plain by amending the Bill to prevent such companies from accessing the UK by using financial transaction blocking measures, which have proved successful in other countries that have gone down the same road. I seek an assurance from the Minister, therefore, that the licensing regime will be backed up with a clear enforcement mechanism that makes it absolutely clear, in the Bill, that if a company outside a white-listed jurisdiction does not have a licence, it will be prevented from accessing the UK market by a financial transaction blocking measure or similar mechanism. I look forward to her response.
My concerns do not end there. Our current regulatory framework incentivises online gambling providers located in the UK to relocate to white-listed jurisdictions beyond the UK. The vast majority of UK-facing online gambling providers have left the UK for nearby white-listed jurisdictions, such as Alderney and Gibraltar, which are subject to a different regulatory regime and one that has often exhibited greater regard for problem gamblers than the UK regulatory framework. My concern, therefore, is that if we remove the incentive for gambling providers to locate outside the UK, problem gamblers in the UK will find many key providers less responsive to their needs—unless, while removing the incentive, we also make our regulatory framework for problem gamblers at least as robust as the best white-listed jurisdictions.
The Minister might be tempted to say that licensing is a matter for the Gambling Commission, and of course it is, but it is also a matter for the House, which created the commission when the current legal regime was introduced. We cannot, therefore, pretend that a significant change in that regime does not require us, the legislature, to review the capacity of the commission to deal with the new challenges emanating from the Bill. I would like a strong assurance that she will review the regulatory regimes of white-listed jurisdictions—the regimes from which British consumers of many online gambling services have benefited in recent years—and the regard they show for problem gamblers and the vulnerable, and ensure that when the Bill takes effect our regulatory regime will be made as sensitive to the needs of problem gamblers as the regulatory regimes of the very best white-listed jurisdictions. If we do not do that, the unintended consequence of the Bill will be that British customers accessing the many providers currently based in white-listed jurisdictions might actually enjoy fewer protections than they do now.
Finally, even if the Bill is accompanied by proper enforcement mechanisms preventing providers from beyond the white list accessing the UK market, and even if we ensure that the return of online gambling providers to the UK does not erode protections by enhancing our regulatory regime with respect to care for problem gamblers, the Bill will still result in an increase in advertising for online gambling in the UK. Although online gambling is not associated with the highest problem gambling prevalence figures, it does have one of the higher figures for problem gambling. Unlike other gambling opportunities, it is available 24/7; one can access hundreds, if not thousands, of gambling websites without leaving one’s house or bedroom.
I and my constituency office are often confronted by people with addictions, be it drink, drugs or gambling, and I am aware of the illusion of the gambler when they make the gamble, their depression when it is not successful and their guilt when they realise they have spent money they could not afford to spend. We cannot ignore the vulnerable or problem gamblers. As online gambling providers not on the white list access advertising opportunities for the first time, the Bill will make people in the United Kingdom, including problem gamblers, more aware of opportunities to gamble online. If the House is to vote for measures designed to result in an increase in online gambling in the UK, which is effectively what the advertising provisions propose, we should complement it with enhanced assistance for problem gamblers, who will face additional advertising challenges as a result of the Bill.
One mechanism developed to help problem gamblers is self-exclusion, which empowers a problem gambler on “a strong day”—even on their strongest days, some of those I have met are still not strong—to exclude themselves from the services of a gambling provider for a fixed period. Although in principle this is a good thing, in the context of online gambling it is useless: there are so many online gambling providers—hundreds if not thousands—that it would be impossible to self-exclude from them all. One answer to that dilemma has been proposed by academics, including Dr Sally Gainsbury, author of “Internet Gambling: Current Research Findings and Implications”, published in 2012, in which she states that “a significant limitation” of self exclusion
“is the lack of collaboration between different online gambling sites and venues, so that excluded individuals may find it easy to gamble at another site or venue.”
Will the Minister indicate how we can address that issue? Again, she might say it is a matter for the Gambling Commission, but again I would say: yes, but it is also a matter for the House, which created the commission and established the legislative framework that the Bill significantly amends. I believe that it would be appropriate for us to put in place a system that provides problem gamblers with a credible, meaningful, one-stop-shop self-exclusion mechanism. I should like to hear her thoughts on that matter.
I fear that, if the concerns that I have outlined are not addressed, the effect of the Bill will simply be to allow some people who cannot currently advertise in the UK to advertise online gambling opportunities, and to erode the level of protection afforded to problem gamblers on the many sites accessed by the UK market. We must seize the day and ensure that those things do not happen. We must ensure that providers from beyond the white list who do not have a Gambling Commission licence are prevented from accessing the UK market, and that the UK licensing regime is made at least as robust as those in the best white list jurisdictions, so that problem gamblers and vulnerable people can be protected in the context of the increase in advertising through the provision of a one-stop-shop self-exclusion mechanism.
Mr John Leech (Manchester, Withington) (LD)
I am delighted to have this opportunity to speak in favour of the Bill. It will go a long way towards creating a level playing field for the onshore betting industry and towards reversing the trend of remote gambling companies setting up their businesses abroad to avoid the Gambling Commission’s regulatory regime and to avoid paying tax on transactions in the UK.
I pay tribute to the former sports Minister and my parliamentary colleague on the Culture, Media and Sport Committee, the hon. Member for Bradford South (Mr Sutcliffe), for recognising in April 2009 that changes would be required to keep up with the technological advances in online gambling. As a “Yorkshire United” supporter, he might not know anything about football, but it is fair to say that he knows a fair bit about gambling, and he was a pretty good Minister in his time in the Department. I also pay tribute to the fact that he took into consideration the arguments of my right hon. Friend the Member for Bath (Mr Foster), who had been arguing the case for reform throughout the whole of the last Parliament.
As a result of the Bill, remote gambling will be regulated at the point of consumption. All operators selling into the British market, whether from here or abroad, will be required to hold a Gambling Commission licence, which will level the playing field for British-based licence holders. The Bill will also repeal section 331 of the Gambling Act 2005, removing the offence of advertising foreign gambling and consequently the distinction between white-list and EEA countries and non-EEA jurisdictions. Instead, in order to advertise to British consumers, all operators will have to hold a GC remote licence, regardless of where they are based.
The changes will provide increased protection for British consumers, because all remote gambling operators will be subject to robust and consistent regulation, as well as being required to support action against illegal activity and corruption in sport, and to comply with licence conditions that protect children and vulnerable adults. They will also be required to contribute to research, education and treatment in relation to British problem gambling.
As the Chairman of the Select Committee, my hon. Friend the Member for Maldon (Mr Whittingdale), pointed out, the Committee carried out pre-legislative scrutiny of the Bill. It is perhaps not surprising that its provisions have not been well received by either the remote gambling operators or the overseas regulators. The Remote Gambling Association has questioned whether the legislation might fall foul of European Union law by creating a restriction on trade between EU states, but the Department’s response has been fairly robust, arguing that the Bill is necessary and proportionate for enhancing consumer protection for British citizens. Our Committee was satisfied that the Government had considered the question of compatibility, and we accepted their confidence that any legal action would be unsuccessful.
The Remote Gambling Association has argued that the change in legislation will send punters to unregulated sites on the black market where there is no regulatory regime. That view has been backed up by the Gibraltar Betting and Gaming Association, which has claimed that online gaming customers will migrate to unregulated and non-compliant operators who have a significant market advantage over the regulated and compliant operators, resulting in completely the opposite of what the Government are trying to achieve. That point was raised by the hon. Member for Shipley (Philip Davies).
I do not believe that that will be the case, however. Jenny Williams, the chief executive of the Gambling Commission, has made it clear that there will be little scope for significant expansion of the black market when there are already few restrictions on the type of gambling available and when advertising is freely available within the regulated market. The Department has also made it clear that this is not about more restrictive regulation; it is simply about consistent regulation.
The RGA has also claimed that this is all about tax. In giving evidence to the Select Committee, it declared that the provisions were a
“backdoor method to tax off-shore operators”.
They are not, but that would certainly be a welcome consequence—unintended or otherwise—of the Bill. Critics of the offshore remote gambling industry, and supporters of the Bill, legitimately point out that in many cases operators ended up as offshore remote gambling sites to avoid paying tax in the first place. The RGA told our Committee that about 7,000 people were working in the UK for remote gambling companies based offshore, but it could not answer my direct question about how many are working offshore. It effectively admitted, however, that it was only a fraction of that number. Let us be honest: these companies are effectively UK-based, barring certain technicalities, and they are based abroad only to avoid paying tax and to be able to compete with their genuinely foreign-based competitors.
The Department for Culture, Media and Sport is adamant that this is not about taxation, but the legislation will have the good unintended consequence of paving the way to ensuring that foreign-based operators are taxed on any gambling taking place in the UK. Our Committee report got it right when it stated:
“Whether or not this is the case, we regard it as a legitimate and desirable outcome of the change in the licensing regime that in future remote gambling companies doing business in the UK should be subject to the same taxation requirements, whether they are based onshore or offshore.”
Philip Davies
I am grateful to the hon. Gentleman for quoting so extensively from our Select Committee report, but does he agree that we were very careful in our wording about what the Government were doing? We said that we were
“satisfied that the Government has considered the compatibility of the proposed legislation with EU law and we note its confidence that any challenge to the legislation would be unlikely to succeed.”
We merely noted the Government’s confidence; we did not necessarily share it.
Mr Leech
I thank the hon. Gentleman for his helpful intervention. My impression from the evidence we took was slightly different from his; perhaps I am a little more confident about the Government’s potential for success if anyone in the industry decided to take further action.
While the Bill has its opponents among the remote gambling industry, it also has its supporters within it. Rank fully supports the Gambling Bill, even though it paves the way for measures that it estimates will cost approximately £10 million a year. It sees it as an important opportunity to provide greater consumer protection for British gamblers. Similarly, the British Horseracing Authority, the Sport and Recreation Alliance and the National Casino Industry Forum all welcome the Bill.
The Bill is, however, limited in scope, and many within the industry would have liked it to go further, whether it be in relation to the horse racing betting levy, British terrestrial casinos being able to offer their dedicated online products in their casino buildings, tackling the inequity of bingo taxation, which has not been mentioned so far, or even addressing very legitimate concerns about the proliferation of B2 machine use and its impact on problem gambling. I recognise that this Bill cannot address all those issues within its legislative scope, but perhaps the Minister will in her closing remarks recognise that many other issues remain unresolved and give some indication that the Government will seek to address them.
Mr Laurence Robertson (Tewkesbury) (Con)
It has been a good debate with many powerful arguments being made. I am in favour of the general thrust of the Bill and its intentions, although like my hon. Friend the Member for Shipley (Philip Davies), I believe that the reasons for introducing it go beyond regulation and consumer protection. I sat in some of the same meetings as my hon. Friend, when we debated potential levels of taxation, and he is right to say that the Bill is mainly about providing the Government with the ability to tax—a point to which I will return.
Let me state one or two non-declarable interests. I am a joint chairman of the all-party group on racing and bloodstock, and the Cheltenham race course is in my constituency. I have a deep interest in horse racing, which is financed largely if not entirely through the levy that comes from bookmakers and from sponsorships that also come from bookmakers. Another non-declarable interest is that through the all-party group, I organise charity dinners in this place, which are heavily supported by bookmaking companies. The last one took place just a few months ago, and we raised £48,000 for charity. Over the last five years—not entirely under my joint chairmanship, as my predecessors should be included— we have raised £234,000 for charities, and it has come largely from bookmakers. I thus want to pay tribute to the legitimate and well-run companies in bookmaking and to recognise the role they play in communities, in charities and in helping to finance horse racing.
As has been said, the Bill is quite limited in scope. It does not deal with taxation and does not mention the levy.
Mr Brian Binley (Northampton South) (Con)
My hon. Friend mentions taxation. Does he agree that the Treasury seems to be turning a deaf ear to the pleas of, for instance, those who play bingo, which is being taxed much more heavily than almost every other form of gambling?
Mr Robertson
I shall have to accept my hon. Friend’s word on that, as I always do on everything. I have no expertise in the taxation of bingo.
The Bill identifies what might be termed a loophole, although it would be better described as an inconsistency. Companies that locate some of their online business offshore are not regulated, taxed or subject to a levy. I understand why that inconsistency worries a number of people, and I am happy to go along with the proposal to create a level playing field.
As I have said, the Bill does not at this stage refer to a tax or a levy, although it was suggested earlier today, probably by more than one speaker, that a recent European Union ruling was likely to give the Government an opportunity to extend the levy to companies that are based offshore. That might well bring in more money for horse racing, but I accept what was said by my hon. Friend the Member for Shipley. There have been some estimates of how much money it would bring in, which I think may have been exaggerated.
My hon. Friend was understandably concerned about the smaller bookmaking companies, but when it comes to the extra tax and the extra levy, I think we should be a little concerned about the larger ones as well, because we are talking about a very highly taxed industry. As well as the ordinary corporation tax and other taxes that apply to all businesses, it is subject to machine games duty, and to the general betting tax and levy.
Philip Davies
Should we not also recognise that bookmakers are giving an increasing amount of money to horse racing through picture rights, which is dwarfing the amount raised by the levy?
Mr Robertson
The bookmakers give money to horse racing through picture rights, through the levy, through voluntary sponsorship of races and indeed through hospitality. As my hon. Friend says, the amount of money they put into racing cannot be measured just by the levy, and we must be careful not to tax them too heavily. Last week, during DCMS questions, a number of Members attacked the so-called clustering and proliferation of betting shops. I pointed out that over the last 20 years the number of betting shops has actually halved. I am not sure that that can accurately be described as proliferation.
The pressures on betting shops and bookmakers have increased. As was mentioned earlier, the amount of money that certain individual shops make is very small, and the number of independent bookmakers has been reduced. Creating a level playing field should not mean heaping more tax on bookmakers. We should view the position another way. Yes, we should be searching for that level playing field, but the level could be a great deal lower than it is at present.
Rather than imposing a 15% tax on bookmakers who are based offshore, should we not try to attract them back onshore by reducing the overall burden of taxation, not just for those based abroad but for those in this country? It would be rather perverse to impose a 5% tax on those based in Gibraltar, for example, and a 15% tax on those based here. The levels should be compatible, but lower. I fear that imposing a 15% tax on bookmakers based in such places as Gibraltar would have a negative effect.
I mentioned in an intervention that I have been to countries—I am not going to name them—where there is a tote monopoly and it is illegal to bet outside that monopoly, and I have sat next to people as they have had illegal bets. That is not a clever situation. It is not something I was proud to witness, but it goes on. That is the real world.
We must be careful not to drive businesses from being legitimate and based in Gibraltar, for example, to being based anywhere else in the world and taking bets from this country, completely unregulated and without paying a penny in tax or levy. That would be the complete opposite of what the Government are trying to achieve. There would be no protection for consumers, and we know the internet is notoriously difficult to regulate. That is no fault of this or the previous Government; it is just what has happened.
A few years ago a company called Betfair stole a march on the entire betting industry by creating a betting exchange business. It was hugely successful, and Betfair puts a lot of money into racing, but that move took the entire country and industry by surprise. Nobody knew how to compete with or respond to it. That is the way of the world, however. That is the way things are going.
That is the way things have gone in this House, too. When I arrived here 16 years ago, there were no such things as iPads. Now, they can be used in Committees, and some Committees have even gone paperless: papers are not circulated and instead they use the iPad, which links into the internet. Things have changed, and we do not know how they will change over the next five or 10 years. It is difficult to regulate what goes on via the internet, and we should not pretend that we can. We have to ensure that we do not inadvertently, through well-intentioned measures, make the situation worse.
Mr Deputy Speaker, I am aware that you are anxious to get on to the next debate so I will not say any more. I entirely agree with many of the points made today, and I do not want to repeat them. I am basically in favour of the Bill and a level playing field for taxation, levy, regulation and customer protection. But as the Bill proceeds, I urge the Minister and the Government to ensure that we do not inadvertently make the situation worse.
Clive Efford
As always when we discuss issues relating to betting and horse racing, this has been a good debate. It has also been very informative, as Members with a great deal of knowledge of the subject have contributed. I pay tribute to the Chairman of the Culture, Media and Sport Committee, the hon. Member for Maldon (Mr Whittingdale), who has conducted inquiries into gambling, horse racing and betting. I was grateful for his comments on licence condition 15.1 and the issues relating to the Financial Conduct Authority, which are important and which we will have to address. I hope the Minister takes that on board. There are also important issues related to match fixing and resources for the Gambling Commission.
Many Members have paid tribute to my hon. Friend the Member for Bradford South (Mr Sutcliffe) for his contribution over many years, both as a Minister and in opposition. He is extremely well-informed and passionate about these issues, and I commend his commitment to education and treatment for people with gambling problems. He talked about the problems created by some aspects of the 2005 Act which were dealt with in the wash-up, and rightly said they need to be addressed. He also raised the issue of the definition of spread betting, and I hope the Minister takes that on board when considering any future amendments. He alone raised the issue of money laundering and how it affects on-course betting operators.
The hon. Member for Shipley (Philip Davies) is always fascinating to listen to. Even if we do not agree with everything he says, he makes his points eloquently. He described himself as modest and of course, that is a word we all immediately think of when we think of him. He expressed his concerns about taxation levels and his desire that online operators locate back in the UK. I was struck by his passionate appeal for recognition of the contribution that small companies make—particularly in innovation and the number of people they employ in this country—and the effect that overtaxing them will have, particularly when they are developing in their early stages of trading. That is an important point and the Government should take it on board. He also showed a healthy scepticism about civil servants who are empire building, which we all share. It is not fair to accuse the Gambling Commission of that in this case, given that there is such widespread support for what we are trying to achieve in the Bill.
My hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) made a passionate case for companies relocating to the UK, and highlighted the fact that bet365 has not been disadvantaged by remaining onshore. He pointed out that it has made a significant contribution to regeneration in his area, employing more than 2,000 people. It is the largest employer in north Staffordshire, and I believe he said that it achieved a profit of £180 million. He also called for sanctions to deal with those providing facilities for those who are avoiding the licensing system. Effective enforcement is something we will want to pursue in considering this Bill. He also referred to the importance of getting taxation right.
The hon. Member for Poole (Mr Syms), like a number of other Members, expressed disappointment at how narrowly drawn the Bill is. He, too, referred to regeneration and casinos. My hon. Friend the Member for Islwyn (Chris Evans), the son of a bookmaker, expressed concern, as one or two other Members did, about people criticising the proliferation of betting shops. I wish to put it on the record that I have never criticised such proliferation. There are not more betting shops following the 2005 Act, but there is concern about the locating of betting shops close to areas of deprivation. Even the betting industry has recognised that that is an issue, and if we are going to deal with it, local government should be able—
Clive Efford
I will not, if the hon. Gentleman does not mind, because I have been given only a few minutes to wind up. Local government should be given the powers to review whether there are too many betting shops in a given area. My hon. Friend the Member for Islwyn, too, expressed concern about the impact of taxation on the industry.
The hon. Member for Rochford and Southend East (James Duddridge) spoke about the capacity for casinos to contribute to regeneration. He also talked about the need to protect online customers who may have a gambling addiction, as did the hon. Member for Strangford (Jim Shannon), who made a passionate plea for effective enforcement and protection from exploitation of vulnerable adults.
The hon. Member for Manchester, Withington (Mr Leech) largely spoke about the importance of the Select Committee report, but he also called for a level playing field in the industry. The hon. Member for Tewkesbury (Mr Robertson), too, expressed concern about the taxation of the industry and the impact it may have on small businesses, in particular, which might be harmed if taxes are set too high. He also referred to the clustering of betting shops, which I have mentioned.
Many hon. Members have called for the Bill to be extended in relation to enforcement protection, particularly for adults at risk of developing, or with, a gambling addiction. Some hon. Members also called for a one-stop shop for self-exclusion across the industry, which is an important factor that we should be looking at, as this is an opportunity for us to set a standard by which we can protect vulnerable adults.
A number of hon. Members called for spread betting regulation, and I hope that the Government will listen and that there will be sports betting rights for those sports that have to pay out much of the money that they generate for themselves so that they can protect their integrity when it is challenged by irregular activities in the betting industry. We must have regard to the concerns that those sports organisations have, and I hope that the Minister will consider consulting the governing bodies to consider what can be done in the Bill to address their concerns.
Whenever we discuss such matters, the debate is always extremely well-informed because the hon. Members who contribute have a great deal of background knowledge. I hope that the Minister has been listening to what has been said today and to the calls for further amendment to the Bill so that we can reach a broad consensus on both sides of the House that will allow us to develop a regulation system for the gambling industry in the UK that has the full support not only of Members of this House but of the people we represent and that sets the standard for regulation across the world.
Mrs Grant
With the leave of the House, I thank all Members who have taken part in the debate. I shall try to remember everything that has been asked and to deal with as many of the questions as possible. I am glad to see that the Bill has support on both sides of the House and that most hon. Members are in favour of bringing in robust and consistent regulation of remote gambling.
Through the Bill, remote gambling will be regulated at the point of consumption. That will mean that all operators selling or advertising in the British market, whether from here or abroad, will be required to hold a Gambling Commission licence. The Bill will increase protection for Britain-based consumers and will level the regulatory playing field with all remote operators, allowing British-based operators to compete on an equal footing.
The shadow Minister, the hon. Member for Eltham (Clive Efford), raised a great number of issues in his opening speech, including the levy, fixed odds betting terminals, enforcement and compliance. I will touch on all those issues in my speech, subject to the time available. I can confirm that we continue to engage with and consult the industry, as does the Gambling Commission, to ensure that issues of detail are dealt with very carefully. Of course, in Committee we will have an evidence sitting followed by a scrutiny sitting, which should deal with any clarification that he needs.
We will not accept an amendment on spread betting. The current arrangements work well, with the FCA and the Gambling Commission working closely together. They are also working with operators that offer spread betting to ensure that suspicious betting behaviour is reported to regulators and that licence code 15.1 is adhered to.
The hon. Member for Bradford South (Mr Sutcliffe), the shadow Minister, my hon. Friends the Members for Shipley (Philip Davies) and for Tewkesbury (Mr Robertson) and many other hon. Members asked about horse race betting levy. I understand why the issue has been raised, but the Bill cannot be the vehicle for other measures that have been neither fully considered nor consulted on. I also want to consider the question of levy reform more broadly as there might be other options that should be considered and there should be proper consultation before any measures are put in place. I will consult on any options that are sustainable, enforceable and legally sound.
My hon. Friend the Member for Maldon (Mr Whittingdale), the hon. Member for Bradford South, my hon. Friend the Member for Poole (Mr Syms), the hon. Member for Manchester, Withington (Mr Leech) and my hon. Friend the Member for Rochford and Southend East (James Duddridge) all raised issues about online gambling, or the lack of it, in casinos. The suggested change in the Government’s position that has been mooted would undermine existing regulatory controls on gaming machine provisions. It would also allow casinos to offer an unlimited number of gaming machines with unlimited stakes and prizes within their premises. The Government see no reason why such machines should be offered on an unlimited basis in casinos, when all other categories of gaming machine remain subject to control. That would risk fundamentally changing the character of casinos and, very sadly, turning them into something that looks like a machine shed. There may be a case to consider greater flexibility in casino regulation, as I mentioned in my opening speech, but that would need to be subject to proper impact assessment and consultation, and the Bill is not, in my opinion, the appropriate vehicle at this stage to change casino policy.
The subject of problem gambling was rightly raised by numerous Members today, including the hon. Member for Bradford South, my hon. Friend the Member for Rochford and Southend East and the hon. Member for Strangford (Jim Shannon). I would say to them that despite the relatively low rates of problem gambling, there are obviously very high participation rates for gambling, at around 73%. The Gambling Commission 2010 prevalence survey showed that fewer than 1% of the adult population are problem gamblers, but the Government acknowledge that while only a very small fraction of gamblers develop problems, that can of course result in significant problems, not just for those people but for those close to them. That is why protecting children and vulnerable adults from harm is a key component of our remote gambling policy. The Bill would require operators to have effective policies and procedures in place in relation to socially responsible gambling, and to contribute to research, education and treatment in relation to problem gambling, as part of complying with the Gambling Commission licence conditions.
Mrs Grant
I am afraid I will not, because I have very limited time and still have an awful lot to say.
The level of taxation was discussed by many hon. Members, including my hon. Friends the Members for Maldon and for Shipley, the hon. Members for Newcastle-under-Lyme (Paul Farrelly) and for Islwyn (Chris Evans) and my hon. Friend the Member for Poole, to name but a few. The remote gambling Bill and the Treasury’s remote gambling taxation reforms are, while complementary, completely independent of each other and we absolutely reject the assertion that the licensing reforms are being pursued in order to generate tax income. The Bill includes, as Members know, no provision for the increasing of tax. Reform is entirely justified on its own merits for public participation and public protection reasons, regardless of the state of any tax plans.
On black and grey markets, I apologise to my hon. Friend the Member for Shipley if I did not answer his question fully earlier, but I can now say that I am confident that the Gambling Commission has the necessary tools to enforce the licence requirements and to deter illegality and black-market activity. It is not meaningful to try to speculate about the size of the black market, which by its nature is unknown. Whatever the size of any black market, the Gambling Commission will make risk-based decisions on when and where it may need to intervene.
Finally, on the extent of the tax, it will be no surprise to learn that I am telling the House that tax is a matter for the Treasury, which I know continually keeps these matters well under review.
On enforcement and compliance, I assure the shadow Minister and all the hon. Members who raised the issue that where illegal operators attempt to target British-based consumers, the Government and the Gambling Commission are confident that action can be taken through existing enforcement mechanisms to disrupt and stop unlawful gambling. Such action would include action on illegal advertising, player education and, ultimately and if necessary, prosecution. There will always, of course, be grey areas where judgments of risk and proportionality will need to be made in each individual case.
The hon. Member for Bradford South, the former Sports Minister, who knows a considerable amount about these matters, rightly mentioned sports betting integrity and cheating. Britain is proud to lead the way in approaches to sports betting and integrity. However, we do not believe that there is a need at this stage to introduce in this country a new criminal offence of match-fixing. We believe that existing law and sports rules are sufficient, but we will keep the matter carefully under review.
My hon. Friend the Member for Shipley asked whether software producers need to be licensed. The Gambling Commission is working with the industry on the issue. In the meantime overseas software suppliers will be able to continue to supply British licensees.
I thank the hon. Member for Islwyn for his kind comments and reassure him that I do sports other than tennis. He asked me for two assurances—first, that the Gambling Commission will take action and has capacity to stop illegal betting effectively, and secondly, that the tax rate is not set too high. On the first issue, the commission will fully implement its regulatory responsibilities in line with the requirements of the Bill, and I will continue to discuss with the commission its needs to ensure that it has the necessary capacity, resources and expertise. On the second issue, as I have already said, tax rates are a matter for the Treasury and I will not venture this afternoon on to its turf.
The hon. Member for Strangford queried whether the Bill would be enforced by ISP blocking or something similar. There is mixed evidence on the effectiveness of ISP blocking, but we do not rule anything out.
Finally, on the matter of fixed-odds betting terminals, which was mentioned by several hon. Members today, although we have decided not to reduce stakes and prizes on these machines at this stage, it is a priority for the Government that we develop a much better understanding of the impact of these machines, and further work is already under way. The research being conducted by the Responsible Gambling Trust into category B machines is very important and it would be wrong to pre-empt this work. Furthermore, we believe that the Bill is not the right legislative vehicle to deal with such difficult issues.
In conclusion, this is a small but important Bill that will increase protection for remote gambling consumers based in Britain. It is not empire-building by the Gambling Commission, as was suggested by my hon. Friend the Member for Shipley. It is about protection and proper oversight and it will ensure that all remote gambling, wherever the operator is based, is licensed by the Gambling Commission and subject to that body’s robust and consistent standards of controls. I look forward to debating these issues in Committee, and I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
gambling (licensing and advertising) bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Gambling (Licensing and Advertising) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall be completed on the first day on which it shall meet.
(3) The Public Bill Committee shall have leave to sit twice on that day.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of those proceedings.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Karen Bradley.)
Question agreed to.
Gambling (licensing and advertising) bill (ways and means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Gambling (Licensing and Advertising) Bill, it is expedient to authorise an extension of the cases in which:
(1) a penalty may be imposed under section 121 of the Gambling Act 2005, and
(2) a levy may be imposed under section 123 of that Act.—(Karen Bradley.)
Question agreed to.
Backbench Business
Water Industry
(11 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Charlie Elphicke (Dover) (Con)
I beg to move,
That this House has considered reform and infrastructure of the water industry and consumers’ bills.
I move the motion also in the names of my hon. Friends the Members for South Swindon (Mr Buckland) and for Skipton and Ripon (Julian Smith). I thank the Backbench Business Committee for allowing time for this debate. The subject has been in the news recently, so the debate is timely, and it is positive that the House should have the chance to consider the issues in relation to the water industry and what reforms, if any, ought to be introduced.
Julian Smith (Skipton and Ripon) (Con)
Before my hon. Friend starts his main remarks I would like to pay tribute to him for his work in leading the debate since early this year and for securing this debate and, hopefully, some exciting announcements from the Government.
Charlie Elphicke
I thank my hon. Friend for his customary generosity.
I will turn to the pressures that hard-working families are facing as we come out of a very difficult economic time for our country. The fact is that most people do not particularly care about politics. They vote us in every few years and decide the Government of the day, but they do not consider politics on a daily basis; they consider how they are going to keep the wolf from the door. They consider how they are going to get through the day, provide for themselves, their families and loved ones, raise their children, manage to pay their bills and get a better paid job. The Government have been very effective in ensuring that there is more employment and a return to economic growth, from rescue to recovery and onward to greater economic strength for our country.
Part of keeping the wolf from the door is dealing with the utility bills that cost all our constituents so much money. That is why water reform matters. People do not really have a choice, because there is not much competition. It is a natural monopoly and people have to pay their water bills. There is an opportunity to foster more competition and ensure that the industry is more effectively regulated than it has been. For many years nothing was done to keep on top of the water industry, particularly before this Government were elected. Now we have an opportunity to make further changes and look more closely at what the issues are and what might be done.
Before the Government were elected, there was a settlement with Ofwat and the water industry that was to last for five years. The assumptions on which the settlement was made have since altered. Retail prices index inflation has risen more quickly than it was expected that construction inflation would rise, and interest rates have been lower than expected. The result has been excess profits for the industry. Ofwat figures highlight a return on regulated equity in excess of 20% in some cases. Investment was allowed to fall in real terms after 2007, while customer bills have risen by more than inflation. Dividend payments are often greater than the profits made, which some would say is particularly unattractive.
Rehman Chishti (Gillingham and Rainham) (Con)
I, too, pay tribute to my hon. Friend for the work he has done to bring the issue to light. In relation to bills and affordability, does he agree that it is completely and utterly unacceptable that bills have risen by 60% over the past 10 years, which clearly shows that the previous Government did absolutely nothing to help the consumer?
Charlie Elphicke
I thank my hon. Friend for that intervention. Certainly a better deal needs to be driven for the consumer than was driven by the previous Government. They also permitted a culture of industrial-scale tax avoidance, which was wrong.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I, too, congratulate my hon. Friend on all his fine work on the water industry. Would he care to comment on the fact that we have seen a 60% rise in water bills yet still face rather serious and sporadic water shortages? Is it not true that the public have really seen no return for their higher bills?
Charlie Elphicke
My hon. Friend makes a powerful point. Ensuring that we have investment in the infrastructure that the country needs is really important.
Frank Dobson (Holborn and St Pancras) (Lab)
In view of the hon. Gentleman’s commitment to the issue, I hope that he will confirm that the only time there have been reductions in water charges was under the previous Labour Government.
Charlie Elphicke
Then they went back up again, as my hon. Friend remarks. Under the previous Government the water industry was allowed to become 100% mortgaged to make the tax avoidance work. There have been excessive pay rises in the boardroom at a time when hard-working families have not seen substantial pay rises. That has been very hard to justify and people look askance at that.
Mr Charles Walker (Broxbourne) (Con)
My hon. Friend wisely talks about infrastructure. One of my concerns regarding the east and south-east of England is that water companies have been extracting water to the detriment of our rivers and not building reservoirs. Indeed, the last major reservoir in the south-east—the Queen Mother—was built 40 years ago. In the meantime, millions more houses have been built, placing more pressure on a valuable resource that tends to come out of the aquifers in the ground.
Charlie Elphicke
My hon. Friend makes exactly the right point. In my constituency, in Dover and Deal in east Kent, we depend on the aquifers. There is water abstraction and water stress, and compulsory metering has been in place for some time. We need to look more closely at the national planning and national infrastructure planning aspect, which I am sure hon. Members will raise.
Andrew Percy
I congratulate my hon. Friend on securing this debate. We have heard a lot about people having problems with a shortage of water. In my constituency, which is very low-lying and where we rely on significant pumping capacity to keep us dry, the problem has been the other way round: we have had too much water. While our water companies have been making big profits, we have not been getting the investment in keeping us dry, let alone in ensuring we have enough drinking water.
Charlie Elphicke
That is true. In some parts of the country we have too much water and in some parts too little. I am sure that at some point someone will raise the need to move water from one place where there is too much of it to another place where there may be too little of it.
Mr Walker
We do not need to move water around from one place to another; we need to build more reservoirs such as the Abingdon reservoir, which was spade-ready and then the plug was pulled, if my hon. Friend will forgive the pun. We need to build more reservoirs, not waste money transporting water around the country.
Charlie Elphicke
My hon. Friend is a passionate advocate for more reservoirs. Reservoirs are not only important for water storage; they are important places for the angling community. Many hon. Members here are passionate anglers who enjoy fishing, and reservoirs provide an opportunity for that pursuit.
Mr John Redwood (Wokingham) (Con)
I am glad that my hon. Friend is going to talk about the need for competition to provide better quality and low prices, but why does he think that there is a natural monopoly? Surely anyone, under a suitably liberated regime, could build a reservoir or drill a borehole and provide water to the customer through a piped system.
Charlie Elphicke
My right hon. Friend makes an interesting point. The planning system obviously means that such things take time. It is certainly important to have more of a national planning framework, which has been discussed by some and is worth considering. The view of water professionals is that competition is important but, in terms of customer service, it does not necessarily reduce costs because the infrastructure represents about 90% of the cost base.
Richard Benyon (Newbury) (Con)
My hon. Friend will be aware that the Water Bill will make it easy for new entrants to do precisely what my right hon. Friend the Member for Wokingham (Mr Redwood) suggested, by giving them access to a market that is currently denied them so that they can provide these infrastructure assets.
Charlie Elphicke
Indeed. That will be an important reform.
Let me move on to the reforms that are worth considering. First, we must consider whether it is possible to tackle the excess profits and excess returns seen over the last period and return that money to hard-working families in the next period, and to drive a fair and equitable settlement whereby investors can get appropriate returns but customers can get a better deal.
Rehman Chishti
One of the key problems is that constituents at the bottom end of the income scale have over many years incurred a debt as a result of high water bills. Given the big profits made by these companies, surely they have a moral responsibility to help those people at the bottom end with the debts they have incurred.
Charlie Elphicke
My hon. Friend makes an important point, but I will leave it to my hon. Friend the Member for South Swindon, who has been studying those issues with considerable care and concern.
Secondly, there is the question of how we tackle tax avoidance. The unacceptable, even antisocial, tax avoidance culture in the water industry has meant that many companies have not paid tax for years. It is wrong that that situation has arisen. Everyone should pay their fair share. We need sustainable debt, not 100% mortgages. Under the previous settlement, these water companies have been allowed to become casinos. We have an opportunity to look carefully at that to see whether the position is safe, secure and sustainable for the future.
Bill Esterson (Sefton Central) (Lab)
I am glad that the hon. Gentleman has pointed out some of the problems in the industry and with the behaviour of the water companies. All of the companies working on an industrial estate in Formby in my constituency have been overcharged for years and the water company has been allowed to get away with not repaying them because of the way in which the regulations are set up. Does the hon. Gentleman agree that that is the type of unacceptable practice that needs to be tackled?
Charlie Elphicke
Clearly, the billing system needs to be fair.
The issue about debt is that water companies are often leveraged to 100% and then say that they cannot fund infrastructure improvements. Many colleagues have concerns about the Thames tideway tunnel and how that is financed. I am sure that will be explored in due course.
We also need more appropriate investment. If real investment falls, where is the justification to increase bills? We need to ensure that real investment does not fall, that we maintain the investment we need and that it is funded in an appropriate way.
Steve Baker (Wycombe) (Con)
I am grateful to my hon. Friend for mentioning the tideway tunnel, because my constituents in Wycombe want to avoid having to pay for it, particularly given that Wycombe faces its own problems with its sewerage systems. I hope my hon. Friend will explain how he sees choice and competition liberating people from having to pay for inadequate services.
Charlie Elphicke
My hon. Friend makes a powerful point. Time denies me the opportunity to go into the issue in great detail, but I know that my hon. Friend the Member for South Swindon has been looking at it with considerable concern, because his constituency, like that of my hon. Friend the Member for Wycombe (Steve Baker), is in the Thames sewerage area.
We need to look at how we can beef up Ofwat and give it greater powers in the Water Bill to say, “There’s been a favourable adjustment, so we can adjust and revisit the settlement on an ongoing basis.” If it had those powers, it would be able to have a stronger conversation with the water industry. That is worth considering. It would also be worth looking at allowing Ofwat to give guidance to the water industry on appropriate and responsible corporate governance.
George Hollingbery (Meon Valley) (Con)
I am grateful to my hon. Friend for giving way; he is being extremely generous with his time. Does not Ofwat potentially suffer from perverse incentives? We know that it does not matter how cheap water is; if there is none, we need infrastructure to be built. If Ofwat has a primary duty to ensure best value for customers—which, of course, it must—it is almost certain to find it very difficult over time to allow infrastructure development that will help our resilience. Is not that a problem we need to address?
Charlie Elphicke
Very much so. I and, I am sure, many other Members would argue that Ofwat should have a stronger role as a consumer champion, but that ought to be done within the framework of the national infrastructure we need. My hon. Friend makes a powerful point and I hope he will explore it further during this debate.
Anne Marie Morris (Newton Abbot) (Con)
Although, clearly, much more needs to be done in the industry to ensure a better balance of risk between the shareholders and the taxpayer, the Government have taken some steps to help in the south-west and we now have a significant £40 million pot from which individual local consumers get £50 each off their bills. Does my hon. Friend agree that the regulators at Ofwat and the Government need to ensure that that is delivered to all residents in the south-west? At present, those who receive benefit through intermediaries—park home owners, for example—do not get that benefit and it cannot be enforced. Does my hon. Friend agree that that needs fixing?
Charlie Elphicke
My hon. Friend makes a powerful point, which Ministers will no doubt take on board. This Government have been great in driving a better deal on water for people in the south-west, and they deserve credit for that.
On potential reforms under the Water Bill, we need to consider the extent to which Ofwat needs new powers and whether the Government should include appropriate provisions. Those are important questions.
The previous Labour Government mismanaged the economy and took Britain to the brink. It was not just the economy they mismanaged; they left a toxic legacy of mismanagement in our utility industries, making life difficult for hard-working families. I welcome the fact that the Government are looking at water reform and I wish them well.
Frank Dobson (Holborn and St Pancras) (Lab)
I congratulate the Members who secured this welcome debate.
Until recently, there had been a general consensus that the privatised water industry was a success. That was a consensus to which I never subscribed, whether in government or in opposition. It is far from being a success.
We must not allow the water industry to get away with all sorts of technical explanations of why it cannot do its job properly and reasonably cheaply, because it has a simple task. It gets its raw material free: it is called rain. It collects the rainwater and pumps it along pipes to its customers. It then charges them for using the water.
Mr Charles Walker
That is exactly the problem. Our water companies are lousy at collecting water. When it is at its most abundant, they wave it down the rivers into the sea. That is why they need to be building more reservoirs. I am sorry to labour the point, but they are not collecting the water.
Frank Dobson
The next word in my notes is “reservoirs”. Every substantial reservoir that the water companies use was built when the industry was in the public sector. The private sector has not increased reservoir capacity in this country since privatisation in 1989-90.
Alec Shelbrooke
I stand to be corrected, but I understand that only 1% of rainfall is captured for domestic use. I wonder whether the right hon. Gentleman has found that during his research.
Frank Dobson
God knows; it would depend on when, if the hon. Gentleman sees what I mean.
The bulk of the reservoir capacity and the pipework was provided when big cities such as Birmingham, Manchester, Sheffield and Leeds and the Metropolitan Water Board in London were trying to look after the interests of the people of their areas. They created the reservoirs and laid the pipes.
During the arguments about the privatisation of the water industry, I received a letter in beautiful copperplate handwriting from an ancient ex-councillor in Sheffield. He said, “All the people at Yorkshire Water are doing is collecting water in reservoirs we built and sending it along pipes we laid. I speak as the former chairman of the water committee in Sheffield.” He pointed out that while the chief executive of Yorkshire Water was getting several hundred thousand pounds a year, when he had been responsible for it he had been paid “nowt” and the job had been done properly, whereas it had not been done properly ever since.
Mr Redwood
Does the right hon. Gentleman concede that the pipe network that the nationalised industry put in was riddled with holes by the time the private sector took over? More than 25% of the water was being lost en route and the private sector has been renewing the pipes.
Frank Dobson
That is certainly true. Until 1995, Ministers from all parties accepted the statement by the water industry that the bulk of the water that leaked out of the system leaked out of customers’ pipes. It took a lot of effort from me and somebody who was working for me at the time to finally reveal that that was nothing short of a lie. It was not that the Ministers were lying; they were being provided with lies by the water industry. I have had the figure changed into fashionable litres now.
Frank Dobson
In 1995, 826 million gallons of water per day were leaking out of the water companies’ pipes. According to my calculations, that is 3,755 million litres per day. The companies now proudly proclaim that they are dealing with the leaks. They have got the figure down to the apparently minuscule 2,910 million litres per day. Once they had to admit they were getting it wrong, we could see that it was a farcical record. Frankly, they simply deserve—I do not know; perhaps total abuse is the word—for their failure, and so does the system that regulates them, and the Ministers and civil servants who are also involved.
During the recent period water companies have increased charges; under the Labour Government charges went down at first then gradually crept up again. One thing that has not gone down, of course, is the huge dividends that the water companies have been paying. Since privatisation, they have paid out £37 billion in dividends. As the hon. Member for Dover (Charlie Elphicke) pointed out, that is 21% of gross value added compared with comparable parts of the private non-financial sector, which come in at about 11% of gross value added.
Look at the figures for individual water companies: Severn Trent Water has paid £6.2 billion in dividends; Thames Water has paid out £6.3 billion; United Utilities in the north-west paid out £7.3 billion; and Anglian Water has paid out £6 billion. Then there is tax avoidance and, as the hon. Member for Dover pointed out, a large amount of that is the product of manipulation of the companies’ borrowing, to the infinite benefit of their foreign owners in particular, more so than to their British owners.
Then there is the bosses’ pay. Some of them are being paid more than £1 million a year for collecting rainwater and sending it down a pipe. I understand the Health Secretary suggested that some managers in the national health service might be overpaid. It may be the case that some are, but let us consider Leeds Teaching Hospitals NHS Trust, for example—two teaching hospitals, 12,000 staff and 1,200 doctors to manage. I do not think anybody in the world would think that the person responsible for managing that, who gets about £250,000 a year, does not have a rather more complex task than someone who collects rainwater and sends it down a pipe. We must get some sense of proportion.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Has the right hon. Gentleman made any assessment of the effect on bills if there were not the excesses of bonuses, payments and dividends that he detailed earlier?
Frank Dobson
I cannot really do that as I have only just come back to looking at the water industry from the time when I tried to make life difficult for it, with some success. “Hammer the customers for the profiteers” is the motto of the water industry. We have higher charges, and now water companies want to install compulsory water meters everywhere. That is basically their policy, and a lot of people who I think ought to know better have been going along with that.
It costs about £250 to supply and install a water meter, and they have about 15 years of life before the grit and impurities in the water make them not do their job accurately. If it is a smart meter I understand that the situation is even worse. It costs about £50 to install a new meter if one has previously been installed. I think there are more than 10 million unmetered households, so at £250 a throw—according to my calculations—that is £2.5 billion. Does anybody think that investing in water meters is the best way of spending £2.5 billion? Even if they do, I certainly do not.
Another thing is that, as soon as anything goes wrong, the companies come rushing to the taxpayer to bail them out. South West Water could not cope with the problems it faced, particularly its sewerage problems and ended up getting a leg-up from the taxpayer.
George Hollingbery
I read one or two historical documents on water management before I came to the Chamber. I believe I am right in saying that the previous Labour Government’s policy was for universal water metering—the policy statement was made in 2008. Is that correct?
Frank Dobson
That might be the case, but the statement was not made in my name—let us put it that way. When I was responsible for water in opposition, I was opposed to metering. I remained opposed to it when Labour was in government and continue to be opposed to it.
South West Water is not the only one. Thames Water had sewage and run-off problems and came up with a great £4 billion scheme. Because of how it finances itself, it could not finance the scheme, despite paying £6 billion in dividends over the years. The only way in which it can proceed is by Government guarantee. It is therefore not really privatised; it is a dependency of the Treasury.
Rehman Chishti
The right hon. Gentleman says that the previous policy was not in his name. Does his party leader have his support for his current policy on water? Is so, what is his party leader’s policy?
Frank Dobson
My understanding is that the party’s policy—no doubt it will be enunciated in due course from the Front Bench—is that the current situation is unsatisfactory, and that we need a dramatic change in the powers and functions of the regulator. No Government Member would think there is anything wrong with that proposal.
Where is all that customers’ money going? In the case of Thames Water, it is being paid out to shareholders in Australia and China. Prior to that, it was paid out to shareholders in Germany. People talk about the wonders of the City of London as a financial centre, but I wonder why, in such a great financial centre, one or two of the people with all the money have not thought of getting together to own the water supply for their own city. Apparently, that has not occurred to them.
Thirty per cent. of the average water bill goes to profits. Even the energy industry uses only 9% of charges as profit, but the water industry uses 30%—30% of every penny and pound that people pay goes off in profits, which is, to say the least, a remarkable return on investment.
Charlie Elphicke
The percentage is not that high. Nevertheless, does the right hon. Gentleman agree that the previous Government allowed an inappropriate settlement that should not have been agreed?
Frank Dobson
It is no good my saying that the previous Government’s record was as good as it ought to have been—I will not pretend that it was.
Another thing is that, over the years, charges for water have risen at twice the average of price rises for everything else. There can be no possible justification for that. What sickens customers are the water industry’s byzantine financial arrangements and how it is an outpost of the tax avoidance industry. Nobody appears to understand this. Ofwat, successive civil servants and successive Ministers do not appear to have understood what is going on. I am not excusing anybody: I have no faith in the continuation of the existing system. The industry continues to be run for the benefit of companies, company bosses and shareholders. If it is to be run properly from an environmental, security of water supply and cost point of view, it is essential, before changes are made, to subject the industry to freedom of information, so that troublemaking pressure groups and individuals can get to work on the figures in a way that Ofwat and the Department are clearly incapable of doing.
I have a more advanced view of what should be done: we should follow recent examples from Germany. Berlin decided to bring the control and operation of its water supply back under the ownership of the people of Berlin, and the people of Hamburg voted in a referendum to bring its electricity supply back under the control and ownership of the people of Hamburg. That almost happened in Berlin, but the necessary turnout was not quite achieved. I propose a trial run in London. We could give the people of London a referendum to ask, “Do you want to take over, and bring your water industry back under the ownership of something similar to the Metropolitan Water Board?” That would be popular with the public: at the weekend, an opinion poll showed that 69% of the population wanted the energy industry to go back into public ownership.
Mr Redwood
The right hon. Gentleman has just criticised spending £2.5 billion on water meters as a luxury we cannot afford. How much would it cost to buy companies back into public ownership, and why would it be a good investment?
Frank Dobson
These industries are pleading poverty all the time, so it would not be all that expensive. The cost could be paid out over a very long period, which is what happened when industries were brought into public ownership in the 1940s and early 1950s.
Most people are sick to death of what is going on. They have no faith in Ofwat, officials at the Department or Ministers. I share their lack of faith and until we put forward some aggressive propositions nothing will change to the advantage of the people we try to represent.
Richard Benyon (Newbury) (Con)
It is a great pleasure to take part in a debate from the Back Benches for the first time in a few years. This is an important subject and I apologise to those on both Front Benches for not being able to be here for the winding-up speeches, as I have a long-standing engagement that I have to attend.
I welcome the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson), to his post. I told him in the Lobby the other night that I had three and a half years to get my head around the water industry. He has three and a half weeks before the Water Bill comes before the House, but he is a clever fellow and I am sure he will be more than a match for the job.
I hope this debate does not over-emphasise the negative and allows us to take a little pride, at least on the Conservative Benches, in what has been achieved in the water industry. I thought the only voice, upon deep consideration, really talking about renationalisation was dear old Len McCluskey—I sometimes wonder whether he is a stooge of Conservative central office—but I now see that there are others: it is a great pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson). I take great pride, however, in what was achieved by privatisation through good, strong political leadership. My right hon. Friend the Member for Wokingham (Mr Redwood) was part of the intellectual force behind privatisation. With people such as Nicholas Ridley and others, he led the debate—with, I have to say, the support of about 8% of the population. However, they drove though something that has delivered for customers. Twenty-two years down the road, I am the first to agree with my hon. Friends, and probably all Members, that the industry is long overdue a tweaking—in fact, more than a tweaking; a serious reform—but I shall explain later why I think the Government are getting it right and the part the House can play to protect the incomes of our householders, particularly those on low incomes.
Jonson Cox, the chairman of Ofwat, came into my office shortly after his appointment and said he was keen to ensure that the industry took more notice of customers’ needs. To summarise, I said: “Good. That is precisely what the Government hope you will do in this price review—more power to your elbow—but we want you to do much more. We want you not only to keep household bills down, but to keep investment up and ensure that water companies play their part in improving the environment.” We must accept, however, that sometimes those three things conflict.
Frank Dobson
When the hon. Gentleman was talking to the new boss of Ofwat, did he draw to his attention the marked reluctance of the water industry to pay the proper amount of tax, bearing it in mind that the aforesaid new boss of Ofwat, when he was at Anglian, made pretty sure it kept its tax liability to a minimum?
Richard Benyon
Like the right hon. Gentleman, I am keen that everybody pay the required tax, but I caution people who criticise capital allowances. If our water company were not exercising its rights under capital allowances, either investment would fall or our bills would rise, or both. There is sometimes a lack of basic economic understanding: tax deferred is not tax not paid; it has to be paid. In one respect, however, I entirely agree, and I am deeply uncomfortable with some practices in aspects of corporate Britain. Work needs to be done—and in fairness to the Government much has been done—to close loopholes.
We need to make the argument that investment in the industry keeps bills down. The right hon. Member for Holborn and St Pancras seems affronted by Chinese companies and sovereign wealth funds and investors from all parts of the world investing in our regulated sector. I am not affronted. I welcome it. It is the sign of a vibrant industry and one that we need to encourage. We need more investment if we are to deal with some of the Victorian—or at least Edwardian—infrastructure we are trying to replace. Under a nationalised industry, directors of water boards would sit outside the Treasury saying, “Please can we have some more money for investment?” Down the ages, Chancellors have said, “Certainly. Just get in the queue behind the NHS, pensioners and the welfare state, and if there are any scraps left, we will give them to you.”
We have seen an historic level of investment— £116 billion—and we want to see more. We also want to ensure that we keep the bills as low as possible. Supplying all the water that goes into households and treating all the sewage that comes out costs households an average of £1 a day, although I accept that there are wide discrepancies in price. As a percentage of our household expenditure, that might be quite small compared with energy costs and other items, but it is still a significant amount, and those in the lowest income decile in this country are, broadly speaking, in water poverty. We need to address that. There are huge challenges facing the industry, and I hope the Water Bill and the ongoing activities in the sector will tackle them.
The challenges include continuing to ensure investment to deal with leakage and other concerns, such as those expressed by my hon. Friend the Member for Broxbourne (Mr Walker), and to ensure that new infrastructure is built. We must also address the challenges of affordability and the credibility of the industry among its customers. An important matter for our constituents is that the companies address the question of resilience. They must be able to keep the water flowing from the taps in a time of changing climate.
In my short tenure as Minister with responsibility for these matters, I saw the worst drought for decades. We are the sixth largest economy in the world, but if we had had a third dry winter, towns in some of the most economically vibrant parts of the country would have faced the very real prospect of standpipes. That is unacceptable in this day and age. Large national events could have been affected. Indeed, the Olympics presented quite a worry at the time. We clearly need more investment to ensure that water continues to flow in areas that are prone to drought.
During that time, I also saw floods. We must not forget that the water companies’ role in managing sewerage systems is vital in protecting our constituents’ homes from flooding. There is also a need for continuing investment in that regard.
Alec Shelbrooke
I shall expand a little on my hon. Friend’s comments on the role of water companies in dealing with flooding when I speak later. Would he care to comment on how the water companies are often ignored when they tell developers that there is a flood risk in the area in which they are building? Does he agree that the water companies are often left to clear up the resulting mess, which puts pressure on their budgets?
Richard Benyon
My hon. Friend makes a good point. The Government are right to deal with the connection to private sewers, where many leakages have occurred. They, and the water companies, are also taking action in other areas to ensure that they are playing their part. Sometimes just a small investment can make a big difference to the flood risk in an entire street, for example. It is vital to ensure that the water companies are sitting down and talking to the flood forums and the local flood authorities to make sure that these issues are being addressed, but perhaps that is a wider issue for another debate.
The Water Bill will play a key part in addressing the challenges. The question of building new infrastructure and new reservoirs was raised earlier. The key reform to ensure that that happens, to secure the long-term sustainability of the industry and long-term benefits for our constituents, will involve enabling new entrants to come into the industry and provide new competition. The competition that will exist in the non-household sector must, in time, be introduced in the household sector as well, and I hope that that will be the long-term ambition in a forward-thinking political agenda. That would result in the kind of benefits for households that businesses will soon be able to achieve by switching supplier. The Bill should be seen only as work in progress, however.
One of this Government’s achievements of which I am most proud is the water White Paper. It might sound rather prosaic to say that I am proud of a document, but it set out some important provisions. It demonstrated that the Government were getting a grip on water policy. In the past, water policy had been created by all kinds of different organisations and bodies, not least the water companies themselves. In the White Paper, we demonstrated our determination that the Government should own the policy and that the regulators should regulate. We stated that, in a regulated sector, if the water companies functioned within meaningful regulation by the three regulators, we would have an industry of which we could be proud. The water White Paper was welcomed by customers’ groups, the industry, investors, green NGOs and all parts of the House, although I do not know whether that makes it a unique document, as the natural environment White Paper achieved much of the same.
Thomas Docherty (Dunfermline and West Fife) (Lab)
I seem to recall that the Select Committee, of which the former water Minister was a member, criticised the Government for not being ambitious enough. Is that not a fair recollection?
Richard Benyon
The Select Committee produced many good things with which I agree. If that is what it said at the time—I am afraid that many of my memories of the last three and a half years merge into one—I would probably not agree, because there was bold ambition in the water White Paper, which was reflected in many of the comments made about it by many different people.
Julian Smith
I pay tribute to my hon. Friend’s work as a Minister. He is speaking passionately about the White Paper and the Water Bill, but does he agree that the financing of these companies still looks dodgy to many of our voters? I would appreciate it if he commented on that before he concludes.
Richard Benyon
I shall talk about debt and gearing shortly, and I think my hon. Friend will find me in agreement with him on those issues.
Let me explain why I believe the Water Bill is only a work in progress when it comes to delivering the ambitions of the water White Paper. In the next Parliament, I really hope we will see a Bill to address the needs of abstraction reform. It would be impossible to bring that forward as part of the Water Bill because there are tens of thousands of abstraction licences, on which many of our constituents and the businesses that employ them depend for their water supply. Trying to create a new abstraction regime from the one created back in the 1960s is a Herculean task that will require thoughtful legislation to make sure that the taps still flow and that we do not suck dry aquifers like the Kennet, which provides a very important water supply to the constituents of my hon. Friend the Member for South Swindon (Mr Buckland). That, however, has been the cheapest place from which to suck water, and it is only through the construction of good infrastructure and investment that we can do this in a sustainable way that keeps bills down, keeps water flowing and supports our economy. Further legislation, then, is needed.
Let me make a further point about investment before I reach my final point. If we want to see continued investment from pension funds—whether they be British or from overseas—sovereign wealth funds and other investors, we need to recognise that this is a relatively fragile and competitive market. I shall give the House an anecdote about the frequent visits I made to speak to the investor community to make sure that it saw that our ambitions in the water White Paper and the Water Bill were consistent with continued high levels of investment.
Some time ago, there was a hiatus concerning a rather technical issue that might well have gone over the heads of most people in this country. It related to the licence modifications that Ofwat wanted to create. This brought me in touch with a new breed in my life—City analysts, many of whom, in the words of my children, were “wusses”. They took an instant view that the regulated sector was not the place in which to invest, so the water sector saw quite a high risk of much needed investment being reduced. It took a Herculean effort—by me on the bottom echelons of the Government, right up to the higher levels—to make sure, first, that what Ofwat was trying to achieve was understood. In my opinion, it might have had a virtuous reason for what it did, but perhaps went about it in the wrong way. It reminded me that if we want to see continued levels of investment, we have to make sure that we explain what we are doing. Ultimately, the need to deal with infrastructure problems needs to feed through to bills, and we need to explain that we want to see a vibrant regulated sector in this country.
Mr MacNeil
I have been listening carefully to the arguments on both sides of the debate. Why does the hon. Gentleman think average water bills are lower in Scotland, where water is publicly owned, than in England, where it is privately owned?
Richard Benyon
We want to see in England the virtue of the competition from which the hon. Gentleman’s constituents benefit in Scotland, in the business sector and, indeed, the public sector. Schools and the health service in Scotland have the opportunity to switch their suppliers, and the Water Bill will enable businesses in England to do the same. I accept that this is still work in progress, but we want to see the benefits of competition flowing—
Richard Benyon
I will not give way again because many other Members wish to speak and I want to say something about debt before I finish.
I took on the water brief with a background in small business, but I had never encountered, or been closely associated with, businesses that had the level of debt and gearing that I saw in the water industry. I observed that the credit rating agencies—for which I have great respect: some very good people work for organisations such as Moody’s and Standard & Poor’s—were giving the water companies very high ratings, awarding them As, A-minuses and high Bs. In fact, Ofwat operates the strict criterion that their ratings must remain at those levels. However, I could not come to terms with that in my own mind at times.
The companies may indeed be complying with Ofwat’s criterion by gaining high credit ratings as a result of their wealth, but I think many Members will feel, as I do, that gearing of that order confers a brittleness—an inflexibility—when it comes to those companies delivering what we want them to deliver to their customers. I hope there will be more understanding of the need for them to reflect the concern that is felt about gearing levels, not just in the House but among their customers.
It is important for us to view water bills in the context of total household expenditure. The Leader of the Opposition has decided that energy bills are an issue on which he wants to bang the drum, but we know that his plan will not work. He knows it will not work, and he knows that we know that he knows it will not work. What is ridiculous about his argument is that it treats one part of household expenditure, albeit an important part, as the sole issue of the moment. Rather than doing that, the Government must view water bills and energy costs in the context of overall household expenditure. They must keep bearing down on council tax, and preferably freeze it. They must continue to protect the most vulnerable by providing winter fuel payments, and to ensure that more of our constituents on low incomes do not pay any tax. It is in that context that the Government should develop policy on household bills.
Water bills are, of course, important. It is vital for us not only to understand but to reflect the concerns of our constituents, and to take advantage of every opportunity to protect those on low incomes. We can, for instance, provide social tariffs. We can also work on the problem of bad debt, which, as we know, adds an average of £15 to every household’s bills—although when that is broken down by company, it is clear that some companies are outperforming others dramatically, and that their bad debt is a fraction of the average. Some are doing magnificently, and others appallingly badly. We must learn from best practice. We must ensure that companies deal with bad debt, but we must also ensure that we address their relationships with their customers in general. We must bear in mind the win-wins that can help those who are having trouble paying their bills to deal with the problem.
I hope that we will not be defensive about the model, because it is a good model. It has created a huge benefit for this country in terms of investment. What it has delivered is relatively affordable for most people, but we need to work hard to make sure prices come down. The five-yearly price review, along with clear policy from the Government, who understand the situation, presents an opportunity. We can make sure the companies are bearing down on bills and there is none of that awful cyclical investment, with investment falling off a cliff two years before the price review period. We want to see continued investment because we know that is the way to have a sustainable water supply and a sustainable sewerage system—not just economically sustainable, but environmentally sustainable as well.
Mr Robert Buckland (South Swindon) (Con)
It is a pleasure to follow my hon. Friend the Member for Newbury (Richard Benyon), who spoke with passion and real understanding about what is a complex issue. The water industry was privatised nearly a quarter of a century ago now, and it is reaching a crossroads. While I agree with my hon. Friend about the levels of investment that privatisation has delivered—which is well in excess of £100 billion in the last 25 years—we are reaching a stage where we now need to look for different solutions. My hon. Friend touched on a number of them in his remarks, and I was very impressed by his description of City analysts and their attitude to the regulated sector, and the challenge of gearing. As he said, the high level of gearing is causing inflexibility. That is leading to unimaginative solutions to the problems that beset companies such as Thames Water, which serves not only the London area, but the area I have the honour of representing: Swindon.
My hon. Friend mentioned abstraction from the Kennet, and I should commend the Save Water Swindon campaign, which is all about encouraging householders to be sensible in the use of water. It has had a marked impact and continues to this day. Indeed, only a couple of weeks ago I was helping Thames Water promote that campaign.
All that is detail, however, but today’s debate presents us with an opportunity to look more broadly at the challenge facing the industry. I am grateful to the Backbench Business Committee for accepting the application made in my name and that of my hon. Friends the Members for Dover (Charlie Elphicke) and for Skipton and Ripon (Julian Smith). There is quite a geographical spread between our constituencies, which shows that this is an issue for the whole country, not just the area I represent.
Although cost-of-living issues are very much the stuff of current political debate, the issues raised today long predate the current political spat. This debate has to be about value for money for local consumers and businesses and finding better ways for our water industry to operate.
Despite the interesting contribution of the right hon. Member for Holborn and St Pancras (Frank Dobson), who is no longer in his place, there is no doubt that 25 years ago privatisation was the right course of action. There was no alternative for the industry if we were to seek and secure new forms of capital investment. The achievements of Bazalgette and the Victorians lasted us for a long time, but we have by now reached a stage where renewal and reinvestment are essential.
Now, after nearly a decade of continued price rises, householders are rightly asking themselves, “Why us?” In the context of the current monopoly, who can they turn to? The situation is worse than the Henry Ford scenario of “You can have any colour you like, as long as it’s black,” because there is nowhere else for consumers to go.
I understand why the regional model was adapted from the previous nationalised structure. In many ways that made sense in terms of bringing together infrastructure with water supply, and I can think of the example of Severn Trent with its assets over the border in Wales, but I ask this question: is the regionalised model sustainable for the long term? Is there not a better way of dealing with the industry?
Mr Redwood
When we debated this, I was the one who said, “You must have competition and you can have competition in water, as in other things.” I lost that battle. Privatisation solved the capital shortage but, apart from that, it has left all the evils of the monopoly in the nationalised business—a lack of quality, a lack of choice, high costs and a lack of innovation.
Mr Buckland
I am grateful to my right hon. Friend for that, and his role in all this back in the late 1980s must not be underestimated. As he rightly says, now is the time for us to draw an analogy with other industries such as telecoms, where infrastructure and supply are dealt with separately. Giving consumers the right to switch suppliers is essential if we are to drive through an improvement in service.
Thomas Docherty
I heard the hon. Gentleman making this argument earlier on the BBC. For the interest of the House, will he clarify whether he also believes that the water companies should be able to disconnect a customer who refuses to pay?
Mr Buckland
Disconnection is very much a last resort. We need to make sure that we do not put consumers off from switching for fear of disconnection that may be unjustified. Not only is water a resource for the country, but it has huge and essential social utility. It is one of the essentials of life, so I quite accept that we must have a social dimension to all this. That is why moving towards a system where we have more social tariffs to help the more vulnerable members of society would be a good thing.
Thomas Docherty
I am most grateful for that half-explanation. Does the hon. Gentleman accept that unless there is disconnection, the market simply cannot work? If we are going to have competition for households, we would have to have disconnection.
Mr Buckland
I do not follow that argument; it does not apply in other sectors and I do not see why it needs to apply in this one. Disconnection would not assist consumers when making that switch because they may well be deterred by the fear of disconnection, so I do not accept that argument.
Charlie Elphicke
My hon. Friend is completely right to reject the outrageous suggestion made by the shadow Minister that there should be the power to disconnect householders. Does he recall whether the Labour party, when it was in government, had any form of social tariffs or anything like what it has been calling for today? Or is this something where the Labour party has woken up and jumped on the bandwagon?
Mr Buckland
I hope that this debate will continue in a spirit of looking to the long-term future of the industry, rather than descending into anything approaching point scoring. I do not think that is worthy of the hon. Member for Dunfermline and West Fife (Thomas Docherty) and I am sure that we will not see such a descent in his contribution, because this issue predates this Government.
As I was explaining, price rises started to increase significantly in the middle of the past decade. The average Thames Water household bill was £254 in 2005-06 and it has now risen to £354. One of my constituents sent me his own list of increases, where he recorded that in 2005-06 his bill increased by a whopping 21% and that since that time his bills have increased by 84%. So we can see why consumers and residents are asking, “Why us? Why do we have to bear the burden?”
I am pleased that Ofwat has issued a preliminary decision to disallow Thames Water’s request to raise prices by £29 for customers’ bills with effect from 2014-15. Thames Water said that it wished to spread that increase over several years but, as Ofwat has said, Thames Water has produced insufficient evidence to justify such a rise. It is unique this year in terms of the other water companies and the issue is compounded by the prospect of indefinite rises of up to £80 for my residents in order to pay for the £4.1 billion Thames tideway tunnel. I am in no way an opponent of bold and imaginative infrastructure schemes. They represent the best spirit of what inspired the Victorians to create the infrastructure on which, in many ways, we rely today. Buildings such as this place were the result of such boldness. It is right, however, that we should ask the legitimate question about whether dealing with the problems experienced through the discharge of sewage into the River Thames is worth that £4.1 billion.
I have no doubt that there are serious issues with pollution, but air pollution in London affects more people than the issue that the tunnel seeks to address. Other proposals, such as those for sustainable drainage, would be a more incremental way of dealing with the problem than inflicting this large hit on consumers.
Mr Charles Walker
What does my hon. Friend suggest that London does with its faeces if we do not put them into the Thames or build a tunnel to take them away from the Thames? Where will it all go?
Mr Buckland
I am not saying that there is not a problem, but that there are alternative ways of dealing with it through sustainable drainage. Earlier, my hon. Friend made an intervention about the need to build more infrastructure. I heard what he said, but to my way of thinking the Abingdon reservoir was the wrong response to the problems that still besets Thames Water—that is, the massive leakages. Thames Water is still losing 646 million litres of water a day.
Damian Hinds (East Hampshire) (Con)
I congratulate my hon. Friend and his colleagues on securing the debate. Does he also agree that there is some question about where the figures of £70 or £80 resulting from the tideway tunnel come from? If we divide the £4 billion by the total number of customers in the area, it seems to come to a somewhat lower number. Are there not also questions about exactly how it is financed and whether it can be done more cheaply?
Mr Buckland
My hon. Friend is right to suggest that the breakdown of the arithmetic for individuals does not seem to add up. Thames Water intends to use a separate corporate vehicle to build this entity, but we must ask why the bill payer must bear the brunt of the problem.
Let me return to the question of leakages because the figures are quite startling. Although Thames Water is making progress in bringing the leakages down, and I give it credit for that, the figures are pretty disturbing. Last year, it was reported that Thames Water was losing 665 million litres of water a day, a leak rate of 25.7%. That was five times higher than the 5% that would have been saved by a hosepipe ban. The leaks would fill Wembley stadium every 36 hours.
Alec Shelbrooke
Would my hon. Friend care to elaborate on that for those who call for nationalisation? Is it not true that the state of the water industry and the state of the pipes the water runs through were caused by the lack of maintenance that happened when they were in Government hands? Since they have been in private hands, the investment has been put in to try to rectify that appalling problem.
Mr Buckland
My hon. Friend is right that the problem would probably be considerably worse had we left things as they were and expected the Government, with their declining pot, to invest and deal with leakages. The problems, however, remain and although Thames Water is working to try to deal with them, I believe that the company should concentrate on leakages before it advocates vast reservoir projects such as the one supported by my hon. Friend the Member for Broxbourne (Mr Walker).
It is not just Thames that has a problem of leakages. It probably has the most serious problem, but other companies such as United Utilities and Severn Trent also have considerable leakages. The most recent figures I have from Ofwat show that United Utilities is losing 457 million litres a day and Severn Trent is losing 441 million.
The Water Bill has been mentioned. The Bill is a good first step. It will be the first reform of the industry since privatisation, and it will bring choice for businesses, charities and the public sector, but as other hon. Members have said, we should be going further to allow that choice to be extended to residents and household consumers. I am glad to hear that the Bill will allow for a more joined-up approach to the water supply network, thereby in some ways dealing with the regionalisation issue that continues to bedevil the infrastructure. I am glad that there will be further improvements to the Ofwat regulatory system.
I am looking for a greater emphasis on developing social tariffs. How that is to be done will be a matter for detailed discussion, and while Government guidance, which has been welcomed, has already been issued about concessionary schemes for community groups, it is now up to the industry to act swiftly on social tariffs and to ensure that those who are the most vulnerable and who, like all of us, need access to a basic staff of life, can have that access without the fear of disconnection that was mentioned by the Opposition spokesman.
As I said, this is an issue of not only household and local significance but national resonance. I shall not repeat some of the points that were raised by hon. Members about excessive boardroom pay, rather exotic tax arrangements and capital expenditure, but it is important to note, looking at the figures based on current prices, that in real terms gross capital expenditure by the four major water companies in England and Wales has fluctuated and is on a downward path. My hon. Friend the Member for Newbury spoke eloquently about the cyclical nature of investment, which is hardly a solid foundation for attracting the much needed future and further investment in the water industry. While it is right to say that the Ofwat regime—Ofwat is currently looking at the 2015-20 price regime—is an appropriate exercise of regulatory power, we need to try and get through the cyclical problem that is causing the inflexibility in the industry that he talked about.
Today’s debate is a chance not only to make an important contribution to the ongoing discussion about the cost of living, but to look forward to the Water Bill, to ensure that we take the opportunity to get that piece of legislation right for the market, and to remember that value for money for businesses, and for the people we represent, must be at the heart of our deliberations and discussions today. We owe it to them to ensure that water bills are priced competitively, that the service is efficient and that there is a real sense of responsibility for the people that the water companies serve. If we help water companies along that road, we will have done the people whom we represent at least some service today.
Mr John Redwood (Wokingham) (Con)
It is a pleasure to see you taking up your new duties, Madam Deputy Speaker.
Monopoly is the evil that we are here to debate. It is monopoly that stifles innovation. It is monopoly that drives prices higher. It is monopoly that takes away choice and consumer power, and it is monopoly that leads to rationing. We saw all those features in the water industry when it was nationalised. I am amazed that the Labour party still has people who think it would be a good idea to go back to the nationalised water monopoly, which regularly ran out of water in the summer. Woe betide the man or woman who had bedding plants in a hot summer in Britain—because before global warming we used to get hot summers, and then the water would run out. It was a tragedy, because it was a direct result of the nationalised industry.
The privatised industry, I am pleased to say, has done one thing better than the nationalised industry—it has got access to more capital. It has mended a lot of pipes, put in new pipes, and put some investment into dealing with dirty water as well, so we have fewer interruptions to supply under the privatised industry than before. However, we did not go far enough with the privatisation. We transferred the ownership but, as some of my hon. Friends have wisely pointed out, we kept in place much of the regional structure.
We bought the idiotic idea that the industry sold to Ministers and advisers that because rivers run to the sea in separate geographical areas called river basins, it was terribly important to have local monopolies around a river basin. Woe betide anyone who wanted to move water from one river basin area to another, and woe betide anyone who wanted to use borehole water. Apparently, it all had to be organised around river valleys. Sometimes it is difficult to create boundaries between them, because tributaries and streams have a habit of not being as neat as administrative lines on maps, but it was decided that we had to have this “natural monopoly”.
There is no natural monopoly in the supply of water. As was pointed out by the right hon. Member for Holborn and St Pancras (Frank Dobson) who has recently departed the Chamber, rain falls across the whole of the United Kingdom, not always all at the same time, not always in the same quantities, but this island is not cursed with a shortage of rain for most of the time, and we collect very little of it. It is also not true to say that water is some precious resource that has to be husbanded because it will run out. Water is the ultimate renewable resource. It falls as rain; it mainly runs out to the sea; it is picked up by the winds and goes back into the clouds; and it comes back again as rain. Nature or God, depending on one’s beliefs, does most of the job for us, producing an endless supply of water to this country. All that we have to do is provide business people who can raise the capital to make sure that we capture enough of that water in a form that we can then put into pipes, and that we clean it up to an appropriate standard for the use.
We did not introduce competition into the industry when we privatised it, so many of the evils of monopoly are still with us. We have less rationing, but we can still have rationing. We have quite dear prices, although perhaps they do not go up quite as quickly as they did when they were part of a Treasury exercise. We certainly get more capital into the industry, but at the expense of quite substantial gearing, as some hon. Gentlemen have mentioned. However, many of the bad features of the nationalised industry are perpetuated and it is very difficult being a challenger to the industry, so I pay tribute to the former Minister, my hon. Friend the Member for Newbury (Richard Benyon), who produced a White Paper which is becoming a piece of legislation, which will try to open up the market a bit more.
I pay tribute to the modest steps taken in Scotland, where it was discovered that far from the taps running dry or the water prices going through the roof if the authorities dared to have more than one provider of business water, the opposite has happened: the prices went down—a little bit, because there was not a great deal of competition coming in—and above all the quality of service rose. I have talked to some of the Scottish businesses that have to deal with the water industry. They say that the great breakthrough in Scotland as a result of competition was the fact that they could get a much better service. They could get the water supply when they wanted it and where they wanted it, and pipes and so on mended and repaired.
Businesses in Scotland can also negotiate with their water industry about what sort of water they want. At present, under a nationalised monopoly or a privatised monopoly, only one type of water is available. It is cleaned to a certain standard and it then has additives put in it. An industry wanting to make drinks may need to take the additives out before it can make its drinks, so there is a double cost and a nuisance, because it cannot get the type of water it wants. A firm that wants to carry out a fairly rudimentary washing business does not need water of a quality that we can drink, but it has to pay the extra price to buy the very high-quality water literally to tip it down the drain.
Therefore, we are not seeing experimentation, innovation or customer service because of a lack of competition. The industry is determined to supply only one grade of water and only the amount it can be bothered to supply, and then it blames the customer, should we dare to say that we want a bit more. We are now bombarded with messages from the industry suggesting that water is a natural monopoly and not the ultimate renewable resource. We are told that good people take only one bath a week in order to save water, that they do not use so much water for cleaning and that they ensure that they husband their use of water in their sinks and whatever machines they have at home that require it.
I have good news for my constituents: I do not believe that. I think that water is the ultimate renewable resource, that it ought to be made available more abundantly and more cheaply and that that could be done if we trusted competition. Surely one of the advantages of rising living standards, which is what we are all here to try to help create, is that people can then use more water because they have more things to clean, or because they wish to enjoy themselves in their bathroom. We need to ensure that they have access to the right quantities of cheaper water, and competition is the way to do that.
Julian Smith
My right hon. Friend, as always, is speaking in an impassioned way about the merits of competition. Will he explain to the House how quickly he thinks domestic competition could be introduced and whether he thinks the Government should be moving more quickly on that?
Mr Redwood
I would do it straight away. I cannot see what the problem is. If water is a natural monopoly, as some people argue, no harm will be done by breaking the formal monopoly; it is just that nothing will happen. But of course it is not a natural monopoly, which is why the industry is fighting so hard to keep a legal monopoly. It knows that it will have to wake up and change quite a lot if it has to face competition.
We would have to give the market some help to get it going, because the monopolists are in a very strong position. We would need to tell them to use their pipe network as a common carrier, because other people would need access to it. However, the challengers might soon find, as was the case with those sorts of arrangements in the telecoms industry, that the existing assets are not so great and that they want to put in their own pipes. The challengers in telecoms did that with wires, and then of course the radio links became a cheaper and better way of doing it. Who knows what technical breakthroughs there might be or how much challengers would want to use the common carrier network? However, to get competition going we would need to start with a common carrier network, so a system would need to be put in place to allow people access to the pipes.
We would also need to ensure that the Environment Agency was prepared to license borehole water and sensible levels of river extraction by other licensees. I do not want our rivers to be run dry by people taking too much out in a dry season, so we would need proper regulation for that. As has been pointed out, however, we let huge quantities of water go to the sea during wet periods, so we do not seem to be very good at planning our water use and holding it in suitable locations so that we have plenty in drier weather.
Another thing that I think the water industry needs to pay attention to, along with other utilities in this country, is the huge disruption they cause to our road network. Our road network is a nationalised monopoly and therefore has rationing and, looking at the tax bill, is extremely expensive. It has all the characteristics of monopoly provision that I dislike. One of the things that make our totally inadequate road network even worse is the fact that it is regularly disrupted by businesses digging up great chunks of tarmac and subsoil with pneumatic drills in order to lay new water pipes, other utility pipes and wires. Why on earth have we not learnt that it is not a great idea to put these things right down the middle of the road and then hard-pack soil, subsoil, tarmac and stones on top, which means huge delay, disruption and cost every time we want to change it? In modern buildings all the services run in ducts under the floors so that we do not have to rip out the plaster, half demolishing the place, every time we want to change the wiring.
Surely we could have a system to provide easy access along the side of our roads to pipes, wires and anything else we want to put down without having to dig up the road every time. We could at least start doing that when we build new estates, shopping centres or whatever. We should do it intelligently by putting in ducts to save all that money and time. I find utility companies very sympathetic to that idea when I invite them in to talk about it. They say, “It’s a very good idea, but it won’t work in this case, Mr Redwood.” We have to make it work, because many other countries are well ahead of us on all this. They think we are completely potty to go in for this idea that the water company digs up the road and puts in a new pipe, then six months later the gas people come along and do exactly the same thing in a slightly different position, and then the following year the electricity people turn up and do it again. It is mad, costly and inefficient, and it is doing huge damage to an inadequate road network.
For all those reasons, give us competition, give us choice, give us innovation, and give us some common sense, because we are getting a rotten deal at the moment.
Gavin Shuker (Luton South) (Lab/Co-op)
I am extremely grateful, Madam Deputy Speaker, for your generosity in allowing me to speak in this debate. I apologise for having missed the opening speech because of parliamentary business that I could not avoid.
It is a pleasure to follow the right hon. Member for Wokingham (Mr Redwood). I think that he and I will agree about one thing: the botched privatisation of the late 1980s and early ’90s has led us to a wholly undesirable situation. However, we are where we are. As someone who, in the past couple of years, has had responsibility on the Opposition Front Bench for the issue of water, I have watched the situation very closely. I was struck today by the news that this Government are now apparently taking water affordability incredibly seriously. There has been a damascene conversion—or perhaps a Dunfermline and West Fife conversion, as my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) has joined the Front-Bench team and is clearly getting far better results than I ever did in the role that he has the privilege of holding.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)
I welcome the hon. Gentleman to this debate and hate to interrupt his complimentary remarks about his hon. Friend. However, following what Government Members have said about the Water Bill and what we want to do on pricing, it is fair to say that we have been working on this issue for a very long time. I think he will find that any announcements in recent days that have come from sources on the Opposition side might be a little new to the debate.
Gavin Shuker
What a fantastic set-up for the speech I am about to give, which is about the Government’s record in the past few years. I freely accept that the hon. Gentleman was not a member of the Government at that time, but he obviously voted on many of the issues that I want to talk about.
It is crucial that we in this House have a proper understanding of the impact that the Bill that is being sold to us will have on the consumer bills that are being levied on many of our constituents right now. Let us be clear: no one was talking about water affordability or Government action to reform the water industry to deliver for customers and not just for shareholders until the Leader of the Opposition gave his living standards speech in Brighton back in September.
Gavin Shuker
I am happy to take an intervention from the former water Minister.
Richard Benyon
I hesitate to rise, because I could just sit here and enjoy the hon. Gentleman’s speech. He and I had endless discussions about affordability when he was in his Front-Bench role, so he knows that he need only read the water White Paper to see that we were concerned about that issue, and he knows that the underlying truth of the Water Bill is that, in order to keep bills low, we need to make sure that we have an industry fit for the future, which is all about affordability and protecting our constituents. He also knows, therefore, that it is ridiculous to suggest that this issue has appeared just in the past few days.
Gavin Shuker
The hon. Gentleman makes a passionate defence of his own record in post.
Let us look at some of the specific measures on which this Government had the opportunity to work and legislate but deliberately chose not to do so. First, there is bad debt. I was interested to read a copy of the Secretary of State’s letter to the water companies—sent out today, curiously enough, purely coincidentally—which talked about bad debt. I thought, “Fantastic! At last this Government have adopted the right position on bad debt.” Each household has to pay £15 or so because some people cannot pay and will not pay, and that money is dumped on the bills of consumers who step up and do pay.
On energy bills, is it not interesting that there is a provision that requires landlords to give companies their tenants’ details so that they can reclaim the money? On reading the letter, I thought, “Fantastic. At last the Government have responded to the Opposition’s calls to make the water situation analogous with that of energy.” However, the letter only makes a firm threat to look at the issue in more detail if the companies themselves do not voluntarily make progress on the provision.
My position and that of my party is clear: bad debt as a result of those people who will not or cannot pay dumps an additional cost on every household, so it would make sense to implement the provision. The Government could have taken that action. We made the case for it, but they have had no interest in it until now.
That is not the only issue. Government Members and the press have today mentioned the social tariff. I was the lead Opposition Member on the Water Industry (Financial Assistance) Bill Committee. We sought to amend the Bill so that every water company operating in the UK had to do one simple thing, namely offer a social tariff to those people who find it hard to pay their bills or who find themselves in a situation where they cannot pay for the service provided. The Government chose to vote down that proposal and Government Members voted against it. Instead, they favoured a voluntary approach: if water companies wanted to introduce a social tariff, they could. It is amazing how few water companies have actually done so.
George Hollingbery
I think I am right in saying that the previous Labour Government were in power for 13 years and I am struggling to add up the number of water regulation Bills they introduced during that time. If the hon. Gentleman would like to tell me, I will take a round number.
Gavin Shuker
Why not start with the three reviews that led to the water White Paper? The Pitt, Walker and Cave reviews looked directly at competition and were conducted in the five years before we exited government and this Administration came in. They laid the groundwork and contained radical ideas that would have resulted in better provisions for water affordability. They would have put in place a framework to deal with the issue in its entirety. The water White Paper, which resulted from those reviews, was quite good, but that has left many of us asking: why is the Water Bill so washed out?
Thomas Docherty
My hon. Friend is making an excellent speech. I think I am right in saying that it was only under the Labour Government that water bills actually fell. Is that correct?
Gavin Shuker
My hon. Friend is absolutely right. If we look at the price review periods since privatisation, we will see that water bills came down in real terms during only one of them and that was under the previous Labour Government. On the price review process, my hunch is that this Government believe that the water companies will read the signals coming from hard-pressed consumers and come in at RPI plus 0 or RPI minus 1 in the next price review period and claim it as their victory, but let us be clear: getting a sustained reduction in water costs requires action from this Government.
Andrew Percy
We have moved on a little, but the hon. Gentleman has graciously given way. He is doing a good job of reading the Labour brief and trying to pretend that all of a sudden it is interested in people’s bills. On the Pitt review, is he suggesting that it was somehow planned by the Labour Government, or did it come about because I and my constituents were all under about 2 feet of water for a long time?
Gavin Shuker
Intense flooding has major implications and climate change means that it will happen more regularly, but the hon. Gentleman seems to be saying that the previous Labour Government were in some way wrong to review the situation and flood defences. He was not the MP for his area at the time, but he knows that the flooding was devastating. If he wants proper action on ensuring that his constituents will be protected against the next bout of flooding, he should support our efforts to amend the Water Bill to make sure that there is a proper, workable Flood Re solution for flooding insurance. He mentions the Labour brief. I humbly point out to him that for the past few years I have been writing the brief.
Charlie Elphicke
Does the hon. Gentleman agree that the last Labour Government did nothing on social tariffs?
Gavin Shuker
No, that is not the case. The Flood and Water Management Act 2010 created the legislative framework for that measure.
I want to talk about some of the measures that have been trumpeted as the solution to bring about water affordability and to stop the rising tide of householders who are finding themselves in water poverty or unable to pay their water bills. The approach of the Water Bill is entirely the wrong way around. It is interesting to hear Government Members say that the only answer is greater competition. I accept that retail business competition could be a good way of reducing water usage. That has made a profound difference north of the border. That is why we have supported it continually. The idea came out of the Cave review.
However, at a time when many parts of the UK are much more water-scarce than other parts of the continent and even parts of Africa, it is short-sighted to think that that idea will work without considering abstraction reform as well. The Government have chosen to punt that issue into the 2020s—until 2025—for the next Government to look at. If we do not deal with scarcity in many parts of the country, there will be a major problem. Instead, the Government have looked for a number of measures that will shake up the industry and make them look pro-reform, but that will not necessarily tackle the issue of abstraction.
There is an idea that the only answer to the problem of some parts of the country being water-rich and others water-poor is to build pipelines. I remind the House that 2% of the country’s energy usage already goes on water. There is a major carbon cost to that idea. If people do not believe that that would end up on people’s bills, they are wrong.
Alec Shelbrooke
Just to clarify, did the hon. Gentleman say that we need a national water grid to move water around or that we do not?
Gavin Shuker
I am happy to clarify that. I was saying that the idea of a national water grid is stillborn, purely on the basis that the carbon costs make it too difficult. If we accept the premise for that idea, surely what we need is a similar level of investment in water efficiency. We must have a similar amount of foresight on how we will get by with less in the many water-stressed areas. The south-east continues to grow and water is becoming more scarce.
Unless there is proper leadership on that issue, things will become very difficult. Big concrete, in-the-ground solutions are not the right approach. There is a need for additional water capacity, but we need to consider the issues. I say humbly that the Government have a green deal, but where is the blue deal? Where is the deep thinking about what we need to do?
Another area where the Government have been caught napping is the structure of the industry. After privatisation, a number of companies emerged that were listed on the UK stock market. There was then a shift in the industry towards foreign ownership. Today, the majority of the industry is owned by private equity firms. At the same time, dividends and water bills have continued to rise. Unison has done some fantastic research that has tracked the nature of the industry. However, it is not just Unison that has raised concerns. Jonson Cox, the chair of Ofwat, has said that there needs to be greater clarity in many of the difficult accounting explanations. I hope that Ofwat will continue to pursue that issue.
One issue on which the Government could take action is Eurobonds, and the practice whereby water companies effectively borrow from arm’s length bodies of themselves at greater levels of interest, which is obviously favourable on their balance sheet. The Government consulted on that issue and decided to do nothing, yet it is a major reason why the water industry is skewed the way it is. If we want to drill down and ensure that the benefit of the reforms goes not only to shareholders but to customers and households, the Government must consider that issue again.
Finally, I want to mention social responsibility for water companies. In January 2012 I went to a fantastic research facility at the university of Leeds called Water at Leeds. I gave a speech in which I laid out Labour’s response to the water White Paper and the forthcoming legislation. I also talked about the consensus that exists on water. Both parties in government, the industry and customers have bought into the idea of a largely monopolised, yet privately owned, privately run and privately debt-financed water industry, but that consensus could break down if action is not taken.
Today, 72% of people believe that water would be better off nationalised. That is a massive flashing red light to the water industry that it needs to take action, and to the Government if they believe that that should not be the policy that passes through. I believe one way of doing that would be to have a social responsibility clause in the Water Bill that lays out clearly and benchmarks what each water company is doing in terms of social responsibility. That would include the companies saying how they manage their tax affairs in a way that is easy to understand and has clarity, rather than things being hidden away on the balance sheet. They would also mention their responsibility to their broader constituencies, and whether they employ apprentices and are investing in R and D, as Cave mentioned in his report. Let us look at the water companies and instead of saying that some have a good story to tell, let us try to raise them all up to the level of the very best.
Those five areas—bad debt, social tariff, abstraction reform, Eurobonds and social responsibility—would in themselves create a coherent basis for tackling water affordability and water scarcity. I humbly remind the House that despite all the hype of today and what the Minister may say, this Government have looked those challenges squarely in the eye and dodged each one.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I would like to go further in the debate and mention some of the powers that I think the water industry needs. I will focus my remarks around the Water Bill, and the fact that as with any industry, resources are scarce. It by no means passes the public by that their water bills go up, yet now and again we have hosepipe bans and so on because—let us be honest—of the mismanagement of our water resources. It does not help, however, when developers take no notice whatsoever of reports from water companies about the impact that their developments may have on the surrounding area. My constituency of Elmet and Rothwell is badly affected by such situations.
I recently had discussions with some people from Yorkshire Water about a small village in my constituency called Walton. It has a couple of houses that are badly affected by heavy rainfall and flooding. Yorkshire Water effectively said that a scheme to save two houses would cost £1.8 million—not in the region of something it could afford do—but that the problem came about in the first place because the original barn should never have been converted into a house. Messages to that effect were put forth at the time, but the conversion went ahead. The house was sold on in good faith and no matter what the situation in trying to alleviate the problem, Yorkshire Water is fairly certain that the water will always end up in that place. No one particularly noticed when it was full of cows, but when it is someone’s house, they tend to notice. That is a prime example.
My constituency is under unprecedented pressure for housing development. Figures from Leeds city council state that 12,500 houses could be built across my constituency. One place currently under great scrutiny is an area of Kippax called Sandgate drive. Some 260 houses are to be built at the back of some houses—by that I actually mean built on a hill behind those houses. Yorkshire Water has said that the water that will run off would be unacceptable and that it would put huge pressure on the water courses to deal with that run-off of water—something the developers appear to be ignoring.
The Environment Agency deals with water that floods off land and is taken away in rivers, but it is down to the water companies to deal with the surface run-off and to get it to the rivers. The current development plans do not help water companies in the slightest, which means two things: first, that resources that should be used to repair the network so we can use our resources more efficiently get soaked up in flood alleviation solutions; and, secondly, that people’s bills rise constantly, with no further improvement.
In an area of my constituency in the town of Wetherby, there is a planning application for 400 houses at the top of a hill. There have been problems with the water pressure in Wetherby. Yorkshire Water had to take measures on the Thorpe Arch trading estate to ensure it had proper pumping facilities to get the water to the top. That has been resolved, but only last week a resident told me that, last summer, on a very warm day, the water pressure dropped off when everybody in the area used the water. The developers have taken no notice of that, which means that Yorkshire Water must spend more of its resources dealing with the further drop in pressure, because it does not have the detonator to say, “That development cannot go ahead unless the developer is willing to spend huge amounts on the water infrastructure.”
A huge development—a dual carriageway ring road—is taking place to the east of Leeds. Back in the storms of 2007, my constituency, like that of my hon. Friend for—
Alec Shelbrooke
I cannot believe I forgot the name of my hon. Friend’s constituency, but there we go. Like his constituency, my constituency had a huge amount of water flooding through it during those storms. Fundamentally, the river valley could not cope with the amount of water. Nobody can do anything about such one-off events, but we can avoid exacerbating the situation. There is a live planning application for a development on the floodplain in the village that was 6 feet under water that day, which is disgusting. Yorkshire Water should have the ability to turn around and say, “No. That area will not be developed.” The developers can put in any flood protection scheme they like on their new development, but they do not give a tinker’s cuss what happens 100 metres down the road, where the houses will be flooded.
Those problems can be alleviated if the water industry has the ability to work hand in hand with the developers. I mentioned the ring road, which should have a flood alleviation drain built under it. The proposal will have a huge impact on my constituents, who have had to deal with flooding and must now deal with extra housing. We are talking about investment in the water industry and how it best uses the money it gets from water bills. Given the pressures of development, we need to ensure that the industry has every ability to work hand in hand with developers.
One village in my constituency, Methley, suffers from huge toxic, rancid smells from a pumping station for sewage. Yorkshire Water believes that that happens because there is a kink in the sewage pipe somewhere in the two miles of road by the village. It does not have the resources to dig up the road and find the kink—it says that the number of people affected does not justify the amount it would need to spend. That is an example of the pressures the water companies are under.
Frank Dobson
Surely Yorkshire Water has access to a device that will identify where the aforesaid kink is and does not need to dig up two miles of road.
Alec Shelbrooke
One would have thought so, and I have had meetings about that. Unfortunately, Yorkshire Water is uncertain about where the sewer actually runs, and that is a consequence of decades gone by when there was not proper mapping. That shows the problems the privatised water industry has come up against when dealing with a legacy of poor investment and poor records.
Incidents such as the one in Methley are a blight on people’s lives. I have stood there and the smell is appalling—people are prisoners in their own homes. We have to ensure that water companies have a say over inappropriate developments. There are 4,500 houses in Garforth and 1,000 house Rothwell, but no consideration is given to water in planning developments. The developers do not care and leave it to Yorkshire Water to deal with. The time water companies have to take to deal with such issues means that they are not able to deal with historical issues, such as ensuring efficient water use, repairing collapsed sewers and so on.
I urge the Minister to take those points into consideration during the passage of the Water Bill. For my constituents, the ability of the water companies to make their lives better cannot come quick enough.
Simon Hughes (Bermondsey and Old Southwark) (LD)
It is a pleasure to serve under your chairmanship for the first time, Madam Deputy Speaker; I welcome you to the Chair. I thank the Backbench Business Committee for giving us this opportunity—I lobbied for it, so I am one of those responsible for securing the debate—and I thank my hon. Friend the Member for Dover (Charlie Elphicke) for introducing the debate. I apologise for being unable to hear his contribution—I was detained—but I have been present for much of the debate. I welcome the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson), who has inherited the Water Bill. His predecessor, my hon. Friend the Member for Newbury (Richard Benyon), said that this issue has occupied him for the past three years. I thank him for always being courteous and engaging, not least on matters relating to Thames Water.
I received an encouraging piece of information a few weeks ago, as did other hon. Members who represent the Thames Water area. As my hon. Friend the Member for South Swindon (Mr Buckland) said a moment ago, the provisional view of Ofwat is that it is minded to reject the latest application from Thames Water to increase prices. Given that we had previously been told by Thames Water that it expected to increase prices not just next year but every year by approximately £60 to £80 per household, to fund the Thames tunnel, that is a welcome relief. I understand that Ofwat has not made its final decision, but I hope it will confirm it this week. My constituents would be encouraged by that news.
It was also encouraging to hear the Environment Secretary this week tell water companies to be mindful that price increases should be imposed only where necessary, and remind them to introduce special tariffs for hard-pressed households. That takes me back to debates at the end of the previous Parliament when my hon. Friends the Members for Brecon and Radnorshire (Roger Williams) and for Cheltenham (Martin Horwood) tabled an amendment to the Flood and Water Management Bill to allow for social tariffs, which had never before existed in the water industry. There had been social tariffs in the energy industry, but not in the water industry. The Act became law on 8 April 2010—probably the last piece of legislation to sneak over the line before the general election. Since then, the Government have been positive about encouraging individuals to consider how they can get help with their water bills and ensuring that water companies introduce social tariffs. Since the Liberal Democrats have been in the Government, guidance on social tariffs was issued in June 2012 and water companies have been able to introduce their own social tariffs since 2013. I credit Thames Water with welcoming and responding to that opportunity.
Many families are often hard pressed by the cost of their water bills. For years, I and my hon. Friend the Minister and his colleagues in Cornwall and the south-west campaigned for a reduction in south-west water bills, but the Government have now dealt with that and, in a welcome move, have legislated to reduce bills in the south-west.
For the benefit of those who follow our debates, I should add that there are two other schemes that provide help. The first is the WaterSure scheme, funded by water customers, which provides financial help to householders with three or more children under the age of 19, if on a water meter and in receipt of certain benefits—people should check which benefits and whether they qualify—and for those without children but in receipt of benefits and with a medical condition requiring excessive water use. That is important. Not everybody knows about it, but they should, particularly those struggling who might qualify. The other scheme, Water Direct, run by the Department for Work and Pensions, helps householders in receipt of certain benefits to manage debt with water companies. Under that scheme, the DWP acts as a broker to help make arrangements.
Simon Hughes
Before I give way, I pay tribute to the hon. Gentleman for the work he did from the Opposition Front Bench and for his contribution a few minutes ago, which I heard and enjoyed.
Gavin Shuker
That is incredibly generous of the right hon. Gentleman. I am just checking I am not dead—people rarely speak nicely of each other in the House, so perhaps I am.
I wanted to be helpful, actually. Does the right hon. Gentleman agree that neither of those quite good schemes is well known, partly because they operate regionally? In other words, there is no clearly identifiable social tariff scheme that the entire water industry can point to—although I appreciate that WaterSure is a national scheme—and there are patches of coverage, which is one reason why all water companies should have a social tariff.
Simon Hughes
I apologise if I phrased my remarks as if to suggest that the hon. Gentleman was the former Member for Luton South. He is clearly still the current Member, as I know, not least because when I last went to Luton on official business—to watch Millwall beat Luton Town—he was there to buy me a drink afterwards. I was very grateful—actually, I cannot remember whether I bought him a drink or he bought me one, but anyway it was a very nice pub, and I recommend it. Luton has good breweries, beer and pubs. But we, as the away team, were very well received by our hosts. [Interruption.] He wants me to stop rubbing it in. I apologise.
One of the dates in my diary this week, besides this debate, was that for making representations to the public inquiry into the Thames tideway tunnel. The latest date for written representations was yesterday, which was when I submitted mine. For my constituents and many others, not just in London but in the whole Thames Water region, it remains a live issue whether Thames Water’s current plans for the tunnel are the right ones, given the alternative ways of dealing with sewage in London, and the question whether the route is the right one. Obviously, the route will impact significantly on constituencies such as mine. For example, a big site on Chambers wharf is proposed for the drive shaft, but I and my constituents argue that it should be used for the reception shaft—if it is to be used at all—and that the drive shaft should be elsewhere.
We also have concerns about the financing. The hon. Member for South Swindon said that the debate was ongoing in government about what the right approach should be, if the Government are to respond to Thames Water’s approaches. My constituents think—the right hon. Member for Holborn and St Pancras (Frank Dobson) probably shares this view—it is a bit rich for a non-public company to run down its assets and then ask the Government to underwrite it in borrowing significant amounts of money and expecting the taxpayer, the bill payer or both to pick up the bill, as is currently proposed.
I have regularly urged my right hon. Friend the Chief Secretary to the Treasury and colleagues in the Department for Environment, Food and Rural Affairs—before and after the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall, took up his post—to be careful not to endorse a solution that appears to condone allowing water companies in England to run down their assets and then try to get Government support to bail them out. That would not send the right message. The water companies must understand that, if they make choices resulting in their profits going not to the consumer but to their shareholders in the form of dividends, they really cannot expect the Government to come to the rescue, even if that means that one company eventually has to be replaced by another. I am sure that there is no shortage of companies willing to enter the water market in England.
Frank Dobson
Does the right hon. Gentleman not agree that it would be ludicrous to expect the British taxpayer to bail out a company that was partly owned by Chinese taxpayers? If Chinese taxpayers want to invest in Thames Water, they should bear the brunt of any charges that the company might incur. The scheme is going to cost £4 billion, but Thames Water’s shareholders have already benefited from £6 billion of dividends. None of that money came to the people of London.
Simon Hughes
I take a similarly hard line on this issue. If Thames Water does not have the money in its own coffers to do what it wants, it should not be doing the job, and it certainly should not be asking the taxpayers of the United Kingdom for help to do it.
I also want to flag up some proposals that I hope the Government will take on board. I do not expect my hon. Friend the Minister to provide an immediate response of yes, yes, yes, but I know that he is alert to the questions I am going to ask about what Ofwat and the Government can do. I pray in aid a useful pamphlet, which I am happy to promote, that was recently published by CentreForum, a Liberal think-tank. It was written by George Turner, who used to run my office here. He became interested in the water industry during his time here because of the Thames Water issues. His pamphlet has the additional commendation of having had its foreword written by Sir Ian Byatt, the well-regarded first regulator at Ofwat.
I shall quote briefly from the pamphlet, then set out my recommendations for what I hope the Chancellor will say in his autumn statement on 4 December. The pamphlet refers only to England; Wales and Scotland have entirely different arrangements. It states:
“Water is one of the essential industries. We literally cannot live without it…There are allegations of widespread tax avoidance. The level of corporate borrowing is becoming unsustainable. The ownership structure means that there is very little public accountability. Most of our largest companies are owned by private equity funds and there are no public meetings where management can be held to account. The ownership structures are murky to say the least with strings of companies dotted around the world’s island secrecy jurisdictions and tax havens. This makes it difficult for the public to know what is going on with its water suppliers.”
The problem has come to a head in relation to Thames Water, which has got itself into this position over the proposed tunnel. I suggest that some of the ideas in the pamphlet should be picked up by the Government, Parliament, Ofwat and the Select Committee. First, we could introduce a water levy on highly geared water companies, which would take away the incentive to introduce risk by increasing gearing and removing financial flexibility. This was mentioned by my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Newbury (Richard Benyon).
Secondly, we could ask the Government to look at—I ask them to do so now—the tax treatment of debt in highly geared companies and to consider economies and systems such as the German ones, where there are earnings-stripping rules that prevent companies from taking out excessive loans with the intention of avoiding tax.
Thirdly, we could legislate—I hope the Minister will be sympathetic when the Water Bill goes through its stages—to make sure that water companies make the interests of the consumer much more central in their organisations, either through a consumer representative on the board or by placing a duty on the non-executive directors to report on how best to serve the consumer interest, or both.
Fourthly and importantly, we should amend the Bill to introduce mandatory annual customer meetings, where customers can hold management to account in companies that do not currently have annual general meetings in the UK. I would also hope to change the law through the Bill, so that, when restructuring companies which have gone into special administration, the regulator must always first consider non-profit companies, rather than putting them straight back into the private sector, as we saw in a recent example in the railway industry. I hope that the Government will also look at how different models of corporate ownership have impacted on the water industry, as they have not all been satisfactory.
I hope that Ofwat will also do four things—and soon. First, I hope it will report on all the companies in England, not just Thames Water, to establish whether more modest dividend and financial policies would have allowed them to have enough money to spend and to reduce bills. Secondly, it should look at how price cuts could be implemented at the next price review. Thirdly, it should change the licence conditions of companies to impose London stock exchange disclosure requirements on non-stock market-listed companies. Lastly, picking up the point made by the right hon. Member for Holborn and St Pancras, Ofwat should change the licence conditions to require public disclosure of all intermediate holding companies, ultimate controlling companies and all the beneficiaries of those companies, so that we know exactly where the benefits that go in dividends to shareholders end up in those many companies behind many of this country’s water companies.
We may have the best drinking water quality in the world, and we are soon to debate changes in the structure of the industry. I hope the Government will be responsive to amendments designed to enhance the interests of the consumer. I hope the water companies will understand that it is now time for them to stop stacking up money for profits to be paid out in dividends, and to put the interests of the consumer and the consumer’s bills first.
Andrew Percy (Brigg and Goole) (Con)
The debate has been interesting, with more contributions from Government than Opposition Members—but I enjoyed their speeches all the same. The hon. Member for Luton South (Gavin Shuker) told us that he wrote the briefing for the Opposition. It seemed to consist of, “Here are lots of good things that the Government should have done, which we did not bother to do in our 13 years”, so he should perhaps revisit history a little before he writes his next briefing on this issue.
There are three water companies—Yorkshire Water, Anglian Water and Severn Trent—in my constituency, covering 250 square miles in two different counties. I have had experience of trying to deal with all three, and the experience can be different depending on which water company one has to deal with. I shall speak about my constituents’ experience with some of those companies and make some suggestions to make the consumer experience better, not just for my residents but for all constituents across the country.
We have been lucky and unlucky. We have seen considerable investment in the constituency in recent years, but that came after year after year after year of regular flooding. Bizarrely, over the last year or two, parts of the constituency have faced hosepipe bans because of a lack of water, while other parts have at different times been under several inches, if not feet, of water. Much of it has been surface water, and hence within the remit of the water and sewerage companies. My constituency, apart from a few bumpy bits, is generally very low lying, below the high-tide mark, and consequently most of the communities I represent rely on a pumping system to keep them dry. Where I live, there is a series of very high banks as well as pumping.
We have had some good experiences with Severn Trent, and have welcomed its investment in Westwoodside and Crowle. I have been a key member of the liaison team dealing with that investment. The company has also worked with customers: we have arrived at some solutions, and it has been generally responsive. That has not always been the case, but we have done reasonably well in recent years, and I am grateful for the company’s investment.
In Goole, which is covered by Yorkshire Water, we have had a very different experience historically, although it has improved a great deal recently. Goole has been flooded in at least four or five consecutive years out of the last seven or eight, including 2010 and 2011, when major assets failed in the town. At the time I was at pains to remind the House, and also Yorkshire Water, that sometimes it is the people who pay the bills who are the last to find out when something has gone disastrously wrong.
In 2011, I was in my wellies going from door to door and from street to street, visiting as many places in my constituency as I could. We were under rising water, because our pumping system had completely failed and if our town is not pumped, the water level rises very quickly. Over a period of about 12 to 18 hours, we all saw water levels rising. It was obvious that something had gone very wrong with our pumping system, particularly the big pumping station at Carr lane.
I became very angry when speaking to Yorkshire Water on the telephone, because it was impossible to obtain any answers. The company failed to communicate with residents at the most important time for them—when they were being flooded. Many of those people have medical conditions that require treatment, but power was going off, and there was still no communication. When the local authority, East Riding of Yorkshire council, tried to descend on the site, it was initially warned that it would not be allowed to enter, so it had to invoke its powers. All that was completely unacceptable.
Since then the position has changed significantly, thanks to the outcry from me and from local residents, and I am pleased to say that we have had a completely new experience with Yorkshire Water. The company has invested £3.6 million over the last 18 months to improve our pumping capacity by 20%, and 18 December will see the publication of a flood catchment study which it has funded and has cost a quarter of a million pounds.
That is all great news, but I must nevertheless ask why my residents and my constituency were put in such a position in the first place, given that it had been clear for a number of years that the town’s pumping capacity and the major assets that were meant to protect us were not fit for purpose. Yorkshire Water has tried very hard since then, and I feel very positive about what it has done, but we should not have been put in that position, particularly in view of Yorkshire Water’s dividends. There has been an improvement since 2010—the company’s dividend is now significantly lower in relation to its post-tax profits—but the statistics for 2005, 2006 and 2008-9 were pretty appalling, at the very time when we should have benefited from investment.
Meanwhile, bills were rising in my constituency. The Yorkshire Water household bill, which I pay every year along with other residents, was £264 in 2005. By 2009-10 and 2010-11, when we were under many feet of water owing to that lack of investment and an inability to maintain assets properly, it had risen to £330. Profit for utility companies is something that is established, and I have nothing against it as long as it is accompanied by investment, but the compelling statistics and data presented by my hon. Friend the Member for Dover (Charlie Elphicke) at the beginning of the debate made it clear that all is not well. We need either beefed-up powers for Ofwat, or the creation of further bodies to deal with water companies that are making huge profits while not investing in communities such as mine which are particularly prone to flooding.
Although Yorkshire Water’s profit-to-dividend ratio has improved since 2010, I am afraid that that of Anglian Water is moving in a different direction. I concur with some of the demands Members have made of the Government and the water industry. I hope the Minister will consider introducing new powers to allow companies making excess profits to be ordered to cut bills and to beef up the powers allowing Ofwat to require investment in our infrastructure when these profits are too high. The Government must stand up for consumers.
I was astonished that the hon. Member for Luton South (Gavin Shuker) claimed that because his leader had been making noises about consumer bills, all of a sudden people are concerned about water bills. If the hon. Gentleman had attended past debates or followed what many of us have been doing in our constituencies, he would know we have for many years been complaining about the fact that our constituents are paying more but we are not seeing the return in investment in our infrastructure. I thought that adding that political element to a debate that had generally been consensual was beneath him. In response, I have tried to make a wholly non-partisan speech.
There have been improvements in our area. My hon. Friend the Member for Beverley and Holderness (Mr Stuart), who is present and takes a great interest in these matters, will know of the transfer tunnel created in Hull which has helped to protect the Hull catchment a lot better. In Yorkshire, we have seen investments in the pipe network, which was in an abysmal state before privatisation, with massive leakage. We have also seen investment in my constituency.
Some good stuff has been done under privatisation by Yorkshire Water, Severn Trent and Anglian, but we now need somebody to stand up for the consumer where these companies are not acting as responsibly as they should. I hope the Government will respond to this debate by making sure the powers are in place to ensure these companies act responsibly towards their bill payers, who, after all, provide them with everything they have.
Julian Smith (Skipton and Ripon) (Con)
The cost of living is a major issue in Yorkshire, as it is across the rest of the country. I therefore pay tribute to the Government for acknowledging that we need to deal on every level with the cost of living, and this debate is at the very centre of what we are doing.
The policies the Government have come up with to get every energy consumer on to the lowest tariff are exactly the right thing to do, and I hope the review of green levies and Labour’s £125-worth of green taxes will enable us to reduce energy bills, too. As my hon. Friend the Member for Newbury (Richard Benyon) and my right hon. Friend the Member for Wokingham (Mr Redwood) have said, addressing water bills will be another big step, by making the industry more competitive and ensuring we have a water industry that is fit for the future.
Giving businesses the opportunity to switch will enable big users of water to get the very best deal. It is unfortunate, however, that that opportunity will not be available to the consumer. I agree with my right hon. Friend, who urged the Government to push ahead, where possible, with consumer-led competition. My constituents really have only one option, which is Yorkshire Water, unless they happen to live in Long Preston, near Settle in the western part of my constituency, where they have their own water trust, which enables them to guarantee much lower prices.
I wish to focus on Yorkshire Water because my hon. Friend the Member for Brigg and Goole (Andrew Percy) is correct: Yorkshire Water has done some positive things on infrastructure, and it has also done some good, and some bad, things on flooding, but the financial situation and decisions of Yorkshire Water show that it is exploiting my constituents and people across Yorkshire.
If Members have not read the Yorkshire Water annual report, perhaps I should recap. In 2013 it made an operating profit of £331 million on a turnover of £936 million. Average increases in bills were 6.6% with the average bill being £356. There was a quadrupling of the dividend payment, from £62.3 million to £256 million in the past year. The thing that really sticks in the craw of my constituents is the fact that despite those massive dividends and huge opportunities for its shareholders, Yorkshire Water paid zero tax in the last financial year, and with a highly leveraged balance sheet. When we compare that behaviour with the behaviour of my constituents, the small and micro-businesses throughout my rural constituency, we see that today’s debate and the one we will continue to have about holding the feet of the water companies to the fire is vital.
People will say that Yorkshire Water has done nothing illegal, and it has not, but we thought as Yorkshire MPs that we should take that from the horse’s mouth, so we invited the senior management team down to Westminster. Let me list that team: Kevin Whiteman, the chairman, earns £1,077,000; Richard Flint, the chief executive, earns £1,091,000; Liz Barber, the director of finance and regulation, earns £476,000; and the communications officer earns £165,000.
Frank Dobson
May I urge the hon. Gentleman not to use the word “earns”, because it has a sensation that they deserve the money? The best way to describe it is probably to say that they are “being paid”.
Julian Smith
The right hon. Gentleman’s intervention is very accurate.
Those highly paid—highly compensated—board members showed no contrition about how tough it is at the moment for consumers. They basically said that they would not budge on their stretching of the tax rules to ensure that they paid no tax. We talked about the clause in their commitment to customers where they said that they would be responsible and that they were environmentally and socially engaged, but they just would not listen.
Andrew Percy
These figures are incredible. Does my hon. Friend share my concern that these people are being paid these million-pound salaries but they still have not responded to my request, on behalf of my constituents, to pay compensation to people who were flooded because their assets failed when the company failed to manage them?
Julian Smith
I absolutely do, because the situation is a kick in the teeth from Yorkshire Water to hard-working people in Brigg and Goole.
We asked the management team about their debt standing at 84.5% of regulated capital value at the end of March in contrast to the figure of 56% when the company was acquired. We asked them how they explained their £63 million of shareholder dividends in 2012 quadrupling to £256 million in 2013. We asked them how they could seriously defend, in these tough financial times, a dividend payment of 27.3% of 2013 revenue. We asked them to enlighten us on the risks of having more than £4 billion in debt and what would happen if things went wrong. We asked them how they explained the quagmire of vested and conflicting interests between the different board structures— between investors and the company and the various Yorkshire Water subsidiaries. And we asked them how they could explain the claim in their annual report that these complex financial arrangements led to lower bills for customers, given that bills actually went up by about 7%. The answers were not weak or woolly—they were non-existent.
I welcome the measures that the Government have taken on tax reform and the general anti-avoidance rule. That is a shift from prescriptive rules to a general rule, which is the right thing to do. However, should Her Majesty’s Revenue and Customs really be having to wage an uphill struggle against a monopoly business that is providing customers with one of the most fundamental services and utilities in the world?
The Government have done a lot on tax, but I urge them to go further. I urge them to use things such as the Water Bill to implant exciting and novel policies from the Treasury and look at whether we can taper the level of deductions received for interest charges in corporation tax as shareholders take on more debt. Can we impose a bank levy on debt? Could we look at how to impose a levy payable by shareholders to customers so that the cost is not simply passed on to customers and instead they gain a share themselves?
Somehow, we must stop this limitless offsetting of interest against tax. We should push on with greater competition and consider ensuring that a percentage of profits goes back to customers. We should knock Ofwat about until it works vigorously in the interests of the consumer first, second and third. We should consider everything in the industry and say clearly to companies such as Yorkshire Water, “No. No more. This has to change.” We should shake this industry up from top to bottom.
Thomas Docherty (Dunfermline and West Fife) (Lab)
I am grateful for the opportunity to respond to the debate on behalf of the Opposition, Madam Deputy Speaker, and I apologise for my slight tardiness at the start. I meant no disrespect to the Chair.
I congratulate the hon. Gentlemen on securing this excellent debate, although I suspect that their ministerial colleagues in the Department will be less keen to thank them after hearing some of the issues that they have brought to the House today.
Three and a half years into the life of the Parliament, and with the regulator expected to have completed its price review by the end of next year, it is well worth reviewing the track record of the coalition Government. It is regrettable that, having by general consensus inherited a substantial body of work from the previous Labour Government on how to reform the water industry, the coalition has frittered away so much of the past 40 months. I am at a loss to understand what, if anything, was done in the first year and a half of this Government. When they came to office in 2010, the new ministerial team inherited not one but two reports on the water industry from Anna Walker and Martin Cave. Both reports had been favourably received by consumer groups, customers, regulators, industry commentators and Parliament. The reports, which complemented each other, provided a clear framework for reform. In fact, the only organisations that did not welcome their recommendations were some of the water companies.
It is not surprising that those who were found to have let down their customers—whether domestic, in the public sector or in private business—were the ones who were less than enamoured of the possibility of reform. The stories of poor customer service are legendary—we have heard many such cases today—as are the dividend returns paid out by many of the water companies. The arrogance of the companies has been astonishing. The tax avoidance measures, coupled with a refusal to plough excess profits back into either infrastructure improvements or a lowering of bills, are simply unacceptable.
Even now, when household budgets are continuously squeezed by inflation-busting utility bill increases, many of the water companies show a breathtaking arrogance by refusing to pass back any of their profits to consumers. For example, Thames Water, having recorded eye-watering returns for its investment, now expects hard-pressed customers to foot the cost of the Thames tunnel.
Water companies are some of the most profitable in the utilities sector, earning even more than energy companies. Energy companies make operating profits of approximately 9% whereas water companies make operating profits of approximately 30%. While shareholders have seen their dividends increase, families across the country have suffered. Last year, regional water companies made a pre-tax profit of £1.9 billion, paying out dividends totalling £1.8 billion to shareholders, yet they have not seen the need to pay their fair share in taxes. As The Sunday Times revealed, in 2012-13 Thames Water, which, as we have already discussed, has asked to increase bills by a further 8%, made £127 million of pre-tax profit and paid zero corporation tax.
There are further examples, as we have heard from the hon. Member for Skipton and Ripon (Julian Smith) and others. Yorkshire Water made £184 million and paid no tax, and Southern Water paid just £6.5 million tax on profits of £172 million.
Water companies have been able to reduce their tax liabilities to such tiny levels by substantially increasing their levels of debt. Some water companies have reduced their tax bills by offsetting the interest payments on debt, often inter-company and involving tax havens, while claiming allowances for spending on infrastructure. Shareholders and bosses, as we have heard, have benefited from that aggressive tax avoidance, with eye-watering salaries going to those at the top. Peter Simpson, chief executive of Anglian Water, received a package worth £1.27 million in the last year, up from a mere £1.06 million the year before. The complex nature of tax governance and the growth in debt has been recognised by Jonson Cox, the chairman of Ofwat, who described the ownership of these companies as complex and “opaque” structures.
Thomas Docherty
I will not, because there were so many speakers and we have very little time for the Minister to speak.
Ofwat has highlighted that the overall proportion of equity has diminished from 42.5% in 2006 to 30% of regulatory capital today, with some companies obtaining only one fifth of their financing from equity.
So why the delay in reform? Why has the coalition dragged its feet? Why have the coalition parties seemed so unwilling to champion the household customer, small businesses and the taxpayer? It is because this coalition Government serve the vested interests, not the interests of ordinary Britons. Ministers have done nothing to help hard-pressed small and medium-sized enterprises because they are too busy cosying up to their friends in the City. Labour understands that when small businesses are struggling to survive thanks to the failed economic policies of the Chancellor, the Government should be standing up for them, not their fat cat friends.
After three wasted years, we have no progress on social tariffs for those who are struggling the most and can afford to pay the least; no pressure brought to bear on water companies to adopt permanent solutions to flood insurance, without which hundreds of thousands of families up and down the country face uncertainty; and, as we heard earlier, no substantial progress on water competition—a series of measures that would help our cash-strapped businesses grow our economy.
It has been four months; 16 weeks; one hundred and sixteen days since the Secretary of State met the water companies. Last week, we had the unseemly spectacle of the Prime Minister briefing against his own Ministers and officials as panic set in on the Downing street spin operation, which reacted to the pressure placed on it by my right hon. Friend the Leader of the Opposition, and the Labour party, to stand up to the water companies. We had days of Downing street briefing that action would be taken, either through regulation or by instructing Ofwat to take action on water bills.
In short, we were all anticipating a big announcement from the coalition parties. And in the end, what did we get? A letter. One thousand words. A missive to the water companies from a Mr Paterson, of North Shropshire, which said, in effect: “Dear chief executive, Thanks for coming along in July for cream tea; our last discussion was so riveting that I clean forgot to write about it until now! I know that times are awfully hard for you at the moment, with your offshore investors demanding an even greater return on their money than last year, but it would be awfully splendid, as we’re all such good chaps, if you could not put your bills up by quite as much next year as you were thinking about doing. It would really help me out of this political pickle the Prime Minister has put me in, and I know that you’re all such good eggs. Best wishes, Mr Paterson.”
The Secretary of State’s letter is clear evidence that the Government do not understand the cost of living crisis here in Britain today. For 39 out of 40 months under this coalition, prices have risen faster than salaries. Until this weekend, water bills were not a priority for the Prime Minister or the Department. After three and a half squandered years, a hastily cobbled together statement of vague promises of future action is simply not enough. It is clear that the Prime Minister is unwilling or unable to stand up to the vested interests that have placed the needs of offshore tax haven investors ahead of those of hard-pressed householders and businesses.
Families deserve better than this; small businesses deserve better than this; Britain deserves better than this. Since privatisation in 1989, water bills have increased by almost 50% in real terms. The Secretary of State has the guile to call the water industry one of the great successes of privatisation. Madam Deputy Speaker, it is only a success story if you are fortunate enough to own shares in one of those companies.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)
This has been a fascinating debate. Contrary to what the hon. Member for Dunfermline and West Fife (Thomas Docherty) just said about my attitude, I welcome the debate. It is a foretaste of the discussions that we will have on Second Reading of the Water Bill and in Committee and subsequent stages.
Today’s debate has been a useful opportunity for hon. Members to raise a range of issues such as affordability and the practices of water companies, and also local issues such as flooding, development and the history of water supply going back to the locally owned water provision that the right hon. Member for Holborn and St Pancras (Frank Dobson) spoke about. I will come back to some of the comments of the hon. Member for Dunfermline and West Fife. It is a great shame that he finished off his speech as he did. He knows quite a bit about these issues and enjoyed dealing with them in the Select Committee. He should have written the speech himself, instead of giving a speech that was written for him. He could have done much better himself.
Dan Rogerson
The hon. Gentleman did not take interventions, so I shall follow his lead and try to respond to some of the issues raised in the debate. We will have plenty of opportunity to come back to his comments.
I congratulate the hon. Member for Dover (Charlie Elphicke) on leading the charge to secure the debate. He wanted to send a clear message to Ofwat and particularly to the water companies that consumers expect more now. They want a fairer deal to cope with the cost of living and to reflect the fact that the water companies have had some good years. They have had much lower borrowing costs in recent years than was predicted when those prices were set. The hon. Gentleman is looking for some flexibility during the current price review period for those issues to be taken on board.
Clearly, that is a matter for the regulator. Ofwat is being far more assertive in the message that it is sending to the water companies. It has the power to revisit the current price settlement, but in particular circumstances. Ofwat’s discussions with water companies are obviously focused on the coming price review period. It will want to see whether water companies come forward with any suggestions. As my right hon. Friend the Secretary of State pointed out in his letter to the water companies, they are in far better circumstances than were predicted at the beginning of the current period. As a Government, we are supporting Ofwat and providing political cover. If Ofwat is looking for a deal from water companies that more accurately reflects current circumstances, it has the political back-up to do that. I welcome the signs that Ofwat is indeed doing that.
The issues surrounding investment are crucial. The right hon. Member for Holborn and St Pancras spoke about the simple business of a couple of pipes in the ground catching the rain water and sending it on. That was the case once upon a time. There are also the issues of what happens—how can I put this delicately?—after the water has been consumed by the consumer. What used to happen is that a pipe would be installed, as I know all too well, representing a coastal constituency, and the waste would drift out into the Atlantic ocean. That is not acceptable now and we expect a far better standard of treatment for sewage and better solutions to deal with the problems. That is why we have much better bathing water quality than we used to have.
Dan Rogerson
I will not give way. I accept what the right hon. Gentleman says about what he considers simple problems. Yes, we want the water companies to do better on price, but we also want them to continue investing and improving. We have a responsibility to deliver better environmental quality. We have seen improvement in that but we want it to go much further, so we want the investment to continue. We will have the opportunity to consider some of these issues on Second Reading of the Bill, so perhaps we can come back to the more technical issues at that point. I know that hon. Members on both sides of the House will want to engage with me in the run-up to that and I look forward to some informal discussions, as well as the discussions on Second Reading.
I pay tribute to my ministerial predecessor, my hon. Friend the Member for Newbury (Richard Benyon)—he is not currently in his place—who did a huge amount of work to get us where we are. Some Opposition Members claimed that nothing has happened over the past three years, but nothing happened over the 13 years they were in office, other than reviews. Her Majesty’s Opposition seem to stake their reputation on a number of reviews, but they did nothing on the back of them. This Government will look at that work and the evidence provided and do something, such as dealing with the inequality in the south-west and the problems people there face, which Anna Walker looked at, and the issue raised by the Cave review, which looked at the water industry as a whole. This Government are taking action.
The Government are also looking at flood insurance, because the previous Government left the clock ticking on an agreement that was about to evaporate. We have negotiated something that will now be delivered in a Bill. I pay tribute to my hon. Friend the Member for Newbury for being at the forefront of delivering that settlement. We look forward to debating that as we take the Bill through the House.
The hon. Member for South Swindon (Mr Buckland) talked about leakages. He said that although water companies have improved, they could do much better and there is still a long way to go. I absolutely agree. The important point is that we still see companies investing in the infrastructure to put it right and get a better solution to the problems. That is why in all our discussions on price we must ensure that we get the balance right so that we can continue to see that investment.
We heard an interesting exchange between the hon. Member for South Swindon and the hon. Member for Dunfermline and West Fife on household disconnections. It was not clear to me whether the hon. Member for Dunfermline and West Fife was recommending that water companies should have that power. I hope that that was not the case, because it is certainly not something the Government want to reopen.
Dan Rogerson
I am pleased to see that is not something the hon. Gentleman wants, because we certainly do not.
We hope to see some benefits through retail competition, but we want to do that carefully. This is a huge area of reform and a big change. That might slightly disappoint the right hon. Member for Wokingham (Mr Redwood), who looks forward to a time when there will be an ample supply of water for everybody to enjoy in all sorts of ways and when we will not have such nasty things as metering and restrictions. There are other reasons for metering which relate to energy use and environmental concerns, because whatever we do to reform the retail side will not suddenly and hugely increase the amount of water. We will work on abstraction reform and encouraging new people into supply, but that does not necessarily mean we want to abandon our commitment to using the water we have efficiently and managing our resources effectively.
However, I accept what the right hon. Gentleman said about the challenges monopolies present, which is why we want first to move towards allowing businesses, charities and so on to have the benefit of competition. We also want them to look at how they can simplify, so that businesses with many sites across the country, for example, can have one unified bill. That would be a huge saving for them and would allow far more transparency, rather than having separate bills for every site.
A number of hon. Members mentioned the tax situation and financing. Some of those points are for the Treasury, rather than me, but they have had the chance to put them firmly on the record. Many of them have been campaigning on that outside this place, which I know they will continue. I know that Ofwat is listening to that carefully. One of the things it is keen to do with water companies is look at how it regulates to encourage transparency and overcome opaqueness, which relates to what Jonson Cox has said. The companies that take a more responsible attitude to engaging with consumers, feeding back their information and being open about what they do can be regulated in a way that reflects that, and those that refuse to engage with that progress will be the ones that Ofwat will want to investigate much more closely and have close conversations with in future. That is the sort of approach that I very much welcome. Having mentioned Ofwat a number of times, I should also pay tribute to the Consumer Council for Water for its work as the voice of the consumer, which has not been mentioned in the debate so far.
Several hon. Members raised the issue of bad debt, and I am pleased about that. We have been very clear that we want the companies that have done less well on that to look to the examples of those that have done much better in offering a better deal, and to try to build on that work.
The hon. Member for Elmet and Rothwell (Alec Shelbrooke) talked about development issues. Water companies have the opportunity to have an input into that process, but so does the Environment Agency in relation to flooding, and that is important. We want to see housing growth in the economy and investment in housing for people who are desperate to get on to the housing ladder or, indeed, to rent. We have to get the right balance in that process.
My right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) posed a number of challenges and raised detailed issues that I am happy to discuss with him as we move towards the Second Reading of the Water Bill and its progress into Committee.
The hon. Member for Brigg and Goole (Andrew Percy) raised issues about flooding and infrastructure investment. It is important that we encourage companies to continue to invest to overcome these problems at the same time as bearing down on price. The hon. Member for Skipton and Ripon (Julian Smith) talked about transparency and the tax framework. He also noted that some consumers feel that they have very little voice in what is being done with the money that they hand over to the water companies in their bills. Ofwat is taking a much tougher line on this, and I welcome that.
Our approach in the Water Bill is to look to update the structure of the industry to deal with some of the problems we have heard about, but not to try to step in and do what Ofwat is there to do. It is the regulator, and, as my hon. Friend the Member for Newbury said, it will regulate. We will therefore make sure that there are opportunities for it to make any proposals that it thinks will improve the Bill. If there are things we are not doing in primary legislation or it wishes to see change, it will be able to get involved in and develop those things without having to come back to this House or the other place.
The Government’s approach to this issue is a responsible one. Knee-jerk reactions that undermine the strengths of the regulatory system could be immensely damaging. A stable, independent regulatory system is vital in keeping bills affordable. Small changes to the industry’s financing costs can have a significant impact on customers’ bills. In that context, I reiterate my strong support for Ofwat’s drive to secure efficiencies and improvements through the price review and other measures that will allow us to keep customers’ bills as low as possible while ensuring that we can continue to attract significant, low-cost investment in the sector.
I thank hon. Members for bringing this issue to the attention of the House. The interest and passion expressed by Members displayed the importance that we all place on the matter, and I assure them that it continues to receive the highest level of attention from the Government. We will return to many of these important aspects of the industry as we move towards the Second Reading of the Water Bill in due course.
Charlie Elphicke
This has been an excellent debate. In particular, we heard a very fine speech by my hon. Friend the Member for Newbury (Richard Benyon), who was an outstanding Water Minister and served with distinction. It was interesting that we had the old left-right battle, with the right hon. Member for Holborn and St Pancras (Frank Dobson) saying, “Up nationalisation”, while others, such as my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Newbury, championed what private investment can achieve.
Many Members, including the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) and my hon. Friend the Member for South Swindon (Mr Buckland), expressed concern about Thames Water, particularly its tideway tunnel. Yorkshire MPs, including my hon. Friends the Members for Brigg and Goole (Andrew Percy), for Skipton and Ripon (Julian Smith) and for Elmet and Rothwell (Alec Shelbrooke), noted that Yorkshire Water could do better, as its school report might say. I was fascinated by the speech of the hon. Member for Luton South (Gavin Shuker), who was until recently the shadow Minister; he spoke with great passion about social tariffs.
I thank Front Benchers on both sides of the House for foreshadowing the Water Bill debates; it was fascinating to watch a dry run. The shadow Minister, the hon. Member for Dunfermline and West Fife (Thomas Docherty), took the somewhat Maoist approach that 2010 was year zero, and the Minister explained the Government’s direction. I hope that the Government have listened to this debate and will consider the matter further.
Question put and agreed to.
Resolved,
That this House has considered reform and infrastructure of the water industry and consumers’ bills.
Alison Seabeck (Plymouth, Moor View) (Lab)
On a point of order, Madam Deputy Speaker. In the past hour the BBC has been reporting more than 1,000 job losses in UK shipyards. If correct, that has major implications for families up and down the country and in particular for our sovereign capability and skills retention. Has the Secretary of State for Defence given any indication that he intends to give a statement to the House?
Madam Deputy Speaker (Dawn Primarolo)
As the hon. Lady will know, that is not a point of order. If she wants to pursue the matter, I am sure she is already considering the options open to her during the next parliamentary day. We will not deal with it now and we will certainly not deal with it through the Chair.
Bullying (School Transport)
(11 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Annette Brooke (Mid Dorset and North Poole) (LD)
On 12 December 2006, 11-year-old Ben took his own life after being persistently bullied on a dedicated school bus in Sussex. The bullying incidents were reported on a number of occasions, but still the end result was this dreadful tragedy. Had it just been his peers he may well have withstood the bullying, but the bus driver decided to join in and, in his parents’ view, this took the situation to another level. As Ben saw it, here was an adult—someone to look up to and who represented authority—taking part in his denigration. Ben’s parents have since moved to my constituency and I have met his father on many occasions. Over the years, Mr Paul Vodden has spent an enormous amount of time working with charities associated with protecting children from bullying and he met a children’s Minister with me during the previous Government’s time in office.
In 2010, a year after the publication of Government guidance on tackling bullying on journeys to and from school, a survey carried out by 4Children and me showed that the majority of local authorities did not have a safer travel policy in place. The survey found that out of 67 local authorities, 60% did not have a safer travel policy and 52% did not have a safer travel team. Of those local authorities that did have a safer travel policy, only 50% said it covered all forms of bullying and only 38% said it covered all forms of journey.
The chief executive of 4Children said that the implementation of anti-bullying policies outside the school gates has been slow, with many local agencies still not working together as well as they could. Mr Vodden said:
“In my opinion, this incident represents a small tip to a very large iceberg of misery for many children who have a hard time on their way to and from school on dedicated school buses. In what other situation would we expect an untrained and unqualified adult to be in sole charge of 50 or more children and to do another complex task at the same time”?
This August, Mr Vodden completed his report on his own online survey to assess bullying on dedicated school buses. The aim of his survey is to attempt to determine the extent of bullying on those buses and the involvement, if any, of drivers. The report demonstrates that a number of problems still exist and they need to be urgently addressed. I have sent the Minister details of the methodology used by Mr Vodden and today I want to look at his conclusions.
The situation on the dedicated school bus is, by its nature, potentially problematic as far as bullying is concerned. Children are placed on a school bus in a group, the composition of which they have no choice over. There is no formal supervision and virtually no opportunity of avoiding conflict situations. In other social situations, such as during playground play, there is at least the potential of formal supervision by a teacher, access to supportive peers and the opportunity of escaping unpleasant situations. However, as we know, even in the playground, bullying is not easily avoided.
Mr Vodden’s survey aims to be a realistic snapshot of what is happening on dedicated school buses and a general indication of the effects and consequences of bullying in general. Although the intention of the survey was to focus on the dedicated school bus, anecdotal evidence suggests that the situation is not much better on public service buses.
To put the level of responses in context, it should be noted that bullied children feel that making an issue of bullying could make matters worse. Although the children ought to feel safe because they are anonymous for the purposes of the survey, the responses indicate that they still feel vulnerable. It is also common for such children to have low self-esteem, which makes them feel that the bullying is their fault and that no one will think that they are worth bothering with.
The responses to the survey indicate that there is a significant problem with bullying on dedicated school buses. That has had serious consequences for many of the bullied children. Thirty respondents reported self-harming, 24 considered suicide and 97 just wanted to hide away. Fear, anger and embarrassment were also significant reactions, which adds to the concerns.
The survey indicates that most bullying on the school bus starts when the student commences secondary school in year 7. One hundred and two respondents said that the bullying started in that year, which is 40% of the respondents. Children in the top year of primary school are confident of where they fit within the school and of their peer group. Moving to secondary school puts them at the bottom of the pile, with all the pressures and insecurities that that engenders. The move from year 6 in primary school to year 7 in secondary school should therefore be recognised as a time of particular vulnerability. That vulnerability is compounded by the fact that children are often moving from a small primary school where they know most of their fellow students to a much larger secondary school with many more pupils, perhaps from a greater variety of social groups. That is a particularly interesting finding and something that could easily be cross-referenced with other research. I wonder whether the Minister has further evidence on that point. We know that school transition can be difficult in many other respects.
Mr Vodden concludes that it is clear that the role of the driver is significant. Only four drivers were recorded as taking action to alleviate bullying, whereas 41 were reported as taking no action, even when many of them were reported as knowing what was going on. A worrying 17 drivers were reported as joining in.
Only six respondents knew about the safer travel policy. Although 69 respondents knew that their school had an anti-bullying policy, it is worrying that an almost equal number did not. A significant number of respondents did not know who to turn to in the event of bullying or whether the school had any systems in place to deal with bullying. That might indicate that the school did not have an effective system in place, if any. Although a few respondents reported that support was forthcoming from the school and that practical, effective action was taken, a large majority reported that they received little help from school staff. When help was provided, it was generally found to be ineffectual.
That part of the analysis shows how patchy anti-bullying policies are across schools. I have seen some excellent examples of good practice in schools in my constituency. It is clearly necessary to ensure that good practice is spread. There is also a question over how much leadership there is from the local authority and over what is happening in academies and free schools. ChildLine and other helplines are important because they allow children to discuss bullying, but children are still highly likely to need practical support from their school. Good mentoring from older pupils can be particularly useful in helping children to overcome their reluctance to talk to adults.
My husband recently led a working party on anti-bullying policies across Poole. He concluded that the local authority needs to promote wider discussions with schools to help them understand bullying and must give schools greater assistance in dealing with individual cases. He found that governors need to develop a more proactive role and challenge or encourage their schools to develop and implement anti-bullying policies. He said that partnership working must be developed in conjunction with the expansion of an anti-bullying programme, which could provide for the greater inclusion of parents. It is interesting that that separate piece of work came up with the same areas where more needs to be done.
Mr Vodden’s survey shows that bullying takes place on dedicated school buses and that it involves both verbal and physical abuse such as spitting, punching, slapping and pushing. He concludes that, apart from some notable exceptions, bullying on school buses is clearly an area of child vulnerability that has received insufficient attention. In what other situation are as many as 50 or more children forcibly restricted in a confined space for up to an hour, with a single, untrained adult present, who is undertaking a separate task that requires their full attention? When students are taken on school outings, the ratio of adults to students is strictly controlled and there are always a number of helpers.
Drivers of school buses, whether public service routes or dedicated school services, are recruited on account of their training, qualifications and ability to drive a bus. I make a plea for a requirement for some training for people who drive a bus with those vulnerable pupils. As a minimum safeguard, most local education authorities of course require drivers of dedicated school buses to undergo a Criminal Records Bureau check, but additional training and assessment is needed to ensure that such drivers are able to relate to children and equipped to deal with the childish behaviour that is bound to happen. The findings of the survey indicate that there is a risk of school bus drivers reacting inappropriately towards the young people in their charge. At best they may fail to notice or to report peer bullying, thus leaving vulnerable children without a responsible adult to turn to. At worst, either through ignorance or wilful intent, they may themselves take part in acts of bullying.
Mr Vodden asks whether the driver of a bus can reasonably and safely be expected to monitor children’s behaviour while giving their full attention to the serious undertaking of driving. If not the driver, however, where is the “responsible adult” who can intervene to safeguard children from bullying during their daily journey to and from school? That question requires an urgent and unequivocal answer.
The psychological effects of bullying on children are potentially long term and significant even in the short term. It seems from the responses given in this survey by victims of bullying that a number of schools do not adequately understand the complex nature of bullying, and appear unclear how to deal with it. The responses indicate a lack of joined-up thinking between the relevant agencies when dealing with bullying, and an absence of a coherent strategy or clear procedures. Schools are required to enforce measures that will encourage good behaviour and prevent all forms of bullying, including the provision of an anti-bullying policy, but the results of the survey indicate that in many cases that is not properly implemented. Even when systems are in place to deal with bullying, they may be ineffective.
Owing to the complex nature of bullying and the varying needs of both the victims and the bullies, it is essential that any procedure for identifying or dealing with bullying should be flexible and applied specifically to the individuals involved. It is self-evident that children—like the rest of us—are individuals and must be dealt with as such. Any procedure must be efficient and effective to alleviate the bullying without delay. It is important to assess accurately what is taking place, but it is potentially risky to undertake a painstaking investigation before taking speedy action.
Mr Vodden’s conclusions and recommendations include a properly trained adult or “chaperone” other than the bus driver to be provided for all dedicated school buses, particularly on longer journeys, and that all dedicated school bus drivers be given appropriate training in how to behave when dealing with children, how to respond in the event of bullying, and how to avoid becoming involved in the bullying itself—I have asked the previous Schools Minister about that issue on a number of occasions. Mr Vodden recommends that all dedicated school bus drivers should be assessed as suitable and safe to transport children; that it should be made clear to all which agencies and individuals are directly responsible for resolving incidents on the school bus; and that those individuals must be properly trained. In Ben’s case, the parents went to the school repeatedly, but nothing happened as far as the bus journey was concerned. It is so easy to separate school departments from transport departments at local authority level.
Mr Vodden also recommends that a professional body of experts and practitioners in child behaviour should be created to set up and frequently monitor a national procedure for assessing and dealing with bullying. That should be flexible and take into account individual requirements. Every school should have in place an efficient, effective and up-to-date procedure for dealing with bullying, ideally including peer mentoring schemes with proper pastoral care for students.
Clearly, this survey has been carried out in response to a heartbreaking tragedy and a father’s passion to try to ensure that better support is given to children like Ben who suffered so much. Seven years on, many improvements could still be made. I commend the whole piece of work—the survey—to the Minister. There is scope to cross-reference with other pieces of research to come up with further ideas to build on the good work that the Department for Education already supports. I should like to request a meeting with the Minister and Mr Vodden to discuss that further.
A number of charities do excellent work for bullied children, and I thank all of them. Mr Vodden specifically mentions the anti-bullying ambassadors scheme operated by the Diana Award—a cheap and highly effective system for implementing peer mentoring in schools—and the counselling work undertaken by Kidscape, and says they are of particular value in dealing with children in extreme cases of bullying. However, all hon. Members know that bullying happens and will continue to happen. The worst situation is when a school suggests that no bullying takes place, because it is most likely to be happening somewhere. We must face up to the problem and not believe that school transport, as something that happens outside the school, is nothing to do with the teacher in charge of bullying policy, and the governors, who must support the school’s anti-bullying policy. Let us ensure that everybody pulls together so we can do our very best to avoid tragedies such as Ben’s.
The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)
I congratulate my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) on the powerful case she has made concerning bullying on school transport. Bullying in any form and for any reason is totally unacceptable and should never be tolerated. It can instil fear, damage self-esteem and reduce academic attainment. Sadly, it can lead to the most tragic consequences.
I am aware of the case of Ben Vodden—the son of my hon. Friend’s constituent, Mr Paul Vodden—who sadly took his own life following bullying on school transport. I very much admire the fact that, since the tragedy, Mr Vodden has devoted time and energy to looking into this issue with a view to ensuring that no other children and their families suffer in the same way. I know that bullying is very high on the list of parents’ concerns about education and children going to school.
I should like to set out the Government’s approach to tackling bullying in and around school. Children and young people can be bullied in and out of school, and on the way to and from school. To tackle bullying successfully, the whole community and all those who provide services that include children and young people need to work together to change the culture, so that all forms of bullying are unacceptable.
Being victimised restricts a group’s or child’s use of their area’s amenities, such as parks, playgrounds and leisure facilities, and can lead to one group gradually dominating a territory. For example, some children do not play outdoors because they are scared of being bullied. Whether children are in groups, clubs or residential care, on the streets, in parks, or using public or school transport, they should feel safe from victimisation and discrimination.
As my hon. Friend has pointed out, local authorities, local safeguarding children boards, the police, schools and parents all have a role to play by intervening to prevent and to respond to bullying. Local authorities have a duty to safeguard and promote the welfare of children under the Children Act 2004, which includes tackling bullying. Authorities can develop their own approaches to tackling bullying, including by employing dedicated staff such as anti-bullying co-ordinators, or by commissioning support from the voluntary and community sector. It is important to recognise that different solutions may be appropriate in different locations, and that local authorities have a responsibility to deliver those solutions.
When contracting to provide school transport, local authorities can instruct companies to include anti-bullying procedures as part of their tenders. I strongly urge them to do so. No doubt they, like me, will be interested in Mr Vodden’s recommendations in developing their policies. Only by taking collective responsibility will we be able to eradicate poor behaviour in our schools and wider communities.
I recognise that the majority of pupils travel by public transport that is provided by private companies. It is for those companies to determine the training of their staff. Responsible providers of any service, whether a private company, a charity or the state, should take into account its interactions with young people and other vulnerable groups when developing safety policies, and they should act when they encounter bullying. Members of the public not directly involved with schools or services for children have a responsibility to play their part in keeping children safe and reporting poor behaviour, in the wider interests of the community. It is important that we all take responsibility for dealing with this scourge in our society.
Bullying is not a specific criminal offence in the UK, although in some circumstances it can constitute a criminal offence: for example, under the Protection from Harassment Act 1997, the Malicious Communications Act 1998, the Communications Act 2003 and the Public Order Act 1986. The Home Office’s Anti-social Behaviour, Crime and Policing Bill, which is currently working its way through Parliament, contains provisions allowing a range of bodies—including the police, local councils and other agencies—to apply for an injunction to prevent nuisance and annoyance in order to tackle antisocial behaviour. The injunction is designed to stop or prevent behaviour whereby someone has engaged, or threatens to engage, in conduct capable of causing nuisance or annoyance to any person. Bullying is a behaviour that could fall into that category. The injunction could be used to stop emerging antisocial behaviour before it escalates, and to protect victims from bullying in and around schools and colleges and in the community, and from cyber-bullying. For example, the injunction could stop a perpetrator associating with the victim outside of school or college, or from entering named areas in the community.
Schools have a key part to play in preventing and tackling bullying. Behaviour and bullying are closely linked. All schools must have a behaviour policy, with measures to prevent bullying. It is up to them to develop their own strategies, but they are now clearly held to account for their effectiveness in doing so by Ofsted. The number of criteria in the Ofsted inspections framework has been reduced from 27 to four. Of the four that remain, one is behaviour and safety, which requires school inspectors to take into account bullying, harassment and discrimination. We have made that criterion a core part of the inspection regime.
To ensure that teachers have the powers they need to maintain discipline and enforce school rules, the Government have introduced a number of reforms, including stronger powers to search pupils, the removal of the requirement to give parents 24 hours’ written notice of after-school detentions, and a clarification of teachers’ power to use reasonable force. Schools that excel at tackling bullying have created an ethos of good behaviour where pupils treat one another, and school staff, with respect, because they know it is the right way to behave. The best schools develop a more sophisticated approach whereby school staff proactively gather intelligence on issues between pupils before they become a problem: they prevent bullying from occurring in the first place. That might involve talking to pupils about issues of perceived difference in lessons, in dedicated events or projects, and in assemblies.
My hon. Friend made a very good point about the transition from primary school to secondary school, not just with regard to academic attainment, but to confidence and how pupils fit into a new school. That needs to be explored. In general, we are concerned about that transition.
Successful schools involve parents to ensure that they are clear that the school does not tolerate bullying and that they are aware of the procedures to follow if they believe their child is being bullied. They involve pupils, so that pupils understand the school’s approach. They regularly evaluate and update their approach to take into account developments in technology—for example, the role of computers and social media. They implement disciplinary sanctions, so that the consequences of bullying reflect the serious nature of the incident, and they have open discussions about perceived differences before they become problematic. It is important that schools work with the wider community, including the police and children’s services.
We acknowledge that tackling bullying outside school is challenging, but we have been clear that teachers have the power to discipline pupils for poor behaviour, including bullying outside the school gates. Where bullying outside school is reported to school staff, it should be investigated and acted upon. If the misbehaviour could be criminal or poses a serious threat to a child or another member of the public, the police should be informed. The Department has issued advice to help schools prevent and tackle bulling, making it clear that teachers have the power to discipline pupils for bullying incidents on school and public transport and on the journey to and from school, when it is brought to their attention.
I agree completely with my hon. Friend about the excellent organisations working in this area, some of which the Department funds. We are providing four organisations with £4 million over two years from spring 2013. First, we are giving £800,000 to The Diana Award to identify and train 10,000 pupils as anti-bullying ambassadors. I recently met representatives from The Diana Award and year-11 student Henry Doran, an anti-bullying ambassador at the Magna Carta school in Surrey. I was incredibly impressed by what Henry told me about how they had created a much more positive culture within the school and how he enjoyed his role helping the other children. At a recent reception in Downing street celebrating that impressive programme, I was told about the smile and compliment days—I said I thought it would be good for us to have them in Westminster sometimes. It is a really good project. What is nice is that it accentuates the positive—it is the opposite of a bullying culture—creating a positive culture in which people compliment each other and focus on their similarities and strengths, rather than the issues dividing them. That is very good.
Secondly, we are giving just over £250,000 to Kidscape to work in nine of London’s most economically deprived boroughs to train primary school professionals to deliver preventive and remedial strategies. Thirdly, we are giving £1.5 million to Beatbullying to train 3,500 11 to 17-year-olds over two years. Fourthly, we are giving £1.5 million to the National Children’s Bureau consortium to focus on bullied children and young people with special educational needs and/or disabilities, working with 900 schools and with parents, carers and school staff to reduce the bullying of these children and the impact when it occurs.
As we have heard, bullying can blight the lives of young people and result in tragic consequences. We do not want other children and their families to suffer as Ben Vodden and his family have suffered. We all have a part to play in helping to prevent and tackle bullying wherever it occurs—whether in the school, the wider community or on school transport—to ensure that no children have to suffer mistreatment. My hon. Friend asked if I would meet her and Mr Vodden. I would be happy to do so in order better to understand the issues at a local authority level: what prevents local authorities from using their powers to make changes—she mentioned the survey—and how we can ensure that good programmes, such as the anti-bullying ambassador programme, become more widespread in our schools. That will help us to change the culture in our schools and create a positive environment where learning can take place.
Question put and agreed to.