Grand Committee
(10 years, 11 months ago)
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Pensions Bill
(10 years, 11 months ago)
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The Deputy Chairman of Committees (Lord Skelmersdale)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 27: State pension credit: phasing out assessed income periods
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, the purpose of this clause is to provide for the abolition of the assessed income period in pension credit cases from April 2016. I will just add that I was most welcoming of the reinforcements I had temporarily.
The assessed income period removes the requirement for certain people to notify the department of changes to their retirement provision for a defined period. The assumption when the assessed income periods were introduced in 2003 was that pensioners were more likely to have relatively stable incomes and capital, so a lighter touch to reviews was therefore considered appropriate as a way to minimise intrusion and ease the administrative process.
The logic behind the policy is clear, but operating the system over the past 10 years has shown the reality to be somewhat different. The operation of assessed income periods has proved to be more complex and intrusive for both staff and the individual than anticipated. For example, people can report a change during an AIP and, as a result, their award can be increased. However, because we have to look again at all of their retirement provision, not just the reported change itself, it does not always lead to a change in the award. This is nugatory work for the Pension Service and is confusing for recipients.
More importantly, our assumptions about the stability of pensioners’ incomes and capital have not stood the test of time. Our analysis shows that circumstances change and fixing retirement provision for such a long period leads to inaccuracies in benefit awards, which then remain in the system for some time. Based on a sample of around 100,000 cases that have been reviewed, the pension credit award required updating in 54% of them, and in 36% of cases the award was reduced.
In the current economic climate, we believe it is right that benefit awards reflect the individual’s current financial circumstances. We therefore propose to abolish assessed income periods by removing them for new claimants and phasing out existing fixed-term ones from April 2016. It is estimated that this measure will result in steady-state savings in AME of around £80 million per year in the long term. We recognise that removing assessed income periods will require pension credit recipients to report relevant changes when they occur—however, this will not necessarily result in increased levels of contact for all recipients.
We will be working with stakeholders and partners on communications products to ensure that people are clear about what this change means and what they will need to report and when. For example, there will be no need to report changes in capital provided it remains below £10,000. Currently, only 12% of recipients—around 290,000—have capital above that level. Above £10,000, changes are only relevant where they cross £500 bands. Annual increases in pensions will be taken into account automatically, as now, so only new income streams will need to be reported. It is also worth remembering that the impact of reporting changes will depend on individual circumstances and that not all will lose out. Some may see an increase in their award, while some may not experience any change at all.
Pension credit is a safety-net benefit designed to help the poorest pensioners, and as such it is right that it takes account of the income and capital people have access to. Through the abolition of the assessed income period, we will ensure that pension credit awards are accurate and that, in future, our limited resources are spent on those who require the most support. I beg to move that Clause 27 stand part of the Bill.
Baroness Hollis of Heigham (Lab)
My Lords, I thank the Minister for his explanation of this clause. I would like to explain why I and my noble friend Lord McKenzie have raised this on the stand part debate so we can discuss the issues. As the Minister said, this clause proposes to abolish the current assessed income periods for pensioners claiming pension credit. At the moment, pensioners are means-tested for pension credit at their retirement at 65; then at 70; then again at 75 and not thereafter. I am genuinely surprised and, actually, disappointed that the Government want to make a quick saving of £82 million gross—as the Minister said—or some £60 million-odd or £65 million or so net by introducing annual means testing, although excepting current pensioners over 75 who may be in receipt. It will affect 1 million pensioners a year up to 2020.
Why do we have the current rules? My noble friend Lord McKenzie was instrumental in further enlarging and developing them in 2008. Very wise he was, and very good they were—of course. I hope Hansard records the “Hear, hears” to that. In particular, he introduced the indefinite assessed income period for no means-testing for those reaching 75. In my mind, that was a most important consideration, the one I am most concerned about. Essentially, we know that pensioners loathe means-testing so much that—either through ignorance or stigma—a third do not now claim that to which they are entitled. Those eligible non-recipients are missing out on something like a mean average of £34 a week. That is an average loss of £34 a week, an income that would transform their circumstances.
More means-testing, which is what the Government are proposing, will not, given this strategy, bring more pensioners in, but will deter even more pensioners from claiming what they should. That is why I am so pleased that we are extracting means-testing out of the new state pension, as the former Pensions Commission recommended when considering the old pension. I was pleased that we were removing it from the new state pension, only to find that the Government are foolishly importing it back in again and extending it through annual means tests, rather than five-yearly ones, in pension credit to make a quick buck. Therefore, those who get the more generous pension in future will escape the means test; the older, poorer pensioners—mainly women—will be subject to even more of it. I think that is wrong.
Why was means-testing for pensioners under my noble friend Lord McKenzie carried out with a light touch? It was essentially because pensioners’ income is pretty well stable in their retirement years. The three major events which are likely to affect their entitlement are, first, the death of their spouse. When he dies—and it is, alas, usually “him” ahead of “her”—his modest pension, if it is a single-life pension which two-thirds of them are, dies with him. That is why it is elderly widows who most need pension credit. The second major event is that they may, rarely, get a small legacy—say, from the death of an unmarried sibling. The third is that they may have to move into residential care.
Such big events should be reported, and I have no objection to reinforcing that and making it clear that capital from, say, a generous legacy of more than £10,000 or £15,000, acquired before 75, should be reported. I do not have a problem with that. Apart from that, a five-year check will discover not just whether pensioners are getting too much, which is rare, but sometimes whether they are getting too little. I do not think we have recently had much in the way of a take-up campaign—funny, that.
Now the Government are going to produce annual means tests, and the Bill team—I thank it for this—very helpfully sent me the best statistics we currently have, which show that twice as many people will lose under annual means-testing as will gain. The Government will not make their savings primarily because people are receiving too much, although some money may come from that and will be clawed back, and so on. No, if the Minister will actually make a saving, it will come from pensioners who should get it not claiming, and certainly not annually. The department has a lot of literature, which is entirely decent, about the problems of the means-testing, which informed the new state pension. It was absolutely right to do so, and yet it seems to be ignoring it in its efforts to make a quick £65 million or so saving from the poorest pensioners.
The Minister and his team will so increase the stigma of means-tested pension credit—with people annually reminded that they are suspected of error, if not downright fraud—that more of the poorest pensioners will slip down the snake of further poverty. Pensioners do not cheat on pension credit, but this proposal suggests that they do. Let us not have any spin about increased take-up as a result. This is about savings and nothing more, and I do not think it is decent.
The Government boast of their reduction in means-testing for the new state pension, while quietly importing a massive extension of means-testing for those not joining the sunny uplands of the full new state pension. They are deliberately widening the gap between those who will get the new pension, and those who cannot on grounds of age. Poorer pensioners will be worse off simply because they are a day older or a year older than other pensioners who are eligible for the new state pension.
Single people who are on pension credit because they are on the wrong side of that cliff edge will have £30 of pension credit added to their BSP of £111, giving them a total income of some £140. However, if they acquire any capital savings over £10,000, they will find them means-tested. In some cases they will then lose every penny of pension credit. Meanwhile, other pensioners, who are a day or a year younger, will get their more generous pension of £144, and will also keep every penny of savings they may have or acquire because we rightly float them off pension credit, and all credit to the Government for that.
The older and poorer start to lose if they have any savings over £10,000, so there is not an incentive to save. Yet pensioners a day younger not only have a higher pension, but their savings are not taken into account at all. This problem will of course be made worse by the loss of savings credit. Is this fair? Far from increasing means-testing for the poorest group, in my view the Government should do exactly the opposite. They should reduce means-testing to achieve greater fairness for pensioners who are being penalised for nothing but their age. That would give less of a cliff edge, and more equity between the two groups of pensioners who are divided by one day. It really is shameful to import an unnecessary cliff edge for trivial government savings, and it is also perverse.
Since my noble friend Lord McKenzie wisely reviewed AIPs, there have been huge cuts in domiciliary support for the elderly from social services. Mr Pickles has cut local government budgets by 35%, and inevitably this is passed on in depleted services. Nearly half a million people, mostly pensioners, have lost homecare since 2008—half a million. Only those with substantial or even critical care needs can now expect to have carers who are funded by the local authority.
Pensioners with only “functional” disability may have quite significant mobility or sight problems, and five years ago they could have received perhaps three or five hours per week of help from social services. They now get nothing, and their family may live 100 miles away. If someone’s needs are more substantial and they are frail, and they need help getting up in the morning and at night, the two hours a day which was offered may now come down to two slots of 15 minutes. On top of this has come Dilnot.
The Government’s response has been to emphasise co-payment. I do not disagree with that, but where is the money for that co-payment to come from? If you are a pensioner on pension credit, you have minimal or low savings and your only asset is your home. Outside London this may be worth perhaps £100,000 or double that. Some 80% of pensioners below 60% of median income are owner-occupiers. Half of those on pension credit are owner-occupiers. Equally, three-quarters of those who should claim pension credit—but do not and so lose out on £34 per week—are owner-occupiers.
Pensioners may have to contribute to the cost of their social care, or decide—rightly, in my view—that they wish to live independently outside of residential care, with more domiciliary support than social services can now provide. However, those on pension credit, having been means-tested at 65 and again at 70 and now coming up to 75, have only one way to do that, which is to release some of the equity in their home.
Lord McKenzie of Luton (Lab)
My Lords, I join my noble friend Lady Hollis in reviewing why this clause should stand part of the Bill. This debate gives us an opportunity to review its rationale, as my noble friend has done, and particularly to scrutinise what alternative support mechanisms are to be put in place for those newly required to notify the DWP of changes to retirement provision. As we know, the assessed income period removes the requirement to notify changes to capital and retirement pension for the purposes of pension credit. It will run for five years but is set indefinitely for somebody who has reached the age of 75.
As the Minister himself has said, the concept was based on the assumption that the capital and retirement income of pensioners would not vary significantly, that administratively it was appropriate to have a light touch for claims maintenance, and that it was also less intrusive for a claimant whose reporting of changes of circumstances obligations was significantly reduced. It is now asserted that the administrative burdens will not be forthcoming, in part because a huge volume of cases come up for review at the same time, and there is not the stability in levels of capital and retirement income originally envisaged. So far as the administration issues are concerned, it would presumably be possible to spread the load by modest extensions of the end dates of existing AIPs to even out their reconsideration. Perhaps the Minister can tell us why such an option was not considered.
We learn from the impact assessment that just under 2 million of 2.5 million people on pension credit have an AIP split roughly half and half between those with a specified end date and those of an indefinite period. Given that those with an indefinite period AIP are not to be preserved, it looks as though these provisions will potentially affect some 1 million pensioners. Do we have figures for those within this cohort who are in receipt of savings credit only, guarantee credit only or both? Obviously, savings credit would have no application for those who reach state pension age after 5 April 2016, and to a certain extent these provisions wither on the vine because those who reach state pension age post-April 2016 will get STP generally which will be above the guarantee credit level, so they get floated off and savings credit does not apply to them in any event.
As for changes to income and capital, as my noble friend has made clear, the numbers have been predicated on scaling up and are now, I think, upwards of 99,400 cases. We know that of those cases, 36,000 will see a reduction in their award—13,000 will lose all pension credit—18,000 will see an increase and nearly half will see no change. However, over a five-year period, the impact assessment suggests that 540,000 people will be affected by the change in policy, with one-third gaining and two-thirds losing. It would seem that the reasons for a reduction in award are attributable to increases in non-pension income as well as increases in capital—the former cases, I think, being more numerous.
We know that in a steady state the Government will benefit to the tune of £82 million a year and will gain further savings from housing benefit and rent support. I do not know whether we have an updated assessment for that figure. Incidentally, will the Minister remind us what is happening because we went through a period when an application for pension credit, council tax benefit or housing benefit was going to involve one process of application, and that was then going to be shared? I do not know what has happened to that process. Clearly, the council tax part of it has had to go because of the localisation of that but it would be helpful to have an update on that process.
Ensuring that pension credit assessments of means-tested benefit are accurate is not an unreasonable ambition, but an equally important ambition should be to improve the take-up of pension credit, as my noble friend made clear. We know that about one in three of those eligible for pension credit are currently not claiming it, although take-up of the guaranteed credit is higher. The greater the required engagement with the system, the greater the risk will be that pensioners will fall out of the system or not engage with it in the first place.
As my noble friend asked, what are the Government’s plans to improve take-up of pension credit? This issue must not be underestimated, especially in an environment in which people are living longer, and living at least semi-independently, with support from formal and informal carers. I have seen this in my family: whereas bank statements and pension slips were once neatly filed in date order, they are now tucked away down the side of a chair, scattered randomly in a drawer or thrown out with the rubbish. When you cannot always remember whether you have had breakfast, it is not always easy to remember to pass on a piece of correspondence to a family carer. These are real issues, particularly as people get older.
Of course, there are penalties for failure to report changes of circumstances, and we know that this Government are hot on sanctions. So can the Minister please say, given the changes to the AIP policy, what additional cost is to be incurred in supporting pensioners, both at the point of the change and routinely thereafter? What special protections will be in the system if someone is at risk of being sanctioned?
Finally, on the matter raised by my noble friend Lady Hollis concerning the effect of this change on equity release and capital more widely, it is with a degree of trepidation that I am bound to say that I cannot fully support the position of my noble friend. I know that that is dangerous territory. I agree that AIPs facilitate the accumulation of substantial sums from equity release without impact on pension credit, but that, of itself, is not a reason why it should be retained. It is common ground that AIPs were designed as an administrative easement, not as a route to allow certain types of capital to be outside the pension credit rules. I see great merit in equity release but I am not sure why capital raised just in that way should have more favourable treatment under the benefit system than capital raised in any other way. There is already a series of provisions under which capital is disregarded for the purposes of pension credit and, indeed, other benefits. They include amounts held to buy a home or to carry out essential repairs. There may well be an argument—and my noble friend has advanced these—to extend these capital disregards in effect to cover costs of caring. However, this should be done explicitly, not under the guise of hanging on to something via an administrative easement.
The Government are going down a dangerous path. Thousands of pensioners could be disadvantaged by this provision administratively, and we certainly want to know, if the Government are going to press ahead with it, what support is going to be given. I do not see anything in the figures about extra costs and more frequent reviews. What is in the analysis that states that the Government are going to support pensioners, particularly older pensioners, effectively to make sure that they take up pension credit when they are entitled to it, and that that they are able to comply with the new, more onerous reporting rules that flow from these provisions?
Baroness Meacher (CB)
My Lords, I support my noble friends. I have just worked out that it was about 40 years ago when I undertook and produced the first research report of the Child Poverty Action Group. The subject of that study was the non-take-up of means-tested benefits. At that time, when I was a young person, I assumed that the important issue was stigma. Of course stigma is a major feature, but what took me by complete surprise was the level of ignorance and complete unawareness on the part of, most particularly, the poorest potential claimants—ignorance that they might even conceivably be entitled to any benefit at all. It just had not crossed their mind. If you do not ask any questions, you do not get the answers to those questions. If he really wants to extend means-tested benefits, I urge the Minister to undertake some research into the levels of knowledge and understanding of potential pension credit recipients, because if the level of ignorance remains today as it was then, the social consequences of these reforms will be very alarming indeed.
Baroness Sherlock (Lab)
My Lords, all noble Lords who have spoken have laid down a significant challenge to the Minister on this part of the Bill. I do not propose to add a great deal, but there are a few questions that I would like to clarify. First, in his opening remarks, I think the Minister said that one of the problems being addressed was that there were significant levels of incorrect awards of pension credit because various assets and income were not being taken into account if they happened after an AIP was set. Does he mean incorrect? Presumably, he does not mean incorrect if they were in line with the rules. If someone is not required to declare it then they do not affect the award, but maybe I misunderstood that point.
Secondly, there is a question about the additional changes of circumstances. I am struggling a little to understand what the department does and does not know about this. The impact assessment states:
“We have limited evidence for the additional number of changes of circumstance that are likely to be reported each year as a result of the change in policy”,
but the impact assessment provides an estimate of £17 million a year as the cost of processing additional changes of circumstances and reviews. What assumptions is that figure based on in terms of the number of changes of circumstances?
Picking up a point made by my noble friend Lord McKenzie, what estimate has the department made of the likely increase in fraud and error as a result of the abolition of AIPs? Will the Minister remind the Committee what sanctions will be imposed on pensioners who fail to report a change in retirement income or capital that is relevant to their award? I would also be interested to hear what kind of support will be given. Will he also take the opportunity to remind the Committee how pensioners will be informed of this, how they will be reminded and what discretion can be exercised in choosing whether to sanction them, and of course what appeal mechanisms are there. That would be very helpful.
There is then the crucial question of the likely effect on the level of pension credit awards to those who have, or would have had, an AIP. The impact assessment was encouraging at first because it states:
“Analysis suggests that many customers are not currently reporting changes which would lead to an increase in their entitlement so they may actually benefit from the simplification of the policy”.
Can the Minister explain the use of the word “simplification”? At the moment, if I have an AIP and an income only from pension and capital, I do not have to tell the DWP about any changes in income, but in future I will. How is that simpler?
On the question of level, the briefing said that despite the fact that many customers may be better off, most people will not be better off as the Minister and my noble friend Lord McKenzie have pointed out. It is obvious that they could not be if £80 million a year is to be saved. Also, my understanding is that not only will there be twice as many losers as gainers, if I have read this correctly the average gainer will gain £6.70 a week but the average loser will lose £13.10 a week, which is twice as much. Will the Minister clarify whether that is right and if so what average means in this context? Is it a mean or median figure?
On the impact by age band of abolishing AIPs, the briefing from the department says that it is not possible to break down savings by age band, but that the younger cohort of recipients who are more likely to be affected by the change in policy are less likely to have capital above £10,000 or other pension income. Will the Minister help me understand that distinction? Assuming that they are spared, these younger pensioners will go on to be over-75s, who would have been entitled to an indefinite AIP. Is the assumption that that cohort, when they reach 75, will still be less likely to have savings over £10,000 or other pension income and thus less likely to face a change in pension credit entitlement? In other words, is the distinction one of age or cohort?
Just out of interest, did the department make any assessment of the effect and cost of, for example, maintaining indefinite AIPs for pensioners above 80 or 85 or any other age level? There is then the question raised by my noble friend Lady Hollis on equity release. I have no intention of standing between my two noble friends on the question of how they should be treated, being a woman with an ambition to live to at least 75 myself. But this is a serious question, to which the Minister responded at Second Reading simply by saying that,
“equity release may not necessarily result in a reduction in eligibility for means-tested benefits and will depend on overall income and capital”.—[Official Report, 3/12/13; col. 193.]
Of course, that is obviously true; for some people it may, and for some it may not. The briefing on the subject that came from the department had a note attached to it that may have come from the Department of Health, entitled, Reforms to Care and Support: Financial Product Review. That said, on equity release:
“Some people do use this to fund the cost of domiciliary or home care. No data is collected on the number of people who take out equity release to pay for care but it is currently very limited”.
At the risk of being a pedant, if no data are collected, how do the Government know that the number is very limited? I wonder if they are perhaps relying on the Age Concern survey referenced in the DWP briefing note, Abolition of Assessed Income Periods—Equity Release? I think probably not, however, because it suggests that the sample size was too small to be used for extrapolation. So I am sure that is not the source of it. But they must be able to make an estimate to be able to declare that the number is very limited, so can the Minister tell the Committee how many people the department estimates take out equity release to pay for care?
The importance of this question is to understand its implications. Even if the Minister takes the view that he does not regard this as being anything other than administrative easement, as explained by my noble friend Lord McKenzie, the Committee needs to understand whether there will be consequences for the treatment of income that may be needed to pay for care and, if so, how those costs will otherwise be addressed. I look forward to the Minister’s reply.
Lord Freud
My Lords, I shall deal with the equity release issue first. Assessed income periods were never intended to enable people to shield their income and capital from interaction with the means-tested system. Pension credit is a safety net benefit providing support for daily living needs for the poorest and, as such, should be a last resort.
Baroness Hollis of Heigham
I am sorry to interrupt, but I am not sure that that is the case. Certainly equity release providers had discussions with the department, to my certain knowledge, and were told that somebody could acquire capital through equity release between, say, 65 and 70, and that if it was then spent down—that is, it was used for reroofing, or a new boiler, or insulation, or whatever—the department was entirely content with that.
Lord Freud
Yes, I shall come to that. In practice, that is absolutely the case. Money taken for essential repairs is disregarded. I can confirm what the noble Baroness is saying.
To go back to the argument, people should draw on the income and capital available to them before seeking help from the state. If people liquidise assets to release money or generate an income, that should be taken into account, no matter what the source—if they sell some shares, release equity or downsize. It has been suggested that abolishing the assessed income period will deter people from using equity release to pay for care under the new care funding regime proposed by the Government. The planned care charging reforms will provide greater clarity about what people will be expected to contribute. There will be financial advice to help people better meet these costs, and the Department of Health has been working with the financial services industry to help create the right conditions for a new market of financial products to develop that will be suited to this purpose. Equity release may be a product some may consider, but at this stage it is difficult to say how future care charging reforms will influence behaviour in this area.
The Government do not want people to be penalised for making proper provision to fund their care. That is why the Department of Health will consider how the charging system can recognise the provision people have made and why we are working with them to understand the impacts and the potential interactions with means-tested benefits. However, we cannot retain a complex feature of pension credit as a way of protecting the position for what may be a minority of pension credit customers in specific circumstances. This would not be a targeted response; indeed, it could be argued that it moves away from and undermines the rationale of a safety net benefit.
There may be alternative solutions that both departments will need to consider in due course to avoid penalising those who have made provision to pay for care, but keeping the assessed income period is not the answer. I can confirm what the noble Baroness, Lady Hollis, said—that officials have spoken with the Equity Release Council and have agreed to meet with them in due course to talk through the implications of this measure. The council, in terms of the information base, has been careful about providing advice to those on pension credit about the potential impact on their benefit and designed products so that they do not breach the £10,000 disregard.
Baroness Hollis of Heigham
Except, my Lords, in referring to the brief to this extent, that usually the minimum sum from any equity release providers, from looking at the Aviva statistics and retirement statistics, is usually £10,000, at which point any moneys above that are netted off pension credit.
Lord Freud
Once these things are put in place with the social care provisions, there may be ways of dealing with that, but it is premature to address it until we have the shape of those social care provisions. As I said, the way to do that is not necessarily through a wholesale change to our AIP strategy.
Lord McKenzie of Luton
Does the Minister accept that the easiest way to change it would be simply to amend the disregards for capital in pension credits? It would be easy to do that.
Lord Freud
I am grateful for all suggestions. The noble Lord has made the point that I was trying to make: there are probably quite a few ways to skin this particular cat and one would want to look at it in that context. I have confirmed for the noble Baroness that sums of money taken out for essential repairs and so on are disregarded, so there are areas of flexibility as we work through the full implications of this policy.
Lord McKenzie of Luton
Is it possible that this cat might be skinned by the time we reach Report?
Lord Freud
My Lords, my experience of cat skinning is that it takes quite a long time, so I am not sure that I can promise the aforesaid cat in its dematerialised form in the right time.
Baroness Sherlock
Is the Minister able to help us find out how big the cat is?
Baroness Sherlock
I am sorry, but I am pressing the Minister on the comment about the assessment of how many people use AIPs for equity release. The phrase I think he used at the beginning of his remarks was that this may be a minority of claimants, which is about as vague as it is possible to get in terms of a formulation. Can he shed any light on this?
Lord Freud
No, my Lords. We do not have any precision on this, and that is one of the reasons that we want to look at it in the context of social care. Clearly, one will need to build a better evidence base rather than me extrapolating from a very thin one. The cat is small; it is possibly a kitten.
On the question from the noble Baroness, Lady Hollis, about potentially retaining AIPs until the age of 75, while the noble Lord, Lord McKenzie, talked about the age of 80, we do not have a breakdown of age from the sample of AIP reviews that we have taken, but we have no evidence to suggest that older pensioners have more stable incomes than younger ones. Retaining AIPs for older pensioners would prevent us driving many of the inaccuracies out of the system and would lead to a two-tier system, whereas we want to see a single, understandable regime for everyone. Older pensioners are more likely to have indefinite AIPs already in place in April 2016 because they are being retained, so they should not experience any significant changes to their reporting requirements.
On the more detailed question about numbers raised by the noble Lord, Lord McKenzie, on the breakdown between guarantee credit and savings credit, I do not have it to hand behind me right now, but I am happy to offer a letter providing that. I can confirm to him that someone who applies for pension credit can make a claim for housing benefit, but people will be encouraged to seek council tax support. As the noble Lord is fully aware, that scheme was localised in April of the current financial year.
Baroness Hollis of Heigham
As this is not an amendment, I do not have a formal right of reply to withdraw an amendment. Before the Minister sits down, therefore, could I press him on this? Why did he—rightly in my view—support his right honourable friend’s position in the other place, which was based on the recommendations of the Pensions Commission, to get rid of pension credit in the new single pension and therefore to reduce means-testing very significantly? Pension credit served its purpose in taking existing pensioners out of poverty. It possibly deterred other, future pensioners from saving, but it did tackle the problem of poverty. Quite rightly, in my view, the current Government have proceeded to take that chunk—a huge chunk of means-testing—out of the system. Why, then, does the Minister think it right to reintroduce it for some people who are simply a day too old?
Lord Freud
My Lords, I think there is a distinction to be made here, which the Government are making. You can reduce the level of means-testing by providing a higher single-tier pension, while still making sure that where you are providing people with a means-tested benefit, it is accurate, in order that the Government do not spend more money than they need to at a very tight time.
Baroness Hollis of Heigham
But the Government are giving the equivalent of a whole pension credit to everyone who draws their pension after 5 April 2016, so the Minister is not worried about a safety net then, or spending money that is not necessary—he is just doing it. Everybody will get the equivalent of a full pension credit if they fall the right side of the line. If they fall the wrong side of that line, it will be means-tested annually. What is the decency behind that?
Lord Freud
As the noble Baroness is fully aware, the dividing line is actually much more spread given the complicated transitional arrangements between one system and another. There is not the sharpness of a dividing line—I know the noble Baroness is fully aware of that because we have debated it in great detail. I am conscious that we are pressed for time.
Baroness Sherlock
There are three questions that the Minister did not answer. I am happy for him to write to me: I wanted to get them on the record so that they could be picked up before Report. I asked about the estimate of £17 million in the impact assessment for the cost of processing additional changes of circumstance. What assumptions was that figure based on in terms of the numbers of additional reviews or changes of circumstance?
I asked what estimate, if any, the department had made of the likely increase in fraud and error as a result of AIPs going. Also, the departmental briefing says that the younger cohort of recipients who are more likely to be affected by the change in policy are less likely to have capital above £10,000 or other pension income. Is it that cohort or because they are young and therefore when they become old that will no longer apply?
Lord Freud
My Lords, I will arrange to write to the noble Baroness. I think I can deal with the second point straightaway. We simply do not know whether it is an age or a cohort effect, so I cannot be clearer about that.
Lord McKenzie of Luton
Could the Minister put something on the record? I am very concerned about issues around sanctions, particularly for older members of the pensioner cohort. They struggle, some of them, in later life to deal with paperwork. When we discussed sanctions in the Welfare Reform Bill around people with mental health challenges, the department undertook never to sanction someone without a face-to-face interview or at least a letter—whether that has been complied with is another matter. There should be some sort of process so that elderly people who fall foul of the system are protected before sanctions are levied.
Lord Freud
The noble Lord makes a very fair point. I know that I smiled about that, but it is a real point about older people handling bills. It is best if I come back to the noble Lord and write specifically on that matter.
I can update the noble Baroness, Lady Sherlock, a little more. We are assuming 1 million extra changes of circumstance. That is what the £17 million comes from, and we are assuming a 10% reduction in savings to account for this on the increase in fraud and error. Those are the figures. I will check that I have not missed any other points. I owe the noble Lord, Lord McKenzie, something on sanctions for sure, and probably one or two other things. On that basis, I hope that the Committee will agree that the clause stand part of the Bill.
“which for a widowed parent shall not be less than three years, or until the youngest child of that person at the time of the death had reached the age of 7 years, whichever is the longer period”
Baroness Hollis of Heigham
My Lords, we move on to a different section of the Bill on bereavement benefits. In moving Amendment 59, I wish to speak also to Amendments 60, 61 and, very briefly, to Amendment 66.
I am unhappy about some aspects of these proposals. I know that they have been out to consultation, as, obviously, I have read the consultation documents, but I wonder whether it was wise to go for a one-size-fits-all approach in the name of alleged simplicity. The background notes go back to our policies in 1925, presumably in the belief that this shows we need to overhaul the system, but, actually, we did review and restructure it in 2000. Why did we structure it in the way we did? I hope that noble Lords will forgive me if I talk about widows rather than deceased spouses or partners.
Currently, widows receive a £2,000 lump sum. We recognised, as have the current Government, that you need money immediately to pay for funeral costs and to tide you over the couple of months while the deceased spouse’s income or, alternatively, childcare are not available and before alternative benefit income, if appropriate, is established. As UC, for example, can be paid in monthly arrears, it could be two months before any money is flowing to the bereaved spouse or partner, so we produced a lump sum. We then sought to support widowed parents with children while the youngest was on child benefit: that is, normally up to age 16. At the time that was consistent with the income support rule for single parents with a taxable benefit. The widowed parent’s allowance is now worth £108 a week—a little less than BSP but more than income support, as it is NI-based. It is not means-tested and no work conditionality is attached. The number of new widowed parents claiming the allowance varies between 50,000 and 100,000 a year. As far as I can see, there is no particular pattern to it. Currently, widowed parents claim their allowance on average for five to six years. Not surprisingly, those with younger children claim it for longer—around nine to 10 years. Only 3.6%—less than 4%—claim it for a year or less.
The Government, to my dismay, while increasing the lump sum to £5,000, are proposing that widowed parents should receive this financial support not until the youngest child is 16 or even 12, but for one year only irrespective of the age of the child, at £400 a month. I believe that this is quite unacceptable. For most, the financial loss will be substantial. Some 88% of widows in work with children will be worse off; 50% of those not in work will be worse off. To put it another way, any widow with children who would have claimed for two years or more, usually because of the age of their children, will in future be worse off. That loss could be £50,000 if eligibility were retained while the child carried child benefit. Instead, within a year, she will probably have to work longer hours if she is in work just to make good her financial loss at the selfsame time that her children need her. Children do not adjust in a year. In my experience they are stressed and distressed for many years longer and need more, not less, care from the surviving parent. My children were grown up when bereavement hit and even then it was very hard, but friends who lost a spouse when the children were young found that their children had nightmares and returned to bedwetting. Those parents experienced broken nights and witnessed their children’s clinging fear of losing their other parent, school phobia, challenging behaviour, miscellaneous, unexplained small illnesses and symptoms of depression. They found that their children needed much extra support, stability and attention as well as affection. The widowed parent—a sole carer and earner—may have to extend her working hours to make good the loss of income at just the time when she needs to be more available to them, perhaps to change childcare, move house and, consequently, change their school.
The more generous working parent’s allowance not only helped to replace his income but could also allow a working mother the financial flexibility to adjust her hours to care for her children to enable them to settle into the new patterns of life that they now experience. Given that few widows claim the full credit that they could, they are making a wise decision for themselves and are in no sense seeking to milk the system. Are we really so desperate for money that we need to take it away from grieving widows with deeply distressed children?
As for work conditionality, if widowed parents are on UC, it is proposed that they are brought within work conditionality after six months. Again, that is quite unacceptable. I am baffled by this lack of empathy or understanding. Of course, if she wants to go back to work—as many of us do, and did—that is fine and we should support her but to impose work conditionality whether she feels ready for work or not seems unbelievably harsh. We talk about advice and guidance and a friendly interview with Jobcentre Plus staff, but the power lies with the staff. The Minister is giving huge discretion to a young single member of staff, however well intentioned—I am sure that they are—but with probably no personal experience of bereavement.
I would not want that. The more, I am afraid, we hear of the culture of targets at Jobcentre Plus, the retraining or demotion of staff who do not meet their targets, and the resulting heavy pressure on claimants who are still numb and barely functioning to go back to work, the more we should all worry. I appreciate and welcome the fact that the Minister has recently offered further consultation to discuss work conditionality and the training of staff with the voluntary groups who support widowed mothers, and I hope that work conditionality pressures, at least, will be properly relaxed.
Baroness Meacher
My Lords, I will speak to Amendment 62ZA, but before doing so I must apologise to your Lordships—I have already apologised to the Minister—because I am running against a very tight deadline. I tabled this amendment assuming it would come up on Monday. Before addressing the amendment, I give my very strong support to Amendment 59, moved brilliantly by the noble Baroness, Lady Hollis. I have no doubt at all that the replacement of the widowed parent’s allowance by the bereavement support payment has positive features, but the limitation of that benefit to one year is absolutely cruel. The noble Baroness, Lady Hollis, really got across the point that bereavement is not just a short-term problem. It brings several years of very considerable distress and discomfort for the children, as well as for the parent left behind.
The aim of Amendment 62ZA is to remove the widowed parent’s allowance and its predecessor, WMA, from the list of benefits treated as income other than earnings for the purposes of universal credit entitlement. I realise that that would be a very big step for the Government, but the result would be that claimants with no other income or earnings would keep the value of the WPA in full. Those with earnings in excess of the personal allowance would of course pay tax on it, but they would at least receive the majority of the benefit.
This is a probing amendment. The Children’s Society has calculated that, without the amendment, those entitled to widowed parent’s allowance could find themselves worse off by about £400 per year compared to those with no entitlement and no national insurance contributions. An important point is that WPA is a contributory benefit. It is only payable when the deceased parent has paid sufficient national insurance contributions. The clear assumption behind the benefit is that a surviving parent with all those contributions should surely benefit over and above surviving parents with no contributions. We regard it as an anomaly that under the universal credit rules this advantage from having national insurance contributions would be stripped away. Do the Government really intend that outcome? I do not think so. The proposed bereavement support payment, which will of course replace a number of benefits including the WPA, clearly identifies bereaved parents with national insurance contributions as being entitled to benefits which are not available to others. There is therefore a real discrepancy between the two basic assumptions behind the two benefits.
Although the bereavement support payment will be limited in time—hopefully it will be provided for at least three years, which seems to be an absolutely basic requirement—nevertheless it will be of greater value to most of those entitled to it than the widowed parent’s benefit. The contributory principle is well and truly recognised by this new benefit. At the same time, as I understand it, those receiving the widowed parent’s allowance will continue to do so when bereavement support payment takes over for new claimants. The WPA will continue to be treated as income other than earnings, which again is a different principle. This means that the benefit will continue to be deducted pound for pound from the claimant’s universal credit entitlement. The result is that a widowed parent with no other income will experience zero benefit from his or her national insurance contributions, thereby entitling them to the WPA.
The situation is, of course, even worse for widowed parents who continue to work. The gross sum of the widowed parent’s benefit will be subject to income tax. I find that absolutely extraordinary. Working claimants may have their WPA deducted in full from their universal credit entitlement, but will also pay tax on the gross income that they have not received. Those are the parents who could end up £400 per year worse off. I would be grateful if the Minister could confirm that that is a correct reading of the situation.
Can the Minister confirm whether the Government really intend that those bereaved parents with a national insurance contribution record should be no better off than those with no such record and that those in work should really find themselves even worse off? Will the Minister confirm that many current recipients of the widowed parent’s allowance will continue to be disadvantaged in this way even after the introduction of the bereavement support payment? Finally, does the Minister accept that only relatively well-off bereaved parents, whose earnings take them above the ceiling for universal credit, will actually benefit from having a national insurance contribution record? Can that be right?
Baroness Finlay of Llandaff (CB)
My Lords, I support these amendments very strongly. The points about bereavement have been made most eloquently. However, I would like to add the scenario where one parent dies suddenly rather than as a result of a protracted illness, where the shock of the death may be absolutely overwhelming. That could be suicide, murder or a sudden death. There is another scenario, too, which is where the surviving parent was involved in a road accident and does not even start to grieve until much later. The children who are bereaved know that one parent is already dead and, for many months, they may not know whether the other parent will survive or not. The shortening of time is quite cruel, and I use that word advisedly. A year is a very short time in the life of anyone bereaved, and the anniversary of the death often marks a major step change in the way that they live their lives. That applies to children as well as the bereaved parent.
The government proposal to increase the lump sum is most welcome because the current lump sum gets nowhere near the immediate expenses incurred. However, it is essential that the Government consider this proposed three-year period, or until the child is seven, if that would be longer than three years, because pre-school children certainly need that security and will become very clingy when they realise that one parent has gone. A scenario might arise with an accident where not only has the parent died but another sibling. It is not uncommon, sadly, for a family of five or six to be suddenly left as a family of two—multiple losses all in one go in a horrendous road accident.
We know that the outcomes for children who are not well supported in bereavement are much worse. When we think about the cost of bereavement support, it must be put in context of the cost to society of young people who have been bereaved who have not had adequate support and have experienced excessive strain and mental health problems. That increases their risk of suffering from depression, attempting suicide and experiencing drug addiction, alcoholism, underage sex, unplanned pregnancies and so on. That cost must be offset against what appears, at face value, to be a demand for an increase in the amount that the Government will put there for bereaved parents. The long-term continuity becomes really important.
The only other point I will make, which was made to me by a young lady doing work experience with me, is that these days not that many parents are married. The issues highlighted in Amendment 62ZB are therefore really pertinent to the way that youngsters live today. I can see that administratively, if the parents are not married, it can become more complicated for government, but I do not believe that that is beyond the scope of being worked out. It is important to realise that the person who the child has lost and needs support to grieve over may not be their biological parent.
Lord German (LD)
My Lords, I raised this issue at Second Reading and have no hesitation in raising it again. I rise to address the issues that have been spoken of already, particularly those in Amendment 66, which the noble Baroness, Lady Hollis, has tabled this afternoon.
I hope and I am sure that noble Lords will judge the issue of changes to bereavement benefits as changes which would improve rather than worsen the current set of arrangements. We are told that these measures are based on what people were told the Government would provide them with, and that they would provide them with the best support. The Government in turn have told us that they are not about reducing entitlement or making savings. Therefore, the test surely must be whether the changes provide a genuine improvement and are not a worsening of the provision. That is why I have this concern about the one implication of the changes, that bereaved parents will be required to go back to work six months after the death of the mother or father. I am afraid I am unable to see the logic or the compassion that I would expect in this change. In fact, I used the word “cruel” at Second Reading.
For the benefit of the bereaved child or children, I would wish for those bereaved parents with children to have full conditionality relaxed for the whole year. This does not rule out preparation for return to work; in fact, there could still be some limited conditionality after six months—for example, attending work-focused interviews only. It is worth making the comparison with kinship carers. I regard this as an anomaly in the proposed regulations. If a child after bereavement goes to live with an uncle, aunt or cousin, that uncle, aunt or cousin, who may have to forgo work to look after the bereaved child, is exempt from full conditionality for 12 months. Yet the bereaved parent, the mother or father, is given only a six-month relaxation. As we know, a 12-month relaxation will not be necessary for everyone. The noble Baroness, Lady Hollis, said this. Some bereaved parents may determine that their circumstances are different and may want to return to work earlier. One would hope that that is always in the best interests of them and their bereaved children, but that is their choice and not a requirement of the state. There is compelling evidence to suggest that we need to alter the proposed provision.
There are six facts from studies, which I want to draw out. The first is that bereaved children and young people are more likely to have a serious illness or accident than their non-bereaved peers during the first year following the death of a parent. The second fact drawn from the studies conducted in this area is that they have higher rates of substance and alcohol abuse than their non-bereaved peers. Thirdly, one-third will show clinical levels of mental health difficulty at some point during the first two years after the death of their parent, and those bereaved suddenly of a parent are three times more likely to develop depression than their non-bereaved peers. Fourthly, there is an increased risk of suicide attempt and hospitalisation for psychiatric disorder. The fifth element is that parentally bereaved children score lower at GCSE than their non-bereaved peers. In other words, it affects their life chances through the examination system. The death of a parent by the age of 16 is associated with girls failing to gain any sort of qualification, and with men and women being unemployed by the age of 30. Sixthly, bereaved children and young people are overrepresented in the criminal justice system.
Of course, the increased risks outlined above do not mean that every bereaved child will go on to develop such difficulties, but they show that, as a group, they are more vulnerable than those who have not been bereaved. The most reliable longitudinal study that we have, which looks at the impact on bereaved children over a period of two years, conducted by JW Worden, Children and Grief: When a Parent Dies, found that the capacity of the surviving parent to care for their child was—and I am sure that no noble Lord will be surprised by this—the most important factor in securing better outcomes, emotionally and behaviourally, for the children. This included the surviving parent’s availability to the child—obviously emotionally but, more than that, in terms of being able to spend time with them and continuing routines where possible. Successful interventions with families generally involve supporting parents to communicate with and be available to their children, all of which point to allowing the surviving parent as much time as possible to be with their child in the year following the death.
Clearly, the conditions for claiming universal credit are intended to be as close to having a job as possible. It is important to think through the parallels between those who are bereaved and claiming UC, and those who are bereaved while in employment. While most employers clearly would not be able to offer a full year off work to a newly bereaved parent, many parents choose to change jobs, or even stop working, if their employer cannot be flexible, so that they can meet the needs of their children better.
This is the most important of issues and the most difficult time for children—when they lose a parent. Given that this is an anomaly compared to when a bereaved child is placed with a kinship carer, I believe that the Government should think again on this very important issue. I hope my noble friend will consider that.
Lord Browne of Ladyton (Lab)
My Lords, I will speak to Amendments 62ZZA and 62ZB, in my name and that of my noble friend Lady Sherlock, to Amendments 59, 60, 61 and 66 in the name of my noble friend Lady Hollis and Amendment 62ZA in the name of the noble Baroness, Lady Meacher.
At Second Reading, this part of the Bill figured large. The mood of your Lordships’ House then was that these provisions merited further debate and possible revision. We were all particularly indebted to the right reverend Prelate the Bishop of Derby for his powerful contribution that day. A lifetime of providing pastoral care to those suffering bereavement amounts to a wealth of experience and knowledge that we ignore at our peril, particularly when the lessons drawn from it are supported by the best research, as the contribution of the noble Lord, Lord German, has just suggested.
I expect that a strong thread of the Minister’s response will be an argument that the principal aim of these reforms is to make bereavement payments more effective in the 21st-century context. The Government have concluded that doing so requires only short-term intervention to allow a bereaved spouse or civil partner the time to deal with the immediate costs of the death of a partner and to come to terms with the consequential emotional and financial implications. In the longer term, they argue, if support is needed to cope with the consequences of bereavement, the universal credit system will provide that long-term support.
Broadly, those whom the Government consulted supported that approach, but significant reservations were expressed about the impact of the proposed changes on bereaved families. I believe, like many noble Lords and, perhaps surprisingly, the Pensions Minister himself, that there is a debate to be had about how long support should last, particularly in relation to bereaved families with children. On 29 October, on Report in the House of Commons, the Pensions Minister, Steve Webb, in restating the basic design of his reforms, said,
“there is a debate to be had about how long support should last”.—[Official Report, Commons, 29/10/13; col. 867.]
Thanks to the amendments before the Committee this evening, we have the chance to have part of that debate. I am indebted, once again, to my noble friends and other noble Lords who, in speeches moving and supporting the amendments, have set out the relevant differences in the proposed new financial support provisions compared to the status quo, saving me the need to repeat them and sparing your Lordships the tedium of having to listen to me do it. However, I have some points that complement their contributions and are worth emphasising.
The Bill—certainly this part of it—is cost-neutral, or at least broadly cost-neutral. It achieves its objective of paying out to all bereaved partners, regardless of age, mainly by reducing the level of support for bereaved families and by redistributing that money to those without children. The biggest beneficiaries are bereaved partners under 45—who are also the group most likely to be in work.
Secondly, the Government’s own figures on the number of families affected and what their numbers mean tell us some things, but not everything. The total number of deaths of people aged 25 to 64 in 2012, according to the ONS statistics, was about 73,000: 43,799 men and 29,413 women. The number of deaths increases with age, as one might expect. The number of people in receipt of each of the current three benefits includes 10,000-12,000 receiving bereavement support payments per annum. In November 2012, there were 21,000 people in receipt of one-year bereavement payments and 44,000 in receipt of the widowed parent’s allowance.
If I understand these statistics—and I might not—it appears that only half of bereaved partners in any one year are receiving bereavement benefits. This indicates that either bereaved partners are not claiming, they are not married or in civil partnerships, or they are unable to meet the national insurance contributions criteria. It would be interesting to know whether the Minister has any more detailed statistics than this. The estimated total expenditure of these benefits in 2013-14 is £575 million, falling to £531 million in 2016-17. The total is falling as the number of people dying below state pension age is falling and it is expected to continue to fall as people live longer. Importantly, however, as my noble friend Lady Hollis and the noble Baroness, Lady Finlay, reminded us very forcefully, behind these statistics each death is a great family tragedy. It is the loss of a loved partner or a loved parent, in some cases both.
This reform package includes a simplification of the conditions of entitlement and a relaxation of the qualifying national insurance contributions conditions. At this stage, I want to make two points. First, the contribution record of the deceased partner is still the principle qualification for these benefits, and that is important. This is not a case of something for nothing: it is a payment out for people who have paid in. Secondly, it is argued—although this is not reflected in any amendment before the Committee this afternoon—that in these reforms, the proposed contribution condition is more restrictive than at present. In particular, the proposed contribution condition requires Class 1 or Class 2 contributions, while the existing contribution condition allows payment of Class 3 contributions. Furthermore, unlike the current arrangements, it is argued, where the contributor dies before the end of the relevant year for the necessary contributions, there is no provision for earlier years to be aggregated and treated as if made in the relevant year. Will the Minister tell us whether this was intentional and, if so, why? Would the Government be sympathetic to an amendment that reflected the current rules?
As has already been explained by my noble friends, the existing system is replaced by the payment of a lump sum and monthly payments for one year to all bereaved spouses or civil partners regardless of age. We understand that the lump sum will be tax-free. Although the impact assessment assumes that the monthly payment will also be tax-free, we understand that this is still a matter about which the DWP is in discussion with the Treasury.
Amendment 62ZZA in the names of my noble friend Lady Sherlock and myself would ensure that both the lump sum and the instalment element of BSP would be tax-free. In the House of Commons, the Pensions Minister argued that if BSP is paid for just one year, it is easier to make the case that it is not a replacement for income, but a grant to meet the extra costs of bereavement. Therefore, he told us, it was easier to argue that it should be exempt from tax. Accepting that this is, of course, a matter for Her Majesty’s Treasury, a proper understanding of the effect of BSP requires more certainty than the Government are providing about its tax status. It would be helpful if the Minister could tell us when he hopes to have more clarity about this issue. Would it be helpful to the DWP if an amendment similar to our Amendment 62ZZA were passed on Report?
Amendment 59, in the name of my noble friend Lady Hollis engages directly with the Pensions Minister’s call for a debate about how long support should last. As explained by my noble friend, it seeks to extend the time of payment of BSP to a bereaved parent with children for at least three years or until the second year of schooling is complete for all dependent children, whichever is the longer period. The Childhood Bereavement Network states its confidence that this could be done cost-neutrally by adjusting down the monthly rate of BSP for parents and by reducing the lump sum for non-parents. Is the Minister willing to use his resources to test whether that brief is well founded? If it is, surely it significantly supports my noble friend’s amendment. She has shared not only her own experience of the effect of the loss of a parent on a child, but referred to research to which the noble Lord, Lord German, referred extensively. This demonstrated that the impact of a parent’s death on a child will be significant beyond a period of three years. This proposal is therefore evidence-based and, interestingly, is less generous than the current arrangements that my noble friend herself introduced.
The question that we are all asking is: to what extent are the Minister and the Government considering the needs of children in making this significant change of policy, by moving money from parents with children to those without? We hope that the Minister will engage with that question when he responds.
Lord Freud
My Lords, I start by thanking noble Lords for their thoughtful speeches. I know that they have been considering these issues very carefully and I appreciate and take on board the sentiments that have been expressed. Bereavement benefit forms an important part of state support. Reforms have been made over the years, but they have tended to have been in response to particular pressures, and until now no one has really considered how this benefit fits in with wider changes in society and, indeed, within a new structure of benefits. By not addressing the radical social and demographic changes that we have seen or accounting for the far-reaching changes to the welfare system, the benefit is out of date, difficult to administer and hard to understand. Radical reform is necessary to make it more effective for this century.
Baroness Hollis of Heigham
This benefit was introduced or revised after quite a lot of work and research in 2000. In what ways is it out of date? I can understand that the Minister may wish to make savings, but his proposals are cost-neutral. So, apart from the fact that funeral costs have gone up, and therefore there is a need for a larger lump sum, in what way is it out of date?
Lord Freud
The history is where it is thought that a partner is a dependent rather than an independent agent—and that is a fundamental change in our demography, and something that I know the noble Baroness welcomes, with the rise of women’s equality. It is one of the biggest structural changes that we have seen since the war.
Baroness Hollis of Heigham
I entirely agree with the Minister, but it is my belief that since 2000 the percentage of people in work, particularly mothers with young children, has changed by only three or four percentage points.
Lord Freud
I do not think that I want to get into a debate with the noble Baroness on whether the reforms that she was responsible for and those that I am responsible for are better. Let me try not to do it in that context. I shall describe what these reforms are doing.
The design is for the bereavement and support payment to be a significantly simpler benefit and to provide specific financial support at a time when it is needed most without affecting access to further support through other parts of the welfare system. The evidence from independent social research and our public consultation exercise found that the financial impact of spousal bereavement is particularly acute in the first months. Bereavement support payment is designed to provide a significant cash boost for people in these early months, with a lump sum followed by 12 monthly instalments. We recognise that those with dependent children need a greater level of support, so the Bill provides the ability to set out a higher amount in regulations, which is what we intend to do.
Amendment 61 is intended to allow us to pay a higher amount to those who have been caring for their spouse or civil partner prior to bereavement. Caring responsibilities at the end of life can be particularly difficult and distressing and we recognise this by continuing the payment of carer’s allowance for up to eight weeks after the death of the person being cared for. Under the new system, this will be paid in addition to bereavement support payment as opposed to being taken into account in widow’s parent’s allowance and bereavement allowance.
The Bill does not preclude us from specifying a higher rate in regulations for people who meet certain conditions. However, making receipt of or eligibility for carer’s allowance or carer’s credit a condition is neither targeted nor fair. It would be particularly difficult to prove that someone would have been eligible for carer’s allowance, or would have met any other such conditions, after their spouse had died. Moreover, while we are spending more money on bereavement benefits over the first few years of reform, clearly we are in no position to significantly increase benefit expenditure. Money for increased payments to certain groups would have to be taken from elsewhere in the bereavement benefit budget, either resulting in lower payments for those without dependants or lower payments for all.
On the duration of payment, the 12 monthly instalments are not intended to equate to the period of an individual’s grief, nor are they intended to provide ongoing income replacement; rather, they seek with an initial lump sum to provide support when it is needed most.
To pick up on the points from the noble Baroness, Lady Hollis, on the overall effect, the DWP ad hoc report shows that overall, 52% of recipients are better off under the reform and that 62% of those out of work, who are typically poorer people, are better off, while 100% of those who currently receive the least, the BPT group, who get the lump sum of £2,000 but no regular payment, are better off after the policy change. On average, out-of-work parents in the poorest 25% notionally gain for 12 years. Out-of-work parents in the next poorest income quartile notionally gain for up to eight years. On average, out-of-work childless people in the bottom 50% of the income range notionally gain irrespective of age. In-work childless people in the poorest 25% notionally gain, regardless of age. In the structure I am describing, bereavement support payment must be taken in the context of the provision of universal credit, which is efficiently directed at helping the poorest people.
Baroness Hollis of Heigham
Perhaps the Minister could help me. He is arguing that this is an improvement and an increase in generosity in work conditionality, but he is comparing what would be the case if someone did not get this payment under the new universal credit regime. At the moment there is no such requirement, if the income that has been provided is adequate for someone to live on. As I understand it, work conditionality therefore does not apply. If I have misunderstood, I am very happy for the Minister to correct me, but I think that he is making the comparison that we did not make, and he is therefore answering a different comparison.
Lord Freud
Clearly, if people can live on the current bereavement payments alone, no conditionality is implied. That is the difference between the systems. Under universal credit if people are reliant on universal credit, work conditionality will be implied.
Baroness Hollis of Heigham
In other words, at the moment someone could get a full widow’s benefit under this, together with tax credits, housing benefit and so forth, and they would be free from work conditionality. In the future, I absolutely accept that there will be a different regime, but the point is that at the moment the Minister is making a comparison with the position of people who are not bereaved enjoying universal credit compared with those who will be bereaved under universal credit. I am concerned, as are many other noble Lords, with the position of those who are currently free and exempt from work conditionality with additional incomes coming through tax credits, housing benefit and the like, which therefore give them a higher or sufficient income which does not attract to it work conditionality.
Lord Freud
The noble Baroness is looking at a pretty narrow group where people are taking general bereavement benefits plus an income from work at over 16 hours to get the tax credits, which do not contain conditionality. Yes, there is a different system, but that is what the noble Baroness is describing in that particular example.
There are types of tailored work search requirements. There are no work-related requirements at all for the lead carer of a child who is under the age of one. There would be some work-focused interviews when the child is older, and noble Lords will be familiar with these. The work-related requirements can be limited in cases where the claimant has childcare responsibilities or has a physical or mental impairment. This is a flexible approach to conditionality, allowing it to be tailored to the individual, which ensures that all claimants receive the right support.
I am absolutely committed to making sure that parents who have suffered a bereavement receive an appropriate conditionality regime, so I have asked the Childhood Bereavement Network to advise us on how we should develop this guidance. Of course, the point about this, as noble Lords have made clear, is that we are talking about the married bereaved. Lots of other people suffer equivalently who are not eligible for bereavement benefit, and I know that there is some pressure to widen it. This conditionality regime could have wide benefits and I would be prepared to develop that guidance in a relatively transparent way.
We need to consider other people who are bereaved in order to ensure that the system is fair to everyone. Bereaved people in employment are not likely to be allowed to stay away from work for six months. On parental bereavement leave, which is a statutory entitlement, the ten-minute rule Bill was asking for a statutory period of only two weeks’ bereavement leave for an employed person following the death of a child. An additional 4,000 bereaved, non-married, non-civil partnered but nevertheless partnered people who are on UC will also be exempt, although they will not be entitled to the bereavement payments themselves.
Our analysis from the current flow of bereavement benefit claims indicates that 55% of claimants are in employment. Out of the remainder, only 9% of widowed parents are unemployed and, if they claimed universal credit, would be required to undertake work-related activity six months after bereavement. Given that the policy of not imposing conditionality requirements on bereaved claimants claiming universal credit for six months is already more generous than that for bereaved individuals in other circumstances, and that our flexible conditionality regime allows us to reflect on and respond to individual circumstances, I see no merit in having a longer period.
I turn to the distinction of kinship carers; I enjoy boasting about the one-year concession on conditionality for kinship carers. I did that for very particular reasons. The death of a parent at any time is clearly a huge loss to a family and children need support during the grieving period, which can be a long period of time, as my noble friend pointed out. In fact, the evidence tends to show that grief comes out well beyond the one-year period. The support will be not only for the surviving parent who has knowledge of their child and how best to support them, but in most cases there is an existing support network of extended family, friends, schools and clubs. Unlike bereaved children who still have a parent to support them, other children do not have that support as they move into a kinship situation. They may have moved away from their home and school, meaning that their social support network has also been removed, and they need time to make new friends, settle into school and learn completely new routines. The difference with kinship carers is that this marks a huge change for both the child and the adult. On top of that, the adult concerned may have little or no experience of looking after a child, and will need time to make adjustments to their own life in order to accommodate the child.
On the point raised by my noble friend on the move to part-time work, I can confirm that a bereaved parent who changes their employment to part-time work will still be eligible to claim universal credit.
Removing any requirement to engage with the labour market through universal credit for a longer or even indefinite period could have a negative effect on a person’s recovery and long-term job prospects. We believe that allowing people to engage with the labour market through universal credit is necessary to help them adjust and regain control of their lives.
Baroness Hollis of Heigham
Did the Minister say “allowing people”; in other words, is he suggesting that it is the choice of the bereaved parent?
Lord Freud
Yes, I did. There is an element of push-pull and expectation, and the expectation here is that people would engage with the labour market after six months except where there would be difficulties in doing so. That is exactly why we want to develop a good guidance package, which we shall do in consultation with the key stakeholder.
Baroness Finlay of Llandaff
I apologise if I am interrupting the Minister when he is about to clarify something further, but I have a question about those situations where things are even more complicated. For example, one parent may have been driving the car, the other parent killed and one of the other siblings killed, so that the bereaved child feels anger towards the surviving parent as the person who was in control of the vehicle when the accident happened, as well as being bereaved of another sibling. Are those the sort of situations that the guidance will address, and will it allow a more flexible interpretation and some flexibility, particularly, over the six-month type of requirement? It is incredibly likely that the surviving child will have an extremely difficult time, including in establishing a relationship with the surviving parent.
Lord Freud
One of the key things is that there are clearly some terribly tragic and difficult situations involved here. However, the risk is that one looks at the very worst cases and draws up a policy that suits them, even though the majority of people are not in those extreme circumstances. What we are trying to develop here is a reasonable norm and then a capacity to adjust for the kind of extreme circumstances that do happen. We need to make absolutely sure that we are able to adjust for those—that is the structure we are looking at here. The risk is, as noble Lords know, that we do something for everyone when literally only 2%, 3% or 4% are affected. Noble Lords will have heard the percentages I gave about the number of families, which is 9% of the total. I want to try to avoid designing a system based on one particular example.
Baroness Hollis of Heigham
But why, unless the Minister is actually accusing widowed parents of exploiting or milking the system? Being more generous in the case of the very moving examples given by the noble Baroness, Lady Finlay, would give greater choice for other widowed parents with perhaps less difficult circumstances. Unless the Minister thinks they are milking the system, they will find their path back into the labour market. Why does he have to make it quite so tidy and precise? Why does he have to second-guess all the time?
Lord Freud
It is important that the system sets out some generous norms against other examples we are looking at. There are people in employment, who would very rarely see a norm of six months, and people who are cohabiting—a huge proportion of the people who suffer this are in that situation and, as I will go on to say, it is very difficult to help them any more. We set up a good norm and then have a robust system to make sure that we can make the appropriate adjustments for people for whom that norm is not appropriate. As I said, I have asked my officials to meet with the Childhood Bereavement Network in the coming months to discuss the policy approach in universal credit and to look at the guidance. I hope that I will be able to report back in time to inform our next debate on this.
I turn to the amendment in the name of the noble Baroness, Lady Meacher, and how widowed mother’s allowance and widowed parent’s allowance are to be treated under universal credit. She is not here now but I know she will read very closely what I say. As in the assessment of any income-related benefit, it is necessary to consider the income the house or individual has access to, including income from other social security benefits. As both the two benefits—the WMA and the WPA—are income-replacement benefits, it is right that they are taken into account under universal credit. Disregarding them would increase government spend on universal credit by a commensurate amount of around £300 million. Claimants migrating to universal credit from legacy benefits, where their circumstances have otherwise remained the same, will be transitionally protected.
This is what Cruse Bereavement Care said about the new system:
“It is a simple system that would provide bereaved people with access to immediate help. It gives immediate financial support at a time when other available sources can be rendered inaccessible … If the principle is that the universal credit should ensure that the bereaved family are adequately supported on an on-going basis then a lump sum to help enable them to get back on their feet may be simpler and more appropriate”.
Of course, this is exactly what we are doing.
Baroness Hollis of Heigham
Except that it may be better for some, but what the Minister is doing is making it a requirement for all.
Lord Freud
The noble Baroness is now going back to the conditionality debate, but I am now going on to the actual level of payments, which is a somewhat different point. I understand that there is a concern that there could still be a potential impact on a small subset of those universal credit claimants who also receive widowed parent’s allowance. This is the point about them being worse off by £7.56 a week. This is not an unintended consequence, because we have been clear about treatment of unearned income and that widowed parent’s allowance would be deducted pound for pound in assessing universal credit. As noble Lords know, universal credit is a fundamental reform of the current benefits system and leads clearly to both increases and reductions in the level of entitlements. However, no one already on benefit whose circumstances remain the same will lose out in cash terms as a direct result of the move because of the transitional protection.
The point is that widowed parent’s allowance is a taxable benefit. Working claimants might not only have their allowance deducted from the universal credit entitlement, but also pay tax on it through the tax code in their earnings. The reduction in net earnings as a result of the additional tax will be only partly offset by an increase in universal credit because of the 65% taper. Noble Lords will appreciate that there are good reasons why universal credit works on the basis of net earnings and tapered withdrawal, because that is the mechanism that is designed to incentivise work. Nevertheless, I will look carefully at the points that have been made on this issue in this debate and by stakeholders. I need to emphasise, however, that it would be a disproportionate and expensive response to move to a full disregard for all claimants of either of these two awards.
I now move on to the question of allowing bereavement support payment for unmarried couples and the request for a review within six months following Royal Assent. Our law and tax systems recognise inheritance rights and needs of bereaved people only if they have a recognised marriage or civil partnership. This stems from the founding principle of the national insurance system, which is that all rights to benefits derived from another person’s contributions are based on the concept of legal marriage and civil partnership. Allowing cohabiting couples to have access to bereavement benefits would significantly increase complexity; and proving cohabitation can be incredibly challenging, not to say an intrusion into claimants’ private lives.
On the request for a review, there clearly needs to be a period following introduction of the new payment to allow changes to bed down before we can review its effectiveness and impact on the different groups of claimants. I can assure the noble Lord, Lord Browne, that we have already committed to review the change in our impact assessment at a point when sufficient evidence is available to assess all aspects of the policy.
I want to pick up another point made by the noble Lord on the take-up of bereavement benefits. The take-up is high at around 90%, which has been helped by the rollout of the Tell Us Once information service. The majority may not qualify for the full amount due to the complex contribution conditions. Indeed, this is why we have simplified them into a position where someone is entitled to the new payment on the basis of payments of 25 times the lower earnings limit in any one tax year. I believe that the bereavement support payment will be simpler and fairer than the current system, providing support when and where it is needed most by supporting people to regain control of their lives as soon as they can. These amendments would be a backward step resulting in more complexity in a system that would provide less help to those who need it when they need it.
Lord McKenzie of Luton
Will the noble Lord perhaps deal more fully with the point raised by my noble friend Lord Browne about contributions and be a bit more specific about why Class 3 contributions are no longer a route to qualification?
Lord Freud
We think that it is essential to retain the contributory principle, and it is reasonable for people to have made those contributions for at least six months in order to qualify. However, the noble Lord and the noble Lord, Lord Browne, will appreciate that this is a radical simplification of the contribution conditions.
Lord McKenzie of Luton
We have been considering this for a long time and I do not want to prolong the debate, but that really will not do. All that has been done is that one route has been chopped off for people who satisfy the contribution conditions. Class 3 contributions are payments. We are not talking about credits into the system here, this is a payment. Presumably the noble Lord will argue that one should reduce the Class 3 rate on the basis that someone will get less for it.
Lord Freud
The point is that, depending on if it is a late payment, it would be possible to make a very small contribution and get a large payment of £9,800 back. I am happy to write to the noble Lord with a full justification of that decision.
Baroness Hollis of Heigham
My Lords, I am very appreciative of everyone’s contributions. A lot of issues have been explored, and although the Minister has been as fastidious and careful as he always is in trying to respond to the points, I have to say that, on what is now our fifth day in Committee, I thought that his responses here have been less persuasive than they have been to almost all of our other debates. They will certainly require us to look very carefully indeed at the small print of his responses because I am not persuaded by almost any of his points.
Let me first thank the noble Baronesses, Lady Finlay and Lady Meacher, and the noble Lord, Lord German, who I think actually used the word “cruel”. If the noble Lord wishes to resile from that, I apologise. I think that they all spoke very well and movingly about the situations in which families find themselves—not just singly bereaved but doubly bereaved. Sometimes the surviving partner or spouse may be seriously injured, which means that they cannot support a child in the family in the way they would wish. We know that such tragedies exist and the consequences multiply in what is a ripple effect for families for many years. That is especially the case when there are multiple losses. All sorts of feelings of guilt continue to plague unreasonably and irrationally but completely understandably, those who survive such a situation.
Lord Freud
I want to make sure that the noble Baroness adjusts the figure of 88% on the record, because that is not the figure. I was trying to supply the figures. Across all groups, 50% are better off compared to 48%. The figure of 88% is for a narrow group of those in work who are receiving the widowed parent’s allowance. A lot of misleading figures have been going around on the structure of this. There are effects of the combination of these payments with other benefits in the system, particularly universal credit. You cannot ignore those interactions and our figures show that poorer people in particular do well out of this new system.
Baroness Hollis of Heigham
I emphasise again that without seeing the Minister’s detailed working I will sustain the figures I have, unless, until or if the Minister can show me the points at which they are inaccurate. Is it 88% of widows with children in work who will be worse off, and 57% of those not in work who will be worse off? To put it another way, any widow with children who would have claimed for two years or more will in future be worse off. It may be that the Minister has not fully taken into account the cohort effect with regard to the point people at which join the labour market. Obviously, we should continue this in correspondence.
My noble friend Lord Browne pressed the Minister hard and showed again that targets interlocking with financial need are going to leave very many widowed parents in a far worse position. He encouraged the Minister to consult further with the Childhood Bereavement Network group of voluntary organisations to see whether a rearrangement of these benefits can meet some of our concerns. I am pleased that the Minister is willing to do this. He also argued not just for a reconsideration but, if necessary, a review, especially as regards cohabiting parents. If the Minister is serious about trying to bring benefits up to date, he should recognise that 50% of all children are now born outside marriage, even though the relationship may be an entirely stable one with two committed parents. The Minister deploys the argument of bringing structures up to date to suit his case, but apparently refuses to recognise other people’s positions. He is obviously right to want to continue to keep all benefits under review as an act of stewardship. However, if he is going to take account of this changed world, he is selecting what factors he chooses to take account of and ignoring others that are equally significant—and possibly in many ways more so—in their effects on families and their children.
The Minister made several points. First, as regards structure, I accept that we need to review it but I think that he is going about it the wrong way. Secondly, as regards money, he paraded the gainers against the losers and implied that somehow that is all right because there is some mythical average. It is not all right and I am sure we will come back to that point. The point on which he was least persuasive was that of conditionality. He seems to think that when you have lost a spouse and your children are very insecure, fearful and frightened, and need the surviving parent’s full-time attention, six months’ relief from conditionality is generous. I would tell him that he needs to live in the world that such parents inhabit. It really is not generous. He is making the comparison with, say, a single parent under UC. I accept that a widowed parent in that situation would be more generously placed in terms of work conditionality than a single parent unaffected by widowhood would be under UC, but that is not the point we are making.
I cannot believe that the noble Lord is deliberately bypassing this point. Our knowledge of what those widowed parents and their children experience was built into the previous structure that is now being abandoned. There is an apparent reliance on the fact that the relevant provision is somewhat better than UC, and therefore what have we got to complain about? The Minister needs to ponder some of the literature which the noble Lord, Lord German, identified; perhaps he has. It may shape his perception of this issue of work conditionality. He is so completely wrong on this that I am puzzled because I know that he tries to enter into the situation of recipients of benefit.
Finally, the Minister referred to kinship carers and charmingly boasted that he had been responsible for making their situation better. I am very glad indeed that he did, but the lesson I draw from that is that widowed parents should now turn themselves into kinship carers. Is it his intention to make the regime harsher for the parent and their children who are suffering grief than is likely to be the case for kinship carers, given that the latter are nearly always grandparents? I know they are nearly always grandparents as I have done some work on this. Is it the Minister’s intention that the regime should be harsher for the widowed parent with children than for a grandparent caring for the children, particularly if the maternal grandparent is involved who has suffered not the direct loss of a son but, say, that of a son-in-law? Is that what he is really arguing? I wonder how much experience he or his team have had of engaging with families in that situation. I would hope that at the very least he will take away from this the argument that whatever he may or may not be able to do in terms of budgets and cost neutrality—and that may follow discussions with the voluntary groups, which we welcome—he will at least extend his empathy for kinship carers, which we respond to and recognise, to the similar group of widowed parents, and at the very least not deploy work conditionality until a year has passed. That would at least go some way to meeting our concerns. Unless the Minister wants to respond to me further now, I beg leave to withdraw the amendment.
Lord Freud
ScheduleOption to boost old retirement pensions Part 1Great BritainSocial Security Contributions and Benefits Act 19921 The Social Security Contributions and Benefits Act 1992 is amended as follows.
2 (1) Section 1 (outline of contributory system) is amended as follows.
(2) In subsection (2)—
(a) omit “six”;(b) in paragraph (d), after “making up entitlement;” insert—“(da) Class 3A, payable by eligible people voluntarily under section 14A with a view to obtaining units of additional pension;”.(3) In subsection (4)(a), for “and 3” substitute “, 3 and 3A”.
3 After section 14 insert—
“Class 3A contributions14A Class 3A contributions in return for units of additional pension
(1) An eligible person is entitled to pay a Class 3A contribution in return for a unit of additional pension.
(2) A person is eligible to pay a Class 3A contribution if the person—
(a) is entitled to a Category A, Category B or Category D retirement pension or graduated retirement benefit, or(b) has deferred entitlement to a Category A or Category B retirement pension or graduated retirement benefit.(3) The amount of a Class 3A contribution needed to obtain a unit of additional pension is to be determined in accordance with regulations made by the Treasury.
(4) Before making those regulations the Treasury must consult the Government Actuary or the Deputy Government Actuary.
(5) A person—
(a) may pay Class 3A contributions on more than one occasion, but(b) may not obtain more than the maximum number of units of additional pension.(6) The maximum number of units of additional pension that a person may obtain is to be specified by the Treasury in regulations.
(7) In this section “deferred”, in relation to graduated retirement benefit, has the meaning given by section 36(4A) of the National Insurance Act 1965.
(8) For the meaning of “deferred” in relation to a Category A or Category B retirement pension, see section 55(3) of this Act.
14B Class 3A contributions: repayment
(1) The Treasury may by regulations provide for a Class 3A contribution to be repaid in specified circumstances.
(2) Regulations under subsection (1) may, in particular, make provision about applications for repayments and other procedural matters.
(3) A person is to be treated as never having had a unit of additional pension if the Class 3A contribution paid in respect of it is repaid.
(4) Regulations under subsection (1) may provide for benefits paid to a person because of the unit of additional pension to be recovered by deducting them from the repayment.
14C Class 3A contributions: power to change eligibility or remove the option to pay
(1) The Treasury may by regulations change who is eligible to pay Class 3A contributions.
(2) The Treasury may by regulations remove the option for people to pay Class 3A contributions
(3) Regulations under this section may, in particular, amend an Act.”
4 If paragraph 3 comes into force before the day mentioned in section 51(5), section 14A(2) as inserted by that paragraph has effect as if the reference to entitlement included the prospective entitlement of a person who—
(a) has not yet reached pensionable age, but (b) will reach pensionable age before that day (assuming that the person lives until pensionable age).5 In section 43 (persons entitled to more than one retirement pension), in subsection (1), after “subsection (2) below” insert “and section 61ZC below (which deals with unusual cases involving units of additional pension)”.
6 In section 44 (Category A retirement pension), in subsection (3)—
(a) in paragraph (b), at the end insert “or where the pensioner has one or more units of additional pension”;(b) after paragraph (b) insert—“For units of additional pension, see section 14A.”
7 (1) Section 45 (rate of additional pension in a Category A retirement pension) is amended as follows.
(2) In subsection (1)—
(a) after “shall be” insert “the sum of the following—(a) in relation to any surpluses in the pensioner’s earnings factors,”;(b) at the end insert “; and(b) if the pensioner has one or more units of additional pension, a specified amount for each of those units.”(3) In subsection (2), at the end of paragraph (d) insert “; and
(e) if the pensioner has one or more units of additional pension, a specified amount for each of those units.”(4) After subsection (2) insert—
“(2A) For the purposes of subsections (1)(b) and (2)(e) the “specified amount” is an amount to be specified by the Secretary of State in regulations.”
8 In section 52 (special provision for surviving spouses), after subsection (3) insert—
“(3A) In subsection (3) the references to additional pension in a Category A or Category B retirement pension do not include any amount of additional pension attributable to units of additional pension.
(3B) If an amount of additional pension in the Category B retirement pension is attributable to units of additional pension, the additional pension in the Category A retirement pension is increased by that amount (in addition to any increase under subsection (3)).”
9 After section 61 insert—
“61ZA Shortfall in contributions: people with units of additional pension
(1) This section applies to a person who has one or more units of additional pension if the person—
(a) is not entitled to a Category A retirement pension, but(b) would be entitled to a Category A retirement pension if the relevant contribution conditions were satisfied.(2) The relevant contribution conditions are to be taken to be satisfied for the purposes of the person’s entitlement to a Category A retirement pension.
(3) But where a person is entitled to a Category A retirement pension because of this section, the only element of that pension to which the person is so entitled is the additional pension attributable to the units of additional pension.
(4) For units of additional pension, see section 14A.
61ZB Shortfall in contributions: people whose dead spouse had units of additional pension
(1) This section applies to a person whose spouse or civil partner died with one or more units of additional pension if the person—
(a) is not entitled to a Category B retirement pension as a result of the death, but (b) would be entitled to a Category B retirement pension as a result of the death if the relevant contribution conditions were satisfied.(2) The relevant contribution conditions are to be taken to be satisfied for the purposes of the person’s entitlement to that Category B retirement pension.
(3) But where a person is entitled to a Category B retirement pension because of this section, the only element of that pension to which the person is so entitled is the additional pension attributable to the units of additional pension.
(4) For units of additional pension, see section 14A.
61ZC Entitlement to more than one pension: sections 61ZA and 61ZB
(1) Section 43 does not prevent a person from being entitled for the same period to both—
(a) a Category A retirement pension because of section 61ZA, and(b) one Category B retirement pension.(2) Section 43 does not prevent a person from being entitled for the same period to both—
(a) a Category A retirement pension, and(b) one Category B retirement pension because of section 61ZB (or, if there is more than one such Category B retirement pension, the most favourable of them).(3) Accordingly—
(a) in section 43(2)(a) the reference to “a Category A or a Category B retirement pension”, in a case in which subsection (1) or (2) of this section applies, includes “a Category A and a Category B retirement pension”,(b) in sections 43(3)(a) and (aa), 51A and 52 “Category A retirement pension” does not include a pension to which a person is entitled because of section 61ZA, and(c) in sections 43(3)(a) and 52 “Category B retirement pension” does not include a pension to which a person is entitled because of section 61ZB.”10 In section 122 (interpretation), in subsection (1), at the appropriate place insert—
““unit of additional pension” means a unit of additional pension for which a person has paid a Class 3A contribution under section 14A;”.11 In section 176 (parliamentary control), in subsection (1)(a), at the appropriate places insert—
“section 14A;”“section 45(2A);”12 In the heading to Schedule 1, for “and 3” substitute “, 3 and 3A”.
Social Security Administration Act 1992 (c. 5)13 (1) Section 162 of the Social Security Administration Act 1992 (destination of contributions) is amended as follows.
(2) In subsection (5)(e), after “those contributions;” insert—
“(ea) in the case of Class 3A contributions, 15.5 per cent of the amount estimated to be the total of those contributions;”.(3) In subsection (8)(c), for “or (e)” substitute “, (e) or (ea)”.
Welfare Reform and Pensions Act 1999 (c. 30)14 In section 47 of the Welfare Reform and Pensions Act 1999 (shareable state scheme rights), in subsection (2)(a), omit “earnings-related”.
Part 2Northern IrelandSocial Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)15 The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.
16 (1) Section 1 (outline of contributory system) is amended as follows.
(2) In subsection (2)—
(a) omit “six”;(b) in paragraph (d), after “making up entitlement;” insert—“(da) Class 3A, payable by eligible people voluntarily under section 14A with a view to obtaining units of additional pension;”.(3) In subsection (4)(a), for “and 3” substitute “, 3 and 3A”.
17 After section 14 insert—
“Class 3A contributions14A Class 3A contributions in return for units of additional pension
(1) An eligible person is entitled to pay a Class 3A contribution in return for a unit of additional pension.
(2) A person is eligible to pay a Class 3A contribution if the person—
(a) is entitled to a Category A, Category B or Category D retirement pension or graduated retirement benefit, or(b) has deferred entitlement to a Category A or Category B retirement pension or graduated retirement benefit.(3) The amount of a Class 3A contribution needed to obtain a unit of additional pension is to be determined in accordance with regulations made by the Treasury.
(4) Before making those regulations the Treasury must consult the Government Actuary or the Deputy Government Actuary.
(5) A person—
(a) may pay Class 3A contributions on more than one occasion, but(b) may not obtain more than the maximum number of units of additional pension.(6) The maximum number of units of additional pension that a person may obtain is to be specified by the Treasury in regulations.
(7) In this section “deferred”, in relation to graduated retirement benefit, has the meaning given by section 35(4A) of the National Insurance Act (Northern Ireland) 1966.
(8) For the meaning of “deferred” in relation to a Category A or Category B retirement pension, see section 55(3) of this Act.
14B Class 3A contributions: repayment
(1) The Treasury may by regulations provide for a Class 3A contribution to be repaid in specified circumstances.
(2) Regulations under subsection (1) may, in particular, make provision about applications for repayments and other procedural matters.
(3) A person is to be treated as never having had a unit of additional pension if the Class 3A contribution paid in respect of it is repaid.
(4) Regulations under subsection (1) may provide for benefits paid to a person because of the unit of additional pension to be recovered by deducting them from the repayment.
14C Class 3A contributions: power to change eligibility or remove the option to pay
(1) The Treasury may by regulations change who is eligible to pay Class 3A contributions.
(2) The Treasury may by regulations remove the option for people to pay Class 3A contributions.
(3) Regulations under this section may, in particular, amend an Act.”
18 (1) If paragraph 17 comes into force before the new state pension commencement date for Northern Ireland, section 14A(2) as inserted by that paragraph has effect as if the reference to entitlement included the prospective entitlement of a person who—
(a) has not yet reached pensionable age, but (b) will reach pensionable age before that day (assuming that the person lives until pensionable age). (2) In this paragraph “the new state pension commencement date for Northern Ireland” means the date on which legislation in Northern Ireland corresponding to section 2 of this Act comes fully into force.
19 In section 121 (interpretation), in subsection (1), at the appropriate place insert—
““unit of additional pension” means a unit of additional pension for which a person has paid a Class 3A contribution under section 14A;”.20 In section 172 (procedure for regulations etc), in subsection (11A), after “11(3)” insert “, 14A”.
21 In the heading to Schedule 1, for “and 3” substitute “, 3 and 3A”.
Social Security Administration (Northern Ireland) Act 1992 (c. 8)22 (1) Section 142 of the Social Security Administration (Northern Ireland) Act 1992 (destination of contributions) is amended as follows.
(2) In subsection (5)(e), after “those contributions;” insert—
“(ea) in the case of Class 3A contributions, 15.5 per cent of the amount estimated to be the total of those contributions;”.(3) In subsection (8)(c), for “or (e)” substitute “, (e) or (ea)”.”
Baroness Sherlock
Baroness Sherlock
My Lords, as we move on to Part 5 of the Bill on private pensions, I want to take the opportunity to remind the Committee of my interests in the register. I have a remunerated interest as the senior independent director of the Financial Ombudsman Service.
This group of amendments looks lengthy, but its aim is remarkably precise. Amendment 62ZC to Clause 32 is actually very simple; it retains the power of the Secretary of State to put in place the consolidation of small pension pots but removes the part of the sentence that limits this to the pot follows member form of consolidation. I will focus my contribution on Amendment 62ZC, as the other amendments in the group address the consequences arising from that specific change. The Government believe that action is needed to address the large number of dormant small pension pots which will arise under auto-enrolment when employees move to new jobs, as they do on average 11 times in their careers. We from these Benches agree that action is needed, but not the form of action proposed.
The impact assessment confirms that the Government considered two default transfer options. The first option would be pot follows member, where small pension pots follow the member to the new employer’s pension scheme. The second is an aggregated scheme in which the small pension pots are transferred to an aggregator such as NEST. The Government had two choices, and I believe strongly that they made the wrong one.
As it stands, the clause allows only for pot follows member. Our amendments would allow the possibility of using a default aggregator model without the need for new primary legislation. I propose to comment on the problem in order to demonstrate why I believe that the Government’s proposed solution is flawed, to put forward an alternative, and then pose some questions to the Minister. I promise to do it as quickly as is practical.
I turn first to the context. The core issues of trust and confidence which we have discussed previously are still centre stage in getting people to start and to continue saving for their retirement. We were reminded afresh by my noble friend Lord Hutton that we do not have a savings culture in this country in Committee last week. This Bill and auto-enrolment need to give people the confidence that they need to save for their old age. but how can we demand that people save if they do not trust the saving vehicles and they do not trust the pensions market as offering value for money?
The pensions market is not a typical retail market where the consumer chooses the product. Under auto-enrolment, the consumer does not choose the product at all—the employer does. The employee choice is either to stay in or opt out and lose the employer contribution completely. There are also many intermediaries in the pension supply chain. Pensions are a complex product; they lack transparency, and while large employers may have the resources to pay for good advice and assessment of fund performance, SMEs may not. The demand side is weak.
The pensions market also has some very big players who offer pension fund products, asset management, and annuities. The OFT says that the four largest players have between them 68% of the assets, 76% of the schemes and 61% of the members. The results are predictable; the combination of a concentrated supply side and a weak demand side is bad for savers and allows conflicts between the two to go unresolved, which is not in savers’ interests. Those characteristics of the pension market combine, as the OFT report puts it, to make the market “dysfunctional”. The OFT concluded that,
“competition cannot be relied upon to ensure value for money for savers in the DC workplace pensions market”.
Future clauses and amendments deal with the criticisms raised by the OFT in its report, but this clause and our associated amendments deal specifically with the challenges of small pension pots created by auto-enrolment. The Government estimate that 50 million pension pots will be created by auto-enrolment by 2050, 12 million of them under £2,000. Already, one in six people have lost track of their pension pots, and there are 1 million unclaimed pension pots out there. The evidence is clear that the Secretary of State needs power to make regulations automatically to transfer and consolidate small pension pots. We all agree that a default consolidation mechanism is needed for those people who do not make an active choice to transfer their pensions. The point of contention is how this should be done.
Lord Turner of Ecchinswell (CB)
My Lords, I would like to speak in support of this amendment. When the Pensions Commission addressed the issue of private pensions eight years ago, we had two absolute priorities. The first was the use of inertia through auto-enrolment to increase the number of people involved in savings schemes. I think we all agree that the degree of support for that principle across society, industry and the political parties has been most heartening, and indeed we are now seeing auto-enrolment coming through with a considerable degree of success. Our other absolute priority followed from the first one because once you auto-enrol someone into a pension, you have to make sure that there is good value. It was to bring down the extremely high costs of pension provision for people on modest or low incomes in small and medium-sized enterprises. We observed that if people went through the private competitive system, by the time they retired, 25% or even more of their entire pension pot had disappeared in cumulative charges over the years. We believed that it ought to be possible to get that figure down to something like 5% or 10%, which makes an extraordinary difference to someone’s income throughout their retirement. We are talking about people living with incomes in retirement that are 20% or so higher than they would otherwise have been.
Those extremely high costs derived from the fundamental inefficiency of the market for private pension provision. It is a system absolutely shot through with market failure where the process of trying to provide in a competitive fashion simply does not work well. We have heard already from the noble Baroness, Lady Sherlock, the quote from the Office of Fair Trading on that.
To get the costs down, it is important to ensure that there are low costs for active members in the scheme to which they are contributing, and it is also important that low charges are levied on those who have already accumulated pots, and on those pots derived from past employment. That requires two things. First, it requires measures to facilitate or require the consolidation of pots, thus removing the costs of multiple proliferation, which are of no benefit either to the industry or to the individual. Secondly, it requires measures to ensure low costs in the scheme into which we consolidate. Again, it is good that a consensus has emerged over the years on the importance of those objectives. I recognise that the pot following the member is proposed as being one way to that end, but I am concerned that while it achieves the first of the two crucial objectives of consolidation, it does not necessarily achieve the second. It does not necessarily achieve low cost in the scheme into which the person is being consolidated because there are dangers that PFM could involve people being consolidated into a scheme where they are paying higher charges than they were paying into the scheme they had been contributing to, and higher charges than necessary. I believe, therefore, that the aggregator option may be the better one and that it needs to be looked at carefully and fairly.
I agree that there are some trade-offs here, but I am not convinced that the impact assessment which has been put before us is a good and fair assessment of that trade-off. The key argument in the impact assessment is that if we go down the aggregated route, we would need to apply it only to “the smallest unprofitable pots” to ensure that the aggregator scheme did not monopolise the market. It states then that the department has interpreted that for the purposes of assessment by assuming that you would aggregate pots only up to a maximum of £2,000, because that was the figure which was suggested in discussions with providers. That compares with the £10,000 assumed when it looks at the pot follows members. Indeed, it is quite noticeable that when it looks at the PFM option, it gives us a set of impact assessments for a variety of options—£2,000, £5,000, £10,000 and £20,000—but when it turns to the aggregator model, it considers only the £2,000 maximum pot.
I accept that if it was really necessary and unavoidable that if we go down the aggregator route we apply it only to pots of up to £2,000, that might be a good argument for taking the PFM route. But I believe that there is no such necessity and that the logic in favour of it is invalid and needs to be challenged. The argument is that a higher level would interfere with the effectiveness of competition in the market and lead to dominant aggregators. However, the whole of the edifice of auto-enrolment, of NEST and of the regulations relating to value for money is based on the recognition that we are dealing with massive market failure and that we cannot rely on fair competition. We cannot therefore consider the argument that some dominant aggregators might emerge to be a valid argument against aggregation. Indeed, dominant aggregators will only emerge if they are lower cost, and that—to go back to my earlier point—is the absolutely central thing and the criteria above all on which we should focus. Will we get the costs down? Will we reduce the total reduction in yield?
I do not believe, therefore, that the danger that the aggregators may become relatively dominant in the market—which is really the only argument put forward against it in the impact assessment—is a valid argument against aggregation. I would urge that, to have a useful impact assessment, we should be considering a range of options with a higher maximum of £2,000 transfer. I see no inherent reason why we should consider having no limit; I certainly believe that if we are to have a fair comparison, we should be thinking about the same limit that applies to the PFM option. I believe, therefore, that this choice between PFM and aggregation should not be concluded at this point. It requires more flexibility and thought to enable further consideration. I am personally, in my gut, in favour of the aggregator limit option, and I think it will be favoured over time, but all that this amendment does is keep that flexibility open for future consideration without the need for later primary legislation. I certainly think that that is required.
Lord Stoneham of Droxford (LD)
My Lords, the previous two speakers have covered the main arguments that I was planning to raise, because there is concern—even from those close friends of the Minister, Steve Webb—on this issue. It is valid, therefore, to register that—there are certainly concerns in our group here this afternoon. The issues have been raised, including the issue of the inefficient market. The issue does not cover the consolidation of old pots. It considers the consolidation of the mobile or live pots. It does not raise the issue of what you do with those people in the labour force who are constantly changing jobs and the costs and the impact on their pension pots every time they do that. It also needs to address the fact that there is a smaller number of aggregators. I agree there is a problem with competition, but it is much easier to supervise them and make sure that the quality of those aggregators is adequate.
The final issue that needs to be raised is that there is a concern that without that supervision, people will be transferring into poor schemes or run the risk of doing so. They need to be protected. For all those reasons, it is right—and the noble Lord, Lord Turner, raised this point—that this is a time for reflection before we make any final decisions.
Baroness Drake (Lab)
My Lords, I will try not to duplicate some of the excellent contributions that have been made. Perhaps I could say that the areas of concern with pot follows member can basically be grouped into three categories. One is confidence in the basis for the Government’s decision to choose pot follows member; the second is differing views on what benefits the saver, and the third is the need to protect dormant pension pots that have already accrued.
When it comes to confidence in the basis for the Government’s decision, the noble Lord, Lord Turner, did a splendid job in identifying the limitations in the impact assessment. I stress that there are significant barriers to overcome before the Government can be confident about the superiority of the PFM model. The consequences of getting this wrong are absolutely huge.
Baroness Drake
My Lords, perhaps I may reiterate for continuity that the areas for concern with PFM can be grouped into three: confidence in the basis for the Government’s decision, differing views on what benefits the saver and the need to protect dormant pots already accrued.
When it comes to the basis for the Government’s decision, where are the significant barriers to be overcome before the Government can be confident about the superiority of the PFM model? The consequences of getting this wrong are huge. Yet the transfer model is in the Bill when there are so many conditionalities still to work through, and confidence in securing lower charges, which is the main benefit claimed for the PFM model, are by no means assured.
PFM requires effective pan-industry collaboration, but what if that is not forthcoming? Are the Government confident that they can overcome industry inefficiencies and conflicts of interest, so well articulated by the noble Lord, Lord Turner? The DWP is working with the industry to find an IT solution to match pots to members. There are significant technical challenges to overcome, standardisation to be achieved and the industry as a whole has to reach a consensus that prioritises the savers’ interests. If and when that is achievable are unknowns, but the Bill locks us into pot follows members.
Some providers will have an interest in getting rid of small, less profitable pots but will also have an interest in setting a pot size cap to defend their more profitable pots. They will have a natural antipathy to an aggregator with a pot cap that increases to a certain level. However, the pot limit chosen for automatic transfer will affect the number of separate pots that a saver builds up over their working life. It is one of the issues that goes to the heart of the efficiency of the aggregator model or the consolidation model chosen. Depending on the assumptions about the aggregator or how many active member and dormant-member pots that it has, the administrative savings can be greater than those that have been estimated in the impact assessment.
The department comments in its impact assessment that, overall, the results of its modelling suggest the aggregator scheme will achieve slightly less consolidation than PFM, but that needs to be set against the greater control that an aggregator scheme could provide in mitigating other risks that come with an automatic transfer mechanism. It would also be interesting to see the results of modelling that includes today’s dormant pots. I would like to come back to this. Equally, pot follows member cannot be implemented without raising quality standards, or the Government risk transferring the savings of millions of ordinary people into myriad schemes over which they currently have little quality control.
Even if the Government succeed in getting all schemes to a minimum quality standard, there will be a wide range between minimum standard and best practice. For example, consider a modestly paid worker who leaves a good scheme provided by a major retailer and goes to work for a two-person employer running a small shop, whose workplace scheme has higher charges, poor governance and a less suitable investment strategy. Would it really be wise to default several thousands of pounds of the worker’s savings into the new employer’s scheme? Regulation could set standards for aggregated schemes above the qualifying standards for automatic enrolment schemes, raising those standards in order to mitigate the risks that can occur on transfer.
Against that, PFM increases the regulatory burden to oversee a myriad schemes into which automatic transfers would be made, rather than focusing on leveraging very high standards in a few aggregated schemes. There is the potential for significant burdens on employers involved in transferring small pots to any number of schemes. Under PFM, every scheme would potentially need to be capable of communicating with every other scheme. Aggregators could pose a lower burden, as there would be—or could be—a much smaller number of such schemes.
Automatic enrolment was intended to carry a lighter regulatory burden for employers, especially SMEs, but this seems to be rowing in the opposite direction. The National Employment Savings Trust, which embraces the most transient low to moderate market, could consequently face higher administrative costs as a result of PFM. What is the consumer detriment to NEST members whose pots are transferred into the schemes of new, small employers, and out of the protection of the high governance standards in NEST?
With pot follows member schemes, the department expects that over the long run average charges would reduce as efficiency savings are made by the industry, but a reading of the impact assessment lacks confidence. Paragraphs 67 to 69 list some of the risks to which I have referred, but paragraph 70 concludes rather sweepingly that,
“the Department would expect the gains and losses from differences between scheme charges and investment performance to cancel out on average”.
When it comes to savers benefitting through lower charges from the administrative savings that providers may make from PFM, paragraph 71 comments that,
“there is a risk that some providers will not experience the resource savings projected”.
Paragraph 72 reminds us of the,
“uncertainty surrounding the assumption over the savings that providers will make”.
This is not the firmest of springboards from which to lock into a solution on the front of a Bill. On the differing views of what benefits the saver, PFM does not currently accommodate people who leave the labour force or become self-employed, as they have no employer scheme into which to transfer their pot. Their ex-employer may nevertheless default them into a poorer personal pension because they do not allow ex-employees in their existing scheme, which I must say is a growing trend. What of women who leave to become carers, move to a new employer, or who work part-time but because of the level of the earnings trigger are not auto-enrolled into the new employer’s scheme?
As has been argued by NAPF and others, pot follows member increases the risk of charges and transaction costs being incurred on the whole pension pot, rather than on the incremental amount saved with the previous employer. If the saver works in an industry characterised by frequent job changes they will be more vulnerable to these risks, which an aggregator could reduce.
Even where individuals choose to transfer to their new employer’s scheme, they face supply-side barriers. Transfers can take weeks if not months, and complexity and lack of standardisation combine to cause delay and increase costs. At decumulation the buying power of a larger pot can be harnessed by the individual, but the buying power is even better if open-market options can be exercised in bulk. Aggregators could facilitate and do this.
I turn to the third element, which is the need to protect dormant pots that have already been accrued. A key weakness in pot follows member is that it excludes existing dormant pots. An aggregator could pool an individual’s dormant and live pots because aggregation would not depend on an active scheme member moving to a new employer. Pot follows member at the point of introduction only consolidates live pots with future live pots. Today’s dormant pots are completely ignored. No start date has been set for pot follows member, as my noble friend Lady Sherlock has indicated, but by 2016 some five years’ worth of dormant pots will have been built up under automatic enrolment, and they will be excluded from the PFM proposition. The summary of the impact assessment points out that those with dormant pots before the start date will,
“remain in their existing scheme”.
That is a key weakness in this solution. Equally, it cannot be right that they should stay with their existing scheme in every instance because some employers will simply default these pots into alternative arrangements anyway if the former employee does not voluntarily transfer. If they are not allowed the option of access to PFM or the aggregator, the employer may well default them anyway into a personal pension.
Finally, the issue of pension pots is not only a future one, it is also one of legacy. Quite a lot of work is being done on standards and reviewing legacy pots by the DWP and the OFT, and there is work to come out of the FCA. I would ask this question: is there to be no synergy on the solution to transferring small pots post-2016 under auto-enrolment, and the solution to the problems that may be revealed in the audit of legacy schemes arising from the OFT investigation? Is it really going to be a set of parallel lines in looking for the solutions to cover the legacy problem, which could also be in auto-enrolment savings pots because of the 2016 dateline and what evolves in the future?
Amendment 62ZC clearly maintains the power of the Secretary of State to make arrangements for the transfer of pension pots, because everyone sees the compelling need to have some way of aggregating or consolidating these small pots. This amendment provides an opportunity to rethink the model to be chosen, but it does not of itself substitute an alternative model. The Government can eventually decide on the alternative model, and new primary legislation would not be needed—but it would not lock us in. The effect of the amendment would not be to lock us in to the PFM model at this stage. The reason for that is, I would say, because the case is not proved, members’ interests are not truly being defended, and there is no synergy with any dormant savings that may exist prior to the implementation of PFM before 2016. I believe that all these issues need much more consideration.
Baroness Turner of Camden (Lab)
My Lords, I have not spoken on this item hitherto except briefly at Second Reading. In my opinion, it is one of the most important issues before the Committee. That is because it is quite obvious that the Government want people to save. Everything they have been telling us about pensions indicates that they want people to save. What happens if people do save, but then they transfer jobs? Nowadays, of course, people do not stay in the same job for their lifetime. They may have several or even many changes of job in the course of a career. What happens to the pension pots that they accumulate? If there is no safety in those pension pots, the whole thing will be a disaster. I support strongly what my noble friends have said. It is clear that this is something that requires a great deal of attention.
Is the regulator to have more powers to deal with this? It is obvious that you cannot have a situation in which pension pots are put at risk because there is no way of handling the market or for dealing with people who will be forced to make choices for which they do not have the necessary skills or experience. They cannot make the right kind of choices and they may end up with a bit of a disaster instead of a reasonable pension, or even a reasonable lump sum to place with another pension provider. Again, I hope that the Government will take seriously what has been said in this debate. It is a very important issue.
Lord Bates (Con)
My Lords, I can certainly assure the noble Baroness, Lady Turner, that we will take very seriously what has been said this afternoon because it comes from such authoritative sources. We have had a high-quality discussion, as is typical of this entire Committee. In fact, at one point I think that we had a Turner commission quorum. This is a very important discussion. We are agreed about the urgent need to tackle small pots and to keep people engaged as regards the value of their savings with a view to their increasing them and being able to purchase a bigger pension when they retire. The savings culture to which the noble Baroness, Lady Turner, has just referred is at the heart of this amendment and the proposals we have put forward.
First, I wish to put some general remarks on the record and, in so doing, speak to government Amendments 62A and 62B, standing in the name of my noble friend Lord Freud. I will then turn to the issues and questions raised and, I hope, give noble Lords some comfort on them.
I think it is worth starting on a note of consensus. Clearly, there is a strong sense that the issue of the proliferation of small pots is one that needs to be addressed. There is some disagreement about how we get there—an issue on which we have consulted extensively since 2011. We announced our preference for the pot-follows-member-model in 2012 and reiterated it in the Command Paper published last year. A full and proper policy-making process has been followed in coming to this conclusion. These amendments seek fundamentally to change our proposals to a type of aggregator model, where pension pots will be moved to a separate nominated transfer scheme. We consulted on the option of an aggregator and there was no clear consensus for a particular type of aggregator. We received views on single, multiple and virtual aggregator models and only 19% of respondents preferred a multiple aggregator which these amendments seek to introduce. Therefore, these provisions, while providing a broad framework, legislate specifically for the pot-follows-member model, providing a clear direction to drive development of the detailed transfer process and to enable the industry to plan for the future.
I will take some time to set out why this Government believe it is right to take this approach. The rationale behind automatic transfers has always been to ensure that individuals have better retirement outcomes and we believe that pot follows member will help to achieve this because it brings greater pension pot consolidation. The proportion of people reaching retirement with five or more dormant pots could fall from one in four without reform to nearly one in 30. We estimate that pot follows member will halve the number of dormant pots and make net administrative savings of £6.4 billion by 2050. That is a key point because the administrative costs of pensions are at the heart of what we are talking about in terms of charges, so therefore reductions in costs mean a bonus for the savers.
In contrast, by their very nature, aggregator models mean less consolidation than pot follows member. Individuals will have at least two pots in a single aggregator model and they could have many more in a multiple aggregator model. Our research shows that a single aggregator scheme would achieve only around half the net present value of a pot-follows-member system to the new employer’s scheme. Given that people are more likely to engage with pension saving as they see their pot grow, coupled with the fact that most annuity providers require a minimum of at least £5,000 or £10,000 in a pension pot to achieve the market option to which the noble Baroness, Lady Drake, referred, consolidation is a key objective to achieve greater results and economies from the purchase of annuities.
Baroness Drake
Will the Minister accept that, whereas getting every automatic enrolment qualifying scheme up to a minimum standard is an excellent aspiration, getting everyone up to a minimum standard is not the same as setting a very high set of standards for a scheme that you are using to default people’s pensions into?
Lord Bates
The Government are not averse to excellent aspirations in a whole range of policy areas but in that particular area we need to look at the issue of the quality. In many ways, this goes back to the introduction of auto-enrolment, when perhaps it should have been the case that scheme quality was dealt with at that time. That would have made an awful lot of sense.
Baroness Drake
I do not want to get into that political debate because there might be some merit in what the noble Lord said. One of the core issues is that a default pension scheme was not chosen but I do not want to drift there. However, it does not matter who should have dealt with the minimum standards for qualifying schemes and when. If the Government are going to take to themselves the power to say, on behalf of millions of people in this country, “We will automatically transfer”, then the governance standards required in the scheme receiving the pots transferred under those terms have to be pretty high, do they not?
Lord Bates
Yes, and our hope and belief is that there will be higher standards. That cannot be issued by diktat and has not been covered. We are simply giving the powers and setting out the framework as to how we will go about that, but that discussion has to be had with the pensions industry. The conversation is ongoing and we will certainly be reporting on that progress.
I turn to some of the specific points that have been raised. The noble Baroness, Lady Sherlock, talked about the level of support and seemed to be fairly sceptical about whether there was any.
Lord Bates
The noble Baroness always asks an honest and genuine question, and I am trying to give an honest and genuine response, which is to say that we are not necessarily comparing like with like here. Although people understand how the pot-follows-member scheme might work—in other words, they will have just one pot, and everything will be transferred into it—they do not necessarily understand what the noble Baroness is proposing in terms of alternatives, whether they are single, multiple or virtual aggregators. Therefore, to give a clear-cut position on that is somewhat difficult.
It was drawn to my attention today that Adrian Boulding of Legal and General, one of the largest pension providers, in today’s Pensions Expert, formerly Pensions Week, says:
“the concept of your pension pot following automatically to a new employer is now not far off. The long-term benefits of people having ‘one big fat pension pot’, as the minister likes to call it”—
I think the Minister he is referring to is my right honourable friend Steven Webb—
“will be greater consumer engagement, more informed decisions, greater buying power and better pension outcomes. All well worth striving for”.
Lord Bates
He might say that but he is one of the providers and I therefore think that that is certainly well worth listening to. Another reason why we have come to this conclusion is because there is a great deal of uncertainty about what is happening out there. Auto-enrolment in pension schemes has been a huge success and the previous Government deserve credit for introducing it in the 2007 and 2008 Acts, based on the recommendations of the Turner commission. The price of the success of auto-enrolment is that it is creating a larger number of smaller pension pots as people move on. Figures have been quoted of there already being 370,000, and the noble Baroness, Lady Drake, has talked about a future figure of 600,000. That means that the need to make a decision is more urgent than ever. The noble Baroness was asking, “What does the industry think? What are people actually thinking?”. Pensions Expert, in its comment and analysis section said:
“If last year was about policy, then this year it is going to be all about making things work. Government have now clearly set the direction of travel. The success of auto-enrolment—in terms of low opt-out rates—means even more small pots are going to be created than were expected. Previous estimates that auto-enrolment would create around 370,000 new pots of less than £2,000 each year now look woefully low”.
They are very clear in what they are saying: they want direction. That does not mean to say that that direction cannot be changed by a future Government—just that they are getting clear direction. We consulted about it in 2011; in 2012 we issued a response; in 2013 we actually said what we were going to do. It seems as if finally, the industry—and, we hope, members—are getting their heads around the fact that this is the preferred option and the route that we are going down to ensure that we actually make it work.
Baroness Hollis of Heigham
They may be getting their heads around the Government’s position, but that does not mean that they agree with it.
Lord Bates
The noble Baroness says they do not agree with it, but when the ABI actually carried out a survey and asked people which one they preferred, 58% of consumers said they preferred pot follow member.
Lord McKenzie of Luton
Did the noble Lord not say a moment ago that perhaps the aggregator model was initially slightly more difficult to understand than the pot-follows-member model? It is not surprising, therefore, that initially, some of these surveys may have shown less support for that model.
Lord Bates
The noble Lord makes my point: it is more difficult to understand. What are we trying to do? We are trying to make it simpler. We are trying to get people to be able to understand it. That is one of the reasons why it appeals to people. They will only ever have one pension pot; under the other scheme they may have several; they will be able to keep track of that and follow it through. Anyway, we can discuss and debate that, but in all of the consultation that was undertaken, it was clear that there was a strong view in favour—not only from the respondents of the consultation, but also in the opinion polls that followed from the industry.
The noble Lord, Lord Turner, raised the important issue that pot follows member fails to deal with high charges. We strongly agree that driving up scheme quality is of paramount importance. This is an issue wider than just a scheme used for transfers in the aggregator model, but actually should be something that applies to all, to set minimum standards across a broader range of schemes. Therefore, in doing so, it would benefit not just those affected by these pension pot transfers, but also the existing members of those schemes.
The noble Lord, Lord Turner, said he did not accept the pot size comparisons that were being put forward. He spoke about the £2,000 limit: why was it £2,000? We actually consulted not just on £10,000: we consulted on £20,000, £10,000, £5,000, all the way down to £2,000 and even £1,000, which is similar to the amount that is currently used in the Australian model, which is often cited in this context. In all of those different levels, pot follows member came out ahead of the aggregator in terms of individual responses.
Baroness Drake
I would not presume to speak for the noble Lord, Lord Turner—I learn from him, not the other way around—but the point he was making was that one of the Government’s arguments against aggregator was that they would have to limit the pot size, which would introduce inefficiencies, because if they did not do so, it would distort the market. He was saying, I think, that he did not necessarily accept that that was a compelling argument against aggregator.
Lord Bates
It is a shame that the noble Lord, Lord Turner, is not here to respond to that himself or to clarify the point, but I take the clarification from the noble Baroness about where he was going. On the issue of how to drive down costs, the noble Lord referred to the potential and mentioned some horrendous numbers—25% or 30% of accrued pension disappearing in charges and how low it was possible to get that. There are some very interesting findings, which we are consulting on at present, about how technology would be a key ally in this. The noble Baroness, Lady Sherlock, asked about this too, wondering whether we preferred a paper-based system or an electronic system. Our preference, based on the current evidence, is invariably towards electronic, because there are associated costs every time you push a bit of paper around. I was interested to read in various articles that you might be able to get the figure for the entire transaction of a transfer down to £105 for both transmitting and receiving the amount if you do it electronically. There needs to be an electronic element to this and that probably points in the direction of a database. We are still consulting on that. We are open to advice, but that is probably something on which the industry will have to offer views.
Baroness Sherlock
I thank the Minister for that response and am also very grateful to all noble Lords who have contributed to this discussion. The noble Lord joked at the beginning that the Turner commission had been quorate. I think when he reads Hansard he may find that slightly less funny than it seemed on the face of it. If I was sitting where he was sitting and two-thirds of the members of the pensions commission told me that I had got this wrong—auto-enrolment and all that flowed from it was based on their recommendations—I would be thinking very hard indeed at this point.
I am very grateful to the noble Lord, Lord Turner, for what seemed to me a pretty damning indictment of the fact that, although we may share an objective, the way the Government are going about trying to achieve this will not tackle the very grave consequences of market failure in the pensions market for savers who are depending on the results of those investments for their retirement income. As my noble friend Lady Turner pointed out, that is one of the most significant issues facing not just the Government but, frankly, this Committee.
I am sorry. I have a great deal of respect for the Minister but I am afraid that he was unable to answer the major questions that came up today. I do not blame him for that. He did not invent the policy: it was invented in another place and he is doing a good job of defending it. But the fundamental questions are out there unanswered. The noble Lord, Lord Turner, pushed home the consequences of that market failure on high costs and charges and what that does to savers’ incomes, and the fact that, despite the Government's best intentions, pot follows member simply does not contain within it the means for addressing that.
The noble Lord also pointed out the consequence of what happens to savers’ incomes in retirement of not getting that right now. Those effects will run for a long time. I was very grateful for the intervention of the noble Lord, Lord Stoneham. Given the origins of this Bill, I thought it was a brave and helpful intervention. But the questions that he posed about how pot follows member can deal with old pots and multiple moves are still sitting on the table. It will be interesting to hear whether there is some small movement on auto enrolment pots, but we will still have the issue of significant numbers of dormant small pots.
We still do not have an answer, as my noble friend Lady Drake pointed out, to the problem of people who are leaving the labour market altogether either to become self-employed or simply to leave the labour market. What happens to those pots?
We did not really get an answer as to why, when so much of the Bill is remarkably loose, the Government suddenly get very prescriptive in this area and solely specify PFM on the face of the Bill. As my noble friend Lady Drake pointed out very powerfully, there are some major difficulties of implementation. The Minister is calling for speed and action now. He must know that the barriers to implementation described by my noble friend Lady Drake are such that he is not in a position to press that button now. If he is, he might want to respond to the questions that she posed about the IT challenges, the standardisation challenges, the huge issues of implementation and the need to build consensus across the industry to prioritise savers’ interests. If he feels that the Government have all those cracked, I encourage him to stand up and intervene and tell me now. Otherwise, there is a lot more work to be done. All this amendment is trying to do is to make sure that that work does not abandon the alternative option—which may in the end be the saving of our shared objective—when there is no need to do so at this stage.
I am also concerned about some of the points that the Minister raised in response to there being no single model. I would be very happy to work with the Government to see if we can build consensus around a single model of an aggregator. If that is what the Minister offers, let us work together to try to do that.
The Minister said that there would be more consolidation in pot follows member. Leaving aside for one moment the serious concerns about the judgment made in the impact assessment raised by my noble friend Lady Drake and the noble Lord, Lord Turner, if pot follows member does not tackle the full range of risks that have been described, then that simply does not answer the question. The Minister again gave an argument that most annuity providers would require a minimum level of pot and the point of decumulation, but again he did not take on the point made by my noble friend Lady Drake, which is that being able to buy in bulk in the market, which an aggregator could do at the point of decumulation, actually opens up whole opportunities in that area.
He made the point about good and bad schemes and that there should not be any bad schemes. I completely agree with him, but there are 200,000 pension schemes in this country. The chances of getting all those up to an optimum level before this is introduced are frankly unrealistic. Given that, the point made by my noble friend Lady Drake stands even more strongly. Even if the Government could guarantee to get all those schemes up to what they would regard as an acceptable minimum standard in the context of the criticism of market failure made by the noble Lord, Lord Turner, and even if they could do that fast, there will still be a significant difference between the best and worst returns. For reasons I will explain in a moment, that seems to be very difficult in the context of auto enrolment.
I was pleased that the Minister managed to find some backing for his scheme from a survey. Did he say that the survey was conducted by the ABI?
Baroness Sherlock
That is marvellous. So the ABI backs a scheme and the survey conducted by the ABI backs the scheme. That is excellent. I think it still leaves out some possibility that there may be other people out there who do not back the scheme. Perhaps it was the other way round. Either way, I think it is the same point made differently. None the less, I take the point and thank him for sharing that with us.
The Minister also made the point that there will be real attractions—and he quoted someone from Legal & General saying that it was clear that the direction of travel from the Government was for pot follows member. There are—but, of course, this is a Bill, not an Act. It is open to Parliament to make a decision if it does not agree with what the Government are proposing, and so far this Committee clearly does not agree with what the Government are proposing. Not one person who has spoken backed the Government’s plan; all backed the alternative. So we still have an opportunity. He also went on to say that many advantages have been mentioned of people having one big, fat pension pot. Of course, there is no reason why that big, fat pension pot could not be sitting in a well performing, well regulated, successful aggregator.
That takes us to the fact that we have two significant public policy dilemmas or issues. The challenge that we have here is made all the more significant by the fact that it comes on the back of auto-enrolment. This is not an individual employee making a choice to go to a pension fund, place their money in it and take their risks in the market. This is somebody who is not choosing, but is simply choosing a job, and by doing so will be forced by default, if they make no other choice, automatically, without their express consent, their pension pot will be moved from their previous employers to their new employers. That is in the context whereby already the state has auto-enrolled them. So step one, without any active consent, we have auto-enrolled them in a pension scheme. Step two, when they move jobs, without any active consent we default moving it with them to the new employer. Doing that in a context where the level of return that they might have expected to gain with the old employer could, potentially, be significantly higher than that which might be enjoyed with the new employer, creates the possibility that the state is creating consumer detriment on a significant scale. That is a very serious challenge, and in that context I suggest that the Government’s proposal of pot follows member has a very high bar to pass.
Finally, the other public policy point is that, if one of the consequences of this is that significant numbers of savers end up with lower retirement incomes than they might otherwise do, that is bad for them, but it is also bad for us as a country. I think that my noble friend Lady Drake quoted from the impact assessment, which suggested that the gains and losses would balance out across the piece. Even if that is true, and I do not know the impact assessment well enough to be sure—I do not have enough confidence in it yet to be confident of that—that does not help us individually. On average, the life expectancy may be X, but if mine is significantly below and yours is significantly higher, the difference matters quite a lot to me, because although on average we may both die at 84, if I die at 60 and you die at 100, that does not make me happy. So the consequences for individuals are really quite significant.
Given all that, there is also the fact that the distribution will mean that, if savers do not go into retirement with the kind of incomes that the Government expect them to have, the whole strategy for retirement on which this is predicated begins to be called into question. So this whole Bill is predicated on an assumption that future generations of savers will have higher retirement incomes because of all these actions taken. It is, therefore, absolutely incumbent on all of us to make sure that the Government get this right. All this amendment does is to put the aggregator option into the Bill. I urge the Minister to accept it and to work with us in doing that. We will definitely return to this matter at a later stage but, since this is the Moses Room, I beg leave to withdraw the amendment.
Lord Freud
Lord Freud
House of Lords
(10 years, 11 months ago)
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Shipping: Passenger Safety
(10 years, 11 months ago)
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Lord Berkeley
To ask Her Majesty’s Government what assessment they have made of the impact on passenger safety of their application to the Committee on Safe Seas and the Prevention of Pollution from Ships for exemption for certain ships and areas of operation from European safety requirements in order to substitute life rings for life rafts.
The Minister of State, Department for Transport (Baroness Kramer) (LD)
My Lords, Her Majesty’s Government require all vessels to carry enough life rafts to meet the risk to those on board in an emergency. The proposal submitted to the Committee on Safe Seas and the Prevention of Pollution from Ships is based on UK regulations for domestic passenger ships and is supported by the department’s formal safety assessment of domestic passenger ships carried out between 2002 and 2004 in response to Lord Justice Clarke’s formal inquiry into the “Marchioness”/“Bowbelle” collision.
Lord Berkeley (Lab)
I am grateful to the noble Baroness for that response. My understanding is that this exemption application applies to passenger ships with up to 130 people on them, which, under directive 2009/45, article 4, allows them to go 15 miles from the place of refuge or five miles from the coast in the summer. The idea is to reduce the number of life rafts to the maximum number of passengers—not allowing, of course, for the fact that you cannot always launch life rafts if a ship is heeling—and to replace the rafts removed with life rings. Does the Minister really think that it is a good idea for people who might be wrecked in an accident in the North Sea or off the Hebrides to have to get into a life ring rather than a life raft?
Baroness Kramer
My Lords, my understanding is that this exemption is for up to five miles and therefore would not apply in most of the circumstances that the noble Lord has just described. It is for small craft of less than 24 metres which have to be travelling in daylight and in summer only. They are required to have sufficient life rafts for all passengers but additional safety can be provided by buoyancy apparatus.
Lord Higgins (Con)
My Lords, are life rafts generally not preferable to life rings, particularly if the water is cold? Is the saving in this negotiation really significant? Presumably all existing vessels already have the current requirement rather than the reduced one.
Baroness Kramer
My Lords, there is clearly some confusion. The EU directive was designed for the large, steel ferries that I think noble Lords are referring to. These are small craft. Existing small craft already have this exemption; it is simply as they are replaced that newer craft can have the same exemption. The rationale is simply that on a very small boat there is very little space for adding one additional life raft, which is what would be required by the directive. You would have to take off passengers. These are usually small, family operations operating on a tight financial margin and, as I say, it is within five miles of the coast so that if something untoward were to happen, modern life rafts are very reliable and air-sea rescue is very close at hand. Therefore, the marginal benefit is considered very marginal.
Lord Lea of Crondall (Lab)
My Lords, I am rather exercised by the fact that Britain over the past 100 years has had the reputation of giving leadership in the International Maritime Organisation, which is across the road there, with the highest standards in world shipping. I am trying to think of the read-across of this to the Philippines archipelago, to Indonesia and so on. Two very brilliant new books on seafaring that have just come out show that many safety standards are now deteriorating. Will the Minister give an assurance that, within the IMO and elsewhere, the British Government will continue to listen to the problems of workers on seagoing ships and that the Government’s contacts with the employers will be equally matched by their contacts with the trade unions?
Baroness Kramer
My Lords, the UK has been an absolute leader in marine safety and I can guarantee that this Government will continue to be. I will ask about various discussions that are taking place with the IMO and other stakeholders, and make sure that we write back to the noble Lord.
Lord West of Spithead (Lab)
Is the Department for Transport involved in any studies looking at lessons learnt from, for example, the “Costa Concordia”, and at the inability to launch lifeboats and life rafts at excessive degrees of heel?
Baroness Kramer
My Lords, I do not have the answer to the noble Lord’s question but I will obtain it. I want to make it very clear, however, that the exemption being sought is not for a boat like the “Costa Concordia”. We are talking about something much smaller in benign waters very close to shore.
Lord Greenway (CB)
My Lords, is not this application one of a number which have arisen from the formal safety assessment by the Maritime and Coastguard Agency which I as a mariner regard as entirely practical?
Baroness Kramer
The noble Lord is exactly right. I think that this is regarded by almost everybody as a practical, reasonable and sensible measure. It has withstood over many years a reputation of providing sufficient safety in the relevant circumstances.
Lord Swinfen (Con)
My Lords, what would be the comparative rates of survival for the two methods, life rafts and life rings, in cold winter water around our northern coasts?
Baroness Kramer
I assure your Lordships that this standard could not apply in winter weather; it is for summer only. It is for boats that are very close to the coast and for small excursion vessels. It is part of an appropriate safety regime to look at how the vessels are being used and to make sure that safety is appropriate to that rather than circumstances in which they cannot be used.
Lord Wigley (PC)
My Lords, may I invite the Minister to reconsider her reference to benign waters? Very often, waters that appear benign can rapidly become less benign, and lifeboats are not available at close proximity all along the coast. Can we make sure that if we are erring, we are erring on the side of safety?
Baroness Kramer
I can assure your Lordships that, from a UK perspective, this measure meets a very high standard of safety. Both the safety required of the boats themselves and the quality required of the life rafts have been very closely examined. I have learnt in this House that the word “benign” can be wrongly used, but I think that these are generally benign waters.
Lord Davies of Oldham (Lab)
My Lords, the Minister is still trying to convince the House that there is virtue in pitching British safety standards below the minimum of European safety standards. Why on earth should that be done unless it is just some doctrinaire response to Europe?
Baroness Kramer
Perhaps I may explain, because I think that there is some confusion here. The EU directive which would require an additional life raft is not intended for this kind of vessel; it is for steel vessels and for large-scale ferries, so it does not apply to most of these craft because typically they are fibreglass, and so on. We want to be sure that we are getting an appropriate exemption for future replacement of existing craft. As I said, the EU directive is not intended to deal with this kind of craft; they are expected to be handled through an exemption process.
Employment
(10 years, 11 months ago)
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Lord Holmes of Richmond
To ask Her Majesty’s Government what assessment they have made of the number of people in full-time employment in the United Kingdom.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
There are more people in work than ever before. The latest figures show that we have reached a record high employment level in the UK, with more than 30 million people now in work. Three in every four workers—about 22 million people—are in full-time employment. In the past year, the number of people in full-time work has risen by 460,000. This represents 95% of the increase in total employment in the UK.
Lord Holmes of Richmond (Con)
I thank my noble friend for his response. These figures are very good news. Work represents the greatest way for people not only to escape poverty but for most of us to realise our potential. What are the Government doing to ensure that all groups benefit from this employment boom, not least young people and disabled people?
Lord Freud
My noble friend is right to concentrate on specifics, and I am happy to assure him that we have campaigns to get the disabled into work. We have just launched the two-year Disability Confident campaign for employers, and in December we issued the disability health employment strategy. As for youth, I am pleased to be able to say that JSA for youth has now fallen for 18 consecutive months. The number of young NEETs is the lowest for a decade. We have 1.5 million apprenticeship places. The key measure that I have used in this House before is the number of young out of work and out of education, which rose under the previous Government, even though we had the biggest boom. We have now got it under control and it is beginning to fall. The number is now down by 100,000 since the election.
Lord Peston (Lab)
My Lords, is the Minister aware that quite a few people in full-time employment are in jobs below their qualifications and abilities, so the figures need to be looked at more carefully? Much more to the point, is he aware that if we look at the present state of the British economy, to cite that great liberal economist John Maynard Keynes, it is nowhere near full employment and the Government’s policies will never get us there?
Lord Freud
My Lords, the leader of the Labour Party said in 2010 that we had a programme that would lead to the loss of 1 million jobs. In fact, we have had a programme that has led to an increase of 1.2 million jobs. We have the right policies to get this country back on the move.
Lord Kirkwood of Kirkhope (LD)
My Lords, whereas it is quite clear that the headline unemployment figures are welcome, there is a problem about emerging underemployment and intermittent hours. While we are waiting, with more and more impatience, for the arrival of universal credit, which in due course will help, will the Minister do all he can to encourage people to take advantage of the existing in-work benefits, which can help employees get into full-time, sustainable jobs? While he is at it, will he do his best to try to tone down the Government’s anti-welfare rhetoric, which indiscriminately and unfairly seeks to caricature every social security claimant as either a scrounger or a cheat?
Lord Freud
My Lords, as my noble friend is fully aware, we are introducing a programme to blend the out-of-work benefits with the in-work tax credits. That is vital because it gets rid of that distinction and makes a smooth transition from being out of work to being in work. That is a vital reform which, as my noble friend knows, I am pursuing with all my energy.
Lord Low of Dalston (CB)
Is the noble Lord able to say when the Government expect unemployment to fall to the level of 7% and we can expect to see interest rates rising again?
Lord Freud
My Lords, that is, of course, a reference to the Bank of England’s target of 7%. Unemployment has been falling pretty dramatically: it fell 0.3 percentage points to 7.4% in the latest three-month period. It is not the job of a government Minister to predict when unemployment will hit any particular rate; all I can say is that these trends are immensely encouraging. We should all look for them to continue to improve and I have no doubt that they will.
Lord Soley (Lab)
Bearing in mind his first Answer, can the Minister tell us what discussions there are in government about the relative economic merits of raising the minimum wage?
Lord Freud
There are two distinct factors. The higher the minimum wage, the more people will not go into the market. Estimates show that if we were to go with the recommended living wage, we would lose 300,000 jobs, particularly among youngsters. On the other side of the argument, there are benefits in terms of pay, particularly for the Government, because—as my noble friend mentioned—the tax credit system boosts the pay of low-paid people. That is the balance of the debate.
The Lord Bishop of Newcastle
My Lords, the Minister will be aware that there are still significant regional differences in unemployment levels in the UK. Can he tell us what regional policies the Government may have in mind to help the situation in areas such as the one where I live, in the north-east of England, where unemployment levels are still in double figures?
Lord Freud
My Lords, I was encouraged, as other noble Lords will have been, to hear the very optimistic remarks about what is happening in the north; namely, that it is outpacing London at this particular time. Let us hope that that is and remains the case.
Taxation: Fuel Duty
(10 years, 11 months ago)
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The Earl of Shrewsbury
To ask Her Majesty’s Government whether they plan to extend the freeze in fuel duty beyond 2014.
Lord Newby (LD)
My Lords, the Government have taken substantial action to support motorists with the cost of living while reducing the budget deficit. As a result of this Government’s action, fuel duty will be frozen for the remainder of this Parliament, which will result in pump prices being 20p per litre lower than under previous government plans by 2015-16. The Government must exercise flexibility to target tax support where it is most needed. The Government will continue to review fuel duty in the context of all taxes and the public finances.
The Earl of Shrewsbury (Con)
My Lords, I thank the Minister for that encouraging reply. Is he aware that in upland, moorland and less favoured areas, such as where I live in the Peak District, the ownership and use of a vehicle—let alone a four-wheel drive vehicle—is a necessity and not a luxury. That therefore causes those communities to have problems with fuel prices, which are a very significant component of their viability. Will Her Majesty’s Government make every possible effort in the future to assist those areas in terms of cost of fuel?
Lord Newby
My Lords, the policy that we have already adopted will assist people in those areas, as it will everywhere else. We are looking at the scope for extension of the rural fuel rebate scheme, which gives an additional 5p rebate in the most sparsely populated areas. We hope to be able to make an announcement of that in the relatively near future.
Lord Barnett (Lab)
My Lords, the Question on the Order Paper asked the Minister a simple question. Should not his answer have been no?
Lord Newby
No, my Lords. The noble Lord knows better than anybody else that it would be foolish to set out at this point firm plans for individual taxes for the course of the next Parliament.
Lord Marlesford (Con)
Has my noble friend noted that the price of petrol in the petrol stations varies up to 3p within a few miles, and sometimes more? Does he realise therefore that if people are able to pay the extra 3p rather than going to a cheaper place, that suggests what the economists call a bit of a consumer surplus since they are prepared to pay extra? What is the cost to the Exchequer of this reduction? First, I think that it was £400 million for this year but what will it be by the end of the Parliament? Secondly, is it really the best way of spending public money, given all the other demands on the Exchequer?
Lord Newby
My Lords, the Government will have eased the burden on motorists by £22.5 billion over the Parliament to 2015-16. The kind of differential that my noble friend describes in a small area is a classic example of a competitive market operating. I am told, although I do not have one myself, that if you have a certain kind of sat-nav it will automatically tell you the price of petrol at petrol stations in your vicinity at the time, which is a very good way of facilitating the market working.
Lord Davies of Oldham (Lab)
My Lords, the Minister will however recognise that the Chancellor, through his VAT increase, increased the price of fuel by 3p. Why do the Government not go further and introduce a price freeze on domestic fuels?
Lord Newby
My Lords, it is true that the effect of the VAT increase ate into the benefit but the price is still 10p less than it would have been, even taking the VAT increase into account. I am not sure whether the noble Lord supports that policy but that is a very considerable net increase. As far as domestic energy prices are concerned, the noble Lord knows that his party’s proposed policy is nothing more than a gimmick.
Lord Lea of Crondall (Lab)
Arising from the question asked by the noble Lord, Lord Marlesford, about what economists call consumer surplus, is the Minister in agreement with the official data of the ONS that hydrocarbon taxes are the most regressive taxes in the country? In other words, they show that the lowest-paid pay—I think—four times more on petrol, as a percentage of their income, than the top decile. There is therefore a distinct impact on poverty, as was implicit in the original Question.
Lord Newby
My Lords, the noble Lord has made a powerful argument for the Government’s policy.
Education: Academy Chains
(10 years, 11 months ago)
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Baroness Jones of Whitchurch
To ask Her Majesty’s Government what controls are in place on the disbursement of public funds by academy chains to their directors and trustees or private contractors linked to them.
The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con)
My Lords, the relevant rules that academies must abide by are quite clear and have been considerably tightened under this Government. No individual or organisation with a governing relationship to an academy can make a profit; any goods or services delivered by these parties to these academies must be delivered transparently and at no more than cost; and proportionate and fair procurement processes must always be followed. As charities, academies are required to adhere to accounting standards. These require the full disclosure of related-party transactions, and independent auditors check those disclosures every year. Unlike local authority schools, academies produce and publish annual third-party audited accounts.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the noble Lord for that reply and of course I accept that the accounts of these firms are audited. However, is the Minister concerned by reports of excessive sums of taxpayers’ money being paid to academy chain directors for travel, subsistence, consultancy and legal services? Is he also concerned that many of these businesses are employing members of their immediate family to provide services for the academies, and does he accept that academy chains lack the involvement of parents and the local community, which could provide a degree of independent scrutiny and governance for the academies? What more is his department planning to do to get a grip on the situation, which seems to be one of prioritising the expansion of the academies over the protection of public money?
Lord Nash
I stand by my original Answer regarding the rigid regime that academies operate under, and resent any allegation that we do not have a grip of the situation. When we came into the Department for Education in May 2010, we found a department with, frankly, a very poor understanding of value for money. Since then, we have halved the cost of building schools under the previous Government; by 2015 we will have cut the cost of running the department by half in real terms; we have slashed the amount of money spent on sponsored academies from an average of more than £300,000 under the previous Government to under £100,000; and we have substantially tightened the rather loose arrangements that the previous Government had in force in relation to these arrangements. I stand by the results of the academies. Sponsored academies open for three years improve their results by 12% versus 5% at secondary level, and primary converter academies are far more likely than local authority schools to be rated outstanding at their next Ofsted when they have previously been rated good.
Lord Forsyth of Drumlean (Con)
My Lords, did my noble friend have the opportunity over the Christmas Recess to read the interview in the Times given by our noble friend Lord Harris of Peckham about the huge success in transforming the lifetime chances of youngsters in this country? Would a responsible Opposition not be asking why we are not getting value for money like that from local authority schools, which are cheating a generation of those opportunities?
Lord Nash
I entirely share my noble friend’s sentiment. We should be praising philanthropists like my noble friend Lord Harris and encouraging more of them into the academies programme, as we are attempting to do. In 2013 the Audit Commission carried out a survey of annual detected fraud and corruption within local authorities and reported 191 cases of fraud in schools. My department is considering what we can do about improving procedures in local authorities in relation to this.
Lord Foulkes of Cumnock (Lab)
My Lords, what are the arrangements for the trustees and directors of these companies declaring their interests?
Baroness Perry of Southwark (Con)
My Lords, does my noble friend agree that the most important form of accountability is the accountability of the school to its pupils, and their parents, to raise the standards of achievement? The huge success that my noble friend has already described is surely evidence of the success of the accountability that has left academies accountable to their pupils to raise standards.
Lord Whitty (Lab)
In replying to the Question, the Minister was trying to be very reassuring. Does that reassurance extend to a circumstance where a charity or an academy chain, having taken over the running of a school, then decides to dispose of property attached to it? Do the proceeds from that property go back to the school or do they accrue to the academy chain or charity?
Lord Nash
The noble Lord asks a very good question. In just about every case—if I can find other cases that are relevant to this answer, I will identify them for him—the land stays with the local authority, with a 125-year lease to the academy, so the circumstances that the noble Lord refers to are unlikely to apply. Certainly, nothing like what he mentioned could possibly happen without the consent of the Secretary of State.
Lord Edmiston (Con)
My Lords, I declare a personal interest as a sponsor of Grace Academy, which has featured in recent articles. Is the Minister aware that many sponsors have put multiple millions into the academy programme rather than taking funds out?
Lord Nash
I share my noble friend’s sentiment entirely. I am fully aware of that. I am extremely grateful to him for his support of the academy programme and, as I said earlier, we should encourage more philanthropists like him to come into the system, rather than trying to score cheap points against them.
Lord Griffiths of Burry Port (Lab)
My Lords, does the Minister agree that, while there is a full-blooded debate to be had about the relative merits of academies and schools that have some local authority involvement—a debate that I suggest will have its full import when we have rather more evidence from the academies than we have at the moment—it does not do anybody any good to castigate those schools that are not yet academies and whose results are manifestly brilliant and would hold any academy’s results to shame? Can we have some assurance that the language we use is not polarised in a way that damages schools in the public sector?
Baroness Hussein-Ece (LD)
Who are some of these academy chains responsible or accountable to? For example, the Academies Enterprise Trust has grown to the size of a local authority. At least local authorities are accountable to the electorate. Who is AET accountable to when it has more than 60 company directors on more than £60,000 a year?
Lord Peston (Lab)
My Lords, the noble Lord, Lord Forsyth, referred to raising standards for all children. If the schools that the Minister is talking about are so good, why do not any noble Lords opposite send their own children—or more likely, their grandchildren—to those schools, as many of us did, because we felt it was our responsibility to be supportive of local schools?
Lord West of Spithead (Lab)
My Lords, bearing in mind the history curriculum that is taught in academy schools, does the Minister agree with his Secretary of State, who wrote in a recent article that those on the left were unpatriotic?
Draft Modern Slavery Bill Committee
(10 years, 11 months ago)
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The Chairman of Committees
That the Commons message of 9 January be considered and that a Committee of seven Lords be appointed to join with the Committee appointed by the Commons to consider and report on the draft Modern Slavery Bill presented to both Houses on 16 December 2013 (Cm 8770) and that the Committee should report on the draft Bill by 10 April;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
B Butler-Sloss, Bp Derby, B Doocey, B Hanham, B Kennedy of Cradley, L McColl of Dulwich, L Warner.
That the Committee have power to agree with the Committee appointed by the Commons in the appointment of a Chairman;
That the Committee have power to send for persons, papers and records;
That the Committee have power to appoint specialist advisers;
That the Committee have leave to report from time to time;
That the Committee have power to adjourn from place to place within the United Kingdom;
That the reports of the Committee from time to time shall be printed, regardless of any adjournment of the House; and
That the evidence taken by the Committee shall, if the Committee so wishes, be published.
Joint Human Rights Committee
(10 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text
The Chairman of Committees
That Baroness Buscombe be appointed a member of the Joint Committee in place of Lord Faulks, resigned.
Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Bill
(10 years, 11 months ago)
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18:29 - Division on Amendment 45 - Ayes: 236 / Noes: 193 - Amendment 45 agreed.
21:37 - Division on Amendment 119 - Ayes: 28 / Noes: 148 - Amendment 119 disagreed.
“unless the expenditure relates to legislation before Parliament during the regulated period”
Lord Harries of Pentregarth (CB)
My Lords, before I focus on the first amendment—
Baroness Anelay of St Johns
May I assist the noble and right reverend Lord, Lord Harries? We allow some latitude, of course, at the beginning of any stage when Members are exiting the House in some large number, but may I advise any other Peer who leaves that they should not walk in front of the person who is moving the amendment? It was impossible for those on the Front Bench, who were listening to the noble and right reverend Lord, Lord Harries, even to hear the first word. I am sure that the noble and right reverend Lord, Lord Harries, may now wish to resume.
Lord Harries of Pentregarth
I thank the noble Baroness very much.
Before I focus on the first amendment in this group, I thank the Minister for responding to a good number of concerns raised by the commission which I have the privilege of chairing. He has responded to quite a lot of our concerns, in particular, I note, with government Amendments 41 to 44 in this group, which we are glad to see. All these issues were mentioned in the second report of the Commission on Civic Society and Democratic Engagement. The government amendments deal with issues of safety and security, particularly in Northern Ireland, extra expenses due to disability and travelling expenses, and they take out the time of volunteers. They also include translation from Welsh to English, although I note that the noble and learned Lord, Lord Morris of Aberavon, has his own amendment to include production costs as well as translation costs, and I hope that the Government will look sympathetically on that. I am very grateful on behalf of the commission to the Minister; he has taken a lot of trouble to listen.
However—and it is a big however—there remain a significant number of concerns, on which we are hoping to have a positive response from the Government. I have in my hands a petition which was started only last Thursday by the commission and, since then, has gained the support of more than 130 NGOs and 160,000 signatures from charities and campaigning groups that are still concerned about the effect of the Bill on the workings of our democratic society.
Briefly, the amendment of the noble Lord, Lord Tyler, is about the distinction between the general public and supporters. The commission put forward an amendment to try to widen out the definition of a supporter because, in a digital age, a supporter cannot simply be considered as somebody who gives money to a charity. As that petition indicates, with its 160,000 signatures, the term “supporters” now has a much wider character. Although the Government did not accept the amendment which we tabled earlier because they thought it was too wide, I hope that they will look sympathetically at that of the noble Lord, Lord Tyler.
To focus specifically on Amendment 34, my amendment concerns legislation before Parliament during an electoral period. It is absolutely fundamental to the healthy working of democratic society that people should be able to campaign quite freely, without being inhibited by too much regulation, against legislation that is going through Parliament during the electoral period. I was disappointed that the Electoral Commission, which has been helpful at a number of points in supporting our amendments, does not support this one in its latest briefing. I will examine its arguments as to why not.
The Electoral Commission says that, if the amendment were allowed, it would allow unlimited spending on what may promote or procure the election of any particular candidate or party. Secondly, it suggests that the range of topics is potentially wide, even if it is covered by primary legislation indicated by the Government. Let us take an example and test that out. In election year, the Government decide to start legislation for, let us say, a new town of 500,000 people not far from an area of outstanding natural beauty. This policy is strongly supported by the Government of the day, but is opposed by the two other parties; it is a highly political issue. Furthermore, the town will actually cover three constituencies where there is a narrow majority.
Surely people ought to be able to campaign either for or against that quite freely without an excessive regulatory burden, even during an electoral period. Otherwise, think what would happen. The Government could save their most controversial legislation until the beginning of the electoral period and bring it forward then, knowing that the opposition to it would be more muted than if it were outside the electoral period. We must remember that one year in five will be an electoral period. This will severely hamper and inhibit the proper workings of our democratic society.
Lord Morris of Aberavon (Lab)
My Lords, I am grateful to the noble Lord, Lord Gardiner of Kimble, for the unfailing courtesy in the discussion that we had on my amendment. When I moved a similar amendment in Committee, with the support of a number of my noble friends and no one dissenting, I said that I hoped that I and all of us concerned with the status of the use of the Welsh language had nothing to worry about. Now the Government have tabled Amendment 44, which includes such provision in new paragraph 1A(1)(b), and I welcome that as a very important step indeed.
Given the history of the success in ensuring equal validity for the language over the years, I presume the failure to include in the Bill a declaratory statement of the kind now in the Government’s amendment was an unintended omission. I was particularly encouraged by the considered statement of the noble Lord, Lord Gardiner, in his reply to the previous debate, where he stated that,
“the Government believe that the Welsh Language Act 1993 includes an obligation to treat Welsh and English on an equal basis and that there is a strong and compelling case for translation costs to be excluded”—
that is, excluded from the ceiling. He added, with regard to the references that had been made to the history of the language, that,
“the Government will consider how this exclusion would operate and will want to return to this important issue on Report”. —[Official Report, 16/12/13; col. 1093.]
That is what they have done, and I welcome that. Hence my noble friend and I tabled the original amendment, and I am grateful for the support of all who spoke in Committee.
The Minister said that there is “no legal obligation” to translate election material from English to Welsh and vice versa, and that is absolutely right. In reality, however, given the sea change in the use of the Welsh language in Wales, in some parts in practice it would not be possible to make any electoral headway without the use of both languages. All parties in Wales recognise this and implement the public expectation of the use of both languages. Indeed, in my time as a constituency Member of Parliament, this is what happened and many people made representations to me in both languages.
The Welsh Language Commissioner, Meri Huws, was concerned about this lacuna in the Bill and sought my support. The Bill defines “controlled expenditure” to include,
“the production … of material which is made available to the public at large”.
Since the cost of translation of electoral material falls within that definition, the commissioner was concerned that the reduced expenditure would adversely affect the provision of bilingual election material in Wales. Non-political organisations might well choose not to use bilingual election material. That was the issue. The mischief which concerned the Welsh Language Commissioner was the possible inhibition of third parties from issuing bilingual material.
I would argue that the Government have sought to meet our need. You cannot translate anything unless you have an original document. Material produced for the public at large by definition includes the production cost. The bilingual production of the document for translation is a preliminary step towards its publication, so it is totally unreasonable to limit the exception to, for example, the actual payment to the translator, which could be quite small. Following my conversation with the noble Lord, Lord Gardiner, this morning, I hope that the noble and learned Lord, Lord Wallace, who I understand will reply, will give me the assurance I seek that “production” is basically a part of the process leading to the translation. Any other interpretation would put my noble friends, and indeed the Government, in an impossible situation.
Let me describe the situation where I was wrong and the expenditure was confined strictly to the actual costs of, for example, paying the translator. Whereas in England the NSPCC may issue material only in one language, the NSPCC in Wales would be obliged to prepare and translate a similar document in both languages. If the whole costs could not be excluded from the expenditure ceiling, that would certainly inhibit it from doing what it would like to do. If I am wrong—perhaps those advising the Minister will want to consider the reply, which I am sure will be helpful—the mischief of discouraging people from producing bilingual pamphlets and material would still be there.
I hope very much that I can have the assurance that I want. I refer again to what the noble Lord, Lord Gardiner, said in Committee, that the Government want to fulfil their obligations,
“to treat Welsh and English on an equal basis”.—[Official Report, 16/12/13; col. 1093.]
I hope and believe that the legislation should leave this House on as perfect a basis as possible.
Lord Wigley (PC)
Before the noble and learned Lord sits down, can he emphasise that the cost of production includes additional paper and printing as well as the cost of translation? That is the point where his amendment, to which my name is attached, has merit over and above the Government’s amendment. There needs to be clarification that the cost of production includes the extra costs related to having the production in two languages.
Lord Morris of Aberavon
Given that the definition I have quoted refers to “production of material”, I assume that that material is included in the definition. You cannot usually translate anything unless you have something on paper to look at, which enables you to translate it. Therefore, this is an initial step in production. I emphasise, for the third time, that the definition refers to,
“the production … of material which is made available to the public”.
Lord Cormack (Con)
My Lords, I very much hope that the comments made by the noble and learned Lord, Lord Morris, will be taken seriously by my noble and learned friend, as I am sure they will be. However, I will direct some very brief comments to Amendment 34, which was moved with commendable brevity by the noble and right reverend Lord, Lord Harries of Pentregarth.
We live in a very different age from people who were active in politics even 20 or 30 years ago. I do not know whether the mass membership political party is a thing of the past or not, but it is certainly not a thing of the present. We live in an age in which single-issue groups and associations predominate and have a collective membership far in excess of the Conservative Party, the Labour Party and the Liberal Democrat party put together. One can illustrate that with one statistic: the National Trust now has over 4 million paid-up members. In this new age, we have to be very conscious of the fact that we should pass no legislation in this House that in any way inhibits the expression of legitimate opinion. The Bill endangers that expression of legitimate opinion.
If ever there was a Bill that cried out for pre-legislative scrutiny, it is this one, but it has not had it. In saying that, I level no criticism at my noble and learned friend Lord Wallace of Tankerness, who has been exemplary in the manner in which he personally has sought to meet and discuss with people who have legitimate concerns and interests. Therefore, I exonerate him from all blame, but I still say to him that this is a Bill that is far from perfect. It is a Bill that should never have been presented in this form to either House of Parliament.
Another thing that makes the present age different from very recent ones is the dynamics of the fixed-term Parliament. Until a future Parliament has the good sense to repeal that Act—which I hope will not be too long distant—the fact is that we know when the next election will be and the election after that and so on. So we have a year of purdah as far as interests groups, charities and others are concerned. The simple aim of Amendment 34 is to try to alleviate some of the problems that that creates.
I very much hope that when my noble friend responds to this brief debate—and I hope that it will be a brief debate because we have a long day before us and many important issues to discuss—he will acknowledge the powerful arguments put forward by the noble and right reverend Lord, Lord Harries, which are supported by many of us. If the Minister cannot give the assurances that we seek, I hope that he will at least give the assurance that he will reflect on this matter, have further discussions and come back at Third Reading, because we need to make this very, very imperfect—no, this very, very bad—Bill a little more palatable than it is currently.
Lord Tyler (LD)
My Lords, I have two amendments in this group. In preparing my notes, I had intended to say precisely what the noble and learned Lord, Lord Morris, said just a few minutes ago. It is the responsibility of this House to try to make sure that anything that leaves us is as good as it can be and as perfect as we can achieve. Today, therefore, we are all together in seeking modest amendments in most cases, but important ones that make the Bill more workable, more acceptable and more democratic.
Before I come to the two specific amendments on which my name leads, I should very much like to support the noble and right reverend Lord, Lord Harries, in his Amendment 34. It is important for the sake of civic society that we enable people to get fully involved in the dialogue with Parliament about the legislation that goes through the two Houses. I hope that, in one way or another, my noble friend will be able to make that absolutely clear. It must surely be right that, when legislation is going through both Houses of Parliament, our fellow citizens are in a position to campaign without let or hindrance to improve that legislation. I very much hope that we will have reassurance on that point.
Amendment 40, which stands in my name and in the names of the noble and right reverend Lord, Lord Harries, my noble friend Lord Cormack and the noble Baroness, Lady Mallalieu, is quite simply about bringing the concept of supporter up to date. I echo here a point made by my noble friend Lord Cormack a few minutes ago. When I was first involved in politics, those of us who wanted to engage in the political process, in the main, joined a political party. I did so as a student and I suspect that many others in your Lordships’ House did the same. Some then drifted off into other occupations. I stayed with politics, to my obvious detriment in terms of income compared with the lawyers in your Lordships’ House. From that period to now there have been dramatic changes in society. Many then did join parties; others might have joined campaigning groups. Some of those groups are still with us and still have a mass membership. In those days, it was very much the culture of the age, particularly among young people, but people today support campaigns à la carte. They do not get involved in just one campaign and stick with it to the exclusion of all others. They are involved for a time but their priorities change, just as in the consumer world people expect now to pick and choose. You go to one supermarket for one purpose and to another for another, to one airline for an outward flight and another to come home again. You do not necessarily feel that you have to join up to one hospital even—you choose. It is part of the culture of our age.
Baroness Mallalieu (Lab)
My Lords, my name is added to Amendments 34 and 40 in this group, which I support. To my mind, Clause 26 goes to the heart of the damage that the Bill as it stands has the ability to do to free speech, to the right to campaign and to the right to protest. It exposes what I believe was an unintended consequence of a Bill which, as we have already heard, was placed before Parliament in haste and without proper consideration.
Clause 26 has the capacity to prevent any campaigning organisation mounting a major campaign against a Bill before Parliament in the regulatory period proposed —in other words, from September this year to May 2015 and, as others have said, for one year in every five thereafter. If Clause 26, together with the rest of the provisions in the Bill currently proposed by the Government, including today’s government amendments, had been in force in 2005, because of the 60% spending limit reduction and the inclusion of staff costs in the expenditure that has to be accounted for, it would simply not have been possible, for example, to mount rallies and marches on the scale organised by the Countryside Alliance—of which, I remind the House, I am president—all of which took place in what would have been the regulatory period for the 2005 election. I suspect that other major protests, such as the Stop the War march, would also have been troubled by the spending limits.
Although it is defective, PPERA was liveable with because the expenditure limits were set at a level which did not capture the activity of most campaigners and because staff costs did not have to be included in returns. Campaigners were therefore able to live with the legislation. However, this is not so with Clause 26 as it currently stands. As the noble and right reverend Lord, Lord Harries, said, it provides an opportunity for a Government to reserve the introduction of particularly contentious legislation to the year before an election—the regulatory period—knowing full well that opposition will be seriously restricted by the financial limits imposed under the Bill. While I accept that opposition would not be wholly silenced, it would, effectively, be seriously curtailed.
For those who have not followed it as closely as others, political campaigning under the Bill does not necessarily involve campaigning for or against a particular candidate or party. I prefer to call that “Political” campaigning with a capital “P”. Under the Charity Commission’s guidance, no charity is permitted to do that. The Bill goes further and restricts what I call political campaigning with a small “p”: in other words, campaigning on a policy, which is what many charities do. You do not have to make any mention of a particular party or candidate to be caught by the Bill, but you will be if your campaign can reasonably be regarded as intended to promote or secure electoral success, even if it can be regarded as intending to achieve some other purpose too. It does not matter that your campaign is long-standing if it fulfils those criteria. As the Minister has repeatedly said, the test is an objective one. So it is also irrelevant if your intentions, as the campaigner, were solely concerned with the issue and not with the election.
The current guidance of the Electoral Commission suggests that where, for example, one political party allies itself with the campaign of a particular organisation, it does not necessarily mean that the campaign and its material become regulated, but if there is a change in the scale and nature of the campaigning it may well do so. However, what if a party in government introduces a contentious Bill, during the regulatory period, which directly impacts adversely on your existing campaign? How can a campaigning organisation reasonably not draw attention to the fact and campaign vigorously against it? Indeed, why should it not?
Legislation before Parliament will, of course, reach a conclusion one way or another with Prorogation. The campaigning directed at legislation, albeit during the regulated period, is aimed not at the election but at something which will have concluded by election day—indeed six weeks beforehand—with Prorogation. A way must be found to enable the people of this country to express the strength of their feelings about proposed legislation at any time in the course of a Parliament. I hope that the Minister, who has repeatedly said that it is not the Government’s intention to stifle protest, will agree to take the amendment away for urgent discussion with the Electoral Commission and return next week, if not with an amendment to meet this real objection to Clause 26 then at least with an unequivocal indication of guidance to be given to permit legitimate campaigning in these circumstances. As the Minister will know, it is not enough for him to make some form of Pepper v Hart statement in this House because the courts, in due course, will not look at what is said in the debates of this House unless the legislation is itself unclear or ambiguous. The Bill is perfectly clear in what it says in that respect.
If the Minister cannot do either, I regret that we would be better off, for the 2015 election, to continue with PPERA until a proper Bill can be produced and Clause 26 should go completely.
Lord Elystan-Morgan (CB)
My Lords, I support Amendment 35 in the names of my friend the noble and learned Lord, Lord Morris, my noble friend Lord Wigley and myself. The case has been put clearly and in very great detail by the noble and learned Lord. I am sure that on the only real issue, the Minister could dispel all doubts very easily, as the Government are showing obvious good will for the Welsh language. I was extremely appreciative of the words of the noble Lord, Lord Gardiner of Kimble, on 16 December when he reiterated the point that many of us have made; namely, that the Welsh language is one of the oldest living languages in Europe. It has been spoken for more than 1,500 years.
Would it not be churlish if the whole concession made by the Government were limited only to the fees paid to a translator—that is the issue—and did not include all other costs which are consequential or involved in translation? That clearly was the intention of the Government and, if there is any doubt whatever in the matter, I would like to see them make assurance doubly sure in that respect.
The noble and learned Lord, Lord Morris, speaks with the authority of a former Attorney-General. Indeed, he is clearly of the view that the words in Amendment 44 are wide enough to encompass exactly what is required in this case. However, if there should be any question of dubiety or it is necessary to remove any peradventure of doubt, it seems that it would be an easy matter to cure this small anomaly by Third Reading.
This is a small skirmish in relation to the Welsh language, which has suffered many attacks and anomalies in the 478 years since the Act of Union 1536. The field of endeavour still remains redolent with possibilities. One obvious campaign that will have to be fought some day is in relation to the right of a person in Wales to be tried by a jury in the Welsh language in an appropriate case, bearing in mind that a tribunal of fact such as a magistrates’ court, dealing with 98% of cases, is entitled to do that and does so under the 1967 Act. I hope that such an issue will be raised before too long in this place.
Lord Horam (Con)
My Lords, first, I thank the noble and right reverend Lord, Lord Harries, for welcoming the amendments made by the Government. He was characteristically generous about that and he gave quite a long list. Secondly, I thank my noble friends for what they have done, despite being incapacitated for a period, in bringing amendments of the scope that there has been in this case. Certainly, I, as a supporter of the Government, have been surprised by the extent to which the Government have agreed to the amendments originally put down.
I take the point made by my noble friend Lord Cormack that the Government were deficient in the way in which they failed to do pre-legislative scrutiny. One has to agree that post that situation, with the pause and with the extent of the amendments that the Government have put down in the past few days, they have responded generously to the points fairly made by Members on all sides of the House.
In his short remarks, the noble and right reverend Lord, Lord Harries, mentioned Amendment 34 in particular. He said that, for instance, if a new Bill came before Parliament during the regulatory period from September 2014 to the general election in 2015, it would be a big issue in any particular constituency and that therefore the Bill would inhibit discussion of the new town in that constituency, which would be wrong.
Baroness Hayter of Kentish Town (Lab)
My Lords, I join the noble and right reverend Lord, Lord Harries, in thanking the Government for the sensible and welcome amendments that they have tabled. We have just heard from the noble Lord, Lord Horam. I wonder if when he used the word “harried” he meant someone who had been harried by the noble and right reverend Lord, Lord Harries, but I will leave that to one side.
However, we feel that more changes are needed to the Bill, which we have opposed from the start, for the very cogent reason spelt out by the noble Lord, Lord Cormack: it inhibits the expression of legitimate opinion. Amendment 34 goes to the heart of that. The noble Lord, Lord Horam, spoke about constituencies, which I think is a different issue, but we might be talking about something like the bedroom tax, which the National Housing Federation campaigned against, worried about the rents coming to it. Anyone who followed the Welfare Bill will know all the detail of that, so I will not go through it. Unless we can get rid of staff costs—which I hope we will within the next hour—had the bedroom tax been in the past 12 months, it is very unlikely that the National Housing Federation, which is not a charity, would have been able to campaign in the way that it is telling us its members wanted. That was not in the past 12 months but something like that could have been.
This is legitimate campaigning. Although we have heard statements from Ministers that it was never the intention of the Government that that type of activity would be within the scope of the Bill, I think all of us feel that despite good—or bad—intentions, that is not a sufficient safeguard and clarity should be provided in the Bill along the lines spelt out in Amendment 34.
The Advocate-General for Scotland (Lord Wallace of Tankerness) (LD)
My Lords, first, I thank those who have contributed to this debate, in particular those who have welcomed the government amendments. We certainly sought to listen and take on board comments from a wide range of those engaged in campaigning. I pay tribute to my noble friend Lord Wallace of Saltaire, who met far more groups than I did. These meetings and deliberations, and indeed the contributions made in Committee in your Lordships’ House, have very much informed the proposals that we have come forward with today. Again, I thank the noble and right reverend Lord, Lord Harries of Pentregarth, and the other members of the Commission on Civil Society and Democratic Engagement for their contribution to this debate.
The purpose of Schedule 3 is to extend the range of activities for which a third party incurs controlled expenditure. It takes forward a recommendation from the independent Electoral Commission to align the range of activities for which third parties incur controlled expenditure with that for political parties. The Electoral Commission has highlighted that there is no clear reason why controlled expenditure for third parties applies only to election material. This difference means that a potential gap arises in the rules governing elections in our country.
The Government and the Electoral Commission believe it is important that this potential gap in the regulatory regime is addressed. However, the Government also acknowledge some important issues that have been raised, not only by noble Lords but a number of campaigning groups. As such, we have tabled a number of amendments to Clause 26 and Schedule 3. I will take the opportunity to explain what they do.
Currently, the regime under the Political Parties, Elections and Referendums Act 2000 outlines specific activities that do not incur controlled expenditure. These include volunteers, publications which are not advertisements in newspapers, broadcasts on certain channels such as the BBC or S4C, and certain reasonable personal expenses. Government Amendment 37 removes these exclusions from Section 87 of PPERA and Amendment 44 inserts them into new Schedule 8A and expands the types of expenses that are excluded from incurring controlled expenditure.
The full range of exclusions that the Government have brought forward includes amendments to expenses in respect of the translation of materials from English to Welsh or Welsh to English. I shall say something about the important points made by the noble and learned Lord, Lord Morris, and the noble Lords, Lord Wigley and Lord Elystan-Morgan. At present, controlled expenditure is incurred on the production and publication of election materials, such as leaflets. The Bill retains this, but costs associated with translating these materials from English to Welsh or vice versa will be excluded. The noble and learned Lord, Lord Morris, said he hoped that this was an oversight and that it was not there in the first place. If there was an oversight, and I think there probably was, it was probably also an oversight in the 2000 Act, because election materials are covered by the provisions in that Act. I hope, albeit belatedly, that there is considerable cross-party and non-party consensus that it is something we should be doing.
The Government believe that this highlights the importance of the Welsh Language Act 1993, which treats the Welsh and English languages as equal. It follows the practice of producing election material and ballot papers in Welsh. We are grateful to the noble and learned Lord for raising this issue in Committee. He asked about production costs. When we are giving something it is easy to say that it is not as much as you thought we were giving, but we believe that extending the exemption further than the cost of translation would go too far. It would allow campaigns to print different material for different addresses without being regulated. For example, if a campaigner prints 100 leaflets in English, he can then print 100 leaflets in Welsh for an entirely different purpose. Therefore, we thought it important that this amendment should relate to the cost of translation, rather than the production of material.
Indeed, that is what we thought was intended by the noble and learned Lord’s amendment, when it says that production,
“shall not include costs incurred by the translation of those materials from English into Welsh or from Welsh into English”.
Indeed, the Government’s amendment refers to,
“expenses incurred in respect of the translation of anything from English into Welsh or from Welsh into English”,
which may even go further—there may be expenses other than translation expenses. I want to make it clear that we think, having considered this, that to relate it to the publication costs—to the printing of the leaflets—goes further than is needed to address the important point about Welsh translation.
Lord Wigley
Surely the Minister accepts that if an organisation—say, the NSPCC—requires a leaflet to be put out in England and in Wales, in England it might be in other languages but it need be only in English to meet the law. In Wales, it would be in Welsh bilingually with English. Sometimes that can mean double the size of the leaflet. Sometimes it might be constrained to six instead of eight pages in the way that bilingualism can be laid out, but the cost of producing something in a bilingual format for the customers is significant because of the print and the paper, not just the time taken to translate a leaflet. That is relative peanuts in the operation. If the Minister is excluding the other parts, there is a very serious implication.
Lord Wallace of Tankerness
My Lords, as I have indicated, we thought that the amendment that the noble Lord, Lord Wigley, has signed did not actually go further than we were going. I think there has been a proper debate on this. I do not want to mislead the House into thinking that we are willing to countenance in the Bill an opportunity to exploit it and to double up on the number of leaflets. I hear what the noble Lord says and, subject to what I have already said about not wanting to incur a loophole, I am prepared to consider whether the wording reflects what might be called a marginal cost of translation but not costs that might allow more leaflets to be published. The noble Lord is nodding his head; perhaps he agrees that that is not an unreasonable position.
I hope that the noble and learned Lord, Lord Morris, will agree that it is not entirely clear that these additional production costs were covered by his amendment either. Certainly, we did not think they were.
Lord Morris of Aberavon
I thank the noble and learned Lord. It is obvious to me that, in accordance with the definition of “controlled expenditure”, production is specifically referred to. You cannot have anything to translate unless you have something produced: that means a piece of paper. I was certainly not encouraging a vast increase in the whole gamut of informational literature, but rather the specific translation and the costs incurred in preparing for the translation, particularly the paper. It may be that I was not ambitious enough. That is entirely my fault and that of those who were advising me—they were not ambitious enough in putting forward that the provision should include specifically the preparation of a document for the purpose of translating. That is all that I am asking.
Lord Wallace of Tankerness
My Lords, I do not think that there is really all that much between our position and what has been said both by the noble and learned Lord and the noble Lord, Lord Wigley. I hope that we can look at it and get the right wording to capture the consensus among us without creating loopholes for having much more material produced. On that basis, I hope that the noble and learned Lord will not press his amendment and, all being well, we will get our amendment on to the Order Paper.
Lord Morris of Aberavon
I am encouraged by that. I hope that, if I do not press my amendment, we will return to the matter at Third Reading after further consideration.
Lord Wallace of Tankerness
That is indeed what I had in mind. Time may be short, but I think that we can have some useful engagement on that.
Government Amendment 43 excludes the costs associated with providing protection of persons or property in relation to a public rally or event. While the Government believe that it is important that third parties who organise public rallies or events which seek to influence voting intentions incur controlled expenditure, it is only right that third parties do not incur controlled expenditure ensuring that such events are run safely.
Government Amendment 44 excludes expenses that are reasonably attributable to a person’s disability. This would mean that costs associated with, for example, providing materials in Braille, or ensuring that any person with a disability could attend a public event or meeting, would not count towards the third party’s controlled expenditure.
Government Amendment 42 provides that parades notified under the Public Processions (Northern Ireland) Act 1998 are excluded from the provisions of PPERA. Your Lordships will recall that we had a debate in Committee on Northern Ireland. Although the particular issue of parades was not raised, we were aware that it was a concern that some people had expressed. The noble Lord, Lord Rooker, led an important and helpful debate on Northern Ireland, and we seek to address it here.
Government Amendment 38 amends the defence, currently in the Bill, for a person or third party charged with an offence of incurring controlled expenditure in excess of the spending limit—that is, above the limit in a part of the UK or the constituency limit—to show that they complied with the relevant code of practice so that it covers both recognised and non-recognised third parties. The amendment is needed to reflect the changes to the reporting requirements in a later government amendment which provides for no spending return if the threshold is not reached. We have since identified a couple of points not properly dealt with in the amendment. The first is that the defence does not adequately cover the case where an offence might be committed by virtue of expenditure incurred on behalf of the third party. Secondly, the defence should also cover the offence in relation to targeted expenditure. We think that it is important in both these cases that those subject to regulation should have the benefit of the defence and we will therefore bring forward amendments at Third Reading to deal with these outstanding anomalies.
Government Amendment 41 clarifies the drafting on public rallies, so that it is “public rallies or events” to be inserted by Amendment 42. The reference to “public meetings” is removed, as it was unnecessary and potentially confusing because “other public events” includes public meetings.
I turn to the amendment moved by the noble and reverend Lord, Lord Harries of Pentregarth, and a number of other amendments that have been spoken to in this group. Amendment 34 would amend Clause 26 so that any campaign which could reasonably be regarded as intended to promote or procure electoral success, involving legislation going through Parliament during the regulated period, would not count as controlled expenditure. I listened carefully to the speech made by my noble friend and agree with him that we should not pass legislation which inhibits expression of legitimate opinion.
To incur controlled expenditure and be included in the regulatory regime, it is important to remind ourselves that the third party must be carrying out activity which could reasonably be regarded as intended to promote or procure the electoral success of a party or a group of candidates. We have heard concerns that campaigns against specific policies or pieces of legislation will be caught by the regulation. It might assist the House if I set out how, generally, this will not be the case and the circumstances in which it might be. The noble Baroness, Lady Mallalieu, asked whether we would meet the Electoral Commission. I can tell her that this issue has been raised with us. We have been in discussion with the Electoral Commission and I can confirm that it agrees with this interpretation.
If a campaign group wished to lobby parliamentarians over legislation going through the House, this would not be subject to regulation under Part 2. It is only where the expenditure by a campaign group can reasonably—that is, objectively—be regarded as intended to promote or procure the electoral success of a party or candidates that such activity will be subject to regulation. For example, encouraging constituents not to vote for MPs in the general election if they had voted a certain way on the legislation before Parliament should and would be included as activity leading to controlled expenditure. If a group so closely aligns itself with a policy of a particular party that its campaigning on behalf of that policy can only reasonably be seen as encouraging support for that party, that would also count. That is campaign activity, and where it takes place the Government believe that spending on it should be transparent to the public.
The noble and right reverend Lord, Lord Harries, gave a good example when he talked about new towns. We believe that under his example, people will be able to support or oppose such a proposition freely. It would be caught only if they promoted electoral success, for example, by distributing leaflets reading, “Don’t vote for candidate X”—or X party—“at the next election”, because he or she had supported or opposed the new town. The amendment states,
“unless the expenditure relates to legislation before Parliament during the regulated period”.
If Parliament were to accept that definition, it would really open the door to any amount of expenditure. My noble friend Lord Horam suggested a limit of £300,000; in fact, it would not be controlled expenditure, it would be unlimited expenditure in the run-up to an election which could be directed against or for a particular party. Given that there are restrictions on what the political parties can spend during that period, it is not reasonable that there should be such a wide gap in the provisions that an unlimited amount of expenditure could be related to a particular campaign.
I reiterate that the general position is that if a campaign group wishes to lobby Parliament and parliamentarians over legislation, that is primarily directed at trying to change legislation and would not be subject to regulation under Part 2. As my noble friend Lord Horam said, we are seeking a balance, allowing proper room to campaign but not to swamp.
I also highlight that the Electoral Commission does not support this amendment. It states that such an exemption would allow unlimited spending on a potentially wide range of topics. It believes that it could produce significant and unintended gaps in the coverage of the rules. The issue of the year up to the campaign was raised generally in the debate. Of course, a later amendment will mean that this is actually only a seven-and-a-half-month period. Clearly, if, as a result of experience, people feel that the guidance has not been sufficiently helpful, as we have provided in later amendments, there will be a review post the 2015 election. The amendment as it stands opens up a considerable gap and would lead to an imbalance whereas, as my noble friend said, we should be seeking a balance.
On Amendment 40, my noble friend Lord Tyler seeks to amend Schedule 3 so that costs associated with sending materials to committed supporters who have been actively involved in the activity of the third party would be excluded from the calculation of costs for controlled expenditure. Costs of sending material to members or certain supporters are already excluded, as PPERA and the Bill make clear. The material or activity must be available or open to the “public”, which for these purposes would not include those members or supporters.
As the existing Electoral Commission guidance makes clear, the exact nature of a committed supporter will vary between organisations, but could include regular donors by direct debit, people with an annual subscription or people who are actively involved in the third party. The amendment goes much further than that. Amendment 40 defines those actively involved as those who have made a donation to the recognised third party, or those who have made a direct communication to the recognised third party in the past 12 months.
Consequently, an individual who writes to a campaign organisation with a general inquiry about their activities, or even one who lives next to an animal sanctuary who writes to them complaining about the noise, might possibly be regarded as being actively involved. I do not believe that that is my noble friend’s intention, but I fear that using that definition allows the provision to become ineffective, particularly in an age of instant electronic communication.
The Electoral Commission does not consider people to be committed supporters if they have simply signed up to social networking sites or tools, or appear on mailing lists that may have been compiled for general commercial, campaigning or other purposes. An exclusion of costs, based on direct communications with third parties—whatever the nature of that communication—creates a wide exemption.
I know that my noble friend has worked hard and has met officials to try to resolve this; I regret, however, that we fear the definition he has come up with is too wide. We believe that the better way is that the Government and the Electoral Commission believe that the Electoral Commission’s guidance is the proper place to outline who counts as a committed supporter. In its briefing the commission outlined that it does not support this amendment due to the fact that it is unclear what scale of campaigning would be exempted from the regime or how the test would apply in practice.
Finally, my noble friend referred to Amendment 45A to ensure that any changes to the range of activities outlined in new Schedule 8A would be made through an affirmative resolution procedure. That is already the case in the Bill as drafted. I draw noble Lords’ attention to Clause 26(12), which amends Section 156 of PPERA so that any order under new Schedule 8A, as inserted by Schedule 3 to the Bill, is by affirmative resolution. It does so by amending the existing section of PPERA, setting out what parliamentary procedure applies to orders and regulations. The Government agree that it is important that any changes to the list of activities that incur controlled expenditure should be subject to the affirmative resolution procedure.
I hope that that reassures my noble friend. In the light of the explanations given, I hope that the noble and right reverend Lord, Lord Harries, is prepared to withdraw his amendment.
Lord Rooker (Lab)
I have thought of a question while the Minister has been speaking, which is not in any way diversionary. It ties in with the comments made earlier about what would happen if, in this period of a year, a Government sought quite deliberately to save legislation. The Minister answered the point about legislation in Parliament, but there are highly controversial matters outside Parliament; people do newspaper adverts and all kinds of things. I have been thinking about this question, having gone through paperwork recently. When we get close to an election, the Cabinet Secretary and the head of the Civil Service will issue an edict around Government to Ministers and departments about what you can do and what you cannot do in that period. Is that going to change now that we have a fixed-term Parliament, with this window and this picture of a much larger window?
This is not purdah, but an extended period in which other people are constrained about what they can say and do. Will the advice that normally comes out close to an election from the Civil Service to Ministers actually change and take account of what is being done in this legislation?
Lord Wallace of Tankerness
My Lords, I always know it to be dangerous when the noble Lord stands up and says he has been thinking about something—and so it was.
I took the fixed-term Parliament legislation through your Lordships’ House and I do not recall—nor, indeed, have I seen at the present time—anything that suggests there is going to be any change. Of course, that means that there still will be a period during which Governments are not allowed to do this; but I have not seen any proposal to reflect the fact that there is a fixed-term Parliament. When that period will arise will become more apparent, or more foreseeable. If I have got that wrong, although I do not think I have, I will inform the noble Lord.
Lord Harries of Pentregarth
I thank all noble Lords who spoke in favour of my amendments and the other amendments to which my name has been attached and I thank the Minister for his response.
The noble Lord, Lord Horam, drew attention to some of the unfortunate consequences, as he understands it, of this legislation at constituency level. However, what I had in mind was primarily what happens at the national level. He suggested that political parties would be limited in what they can campaign; but the Government, in pursuing their legislation, are not limited in the amount of money they can spend in order to get legislation through Parliament, and nor are the Opposition.
Suppose you have two third parties: one, the Countryside Alliance, which wants to campaign against a new town, and the other the National Housing Federation, which wants to campaign in favour of more housing. Why should they be inhibited by the Bill in a way that the political parties would not be inhibited? As the noble Baroness, Lady Mallalieu, pointed out, we are not talking about the post-Dissolution period, so a lot of the ill effects that the noble Lord suggested might happen at constituency level would not be allowed by this amendment, because we are talking about only legislation going through Parliament and that ends when Parliament is prorogued. Therefore I believe that this is a crucial issue that goes to the heart of our democracy.
Lord Wallace of Tankerness
The noble and right reverend Lord indicated, when referring to what my noble friend Lord Horam had said, that it had not been his intention to engage in constituency expenditure. Does he accept that if this is not controlled expenditure, it could lead to expenditure in a constituency up until the time when the Representation of the People Act kicks in?
Lord Harries of Pentregarth
I accept that there are certainly implications for what might happen at local level. However, I ask the noble and learned Lord to continue to think about it because this issue goes to the very heart of the democratic process. I very much hope that, having talked to the Electoral Commission to see whether there might be a way forward, he might give the very clearest statement at Third Reading, which would then be translated into advice for the Electoral Commission. We need something here to safeguard the fundamental rights of campaigners to campaign during this period. With that, I beg leave to withdraw the amendment.
Lord Morris of Aberavon
“(5A) Before subsection (5) insert—
“( ) Any limit applying to campaign expenditure under this Act where that expenditure is incurred by or on behalf of third parties in connection with the production or publication of election material which is made available to the public at large, or any section of the public in Wales, shall not include costs incurred by the translation of those materials from English into Welsh or from Welsh into English.””
Lord Morris of Aberavon
My Lords, I welcome the promise of a discussion with Ministers before Third Reading and if a satisfactory formula is not found, I would wish to return to the matter then. The Government might seek the advice and elicit the views of the Electoral Commission in the short period we have, so perhaps we could make progress on that basis.
Lord Phillips of Sudbury
“( ) In subsection 8(a) after “body” insert “(except a body which is a charity)”.”
Lord Phillips of Sudbury (LD)
My Lords, first, I should like to say how good it is to see the other Lord Wallace—my noble friend Lord Wallace of Saltaire—back in his place on the Front Bench having, I hope, had restorative attention.
In Committee, there was a long debate on this amendment, which has a simple purpose: to remove charities altogether from both the Bill and PPERA 2000. I am bound to say that in the intervening period there has been a great deal of discussion, meetings and lobbying. It is fair to say that the dear old charity sector —which must be one of the slowest of any sector in our society to get the hang of things, while being a most invaluable element in our society—is now showing its support, late in the day, for the proposal that charities are taken right out of the Bill. It is a pity that this movement did not show itself a good deal earlier.
I must also explain that in Committee there were three different supporting names on this amendment: my noble friends Lady Williams, Lord Tyler and Lord Greaves. They—how shall I put it?—stood back at this stage of the Bill to enable Peers from other parts of the House to put their names to an amendment which is felt strongly about. It is a great resource and support to have the names of the noble and learned Lord, Lord Mackay of Clashfern, and the noble Lords, Lord Best and Lord Low of Dalston, on the amendment. They are, respectively, an ex-Lord Chancellor, an ex-chief executive of the Joseph Rowntree Foundation and an ex-chief executive of the Royal National Institute of the Blind.
We have put this amendment forward today and continue to feel really strongly about it because we are convinced that to draw charities into this net is counterproductive, legally illogical, because they are the subject of a completely separate and rigorous branch of law in a way that no other NGOs are, and wasteful of scarce and valuable volunteer time and philanthropic resources if we persist in so doing. I shall address only a few points. I am very mindful of the time and my colleagues will deal with different points relating to the amendment and its consequences.
The one word that keeps coming back to me in relation to all this is “practical”—or, in this case, “impractical”. It seems a thoroughly impractical proposal to lump charities in with NGOs, which can range right across the board from being relatively public-spirited—as, for example, most of the supporters of the Harris commission certainly are—to completely self-interested NGOs, some of them acting as fronts for commercial organisations and others with political aspirations. The one thing you know for certain and beyond peradventure about a charity is that it exists exclusively for the public benefit. Private benefit and charity are wholly incompatible dimensions.
This branch of our law is not some Johnny-come-lately or some rather weak branch of law, if I may put it that way; it is about as fiercely and strongly embedded in our culture as any aspect of law. What is more, the Charity Commission, which has been doing its job for more than 150 years, is a committed body with vast experience, though admittedly with inadequate resources, which is there to try to police this extraordinary sector. Extraordinary it is because it actually needs wonderfully little policing. The amount of fraud and—how shall I put it?—manipulation in the charity sector is a tribute to the best in British society and culture.
The duty on us as legislators, when touching on this sector in particular, is to act with extreme caution because one can so easily damage that which one hopes to assist. Above all, we need to avoid confusion in the legislation that we shower on the British public. There is one way of avoiding confusion in the issue of the regulation of NGOs: to avoid shackling charities of all organisations with duplicatory regulation and thus the responsibility for two sets of regulations and indeed regulators. Of all the groups in our society that surely do not need that, above all others by far are charities. Although of course the Bill is vital and it is good that amendments have been introduced—we thank the Government for being so receptive—it is important that we retain our civic vitality, which, let us be honest, is languishing somewhat. However, in the process, we must not damage that which we seek to uphold.
The confusion surrounding charities in relation to the Bill is quite extraordinary. I can illustrate that by referring the House to the letter written last night by the Charity Commission to a number of us now in the Chamber. It deals in particular with this amendment because the Charity Commission considers it of such importance. I confess that many of us have been trying for some considerable while to get the Charity Commission to come out of its shell and be clear about what it thinks of the arguments advanced on each side of this debate. At least now we have a letter, written by the public affairs manager of the Charity Commission at 6.30 pm last night. Pretty early this morning, as one might guess, I was on the telephone to seek clarification.
The letter has four paragraphs. Can one ask Peers to put up their hands if they have had this letter? It is probably unprecedented, but I have seen one, anyhow. I suspect that a minority of those here have seen this letter and that it will be helpful to quote from it. It is important given that the Charity Commission is the kingpin in this field. The first point that it makes in relation to this amendment is under the heading “Charity law and electoral law—the current situation”. It states:
“Charities must never support political parties or candidates for election”.
That is the basic premise. It continues:
“A charity can engage in campaigning to influence public policy but only in the context of supporting the delivery of its charitable purposes. We recognise that there are some circumstances where a charity’s activities can adhere to charity law but may still require them to register with the Electoral Commission during an election period”.
I have to be honest. I was slightly crestfallen when I saw that because my proposition hitherto has been that charity law and election law in this bit of the landscape are so similar as to be no different from each other. I argued this with the senior member of the commission who is fielding calls in relation to this letter and after a while, she said, “Well, perhaps we did not put this as we intended”. It then became apparent that when the Charity Commission made this statement it was talking about the law as it stands now, not the law as it will be after the Bill is enacted.
Lord Tyler
I am grateful to my noble friend because I shared his confusion about that missive last night. I too quite separately raised a question with the same person at the Charity Commission and was sent back this very explicit statement:
“We are by no means suggesting that CC9 is not fit for purpose. Instead we believe that CC9 provides clear and concise guidance on what is and is not acceptable for charities when campaigning. This is an issue that we regulate firmly and take action where necessary”.
In other words, far from saying as seemed to be the first impression that I had from the previous letter that the Charity Commission was not up to this job, it thinks it is up to the job and does not think it is necessary to change the situation so that another commission is so actively involved, as the Bill would suggest.
Lord Phillips of Sudbury
I am grateful for that. My noble friend is lucky in having had a letter. When I finished the conversation, the Charity Commission said to me that it would send a new communication forthwith to everybody who received the first one to make clear that this statement did not relate to the law as it will be after the passing of this Bill. That is just one small example of—
Lord Harries of Pentregarth
I am fortunate enough to have the original letter before me. I wonder what the noble Lord makes of the statement:
“We do not believe that in the best interests of public trust and confidence in charities an exemption for charities is the most appropriate method for the regulation of charities during an election period”.
There cannot be anything clearer than that. I know it is very disappointing for the noble Lord, but the Charity Commission has come out unequivocally in opposition to his amendment and I think he will have to face that.
Lord Phillips of Sudbury
My Lords, the noble and right reverend Lord, Lord Harries, is actually addressing a different issue in this letter. I was dealing with paragraph one. He is dealing with paragraph two, about public trust and confidence in charities, which I was about to come on to and which, if I may, I will deal with in a second.
I emphasise the fact that the Charity Commission has delivered to those in this House who are particularly involved with this issue some guidance in relation to the law—comparing electoral law with charity law—that leaves us at best in a state of some confusion. I think, as I will say in a minute, that the approximation of charity law and electoral law is now so close that to all intents and purposes it is in practical terms the same. However, as we know better than anybody on earth, the capacity of lawyers—and not only lawyers—to argue about that is infinite. When you get a letter such as this from the Charity Commission, you can see why.
Lord Rooker
I was minded to vote for the amendment, but, having read the letter twice now, does the noble Lord not accept that the Charity Commission does not agree with Amendment 36? That is crystal clear. There is incompetence of a very high order by the Charity Commission, by the way, because it does not do a very good job. However, it does not agree with Amendment 36, so do we have to spend a lot of time on this?
Lord Phillips of Sudbury
My Lords, that is, on the face of it, a compelling argument. However, I am trying to put it to the House that the Charity Commission’s own advice here is faulty. It admitted as much in our conversation this morning and said that it would circulate a letter forthwith.
Lord Phillips of Sudbury
Which, of course, it has not done. I suspect the reason is that when the person I was speaking to went back to the chief commissioner and the chief executive, they said, “My goodness, we can’t go into print admitting that we’ve made a mistake”.
Lord Cormack
I am very grateful. Of course, I was also minded to support my noble friend. However, time is at a premium. There is clearly a problem here. Would it not be better to have discussions with the Charity Commission and the Minister between now and Third Reading, and then, perhaps, to table an amendment that does have their support? We can waste an awful lot of time on this. I am not being critical of my noble friend, for whom I have very real regard, but he has been speaking for a quarter of an hour or more and we have very important issues that we must determine today.
Lord Phillips of Sudbury
My Lords, I am in a cleft stick; I have indeed got 15 minutes on the Clock, but my noble friend will accept that I have been interrupted five times now, which takes a wee bit out of one’s available argument time. I will keep this as short as I can. It is unfortunate—let us put it that way—that we have a letter at the 59th minute of the 11th hour which is, at best, unclear.
I know that a number of my colleagues have different points to make. It has been said, time and again, that there should be a level playing field between non-charitable NGOs and charitable NGOs. Well, yes and no. First, we have a whole lot of improvements for the non-charity NGOs. Secondly, however, the reason we persist in seeking this important change is precisely because charities are basically different in kind, not just because they have a separate branch of law and a separate regulator.
The bureaucratic consequences for charities having to meet the demands of two regulators will be significant. Although the thresholds have been raised, which is important, the number of charities that will still be swept up by this legislation is far greater than many Members of this House may think. It will be many thousands. It does not take a great deal to rack up £20,000 if you are a charity with a few branches around the country.
Secondly, given that the vast majority of charities have no paid staff, the people who will have to implement this complex bureaucratic stuff are not professionals but volunteers. Simply tooling up a charity that is wholly run by volunteers to cope with this new regime and all that it means will be a massive and demoralising task for so many of them. Frankly, volunteers do not want to spend their precious hours getting to understand the legislation that we are in the process of putting on the statute book and then trying to get to grips with it in practical terms, filling in the forms and all the rest of it. The consequences, I put it to the House, will still be huge, despite the number of charities that are, on the face of it, taken out of the purview of these provisions by the raising of thresholds and the rest of it. I cannot emphasise that too strongly.
Let us suppose that you are a trustee of a charity. You will not have a paid chief executive, so it may be a senior volunteer who comes to you and says, “Look, Mr Phillips, we have this new legislation. We do not think we are touched by it because we do not think we will reach the threshold, but what do you want us to do?”. I am afraid an awful lot of trustees will say—
Lord Hodgson of Astley Abbotts (Con)
Not only the Charity Commission opposes this amendment; the Electoral Commission does, too. Also, we have a situation where the Government have given way on the review period. We argue there is going to be a review of this piece of legislation, so if the matters that the noble Lord is so concerned about come to pass, the review will pick them up. We are now in supposition territory. I hope that the noble Lord will reflect on that before deciding what to do with his amendment.
Lord Phillips of Sudbury
I certainly will. I am grateful for that point, because I was going to say that a review of this will be essential in light of what happens at the next general election. Indeed, the noble Lord, Lord Hodgson, tabled an amendment that I think—
Lord Phillips of Sudbury
It is now a government amendment, so we are going to get it—and that is vital because we will learn a great deal after that. I will just finish the point that volunteer trustees, perfectly understandably, are going to be cautious about this new legislation. The last thing in the world they will take a risk with is the prospect that things may get a bit out of hand or may not be perfectly understood, and that they, the trustees, will end up being personally liable. As I am sure everybody hearing this debate knows, they are personally liable. It does not matter if they are a limited-liability charity.
All in all, therefore, these are some of the reasons—I think other contributors to the debate will add others—that we should avoid the huge confusion that will follow if we subject charities to both charity law and electoral law. For good reason, I will not detain the House now beyond saying that this is still a very important issue that touches a hugely important part of our civic society—the very part of our civic society that does so much to uphold and vivify election campaigns. I beg to move.
Lord Mackay of Clashfern (Con)
My Lords, I am extremely well aware that the Charity Commission has given us a document to say that it is against this amendment, but the charity commissioners do not actually do legislation; that is our responsibility. They have set out in this missive that we got about 6.30 pm yesterday some of the reasons for their opposition.
Charities are, as I understand it, very fully regulated by law. Charities are those bodies that are established for charitable purposes only, and charitable purposes are defined as falling into certain classes, with the general provision that a charitable purpose is one that must be for public benefit. When I got this missive and had a chance to look at it, I e-mailed back the writer of the document asking, “Are you saying that a charity can lawfully, under existing charity law, engage in activities regulated by this Bill?”. I got an e-mail back to say that he was out of the office today and that, if it was urgent, I should ring a number. So I rang the number, and no one answered—although these things happen, even in the best regulated circles.
This is an extremely important point, as I see it. Charity law is sufficiently robust to require charities to obey the rules, which state that they can use their expenditure and efforts only in support of or in pursuance of their charitable purposes. As the missive says:
“Charities must never support political parties or candidates for election”.
At the moment, I cannot see why it is necessary that the Bill applies to charities. However, the Charity Commission, in the missive we got last night, goes on to explain that if the charities were exempted, its task of making sure that the charities obeyed the law in this regard would be too much for it, particularly in an election period. The Government have cut its budget so much that it cannot support this or do it properly. If that is the reason for passing the responsibility for seeing to this from a government organisation, the Charity Commission—which has a very long history of 150 years or so—on to charities, which depend on voluntary contributions for their financial support and to a great extent for their personnel support, it is an extremely bad one. Why should the government organisation pass on its responsibility to ensure that this is happening to the charities themselves and have them registered for that purpose?
This is an extremely serious matter that the Charities Commission has raised in this missive to us. So far as I am concerned, it requires the Government to look into the matter. I would like to see the Government undertake to look into this between now and Third Reading. I do not wish to pursue the matter further today. I originally raised this matter with the noble Lord, Lord Wallace of Saltaire, before he was away, and I am extremely glad to see that he is able to be back with us again. This is an important matter that I feel strongly about, and one that your Lordships’ House should not just pass over. We do not need to spend long on it, because it is a short but very important point.
Baroness Lister of Burtersett (Lab)
Before the noble and learned Lord sits down, I have a question about the e-mail from the Charity Commission, which I have here. My reading of it is that the question about resource implications is a subsidiary argument, and that the key argument is:
“We do not believe that, in the best interests of public trust and confidence in charities, an exemption for charities is the most appropriate method for the regulation of charities during an election period”.
Surely that is the argument that the Charity Commission is putting forward against this amendment. The question about resources is just supporting that.
Lord Mackay of Clashfern
The reason that that is a difficulty is because it cannot be relied upon to enforce the law. There is no question of trust in charities being damaged by propaganda and that kind of thing. If it were shown that charities were not obeying charitable law, that would damage trust and confidence. If the commission does not have enough resources to pursue that properly—as paragraph 4, I think, says—that is a problem. I can see that if that is justified, it is a problem, but it is a very serious problem if organisations set up to ensure that the law is observed in a particular area say that they do not have sufficient resources to do it properly.
Lord Harries of Pentregarth
Does the noble and learned Lord not accept that the Electoral Commission has come out exceedingly strongly against this amendment? It is not just the Charity Commission but the Electoral Commission, which has a specific statutory duty.
Lord Mackay of Clashfern
I understand that, but I do not understand why they have come out against it, because it must be based on an understanding that charities could in fact engage in activities that are regulated by this Bill.
Lord Low of Dalston (CB)
My Lords, my name is added to this amendment and I do support it, but I think that we have been somewhat blown off course by the reference to this letter that we have had from the Charity Commission, which we have not had very long to consider, and also by the briefing that we have received from the Electoral Commission.
On the Charity Commission’s letter, I honestly think that this faces both ways: at one point the commission says that it is not in favour of an exemption but elsewhere it says that it believes in keeping the burden of regulations on trustees and charities to the minimum that is consistent with effective regulation. If that is what the commission is saying, then why on earth impose another burdensome layer of regulation on charities? Or is the commission saying that the regulation that it provides is not effective? I honestly think that the letter that we have received from the Charity Commission is not robust enough to sustain any argument and I do not think that we should be further diverted by it, certainly not today.
I agree that this has rather blown the debate off course and I think that the suggestion made by the noble and learned Lord, Lord Mackay of Clashfern, that this be taken away, that discussions take place and that we ask the Government to review the situation and come back with something at Third Reading, would honestly be the best way of proceeding.
Lord Best (CB)
My Lords, I think that I shall go with the suggestion that we defer debate on this until Third Reading. I will just throw one or two thoughts into the pot that have not yet been fully explored.
Charity law is currently very much under review. The noble Lord, Lord Hodgson of Astley Abbotts, has reported on the workings of the Charities Act 2006 and the Select Committee on Public Administration has looked into the operations of the Charity Commission. Both the noble Lord, Lord Hodgson, and the Select Committee on Public Administration issued reports last year recommending changes, and the Government have accepted many of those recommendations. In addition, the National Audit Office recently issued a report calling for a reform of the Charity Commission, and the Law Commission is looking at charity law and will report this year.
It is almost certain, therefore, that there will be significant reforms to charity law in the near future, so if charities are taken out of the lobbying Bill, which is the proposition here, there will be an opportunity, if necessary, to amend charity law and to see changes of this kind in a broader and wider context at a later date. The many arguments on why charities should be taken out of this particular Bill stand on their own, I think, and although we are giving great deference to the quangos, I find the comments of the noble and learned Lord, Lord Mackay of Clashfern, and others to be compelling. Possibly we should not be debating all those details if legislation that is specifically about the future of charities, charity law and the Charity Commission is in the pipeline. It would be better to defer our debate until then, but I would be very happy to see this brought back at Third Reading.
Lord Harries of Pentregarth
Perhaps the House will allow me just a couple of minutes to put the opposing point of view to the noble Lords who have spoken so far. Their proposal is superficially very attractive and would be possible if the definition in Clause 26 were different. If the definition of “controlled expenditure” in the Bill said that it was expenditure whose prime purpose was the promotion, or procuring the election, of a particular candidate or party, it would be possible to take out charities. They should be taken out because, as the noble and learned Lord, Lord Mackay, rightly said, charities are not allowed to have as their prime purpose the support of political parties.
However, that is not what the Bill says. Clause 26—and we have heard it thousands of times—includes two important points, which are that you do not have to mention the name of the party and it does not have to be your prime intention. Therefore, you can campaign on an issue and still be caught by the regulation of the Bill. That is why—
Lord Low of Dalston
I thank the noble and right reverend Lord for giving way. Does he not agree that to be caught by the legislation the expenditure has to be “intended” to procure that effect?
Lord Harries of Pentregarth
The whole point of those provisions, which is where the sting is, is that you can campaign on and focus on an issue and that can be reasonably regarded as indirectly supporting a particular candidate or party, or you can even do so inadvertently. Let us be quite clear: charities are able to campaign on issues.
Lord Phillips of Sudbury
I am grateful to the noble and right reverend Lord for giving way, but he really cannot get away with that. You cannot inadvertently satisfy the requirements of Clause 26 when it says that you “intend” to promote or procure electoral success. Intention is not the same as inadvertence at all, and it is a very strong test. The fact that there are other matters that you are trying to advance at the same time does not get away from that test.
Lord Harries of Pentregarth
Then why does the Charity Commission guidance—and I have read carefully both its main guidance and its guidance in relation to the Electoral Commission—include a series of examples, just like the Electoral Commission, where charities may or may not be caught? This is a borderline area. Charities are able to campaign and to campaign vigorously, and many trustees encourage them to do so. Therefore, it is always possible for them to come within the scope of this provision.
If you take out charities, only two courses are open to you. Either you have an unlevel playing field so that you have a charity campaigning against a campaigning group which is not a charity, and the charity, if it were taken out, would be able to spend an unlimited amount of money, whereas the non-charitable campaigning group would have very strict limits on what it was allowed to spend, or the Charity Commission could set up a much stronger policing body than it has at the moment—one which would match that of the Electoral Commission.
Lord Low of Dalston
I am grateful to the noble and right reverend Lord and I apologise for intervening again, but does he not agree that we are continuing to get bogged down in technicalities about the interpretation of very detailed points in this clause? If the point is taken that there will be discussions before Third Reading and we can look for something more fully considered to come back then, it will make a lot of sense to put into that review the points that the noble and right reverend Lord, Lord Harries, is dealing with at the moment.
Lord Harries of Pentregarth
My Lords, I take the point but it was important to state the argument because some people are understandably initially very attracted to this idea. It would lift the regulatory burden, and people are attracted to the idea of taking out charities. However, there are very strong, compelling and rational reasons why this should not be done, and that is why it is opposed by the Electoral Commission, the Charity Commission, the commission that I chair, the NCVO, ACEVO and all the others.
Lord Gardiner of Kimble (Con)
My Lords, with the greatest respect, we are really getting beyond the guidance in the Companion regarding Report stage. I think that in a sense the House would like to make some progress.
Lord Rooker
My Lords, I will take three minutes; I am not going into technicalities and I freely admit I am going to introduce a bit of partisanship.
The Charity Commission states:
“Charities must never support political parties”.
If that was the case—if that was the norm—we would not have a problem. I would like to vote for this but charities have got to be regulated, even during the electoral period. I make no apology: I raised this before, at Second Reading.
Page 14 of the Conservative manifesto for the 2010 election shows a full-page portrait of the chief executive of a large national charity, extolling the virtues of the policies set out on the subsequent pages. This was the Conservative Party manifesto using a charity for party-political purposes. I was appalled when I saw it and could not understand why there was not a row about it. That chief executive, whom I later recognised, turned up in this House a few months later. I am not going to mention her name because I have not given notice, but the charity is Tomorrow’s People. This was a thundering disgrace and I would like, in the discussions that are about to take place, an assurance that political parties will submit their manifestos to the Charity Commission and the Electoral Commission to make sure that this kind of abuse of the system and of charities does not happen again, either by the Conservative Party or, inadvertently, by any other political party.
I apologise for introducing a note of partisanship, but I have been waiting a long time to say this.
Baroness Howarth of Breckland (CB)
My Lords, with due respect to the House, as I have not spoken on this, a number of the noble Lords who are proposing the amendment are suggesting that they will not take it forward but that there will be other debates. There are amendments later which are extremely important and vital to the sector if it is to carry out its work. I would be grateful if the House could move on.
Baroness Hayter of Kentish Town
My Lords, that being said, I will speak quickly and shortly to say that, while we absolutely understand the desire to stop the bureaucracy being placed on charities, we do not want that for other bits of the third sector either. This is why we want a much more fundamental change which takes them out too. They also use volunteers and have all these problems. We do not think the rest of the voluntary sector should be caught by something which other campaigners will not be. We are, obviously, interested in the Government’s response, but if the issue is simply about dual regulation then there may be a way for the Electoral Commission to devolve its responsibilities in this area to the Charity Commission. However, if it could not answer its phone to the noble and learned Lord, Lord Mackay, last night, I am not sure I would devolve much to it at the moment.
There is a difference: there is an area of activity which is completely legitimate for charities but which will not be covered by the Charity Commission, which only polices charitable law. Even at the moment, under PPERA, there are a whole lot of things which charities are covered by but which are not policed by the Charity Commission, so extra work would be going to them. As the noble Lord, Lord Horam, said, this clause covers work which is completely within their charitable aims and, therefore, eligible under charitable law. To take out one part of the voluntary sector and leave the other in is something we cannot understand. The charities themselves did not ask for this when they gave evidence—oral and written—to the commission chaired by the noble and right reverend Lord, Lord Harries. The Electoral Commission is against it, as are the NCVO and the Charity Commission. There may be a good reason for this: the overwhelming majority of charities that have contacted me are not in favour of it.
As I think the last speaker said, we are very interested in the important issue of staff costs. That is what the charities really want taking out, so I hope we can move quickly to it and the House can have a decision.
Lord Wallace of Tankerness
My Lords, I thank my noble friend Lord Phillips for raising the important issue of charities and seeking to exclude them from the regulatory regime governed by controlled expenditure for third parties. In Committee, we had a useful debate during which I indicated that some very important points had been made and undertook to give consideration to them. To those who ask the Government to take this issue away and to think about it, I say to your Lordships’ House that we have given this very serious thought. I probably spent more of my time on it than I had necessarily expected over Christmas and the new year in Orkney. I will not overegg it but I think my wife thought that it probably was more than was healthy.
With other Ministers, the Government have seriously thought about this matter and looked into it. Under present charity law, charities are organisations which must be established for charitable purposes only which are for the public benefit. An organisation will not be charitable if its purposes are political. Campaigning and political activity are legitimate and valuable activities for charities to undertake. However, this must be undertaken by a charity only in the context of supporting the delivery of its charitable purposes.
The Charity Commission and the Electoral Commission produce guidance for charities on campaigning and political activity. Both regulators acknowledge that there may be a narrow range of circumstances—noble Lords who took part in Committee will remember that the word given to me by officials was “sliver”, which I did not particularly like but was meant to show that it was a very narrow range of activities—in which charities may be compliant with charity law and also operate within the regulatory regime established by the Political Parties, Elections and Referendums Act 2000. I listened carefully to the speech of my noble and learned friend Lord Mackay of Clashfern. The Charity Commission guidance updated in January 2011 on charities, elections and referendum states:
“A charity may publish the views of candidates in local and national elections where these views relate to the charity’s purposes and publishing them will raise public interest and debate about the underlying issues. The charity must not encourage support for any particular parties or candidates”.
It goes on to say that “even if” a charity is,
“following the guidelines set out in this document and in Speaking Out: Guidance on campaigning and political activities by charities (CC9), if you use material that could be seen as indicating to the public that particular candidates or parties support or oppose your policies, it is possible that you may need to register as a third party with the Electoral Commission”.
Indeed, that has been the position following PPERA 2000. My understanding is that two charities registered in 2010 .
I admit that the circumstances may be very narrow but the important point to remember is that we are using an objective test. It is not a subjective intention of the charities: it is how a reasonable person might perceive what the charities have done. As the noble and right reverend Lord, Lord Harries of Pentregarth, pointed out, Clause 26(4)(c) states that,
“a course of conduct may constitute the doing of one of those things even though it does not involve any express mention being made of the name of any party or candidate”.
Applying that consideration and the objective test is the considered view of the Electoral Commission and the Charities Commission that there could be circumstances in which PPERA should apply.
Lord Low of Dalston
I am sorry to intervene on the noble and learned Lord, but does he not agree that the test is only partly objective because the test is not what a reasonable person would make of what the charity has done but what a reasonable person would make of the charity’s intention?
Lord Wallace of Tankerness
My Lords, I can do no better than remind your Lordships of Clause 26, which states that,
“the expenditure can reasonably be regarded as intended to promote or procure electoral success at any relevant election for—”.
The point is that there is a distinction between an objective and a subjective test. It may be that if the charity was complying it was not intending, but if objectively it was thought to have done so it would fall into that narrow range of activity. The important point was made by the commission chaired by the noble and right reverend Lord, Lord Harries; namely, that it is the activity that is important rather than who is undertaking the activity.
I know that the House wants to move on, but the e-mail issued yesterday evening by Mr Rowley has been referred to by a number of noble Lords. He says:
“We recognise that there are some circumstances where a charity’s activities can adhere to charity law but may still require them to register with the Electoral Commission during an election period. Indeed, during the last General Election a small number of charities did register with the Electoral Commission. Due to the increased awareness and scrutiny of this area we believe that this number may increase, regardless of the change in the scope of activities and limits that this Bill proposes”.
My noble friend Lord Phillips was suggesting that somehow or other the information on this coming from the Charities Commission was out of date. It is important to recall that it does set out the current position, but it is a situation in which PPERA is not changing with regard to the definition. It will not change as a result of this Bill, so the case remains that a narrow scope of activities could be covered. The Electoral Commission is clear that charities should not be exempt from the PPERA regime. It highlights that such an exemption would undermine the effectiveness of the PPERA regime and create incentives for campaigners to carry out as much campaigning activity as possible via charitable channels. Potentially that could have implications for the reputations of the charities.
I repeat what the commission said:
“It is the Commission’s view that it is right that charities are not excluded from within this legislation, and we believe the Government’s approach to distinguish by activity rather than by type of organisations is correct”.
The Government’s view, however, is that the nature of the PPERA test, to which I have referred, and the constraints of charity law will mean that the circumstances in which charities are brought within the scope of PPERA rules will be very rare. First, they must meet the PPERA test where their activities can reasonably be regarded as intended to promote or procure the electoral success of a party or candidate. Secondly, if they meet this test they must incur controlled expenditure over the registration threshold. The amendments that we will debate later and that are being brought forward by the Government to raise the registration threshold in essence will ensure that smaller or even medium-size charities will not have to register with the Electoral Commission.
I heard comments in Committee and in the meetings that I have had about the importance of trying to keep the administrative burden to a minimum. I accept that there was force in the concerns expressed when I first became engaged in this Bill and attended meetings with my noble friend Lord Wallace of Saltaire, in which charities said that there was a possibility that they could do something that took them into PPERA-controlled expenditure, with the limit at £5,000—£2,500 in Scotland, Wales and Northern Ireland. That might happen, without their knowing that there could be a freeze on their activity. But limits of £20,000 for registration are now proposed; in Scotland, Wales and Northern Ireland it is £10,000.
If charities are undertaking that level of expenditure this is neither unreasonable nor the sort of thing that will get lost in the loose change. It is significant expenditure. Therefore many charities will be removed from any concern by the thresholds that we are setting. Those approaching that level of expenditure may wish to consider whether it is appropriate. In terms of the general core principles of accountability and transparency in the Bill, it is important that if a body is undertaking the kind of activity that falls within this scope it should be accountable and transparent. In some of my discussions with the chief executive of OSCR, the Scottish charities regulator, he said that he thought that the transparency argument was important: if two organisations were doing exactly the same thing that brought them within the scope of the Bill or PPERA, it was wrong that one should have to be accountable and transparent, and the other, because it was a registered charity, should not. In transparency and accountability terms, this departed from an objective of the Bill.
Charities have raised concerns as to what happens if a party or a candidate adopts one of their policies. The Electoral Commission guidance is clear on this point. If a party or a candidate adopts a charity’s policy this will not automatically result in the charity incurring controlled expenditure. A charity will incur controlled expenditure only if it subsequently highlights the fact that party A or candidate B supports its policy, or ramps up its campaign. As such, the Government are not persuaded that there is a compelling case to take such a significant step as to exempt charities from the regulatory regime. It is the activities of the third party and not the type of organisation that should be subject to regulation. I can assure my noble friend, who raised the matter, as did other contributors to the debate, that the regulatory regime on charities will be explored during the review of third-party campaigning that we have indicated, as laid out in later amendments, will take place after the 2015 election.
We have had a good debate. I am not sure that I can elaborate these points much further. The noble and learned Lord, Lord Mackay of Clashfern, very properly made the point that the shape of the Bill will not be determined by the Charity Commission or the Electoral Commission; it will be done by Parliament, by your Lordships’ House and the other place. But, in doing so, it is important that we have some regard to those who have dealt with these issues in elections past, and to the Charity Commission and the Electoral Commission, which agree that the amendment proposed by my noble friend would not be appropriate in these circumstances. I therefore invite my noble friend to withdraw it.
Lord Mackay of Clashfern
Is my noble and learned friend saying, as a law officer of the Crown, that it is lawful for a charity in pursuance of its charitable purpose to do something that can,
“reasonably be regarded as intended to promote”,
the interests of a particular party or candidate?
Lord Wallace of Tankerness
My Lords, that has been the legal position since 2000. It is very rare that it would happen but, conceivably, there is a very limited range of activities that could fall within that. It would not be the intention of the charity but it might be reasonably seen by others to be the intention of the charity. It is because of that very limited possibility that it is important to maintain the provision as it is rather than implement the exemption proposed by my noble friend.
Lord Phillips of Sudbury
My Lords, I am grateful to my noble and learned friend the Minister for the way in which he summed up the debate. I am grateful to all those who have participated in discussing this important amendment. Given that Third Reading is on Tuesday, realistically there is not time to have the sorts of discussions that some noble Lords have looked for, particularly in terms of the speed at which the Charity Commission will move in relation to these sensitive matters. One has to look to the review of the workings of this legislation in the wake of the 2015 election. That will be vital. Having said that, I beg leave to withdraw the amendment.
“( ) In section 87 of that Act (expenditure by third parties which is not controlled expenditure)—
(a) in subsection (1), omit paragraph (a) and the “or” at the end of it;(b) omit subsection (2).”
“( ) After subsection (4) insert—
“(4A) It is a defence for any person or third party charged with an offence under subsection (2) or (4) to show—
(a) that any code of practice for the time being issued under paragraph 2 of Schedule 8A was complied with in determining whether any expenditure is controlled expenditure for the purposes of this Part, and(b) that the person or third party’s acts or omissions would not have amounted to an offence on the basis of the controlled expenditure as determined in accordance with the code.””
“Arrangements between third parties notified to the Electoral Commission
(1) Part 6 of the Political Parties, Elections and Referendums Act 2000 (controls relating to third party national election campaigns) is amended as follows.
(2) In section 94 (limits on controlled expenditure by third parties)—
(a) after subsection (3) insert—“(3A) For provision requiring certain controlled expenditure to be disregarded in determining for the purposes of subsection (3)(a) whether a limit is exceeded, see section 94A(5) (arrangements between third parties notified to the Commission).”;
(b) in subsection (4), for “such a case” substitute “the case mentioned in subsection (3)”;(c) in subsection (5A)—(i) after “Subsections (3) to (5)” insert “and section 94A”;(ii) for “those subsections” substitute “those provisions”;(d) in subsections (8) and (10), after “the purposes of this section” insert “, section 94A”;(e) in subsection (11)(a), after “this section” insert “and section 94A”.(3) After section 94 insert—
“94A Arrangements between third parties notified to the Commission
(1) A recognised third party (“a lead campaigner”) may, at any time before the end of a regulated period, send a notice to the Commission—
(a) stating that the lead campaigner is party to an arrangement of the kind mentioned in section 94(6), and(b) identifying one or more third parties that—(i) are parties to the arrangement, and (ii) have agreed to be minor campaigners in relation to the arrangement.(2) A notice under subsection (1)—
(a) may not identify a third party as a minor campaigner if the third party is a lead campaigner in relation to the same arrangement, and(b) may not be sent by a recognised Gibraltar third party.(3) On receipt of a notice under subsection (1) by the Commission, a third party identified in the notice becomes “a minor campaigner” in relation to the arrangement in question.
(4) Controlled expenditure that is incurred during the regulated period in a part of the United Kingdom by or on behalf of a minor campaigner in pursuance of the arrangement is to be treated for the purposes of section 96 (returns as to controlled expenditure) as having also been incurred during the period and in the part of the United Kingdom concerned by or on behalf of the lead campaigner.
(5) In determining for the purposes of section 94(3)(a) whether a limit is exceeded by a third party in relation to a regulated period, controlled expenditure incurred in a part of the United Kingdom is to be disregarded if conditions A to C are met in relation to the expenditure.
(6) Condition A is that the expenditure—
(a) is incurred in pursuance of an arrangement that has been notified to the Commission under subsection (1), and(b) is, by virtue of section 94(6), treated for the purposes of section 94 and Schedule 10 as incurred by or on behalf of the third party.(7) Condition B is that the third party is, at the time the expenditure is incurred, a minor campaigner in relation to the arrangement.
(8) Condition C is that the total of the controlled expenditure incurred during the regulated period in the part of the United Kingdom by or on behalf of the third party (disregarding any expenditure in relation to which conditions A and B are met) does not exceed the limit for that part mentioned in section 94(5).
(9) Section 94(6) applies for the purposes of subsection (8).””
Lord Wallace of Tankerness
My Lords, Amendment 39 relates to arrangements between third parties notified to the Electoral Commission. In our earlier debates, this was referred to as the coalition issue—not be confused with the coalition—and in the meetings I attended with charities and campaign groups it was probably the issue that was raised more often than any other. My noble friend Lord Wallace of Saltaire agrees.
The Government received many representations to this effect and I would like to make it clear, as I have done on previous occasions, that this Bill does not amend the controls on third parties that each incur controlled expenditure as part of a coalition. In addition, only coalitions that incur expenditure that can, in the phrase we have been using,
“reasonably be regarded as intended to promote or procure the electoral success”,
of political parties or candidates are regulated and will continue to be regulated. Those rules are necessary and I will take a moment to clarify their operation.
Section 94(6) of PPERA requires that if two or more third parties work together to incur expenditure to a common plan or arrangement, the entirety of the expenditure they incur as part of that coalition must count against each third party’s individual spending limit. However, it is also important to be clear about what is not caught.
Lord Tyler
As my noble and learned friend Lord Wallace has said, I and the noble and right reverend Lord, Lord Harries, the noble Baroness, Lady Mallalieu, and my noble friend Lord Cormack have a subsidiary but quite important additional amendment, Amendment 39A. I am sure that all four of us welcome the recognition that my noble and learned friend Lord Wallace has given to the fact that the 2000 Act—this is not about this Bill; it is about the 2000 Act—has caused real problems for any organisations that were encouraged to work together in what were then called coalitions. Since then, the term “coalition” has gained a different connotation, so perhaps we should talk just about “working together”. The way in which this matter was handled in 2000 has caused real concerns. I know from reading Hansard that this confusion was caused at the last minute by a government amendment during the Committee stage of the Political Parties, Elections and Referendums Bill, as it then was, in this House.
It is curious that, over the years since 2000, very few of us seem to have heard of the problems that were caused by those provisions. Neither the Electoral Commission nor the Charity Commission ever came forward and said that these matters needed review and either repeal or revision. However, we now know, because a large number of organisations have been in touch with many Members of your Lordships’ House saying that this is a real practical problem—hence the Government’s amendment, which is excellent so far as it goes. However, as I shall seek to explain in a moment, there is one additional problem which I hope my noble and learned friend will be able to say he can look at again, since, as he just said, there will be some additional clarification at Third Reading.
As my noble and learned friend has said, the new provisions should be a major help to smaller players in those joint campaigns, ensuring that others can account for their spending, but the approach in Amendment 39 does not go quite far enough. The fundamental problem with the so-called coalition arrangements in the 2000 Act is as follows. If, let us say, Friends of Earth intends to spend £300,000 on a campaign about climate change and does so in coalition with, for example, Oxfam, which contributes £25,000, under PPERA both are deemed to have spent, or to plan to spend, £325,000. Clearly, that is absurd, because that would mean that Oxfam, which had contributed only £25,000 to that campaign, might well then be precluded from doing anything else on other issues, which it is clear was not intended by the 2000 Act and which, I hope, is not something that we would intend to do today.
To prevent people working together and therefore having to multiply the spending limits under the 2000 Act by a factor equal to the number of organisations involved seems to be most peculiar. Removing the rules altogether would create another new loophole. I keep saying to colleagues in the third sector, “We’ve got to be very careful that we don’t increase flexibility for what we think is a good cause only to create a loophole for much less meritorious campaigning activity”. However, what is unfair about the rules is not that some spending on common campaigns is counted together to prevent an overall breach of the limits but the fact that spending by one organisation on one campaign can then restrict the campaigning of another organisation on a totally different campaign. In my example, Oxfam would be deemed to have spent £325,000 not just for the purposes of that climate change campaign but for all purposes. It would then be very close to the limit, which would then mean that it would have to worry about whether any of its other spending on, let us say, development targets could,
“reasonably be regarded as intended to promote or procure electoral success”,
of a party or candidate.
If that organisation’s trustees believe that the future spending could be so regarded, they would be left with a very small amount of headroom in the national spending limit even though they had contributed a relatively small amount of money to the tune of £25,000. Therefore, £25,000 spent on climate change would mean very little room left for spending on other development targets. I am sure your Lordships will see that that would not be just and right and does not meet the objectives either of the existing law or of this Bill.
Our Amendment 39A would build on the progress made by the amendment moved by my noble and learned friend Lord Wallace in setting out the principle that there should be an overall cap on spending by any one joint campaign or by any one individual organisation. However, new subsection (6B) proposed by my amendment states that,
“expenditure by a third party within the limits set out in Schedule 10 in pursuance of any matter unrelated to an arrangement and which could not reasonably be regarded as intended to achieve a purpose common to an arrangement”,
should not be so restricted by the coalition rules in PPERA 2000.
The amendment would provide for some affected organisations a silver lining in the passage of this Bill. In short, it would remove a very unjust element of the existing law which has caused quite unintended problems for many non-party campaigners. Their arrangements would be improved immeasurably. The amendment would also improve significantly what the Government have so far managed to come up with. I hope that my noble friends will recognise that the problems with the 2000 Act are considerable. This was one very specific problem that was caused to a large number of organisations. I hope therefore that before Third Reading, when, as my noble and learned friend has already indicated, there has to be some further clarification and therefore amendment of the set of amendments that he is putting before the House today, he could look also at this additional problem, which otherwise will go unresolved and continue to cause considerable difficulty for all sorts of organisations.
Lord Harries of Pentregarth
I, too, thank the noble and learned Lord, Lord Wallace, for the government amendment, which is a positive response to the suggestion put forward in our commission’s report, as he acknowledged. I have added my name to the amendment tabled by the noble Lord, Lord Tyler. I shall not repeat the reasons that he has already put forward, but it is an important amendment for charities and campaigning groups generally because they do a huge amount of campaigning not just with one coalition but with a whole series of coalitions. For instance, aid agencies may be engaged in a coalition on overseas aid and, at the same time, be engaged in a coalition on climate change. That is the way in which they work.
I want to make a point that has not been made so far in any of these debates. It concerns the fundamental purpose of this part of the legislation and whether it will achieve what the Government hope. The purpose of the legislation at this point is to stop front organisations drawing on large sums of money to distort campaigning, but I suggest that the legislation as we have it now will not have that effect. Let us take a hypothetical example. Six very strong anti-Europeans have dinner together. They have access to large amounts of money from various sources. They go away to different parts of the country and they decide to start six different campaigning organisations under different names. But, in fact, everybody knows that their purpose is to get Britain out of Europe. Would they be caught by this legislation? No. I have read carefully the briefing note presented by the Electoral Commission, which says that you are not working together—that is, you are not engaged in co-ordinated campaigning—if you have informal discussions with other campaigners but do not discuss your plans with them in any detail—all this party will have done is have dinner together; if you speak at an event organised by another campaigner but do not participate in other ways—they could even speak at each other’s events; and if you do not consult other campaigners about what you should say in your campaign or how you should organise it. However, it goes on to say that you can sign a joint letter together. I hope that the noble and learned Lord will take seriously the fact that the legislation as it now stands will not have the desired effect of stopping big money coming in and using front organisations. We firmly support the intent but we do not think that the Bill will achieve it.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I intervene very briefly. I tabled an amendment on coalition working and I am very grateful to the Government for adopting this way forward.
The other issue that charities raised frequently was the question of nil returns. I know that we shall come to nil returns later under government Amendments 81 and 89, but that, I hope, will cross-ruff into this amendment. In other words, we will make sure that when the new rules for coalition working come in charities will be able to take advantage of the nil return provisions, which the Government properly propose in Amendments 81 and 89. I should be grateful for the Minister’s clarification on that.
Lord Ramsbotham (CB)
I, too, welcome the government amendments and repeat something that I have said on earlier occasions about the importance of getting the issues about coalitions right in relation to the criminal justice system. If you look at the transforming rehabilitation revolution, you will find that the Government are trying to encourage coalitions to take on the supervision of offenders. They consist of a large number of different organisations, private and voluntary, and it is important that they are crystal clear on anything to do with coalitions before they are formed to take on that very important public work.
The Earl of Sandwich (CB)
My Lords, I detect self-restraint in the House at the moment, and I know that we need to move on rapidly, but I just wanted to say a word in support of Amendment 39A. I have to repeat what the noble Lord, Lord Cormack, said earlier about the value of charities generally within the political system and the role of networks, which have become so important and have been encouraged by government. If the noble Baroness, Lady Chalker, were here—she could not be here today—she would explain how the Government were siding with charities all the way through the 1980s and 1990s to achieve consensus with coalitions. The idea of attacking even the larger coalitions seems to be against the Government’s own policy.
The noble Baroness, Lady Mallalieu, said on an earlier amendment that a lot of damage had been caused by Part 2, but it must also be said that the Bill has strengthened the charities in opposition to it. That must be a force for good. But one damaging effect of the Bill, which was not intended by the Government, is that if it is unamended, many charities will become more wary in their campaigning. They will in many cases withdraw from the front line. I have been 40 years in charities and church organisations attending party conferences. What would they all be like without those charities displaying their wares, and so forth?
I know that the Government have come quite a long way to meet the smaller charities, but I do not think that they have moved far enough. The noble and learned Lord should recognise the injustice of netting so many legitimate activities just to catch one or two miscreants who would probably be recognised anyway in the context of a local constituency. Charities are usually pretty visible in what they do. The Electoral Commission itself says that we are talking only about a small number. Although the numbers add up and may increase, we are all in danger of exaggerating the number involved. It is the sledgehammer effect.
Surely, when there is disaffection with elections generally and with mainstream politics and politicians, we want more awareness among the public of the range of current non-party political issues. The amendment leads us in the right direction.
Baroness Tyler of Enfield (LD)
My Lords, I rise briefly to support Amendment 39A and, in doing so, very much welcome Amendment 39 introduced by my noble and learned friend. In Committee, I drew on my personal experience of being involved in coalitions of charities both previously and currently. It is very important —Amendment 39A achieves this—that even small and medium-sized charities are not restricted to being involved in only one coalition. I end by giving the example of when I was chief executive of a charity in the field of family relationships. At any one time, with a very small amount of money, we would be involved in a campaign to do with children and young people, a campaign to do with domestic violence, and a campaign to do with older people and the role of grandparents. All of those were important activities. We could never have done that ourselves; we simply did not have the money. That is why Amendment 39 is so important.
Lord Wallace of Tankerness
My Lords, I expressed appreciation for those who have welcomed Amendment 39, not least my noble friend Lady Tyler, because—I do not say this in any critical way—that is where we have managed to build on the amendment moved in Committee by the noble and right reverend Lord, Lord Harries. It would allow smaller charities, without reaching the threshold limit, to engage in a number of different campaigns.
I respond to the example used by my noble friend, and to the noble Lord, Lord Ramsbotham, and the noble Earl, Lord Sandwich, about the kind of campaigning that charities are doing. My noble friend talked about promoting grandparents’ rights, and I know that the noble Lord, Lord Ramsbotham, has a passionate interest in rehabilitation issues. As he said, the Government have encouraged the work of coalitions. One has to remember that to be subject to controlled expenditure, a campaign must fall within the definition set out in Clause 26. I honestly do not believe, without a huge leap of imagination, that the valuable work done by coalitions to promote the rehabilitation of offenders or grandparents’ rights could be interpreted as seeking the election or promotion of a particular party. By no stretch of the imagination could a reasonable person think that that was intended to secure the promotion of a particular party or candidate in an election. The noble Earl, Lord Sandwich, raised similar concerns.
The overwhelming amount of campaigning by charities will not fall within the definition of controlled expenditure here. I hope that that gives some reassurance, because I recognise the sincerity with which these concerns are expressed. Work that is being done to promote rehabilitation in prisons cannot be seen in any way as falling within the ambit and scope of activity that would bring it within PPERA-regulated controlled expenditure.
My noble friend’s amendment is intended to allow third parties that set up a coalition to move away from the common plan rules by allowing that coalition to have both its own spending limit and separate, individual spending limits for the members of the coalition. The coalition will be able to spend up to the national limit, and its members will also be able to spend up to the national limit on activities not taken forward as part of the common plan.
My noble friend was right to point out that the issue we are grappling with here has been in place since 2000; I accept that the range of activities increases under the Bill, but the problem has been with us since the outset. I point out that under existing legislation, there is nothing to stop a coalition establishing itself as a distinct third party. This allows the organisations and their members also to campaign on separate issues individually, with a separate spending limit.
The Electoral Commission has been very clear on this point, both in its guidance and in its evidence to the Commission on Civil Society and Democratic Engagement. That evidence gave the example of a lead campaigner which runs the coalition’s campaign and authorises its spending. Only the lead campaigner would be required to register with the Electoral Commission. Contributions to the coalition campaign from other third parties will be treated as donations or donations in kind to the campaign. In the words of the Electoral Commission,
“this means that the ... campaigners do not need to register themselves or report anything themselves to the Electoral Commission”.
Those campaigners would therefore be able to continue to campaign independently, too, to the maximum spending limit.
However, the Electoral Commission also made it clear in its Report stage briefing that it cannot support this particular provision. It noted that the amendment,
“would allow an individual or organisation to spend substantial amounts campaigning on an unlimited number of issues, as long as they are working together with someone else in each of those campaigns. For instance, someone could spend hundreds of thousands of pounds on each of a series of campaigns with others that attack different aspects of a political party’s manifesto in the run-up to an election”.
For example, it could be that you have an energy company that went into campaign with other energy companies, set up a coalition in favour of fracking and supported candidates who would support that. It could spend up to, say, £300,000 on that. Quite separately, under my noble friend’s amendment, it could be engaged in another campaign, with other participants, in which it tried to promote onshore wind power and could spend up to £300,000 on that. I am sure that that is not the intention of what my noble friend is proposing, but I fear that might well be the result his amendment would have.
I know that my noble friend has worked hard on this—as have many people—to try to find the right way to deal with this coalition issue. I do not believe that his amendment would have an effect that was helpful; and, as I indicated earlier, it is possible for a coalition to set itself up as a third party in itself. In these circumstances I invite my noble friend not to press his amendment, as it may have consequences that he does not intend. However, I hope we have indicated to the House, through the amendment that the Government have brought forward, that they have listened, have grappled with the issue and have built upon the amendment proposed by the noble and right reverend Lord, Lord Harries, in Committee.
(a) ”
(b) any public procession or protest meeting, within the meaning of the Public Processions (Northern Ireland) Act 1998, in respect of which notice is given in accordance with section 6 or 7 of that Act (advance notice of public processions or related protest meetings)”
“But expenses in respect of such events do not include costs incurred in providing for the protection of persons or property.”
“1A (1) Nothing in paragraph 1 extends to—
(a) expenses incurred in respect of the publication of any matter relating to an election, other than an advertisement, in—(i) a newspaper or periodical,(ii) a broadcast made by the British Broadcasting Corporation, by Sianel Pedwar Cymru or by the Gibraltar Broadcasting Corporation, or(iii) a programme included in any service licensed under Part 1 or 3 of the Broadcasting Act 1990 or Part 1 or 2 of the Broadcasting Act 1996;(b) expenses incurred in respect of the translation of anything from English into Welsh or from Welsh into English;(c) reasonable personal expenses incurred by an individual in travelling or in providing for the individual’s accommodation or other personal needs;(d) reasonable expenses incurred that are reasonably attributable to an individual’s disability;(e) expenses incurred in respect of the provision by any individual of the individual’s own services which the individual provides voluntarily in the individual’s own time and free of charge.(2) In sub-paragraph (1)(d), “disability” has the same meaning as in the Equality Act 2010 (see section 6 of that Act).”
“Exclusions of background staff costs1AA Nothing in sub-paragraphs (3) to (5) of paragraph 1 shall be taken as extending to any expenses incurred in respect of remuneration or allowances payable to any member of staff (whether permanent or otherwise) of the third party.”
Lord Harries of Pentregarth
My Lords, this amendment is very important for campaigning groups and charities, but I can move it very briefly: it is quite clear and simple.
First, let me say that the charities and campaigning groups, as part of the commission, very much support the aim both of transparency and accountability, and with that aim in mind support the extension of activities that should be regulated and are set out in new Schedule 8A. This amendment is about removing the background staff costs from those activities in sub-paragraphs (3) to (5) of that schedule. They refer to press conferences and media events; transport costs, when those are directed towards obtaining publicity—for instance, a campaign bus; and public rallies and other meetings.
We agree that all those should of course be brought into regulation, but this amendment is about excluding the background cost: that is, the cost of the member of staff of the third party. That is not primarily on cost grounds, but because of the additional bureaucracy that it would involve. How do you delineate the amount of time that the staff member spends—let us say, on mounting a public rally—from the amount of staff time they spend on their campaigning work anyway?
It is easy to assess the amount of money you are going to spend on hiring the hall for a public rally; you get an invoice for that. You do not get an invoice for a member of staff or the 10% of their time spent over four weeks doing that. Therefore, we think that the best thing to do is eliminate the background staff costs from the regulated costs in those three areas. It should be noted that the Electoral Commission recommends the removal of all staff costs, at least for the 2015 election. We are not going as far as that; we refer only to the background staff costs in relation to these three activities that are being brought into regulation. I beg to move.
Lord Tyler
My Lords, I strongly support the noble and right reverend Lord, Lord Harries, on this amendment. Indeed, we had very co-operative discussions about how best to tackle this problem. I am grateful to him and, indeed, to others who effectively endorsed an amendment we tabled in Committee on this crucial issue.
Given that there was much quotation of the Electoral Commission’s advice earlier, it is important that it has very explicitly said that Amendment 45 offers some advantages over the current position in the Bill. With this amendment, at least, we have that endorsement.
As I said in Committee, the Electoral Commission actually thinks that counting staff costs for political parties’ election expenses would be an appropriate way to proceed. Of course, that is not in front of us today; it may be for another day and another Bill. For the purposes of this Bill, the NGOs have been dealing with a considerable problem: namely, that the Bill includes not only staff costs on direct campaigning but what are called “background costs”.
As my noble friend will no doubt point out, staff costs for non-parties are already regulated for the production and distribution of election material. Our amendment suggests that this should continue but that costs should also be accounted for if they are incurred in direct relation to canvassing voters. In that context it seems that it would not be very difficult to identify the particular costs; equally, however, we do not want to increase the difficulties that could be caused by burdensome regulation on background costs that are not in any way so easy to account for. For example, the costs in relation to organising meeting rooms, travelling to a venue or setting up a press conference might be a matter of a few minutes of somebody’s time—and therefore, for many small organisations, a considerable absurdity.
Bluntly, I do not think that anyone cares if a policy officer, whose job for the rest of the year is something completely different, spends a little time booking a room for an election rally, or incurs costs travelling to it. These matters cannot be said to be likely to greatly affect the outcome of an election in that particular area, or nationally. However, if the regulations go through without us thinking about the implications, they could unnecessarily tie up campaigners in accounting for their time—and, worse still, could deter some from campaigning at all.
As was said so forcibly earlier, there are many organisations in this country—and thank God for them—that rely entirely on time being given voluntarily to this sort of activity. Would it be necessary to try to cost that time, or would it be difficult, in any case, whether they were employed or volunteers? Many a charity and many a non-charity would find that totally inconsistent with the Government’s intention of avoiding unnecessary spending on unnecessary bureaucracy.
This amendment, along with some of the others, helps the Government to do what they say they want to do. I hope, therefore, that my noble and learned friend will be able to find some way of making a sensible compromise on the whole issue of staffing costs.
The Government have moved sensibly in so many ways to try to meet the concerns and anxieties about the so-called chilling effect that many of us have understood to be the case with organisations with which we are involved. Many noble Lords are active members of charities and non-charities that do such important work in civil society today. Surely, the last thing that we want to happen is for the time, energy, enterprise, inventive activity and, indeed, the cost of those organisations to be unnecessarily distorted by new bureaucracy of the sort that could occur. Therefore, I very much hope that the Government will see that this is a sensible compromise on the whole issue of staffing costs.
Lord Cormack
My Lords, I have attended a number of meetings which the noble and right reverend Lord, Lord Harries, has convened and I, for one, am extremely grateful to him for the leadership that he has given and the amount of time he has devoted to the Bill over the past few months. Last week, following those meetings, I met with the chief executive officers of two important charities. I do not intend to name them because I did not say that I would, but when I asked them, “If we could get only one amendment through the House next week, where would your priority be?”, they said that it would be on staffing costs.
Any regulations imposed as a result of the Bill should be clear, simple and, above all, fair. The problem with this is that we would be faced with regulations that would be far from clear or simple, and which would most certainly not be fair. Because I do not want to take the time of the House when we have already had a clear and brief exposition from the noble and right reverend Lord, all I will say is: let us this evening make sure, as far as we can, that that clarity, simplicity and fairness is in the Bill.
I, too, am grateful to my noble and learned friend Lord Wallace of Tankerness and to the other Lord Wallace, my noble friend Lord Wallace of Saltaire, who we are all delighted to see back—but I urge them to go this one further step. They have done a great deal to try to make a bad Bill better; they can take another step this evening.
Baroness Royall of Blaisdon (Lab)
My Lords, the inclusion of staffing costs is hugely burdensome for large and small campaigning organisations. We have heard that tonight and we have all received e-mails and had discussions with campaigning organisations. Like the Electoral Commission, our preference would be for all staffing costs to be taken out for the 2015 election period. However, we recognise that this is an excellent compromise and I urge the noble and learned Lord, Lord Wallace, to accept it. Later on this evening the noble and learned Lord will be putting a review into the Bill, which could be an opportunity to revisit these things, so I very much hope that he will accept the amendment.
Lord Wallace of Tankerness
My Lords, I thank the noble and right reverend Lord, Lord Harries, for his amendment, because I, too, recognise that this issue has been regularly raised in many of the meetings that we have had—as did my noble friend Lord Cormack and the noble Baroness, Lady Royall. The noble and right reverend Lord’s amendment seeks to exclude those staff costs associated with staff directly employed by a third party from the calculation of controlled expenditure for transport, press conferences and organised media events, and for public rallies and public events.
The starting point is to recognise that the PPERA Act 2000 has always required third parties to account for staff costs. I acknowledge that the Bill extends the range of activities that may incur controlled expenditure; these are the activities that the noble and right reverend Lord seeks by his amendment to remove from staff costs. The Bill seeks to retain the need for staff costs to be included. As I said, I recognise that there has been concern, first, over the unfairness of third parties having to account for these costs when political parties do not. I think that my noble friend Lord Tyler mentioned that. Secondly, there has been concern about the difficulty for third parties in calculating the staff time attributable to activities giving rise to controlled expenditure.
On the issue of third parties having to account for these costs while political parties do not, your Lordships will be aware that when Parliament passed the 2000 Act it felt that it would be transparent and proportionate for a third party to account for staff time. This was on the basis that a third party undertakes campaigning activities other than simply political campaigning, and where a third party enters into political campaigning its spending for those purposes should be fully transparent. I am sure that that was the underlying thinking behind the 2000 Act. I would at least hope that someone who is employed by the Liberal Democrats during an election is actually working for the Liberal Democrats. Indeed, I am sure that the other parties would hope the same on behalf of their staff. It is as transparent as it possibly can be.
Regarding the concerns of third parties over the difficulties associated with calculating staff time, this is an existing element of the regulatory regimes. Its operation in the last two general elections, alongside Electoral Commission guidance on this, highlighted that such costs can be accounted for without becoming overly burdensome. The Electoral Commission takes a proportionate approach in current guidance to the calculation of controlled expenditure, including staff costs, by clearly stating that third parties should make an honest assessment of the costs that need to be reported.
I have shared with a number of the groups which have come to see me since Committee the fact that we did examine whether it would be possible to put in a de minimis exemption. Quite frankly, having seen what its terms would be, it would give rise to more concern about legal definitions than it merited, particularly if we had a de minimis exemption in statute. That would make it much more difficult for the Electoral Commission to take that proportionate approach to the calculation of controlled expenditure which it has done through its guidance.
It should also be noted that with the increases in the registration threshold the smaller organisations to which my noble friend referred, be they charities or campaigning organisations, will not be subject to regulation and the need to calculate staff costs. The best way of addressing the de minimis question is by what we have done in raising the threshold and taking so many of these organisations outwith the scope of controlled expenditure altogether.
My noble friend quite properly paid tribute to the work done by volunteers, not only for charities but for so many campaigning organisations. In many respects, they are the people who make the wheels of campaigning and democracy go round. However, volunteer costs will continue to be excluded from the calculation of controlled expenditure. In Amendment 44, which the House has just agreed, volunteer costs are excluded from the calculation of staff costs by virtue of paragraph 1A(1)(c) of new Schedule 8A. They were excluded under the existing regime, but it is important to emphasise that volunteer costs will also be excluded under what we are proposing. There is a world of difference between volunteer costs, which will be excluded, and the great advantage that there can be to candidates or political parties of third parties putting paid staff into campaigning activity in constituencies, or into running media events, press conferences or rallies.
The result of the amendment proposed by the noble and right reverend Lord, Lord Harries, would be to exempt that kind of expenditure associated with paid staff being moved in at the time of an election to facilitate the electoral advantage of a particular party or candidate. It is for that reason that the Government do not feel able to accept the noble and right reverend Lord’s amendment, and I invite him to withdraw it.
Lord Harries of Pentregarth
I am disappointed with the noble and learned Lord’s reply. This was a very simple step that the Government could have taken to ease the regulatory burden on charities and campaigning groups. It is disappointing. He stressed the fact that staff costs were already in PPERA. With due respect, that is no good reason for continuing them, if we have an opportunity to improve that Act and make it not just workable but one which eases the burden on charities and campaigning groups.
The Minister stressed that the Electoral Commission had found it possible to regulate this, but the fact is, as he knows, that charities and campaigning groups find this whole area very burdensome. I really do not see how the Electoral Commission can possibly police this area and work out what percentage of the time has been allotted, let us say, to the mounting of a public rally. What kind of receipts or statements is it going to get from the charity concerned? I am afraid that I find it very disappointing and I would like to test the opinion of the House.
“(1) Section 94 of the Political Parties, Elections and Referendums Act 2000 (limits on controlled expenditure by third parties) is amended in accordance with subsections (1A) to (1E).
“(1A) In subsection (3), for paragraph (a) (but not the “and” after it) substitute—
“(a) during a regulated period—(i) any controlled expenditure is incurred in a part of the United Kingdom by or on behalf of a third party in excess of the limit for that part of the United Kingdom mentioned in subsection (5), or(ii) any controlled expenditure is incurred in a particular parliamentary constituency by or on behalf of a third party in excess of the limit mentioned in subsection (5ZA),”.(1B) In subsection (5)—
(a) in the opening words, for “(3)” substitute “(3)(a)(i)”;(b) in paragraph (a), for “£10,000” substitute “£20,000”;(c) in paragraph (b), for “£5,000” substitute “£10,000.”(1C) After subsection (5) insert—
“(5ZA) The limit referred to in subsection (3)(a)(ii) is 0.05% of the total of the maximum campaign expenditure limits in England, Scotland, Wales and Northern Ireland.”
(1D) In subsection (5A) for “(5)” substitute “(5ZA)”.
(1E) In subsection (10), omit the “and” at the end of paragraph (c) and after paragraph (d) insert—
“(e) the “maximum campaign expenditure limit” in a part of the United Kingdom is the limit imposed by paragraph 3 of Schedule 9 in relation to campaign expenditure incurred in the relevant period (within the meaning of that paragraph) by or on behalf of a registered party which contests all the constituencies in that part (and to which sub-paragraph (6) of that paragraph does not apply).””
Lord Wallace of Tankerness
My Lords, one of the aspects of the Bill that has received considerable attention and debate during our discussions, not only in your Lordships’ House but with campaign groups, relates to the registration thresholds, spending limits and constituency limits.
On registration thresholds, the point has been made repeatedly that small campaigners who do not incur much expenditure would be brought into the regulatory regime. This would, it has been claimed, impose undue administrative burdens on organisations that are not equipped to handle those responsibilities.
Noble Lords will recall that the Government have been considering this issue for some time. Indeed, my noble friend Lord Wallace of Saltaire gave a commitment on the first day in Committee that the thresholds would be revised. Extensive debate in Committee followed, at which representations were made to either revert to the existing PPERA thresholds, or to raise them further. I am grateful to my noble friend Lord Hodgson and to the noble and right reverend Lord, Lord Harries of Pentregarth, for leading that highly useful debate.
The Government have considered this matter and the appropriate level for registration thresholds further. Amendment 46 proposes to raise the levels to £20,000 in England and £10,000 in Scotland, Wales and Northern Ireland. The noble and learned Lord, Lord Hardie, has tabled an amendment proposing those levels be set at £20,000 for each constituent part of our United Kingdom. I simply observe that the Government’s amendment represents not only a substantial increase from the levels currently in the Bill, but reflects the original structure where the amounts were higher in England than in Scotland, Wales and Northern Ireland, no doubt due to the fact that there is a substantially greater number of constituencies and voters in England than in Wales, Scotland and Northern Ireland. Nevertheless, this is still a significant increase not only for England, but for Scotland, Wales and Northern Ireland, and it doubles the current registration thresholds in PPERA.
These thresholds will effectively exclude from the controls those campaigners who incur only small amounts of money. They will be able to campaign as they currently do, secure in the knowledge that unless they spend a substantial amount of money on controlled expenditure, they will not be subject to any aspect of the regulatory regime.
Bearing in mind what not only noble Lords but people outside sometimes hear in general debates or see in e-mails, it is also important to point out that these are thresholds for registration. It has sometimes been represented that there are limits on what organisations can spend, but the thresholds for registration are consistent with our objective of promoting transparency and accountability. We are maintaining the constituency limit of £9,750 throughout the regulated period to prevent a third party focusing a significant amount of its spending power on a small part of the United Kingdom.
Amendment 46 also specifies that, where a third party spends £9,750 in a constituency, it must register with the Electoral Commission. This is to ensure that the offence of spending more than £9,750 in a constituency is fully effective. I know my noble friend Lord Tyler is particularly interested in that point. As constituency limits apply only in relation to regulated periods involving a parliamentary general election, so the constituency threshold will have effect only in relation to such periods. We recognise that the current draft does not accurately reflect this, and the Government will accordingly bring forward an amendment at Third Reading to correct that.
In contrast, my noble friend Lord Tyler has proposed that rather than require a constituency registration threshold of £9,750, the registration threshold should be only £5,000. Reintroducing a lower constituency threshold than £9,750, as proposed by my noble friend, would only reinsert an extra layer of bureaucracy and confusion, particularly as the Government have also tabled Amendment 53, which would remove a post-dissolution limit of £5,850. The government amendment means that campaigners may spend the entire £9,750 throughout the regulated period, or just in the last few weeks before the election. Having just one constituency limit will be a much more straightforward and easier regulation to follow.
Finally, on spending limits, campaigners and Members of your Lordships’ House have sought to retain third parties’ spending limits at either the existing PPERA amounts, or even beyond those. The noble and learned Lord, Lord Hardie, and the noble and right reverend Lord, Lord Harries of Pentregarth, were clear on this point when we addressed this issue in Committee. The spending limits in the Bill for Scotland, Wales and Northern Ireland have particularly concerned campaigners. It has been argued that third-party campaigning in any part of the UK generally has a fixed cost; leaflets, for example, cost the same whether printed in Wales or England, and billboards cost the same, whether they are placed in Scotland or Northern Ireland. As a result, the spending limits for Scotland, Wales and Northern Ireland were felt to be disproportionately low. It is with that in mind that government Amendment 47 would uplift those limits by an extra £20,000 each. This would mean that there would be a spending limit of £55,400 in Scotland, £44,000 in Wales and £30,800 in Northern Ireland.
The Bill proposes spending limits for each of the parts of the UK which add up to £450,000. It is important to remind your Lordships that while these limits were initially to be over not quite a year—from the day after the European elections—if your Lordships approve our amendment which we will debate later, these will apply over the length of the reduced seven-and-a-half-month regulated period, which is also reflected in another government amendment. In fact, therefore, there is a larger amount in Scotland, Wales and Northern Ireland over a shorter period. Indeed, the amount for England is over a shorter period.
I have previously sought to explain that considerable amounts of campaigning can still be undertaken for that amount. In Committee, I gave the example of £390,000 buying a campaigner 40 million leaflets, a dozen front-page adverts in a national newspaper or even 780,000 telephone calls from a professional phone bank. I hope that noble Lords will agree that these government amendments as a whole will lead to a substantial increase in the registration thresholds and a significant uplift to the limits in the Bill for campaigning by third parties in Scotland, Wales and Northern Ireland.
I note that the noble and right reverend Lord, Lord Harries of Pentregarth, has further amendments on spending limits. I will respond to them when I wind up. I beg to move.
Lord Hardie (CB)
My Lords, before speaking to the amendment in my name, I thank the Government and the noble and learned Lord the Advocate-General for listening to the concerns from all sides of the House about the original proposal in the Bill to reduce the existing thresholds for registration as a recognised third party. The government amendment addresses these concerns and, rather than reducing the limits, they have accepted that the limits should be increased. It is appropriate that tribute is paid to the efforts made by the Government and the noble and learned Lord.
However, Amendment 46 does not address the anomaly that I mentioned in Committee, caused by having different registration thresholds for England and the rest of the United Kingdom. My amendment would remedy that by having the same registration thresholds throughout the United Kingdom. I noted that the Minister suggested that the distinction between England and the rest of the United Kingdom was the larger number of constituencies and voters. It is important to appreciate that there is a distinction that should be drawn between total expenditure by third parties in each constituent part of the United Kingdom, as against expenditure limits that determine whether the third party is required to register for recognition.
I accept that a distinction must be drawn between the various countries when one considers the total expenditure by a recognised third party in each country. That distinction reflects the number of parliamentary constituencies in each country and the greater number of voters in England than in any of the other three countries. That is the point that has been addressed since the 2000 Act, and is preserved in that Act, notwithstanding the amendments, in paragraph 3(2) of Schedule 10.
However, the threshold for registration is different. There is no justification for distinguishing between the different countries in this respect. The distinction was introduced in the 2000 Act, which followed the fifth report of the Committee on Standards in Public Life on the funding of political parties in the United Kingdom, which was presented to Parliament in October 1998. I referred to this in Committee and will not repeat these references. However, in Committee I explained that that report and the Government’s response to it never suggested any distinction between the different countries. There was a reference in a footnote which suggested that the reduced figure of £10,000 across the United Kingdom might be more significant in the three countries other than England, but it did not go as far as suggesting that there should be a difference.
I have been unable to find any subsequent explanation for halving the limit of £10,000 allowed for England in the other countries of the United Kingdom. I do not understand the need for a distinction when it comes to the threshold for registration. It is illogical and risks inhibiting local people from engaging in effective political debate about issues that are of concern in their constituency at a crucial time in the electoral process, by imposing upon them what my noble and right reverend friend Lord Harries of Pentregarth described at Second Reading as a,
“bureaucratic burden on small charities or campaigning groups, especially during the actual election period”.—[Official Report, 22/10/2013; col. 914.]
For example, suppose that a local hospital is threatened with closure and a group of individuals in the constituency wish to make this an issue at the general election but stop short of fielding their own candidate. If some candidates in that election support the retention of the hospital while others do not, the expenditure by the local group will be controlled expenditure. If this occurs in England, the pressure group can spend £20,000 before the need for registration and the administrative burden that entails, but if it occurs in Scotland, Wales or Northern Ireland, it can spend only £10,000. The expenses of running such a campaign in Scottish, Welsh and Northern Irish constituencies will be similar to those in many English constituencies. Do the Government seriously suggest that the cost of transport to meetings or venues of meetings in every English constituency is double that in any constituency elsewhere? In his reply, will the noble and learned Lord the Advocate-General explain the justification for this distinction?
My final point is that my amendment is not academic. Apart from being fair to all people across the United Kingdom who wish to campaign in the course of a general election about a matter of local importance to them, there is also a question of perhaps greater significance: that the consequences of not registering but exceeding the registration threshold are a criminal offence under Section 94 of the 2000 Act. Why should electors face prosecution in Edinburgh, Cardiff or Belfast for spending £6,000 on a campaign without registering as recognised third parties but have immunity in Newcastle for identical activity?
Lord Tyler
I have a separate amendment in this group. We all welcome the way in which my noble friend Lord Wallace of Saltaire and my noble and learned friend Lord Wallace of Tankerness have responded to the request for an increase in the registration thresholds. This was a key recommendation of the commission headed by the noble and right reverend Lord, Lord Harries, and it certainly deserved to be listened to.
In this last-minute change to the Government’s position, however, there is one new outstanding problem. The interaction between the national thresholds for registration and the constituency limits in the Bill simply do not hold together. As we will discuss in the next group, I believe very strongly that the constituency limits are a very important part of this Bill. Indeed, I am sure Members on all sides of your Lordships’ House are aware that if we did send back to the other place a Bill that did not deal with this point, many people there would think that we were not doing our duty.
For the constituency limits to be effective, those who spend at a constituency level will surely need to make an expenses return about what they are spending. The rules in the 2000 Act and in the Bill rightly also ask where the money is coming from. There is, however, a problem. As the Bill will stand in the light of these new government amendments, someone could be spending £9,750 in a constituency, or indeed could spend £19,500 across two English constituencies, yet would not have to register. The registration limit is now raised to £20,000, and therefore that spending and its sources would be totally opaque. It would not be transparent even though £9,750 could have a significant impact on the constituency result.
In my own amendments on thresholds in Committee, I suggested that this problem could be dealt with by stipulating that the threshold should be at a particular level which would take that into account. The Government have chosen £20,000, and that is fine, except that all the spending could be concentrated in one target marginal constituency. A group could spend a significant sum—I am suggesting £5,000 in my amendment—all in one place. Surely in those circumstances it should have to register.
The Government’s answer has been that somebody who spends more than £9,750 in one constituency will be committing an offence under their proposals. If that someone does not have to register, because he is below the new registration threshold, how can anyone know that he is committing that offence? I cannot think—and I know a little bit about these things—of any other part of electoral law in which someone who is subject to a spending limit is yet not required to produce any paperwork on what he is spending. Introducing that concept now would make for a completely absurd anomaly.
Lord Cormack
Will the noble Lord not agree with me that there would be more logic in having a figure that was close to that which an individual candidate is entitled to spend? No individual candidate is entitled to spend as much as £20,000 in any constituency in the United Kingdom.
Lord Tyler
My noble friend is right. He and I have relatively recent experience of these things. The normal figure is around £12,000 during the election period. As I will come to in a moment, that could be swamped under these proposals, and therefore this is an absurd anomaly. I understand why the Government have arrived at their position. Their formula sounds simple, but it may be so simple as to be unequal to the task in hand. Equally, the move in Amendment 53 to do away with different limits for constituency spending seven months before an election, and constituency spending seven days before, seems to me to lose what is an important and not particularly complex distinction in the name of simplicity—and I am not sure the Government have got this right.
I ask the Minister to consider carefully the horror story that could emerge. Imagine: a campaigning group could come into a constituency and spend £19,999.99 in the last seven days of the campaign with the aim of affecting the outcome in that constituency, and it would not need to register. A second group, unrelated to the first, could, during those seven days, do the same. It would not register. A third group, unrelated to the other two—not a coalition, not working together— could do the same. In the last few days of a campaign in a marginal constituency, just under £60,000 could be spent, completely swamping the amount permitted for a candidate and a party, which is around £12,000, in one constituency. The candidates are, as I say, limited in those final four to six weeks.
Because this spending would not be registered, it might not be revealed until after polling day. Think of the mess that that would cause to our electoral law. Because such groups, though technically in breach of the law, would not need to register, no one would be any the wiser about what they had been up to. My noble and learned friend has said that he is looking at this section with a view to some clarification, and I think he will have to agree that there is a major loophole looming in front of us. I therefore request that he look carefully at Amendment 46ZA. He may find a better solution but a solution must be found, otherwise political parties and those who will be looking at this legislation when it goes back to the other place will not have seen this particular problem, because until now the registration threshold has not been so high. It is only under the present Government’s changes in this House that it has been raised to this height.
I hope that my noble and learned friend will be able to give some reassurance to those of us on all sides of the House who are concerned about such spending that the Government are not prepared to accept this loophole.
Lord Harries of Pentregarth
My Lords, Amendment 46A in my name concerns the spending cap for England. First I would like, on behalf of the commission, to warmly welcome the raising of the registration thresholds by the Government. I think that has done more than anything else to reassure the smaller charities; we give the Government a very warm thank you. We also warmly welcome the raising of the spending cap for Wales, Northern Ireland and Scotland. The spending cap for England, unlike that for Wales, Northern Ireland and Scotland, has been reduced by 60%. That reduction has taken place with an increase in the number of activities to be regulated and without taking inflation into account.
It is true that not many campaigning groups and very few, if any, charities would spend a high figure coming anywhere near that. The one I have checked that does spend quite a lot of money is Hope not Hate, which campaigns against racism all over the country. It is not a charity but a campaigning group. In 2010 it spent £319,231. That is very nearly the limit for England as we have it under the Bill, which is £319,800.
There was no evidence of abuse with the previous spending caps for England, and no rationale has been given for this reduction by 60%. Even if the Government are not willing to revert to the PPERA limits for England, I ask the Minister whether he sees any scope for some kind of compromise between the drastic reduction which has been brought about by the Bill and the spending limits there were for PPERA.
Lord Cormack
My Lords, I will add just a few words to what I said a few minutes ago. I fought 12 general elections, in 10 of which I was elected, to go to the other place. In every one of those the expenditure that I was allowed was very clearly defined. The returns that one had to make afterwards were minutely examined, and there have been cases within our memory where candidates have been challenged on their returns because they were a little careless in submitting them. We have to be extremely careful. The last election I fought was in 2005, and if I remember rightly I was allowed to spend around £8,000 or £9,000. My noble friend says that it is now about £12,000, and I accept that—I am sure he is right. It was all very carefully defined, and we have to be careful, much as we all want to protect free speech and engagement in campaign and all the rest of it, that the expenditure of candidates who stand for particular political parties or as independents is not put into the shade by the expenditure that is allowed to campaigning organisations within individual constituencies. Although I do not suppose that my noble friend Lord Tyler will push his amendment to the vote, I hope that the Minister will reflect upon what he and I have said.
Baroness Williams of Crosby (LD)
My Lords, when at these debates, I have always felt that not enough attention is paid to the real danger of our fragile system of controlling election expenditure beginning to break down altogether. I am strongly in favour of charities having the right to campaign and being free to speak out about what they believe—that is absolutely right—and a huge contribution is made to us as a society in that way. Frankly, however, I am frightened that here, on the edge of the Third Reading of the Bill, we have observed and commented upon two huge anomalies that are still with us and still in the Bill, which open the door to the misuse of some aspects of the Bill in a way that would make the holding of that line against the misuse of public and private expenditure very difficult to hold.
Throughout my whole political life I have been very conscious, like the noble Lord, Lord Cormack, of the importance of the restrictions on the amount of money that passes into the British political system and what a huge benefit that has been to us in terms of retaining a democracy that is genuinely a democracy of the right of every individual to vote. Some of my colleagues in this House will know that I have been very much affected by the recent history of the United States, having been for 10 years an elective politics professor at Harvard, between 1986 and 1996. I will quickly say what so frightens me.
In 2010, the American Supreme Court decided to lift all restrictions on what amounts of money could be given by either corporations or trade unions directly to campaigns at the federal level. One of the outcomes of that—a decision that was made, let the House not forget, in 2010—was that in 2012 no less than $6 billion was poured into federal elections in the United States in a one-year electoral cycle. That was not enough. The sweeping away of all those restrictions was based upon the constitutional right of free speech, in my view distorted in a very troubling way. Today, the Supreme Court of 2014 has on its agenda yet another proposal, McCutcheon v Federal Election Commission, which would enable any individual, without restriction, to contribute any amount he or she wishes to the election of an individual named federal candidate—in other words, it is back to Eatanswill and the buying of politicians.
The United States is a great and very open democracy, but we are rapidly seeing the gradual distortion of its democracy by huge expenditure of money for other purposes than simply a desire to register a particular campaigning goal. I fully take the point that every step that can be taken has been taken to avoid that in the Bill. I am dubious about the proposal of the noble and learned Lord, Lord Hardie, to increase substantially the limit. However, I appreciate that the original limit was almost certainly too drastically cut. There is a median way there.
Lord Wallace of Tankerness
My Lords, I thank all noble Lords who have contributed to this debate. I express particular appreciation of the welcome that has been given to the very significant increase in the registration thresholds that the Government have brought forward and to the uplift in the spending limit in Scotland, Wales and Northern Ireland. To follow on from my noble friend Lady Williams, it is certainly useful to remind ourselves, as she also did very eloquently in Committee, of the core purpose of the Bill, which is to ensure that our electoral and democratic system is not hijacked by people who can spend large amounts of money without proper accountability, and that there is proper transparency. It is important that we keep those important points in our minds when we consider the different measures.
Perhaps that is consistent with the point made by my noble friend Lord Tyler, which I addressed in my opening remarks, on not wanting a particular constituency to be overwhelmed. He proposed a threshold of £5,000 and said that he did not wish to find a situation where an organisation could come rattling into a constituency with one week to go, spend £19,999, get away with it and not be accountable for that. It is important that the Representation of the People Act might have a certain impact on that kind of expenditure, if it offended that Act; under the Bill that expenditure is increased from £500 to £700. I ask my noble friend to reflect on that, although I know that he does not overlook it as he knows full well about it.
But, more importantly, there is not that kind of loophole. My noble friend seems to have overlooked—and I did try to draw his attention to it in my opening remarks —that it will be an offence under the Bill to spend more that £9,750 in a constituency, even where the RPA does not apply. One of the consequences of a situation where we are amending another piece of legislation is that it is not always self-evident. Amendment 46 says:
“In subsection (3), for paragraph (a) (but not the “and” after it) substitute … (ii) any controlled expenditure is incurred in a particular parliamentary constituency by or on behalf of a third party in excess of the limit mentioned in subsection (5ZA)”.
I think that the purpose of that is in fact to make a registration requirement if the constituency limit of £9,750 is reached, or at least that is what I am reliably advised and I know that it is certainly the intent that there should be a registration of the maximum for each constituency to make more effective the criminal sanction that will follow if a party or third party spends in excess of £9,750. His example of spending £19,000 could not actually happen under the Bill, in line with the proposed amendment.
Lord Tyler
Whether it is £9,000 or £19,000, my general point is that I have been unable to find anything in electoral law where there is a spending limit but no paperwork for anybody to provide that shows that they are keeping within that spending limit. It seems to me that there is a potential anomaly. I am just asking my noble and learned friend to be absolutely certain before, as has been said, we send back to the other House a potential anomaly in these circumstances.
Lord Wallace of Tankerness
My Lords, I do not think that there is an anomaly. One of the reasons for putting in the registration requirement was to try to address the kind of anomaly that my noble friend mentions. We share the same objective and if he thinks that there is a loophole there then I will certainly make sure that we look at that, because these provisions have been worked up over recent days. I think that it is okay, but it is probably quite good counsel that we should check to make sure that that is in fact the case.
The noble and learned Lord, Lord Hardie, made his case for having similar registration thresholds in Scotland, Wales and Northern Ireland as in England, and I can see some force in what he is saying. He says that he has not been able to divine why there has been a difference, which has been in place since the very outset. Since PPERA, a distinction has been made: it was £10,000 for England and £5,000 for Scotland, Wales and Northern Ireland. I will not allow myself the cheap debating point that that was what the noble and learned Lord proposed in Committee, but I think that his purpose behind that was to make sure that the Government considered the threshold properly.
It is interesting too—I will finish this point and then let the noble and learned Lord come in—that what is actually proposed by the Government is also the architecture proposed by the commission chaired by the noble and right reverend Lord, Lord Harries of Pentregarth. The commission report proposes £20,000 for England and £10,000 for Scotland, Wales and Northern Ireland.
Lord Hardie
I was going to say that I would not add such an adjective. The noble and learned Lord will remember that I tabled two amendments: the first was to preserve the status quo and the other was to seek an increase in the limits. As the noble and learned Lord has much more experience in political matters than I have, he will appreciate that it is useful to have a stop-gap in case the main objective is not achieved. In relation to the comment about the point made by my noble and right reverend friend Lord Harries, the noble and learned Lord might remember that, in Committee, when the noble and right reverend Lord was speaking, having heard my suggestion that there should be uniformity for registration levels, he indicated that he thought that there was some force in that and that it had not been a point considered by the commission.
Lord Wallace of Tankerness
My Lords, I was going to say that I was aware that the noble and learned Lord had also tabled an amendment in that group to raise the threshold to provide an equalisation—at, I think, £25,000 if my information serves me correctly.
It is a fair question as to why there is such a difference. I think one of the reasons, which I gave at the outset, is that there is a difference in the number of voters and number of constituencies. It is also the case that spending of less than £20,000 could have a more significant impact in, say, Northern Ireland, which is a very compact area with a very focused media. Spending of less than £20,000 could have a much more significant impact there than in England, and I suspect that the different political and media circumstances was one of the considerations as to why the difference came about in the first place.
There are one or two points made by the noble and learned Lord that I could not quite follow. He said that if there was a hospital closure in a particular constituency, a pressure group could spend up to £20,000 in England but just under £10,000 in Scotland. Of course, following on from the debate that we have just had about constituency limits, they would be restricted to £9,750 in Scotland, Wales, England and Northern Ireland regarding the kind of example that he gave. He suggested—I apologise if I misheard him—that someone could be prosecuted for spending £6,000 in campaign expenditure in Edinburgh but not in, for example, Birmingham. I think that he will accept that, with a £10,000 threshold, that would not happen in either Birmingham or Edinburgh. I do not think that I misheard him, but sometimes people get that impression and suddenly there are concerns.
Lord Hardie
The noble and learned Lord is correct; it was a mistake on my part, I should have said £12,000. The point was that it is simply over the limit in Scotland but under the limit in England.
Lord Wallace of Tankerness
My Lords, we recognised the core expenditure that was needed in Scotland, Wales and Northern Ireland in order to mount campaigns and that has been reflected by—for the first time, actually—making a distinction and giving an uplift for Scotland, Wales and Northern Ireland over and above the percentages that have otherwise been applied.
The noble and right reverend Lord, Lord Harries of Pentregarth, proposes reverting to the total national spending limit of £988,500. As I have explained, the Government have brought forward amendments to increase spending limits for Scotland, Wales and Northern Ireland but, as I explained in Committee, only a few political parties at the last general election spent more than £390,000—the total now would be £450,000—on the full range of activities that we now wish to extend to third parties. Only the Conservative Party, Labour Party, Liberal Democrats and UKIP spent more than £390,000 and, I assume, more than £450,000.
As my noble friend Lady Williams said, there are risks associated with allowing third parties to incur vast amounts of spending. Given that third parties campaign for or against electoral success of political parties, it is a very reasonable assumption that a relationship can and does develop between some third parties and political parties. This opens up the potential for supporters of political parties to demonstrate their backing by diverting their funding to an aligned third party and away from the political parties themselves, which have their own limits. I do not think it is right that, where limits are imposed on political parties, they can be circumvented in this way.
Even the limits that we have allow very extensive campaigns to be mounted. I do not wish to indulge in too much repetition, but £390,000—and of course it has gone up by £60,000—is 40 million leaflets, a dozen front-page adverts in a national newspaper, or 780,000 telephone calls from a professional phone bank. These are not insignificant campaigning activities and I therefore believe that the judgment that we reached in coming to these figures is the right one.
I therefore urge the House to support the Government’s amendments with regard to thresholds and I invite noble Lords not to press their amendments.
(a) in relation to England, 2% of the maximum campaign expenditure limit in England;(b) in relation to Scotland, £20,000 plus 2% of the maximum campaign expenditure limit in Scotland;(c) in relation to Wales, £20,000 plus 2% of the maximum campaign expenditure limit in Wales;(d) in relation to Northern Ireland, £20,000 plus 2% of the maximum campaign expenditure limit in Northern Ireland.”;”
Lord Tyler
(a) sending election material falling within paragraph 1 of Schedule 8A which is addressed to electors (whether addressed to them by name or intended for delivery to households within any particular area or areas);(b) unsolicited telephone calls falling within paragraph 2 of Schedule 8A, made to such persons or households, which may reasonably be regarded as intended to ascertain or influence their voting intention.( ) For the purposes of this paragraph, “election material” is defined as in section 143A.”
Lord Tyler
My Lords, this amendment, which I am moving on behalf of a number of noble Lords in different parts of the House, deals with some small changes to a previous amendment that we looked at in Committee on constituency limits, but they are changes that I know will be very welcome to a number of organisations which have been in touch with several Members of your Lordships’ House. It received considerable support across the Chamber in Committee and has two compelling advantages to recommend it.
First, it retains the Government’s intention to have a constituency limit. That is surely central to the Bill. As I have said consistently, I strongly support that and I know that a large number of other Members of your Lordships’ House also think it is important to retain that. However, even if we were to take it out, as some have suggested, I would certainly expect that Members of the other place would need no whipping at all to put it back in, for the reasons that were advanced so eloquently by my noble friend Lord Cormack a few minutes ago. Surely even Labour MPs would want it to be put back in.
The second advantage to the amendment is that it very closely and carefully defines what the constituency limits should apply to. As many charities and NGOs, big and small, have pointed out to me and to other Members of your Lordships’ House, they are not used to dealing with constituency boundaries; they have quite a different sort of geography from those of us who are involved in politics. Therefore, trying to assess the relative effect of, say, a rally in different constituencies would be quite problematic. It would be problematic for the political parties too, and for that reason we, as politicians, are not asked to account for it.
I shall give a practical example. I once chaired a rally for the five constituencies, as they then were, in Cornwall, and it took place in one particular constituency. It just so happened that we won all five seats but that did not have anything to do with my chairmanship at that rally. However, how would the costs of that rally be allocated to each constituency? You could allocate the costs to one constituency but what about the other four? That clearly is not what this Bill is all about. It really is not possible to measure the effect of a rally, or indeed a billboard or a press conference, on the result in an individual constituency.
I have one other example. I lost a lot of hair—or, rather, most of it went grey—in two elections arranging the national tour of the battle bus for the then joint leaders. Your Lordships may remember that at one stage we had two leaders in the alliance—the two Davids—although they did not always see eye to eye. That caused me a great deal of aggro. However, how I would ever have accounted for five minutes in this constituency, 10 minutes in that constituency and an hour in that constituency if I were running a campaign on behalf of a non-political organisation is quite beyond me.
Amendment 52, on which I am very grateful for the support of the noble and right reverend Lord, Lord Harries, the noble Lord, Lord Cormack, and the noble Baroness, Lady Mallalieu, would limit the scope of the constituency regulations to just activities where people communicate with specific voters. The one advantage of this amendment is that it ties down very specifically the activities that target specific people at a specific address in a specific constituency—letters or leaflets sent or delivered to voters, or telephone calls directed specifically to them—and which try to influence or ascertain their voting intention. Other activity would still have to be accounted for but only on a national basis. Therefore, if it is the national tour of a battle bus, arranging rallies or whatever, that has to be accounted for nationally but under the more generous national limits.
What has been made clear to us by many organisations which think that they may be involved in the activities covered by the Bill is that, if they are asked to account only for those activities that specifically target specific individuals, that will make their lives a great deal easier. It will retain the central purpose of the Bill, which is to stop big-money campaigns dwarfing the limits that candidates have to adhere to—my noble friend was very eloquent on this point a few minutes ago, as was my noble friend Lady Williams—and it will mean that the additional costs of activity directed at specific candidates can be identified neatly, clearly and succinctly.
The Electoral Commission has very clearly endorsed this amendment and expressed clear support for it because it makes simpler the guidance that it will have to give and the subsequent monitoring that it will have to undertake. I beg to move.
Lord Harries of Pentregarth
I support the amendment for the reasons that the noble Lord has set out. Constituency limits have been of very great concern to charities and campaigning organisations. I am fully aware of the kind of concerns raised by the noble Baroness, and, as the noble Lord, Lord Tyler, indicated, this issue has also been a very great concern for the Electoral Commission because it does not see how it can regulate and enforce this area. The noble Lord’s amendment will make it far easier for charities to be regulated by the law and for the Electoral Commission to regulate it.
Lord Cormack
My Lords, an amendment that can produce a joint letter from the National Secular Society and the Christian Institute clearly deserves careful consideration. When they take into account that the Electoral Commission also believes that there is good sense in this proposal, I hope that your Lordships will feel likewise. I hope that we will not have to exercise ourselves by going into the Lobbies. I hope that my noble and learned friend will be able to indicate at least a significant degree of sympathy with this and, if he cannot accept these precise words, that he will undertake to come back at Third Reading next week with something similar.
Baroness Hayter of Kentish Town
My Lords, we also strongly support the amendment. It is not the provision’s intention that we have problems with but its workability. It will add an enormous bureaucratic burden. When people campaign against the proposed path of HS2, flight paths around Heathrow or fracking and so on, that is not divided up by constituency. It is strange that a Government who are cutting red tape elsewhere, and who on Monday said that they could not possibly ask special advisers to list their meetings with lobbyists, seem to want this for really small organisations. Amendment 52, which limits the requirement to telephone calls and literature aimed at households, is immensely sensible. I hope that the Government will do one of two things: either accept the amendment or put off their new rules until after the next election.
Lord Wallace of Tankerness
My Lords, we have just had a discussion on constituency limits, and it was also covered extensively in Committee. The House has agreed to a government amendment to remove the post-Dissolution limit to make the provision less complex, yet there remains some concern about it. From what was said in a previous debate, I think that my noble friends Lord Cormack and Lord Tyler believe that there should be some limit on constituency spending. My noble friend Lord Tyler argued for a lower limit but now wants lots of expenditure to be incurred without any limit at all. That is a concern that we have.
It is important to put this in context. Constituency spending limits do not replace the existing controls under the Representation of the People Act 1983. Those long-standing rules stipulate that third parties campaigning for or against a particular candidate may spend only up to £500 in doing so. Other than raising that amount to £700, and requiring records to be kept of such expenditure, this Bill does not affect those provisions.
In contrast to the RPA rules, Clause 28 introduces a new limit on how much a third party that is promoting the electoral success of parties, or candidates who support particular positions, can spend in individual constituencies. As has already been explained, the limit is £9,750. The reason for this amount—which might, on the surface, appear somewhat odd—is that it is equivalent to 0.05% of the maximum campaign expenditure limit applied to political parties. This limit will apply for the duration of the regulated period for a UK parliamentary election.
As has already been rehearsed, the need for constituency limits is profound. It is not right that candidates and parties should effectively be bowled out of the field purely because well funded campaigners are able to outspend them. Elections are the principal domain of political parties and candidates, and those who are not campaigning for their own electoral success should still be able to participate: that is the essence of our democracy. However, in these circumstances, we believe that the voices of such campaigners do not diminish the voices of the political parties and candidates and that constituency limits will ensure that.
The Bill makes clear that a third party’s expenditure would be wholly attributed to a constituency only if that expenditure had “no significant effect” in any other constituency. That means expenditure in a local area could, of course, be attributed to several constituencies if the effect was felt in them all. Expenditure with a wider regional, or even national, reach would be attributed proportionately to all the relevant constituencies.
My noble friend Lord Tyler has proposed an amendment to dampen the effect of these constituency limits. The amendment proposes that only certain costs —in other words, only expenditure related to certain activities—should count towards constituency limits. Specifically, the amendment says that only costs associated with election materials should be counted. That would mean the costs related to leaflets, mailshots and adverts, all of which must also have been either specifically addressed to or delivered to households in a constituency, and unsolicited telephone calls to such households.
I recognise the issue which my noble friend is trying to address, but I believe there are drawbacks. For instance, significant activities such as rallies and events would not be regulated at a constituency level if his amendment passed. I gave some of my colleagues an example of Scottish Liberal Democrat pre-election rallies in Edinburgh East. Anyone who knows Scotland will know that Liberal Democrats would not be spending money in that constituency; no doubt Edinburgh East Liberal Democrats will now write to me and say, “Do not let us down”. That was a national campaign, but an event in my own former constituency could not, by any stretch of the imagination, relate to any other—not even Caithness, Sutherland and Easter Ross.
In addition, material otherwise distributed or displayed would also not count towards the constituency limit. A third party could therefore freely distribute leaflets by hand in a town centre, or, indeed, in shopping areas in different parts of a constituency, in the knowledge that, because they are not being delivered to voters’ homes, the associated costs need not be accounted for in that constituency’s limit.
We are concerned that these are key gaps which would allow a third party to target an area by holding large partisan events, or flood an area by handing out election material in the street or in shopping precincts. Allowing only certain activities to count towards constituency limits would undermine the entire principle of constituency limits, on which my noble friend spoke so eloquently earlier. For that reason, I urge my noble friend to think again and to withdraw his amendment.
Lord Tyler
My Lords, I am rather disappointed by that. Throughout today’s debate and, indeed, on previous occasions, many noble Lords—particularly my noble friends on the government Front Bench—have quoted the advice of the Electoral Commission. I apologise to the House for detaining it for a minute, but this is what the Electoral Commission says about this amendment:
“In principle, we support Amendment 52, tabled by Lord Tyler and others. It narrows the scope of the constituency limits so that they only cover spending in respect of election material sent to voters and households in a constituency, and unsolicited phone contact with such voters”.
Then, in heavy type, it continues:
“We see benefits in defining the scope of activity covered by the constituency controls more narrowly than in Part 2 of the Bill generally”.
The Electoral Commission feels there is a need to deal with this question and has identified it as one of the problems with campaigning organisations. Even if the amendment in our names does not meet the particular point and is not the right way to go about it, there is clearly a need to do something. Will the Minister undertake, in these last few days before Third Reading, to go back to the Electoral Commission and discuss this issue with it again? On that basis, I am prepared to withdraw the amendment.
Lord Gardiner of Kimble
I beg to move that further consideration on Report be now adjourned. In moving this Motion, I suggest that Report should begin again not earlier than 8.15 pm.
Lord Harries of Pentregarth
My Lords, Amendment 52A concerns constituency spending limits. It proposes that the spending limit for constituencies, instead of being 0.05%, is 0.1013%. I think your Lordships are well aware that campaigning groups and charities have found the regulation regarding constituencies exceedingly burdensome and the Electoral Commission has found them unenforceable. We take very seriously all that the noble Baroness, Lady Williams, has said about ensuring that big money does not come in. Nevertheless, we think that the constituency limits are too low. Raising them by this percentage, which reflects the wider percentage of caps, would give that greater degree of freedom which the charities and campaigning groups would like. I beg to move.
Baroness Hayter of Kentish Town
My Lords, we have Amendment 62A in this group. In order that the notes in reply can be thrown away, I give notice that I will not speak to it. Essentially, the issues were covered in the earlier group. Nevertheless, we retain our concerns about constituency limits and would very much like to have voted on the previous amendment, but there we are. However, we support the other amendment.
Lord Wallace of Tankerness
My Lords, the noble and right reverend Lord, Lord Harries of Pentregarth, has tabled an amendment which would raise the constituency limits from being the equivalent of 0.05% of the maximum campaign expenditure limit applied to political parties to 0.1013%. This would amount to almost £20,000—specifically, £19,753.50. As the noble Baroness indicated, we have already debated the issues on constituency limits. I have explained the necessity of constituency limits being in place. Without these limits in place, a third party could otherwise be able to focus the entirety of its spending power on a small part of the United Kingdom, outspending even candidates and parties in that location. That point was forcefully made by my noble friends Lord Cormack and Lord Tyler. It is important that those limits are set at an appropriate level and it is our view that the noble Lord’s amendment would not be appropriate.
I will not repeat the earlier points. We wish to promote accountability and transparency. Constituency limits relate to campaigning for or against a particular party and instances where a campaign is intended, or may reasonably be regarded as intended, to support groups of candidates who might hold particular views or support particular policies. Where such campaigning is subject to a national limit, it is also right that it is subject to a proposed constituency limit but we believe that that must be at a proportionate level. The comments we heard in earlier debates suggest that the limit we have set is too generous. Indeed, even my noble friend Lord Tyler might think it. However, we think that the limit we have set is proportionate, especially as we have removed the distinction between spending throughout the regulated period and spending during the period between the dissolution and election day. The limits are intended to remove undue influence, particularly by those campaigners who can afford to spend significant amounts of money. I do not believe that the noble and right reverend Lord’s proposal would be proportionate. It could allow substantial sums of money—sums, as we have heard, such as £12,000, which is the candidate’s limit. To have a third-party sum that is almost half as much again does not appear to be proportionate. I therefore urge the noble Lord to withdraw his amendment.
Lord Harries of Pentregarth
My Lords, I can well appreciate the noble and learned Lord’s answer to that. The issue that is continually raised by the commission I chair is the rationale for always linking third-party spending and regulation to political-party spending and regulation. That has never really been fully set out. I take the point that the noble and learned Lord has made but I hope that he will take on board the fact that there is continuing concern among charities and campaigning groups about constituency spending, and not just the spending but the regulation for campaigning in constituencies. As the noble and learned Lord knows, there is also great concern in the Electoral Commission. Even if he is not prepared to consider this amendment again, will he look seriously at Amendment 52 in the name of the noble Lord, Lord Tyler? That would help significantly. If he is not sympathetic to my amendment, I hope that he might be able to look again at Amendment 52 and bring something back in relation to it. With that, I beg leave to withdraw the amendment.
Lord Gardiner of Kimble
“( ) In subsection (2), after paragraph (c) insert—
“(ca) a body incorporated by Royal Charter which does not fall within any of those paragraphs of section 54(2),(cb) a charitable incorporated organisation within the meaning of Part 11 of the Charities Act 2011 or within the meaning of the Charities Act (Northern Ireland) 2008,(cc) a Scottish charitable incorporated organisation within the meaning of Chapter 7 of Part 1 of the Charities and Trustee Investment (Scotland) Act 2005 (asp 10),(cd) a partnership constituted under the law of Scotland which carries on business in the United Kingdom,”.”
Lord Gardiner of Kimble
My Lords, Clause 31 seeks to require registered third parties to identify members of their body, management committee or relevant officers. It places requirements on those bodies that are allowed to register as third parties under the Political Parties, Elections and Referendums Act 2000.
As outlined in Committee, when PPERA was passed, a number of groups were specified: individuals, companies, trade unions, building societies, limited liability partnerships, friendly societies and unincorporated associations. The Government acknowledge that as almost 14 years have passed since PPERA was enacted there may be other bodies that should now be added to the list. My noble friend Lord Hodgson of Astley Abbotts made this point persuasively in Committee. In the light of this, the Government have brought forward amendments to allow royal chartered bodies, charitable incorporated organisations and Scottish partnerships to register as recognised third parties should they incur controlled expenditure over one of the registration thresholds.
These amendments address the Government’s commitment in Committee to ensure that those bodies which would like to register as third parties are able to do so. I beg to move.
Lord Hodgson of Astley Abbotts
My Lords, I will detain the House only for a moment to thank my noble friend and the Government very much for having listened to the persuasive arguments put forward by the Law Society and others and for providing a way forward for CIOs, a new corporate form that has emerged since PPERA was passed. There are more than 1,000 royal charter bodies. This is a very helpful and beneficial result and I thank the Government for it.
“( ) After subsection (3)(c) insert—
“(d) if given by a body falling within any of paragraphs (ca) to (cd) of subsection (2), state—and be signed by the body’s secretary or a person who acts in a similar capacity in relation to the body.”(i) the relevant details in relation to the body (see subsection (3C)), and(ii) the name of the person or officer who will be responsible for compliance on the part of the body with the provisions of Chapter 2,and be signed by the body’s secretary or a person who acts in a similar capacity in relation to the body.”( ) In subsection (3A)—
(a) for “or (c)(ii)” (in both places) substitute “, (c)(ii) or (d)(ii)”;(b) after “(3)(c)” insert “or (d)”.”
“(3C) For the purposes of subsection (3)(d), the “relevant details” in relation to a body are—
(a) in the case of a body falling within subsection (2)(ca) (body incorporated by Royal Charter)—(i) the name of the body,(ii) the address of its main office in the United Kingdom, and(iii) the names of its officers or the members of its governing body;(b) in the case of a body falling within subsection (2)(cb) or (cc) (charitable incorporated organisation)—(i) the name of the body,(ii) the address of its principal office, and(iii) the names of its charity trustees within the meaning of the Charities Act 2011, the Charities Act (Northern Ireland) 2008 or the Charities and Trustee Investment (Scotland) Act 2005 (asp 10);(c) in the case of a body falling within subsection (2)(cd) (Scottish partnership)—(i) the name of the body,(ii) the address of its main office in the United Kingdom, and(iii) the names of the partners.””
“( ) In section 85(7)(c) of that Act (definition of “responsible person”), after “88(3)(c)(ii)” insert “or (d)(ii)”.”
Lord Wallace of Tankerness
My Lords, these amendments address concerns raised by noble Lords in Committee and by campaigning groups in the discussions we have had with them. It is important to guard against the risk that significant donors might use third parties to aid political parties and evade the party spending controls. That is why at present third parties campaigning nationally during regulated elections are subject to rules on donations similar to those of political parties.
However, recognised third parties need to report only donations related to controlled spending, and currently are required to do this only once at the end of every campaign, as part of a return to the Electoral Commission after the relevant election, rather than at the regular intervals required of the political parties. Therefore, Clause 32 introduces important measures to improve transparency by ensuring that people know the source of reportable donations received by third parties during the regulated period via quarterly and weekly donation reports.
I hope that noble Lords support the principle of providing information on reportable donations during the election campaign. However, the Government acknowledged in Committee that the right balance needed to be struck between increased transparency and the avoidance of overly burdensome reporting requirements. As set out in the Bill, only third parties that are required to register with the Electoral Commission are required to provide reports on the donations they receive. The amendments that this House agreed earlier today to increase the registration thresholds mean that only third parties which incur controlled expenditure of more than £20,000 in England or more than £10,000 in each of Scotland, Wales or Northern Ireland will have to produce donation reports.
Furthermore, government Amendments 81 and 89 remove the need for recognised third parties to provide nil reports. Instead, a recognised third party will be required to provide a donations report to the Electoral Commission only when they receive a reportable donation. Only donations over £7,500 are reportable. If a third party does not receive a reportable large donation, they will not have to provide a report.
The Government have also brought forward amendments to take account of snap general elections. The Government accept that these provisions, while important in the regulated period for an election the date of which is known in advance, may cause problems if they were to be applied to an early parliamentary election. If a snap general election were to occur, third parties would have to provide weekly reports to the Electoral Commission only during the post-dissolution period, and then only if they receive a reportable donation. They would not have to prepare quarterly reports.
The Government believe that these amendments meet the concerns of charities, particularly in relation to the removal of nil reporting, which was a key area of concern for both the NCVO and the Commission on Civil Society and Democratic Engagement. They retain the vital transparency measures introduced by the Bill, but ensure that unnecessary burdens are not placed on campaigners.
I apologise to my noble friend Lord Hodgson, who asked me about nil returns in the debate we had on coalitions. I assure him that if a coalition spends less than the registration threshold, it will not have to produce a spending return. If a coalition does not receive a donation, it will not have to provide a nil return.
At present, recognised third parties have to provide details of their campaign income and expenditure to the Electoral Commission after a UK general parliamentary election and after the poll for certain other elections. Campaigners pointed out that many third parties register with the Electoral Commission with the intention of incurring controlled expenditure but at the end of the regulated period find that they have not spent above the registration threshold. While it is important to ensure transparency in spending any donations, we have listened carefully to the concerns of campaigners and, as I have said previously, we do not want to impose unnecessary administrative burdens, particularly on small campaigners.
To ensure that these provisions are proportionate, government Amendment 98 provides that a third party which registers with the Electoral Commission but does not incur controlled expenditure in excess of the required registration threshold does not have to submit a spending return or a statement of accounts. The intention is that a recognised third party should also have to prepare a report if its expenditure in a constituency, in the case of a regulated period involving a parliamentary election, exceeds the constituency threshold that will from now on apply to non-recognised third parties. We recognise that the amendment does not currently do that so we will bring forward a small amendment at Third Reading to put that right.
To improve transparency by providing a clearer understanding of the finance of those involved in elections and to align the reporting requirements of third parties more closely with those of political parties, the Bill provides that a statement of accounts should also be submitted to the Electoral Commission. To ensure that this additional obligation is proportionate, individuals would be excluded from this requirement. The Government believe that not to exclude individuals would result in an unwarranted intrusion into their personal financial matters. However, individuals who exceed the spending threshold would still be required to provide details of their campaign income and expenditure, as is currently the case.
Under the Bill as introduced, the Government also provided that those third parties, such as companies, charities and trade unions, which provide statements of accounts under another legislative framework that could be reviewed by the Commission would also be exempt from any requirement to provide a separate set of accounts.
Government Amendments 108 to 111 make minor amendments to improve the working of this arrangement. Government Amendment 112 provides that a statement of accounts can be sent to the Electoral Commission in a longer timeframe: within nine months of the end of the regulated period where they do not have to be audited, or 12 months where they do have to be audited.
Again, the Government believe that these amendments, alongside the existing provisions in the Bill, ensure that transparency is improved without overly burdensome requirements being placed on third parties. I therefore beg to move.
Lord Tyler
My Lords, I welcome this group of amendments. I said at Second Reading that the Government and, indeed, the House, have a very difficult task in getting exactly the right balance between improving transparency and accountability on one hand and the inevitable potential for more bureaucracy. These amendments are a real improvement on where we were and I commend my noble and learned friend for them. The irony is, however, that we have the complexity of the number of amendments—I have not counted them—that have been necessary to remove complexity. It is a bit alarming, but I particularly welcome the amendment concerning the nil return, which is Amendment 98 if I have got it right.
It is particularly helpful because there really was rather an absurd situation when the organisations with which Members on all sides of your Lordships’ House have been in contact thought that they might be caught up in some elaborate new accountancy exercise when they did not anticipate that they would be engaged in the kind of activities that are caught by the Bill. This is a good balance and we are achieving the right threshold for transparency and accountability, but I just forewarn my noble and learned friend that it will take some time for the organisations that we have all been in contact with to understand the full significance of this battery of complex amendments.
Lord Hodgson of Astley Abbotts
My Lords, I add my thanks to those of my noble friend Lord Tyler, particularly for Amendments 81 and 89, which concern nil returns. It was extraordinarily difficult to justify to people why nil returns should be made. I am also very grateful to my noble and learned friend on the Front Bench for his reassurance about the interaction with the coalition working returns that we discussed earlier.
Lord Harries of Pentregarth
My Lords, while I welcome the government amendments, I draw the attention of the House to the report of the Electoral Commission on Amendments 74 to 81, 83 to 97 and 99 to 106. It says that it supports the amendments,
“which go some way to simplify the donation reporting requirements”,
but it goes on to say:
“We regret that the Government has not adopted other recommendations we have made to reduce burdens on registered campaigners further without affecting transparency”.
It indicates what these are and ends:
“We continue to recommend these changes … we now recommend two further changes to reduce burdens further”.
Will the Minister, even in the short time between now and Third Reading, have further conversations with the Electoral Commission to see whether some of its recommendations could be accepted by the Government? From the point of view of the charities and campaigning groups there is still a huge amount of regulation to be carried with the Bill.
Baroness Royall of Blaisdon
My Lords, I, too, welcome the amendments that have been put forward by the Government, as far as they go, but as the noble and right reverend Lord, Lord Harries, said, there is more work to be done and it would be excellent if the Government would commit to come back at Third Reading with further amendments. This might seem a bit curmudgeonly, because the Government have received plaudits throughout our debate this afternoon for having moved a long way and tabled many amendments. However, if it had not been for the noble and right reverend Lord, Lord Harries, his commission, which has also received praise this afternoon, and the excellent work that it has done, the Bill would still be the exceedingly bad Bill that it was when it arrived in our House, precisely because it was rushed, did not have proper pre-legislative scrutiny and a great deal of it was not necessary. So while I thank the Government for having listened—and they have moved—I place on record that none of that would have happened without the noble and right reverend Lord, Lord Harries, and his fellow commissioners, who undertook the consultation that the Government themselves should have undertaken in the first place.
Lord Wallace of Tankerness
My Lords, I acknowledge the welcome that has been expressed for these amendments, which lift a considerable administrative burden from campaigning organisations. I note what the noble and right reverend Lord, Lord Harries, has said, echoed by the noble Baroness, Lady Royall.
I will look specifically at what the noble and right reverend Lord said, but I know that there were a number of other things that the Government looked at and decided they did not wish to accept—it is not as if they have come out of the blue. However, I will check that the suggestions that we looked at and decided not to go ahead with were those to which he referred; it is only fair that we do so. However, I do not want to do that with any raising of expectation, because, as I think the noble and right reverend Lord will realise, we have given considerable consideration to these points. I ask the House to accept the amendments.
“( ) A “pre-dissolution period” means a period—
(a) beginning with the first day of a qualifying regulated period, and(b) ending with the day before the day (or the last day) during that qualifying regulated period on which Parliament is dissolved.”
( ) An “early parliamentary general election” is a parliamentary general election the date of the poll for which is appointed under section 2(7) of the Fixed-term Parliaments Act 2011.”
“( ) This section does not require the preparation of a quarterly report in respect of a reporting period if no reportable donations are accepted, or dealt with, as described in subsection (5)(b), by the recognised third party during that period.”
“( ) This section does not require the preparation of a weekly report in respect of a reporting period if no substantial donations are received by the recognised third party during that period.”
“Returns as to controlled expenditure
(1) Section 96 of the Political Parties, Elections and Referendums Act 2000 (returns as to controlled expenditure) is amended as follows.
(2) For subsection (1) substitute—
“(1) Subsection (1A) applies where, during a regulated period, any controlled expenditure is incurred by or on behalf of a recognised third party in a relevant part of the United Kingdom in excess of the limit for that part mentioned in section 94(5).
“(1A) The responsible person must prepare a return in respect of the controlled expenditure incurred by or on behalf of the third party during that period in each relevant part of the United Kingdom.”
(3) In subsection (7)—
(a) in the opening words, for “(1)(a)” substitute “(1A)”;(b) in paragraph (a), omit “falling within subsection (1)(a)”.”
(a) a statement of the income and expenditure of the third party for the regulated period, and(b) a statement of its assets and liabilities at the end of that period.”
“( ) that a statement or statements prepared or to be prepared by the third party under any enactment contains or will contain the information required by subsection (2) or equivalent information, and”
“( ) Equivalent information is—
(a) a statement or statements of the income and expenditure for a period or periods other than the regulated period, or(b) a statement or statements of assets and liabilities at a date or dates other than the end of that period, but which in the Commission’s opinion gives a sufficient indication of the third party’s accounts for, or at the end of, the regulated period.”
““(2A) Where a statement of accounts falls to be prepared under section 96A, the responsible person must deliver—
(a) the statement, and(b) if an auditor’s report on the statement falls to be prepared under section 97(1A), that report,to the Commission before the end of the period of 6 months beginning with the end of the period under subsection (1) or (2) for the delivery of the relevant section 96 return.(2B) “The relevant section 96 return” means the return mentioned in section 96A(1)(a) which gives rise to the duty to prepare the statement of accounts.””
“(5) In subsection (4)(a), “the relevant section 96 return” has the meaning given by section 98(2B).””
“Candidate’s personal expenses not to count for local election expenses limit in England and Wales
(1) In section 76(5) of the RPA 1983 (exclusion of personal expenses from limitation on election expenses), after “subsection (1A) above” insert “or a local government election in England or Wales”.
(2) Subsection (3) applies where, before the relevant date, an enactment—
(a) provides that section 76 of the RPA 1983 is to have effect in relation to an election of any description as it has effect in relation to a local government election in England or Wales, or(b) otherwise makes provision (however expressed) to the effect that that section applies to an election of any description as it applies to a local government election in England and Wales.(3) If the date of the poll at an election of that description is on or after the relevant date, section 76 of the RPA 1983 applies to the election as amended by subsection (1).
(4) In this section—
“the RPA 1983” means the Representation of the People Act 1983,
“the relevant date” means the date on which the amendment made by subsection (1) comes into force, and
“an enactment” means an Act of Parliament or any subordinate legislation (within the meaning of the Interpretation Act 1978).”
Lord Wallace of Tankerness
My Lords, government Amendment 117 would exclude personal expenses from being considered for the purposes of candidates’ expenses limits at local elections in England and Wales. I do not think that this issue has yet been referred to in any of our deliberations.
The Government have brought forward the amendment to bring greater consistency to the treatment of personal expenses across the different types of election. It will also ensure that the Access to Elected Office for Disabled People Fund can successfully continue operating following the expiry of existing secondary legislation.
The access to elected office fund was set up by the Government to award grants to disabled people who are, or go on to become, candidates at elections. The fund’s grants are intended to help candidates overcome barriers to elected office that might arise as a result of their disability. Currently, such awards from the fund would not count towards candidates’ spending limits at certain elections, as they would be considered personal expenses. Noble Lords will no doubt be aware that personal expenses are exempted from candidates’ limits at certain elections, such as UK general elections, police and crime commissioner elections and Greater London Authority elections, among others.
However, there is currently no such exemption at local government elections. Given the generally low expenses limits that apply at those elections, recipients of the fund are likely to find themselves in the unusual and punitive position of having their entire expenses limit taken up by fund awards. It is a distinct unfairness that disabled candidates should have to account for costs associated with their disability when campaigning in elections. The Government therefore brought forward secondary legislation last year so that fund awards would be excluded from candidates’ spending limits at all elections. That secondary legislation will cease to have effect in June this year. The Government therefore consider that the Bill presents a key opportunity to make such an exclusion permanent, while also rationalising the position of personal expenses across various elections.
Rather than merely exclude disability expenses financed by fund payments from candidates’ limits, as the order does, this amendment instead extends the personal expenses exemption to local elections, including parish and community council elections, in England and Wales. It will cover any disability-related expenses incurred by a candidate personally, regardless of whether they are financed by the fund. This is a sensible amendment. It seems unfair to require that disability costs should count towards candidates’ spending limits at local elections when they are already excluded from certain other elections.
Amendment 127 is a related amendment that will allow the new clause inserted by Amendment 117 to be commenced by order. I beg to move.
Baroness Hayter of Kentish Town
My Lords, I simply give the amendment a warm welcome. We previously discussed this with the noble Lord, Lord Wallace of Saltaire, probably in the Moses Room last year, but we had not seen this clever device to add the provision. We should congratulate the Government on finding a nice wheeze for this.
Lord Gardiner of Kimble
“Post-election review
(1) The Minister must, within the period of 12 months beginning with the day on which this Act is passed, appoint a person to conduct a review of the operation of Part 6 of the Political Parties, Elections and Referendums Act 2000 in relation to the first relevant parliamentary general election.
(2) The “first relevant parliamentary general election” is the first parliamentary general election to be held after the beginning of the first Part 6 regulated period in relation to which one or more of the amendments made by Part 2 mentioned in section 42(1) have effect.
(3) A “Part 6 regulated period” is a regulated period within the meaning given by section 42(2)(b).
(4) The Minister may specify matters which the review must, in particular, consider.
(5) On completion of the review, the appointed person must—
(a) make a written report on the review, and(b) provide a copy of the report to the Minister.(6) The Minister must—
(a) lay a copy of the report before Parliament, and(b) publish the report in such manner as the Minister considers appropriate.(7) The Minister may pay to the appointed person such remuneration and expenses as the Minister may determine.
(8) “The Minister” means the Secretary of State or the Lord President of the Council.”
Lord Gardiner of Kimble
My Lords, government Amendment 118 requires that within 12 months of the Bill receiving Royal Assent, the Minister must appoint a person to review the operation of Part 6 of PPERA as it is amended by Part 2 of the Bill. Noble Lords will recall that in Committee there was some debate about the need for a post-legislative review of the provisions of Part 2.
I am most grateful to the noble and right reverend Lord, Lord Harries, and my noble friend Lord Hodgson of Astley Abbotts, who tabled amendments in Committee to ensure that this important matter was discussed. As was explained during Committee, it is right that an assessment should be made of the entire system of rules governing third-party campaign expenditure. That assessment should of course extend to the changes made by the Bill. The entire range of existing and newly introduced rules should be carefully reviewed after their first operation, which is expected to be at the 2015 UK parliamentary general election. A commitment was given by my noble and learned friend that an amendment would therefore be brought forward at Report to require a review of the operation of Part 6 of PPERA as it is amended by Part 2 of this Bill. That is indeed what the Government have now done. The next scheduled general election presents the first opportunity at which all the third-party campaigning rules will be in operation, and it is a timely opportunity to review the effectiveness of those rules.
The Minister must appoint a person within 12 months of Royal Assent to allow the reviewer to start work during the general election campaign. The Government believe that it is particularly important that a reviewer should be appointed sufficiently ahead of the general election to allow him or her to fully assess the operation of the rules. The amendment requires that on completion, the person carrying out the review must produce a written report. That report must then be laid before Parliament by the Minister. I am sure that noble Lords will agree that it is only right that Parliament should have the opportunity to consider how to respond to the findings in the report. Noble Lords will also have noted that in its most recent parliamentary briefing, the Electoral Commission gave its support to the amendment.
Government Amendment 135 is a related but minor amendment, which clarifies that government Amendment 118 extends to the United Kingdom only. I beg to move.
Lord Hodgson of Astley Abbotts
I congratulate the Government on having brought this forward. It is really important, because so much of what we have been discussing is supposition. We are peering into the fog of the future concerning how things will work out. This will be a chance to see what the reality is. I have just one question. The amendment talks about the person—the lucky person—who will presumably be imposed for about a year, if they start in March 2015. There will be the aftermath of the general election, and the returns required after that will be six to nine months later, so they will have to be in post for a year.
The amendment refers to remuneration and expenses. One issue when people undertake such reviews is access to skilled manpower and a team who can help them. No matter what he or she is paid, if they are trying to do it on their own, they will undoubtedly be in a much weakened position. I assume, but I want to have it confirmed, that the amendment implies that adequate manpower resources will be available to the reviewer to ensure that he or she can carry out their work and appropriate investigations. I think it is an excellent proposal.
Baroness Williams of Crosby (LD)
My Lords, I will not trespass on the delicate field of remuneration; but I would like to congratulate the Government on doing what they said they were going to do in putting this excellent review in the Bill.
I will add something that I can only say because of my parliamentary background. It would be immensely helpful if it could be understood that the person who conducts a review will, in the course of doing so, consult and listen to evidence from parliamentarians of all parties engaged in the campaign. They are likely, at grass-roots level, to know more than—with great respect—most leading lawyers or leading statesmen are likely to know. I very hope that it will be indicated to the person who conducts the review that he or she will be expected to invite evidence from people who are standing for Parliament and to consider the particular evidence they would like to bring to his or her attention.
Lord Harries of Pentregarth
It is a great relief to be able to welcome an amendment without any qualification at all; but it might be worth reminding ourselves why a review is so essential. First, with the existing PPERA, most charities were not even aware that they were regulated; it is only recently that they have come up against it. Therefore, there are fundamental problems with PPERA that have only just been revealed, and probably we have not yet had proper time to put them right.
Secondly, we have had a very short time to think about and amend the Bill before us. As we know, there was no pre-legislative scrutiny and no six-month period for consultation—which we recommended. We have had only a very short five-week period. The commission that I chair has always made it clear that the recommendations we put forward were only for the 2015 election, because we could not see the answer to a number of issues. In particular, the issue of coalition working keeps coming up and we have not yet found a satisfactory answer to that. Therefore, it is extremely good that the review body is going to be set up and that it will be in time to watch what happens with the election. It is going to have to report within a year, which of course meets the concern raised earlier by the noble Baroness about a sunset clause. It will now have to report within a year.
I have only one question: why have the Government decided that the review should be done by one person, rather than by a committee of Parliament?
Lord Tyler
I very much welcome the initiative that my noble friends have taken on this. It is vastly preferable to a sunset clause, precisely because it will start at the right moment. The timing is going to be critical, as the noble and right reverend Lord and my noble and learned friend said, because it will see right through the process of the next election and beyond. For that reason it is preferable to a sunset clause.
I, too, wonder whether the precise definition of a “person” is appropriate to this, but we will have to judge it on its results. Because my noble and learned friend has put into his amendment that a copy of the report will be laid before Parliament, the process thereon is extremely interesting. If major changes are required in this legislation, we will need to know quite quickly in order that we do not run into another period of rapid digestion, as we have on the Bill.
I particularly want to underline the point made by the noble and right reverend Lord, Lord Harries, just now. We should have this review of the 2000 Act. I take some responsibility, because I sit on a little, totally informal cross-party advisory group for the Electoral Commission. We were never forewarned of all the problems with the 2000 Act that have now come to light—not least, the coalition issue to which the noble Lord has just referred. It has been 13 years; the Electoral Commission never forewarned us of the difficulties it was encountering in giving appropriate advice to organisations that wished to campaign in this field. The Minister has taken elaborate and proper precautions to make sure that the situation never arises again, and I congratulate the Government on that.
Lord Cormack
Briefly, I add my congratulations and thanks. Those who criticise—and I have been very critical of aspects of the Bill—should always praise when the right thing is done. I am exceptionally grateful to my noble friend and his ministerial colleagues for putting this amendment into the Bill. It is a very satisfactory outcome and I agree entirely with what the noble and right reverend Lord, Lord Harries, and my noble friend Lord Tyler said.
Baroness Royall of Blaisdon
My Lords, we, too, warmly welcome this amendment and the fact that there will be a review, and that a report will be laid before Parliament. The timing is absolutely correct. Should there be a Labour Government after 2015—and in 2016 when the report is laid before Parliament—as I very much hope, if there are any recommendations for change I will guarantee at this Dispatch Box that there will be proper consultation and that if any legislation is necessary, there will be pre-legislative scrutiny of such legislation.
Lord Gardiner of Kimble
My Lords, I am most grateful for what has been a short but quite buoyant debate. It is important that we have this review. My noble friend Lord Tyler referred to the 2000 Act and a number of problems there which had not been properly identified. I am very mindful of what the noble Baroness, Lady Royall, has said. Who knows what the result will be? However, there are always lessons to be learnt from all these adventures that we have.
I say to my noble friend Lord Hodgson that it is absolutely clear that the reviewer has to have the appropriate resources to do a proper job. My noble friend Lady Williams of Crosby asked about evidence. It is clear that for the reviewer to do a proper and thorough task, that person should seek views from many sources. Clearly, it would be sensible that those in the front line of political activity, such as candidates and elected representatives, should be part of that process.
It was nice of my noble friend Lord Cormack to be cheerful about this amendment. There is important work to be done and I understand what the noble and right reverend Lord said about his inclination or desire to have a parliamentary committee. However, I have no doubt that we will see the reviewer doing what we expect him or her to do—a thorough piece of work. I look forward to that, in whatever capacity I remain.
Lord Campbell-Savours
“Part 2ATax relief on donationsTax relief on donations
(1) In the Political Parties, Elections and Referendums Act 2000, after section 70 insert—
“70A Tax relief on donations
Tax relief shall be given, subject to Schedule (Tax relief on donations), to individuals who make donations to a registered political party.”(2) Schedule (Tax relief on donations) has effect.”
Lord Campbell-Savours (Lab)
My Lords, in moving Amendment 119, I shall speak also to Amendment 119A. We had a long debate on this subject in Committee and I do not intend to rehearse all the arguments that I used on that occasion. In Committee, it was quite clear that support for the amendment was overwhelming. Apart from the two Front-Benchers, and the noble Lord, Lord Finkelstein, no one spoke against the amendment. Everyone supported the amendment as it was phrased on that occasion. Perhaps I should clarify at the beginning of my contribution what my amendment would do. It would incentivise a system of donations by individuals by allowing taxpayers to reclaim the basic rate of tax on their donations to political parties. It would limit the relief to the standard rate and operate in the same way as gift aid to charities or covenanting to your local church.
This issue has had much support over the years from all political parties and all the organisations associated with political debate. The Committee on Standards in Public Life, chaired by the noble Lord, Lord Neill of Bladen, recommended essentially this amendment in 1998, some 15 years ago. The Electoral Commission’s report of 2004 on the funding of political parties recommended a similar change in the law, with a £200 cap. In 2006 the Constitutional Affairs Committee in the House of Commons made a similar recommendation in line with my amendment. The Conservative Party’s Tyrie report of 2006, entitled Clean Politics, also made reference to an amendment of this nature. In 2004 the Liberal Democrats called for a scheme of tax relief of a similar nature, and indeed in 2009 moved a very similar amendment to this during the proceedings on the Political Parties and Elections Act. When the Labour Government established the Hayden Phillips inquiry in 2007, they recommended a tax relief match funding scheme that bore a close resemblance to the scheme that I am proposing, but on that occasion with a £500 cap on contributions.
Over recent weeks I have not found a single Member of this House, apart from those supporting the hierarchies of the political parties, who is opposed to my amendment. Everyone I speak to cannot understand how it is that sane politicians in sane political parties can possibly oppose what is deemed to be a perfectly reasonable and sensible amendment. They all ask, “What is the problem?”. I intend to set out briefly what the four principal objections are and how they are being answered.
First, I am told that there is a need to continue negotiations. Indeed, a colleague sent me a note on my BlackBerry today to say that that was one of the reasons why my colleagues were being advised to vote against my amendment. The fact is that no negotiations are going on. They terminated earlier this year and anyone who suggests that they are continuing is actually fibbing and not telling the truth. There are no negotiations. They fizzled out and there are people in this Chamber today who were party to those negotiations and know exactly what the position is. Indeed, I understand that Mr Clegg has stated in the other place that the negotiations have finished and, obviously, will not be reopened until some time in the future, perhaps under a separate Government. My view is simple: negotiations on these matters will not work and the only way in which we will get change is by introducing incremental improvements—a little bit here, a small change there—and over a period of time we will see a new regime established for political donations in the UK.
Secondly, I was told that a party might gain out of the proposals that I am making and indeed might abuse its position by unilaterally increasing the contribution threshold in future. I took that problem on board. In the amendment before the House today there is a change to ensure that the only way in which the contribution threshold can be changed in future is by way of primary legislation and not by regulation. A new Bill would have to be introduced in primary legislative form to change the thresholds in the Bill. In my view there is another argument in favour of the amendment. It is right to allow a scheme to percolate throughout the system to see how it beds in and whether it works. My view is that it will work and that at some stage in the future there will be a need to review the thresholds as set out in my amendment.
Thirdly, there is the cost of the scheme. When the Hayden Phillips report was published in 2007, there was a reference to a £500 cap on contributions. That cap is 25 times greater than the cap that I have set for the first year in my amendment and five times greater than my third-year figure of £96 per calendar year. My view is simple—and it is the view of others—that my proposal would cost but a few million pounds, perhaps £2 million or £3 million per year. We need to balance the problems of introducing that against all the malevolent publicity that surrounds political institutions today. Is it worth £2 million or £3 million to begin the process of avoiding all the adverse publicity that surrounds donations?
However, the fourth objection to my amendment—the one I found most ludicrous—is the view that it would be impossible to sell the principle of support for political parties through tax relief at a time of austerity. That objection surfaced during the course of discussions. It is always a time of austerity. There is never a right time to spend money, but we are talking only about a very small amount of money. However, again in a spirit of generosity, I have amended my amendment for proceedings in the House today to ensure that it would not trigger until the financial year that follows the next general election so as to avoid the very debate that people might be concerned about. I have made two concessions on my amendment, almost neutering it, but it would still stand on the statute book as a scheme to be introduced in the first year, 2016-17, at £16; in 2017-18 at £32 and in 2018-19 at £96—the threshold under which tax relief could be secured on a donation.
Today I can be even more flexible. If the Government, even after all these concessions, feel that they cannot give way, I understand that it would be possible for them to introduce an amendment to delay commencement of my proposed scheme pending an order to be brought in by the Secretary of State under the next Government. In other words, an amendment to Clause 41 could be introduced at Third Reading to allow for an order to be introduced to delay the date of commencement of the scheme.
I cannot understand, in the light of all the concessions that I have made on my amendment and the way in which I have bent over backwards to make it possible for the Government to deal with all the problems and objections that have been raised, how the Front Benches of both parties find it objectionable to introduce an amendment which I know is supported in reality in free debate by an overwhelming majority of this House as well. I say that having talked to colleagues across Parliament who simply cannot understand why the Government refuse to go down this route.
At the end of the day, the very credibility of this institution is at stake. We have had far too many scandals over the years; political scandals relating to money and politics. All I am doing in moving my amendment today is setting in train a course of events towards bringing in the embryo of a provision of change that might one day lead to a cleaner donation regime for British political parties. I am confident that, if the measure is presented in that form, as against all the scandals that we currently have in this area of political activity, the general public will support me. I hope that noble Lords will support me in the Division Lobbies later this evening. I beg to move.
Lord Hamilton of Epsom
My Lords, I have added my name to this amendment because it is a very modest and necessary step to take towards taxpayer funding of political parties. None of us should be pleased, content or comfortable with the fact that political parties in this country are financed by the trade unions and, to a very large extent on all sides of the House, by extremely rich men who are seen to exert influence. I am not saying that they do exert more influence than anybody else who runs industries or anything, but they are seen to exert influence over policy. This does us no good at all and we should grasp this nettle and do something about it.
I am delighted that the noble Lord, Lord Campbell-Savours, has arranged that these measures would come into place after the general election. I would like to see a lot more done after the general election. I would like to see matched funding up to a certain limit, but now is not the time to talk about that. The fact remains that we are already paying opposition parties millions of pounds a year. We are paying the Opposition in your Lordships’ House Cranborne money of hundreds of thousands of pounds. I challenge anybody in this House to say that anybody has mentioned on a doorstep either Short money or Cranborne money. They do not know that it is happening. In terms of public expenditure, they are insignificant sums of money.
We should be grasping this nettle early on in a Parliament. I hope that whoever wins the election will do so at the beginning of the next Parliament and get the entire funding of our political parties in this country into a sleaze-free zone, where it should always have been. If we go on as we are, we will have endless problems. We will always be accused of having an unhealthy influence on the political system. This does nothing for politics in this country. I therefore support the amendment with enthusiasm.
Lord Tyler
My Lords, my name is also on the amendment. I will make a slightly different point from those of other noble Lords who have spoken to it.
Public service in a parliamentary democracy is an honourable activity. I look around the House, and I could say exactly the same thing about the other place, and see a great majority of people who give of their time, talents and careers, and sacrifice their family life, to public service. That is something that we should recognise as being an extremely important part of our civic life.
Yet it is absolutely true, as noble Lords have already said, that it is somehow thought that to be active in politics is less reputable than, for example, supporting a charitable or voluntary organisation; many of us do that as well. That is exaggerated, underlined and repeated every time one of us contributes something to our local church or favourite charity and gets respect from the tax system for so doing, in exactly the way that the noble Lord, Lord Campbell-Savours, has described. If politics is an honourable activity, why are we not allowing our fellow citizens to recognise that and, in their own way, be more active participants through the gift aid system?
It is not just because of the way in which politics has been supported in recent years by bigger and bigger cheques from smaller and smaller numbers of people, but also because millions of people feel disenchanted by and disconnected from the business of politics, that we have reached such a low reputation in the public mind. It is far more important to engage and incentivise millions of people than to engage and incentivise millions of pounds. In those circumstances, it is perhaps worth reminding your Lordships’ House, in addition to the points already made by my noble friend Lord Hamilton, that the taxpayer already makes a huge contribution to the business of politics. For example, the Royal Mail free delivery of election addresses for every single party and contestant in the European parliamentary election in May will cost the taxpayer something between £30 million and £40 million. The sums that the noble Lord, Lord Campbell-Savours, is referring to are a drop in the ocean compared to that. Yet it is far more likely to engage the individual citizen in the business of politics than the necessity for every single elector to receive a separate delivery from each of the parties.
It is perfectly true that there are already a number of proposals for a wider reform of the funding of political parties. Indeed, last year, I, along with colleagues from two of the other parties, produced a draft Bill that would have incorporated the latest proposals of the Committee on Standards in Public Life on this wider issue. We will not move in that direction between now and the general election but, in this modest way, we could put down a marker that we believe that the actual, practical financial support of our fellow citizens for the business of politics is just as honourable as their support for a charity or a church. It would be a very welcome development.
Lord Elystan-Morgan
I feel deeply privileged to belong to such a broad church as is suggested by this amendment. I little thought that I would have the privilege of standing in the same rank as the noble Lord, Lord Hamilton, and the noble Lord, Lord Tyler, but I am utterly sincere in the support that I give to the amendment in the name of the noble Lord, Lord Campbell-Savours. When he very respectably sought to accost me some days ago to support this matter, I had misconceived the situation. I thought he was seeking to place political parties on a charitable basis, which of course would have been utterly improper. The definition of charity, however impractical it may be in the modern period, is well laid down in the statute of Elizabeth I and in the authority of Re Pemsel, which I still remember from my student days.
That is not at all what the amendment is about. It is a question of what fuel there should be available in a democracy to any political movement. That fuel, I suggest, is the united will of millions of people, of government, opposition or a third force, or a fourth, for that matter. That fuel is the desire and hopes of millions of individual people, possibly for tens of thousands of different reasons, but it is the amalgam of that united force that gives politics significance.
If you interfere with that system from above by the injection of vast amounts of money, you corrupt that system. It was Oliver Goldsmith, in the 18th century, who had these words:
“Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay”.
In this case, wealth will diminish completely the significance of democratic politics. Now, we will say, “That is highly idealistic and immensely impractical”. It may well be, but we are deeply grateful to the noble Lord, Lord Campbell-Savours, who is a brave, iconoclastic, reforming character and to whom the House owes a great debt.
In America, in the two elections that President Obama has won, it may very well be that there were tactical and highly materialistic reasons why he chose to rely on millions of people rather than on the support of a few wealthy, almighty subjects. Be that as it may, it gave those campaigns impetus and significance. That is exactly what this amendment proposes. It may very well be that the amounts that are mentioned could be debated high and low. That does not matter at all. The significance is that we wish to see politics as an amalgam of millions of people with desires supported, we hope, by the substantial subvention of most of those people.
Lord Cormack
My Lords, I have always believed that public life is a vocation. I greatly regret the decline in membership of political parties over the nearly 44 years that I have been in the Palace of Westminster; I touched upon that in an earlier amendment today. We do not know the precise figures, but our three major political parties in this country together have probably less than a quarter of the membership of the National Trust. That is a dismal statistic, which we should all take to heart. However, we have to recognise the realities. One of those is that if the proposals of the noble Lord, Lord Campbell-Savours, were adopted—and in principle I support them—they would not have an immediate and enormous transforming influence. I am glad to see him nodding assent.
Lord Cormack
I will finish in one second. As one of our colleagues pointed out, this does not confuse political parties with charities but elevates the role of the political party in our national life, and it would be right to have some form of tax concession for those who nail their colours to a mast, be it blue, red or yellow.
Lord Campbell-Savours
I have fought long and hard about the point the noble Lord has just made. The difficulty is this: I know that among those who will vote against my amendment in the Lobby tonight there will be many who support it.
Lord Cormack
Of course—I was going to say “my noble friend”, but he is my friend—the noble Lord may well be right. However, I remember the famous words of Jack Straw, when a lot of people in the other place voted for an all-elected second Chamber on the advice of the Labour leader of the campaign for an appointed second Chamber, although he then acknowledged that he had made a tactical mistake. Jack Straw kept saying, “A vote is a vote, and that’s all that counts”. That is what will be said tonight. The noble Lord should reflect very seriously on that.
We also have to consider whether the Bill is the right one in which to insert such an amendment.
Lord Tyler
I am very grateful to my noble friend and I know that he shares with me the same objectives. I think that he is advancing the old, old argument of unripe time, which we hear in this House so often. If you wait for the ripe time, it is usually when it has gone bad again, when it has gone beyond ripeness. I think that the noble Lord, Lord Campbell-Savours, by saying that the actual introduction would not take place until beyond the next general election, is simply insisting that we should put down a marker of the direction in which we wish to go. If we are not permitted to do that, what are we allowed to do in this House?
Lord Cormack
Of course we are permitted to do that, but at the same time it is not unreasonable to talk about the practicalities. The fact of the matter is that if we have a vote tonight, this amendment will be very heavily defeated. It will not advance the cause. Whereas if we do not have a vote tonight, the statement of the noble Lord, Lord Campbell-Savours, which I believe not to be hyperbole but to be accurate—that there are many, many members of your Lordships’ House who are sympathetic to this point of view—will stand on the record. What will stand on the record if we have a vote is that because of a very, very small number of people, for a variety of reasons—one of them being that this may not be the right vehicle for such an amendment—the figures will not be encouraging to our cause.
I end by pleading with noble colleagues in all parts of the House that we seek in our respective parties to begin a campaign to advance this and that we talk to our colleagues in the other place as well. That is crucially important, as they are the people who get elected. Tonight is not the moment to be heavily defeated when we know, and the noble Lord in particular knows, that there is such widespread sympathy for the principle that he has very reasonably advanced.
Lord Gardiner of Kimble
My Lords, I apologise to the noble Lord, but I am very conscious of the Companion and I am very conscious that we are at Report. I sense that noble Lords would like to make progress. I apologise for intervening.
Lord Hodgson of Astley Abbotts
My reason for having supported the noble Lord in Committee and again tonight is that if, like me, noble Lords participate in the Lord Speaker’s outreach programme, they will know that when you go to schools up and down the country the issue that comes up again and again and again is that of money. We have a generation of schoolchildren about to go to university who have grown up with the idea that this is a dishonourable place where rich men and influential groups have a power because of their ability to fund.
The noble Lord, Lord Campbell-Savours, has put forward some incremental steps, which I support. I can only believe that the Front Benches cannot support them because they believe somehow, or they fear, that the comparative advantage, or competitive advantage, will be lost forever. They cannot think what it is, but something might come out of the woodwork that leaves one party at a disadvantage forever.
Sometimes, somewhere, we have to be brave, because against the £2 million to £3 million that the noble Lord, Lord Campbell-Savours, has said that it was going to cost, is the drip, drip, drip of damaging information about the behaviour and performance of this Parliament. That cannot be right for our country, whatever your political beliefs. Someone, sometime, somewhere has to be brave, and we need to give them a nod tonight to get on and be brave as soon as possible.
Baroness Corston (Lab)
My Lords, I rise very briefly to support the amendment in the name of my noble friend Lord Campbell-Savours. It takes me back 40 years to the Houghton committee on state aid for political parties. Both political parties ran away from the idea at the time—and there were only two major parties at that time, it has to be said. The campaign itself for the Houghton committee was under the slogan of “A penny from the workers to support our politics”. It was said that we had our politics on the cheap. The amount of money that is now required to mount a political campaign or to support a political party in a constituency is eye-watering compared with what was considered to be normal in 1974. Now, we are all more and more dependent on very large donations from a very small pool of people. Whether or not those people seek personal advantage from it, the public think that that is what will happen.
The noble Lord, Lord Hodgson, is entirely right about the attitude of young people towards politics. We find a great deal of apathy and disgust, as well as a decline in participation in politics and certainly a decline in turnout in local and general elections. It is never the right time to introduce a measure such as this. I have been active as an organiser and a parliamentarian for well over 40 years and I have never, ever heard anybody from a Front Bench say, “Perhaps this is the time”; it is always, “Well, this is a really good idea, but not yet”.
The person whom I think of as my noble friend, the noble Lord, Lord Elystan-Morgan, has just referred to President Obama. He was wise enough and smart enough to see that this issue was poisoning politics in the United States. What did he do? He had a deliberate strategy of asking for $20 from millions of people. Can any of us remember—I certainly can—what Washington looked like on the day of his inauguration? Washington had never seen so many people turning up for an inauguration, and I do not think that that was an accident.
Baroness Royall of Blaisdon
My Lords, I am sorry to be the sad spectre at the feast. I am grateful to my noble friend for the important changes that he has made to his amendment since Committee. I am also grateful to him for providing answers to the various hurdles raised in Committee and in the many discussions that he has had since.
All noble Lords are absolutely right to say that the current situation is untenable. None of us—nobody who is active in politics—is comfortable in any way with the current situation. We absolutely have to get big money out of politics, and we have to find a solution to the problem of party funding, which is undoubtedly a running sore that diminishes trust in politics. That trust must be restored if our democratic system is to thrive.
As has been said—and I completely agree—politics is a noble part of our civic life and we have to find a way forward. The proposal from my noble friend could well be part of that solution. Of course, it is correct to say that there is never a good time to put forward such proposals, but I take issue with my noble friend when he says that it is always a time of austerity. I do not think that that is true and I do not think that now is a particularly good time to put forward this proposal. However, I understand why my noble friend is doing it and I recognise that, should he wish to test the opinion of the House, he will undoubtedly have the support of some of my colleagues. However, my party’s position is that, while, as I said, this may well be part of a solution, it should not be dealt with in isolation. We have to find a comprehensive solution to the problem of party funding and it is incumbent on all of us to try to do that. Until we do, as has been said, politics will suffer, our democracy will suffer and young people will not have the faith in politics that we would wish them to have in order that we may have a healthy, democratic society.
Having said that, although I think that it is an interesting idea, should my noble friend wish to test the opinion of the House, I regret that I will not be following him into the Lobby this evening.
Lord Wallace of Tankerness
My Lords, perhaps I may reassure the noble Baroness, Lady Royall, that she is not the sole spectre at the feast. Indeed, as I think the noble Lord, Lord Campbell-Savours, indicated when he moved the amendment, he does not expect the Front Benches to fall into line with him. We had this debate four weeks ago. Admittedly, there are differences in this amendment—but, frankly, in the intervening four weeks the Government’s position has not changed.
That is not to say that raising these issues is not without merit. As my noble friend Lord Cormack said, it may serve to stir up the leaderships of all three parties. I endorse what was said by my noble friends Lord Tyler, Lord Cormack and Lord Hodgson, and by the noble Baroness, Lady Royall, about politics being a noble calling. We in your Lordships’ House like to think that we make a contribution. We may disagree with each other—sometimes quite strongly—but we recognise, across the House, that we have good motives for coming into politics. Although we operate, vote and make speeches by different lights, we nevertheless have the common good of the nation at heart.
However, the proposal we are dealing with this evening is not necessarily the one and only way to restore the nobility of the political calling. The rules on party financing have been the cause of much discussion. The noble Baroness, Lady Corston, gave us a very good historic perspective when she mentioned the Houghton committee. This has gone on for some time. Most notably, this Government led talks on the subject between the three main political parties during 2012 and 2013. In 2010, each of the three parties had a manifesto commitment of one kind or another to some reform of party financing.
It is a complex issue. I noted the four points that the noble Lord, Lord Campbell-Savours, said had been given as excuses. I checked the speech I made in Committee, and we advanced none of the four then. In particular, I made it very clear that talks were no longer continuing, and I quoted from the Written Ministerial Statement issued by the Deputy Prime Minister on 4 July 2013 when he announced that the talks had not produced results—I think they met seven times—and that it was clear that the reforms would not now go forward in this Parliament.
The noble Lord’s point was that some people were arguing that talks were still going on. I did not seek to do that, but it is a legitimate expectation that all parties will seek to find a way forward on this complex issue in the next Parliament. I was not party to these talks but I am told that they were close. The Government want party funding reform but, as the noble Baroness, Lady Royall, said, it should come as part of a package and by consensus. Some have asked for donations to be treated in the same way as charitable giving, and I can understand the relevance of that comparison from a tax point of view. However, I am not sure that the public necessarily see donations to charities—many of which we have been discussing in the course of our debates on the Bill—in the same light as giving support to political parties through the tax system.
I suspect that many noble Lords support state funding of political parties. As has already been mentioned, we have Short money, Cranborne money and the money that goes to the Royal Mail. However, this would be a significant step. Short funding is probably not mentioned on doorsteps. However, although I was probably still a student when it first came in, I remember that it was a major step which attracted quite a lot of discussion. It would be naive to think that a step as significant as the Exchequer funding political parties in this way through the tax system would not be devoid of any comment, which is why I think all parties have sought to go forward together by way of consensus.
As my noble friend Lord Cormack said, I do not believe that this is the appropriate Bill for dealing with this issue, but it is the Government’s hope that further discussions will take place in the next Parliament. My noble friend Lord Hamilton said that he wanted more done after the next election. I would echo that. Anyone from all party leaderships who reads our debates and follows this will realise that there is an appetite among Members of all parties that this matter should not be allowed just to gather dust in the next Parliament. But I do not believe that it is appropriate to act in the context of this Bill or at this time and without a bigger package that commands a consensus among all the parties. I therefore invite the noble Lord to withdraw his amendment. If he seeks to push it to a vote, as he has indicated, the Government will not support his amendment.
Lord Campbell-Savours
My Lords, I shall push my amendment to the vote. I thank all those who contributed in a most passionate way to the issues that we have raised in this debate. In the 1997 to 2001 Parliament, we were told that the matter would be resolved during the next Parliament and it was not. In that Parliament we were told that it would be dealt with in the next Parliament. Hayden Phillips came in the next Parliament and it was not resolved. We were told that it would be resolved in this Parliament. Again, there have been talks but it has not been resolved. We will go through Parliament after Parliament after Parliament ducking this issue. That is why it is important that we take a decision now. Some of us are becoming exasperated by the ducking and weaving.
For me, one of the great joys of coming to the House of Lords from the Commons is that I have always regarded ours as the House of free thinkers. In the Commons, you are held in a rigid, party, heavily whipped atmosphere where there is very little room for the kind of flexibility that we can exhibit as Members of this place. Because of the rigidity of debate in the other place, I believe that party reform ultimately will come through this House and not from the House of Commons. That is why tonight I am going to push my amendment to a vote. As I have said, I believe that this is the House which at the end of the day will make the reforms. I do not know, but it might well be that I will be defeated this evening—although I suspect some people will be surprised by the names of those who move into our Lobby.
As has been said, it is never the right Bill, the right time or the right moment to spend money, but this is the right time to take a decision. I should like to test the opinion of the House.
“Electoral Commission and Charity Commissions: joint guidance
Before the commencement of this Act, the Minister shall require the Electoral Commission and the Charity Commissions to produce co-ordinated guidance on the requirements of Part 2 as they apply to charities.”
Lord Hodgson of Astley Abbotts
My Lords, after the fireworks, we return to the meat and potatoes. This amendment returns us to an issue we discussed in Committee: how to ensure that the work of the two relevant regulators—the Electoral Commission and the Charity Commission—is truly joined up.
As I explained in Committee, both commissions have produced guidance. Both sets are clearly written and well signposted but they are not yet joined up. As I also explained, CC9—the Charity Commission guidance—is 35 pages long. There is a section titled “Campaigning: getting it right”, in which the Electoral Commission’s role and purpose are not mentioned at all, although the Advertising Standards Authority is. Meanwhile, in the Electoral Commission’s guidance, no reference is made to charity law; it confines itself to the two tests of the purpose test and the publicity test.
Of course, as both commissions have pointed out to me—and, indeed, in guidance to Members of your Lordships’ House—both have their individual, separate procedures for updating their guidance from time to time as the months go by. Therefore, any and all joining up has to be done by the individual charity and this is quite a challenge for a charity, especially smaller ones with limited financial and operational resources. Indeed, there must be, as some noble Lords have said, a real danger that many smaller charities will merely throw up their hands in horror and give up.
I explained to my noble and learned friend that without some ministerial pressure I was convinced that the two organisations would likely continue to plough their own individual furrows. My noble and learned friend gave the Committee some pretty honeyed words, I thought, when he said:
“I have no doubt that today’s debate, and the amendments tabled by the noble and learned Lord, Lord Hardie, and by my noble friend will have reinforced that message … I hope that the fact that the Electoral Commission and the Charity Commission have indicated an awareness of the need for clear and comprehensive guidance is of some reassurance to the Committee. However, the Government are also keen to reassure campaigners and charities that the provisions of the Bill and the PPERA rules will, and should, be clearly communicated to them. It is our view that the Electoral Commission should produce guidance in consultation with the Charity Commission, and provide specific consideration of charities”.—[Official Report, 18/12/13; cols. 1348-9.]
However, he could not quite bring himself to commit specifically to joining up the two sets of guidance. I have retabled this amendment tonight because I remain convinced that without this statutory pressure the two regulatory silos will remain intact.
The two commissions were very kind and courteous and they agreed to meet to discuss how to address this issue. Following that meeting, I have retabled my Committee stage amendments, but I have made two significant wording changes. I have replaced the phrase that I originally used, “joint guidance”, with the phrase, “co-ordinated guidance” and replaced “Commission” with “Commissions”. It was explained to me, of course, that the Charity Commission does not regulate charities in Scotland and Northern Ireland. OSCR, the Office of the Scottish Charity Regulator, and a new body recently set up in Northern Ireland will do that. By contrast, of course, the Electoral Commission regulates the whole of the United Kingdom.
So the vision I have and the vision I shared with them of co-ordinated guidance, which we discussed and they felt was a possibility, was for a homepage, prepared and signed up by the commissions, with links to policy issues or subjects that might be of more specific and important concern. This will offer two great advantages. The first is simplicity. Any charity of any size has just one place to go to look for guidance on this quite complex topic. We know it is complex because of the discussions we have been having over these past few hours. The second advantage is consistency. No regulator can introduce new policies or approaches without the other regulatory bodies knowing about it and being able to have their own specialist input. This avoids charities being caught in the crossfire of the regulators acting independently and quickly—maybe too hastily—in the heat of an election campaign.
To conclude, this amendment has, at least in principle, the support of the Electoral Commission and the Charity Commission. It certainly has the support of the NCVO and the commission of the noble and right reverend Lord, Lord Harries. I believe that it will be warmly welcomed by the sector as it grapples with the undoubted challenges of the Bill, so I hope that on this occasion my noble and learned friend can go further than honeyed words and accept this amendment. I beg to move.
Lord Horam
My Lords, the noble Lord, Lord Hodgson, certainly raises a very important point, which I am glad we are discussing, even though it is rather a late hour to do so. We should have some reassurance from the horse’s mouth: he mentioned that the Government have made various points, he has made various points and he has talked to the Charity Commission—presumably the Charity Commission for England and Wales—and the Electoral Commission. However, I remind the House and read into the record that our briefing from the Electoral Commission says specifically, under the heading, “A joint introductory guide for charities”:
“We are committed to working with the UK’s three charity regulators”—
that is, the one for England and Wales, the one for Scotland and the one for Northern Ireland—
“to ensure that charities have clear and reliable guidance about how to comply with the rules. The Electoral Commission and Charity Commission for England and Wales will produce a joint introductory guide for charities that need to understand if their activities are covered by non-party campaigning rules”.
It goes on to make various sensible points about testing its guidance, about taking campaigners’ views into account and about supporting and advising campaigners. That is all part of a process of being available in a sensible and practical way to charities and to campaigners who are not charities—which is equally important.
Given that the Electoral Commission and the Charity Commission are, I believe, working along the same lines and intend to produce joint guidance for charities and non-charity campaigners, and given the clear commitments being made, I think that it would be unnecessary to put this provision in the Bill. Neither the Charity Commission nor the Electoral Commission has the slightest doubt that it has to produce something sensible in this area. As a result of the amendments that have now been made by my noble and learned friend, there is time to do that before September, before the new arrangements kick in. While I support the spirit of my noble friend’s amendment, I think that it is unnecessary in the light of the clear commitments which have been made.
Lord Harries of Pentregarth
I am happy to have added my name to the amendment in the name of the noble Lord, Lord Hodgson, for the reasons that he articulated so clearly. Reading through the guidance provided by the Charity Commission, both its general guidance and its specific guidance for election periods, it is clear that it covers the same kind of ground as the guidance of the Electoral Commission—it has to give the same kind of detailed guidance—and it must make total sense for the two bodies to produce some co-ordinated guidance. I do not think that we need any reminding that guidance for future elections will be crucial. There are so many complex areas here, and this whole subject has been so raised, that charities and campaigning groups will need to be crystal clear as to what part of their activity is covered by the regulation and what is not. I am therefore very happy to support the amendment.
Lord Cormack
I am glad to add my name to the amendment. I was delighted to hear what my noble friend Lord Horam had to say, but I see no harm in putting this provision into the Bill. I hope that when my noble and learned friend the Minister replies, it will not just be with honeyed words but with a promise of a taste of honey.
Lord Tyler
My Lords, this will be my shortest contribution through the whole length of this Bill, as I hope the night shift will appreciate. I want to make just one point: I am not sure whether the solution suggested by the noble Lord, Lord Hodgson, is right; I am absolutely convinced that there is a problem. I instance that by saying that, as somebody who has been involved in this area for years, I have never had advice or guidance on the problems that we have heard about so often in recent weeks from anybody in the Charity Commission. The first time that I ever heard from the Charity Commission was at 6.30 last night. There is a clear need for comprehensive, careful and co-ordinated advice from the two organisations. It has not been there in the past. They have not fulfilled their responsibilities to Parliament, to which they are responsible, over many years, and it is about time that they did. Throughout today’s discussion, it has been apparent that this lack of co-ordinated information from the two organisations has been one of the major problems that many organisations have had to face, as well as parliamentarians.
Baroness Hayter of Kentish Town
My Lords, I am glad that the noble Lord, Lord Tyler, made that point about the Charity Commission, because no matter how good the commitment, we want to see this co-ordinated guidance. Having this requirement in the Bill would mean that it was not just a promise but an actuality.
In addition to making sure that it happens, the provision would be a signal to the charities, given that they will be caught by new restrictions under the Bill that they have not dealt with before, that the House has taken seriously the need for them to be absolutely clear and for there to be co-ordinated guidance on that. There is no downside to having it in the Bill, so I hope that the noble and learned Lord has one yes that he can pull out of his bag at this stage.
Lord Wallace of Tankerness
My Lords, my noble friend Lord Hodgson tabled a similar amendment in Committee and brings forward this amendment to require the Electoral Commission to produce guidance for third parties and for that guidance to be co-ordinated with the Charity Commission, particularly to consider the impact of Part 2. As has been said, the issue was discussed at length in Committee, and it is clear to the Government that there is a lack of understanding among third parties and charities as to exactly what are their responsibilities under existing PPERA provisions—the point made by my noble friend Lord Tyler. That the Bill amends those provisions reinforces the need for clarity. The Government made clear in Committee that the issue of guidance and whether a duty should be imposed on the Electoral Commission would be revisited at Report.
Those are not just honeyed words, because since our debates in Committee, the Government have discussed with the Electoral Commission the importance of its producing clear guidance. It is essential that such guidance take into account the impact on charities in particular. Although charities do not campaign in support of political parties at elections and only two have ever registered as third parties to date, there is still an obvious need to ensure that they fully understand the workings of the new regime—that has been made very apparent during our many debates today—and whether they might be held to account by the new provisions as a result of their activities.
As the independent regulator, it is of course for the commission to provide this guidance, but the Government agree that the views of the charities regulator, the Charity Commission, must also be taken into account. Indeed, this involves not just the Charity Commission but its equivalent in Scotland, OSCR, and the Charity Commission for Northern Ireland. Suitable guidance, particularly aimed at charities, can come only if it is jointly produced.
I am pleased to note what the Electoral Commission stated in its briefing to Parliament. If your Lordships will allow me, I shall repeat the words already cited by my noble friend Lord Horam, because they are important. That is why this is substance, not just words. The commission’s precise words are:
“We are committed to working with the UK’s three charity regulators to ensure that charities have clear and reliable guidance about how to comply with the rules. The Electoral Commission and Charity Commission for England and Wales will produce a joint introductory guide for charities that need to understand if their activities are covered by non-party campaigning rules ... Our guidance will explain key areas of the rules such as deciding what counts as regulated spending, how to manage regulated spending, and how the rules cover co-ordinated campaigning in coalitions”.
The Government welcome that clear commitment. At the big risk of quoting again from the e-mail from the Charity Commission, sent at 18.08 yesterday evening, in that e-mail, under the heading, “Co-ordinated guidance for charities that need to understand if they are covered by the rules”, Mr Rowley states:
“The Charity Commission and the Electoral Commission have committed to producing co-ordinated guidance along with a joint introductory guide for charities ahead of the regulated period for the 2015 General Election should charities not be exempted. We are sensitive to the particular help that some charities may need to comply with both electoral and charity law. In the past we have worked closely with the Electoral Commission to ensure their advice for charities on complying with electoral law and our guidance on charities and political campaigning in an election period is aligned and have continued to work closely together throughout the passage of this Bill”.
The Government will continue in our discussions with the Electoral Commission. We will follow them up, and I am sure that our brief debate this evening will have further reinforced to the Electoral Commission the need for it to provide clarity to campaigners. It is the Government’s view that the Electoral Commission must produce guidance in consultation or co-ordination with the Charity Commission and the other charity regulators in the United Kingdom, particularly with regard to how charities might be required to comply with the regime.
I can see why noble Lords say that there is nothing to be lost by having the provision in the Bill, but when a clear and unequivocal commitment has been made by the Electoral Commission, and by the Charity Commission in the quote I have just read, as my noble friend Lord Horam said, it is unnecessary to put this in the Bill. In the light of these commitments, which I think go further than honeyed words, I ask my noble friend to withdraw his amendment.
Lord Hodgson of Astley Abbotts
My Lords, as it is 10.05 pm I shall be brief. I am very grateful to all those who have spoken in support of this amendment—the noble and right reverend Lord, Lord Harries, my noble friends Lord Cormack, Lord Horam and Lord Tyler, and the noble Baroness, Lady Hayter of Kentish Town.
I tabled the amendment with the Hippocratic oath in mind—first, do no harm. I could not see that this could do any harm. It could only do good, because it is either superfluous—in which case, it does not matter—or, if things started slipping, it could be brought into play. Therefore, I cannot say that I am pleased with the outcome. The “too difficult” tray, in which I always thought this would end up, probably has been pushed a bit further round the desk by the words that we managed to extricate from the two commissions. However, it is late. I hope that my noble and learned friend will continue to look at this.
Another amendment that I was keen on, which the Government have accepted—namely, the review—will be an issue for the reviewer to look at. I think that there will be issues, unless we really join this up tight; charities will find things complex and difficult. However, given that it is 10.05 pm, I beg leave to withdraw the amendment.
“( ) section 26(10) and (11) (definition of “election material”);”
Lord Wallace of Tankerness
My Lords, this is the final group of amendments. There has been much discussion about the regulated period for third parties and whether it is indeed of an appropriate length. Many have argued that 365 days is simply too long. The noble and right reverend Lord, Lord Harries of Pentregarth, proposed in Committee that the regulated period should be shortened to six months. As noble Lords know, there are different regulated periods for different elections. For the general election it is 365 days. For elections to the devolved Administrations and the European Parliament it is four months.
What is the purpose of a regulated period? It is the time before an election within which financial limits on expenditure apply and campaigning rules must be adhered to. It is the time during which expenditure incurred for campaigning purposes must be reported. Noble Lords will know that the Bill already reduces the regulated period for the next general election in 2015, so that it will commence on 23 May 2014, which is the day after the European elections. The reason for this is that the original regulated period would have been a combined period for the 2014 European parliamentary election and the 2015 general election and would have started on 23 January 2014.
However, as the Bill makes changes that would have affected third party campaigning in European parliamentary elections, it would not have been sensible to have those changes take effect in the midst of the regulated period. The two regulated periods are therefore separated by the Bill, so its changes will take effect for the first time only for the 2015 general election.
The Government have now tabled Amendment 128, and Amendments 131 to 134, to shorten further the regulated period for third parties. These amendments will shorten the regulated period so that it commences on 19 September 2014. That is the day after the Scottish independence referendum. Although this Bill does not affect campaigners in the referendum—it is important that we make that clear—for the avoidance of any doubt and to ensure that there is no confusion, the day after the referendum has been chosen as an appropriate start date for the regulated period.
This step has been taken in response to calls from third party campaigners that they will need further time to fully understand the implications of the Bill and to ensure that they know how to comply with its provisions in the run-up to the 2015 UK parliamentary general election. I should stress that we are not reducing the spending limits to take account of the shorter regulated period. Campaigners will still be able to spend up to £319,800 in England, up to £55,400 in Scotland, up to £44,000 in Wales and up to £30,800 in Northern Ireland on promoting the electoral success of parties or candidates.
However—and this is crucial, not least as a follow-on to the previous amendment—delaying the start of the regulated period will give campaigners crucial time. The move has been supported by the Electoral Commission, to give it and the Charity Commission sufficient time to produce clear and easy to follow guidance. As has already been said, we believe that it is essential that campaigners have the clarity they have been asking for, and shortening the regulated period will allow the Electoral Commission enough time to test the appropriateness and clarity of its guidance with the campaigners themselves.
I should make clear here that only the regulated period for third parties is being amended. The regulated period for political parties will still begin on 23 May 2014, as under the existing transitional provision in Clause 42. It is also the case that for future general elections the period of one year will apply—although, given that there is to be a review, no doubt people will wish to raise this then. I just make it clear that the reduced period is for the 2015 general election.
The Government have also tabled Amendments 126, 129 and 130. These are minor and technical amendments to improve the drafting of Clauses 41 and 42. I beg to move.
Lord Harries of Pentregarth
My Lords, I warmly welcome this shorter regulatory period for the 2015 election, for the reasons that the noble and learned Lord stated: it will enable the Electoral Commission to prepare the guidance to educate the people who will have to conform to it. However, I express the hope that in the review, the review body will look seriously at the recommendation of the commission which I chaired, that for third-party campaigners there should be a six-month period. This seven and a half-month period is absolutely right for this election but a six-month period should be reconsidered afterwards.
Perhaps I might end on one final point. We are all very much aware that this whole process has, towards the end, been extraordinarily compressed. Normally, the Government would listen first, bring forward amendments in Committee and then report those back on Report. We did not have any government amendments in Committee. The Government listened, and I am glad that they did, but this means that this Report stage has been a kind of compression of Committee and Report all in one. The implication of this is that I very much hope that the Minister will take seriously those amendments that we did not press to a vote, while hoping that he might come back at Third Reading having thought again. Because of this very compressed period, that would be a great help to the House.
Baroness Royall of Blaisdon
My Lords, following on immediately from what the noble and right reverend Lord was saying about this compressed period, I particularly hope that in view of what the noble Lord, Lord Tyler, said in withdrawing his Amendment 52 on constituency limits, the Government will bring that back at Third Reading. As I understand it, the noble Lord, Lord Tyler, believes that the Government made a commitment to do so. That was the basis on which he withdrew his amendment. I do not wish to have a discussion this evening but I hope that the noble and learned Lord will look at it.
Lord Wallace of Tankerness
I did not actually respond to anything that my noble friend said, so there was no commitment. I said to officials immediately after that it would be appropriate if we went back and talked to the Electoral Commission, but that was without any commitment that we would bring an amendment back. We would take the points that were raised on my noble friend’s amendment to the Electoral Commission but, to make it clear, without a commitment on bringing it back. That is only fair because I did not actually make any commitment.
Baroness Royall of Blaisdon
My Lords, I am grateful for that clarification but I very much hope that, having spoken to the Electoral Commission, while I understand that the noble and learned Lord has not made a commitment, it will lead to him bringing something back at Third Reading. Having said that, I warmly welcome this group of amendments, which amend the regulated period. I am glad that it pertains only to the upcoming election, when it will be seven months. I am grateful to the noble and learned Lord and his officials for listening.
“section (Candidate’s personal expenses not to count for local election expenses limit in England and Wales) (candidate’s personal expenses not to count for local election expenses limit in England and Wales);”
“(a) regulated periods beginning after that day, or(b) (for the purposes of enactments having effect otherwise than in relation to regulated periods) expenditure incurred after that day.”
“(including a period in relation to which a limit is imposed by that Schedule by virtue of subsection (3)(b) or (6A)(b)).”
“(3) If, apart from this subsection, the day on which this Act is passed would fall within a period in relation to which one or more limits are imposed by paragraph 11 of Schedule 9 to PPERA 2000 (limit on campaign expenditure where combination of parliamentary election and other election)—
(a) paragraph 11(2) of that Schedule (which disapplies limits and periods which would otherwise be imposed by paragraph 3 of that Schedule and substitutes new limits and periods) is of no effect (and is treated as never having had effect) in relation to the parliamentary general election, and(b) for the purposes of paragraph 3 of that Schedule as it applies by virtue of paragraph (a), the relevant period is the Schedule 9 transitional period.”
“(a) beginning with 23 May 2014, and”
“(6A) If, apart from this subsection, the day on which this Act is passed would fall within a period in relation to which one or more limits are imposed by paragraph 11 of Schedule 10 to PPERA 2000 (limit on controlled expenditure when combination of parliamentary election and other election)—
(a) paragraph 11(2) of that Schedule (which disapplies limits and periods which would otherwise be imposed by paragraph 3 of that Schedule and substitutes new limits and periods) is of no effect (and is treated as never having had effect) in relation to the parliamentary general election, and(b) for the purposes of paragraph 3 of that Schedule as it applies by virtue of paragraph (a), the relevant period is the Schedule 10 transitional period.(6B) In subsection (6A) “the Schedule 10 transitional period” means the period—
(a) beginning with 19 September 2014, and(b) ending with the date of the poll for the parliamentary general election.”
“(6C) Subsections (3) and (6A) do not apply in the case of a period in relation to which one or more limits are imposed by paragraph 11 of Schedule 9, or paragraph 11 of Schedule 10, that ends with the date of the poll for an early parliamentary general election.
(6D) An “early parliamentary general election” is a parliamentary general election the date of the poll for which is appointed under section 2(7) of the Fixed-term Parliaments Act 2011.”
“( ) In Part 2 of this Act—
(a) section 32(12) to (15) extends to the United Kingdom and Gibraltar, and(b) section (Post-election review) extends to the United Kingdom.”
Offender Rehabilitation Bill [HL]
(10 years, 11 months ago)
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