House of Commons

Monday 20th January 2014 Commons Chamber

Monday 20 January 2014

The House met at half-past Two o’clock

Prayers

Monday 20th January 2014 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 20th January 2014 Commons Chamber

The Secretary of State was asked—

[Alison Seabeck (Plymouth, Moor View) (Lab)]

1. What assessment he has made of the incidence of damp in social housing.

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

7. What assessment he has made of the incidence of damp in social housing.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Stephen Williams)]

The latest data that we have from the English housing survey, from 2011-12, indicate that 6.9% of local authority homes and 3.7% of housing association homes had some problem with damp in that year. As a consequence of the 2011-15 spending review, the coalition is investing £2.1 billion to bring social homes up to the decent homes standard.

[Alison Seabeck]

I draw the House’s attention to my interests as usual.

It is slightly disappointing that the Minister did not refer to a recent survey which indicated that social housing providers—along with Members of Parliament, incidentally—are receiving more and more complaints from people who have damp in their properties because they cannot afford to heat them. As the Minister will know, condensation and damp are a real health problem. What is he doing to ensure that his colleagues in the Department of Energy and Climate Change understand the implications for those families, and do something about them by dealing proactively with energy prices?

[Stephen Williams]

Presumably the hon. Lady is referring to a survey of 30 social landlords conducted by the Direct Works Forum, which represents those who carry out repair work of this kind. Given that there are 336 local housing authorities, and many hundreds more housing associations, we shall have to wait and see whether that survey is representative.

Throughout the Government, we understand that fuel poverty is an issue. Both my Department and the Department of Energy and Climate Change are doing their best to drive down household energy costs, and we recently announced that we would reduce energy costs by £50 per household.

[Mr Sutcliffe]

Is not one of the problems the bedroom tax, which has meant that people are in arrears and have to choose between paying their rent and paying their energy bills? In Bradford, 2,100 families are suffering because the tax means that they cannot pay their energy bills.

[Stephen Williams]

People may have damp in their homes for a great many reasons, but one of the reasons that have been brought to my attention is the amount that has been spent on bringing homes up to a decent standard. The last Government spent a lot of money on that, and the present Government have spent £2.1 billion on it. Paradoxically, the fact that homes are so well insulated can contribute to a dampness problem. Obviously some households also have income problems, but the Government are doing their best to reduce the cost of living per household by lowering council tax and energy bills, and by putting more money into people’s pockets through income tax changes.

[Andrew Bridgen (North West Leicestershire) (Con)]

When the Government came to office, 70% of the council housing in my constituency was not up to the decent homes standard. Thanks to £21 million-worth of investment from this Government, by 2015 all of it will be. Can my hon. Friend confirm that the Labour Government cut the decent homes programme by £150 million in July 2009? [Interruption.]

[Stephen Williams]

I hear an Opposition Member shout “We introduced the decent homes standard”, and that is perfectly true. We often hear from Opposition Members that when it came to expenditure their priority was decent homes rather than the building of new homes, and that is why we had a problem with social housing stock. This coalition Government are bringing houses up to a decent standard, but also have the largest house building programme in the social sector that we have seen for decades.

[Stephen Mosley (City of Chester) (Con)]

My hon. Friend is right. One of the main causes of damp in property is condensation. That can be easily be solved by improving ventilation, which is often as simple as opening a window. Some housing authorities give their tenants very good advice. What advice would the Minister give others to ensure that that information gets out there?

[Stephen Williams]

I do not think that it is for Ministers to give advice to individual households—therein trouble often lies—but I will say that it is up to local authorities and housing associations to help their tenants with their budgeting as much as possible, in order to deal with welfare reform and other cost pressures.

[Bill Esterson (Sefton Central) (Lab)]

Condensation, damp and mould in social housing are now at a level that has not been reported by social housing experts for many years. Does the Minister not appreciate that what has changed the situation is the bedroom tax, along with other cuts in the income of people who live in those properties?

[Stephen Williams]

Plenty of things have changed since 2010, but this Government are still giving huge priority to bringing homes up to a decent standard. In the next spending review, we are allocating money for that purpose until 2017. By that stage, 99% of houses owned by housing associations, and almost as many local authority houses, will be up to the decent homes standard.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

2. What representations he has received on the cumulative visual impact of proposed wind turbines in Lincolnshire.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

We have received a number of representations about matters relating to wind turbine proposals in Lincolnshire, including their visual impact. We are very clear about the need for councils to consider cumulative impacts, and our new planning guidance underlines the fact that they require particular attention.

[Stephen Phillips]

In Lincolnshire there has been a large number of planning applications for wind turbines, many of which are in close proximity to one another. When I and other Lincolnshire Members meet local residents, they often tell us of their concern that planning authorities do not take into account the accumulation of turbines when deciding individual applications, so what further steps is the Department taking to enable local authorities to look at the bigger picture?

[Kris Hopkins]

This Government have been robust in laying out guidelines relating to landscape, heritage and local amenities, and in ensuring that the Secretary of State can recover those applications to ensure the guidelines have been adhered to. I reassure my hon. and learned Friend that since the proposals were brought in, the proportion of successful applications has dropped from 52% to 36%.

[Alex Cunningham (Stockton North) (Lab)]

3. What assessment he has made of the potential effect of his Department’s proposed change to permitted development rights on the number of (a) betting shops and (b) fixed-odds betting terminals on high streets.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)]

I think there may be some misunderstanding because there are no current proposals to make any change to permitted development rights in regard to betting shops. We have consulted on a permitted development right to change the use from a shop to a bank or building society, but that would not apply to betting shops.

[Alex Cunningham]

There is no confusion over the fact that there is one fixed odds betting terminal for every 701 adults in my Stockton North constituency, one of the country’s most deprived, and one for every 18,267 people in the affluent Broadland constituency. What will the Minister do specifically on planning rules to stop the betting industry going wherever it likes and targeting areas of high deprivation?

[Nick Boles]

Of course it was the last Government who made it easier to bring in fixed odds betting terminals, and I am sure that is why the hon. Gentleman is so enthusiastic in attacking their record. If he attended the debate on the matter, he will have noted that there are now fewer fixed odds betting terminals than there were when the last Government left office.

[Mr David Burrowes (Enfield, Southgate) (Con)]

Does the Minister share my dismay that, despite the concerns expressed by my constituents in Southgate and Palmers Green about the proliferation of betting shops, Enfield council has not as yet applied for an article 4 direction? In the meantime, will he support my constituents drawing up neighbourhood plans to promote the high street, which is the lifeblood of my communities?

[Nick Boles]

I entirely agree with my hon. Friend. I find myself in the curious position of having to hail the work of the London borough of Southwark and of the London borough of Barking and Dagenham in using article 4 powers in exactly the way the Government intended. I can only hope that the London borough of Enfield will follow my hon. Friend’s advice and do the same.

[Mrs Mary Glindon (North Tyneside) (Lab)]

A friend and constituent of mine, despite being self-excluded from his local Ladbrokes, recently walked into that shop and using his partner’s debit card promptly lost £2,000 on a fixed odds gaming machine. How can the Minister justify, to people like my friend, his policies, which are making it easier for more betting shops to open and harder for gamblers to fight their addiction?

[Nick Boles]

This Government share the concerns the hon. Lady has expressed about the way in which some people can fall prey to these machines. The Government and the Prime Minister made clear that we will look at the evidence, that we are conducting a review with the Responsible Gambling Trust and that we will then come forward with proposals, but I hope she will admit that it was the Government she supported who brought in the relaxation in the first place.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

May I ask my hon. Friend to ensure that this will be a local decision in accordance with article 4, but that we should recognise that betting shops do employ local people and make a contribution to the local economy?

[Nick Boles]

My hon. Friend is absolutely right. Betting shops are significant local employers and can make a significant contribution to the local economy, but it is also right that local authorities can look at local conditions and apply an article 4 direction where they feel that local impacts merit it.

[Graham Jones (Hyndburn) (Lab)]

The Minister says that the number of such properties has fallen, but the fall is only marginal and the figure is about the same. However, the issue, which he has not addressed, is that turnover and profits have increased dramatically. The precautionary principle was applied at the beginning of this month when the Minister said that splash screens would be put in to control the amount that players play. Is the Government’s policy not a complete shambles?

[Nick Boles]

This is from the party that presented gambling as the chief source of regeneration for inner cities in the north, and that wanted to introduce super-casinos to turn around central Manchester and Liverpool. It is humbug. [Interruption.]

[Roberta Blackman-Woods (City of Durham) (Lab)]

The Conservative chair of the Local Government Association said recently:

“High streets across the UK have suffered a cardiac arrest and it is now time to let local authorities step in and deliver the necessary life support.”

Will the Minister tell us how successful his policy of deregulating use classes and taking powers away from local councils and communities has been in regenerating our high streets?

[Mr Speaker]

Order. May I just say that the noun that appears to have occasioned offence following the last question from the Opposition Back Bench was I think applied to a collective, rather than to any individual? The concerns about disorder expressed by the hon. Member for Cardiff West (Kevin Brennan) are therefore, on this occasion, misplaced.

[Nick Boles]

I should like to reassure the hon. Member for Hyndburn (Graham Jones) that I would never dare to apply any such epithet to him personally—just to what he said.

Turning to the question raised by the hon. Member for City of Durham (Roberta Blackman-Woods), I find it extraordinary that she wants to talk down the high streets just when the number of empty shops is falling. The fact is that high streets are facing a secular change because of the growth of internet shopping and the change in lifestyles. The way to re-form high streets is not to place restrictions on the way in which people can make use of properties, but to encourage people to come forward with new uses for them that will revive our town centres.

[Mr Speaker]

The Minister’s ship was sailing in the right direction; there was no need to go quite so close to the wind. But there you go.

[Sir Bob Russell (Colchester) (LD)]

4. What requirement is placed on local authorities to ensure that legal agreements within the planning consent for major developments include provision of funding for new schools.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)]

I will try to be more prudent with my answer this time. The national planning policy framework is clear that where development generates the need for investment in more school places, plans should be brought up to secure that investment. Of course local authorities will also want to ensure that those plans can be funded.

[Sir Bob Russell]

The Minister might be aware of the lack of funding provision under the section 106 agreement for the new development in the north of Colchester. Will he meet me and representatives of Myland community council and Essex county council to see how we can retrieve the situation?

[Nick Boles]

Of course I would be delighted to meet my recently knighted hon. Friend, along with whomsoever he wants to bring to see me. I must point out that the funding of those investment plans is not strictly a planning matter, but I would be delighted to meet him.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Does the Minister acknowledge that we are in a pretty parlous state, with local authorities having less and less power to influence an integrated, holistic education policy across their communities? At the same time, companies such as Tesco can use bribery—I use the term advisedly—on local communities to get planning permission by giving a little bit of money to a local school.

[Nick Boles]

I have the greatest respect for the hon. Gentleman, but I totally disagree with everything he has just said. Contributions to create community benefit are exactly what we should be trying to get more of, so that it is not just the owners of new developments who benefit but the entire community, whether through new facilities or through a financial contribution to make their lives easier. We should be supporting this, not describing it as bribery.

[Mr Philip Hollobone (Kettering) (Con)]

But how can we ensure that, when new funding is made available for new schools and other developments, it is not simply provided by the local county council, for example, as the local education authority? How can we ensure that academies and other education providers also have a chance to come forward with sensible proposals?

[Nick Boles]

My hon. Friend is absolutely right, and I know that the Secretary of State for Education has made it clear that it must be open for a free school to be the promoter of any new school that is set up.

[Richard Harrington (Watford) (Con)]

5. What recent steps his Department has taken to facilitate holocaust survivors in sharing their testimony in communities throughout the UK.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

Hearing survivors’ stories is one of the best ways for communities to remember the obscenity of the holocaust. That is why we have given over £1.8 million to the Holocaust Memorial Day Trust, so that those stories can be preserved and shared more widely.

[Richard Harrington]

I thank the Secretary of State for that answer. I hope he will join me in commending the work of the Holocaust Educational Trust, of which I am a trustee. We must commend its work in enabling holocaust survivors to share their stories with more than 70,000 young people every year. Does my right hon. Friend also accept that there will be a big challenge ahead in regard to passing on what happened during the holocaust when there are no more survivors around to communicate that message?

[Mr Pickles]

Of course I agree with my hon. Friend. I believe that the trust is doing a series of films, and organising events, where the children of holocaust survivors are taking up witness. One of the most effective things I have ever seen was a film where the daughter of a holocaust survivor took up her father’s testimony. When he was a child, his mother had said, as her final parting to him, “I have lived a long life. You’ve barely started. Do what you need to survive.” It occurred to me that not only was the voice of the father being heard; we were also hearing the voice of a grandmother whom the daughter had never met. That is the final victory over Hitler and over the obscenity of Nazism.

[John Cryer (Leyton and Wanstead) (Lab)]

I agree with everything that the hon. Member for Watford (Richard Harrington) has just said about the Holocaust Educational Trust. Will the Secretary of State continue a close working relationship with the trust and with Karen Pollock in the future, because for many decades they have done exactly the sort of work mentioned in the question on the Order Paper?

[Mr Pickles]

I am happy to give that assurance. Karen Pollock has done a remarkable job in casting fresh light on not only the holocaust that took place in Europe, but on Cambodia and Rwanda. One of the key focuses of the Prime Minister’s holocaust commission will be to ensure that what happened in the holocaust is not forgotten when survivors are no longer able to give personal testimony.

[Mike Gapes (Ilford South) (Lab/Co-op)]

6. What assessment he has made of recent trends in the level of private rents.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

The Office for National Statistics’ latest figures show that rents are falling in real terms; in England they have risen by just 1.1%, which is well below the rate of inflation.

[Mike Gapes]

I do not know whether the Minister has got some figures for London, but I can tell him that private rents are going up here. They are rising consistently, particularly in outer London, as a result of Government policy. It has also been revealed that 36% of properties sold under the right to buy in London are now in the hands of private landlords, who are charging extortionate private rents. What more are the Government going to do about it, instead of using complacent weasel words such as we just heard?

[Kris Hopkins]

I do have the figures for London actually. The ONS clearly states that rents in London have risen by 1.9%, which is still below inflation. Those are the figures on actual rents paid, as opposed to advertised rates—they are what often fill our newspapers. This Government are absolutely committed to right to buy. We want to encourage as many people as possible to own their own house, and that is the right thing to do.

[Tim Farron (Westmorland and Lonsdale) (LD)]

Families in private rented accommodation have as much right to a decent home as anybody else, so will the Minister bring forward a new deal which will ensure that families in private rented homes can look forward to more predictable rents, longer-term tenancies and better standards?

[Kris Hopkins]

This Government are absolutely committed to increasing the number of rented properties, challenging the behaviour of the rented sector—the management of those properties—and making sure that the quality of those houses is put in place. Our approach includes the redress scheme which is currently in the House of Lords, and I look forward to it coming to this House so that we can support tenants and the management of those houses.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

20. I draw the attention of hon. Members to my entry in the Register of Members’ Financial Interests. Private rents in my constituency are now so high that constituents are coming to my surgery afraid to take on private tenancies for fear that on an average wage they are unable to afford them, which they certainly are. When will the Minister wake up, smell the coffee and get a house building programme in place? Does he not agree that that would reduce private rents?

[Kris Hopkins]

The Mayor of London is absolutely committed to building an affordable base, which is why this Government have supported his strategy to build more affordable housing with a £1.1 billion grant, which will deliver some 32,000 houses. Before the hon. Lady chucks stones, she should be aware that the number of affordable houses dropped by 427,000 from the start of Labour’s term in government to when it finished. Labour let down the people of this great city, not this Government.

[Mr Mark Prisk (Hertford and Stortford) (Con)]

Alongside a tenants charter, which has been referred to, the key to rents and indeed the private rented sector must surely be institutional investment for the long term. What progress is being made with the Build to Rent fund, to which the Minister alluded? How many schemes will it unlock, and let us contrast that with the paucity of action that we saw under the previous Government?

[Kris Hopkins]

I applaud the work that my hon. Friend did during his time in this position. The Build to Rent programme has been oversubscribed. The first round is some £200 million. Those houses are now beginning to come out of the ground. There are projects in Southampton and Manchester. As a northern MP, I know that the area will appreciate the development of some 100 new properties. Bids have now been received for phase 2. Applications worth more than £2 billion have been made. We are looking forward to announcing the results of that round in the spring. I am talking not about promises to deliver more housing, but about real tangible housing coming out of the ground as a consequence of this Government’s intervention.

[Emma Reynolds (Wolverhampton North East) (Lab)]

The Minister seems to be in complete denial about the levels of unaffordable rents in London and elsewhere. In London, for example, an average family spends more than half its income on rent. The truth is that the Government are presiding over the lowest level of house building since the 1920s and they have cut the affordable homes budget by 60%. Furthermore, the number of working families receiving housing benefit has doubled. What will the Government do to boost supply and to ensure that rents are affordable?

[Kris Hopkins]

The reality is that it was the Labour Government who delivered the lowest number of houses built in their last term of office. Despite presiding over a period of boom, they still never achieved the ambitious figures that they are talking about now. At the peak, only 176,000 houses were delivered. It is this Government who are using both public and private money to deliver a very ambitious project of affordable housing. Of the 170,000 houses that are planned, 99,000 have already been delivered. We are more than halfway through. With the money that we have given to the Mayor, another 32,000 houses will be delivered. It is this Government who are committed to building houses.

[Mr Henry Bellingham (North West Norfolk) (Con)]

8. When he next expects to meet local authorities in East Anglia to discuss the problems caused by the tidal surges of 5 to 6 December 2013.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

I am at the moment inviting local council leaders from across the country whose areas have been affected by flooding to meet me, beyond those I have already spoken to. In fact, I plan to meet East Anglian authorities on 27 January.

[Mr Bellingham]

Will the Minister join me in paying tribute to the Environment Agency and all the other emergency services that worked so tirelessly on the night of the tidal surges, many of which, along the Norfolk coast, were the highest ever on record? Does he agree that the repair work has also been absolutely fantastic? The repairs are now nearly all finished, as I saw for myself when I visited the shingle embankment between Snettisham and Hunstanton last Friday. Will he tell the House what more he will do to talk to local authorities?

[Brandon Lewis]

My hon. Friend is right to highlight the excellent work done by local authorities and emergency services. I must stress that voluntary groups and schools also worked through the night. Particular credit must go to local organisations, such as the Norfolk Community Foundation and our great Eastern Daily Press, which have campaigned on behalf of local communities. I will invite those groups to talk to us about the lessons they have learned and what more we can do to ensure that the recovery goes smoothly.

[Peter Aldous (Waveney) (Con)]

I am grateful to the Minister for that answer. Repairs to sea defences were badly damaged in the storm surge on 5 December. They are not automatically covered by the Bellwin scheme. Will the Minister confirm that in his meetings with local authorities he will work with them to ensure that the repair works are carried out as quickly as possible so that coastal communities in Suffolk and Norfolk can get back on their feet?

[Brandon Lewis]

My hon. Friend makes a good point. The Bellwin scheme is only one part of the funding available for various issues from which areas affected by flooding will suffer. I am pleased to say that the Department for Environment and Rural Affairs will be addressing the matter of sea defences in a report to Parliament in the next few weeks, as the Environment Agency’s programme moves forward.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

9. What assessment he has made of the effect of the local government finance settlement on the most vulnerable communities.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Stephen Williams)]

The provisional local government finance settlement for 2014-15 includes protections for the most grant-dependent authorities. Councils facing the highest demand for services continue to receive substantially more funding. No council will see a reduction of more than 6.9% in overall spending power next year.

[Mr Bailey]

The elderly, infirm and immobile are often unseen, unheard and most dependent on local authority social care. My own local authority of Sandwell has been forced to cut £75 million from its budget by 2015 and now faces a further £25 million cut by 2017. The Government’s better care fund is totally inadequate to compensate. What is the Minister going to do about it?

[Stephen Williams]

The spending power in Sandwell is still significantly above that in many other local authorities. The spending power per head in Sandwell, where the hon. Gentleman’s West Bromwich West constituency lies, is £2,481, £900 more than in many districts in the south of England.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

21. Local authorities now also receive funding through the public health allocation. Has the Minister had any discussions with the Department of Health about cities such as Birmingham that have a disproportionately high young population, as they are disadvantaged by the fact that the funding formula has a higher weighting for those aged over 60 and 65? Are the Departments talking to each other to ensure that the young cities are not doubly hit?

[Stephen Williams]

I take the hon. Lady’s point, but the transfer of public health from the NHS to local government is a welcome reform by this Government that builds on what was done on public health in her own city by Joe Chamberlain back in the 19th century. It is a major opportunity for local government to address health inequalities, including in cities such as hers.

[Mr Clive Betts (Sheffield South East) (Lab)]

Both the National Audit Office and the Local Government Association have expressed concerns that unless there is a change of policy, some councils are simply not going to be able to make ends meet over the next two or three years. The Government have powers under section 31 of the Local Government Act 2003 to help councils in that situation, but Ministers have also pointed out that there is potential to use a referendum to increase council tax. Who would vote for an increase in council tax in such circumstances unless the Government make it absolutely clear in advance the criteria under which they will use section 31 powers? Can the Minister tell us what they will be?

[Stephen Williams]

The Government will make the referendum criteria clear shortly, but council tax bills are a major part of every household’s budget—often far more significant than utility bills—and it is right that, rather than mandating local authorities or imposing caps as previous Governments did, this Government should give those in local government the discretion to raise council tax if they wish while expecting them to go to the people to get endorsement of that decision.

[Andy Sawford (Corby) (Lab/Co-op)]

Of the 30 areas in England with the highest black and minority ethnic populations, 29 face cuts above the national average and eight are dealing with cuts that are double that average. Will the Minister explain why BME communities are being hit so hard and will he agree to look at that?

[Stephen Williams]

I am the Minister responsible for race equality and I take the issues that the hon. Gentleman raises seriously. Perhaps we can have a separate discussion about it. Local authority settlements are not predicated on that basis, as a whole basket of factors goes into them. The Government are still putting substantial amounts of money into our integration budget to ensure that communities cohere, through measures such as specific funding for English language.

[Mr Dave Watts (St Helens North) (Lab)]

10. What recent progress his Department has made on negotiations regarding firefighters’ pensions.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

The Government have offered a generous pension scheme to firefighters and proposed steps and protections to help with their concerns about fitness and capability. We hope that the Fire Brigades Union will accept the offer rather than continuing with an unnecessary dispute. I also continue to meet the union, having last done so on 6 January, and I will meet it again next week.

[Mr Watts]

I thank the Minister for his response. Given the Government’s praise for the actions of the fire service during the recent floods, does he believe it is right that if our brave firefighters cannot carry out their full range of duties, they should be faced with no job and no pension? Should he not be ashamed of himself?

[Brandon Lewis]

The hon. Gentleman’s interpretation of the facts is inaccurate, as that is not how the system works. That is why we are consulting on a set of principles, which give even more protection than the principles being consulted on in Scotland, to deal with any concerns that firefighters have. His facts on this matter are not correct.

[Richard Fuller (Bedford) (Con)]

To achieve a settlement on firefighters’ pensions, firefighters need to believe that the fitness test that will apply to them in their late 50s will in practice enable them to continue in service until they reach the age of 60. Will the Minister update the House on what discussions he has had about the specifics of the fitness test that will be applied in the future?

[Brandon Lewis]

I thank my hon. Friend for his question. One of the reasons that the issue does not exist in the way that the hon. Member for St Helens North (Mr Watts) suggests is that there is no national fitness standard for firefighters. It is a matter for local services to look at their local needs and for the chief fire officer and the fire authority to decide on their local needs. What should be in place, and what we propose to put in place in the national framework, is a process and a set of procedures that are both fair to the service and to firefighters and which give them the right protection to ensure that they get the support from their service that they need to attain the relevant fitness required by their local fire service.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

The Minister offers some reassurance. However, the Government’s survey says that between 29% and 92% of firefighters will not be operationally fit to continue until they are 60. He says that he is meeting the Fire Brigades Union. Will he seriously discuss with it the reassurance that he is offering and tell it how that will be achieved?

[Brandon Lewis]

I thank the hon. Gentleman for giving me a chance to clarify the issue. It is one of the conversations that we had on 6 January and which will be continuing, I hope, next week. I do not entirely agree with his interpretation of Dr Williams’s report, which makes it clear that, with proper fitness work going on—one of the things that we expect the service to do as part of the principles that we are consulting on—firefighters can retain fitness until 60. That is very achievable, and we want to make sure that the protections are in place. Beyond the Scottish agreement, we have suggested an independent review to ensure that the service is putting these protections in place.

[David Mowat (Warrington South) (Con)]

11. What guidance his Department has issued to local authorities on the duty of co-operation arising from the Localism Act 2011 in respect of waste disposal.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)]

We issued draft guidance on the duty to co-operate on 28 August and expect to finalise this shortly. The Localism Act has given local councils more power over planning for waste management.

[David Mowat]

I thank the Minister for that answer. He may be aware of the Arpley landfill site, which is located right in the middle of Warrington and causes severe disruption to more than 5,000 residents. All Warrington’s councillors want it closed. Both Warrington’s MPs want it closed. As of next year, no Warrington waste will go to it. Does the Minister agree that it would be a triumph for localism if the current 20-year planning application was rejected and that those local authorities that still use the site found somewhere else to put their rubbish?

[Nick Boles]

My hon. Friend will understand that I cannot comment on an application that is yet to be determined, but I hope he is aware that, if he thinks that an application raises issues of particular concern and national significance, he can write to the Secretary of State and ask for that application to be recovered for ministerial decision.

[John Healey (Wentworth and Dearne) (Lab)]

12. What steps he is taking to ensure that claimants of housing benefit are able to access accommodation in the private rented sector.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

The key to making the private rented sector accessible to all is to build more homes for rent. That is why we are investing in the private rented sector through the £1 billion Build to Rent fund and giving £3.5 billion in guarantees to get builders building—and we will deliver 170,000 new affordable homes by 2015 through this process.

[John Healey]

I came across the case of Christina last week. She is a homeless young woman, helped by Centrepoint, the charity. She wants to finish her college course, she wants to get a job, and she wants to move on with her life, but she cannot because no private landlord will take her while she is on housing benefit. Will the Minister now admit that the housing benefit changes are locking people on low incomes, including those who are in work, out of private housing altogether?

[Kris Hopkins]

If the right hon. Gentleman wants to write to me about the specific individual concerned, I will attempt to address that case, but I reassure the House that we take seriously the need to deliver affordable housing. That is why the Government have clearly laid out that our principal priority in house building is supporting the affordable sector. Indeed, 170,000 new houses will be delivered by 2015, and we will soon announce a prospectus that will deliver 160,000 new homes by 2018. That is our commitment to people such as the one he mentioned.

[Helen Jones (Warrington North) (Lab)]

The Minister and his colleagues have frequently told those who are in receipt of housing benefit and subject to the bedroom tax that they should downsize, yet for many people that means moving into the private sector, which either will not take them or, if it does, charges more rent, so costing the public purse more. Is it not time that the Government abandoned this totally ill-conceived policy?

[Kris Hopkins]

There are more than 1 million one-bedroom flats on the market at the moment, and the Government are absolutely committed to ensuring that there are more houses out there. Every single penny that we are spending on housing is intended specifically to address that need, to ensure that vulnerable individuals are supported, with £470 million for the homeless and £445 million for transition through welfare reform. We have had to make those difficult decisions because the previous Labour Government failed to do so.

[Mike Thornton (Eastleigh) (LD)]

13. What assessment he has made of the effectiveness of the troubled families unit since its creation.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

Thanks to the help of local government and the personal commitment of right hon. and hon. Members on both sides of the House, we are on track. In November, 18 months into our three-year programme, I announced that over half of the 120,000 families were being worked with and that over 22,000 had been turned around. I hope shortly to be able to give an update, which I think will show even more spectacular figures.

[Mike Thornton]

I thank the Secretary of State for that answer. I am sure he will be pleased to know that the initiative has been actively and successfully embraced in Eastleigh, with Eastleigh borough council and Hampshire county council working together to transform people’s lives. However, I have heard that some councils are using it as a box-ticking exercise. How can the Department ensure that local councils are genuinely changing lives, not just filling in the appropriate forms?

[Mr Pickles]

There is a robust system in place for verification and checking. Both councils’ internal audits and my Department carry out spot checks, but the hard truth is that there is no reason to do this, because it offers no advantage to a council. In fact, doing it will effectively cost councils more money. In the long term it will save them money, but it means that they have to give an extra commitment. I think it is the commitment we have seen from local authorities that we should be celebrating.

[Nic Dakin (Scunthorpe) (Lab)]

Will the Secretary of State clarify whether a family can be considered “turned around” if they are still committing crimes or engaging in antisocial behaviour?

[Mr Pickles]

The short answer is no. We went about it in a very straightforward way and so have some very straightforward criteria. Basically, the kids must be in school, and for three terms, which is why there is a bit of a lag, and somebody must be on the road to work, in the same way that they will be within a programme, and the incidence of antisocial behaviour on the estate must have been reduced measurably.

[Stuart Andrew (Pudsey) (Con)]

Although most of the families on the estate that I grew up on were hard-working and decent people, the odd one or two troubled families caused problems for the rest of the estate. Does my right hon. Friend agree that this initiative, which helps to get children back into school and parents into work, is helping not only the family concerned, but the wider community?

[Mr Pickles]

Sure, and the important thing is that we have one social worker dealing with one family as a whole, not a series of social workers dealing with different members of the family. That has been very impressive. I have toured the country and seen a number of the schemes in action, and I have been very pleased with the level of co-operation.

[Lyn Brown (West Ham) (Lab)]

I fear that the Secretary of State is in denial, because his programme actually causes a reduction, not a cessation, in the problems for which the families have been put on the programme. Is it not the truth that many of the families that he says have been turned around are still truanting and engaging in antisocial behaviour? How on earth does he justify the fact that many local authorities are failing to monitor those families after they come off the programme? Is it not the truth that he is scared of real scrutiny of the claims he makes?

[Mr Pickles]

I invite the hon. Lady to come to my office and talk with Louise Casey. I do not think there is a scintilla of truth in anything the hon. Lady said, and I greatly regret the breach in bipartisanship towards the programme. Our books are open, so she should come in to see them. I have to tell her, in the nicest possible way, that she should put up or shut up.

[Graeme Morrice (Livingston) (Lab)]

14. What assessment he has made of changes in demand for larger social homes since April 2013.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

We do not undertake a national assessment of need as we believe that such assessments are better made at a local level. In the new affordable homes programme we will encourage the building of homes to match local needs, including smaller properties in areas with a shortage, and funding for larger homes where that is appropriate.

[Graeme Morrice]

There is much evidence to suggest that the Government’s bedroom tax is responsible not only for an increase in the number of empty larger properties but for escalating rent arrears and significant extra costs to social landlords. As my hon. Friend the Member for Warrington North (Helen Jones) said, why is the Minister defending this iniquitous and failing policy that is resulting in abject misery for thousands of families up and down the country?

[Kris Hopkins]

There is no evidence that removing the spare room subsidy has had that impact. There will be an assessment in the spring, when we will look at that. I would imagine that any of the 1.69 million people who are currently on waiting lists in a council area with an empty house would be outraged that they are still on a waiting list and are not being accommodated by the local council. There should be no empty homes out there when such a significant number of people are demanding a house.

[Caroline Dinenage (Gosport) (Con)]

15. What guidance he has issued to local authorities on prioritising (a) members of the armed forces and (b) local residents for social housing.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

I am incredibly proud that this Government have published guidance strongly encouraging councils to prioritise armed forces members and their families for social housing. Last month we issued guidance ensuring that local homes go to local people.

[Caroline Dinenage]

My constituency has a very proud history of serving the armed forces and was an early adopter of the armed forces covenant. Although I warmly welcome the Government’s efforts to encourage local authorities to prioritise local people when allocating social housing, what is the Minister doing to encourage local councils to make sure that forces families are not disadvantaged by this measure?

[Kris Hopkins]

As a former squaddie, I think this Government can be very proud of what we have done, whether it is the Help to Buy scheme, the covenant, or making sure that members of our armed forces who have been away from home still have a high priority on waiting lists. That message has gone out to local councils, and they need to adhere to the policy to support members of the armed forces who live in my hon. Friend’s constituency and in many others.

[Diana Johnson (Kingston upon Hull North) (Lab)]

16. What estimate he has made of the number of families with children who were placed in bed and breakfast accommodation for longer than the statutory maximum six-week period since 2010.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

Keeping families with children in bed-and-breakfast accommodation for more than six weeks is unacceptable and unlawful. We challenged local authorities to grip the problem and gave them an extra £2 million to help in that process.

[Diana Johnson]

Today, BBC Radio Humberside reports increasing numbers of families being evicted in Hull. Soaring homelessness under this coalition has seen an 800% increase in families staying in bed-and-breakfast accommodation beyond the six-week statutory limit. What is the Minister going to do about it?

[Kris Hopkins]

I am sure that everybody in this House wants to address homelessness, and this Government have committed some £470 million to doing so. Some 53,000 people are currently rated homeless compared with 133,000 people at the high point under the Labour Government. According to the most recent figures that I have, no household with children has been in a B and B for more than six weeks in Kingston upon Hull.

[Andy McDonald (Middlesbrough) (Lab)]

T2.

If he will make a statement on his departmental responsibilities.

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

I would like to make a very brief statement about a recent development regarding my Department and officials at the European Union. The previous Labour Government signed up to a petty EU regulation that forced my Department and other Departments to fly the European flag outside our buildings. I can announce today that we have renegotiated this, and the burdensome law on flying the EU flag has now gone. This small step shows that our nation can and should claim powers back from Brussels. I apologise to you, Mr Speaker, for not flying the flag of Buckingham yesterday to celebrate your birthday. I hope you had a good day.

[Mr Speaker]

The Secretary of State is forgiven.

[Andy McDonald]

Remembering how British troops fought for the world’s freedom in the first world war is a very good thing. However, why did a Minister in the Secretary of State’s Department give £120,000 to a company run by a friend of hers, who also happens to be a Tory candidate, to organise just 50 school visits? There was no tender and no competition. If the Secretary of State has nothing to hide, will he publish all the documents and civil service advice about this work?

[Mr Pickles]

The hon. Gentleman is very good at smearing. This was properly conducted and, frankly, what a member of a company does in their spare time is not a matter of concern. I regularly deal with Labour councillors on a commercial basis and, frankly, I regard his attempt at smearing as pathetic.

[Nick de Bois (Enfield North) (Con)]

T3. Does my right hon. Friend agree that Enfield council’s proposal to use its public health budget for enhanced gritting is a gross misuse of public funds—the more so because in Enfield borough there is a 12-year life expectancy difference within less than 1 mile?

[Mr Pickles]

I am very surprised to hear that. I know my hon. Friend takes a great interest as a co-chair of the all-party group on primary care and public health. That issue goes to the very heart of whether we trust local government. A number of us have wanted the removal of ring-fencing, but using on gritting what should be used on public health is frankly ridiculous, and it brings local government into disrepute.

[Hilary Benn (Leeds Central) (Lab)]

Last year, the Prime Minister was reported to have abandoned his support for new towns and garden cities. Last week, however, the Housing Minister said he was not aware of any report which was supposed to have been published, while the Deputy Prime Minister revealed that there is a prospectus and said that the Government should be honest about their plans to build new garden cities. Yesterday, the Secretary of State confirmed that there is a report, but that it seems to have nothing to do with his Department. Given that he is supposed to be in charge of housing and planning, why has he not asked to see a copy?

[Mr Pickles]

Of course there are reports. A report commissioned by the previous Government wanted to impose five garden cities, and when that failed, there was a report for 10 garden cities, but the truth is that Labour failed to build. We have been very straightforward about it: through local development growth, we will do our best to help those communities that want to have a garden city or volunteer for a garden city. Within my Department, there are certainly no plans to build on the floodplain or to increase London sprawl.

[Hilary Benn]

This is what the Secretary of State said yesterday. He said that

“I am told by my department that this report”—

confirming its existence—

“does not come from my department.”

He should clear it up by publishing the prospectus now.

Since the Secretary of State and I agree that identifying sites for new garden cities must be locally led, will he tell the House whether Yalding in Kent, Gerrards Cross in Buckinghamshire or any council in Oxfordshire has come forward to express interest in providing such a site? If not, will he confirm to the House that his officials are not currently looking at any of those areas as potential sites?

[Mr Pickles]

The only person who I think is looking at those as potential sites is Michael Lyons, who is working for the Labour party on these matters. Just to be absolutely clear, I cannot rule out some ambitious civil servant re-heating and re-badging an old Labour scheme to bring it to us. I want to be absolutely clear: no one is going to be forced to have a garden city against their will. I think that the right hon. Gentleman is a little confused. He seems to be mixing up a prospectus with this report, whether it exists or not, but the prospectus with regard to the local growth fund—an extra £1 billion has been put in—will of course be published in the spring.

[Iain Stewart (Milton Keynes South) (Con)]

T4. The Minister will be aware of last week’s article in The Daily Telegraph alleging a major relaxation of planning laws. This has caused some concern in my constituency, where substantial housing growth is already planned. What reassurance can he give my constituents that we will not have some planning free-for-all?

[The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)]

The Daily Telegraph is no doubt one of your favourite newspapers, Mr Speaker, as it is of mine, but it is in the business of selling copies, so it sometimes needs to entertain and provoke as well as inform. I can reassure my hon. Friend that we are not proposing any further major planning reforms, but simply a few minor tweaks to the administrative process of discharging planning conditions.

[Graeme Morrice (Livingston) (Lab)]

T5. Under the Bellwin scheme, the Government give emergency financial assistance to local authorities that are hit by natural disasters. In June and July last year, the Government provided 100% of emergency expenditure, but they are providing only 85% for the more recent floods. Will the Minister explain how the damage caused and the costs incurred more recently are different from what they were then?

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

So far, 37 authorities have indicated that they plan to make a claim through the Bellwin fund. As I said earlier, all the local authorities that have been affected are coming in to talk to us about the recovery process. I am sure that they will want to raise the issue of funding. The Bellwin fund is well tested, it works and local authorities know how it works. We will obviously work with any authority that needs specific help.

[Mr Marcus Jones (Nuneaton) (Con)]

T6. Will my hon. Friend reassure me that planning inspectors will recognise the constraints that are on councils as they draw up their local plans, and that they will get the balance right between holding those councils to account and not subjecting them to undue delay?

[Nick Boles]

I am grateful to my hon. Friend for that question. I have been encouraging planning inspectors to recognise that perfection is not something that we mere mortals can ever hope to achieve, and that they should be pragmatic in recognising the way in which national policies can apply to local circumstances.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

T7. On 8 January, I was told by the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth (Brandon Lewis) in a written answer that he does not know“the net change in central Government support to individual local authorities”since May 2010.—[Official Report, 8 January 2014; Vol. 573, c. 257W.] If he does not know by how much he has decided to cut the funding for particular local authorities, how can he possibly assess whether it is beneficial or detrimental?

[Brandon Lewis]

The entire system of local government funding has been changed under this Government so that it is based on incentives rather than the begging bowl. Authorities that build houses will get more money and authorities that deliver economic growth will benefit from business rate retention. That is the way forward for local government—it is in control of its own destiny.

[Stephen McPartland (Stevenage) (Con)]

T8. I am working hard to promote right to buy in Stevenage, with some success. Sadly, Stevenage borough council does not support hard-working families in buying their own council homes. Will the Secretary of State consider making Stevenage a pilot area and contacting directly all tenants who are eligible to take up right to buy?

[Mr Pickles]

I will happily talk to my hon. Friend about that idea. I am shocked to hear that Stevenage is not playing its full part. Under right to buy, we will ensure that there are replacements on a one-for-one basis. Essentially, what Stevenage is doing is shooting itself in the foot.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

T10. A disabled constituent of mine lives with her husband in a two-bedroom property. The second bedroom is used as a lockable safe room because her husband’s mental health condition leads him to become violent. She manages thanks to the discretionary housing payment, which is by definition discretionary and temporary. Why is she not exempt from the hideous bedroom tax, given her circumstances?

[The Parliamentary Under-Secretary of State for Communities and Local Government (Kris Hopkins)]

The hon. Lady is right that councils have the discretion to remove those demands from people in those particular medical circumstances. If she would like to write to me about the circumstances of that case, I will take it up with my colleagues at the Department for Work and Pensions.

[Steve Brine (Winchester) (Con)]

T9. The Stanmore estate in Winchester was one of the first council estates in the country and was built in the post-great war building boom. Thanks to the changes to housing finance, Winchester city council is investing £60 million over the next 10 years to build 400 new council homes. Does the Secretary of State agree that that is very good for my constituents and that it is a genuinely affordable housing scheme?

[Mr Pickles]

I congratulate my hon. Friend and the local authority. There is a certain irony in the fact that the two Administrations of the past 40 years who have built the greatest number of council homes are Margaret Thatcher’s Administration and this Administration. In the past few years, we have built more council houses than the Labour party built in 13 years.

[Chris Williamson (Derby North) (Lab)]

The Government give private landlords £9.5 billion every year through housing benefit, and yet they spend only £1.1 billion on building affordable homes. If they spent all that money on affordable homes, they could build 600,000 homes every year. Why does not the Minister stop picking on and vilifying low-income tenants, and call time on profiteering landlords by capping rents and using the savings in housing benefit to build more council houses?

[Kris Hopkins]

This Government have invested some £4.1 million into tackling rogue landlords. We have received a number of thank you letters from people on the Labour side, which is not in line with what the hon. Gentleman is saying. The Government are ensuring that tenants have decent homes. We support tenants and are not afraid of taking on rogue landlords.

[Sir Tony Baldry (Banbury) (Con)]

Is my right hon. Friend aware that Cherwell district council is willing to discuss with him the possibility of Bicester becoming a new garden city? Work has started on the eco town and the redundant Ministry of Defence land. It is probably one of the largest house building areas in south-east England, and we are certainly willing to enter into constructive dialogue about a new garden city with the Secretary of State.

[Mr Pickles]

Once I have been spared from my duties in the Chamber, I intend to go to the Tea Room where I shall expect an orderly queue of hon. Members lining up to volunteer.

[Sheila Gilmore (Edinburgh East) (Lab)]

In a recent debate the Secretary of State told me that in England landlords did not refuse housing to people on housing benefit, yet a big landlord was reported in the press as saying that he was moving completely out of letting to housing benefit tenants. Will the Secretary of State now carry out a proper inquiry so that he can give a clear answer to the point I raised in that debate?

[Mr Pickles]

With all respect to the hon. Lady, she was making exactly the same point about an article that had been in the Daily Mail that very weekend. I pointed out, with enormous respect, that there are a lot more private landlords than just that particular gentleman, and I do not think he represents anything that speaks of the sector as a whole. The short answer is no.

[Tessa Munt (Wells) (LD)]

Lack of planning enforcement by local authorities causes disproportionate distress and aggravation to my constituents. Does the Minister agree that councils should have the ability to delay granting planning permission for new applications until all outstanding conditions on previous applications by the same developer have been complied with?

[Nick Boles]

My hon. Friend makes an interesting point and I would be happy to look into the specific case. Perhaps I can generally reassure her that, through the Localism Act 2011, she, I, and the rest of us have improved the enforcement powers of local authorities, and removed the restrictions that the previous Government had placed on the use of temporary stop orders in enforcing against abuse.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

In 2015 Ministers will take on responsibility from the Department for Work and Pensions for hardship funding delivered by local councils. What discussions have taken place with Ministers at the DWP so that the vulnerable are not hit the hardest once again when the change takes effect?

[The Parliamentary Under-Secretary of State for Communities and Local Government (Stephen Williams)]

The Department for Work and Pensions has transferred £175 million for the current year to meet those obligations, and £172 million for next year. The expectation for subsequent years is that local authorities will find those funds from within their own budgets. Of course, with the recovering economy, we hope there will be less demand.

[Mark Pawsey (Rugby) (Con)]

Did the Secretary of State see last week’s report that showed that local authorities have lost £51 million over three years in overpayments to staff, with £16.7 million still to be recovered? Does he agree that local authorities need to raise their game in that area?

[Mr Pickles]

I am sure that is right. The amount available through preventing fraud, overpayment and mistakes is something we expect local authorities to tackle, just as we expect them to tackle their growing balance problem.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I am sorry to disappoint colleagues. This Secretary of State’s Question Time is always a box office occasion, and I dare say colleagues will just have to wait until next time to renew the flame of their interest.

UN Syrian Refugees Programme

Monday 20th January 2014 Commons Chamber

15:33

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

(Urgent Question): To ask the Home Secretary if she will make a statement on the UN settlement programme for vulnerable Syrian refugees.

[The Minister for Immigration (Mr Mark Harper)]

More than half the Syrian population of 9.3 million is in need of humanitarian assistance, and 2.3 million people have been displaced from Syria to neighbouring countries. This is a crisis of international proportions and needs a commensurate response from the international community. The Government are proud to be playing their part in that response, and share the view of the UN Secretary-General that the priorities must be to

“assist the Syrian parties in ending the violence and achieving a comprehensive agreement for a political settlement”,

and ending the suffering of the Syrian people. No one should underestimate the difficulties ahead, but we are determined to strive for a peaceful settlement through the Geneva II process, which starts later this week and is working towards the establishment of a transitional governing body for Syria.

The Government continue to believe that the best way to address the suffering of the Syrian people should be to provide humanitarian assistance to displaced people, in partnership with neighbouring countries and the United Nations High Commissioner for Refugees. Before last week, the Government had provided £500 million for the Syrian relief effort, of which more than £480 million had been allocated to partners in Syria and the region. That has helped more than 1 million people. Almost 320,000 people are being provided with food assistance each month in Syria and neighbouring countries, and more than 244,000 people in Syria have been offered medical help. The Government continually press for better access and protection for humanitarian convoys inside Syria so that aid can get to the millions in need inside the country. That represents the UK’s largest ever response to a humanitarian crisis.

We are leading the way in helping the Syrians suffering from the humanitarian crisis as the second largest donor, behind the US, helping refugees, and through consideration of Syrian asylum claims under our normal rules. In the year to last September, we had already recognised more than 1,100 Syrian nationals as refugees.

We are very aware that some, including the UNHCR, would like to see a more proactive programme of resettlement of refugees who are currently hosted by countries neighbouring Syria. We have considered those options very carefully and respect the views of those countries who favour a resettlement programme, but we think that our priority should continue to be to provide humanitarian assistance to displaced people in the region, in partnership with neighbouring countries, the UNHCR and other UN and non-governmental partners. Most of those who are displaced want to return home as soon as it is safe to do so, and protection in the region affords them that hope.

Beyond immediate humanitarian assistance, our priority must be to help neighbouring countries to provide sustainable protection in the region. That should be our focus, rather than resettlement or providing humanitarian admission to Syrians—initiatives that can provide only very limited relief and have only a token impact on the huge numbers of refugees.

The UK can be proud of its contribution but there is still more to do. Last week, my right hon. Friend the Secretary of State for International Development pledged a further £100 million in aid at the pledging conference in Kuwait, taking our contribution to £600 million.

I recognise that this is a highly emotive issue and one that continues to require real action through high levels of international co-operation, both in the region and more widely. The UK has a proud tradition of providing protection to those in need, and this Government are committed to continuing to playing our full part in the international response to the humanitarian crisis in Syria. Our response to date is one of which we can be proud.

[Yvette Cooper]

I am sorry the Home Secretary has not come to the House for this question.

When the House opposed military intervention in Syria, both sides were adamant that we had an even greater moral obligation to provide humanitarian support in that dreadful conflict. The position is now desperate. Two million refugees have fled their country, more than half of whom are children.

Most of the support is rightly being provided in the region, particularly by Syria’s neighbours. Britain has led the way, through Government aid and the generosity of the British people, in providing outside help, but we have also been asked by the UN to join its programme for the most vulnerable refugees. I spoke to the UN this morning. The programme is for those whom the UN believes will find it hardest to survive in the camps in the region, such as abandoned children who have no other protection or support; torture victims, who may be suffering immense physical and mental distress; those who need urgent medical help; mothers of young children who have lost their husbands and relatives and are vulnerable; and those who have been abused in the camps. They are not asylum seekers. They cannot travel here or elsewhere to apply for asylum. They are already UN-certified refugees.

Other countries—France, Spain, Germany, Austria, Switzerland, Belgium, the Netherlands, Ireland, Norway, Sweden, Finland, even Luxemburg and Moldova, and Australia, Canada and the USA—have agreed to help. Those countries have offered places, taking the UN well on its way towards its target. Britain is being asked to provide only limited help as part of the wider programme, but the Government have refused. The Minister described such help as “token”, but it is not token for a child who is given a home. He dismissed the UN programme in favour of regional support, but it is not an either/or question. As every other major western country understands, some vulnerable refugees need a different kind of help. This is not about border control or immigration policy, but about our long tradition of sanctuary. How can we ask Jordan, Turkey and Lebanon to keep their borders open or to keep helping millions of people if Britain will not do its bit for a few hundred of the most vulnerable, or if we will not even take in those with British relatives who are desperate to help? Charities like Oxfam and Save the Children are urging us to join this programme. It would be shameful for Britain to refuse.

Will the Minister tell the Home Secretary not to turn her back on vulnerable refugees? Will he tell her to look urgently at how many places Britain can provide? The Prime Minister said:

“We should encourage other countries to step up to the plate”

and that we must

“fulfil our moral obligations to those people who will suffer.”—[Official Report, 18 December 2013; Vol. 572, c. 744.]

He is exactly right. This is a moral obligation. How can we encourage others if we do not act?

[Mr Harper]

Listening to the shadow Secretary of State’s response, I do not think that she could have listened to a word that I said. On the scale of help and support the United Kingdom is giving to the region, our level of aid support dwarfs that of most other European countries. Some countries are willing to take very small numbers—sometimes just two figures, by which I mean 10 or 20—and they are not providing financial support. We are the second largest donor: we are helping not hundreds but hundreds of thousands of people in the region by providing water, food and medical supplies. That has to be the right way. Indeed, my right hon. Friend the Secretary of State for International Development has been one of the leading players working with UNICEF on a programme to help about 15,000 vulnerable children in Syria and the neighbouring countries. That has to be the right solution, rather than offering to take token numbers of people compared with the millions of people in need and the hundreds of thousands of people we are helping in the region.

We are stepping up and doing our part, not just on aid but in the work we are doing on the diplomatic front to help to bring the Geneva II talks, which my right hon. Friend the Foreign Secretary has been leading, to a successful conclusion. That has to be the long-term solution. It has to be in the region, making sure that those people can return home when the country is safe for them to do so. I am sorry that the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) did not acknowledge the work that we are doing, with our European partners, to lead that approach.

[Sir Menzies Campbell (North East Fife) (LD)]

There is no dispute that the Government have led the way in the provision of financial aid; nor is there any dispute that the Government have helped to lead the way in relation to a political settlement, but the children of Syria have suffered grievously. Are we really saying that we cannot take a few hundred of those who have suffered most, or are we now so intimidated by UKIP that we have abandoned our humanity?

[Mr Harper]

I agree with the right hon. and learned Gentleman that children are among those most at risk. One example of what we are doing for children in particular is our work with UNICEF in Syria and the region to provide help not to a few hundred children, but to 15,000. My right hon. Friend the Secretary of State for International Development has been leading this initiative with UNICEF. In terms of the numbers we can help, it is better to help tens of thousands and hundreds of thousands of people in the region than the frankly relatively small numbers that some European countries are talking about. They are taking very small numbers of people and they are not providing aid. This country is playing a leading role and we can be proud of that.

[Mike Gapes (Ilford South) (Lab/Co-op)]

May I declare an interest? I visited the Domiz refugee camp in Iraqi Kurdistan in November, where I saw facilities for the protection of children, because of some issues that arise in huge refugee camps. Will the Minister explain why he believes his Government should have a policy that is to the right of UKIP?

[Mr Harper]

I do not understand the hon. Gentleman’s obsession with other political parties. We are taking this view because we think it is the right way to get the maximum help to the largest number of people. The £600 million we are spending—not everyone agrees with our significant international aid commitments, but we have met our 0.7% aid target and are proud of the help we can give to those most vulnerable—is helping hundreds of thousands, not hundreds, of people in the region with food, water and medical attention. That is the right priority.

[Mr James Gray (North Wiltshire) (Con)]

The Government can indeed be extremely proud of what they have done in financial terms, and the tens and hundreds of thousands of people the Minister mentions of course have a great deal to thank us for, but does he not accept that what the UNHCR has asked for—that a small number of extremely vulnerable children be helped by coming to this country—we could do at a very limited cost to ourselves, and not as an alternative to the things he is talking about, but as well as?

[Mr Harper]

We have taken the view that the best way to help people is in the region. Most of the Syrian refugees do not want to come to another country; they want to return to Syria when it is safe, and by supporting them in the region, we enable them to do so. That is the right way to help significant numbers of people. Our support is helping not hundreds but hundreds of thousands of people, which is the right thing to do.

[Sir Gerald Kaufman (Manchester, Gorton) (Lab)]

While in no way setting aside the overall disaster of the refugee situation caused by the Syrian conflict, I ask the Government to pay specific attention to the plight of the Palestinian refugees in the al-Yarmouk camp, who are being slaughtered and dealt terrible blows as a result of this conflict, which is not their conflict. The Minister says that of course one of our objectives is that the refugees should be able to go home, but the Palestinian refugees have no home to go to, and their plight must be given special attention in the overall tragedy. Will he give that specific commitment to the House?

[Mr Harper]

I am pleased to tell the right hon. Gentleman that actually we are helping. UK funding is supporting the United Nations Relief and Works Agency in its work with Palestinian refugees, providing support for more than 350,000 Palestinian refugees in Syria, Lebanon and Jordan. I am pleased to give him the reassurance he asks for.

[Sir Edward Leigh (Gainsborough) (Con)]

France has been mentioned. Just how many refugees is it taking? Are we not spending 15 times more than France on humanitarian aid? Our Parliament refused to bomb Syria; France wanted to bomb it. Which approach is more likely to produce peace and light—our approach or the French approach?

[Mr Harper]

In my initial response, I deliberately did not set out details of our European partners, but my hon. Friend has specifically asked me to. Yes, France has offered to take a few hundred refugees, but it is only prepared to put in £25 million—a significantly smaller amount than us and several other smaller European countries. We are stepping up and doing what is necessary. I think that some other European countries need to reflect on their contribution—if they did, they might look to do a little more.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

Everyone agrees that Britain’s international aid effort is significant, but the Minister is missing the point about refugees. If Britain does not step up, other countries already threatening to shut their borders will see no reason to continue. The population of Lebanon, which I recently visited with World Vision, has grown by a third because of the refugee flows. We need to lead by example, and that is essentially the point of today’s question, which I hope he will take seriously, instead of referring to this as tokenistic. It is too important for that. We need to step up.

[Mr Harper]

If I may say so, I think the hon. Lady is missing the point. Neighbouring countries have significant numbers of refugees because they are neighbouring countries, and of course there are family connections. Ultimately, the refugees want to return home. My right hon. Friend the Secretary of State for International Development was in Lebanon only last week. Part of the point of our huge financial effort is to support Lebanon and Jordan to help them deal with the refugees. That is the whole purpose of our funding. We are not leaving those countries to give the support themselves; we are putting our shoulder to the wheel and assisting them in providing it in the region.

[Mr Henry Bellingham (North West Norfolk) (Con)]

Given that the cost of resettlement is a significant amount of money per person, surely that money is better spent on the ground, where it can immediately save lives. Given that other countries have not lived up to their donor responsibilities, what more can be done to persuade them to do so?

[Mr Harper]

My hon. Friend makes exactly the right point. Looking at how best to deploy our financial resources to help the largest number of people, we need to recognise that there is a difference between taking in refugees in the United Kingdom, as some are calling for us to do, and what we are doing through providing funding for the region. I think that helping hundreds of thousands of people in the region is the right priority, one of which we can be proud.

[Jeremy Corbyn (Islington North) (Lab)]

Will the Minister think again? Many of us welcome the amount of money the British Government have provided to assist refugees—we have no problem with that and fully understand the need. Syria as a whole, however, has hosted a very large number of refugees in the past, particularly Palestinians coming from Iraq, and as my right hon. Friend the Member for Manchester, Gorton (Sir Gerald Kaufman) pointed out, they are being bombed in al-Yarmouk refugee camp. Will the Minister think again and join in a UN programme to give safety to the most vulnerable refugees who, should they remain in place, will be killed for political or social purposes?

[Mr Harper]

The hon. Gentleman talks about refugees who previously lived in Syria. Of course, the help we are providing is not just to the neighbouring countries; a lot of it is for people who are internally displaced in Syria. We are working very hard with our diplomatic partners to secure humanitarian access in Syria, as well as supporting neighbouring countries. I hope the hon. Gentleman will welcome that too.

[Sarah Teather (Brent Central) (LD)]

Before Christmas, I visited Jordan and the Zaatari refugee camp, as well as a number of organisations providing help for refugees living in host communities. I was particularly concerned about the plight of disabled children and children who have managed to travel on their own. The Minister is of course correct to say that most refugees just want to go back to Syria and do not want to come to Britain, but we are not asking for most refugees to come to Britain; we are asking only for those in exceptional need whom we could help to come to Britain. We should continue to make the arguments for Jordan and Lebanon to keep their borders open; otherwise, we really will have a catastrophe.

[Mr Harper]

As I think I said in response to the right hon. and learned Member for North East Fife (Sir Menzies Campbell), we are working closely with UNICEF in Syria and the region on providing support services and protection for 15,000 of the most vulnerable Syrian children and their carers, as well as for refugee children in neighbouring countries. We are providing that support, and we are able to help a significantly larger number of people than the numbers the hon. Lady talks about.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Is this not about trying to create a false set of alternatives? These strategies are not mutually exclusive. We recognise, welcome and acknowledge—this has been made clear by Opposition Members—the Government’s good record on total aid programmes and specifically their excellent record so far on providing aid to Syria. However, the Minister is belittling and undermining that effort by his stubborn and incomprehensible refusal to take part in a United Nations-backed programme targeted on those in most urgent need in Syria—primarily children—for no good reason that we Opposition Members can understand. Will he not reconsider?

[Mr Harper]

I could turn it around and say to the hon. Gentleman that we are providing support for those people in the region. We are helping hundreds of thousands by providing food, water and medical aid—[Interruption.] The hon. Member for Bolsover (Mr Skinner) says that it is the sixth time I have said that, but that is because it is true. It is the right policy, and I do not mind repeating it as many times as necessary. If I look at what some of our European neighbours are providing, I find that they are taking very small numbers of people and not providing any support. We are helping hundreds of thousands more people than most other European countries, and I think we can be very proud of that response.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

There is no doubt that all colleagues mean well, but the enormity of this humanitarian crisis means it is imperative for the Government to continue to help as many people as possible—and help the many rather than the few in this case rather than using helping the few as an excuse. Other agencies are helping, like the Lady Fatemah Trust in my constituency—a small charitable organisation that takes no administrative fees whatever—so what can the Government do to help support those charities? This one has already distributed 103 tonnes of food to Syrian refugees in Lebanon.

[Mr Harper]

I am very grateful to my right hon. Friend for drawing attention to the work of that excellent organisation in her constituency. We are working with various organisations, including partner organisations, but the Secretary of State for International Development is present and will have heard the details about this charity. I am sure that she will discuss with my right hon. Friend whether we can do more to support its work in helping people in the region.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Like most people in Scotland, I am appalled that this Government, unlike Governments in other small European nations, will not take refugee children. I know that they are terrified of UKIP, but even Nigel Farage recognises that there is a difference between a refugee and an immigrant. Why can the Minister not recognise that as well?

[Mr Harper]

The hon. Gentleman seems to be obsessed in a way that we are not. [Laughter.] I have made very clear what our policy is when it comes to assisting the largest possible number of people in the region, and I think that that is the right approach. It enables us to help hundreds of thousands of people by providing water, medical resources and food. We are supporting the neighbouring countries and helping them to do the right thing, and I think that we can be very proud of that support.

[Mark Pritchard (The Wrekin) (Con)]

I am proud of the fact that our Government is the largest donor to Syria. Of course we need a permanent and a political solution, and of course we cannot take every refugee. However, with the greatest respect, I disagree with the Minister. Surely there is room for more children in this country, particularly vulnerable children such as orphans and those who have been most severely disabled as a result of the conflict. We are not talking about taking everyone, but surely we can take some more, as well as helping on the ground.

[Mr Harper]

As I said in my statement, we granted refugee status to 1,100 Syrians in the year to last September, and we will continue to grant such status if we receive asylum applications. We should consider how we can help the largest possible number of people, including those who are vulnerable. As I said in answer to questions from Liberal Democrat Members, one of the programmes that we have been supporting is the UNICEF programme, which has been championed by my right hon. Friend the International Development Secretary and which has helped 15,000 of the most vulnerable Syrian children, and I think that that is the right thing to do.

[Chris Bryant (Rhondda) (Lab)]

This is rapidly becoming one of the largest humanitarian crises of the last 50 years, and it is producing a phenomenal problem politically in that very complex country, Lebanon. Surely the answer in every country must be “both…and”, not “either…or”. Would we not have much more moral authority if we argued to the French that we are doing “both…and”, not “either…or”, and would it not therefore be a good idea for us to start taking more of these children?

[Mr Harper]

There are 2.4 million refugees in neighbouring countries, and about 6.5 million displaced people in Syria. Arguing about helping a few hundred people misses the point. [Interruption.] We have put £600 million into the region—the hon. Gentleman is right: this is the biggest humanitarian crisis, which is why our response is the biggest humanitarian response that this country has ever mounted—in order to help hundreds of thousands of people there. That is the right thing to do, and we are helping an enormously larger number of people than any of our European partners.

[Mr Brooks Newmark (Braintree) (Con)]

I congratulate the Government on all that they have done for refugees outside the country. I recently visited the Nizip refugee camp, which is on the Syrian border in Turkey. The Turks do a tremendous job in delivering support, and it is far more cost-effective for the Government to provide for those refugees—particularly the most vulnerable—in situ, in a refugee camp or nearby. Does my hon. Friend not agree, however, that it is the tragedy within Syria that is greatest, and would he support an initiative at Geneva II to ensure that there are safe corridors inside the country so that we can maximise the safety of the majority of Syrians?

[Mr Harper]

I am grateful for my hon. Friend’s question, and the fact that it is informed by his recent visit to the region where he was able to see practically what our colleagues in Turkey—one of the neighbouring countries—are doing to help on the ground. In answer to his specific question, he is right: we have been pushing for better access within Syria and we need to continue to do so, so that we and the aid agencies can get access to the 6.5 million internally displaced people and provide the help they need, as well as providing help to those in the neighbouring countries.

[Barry Gardiner (Brent North) (Lab)]

The Minister is absolutely right to praise the Department for International Development for the work it has done, but it is his Department that has been called to the Dispatch Box today, not DFID, and he has undermined his own argument. He said that what is being asked of the Government is simply nugatory—that it is insignificant, that it is a token. If it is so small, why do the Government not do it? Is it because it will contribute to the Minister’s net migration figures? Is that what he is afraid of?

[Mr Harper]

First, Ministers speak at this Dispatch Box for the Government and set out the Government’s policy. We do not have different policies in different Departments. The hon. Gentleman ought to go away and have a look at that, because we have a collectively agreed policy and I am setting out the Government’s response to the question asked by the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper). The reason why I do not want to agree to the proposition the hon. Gentleman puts is that the Government do not think it is the right solution. We think that the solution we have set out, which is to provide the UK’s largest ever response to a humanitarian crisis, will be more effective in helping in the region, and I think that is the right thing to do.

[Sir Tony Baldry (Banbury) (Con)]

Does my hon. Friend agree that we need to have some policy coherence here? It is not coherent policy to call for the United Kingdom to admit refugees from Syria if one is not also simultaneously going to be calling for the UK to admit refugees from Darfur, South Sudan, Central African Republic and other jurisdictions. One cannot pray in aid just one country and say that the UK should admit refugees from that country. That simply is not a coherent position.

[Mr Harper]

My right hon. Friend makes a very good point. Our usual asylum rules are in place, and as I have said we have already granted asylum, in the year to last September, to 1,100 Syrian refugees and will continue granting asylum where someone has a claim that meets the rules on providing international protection. My right hon. Friend makes a very good point about the various crises around the world where we apply our normal asylum rules. In this case, I think we have more than stepped up to the plate. The hon. Member for Rhondda (Chris Bryant) said this was an enormous humanitarian crisis: it is, and that is why we have delivered our biggest ever humanitarian response.

[Heidi Alexander (Lewisham East) (Lab)]

A few months ago the Prime Minister stood at the Dispatch Box and suggested that Britain was leading the world in the humanitarian response to the Syrian crisis. Why does that leadership not extend to doing the most human thing of all: giving a home to vulnerable children who have suffered horrendous atrocities at the hands of President Assad?

[Mr Harper]

I do not think anybody can say that this Government are not playing our full role on the diplomatic front. The Foreign Secretary has been leading efforts in trying to get a diplomatic solution and I am very pleased that those Geneva II talks will take place and start this week. They are, of course, a process, not a single point in time. I think we are leading. We are the second largest donor in the world and the largest donor in the European Union. Until very recently when the Germans stepped up, we had donated more money than the rest of the EU combined.

[Mr Julian Brazier (Canterbury) (Con)]

Going back to the question of Lebanon, does my hon. Friend agree that that frail state desperately needs two things: first, the splendid programme of aid we have, and, secondly, much greater assistance for the very brave, but very small and poorly equipped, Lebanese army, which is trying to hold the border and the ring within the country?

[Mr Harper]

My hon. Friend is right. As well as the support we are providing in Lebanon to the Syrian refugees, we are of course making sure that we are providing support to it in order to promote stability. We are also providing help to make sure it can deliver the support it is having to deliver because of its location as a neighbour of Syria. I therefore think we are both helping refugees in Syria and providing the necessary support to Lebanon so that it can step up and do what it is required to do in the region.

[Ian Lucas (Wrexham) (Lab)]

Does the hon. Gentleman, whose views I respect, acknowledge that operating a blanket ban and excluding the most vulnerable few from admission to the UK is undermining the authority with which he speaks from the Front Bench? Will he listen to the mood of the House, which is clear for all to hear, and go away and change this policy?

[Mr Harper]

I do not agree with the hon. Gentleman; we do not operate a ban. As I have said, 1,100 Syrian refugees have been granted asylum in the United Kingdom under our normal rules in which people make a case for international protection. That is more than most European countries have done, and we are providing the largest ever humanitarian response—more than all our European partners combined. I think that is a record of which we can be proud.

[Dr Julian Huppert (Cambridge) (LD)]

Seventy-five years ago, through the Kindertransport, this country saved some 10,000 children from what was happening in Europe. That was not the complete answer to the problems of the holocaust and its terrors, but it made a difference and saved many thousands of lives. The Government are right to be proud of the money they are now putting in, but in much the same way, they could now take further action and save the lives of thousands of children. With Holocaust memorial day coming up, will the Minister reflect on this matter and talk to the Home Secretary to see whether some progress can be made?

[Mr Harper]

It is sometimes a mistake just to talk about the money we are providing, which is why I have tried to set out some of the help that that money is providing in region. It is helping hundreds of thousands of people there, including tens of thousands of children and some of the most vulnerable people. That is enormously more valuable than what I am being asked to do by the Opposition.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Often when we discuss foreign or defence policy, we rightly talk about the need to uphold Britain’s standing in the world. Surely that applies to this situation too. Aid and sanctuary are not opposing policies, and the Minister can clearly hear the will of the House on this matter. Many countries are doing both; why cannot we do the same?

[Mr Harper]

The hon. Gentleman says that many countries are doing more, but I do not know who he could mean. We are providing more support to the neighbouring countries in the region than any other country except the United States of America. Of the 28 member states of the European Union, we were until very recently providing more financial support than the rest of the EU combined. That is a record of which we can be proud, and on which we lead.

[Bob Stewart (Beckenham) (Con)]

I totally support the Government in the amount of humanitarian aid that they are providing, but let us be quite clear that the key to sorting this problem out is to stop the war. That will happen when one side or the other wins, but there is now a stalemate within Syria. Probably the only way ahead will be through a United Nations Security Council resolution. How are we going to get such a resolution, which would be the first step towards stopping what is happening in that very sad country?

[Mr Speaker]

The hon. Gentleman’s question was extremely interesting, but it was a tad distant from the question of refugees. Perhaps with a degree of licence, however, and knowing the dexterity of the Minister, we can hear his response.

[Mr Harper]

You can be assured, Mr Speaker, that I shall not go much wider than what I have already said. My hon. Friend will know the challenges involved in getting a United Nations Security Council resolution. We have welcomed the announcement of the Geneva II process, which starts this week, as well as the positive news at the weekend that the national coalition has taken the difficult decision to involve itself in the process. That will be the best—and probably the only—solution to getting a sensible, peaceful settlement in Syria, so that those refugees can do as they want to do and return home to rebuild their country.

[Several hon. Members]

rose—

[Mr Speaker]

[Interruption.]—I call Mr Huw Irranca-Davies.

[Huw Irranca-Davies (Ogmore) (Lab)]

Thank you, Mr Speaker.

[Mr Speaker]

I do not want the hon. Gentleman to think that I normally have to take a deep breath before I hear him speak. I am delighted to hear what he has to say, even though I do not yet know what it is. I am sure that he does, however; or at least, I hope so.

[Huw Irranca-Davies]

I do not blame you for taking a deep breath before I speak, Mr Speaker. The purpose of these urgent questions is for the Minister, first, to outline what work the Government are doing and, secondly, to listen to the will of the House. May I urge him, once again, to listen to the voices in all parts of this House that are saying that it is not a binary choice between the excellent humanitarian aid the UK Government and UK people are currently gifting to the region, and receiving here in this country a few of the most vulnerable children? We should be doing both, and the Minister should listen to the voices from these Houses of Parliament.

[Mr Harper]

I am sure that your intake of breath was because you were spoilt for choice by the excellent number of colleagues on both sides of the House who are waiting to ask a question. Let me respond directly to the hon. Gentleman. The question for the Government is: with the resources at our disposal, how can we help the largest number and deliver the best support we can? Our judgment is that we can deliver that help and support best in the region, by providing the support we have—we are the second largest donor in the world. We are helping not hundreds but hundreds of thousands of people. We think that is the right solution, but we have also already accepted, under our normal terms, more than 1,000 refugees from Syria in the year to last September.

[Rehman Chishti (Gillingham and Rainham) (Con)]

I very much welcome the Minister’s statement. On resettlement in the region, have further discussions taken place with countries such as Qatar, Saudi Arabia and the United Arab Emirates? Those three countries are the ones pushing for change in Syria by supporting the opposition, so are they taking their fair share of refugees?

[Mr Harper]

My hon. Friend will of course know that we continue to talk to our partners in the Gulf on this issue, as on many others, and they and we keep this matter under review. I know that they are providing help and support where they can as well.

[Mrs Madeleine Moon (Bridgend) (Lab)]

We know that al-Qaeda and the Syrian Government have been targeting medical personnel, including British medical personnel who have gone to provide assistance. Given that there are problems with accessing medical aid in Syria and in the neighbouring countries that are providing asylum to refugees, is it not right that the UK offers humanitarian admission—not refugee status—to this country for those needing medical aid, including children, disabled children and those who have been tortured? Is it not our moral responsibility to act in that way?

[Mr Harper]

What the hon. Lady says about medical support for people who require it—critically injured or sick people—is very important, which is why the work we are doing with the World Health Organisation has supported, across Syria and in neighbouring countries, nearly a quarter of a million people. That is a significant number, and it is far more than anyone is talking about providing for in the United Kingdom.

[Margot James (Stourbridge) (Con)]

We can indeed be rightly proud of the humanitarian assistance that this country has provided, which is second only to that provided by the United States. However, I urge the Minister to consider how much more we should be doing, despite the lack of action on the part of some neighbouring European Union countries. We are now being asked by the UN to take on some special cases, and that would not necessarily be a tokenistic response if we could combine that with the sheer number of special cases that other countries might be prepared to take. Will he at least not rule out our participation in such a programme in the future?

[Mr Harper]

We always keep these matters under review, but we judge that helping the largest number of people is best achieved in the region. As I said, we have accepted more than 1,000 asylum seekers in the United Kingdom, but we think that the help we are providing—not only food and water, but medical support, including to the most vulnerable and to children—is best provided in the region, working with our partners.

[Paul Blomfield (Sheffield Central) (Lab)]

The House has made it clear that this is not seen as a question of, “Either aid or refugees.” The Minister has belittled the number of refugees taken by some other countries in Europe. Does he not accept that if we took a number even proportional to the number Moldova has taken, we would be making a significant difference to the lives of hundreds of the most vulnerable children?

[Mr Harper]

When the hon. Gentleman talks about making a difference to the lives of hundreds of children, he should understand—I have set it out many times—that we are helping not hundreds of children but hundreds of thousands of children in Syria and the neighbouring countries, and that is the best way of helping. We are helping enormous numbers of people in incredibly important ways, such as by providing food, water, medical attention and shelter. We are also supporting the neighbouring countries that are doing so much to help. That is the right thing to do and something of which we can be proud.

[Julian Smith (Skipton and Ripon) (Con)]

The Minister talked earlier about how poor some countries have been at pledging in this crisis. Does he think that Britain can be proud of its Ministers and the work that they have done to get other countries to pledge, culminating last week in the Kuwait conference where $2.4 billion was pledged, $1 billion more than last year?

[Mr Harper]

My hon. Friend makes a good point. We have been leading on that approach. We have carried weight because of our own very significant donations. He rightly draws attention to the pledging conference. As I have said, up until last week, we had pledged £500 million, most of which has already been distributed, and is providing help to the region. Last week, the Secretary of State was able to increase that by a further £100 million, demonstrating that we put our money where our mouth is.

[James Duddridge (Rochford and Southend East) (Con)]

This debate has been typified by whether we should be doing either/or. In many ways, I congratulate the Government on doing both. By that I mean accepting the 1,100 refugees and also focusing on the other 2.3 million. On reflection, it is the right thing to spend the money in the camps, but could we have a differentiated response for that 2.3 million? We should look at helping categories of individuals, such as children, and use UK expertise effectively and efficiently in-country to help the maximum number. Rather than taking out just one or two—or 500 in this case—and bringing them back to the United Kingdom, we could help far more of them in their own country.

[Mr Harper]

I think my hon. Friend is right. Some of the work we are doing with UNICEF in Syria and in the region includes providing support services and child protection for 15,000 of the most vulnerable Syrian children and their carers, as well as for refugee children in neighbouring countries. That is a significant amount of help to many, many thousands of children.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I, too, have recently visited Turkey and the Nizip refugee camp, which is receiving support from Saudi Arabia, the United Arab Emirates and Qatar. I have seen first hand the scale of the human tragedy that is unfolding there. It is hard not to be moved by the plight of the 2.4 million Syrians who have been displaced. However, on talking to them, it is obvious that their desire is not to come to the UK but to go home. The Government are doing the right thing in providing support on the ground to the most vulnerable people in the camps and in the communities, and we have to work tirelessly to allow all those people to go back to their own home country.

[Mr Harper]

I am grateful to my hon. Friend for his question, which was informed by his recent personal experience. He answered rather better than I did the earlier question about the support the Gulf countries are providing to Turkey. He is exactly right. We are providing diplomatic support to the Geneva II process, which is the best solution to a settlement in Syria, and we are providing help to the 2.4 million refugees and the 6.5 million internally displaced people in Syria, and that is the right thing to do.

[Mr Philip Hollobone (Kettering) (Con)]

Having visited Syrian refugee families in Lebanon, I find it staggering that this country should be accused of being uncaring towards Syrian children. We are the first country in the world to pledge 0.7% of our economy every year in international aid. As the second biggest donor to the Syrian refugee crisis, will the Minister confirm that we are helping the second largest number of Syrian children?

[Mr Harper]

I thank my hon. Friend for that question as he draws attention not only to the help that we are providing in Syria but to the help that we are able to provide across the world with our international development spending, which, although not universally popular, makes sense from both a humanitarian and a security perspective. He has put his finger on the help we are providing. By being the second largest global donor, it follows that we are almost certainly helping the second largest number of people after the United States of America.

[Mr John Leech (Manchester, Withington) (LD)]

The sizeable Syrian community in Greater Manchester makes a valuable contribution to that city and the wider area, so places such as Manchester are therefore best equipped to support Syrian children who have faced unmentionable suffering. Surely the Minister needs to think again.

[Mr Harper]

As I said, we are providing help and support to tens of thousands of Syrian children, including some of the most vulnerable, working with our international partners. The work we are doing in the region is more effective than some of the solutions proposed by hon. Members. I know that the hon. Gentleman does not agree, but I think that the Government’s policy is the right one and it is one that we will stick to.

Points of Order

Monday 20th January 2014 Commons Chamber

16:20

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

On a point of order, Mr Speaker. The Foreign Secretary made a statement to the House last Monday on chemical weapons from Syria. It now transpires that they are to be destroyed at the plant in Ellesmere Port in my constituency and that the Government and the company involved knew at the time. That has understandably raised a number of legitimate concerns and questions that need to be answered. Has the Foreign and Commonwealth Office approached you, Mr Speaker, to add to what was said last week?

[Mr Speaker]

The short answer is no, I have not been approached by a Minister in the Foreign and Commonwealth Office. The hon. Gentleman is an assiduous parliamentarian of more than 20 years’ standing and I feel confident that he will be well aware of the parliamentary timetable for the week, which includes questions to the Secretary of State for Foreign and Commonwealth Affairs tomorrow. I confidently predict that he will be in his seat and that he will leap up from it in a bid to catch my eye.

[Ian Paisley (North Antrim) (DUP)]

On a point of order, Mr Speaker. The Minister for Foreign Affairs and Trade for the Republic of Ireland, Mr Eamon Gilmore, made a statement at the weekend that he intends to get involved in the internal affairs of Northern Ireland with regard to protests, flags and parades. Have you, Mr Speaker, learned from the Northern Ireland Secretary whether she intends to make a statement about that intrusive intervention by the Foreign Minister for the Republic of Ireland?

[Mr Speaker]

I have heard no such thing thus far, but the hon. Gentleman has put his concern on the record and it will have been heard by those on the Treasury Bench. I feel sure that news of his concern will wing its way to the Secretary of State in a matter of moments.

Intellectual Property Bill [Lords]

Monday 20th January 2014 Commons Chamber

Second Reading

16:22

[The Minister for Universities and Science (Mr David Willetts)]

I beg to move, That the Bill be now read a Second time.

I am delighted to bring the Intellectual Property Bill from the other place to this House. The Government believe in business, large and small, and in removing obstacles that prevent growth. That is why we have pledged to invest a further £4 billion in the industries of the future and why legislative changes, such as those before us today, are so important.

In 2010 my right hon. Friend the Prime Minister commissioned Professor Ian Hargreaves to carry out a comprehensive review of intellectual property. The Bill represents one important element of the Government’s response to his recommendations. The Hargreaves review confirmed that intellectual property is important to the UK and to a wide range of industry sectors. This year, the UK has been rated number one in Taylor Wessing’s global IP index in obtaining, exploiting and enforcing the main types of IP rights. Total annual investment in intellectual property rights represents 4.3% of our GDP.

The Bill proposes changes to help businesses better to understand what is protected under the law, to reduce the need for costly litigation and to provide greater certainty for investors in new designs and technologies. It aims to simplify and improve design and patent protection to help businesses to clarify the legal framework for intellectual property and to ensure that they are appropriately supported by the international IP system. These reforms are vital in cutting red tape to help British businesses to succeed.

UK business invested more than £15 billion in design in 2009, and the Bill seeks to protect and develop this important industry. It will make important changes to design law by strengthening and clarifying the framework that supports the design industry and aligning the UK and EU frameworks where sensible. We particularly aim to help small and medium-sized enterprises, which raised concerns about protecting their designs in the consultation process.

The design sector, which accounts for about 2% of UK export earnings, is made up almost exclusively of SMEs. The Hargreaves review identified the importance of design law and asked for more evidence concerning IP and the design industry. We addressed this challenge through a consultation in 2012. Industry informed us that 350,000 people are employed in the UK’s design sector and that 87% of companies in the design sector have fewer than 10 employees and 60% have fewer than four employees.

These small businesses have made clear to the Government the difficulty that they have in protecting their designs from copying. For example, Anti-Copying In Design—ACID—responded:

“We believe that the currently available ‘punishment’ does not go far enough in fitting the crime of blatant and consistent design infringement and that those who make it their business to follow this unlawful way of doing business should be dealt a criminal record.”

I pay tribute to ACID for its activities in working with us on this negotiation.

[Mr James Gray (North Wiltshire) (Con)]

My constituents at Dyson, which is one of the few very large companies that employ, I think, several thousand designers and engineers in Malmesbury in my constituency, of course welcome the broad thrust of the Bill. None the less, they are concerned about the fact that clause 13, to which my right hon. Friend refers, would criminalise people who might inadvertently copy someone else’s design. Will he not clarify that by inserting the word “intentionally” into clause 13, to deal with the concern of people such as those who work at Dyson?

[Mr Willetts]

My hon. Friend speaks very well on behalf of Dyson in his constituency. I recently met representatives of Dyson. They have a very important concern, which I hope we will be able to address in Committee.

I was paying tribute to ACID’s efforts. Following consideration and consultation, one of the central proposals in the Bill is to introduce a criminal sanction for those who set out intentionally to copy a design in the course of business. That will give design the same protection, in broad terms, as trade marks and copyright. One partner of a leading intellectual property law firm recently described the sanction as “evolution not revolution”, and the proposed changes as “sensible and pragmatic”.

I recently met one SME from Sheffield—I think it is located in the constituency of the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), whom I do not see in his place—and the representative of Burgon and Ball told me that it had to cope with 20 civil disputes over alleged design infringements in a period of two years. This problem will have been raised with Members on both sides of the House by SMEs active in the design sector. The problems caused by such design infringements impose an unmanageable financial burden on some of our most innovative small companies. We believe that other means of redress should be available, and the introduction of criminal sanctions will, for the first time, enable small design companies to bring the issue of copying to the relevant enforcement agency.

[Pete Wishart (Perth and North Perthshire) (SNP)]

The Minister accurately sums up the view of Anti-Copying in Design when it comes to registered design rights, but he will have seen its concern about the need for the Bill to cover unregistered design rights, given that the vast majority of designs are unregistered. Will he consider that as the Bill is debated in Committee?

[Mr Willetts]

I will, of course, consider all these issues as the Bill is debated in Committee. I think we have got the balance broadly correct on that issue, but I am happy to consider it further in Committee.

[Richard Fuller (Bedford) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. As many IP infringements occur in goods manufactured outside the United Kingdom, how will criminal prosecutions take place within the United Kingdom to protect rights?

[Mr Willetts]

We will be able to apply the provision to any companies active within the UK. If the goods are manufactured abroad, there will nevertheless be some distribution or other entity within the UK.

[Mr David Lammy (Tottenham) (Lab)]

I am pleased to see the Bill before the House, but the Minister will recognise that large sections of the Hargreaves review, and indeed of the previous Government’s copyright review, are not in it. Will he say something about what is not contained in the Bill, for those concerned about copyright infringement, and on the context in which young people need the freedom to create?

[Mr Willetts]

I do not know to what extent you, Mr Speaker, would permit the debate to range across the entire Hargreaves agenda. We have introduced a small but perfectly formed Bill that delivers part of that agenda, but it is an important part that will help the design industry, in particular. I will try to focus my remarks on what is actually in the Bill. The Government, as a whole, have already implemented some of Hargreaves and there is more to come. However, given that this is the Second Reading of an important Bill, particularly for the design industry, I hope that the right hon. Gentleman will understand that I will try to focus on that.

The crucial change set out in the Bill—the introduction for the first time of criminal sanctions for infringement of design rights—is not intended to have a chilling effect on innovation or legitimate and competitive risk taking in business. The offence has been carefully drafted to ensure that innocent infringement is not caught. In addition, it will be measured to the high criminal standard of proof of “beyond reasonable doubt”.

That measure sparked much debate in the other place, and our colleagues there made a number of changes to the clause to improve and tighten the sanction. The Government proposed an amendment to ensure that incidental use of a copied design would not be criminalised. Following discussions with industry, an additional amendment was made to provide a defence for those having a reasonable belief of non-infringement. That additional defence was welcomed by the Opposition and industry representatives. We have continued to talk with businesses big and small. Some still have concerns about the scope and clarity of the new offence. We are continuing our discussions with them—this relates to the earlier intervention by my hon. Friend the Member for North Wiltshire (Mr Gray)—and I hope to say more about it in Committee.

Our colleagues in the other place have sent us a much improved Bill. We have continued to improve it since it left the other place as other concerns have arisen. The intellectual property Minister, his officials and I have continued to engage with a number of interested parties, such as representatives of the pharmaceutical, aerospace and IT industries, on their concerns. That included discussions on the detailed wording of the qualification criteria for unregistered design rights. We have listened carefully, and I am pleased to announce that I will be tabling an amendment to the clause in Committee in the light of businesses’ concerns that it is unduly broad. It will ensure that the principle of reciprocity between countries is maintained. I am grateful to the IP Federation for raising the issue so effectively.

The Bill also makes a number of small but important changes to the definitions and legal framework protecting UK designs. They all recognise the need, identified by Hargreaves, to simplify and clarify the designs system. The measures include changing the standard position for ownership to make the designer the default owner of a design, rather than the commissioner. Such changes bring UK and EU design laws into harmony and provide a more logical and simplified system for designers and design users.

In addition, the Bill provides protections from infringement for businesses and individuals using designs in specific circumstances. For example, allowing use of an unregistered design for teaching purposes, such as carpentry in a school, is a sensible measure. So too is the provision of a defence for third parties when, in good faith and without copying, they have made preparations to use a design before a similar design is registered. This and other measures in the first half of the Bill provide more certainty for business and are aimed at modernising and improving the design framework.

The Government’s consultation on designs sought views on the introduction of a non-binding opinions service along the same lines as that currently available for patents, and the majority of respondents supported that. As well as this, the Bill will therefore extend the patent opinions service. That means that the Intellectual Property Office will provide a wider range of expert, but non-binding, opinions on IP in disputes. The existing opinions service provides a low cost means of resolving such disputes, in many cases without a need to seek redress in the courts. Almost 70% of respondents to an IPO review who had used the service considered that it should be extended to other areas of IP. Over 65% wished to see it extended to registered designs and 40% wished to see it extended to the UK unregistered design right. Many of these users are small and medium-sized enterprises that could not afford the high costs of civil litigation. We are therefore pleased that the Bill is going to extend the non-binding opinions service.

The Bill also makes important changes to the patents framework. In particular, innovative businesses in the UK have been waiting for over 40 years for a single European patent system. Creating a business-friendly patent regime for Europe is an important element of the Government’s growth strategy. My right hon. Friend the Prime Minister was instrumental in the negotiations on the unitary patent and the unified patent court. I am therefore very pleased that the Bill gives us the power to implement the pan-European court structure that will underpin the long-awaited unitary European patent system. [Interruption.] I was overcome with emotion at the triumph of the Prime Minister’s negotiating skills on this. The unitary patent could save UK businesses up to £20,000 per patent in translation costs alone—a saving of enormous benefit. Former Supreme Court justice Lord Walker of Gestingthorpe described the unitary patent as

“a remarkably bold step forward, on which successive Governments are to be congratulated, because it has been a very long haul indeed.”

Establishment of the court will further enhance the UK’s reputation as a centre of excellence for commercial dispute resolution, especially in the field of life science patent litigation.

The Hargreaves review stressed the importance of intellectual property for innovation and growth. It argued, however, that policy development in this area had not always been sufficiently directed towards those objectives because of an incomplete evidence base and strong lobbying activity. Innovative businesses grow twice as fast in jobs and in sales as businesses that fail to innovate. The Government therefore want to ensure that the IPO has a sharpened focus on innovation and growth. The Bill requires a report to be submitted to Parliament on how the activities of the IPO contribute to this goal. The report will also increase transparency and allow a wider range of interested parties to scrutinise the work of the IPO.

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

Will the report that the IPO will provide to Parliament each year include sections to do with the problems that companies and individuals face with intellectual property rights? I recognise the point about showing how the system is working and impacting on growing the economy, but will areas of dispute or problem areas be covered as well?

[Mr Willetts]

Yes, I certainly envisage the report covering issues where further work may be needed. It will be a report on the IPO’s overall activities.

I now turn to the set of provisions in part 3. I am pleased to be introducing a change that has been called for by the Justice Committee and by the UK’s higher education sector—an exemption to the general right to information under the Freedom of Information Act 2000 to protect pre-publication research. The lack of a dedicated exemption has, for example, left academics worried about whether a freedom of information request might be made for their lab notes before they publish an article in Science or Nature.

The lack of such an exemption has increasingly led businesses to demand contractual guarantees that their data will be secure, which is not only costly in time and resource but has inhibited research collaboration between universities and businesses. For example, the Russell Group has informed the Government that significant university resources were needed to negotiate funding for a studentship with a large multinational company that was unhappy with the perception that its sensitive data might be released. An exceptional compromise agreement was required to resolve that situation, because the university and business were unable to sign off the contract.

[Dr Julian Huppert (Cambridge) (LD)]

The Minister is absolutely right to highlight the importance of clause 20, which is very welcome. He will be aware that the Wellcome Trust and others, especially those in the bioscience sector, are concerned about the lack of clarity on when protection starts in relation to people preparing a piece of research, which is often the creative element. The Wellcome Trust has proposed two sets of two extra words that could be added to provide clarification. Will he make clear his position and say whether he is prepared to update the Bill?

[Mr Willetts]

My hon. Friend has made that point to me and I have considered it. He is right that the Wellcome Trust has also raised it. Our view at the moment is that we should stick with the proposals in the Bill, because they have the merit of copying exactly what is already done in Scotland. Of course—I am looking across the House at representatives from Scotland—we are always keen to learn from Scottish examples. Indeed, it is known in the trade as the Scottish exemption. We think that having two rather different provisions for research across the UK might be unhelpful, and that the extra words might cast doubt on the effectiveness of the Scottish provision. We have no reason to doubt the Scottish provision, which currently gets the balance right and ensures protection. I am happy to debate the point further in Committee, but I must tell my hon. Friend that we are not at the moment inclined to go as far as the Wellcome Trust has asked.

Let me give another example, which comes from Universities UK, of the problems that the provisions will undoubtedly tackle. A professor turned down an appointment to the European Research Council as an expert referee because the contract could be read to mean that any material had to be subject to absolute confidentiality. His commitment to that was perceived to be difficult due to existing provisions in the Freedom of Information Act, and ultimately the contract was not signed. As a result, the professor did not take up the work, and the European Research Council lost valuable expertise.

The introduction of a specific exemption for research will therefore provide clarity both to higher education institutions and non-public sector research partners—our excellent research community—and enhance the UK’s leading position in international research.

[Richard Fuller]

Before the Minister concludes, will he apprise the House of the changes that he said will help to boost small and medium-sized enterprises to grow? When he comes to the Dispatch Box to report on the success of the measures in five years’ time, what metrics will he use to help us to evaluate whether the changes proposed in the Bill have succeeded?

[Mr Willetts]

That is a very good question. Above all, we will look to the further growth of innovative SMEs in our design sector. We have a fantastic network of designers, especially in small businesses, but many of their innovations are currently taken all too easily, sometimes by bigger companies that have almost a corporate strategy of copying and lifting what our smartest entrepreneurs and designers are doing. I want our design sector and especially such SMEs to thrive, and I hope that the sector will grow strongly over the years. That will be a very good test of the central provision in the Bill, which is to extend more protection to our world-class design community.

The changes that are introduced by the Bill will mean that UK businesses that want to protect their products and technologies through patents and design rights will be better off. The Bill will support our hugely successful design sector and make the law clearer and easier to navigate for innovative small businesses. I trust, therefore, that the House will be content to give the Bill a Second Reading. I commend it to the House.

16:44

[Mr Iain Wright (Hartlepool) (Lab)]

I thank the Minister for outlining the provisions in the Bill.

Intellectual property matters, and it is growing in importance in the modern economy. Britain will pay its way in the world, create wealth and provide prosperity and higher living standards for all her citizens not through a race to the bottom and by trying to undercut the rest of the world on wage rates and employment rights, but by emphasising the importance of knowledge, creativity and innovation. That is certainly true of our creative industries. As the CBI said in its recent report:

“Our culture and creativity is at the forefront of the UK’s global appeal”.

Our fashion industry is worth almost £21 billion. As the House can see, I am a leading ambassador of that industry. We have the largest broadcasting hub in Europe. Global successes such as “Downton Abbey” would not have been made here and would not have provided jobs in the UK and export success for this country had it not been for the strong IP framework.

Britain boasts one of the world’s largest music industries. It generates £3.5 billion for the UK economy and provides more than 100,000 jobs. In four of the past five years, British artists were the highest selling artists in the world. One in eight albums sold anywhere on earth are by British artists. It is particularly apt that we are discussing this matter today, because I understand that today is blue Monday, which is apparently the most miserable day of the year. Right hon. and hon. Members will know that the highest selling 12-inch record of all time was “Blue Monday” by New Order. I know that the Minister is a fan. I can see him now in the Hacienda in Manchester, with a wide-eyed stare, dancing to “Blue Monday”.

The UK has the fastest growing digital economy in the G20. Our video games industry is worth £1 billion a year and is growing at a rate of 6.5% per annum.

The UK film industry goes from success to success. It supports almost 120,000 jobs in Britain and contributes £4.6 billion to our GDP. In the past few years, the global film industry produced 42 blockbuster films—that is a film with a budget of more than $100 million. Of those 42 films, 24 were produced in Pinewood or Shepperton studios. That is a fantastic achievement for our country and something of which the House should be proud. I am particularly pleased that the new “Star Wars” film is being filmed here. I hope that it will be more like “The Empire Strikes Back” than “The Phantom Menace”. The recent success of “12 Years a Slave” again shows the enduring quality of the British film industry.

[Ian Paisley (North Antrim) (DUP)]

Will the hon. Gentleman also plug “Game of Thrones”, which is filmed in Northern Ireland and is one of the most successful HBO offerings on television?

[Mr Wright]

The hon. Gentleman makes a very good point. In the creative industries, and in industry as a whole, there are incredibly important hubs across the United Kingdom. He mentions the film industry in Northern Ireland and there are other examples, such as the great video games cluster in Dundee. There are pockets across our country where creativity and industry are booming.

The UK publishing sector is bigger than our pharmaceutical industry and reaches across all aspects of our economic life. The book market in the UK is the fifth largest in the world and is growing. Every year, 120,000 new book titles are published, including academic journals, titles that tie in with TV or film rights, novels and biographies.

[Mr Sutcliffe]

My hon. Friend will be aware of the report by the Culture, Media and Sport Committee on creativity and innovation, which highlights the importance of the book industry. Will he speak about the concerns of the book industry about the role of Google, whose representatives have visited the Prime Minister’s office 17 times in the past two years?

[Mr Wright]

I thank my hon. Friend for that question, but where does he think I am getting these statistics, if not from his Committee’s report? It showed the important role that creative industries play in our economy in providing well-paid jobs, innovation and investment in the country. It also mentioned the tension between content companies and technological companies. My hon. Friend mentioned Google, and I seem to remember reading in the transcript of his Committee’s proceedings that the IP Minister, Viscount Younger, said that he finds it more difficult to get into No. 10 Downing street to meet the Prime Minister than the representatives of Google. Perhaps that needs to be dealt with.

In the Committee’s report on that excellent review of the UK creative industries, my hon. Friend and other hon. Members stated:

“Given the importance of the creative sector to the UK economy and the relative importance to that sector of strong IP protection, strongly enforced, the Government must do more to protect and promote UK IP as a system for growth.”

It would be wrong, however, to think of IP as confined only to the creative industries. High-value manufacturing is dependent on innovative design.

[Helen Goodman (Bishop Auckland) (Lab)]

Will my hon. Friend give way before he leaves the subject of the creative industries?

[Mr Wright]

Before I move on to manufacturing I will give way to my hon. Friend.

[Helen Goodman]

Everything my hon. Friend has said about the creative industries shows how important they are. Does that not show how bizarre it is that the Government have not made the creative industries one of their 11 priority sectors?

[Mr Wright]

Yes, it does; my hon. Friend is spot on. Given that 11 industrial sector documents—I think—have been produced, and that the creative industries are a fantastic growth area that provides innovative and well-paid jobs and projects around the world an image of the UK’s soft power that is envied by other countries, and given how that can bring further investment and prosperity to our country, I do not understand why the Government have not got a creative industries industrial sector document. Perhaps the Minister will respond to that point when he sums up the debate. Perhaps it is because Whitehall is often silo-driven and IP is often in a conflict between the Departments for Business, Innovation and Skills and for Culture, Media and Sport. No one from the DCMS ministerial team is on the Treasury Bench, and I wonder whether there is a degree of tension and conflict. Are the Government speaking with one voice when it comes to IP and to supporting and promoting our fantastic creative industries?

[Mike Weatherley (Hove) (Con)]

Does the hon. Gentleman agree that it may be time to start moving towards a US-style IP tsar to co-ordinate the various Departments?

[Mr Wright]

I think the hon. Gentleman is pitching for that job, so he should have declared his interest. However, he makes an important point. During deliberations in Committee, it will be important to table amendments to consider what the Intellectual Property Office will do to promote innovation and jobs in the UK economy. Having some sort of IP champion, IP tsar, or whatever the hon. Gentleman wishes to call the role, needs to be considered closely, and hopefully we will do that in Committee.

Let me turn at last to manufacturing. High-value manufacturing is dependent on innovative design to produce comparative advantage. Indeed, high-value manufacturing in the 21st century requires a blend of design, creativity, innovation and production to compete and succeed. Modern means of research, development, production and distribution all emphasise in the modern age open, innovative models and the sharing of ideas. That makes IP more, not less, important.

The increased proportion of intangible assets on the balance sheets of many firms means that there is an ever-growing importance to securing returns from those assets. That in turn means that companies need to pay more attention to IP issues. In the 21st century, a strong intellectual property regime is needed. IP should not be seen as regulation or bureaucracy, with all the negative connotation that that entails. IP is not regulation but a legal right, and it would be wrong to suggest that, in an era of globalisation and digitisation, IP is irrelevant or an anachronism that needs somehow to be swept away. Businesses will not invest if their innovation or creativity is not protected. If somebody has created or invested in something, they should have the right in law to derive benefit from that creation or investment. That right should be protected and enforced by the legal system.

The Minister rightly referred to the recent global IP index, produced last year by Taylor Wessing. It should be a source of pride to the House that the UK was placed No. 1 in the world for IP. We need to protect, maintain and enhance that position as much as possible. However, the difference between the top three ranked nations in that report—the UK, Germany, and Netherlands—was only 0.2%, showing intense global competition and the perils of introducing proposals that might undermine our position as No. 1 in the world.

[Jim Dowd (Lewisham West and Penge) (Lab)]

My hon. Friend says that the UK is the No. 1 place in the world for IP, but the ranking in that survey was actually for the enforcement of copyright and trademarks. It was ranked only in second place for patents and in fifth place for design. IP is not a single entity; there are a lot of activities, and we protect some better than others.

[Mr Wright]

My hon. Friend makes an important point. There is a second consideration. We might have the best framework in the world, but if it is not enforced properly, it is largely redundant. We need to ensure that enforcement is maintained.

It is important to retain our position as No. 1 in the world for IP. We should also reinforce the need to avoid needlessly tinkering with the system. The House will agree that IP needs to adapt to take account of changing circumstances such as globalisation; growing collaboration across firms; and new, often disruptive, technologies such as 3D printing and digitisation. All of those bring many challenges. However, it is also important to be mindful of avoiding changes that undermine business certainty and thereby deter investment and innovation.

It is in that context that the House considers the Bill, which is brief and flimsy. It gives the impression of being the remnants of a much larger piece of legislation—perhaps it is the remnants of the much vaunted but hitherto unseen communications Bill. That reinforces the notion that the Government do not have a strong and clear vision on how to proceed with IP, leaving industry with uncertainty. Ministers could be accused of tinkering and making piecemeal changes that could undermine confidence and investment in our economy.

In many respects, the Government are continuing the approach they used last year with the Enterprise and Regulatory Reform Act 2013, several sections of which are devoted to IP and copyright. They were not discussed with stakeholders, and subsequently there was much alarm within the creative industries. The Act deterred investment in the UK economy. We should avoid that when possible.

As the Minister has said, the Bill is meant to simplify and to provide greater clarity and certainty on the IP framework, but it often does not do so. For example, the Government’s recent design consultation asked whether the Registered Designs Act 1949 should be amended by providing greater consistency between joint ownership provisions for both registered and unregistered designs. All or most respondents to the consultation agreed with the move to greater clarity and consistency in principle, but for whatever reason the Government have decided not to change the law in that regard.

Clause 13, to which I will return, has been mentioned a number of times. It provides a significantly different approach to registered and unregistered design rights. It is as if the Government are saying, “We like consistency in certain areas, but not in others,” which merely provides inconsistency by a different name. The measure is a new inconsistency, so it provides greater complexity and subsequent uncertainty to business. We will want to scrutinise the Government on those inconsistencies in Committee.

That said, much in this slight Bill is to be commended, and the Opposition will not oppose it this evening. For example, clause 8 is welcome. It allows UK implementation of The Hague agreement, which allows for the protection of design rights throughout the EU with a single application rather than multiple applications in each country. That should help small and medium-sized firms to cut down on costs.

I am pleased that, in another place, the Government moved away from implementing that measure via the negative procedure, and that they listened to my noble Friends on the Opposition Front Bench and the recommendations of the Delegated Powers and Regulatory Reform Committee and moved to the affirmative procedure. I hope that that listening exercise will continue in Committee.

Clause 17 enables the establishment in the UK of the unified patent court. The use of the court throughout Europe will provide a consistent and welcome framework in participating European country. It is particularly pleasing for the UK economy that part of the court will be based in London, with the prospect of another part of the country—perhaps Hartlepool—being the location for a second part. I commend the Prime Minister, good European that he is, for helping to secure that.

[Pete Wishart]

One place where one of these divisional courts will not be—so far—is in Scotland. Will the hon. Gentleman join me in ensuring that the Bill is amended so that the Court of Session can continue the centuries-long tradition of ruling on patent cases in Scotland? Without that, the extra costs and burdens on Scottish businesses will be intolerable.

[Mr Wright]

When I was reading Hansard from another place on this matter, many noble Lords mentioned the importance of Scotland as a possible second area. It would be useful in Committee to discuss that and, possibly, the wider point of whether independence for Scotland would help to produce that—or otherwise, as I would suspect.

Exemptions in the Freedom of Information Act 2000 for continuing programmes of research, as contained in clause 20, will maintain UK universities’ excellent reputation around the world for research, without, as I think the Minister said, forcing institutions to make public research without its being completed or subject to peer review. That is also to be welcomed. There are certain provisions, however, that will need to be looked at closely in Committee, and which might have a detrimental effect on UK-based innovation. The Minister mentioned this point, and I was pleased with his accommodating remarks on the possibility of amendments in Committee. This is a concern for UK-based manufacturing.

Clause 3 extends the qualification of unregistered design rights to the functional designs of companies incorporated in countries that do not offer reciprocal protection for UK functional designs. The Minister mentioned the IP Federation, which has been particularly strong on this point. It stated:

“Under the changes proposed in Clause 3 of the IP Bill, parity no longer exists and UK manufacturers are strategically disadvantaged with additional hurdles being introduced to the manufacture of functional designs in the UK. This will directly impact those engaged in general engineering because of the importance of functional designs which are covered by UK UDR.”

It went on to state:

“The manufacturing facilities of both small and large UK-based engineering companies will be seriously impaired by extending UK UDR to foreign corporate entities. Careful consideration would need to be given to the location of manufacturing facilities as the manufacture of functional articles in the UK will be inhibited. It would become more attractive to move design and manufacturing offshore and to commercially source functional designs from businesses outside of the UK where the copying of functional designs is lawful.”

It is important for the rebalancing of the economy that we in this House do nothing that adversely affects high-value manufacturing in this country. Clause 3, as currently drafted, poses a threat to investment and manufacturing capability in the UK, and could put us at a competitive disadvantage with other parts of the world when considering manufacturing locations. That cannot be right. I am pleased with what the Minister has said. We will examine this matter closely in Committee. I hope we can work together to introduce amendments that do not inhibit UK-based manufacturing.

As has been said, the most contentious part of the Bill is clause 13, which brings into law criminal sanctions for deliberate infringement of registered designs. I think that this will take up a significant part of our deliberations in Committee. On the one hand, as I think I mentioned earlier in my remarks, the Opposition strongly believe in the principle that a person who has created, invented or designed something should derive some protection of ownership in law, together with the right to derive benefit from that creation, invention or design, and that appropriate and proportionate sanctions should be put in law to assert that legal right. If criminal sanctions exist for copyright or trademarks, why not for design, especially when the future UK economy will rely so heavily on innovative design? This is a strong argument, especially when there is already similar protection in other parts of the IP framework, such as for copyright or trademarks. However, the introduction of criminal sanctions with the prospect of 10 years’ imprisonment is a serious matter and must be considered closely by the House.

We will be probing the Government in Committee on whether clause 13 is appropriate and proportionate, whether it would act as a sufficient deterrent to those who deliberately infringe designs—steal, for want of a better term—or whether it would unfairly criminalise those who accidentally or inadvertently copy a design. In another place, the Minister said the arguments were finely balanced. We need to ensure that that balance is well drafted in the Bill. Clause 13 is opposed by many stakeholders working in this field, such as the IP Federation, the Intellectual Property Bar Association, the City of London Law Society, the Chartered Institute of Patent Attorneys, and a number of experts and specialists, including Sir James Dyson, as we heard from the hon. Member for North Wiltshire (Mr Gray), and the Ministry of Defence.

As I said, we will consider this matter closely in Committee, but what causes me most concern about clause 13 is that, as several stakeholders have stated, criminalisation, with the prospect of up to 10 years’ imprisonment, might have a “chilling effect” on innovation. New products might not come to market or benefit the UK economy because people are reluctant to risk a criminal trial and 10 years’ imprisonment. I suspect that in Committee we will deliberate at length about the nature of innovation—whether there are great leaps forward or whether innovation is undertaken by swinging from tree to tree in the jungle or, to switch my metaphor, by standing on the shoulders of giants. We need to be careful to strike the right balance in order to protect designers’ creativity and ingenuity while avoiding the risk that no further product improvements will be made through adaptation.

There is a second concern with clause 13 that I think the hon. Member for Perth and North Perthshire (Pete Wishart) has mentioned. If the purpose of the Bill is to simplify and make consistent the patchwork, as Hargreaves calls it, of differing rights, I do not see why registered designs should be subject to criminal sanctions, but unregistered designs should not be. During the passage of the Bill in another place, the Government could not provide a logical or rational explanation for that inconsistency. In Committee in another place, the Minister stated quite bluntly:

“The introduction of criminal sanctions for unregistered rights could lead to a negative effect on business and innovation.”—[Official Report, House of Lords, 13 June 2013; Vol. 745, c. GC409.]

If that is the case, why are registered designs different? The Minister also said that SMEs

“do not tend to register their designs”.—[Official Report, House of Lords, 13 June 2013; Vol. 745, c. GC395.]

It is difficult to see, therefore, how the Government’s proposals in this part of the Bill will strengthen innovation, prevent infringement for the vast proportion of designs in this country and deter exploitation of small and micro-firms by perhaps more unscrupulous businesses. Registered designs do not imply approval or confer an inflated status, so there is no possible legal justification to treat them differently in this regard.

Many UK businesses clearly see merit in the UK unregistered design right, which helps their competitiveness and commercial position. Why, then, should that right not be protected through criminal sanctions when the Government propose that for unregistered designs? I cannot see anything that would prevent companies from identifying unregistered designs, registering those designs for themselves and then stating to the original designer, “You’ve infringed our registered design. We will bring a criminal case against you for deliberately copying our registered design and you may go to prison for 10 years unless you pay us a large fee or assign the rights of the design over to us to exploit anyway.” How does that protect small and micro-firms or help to promote innovation? I do not think that the Government have offered an adequate explanation for this discrepancy, so we will want to scrutinise it further in Committee.

I think the whole House is united in thinking that a strong and consistent framework for intellectual property is essential if the UK economy is to prosper and thrive in the 21st century. A balance is needed to ensure that the IP regime is consistent and provides certainty, while adapting to rapidly changing economic and technological developments. A balance is also needed between protecting the rights of creators and innovators and not discouraging further innovation or possibly disrupting entrepreneurs, companies and technologies. We hope to work closely and constructively with the Government in Committee to strike those balances and ensure that the UK economy can thrive in the modern world.

17:09

[Mr John Leech (Manchester, Withington) (LD)]

I am delighted to have the opportunity to speak briefly on Second Reading this afternoon. Given the enormous contribution of the creative industries to the economy and growth of the UK, the Bill is long overdue. The design industry is worth £33.5 billion or 2.2% of gross domestic product, employing some 350,000 people in the UK.

A recent survey of designers found that 59% had suffered from design copying, but only 32% took a case to court. Copyright infringement costs £775 million every year—5% of the total value of UK design investment—while global patent processing delays cost £7.6 billion annually. We must not forget that intellectual property is not important only to the big multinationals, major record labels or Hollywood studios; it is vital, too, for hundreds of thousands of small, medium and even micro-businesses delivering jobs and growth in every region of the UK.

The Bill seeks to introduce some changes in the field of patents and design law, something that we should warmly welcome. Clause 13 introduces a new criminal offence of intentional infringement of a registered design, bringing the law into line with copyright and trademarks. Unfortunately, although this is a welcome move, the vast majority of designers, many of whom are individuals or micro-businesses, rely on unregistered rights, as several hon. Members have said. Approximately 4,000 designs are registered each year with the Intellectual Property Office, while between 18,000 and 25,000 unregistered designs were lodged on the ACID—anti-copying in design—data bank last year, yet there are only 1,100 members. The vast majority of designers rely on unregistered rights, so if we really want to make this legislation effective, it should be amended to cover unregistered, as well as registered, rights.

I support clause 21, which introduces a duty on the Secretary of State to report annually on how the activities of the Intellectual Property Office have supported innovation and growth in the UK. This is a welcome improvement, but amendments were introduced in the other place to try to ensure that it is a genuinely effective provision in the interests of the traditional creative sector. I seek reassurances from the Minister that consideration will be given to bringing forward similar amendments in Committee to address those concerns.

It is disappointing that the Government have missed an opportunity to tackle a number of other issues around intellectual property, which the other place highlighted, that could helpfully be remedied through the Bill. These issues would benefit from further discussion and examination as the Bill progresses through the Commons.

First, the Bill should increase the maximum penalty for digital copyright theft to bring it into line with the available maximum penalty for physical copyright theft. Criminal offences for online copyright theft have a maximum penalty of two years’ imprisonment. Criminal offences for physical copyright theft have a maximum penalty of 10 years’ imprisonment. This discrepancy has existed since 2003, when new online offences were introduced via secondary legislation as part of the UK’s implementation of the copyright directive, using the European Communities Act 1972. The recent Culture, Media and Sport Select Committee report recognised that that inconsistency needed to be addressed, and the Minister in the other place agreed to have another look at it.

[Martin Horwood (Cheltenham) (LD)]

I strongly support what my hon. Friend is saying about the importance of the digital realm. Publishers like Edward Elgar Publishing in my constituency, which is successfully shifting its publishing increasingly into digital format, feel that the whole issue of digital piracy needs to be tackled. Does my hon. Friend agree that it needs to be tackled on an international basis, and that tackling only the domestic situation is only half the battle?

[Mr Leech]

I agree with my hon. Friend that we need an international, as well as a national, dimension.

The discrepancy I mentioned is a source of great frustration. For example, the private prosecution by the Federation Against Copyright Theft of Anton Vickerman, who was making £50,000 a month from running a website that facilitated mass-scale copyright infringement, saw him convicted of conspiracy to defraud and sentenced to four years in prison. This level of sentence would not have been possible if he had been prosecuted under copyright law, but FACT was able to prove conspiracy in his actions. Without proof of conspiracy, a serious criminal could have been left subject to a disproportionately low maximum penalty.

This is not about introducing a new criminal offence, but simply about addressing a discrepancy in the levels of penalty available for existing offences. The current position causes problems for prosecutors, to whom the full package of legislative options should be available so that they can consider each case individually and use the legislation that will produce the best results. Equally important is the fact that the discrepancy sends the wrong message to infringers, and to the public, about the level of seriousness of the crime.

The Bill also fails to deal with the ongoing problem of parasitic packaging. Businesses and consumers need more protection against copycat packaging of goods or services. Packaging consumer products to mimic familiar branded products free rides off investment in brand reputation, misleads consumers, and distorts competition. A report published by the Intellectual Property Office in April showed that nearly 60% of those surveyed had mistakenly purchased a copycat product on at least one occasion. Moreover, the copy hijacks the reputation of the brand, which has often been built up over years of consumer experience and investment in innovation and product performance. The copy bears none of the cost of building that reputation, while benefiting from higher sales and “assumed” reputation and quality.

The current legislation, including legislation on passing off, clearly does not work. An amendment, through the Bill, would clarify the law, allowing consumers to make clear decisions about the products that they are using while protecting the vast amounts that businesses invest in creating, marketing and protecting their brands.

The Bill would be improved by the introduction of a number of simple measures to ensure that intellectual property is better protected online, rights can be enforced, and owners and consumers can be adequately protected from criminal activity. Those measures should ensure that the likes of eBay and social media platforms have robust and effective processes in place to prevent illegal traders from selling on their platforms and to ensure that, once discovered, such traders cannot register under a different name and continue their illegal activity.

The Bill should include measures to compel domain registries to carry out effective verification and validation of all their registrants’ contact details, so that they can be traced for the purpose of serving legal notices or warnings. It should also include measures requiring businesses such as Google to take all reasonable steps not to promote or support sites where they have reasonable knowledge of infringement of copyright, and requiring businesses to have an obligation not to trade with or promote sites where they have actual knowledge of infringement.

[Mr Sutcliffe]

I hope that we can say more later about the role of Google and the way in which it investigates, or rather does not investigate, the complaints that are made to it. I believe that millions of complaints have not been dealt with.

[Mr Leech]

I thank my fellow member of the Select Committee for his intervention. He will recall that we visited Google as part of our inquiry, and he will also recall the complacent attitude taken by its representatives to the whole issue, as though it had nothing to do with them and was not their problem. I think we all agreed that it certainly was their problem, and that they should take much more responsibility for tackling it.

Finally, I am disappointed that the Bill does not seek to repeal section 73 of the Copyright, Designs and Patents Act 1988, which was intended to encourage the roll-out of the cable network in the United Kingdom, and allowed cable operators to re-transmit public service broadcasters’ programmes free of charge. At a time when Sky and Virgin are willingly entering into commercial deals with public sector broadcasters for their non-public sector broadcasting content, it is a nonsense that they are still able to make money on the back of free PSB content.

[Alun Cairns (Vale of Glamorgan) (Con)]

Has not the technology out-developed the legislation? Should not section 73 of the 1988 Act be adapted to take account of commercial considerations?

[Mr Leech]

Yes, I think time is up for the likes of Sky and Virgin. They have been making a lot of money on the back of this for some time, and it is about time we brought it to an end.

By contrast, in the United States News Corporation has led the campaign for channels to receive fees from platform operators, which has resulted in over $2 billion being available for investment in original content and news production, so I urge the Minister to bring forward an amendment repealing section 73 of the Copyright, Designs and Patents Act.

[Jim Dowd]

I congratulate the hon. Gentleman on reading out so thoroughly the briefing provided by ITV on this issue, but is it not a fact that as long as there is an obligation to carry the terrestrial channels, the Government could either remove that obligation or charge the pay-TV companies for using the material, particularly Virgin, which has the TiVo machine that allows people to build up private on-demand libraries without paying any of the costs or having to watch any of the advertising?

[Mr Leech]

The fact remains that the likes of cable platforms are making significant amounts of money on the back of public sector broadcasting, which often invests a lot of money in original content. A very easy way of bringing this to a conclusion is to repeal section 73 of the 1988 Act, which is why I urge the Minister to introduce that through an amendment to the Bill.

In conclusion, although I welcome the Bill I hope the Minister will recognise its limitations and commit to addressing at least some of the concerns that have been raised. This Bill could deal with a number of the outstanding issues in relation to intellectual property.

17:22

[Jim Dowd (Lewisham West and Penge) (Lab)]

I think everybody welcomes the Bill as far as it goes. The Minister said in introducing it that it was a small but perfectly formed extract from Hargreaves. I agree to some extent with part of the latter, but I certainly agree with the former.

The value of the creative industries—however one chooses to define them—to the UK economy is certainly no less than £20 billion, and I have seen figures suggesting sums up to four and five times that. They are therefore a significant part of our economic and social activity. In the fields of music, arts, literature, film, design, invention, fashion and innovation, Britain is an international leader. That is why we need the strongest possible framework for IP protection and why I think the whole House will welcome the Bill as far as it goes.

May I ask the Minister to tell the Prime Minister that Viscount Younger of Leckie in the other place is the Minister for intellectual property, because when I asked the Prime Minister a question a couple of months ago, he seemed to believe it was the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Wantage (Mr Vaizey)? The fact that the Prime Minister does not know who his intellectual property Minister is does not bode well for the Government’s policy in general in respect of the sector. In a letter, Viscount Younger and the Minister for Universities and Science said that the Bill had three main points:

“to simplify and improve design and patent protection; to clarify the IP legal framework; and to ensure the international IP system supports UK businesses effectively.”

In an additional note included with that letter to all Members, three further areas were highlighted: clarifying and enforcing rights in design; improving the operation of UK patent law; and reorganising the Intellectual Property Office and giving it an annual review. I am an office-holder—don’t ask me which one—of the all-party parliamentary intellectual property group, and I see other members of the group in the Chamber today. We have discussed the proposals and I certainly welcome them.

Will the Minister tell us whether the Intellectual Property Office’s new role will include that of champion, advocate or protector of intellectual property rights, rather than being merely a registry as it was when it was the Patent Office? There is a strong feeling that, since it took on the broader remit, it has been searching for a role. I am led to believe that one of its leading officials is going off to pastures greener—or perhaps a different colour altogether—in the near future. I hope that the Government will take the opportunity to redefine the purpose of the IPO, particularly as many competitor countries have a far more interventionist role in IP, given its value to the economy. Perhaps the hon. Member for Hove (Mike Weatherley) could become a tsar, or be given some other rank. I can think of plenty worse appointments; they number at least 20! We need to take this matter far more seriously and push it up the agenda, particularly as we move from an economy based on industry and manufacturing to one that is more knowledge-based. A modern economy needs the protection of strong IP rules and regulations.

In an intervention on my hon. Friend the Member for Hartlepool (Mr Wright), I mentioned the Library briefing document on the Bill. It states that a survey of 36 similar countries found that the UK was ranked as the best place to obtain, exploit and enforce copyright, but that it was ranked second for patents and only fifth for design. That illustrates the imbalance that exists. The question posed in recent years has been whether the existing legislative framework is inhibiting expansion of the design sector. In 2010, the Prime Minister set up the review under Professor Hargreaves. That followed the Gowers review, which was set up by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) in 2005. That review reported in 2006, and I have to be candid and say that I was disappointed that the then Government did not do more to implement its findings. I suspect that that was for similar reasons to those that are afflicting the present Government—namely, that parts of the Government do not really understand the necessity of providing the strongest possible legal framework for creators and innovators.

Hargreaves replicated much of what Gowers had done. He reached different conclusions in different areas, but there are parts of his report on which we need to make progress. Given that the Bill represents only part of the fall-out—that is not really the right word; I should say the results—of the Hargreaves report, does the Minister acknowledge that there is much more to do? Given the threadbare nature of the Government’s programme, the inability of the component parts of the coalition to agree on very much at all, and the likelihood of there being precious little more for the House to do after the next Queen’s Speech, would that not be an ideal opportunity to fillet some more out of the Hargreaves report and bring it before the House—

[Helen Goodman]

Very sensible!

[Jim Dowd]

Well, I am an engineer by training. I just happen to know these things. We could bring forward those proposals and make more progress. These issues are becoming more, not less, urgent, and the need for us to take action is becoming ever more pressing.

I congratulate the hon. Member for Manchester, Withington (Mr Leech) on reading out the briefing from the Alliance for Intellectual Property almost word for word. I am sure that the alliance will be delighted that its researcher has not laboured in vain to bring its concerns to public attention. The hon. Gentleman also pointed out that the most contentious part of the Bill was clause 13. The difficulty with it, and it will be hard to find a way that pleases everybody, is that legitimate and genuine but conflicting rights and interests are involved. Those depend on where someone comes from, and people’s instinct or feelings about the clause tend to be based on their commercial interest in the matter. My hon. Friend the Member for Hartlepool outlined how a large organisation could intimidate a small rights holder by saying, “Unless you pay us, we will not allow you to use this.” Equally, a small rights holder could be told by an organisation that it is going to use something come what may and the only way of stopping it is by court action, particularly if it disputes that there is a breach or infringement in the first place. The IP Federation is the most antagonistic to clause 13, although, as has been mentioned, others are too. By contrast, plenty of others, including the Alliance for Intellectual Property and the Law Society, are in favour of its provisions. Clearly something will have to be put in the Bill there. Rejecting the clause entirely is not a viable option, as it will not bring clarity and it will not deal with the imbalance between those who are powerful and those who are not so.

The IP Federation contains some of the largest businesses and corporations in the country, but that does not mean it does not have genuine and serious concerns. Dyson Technology Ltd, which has been mentioned, is a member of the IP Federation. As I say, that does not mean that it does not have genuine concerns and legitimate interests. The problem in this whole area, and it will be with this Bill, is trying to find the correct balance between competing and sometimes contradictory interests.

There is a broad welcome for the Bill, but the missed opportunity has been outlined in detail by the hon. Member for Manchester, Withington. It is not unknown in this House for people to repeat things that somebody else has said, but I will disobey that particular convention and gloss over most of what he said. However, he did make a point about parasitic packaging, which is entirely different from counterfeit packaging—that is an offence in itself.

This issue was brought home to me most strikingly just last Saturday when I was in The Hare & Billet pub in Blackheath, which is well known to my hon. Friend the Member for Lewisham East (Heidi Alexander), whom I see on the Front Bench. I was having lunch and I asked whether there was any Worcestershire sauce—everybody knows the famous manufacturers of it and, being a simple soul from south-east London, I thought there was only one Worcester sauce. The nice chap serving us said there certainly was, and he came back with a bottle shaped like the one I always remember containing the marvellous concoction that is Lea & Perrins Worcestershire sauce. Not only was this bottle the same shape and size, but, amazingly, its label was orange with black lettering. However, it was something from Sheffield, from someone called Henderson’s, whoever they are. I am sure that Mr Henderson and his company are perfectly estimable, and I am sure they pursue an entirely legitimate business, but I could not help feeling, “Of all the colours they could choose for their label and all of the shapes they could have for their bottle!” I did not even know there was such a thing as Sheffield sauce until then.

I thought that was an ideal example of just how easy these things are to do. As we can all recall, some of the most successful contemporary retailers have their own named products—I will not name them—which mimic exactly the colours and packaging of their more famous rivals. As I recall, in its television advertising one of them actually uses the slogan “Like brands, only cheaper”. That is clearly a deliberate attempt to exploit the efforts of others without any concomitant responsibility to contribute to them.

The other area is the growth of online activities. In recent months, we have seen the emergence of a number of sites that, while not illegal, masquerade as official sites. I experienced that recently in relation to the congestion charge and the Transport for London site. The unofficial site managed to get the search engines to promote it up the scale. Although it offered to pay the congestion charge for someone entering the zone, it charged a fee as well. Anyone going straight to the TfL site can pay the congestion charge with no fee whatever. There has been an increase in the number of such sites, even false sites offering Government services.

One bit of evidence that the hon. Member for Manchester, Withington did not read out said that the British Phonographic Industry, which represents the recorded music industry in which this country excels,

“sends in excess of three million requests to Google”—

I ask my hon. Friend the Member for Bradford South (Mr Sutcliffe) to note that—

“each month to delist URLs which point to infringing content.”

This is a grave and growing problem that we need to address.

My earnest hope is that we will consider all these matters in some detail in Committee and during the later consideration of this Bill to ensure that we optimise the modest proposals that are coming forward today.

In future, comprehensive IP protection will be ever more important as we become more dependent on the knowledge-based and creative industries to ensure the proper utilisation and advance of innovation and the exploitation—in its best sense—of developments while ensuring adequate reward to the creators and innovators to encourage originality and ingenuity. If we do not go down that route, we will lose our expertise across a wide area in which this country has for long excelled, and we will be the poorer socially, intellectually and economically.

17:36

[Mark Field (Cities of London and Westminster) (Con)]

It is a great pleasure to follow the hon. Member for London South East or wherever it is. [Interruption.] Sorry, I mean the hon. Member for Lewisham West and Penge (Jim Dowd). We Londoners rightly feel that the centre of the universe is here, but we need to make some allowances for Members from Manchester, Withington and elsewhere.

I recently discovered that I have something in common with the hon. Member for Lewisham West and Penge; we both have German mothers. I must confess that my mother spent the first 15 years of her life living under socialism, courtesy of the Gestapo and then the Stasi, which is why she inculcated some solidly right of centre and Conservative views in my mind. I am not sure what went wrong with the hon. Gentleman’s upbringing. However, I very much agreed with what he and other contributors have had to say today. We must emphasise the underlying importance of intellectual property both to the UK economy and my own central London constituency.

The people of these islands have a long and proud history of innovation. Much of what we take for granted in the modern world came about as a result of various aspects of British ingenuity. However, in an increasingly globalised world, much more must be done to protect the IP that is developed in the UK, so that we can attract the world’s brightest to invest here or to develop their ideas here.

The high-tech sector is naturally a sizeable generator of intellectual property. I welcome the fact that the Bill seeks to reduce the need for costly litigation and provide greater certainty for investors in new designs and technologies. I believe that such reforms send out a clear signal that the UK is open for business and they will play an important role in helping the UK to succeed in these highly competitive international markets.

Over the past five years or so, on the fringe of the City of London, which I represent, Tech City, commonly referred to as Silicon roundabout, has emerged almost from nothing and has quickly flourished into a renowned European IT hub. In my view, that is precisely the type of location where much of the £16 billion of intellectual capital produced annually in the UK originates. We all pay lip service to boosting traditional manufacturing, but it is in the IT and IP fields that we face great international competition. The Government’s strategy to maintain a distinctive reputation and a great competitive advantage over the export of IP is, I believe, vital to future economic growth.

In Soho, Covent Garden and the west end as a whole, in my constituency, we find the spiritual home of our globally competitive creative sector, which includes film, music, television, theatre and, of course, the animation industries. Those creative industries are one of the great white hopes for economic growth. I spearheaded a five-year parliamentary campaign to secure a tax credit for the animation industry and I was delighted when it came to fruition in last year’s Budget. I am afraid it still has a few teething problems in relation to the European Commission, but slowly but surely we are getting there.

I hope that the tax credit will help to keep animation jobs on these shores, but the real golden egg, as we all know, is the retention in this country of the IP rights. Money is generated annually worldwide by unimaginably successful animation franchises such as Thomas the Tank Engine, Wallace and Gromit and Peppa Pig—as I have two young children, I am now rather more used to that, as I am sure you are well aware, Madam Deputy Speaker. They all have a huge amount of secondary branded products. Let me give some perspective. The Thomas the Tank Engine brand alone tots up worldwide sales in excess of £1 billion each and every year, with his tales broadcast to more than 1 billion households in 185 countries each and every day.

It is important that we allow no room for complacency about the west’s domination, as we see it, of the knowledge economy. Within the next 20 years, I suspect that the IP rights that have underpinned the west’s competitive advantage—whether in licensing, copyright, design or patents—will be due for a radical philosophical shake-up. An ever more assertive China will argue that traditional IP structures are no more than an attempt by Europe to impose its own form of protectionism to suit its particular demographic. We cannot assume that the dominance of our values in determining global trade will remain unchecked.

To that end, the aspects of the Bill that are aimed at improving the operation of the IP system internationally are most welcome. The recognition of foreign copyright claims in the UK and enabling the Intellectual Property Office to share information on unpublished patents with other patent offices should, in principle at least, make it easier for UK companies’ IP rights to be respected internationally. However, clause 13 introduces a new criminal offence of deliberate infringement of a registered design, but, as the hon. Member for Hartlepool (Mr Wright) rightly pointed out, the vast majority of the UK’s 350,000 designers rely on unregistered design rights. There should be consideration of whether the criminal sanctions could and should be extended to include them as well.

Only about 4,000 designs are registered each year with the IPO. That pales into relative insignificance when compared with the 18,000 to 25,000 unregistered designs placed on the ACID design database last year, especially as the organisation has only 11,000 members. Given the vast amounts of capital invested in developing brands and the economic benefits that creates, I agree with the hon. Member for Hartlepool that it seems advisable to at least consider in Committee whether criminal sanctions for the infringement of copyright online should match the level of sanctions for the infringement of physical goods. As our lives increasingly shift online, the discrepancy between the maximum penalties for online copyright theft, with a maximum of two years’ imprisonment, and physical copyright theft, with a maximum of 10 years, seems in need of updating. The Minister made it clear that he recognises that the situation is fast moving. The Bill itself will no doubt be largely redundant within a few years, so we need to be aware of those changes.

In my work as a member of the Intelligence and Security Committee, I am increasingly aware that malicious cyber-activity such as the ongoing and daily attempts to steal British-owned IP—whether that involves patents, ideas and designs—is carried out primarily to gain competitive commercial advantage. Such efforts, I fear, are commonplace and are getting more common as time goes by. Much more will need to be done to tackle cyber-security internationally.

On a more parochial and local basis, in 2009, I worked with a group of local entrepreneurs and recommended the development of a start-up business incubator, now called the innovation warehouse, to the economic development office of the City of London corporation. I am pleased to say that that proposal was strongly supported financially and generally by the corporation. It is now based on the northern edge of the City, in Smithfield market. It opened in May 2011, and it provides 88 desks, counts more than 50 small businesses as tenants and provides a range of business-related mentoring and other events each month.

The dynamic office and incubation space developed at Smithfield market not only provides much-needed resources for small and growing businesses, but houses a large number of high-growth potential start-ups that have gone on to secure significant investment. I am sure that one of the Bill’s longer-term effects is that we will see such innovation not just in the gilded parts of the City of London, but in all the suburbs and, indeed, in many other UK cities. The scheme has rightly received praise from central Government and has become a destination of choice for UK Trade & Investment tours of Tech City. It is in my view precisely the sort of initiative that needs to be encouraged if the UK is to continue to aspire to be a world leader in IP, as the 21st century develops.

The Government could do a little more to encourage the development of IP in the UK. At a City round-table meeting on IP a year or so ago, I met a former engineer and investment banker who now helps technology start-ups. He had worked as a part-time chief financial officer for a tech spin-out from one of Britain’s top research universities. In the end, although it was backed by a quasi-governmental venture capital fund, the technology was sold prematurely to a large French company, as it had proved impossible to eke out the limited VC funding to expand the fledgling enterprise. Had it not been for the complexity of Her Majesty’s Revenue and Customs rules and an equity gap in first-stage venture capital, he believed that the UK Treasury would by now have been enjoying the rewards of fresh job and corporation tax receipts.

New tech businesses are typically nucleated when a piece of IP is picked up by a small team of high-calibre executives who practically apply and market that technology. Seed funding of £50,000 to £250,000 is typically not too difficult to come by, but founders’ resources, or those of business angels, can be tapped and new Government mechanisms, such as the seed enterprise investment scheme, incentivise investment in the early stages. However, the next part of the corporate journey—to obtain between £l million and £5 million in more conventional first-stage venture capital—represents the big stumbling block to expansion.

The structural shortage of such funding in the UK is exacerbated by the fact that, before these start-ups begin generating revenue, a large share of funds goes towards paying executives’ salaries. Therefore, the taxman gets much of the VC money through employer and employee national insurance and pay-as-you-earn tax. That is, of course, particularly ironic because, in many instances, a quasi-public source has helped to generate the VC funds in the first place.

To work through this problem, many start-ups eke out their VC money by instead rewarding executives with sweat equity. Since many such participants are perhaps established people in the 45-to-60 age bracket, they tend to have an existing financial cushion that leaves them able to work for free in the short term in return for those shares. However, HMRC rules currently insist that such shares are valued and treated as taxable salary. To pay the tax charge associated with the granting of shares for which there is no liquid market and which might turn out to be worthless in the end, executives must raid their savings. In short, when a start-up fails, as is often the case, executives have paid from their own resources for the privilege of working for free. That common problem is part and parcel of the whole intellectual property package that we are looking at today.

Partial work-rounds are in place based on approved share option schemes, but they are complex and hard for many SMEs properly to understand and administer. The Government could do a little more to solve the conundrum. As other Members have said, it is often difficult to say precisely where the responsibility for intellectual property lies. I am therefore taking the opportunity of this debate to say that, although perhaps other Ministers have a part to play as well, we need to try to find a way to ensure that such share rewards are not crystallised during the tax year in which they are awarded. The tax could be levied instead when the shares are withdrawn from escrow.

[Bob Stewart (Beckenham) (Con)]

I am not sure, but would not the answer be to allocate shares, rather than to give them? If shares are allocated, people do not have to pay tax on them, yet they are their shares when they want to cash them in.

[Mark Field]

I am sure that my hon. Friend has a little more knowledge of that. I think that some specific problems apply to small start-ups in the venture capital world and, as I have said, for individuals who, for tax purposes, would not want an allocation, other than at a particular time when it was known that the venture would work through.

I do not want to be overly negative, because I think that the Bill is an important piece of legislation. It reflects the commitment that the Government, rightly, have made in this area. We can be proud of our place in the global league tables for intellectual property rights, but we have no cause for complacency. We are perhaps ahead of the game, or cheek by jowl with Germany and the Netherlands, which I think—without being complacent —is a good place to be.

I am fairly supportive of what the Government are trying to do, which is to make the IP landscape easier to navigate for businesses, especially small and medium-sized enterprises, many of which will be looking to expand globally and make an impact for the future. It is of underlying importance that the Bill will make better off UK businesses that wish to protect their products and technologies through patents and design rights. The Government must continue to focus their attention on doing more to encourage investment and to secure IP rights if Britain is to remain a global player in what I am sure will be, in decades to come, an extremely competitive international market.

17:49

[Pete Wishart (Perth and North Perthshire) (SNP)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I also belatedly welcome you, Madam Deputy Speaker, to the Chair. The appointment was perhaps a loss to the no campaign on the constitutional question, but one that we welcome.

I generally welcome the Bill. I have managed to speak in most of the debates on IP since becoming a Member of Parliament, and I have had the great pleasure of introducing a couple of them, but this is the first time in those 13 years that we have had a Bill dedicated to it. It gives us an incredible opportunity to assess the value of IP-supported business and industry to the economy. IP makes a fantastic contribution—4.3% of our GDP, as the Minister said.

[Mr Sutcliffe]

The hon. Gentleman makes an important point about the importance of IP rights. Does he agree that there is a need to educate most of the country, including young people, about the value and importance of IP rights?

[Pete Wishart]

The hon. Gentleman is spot on. So much more could be done through educational initiatives. I have seen some important work being done. I have visited schools and seen schoolchildren trade marking their work with the little copyright symbol. They were starting to appreciate that what they produce, even if it is just a drawing, has an intrinsic intellectual value. If we can get across the message that intellectual property is as important as a property right, and if we can encourage that culture, we will be making great strides forward.

It has been reported in recent weeks that the creative sector has grown by 8.6% in recent years, compared with growth of only 0.7% in the general economy. It is the UK’s fastest growing sector and is worth around £71 billion a year. As the Culture Secretary has said, so much of our cultural and creative endeavour rests on important intellectual property rights, which is absolutely spot on. It is the creative industries that are growing us out of recession. Imagine growing our economy on the back of the creativity, talent and imagination of the people of this country. What a fantastic way to grow our economy. That is why it is so important that we get the intellectual framework right.

We have not done too much that is wrong over the past 10 years. The UK remains a leader. We are in the top three countries in practically every cultural discipline, whether music, film, television, publishing or whatever. We must be doing something right. It also comes naturally to people in these isles; we are just naturally creative. That is reflected in the great output we have seen over hundreds of years, in our contribution to invention, talent and creativity. We get something right and we are able to protect it, so we have to be very careful as we progress with intellectual property rights. We tamper with that at our peril. We have to be careful about how we progress.

The genesis of the Bill was in November 2010, when the Prime Minister made his great “Googlesburg” address. I remember coming home one evening and being unable to believe what I was seeing on the television: a UK Prime Minister talking about intellectual property. It was the first time I had seen a UK Prime Minister take an interest in intellectual property, which was great. I was also interested in what he was saying, because I wondered what on earth he was going on about. His basic premise seemed to be that we would never see a Google emerge in the UK because of our restrictive intellectual property laws and copyright framework. He did not say whether it would be a good thing to have a UK Google. The clear thing he said was that we would not be able to create a Google in the UK, and he also said something about our IP rules being restrictive and that they needed to be fixed.

I do not know who was advising the Prime Minister at the time, but it was certainly not the hon. Member for Hove (Mike Weatherley), who is now his adviser, because I know that the hon. Gentleman would never advise him to say such nonsense about the need for a Google to emerge in the UK—he would have advised him to say something much more sensible and measured. Was there perhaps somebody close to Google working at No. 10? Was somebody in a personal relationship with somebody working at No. 10 and advising the Prime Minister? I will leave that question hanging. Thank goodness the hon. Member for Hove is now advising him much more sensibly on such matters. [Interruption.] I see the Whip, the hon. Member for Devizes (Claire Perry), nodding her head. I will return to Google later, because there are lots of important things to be said about that. We have to understand what that has all been underpinned by and the impact and damage that type of process is having.

The Prime Minister then dispatched Ian Hargreaves to solve the Google conundrum. Ian Hargreaves rightly dumped all the Google nonsense as soon as he could. He went to the United States to see if he could introduce the American system of fair use into UK law. When he was prohibited from doing so because of very sensible European legislation, he moved on to the substance of his review by looking at IP’s economic contribution. He came up with 10 recommendations—some good, some bad, some indifferent and some repetitive—that the Government were minded to accept.

Since then, throughout the Hargreaves process, we have been in the business of legislating for those 10 recommendations. Some have required primary legislation, such as the Enterprise and Regulatory Reform Act 2013, and some have required secondary legislation. We are yet to see the statutory instruments, because the Hargreaves process has not concluded. We have this Bill and the SIs are coming forward. One thing that I would like the Minister to tell us—he can intervene now or answer when he responds—is what on earth is happening with the SIs for the rest of the copyright exceptions. He will probably say that they are still with parliamentary counsel and that they are not yet ready to be presented. Well, he had better get a move on, because he only has until March to do it.

I would like to hear about the process for introducing the SIs and what we should expect. I strongly suggest—several Members have said this several times to various Ministers—that we have separate SIs for each of the copyright exceptions. As a matter of principle, it is right and proper that we should be able to assess each of the exceptions individually. It would be unacceptable to bundle them together on a “take it or leave it” basis, particularly the new exceptions, and there are some really important ones, such as parody, copying and all the other ones—I cannot remember what they are, but the Minister knows what I mean. We have to ensure that we see them separately and debate them properly when they come through.

We are getting close to the end of the Hargreaves process. Has it been good? Yes, some of it has been all right. The digital copyright exchange is fantastic—a great little innovation. That part of the process has worked. However, there is a lot of nonsense—stuff that we did not need. In fact, great unhappiness has been caused among many people who represent our creative industries, because when they came to the Government stating their strong concerns about some aspects of Hargreaves they were arrogantly dismissed as though they—the people who have built the success of the industry—did not understand the environment they were working in and the Government or Hargreaves knew it better. There was a great deal of dissatisfaction among people who felt out of sorts with the way the Government went about this business. I hope that if we have a process such as this in future we will be able to look at things much more circumspectly and take everybody with us as we go forward.

I want to make a few remarks about how the Bill has been handled. It is an absolute disgrace that the House of Lords looked at this matter first: it should have been elected Members in this House. Given the value of the role that IP plays in industry and business, we should have considered it first, and if the House of Lords then wanted to look at it and suggest amendments and things we should reconsider, that would have been absolutely fine. Something as important as intellectual property and its contribution to the economy should have been handled first by directly elected Members rather than the House of Lords, talented and well respected as some of its Members may be. It should have been our right and our responsibility.

The Minister responsible for IP is an unelected Lord himself. The hon. Member for Lewisham West and Penge (Jim Dowd) was spot on in his comments. The Minister is anonymous. Not even the Prime Minister could remember his name, so what chance have the rest of us got? It is great that the Minister for Universities and Science is here—who better to have dealing with a Bill on intellectual property than a Minister with a multiplicity of brains?—but the real IP Minister should be taking this Bill forward and held accountable through the questioning of this House’s directly elected Members.

That unelected Lord is a Minister in the Department for Business, Innovation and Skills, which is responsible for the Intellectual Property Office despite the fact that the IPO deals with matters looked after by the Department for Culture, Media and Sport. All the disciplines that the IPO manages and supports are covered by the DCMS, but the IPO is covered by BIS. Is anything as ridiculous as that? Surely we should be trying to bring this together, as suggested by the all-party intellectual property group. I see some of my fellow officers here; the hon. Member for Lewisham West and Penge is its secretary. DCMS would be the perfect fit for the IPO in ensuring that it could work beside all the industries it is there to support. I hope we can resolve this issue.

The all-party group also suggested that we should have an IP champion. If this is going to work cross-departmentally, we need somebody out there banging the drum for IP-supported business and industry. That is the great forgotten in all this. There are people here who are passionate about IP and recognise its value and importance, but the place should be mobbed—full to the gunwales. This is about billions of pounds and we have to get it right. The problem is that we have an anonymous Minister in a Department that does not serve the industry. We must get this fixed. We should make the hon. Member for Hove our IP champion—an IP tsar who is out there getting things sorted out. He was right to mention the IP tsar in the United States, who is doing a fantastic job. When the all-party group met her, we were all very impressed with the power and clout she has on Capitol Hill to get things done. That is what we need in this country—somebody who will work cross-departmentally to get things resolved and make sure that we are able to take this key matter forward.

On the Bill itself, I do not want to be repetitive—[Interruption.] Come on, let me get this properly into context. We have heard all about the sorts of things that the Bill does. It is great that it covers registered design rights—the great forgotten IP right. It is fantastic that ACID has at last got its way and that this will now be covered by criminal infringement provisions, but it is totally wrong that unregistered designs are not covered too. In the House of Lords there was a big debate about this on clause 13. There has also been a debate within the industry whereby a consensus has developed that if we are to pursue the idea of registered design rights, unregistered design rights must be included. The vast majority of people who work in the design industry are in small or micro-businesses with probably fewer than four people working for them, and they cannot spend so much time making sure that things are registered. We must get this resolved.

[Bob Stewart]

I have listened carefully to the arguments about unregistered designs, and I wonder how this matter can be policed. How will that be possible when no one has actually said “This is my design” and someone has agreed with them? That is really worrying.

[Pete Wishart]

ACID has built up a database of unregistered designs, and tens of thousands of people have registered with it. If that can be achieved by a small organisation such as ACID, which runs so efficiently and effectively with Dids Macdonald and her very small staff, surely the UK Government can do likewise, and that is what we are asking them to do. It is absolutely right to make sure that our design industry is properly looked after in this regard. I welcome any progress on patents and designs, but we need decisive leadership, not another piecemeal Bill that does the absolute minimum that is required.

I did not expect to be raising a constitutional point in relation to these issues, but the unified European patent court could seriously affect Scotland’s ability to judge and make rulings on patent issues within Scotland. As the Minister knows, under the new European regime every member state is allowed four divisional courts. We know there is going to be one in London, because the Government have said so, but we do not know where the other three will be—if there are three; they have not said how many they have chosen to have. One of them has to be in Scotland. We cannot have our economy suffering because our inventors and creators in small businesses have to leave their jurisdiction to secure justice and satisfaction elsewhere in the UK or further abroad. After centuries of looking after these issues, this ability must be available to the Scottish judiciary. The Minister has probably seen the letters from the Law Society of Scotland and the Faculty of Advocates in Edinburgh, who are very worried that we could be diminishing or getting rid of not just decades but centuries of experience in dealing with patents according to Scots law. We must make sure that the Court of Session in Edinburgh becomes one of the divisional courts of the new unified court.

[Mr Willetts]

Several Members have raised this issue. As the hon. Gentleman rightly said, London will be one of the divisions. How many divisions there are and where they are will depend on the pattern of need and demand. We absolutely understand the importance of accessibility to these services across Scotland. We are working closely with the devolved Administrations and court services in Scotland and in Northern Ireland. I cannot give him the assurance he is asking for today, but as we see the pattern of demand emerge, and if we have good conversations, then what he seeks is very possible.

[Pete Wishart]

I am very grateful to the right hon. Gentleman for saying that; it does bring a degree of comfort. I recognise that there is an attempt to try to resolve this matter. He clearly recognises that it is a huge issue for us that has to be resolved. The whole Scottish legal establishment is united in calling for that. I welcome what he said and hope that as we take the Bill through we will hear more about it and can ensure that the Scottish courts are satisfied and that we do not lose their centuries of experience in dealing with patent issues.

I want to say a few words about clause 21, which will require the Secretary of State to report on the activities of the IPO and how it has supported innovation and growth in the United Kingdom. I do not think any Member would argue against that. It is a very positive step that provides a bit of a focus for the IPO’s activities. However, any measure must be quantified, and it must include some reference to how those activities have supported IP-dependent businesses and IP rights.

One major battle throughout the Hargreaves process was all the stuff about economic evidence. I remember when the creative industries used to present evidence to us. The work done by the creative industries to inform the Government about their activities—it was sometimes commissioned by the Government—was arrogantly dismissed by Hargreaves as “lobbynomics”. However, the Intellectual Property Office made some heroic assumptions to support its copyright exceptions. It said that if all 10 of Hargreaves’s recommendations were introduced it would make a difference of between 0.6% and 0.9% of GDP. Come on! It expected us to believe that. It therefore works both ways.

Some of the other heroic assumptions underpinning copyright exceptions were totally unbelievable. We in the all-party group on intellectual property asked IPO officers to come in and explain them, and we found what they said totally unsatisfactory. The annual report must therefore be credible and robust, and it must respect everybody in the sector. The Government should not just leave it to the Intellectual Property Office to concoct some figures and expect us to be happy and satisfied with them. At some point, we will have to be able to challenge the assumptions and look at what underlies them, because we cannot have some of the nonsensical economic assumptions that we had in the past.

Lastly, I want to return to Google. This all started with Google, did it not? It was kicked off by the “Googlesburg” address, but let us try to turn that on its head. The issue was all about whether a Google could emerge in the UK because of restrictive intellectual property practices. What about looking at Google itself? It is a digital behemoth—there is nothing bigger in the digital world—and the gatekeeper for all our content industries. Nothing happens without Google, and nothing can go through its prism without satisfying it in some way. It distorts the digital market, and it is damn good at ensuring that it keeps its predominant position. All its activities are about maintaining its predominant, almost monopoly position as the gatekeeper of content. It produces no content of its own—not a bit—but, yet again, the question all comes down to how content is measured and assessed.

[Helen Goodman]

As a matter of fact, what the hon. Gentleman says about Google not producing its own content is inaccurate. It would strengthen his argument if he acknowledged that it produces content—for example, maps. He is probably aware that the European Commission is now looking at its uncompetitive behaviour in putting its own products above others in the search engine.

[Pete Wishart]

I was perhaps a tad too harsh in relation to Google producing some of its content. Yes, it copies maps, puts them up and makes sure that people can access them, but it produces none of what we understand and appreciate as content, whether drama, film, television or whatever. All it does is act as a platform, which is the only platform that people use.

At some time, this Government must have a proper look at the almost monopoly status of this huge, multinational, non-UK business and ask whether it is good for our content industries. I have a sneaking feeling that it is not. I have seen the evidence from the British Phonographic Industry. It sent 50 million notices to Google asking it to take down links to illegal— I emphasise, illegal—sites. Google should not be doing that. What on earth is going on if it receives 50 million requests to take down links to illegal sites?

If hon. Members run Google searches for MP3 downloads for the top 20 singles or albums from the whole of November, on average 77% of first-page search results for singles and 64% of those for albums will direct them to illegal sites. Is that not incredible? If they put in the name of a band to find some of its musical content, they will be directed to an illegal site through Google. What on earth is going on? As the BPI has said, Google’s monopoly leads consumers into

“a murky underworld of unlicensed sites, where they may break the law…because it persistently ranks such sites above trusted legal services when consumers search for music to download.”

It is time to call in the Competition Commission: we cannot continue to allow Google to be the gateway to content industries when they do them so much damage.

I met and had a fantastic chat with the Featured Artists Coalition just before Christmas. It has represented some of our greatest pop stars over the past 50 years—people who have made millions of pounds for the UK economy and given us great entertainment throughout those years. One of its spokespeople, Crispin Hunt, perfectly summed up the situation when he said:

“A brilliant new band that I recently worked with has just been dropped by their label because their debut EP sold barely 4,000 copies. Yet the number one site on a Google Search for the same EP boasts of 23,000 illegal downloads…then directs me to an online brothel, next to an advert for Nissan as I rip the tunes. What more do I need to say?”

What more, indeed, need he say before something is done about the monopoly status of Google?

I hope that now we are bringing the Hargreaves process to its conclusion, we will start to consider how people access content, how it is distributed and how that distribution distorts the market, as well as how to ensure that our artists, inventors and creators are properly rewarded for their work. I hope to serve on the Public Bill Committee as there are several outstanding issues that need to be considered, and I look forward to the Minister’s response. He has those two brains, so he can get thinking on the Intellectual Property Bill, and I hope that his two brains will be in the mood to accept some helpful amendments as we try to improve it and to secure satisfaction for our creative industries and our artist creators.

The Bill is adequate and piecemeal, but it is the only one we have, so let us get this done. Let us finish the Hargreaves process and move on to the substantial and real work that we need to do to ensure that this country remains at the top of all cultural and artistic disciplines as we go into the next decade.

18:09

[Mike Weatherley (Hove) (Con)]

It is a great honour to follow the hon. Member for Perth and North Perthshire (Pete Wishart). I greatly respect his views on intellectual property, and I thank him for his kind comments.

Intellectual property affects every one of us. We have heard from the Minister about its importance to the economy. The statistics speak for themselves: the creative industries are worth more than £71.4 billion a year in gross value added terms, which is 5.2% of total GVA in the UK; they generate £130,000 every minute for the UK economy; they employ 1.7 million people in the UK, which is 5.6% of all UK jobs; and, at £15.5 billion, they account for about £1 in every £10 of the UK’s exports. Without a vibrant creative economy, our deficit would be higher and our services worse. I am often told that the creative industries are not as important as the NHS, but one thing is certain: without them, we would have a much reduced NHS. Every person in the UK benefits from a thriving creative sector.

As the intellectual property adviser to the Prime Minister, I am well aware that a strong intellectual property culture and regime is the cornerstone of how we do business, and that protecting intellectual property rights is essential for growth. I therefore broadly welcome the measures in the Bill. By valuing intellectual property, we help not only the UK businesses and investors that take the brunt of the litigation headaches arising from intellectual property and copyright infringement, but the consumers by ensuring that the public are able and willing to buy the most legitimate product available, and that creators or authors of products are financially remunerated.

A focus on the entrepreneurial aspects of intellectual property is vital to helping Britain succeed in the competitive global market. Alongside that focus, winning the hearts and minds of the public on intellectual property—in all its forms, from patents to copyright—is essential to the future of our creative industries, world-beating brands and, indeed, the country as a whole.

As many colleagues will know, I pioneered the Rock the House and Film the House initiatives to educate right hon. and hon. Members about intellectual property, and to bring them into contact with musicians and film makers in their own constituencies. Such initiatives for music, film and other creative industries are important in winning the public relations battle. Industry has a huge role to play in that regard, as do the Government. I welcome the initiatives of the Industry Trust for IP Awareness, the Alliance for Intellectual Property, the BPI and many others. With those organisations, I will be exploring what more can be done to ensure that there is greater collaboration and co-ordination between industry and Government with respect to educational initiatives.

The Government have started to tackle the issues that plague intellectual property law enforcement, and the Bill addresses some of those issues head-on. From the introduction of criminal penalties for deliberately copying UK-registered designs to extending the expert opinion services delivered by the Intellectual Property Office to include registered designs, the Bill will bring to design rights the same level of protection that is afforded through copyright and trade marks. In addition, the implementation of the unified patent court agreement proposed by the Bill will lead to direct benefits to UK business of up to £40 million per year. Simple changes, such as providing the option to mark a patented product with a web address, rather than a patent number, and allowing the sharing of information between international patent offices, could reduce the burdens on businesses and individuals, as well as alleviate the backlog of more than 4 million patents worldwide.

Before I discuss what additional measures it would be beneficial to incorporate in the Bill, I will expand briefly on some general points. With industry, I have developed a three-pronged plan for how to address intellectual property issues in my position as the Prime Minister’s IP adviser, using education and the carrot and stick.

As has been mentioned today, education is all about winning the debate about cheap or free goods. We must make the argument that if people get something cheap or free, they will eventually get only cheap goods or none at all. We must use education to get the public on side, with a focus on young people. We must convince people that piracy and similar illegal activities are not in their best long-term interests and are not socially acceptable. My goal is to have young people telling their friends that illegally downloading content or buying counterfeit goods will harm them all in the long run and is just not right. Their friends who might want to carve out a career as musicians will be the hardest hit.

Ultimately, we will all be hit hard. I mentioned some impressive statistics at the start of my speech. The creative industries are the third largest employer in the UK and we are one of only three countries worldwide that are net exporters of music, the other two being the USA and, perhaps surprisingly, Sweden. As I have mentioned, all our public services will be hit if we lose that enormous revenue stream for the country.

The second part of the process—the carrot—is about providing incentives. We must challenge the creative industries to step up and provide appealing, consumer-focused services for their products. Some companies, such as Spotify, Netflix and Bloom, are already doing work in that area, but there are many more possibilities to be tapped. Indeed, there was a Rock the House seminar on that very topic in December last year, chaired by my hon. Friend the Member for Morecambe and Lunesdale (David Morris), at which the industry discussed the role of innovation in protecting British intellectual property rights.

We must encourage supportive industry measures. PRS for Music has proposed a traffic light system for search engine results that would inform consumers whether a site is legal. The Content Map is a web portal that lists all legal services across music, film, TV, e-books, video games and sport broadcasts, providing an invaluable service to those who are unsure whether a site that they or their children are using is safe and legal. Another example is the IPO-funded whiteBULLET initiative.

Finally, I come to the stick. To address abuses of intellectual property, there has to be IP enforcement legislation with real teeth. There are welcome measures in the Bill, such as increasing the protection of design rights. There are other measures, like increasing the maximum penalty for digital copyright theft, that are not in the Bill but perhaps should be. Another enforcement measure would be to follow the money and stop advertising and payment facilities on websites that host illegal content. Internet service providers and search engines would also be accountable if there was known to be criminality. Ultimately, we need to consider withdrawing internet rights from lawbreakers, along with imposing fines and, as a last resort, custodial sentences.

The technology is available to bind the various strands together, and just a little help from the Government is needed. Perhaps it is time, as has been mentioned, to consider a USA-style IP tsar to co-ordinate all the interested Departments and the industry. Perhaps the hon. Member for Lewisham West and Penge (Jim Dowd) would be good in that role. I can think of 10 worse people to have.

Like other Members, I am grateful to the Alliance for Intellectual Property, which has produced a useful list of recommendations on how the Bill could tackle IP issues more effectively. It has rightly pointed to clauses 13 and 21 as especially vital. Clause 13 creates a new criminal offence for deliberate infringement of registered designs. That addresses the long-standing anomaly that a 2D drawing receives greater protection under the law than its 3D manifestation. To provide any significant benefit to UK designers, the provision must be extended to cover unregistered designs. My hon. Friend the Member for Beckenham (Bob Stewart) raised that matter earlier and I would be happy to explain to him in greater detail why that is required.

Certain sections of the manufacturing industry that rely on innovations to maintain their position as market leaders are concerned that clause 13 could turn their directors into criminals when something is copied unwittingly. The Bill is clearly not intended to have that effect. On balance, I think that their fears will be unfounded in practice.

Clause 21 introduces a requirement for the Secretary of State to report annually to Parliament on how the activities of the IPO have supported innovation and growth. That is welcome, but ideally it would include how those activities have supported the businesses and individuals who create and own intellectual property, not just those who seek to exploit it.

Further measures that the Bill could include are an increase in the maximum penalty for digital copyright theft from two to 10 years, which would match the penalty for physical copyright theft. I support that proposal. The same crime is being committed and matching the penalty would show that the Government agreed. In addition, more effective protection is needed for brands that fall victim to clone packaging, as we heard earlier.

The Bill deals with only a relatively small area of IP. It does not include any of the supportive measures of the Digital Economy Act 2010 or any of the Hargreaves exception recommendations. Indeed, this is a missed opportunity to debate those exceptions on the Floor of the House. The Bill shows that the Government wish to strengthen IP importance and enforcement. However, the Hargreaves exceptions have the potential to send out exactly the opposite message, with a plethora of IP relaxation measures that will introduce new exceptions for parody, text and data mining, and private copying.

The Hargreaves exceptions will affect businesses that employ significant numbers of people in the UK, so their wording matters greatly. The wording needs to be tight and must not go further than is necessary to implement Government policy. For example, the statutory instrument on private copying needs to ensure that the definition of private copying does not mean the wider definition of “friends and family”, as it does in Europe. Creative content providers are very concerned that the education exception may extend beyond the classroom. I cannot emphasise enough the importance of considered drafting. It will define the Government’s approach to IP. We await with bated breath the wording of the statutory instruments relating to Hargreaves. However, I fear that it may be too late and that we will send the wrong message to our creative industries and to European legislators. We shall see.

There is one further useful amendment that could be made to the Bill. I suggest that there should be an amendment to encourage the IPO to put education at the heart of its activities. The IPO has some good initiatives, but I believe that they could be expanded. Clause 21 places a reporting duty on the IPO that relates to innovation. My proposed amendment would add a requirement to report on the educational aspects of its work. Specifically, it would ask the IPO to report to the Secretary of State on how the activities of the Patent Office have contributed to promoting an understanding in the United Kingdom of the importance of intellectual property and its effective exploitation, and how the activities of the Patent Office and other UK institutions have contributed to educating users of creative content about intellectual property and intellectual property rights.

Ultimately, the Bill provides us with an opportunity to lead the world in raising awareness of the importance of intellectual property and IP enforcement. Ian Hargreaves recommended that we need an IP framework that is responsive to change. He was right. The Bill is one step in that direction. I urge the Minister to consider the points that I have made and, if at all possible, to include my recommendations in the Bill.

To summarise, I have suggested an extension of clause 12 to include unregistered designs, an increase in the maximum penalty for digital copyright theft to 10 years, more effective protection for brands in relation to clone packaging, an extension of the reporting requirements of the IPO to include educational activities, and the consistent promotion of the benefits of a robust IP framework. Above all, although away from this Bill, I urge the Government to be careful about the wording of the Hargreaves exceptions statutory instruments.

18:29

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

It is a great pleasure to be involved in this debate and to follow the hon. Member for Hove (Mike Weatherley), who has shown why he should be the IP tsar. I know that he is the IP adviser to the Prime Minister, but in his contribution he has shown an understanding of the issues that we face. I first became involved in intellectual property rights as the Minister responsible for consumer affairs in the Department of Trade and Industry, and my interest has continued as a member of the Culture, Media and Sport Committee. It has been impressed upon me how important these issues are. The amendment proposed by the hon. Gentleman, which would put education at the heart of this issue, is vital, and I hope the Whips will ensure that he serves on the Committee so that we have the opportunity to debate the issues he raised.

I was grateful to the Minister for initiating this debate in the way he did because it would have been easy for us to get into the usual argy-bargy about how long it has taken to get to this point. My hon. Friend the Member for Lewisham West and Penge (Jim Dowd) is right to say that the Gower report was the predecessor of the Hargreaves review, but it has taken an inordinate length of time to get to where we are today, which is an important stage of discussing an important Bill that will have an impact on creativity. I will chide the Minister a little because he did not mention the Culture, Media and Sport Committee report—unlike my hon. Friend the Member for Hartlepool (Mr Wright)—and what it said about the creative industries and the impact they have on our communities.

I represent a northern city, and we are looking at creativity to replace many of the manufacturing jobs we have lost over the years. The creative industries—whether film, television, the arts, or books—can create lots of new jobs. Bradford university and Bradford college provide opportunities to young people and small and medium-sized enterprises to use creativity as a way of creating those jobs of the future. Intellectual property is a key element of that, which is why the point about education is so strong, especially with the copying and so on that people do because they think they are getting things for free. In fact, that has an impact on the sector, particularly music, film and television.

The Hargreaves review has been broadly accepted by the Government and it is important that we move forward in a progressive way. The point about exceptions in the statutory instruments is a vital message that will be sent to the sector, and it is important we get that right. I hope the Minister will take that issue to his colleagues and ensure that we see the separate installation of the SIs on the exceptions.

I am not anti-Google. I think it does a lot of good, but the way it has operated with regard to intellectual property is a cause for concern. That concern was echoed by the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Wantage (Mr Vaizey), when he appeared before the Select Committee and said that it was easier for Google to get to No. 10 than it was for him—I do not know what that says about him as a Minister, but there are clearly concerns there.

[Jim Dowd]

I am sure it was a slip of the tongue, but I remind my hon. Friend, as I reminded the Prime Minister, that it not the hon. Member for Wantage who is responsible for IP, but Viscount Younger in the other place, and he made the comment about access to No. 10.

[Mr Sutcliffe]

How soon I forget. My hon. Friend is right: Viscount Younger did come before the Select Committee, but the hon. Member for Wantage, who is also a Minister from the Department for Culture, Media and Sport, also gave evidence to the Committee on IP rights.

The Committee’s report is worthy of being read by hon. Members who have not yet done so, given the impact that creativity can have on well-being, innovation, and the growth of potential new jobs. When the Committee went to America to look at the creative industries—a difficult job but somebody has to do it—we went to Google and to the film studios. I found it interesting to note the importance of tax credits to the film industry. Film tax credits are one thing I will congratulate the Government on, and moving those measures to high-end television and games will maintain our lead in such things.

[Mike Weatherley]

Does the hon. Gentleman support my call for the music industry to have a tax credit for A and R, perhaps above the 20% level that they would normally spend?

[Mr Sutcliffe]

I do. I know it is difficult when, in austere times, we are asking the Treasury to give more tax breaks, but I think it is a case of invest to save: if we do that for the music industry, we will get more back in the fruition and growth of that sector. I support what the hon. Gentleman proposes.

I think that Google has responsibilities and needs to consider the issue raised by BPI—I had forgotten that so many million requests have been made, and I do not think Google responded in anything like the way it needed to. I hope that with this debate, and with pressure from Ministers, we can put some pressure on Google to meet its requirements and responsibilities.

Clause 21 concerns the IPO report. I was grateful that the Minister said that Members would be able to consider all aspects of that report annually, though there are areas where things have not worked out as well as they could have. Returning to my former role as the Minister responsible for consumer affairs, I remember that on issues like trading standards, reports came from many areas of the country showing that things worked well in some places, but not in others. Enforcement is a big issue, and perhaps when we get the opportunity in Committee, we can look at the role of the IPO, trading standards, packaging, and some of the goods that mimic others. As a former sports Minister, I think particularly of the football industry where counterfeit football shirts and so on are produced. There is a tremendous cross-section of areas to consider, which is why it is important to have an IP tsar. We will want to consider clause 21 in greater detail, as well as clause 13 and the issue of criminalisation.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Like my hon. Friend, I am interested in how successful the legislation will be in addressing new kinds of difficulties with intellectual property. Does he think that clause 13(1)(a) will deal with something like TrafficPaymaster, which is the software product marketed by the HowToCorp company? It allowed people to scrape content from websites, and spin it so that it was presented as fresh content, rather than plagiarised content. I would say that that is a form of intellectual property theft. Will clause 13 deal with that?

[Mr Sutcliffe]

I would be interested to see how the Minister responds to those issues because it is difficult to get to the definition of what is and is not a criminal offence. I understand the arguments on both sides, but having received representations from designers in the furniture manufacturing industry, I feel that we have to do something; we cannot continue without there being recourse to some punishment, or without problems being addressed. I believe that clauses 13 and 21 will take up most of the Committee’s time.

To return to the issue of education raised by the hon. Member for Hove, we need to educate many of our colleagues about these issues and how they affect companies in their constituencies. It will be interesting to look at how we can work together to try to raise the profile of such matters. I know the hon. Gentleman has done that through Rock The House and Film the House and I congratulate him on that work, but more needs to be done.

I want to raise a point about IP rights and what the Government are proposing across the health sector with the introduction of plain packaging for cigarettes, and the IP costs linked to that. Legal opinion has stated that compensation may need to paid to some tobacco companies for their loss of intellectual property rights, which could be between £5 billion and £6 billion. I raise the point because people do not look at the consequences of a loss of IP rights. Perhaps in future debates we will consider that issue on the back of what happens in Australia.

I welcome the Bill and the spirit in which the Minister has said that he will listen to what has been said, so that we can try to enhance and develop it further. This is a great opportunity and at long last IP rights are getting recognition in being addressed by this House.

18:38

[Gordon Birtwistle (Burnley) (LD)]

I do not want to delay the House long because I have just a few comments, mainly about business growth created by the design industry across the country. The design industry alone is worth £33.5 billion, but we could put many billions on top of that given the manufacturing that takes place from designs that are developed in this country. It is vital to protect that industry from those who try to copy and fraudulently get involved in it.

There is a company in my constituency that one would not think was a massive designer of equipment for the film industry. In fact, however, AMS Neve designs the music mixing systems that are used by all the main pop groups and pop singers across the world, and it was the main designer of the music mixing systems for the film “The King’s Speech”. For that, the owner, Mark Crabtree, got a British Academy of Film and Television Arts award. It is extremely unusual for somebody working in manufacturing to get such an award. It was developed, designed and manufactured in my constituency. It is so high-tech that he has a problem protecting his designs.

The games industry and the fashion industry are other major industries for which it is vital that we protect design. Many industries are desperate to steal our major designs. Burnley college has an amazing design department. The people there design clothes of the future, particularly for the Asian market. They need their designs to be protected, which will happen under the Bill.

It is important that we protect those industries because 350,000 people work in them. We cannot put such industries at risk. They are high-tech, and are in the main developed by graduates and students of our universities. The Bill needs to be developed to ensure that they are protected against fraudsters and other people around the world who would be delighted to get into those industries. We are No. 1 in intellectual property.

[Bob Stewart]

It crosses my mind that it must be extremely difficult to protect our industries when countries —I am perhaps thinking of one very large country in Asia—believe it is in their interests to steal designs for things such as games and do not seem to give a damn about intellectual property.

[Gordon Birtwistle]

I agree with the hon. Gentleman. When I was in engineering, we did a staggering amount of work for a local company that made wallpaper machinery. The company lost the majority of the manufacture of the kit but managed to hang on to the high-tech part of it. The country to which my hon. Friend is alluding could not develop the high-tech part, but it could do the basic engineering—the steelwork and building the machines. Fortunately, that equipment is secured in the UK, because that country has not yet developed the skills to develop the high-tech part—changing the machine for the different colours used in the manufacture of wallpaper. The situation is the same in the carpet industry. That country can make the machines easily, but it cannot develop the technology to produce the carpet patterns.

I am delighted with the Bill and am pleased that the majority of hon. Members agree with it—there seems to be no opposition to it at all. I hope that, in Committee, any problems with clauses 13 and 21 are resolved so that we have a good, solid, secure Bill in the House on Third Reading. I hope that we can put the legislation on the statute book to protect the industries of the future and the jobs of the people working in them.

18:43

[Helen Goodman (Bishop Auckland) (Lab)]

I am pleased to have the opportunity to speak in the debate. I agree with everything my hon. Friend the Member for Hartlepool (Mr Wright) said at the beginning of the debate and am pleased to see a joined-up approach between the teams from the Departments for Business, Innovation and Skills and for Culture, Media and Sport.

As the hon. Member for Burnley (Gordon Birtwistle) has said, protecting intellectual property is essential in the modern, knowledge-based economy. It is particularly important in the creative industries, which support 1.5 million jobs and produce about £36 billion-worth of output.

The hon. Member for Perth and North Perthshire (Pete Wishart) described the problem of illegal downloads, but he did not tell the House how large the number of illegal downloads is when aggregated. Ofcom estimates that, every three months, 280 million music tracks, 52 million television programmes, 29 million films, 18 million e-books and 7 million games are downloaded from sites without payment. It also estimates that about a fifth of households in this country go to those sites and do not pay for content. On behalf of the music recording industry, the BPI estimates that that costs the industry £250 million a year.

In the wash-up at the end of the previous Parliament, Labour and the Conservatives—the two major parties—agreed to pass the Digital Economy Act 2010. Unfortunately, the Government have been extremely dilatory in implementing its provisions. I am not saying that the provisions are perfect in every respect and that they do not need amendment, but the Government’s failure to get to grips properly with illegal downloading will cost the industry more than £1 billion in the lifetime of this Parliament.

The Government’s measures will not come into effect until the end of the next calendar year. They propose a voluntary code for ISPs. Under the Bill, the ISPs would notify people three times, after which the copyright holders of illegally downloaded content can call for slow connections, disconnections and so forth.

I do not agree with the proposals of the hon. Member for Hove (Mike Weatherley), the Prime Minister’s adviser, because he has brought no common sense to the debate. It is important that we distinguish between 14-year-olds in their bedrooms downloading two or three Justin Bieber tracks on to an iPod and people who make multi-billion pound businesses out of providing illegal material. It is not right to treat the two groups in the same way. We need measures that address the audience, who are unconscious of what they are doing, and the industry, which knows perfectly well what it is doing and is utterly disingenuous. [Interruption.] The right hon. Member for Wokingham (Mr Redwood) is mithering from a sedentary position. I am not saying that there should not be a penalty for the teenagers downloading material illegally, but I am saying that we should regard the problem much as we regard driving fines—we should have a points system building up to fines.

[Mike Weatherley]

rose—

[Helen Goodman]

I will say why after I have given way to the hon. Gentleman.

[Mike Weatherley]

My point was that, when we get the education right and people understand that stealing intellectual property is wrong, and when the industry has alternative downloading models, if we exhaust fines and other means of stopping persons downloading illegally, we must consider some sort of custodial sentence for persistent offenders and people who operate on a commercial scale.

[Helen Goodman]

The point is that the people operating on a commercial scale are in a different category and should be dealt with much more severely. I completely agree with the hon. Gentleman that education must be part of that strand, but I am uneasy about switching off the internet because, for example, the 12-year-old little sister of a 16-year-old who illegally downloads pop music might be unable to upload her school home work. That does not seem to be the right way to go about dealing with the problem. But if the governing party wants to charge into criminalising every teenager in the land—well, that is an election opportunity for them.

To make any of this happen, it is obvious that we must reform the Intellectual Property Office, which does not have an important role at the moment. The hon. Member for Hove said nothing about what should be done with respect to the industry. The hon. Member for Perth and North Perthshire was absolutely right: we must have an EU approach. I know that that pains Ministers and means that they will have to see off the wilder shores of Euroscepticism, but this is a perfect example of where we need to see a European approach. Two points are particularly important: blocking sites that give people access to material they do not pay for; and requiring search engines to change their algorithms to prioritise legal sites. It is completely disingenuous for them to say, “Oh, we have received 5 million notifications and blah-de-blah-de-blah.” We all know that this is the root cause of the problem, so let us tackle it.

We must remember that this industry is one engine of growth in the British economy, but we must also take seriously the needs and the role of researchers in universities and in the British Library. We must update the law to allow them to have what they need: text mining for non-commercial research; heritage protection by digitising material; a workable private copying regime; and ensuring that the law overrides private contracts on digital material. The Hargreaves report came up with a number of proposals. Some were sensible—on orphan works and digital exchange—while others were perhaps more controversial, but one point on which I think we can all agree is that we do not wish to move the British economy to a litigious model, with the levels of litigation that are prevalent in the United States.

What I will say now relates in part to unregistered design. I have a concern about people putting patents on things that are part of the common culture, either here or overseas. For example, the recipe for a cucumber sandwich or people singing “Ring a Ring O’ Roses” at a children’s birthday party are a part of the common culture. Those examples might seem a little fanciful to hon. Members, but I will provide two examples where the common culture has been appropriated by some people to their financial benefit, and not necessarily to the financial benefit of all.

In the 1950s, some people collecting folk songs went to Teesdale in my constituency. They went right to the top of the dale and met some stonemasons. They got the stonemasons to sing songs and recorded them. They took the recordings away and shared them with people making music. One of the songs they recorded was “Scarborough Fair”. This was given to Simon and Garfunkel, who of course made an absolute fortune with it, and the stonemasons in my constituency made absolutely nothing. I think Simon and Garfunkel are great and they made a lovely production of the song, but it was a part of our common culture.

Today, we see this kind of thing going on in other industries. Sometimes there are glamorous models shimmying along the catwalk wearing prints that, not to put too fine a point on it, have been ripped off from people in Africa. The people in Africa, who have been making the prints for generations, get nothing, but the people who reproduce them patent the design and make an absolute fortune. I am sure that hon. Members agree that this need not to patent the common culture is something that we need to keep in our minds, so that we do not shift from one situation that deprives people who are genuinely making new, scientific innovations and discoveries, to a situation where we put legal attributions on every single idea and part of the common culture.

[Mr John Redwood (Wokingham) (Con)]

I am a little intrigued by the hon. Lady’s “Scarborough Fair” example. I presume that Simon and Garfunkel rightly had title to their particular performance, but surely they did not gain title to the song? I assume other people can go off and make their own arrangements of it without having to pay Simon and Garfunkel.

[Helen Goodman]

Unhappily, I think that that is exactly what did happen, and that was a mistake. I just want to caution the Minister and my hon. Friend the Member for Hartlepool not to make that kind of mistake.

I remind Members that, although we are talking a lot about the implications of new technology, this is a very old problem. I am sure that some Members will know this poem, which is at least 600 years old and is absolutely on the point:

“The law locks up the man or woman

Who steals the goose from off the common

But leaves the greater villain loose

Who steals the common from off the goose.”

18:56

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

It is all too easy to characterise this as a Bill of interest only to lawyers—one that is technical in nature and of little interest to the general public or the great British entrepreneur. Indeed, the title, the Intellectual Property Bill, does little to describe its underlying purpose, for this is not a Bill about the law; it is a Bill about creativity and innovation.

Every year, UK businesses invest nearly £16 billion in design and innovation. That is £61 million per working day, an incredible figure that represents 1.1% of GDP. The Bill is about not just protecting that investment, but growing it. It is about ensuring that British businesses are able not just to win in the global race, but to protect the advantages that got them to the top of the podium in the first place. Like many other of the Government’s policies, the Bill is about ensuring we attract the best talent and the best companies to the UK. When it comes to business and economic policy, this has been a recurring theme of this Administration.

When I was the chief executive of a global business looking to enter a new market, my board and I would carefully weigh up the tax and regulatory regime before deciding on a host country for the venture. Much has been made of how corporation tax impacts on this decision, and with the rate set to fall to 20% there is no doubt this will become an ever-increasing pull factor, but we should not underestimate the importance of the intellectual property protection regime. As the global race becomes ever more the battle for ideas and innovation over the battle for cheap labour, this will become an increasingly important concept.

As a member of the Select Committee on Business, Innovation and Skills, I sat on the inquiry into the Hargreaves review. Opposition Members would like to characterise the Bill as having little to do with Hargreaves’s findings, but you, Madam Deputy Speaker, will not be surprised to hear that I disagree. At the heart of Hargreaves’s recommendations was the need for copyright laws to recognise that IP is a tool for stimulating economic growth. I am confident that the changes implemented by the Bill will do just that: stimulate economic growth and help to secure the continuing recovery.

There are many admirable clauses in the Bill, but I should like to highlight a few in this context. First, on the creation of a criminal offence of infringement of a registered design, our IP framework already has criminal sanctions for breach of copyright—in the case of music, for example—and breach of trade marks to protect brands, but this change recognises that creativity of design is as important to the economy as any other piece of intellectual property. In doing so, it gives creators an additional tool to protect their creativity from the blatant copying that impacts on their bottom line. One also hopes that the threat of criminal sanction will deter such copying in the first place.

Clause 15 brings patent notifications into the modern world. Currently, in order to obtain the maximum protection, patent owners must mark every single patented product with all the relevant patent numbers, but the clause will allow them instead to mark products with a website address, reducing costs while maximising protection. It will also allow a patent holder to update the information as new patents covering the products are granted. I understand that such a system already operates in the US to great effect.

The Bill also proposes many reforms to the Intellectual Property Office, all of which will reduce costs for business and decrease uncertainty. In particular, the extension of the IPO’s patent opinion service to give non-binding opinions on patent validity and the introduction of a design opinion service will help resolve disputes without the need for costly litigation. It is right that businesses have the option of litigation, but it should not be the first port of call or the only way of testing validity. These reforms will help with this often-heard complaint.

I should also like to highlight the basic structural and operational reforms proposed to the IPO, such as allowing it to provide online inspections of registered design files and permitting changes to statutory forms, and even business hours to be made by directions rather than secondary legislation. It is unbelievable that should the IPO wish to extend its opening hours, secondary legislation would have to be passed in this House. I also welcome clause 21, which implements Hargreaves’s recommendation that the Secretary of State report annually to Parliament on the IPO’s activities and specifically on how they have contributed to the promotion of innovation and economic growth. This increased transparency can only be a positive move.

The final area in the Bill of interest to growth are clauses 8, 17 and 18, which relate to the international and European IP systems. Implementing the unified patent court agreement is a central requirement to creating a single EU patent, and such a patent would save British business about £40 million a year in translation costs when it seeks to protect its innovation EU wide—something that will be most welcome.

To conclude, this is a Bill not for lawyers but for business. It will ensure that British business secures its position in the global race and attracts winning businesses to the UK. It is a Bill that I fully support.

19:03

[Mr Iain Wright]

With the leave of the House, I wish to respond to what has been a very knowledgeable debate—fittingly, given that IP is key to knowledge-based innovation and industry.

Ten hon. Members have spoken from the Back Benches, starting with the hon. Member for Manchester, Withington (Mr Leech), who is not in his place, but who mentioned how design was worth £33.5 billion to the UK economy, as did the hon. Member for Burnley (Gordon Birtwistle). He said that 4,000 designs were registered, but that about 18,000 to 25,000 unregistered designs were logged on the ACID register—a point also made by the hon. Member for Cities of London and Westminster (Mark Field)—highlighting the possible inconsistency between the approaches to registered and unregistered designs in clause 13. He also said we needed greater consistency in our approach to digital copyright theft, along with physical copyright infringement, and called for the repeal of section 73 of the Copyright, Design and Patents Act 1988.

My hon. Friend the Member for Lewisham West and Penge (Jim Dowd) pointed out that not even the Prime Minister knows who the IP Minister is. To be fair to the Prime Minister—not a phrase I use very often—there have been three IP Ministers in the last two years, so it is unsurprising that he has not been able to keep track. Importantly, he also mentioned parasitic packaging and his experiences of Worcestershire sauce at The Hare & Billet, which we will cover later in Committee. As my hon. Friend the Member for Bishop Auckland (Helen Goodman) said, there is a sense of a common culture. For example, ready salted crisps tend to be packaged in red—not a bad colour at all. Flavours can denote across the board what colour can be used, but when a design—for shampoo or Worcestershire sauce, for example—becomes misleading, we get into the realms of parasitic packaging. We need to explore that in Committee. He also made a good point about fraudulent websites and, in the public sector, mentioned Transport for London. The Alliance for Intellectual Property has shown me websites for Ugg boots that look very credible but are illegal, fraudulent and not providing a proper service. Again, that should be looked at.

The hon. Member for Cities of London and Westminster generally welcomed the Bill, but said that more needed to be done. He said that his spiritual home was Soho, which started to get me worried, but he soon brought it back to animation and video games, on which he said it is important that we stay ahead in the global race. He makes an important point. Canada is aggressively pushing to be the leading place in the world for video games and animation, using tax credits and other things. We have to be mindful of that. He made another important point about tech companies and their scale. The UK is good on start-ups, but perhaps not so good at growing them to the scale we need. That might have something to access to funding, as opposed to IP, but it is certainly something to look at.

The hon. Member for Perth and North Perthshire (Pete Wishart) was great in Runrig, but he is even better in MP4 and has consistently advocated a strong IP framework. I think he said that we tamper with it at our peril and made an important point questioning what was happening with the delay to statutory instruments for copyright exceptions. He made another important point about how these things should not be bundled together but taken, I hope, on the Floor of the House, and certainly individually so that we can consider things such as parody and private copying. He made the astonishing point that 77% of singles and 64% of album downloads had been directed via an illegal site. That is something we need to look at.

The hon. Member for Hove (Mike Weatherley) is the Prime Minister’s IP adviser. He brought a lot of knowledge and experience to the debate. He said that helping the consumer to buy legitimate products was a key concern and mentioned the three elements he wanted to deal with—education, carrot and stick. He also made the important point that a 2D drawing was covered in the Bill and IP legislation, but that a 3D physical manifestation of that design was not. Surely, that cannot be right and needs to be dealt with.

My hon. Friend the Member for Bradford South (Mr Sutcliffe) said that education was at the heart of all this. His area is using creativity in creating jobs for the future. He mentioned the importance of tax credits and touched on film tax relief, which was introduced by the last Labour Government, showing the importance of certainty and a long-term policy framework. He also mentioned enforcement and the role of trading standards.

My hon. Friend the Member for Bishop Auckland, who is an excellent shadow media Minister but will be an even better actual media Minister, pointed out that the media industry lost about £250 million a year through illegal downloading. The music industry has been slow to deal with illegal copying and digital technology—I think of Napster a couple of years ago—but interestingly this weekend’s Financial Times said that downloading was now being eclipsed by subscription services such as Spotify. We can talk about whether artists, such as Thom Yorke of Radiohead, get enough royalties from subscription services, but pushing people in that direction seems to be the way the music industry is going in order to raise revenue. She also said that the IPO should have an enforcement role and brought to bear the points about stonemasons and “Scarborough Fair”.

More than anything else, this debate has shown that the House appreciates and recognises how vital IP is to the future prosperity of the UK economy. This is an important Bill that will be studied closely in Committee to ensure that the UK economy can prosper and thrive. I look forward to hearing the Minister’s response to the points raised today, but there can be no doubt that IP matters to the UK economy.

19:09

[Mr Willetts]

With the leave of the House, I would like to respond briefly to the many issues raised in this useful debate.

Although many of the interventions went beyond what is in the Bill, I appreciated the general welcome for the specific proposals, in recognition of the importance of protecting intellectual property. It is sometimes said that behind every fat person is a slim person trying to get out; on this occasion, we have a slim Bill, but there seems to be a fat Bill that Members are trying to impose on us. This slim Bill, however, is intended to achieve some of the specific objectives set by Hargreaves, and I believe we are doing that in the right way.

Several Members, including the hon. Member for Lewisham West and Penge (Jim Dowd), mentioned the IP index. We score well internationally on the quality of our IP protection, including being second in the world in respect of patents. The area where we underperform—down to fifth—is design. That is why this Bill specifically focuses on that area where our performance is weakest, as our legal framework on design is inadequate.

Several Members raised the specific issue of whether the new criminal offence we are introducing should extend beyond registered design to unregistered design. I have said at several points in the debate that we are absolutely up for consultation, and I intend to introduce amendments in Committee. On this particular issue, however, we do not take the view that unregistered designs should be subject to a criminal sanction. Our view is that the design registration provides a clear starting point for any prosecution and includes important information such as the precise scope of the protection of the design and who owns it, which would be important for any criminal prosecution. It can be difficult, however, to track down information about unregistered design—such as who owns it and whether it is still protected. There can be uncertainty about whether a design is free to use. Unlike the UK registered right, the UK unregistered right can protect functional designs, and where these are complex and highly technical, it could cause difficulties in criminal cases. If we think about the risks of injustice from criminal sanctions in cases where unregistered designs are involved—we have had a long consultation on that—we believe that we have got the balance correct in extending criminal protection to registered but not to unregistered designs.

There were several questions about the working of the Intellectual Property Office, including from my hon. Friend the Member for Cities of London and Westminster (Mark Field), who asked where the responsibility for IP lies. Let me be clear: the IPO, which is an agency of the Department for Business, Innovation and Skills, leads on IP policy across the Government. It works closely with a whole range of Departments and organisations, including the Treasury and the Department for Culture, Media and Sport. It worked well with the Treasury on the patent box, for example, which has been a real boost to our IP-generating industry, and it accessed finance for IP intensive businesses, while it has worked with DCMS on copyright enforcement online.

[Mark Field]

I would not want our earlier exchanges to be seen as negative about the IPO in any way. In my small number of dealings with it, I have been impressed by its clear focus and its international vision. It was clear from what Members of all parties said that dealing with the issue of intellectual property seems to be divided into a number of different Government Departments. It is good to have a welcome confirmation from the Minister today that ultimately his neck is on the line for this matter.

[Mr Willetts]

I did not know that I had confirmed that! I must have strayed into that confirmation, as I was about to say that we are also fortunate in having a Minister for intellectual property. On several occasions when Members were talking about the need for a Minister for intellectual property, I could see that Minister up in the Gallery. Those comments were a disservice to my colleague, Viscount Younger of Leckie, who does an excellent job as the Minister for intellectual property. The IPO does have an enforcement role, and it works in parallel with the Home Office and other enforcement authorities, as the hon. Member for Bishop Auckland (Helen Goodman) mentioned.

Several Members, including my hon. Friend the Member for Hove (Mike Weatherley) and the hon. Member for Perth and North Perthshire (Pete Wishart), asked where we are on copyright exceptions and what the next stages will be. There has been a consultation process on these provisions. It is correct to say that it has taken a long time; it is a complicated question. Given the technical nature of some provisions, we put out some draft regulations for further consultation, adding another stage to the process.

[Mr Redwood]

Will the Minister adjudicate on the little dispute about whether it is possible for an artist or theatre, for example, to take a very old play or song—it may be a non-trad or written by somebody long dead—and take over the copyright? I thought that was not possible— I thought it was possible to get a copyright for the production, but that a non-trad could not be copyrighted.

[Mr Willetts]

I am not aware of Simon and Garfunkel having gone around Derbyshire—

[Helen Goodman]

Durham.

[Mr Willetts]

Sorry, was it Durham? I am not aware of Simon and Garfunkel prosecuting folk musicians for singing their version of “Scarborough Fair”. I do not think they ever did that, and I very much doubt that the law would have sustained them if they had tried to do it.

What the Government intend to do on copyright exemptions is to lay down the regulations in February, and they will then be subject to a debate under the affirmative resolution procedure. We understand the need for individual consideration; the regulations will not be completely bundled up.

Time is tight, so let me move on. Several Members raised the issue—and I completely understand the strong feelings about it—of links to illegal sites via Google, pirated content and so forth. We in the UK have led the way on intervening against criminal IP infringement through intermediary services. We have set up a new police unit that uses money laundering regulations to force removal of payment services from infringing sites. Similar work is being done with advertising revenue and domain registration. We are absolutely tackling this issue; we are ahead of the rest of the world.

My hon. Friend the Member for Hove asked about the important issue of education. I welcome the work he does as intellectual property adviser to the Prime Minister. Again, we are trying to make progress in this area. We have seen the IPO do more to build an environment in which IP rights are properly respected. We absolutely understand the importance of education.

That brings me to interventions about the IPO’s annual reporting, which will be wide ranging. It will be able to comment on topical issues that developed during the year, looking ahead. It will certainly be able to report on what is being done on education so that people understand the danger of not properly valuing intellectual property. As we heard in the intervention from my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi), in doing so, the IPO will contribute significantly to economic growth by ensuring that innovators, particularly in design, that are essential for our economy’s performance, are at last properly protected against people who rip off their designs and do not properly respect the value of the work they have done. This Bill brings important protection to those designers. For that reason alone, if for no other, I greatly hope that the Bill will be supported on Second Reading across the House.

Question put and agreed to.

Bill accordingly read a Second time.

Intellectual Property Bill [Lords] (Programme)

Ordered,

That the following provisions shall apply to the Intellectual Property Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 30 January 2014.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of the proceedings.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(Anne Milton.)

Children and Families Bill

Monday 20th January 2014 Commons Chamber

19:20

[The Parliamentary Under-Secretary of State for Education (Mr Edward Timpson)]

I beg to move,

That the period on the expiry of which proceedings on the Children and Families Bill shall lapse in pursuance of paragraph (13) of Standing Order No. 80A shall be extended by 46 days until 21 March 2014.

I am aware that there is a very important Back-Bench business debate to follow, so I shall keep my remarks to a respectable minimum.

The Bill, whose Report stage is due to conclude in the other place on 29 January, was introduced in this House on 4 February 2013. As set out in Standing Order No. 88, as a carry-over Bill it will fall if it does not receive Royal Assent within 12 months of its First Reading, and that date is now approaching. Given the strong interest in, and support for, the Bill in both Houses, it is only right for us to guard against that.

The Bill makes critical and far-reaching improvements to services for children, young people and families. It has benefited, and is continuing to benefit, from the detailed scrutiny of Parliament, and I know that the principles on which it is based have cross-party support. If both Houses and all parties can work together to ensure that we can meet the new target date of Royal Assent by 21 March and then find time for the necessary consideration of the secondary legislation and the special educational needs code of practice, we shall be able to proceed swiftly to the implementation of these hugely important reforms.

I look forward to the House’s co-operation in this matter.

19:21

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

We are entirely happy to support the Minister’s request for the Bill to be carried over.

Question put and agreed to.

Backbench Business

Monday 20th January 2014 Commons Chamber

Payday Loan Companies

Monday 20th January 2014 Commons Chamber

[Relevant documents: Seventh Report from the Business, Innovation and Skills Committee, on Payday Loans, HC 789.]

19:22

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I beg to move,

That this House has considered payday loan companies.

I thank the Backbench Business Committee for providing time for a debate on an issue which has been gathering importance and significance, and which was the subject of a second Select Committee report fairly recently. The report was published just before Christmas.

Before I deal with the substance of the report’s recommendations, let me thank my colleagues on the Business, Innovation and Skills Committee for their assiduous work and their commitment to promoting the recommendations, which went far beyond just supporting them in the Committee. While I recognise that there has been a huge body of support for the recommendations on both sides of the House, and that people have campaigned for them for a long time, I feel that I should mention in particular my hon. Friend the Member for Sheffield Central (Paul Blomfield), who has fought a long, sustained and robust battle to secure the recommendations, and will continue to do so until he sees them enshrined in appropriate regulation.

We wanted the issue to be debated today because this is a particularly strategic time for such a debate to take place. Historically, the regulation of payday lenders has been the responsibility of the Office of Fair Trading, but in April that responsibility will be taken over by the Financial Conduct Authority. The FCA has conducted a consultation on the rules that it is proposing, and we felt that it was timely for the Select Committee’s recommendations to be given an even more public airing before the authority published its conclusions.

The impact of the payday lending industry has been a subject of growing concern for a long time. I could probably spend 20 minutes giving the House statistics about the impact that it has had on particular sections of the public, but I shall try to confine myself to one or two particularly relevant ones.

A personal debt survey that was conducted in December last year found that 5% of adults admitted to having taken out payday loans. An even more significant finding was that 6% said they would consider taking out such a loan in the next six months. The turnover of the market increased from £900 million in 2008-09 to £2.26 billion in 2011-12, and all the indications are that the more recent figures will show an even greater increase. According to StepChange, an organisation that provides advice on debt, 36,000 people approached it for advice in 2012, and 30,000 people did so during the first six months of 2013. That means that what was a very large number of people in the first place has almost doubled over the past year.

The payday lending industry gives rise to many reasons for concern, but given the time that is available to me this evening, I shall not try to deal with all of them.

[Sir Tony Baldry (Banbury) (Con)]

The hon. Gentleman is right to focus on the need for us to review the existing regulations. He is also right to draw attention to the problems involved in payday lending. As he will know, the Archbishop of Canterbury is keen for us to try to compete payday lenders out of existence. I hope that he and the House will be pleased to learn that the Archbishop has appointed Sir Hector Sants to lead a taskforce that will try to establish what more can be done to improve competition and the alternative market. Of course, that will not happen overnight.

[Mr Bailey]

I broadly support that course of action. I think that there is a sector of the market to which payday lenders can be relevant, but that sector must be closely regulated and transparent, and there must be a process that prevents lenders from adding to the problems of those who apply to them for loans. I shall say more about that, and about the important issue of competition.

I intend to talk about just one significant part of the industry, but let me first point out that much of the publicity about the industry has focused on the interest rate charged by payday lenders and the associated costs. That is obviously crucial in terms of the impact that it has on the people who take out the loans, but I think that we should view the issue much more broadly. We should think about the way in which payday lenders promote themselves, and the way in which they lure people into taking out loans. We should think about the processes in which they engage, which do not ensure that the loans given to people are appropriate to their personal needs, as well as how much they charge and how much they make from those charges. The Select Committee’s recommendations cover all those issues.

I think that the main problem—which was reflected in the 2013 OFT review of payday websites—is that payday lenders who are in competition with each other do not operate on a competitive price-offering basis; they operate on the basis of speed of access to such loans and lack of accountability. Anybody who goes on a payday loan site will see that the key aspects of every company advert are speed of access and lack of accountability. The OFT review made a substantial impact. As a result of the investigation, 19 of the 50 operators left the market, three had their licences revoked and three surrendered them. That alone shows the appalling misrepresentation that was going on at that point, but should anybody believe that that problem is over as a result of that action, even a cursory glance at their advertising will show that it is not. There are still many areas of enormous concern, and I know other Members will want to comment on them.

I want to concentrate on the advertising element. I have mentioned that the emphasis is on speed, ease of reading and ease of application. I took one advert at random. It says, “Great news!” and

“We have 7 lenders who can offer you £1,000—paid online today!..Complete our 1-minute verification form.”

For an industry that claims to be cleaning up its act and not to be lending to those who cannot afford to pay back, to offer to verify the appropriateness of a loan to somebody in a one-minute online process defies all credibility.

I looked at another advert that had a beautifully seductive cheery pink pig. I could not help but marvel at how the piggy-bank, a symbol over the decades of thrift and financial responsibility, should be misused in such a way to promote what is perhaps some of the most irresponsible lending, but that is how these companies advertise on their websites.

We found the television advertising to be the most concerning of all, however. Ofcom carried out research on this. In 2008 there were 12 million impacts, and in 2012 there were 7.56 billion impacts, with 152 loan adverts per viewer per year. Most seriously of all, children aged between four and 15 saw 3 million adverts, an average of 70 per child per year.

The Committee recommends that all advertising targeted at children should be banned. I acknowledge that there are problems around this, because the amount of advertising aired directly in children’s programmes is relatively small. However, there is an enormous amount shown during programmes that children are likely to watch. These adverts are largely focused on daytime and early-evening television, which is far more likely to be seen by children.

I shall now quote an e-mail I received from a teacher. She said:

“I asked the children what they could do if there was something they wanted to buy and didn’t have the money for yet. Almost all the hands went up (Only one child said they should save up) and I was given the names of several payday loan companies…They said that it was on TV and then most of them sang the song in the advert.”

Certainly the cartoon style of some of the adverts can only be interpreted as being geared for children.

The teacher went on to say:

“The advertising seems to have ‘normalised’ payday loans for the children as a way to buy things instead of saving and I feel that by the time these children are adults they won’t think twice about taking out a payday loan to pay for it. I spoke to them about interest charges and none of them had realised that these companies were anything other than a benign service helping people to pay for things.”

This ties in with the research done by Martin Lewis. He stated in his evidence to the Committee that he thought that in effect these companies were grooming children. Those are strong words, but the evidence so far is that the number of children seeing these adverts and the impact they are having on them is such that we cannot stand aside and disregard that. I understand the broader issues about regulating advertisements, but I feel there is now a huge body of evidence to demonstrate that the Advertising Standards Authority should be working with the financial services industry and others to ensure that there is a code of practice so that children are not subjected to such a level of pressure.

I cannot believe all this is coincidental. Parents respond to pester-power from their children, and if those children believe it is so easy to obtain money, the pressures that adults may feel are multiplied many times. That is reinforced by constant demands from their children to spend money they cannot afford.

I have spoken about just one element of this issue. There are many others that are equally important and significant and equally damaging to people’s personal financial situations. I know many colleagues will want to highlight those and I will not try to pre-empt them. I will instead conclude my remarks at this point, having highlighted that particular recommendation.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I inform Members that there will now be an eight-minute time limit on all Back-Bench contributions to this debate, as a large number of Members wish to speak.

19:37

[Charlie Elphicke (Dover) (Con)]

It is a real pleasure to follow the hon. Member for West Bromwich West (Mr Bailey) who made an interesting and well-informed speech.

My general philosophical approach is very much that we want to build a land of opportunity and aspiration where anyone can do well and where they have the tools to succeed and achieve and even reach for the moon. There is a flipside to that form of opportunity politics—that Conservatism—and that is that we also need to protect people from being taken advantage of. In too many cases, there is a history in this country of lax regulation, which has enabled people to be taken advantage of: water and power companies not properly regulated with rising bills; the banking system was not properly regulated and spawned payday lending; a tax system that was lax and weak and allowed industrial-scale tax avoidance, which was unacceptable; and employment law that is not properly regulated, even though it was previously reviewed and zero-hours contracts were allowed to carry on. In too many cases, this Government need to protect people and make sure they are not taken advantage of. In many instances action has been taken, however, and I welcome the action on payday lending announced by the Chancellor.

The problem is not a new one; it has been around for a while. I remember a client phoning me up back in 2006 and saying “I’m thinking of buying a payday lender.” I said, “What is that? I haven’t heard of it.” He explained what it was and I said, “This is a car crash in the making.” He said, “It’s great: it’s a rising a market and I can make lots of money out of it.” I said, “Don’t do it. People will not understand. It will not be acceptable, and sooner or later it will cause a massive scandal in this country and an enormous row,” and that has turned out to be the case. I am glad to say he did not take on that business, but many others did: they saw an opportunity and took it, and what has happened is wholly unacceptable in too many cases.

Many people say we should not take any action on payday lending because that will drive people into the hands of loan sharks, but the evidence from the Bristol university department for business was that when customers could not access short-term loans, most would either go without or approach a friend or relative for help. It showed that a small number would try to borrow from other short-term lenders, but that the use of an illegal lender was not an option that the vast majority would consider. It does not seem right, therefore, to say that most people would end up going to loan sharks.

I want briefly to look at the international comparators. This is not simply a UK problem. It is a problem worldwide, and many other countries have taken action to try to deal with it. The hon. Member for West Bromwich West spoke movingly about advertising and related issues. I want to talk about interest rate caps and what we can do to control the excessive amount of money that is often demanded by payday lenders.

The USA has introduced caps, and the overall result has been substantially to restrict the market. Payday lending has been dramatically reduced as a result. Other countries have gone down different routes. Canada, for example, has introduced substantial regulation for short-term loans and established a payday lending education fund. It has also introduced a two-day cooling-off period during which customers can cancel their payday loan, and banned the inclusion of fees in the value of the loaned amount. The payday loan industry has set up its own industry body. There are also rules banning the rolling over of payday loans; the issuing of multiple payday loans to the same customer; the taking of collateral as security; and the charging of an interest rate greater than 90 cents a week for the first 13 weeks. Canada has thus produced a system of regulation that involves capping amounts of money, rather than capping interest rates.

Japan has introduced an interest rate capping system, set at around 20%, which was implemented in 2010. Australia has introduced an interesting system of payday loan regulations, as many hon. Members will be aware. It has looked at a form of regulation similar to the one we are considering. Those international comparators suggest that we should consider not only an interest rate cap but perhaps a cap involving a particular amount per £100 over a set length of time, and I hope that hon. Members will consider that.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

A bit closer to home, in Oldham—and elsewhere in this country—there are good examples of credit unions. They charge very low interest rates and work in the collective interest, which I am sure we all agree is a good thing. Does the hon. Gentleman agree?

[Charlie Elphicke]

I am in complete agreement with the hon. Lady. Credit unions are a good idea, and mutual finance is a good thing. I am a fan of mutuals, having made the case for my own port of Dover to become a people’s port—a community mutual. We have mutuals in the financial sector in this country, but they are rarely mentioned. What happened to the building society movement? Why is no one fighting for that these days? Building societies are mutual organisations. We should look again at what we can do with them and at the kind of organisations they could become. They are substantial organisations, and this is something we should look at. In Australia, the credit unions have been more successful than they are here. Here, we have a building society movement, and we should look at developing it.

I want to touch on a further concern. Why is the payday lending industry there at all? Why has it arisen? I believe that bank overdrafts have a lot to do with it. Anyone who has an unauthorised overdraft will be charged 20 quid for a letter and 50 quid for the unauthorised overdraft fee, plus an extra amount per cheque or payment. That is wrong; it is egregious. When people have run out of money and cannot get an authorised overdraft, it is the behaviour of the banks that can help to drive them to the alternative credit providers. A practical step would be to look into the banks’ behaviour. We need to strike a balance between protecting customers from being stung by the banks when they have short-term cash-flow problems and making access to irresponsible credit too easy for them.

I propose that the banks should operate a grace period, so that people who ended up with an unauthorised overdraft would not get hit with fees immediately. They should be able to overdraw for a short time without being charged. That would reduce the numbers being forced to seek alternative forms of credit. There should also be a wide-ranging review of the way in which the banks handle overdrafts, and of their ability to help people who find themselves short of funds in the short term. Most of us in the House want to defeat the payday lending industry, and the best way to do that is to provide an alternative for people who do not have much money and who are in real need of assistance. I am also concerned about the EU consumer credit directive. The ability of lenders to operate across EU borders makes it possible for payday lenders to bypass anything that we decide here. That needs to be carefully considered and addressed.

Finally, what more can we do, above and beyond what the Financial Conduct Authority is proposing to look at when it takes over in a few months’ time? We could consider the following measures: setting a ceiling on the total cost of borrowing, rather than setting an interest rate cap; seeking reform of the European consumer credit directive; introducing tougher sentences for illegal lending, including mandatory prison sentences; enabling victims of illegal lending to recover all payments made to the lender, plus extra, rather like what the Labour Government did with tenant deposit schemes; requiring payday lenders to form an accredited industrial body; and requiring banks to give a grace period of three working days before customers are charged for unauthorised overdrafts.

19:46

[Ann McKechin (Glasgow North) (Lab)]

The fact that this is the second time in two years that the Business, Innovation and Skills Committee has reported on this issue reflects the enormous public interest in the matter and the concern about the impact of the sector on our communities as well as on individual borrowers. To date, the regulatory authorities have being running behind the curve, and it is important that the Financial Conduct Authority should start ahead of the game. The regulators initially gave little priority to protecting the poorest borrowers on the basis that the total lending represented just a small percentage of the total in the financial services sector. They failed to take proper account of the problems that had already beset other international jurisdictions, to which the hon. Member for Dover (Charlie Elphicke) has referred. The Government’s response to our first report was simply to try to shift the problem further down the time line, with an instruction for further reviews and reports. The transition to regulation by the FCA was used as the main reason for not taking immediate action.

In my own city of Glasgow, the council reported last year that its citizens borrowed £57 million annually through high-cost credit, including payday lending. Given that 49% of our residents are within the bottom 20% of the income quartile, it is not surprising that the council estimates that a staggering 100,000 residents are using non-standard credit and that a high percentage of that number are finding it difficult, if not impossible, to repay their loans.

In 2013, the regulatory authorities and the Government realised that a policy of laissez-faire was not going to work. The findings of the Office of Fair Trading’s damning report showed the scale of contraventions in the sector, and the growing amount of strong evidence from agencies like Citizens Advice, StepChange and Which? could not be ignored. The sector itself had rapidly increased from £900 million in 2008-09 to £2.2 billion in 2011-12. Wonga had become a household name and, even more worryingly, the level of personal debt in this country was beginning to rise again, potentially threatening any increase in growth.

The sector now has a shop in every high street, it dominates the advertising schedules and it has been allowed the freedom of a wild west market to achieve rapid growth and massive profits. Many of its victims now populate the ever-growing food banks and our debt courts. It should be abundantly clear that this issue cannot exist in a vacuum, devoid of political direction. The statutory independence of a regulatory authority to act should not be a barrier to setting a framework and priorities that it needs to address; nor should it be a way to sidestep the will of Parliament, which on numerous occasions over the past three years has expressed exactly the concerns that are being raised today. The level of cross-party agreement and civic support for tougher regulation is overwhelming.

Wider issues have intensified the interest in this sector. The hon. Member for Dover referred to the lack of provision in the mainstream credit sector, but other issues include the squeeze on real incomes, and the above-inflation rises in essential costs—energy, transport, housing and food. The demand for unsecured lending continues to expand, but we also have a rapidly changing financial services sector that often lacks adequate transparency not just in short-term lending, which adds to consumers’ confusion in making the best decisions to suit their needs.

I believe the major players in this sector well know that the current era of weak regulation ripe for exploitation will one day come to an end, but if they can extend that period or find a new avenue for profit, they will happily go for the bottom line. They have achieved their aim of being a ubiquitous presence. The Chair of the Select Committee on Business, Innovation and Skills, my hon. Friend the Member for West Bromwich West (Mr Bailey), has referred to the evidence from the money expert Martin Lewis, who brutally exposed the scale of this insidious influence. He said:

“14% of parents of under-10s, when they have said, ‘No, you cannot have your toy,’…have had a payday loan company quoted to borrow the money from.”

We have also heard about scale and the Ofcom research on advertising, which found that there were 17,000 payday lending adverts in 2008 whereas there were 397,000 in 2012. That equates to each adult in the UK seeing an average of 152 payday loan adverts a year. Given that level of market penetration, some of the biggest firms barely need ever to advertise again. That is why our Committee believes that our modest recommendation on curbing TV advertising is important, but we should not believe that it will cure the cultural influence.

[Caroline Dinenage (Gosport) (Con)]

Does the hon. Lady agree that it is not just the volume of TV advertising, but the nature of it that is concerning? These companies are often advertised via cuddly, humorous characters, such as knitted grannies and granddads. That is worrying it lulls people into a false sense of security about the nature of the product in which they are investing.

[Ann McKechin]

I absolutely concur with what the hon. Lady, a Committee colleague, says. The advertising is very clear and insidious, and it is targeted at younger people and children in particular. There is no debate about that; it has happened and continues to occur.

I want to deal now with the real-time recording of credit information. If credit information is to work, it needs to be both accurate and comprehensive; otherwise, there is little point to it. Unsurprisingly, the industry was quick to downplay the significance of this potential regulatory step, and again it is regrettable that the authorities have not been faster to respond, preferring instead an approach of wait and see. I commend the sustained pressure from agencies like as Citizens Advice and StepChange, but the cloud lifted when BBC’s “Newsnight” programme and others reported at the end of last year on the potential impact on mortgage lending. If there is no real-time recording in the payday lending sector, the existing credit recording systems become increasingly unreliable and inaccurate, particularly in respect of younger borrowers, who form the bulk of this sector’s customers. Lenders in the mainstream sector have now decided, in their world of lower risk, to dismiss payday borrowers entirely from their eligibility test—and hey presto, this month we have the announcement from Wonga and some others that a real-time recording system is going to be put in place later this year. Call me a cynic, but I suspect that the potential hit on their client base, who were increasingly worried about future access to mainstream lending and to mortgages, acted as a greater incentive than the dialogue with the FCA.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

My hon. Friend will be aware that only four payday lenders have entered into this real-time conglomerate. The FCA has indicated that it will take action if the sector does not get its act under way. Do we not need to get action from the FCA to make sure this happens?

[Ann McKechin]

My hon. Friend has taken the next sentence from my speech, because that is what the FCA absolutely needs to do and it is what we have recommended. Unless we have a recording system that is properly comprehensive, we will not have a solution and we will not stop lenders making non-compliant loans. The current proposal contains no requirement to report to the FCA; it still relies on voluntary reporting, and we know that many of the same lenders were found wanting in last year’s OFT investigation. As colleagues have done, I urge the FCA not to rely on the industry to provide the solutions, but to ensure that the public’s protection is paramount. Given that no one trade organisation represents the sector and that new entrants are likely, albeit in smaller numbers than before, we need a regulated and transparent system of recording which will have the trust of borrowers and lenders alike, and which will do the work it needs to do to allow our constituents to obtain legitimate credit. The FCA should quickly impose such a system, rather than allowing a not very satisfactory alternative to emerge in fits and starts.

Our Committee has further requested that in the light of the disturbing evidence we received of continued abuses of the present regulatory system, all companies should resubmit their affordability tests to the FCA for approval. Like some other hon. Members here today, I received whistleblowing evidence this weekend from a former senior employee of a major payday lender. It portrays an endemic culture of avoidance, from the senior managers down to shop-floor staff, and I trust it will receive the urgent and serious attention it deserves from the regulators. This is not just about a company bending the rules to suit its own profit line; it is about full-scale lending to people the company knows will be unable to repay in full or part, with the misery that goes along with it. I do not believe this is an isolated example, and as the Chair of our Committee has stated, the evidence before us challenges regulators to make sure that their enforcement systems are going to work. As this evidence suggests, there may be a move by some lenders to have long-term lending simply to bypass regulatory attempts. To be fair to the FCA, I know it appreciates that the challenge on effectiveness will be in trying to cope with changes in the market and how it shifts over months and years. I believe it is important for the Government to have a strong response to our Committee’s report, to accept our recommendations and to make sure that public protection is always paramount in our considerations.

19:57

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

I am sure that we would all much rather that people did not have to resort to payday loans to make ends meet. My hon. Friend the Member for Dover (Charlie Elphicke) cited the behaviour of the banks in respect of overdrafts as a possible reason for the rise of the industry, but I cannot help but think it correlates with the last Government’s economic policy, whereby we saw an explosion in household debt, the decoupling of median pay from GDP and a recession that wiped out 7.2% of our national income. We have to deal with the world as we find it, not as we would like it to be. If desperate people do need credit at short notice, I would much prefer they got it from legitimate companies which can be monitored and regulated, than through illegal means. My hon. Friend cited pieces of research that say that people will not go to loan sharks, but a significant minority do end up going to loan sharks, who would do anything to get their money back.

[Naomi Long (Belfast East) (Alliance)]

One concern in my constituency is that paramilitary organisations are often the loan sharks and, although the consequences that flow from a payday lender are of concern, the consequences of defaulting on such a loan are serious in the extreme.

[Nadhim Zahawi]

The hon. Lady makes a very powerful point. I have seen evidence of conversations between a young lady and a loan shark in a coffee shop where she was having to agree to lie to her husband to try to get some more money, otherwise her limbs would be damaged.

The question is how we regulate the sector. As with any financial market, we need a system of clear rules backed up by tough enforcement. A good regulator needs to have blood on its sword, and I hope that the FCA will use its enforcement powers to drive the most egregious players out of the market. I am on record as calling the behaviour of some of these companies rapacious.

Unlike the Office of Fair Trading, the FCA will have the power to cap the total cost of credit, which is welcome news, but I want to see the FCA go further than the terms of its consultation in two areas. First, it should mandate the use of real-time data sharing as a condition of being able to trade in this market. The hon. Member for Glasgow North (Ann McKechin) made that point eloquently. It is vital that we make it harder for consumers to take out multiple loans from different companies. Such borrowing can quickly spiral out of control, trapping people in huge debt. As we know from macro-economic policy, we cannot borrow our way out of a debt crisis.

[Mike Crockart (Edinburgh West) (LD)]

Does my hon. Friend agree that, although real-time information is essential, it would be good if the companies checked any information at all? When I conducted some research, I made an application for a loan under the name Boris Peep, using my constituency address as the address for the individual. The loan was approved by WageDayAdvance. I then received—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. This is not a 40-minute speech.

[Mike Crockart]

I then received numerous texts saying, “Hi Boris, your loan application has been approved.” That surely shows that no real-time information was used at all.

[Nadhim Zahawi]

My hon. Friend raises an important point. It just shows how farcical the system is when Bo Beep can lose her sheep, but get a loan from a payday lender.

Secondly, I want to see the FCA introduce a roll-over limit of one. Failure to meet a loan repayment should be a clear signal that the borrower is in financial trouble. The answer is not then for the lender to refinance the debt. The purpose of payday loans is to tide the borrower over until payday; they should not be allowed to become long-term financing instruments. Two roll-overs equate to three months, which is far too long. Getting the regulation right is important, but if we do more to support the incomes of the lowest paid, this market will lose much of its raison d'être.

I warmly welcome my right hon. Friend the Chancellor’s support for an inflation-busting rise in the minimum wage. Such a rise would put more money in the pockets of millions of hard-working people, reducing reliance on high cost credit. Of course, the most direct impact Government can have on our income is to take less of it in tax. That is why the increase in the personal allowance, which has a disproportionate impact on the low paid, is so important. Someone working a 40-hour week on the minimum wage is now paying half the income tax they paid under the previous Government.

In the longer term, we need to get more people into work and improve workplace productivity, so that higher wages can be paid for out of higher profits. The Government’s reforms to schools and welfare will help us get there. I believe in markets, but all markets need strong frameworks to ensure that the consumer can make free and informed choices—free from coercion and informed about the risks. Nowhere is that need more clear than in the market for high-cost consumer debt.

20:03

[Yvonne Fovargue (Makerfield) (Lab)]

I welcome the report from the Business, Innovation and Skills Committee. It is right to focus on payday lending, but there are other practices that we need to look at. The logbook loans, the rent-to-own model of BrightHouse and brokers such as Cash Lady all bear closer inspection, but at the moment we are looking at the payday loan industry. The industry has said that it recognises the need to clean up its business, and it introduced the good practice customer charter a year ago. However, were those just fine words, or has it cleaned up its business? Over the past year, Citizens Advice surveyed more than 4,000 people who had taken out a loan with payday lenders, and I am afraid that the results do not make encouraging reading. Like my hon. Friends, I do not trust the payday industry when it says that it is going for the database.

The real-time database must be mandatory to have any effect. If it is not, lenders can pop up all over the place without putting in the data. It is no good for lenders to say that they will give the FCA information on their products and services on a six-monthly basis, as has been said by the lenders who have promised to join the real-time database. That promise is simply not worth having. This is a fast-moving and—shall we say—innovative market, and the FCA must have the tools to work with the companies, examine their products and see how they are lending to people in as quick a time as they are changing their practices.

Let me give an example from Florida of how a real-time database can help. Loans are capped at $500. The regulator thought that a company had given two loans that breached the cap. It went in and the manager of the shop said, “Hands up, yes. It was a rogue employee. I am terribly sorry.” The regulator had the real-time data in enough detail to be able to say, “Actually, it was you, the manager of the shop, who approved this loan on two occasions.” That is the sort of data we need.

I am still uncomfortable with the idea of two roll-overs. The survey says that for 18% of such borrowers, the risks were never explained at all. In only 18% of cases were the risks of extending the loan explained to people. In 37% of cases were the costs clearly explained. Only 17% of people were treated sympathetically when they got into difficulties. In only 16% of cases were the charges and interest frozen. I have even more concerns now after receiving the same e-mail as my hon. Friend the Member for West Bromwich West (Mr Bailey) in which the company talked about repaying the loan in full, and then making another loan, which means they would get out of any cap. They would not be capped because it would be a new loan. The market is extremely fast-moving and slippery, and we must ensure that the regulations are worded in such a way that we can regulate on the basis of intention.

Default fees are a major problem for many people. Someone who borrowed £200 was charged £50 for a letter telling them that they had not paid. That is a completely ridiculous amount to charge for a letter. I have always said that payday loans are a perfectly sensible way to borrow in certain situations, but if someone cannot pay the loan, they can expect to be treated with some sympathy. I am more concerned that the cap on the total cost of credit will not include default fees. I have heard some companies say that it is the cost not of credit but of not paying, and that is how they will get around the cap, which is why there should be a cap on the default fee, and it should be an amount that the regulator says is reasonable. I am sure that a company can justify £50 for a letter, with time, office costs and so on, but it is not justifiable on a £200 loan. It means that vulnerable people who take out a loan, like 48% of the population, and are slightly over-optimistic about whether they can pay it back will continue to be exploited.

I am pleased that limiting continuous payment authority is under consideration. People need to have a letter before money goes out of their account, because I am not convinced that they understand that they are giving a supply of blank cheques to such lenders.

[Mr Love]

Is not the root cause of all these problems the lack of an affordability test on the credit that is given? Should not the FCA take action where that is not being done?

[Yvonne Fovargue]

I totally agree with my hon. Friend. As my hon. Friend the Member for West Bromwich West said, the affordability check should be sanctioned by the FCA. It should be approved, but, as we know, at the moment speed trumps affordability in most cases.

Let me return to the report by a group of northern housing associations and social landlords, which regularly surveys 100 tenants—this is the second time that it has surveyed the same people. It found that 55% of those surveyed said that they had “never” felt optimistic about their future in the past six months, and 21% said that they were “rarely” optimistic about the future. Those are horrifying statistics, and when we consider that 89% of those surveyed said that they were concerned about the level of debt they were in, it is not surprising. According to a survey by Citizens Advice, only 9% of those who are in hock to payday lenders have been referred to free debt advice. That means that 91% of those who should have been referred have not been.

This is probably a once-in-a-generation opportunity to influence and control these lenders and we need to make the most of it. We must also ensure that we cannot sit back after taking some action and say, “That’ll be the end of it.” As I have said, these people are extremely innovative. They will look at the rules and how they can get around them, so we need a regulator with the tools to act and the will to move with lenders to ensure that vulnerable people do not continue to be exploited.

20:11

[Damian Hinds (East Hampshire) (Con)]

It is a great pleasure to follow the hon. Member for Makerfield (Yvonne Fovargue), who, as always, speaks not only with great passion but expertise and first-hand experience. This is an important debate, and not just because of the widespread detriment that is acknowledged to result from the payday loan market and the huge growth in it, which is not new but continues to happen and is set in the context of a much wider high-cost sub-prime market in this country. We cannot consider one without thinking about the interaction with the others.

The debate is also timely. This is debt awareness week and this Friday, the 24th, has been dubbed payday loan danger day as apparently it is the day of the year on which, as a result of Christmas and so on, people are most likely to take out a payday loan. To look at the more positive side, we are also in a period of regulatory change and an evolving FCA regime. This is Parliament’s opportunity to have some input into that and, I hope, to shape it.

We should also acknowledge what has already been done and welcome it: the enhanced enforcement from the OFT; the referral of the entire sector to the Competition Commission; and the FCA’s announcements on its regime, including the affordability checks, measures on roll-overs, advertising restrictions and what is being done on the continuous payment authorities, which the hon. Member for Makerfield mentioned. It is also worth acknowledging some of the wider things the Government have done, such as putting financial education on the national curriculum and providing great support for credit unions, putting £38 million behind the credit union expansion project and liberalising that sector.

[Sheila Gilmore (Edinburgh East) (Lab)]

On credit unions, does the hon. Gentleman agree that we need to put a lot more effort in if the system is going to work? The credit union in my constituency is run by volunteers and operates from an upstairs office, without a shop front. The payday lenders and the like are in glossy high street operations. Perhaps local councils could help credit unions to get out on the high street.

[Damian Hinds]

The hon. Lady is right. Of course, many local councils do that, providing premises and soft support in all sorts of ways. What the Government are doing, which is key, is trying to help the sector get to a point where it stands on its own two feet. Although subsidy and direct support have a role, we eventually want the sector to thrive, to be self-sustaining and to be able to take on the other lenders. That will include brand awareness and a product range that is right and that attracts people, but essentially we want the sector to be a bigger, professional operation that provides a real alternative. I think that we are moving in that direction, both through the Government’s support and through the liberalisation of the sector, with the legislative reform order and the move from a 2% cap to a 3% cap on interest a month. That puts credit unions a little closer to being able to compete with payday lenders, although it is still very hard to break even at 3% per calendar month on a payday loan.

The biggest change by far that the Government are putting in place is the duty to have a cap on the cost of credit. That is an enormous change—not just for a Conservative or coalition Government, but even for a Labour Government. I was reluctant about such an idea, but a couple of years ago I finally concluded that we needed to cap total costs in this market.

Why was I reluctant and why did I change my mind? I was reluctant because, in this country, with the exception of natural monopolies and a few other very specific examples, we do not do price control. It goes against the philosophy of our economy and of our politics. We—by which I mean most people in this House, not just those on the Government Benches—tend to believe in the efficacy of markets, in consumer sovereignty and in the beneficial impact of price competition. Why did I change my mind? I was trying to reconcile all those beliefs about what markets do with what we see in this market, and in many ways the normal laws of economics do not seem to apply to high-cost sub-prime credit.

The hon. Member for Makerfield talked about how pessimistic some people can be, but in some ways people are incredibly over-optimistic, even about their ability to pay back a loan. They feel that they are not the type of person who will get into difficulties. The hon. Member for West Bromwich West (Mr Bailey) set out very clearly how consumers in this market tend not to buy on the basis of price, so, unlike in other markets, bringing in more competitors does not tend to bear down on price.

If the normal rules do not apply, in many ways the normal remedies that one might apply to a market that was not working well do not apply either. Of course we want clarity about what a product offers, disclosure, health warnings and so on, but there is a limit to their effectiveness. Warnings quickly become part of the wallpaper of life, just like that thing that goes, “Your home is at risk if you do not…blah, blah, blah.” People stop paying attention and, as I say, borrowers do not anticipate that they are the ones who will end up with a problem.

As for sound financial education, of course we want educated, empowered consumers but there are limits here too. There is a big time lag. If we educate the next generation, we will have to wait quite a long time before they are in a position to need to use that education—and I can guarantee that by the time they do need it, everything will have changed. If we had had financial education when we are at school, we would have learned about clearing houses and endowment mortgages. They would have said, “Don’t worry—at least a final salary pension will see you safe,” and we probably would have been told that payment protection insurance was a damn good idea and we should get as much of it as we could.

Of course competition is a good thing, but if it does not affect prices there is a danger that more competition can mean more ubiquity, more advertising about speed and convenience and more proposals of instant solutions that do not really exist—and, I am afraid, more people believing in those things.

Micro-interventions are another suggested solution. We think that if we find an abuse in a market we should stamp it out, but there are limitations in that regard. If we restrict roll-overs, I can guarantee that the industry will find a different way to make money. That even applies to the real-time database that people are setting such store by—we should always beware when people think that one solution will solve a lot of problems. Quite apart from the other problems caused by the creation of mega-databases, there is also the issue of scope. In Florida, for example, there is no home credit market on the same scale as ours. If a real-time database is to be really effective, it must include the other parts of the market too.

If we believe that the current levels of payday lending are a social ill, that it will not go away as the economy improves, as there is growth and real wages increase, and that to some extent the market creates its own demand through advertising and supply, we should ultimately conclude that we must make the market less attractive. We must reduce its ubiquity so that we reduce both supply and demand. Not only do we want to make the market work better, we want less of a market. A cap on the cost of credit is a fundamental part of that, not only in ensuring that consumers are not ripped off but in making it less attractive to players coming into the market. We do not want to make it unattractive, because, as the hon. Member for Makerfield said, there are of course times when the short-term borrowing of relatively small sums of money makes perfect financial sense, but we want to make it less attractive.

A cap is, of course, not a panacea either. First, stimulation, whether big or small, at the margin of the illegal market will definitely be a problem. Of course, firms will find other ways to make money. When people hear that, they say, “Oh, but I’m not talking just about a cap on interest. I mean a cap on the total cost of credit,” but what do they mean by that? I suggest that people mean different things and think that everyone else is using the same definition. Sometimes, people mean restricting behavioural charges or penalties. That is a perfectly legitimate goal, but it is not the same as reducing the overall cost of credit. Such a cap would have to be really rather high to tackle the real abuses.

Some people say, “Ah, but we’re talking not about penalties, but the overall cost and the hidden fees.” Well, that is what annual percentage rates cover. If a fee is paid by everyone, it is already included in the APR. Because people do not understand percentages very well, they could be presented with a cash number for the total cost of credit, but I suggest that there is a big difference between using a cash number for disclosure where it makes perfect sense—“You will pay x per £100”—and using it for a limit where it can be generalised. That probably explains why most usury caps use APRs, and I suggest that the twin caps approach now used in Australia is probably the most effective.

20:21

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

This is a timely debate. The issue has captured the public’s imagination because people cannot understand why apparently high and exploitative interest rates are charged on short-term loans, and the Government have faced mounting pressure. It is important to pay tribute to Members on both sides of the House, but particularly my hon. Friends the Members for Sheffield Central (Paul Blomfield) and for Walthamstow (Stella Creasy). Their work, in combination with the public’s feeling that this is somehow unfair and wrong, has brought the issue to the Government’s attention. The Government have recently crossed the Rubicon in announcing that an intervention in this market would be justified. They said not only that the FCA now has the power to impose a cap on the total cost of credit, but that they feel that that will happen.

In a moment, I will draw an analogy with the pensions market, which I know something about. I was struck by the fact that the hon. Member for East Hampshire (Damian Hinds) said that Conservatives were against caps in general, but that this was an exceptional case. I am sure that he is aware that the Government are consulting on a pension price cap for somewhat similar reasons, particularly the fact that consumers in the marketplace are not sovereign because they do not know what they are being charged.

A few reasons have been given for why we find this to be such an issue in 21st century Britain. My hon. Friend the Member for Glasgow North (Ann McKechin) noted the extraordinary growth in short-term loans being taken out. Members on both sides of the House have suggested that that is something to do with either bank overdraft charges or, perhaps more fundamentally, the growth of a low-wage economy. The latter is absolutely true. We cannot understand this problem without reference to the growth of low-wage employment. However, it is important to refer not only to low wages but to irregular and insecure employment.

What we see in the 21st century phenomenon of payday loans is something that we commonly found 100 years ago in the form of the pawnbroker: the debt-credit cycle, which appears in economies and contexts where low pay and insecure and irregular employment are a reality. One hundred years ago, the pawnbroker was ubiquitous for a simple and straightforward reason: weekly wages did not cover outgoings. Therefore, in a world where weekly wages could not meet the cost of living, what was the rational response of people in that position, of whom there were many millions? The rational response was to pawn their good claithes at the point in the week when their wages were exhausted and then to redeem their good claithes—that is, clothes, for non-Scottish Members of Parliament—when their wages were paid. That continued week after week. They pawned when their weekly wages were exhausted but their outgoings had not been met, and they redeemed when they were paid—over and again, week after week.

Of course, the world has changed enormously in the past 100 years. Everyone’s standard of living has increased significantly. I would argue that it is not coincidental that that happened at the same time as the Labour party was formed to advance the interests of people in those situations. [Interruption.] Government Members are laughing. I did not even think that that would be a point of controversy. Surely, the past 100 years have seen a significant—[Interruption.] The hon. Member for Brigg and Goole (Andrew Percy) shouts something. The point is that, 100 years ago, the pawnbroker was a reality; in the 21st century, the payday lender is a reality. The standard of living is much higher of course, but we find this problem emerging once again. It used to be a weekly problem; it now might be a monthly, six-weekly or bi-monthly problem.

[Ann McKechin]

There is one advantage of the pawnbroker: at least, the debt could only go so far—the amount of credit that someone put up. The problem with payday lending is that interest rates keep increasing and people are caught in a vicious cycle of debt, which is why it is becoming even more difficult for ordinary people to cope with it.

[Gregg McClymont]

My hon. Friend takes the words right out of my mouth. That, indeed, is the big difference. This is a much more exploitative form of lending than pawnbroking.

The hon. Member for East Hampshire, in a thoughtful speech, got on quickly to what sort of cap one should look to the Government to construct. I mentioned that the Government are consulting on a pension cap, and my involvement in that from the Labour side leads me to make a couple of observations that might seem obvious. The most obvious is that one must be absolutely clear about what one is encompassing in the cap—a point that he made very well—while being clear about when the cap will be introduced. As things stand, we have an undertaking from the Government to move towards a cap on the total cost of credit, but until we are clear what the total cost of credit includes, the dangers of leakage are significant.

Alongside that, we must be clear about what the objective of regulation is in that context. It must be to end the exploitation that is widely thought to be taking place—Members on both sides of the House feel that, and the public certainly do—but at the same time to ensure that legitimate access can be maintained to short-term loans that are not exploitative. That is the principle from which the Government must proceed.

However, to pick up on a point made by more than one Government Member today, when all that is done and exploitation through payday loans has been reduced, or hopefully ended, we will still not solve the problem unless we can build securer and more regular forms of employment with a higher wage. My hon. Friend the Member for Glasgow North is absolutely right that that form of lending can be much more exploitative than pawnbroking has been over the past 150 years, but the lesson from the era when pawnbroking was ubiquitous in working class communities is straightforward: as long as there is low pay and irregular and insecure employment, it is rational for people to have to find a way to make ends meet.

We welcome the view that the Government have taken on regulation. It is fair to say that they are moving on to the territory that the Opposition have staked out, but I think that we can agree—we might disagree about the method of achieving it—that unless we can a securer and more regular employment economy with a higher wage, the problem will not disappear.

20:30

[Justin Tomlinson (North Swindon) (Con)]

I pay tribute to those Members who have already spoken for what has been a balanced and well-informed debate so far. I also pay tribute to the hon. Member for Sheffield Central (Paul Blomfield), who has been leading a cross-party push to influence and shape policy in this extremely important area. I have been proud to work with and support him. I am delighted that my borough council has achieved cross-party support, so we are leading nationally and locally, and with cross-party support—perhaps it is the future.

I have talked about this subject on a number of occasions, particularly the need to empower consumers to make informed and savvy decisions. I recently read an interesting report on consumer markets by my hon. Friend the Member for South Thanet (Laura Sandys). It states:

“Good markets put consumers in the driving seat to make, shape or break products. Bad markets disguise, mislead or control consumer choice”.

How true that is of this market. It is absolutely key, because there is a fundamental information asymmetry in the payday lending market, and that is at the root of why it does not work in the consumer’s interest. The market distorts decision making so that, rather than making an informed decision based on price, the consumer is led into favouring other factors above all others in making their decision—a point that has been made by a few Members today.

The Office of Fair Trading investigated 50 payday lenders, and 60% of the consumers who responded emphasised speed and quick access. For the industry itself, the FCA produced an informative and useful video and talked with some of the consumers. They said that traditional mainstream banking was often too formal. There was a perception that they would have to turn up in a suit and justify their demands, wishes and financial actions.

[Mark Tami (Alyn and Deeside) (Lab)]

Does the hon. Gentleman accept that many who have tried with the normal banks, regardless of whether they were wearing a suit, were turned away or found it very difficult, and that is why they have ended up with payday loan companies?

[Justin Tomlinson]

I thank the hon. Gentleman for that intervention. I will be moving on to the failings of mainstream banking shortly.

It is also a recognition of how consumer habits have changed. With 24/7 internet shopping becoming increasingly popular, if consumers see something online at 3 o’clock in the morning and want to purchase it, they would like to be able to access the funding right away. Society is geared up for consumers wanting something, and wanting it right away. That market adapted to consumer demand and stepped in where the mainstream banks were not looking. Clearly, value for money for the consumer is not paramount, and that needs to be addressed.

I welcome the positive steps that the Government have started to take, working with the FCA. I will comment briefly on the various things that I would like to see. The first one, and it is often the simplest, but the one on which I am not sure we are there yet, is that the total cost of a loan should always be displayed in cash terms. I suspect that not even Treasury Ministers can calculate an APR rate, which involves a hugely complex formula. Therefore, a customer should be able to say, “I want to borrow £100, and it will cost me £20.” Even those without a particularly good grasp of mathematics would then be able to make a reasonably informed decision on whether that represents good value for money.

To encourage competition, we need a standardised unit for comparison. In the energy market and in mobile phone contracts there are standard units, so consumers can visit price comparison websites to find the best product. That is very difficult with payday loan companies.

[Caroline Dinenage]

My hon. Friend is making an excellent speech. I know that he has worked hard to bring financial education into the school curriculum. Does he agree that to be able to fathom even the cost of these loans in numerical terms people need a certain level of literacy, so we really need to tackle the poor levels of adult numeracy and literacy, which are a big barrier in this case?

[Justin Tomlinson]

I thank my hon. Friend for that contribution. If she can just be patient, I will be heaping huge amounts of praise on her shortly.

The second thing I would like to see is real-time credit checking. The industry wants that because, despite a lot of the rumours, it relies on people being able to pay back the money they have borrowed. It would help to avoid somebody going into one shop and 15 minutes later going into another one. The credit checking agencies follow the traditional monthly banking system, so in theory somebody can wreak damage on themselves in the course of a month before the banks catch up. The industry says that it wants real-time credit checking; the credit agencies say they would like to offer it but that it is very complicated. One of the smaller operators, Call Credit, has got 10 operators signed up, but it will not be 100% participation. The Government will therefore have to empower the FCA to demand this. We are getting close to it, and it exists in some forms in America. It will make a huge difference because it will protect people from taking out multi-loans and allow the FCA to enforce affordability checks so that lenders who are lending to people who cannot afford it can be dealt with.

I would like to go one step further in ensuring that people can rebuild their credit rating. When someone has been turned down for a loan by one of the mainstream banks, the payday lending industry is often the only one that is prepared to take the risk with them. If they pay back the loan properly and on time, they should then have their credit rating repaired, allowing them to re-enter mainstream traditional lending.

There is a perception that the products, prices and requirements placed on people pushed them away from mainstream banking into a more modern, innovative industry that was responding to the situation. Mainstream banking has to take a long look at itself to see how it can adapt to a changing world. I fully support the fantastic work that my hon. Friend the Member for East Hampshire (Damian Hinds) has done on credit unions as an alternative for people. It might not be the total solution but it is certainly a very important part of the process.

On debt advice, which will be debated tomorrow in Westminster Hall, I fully support the levy, and I think the industry does as well. The Nationwide building society carried out a survey showing that 91% of people who get into financial difficulty say, “If only I had known better.” We see this in our casework. People who have got into difficulty come to see us with their carrier bags of unopened envelopes, and they need face-to-face, patient help. At the point where they go to get one of these loans, it would be helpful to have well-advertised information about how they can access free, independent debt advice, with a freephone telephone number.

Under the licence to operate, it costs lenders about £2,000 to get set up. A particularly bad, unscrupulous lender can wreak all sorts of damage before the FCA, or formerly the OFT, will have had time to do something about them. Unfortunately, some of these operators on the very fringes of the market will take advantage of the potential two-year window to do whatever they want before being taken down, and will then spend more money to get themselves back up the Google search engine listings.

The FCA needs to be extremely proactive in terms of mystery shoppers. Often the consumers who get themselves into the most difficulty are vulnerable people who are least equipped to raise it with us so that we can chase things up. This particularly applies to doorstep lending, as I have said in previous debates. With that lending model, the lender befriends someone, gains their trust, goes into their house every month, and could encourage them to borrow more. They might say over a cup of tea, “Have you sorted out your Christmas presents? If not, don’t worry, because we could provide the money for that, and why don’t you get your carpet sorted out if you’ve got your family coming round—that’s only another £3 a week.” We need to have mystery shoppers to check that the operators are sticking to the rules.

I championed the desire to get financial education on to the statute book, and I am delighted that the Government are implementing that in 2014. As my hon. Friend the Member for East Hampshire said, things will now change. This is about equipping the next generation of consumers with the skills to be able to make informed decisions—not moralising on those decisions but enabling them to make the mathematical calculations.

[Andrew Percy (Brigg and Goole) (Con)]

My hon. Friend is absolutely right to mention financial education. It is good that we have got that on to the curriculum, and it was a good campaign, but we also need to make sure that it is covered in teacher training. I used to be a teacher, and I would be the last person to give advice on financial literacy, as people will know from my previous speeches. We have to make sure that teachers are trained properly in how to deliver this.

[Justin Tomlinson]

My hon. Friend is absolutely spot on. From his experience as, I am sure, a wonderful teacher, additional training would make a real difference. It is important that the Government tie that in with the national curriculum to be introduced in September.

My hon. Friend the Member for Gosport (Caroline Dinenage) was also spot on about adult literacy. We cannot just wait for future generations to filter through; people are making bad decisions now because they simply do not have the capabilities to do anything else.

As a country, we need to encourage a savings culture. I sometimes worry that we all—we are all as bad as each other—want everything tomorrow, but it is sometimes not such a bad thing to wait.

The cost of credit is being looked at, and we are absolutely right to consider the total cost. We should look not just at the crude APR measurement, but at the fees, the cost of roll-overs and things such as bank overdrafts. Some of the charges I have seen equate to about 80,000% APR. The hon. Member for Makerfield (Yvonne Fovargue) made some good points about fees and roll-overs, and we should continue to push on those matters.

Finally, we just have to recognise the need to be flexible. The industry will continue to change: when we started to look at limiting roll-overs of loans, it began to extend loans. The market will keep changing, so we have to be quick on our feet.

20:39

[Naomi Long (Belfast East) (Alliance)]

Debt is a growing issue faced by many people in my constituency, just as it is in those of other hon. Members. As a result of both the recession through which we have laboured during recent years and changes in employment practices, people find themselves increasingly unable to make their income stretch to the end of the week or the month to cover necessities such as rent, heat, food and clothes, and desperately seek a source of credit to tie them over from one pay cheque to the next. Particularly for those who are financially vulnerable and find access to mainstream credit difficult or impossible, due to the risk of defaulting, payday lenders offer the illusion of quick and easy credit, but in many cases at significant cost in the long term.

Unmanageable debt has a corrosive effect on people’s lives. Servicing high levels of debt repayment has been linked to rent and mortgage arrears, rates and utility arrears, constraints on jobseeking behaviour, poor diets, cold homes, and mental and physical health problems that are not limited to distress and depression.

Several things that can be done to tackle the problem have been mentioned by right hon. and hon. Members, and I want to touch on a few of them. First, we need to acknowledge and address the growing poverty in our country. It affects not only those who rely entirely on benefits, but—and, in some cases, more so—the working poor who struggle to make ends meet on low and irregular pay. The rise in the uptake of payday loans has been accompanied by a growth in the number of food banks, which is evidence of the financial stress with which many families have to contend in trying to afford the basics.

Raising the level of the minimum wage and lifting the poorest out of taxation are two very positive measures that the Government are considering and have committed themselves to doing. However, the impact of welfare reform is likely to hit hard precisely those same families who are struggling now, which will increase the risk of their getting into unmanageable debt. One alternative source of help that has been available for those in difficult financial circumstances is the social fund. Although it has certain eligibility limitations, I am concerned that it will go under welfare reform, and that there is little information about what will replace it.

We need to provide good alternatives to payday lenders for those in need of credit. The role of credit unions and community banks, which has already been referenced, could be significant. There are some excellent credit unions in my constituency, and they have a greater presence in Northern Ireland than in the UK generally, due to the Irish League of Credit Unions and the Ulster Federation of Credit Unions, but more work could be done to promote what credit unions have to offer. That service extends beyond access to credit, because it covers work with adults and children to support good financial habits and to encourage saving and good literacy and planning, which are hugely important.

That leads to another thing that we can do, which is to invest in financial literacy, as other hon. Members recognised in their speeches. We need to give better financial advice, guidance and education to everyone, young and old. Many people simply do not understand the implications of taking out a payday loan, the potential impact on their credit rating or the rapidity with which their debt can escalate if they fail to meet all the conditions.

A levy on payday loan companies’ profits to fund advice services would be one way to expand the advice available to people with financial problems. I have raised that with the FCA. Given that companies have made such massive profits due to charging extortionate interest rates, they could well afford it. Such advice is particularly important because people are also facing changes in their benefits and in their workplace arrangements, and yet much of the advice that is available has also been hit by austerity measures. It is hugely important that people get financial education, but it is also important that clear, transparent information is available from the loan companies themselves on how the payments will be collected and on what charges will be incurred.

There needs to be much more regulation of the operation and marketing of payday loans. Other Members have spoken about advertisements during programmes that are aimed at children—even the tone of the advertising is aimed specifically at children.

[Mark Tami]

Is the hon. Lady concerned not only about payday loan companies, but about companies such as BrightHouse that offer access to high-value products? The costs are extraordinary by the time people finish paying for those products. To all intents and purposes, it is the same sort of arrangement. People are being charged a high amount of interest to have access to those products.

[Naomi Long]

I agree that it is not only payday lenders who are at fault. People are offered a range of credit facilities. Part of the difficulty is that people do not understand what the APR means in real terms when they take out a loan. We really need to work on that. People must also have transparent information when they make such decisions.

On advertising, I want to bring to the attention of the House an experience that I had of late. I received an unsolicited letter from Wonga. I will name the company because I have already done so on Twitter. That was the only way that I could get a reply to my original letter of more than a month ago, in which I asked why I had received the letter. I wrote to it because I was concerned to receive what appeared to be a marketing mailshot, claiming that I had applied for credit with the company, which I had not. It offered me terms on which I could apply for a loan.

Wonga claims that the information of mine that it possessed had been used fraudulently to try to obtain credit in my name. It had retained my details on file for the purpose of excluding that, but had mistakenly sent me the mailshot as part of a marketing test. I asked whether the matter had been reported to the police and why Wonga did not contact me directly to say that my details had been used, given that it had my address. I also asked whether it could tell me when the incident had taken place and whether it was only people in the same category as me who had received the marketing shot or whether it was more general.

I intend to pass on my experiences to the FCA and the Information Commissioner’s Office, because although some people will realise that they had not sought the unsolicited mailshots, such abuse could fool others into thinking that they have previously applied for a loan and that it is something that they may want to take up. It is hugely important that aggressive marketing tactics are stamped out and dealt with through proper regulation.

There needs to be a cap on the total cost of payday loans. That has been referred to by a number of Members. I welcome the FCA’s ongoing consultation on such a cap. It is worth noting that other EU states have imposed a cap, as have many states in America. Given the mobility of payday loan companies, if the UK does not have a cap on a par with those of other EU states, we might find that companies move to the UK to capitalise on that.

Other Members have said that competition does not really work in this marketplace. I think that that is true. Six lenders account for about 90% of the market share. There is no incentive for them to offer competitive interest rates because convenience seems to drive demand, rather than interest rates.

The regulation of charges is required, in tandem with an overall price cap, so that the costs are not passed on in that way. I welcome the work that Which? has been doing to expose the excessive default fees that are charged by many companies. It has described that as exploiting borrowers and potentially illegal. Such fees are often well above the costs of administration for the default and are one of the biggest factors that tip people into a debt spiral. The Which? research shows that one in five payday loan users has been hit with unexpected charges and that more than 50% of payday loan users have incurred late payment charges over 12 months, compared with 16% among all credit users.

For the information to be effective and meaningful, we need a real-time lending database. Some payday loan companies have worked together to implement that, but it needs to be mandatory if it is to be meaningful. It would hopefully stop multiple loans and prevent people from taking out one loan to pay off another, thus compounding their problems.

I hope that in raising these issues tonight and in keeping the public focus on payday loans, we will be able to do something worth while to protect those in our society who are financially very vulnerable.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before I call the hon. Member for Worcester (Mr Walker), it will be obvious to Members present that everyone who has spoken has gone to the wire and taken every second, or more, of the eight-minute time limit. It is not really meant to work like that, and it would have been helpful if hon. Members had sometimes limited their remarks, rather than going absolutely to the cliff edge. After the hon. Gentleman has spoken, I will reduce the time limit for speeches to seven minutes.

20:50

[Mr Robin Walker (Worcester) (Con)]

It is a pleasure to follow what I thought was an excellent speech by the hon. Member for Belfast East (Naomi Long). I am pleased that the Backbench Business Committee has requested this debate about an important report and a subject in which I have taken an interest for a long time. I first spoke about this issue in a Backbench Business Committee debate, and it is particularly appropriate that this subject should have received time for debate, given the essential role played by Back Benchers of all parties in driving forward the debate on high-cost credit and the regulation of the payday loan industry—a role that has been acknowledged by the Government in the past.

I congratulate the Chair of the Business, Innovation and Skills Committee, the hon. Member for West Bromwich West (Mr Bailey) on the report we are discussing and on his powerful speech in opening the debate. He made the point about television advertising extremely well, and one of the most memorable moments in evidence to the Committee was when Martin Lewis made his passionate case about grooming by payday lenders.

Over the past year a number of steps have been taken, which will be welcomed across the House, to tighten and improve the regulatory regime for high-cost lenders, to mandate a cap on the cost they can charge their customers, and to protect consumers. The FCA provided a helpful briefing for today’s debate that enumerates many of the improvements it intends to introduce, and given the rapid growth of the industry since 2008, such action is not only welcome but necessary. Nevertheless, there remains a high degree of concern about the prevalence and ease of access to very high-cost loans, and a good deal of evidence that they are causing real problems to many of our constituents.

When the Select Committee took evidence from payday lenders, they were at pains to point out that the number of people driven to default was only a small proportion of the total number who use such loans. That may be the case, but given the enormous scale of the industry, that small proportion represents a significant number of people whose lives have been profoundly affected for the worse, whose credit ratings may have been destroyed, and who will have been left permanently worse off and—as the hon. Member for Glasgow North (Ann McKechin) pointed out—sometimes unable to get a mortgage as a result of short-term credit. I therefore speak for all members of the Committee when I say that we feel that we need to go further in regulating the sector.

The report sets out some important points, and I wanted to focus on two: real-time data sharing and the importance of the FCA levy to fund free debt advice. For real-time data sharing, and taking on board the point made by my hon. Friend the Member for East Hampshire (Damian Hinds) that it is not a total solution, affordability is key, and it can play an important role in ensuring that payday lenders better assess affordability in the future. Representatives of the industry who gave evidence to the Committee went to great lengths to argue that they apply strenuous and rigorous affordability tests, but we also heard a great deal of evidence to the contrary. Perhaps one of the most illustrative points was the example cited by my hon. Friend the Member for Edinburgh West (Mike Crockart) about Bo Peep applying for a payday loan—an extraordinary story.

Charities such as Citizens Advice and StepChange were able to demonstrate too many cases where the same person was able to take out irrational numbers of loans from different providers, and the evidence both on defaults and roll-overs suggests that affordability is still not properly assessed. Although the spokesman for Wonga argued that the proportion of its debts written off had been overstated in some media coverage, he admitted that there was £77 million of bad loans, which represented almost 10% of lending by that company, or 300,000 customers. In another answer he suggested that only 3% of customers got into financial difficulties and could not afford to repay, but even if we take that 3% as a fair assessment, we would be talking about tens of thousands of people.

I think that real-time data sharing—unglamorous and perhaps wonkish as it is—is one of the keys to making the short-term credit industry work better and more fairly. Not only would it mean that existing lenders could avoid giving loans to those who might already be overcommitted elsewhere, but it would allow new entrants to the market to lend at a better rate, increasing competition and providing a real alternative to some of the sky-high costs out there in the market. That is because they would be able to avoid lending to people with large numbers of outstanding short-term loans, and thereby reduce their default rates. I have met potential market entrants who believe that if a proper system of real-time data sharing were available they could offer short-term loans at not much more than the roughly 39% APR allowed to credit unions.

The industry has suggested that it is in favour of such a system. Callcredit, one of the main players in the credit reference agency sector, has recently announced that it is piloting a data sharing scheme. That is to be welcomed, but there are a number of concerns with that voluntary approach. One credit reference working on its own with its clients will be unable to provide an accurate picture of the whole market. Its suggestion is an improvement, in that it reduces the interval between filings on lending, but it is not a real-time system. There is still a chance that customers could apply for one loan after another in a short time interval, and that lenders will be unaware of the loans outstanding at the time of their lending decisions.

More seriously, as long as credit reference agencies continue to provide lending data to their paying customers only, and as long as they compete on which agency has the best client list, there will be gaps in the picture of the market they can present. There is no guarantee that that voluntary approach will make lenders or the FCA aware of all the loans an individual has outstanding at any moment in time. Unless there is a firm agreement for all the credit reference agencies to work together and share their data, which is inimical to their reason for being and their way of doing business, some form of Government or regulatory intervention will be necessary.

I was pleased that both the regulator and the Minister, in their evidence to the Committee’s inquiry, expressed a willingness to intervene should it become necessary to do so, and I welcome the recognition they gave to the importance of real-time data sharing, but I reiterate the question I asked then: what time line will they set before taking action to mandate real-time data sharing? The Committee’s report suggests a deadline of July 2014 for the FCA to step in if the industry has not delivered. Notwithstanding the decision of Callcredit, I believe that that is likely to be necessary.

I do not want to give an exhaustive list of the Committee’s recommendations, which I support, but hon. Members who have followed debates on payday lending will know that the funding of the free debt advice service through the FCA levy is dear to my heart. There is a great deal of evidence that the high-cost credit sector is driving demand for free debt advice services. I have previously advocated a levy on their charges to help to finance the sector. The current mechanism is the FCA levy. I want to put in a quick advertisement to hon. Members in the Chamber. Tomorrow morning, we will have a debate in Westminster Hall. I do not want to put all my arguments on the levy tonight, but I hope many in the Chamber will join me in advocating the case, as the Committee has recommended, for the additional levy for payday lenders to be passported to the free debt advice sector. That will be crucial in making the sector work better.

I pay tribute to hon. Members on both sides of the House who have worked on this issue. My hon. Friend the Member for North Swindon (Justin Tomlinson) has worked on improving financial education; the hon. Member for Sheffield Central (Paul Blomfield) has run a cross-party campaign; my hon. Friend the Member for East Hampshire (Damian Hinds) has done important work on credit unions; and the hon. Member for Makerfield (Yvonne Fovargue) has worked with Citizens Advice and the debt advice sector. By working together, hon. Members have achieved good things, and we can go much further.

20:58

[Roberta Blackman-Woods (City of Durham) (Lab)]

I thank my hon. Friend the Member for West Bromwich West (Mr Bailey) and the Business, Innovation and Skills Committee for their excellent report on payday lending and for doing so much to raise the profile of the issue, including by stimulating debate. There is a strong degree of cross-party consensus on what needs to be done. I thank my hon. Friend the Member for Sheffield Central (Paul Blomfield) for doing so much to bring the problems of payday loans to our attention.

Most MPs will know from their constituency casework, and from the growing number of payday loan companies on our high streets, that payday loans are becoming more of a problem for our constituents. I hope to be able to run through my four main concerns, the first of which is the exorbitant interest rates charged by those companies, which should not be tolerated in our society. Pay-back rates of 5,800% are not unheard of, and APRs of 2,600% are not at all unusual. That creates huge problems for people paying back the loans. Despite this, more and more people have to turn to payday loan companies just to make ends meet. That indicates that there is a huge cost of living problem in our society, and that many jobs simply do not pay people enough money to live on.

In 2010, just 1% of people getting advice from citizens advice bureaux had debt from at least one payday loan. That rose to 4% in 2012 and 10% this year. Evidence from Citizens Advice also reveals irresponsible lending, and says that it is intrinsic to the industry. New 12-month figures from the national charity’s payday loan tracker reveal that 61% of loans still come without proper checks to assess whether borrowers can afford to repay. It also found not only that three out of four borrowers found it difficult to repay their loan, but that in 84% of cases lenders were breaking their promises to freeze interest and charges for those who were struggling.

National Debtline says that calls for help with payday loan issues soared from 776 in 2008 to more than 20,000 in 2012. A ComRes survey found that 98% of MPs and 93% of the public believe there is a problem with payday lending, and that 66% of MPs and 65% of the public support a cap on the total cost of credit. It is hardly surprising, therefore, that the Government were forced to take action earlier this year, but I am not sure that requiring the FCA regulator to clamp down on excessive interest rates is really good enough, especially when it will be some months before any such scheme can be implemented. Labour put forward an amendment to the Financial Services Bill, which would have given the new FCA clear powers to tackle the overall cost and duration of high-cost loans, especially where it could demonstrate consumer detriment. It is a real pity that the Government did not accept the amendment.

My second concern is the methods used to trap people in cycles of debt. I have a constituent who, when desperate and applying for a loan, was told that she had to give her mobile phone number. Thereafter, she was sent texts that offered her more loans and offered to give her more money to pay outstanding loans. She was contacted at the end of the month, when she was particularly short of money, and urged to take out more loans. When she came to my surgery she was literally at her wits’ end and did not know what to do. That case is not unique and we really should not continue to allow companies to behave in this way. If this sort of bullying was taking place anywhere else, it would be tackled. My hon. Friend the Member for West Bromwich West mentioned how advertising is increasingly being targeted at children. Again, that is a disgrace and something that should be brought to an end immediately. Research shows that of those sampled who had taken out a payday loan, 60% regret the decision and 48% believe that their loan has made their financial situation worse. Only a tiny number think it has had a positive impact on their finances.

My third concern relates to the proliferation of these companies on our high streets. Action the Government have taken to deregulate use classes and permitted development rights means that it is much easier for payday loan companies to set up on our high streets without having to gain planning permission. This is a step in completely the wrong direction. We are urging the Government to take action on this immediately by returning powers to local councils and local communities, so that they are able to reduce the numbers of payday loan companies on their high streets. We know, from a number of different surveys undertaken with communities, that local people want those powers and they want their councils to be able to reduce the number of payday loan companies in their area.

My fourth point concerns the way in which payday loan companies target disadvantaged areas and prey on poor people. Research recently carried out by Professor Sarah Banks at Durham university described payday loan companies as preying on the poor. She said that many people have multiple loans with payday and doorstep lenders at annual interest rates of up to 4,000% even though their incomes are very small, and that the companies did not even look at the other debts people had or whether they could afford to repay them. They lent to people, even though some of them had only a very small amount of savings or no savings at all. She gave lots of examples of the unscrupulous way in which loans were being targeted, particularly at those with very low incomes.

As several hon. Members have said, we need to find ways out of this situation, and one of them is to support and promote credit unions better. I am pleased that our new Bishop of Durham has signed up to the Durham County credit union. It is important we see this as a way of fighting poverty, particularly in areas like the north-east that still have very high rates of unemployment and where people are losing lots of money through welfare reforms and increasingly being driven to loan sharks just to make ends meet. We must ensure that people see credit unions as a viable way forward and give them the support they need to join them.

21:05

[Andrew Percy (Brigg and Goole) (Con)]

This has been an interesting and largely consensual debate. The only comment I bristled at was that by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) linking the rise in living standards to the emergence of the Labour party. As a former history teacher, I thought it had something to do with the industrial revolution as well—next he will be claiming credit for the power shift to the workers after the black death. Apart from that, it has been a generally consensual debate. Regarding solutions, I think we all agree on the general direction of travel and have all been receptive to the Government’s proposals, although some of us would perhaps like them to go a bit further.

I shall focus on some of the reasons for the rise in payday loans and then look at one solution that others have touched on, which is education. Members on both sides of the House have tried to explain the reasons for the explosion in payday lending, but in reality it happened at the same time as a reasonable explosion in living standards, so it is not simply about the economic downturn or people finding themselves in a more difficult position economically; culturally, something deeper is going on.

Members have talked about the “we want things today” culture. My grandparents never had any debt in their entire lives; they saved for everything and they tried to embed that idea in their grandchildren. It failed spectacularly in my case—I listened to them on many things, but clearly not on debt. Something deep has changed in society. As my hon. Friend the Member for North Swindon (Justin Tomlinson) said, we want things immediately—at three o’clock in the morning, if the money is not quite there but someone can click on a payday lending website, that is unfortunately what too many people do.

The high streets in my constituency, particularly in Goole, have seen an explosion in the number of these shops and services. I have to say I bristle when I walk down the high street. The high street should be a place for visiting the butcher, the baker and the candlestick maker—there is still one of those not too far from my constituency. That is how we think of our high streets, but regrettably they are today overpopulated with betting shops and payday loan companies. I probably have more complaints in my constituency office about the behaviour of the banks than about individual payday lenders, but that does not mean there is not a problem—we should not mention banks in anybody’s defence.

Obviously there has been an explosion in personal debt, and that is a deeply engrained cultural thing. The solutions spoken about this evening are to be welcomed, but they deal with the symptoms, not the causes. As my hon. Friend the Member for North Swindon and others have alluded to, education is key—and not just in schools. I was happy and proud to chair the inquiry by the all-party group on financial education for young people into financial education. We welcome the fact that the Government have taken that report on board—it is a good start—but much more still needs to be done, because far too many people simply do not understand how to handle debt, what it is, how to work out how much they will have to pay or the impact on their life.

I have spoken before about the debt troubles I got into when I was a teenager and in my early 20s, funding my way through university. I bristle when I am told on Twitter, “You’re a millionaire Tory MP who doesn’t understand real life.” That happens too often, but it was not the case with me; I struggled with high levels of debt that I am still dealing with. I am lucky: I am a Member of Parliament with a reasonable salary, and I can get to grips with it. I did not realise at the time, however, that I would be one of those who might struggle—the hon. Member for Makerfield (Yvonne Fovargue) talked about this. I did not realise that it had to be paid back and that the interest would be huge. The minimum payments are often less than the interest accrual every month. Until we crack that, we will not get anywhere, whatever caps on lending, roll-over caps or whatever else we introduce. Until we get to the bottom not just of how to work this into the curriculum, but of how to demonstrate the impact of this problem on people’s lives in the longer term, we will not make real progress.

I am still dealing with the debt issues I encountered in getting myself through university. I am lucky, as I said, but others will be condemned by their debt for very many years. This is largely because of the failure to understand that while some debt is good—the Select Committee talks about mortgages, home ownership and so forth, perhaps as necessary evils—much debt is truly evil and life changing for so many people. Until we crack that problem through education, I do not think that any of the other solutions will do a great deal, welcome though they are. Financial education in schools is a good start, but we need to address the adult population if we want to make a real change. We face a great problem with financial illiteracy in our adult population. I know that my hon. Friend the Member for Worcester (Mr Walker) is passionate about that issue and he spoke about it.

I welcome the interesting debate we have had and some of the solutions put forward, but as I have said, without cracking the financial illiteracy that is so evident in this country, I think that everything else will be but a drop in the ocean.

21:11

[Fiona O’Donnell (East Lothian) (Lab)]

I was rather hoping that you would not be in your seat when I rose to speak, Mr Speaker—not because it is not always a pleasure to speak under your chairmanship, but because you will realise that I am being rather greedy this evening, having secured an Adjournment debate on pre-payment meters and fuel poverty. I think there is a link between the two topics of debate, and it is a pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy), who I thought seemed to be arguing rather dangerously in respect of financial education: those who can’t should teach.

I congratulate my hon. Friend the Member for West Bromwich West (Mr Bailey) on the work he, his staff and members of the Select Committee did in bringing this report before us. At last, we are seeing some serious progress on regulation of the payday lending sector. I also congratulate, and express the gratitude of my constituents to, my hon. Friends the Members for Sheffield Central (Paul Blomfield) and for Walthamstow (Stella Creasy) on the work they have done, because it takes real courage to take on payday lenders, especially when a Member does not have the support of the whole Committee. To go out there alone to take on these payday loan companies can be a terrifying experience.

My first encounter with Wonga was very similar to that of the hon. Member for Belfast East (Naomi Long), so we must catch up later. I received an e-mail, saying that I had previously secured a loan from them and they wanted to be back in touch. I tried to contact the customer care service and then phoned. They told me it was a fraud, so I asked why I was being put through to customer care service when I replied to their e-mail, but I really got nowhere. My next encounter with Wonga was when a constituent had two loans fraudulently taken from her account. I put out a press release on my website, mentioning legal loan sharks. Within a few moments, Wonga was on the phone in my constituency office. It was presumably whoever it is who tries to promote the good name of Wonga. He said, “If you have a problem with Wonga, I really wish you had lifted the phone to us.” I explained that I had not found phoning to be the most fruitful way of dealing with Wonga in the past. He then said that my description of them as “legal loan sharks” was not helpful to Wonga. I responded that I had not waited 50 years to come to Parliament to be helpful to Wonga. The conversation pretty much ended at that stage!

We have definitely reached the stage where we need regulation and reform of this sector. The hon. Member for East Hampshire (Damian Hinds), who is unfortunately not in his place—I am sure he has something very pressing to attend elsewhere—spoke in praise of markets. I do not want to bury them, but I believe different markets work in different ways. In the food retail sector, for example, competition drives down prices. Generally, people in areas of larger population concentrations have access to other companies offering the same service. Other markets, however, do not operate in that way, and it almost seems that the different players are colluding to drive up the price rather than drive it down. I certainly think that that applies to payday lenders.

The hon. Member for Brigg and Goole spoke about walking down his local high street. I urge him not just to walk down it, but to stand in it and campaign against payday lenders. I did that in Musselburgh high street, in partnership with my Labour colleague in the Scottish Parliament, Kezia Dugdale, whom I must praise for her work on the Debtbusters campaign. I was goaded by the hon. Member for Edinburgh West (Mike Crockart) to put on a shark costume in the high street, which I duly did. I must add that, after I had positioned myself outside the premises of each of the four providers of expensive unregulated credit in Musselburgh, each one came out and challenged me about my right to be on the pavement.

I think that it is time for action, and that it cannot come soon enough. I had the strong impression that people in Musselburgh did not like the fact that those shops were in their high street. I agree with my hon. Friend the Member for Makerfield (Yvonne Fovargue) that we should look at other sectors as well, including pawnbrokers. One of them kept saying, “We do not lend money”, but there were signs all over his shop saying “cash loans”, which seemed to contradict that. The whole sector needs a thorough examination.

We need to look at the total cost of credit. I realise that that will be difficult, but we must find a way of doing it. We also need to deal with advertising as rigorously as we have dealt with it in the alcohol industry. Advertising should not just make the facts clear, but should not be able to glamorise credit.

[Neil Parish (Tiverton and Honiton) (Con)]

I think that we are now seeing a cross-party attack on payday loans, along with a wish to attract people to credit unions and create more of them. We should put pressure on payday loan companies not to charge huge interest rates and huge fees for late repayment, and try to give people access to credit at an affordable rate through credit unions.

[Fiona O’Donnell]

I want to finish what I was saying about advertising, but I shall then say something about possible alternatives.

I was very disturbed and disappointed to learn that Kerry Katona was advertising Cash Lady. I saw no reason for her to be involved in a project that was aimed specifically at women. Car insurance is a different matter, because, as we all know, we are better drivers than men, and a separate service may be appropriate in that context. I was pleased when many people complained and the advertisement was removed, but Kerry Katona then appeared in another one. Advertising in this sector must be rigorously controlled.

The hon. Member for Tiverton and Honiton (Neil Parish) mentioned alternatives, and I agree that we should think about them. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) said that credit unions needed to have the same sort of presence as payday lenders. Unfortunately, the credit union shop in East Lothian closed, and credit unions have no high street presence in the area. That makes it far more difficult to reach out to people, and makes competition much more difficult. One Member said that the sector did not need support, but I think that that is unlikely. We do not want the cost of credit from credit unions to rise, because that would defeat the purpose.

The hon. Member for Dover (Charlie Elphicke) spoke of watching “It’s a Wonderful Life” at Christmas, with its talk of mutuals and building societies, and the Building and Loan company. This evening’s debate has been cordial, apart from, as ever, the contribution of the hon. Member for Stratford-on-Avon (Nadhim Zahawi), who also reminded me of “It’s a Wonderful Life”, because in his account of where we are today he seemed to be saying, “Imagine what it would have been like if the Conservatives had never been in government.” I think that the hon. Gentleman was the only Member who—as he often does—struck the wrong chord. There are links between increased poverty and welfare changes, and the fact that more and more people are having to turn to payday lenders.

The Select Committee report and the debate are welcome, and I hope that they will result in more protection for many of my constituents, such as those who came out of Loretto primary school to find people from the cash store in Musselburgh giving balloons to the children and providing fliers that did not contain any information about the cost of borrowing money. I hope that we shall see an end to practices of that kind, and an end to some of the poverty that is driving people to these lenders.

21:20

[Mr William Bain (Glasgow North East) (Lab)]

I congratulate my hon. Friend the Member for West Bromwich West (Mr Bailey) on securing this important debate and on his continued chairmanship of the Business, Innovation and Skills Committee. I thank my hon. Friend the Member for Sheffield Central (Paul Blomfield) for promoting the charter on payday lending, whose terms I strongly endorse, and I hope that the Government will respond positively and speedily to the important recommendations in our Select Committee’s report on advertising and marketing as well as on access to real-time data on a person’s suitability to a specific loan. The Committee has also called upon the Financial Conduct Authority to extend this practice of access to real-time data, concluding that if it is not properly established by this July, the FCA should make it obligatory for all regulated lenders seeking to provide payday loans or similar financial services products. I hope that the Minister in replying to this debate will say that is precisely what the Government’s approach will be. On roll-over loans, which can see an individual’s effective interest rate on debt escalate rapidly, a limit of one roll-over for each payday loan would prevent much unnecessary hardship for our constituents across the country.

In this debate we have heard a great deal from Members, representing the views of their constituents, on the purpose of markets. The views of my constituents are that where markets do not serve the public interest and serve only the purpose of maximising profits for a very few, we in this House are right to call for them to be reset and rebalanced in order to provide greater fairness for consumers, and in this case greater justice for those on the lowest incomes. Sadly, however, the Government’s recent proposals may be too late for many people in Scotland who are facing escalating charges from using payday lenders. It is clear that the cost of living crisis is biting hard in areas like mine, where 16.5% of all people in work earn less than the living wage, including nearly 3 in 10 of all part-time workers. The mean wage, at just £342 a week, fell in cash terms by nearly 2% in the year to last April, while at the same time prices were rising at a rate of 2.7%, meaning ordinary workers in my constituency were nearly 5% worse off in the year to last April.

As prices have outpaced wages for such an extended period it is no wonder that people have had no choice but to run down their savings or seek recourse to credit to try to maintain what they can of their previous living standards. This means that they are increasingly likely to seek payday lending from a proliferating range of shop-front lenders in Springburn, Dennistoun and other areas in my constituency, but they also seek lending online or increasingly by following up adverts that they have watched on television. My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) was on to the very important point that the under-employment in our economy, with nearly 1.5 million people trapped in part-time work but seeking further hours, is driving the sense of weak productivity, and the response to the growing crisis people are facing with rising personal debt is a very poor one.

Scotland has the highest volume of payday lending in the UK according to research published by StepChange last November. Last June, some 10.3% of total client debt in Scotland was the result of payday lending, compared with 9.4% in England, 8.4% in Wales and 7% in Northern Ireland. The research also shows huge increases in arrears in priority debt areas such as rent, mortgage, gas and electricity, particularly in the preceding six months. Moreover, payday borrowers in Scotland had the highest value of council tax arrears in 2012—nearly double the UK average at £1,312.

StepChange presented its data in terms of the Scottish Parliament constituency boundaries rather than UK Parliament boundaries, but the picture it painted of the payday lending problem in the two constituencies which make up Glasgow North East is equally depressing. In areas with some of the highest material deprivation in Scotland, we see people falling into severe payday debt interest rate problems, with 37% of people in Maryhill and Springburn having council tax arrears averaging £1,504, and half—50%—of all StepChange clients in Maryhill and Springburn with rent arrears averaging £620. That is the scale of the crisis that is being faced in some of the poorest parts of this land.

To deal with the crisis, the Government should be encouraging the FCA to use the powers it has at its disposal now to implement a total cap on the costs of lending, to ensure that the consumer credit market serves the consumer, rather than the other way round. We also know that our credit unions are experiencing the sharp end of this cost of living crisis. People are using them to save for the things they need—such as a washing machine, when theirs breaks down—when their pay and savings can no longer stretch to them.

Nearly a fifth of the payday lending industry’s profits come from just 5% of loans, which are rolled over four or even more times. Most people would think it fair if those companies faced a higher levy on their profits, so that a much-needed doubling of Government support for our credit union sector could be provided. I urge the Government to do all they can to implement the Select Committee’s findings, but that would simply be a first step to ensuring that, together, across the House, we could lift millions of vulnerable people from the life of misery that deeper levels of personal debt caused by unscrupulous and irresponsible payday lending are putting them into.

21:26

[Simon Danczuk (Rochdale) (Lab)]

I thank my hon. Friend the Member for West Bromwich West (Mr Bailey) for introducing this important debate and for chairing the Business, Innovation and Skills Committee. I want to make four points, and I shall do so as quickly as possible, not least so that I can listen to my hon. Friend the Member for Sheffield Central (Paul Blomfield), who has done some excellent work on this matter. I am keen to hear what he has to say.

First, I endorse the Committee report’s recommendation for limits on payday loan companies’ advertising. That should apply particularly to advertising on children’s television channels. There should also be health warnings in relation to advertising, as the report suggests. Secondly, I endorse the report’s recommendation about ring-fencing the levy that is to be placed on payday lenders, in order to fund debt charities. Those charities do excellent work, and I welcome any measure that would ensure that the payday lenders funded them.

My third point relates to payday lenders on the high street. There is no doubt in my mind that there are far too many of them, and better regulation will be critical in that regard. There are 10 payday lenders on Rochdale’s main shopping street alone. Their presence creates difficulties for the regeneration of our high streets, and I endorse Labour’s proposals to change the use classes available to local authorities in order to limit the number of payday lenders on high streets. It has already been mentioned that local authorities could do more to help credit unions to gain a greater presence on the high street. I supported the Manchester credit union in setting up a pop-up shop in Rochdale for three months, which was extremely popular. Local authorities could do more, not least by implementing a 100% business rate waiver for credit unions to enable them to have a greater presence.

While I am on that point, various alternatives to payday lenders have been discussed today. The directly elected mayor of Salford is proposing to establish the bank of Salford, which would see the local authority getting directly involved in providing an alternative to payday lenders. I thoroughly endorse that proposal, and I will be interested to see how it develops.

I am conscious that there has been a lot of cross-party consensus in this debate, and I do not want to make anybody’s chips soggy by moving on to something more contentious, but I want to make an important point about the Government’s effect on the discretionary social fund. It used to be administered by the Department for Work and Pensions, but from last April the Government passed it down to local authorities to manage. There has been variable performance by local authorities in how effective they have been in getting that money to people in desperate straits. So the Government, first, reduced the social fund budget and then passed the responsibility to local authorities, and we heard just before Christmas that they intend to scrap it completely from 2015. It appears that they would rather the private sector, through payday loan companies, met this need. We should remember that this crisis fund has been a safety net for people at a critical time, and the Government are now proposing, in effect, to privatise it, because they want payday lenders to step into the breach to meet that need. That is wholly unacceptable, and people will reach their own conclusion as to why the Government are so enthusiastic about payday loan companies providing this safety net instead of the Government. The Government should remain the lender of last resort and provide a safety net when people are really in crisis. At that point, I will leave the Floor open to my hon. Friend the Member for Sheffield Central.

21:31

[Paul Blomfield (Sheffield Central) (Lab)]

On this occasion, it is a pleasure to be called at the end of the debate, Mr Speaker, because it provides me with an opportunity to reflect on the contributions, where two things have stood out. The first is the deep concern on the issue and the positive points that have been made about the Financial Conduct Authority and its proposals. The second is the unanimity across the House that the FCA is moving in the right direction, but not going far enough. After it launched its proposals in October, Members from every party represented in this House came together to launch the “Charter to Stop the Payday Loan Rip-off”, not only outlining a holistic intervention on how we could regulate the sector, but critiquing the FCA proposals. That has subsequently been backed by civil organisations ranging from Unite to the Women’s Institute, and by councils of all political persuasions, as the hon. Member for North Swindon (Justin Tomlinson) pointed out. It is also supported by every major debt advice and consumer organisation.

Many Members have cited shocking statistics and research to back the case for further action, but I thought I would share the case of one Sheffield woman and ask how she would be helped by the FCA proposals. She has asked to be kept anonymous so let us call her Susan, and her case is all too typical. She was struggling to keep up with bills and to make ends meet, she took out a payday loan to help tide her over but still found that she was short at the end of the month. By rolling over the initial loan and taking out new ones to pay off that debt, she found herself in a spiral of increasing debt, with three payday loans, costly default fees and mounting interest.

My first question is: would the FCA proposals on advertising have protected Susan? She took out that payday loan because of the advertising she had seen. Too often, such advertising makes borrowing look easy and stress free. The hon. Member for Gosport (Caroline Dinenage) made the point that the FCA is focusing on tackling misleading advertising, but we should be focusing on tackling irresponsible advertising. We have all seen “Wonga: the movie”, which illustrates the problem of advertising that makes loans seem aspirational and life-improving, whereas payday loans are in fact the worst form of credit anybody could take out. So Susan would have been failed by the proposals on advertising.

My second question is: what about roll-overs? Once Susan had taken out her first payday loan, why was she encouraged to keep rolling it over? How could she have taken out two further payday loans when she was clearly having difficulty repaying the first one? The FCA’s proposal to limit the number of roll-overs to two is a step in the right direction, but the Select Committee is right to say that there should be a limit of one. Is the need to roll over more than once not a sign that the borrower is in trouble?

Similarly, we must look at repackaging loans and the problem of multiple loans. On the issue of multiple loans that pushed Susan into the spiral of debt, I recall that in a debate on 11 December on the Financial Services (Banking Reform) Act 2013, there was great agreement across the House on the need for real-time data to prevent irresponsible lending. As my hon. Friend the Member for Makerfield (Yvonne Fovargue) pointed out, Callcredit, with great support from Wonga and the Consumer Finance Association, announced the establishment of some data sharing. However, that scheme will not stop irresponsible multiple lending.

Let us consider these questions. Are all lenders signed up to this data sharing? If not, and Susan went to one that was not, they would not know that she was struggling to pay back her initial loan. Will the scheme identify lenders who are breaching FCA rules by, for example, rolling over loans too many times, and report them to the FCA? If not, Susan’s loans could be rolled over, just as now, with the FCA left to play catch-up once it has received its six-monthly data report from lenders. Will it establish a benchmark of affordability and assess whether that is being met by lenders? If it is not, will it report those lenders to the FCA? If it does not do that, Susan will still be trapped by unaffordable loans. The answer to each of those questions is no, so we still need the FCA to establish a database, require all lenders to use it, and use the data to enforce its rules. The case for that database is as strong now as it ever was, and I hope that the Minister and the FCA will pay heed to it.

There is also the issue of the continuous payment authorities. I welcome the fact that the FCA is suggesting that CPA administration be limited to two unsuccessful attempts, but it does not go far enough. It still provides lenders with the opportunity for a strategic intervention into somebody’s account to drain them of all their resources at a critical point in the month when they need that money for rent and other vital payments.

The code of practice that the sector has established, to which my hon. Friend the Member for Makerfield referred, suggests that lenders should provide three days’ notice of using a CPA, and yet, assessment of the sector by Citizens Advice suggested that 60% were not complying with their own good practice. The three days’ notice should be accompanied by a reminder of the right to cancel, which has been deliberately obscured in the case of many people who have got into difficulties with CPAs. I agree with the hon. Member for Worcester (Mr Walker)—I will be supporting him tomorrow morning—that we should use the opportunity of the new levy on payday lenders to increase the overall resource that is available to support free and independent debt advice, which has grown in response to the growth of the payday lending sector.

[Mike Crockart]

The hon. Gentleman has talked about being able to cancel the CPAs. He said that only 23% of lenders were explaining the situation, but the figure for those lenders explaining the ability to cancel is even worse, standing at only 5%. Does he agree that that is absolutely abysmal?

[Paul Blomfield]

I agree with the hon. Gentleman. The level at which the good practice surrounding the administration of CPAs has been obscured by lenders has caused enormous difficulties for many people. It underlines why we need a clear regulatory framework for the use of CPAs, in which any lender participating in the sector must comply.

My hon. Friend the Member for Glasgow North (Ann McKechin) was right when she said that, although the FCA is moving in the right direction, it is currently behind the curve. I hope that it listens to the debate tonight, gets itself ahead of the curve and listens to the voice of Parliament.

21:40

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

We have had a very thoughtful and interesting debate this evening, with 17 speakers in total as well as interventions. Most of the speakers seemed to reach a consensus on a way forward, although, as my hon. Friend the Member for East Lothian (Fiona O'Donnell) pointed out, the slight exception might be the hon. Member for Stratford-on-Avon (Nadhim Zahawi), who has just returned to his place. He tried his best to be consensual, but every now and again he was straining at the seams—[Interruption.] I hear someone say that he cannot help himself.

We heard an excellent speech introducing the report from my hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Select Committee on Business, Innovation and Skills. I know that we have had a number of debates on the issue and I wondered whether we would be able to reach consensus on the report this afternoon. That has happened and, as a number of hon. Members have said, this is an important time for such a debate, not least because the FCA is considering the responses to the consultation and will be publishing the rules shortly. It is also debt awareness week. I always feel that we should be concerned by debt awareness week—it is good for us and for the organisations that support people as it focuses our attention, but for many people the harsh reality of debt is something of which they are aware not just for one week of the year but every single day.

We have heard once again this evening examples of the cases with which we are all only too familiar that involve people in our constituencies. The Chair of the Select Committee highlighted a number of issues with advertising. He put it very powerfully when he talked about the suggestion that there could be a one-minute verification to decide whether someone could access such a loan. That highlighted why we need action on advertising.

My hon. Friend the Member for West Bromwich West also highlighted the impact of television advertising on children and young people aged 12 to 15. I have raised concerns about the issue in a previous debate, and about how advertising normalises payday loans and such borrowing. Someone might not normally consider such an option, but it can be instant and they can do it without thinking. I was also concerned to hear the story from a teacher about children’s awareness of the payday loan sector as one way of getting the things that one wants quickly. A strong case has been made this evening about advertising on television during daytime, early evening and children’s programmes.

My hon. Friend also made an important point in his opening speech about the need for the Advertising Standards Authority to work with the industry on a code of practice. If everyone were to come together to work on the matter and agree on how to take things forward, that would be excellent. If that does not happen, however, and if there is any delay, we should be prepared to ensure that action is taken.

My hon. Friends the Members for Glasgow North (Ann McKechin) and for Glasgow North East (Mr Bain) raised some of the particular concerns of the city of Glasgow. Let me take this opportunity to pay tribute to the new scheme introduced by Glasgow city council whereby pupils going to secondary school for the first time will be given the opportunity to have a credit union account, with £10 put into each account. That is one way of providing financial education while working creatively with the credit union movement in the city.

A number of Members stressed that it is now time for the FCA to act and various evidence was given from the CAB and StepChange about the level of debt. My hon. Friend the Member for Makerfield (Yvonne Fovargue) raised concerns that she has pursued for a long time now about the database and access to real-time information. A number of hon. Members talked about the Callcredit announcement and questioned whether it went far enough, as it does not necessarily provide real-time information on how decisions are made. That must be considered in more detail because, essentially, it is no good having information if it is not up to date.

As we have heard, indebtedness is not a new issue. As a former social worker, I well remember spending a lot of time trying to work with families who had to borrow money to pay for the basic necessities of life, without understanding the ongoing costs and how they would pay the money back. Of course, access to online systems and the “press the button, do it now” approach of the payday loan companies make it even easier to borrow now than in the days when the payday lenders of the time went around the doors and persuaded people to take out loans.

We heard some interesting comparisons with work that has been done in the US, Canada and Australia, particularly on roll-overs, and some good questions have been asked. For example, if someone cannot deal with one roll-over debt, why on earth would we want to let them have a second roll-over debt without that being challenged? We have heard concerns about the fact that payday originally meant payday. Of course, now it does not always relate only to people who are in work; many people on benefits and very low fixed incomes are also encouraged to take out these loans.

We have heard concerns about the continuous payment authority and people not understanding what they were getting into. We have heard a call for mainstream banking services to look more at how they support people on low incomes and the important point about financial education being about not only what happens in school but what happens particularly at key points in people’s adult lives, when there is an opportunity to intervene and to work with people to ensure that they understand what they are getting involved in.

A couple of hon. Members, including the hon. Member for Belfast East (Naomi Long), mentioned fraud. We heard from my hon. Friends the Members for City of Durham (Roberta Blackman-Woods) and for Rochdale (Simon Danczuk) about the implications of the planning system and the problems of payday loan companies opening shops in the high streets.

[Fiona O'Donnell]

Does my hon. Friend agree that, for her constituents and mine to be protected, we also need action from the Scottish Government, so that they use their powers to protect our constituents?

[Cathy Jamieson]

My hon. Friend makes an important point, but I do not have time to develop it now because I must now come to a conclusion.

I hope that the payday lending industry will understand the strength of feeling in this debate. To be fair, some Government Members said that they had come round to our way of thinking and are now prepared to back some of the actions that we have been calling for. The industry should look at that. The FCA should take note of the issues that have been raised this evening, and it should listen to the calls for action and the suggestion that it has perhaps not gone far enough.

I will finish by congratulating again the Business, Innovation and Skills Committee on the thorough work it has done on the issue and, indeed, all the campaigners who have brought it into the mainstream of opinion and concern, rather allowing it to be seen as something on the margins.

21:47

[The Financial Secretary to the Treasury (Sajid Javid)]

I congratulate hon. Members on securing this debate, and balanced and thoughtful contributions have been made by hon. Members on both sides of the House. In particular, I thank the hon. Member for West Bromwich West (Mr Bailey) for his contribution and his work on the issue in chairing the Business, Innovation and Skills Committee.

I recognise that the issue has caused concern not just in the Chamber but across the country. I should like to reassure all the hon. Members who have spoken today that the Government are taking decisive action to protect borrowers from the harm caused by payday lenders and that we are fundamentally reforming the regulatory system that governs them. I will do my best to answer hon. Members’ questions, but first I should like to take a little time to set out the main course of action that is being undertaken.

As many hon. Members will be aware, thanks to the changes made by the Government, the Financial Conduct Authority will take on new consumer credit responsibilities from the Office of Fair Trading in April. The OFT has done a good job with its powers and resources. However, the FCA will have far stronger powers than the OFT. It will be a regulator with teeth. It will have the power to set its own rules, rather than having to wait for the Government to pass legislation each time a new problem arises. That will put it in a stronger position to keep pace with a fast-moving market.

Furthermore, for the first time those rules will be binding on lenders. The FCA will have far stronger powers to enforce breaches of its rules and standards. For example, currently the OFT can fine up to a maximum of only £50,000, whereas there is no ceiling on FCA fines. For the first time the regulator will have powers to award redress to wronged borrowers. The FCA will thoroughly assess every single lender over the next two years. Those that are not fit to trade will be ejected from the market. It will approve key executives to ensure that they are personally accountable for the way their firms operate. In short, we are moving from PC Plod to Sherlock Holmes.

It is encouraging to see that the FCA is already flexing its regulatory muscle. It set out proposed new rules in October, as we have heard today, including: a cap on roll-overs; curbs on the use of continuous payment authorities; and mandatory risk warnings on adverts. The Government, as many Members will know, have welcomed the FCA’s proposals, and we look forward to its confirmation of the final rules next month.

Our absolute priority in this area is to ensure that the FCA can clamp down quickly on the causes of harm in the payday lending market, particularly the unfair and extortionate cost of borrowing from certain payday lenders and the spiralling costs faced by those struggling to repay. We took the opportunity in the Financial Services (Banking Reform) Act 2013 to give the FCA a clear mandate, and indeed a duty, to put a cap on the cost of payday loans by the beginning of next year, which means that it will not have to spend precious time making the case for a cap and can instead focus on the best way of implementing a cap and protecting consumers from those unfair and damaging costs.

The FCA is already on the case on that front, and we should see rules to implement a cap in place this year. It will be not just an interest rate cap, but a cap on all fees and charges associated with a payday loan, including default charges and roll-overs, which many hon. Members made the case for today. The total cost cap will work alongside the regulatory interventions already proposed by the FCA to tackle decisively the causes of consumer harm in the payday lending sector.

I will endeavour now to cover some of the important points raised in the debate. A number of hon. Members mentioned real-time data sharing. The Government believe that lenders must make proper assessments of an individual’s ability to repay before they lend and that that should be based on accurate, timely and comprehensive information. The FCA is looking at real-time data sharing as an absolute priority and has committed to bringing about a real improvement in the way data are shared, including looking at the role of credit reference agencies and at international examples of data-sharing systems.

The FCA has warned the industry that it must improve the way data sharing works, including how quickly lending data are made available. A number of Members referred to last week’s announcement by Callcredit that it will introduce real-time data sharing from this April, which I think is a welcome step. However, if the industry fails to improve properly, the FCA has been absolutely clear that it will not hesitate to act. The Government wholeheartedly endorse both that message to the industry and the regulator’s commitment to action.

The hon. Member for West Bromwich West and several others rightly mentioned advertising, particularly advertising aimed at children. The idea that children might see payday loan adverts and then put pressure on parents to take out loans is very concerning. The Broadcast Committee of Advertising Practice, the body that writes the broadcast advertising code, is considering the extent to which payday loan advertising features on children’s TV and whether there are any implications for the regulation of the sector. However, it is important to note that recent Ofcom research found that payday loan adverts make up just over 0.5% of TV ads seen by children aged between 4 and 15. Many payday loan firms, including Wonga and those that are members of the Consumer Finance Association, have stated that they do not advertise on children’s TV. It is essential that all payday loan advertising is responsible and is not designed to target children. That is why payday loan adverts are subject to the Advertising Standards Authority’s strict content rules. I hope that I will reassure hon. Members when I say that the ASA will not hesitate to ban irresponsible adverts. In fact, it has a strong track record of doing so, including, recently, Wonga and Cash On Go adverts. I hope that I will provide further reassurance by saying that the FCA is consulting on new rules for consumer credit adverts, and it will have the power to ban those that breach its rules.

Several hon. Members mentioned affordability tests. The Government believe that it is crucial that loans are made only to those who can afford to repay them, so we welcome the FCA’s tough action to make sure that that is the case. This will include ensuring that firms have suitable and sustainable business models, including appropriate affordability assessments. The FCA has announced in its rule book consultation that it will transpose much of the OFT’s affordability guidance requiring lenders to check borrowers’ ability to repay loans sustainably into binding rules that will, for the first time, be enforceable with the full range of FCA enforcement powers. This package of measures should help to address the problem of lenders giving loans to those who will struggle to repay them.

A number of hon. Members rightly raised credit unions as an alternative for people looking for short-term credit. The Government believe that credit unions provide an invaluable service to people on lower incomes, offering sound financial advice and responsible lending. That is why we have already taken action to try to help the sector by, for example, increasing the interest rate that credit unions can charge, as we found that many—indeed, almost all—were making losses, and this was clearly not sustainable. The interest rate was therefore increased from 2% to 3% per month. We also have the credit union expansion project, with £38 million of Government money designed to modernise the sector. I want to do more for it, and the Government are considering what further action they can take.

I congratulate the hon. Member for West Bromwich West on securing this debate and thank all hon. Members for their thoughtful and balanced contributions.

21:57

[Mr Bailey]

I thank all Members who participated in this debate, particularly members of my Committee. An enormous number of contributions from across the House have brought to this Chamber the detail of Members’ experience and expertise, and in some cases some imaginative solutions.

There is clearly a serious problem, and the proposed measures on capping credit and interest rates are very welcome but will not in themselves be sufficient to deal with the scale of it. The issues raised included roll-overs, continuous payment authorities, affordability tests, real-time data sharing, free debt advice services, financial education, and advertising. Dealing with those is all part and parcel of a comprehensive solution to the problem. I recognise that the FCA does not have all the powers it needs to do so, and that requires Government to look at other means of addressing the issues. My hon. Friend the Member for Glasgow North (Ann McKechin) made a pertinent comment when she said that regulation is behind the curve. That is true. We must now ensure that the Government and Parliament are ahead of the curve in order that the appropriate measures are put in place.

Question put and agreed to.

Resolved,

That this House has considered payday loan companies.

Business without Debate

Monday 20th January 2014 Commons Chamber

Political and Constitutional Reform

Ordered,

That Sheila Gilmore and Simon Hart be discharged from the Political and Constitutional Reform Committee and David Morris and Chris Ruane be added.—(Greg Hands, on behalf of the Committee of Selection.)

Prepayment Meters and Fuel Poverty

Monday 20th January 2014 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Evennett.)

20:44

[Fiona O'Donnell (East Lothian) (Lab)]

This is the first time that I have been successful in securing an Adjournment debate, so my expectation of the Minister is high. I hope that he will not disappoint me, because I have some specific questions that I want him to answer.

It is appropriate to have the opportunity for this debate after the previous one about the effective regulation of payday lenders, in which you also generously called me to speak, Mr Speaker. As poverty and the cold bite across the UK, some will be driven into the jaws of those high-cost, under-regulated lenders to pay their energy bills. It is also appropriate to have the opportunity to hear from the Minister on blue Monday. As I left my home in East Lothian this morning, having scraped the ice off my car, I was aware that many in my constituency today not only face feelings of being blue about their lives, but are unfortunately blue with cold.

It was as a volunteer in my local food bank that I first saw the connections between changes to welfare, food insecurity, fuel poverty and prepayment meters. It is not an uncommon experience for food banks to find that people with prepayment meters who use the services of food banks have no energy to heat the food they receive. Households across the UK have seen energy bills soar. Last year, the big six announced increases of from 8% to 10%, with the average dual fuel bill now costing households £1,385. Many in my constituency without access to gas miss out on that dual fuel discount.

The Government have given two main responses to fuel poverty. The first was advice to shop around for a better deal. Does the Minister recognise that prepayment meters and debt are barriers to switching, and what is he doing to ensure that more people can switch supplier?

It is difficult for someone who inherits a prepayment meter to return to the credit method of securing an energy supply. Will the Minister tell the House whether he has any plans to act on that? During the last debate, I had a text from my son Michael to tell me that when he inherited a prepayment meter in the last property he rented in Newcastle, the supplier refused to remove it and to put him on the credit method, because of the postcode where he lived. I would hate to use my position to seek any preferential treatment for members of my family, but it shows that the experience is now hitting not only people with a record of debt and poor credit, but those inheriting prepayment meters.

The debt assignment protocol was promoted by Ofgem in September and introduced in November 2012. It was designed to assist customers with a debt to switch to the cheapest prepayment deal for them by increasing the threshold for the amount of debt that could be switched between suppliers from £200 to £500. The big six agreed to implement it voluntarily. Will the Minister tell the House what assessment he has made, or plans to make, of the protocol’s impact?

The second Government response was the statement to the House by the Secretary of State for Energy and Climate Change about the reduction—I refuse to call it a cut—in increases in energy bills to, on average, £50. In a response to me, he stated that prepayment meter users would benefit equally from that Government policy. Will the Minister explain to me exactly how people with prepayment meters will benefit, and what estimate he has made of the policy’s effectiveness for and impact on them?

Despite households being hit with increased prices, Ofgem’s “Domestic Suppliers’ Social Obligations: 2012 annual report” found that from 2010 to 2012 the number of disconnections for debt fell by 51% for electricity and by 69% for gas.

In June 2012, about 7.2 million people in the UK were paying for gas and electricity through a prepayment meter. The number of prepayment meters rose by 4% from 2011 to 2012 for electricity and by 6% over the same period for gas. It is reasonable at least to ask whether the reduction in disconnections and the growth in PPMs is linked. The problem will not have gone away, but may have been masked by the increasing number of PPMs.

Consumer Futures is conducting research with Citizens Advice and Citizens Advice Scotland to assess the scale of the problem of income-related self-disconnection and the impact of the changes, particularly in welfare, since 2010. Its findings will be reported later this year. Will the Minister give a commitment tonight that he will respond to any evidence from that research, and that he will work with consumer organisations to introduce a code of best practice on suppliers’ monitoring of PPM customers? We have to know the extent of this problem.

[Julie Hilling (Bolton West) (Lab)]

Does my hon. Friend agree that it is wrong that the energy companies do not monitor the energy use of people who are on prepayment meters? We have no record of the number of people who have self-disconnected because they are unable to afford energy and who are living in very cold homes.

[Fiona O'Donnell]

My hon. Friend makes a brilliant contribution, as ever. She is exactly right. It was ironic to hear British Gas boasting to the Energy and Climate Change Committee that it had not made any disconnections in the past year. It is clear that there has not suddenly been a solution that means that people are able to pay their energy bills. We have to get a handle on the scale of the problem. I hope that the Minister will consider sitting down with the big six, or getting Ofgem to do so, to find a way to ensure that they monitor the problem effectively, because the implications for people’s health and well-being—children and vulnerable people in particular —are considerable. The matter merits his attention.

Research conducted by Consumer Futures has also shown that 60% of PPM households had an income of less than £17,500. Given the clear connection between PPMs and poverty, and all the other factors that stem from poverty or cause poverty, it is vital that the Government and Ofgem do everything that they can to protect vulnerable consumers. However, the Government are in denial about the links between fuel poverty and PPMs. The Minister himself is in denial about it.

I deliberately put prepayment meters and fuel poverty in the title of this debate because I believe that there is a link. On 11 June, the Minister said that

“there is often an assumption that ‘fuel-poor’ and ‘prepayment meter’ are synonymous. In fact, only a relatively small number of the fuel-poor—20%—are on prepayment meters.”—[Official Report, 11 June 2013; Vol. 564, c. 60WH.]

However, the Department’s “Annual report on fuel poverty statistics 2012” showed that the highest fuel poverty rate by payment method is among households that pay for fuel using PPMs. I maintain that there is a clear link. The Minister needs to face up to that if he is to address the problem.

Customers who are moved on to PPMs are usually put on their supplier’s standard prepayment variable tariff and are therefore unable to protect themselves against price rises. Consumer Futures found in its March 2013 report, “Addressing the poverty premium”, that PPMs cost an average of £253 per year more. A report by Stratford-upon-Avon’s citizens advice bureau, “Left out in the cold: why prepayment meter users need a better deal”, said that the standard tariff is not always the cheapest and so customers who are already struggling to keep up with payments on their supplier’s cheapest tariff—perhaps an online tariff paid by direct debit—are moved to a more expensive one. Those customers are unable to access the best deals and discounts on the market or to lock into fixed-price deals. The report also found that only one of the 10 suppliers featured on comparison websites, British Gas, offered PPM users the opportunity to fix their fuel costs. Does the Minister agree that giving PPM customers the opportunity to take up fixed-price deals could be of benefit? What is he prepared to do to make that happen?

It is not just those on low incomes who may be disadvantaged by PPMs. The Muscular Dystrophy Campaign’s 2010 report, “The Cost of Living with Muscle Disease”, highlighted how for many people with neuro- muscular conditions, heating their home is essential for their muscles and mobility. Many patients are advised by their specialist consultant that they must keep their heating on at a minimum level, even at night. The report states:

“It is plainly inappropriate for people with muscular dystrophy to rely on PPMs in any circumstances”.

It says that that is inappropriate because of limited and fixed incomes, the extra costs of PPMs, and the risk of self-disconnection. Will the Minister confirm whether he has considered—or will consider—prohibiting the use of PPMs in the homes of anyone receiving the higher rate of disability living allowance or the enhanced rate of the new personal independence payment?

Citizens Advice and Consumer Futures have noted that many households with PPMs have never seen instructions on how to use or manage the meters, and have little understanding of the standing charges that apply. They conclude that that is because the meters have been inherited—a situation I referred to earlier. Consumer Futures has called for manuals to be distributed every time there is a new householder. How will the Minister ensure that consumers have better access to information about their PPMs?

Citizens Advice Scotland has found cases where levels of recovery were set too high, meaning that PPM users often sank further into debt. One customer was repaying £7 of debt out of every £10 on his meter. That same customer found that his debt had increased from around £260 to more than £600 following installation of the PPM, because the supplier had not told him the truth and had said there would be no charge for installing the meter when there was a charge. Therefore, action taken, supposedly to reduce and manage debt, had the opposite effect. What is the Minister prepared to do to ensure that energy suppliers are honest about charges for installation and removal of meters, and what more can be done to ensure that people have help in negotiating sustainable recovery levels with their supplier?

I understand that PPMs could be useful in helping consumers to reduce their debt and manage energy expenditure, and that that should be an option for consumers. For that to be the case, however, PPM users should have the same opportunities as other consumers to switch suppliers, and to have access to fixed tariffs, better and accurate information about the way their tariff works, and fair arrangements for repaying debt. The energy market as it stands does not serve the needs of consumers, and that is particularly true of vulnerable consumers and PPM users. The Government can and should do more. I hope that in the time available, the Minister will answer the questions I have raised, and I look forward to his response.

22:13

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

I congratulate the hon. Member for East Lothian (Fiona O’Donnell) on an excellent maiden Adjournment debate—I believe she said it is the first time she has secured one—and may I say upfront that she raised some sensible and pertinent points that I take very seriously? I doubt that I will be able to answer all the points she has raised—[Interruption.] The hon. Lady asks whether I will write to her. She has made a serious and sensible speech tonight, and I would be happy to go further than simply writing to her. If she would like to take up my invitation to come and meet me and my officials, I will happily consider in more detail, face to face, the questions that she has raised. Not all her questions have convenient, pat answers. They bear further analysis, and she would be right to scrutinise further the answers she gets. There is undoubtedly a lot more to do on the problem—I am not complacent for a moment—but the fact is that we have finite resource to address it. We have made progress in recent years, but not nearly enough to be in any way confident that the problem is being defeated.

We are heading in the right direction and determined to do more, but, as the hon. Lady says, unacceptably high numbers of people are living in cold, damp and unhealthy conditions. That is why, for starters, the Government have introduced a new and more accurate measure of fuel poverty, and why, for the first time in many years, we will publish a fuel poverty strategy. That will happen later in the year. The strategy will be deliverable but, in addition, the public, the Opposition and parliamentarians from both sides of the House can hold the Government to account on delivery.

We continue to deliver the policies that we believe will make a difference in tackling fuel poverty this winter. The energy company obligation, which runs alongside the green deal, ensures that help goes to low-income and vulnerable households to help them to heat their homes and stay warm and healthy. New statistics will, I believe, be published tomorrow, but up to the end of October 2013 more than a quarter of a million measures were installed for people on low incomes, equating to around 220,000 households.

Colleagues will be aware of the proposed changes announced last year to the energy company obligation. They will result in savings of £30 to £35 in household bills on average in 2014. Those savings are part of a wider package of changes to green levies that is designed to reduce the cost of household bills by, on average, £50 a year. That will be welcomed by everyone, but particularly by the fuel poor, who must still pay those charges.

In respect of low-income and vulnerable households, I can assure the hon. Lady that the changes will not lead to any reduction in the intended level of support. Indeed, we want to provide longer-term certainty, so our consultation on the ECO changes will propose setting new targets for 2017, ensuring that the current annual scale of activity and ambition continues. In addition, the Government will use the consultation to come forward with further improvements to our fuel poverty schemes, with the aim of ensuring that greater help is made available to those fuel-poor households who are off the gas grid and living in rural areas.

I believe that the Government’s proposals strike the right balance between supporting the delivery of our critical energy efficiency agenda and limiting the cost borne by all customers, but especially those living in fuel poverty.

[Fiona O’Donnell]

I am aware that I have posed a lot of questions to the Minister, but could he answer one specifically? If the energy companies are not monitoring self-disconnection, how can he have a realistic picture of UK fuel poverty?

[Gregory Barker]

No Government to date have come up with a totally satisfactory answer to the self-disconnection question, and it is a problem. However, it is a relatively small part of the overall fuel poverty picture.

Let me clarify a point on fuel poverty and prepayment meters. The hon. Lady quoted me accurately, but my point was that the percentage of prepayment customers in fuel poverty—the latest year for which we have audited figures is, I am afraid, 2011—has continued to come down. In fact, fewer than one in five customers with a prepayment meter are defined as fuel poor. Not all those who have prepayment meters are fuel poor, and it is by no means true that the fuel poor all have prepayment meters—as I say, only about one in five do. It is not that I was trying to deny a link between the two—absolutely not. Of course there is a link. What I was pointing to is a larger problem. Quite often in this House, Members have assumed that by attacking the prepayment issue, we were really putting one’s hands around the fuel poverty issue. Unfortunately, it is only one of several concentric circles as far as fuel poverty is concerned. The hon. Lady is absolutely right to focus on prepayment customers as being vulnerable and worthy of further attention and support, but it is not correct to say that in so doing she is tackling the majority of fuel poor customers. I am glad to have cleared that up.

In addition to the energy company obligation, the warm home discount scheme requires more than 250,000 domestic customers to receive a discount on electricity bills. Typically, that is aimed at low-income and vulnerable customers. Some 2 million households this year will receive help under the warm home discount, including well over 1 million of the poorest pensioners who, in addition to the winter fuel allowance, will receive £135 off their electricity bills. The Government have also committed to extending the warm home discount in 2015-16, with an increased spend of £320 million. More than 1.16 million low-income households will receive that payment, and will do so, I am glad to say, without having to take any action. This is the result of data-matching undertaken by the Government and the seven largest energy suppliers. I am sure that the hon. Lady knows that accurately pinpointing who the fuel poor are and where they are has been a great stumbling block for this Government and previous Governments. We are making progress. Furthermore, the Department for Work and Pensions provides winter fuel payments and cold weather payments to help vulnerable households.

Finally, in 2013 the Government announced the creation of the Big Energy Saving Network. The network was established alongside existing advice to deliver a comprehensive package of advice and support, particularly to vulnerable customers, and has focused on helping them to reduce their energy costs through assisted action on tariffs, switching and take-up of energy efficiency offers. With total funding of £900,000, the network is supporting activity for more than 150 organisations. Some 500 volunteers from third sector organisations and community groups have been trained to provide advice and help consumers to take action.

I understand fully the point the hon. Lady made regarding manuals for prepayment meters, but for many customers a manual can often be daunting. I think the most effective thing is for one of the many volunteers, or people from the excellent organisations that are part of the Big Energy Saving Network, to be on hand to give helpful and supportive in-person advice on prepayment meters.

Of households that were fuel poor in England in 2011, approximately 25% paid for their electricity and 20% paid for their gas through prepayment meters. That compares to 13% and 10% among non-fuel poor households. Clearly, prepayment is more common among poorer households, but the relationship is far from absolute. They can also be a valuable alternative to disconnection for non-payment of bills. In 2010, Consumer Futures found that more than one third of consumers expressed a preference for prepayment meters, citing the security and peace of mind that comes from knowing they will not receive an unexpectedly large bill. Often, many of the poorest customers worry not just about the bill but about unexpected changes in it, and many value the certainty that prepayment meters bring.

Prepayment meters are not ideal, however, and have many drawbacks. Typically, they have been one of the most expensive payment methods, and when exchanging one for a credit meter, many suppliers have charged a fee or requested security deposits. As the hon. Lady said, if a customer cannot afford to top up their prepayment meter, they may self-disconnect. This is a difficult area, with many other factors that can confuse the figures—second homes, holiday homes and so on—but we are talking to suppliers to try and get a better grip on this important group of customers. We take the issue seriously and are currently looking at some proposals that I and my officials would be happy to talk through with the hon. Lady.

All these issues underline the importance of ensuring that prepayment meter customers are not prevented from accessing the benefits of competition or innovation in the market. Recently, several changes have improved the experience of prepayment meter users. Since 2010, most suppliers have chosen to equalise their prepayment tariffs with standard credit prices, while any remaining price differences from other suppliers are likely to fade out with the roll-out of smart meters. Suppliers, including some smaller providers, have also been competing hard for customers who pay by prepayment meter. Recent innovations include offering to change for free, scrapping security deposits and replacing meters with smart prepayment meters—that is obviously not universal among suppliers, but it is an encouraging trend in the market.

Suppliers now offer more ways to top up a meter, such as paying over the phone, online or through an ATM, showing that the prepayment market is far from uniform. There are welcome changes taking place. Prepayment consumers can still access considerable price savings and other benefits by comparing the market for the best deals, and smart metering has the potential to bring further benefits to prepayment customers. Every smart meter will have the functionality to operate in either prepayment or credit mode, so will enable easy switching between the two payment methods as customers’ circumstances change.

It is vital that suppliers take proactive steps to protect their prepayment customers, particularly the most vulnerable. They are currently obligated under their licence to take account of a customer’s ability to repay when setting a repayment schedule, and there is evidence to suggest that they are fulfilling this obligation. Average weekly debt repayment rates for prepayment customers have declined. In quarter 4, they were £6.94 for gas and £6.31 for electricity. This compares to £7.87 and £8.31 respectively in 2010. Furthermore, the majority of indebted customers are on standard credit, not prepayment meters, and repay through a variety of means, suggesting that repayment is tailored to the individual customer. Moreover, all suppliers now provide emergency credit on prepayment meters.

I apologise to the hon. Lady if I have not addressed all her points. We are committed to giving more choice to prepayment meter customers and to working with Ofgem and suppliers to ensure that their reforms work for those customers. I would be happy to sit down with her and go through it in more detail.

Question put and agreed to.

22:29

House adjourned.

Written Statements

Monday 20th January 2014 Written Statements

Monday 20 January 2014

“Closing the Gap: Priorities for Essential Change in Mental Health”

Monday 20th January 2014 Written Statements

[The Minister of State, Department of Health (Norman Lamb)]

We are today publishing “Closing the Gap: Priorities for Essential Change in Mental Health”.

At least one in four people will experience a mental health problem at some point in their life; one in 10 will do so before they are 18. An estimated one in six adults has a mental health problem at any one time; there are also many who experience poor mental well-being but do not have a diagnosable mental disorder.

Mental ill-health can mean people are out of work. It can lead to family breakdown and homelessness. It can mean leaving school with poor qualifications, or none at all. It can directly impact on parenting, and in particular on the relationship between children and their parents in those critical early years. It also has a direct impact on physical health. Life expectancy for those with severe mental illness is on average 20 years less for men and 15 years less for women.

All of this places an enormous strain on the health service, and on other public services: mental illness is now the cause of over 40% of sickness benefit claims. Businesses feel the impact: the average cost of poor mental health to business is just over £1,000 per employee per year, or almost £26 billion across the UK economy.

The time is long overdue for us to take a bolder, broader approach to tackling mental ill-health and promoting well-being. In 2011, we published our mental health strategy, “No health without mental health”. This set out a long-term ambition for the transformation of mental health care—and more importantly, for a broad change in the way people with mental health problems are supported in society as a whole. This was reinforced by the mental health strategy implementation plan in 2012 which provided detailed recommendations for action to deliver the objectives.

Two years on from the publication of our strategy, important progress has been made. Crucially, we have taken firm steps to narrow the gap between the way in which physical and mental illnesses are viewed and responded to. The Health and Social Care Act 2012 sets out, in law, that mental health should be on a par with physical health. And we have put mental health at the core of our mandate to the NHS, setting out what the NHS is tasked to deliver—and the NHS constitution. This means that improving mental health, and treating mental illness are key priorities for NHS England. These are also central to our mandates to Health Education England and Public Health England.

We can see that in many areas, real change is already happening to deliver the strategy objectives.

Change is also visible beyond the health and care sector. Many areas of Government policy and public service delivery, from education to employment, the justice sector to housing, are addressing mental health. There is strong cross-Government support for, and actions to deliver, the objectives in the strategy as demonstrated by the children and young people’s health outcomes forum, and the forthcoming crisis care concordat.

Crucially too, there is already a clear change in society. The time to change campaign, set up to tackle discrimination and remove the stigma associated with mental illness, has made real impacts. Research has shown that, since the launch of the campaign, people with mental health problems already experience less discrimination from friends (14% less than in 2008), family (9% less) and in social life (11% less).

All of this amounts to important progress towards achieving the long-term objectives set in our strategy. But we recognise too that for many people with mental health problems, this progress has not yet translated into significant change in the care and support they receive. Much of the work to date has been around laying foundations for further change which means the impact of what has been done is not always clear and relevant.

Our goal is that progress will accelerate and outcomes become more tangible. This document aims to bridge the gap between our long-term ambition, and shorter-term action. It therefore sets out 25 areas where people can expect to see, and experience, the fastest changes. These are our priorities for action; issues that current programmes are beginning to address and where our strategy is coming to life.

While we are highlighting these priorities, it is important to underline that they are only part of a much bigger picture—and a much broader ambition for improved mental well-being. We are determined that achieving these priorities serves not as a distraction from the greater ambition, but instead as a catalyst for further and faster change.

It is right to assert that mental health must have equal priority with physical health, that discrimination must end and that everyone who needs mental health care should have the right support at the right time. These are issues which demand our collective response. I am confident by focusing on the priorities identified in this document we can achieve real and lasting benefits both for mental health services and, more importantly for the people who use those services.

“Closing the Gap: Priorities for Essential Change in Mental Health” has been placed in the Library. Copies are available to hon. Members from the Vote Office and to noble Lords from the Printed Paper Office.

Transforming Rehabilitation

Monday 20th January 2014 Written Statements

[The Lord Chancellor and Secretary of State for Justice (Chris Grayling)]

All probation trusts have now received formal notification of the termination of the probation trust service contract as part of the transforming rehabilitation programme.

Trusts are now completing the allocation of staff to their new roles, and every trust is on track to do so by 1 April. We will then test key aspects of the new model so that those who will be in both the community rehabilitation companies (CRCs) and in the National Probation Service (NPS) can trial the new ways of working before we formally complete the transfer to the new governance arrangements. Over a two-month period from April we will prepare for the full transition to new IT and support systems in areas like HR.

We will also start new interim account management arrangements from 1 April, to allow the account management team to start to work closely with emerging CRC and NPS teams right away and prepare for contract mobilisation from the end of May. Full commercial contract management will follow at the conclusion of the competition process.

A copy of the letter terminating the probation trust service contracts has been placed in the Libraries of both Houses.

Psychological Wellbeing at Work

Monday 20th January 2014 Written Statements

[The Minister of State, Department for Work and Pensions (Esther McVey)]

Poor mental health is a major issue for Government, society and for the many individuals either directly or indirectly affected by it. At any one time, around one in six people have a common mental health problem like anxiety or depression, and a further two in a hundred are affected by severe mental illnesses like schizophrenia. Additionally, we know many people suffer from both physical health and mental health problems at the same time.

The sheer number of people with mental health problems in work, and out of work, across all working-age benefits, makes this a mainstream issue for the Government. It represents an enormous challenge to both health and employment services, not just in the UK but across industrialised nations.

While none have yet established the best way to increase the effective support for people with mental health problems to work, the mental health benefits associated with good work are well known. We are working towards a solution and, if we get it right, the benefits for society will be substantial.

It is clear that health and work services need to work together, for example with flagship programmes like improving access to psychological therapies (IAPT) working more closely with local employment services. We are also developing the health and work service in order to support employees to return to work from sickness absence.

This need for collaboration between health and work services is precisely why my colleague the Minister of State, my hon. Friend the Member for North Norfolk (Norman Lamb), who is responsible for care and support, and I are vigorously pursuing solutions to this issue. Through the Cabinet Office’s Contestable Policy Fund, the Department for Work and Pensions and the Department of Health jointly commissioned RAND Europe to explore the most promising approaches on how to improve employment outcomes for people with common mental health problems, with a focus on better alignment of employment and health services.

Today we are launching RAND Europe’s report, “Psychological Wellbeing and Work: Improving Service Provision and Outcomes”. The report sets out key findings and advocates:

enhanced employment support in primary care including IAPT services, building on the employment advice currently offered in these services, with fully-specified support models like individual placement and support (IPS);

activities for benefit claimants with, or at risk of developing depression or anxiety to build belief in capability for work and increase emotional resilience to the setbacks people face when job seeking; and

different modes of specialist work and well-being assessments and support, including online, telephone and face-to-face.

The project report and its proposals will contribute to a better evidence base for action. It will enable both Departments to take forward our exploration into better mental health and employment provision—providing better approaches to help people with mental health problems to work.

The report will be published later today on the gov.uk website, and I will place a copy in the House Library.

Grand Committee

Monday 20th January 2014 Grand Committee

Monday, 20 January 2014.

15:30

Pensions Bill

Monday 20th January 2014 Grand Committee

Committee (6th Day)

Relevant documents: 13th and 16th Reports from the Delegated Powers Committee.

[The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)]

Good afternoon, my Lords. If there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes.

Clause 37: Automatic enrolment: powers to create general exceptions

Amendment 62D (in substitution for Amendment 62C)

Moved by

[Baroness Sherlock]

62D: Clause 37, page 19, line 22, at end insert—
“(5) Regulations under this section shall not be made to exempt entire classes of business or businesses, such as small and medium-sized businesses, from automatic enrolment.
(6) Regulations under this section shall be laid before and approved by resolution of both Houses of Parliament.”

[Baroness Sherlock (Lab)]

My Lords, Clause 37 is headed: “Automatic enrolment: powers to create general exceptions”. I am tempted to rest my case there but I will press on a little. I hope that this will be a relatively uncontroversial amendment that the Minister can accept.

If the Committee looks at Clause 37, it will see immediately that it is drafted very broadly—too broadly, I suggest. In effect, it gives the Government the power by regulation to create exceptions from the employer duties under auto-enrolment in a way or to an extent that could undermine the intention of Parliament in establishing auto-enrolment in the first place.

When this clause was discussed in another place, the Pensions Minister said that the Government needed the powers to make regulations in order to ensure that employers do not automatically have to enrol people whom it will be a waste of time to enrol because they will be immediately removed; for example, people who have resigned, are retiring or have used their lifetime tax allowance. Apparently the clause is broadly worded because, the Minister said in the other place, we cannot predict the future need for exceptions. I suspect that our Minister’s brief contains similar assurances.

Clause 37(2) inserts a provision into the Pensions Act 2008 which enables the Secretary of State by regulation to provide for exceptions to the employer duty that may,

“be framed by reference to a description of worker, particular circumstances or in some other way”.

We accept that there will be circumstances in which it will be inappropriate to auto-enrol someone who is likely to want to be removed immediately, but it is our view that the clause is unnecessarily widely drafted—a view that is shared by others, including the TUC and the CBI.

In Committee in another place, the shadow Pensions Minister, my honourable friend Gregg McClymont, quoted from a letter from the CBI in which it expressed support for the intention of the clause but said it was too broadly drafted because:

“The inclusion of ‘in some other way’ would provide too broad a power to government to change the scope of automatic enrolment at any time it saw fit. For instance, it would provide the Secretary of State with a secondary legislation power to exempt some businesses. This is a move the CBI could not support, as it undermines the consensus that was reached on pensions reform by giving exempted firms a cost advantage”.—[Official Report, Commons, Pensions Bill Committee, 9/7/13; col. 352.]

If the Government want to exempt a category of business, they should come back to the Floors of both Houses and amend their legislation. This is not fanciful. It is not long since the Beecroft report recommended that micro-employers be exempted entirely from auto-enrolment.

This amendment makes it clear that Clause 37 shall not be used to exempt entire classes of business, such as small or medium-sized employers. This will ensure that the Government’s apparent intention for auto-enrolment to apply to all categories of employer and business will be honoured. If the Minister is of the same view as the Pensions Minister on this point—in other words, if it is the Government’s intention that no such general exemption should be made—there can be no reason to resist this amendment. If he does, he has some explaining to do.

[Lord McKenzie of Luton (Lab)]

My Lords, I support my noble friend’s amendment. Auto-enrolment has, initially, clearly been a success and the Government deserve credit for implementing the policy. But we should recognise that we are just at the beginning: although it has been up and running for 18 months, we are just approaching the point in April this year when smaller and medium-sized employers, those whose largest PAYE scheme covers between 50 and 249 employees, have to commence their duty.

There have already been a range of changes to the process, implemented by regulations, resulting from a review of early live running. Those changes mostly came into force last November, although some are due this coming April. The consultation on the draft regulations also canvassed views on other changes, including the proposition of excluding a certain category of worker from auto-enrolment. It sought more information on three situations, identified that it had a substantive response to the use of an exception, and committed to publish the results, with government proposals and a further consultation. When will the results be published? Will it be before Report? At the very least, can the Minister provide us with a list of the circumstances being considered, if those extend beyond the three identified in the briefing note, which states:

“The initial evidence suggested that there is a case to re-examine the appropriateness of the employer duty in some, very carefully specified, circumstances”?

However, as my noble friend has clearly set out in the amendment, the power taken in Clause 37 is a very wide one.

The circumstances covering someone handing in their notice, where the notice spans the automatic enrolment date, and where an active scheme member gives notice of retirement and stops making contributions could, it is suggested, be the subject of specific amendment. As for those individuals with fixed or enhanced protection for their lifetime allowances, the Minister might tell us how an exclusion might be framed so that the employer could operate without input from the worker. That those circumstances need to be addressed to avoid detriment to workers is clear, but at present the encouragement from HMRC is to do so by opting out. If the system for exemption depends on the worker lodging the existence of enhanced or fixed protection, perhaps with some validation from HMRC, I am not sure that that is a more effective route than the worker simply opting out.

If the rationale for Clause 37 is based on just those three circumstances, I am bound to say that it is not overly convincing. If we are to understand that a range of other circumstances have been identified which justify the clause, we must be entitled to know what they are. The Government must be aware of them from representations that they have already seen. The briefing note sets down some core policy principles against which suggested exclusions are to be tested. One of these is:

“Are the individuals unlikely to benefit from pension saving?”.

This has echoes of some of the challenges to auto-enrolment when the policy was first originated and being developed, particularly around older women just approaching retirement.

It is entirely reasonable that there will be changes to the operation of auto-enrolment arising from practical experience, but we should be cautious of wide powers to remove the employer duty of enrolment. That is the cornerstone of the policy. Of course, we are mindful that the duty has already in practice been narrowed by aligning the starting point with the level of the income tax personal threshold, thereby removing thousands of the low-paid from its benefits. We are also mindful that there is a subtext to the overall Bill about generating savings for the Treasury, so my noble friend is right to be cautious about this clause.

[Lord Bates (Con)]

My Lords, it is now two years since the rollout of automatic enrolment began and we are seeing how it works in practice. Automatic enrolment is a blunt instrument, since everybody who meets the relevant tests is automatically enrolled. There is emerging evidence that we should consider refining and targeting, but it is impractical to make refinements by amending primary legislation every single time. A degree of flexibility is an integral part of future-proofing the policy. This clause provides that flexibility, with a power to exclude prescribed types of workers from the scope of automatic enrolment.

I should respond to the points made by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie. The inclusion of all employers, whatever their size, is part of the broad consensus that continues to underpin support for automatic enrolment. That is Her Majesty’s Government’s position. I will come back to the specific points, which have rightly been raised, at some point.

We need to take the oddities out of the system and this clause enables us to do just that. Automatic enrolment is not always appropriate. Indeed, in extreme cases, pension saving could lead to an individual incurring a financial penalty. Until now we have relied on opt-out as a solution: an individual can opt out of automatic enrolment if pension saving is not right for them. However, a problem remains: inappropriate enrolments, opt-outs and refunds still cause work for employers and frustration for the individual. We need to consider how we can remove, or at least reduce, the administrative burden in cases where automatic enrolment serves no purpose.

The Government’s consultation on technical changes to automatic enrolment last year shows significant support from employers, pension providers and financial advisers for limited, carefully crafted exclusions which help individuals where automatic enrolment has no benefit or makes no sense. We are currently looking at the evidence from that consultation with a view to publishing proposals when a power is on the statute book. So far, the evidence suggests some clear examples. One straightforward example is that people with enhanced or fixed tax protection status could face a tax surcharge if they make any further contributions into a pension. As well as this, automatic enrolment may be illogical for leavers, since it may make no sense to force an employer to enrol a worker into a company pension scheme if they are serving out their notice.

Any exclusion is likely to be sensible and uncontroversial, which is why the Government suggest that a negative resolution in these circumstances is an appropriate use of Parliament’s time. In terms of the breadth of this power, we have been clear from the outset that the intention of this clause is not to exclude entire employment sectors from automatic enrolment or to carve out a particular size of employer; that is a specific statement in relation to this.

We know that undersaving is most prevalent among low-to-moderate earners, those who work for employers who have not provided an accessible pension scheme or those who do not pay into one. These are the core policy objectives on which the consensus was built and to which we are still committed. We are not considering exclusions to the automatic enrolment duty simply because some employers tell us automatic enrolment is an inconvenience. This is about exceptional situations where it makes sense to take a person outside the scope of the Bill, hence the exemption. Although I can understand the aim of the amendment, it is trying to stop the Government from doing something that we have no intention of doing. As noble Lords will know, it would not ultimately constrain future Governments in any event.

The noble Baroness, Lady Sherlock, mentioned Beecroft. We have already firmly rejected proposals to cut micro-employers out of auto-enrolment. Workers in those firms have as much right to save for their retirement as anyone else; we have been quite clear about that. Measures have been introduced, such as the timetabling for the introduction of auto-enrolment meaning that smaller businesses, with fewer than 50 workers, are not affected by the reforms during the lifetime of this Parliament. This provides an additional breathing space. That is how we are seeking to tackle this and intend to make allowance.

On the words “in some other way” in the clause, which have been the focus of remarks by noble Lords, the power is there to exclude people for whom pension savings make no sense. We want to be sure that we can deal with future situations in which exclusion is clearly justified. The drafting of this power enables us to react to unforeseen circumstances. That is critical, particularly as we are dealing with such a complex and technical area. On what happens next with the power to make exemptions, the Government’s intention is to publish draft regulations for consultation later this year.

The noble Lord, Lord McKenzie, asked whether this was about saving tax, or tax relief. We are looking at the use of this power. Saving money for the Treasury will not be one of the factors we consider. Although, of course, general consideration of the management of fiscal balances is sensible, the primary purpose here is to ensure that employers of all sizes, and employees, take the opportunity to engage with pensions and save for their retirement. Ultimately, in the long-term, that is in the best interests of the Treasury, the Department for Work and Pensions—indeed for all of government—and, chiefly, the people themselves.

I understand the thrust behind the amendment and that it is important to get those remarks on the record, but with those reassurances, I ask the noble Baroness, Lady Sherlock, to consider withdrawing it.

15:45

[Lord McKenzie of Luton]

Nobody disagrees that there could be some limited and carefully targeted exclusions in particular circumstances, but I am trying to understand the circumstances that the Government have currently identified. They have laid out three of them in the briefing document, which suggests that they might have had representations on a whole range of other areas. I reiterate my question: can we know what circumstances, other than the three identified, the Government are focusing on that warrant an exclusion from the provisions?

In particular, one of those that has been identified deals with enhanced or fixed-protection provisions. I accept that there is a financial detriment for people who get auto-enrolment in those circumstances, but HMRC has advised them pretty clearly to opt out in that case. How, specifically, would the Government draft an exclusion to encompass that group of people? The enhanced or fixed-protection status of individuals would not be readily known to employers. Would an employee have to report it to an employer? How is that a better arrangement than the employee simply opting out?

Fundamentally, I am trying to understand how many circumstances the Government have identified where they think there might need to be an exceptional exclusion from auto-enrolment. I accept the Government’s good faith on that remaining the cornerstone of the policy, but how many other circumstances, given all that has gone on and all the representations and discussions to date, have been identified which warrant this power?

[Baroness Sherlock]

I have a question to add to that. I am grateful for the Minister’s explanation as to why the Government feel they need to have some flexibility to deal with circumstances as yet unknown, but I do not think that the Minister addressed what the problem is with the specific amendment I moved. After all, the amendment does not seek to prevent the Government from having those powers; it simply says that the Government may not make regulations in such a way as to exclude categories of business such as small and medium-sized businesses from auto-enrolment. What is the Government’s particular problem with this amendment?

[Lord Bates]

I will come to the noble Lord, Lord McKenzie, in the first instance. We have said that there are three categories, which he rightly referred to: tax protection, leavers and retirees. Those are the issues that we have identified. We are, of course, having a consultation. One of the challenges we invariably have is that we phrase a piece of legislation and make certain statements on the record in terms of the progress of that legislation through the House. We give certain assurances and then put something in to say, “This is to cover for unforeseen circumstances”, to which the legitimate question is: “What are those circumstances?”. The legitimate response to that has to be that they are unforeseen at present.

Responses to the consultation are currently being processed. They will be dealt with and published later this year and could reveal examples that we have not actually identified at present. This is a new policy and a new area and we therefore need to look at this. As I made my remarks about unforeseen circumstances, I gave examples of areas where it would be unacceptable to exclude people from the terms. We have rejected these exemptions and certainly would not want to introduce them. We have identified casual staff and teachers with second jobs, for instance, as being examples of people for whom we would not want this provision to apply. However, there will be further consultation on this issue and I ask noble Lords, if not quite to trust the Government, at least to accept that sufficient assurances have been put on the record. We recognise that there is broad consensus, but this needs to apply to everybody. However, this is a young policy in general terms and therefore flexibility is still required.

[Lord McKenzie of Luton]

I do not want to labour this for too long but it is important that it is clear. As regards the range of circumstances under consideration—in addition to the three of which we have already had notification—will we get any details, or at least the headlines of those circumstances, before we get to Report? On the three that have been identified, does the Minister accept that you could deal with those—particularly two of them—through specific legislation rather than giving a power to the Secretary of State? I come back to my point about the enhanced and fixed protection provisions for the lifetime allowance. Do the Government have it in mind to craft an exclusion for those circumstances? How does the Minister see that working?

[Lord Bates]

The short answer is that it is not easy. As the noble Lord will well know, given his experience as a distinguished Minister in the previous Government, it is not easy precisely to craft provision in those areas. We will seek to produce further examples by Report, following the responses received to the consultation. However, I can certainly assure the noble Lord that none of the responses has suggested that small employers should be excluded from the scheme. I know that is at the heart of the concern and, I hope, is at the heart of the reassurances which I have sought to give.

[Baroness Sherlock]

My Lords, I thank the Minister for that response, but confess that I am still a little uncertain about what the Government’s position is. I understood him to say that it is the Government’s policy that all categories of employer should be included and that the Government are still consulting and categories of person may emerge who they do not yet know about who they may wish to exclude in the future, and therefore they need to keep this open. So the question I am left with is: are the Government open to the possibility that somebody may make a compelling case for excluding a category of employer by size? If they are not, there is no reason for them not to accept this amendment. If they are, then, frankly, their assurances are not worth the time that they have been given today. I am disappointed that the Minister has failed to address the specific amendment. However, as we are in the Moses Room, and I do not have the option to do anything other than withdraw the amendment, I beg leave to withdraw it.

Amendment 62D withdrawn.

Clause 37 agreed.

Amendment 62E

Moved by

[Lord Bates]

62E: After Clause 37, insert the following new Clause—
“Alternative quality requirements for UK defined benefits schemes
(1) The Pensions Act 2008 is amended as follows.
(2) After section 23 insert—
“23A Alternative quality requirements for UK defined benefits schemes
(1) The Secretary of State may by regulations provide that a defined benefits scheme that has its main administration in the United Kingdom satisfies the quality requirement in relation to a jobholder if any one or more of the following is satisfied—
(a) the scheme is of a prescribed description and satisfies the quality requirement under section 20 in relation to that jobholder;(b) the cost of providing the benefits accruing for or in respect of the relevant members over a relevant period would require contributions to be made of a total amount equal to at least a prescribed percentage of the members’ total relevant earnings over that period; (c) in the case of each of at least 90% of the relevant members, the cost of providing the benefits accruing for or in respect of the member over a relevant period would require contributions to be made of a total amount equal to at least a prescribed percentage of the member’s total relevant earnings over that period.(2) For this purpose—
“contributions” means contributions to the scheme by, or on behalf or in respect of, a relevant member;
“relevant earnings” means earnings of a prescribed description;
“relevant members” means members of the scheme of a prescribed description;
“relevant period” means a period specified in or determined in accordance with the regulations.
(3) A percentage prescribed under subsection (1)(b) or (c) must be at least 8%.
(4) Regulations under subsection (1)(b) or (c) may make provision—
(a) about how to calculate whether the requirement is satisfied, including provision requiring the calculation to be made in accordance with prescribed methods or assumptions;(b) requiring benefits of a prescribed description to be disregarded in determining whether the requirement is satisfied;(c) that a scheme only satisfies the requirement if the scheme actuary certifies that it does; and for this purpose “scheme actuary” has the prescribed meaning.(5) Section 13(3) (meaning of “earnings”) applies for the purposes of this section as it applies for the purposes of that section.
(6) The Secretary of State must from time to time review any regulations in force under subsection (1).
(7) A review must be carried out—
(a) during 2017, and(b) after that, no more than three years after the completion of the previous review.”(3) In section 24 (quality requirement: UK hybrid schemes), in subsection (1)(b), for “23” substitute “23A”.
(4) In section 28 (certification that quality requirement or alternative requirement is satisfied)—
(a) after subsection (3A) insert—“(3B) This section also applies to a defined benefits scheme that has its main administration in the United Kingdom and is of a description prescribed under section 23A(1)(a).”;
(b) in subsection (4), after paragraph (d) insert—“(e) for a scheme within subsection (3B), means the quality requirement under section 23A(1)(a).”(5) In section 29 (transitional periods for money purchase and personal pension schemes), in subsections (1) and (3) omit “for money purchase and personal pension schemes”.
(6) Section 30 (transitional period for defined benefits and hybrid schemes) is amended as follows.
(7) In subsection (3), at the end of the substituted subsection (2) insert—
“A reference in this subsection to a scheme does not include a scheme to which section 30(11)(a) or (b) applies.”(8) In subsection (5), in the substituted subsection (2)—
(a) in paragraph (a), after “defined benefits scheme” insert “other than a scheme to which section 30(11)(a) applies”; (b) in paragraph (aa) (inserted by section 38 of this Act), after “a hybrid scheme” insert “other than a scheme to which section 30(11)(b) applies”; after paragraph (c) (inserted by section 38 of this Act), insert—“(d) becomes an active member, with effect from the automatic enrolment date, of an automatic enrolment scheme which is a defined benefits scheme to which section 30(11)(a) applies, or(e) becomes a defined benefits member , with effect from the automatic enrolment date, of an automatic enrolment scheme which is a hybrid scheme to which section 30(11)(b) applies.”(9) After subsection (10) (inserted by section 38 of this Act) insert—
“(11) In subsection (2) references to a scheme do not include—
(a) a defined benefits scheme that satisfies the quality requirement in relation to the jobholder by reason only of section 23A(1)(a), or(b) a hybrid scheme if—(i) the appropriate paragraph of section 24(1) for any provisions of the scheme is paragraph (b) (those provisions are referred to below as “the defined benefits section”),(ii) the defined benefits section satisfies section 23A(1)(a) as applied by section 24(1)(b), and(iii) the defined benefits section does not satisfy any of the other requirements mentioned in section 24(1)(b).””

[Lord Bates]

My Lords, this introduces alternative quality requirements for defined benefits schemes being used for automatic enrolment. It will simplify the task of determining whether a defined benefits scheme is good enough to provide both increased flexibility for employers and protection for members’ benefits.

By way of context, I should first explain that currently, if an employer wishes to use a defined benefits scheme for automatic enrolment, the scheme must either be contracted-out, and provide benefits broadly equivalent to the state second pension, or provide benefits broadly equivalent to, or better than, a hypothetical “test scheme”. There is a separate test for money-purchase schemes based on minimum contributions, set at 8% of qualifying earnings.

These amendments add to these arrangements in two ways. First, they make it possible for certain schemes that are defined benefit in legal terms, but actually have a defined contribution structure, to be assessed against the money-purchase scheme requirement.

The Government will define the schemes to which this could apply in regulations but an example might be one where contributions are set out in the scheme rules—as with a money-purchase scheme—but there is a guarantee over investment performance that means it does not meet the strict legal definition of a money-purchase scheme. Such a scheme might well meet the money-purchase quality requirements but it would be difficult to show how it satisfies the test scheme standard. That is because the benefits are not defined in a way that is comparable with the test scheme benefits.

These amendments also—

15:55

Sitting suspended for a Division in the House.

16:04

[Lord Bates]

My Lords, these amendments allow for two simpler alternative tests for a scheme to demonstrate that it is of sufficient quality. These were developed following last year’s consultation on technical changes to automatic enrolment, asking for views on whether there is a simpler way to determine whether a defined benefit scheme is good enough for automatic enrolment.

As well as calling for a general simplification in these rules, responses to the consultation highlighted that once the contracting-out period ends in April 2016, all those schemes that are currently contracted out, and so considered good enough, must satisfy the test scheme standard. This is considered unnecessarily complex and burdensome, particularly as, until the end of the contracting-out period, the schemes will have satisfied the higher standard of the reference scheme test. The alternative tests provide for a scheme to be used for automatic enrolment if the cost to the scheme of the future accrual of benefits for active members would require contributions that are at least equivalent to one of two prescribed percentages of relevant earnings. The first will apply at the aggregate level, looking at the scheme as a whole, and the second will apply at the individual level and must be satisfied for at least 90% of relevant members. Moreover, in order to provide assurances about the quality of schemes satisfying this alternative test, the amendment ensures that the prescribed amounts will not be lower than 8% of relevant earnings, in line with the minimum level for total contributions into a qualifying money-purchase scheme.

We are mindful of the need to strike the right balance between increasing simplicity and flexibility and ensuring adequate member benefits across all qualifying schemes. This balance will be one of the key issues to explore as we consult stakeholders on the detail of the alternative tests, and will also be reviewed in 2017 to ensure that the legislation is working as intended. I beg to move.

[Baroness Sherlock]

My Lords, I thank the Minister for his explanation of these amendments. I have two questions. He may have answered them but, although I listened hard, it is hard to be sure. First, will he confirm whether the Bill, with these amendments, will qualify the existing accrued rights protections in any way? Secondly, will he assure us that, given the variations in definitions of pensionable pay, the new defined benefit scheme qualifying tests will be of no lesser standard than the certification alternative requirements used at the moment for employers using money-purchase schemes but using an alternative definition?

[Lord Bates]

I certainly give the noble Baroness the assurance that she rightly seeks with her second question: there will be that minimum standard. In answer to her question as to whether the amendments will qualify in any way the existing accrued rights protections, nothing that we are doing in this clause or in the regulations that we plan to make under it will have any impact on accrued rights.

Amendment 62E agreed.

Clause 38: Automatic enrolment: transitional period for hybrid schemes

Amendment 62F

Moved by

[Lord Freud]

62F: Clause 38, page 19, line 38, leave out subsection (4) and insert—
“(4) In subsection (5), in the substituted subsection (2)—
(a) in paragraph (a), for “or a hybrid scheme, or” substitute—“(aa) becomes a defined benefits member, with effect from the closure date, of an automatic enrolment scheme which is a hybrid scheme,”;(b) after paragraph (b) insert—“(c) becomes a money purchase member, with effect from the automatic enrolment date, of an automatic enrolment scheme which is a hybrid scheme.””

Amendment 62F agreed.

Clause 38, as amended, agreed.

Clauses 39 to 40 agreed.

Clause 41: Work-based schemes: power to restrict charges or impose requirements

Amendment 62G

Moved by

[Lord Browne of Ladyton]

62G: Clause 41, page 21, line 37, at end insert—
“(2) In this section—
(a) “charges”; and(b) “transaction costs”,shall be defined in regulations by the Secretary of State.(3) Before making regulations under subsection (2), the Secretary of State must undertake a public consultation, which must include the views of—
(a) the Financial Conduct Authority; and(b) the Pensions Regulator.(4) With reference to subsection (2)(a), any public consultation must consider the different elements which comprise charges and not just the annual management charge.
(5) Such charges, together with any transaction costs incurred by the funds in which qualifying schemes are invested, shall be declared on an annual basis to the Pensions Regulator, which shall maintain a public register thereof.
(6) The Secretary of State shall by regulations set the standards by which pension schemes must declare charges and transaction costs for the purposes of the register and for declaration to their members and their members’ employers.
(7) The standards set out in regulations under subsection (6) shall be reviewed every three years.
(8) The Secretary of State shall have power to make regulations ordering other disclosure arrangements on administration charges.
(9) Regulations under this section may not be made unless a draft has been laid before and approved by resolution of both Houses of Parliament.”.

[Lord Browne of Ladyton (Lab)]

My Lords, I will also speak to Amendment 62H, which is again in my name and that of my noble friend Lady Sherlock. Amendment 62G would amend Clause 41, which is the statutory basis for the Secretary of State to make regulations to restrict charges or impose requirements on work-based pension schemes. The amendment would amend that clause to enable the Secretary of State, following a public consultation, to set the standard by which pension schemes must declare charges and transaction costs to their members and the members’ employers.

Amendment 62H would give effect to a DPRRC recommendation and prevent the Secretary of State from amending legislation “whenever made” and imposing requirements on certain work-based pension schemes by secondary legislation, thus bypassing full parliamentary scrutiny. The DPRRC made this recommendation because it was not persuaded adequately by the Government’s justification for granting themselves this power. We agree with the DPRRC. That is the simple basis for Amendment 62H.

While I am dealing with this group, the noble Lord, Lord Lawson, has two amendments in it. Amendment 63 would create a power to require disclosures at least annually of certain management and transaction charges incurred by administration and management of investment portfolios. Amendment 67 would create a power for regulations to be made requiring work-based pension schemes to disclose periodically certain costs and information relating to charges for management of investment portfolios. I shall return to these amendments later. However, by proposing them the noble Lord has made a powerful intervention into this debate and one I hope that his noble friends will treat with the respect it deserves.

Finally, there is government Amendment 70, which would give effect to a DPRRC recommendation that the first set of regulations under paragraph 1 of Schedule 17 should be subject to affirmative procedure. We support that.

In my noble friend Lady Sherlock’s excellent speech at Second Reading on 3 December 2013, in considering this part of the Bill she made the compelling point that the state owes a serious duty of care to the large numbers coming into auto-enrolment. It is crucial that every one of the 10 million auto-enrolled between 2012 and 2017 can be sure of getting value for money from that pension scheme. That necessity for value for money drives all the Labour amendments to Part 5 of the Bill, on private pensions.

In my noble friend’s Second Reading speech, she said:

“This is a huge industry in the UK. About £180 billion is invested in trust schemes and £275 billion of assets is invested for DC schemes. Some 180,000 people with assets worth £2.65 billion have money in pension pots with annual management charges of over 1%, and 400,000 people a year buy an annuity. The numbers are eye-watering but the principles are pretty simple: the pension industry has to deliver value for money. However, the OFT study published this year made it clear that there are some serious issues in this industry which need addressing”.—[Official Report, 3/12/13; col. 147.]

Her amendments are designed to address those issues. Amendment 62G argues for the full disclosure of all costs and charges, including the costs extracted by fund managers.

I am sure that all Members of your Lordships’ Committee agree that pension charges must be reasonable for people to have the necessary confidence to invest their hard-earned money in pension schemes. From the evidence available now, it is difficult to exaggerate how obscure the charging structure on pensions is. Pensions are pretty complicated to begin with because, in an occupational pension scheme, the employer—not the employee—is the person buying the pension. That pension schemes are then invested in asset classes by fund managers further complicates the challenge of understanding what is charged.

For reasons we have debated repeatedly in this Bill, the market cannot address this challenge. I regret that the Government have been slow to understand the depth of the problem in the pensions market. My right honourable friend Ed Miliband first raised this issue in July 2012. He identified pensions as the next big scandal, warned that savers must be protected from the scandal of hidden pension fees that can see people stripped of huge percentages of their savings, and called for a new regime imposing a clear charging structure on pension funds. He warned that fees need to be capped. He was accused by the Pensions Minister of being irresponsible. Regretfully, the Minister joined industry voices who were making accusations of scaremongering. The next day, the RSA published Seeing Through the British Pension System, which found that 21 out of 23 providers denied that there were any additional charges other than the annual management charge and administration costs. They failed to reveal what is charged for items such as audit, custodial costs and other costs such as taxes, lending fees and broking commissions.

16:15

The report, of course, corroborated the basis for Ed Miliband’s concerns. In his conference speech in September 2013, he announced that Labour would support an OFT inquiry into the pensions industry, put a cap on pension charges and force pension firms to stop hiding the full impact of the pension charges they intend to levy on the full value of a pension. The Pensions Institute at Cass Business School published a report entitled Caveat Venditor, which examined the default funds that it is estimated more than 90% of private sector employees will use under auto-enrolment, and raised serious concerns about the continued use of older funds with what it described as “toxic charges”.

January 2013 saw the announcement of an OFT inquiry, while the Pensions Minister maintained his scepticism about capping pension charges. March 2013 brought the publication of a Which? investigation, which revealed a complexity of some 18 or more charges, and revealed that in some cases first-year charges in enrolment schemes can be as high as £600 per member, followed by an ongoing £60 per year charge. In May 2013, the Government stirred and announced a ban on consultancy charges on auto-enrolment schemes, and they are to be congratulated on that. In October 2013, on the day of Report in the Commons—although it was trailed the previous day—the Government launched a consultation on setting a cap on the maximum charge that can be levied on savings and default funds, and moved the inclusion of Clause 41 in the Bill.

I am bound to say that there were those who were sceptical about whether Steve Webb and the Government had really woken up to the dysfunctionality of the pensions market or were merely acting politically in an attempt to take the impetus away from Ed Miliband, who had clearly identified pension charges as a crucial part of the current cost-of-living crisis. The reasons for that view were simply that the Pensions Minister continued repeatedly to oppose Labour’s amendments on the grounds that they would interfere with the functioning of the pensions market. He appeared oblivious to the findings of the OFT report. In particular, I remind the Committee that the report stated:

“The OFT has provisionally concluded that the legal test for making a Market Investigation Reference is met … in light of the fact that there are steps in place to address the competition concerns”,

and,

“that the Government is currently poised to take forward reforms that are likely to impact on competition on charges and quality in the market, we have provisionally concluded that now would not be an appropriate time for such a reference”.

One wonders what the OFT has been thinking this morning, following the report in the Financial Times on Friday, 16 January, which stated that:

“Government plans to cap charges on workplace pensions will be shelved for at least a year”,

and went on to say that,

“senior pensions industry figures have been briefed by officials this week”.

I pause to pose some questions to the Minister. Can he confirm that that report is correct? In particular, can he confirm that senior pensions industry figures have been thus briefed by officials last week? If it is true, can he confirm why the Government appear to have caved into the vested interests of fund managers and pension companies? Can he confirm that the proposed reforms are now unlikely to emerge until some time next year at the earliest and may not take place even during the current Parliament? In the light of the Government’s reported position—again, if true—a package of measures on value for money is all the more essential. This amendment simply proposes a mechanism whereby all costs and charges would be disclosed. I cannot see any basis on which the Government could be against full disclosure of every cost or charge that impacts on pensions, especially in the face of mounting evidence, which was added to on Friday by the publication by the Pensions Institute at the Cass Business School of a further report, entitled Assessing Value for Money in Defined Contribution Default Funds.

As of today’s date, the amendments in the name of the noble Lord, Lord Lawson, contain a comprehensive definition of a total expenses regime. They identify and incorporate the 18 charges identified by Which? and the OFT reports. My reservation, however, is that such a comprehensive present-day list may not be future-proofed. To put it simply, we have no reason to trust the sector not to invent other forms of charging to get round such a comprehensive list. Anyone who has read the OFT or the Cass Pensions Institute reports would be wise to hold such a position. This industry is dysfunctional and in large part does not act in savers’ interests. When it has been forced to make changes, it has done as little as possible. I fear that if we set in law a comprehensive list of charges as of today, the industry will not be long in dreaming up another set of charges to avoid accounting for them. Our amendment does not seek to specify the charges. We believe that this more flexible approach, leaving definition, enforcement and review to the regulator, is a better way. In our view the sector needs to be kept on its toes with active ongoing scrutiny. However, I have to say to the noble Lord that between now and Report, depending on the Minister’s response to the debate today, we will be open to discussions about what is the best way to proceed on this issue, where we have a significant common interest.

We need active management of the fees and charges to keep up with an industry that has shown itself in large part not to be trustworthy, which is why we prefer the framework approach. I beg to move.

[Lord Lawson of Blaby (Con)]

My Lords, I will speak to Amendments 63 and 67 in my name, which are linked. I am glad that some time after I tabled these amendments the Official Opposition tabled their amendments, which are very much on the same point. I hope that what I did may have been some kind of a stimulus to them, because we are to a considerable extent on the same point.

There is a difference between the approach that the noble Lord, Lord Browne, takes and that which I take. However, before I explain the difference, I wish to articulate what the problem is. This problem is not confined to the pension area but is well known to those who have studied any economics at all. It is known in the trade as the principal agent problem, where a principal cannot achieve his or her economic objectives without giving an agent responsibility for dealing with it. The incentive for the agent may be very different from the incentive with which the principal originally entrusted the agent to carry out what is needed. Here the principal is essentially the pension fund beneficiary, via the pension fund itself, and the agent is the investment manager. How is this of interest? I would hope that my noble friend the Minister, even if he does not accept either the Labour amendment or my amendments, will agree that there is a problem here that has to be addressed. I hope that he will say how the Government propose to address it.

There are two differences between the approach adopted in the amendment of the noble Lord, Lord Browne, and that adopted in mine. He seeks primarily to regulate various charges made for the carrying out of the investment. He mentioned disclosure, but the issue is mainly the cap on charges and other forms of regulatory charges. There are problems with that approach, which I shall not spell out because I do not want to detain the Committee.

What I have gone for is compulsory disclosure. In a competitive market, compulsory disclosure will go a very long way towards removing the mischief. If there is proper disclosure, there is no need for a cap or the regulation of charges in the first instance. We can then see how it works out. Events may subsequently suggest that there may be some need for regulation but initially the remedy must be to require disclosure. I have mentioned seven types of cost that I believe should be disclosed. The noble Lord, Lord Browne, said that the sector might very inventively find some other form of charge that does not fall within these headings. I think that is highly unlikely. If noble Lords look at the headings, it is difficult to see how any charge could not fall under one or other of them.

The important thing is the principle. The funds are inclined to say, “You don’t need to worry about costs; all that matters is the investment performance of the fund net of costs”. That is not acceptable. The costs are massive in this area. Of course, the investment performance may differ according to what period of time you look at. One fund may have a very good performance during one period and a bad performance during another. One has to look at the costs. Some costs are not revealed at all; some are. Even with the costs that are revealed, there is such a lack of consistency that it is difficult to compare them and to see whether or not they are remotely fair.

There are also other defects in the system. One is, I have to say, one of the many defects of the accountancy profession in this country. According to the accountancy profession, the Investment Management Association is responsible for writing the statement of recommended practice on cost disclosure for fund managers. This is ludicrous. You are asking the foxes to regulate the hen coop, as it were. If my noble friend the Minister looks at this, I am sure that he will find that it needs a remedy.

There is another relevant point. At the end of the day it is not merely the pension fund beneficiaries who are being cheated by these excessive costs—and many of these costs are grossly excessive—but there is also the problem of pension fund deficits. The more costs are ramped up unnecessarily by the pension funds, the worse that will make the problem of deficits. Of course, there is no incentive for investment managers to expose the costs that they are incurring in their recommendations to the funds if they are not obliged to do so. It will only make most of them look rather expensive.

There have been some studies in this area, both here and in the United States. Among the findings of these studies is that there is absolutely no correlation between investment management fees and performance. There is also no correlation between portfolio churn, which creates a lot of income for various people, and performance. There is some evidence, although it is not conclusive, that portfolios are deliberately churned in order to generate commissions. In the United States, a study has been done that shows that most foreign exchange currency pairs are not monitored but that, when they are, the foreign exchange costs paid by funds are halved. There are problems across the board, such as the fact that custodian banks pay lower rates on cash than money market funds or that financial intermediaries can collect excessive rewards.

The FRC has some of these problems in its sights, but it is totally inadequate. I believe that the FCA is pressing fund managers to manage their research procurement, another area of costs that I have identified, in a more defensible and transparent way. However, it is no accident that typically pension funds meet in Manchester and fund managers meet in Monte Carlo. I hope that my noble friends, who have done such an excellent job on this Bill, will take on board that this is a serious problem—the principal agent problem, as it affects pensions—and must be addressed one way or another.

16:30

[The Lord Bishop of Chester]

My Lords, I warmly support both these approaches. Although they are contrasting—the noble Lord, Lord Lawson, emphasises transparency while the other approach offers appropriate consumer protection through some degree of regulation—I do not think that they are incompatible with each other.

In approaching this matter I follow what the noble Lord, Lord Bates, said in response to an earlier amendment: the overall aim is to engage people so that they save for their retirement. As I said earlier in the passage of the Bill, the lack of provision in retirement for future generations is a time bomb. The Bill, which in general I warmly support, attempts to address that.

The sheer complexity of this area is a problem, as we have discovered in this Committee. If we find this issue complex, how does a member of the public find it when they are making a decision about whether to put additional contributions into their scheme? The money-purchase schemes that are now predominant will work only if people add contributions of their own and do not just rely on the employer contribution. I think that we need transparency in this area—not only the details set out by the noble Lord, Lord Lawson, but an overall figure of costs bringing together all the different costs discovered by the Which? report. Transparency over overall costs is necessary or people will feel disengaged.

One of the problems in our society is disengagement with politics in general, partly caused by the sheer amount of legislation turned out by Parliament. No one really understands what is going on and so people disengage from it. With all the jargon in the investment industry, not least in relation to pensions—terms such as “bid/offer”, “revenue splits” and so on—the average person in the street simply would not know what is being referred to. We need an overall figure that helps people to understand how much of the money that they are investing is actually invested, and investment returns, in a way that is transparent and where the consumer is generally protected. A few years ago, stakeholder pensions were an attempt to achieve this, but I am not sure what happened to them. As far as I can see, these amendments are entirely consonant with the broad push of Schedule 17. I conclude my remarks.

16:34

Sitting suspended for a Division in the House.

16:43

[The Lord Bishop of Chester]

I am not used to being interrupted in my perorations, but I was coming to an end. Schedule 17 says that the Government,

“may impose duties on the trustees or managers of a relevant scheme”.

These amendments spell out what those duties might be, in the interests of transparency, with a view to try to encourage people to invest in these products with some certainty as to how much of their money is going to be invested. I hope that the Government will look sympathetically on the issues that have been raised.

[Lord German (LD)]

My Lords, I am grateful to the noble Lords, Lord Browne and Lord Lawson, for raising these issues, because they allow us to examine the approaches which might be taken in the regulations which may follow and to ask the Government to describe which of these approaches, or what combination of these approaches, they might take. It is quite clear, in my view, that there are two separate approaches: one based on regulation and the other based on openness, transparency and disclosure. There is no reason why you cannot have some of one and some of the other; where the balance is drawn is a matter for debate and discussion. Ultimately, this matter goes to the heart of the success of our pensions industry for savers. The saver must have trust in a system which has a long tail behind it to understand that his or her money is being invested wisely and will return on that investment to provide a pension.

Auto-enrolment will, in the long run, be a success only if the schemes into which people are enrolled are well run and invest people’s savings responsibly. This is particularly important in DC schemes because, in the end in those schemes, the saver bears the investment risk of that complex decision process, which is more often than not made entirely without the saver’s knowledge or input. I was very interested in the chain described by the noble Lord, Lord Lawson, which stretched from Manchester to Monte Carlo. I dare say that if you started to plan these chains out around the world, you would probably find that these decisions were taken in all sorts of places and the connections very wide. That helps demonstrate the length of the chain in investment decisions, particularly if you start with the saver.

Of course, auto-enrolled savers do not choose their own pension provider. Poor pension companies might not become immediately evident to the saver. The best governance of the system would ensure robust oversight of savers’ interests and, most importantly, open communication with savers. It is not always obvious that those in the investment chain place the obligation to protect the best interests of savers at the heart of their decisions, particularly if they are in Monte Carlo. Fundamentally, that means improving transparency and promoting the disclosure of clear and relevant information to savers, as well as ways in which savers can easily find out information about their own savings.

I hope that the Government will tell us a little bit today about how they propose to deal with these very important issues and which approaches they intend to take that might guide the legislation that is to follow in regulations. Could my noble friend say something about how they intend to make the application of the UK stewardship code applicable to all pension schemes into which people are auto-enrolled?

[Baroness Donaghy (Lab)]

I just want to say a few words about the culture within the financial services companies and how difficult it is, given that culture, to have any compliance rules that staff will obey if their jobs depend on selling products. I think it was the whistleblower Dave Penny, who worked for Lloyds TSB, who gave a long list of tricks of the trade that he had tried to warn against. We all know the fines that that company had to pay for using those tricks in both PPI and bond selling. Mr Penny said:

“A supposedly strict compliance regime is meaningless if the management style is putting immense pressure on staff to sell, sell, sell. To keep their jobs, staff will always find ways around compliance”.

That has not gone away just because of the massive fines and compensation that these companies have paid. Only a couple of months ago, a woman in her 60s received a cheque from her son for £35,000. She planned to put that into a stock market investment. That same day that the money arrived in her current account, she was called by a Lloyds employee, who told her that the money could be at risk—an extraordinary claim to make about funds left in the care of a clearing bank. The Lloyds customer said, “The woman at the other end of the line said that my money might not be safe in my current account over the weekend and recommended that I transfer it to a savings account where it would be less easy to steal. I was naturally very worried about this and the bank did not really explain why my money would not be safe in my current account. The whole thing caused me a great deal of distress and eventually my husband intervened, and called the bank to say I did not want to transfer my money to a savings account and went ahead with my original investment plans”.

Of course, there is a financial incentive to place money in an investment account in a bank, no matter how low the interest rates compared with a current account, which is the sole reason why that employee made the effort to contact that person. I realise that that is not of direct relevance to these amendments, except to say that compliance will not work unless you deal with the issue of the culture in these companies. We will see all these tricks of the trade happening again, particularly as the Government are going on the pot-follows-member formula. This will give many more opportunities for companies to salami-slice their charges as each of these small pots is transferred.

[Lord Bates]

My Lords, this has been a useful debate with lots of high-quality and thoughtful interventions. I will try to follow that standard by putting some remarks on the noble Lord’s amendments on the record, and also on my noble friend Lord Freud’s Amendment 70.

As your Lordships will be aware, we launched our recent consultation on charging in October 2013, following on from the Office of Fair Trading’s September 2013 market study into defined contribution workplace pensions. That study raised concerns, which the Government share, about the weakness in the buyer side of the market—a point made powerfully by the noble Baroness, Lady Donaghy, in recounting those examples—the complexity of the product and a lack of transparency, which hinders consumers’ abilities to compare schemes. My noble friend Lord Lawson, a distinguished economist, mentioned the principal agent problem, which has at its heart, in an economic context, asymmetry of information. Transparency must therefore be part of the play which somehow levels the playing field between one side and the other.

Our consultation sought views on how the total cost of scheme membership, including transaction costs, might be captured, reported and managed. My noble friend Lord German rightly said that perhaps it was not an “either/or” solution, but more of an “and” solution. That was reflected in the consultation’s remit, which presented not just one idea but alternative measures to improve the transparency and disclosure charges, as referred to by my noble friend Lord Lawson with regard to his proposed new schedule: a cap on charges on default funds of defined contribution workplace pension schemes, a point made powerfully by the noble Lord, Lord Browne; a ban on active-member discounts and commission; and an extension of the ban on consultancy charges to all schemes used for automatic enrolment. Quite a wide-ranging consultation was launched.

By November last year we had 160 written responses from the evidence received. We will be publishing our response to this consultation shortly. In fact, Steve Webb, the Minister for Pensions, will be updating the other place on his response to the issue of a cap on charges on Thursday this week. I know how the machinery of government works; that does not quite deliver what we want before us in Grand Committee as we consider the amendment. But that information will be in the public domain, and I am sure will be a source of debate for others to draw upon on Report. I will offer some reassurances in the interim.

[Lord Browne of Ladyton]

Before the Minister moves off that point, I am conscious that if the FT report of Friday 17 January was based on information that should not have been in the public domain, the Minister will be constrained in what he can say. Those of us who have been in that position understand that. However, does the expected update from the Pensions Minister, Steve Webb, relate to the very consultation that has been reported in the FT as being postponed—I think it says shelved for at least a year—potentially indefinitely? Is the Minister prepared to address the specific piece of evidence which suggests that officials briefed members of the industry that that was the case—last week, it is said, which presumably was the week before last?

[Lord Bates]

The noble Lord was a very experienced Minister and a much more senior one than I will ever be.

[Noble Lords]

Oh!

[Lord Bates]

That was a plea for sympathy.

[Lord German]

No sympathy votes here.

[Lord Bates]

The noble Lord will therefore know that our position is that we do not comment on speculation in the press, even when it is in the Financial Times, and that the Minister’s announcement, which will be given to the House later this week, will be delivered first to the other place, and therefore we will have to respond to it.

[Lord Lawson of Blaby]

I am glad to hear that Steve Webb will make a statement in another place on this range of issues. Will my noble friend go further and say that the statement will accept the problem of the principal agent position as it affects pension funds, as was outlined in the contributions made by the noble Lord, Lord Browne, and myself, in this debate, and that it will put forward a remedy?

[Lord Bates]

After making deferential remarks to the noble Lord, Lord Browne, I have to make even more deferential ones to the noble Lord, Lord Lawson. The direct response is that I am not privy to the content of that statement, confirmation of which has been received only recently. However, addressing the principal agent problem which he so eloquently outlined for us was at the heart of the consultation process which was launched back in October, and was at the heart of what the OFT was driving at in its review. Therefore, in responding to that consultation, I reassure my noble friend that he will find—I hope—that this offers the reassurances he seeks. If not, he is at liberty to bring this matter back on Report, should he choose not to press his amendment at this stage.

On the definition of charges and transaction costs, Schedule 17 gives the Secretary of State the power to restrict administration charges by regulation. In the consultation we proposed specifying a broad definition of charges to encompass any expense that does not result in the provision of pension benefits for a member. We also asked for views on whether transaction costs should be included within a charge cap. Any charges that are restricted—even those under a possible cap—will have to be defined in regulations. These regulations will, of course, be subject to public consultation and we have accepted the DPRRC’s recommendation that these regulations be subject to the affirmative procedure on first use. Government Amendment 70 will achieve this.

With regard to the noble Baroness’s Amendment 62H on the Henry VIII power in Schedule 17, we have noted the comments and recommendations put forward by the DPRRC. However, we believe that it is vital that the Government’s ability to regulate effectively in this area is not inadvertently undermined by future legislation that could not have been foreseen. We are back to an earlier point.

17:00

I turn to the issue of disclosure of pension scheme charges and other costs, the subject of the amendment and my noble friend Lord Lawson’s amendments. As I have said, the Government share the concerns of the OFT that a lack of transparency can hinder consumers’ ability to compare schemes. As the right reverend Prelate the Bishop of Chester said, while there is also concern about the correct operation and transparency of scheme, there is a greater concern for us in our cross-party consensus: lack of knowledge or understanding may deter people from making the very savings in their pension schemes that they so desperately need to secure a future that they and their families desire.

That is why we have consulted on a proposal to regulate, under existing powers in Section 113 of the Pension Schemes Act 1993, for greater transparency of pension scheme charges. These powers could allow us to mandate disclosure to both members and employers, and we asked for views on these approaches. My noble friend Lord Lawson’s amendment sets out a significant number of specific charges to be disclosed. I thank my noble friend for his amendment and contribution, and will ensure that they are considered as part of the response to the consultation. His amendment illustrates the complexity of charging structures and definitions—a point illustrated also by the number of, and level of detail in, the responses to our consultation. Given that these charging structures may change over time, we are not minded to constrain the Government’s freedom of action to respond to these changes by putting such specific details in primary legislation, hence the need for Henry VIII powers. I should add that we have been clear in our consultation that any requirement to disclose information must result in that disclosure being meaningful, relevant and accessible—not buried on page 12 in the fine print of a document or policy, as might have been the case in the past—to those who are making decisions about pension saving. That includes employers and scheme trustees as well as individual savers. I realise that I have been unable to provide specifics on how the powers in Schedule 17 and Section 113 of the Pension Schemes Act 1993 will be used in respect of restricting charges or requiring disclosure. We are still considering responses to the consultation and will make an announcement about that this week.

My noble friend Lord German asked a specific question to which I will try to respond. He asked whether the Government will make a stewardship code mandatory. The code sets out the best practice for institutional investors. The FCA already requires UK asset managers to report on whether they apply the code. We can write to the noble Lord with an update from the FCA on whether it has plans to make this mandatory. The consultation seeks views only on pension scheme governance at this stage. I hope that that will help to reassure.

However, I hope that I have been able to offer some further reassurance that the powers in the Bill and previous Acts are sufficient to allow this Government to take decisive action on the breadth of charging structures in operation, and that the public, stakeholders and, of course, noble Lords will have ample opportunity to scrutinise the details in secondary legislation. With those reassurances, I ask the noble Lord and my noble friend to withdraw or not move their amendments.

[Lord Browne of Ladyton]

My Lords, I thank the Minister for his reply to this short debate and for the answers he has given to questions. I am grateful—and noble Lords will be grateful—for his acceptance that transparency and disclosure are a necessary part of the reform that we are engaged in; for his confirmation that he and the Government share the concerns that have been expressed in this debate; and, in particular, for his assurances, in so far as they are assurances, that the response to the consultation can be expected shortly but that we will receive from the Pensions Minister Steve Webb on Thursday in the House of Commons an update on the Government’s response to the consultation.

I feel that we now have to wait until Thursday to see whether this response is adequate and, in terms of what it allows us to expect or anticipate, whether it puts a timeous set of potential actions in place that will meet the challenges of the continued rollout of auto-enrolment and the increasing numbers of people who are being engaged by default in individual pension schemes. I will come back to that in my peroration.

I thank all noble Lords who have contributed to this debate. First, I thank the noble Lord, Lord Lawson, for his engagement. I can confirm that there was some stimulus from the fact that he tabled Amendments 63 and 67. Of course, the fact that he did so first in your Lordships’ House does not detract from the fact that an almost identical amendment was tabled in the name of the Labour Party in the House of Commons by my honourable friend Gregg McClymont before Committee there. I make this point not to in any sense undermine our common interpretation of this problem or our substantially common approach, but to point out that but for the slight difference of wording between the amendment my honourable friend tabled in the Commons and the one we tabled in your Lordships’ House, our amendment would probably have been tabled about the same time as the noble Lord’s amendment. The question of timing does not detract from the fact that we have been engaged with this issue for some significant time.

I am very grateful to the right reverend Prelate the Bishop of Chester for two things: first, for his identifying that the approach of the Labour Front Bench and that of the noble Lord, Lord Lawson, are much more compatible than others who have commented on this appear to believe. These amendments proceed by way of regulation but the regulation is to define what subsequently should be disclosed. I point out to those who have contributed to this debate that we, too, are about disclosure with this amendment. We have an ambition to cap the charges on the administration of pension funds but this is not the vehicle for that policy. This is about disclosure. It is about defining what ought to be disclosed in a very precise fashion through a process of consultation and regulation, and then about disclosure for all the same reasons that the noble Lords, Lord Lawson and Lord German, the right reverend Prelate, my noble friend Lady Donaghy and indeed the Minister all seem to consistently agree with.

The second reason I am grateful to the right reverend Prelate the Bishop of Chester is that he not only put his finger on the problem for the member, or potential member, of a pension scheme but explained more fully than I did—perhaps I should have done—why value for money is so important to our reforms. It is about confidence. If there is no confidence in the market, as the right reverend Prelate pointed out—and drew the Minister to agree—this whole package of reforms will fail. This will be half a reform, if there is no confidence in the private pensions industry. Our whole thrust is to address the issues that have been successively identified by reports and analysis of the issue in a form that is designed to reform the law and to provide the confidence that will be necessary for this whole reform—which we support—to go forward.

My noble friend Lady Donaghy reminded us of the importance of trying to change the culture more broadly in the financial services industry if we are to instil the confidence in the people of this country in saving and, I suppose, the mature handling of their own resources. That is a challenge we face that goes beyond just pensions, but it is crucial to them and she is wise to remind us of that.

I thank the noble Lord, Lord German, for engaging with the debate and for encouraging the Minister to respond to some of the important questions that needed to be answered. I remind him that although regulation and a more straightforward form of disclosure are the difference between the way our Front Bench here and the noble Lord, Lord Lawson, have approached this issue, we are concerned about disclosure as well.

It comes down to this: the Minister, as his honourable friend the Pensions Minister, Steve Webb, did in the other place, rests his case on the statutory structure which is being created and a process of consultation with a promise of significant regulation following thereafter, which will be engaging and confidence building. His case depends on how his honourable friend the Pensions Minister responds to the consultation thus far, which is so important to that process. We will all listen very carefully to that statement.

I fear that there may be more in the Financial Times report than the Minister is in a position to reveal to your Lordships’ Committee today. If that proves to be correct, he will appreciate that it is almost certain that we will return to this issue on Report. Between now and then, I hope that the noble Lord, Lord Lawson, will take up my offer to have discussions about where we agree and what is the best way for us to proceed on this issue. We share an analysis and a common concern, or remedy, about how to proceed.

However, in the mean time, I thank the Minister for his response and engagement with the debate and beg leave to withdraw my amendment.

Amendment 62G withdrawn.

[Lord Lawson of Blaby]

At what point should I contribute to the discussion on this?

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

It will be possible for the noble Lord to speak briefly on his own amendment, Amendment 63. He has already spoken but he can certainly respond then.

Clause 41 agreed.

Clause 17: Work-based schemes: power to restrict charges or impose requirements

Amendment 62GA

Moved by

[Baroness Drake]

62GA: Schedule 17, page 94, line 16, at end insert—
“(c) may provide for requirements for the identification, avoidance and management of conflicts of duty and interest”

17:15

[Baroness Drake (Lab)]

My Lords, Amendment 62GA is designed to address shortcomings in the governance of pension schemes, particularly contract-based schemes. It would give the Secretary of State the power to set regulations that

“provide for requirements for the identification, avoidance and management of conflicts of duty and interest”.

They would require, in the event of a conflict of interest, for priority to be given to the interests of the saver and to ensure that the duties to the saver are met despite the conflict.

In his review, John Kay criticised FCA rules as falling,

“materially below the standards necessary to establish”,

trust, confidence and respect. He recommended a shift towards fiduciary standards. In an auto-enrolled world, that comment has even more resonance because, increasingly, private sector workers’ pensions will be contract based, where, as the noble Lord, Lord Turner, mentioned in debate last Wednesday, there is a,

“fundamental inefficiency of the market ... 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”.—[Official Report, 15/1/14; col. GC 161.]

My amendment seeks to capture that governance challenge. To achieve an increase in pension savings, workers are auto-enrolled into workplace pensions. There can be no caveat emptor, as the saver does not buy. The system is designed to restrict the saver to one choice—either stay in or opt out and lose the employer contribution. Current regulation of contract-based pensions is at odds with the assumptions underlying auto-enrolment. Contract-based regulation is built on informed consent and consumer choice. Auto-enrolment is designed and built on the principle of inertia, on a population of savers who do not engage with investment choice. A plethora of reports has revealed the conflicts of interest in the industry. The OFT report confirms a dysfunctional pensions market with a weak demand side and concludes that the market could not be expected to self-remedy and that there is a need for intervention.

The introduction of auto-enrolment has been a success and the Government should be pleased. Opt-out rates have been low. The Government must now secure a level of quality and governance that delivers optimal results for savers in terms of building trust so that workers persist with their savings, thereby setting the ground for increasing contributions beyond the current statutory minimum and improving savers’ chances of achieving a reasonable income in retirement. Measures to encourage savers to engage with their pension savings are important but of themselves are not sufficient. The majority of savers will not actively engage. It is that very inertia that can be used by some providers to create or sustain profitable inefficiencies. The legal framework must protect those who do not engage.

The challenge of inertia means that there is a need for efficient defaults over the life cycle of the pension saver. For example, there is a need to get people saving; to determine a minimum they should save; to determine their investment choice at different intervals in the life cycle on, for example, joining a scheme or following a quality review as they get nearer to retirement age; and, by default, to transfer and consolidate their pension pots. Over time, I suspect that we will be considering default arrangements on decumulation when a person retires. The need for defaults raises the bar on governance because someone is using their discretion on behalf of the saver.

Contract pension provision has systemic weaknesses of governance and a particular feature that constrains efficient default arrangements. For example, looking forward, an employer conducting a triennial review that decides that the current scheme is poor value will be unable to switch workers in a contract-based scheme unless they individually consent. However, the very nature of auto-enrolment means that this active consent is unlikely to be granted by many savers. On legacy schemes and pots, I am sure that any OFT-driven audit will reveal poorly performing funds and high charges, but the solutions will not be effective if they require individuals’ consent.

We have a misalignment between what contract-based provision can do and what it is necessary to deliver in the interests of the saver. How does one respond to that challenge? Recent press comments are peppered with references to making it easier to move contract-based scheme members from old to new schemes. Standard Life’s head of workplace pensions, speaking at the NAPF conference, said that contract law acted as a barrier to moving people from poor-quality schemes to good-quality schemes, and added:

“We need to learn the stuff that works in the trust-based world”.

A recent Pensions Institute report found potential for massive improvement in outcomes where poor-quality legacy schemes transferred en masse into better-quality modern schemes with lower charges. The Pensions Institute called on the Government to facilitate changes to contract law to allow such transfers to be made without the individual consent of scheme members where it is clearly in their best interests. However, there is the rub. Who decides where it is clearly in their best interests? How is the primacy of the saver’s interest protected? Governance requirements must be fit for purpose under auto-enrolment and remove a constraint in contract provision, but in a way that ensures that the interests of the saver trump the interests of others when there is a conflict. Putting the legal responsibility for the best interests of the saver on the employer will be problematic, particularly for the long tail of SMEs and micros.

The Government’s use of statutory overrides has a role to play, particularly in placing new quality and governance requirements into future, existing and legacy pension contracts. I ask the Minister to confirm whether this Bill would give the Secretary of State the power to change retrospectively the terms of existing pension contracts to embrace any new quality or governance requirements.

However, the solution must rest in major part in raising the governance in the pensions industry. Like trustees, it should carry a fiduciary responsibility in the management and provision of its pension products and investments. Conflicts of interest must be resolved in the interests of the saver. An efficient private pension system that requires the default transfer of savers’ pots to new schemes and funds simply cannot happen without that.

There is an imbalance in the duties of contract-based pension providers, compared to those placed on trustees, which challenges the success of auto-enrolment. The OFT stressed the need for stronger measures to improve governance but I fear that the independent governance committees that it has agreed with the industry—here there are shades of what the noble Lord, Lord Lawson, referred to as the fox in the hen coop—will fail to achieve the requirement of aligning scheme governance with the interests of savers.

The proposed independent governance committees have many weaknesses. At the very least, such bodies need both a duty to act in members’ best interests and the power to make decisions. The current OFT proposal fails on both points. As the Law Commission commented,

“there are many difficult questions about how these committees will work”.

They,

“will not have the power to change investment strategies or investment managers ... Furthermore, it is not clear whether ... the committees will be under explicit legal duties to act in the interests of”,

the savers. Introducing independent governance committees accountable to the boards of pension providers, without addressing any of the conflicts faced by these providers, or clarifying that decisions must prioritise the interests of policyholders over those of the shareholders, does little to solve the governance deficit.

As a comparator, the governance requirements for the Australian private pension system have been toughened up recently. It is a sad reflection on my character that I spent a significant number of days over the Christmas holidays ploughing through the regulatory requirements under the Australian system—I promised in my new year’s resolutions to get a more exciting life in future. The Australian Prudential Regulatory Authority enforces a range of prudential standards on pension providers, including an unequivocal requirement that conflicts of interest must be resolved in the beneficiaries’ interests and a specific duty to deliver value for money.

The advent of auto-enrolment raises the bar on governance. I welcome the Government’s decision to impose quality and governance requirements on pension schemes, but I think that it is necessary to make it explicit that those requirements should provide for the identification, avoidance and management of conflicts of duty and interest. Conflicts of interest go to the heart of the problems in the private pension system. The regulations, when addressing governance requirements, must address the issue of conflicts of interest. Amendment 62GA, without being prescriptive, seeks to do that. I beg to move.

[Lord Browne of Ladyton]

My Lords, I speak to Amendments 67ZB and 67ZC in my name and that of my noble friend Lady Sherlock. It is always a pleasure to follow my noble friend Lady Drake on issues such as this. She has once again characteristically set out an informed and persuasive argument in her contribution to the debate. To a degree, I accept that it could be said to undermine Amendment 67ZC in that it approaches the same issue but in a distinctly different fashion, accepting the same principle. From my perspective, however, I am not that concerned how the Minister responds to the nature of the challenge that my noble friend set out. If he chooses to accept her amendment—I venture to suggest to him that he would invariably be wise to do so in such matters—he will find no great cavil from these Benches that our amendment fell by the way as a consequence.

Amendment 67ZB is designed to address the issue of scale by way of a new clause. It would promote good value in scheme sizes and would require trustees to consider whether the scheme had sufficient scale to deliver good value. I note that, in the Government’s consultation on quality standards in workplace defined-contribution schemes, the Government reveal that they are “interested” in the idea that trustees should have a duty, and underline their interest in the Australian approach to imposing duties on trustees.

I am glad that the Government are beginning to catch up with the Labour Party’s policy review on these issues, but I also note that they have not yet progressed sufficiently far in its investigations to recognise that the Australian Government, the policies of which have already been prayed in aid by my noble friend, also deploy the regulator in this respect. It is not clear why the Government think that trustees of very small UK schemes, which we know from the TPR surveys self-identify as not incapable of understanding investment processes, will be able to make a judgment as to whether they have sufficient scale. If these trustees fail to act, what is supposed to happen?

In Australia, those intending to supply a pension scheme have to apply to the regulator for a licence, and one of the licence conditions requires a reasoned attestation as to how the trustees of the scheme will meet best practice in terms of scale at the investment and administration layers. This process has a ratcheting effect, as the attestation must be repeated on an annual basis and, as best practice improves, this forces mergers. Failure to attest would mean a breach of the regulatory licence, and commentators believe that there will only be a sixth of the current number of schemes within 20 years. For trustees to move to scale we would need a ubiquitous requirement for trustees, a duty on them to assist scale and a mechanism to require action where they fail to act or mis-assess. That is what we seek to provide the beginnings of with this amendment.

Amendment 67ZC would provide for regulations to require any pension scheme to appoint a board of trustees which will have fiduciary duties towards the members of the pension scheme. Our view is that a minimum requirement for auto-enrolment schemes is that they must be governed in a way which legally requires the scheme to prioritise the interests of members over all other interests.

The Minister may say that they have consulted on governance for automatic transfer schemes; again, it is a good thing if he is catching up with our policy review. However, his quality standards are intended for automatic transfer schemes only. Under our approach, automatic transfer will be limited to aggregators, as the Minister is well aware. Our requirement for trustees applies to all qualifying schemes, not just to automatic transfer schemes, and, in addition, our definition of qualifying schemes includes closed-book schemes, which his does not.

As a further point, these conditions will apply to schemes that wish to operate as automatic transfer schemes, but an automatic transfer system is years away. The requirement for trustees is immediate, however, as my noble friend has pointed out. Why should we adopt a lesser principle than that adopted by the Australians? Their Cooper review found:

“Superannuation must always be for the benefit of members. The superannuation system does not exist to support intermediaries. Trustees must be relentless in seeking benefits for members”.

Thanks to my noble friend Lady Drake, we now know that that has also been translated into regulation in Australia.

17:30

[Lord Bates]

My Lords, ensuring that schemes deliver good value for, and are run in the best interests of, their members is a primary concern for this Government, so we welcome this discussion, which was set out with great insight and clarity by the noble Baroness, Lady Drake. We agree that the issues highlighted by these amendments—scale, fiduciary duties and conflicts of interest—are important ones to consider. However, we do not agree that simply encouraging the creation of large, trust-based schemes is the right approach to ensuring good value for members.

We are interested in testing how far scale can help schemes to deliver better quality and lower charges for members. Last year we published a call for evidence on defined contribution quality standards, in which we sought evidence about how a scheme’s size can influence outcomes for members. As noble Lords are no doubt aware, the issue of scale is not straightforward, and most responses to our call for evidence saw benefits to members in both large and small schemes. We are currently considering the responses to the call for evidence alongside the recommendations of the Office of Fair Trading, and will respond in due course.

We would have concerns about compelling schemes to merge in the way that this amendment suggests. Determining what is in all members’ best interests would be extremely challenging for the Pensions Regulator, which simply would not have the capacity or information needed to scrutinise every small scheme and consider whether it should close or merge. There could also be European Court of Human Rights issues in relation to property rights because to force a scheme merger could lead to some members losing out.

Turning to the idea that all schemes should be trust-based, in our call for evidence we set out the importance of ensuring that schemes are governed in members’ interests; of course, we recognise the vital role that trustees play in achieving this. However, we disagree that simply imposing a trust-based structure on all schemes is the way forward. Neither the presence of trustees nor fiduciary duties are a panacea for poor governance. This is shown in the findings of the OFT, which identified governance weaknesses in trust-based schemes of different sizes. The Law Commission’s current consultation on fiduciary duties notes that legal duties are,

“insufficient to ensure good outcomes for members”.

In addition, the amendment suggests that in scheme governance, trustees’ decisions should take precedence over an employer’s decisions in any circumstances. This does not provide any opportunity to balance interests, and would apply even if the trustees’ decisions are unreasonable. Such a broad requirement could lead to significant financial difficulties for employers, which would not be in anyone’s interests.

The amendment moved by the noble Baroness, Lady Drake, highlights the importance of identifying and avoiding conflicts of interest. The Government agree that this is an important area; in our call for evidence we suggested that all schemes should have a governance body that must be able to act freely in members’ interests. The noble Baroness referred to the Australian scheme, as did the noble Lord, Lord Browne. She was very dutiful in reading it over Christmas. I suggest that she would find the Australian pension code less onerous to read if she was reading it in Australia, but she was probably shivering here with the rest of us.

The Australian regulator’s new power is interesting but it is not translatable to the UK pension system. Following the Cooper review, which has been referred to, the Australian pensions regulator—APRA—has been given new powers to drive schemes to merge.

We are interested in this approach and will monitor how it is used and how effective it is, but it should be remembered that the Australian pensions landscape is significantly different from our own. It is our understanding that the APRA does not intend to use the power to target all small schemes but to focus, for example, on cases where there is a link between underperformance and an absence of scale.

The noble Lord, Lord Browne, argued that you need to drive up scale in order to increase consolidation, which has an effect on charges and therefore brings a benefit to members. Scale is not necessarily a determinant of value: bigger schemes are not always better. Consolidation is already happening. For example, in 2012 around half the active members of private occupational defined contribution schemes were in schemes with 10,000 or more members; in 2000 this figure was one in eight. The number of active members in small and medium-sized private occupational defined contribution schemes decreased from 0.3 million to 0.1 million between 2000 and 2012—a reflection of the greater regulatory requirements and burdens that are placed upon scheme managers, as well as the challenge of finding trustees who will undertake the work.

Finally, turning to the comment made by the noble Baroness, Lady Drake, about independent governance committees and whether they would have a fiduciary duty to members, the OFT has recommended a model of independent governance committees to address a number of problems that stem from weaknesses in the buyer side of the market. As part of the consultation on fiduciary duties, the Law Commission has asked about the duties that should apply to members of independent governance committees. Its tentative view is that members should be subject to legal duties to act in the interests of members. We are working with regulators and stakeholders on requirements for independent governance committees, and will respond in due course.

This has been a helpful discussion but I hope that my responses will enable the noble Baroness, Lady Drake, to consider withdrawing her amendment.

[Lord Browne of Ladyton]

Perhaps I might engage with the Minister on the issue of whether or not larger pension schemes provide better returns to their members. I do not intend to delay the Committee long on this issue but I have before me a page and a half of significant research that challenges the assertion made by the Minister. I will say only this: recent NAPF research shows that a person in a larger scheme will get a 28% larger pension pot than a person in a smaller scheme. Indeed, research from Australia supports the assertion that fund size has a positive impact on the performance of not-for-profit superannuation funds there. I shall arrange for the Minister to have access to this research but I could not let that assertion remain unchallenged.

[Baroness Drake]

I thank my noble friend Lord Browne for his supporting contributions in this debate. I thank the Minister for his response but he has not actually answered my question—I did listen; perhaps I missed it but I do not think so—which was: can the Minister confirm that this Bill will give the Secretary of State the power to retrospectively change the terms of existing pension contracts to embrace any new quality or governance requirement? It is a pretty key point because it goes to the heart of what the Government can or cannot do unless they take those powers to themselves. A lot of people are quite interested in whether the Government are taking those powers so that when they decide what the quality and governance requirements are, they have the power to retrospectively apply them to existing pension contracts.

[Lord Bates]

Perhaps I can seek some clarification from the noble Baroness on the nature of her question; I apologise for not responding to it directly. The whole point of what we are introducing is that we are seeking to tackle the issue of the quality of schemes. Therefore it would stand to reason that if one is seeking to improve the quality of schemes, it would be wrong to disbar those who were in previous schemes from getting the benefits of those improved quality standards. That provision is therefore there: it will be necessary to enhance the quality of schemes. I might be missing something; I am sorry if I am.

[Baroness Drake]

The Minister has got the sentiment of my point. I was looking for firm clarification that the Bill gives the Secretary of State the power to put in place those quality and governance standards, once they are decided, to existing pension contracts, because they are contracts.

[Lord Bates]

The noble Baroness has a high degree of expertise in this area, which is respected on all sides of the Committee. I wonder if I could write to her on the specific point on which she is pressing me, with a response on the record. If she wishes to press it further, she can of course come back to the issue on Report.

[Baroness Drake]

I thank the noble Lord for his offer to write to me on the matter. Maybe having it in writing will be better, because the efficiency or ability of any requirements under the Bill will be heavily influenced by the extent to which they can retrospectively apply to existing pension contacts. However, if the noble Lord is going to write to me on that point, I will also deal with other matters.

We need to get a sense of perspective on this. Auto-enrolment potentially affects 20 million people in this country. The whole of the private sector workforce, when it is engaged in employment above a certain income level, is a huge community of people; it is a great statement of trust between the working population and the Government. People are saying that they accept the argument that the people must take responsibility for providing for our income in old age, but they have the right of a reciprocal entitlement to know that the Government are doing what is necessary to ensure that those who have discretion over their savings and are managing them do so in a way which is in their interests and to high standards of governance.

I am afraid that I do not buy “balance of interests” at all on this issue. If you come into the market to provide a pension product under auto-enrolment, you cannot sell or manage a product that does not meet the needs of the savers. You would not say, “Well, I will leave the brakes off a car in the interests of not making the employees redundant”. You have to sell a product that meets the interests of the members and is designed and managed with the interests of the saver at heart.

The independent governance bodies, or committees, are very weak as they are proposed. There are lots of people commentating to that effect. As proposed, they have fewer new powers—or no powers—for resources, for information, or for appointment of members to the board. It is in the gift of the companies themselves. As currently advised, they have no powers or capacity to address conflicts of interest. I know that this issue of governance is a work in progress. The Government are considering the matter and are due to report further. The OFT says that it has more work to do on its recommendations. The Law Commission is looking into this.

What cannot be dodged at all, in my view, is that any governance structure, requirements or arrangements for a private pension system that does not put the identification and resolution of conflicts of interests in the interests of the saver at its heart will be flawed. Successive Governments will keep picking up the consequences of that. There must be some—cross-party or whatever—biting on the principle that if you give the market a huge demand side that it could never have created itself under a voluntary system, that carries with it the requirement for a high standard of governance. The Government must say that those who enter the market under auto-enrolment to provide pension products must operate on the basis that any conflicts of interest are resolved in favour of the beneficiary or saver.

17:45

I know that there is a general enabling clause in Schedule 17, but this issue is so powerful and central that the regulations should state that they need to provide for requirements in relation to the identification, avoidance and management of conflicts of duty and interest. I have not sought to go into the detail of how that is done in my amendment, only to say that it must be done. Having made my point, I beg leave to withdraw my amendment.

Amendment 62GA withdrawn.

Amendment 62H not moved.

Schedule 17 agreed.

[The Deputy Chairman of Committees]

We come to Amendment 63. Lord Lawson of Blaby?

Amendment 63

Moved by

[Lord Lawson of Blaby]

63: After Schedule 17, insert the following new Schedule—
ScheduleWork-based schemes: requirements for disclosure of charges and other informationThe Secretary of State shall by regulations make provision to require disclosure at least annually of the following management and transaction charges incurred by the administration and management of each investment portfolio managed by or on behalf of a work-based scheme—
(a) fees and performance fees paid to investment managers,(b) commissions and bid-offer spreads paid to brokers,(c) bid-offer spreads paid to foreign exchange counterparties,(d) fees, revenue splits and bid-offer spreads paid to custodian banks,(e) fees paid to in-house or third party scheme administrators,(f) fees paid to professional advisors (e.g. actuaries, legal advisers, auditors, investment consultants etc.),(g) initial charges, bid-offer spreads, exit charges, other fees and rebates charged on investments in pooled funds.”

[Lord Lawson of Blaby]

Thank you, Lord Chairman. You advised me that I need to move this amendment, which I am happy to do even though we have already had the debate on it. I will just say one or two things briefly. First, I thought the debate was very useful and I am particularly grateful to my noble friend the Minister for indicating that the Government accept that there is an issue here that needs to be addressed and that the Minister in the Commons, Steve Webb, will make an announcement about it later this week. Presumably, he will set out what he considers to be the remedy for the problem identified. It would certainly be churlish to persist with my amendment in the light of that. I will wait to see what Steve Webb and the Government have to say and then decide whether that is adequate or that it is necessary to pursue the matter further on Report.

I have two other quick points. First, the Minister said that the degree of specification for costs to be disclosed, as I have in my amendment, was not suitable for primary legislation. He is probably right but I interpret the meaning of that to be that he thinks it is suitable for secondary legislation. This is certainly a matter where legislation is needed and I am perfectly happy to accept his advice that there is a need for secondary legislation.

The other point is that the noble Lord, Lord Browne, suggested that between Mr Webb’s announcement and Report, he and I might discuss the matter to see what we feel about this. I am very happy to do that. This is not a party-political point, but if we think that the Government’s remedy is inadequate—I hope that will not be the case—it may be that he and I can agree an amendment to jointly move on Report in the best bipartisan traditions of this House.

Having said that, unless any Member of the Committee objects, I beg leave to—

[The Deputy Chairman of Committees]

The noble Lord should move the amendment first.

[Lord Lawson of Blaby]

Sorry, I thought I had moved it. I beg to move.

[The Deputy Chairman of Committees]

Does nobody wish to speak?

[Lord Lawson of Blaby]

The silence is eloquent and, in the light of it, I beg leave to withdraw the amendment.

[The Deputy Chairman of Committees]

Perfect.

Amendment 63 withdrawn.

Clauses 42 and 43 agreed.

Schedule 18 agreed.

Clause 44 agreed.

Clause 45: Pensions Regulator’s objectives

Amendment 64

Moved by

[Lord Whitty]

64: Clause 45, page 23, line 37, leave out “sustainable growth” and insert “sustainability”

[Lord Whitty (Lab)]

My Lords, in a Bill of extreme complexity, with a large number of amendments that are equally complex, this must be the simplest amendment on the Marshalled List before the Committee. Therefore, I assume it is one which the Government could easily accept or, alternatively, make a slightly different proposition in respect of. Most of my interventions in Committee have been on behalf of the interests of beneficiaries of pension schemes, which I think is right, but this amendment is on behalf of a subset of employers; namely charities, although it would extend more broadly to the non-commercial private sector.

Charities are providers of occupational pensions—in fact, the top 50 charities have pensions liabilities of more than £5 billion. Clause 45 provides some degree of protection for all employers engaged with the Pensions Regulator in restoring the affordability of pension schemes, long-term deficit reduction plans and related matters. It requires the Pensions Regulator to take into account the effect on the employer’s “sustainable growth”. That is obviously a very important issue for commercial private sector employers, but the aim of charities, and of certain other organisations that provide pensions, is not growth. The aim is to work on the object of the charity and, in some cases—for example, with the alleviation of poverty or the eradication of disease—the charity’s aim is to reduce that object and therefore to run down its actual activities in the long run.

“Sustainable growth” is not the appropriate term to give the equivalent protection to private sector employers and to charities and other bodies for which growth is not the objective. I am therefore suggesting that the broader term of “sustainability” should be substituted for “sustainable growth”. Alternatively, if the Government are not prepared to go along with that entirely, I suggest “sustained growth or sustainability”. Otherwise, charities which face equal and, in some ways, greater financial pressures than private sector commercial employers, because of the legal and trustee-type restrictions on how they can use their own money, will have difficulty running pension schemes in many respects. They need this protection, but appealing to this clause, which amends the Pensions Act, would not automatically give them that protection.

I hope that the Government can consider this amendment and accept it, or at least make it clear, in an amendment of their own, that the broader objectives of organisations are also covered by this otherwise very valuable clause. I beg to move.

[Baroness Sherlock]

My Lords, as my noble friend Lord Whitty has explained, the purpose of this amendment is to ensure that the objectives of the Pensions Regulator, as set out in the Pensions Act 2004 and as to be amended by Clause 45 of this Bill, can be applied appropriately to charities.

We on these Benches are sympathetic to the aims of Clause 45 and recognise that there is a balance to be struck between the requirement on the Pensions Regulator to ensure that there is enough money in pension funds to meet their liabilities and the need to ensure that burdens are not placed on employers, with requirements so tough that they are effectively forced out of business and thus rendered unable to make any future contributions to said pension funds. However, as my noble friend pointed out, there are real concerns among those responsible for managing the finances of charities and other non-profit organisations over whether the clause, as drafted, is fit for purpose.

Charities have charitable objects that effectively circumscribe their purpose and activities. I declare an interest as the chair of some charities now and having been formerly chief executive of three different charities. I also remind noble Lords of the interest I declared previously as a non-executive director of the Financial Ombudsman Service.

As my noble friend has pointed out, charities do not necessarily aspire to grow as companies do. They may happen to grow, if demand is there and money is available to fund their activities. They may aspire to grow, to increase the number of people that they work with in line with their charitable objectives. However, they may not. In my time, I have presided over charities that grew but I have also taken decisions that effectively reduced charities by refocusing them on core objectives and ensuring that they were sustainable. While charities generally do grow, they also need to be sustainable, and that is what my noble friend is addressing here.

This is not a negligible issue. Registered charities employ around 850,000 people. The voluntary sector, according to the Charity Finance Group, contributes £11.6 billion to UK gross value added, compared, for example, to the contribution made by agriculture, which is just £8.3 billion. As my noble friend pointed out, there is a significant issue with charity pension funds. The Charity Finance Group estimates that the top 50 charities are carrying almost £5 billion in liabilities. I am advised that those liabilities, and the actions that have been required to flow from them, are driving a significant number of charity mergers. This is having an effect on the architecture of the sector, not just on the individual charities and their employees. Those charities are understandably nervous about any shift in direction or emphasis that is not appropriate to their circumstances.

I have personal experience of the fact that charities have often suffered at the hands of legislation or public policy that was based on the assumption that most organisations were either public or private and did not take into account the often quite different structure and funding arrangements of charities. The noble Lord has had significant involvement with charities and will understand that point.

If the Government are not minded to accept this amendment, can the Minister tell the Committee how the Government envisage “sustainable growth” being applied by the regulator to charities? What reassurance can he give to worried finance directors of charities? Can the Minister remind the Committee of what relationship, if any, there is between his department and the regulator when it comes to deciding how best to interpret their objectives as set out in statute?

[Lord Bates]

My Lords, this amendment relates to the proposed new objective for the Pensions Regulator. The Pensions Regulator oversees the scheme funding regime for defined benefit pension schemes. This regime requires, among other things, the regular evaluation of a scheme’s funding position and a formal recovery plan to plug any deficit identified.

In undertaking this evaluation, the Pensions Regulator is guided by a number of objectives set out in the Pensions Act. It is therefore important, in reference to the remarks of the noble Lord, Lord Whitty, and the noble Baroness, Lady Sherlock, that when we talk about this new requirement, it is placed in the context of the six or seven different measures that the Pensions Regulator will take into account in determining the funding rate that is necessary for the scheme to make up any deficit. While some consideration of sponsoring employers is implicit in these objectives, the new objective will make it explicit that the regulator must consider them, alongside members and the Pension Protection Fund, in deciding upon the suitability of deficit recovery plans and other decisions related to scheme funding.

The new objective responds to concerns expressed by sponsoring employers which felt that they needed to be recognised in the regulator’s statutory objectives, given their importance to defined benefit schemes. The current wording of the objective refers to sustainable growth, as the Government believe that the best protection for scheme members is a strong, healthy employer standing behind its scheme now and in the future. Whether that is a charitable organisation or a commercial organisation, its health must be the first objective in order to keep a sustainable body behind the scheme. Sustainable growth can benefit both the organisation and pension scheme members via a potentially stronger employer covenant underpinning the pension promises made.

18:00

I can reassure the noble Lord that the proposed objective on sustainable growth is intended to be interpreted in a broad sense. The regulator has outlined this approach in its ongoing consultation on its updated code of practice and funding policy, which will take account of the new objective, subject to it becoming law. In that consultation, the regulator recognises that the proposed objective may need to apply,

“differently to different employers. For some, growth is a real prospect while for others it may be more about maintaining their position or limiting the effects of a declining business. For employers in the not-for-profit sector, growth can also have a different meaning than for employers in a purely commercial environment”,

as the noble Lord, Lord Whitty, and the noble Baroness, Lady Sherlock, mentioned. Of course, trustees—and the regulator, if called upon to intervene—will still need to assess the impacts and understand the risks attached to any proposals in respect of the funding recovery plan. Ultimately, the new objective is about balancing the long-term risks to members and employers in respect of sustainable growth.

To sum up, we believe that the interests of all kinds of employers will be sufficiently covered by the new objective. I therefore ask the noble Lord to take comfort from that reassurance, and my reassurances that the measures will apply equally to private and non-government sectors, and consider withdrawing his amendment.

[Lord Whitty]

My Lords, I am grateful to the Minister, at least for his quote from the consultation of the Pensions Regulator, which recognises that growth may well not be considered in the same way by certain non-profit organisations, including charities. However, I find the Minister’s conclusion from that to be slightly illogical. If he is correct and pension fund administrators in the not-for-profit sectors look at this apparent protection and do not interpret growth or have it as an aspiration in the same way that commercially driven organisations do—the strength of not-for-profit organisations will relate to their objectives, not to a growth objective—I do not really see a problem for the Government in extending the phrase in the Bill, thereby ensuring that the position of not-for-profit organisations is covered.

The somewhat convoluted way in which the Pensions Regulator’s consultation is spelt out does not convey that. I ask the Minister to take this issue away and consider whether it would not be easier to make this minor amendment rather than to have a convoluted explanation that belied the text of the Act, or perhaps retain both “sustainability” and “sustainable growth”. It is a fairly simple point but it would make clearer the position of a lot of charities and other not-for-profit organisations. However, I will leave that with the Minister and, in the mean time, beg leave to withdraw the amendment.

Amendment 64 withdrawn.

Clause 45 agreed.

Clauses 46 and 47 agreed.

Amendment 64A

Moved by

[Lord Bates]

64A: After Clause 47, insert the following new Clause—
“Pension Protection Fund: compensation cap to apply separately to certain benefits
(1) Paragraph 26 of Schedule 7 to the Pensions Act 2004 (Pension Protection Fund: compensation cap) is amended as follows.
(2) In sub-paragraph (1)(b), for “sub-paragraph (2)(a) or (b)” substitute “sub-paragraph (2)(a), (b) or (c)”.
(3) In sub-paragraph (2)(a)(ii), for “paragraph (b)(i) does not apply” substitute “neither of paragraphs (b) and (c) applies”.
(4) In sub-paragraph (2)(b)—
(a) before paragraph (i) insert—“(zi) benefit A is attributable to the person’s pensionable service,”;(b) in paragraph (i), after “one or more other benefits” insert “that are attributable to his pensionable service”.(5) In sub-paragraph (2), after paragraph (b) insert “, and
(c) this paragraph applies if—(i) benefit A is attributable to a pension credit from a transferor,(ii) at the same time as the person becomes entitled to relevant compensation in respect of benefit A he also becomes entitled to relevant compensation in respect of one or more other benefits that are—(iia) under the scheme or a connected occupational pension scheme, and(iib) attributable to a pension credit from the same transferor,(“benefit or benefits B”), and(iii) the aggregate of the annual values of benefit A and benefit or benefits B exceeds the compensation cap.” (6) In sub-paragraph (5), after “sub-paragraph (2)(b)” insert “or (c)”.
(7) The amendments made by this section are to be treated as always having had effect.”

[Lord Bates]

My Lords, the four amendments I will speak to fall into two groups of two. The first two, Amendments 64A and 72A, relate to the application of the PPF compensation cap to individuals who have entitlement to both an occupational pension and a pension credit arising from a divorce or civil partnership dissolution settlement. It has come to light during the drafting of the Bill that the way in which the PPF currently applies the compensation cap to this group, while in line with the policy intent, does not comply with legislation. When compensation is calculated, these two entitlements are kept separate. It was the intention that the compensation cap would also be applied separately and this is what the PPF is currently doing. However, the legislation, as currently worded, requires the two amounts to be added together and the total capped, leading to a significantly lower payment. These amendments simply bring the existing legislation into line with the policy intent and the actual practice of applying the cap separately. They also allow the change to be applied retrospectively to cover past calculations and for them to come into effect from Royal Assent to reduce the period in which the practice and the legislation are out of alignment.

The second set of amendments—Amendments 67A and 67B—relates to the provisions in the Bill that establish a long-service compensation cap in the PPF. Those provisions in Clause 47 already make provision for how the long-service cap will apply in the calculation of PPF compensation for individuals in the PPF when the long-service cap legislation is commenced. The amendments deal with how the long-service cap should be applied when a scheme is either undergoing assessment by the PPF or winding up when the long-service cap is introduced. When the legislation commences, a scheme could be in the PPF assessment period—that is, being considered for entry to the PPF, or the scheme could be in wind-up.

Members of schemes in the assessment period will see their payments increased to reflect the long-service cap. However, any valuation of the scheme’s liabilities as part of the assessment period will continue to be based on the current cap structure. Any scheme that winds up outside the PPF, after being in assessment or not, will allocate its assets against the current cap structure. I hope that is absolutely clear. I beg to move.

[Baroness Sherlock]

My Lords, I thank the Minister for that very helpful explanation of these amendments. He may have answered the question that I am about to ask in his final sentence but I did not quite catch it, and I apologise for asking him to repeat it. In relation to the cap, for schemes currently in assessment, do the current PPF rules and levels of benefits or the more generous rules apply?

[Lord Bates]

The answer is that the current provision applies if a scheme is wound up outside the PPF. Schemes will increase payments where appropriate to reflect a long-service cap. However, the scheme’s liabilities will continue to be measured against the old cap. This is to prevent the actuary having to recalculate the scheme valuation, leading to delays and extra costs. I hope that that is helpful to the noble Baroness and thank her for raising the point.

Amendment 64A agreed.

Amendment 65

Moved by

[Lord Bates]

65: After Clause 47, insert the following new Clause—
“Public service pension schemes: transitional arrangements
(1) Section 18 of the Public Service Pensions Act 2013 (restriction of existing pension schemes) is amended as follows.
(2) After subsection (5) insert—
“(5A) Scheme regulations may also provide for exceptions to subsection (1) in the case of—
(a) persons who were members of a public body pension scheme specified in the regulations, or who were eligible to be members of such a scheme, immediately before 1 April 2012, and(b) such other persons as the regulations may specify, being persons who before that date had ceased to be members of a scheme referred to in paragraph (a) or to be eligible for membership of such a scheme.”(3) In each of subsections (6) and (8), after “(5)” insert “or (5A)”.”

[Lord Bates]

My Lords, this group of amendments makes a small change to the Public Service Pensions Act 2013 and a number of consequential amendments to this Bill so that members of public body pension schemes can benefit from the transitional protection provided for by the 2013 Act as it was intended, but in a way that delivers much greater administrative savings.

The Public Service Pensions Act delivers the commitments made in another place by the Chief Secretary to the Treasury, Danny Alexander, that those members of the larger public service pension schemes who are less than 10 years from their normal retirement age in April 2012 should not be impacted by the Government’s reform programme. He was clear that this transitional protection should also extend to members of the smaller public body pension schemes; for example, those administered by the UK Atomic Energy Authority, the various research councils, or the Homes and Communities Agency. The larger schemes are those that cover the major public sector workforces: the Civil Service, judiciary, local government, teachers, the NHS, firefighters, the police and the Armed Forces.

As part of the Government’s reform programme, the intention is for the smaller schemes to be consolidated into the larger schemes wherever possible to allow for savings to be made from reduced administration and management costs, without affecting the value of members’ benefits. However, the current phrasing of the Public Service Pensions Act limits those eligible for transitional protection in the larger schemes to,

“persons who were members of an existing scheme, or who were eligible to be members of such a scheme, immediately before 1 April 2012”.

This means that moving transitionally protected individuals who do not meet this criterion from smaller schemes into the larger schemes would cause them to lose their protection, and the Act currently provides for them to remain in these smaller schemes.

This amendment removes the necessity to leave the smaller schemes in place to provide for transitionally protected members who do not meet this criterion, leading to unnecessary administration and management costs. It will have no impact on the value of members’ benefits and they will continue to receive the transitional protection as set out in the Public Service Pensions Act. Amendments 71, 72 and 73 are consequential amendments to allow the Treasury to commence the provision by order. I beg to move.

Amendment 65 agreed.

Amendment 65A

Moved by

[Lord Dubs]

65A: After Clause 47, insert the following new Clause—
“Railways pension scheme
(1) The Railways Act 1993 is amended as follows.
(2) In Schedule 11 (pensions), after paragraph 11 insert—
“11A (1) This paragraph applies if an insolvency event occurs in relation to the employer or former employer of a protected person.
(2) Where this paragraph applies, the Secretary of State shall become liable to discharge any liabilities in respect of relevant pension rights, to the extent that they are not discharged by the trustees of a new scheme in which the employer was a participating employer.
(3) For the purposes of this paragraph—
(a) “insolvency event” has the meaning set out in section 121 of the Pensions Act 2004;(b) “relevant pension rights” means the relevant pension rights referred to in paragraph 6(3) above.11B The duty referred to in paragraph 11A also applies if an insolvency event has occurred in relation to the employer or former employer of a protected person on or after 1 October 1994.””

[Lord Dubs (Lab)]

My Lords, Amendment 65A is concerned with persons who worked for a company called Jarvis, which went into administration. Jarvis was one of the private companies that had subcontracts for renewal work with Network Rail; essentially this was the replacement of worn-out track and signals. This company was one of the main firms working on behalf of Network Rail—all well and good.

In March 2010, Jarvis went bankrupt and 1,200 skilled rail workers across Britain were thrown on to the dole. I believe that the situation could have been avoided, and I will come back to that in a minute. Jarvis’s work was transferred to new companies but the 1,200 workers were not transferred. Jarvis was forced into administration because Network Rail deferred renewals work to comply with the Office of Rail Regulation’s decree that Network Rail needed to make 21% efficiency savings over the next five years. Therefore, Jarvis going into administration was not the result of the recession and is separate from the general question of railway funding. It is ironic that Network Rail has recently been criticised for delays caused by its decision to scale back renewals work in 2009.

Jarvis had cash-flow problems but its rail business had an order book of up to £100 million. However, Network Rail and the previous Government refused a £19 million rescue plan from the administrator for the Jarvis rail division for running costs and wages over the next month or so, which would have bought time in order to ensure an orderly transfer of Jarvis employees to new contractors. Representations were made by the unions to the Government, who refused to allow their legal powers under the Railways Act to treat Jarvis as an essential railway activity, which would have allowed them to step in and protect the work of the members of the union. Instead, these 1,200 were thrown on to the dole. This is despite the fact that the Government, according to information provided in response to an FOI request, knew quite a long time in advance that Jarvis was in imminent danger of collapse. Had Jarvis remained in business, the pension entitlements of the workers, past and future, would have been protected.

18:15

Undertakings were given at the time of rail privatisation. I quote from a Written Answer given by the Secretary of State, John MacGregor. He said:

“My objective remains to preserve the security of rights enjoyed by pensioners and members while adopting arrangements to suit the new structure of the privatised industry. The proposals I am announcing today meet this objective”.—[Official Report, Commons, 20/5/93; col. 235W.]

He went on—it was a longer answer—but, essentially, workers in the company would legitimately have believed that their pensions were protected. I appreciate that nobody foresaw that the company would go into administration. It was assumed that the protection would transfer with the workers into Jarvis. Nobody at that time anticipated what would happen to Jarvis. Nevertheless, in moral terms, the Jarvis workers have a right. They could not foresee that their company would go into administration, yet they lost a significant proportion of their pension entitlement. That is unfair, and it is only proper to ask the Government to step in, whether by accepting this amendment or by another method. I accept that there are possibly other ways of doing it. People who legitimately expected their pension entitlements to be protected found that they were not. I beg to move.

[Lord Bates]

My Lords, we have discussed protected persons status previously in relation to the statutory override provisions, but it might be helpful in the context of this debate briefly to restate the position.

The status of “protected persons” was created when rail and other public sector industries were privatised, and new pension schemes were created to ensure that ongoing pension provision was made. Protected persons status gave members of certain schemes protection against their new employers providing pension benefits that were less favourable than those offered prior to privatisation.

However, there was never any intention by the Government for protected persons status to protect pension benefits already accrued in the event of a future employer insolvency. The amendment would oblige the Government to provide the full pension of those members of the railway pension scheme who have “protected persons” status in the event of their employer becoming insolvent. This would also apply to benefits accrued after privatisation.

There is, of course, a need to protect members of schemes where the sponsoring employer is insolvent. Since the Railways Act 1993, successive Governments have created a stronger pension-protection regime. This regime crucially includes measures that increase the security of members when their occupational scheme is underfunded and the sponsoring employer of the scheme becomes insolvent. It is that regime which is intended to provide protection to members of defined-benefit schemes. The status given to protected persons, on the other hand, was focused on ensuring that their pension benefits after privatisation were at least as favourable as those before. When it comes to protection in the case of employer insolvency, it is right that members of the railways pension scheme are treated the same as other members of occupational schemes in a similar position.

The railways pension scheme is a multi-employer sectionalised scheme. The different sections of the scheme are covered by the full provisions of the pension protection regime. The sections have to meet the funding requirements, debt requirements and compensation arrangements. They are covered by the Pension Protection Fund and pay the pension protection levy. This means that the scheme has been making specific payments to provide its members with protection in the event of any of the sponsoring employers becoming insolvent.

I am aware of the situation of the members of the Jarvis sections in the scheme. Of course, we have enormous sympathy for them and for any individual who is placed in the stressful and depressing situation not only of losing their job but of potentially seeing a limitation on their benefit entitlements. It is right that the full range of protection requirement rules should apply to the sponsoring employers of the railways pension scheme.

If this amendment were made, the Government would be responsible for covering a scheme’s liabilities if the employer became insolvent. Sponsoring employers would therefore not have to worry about the liabilities of certain members. The noble Lord, Lord Dubs, rightly referred to moral sensibilities, which of course we have, but there is also the danger of moral hazard if the Government were to stand in that way. Finally, the amendment is retrospective, which would mean that insolvencies that have already occurred would have to be unpicked and arrangements that had already been made would have to be revisited.

This seems like a fairly negative response but of course legislation has been passed in the intervening period. I pay tribute to the then Government for introducing the statutory system of protection for scheme members and the levy, which Jarvis contributed to prior to its insolvency. In that sense, Jarvis members enjoy a higher level of protection even now as a result of the Pension Protection Fund. I understand the sensitivity of the issue and I do not underestimate the distress that has been felt by those members and their families, but this is not something that the Government feel able to accept and I ask the noble Lord to consider withdrawing his amendment.

[Lord Dubs]

My Lords, I am not totally surprised by the answer but, as I understand it, whatever the Minister said, these former Jarvis workers have lost out through no fault of their own and, because an earlier Government decided to privatise the railways, they are the victims of a process that began with rail privatisation. At the time, they had pretty secure jobs—nobody should have a secure job in the face of any eventuality but they were given assurances at the time. I agree that those assurances did not cover the prospect that the firm might become insolvent; nobody anticipated that and none of the safeguards covered this particular situation. But in moral terms, assurances were given and those assurances should transcend the other points that the Minister made.

It was a very disappointing answer and I will consider coming back to this on Report. In the mean time, I beg leave to withdraw the amendment.

Amendment 65A withdrawn.

Amendments 66 and 67 not moved.

Amendment 67ZA

Moved by

[Lord Browne of Ladyton]

67ZA: After Clause 47, insert the following new Clause—
“Decumulation
(1) Any qualifying money purchase scheme must direct its savers to an independent annuity brokerage service or offer such a brokerage service itself.
(2) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—
(a) an assisted path through the annuity process;(b) ensuring access to most annuity providers;(c) minimising costs; and(d) ensuring that information and support is available on alternative at-retirement products.(3) The standards meeting best practice on decumulation shall be defined by the Pensions Regulator after public consultation.
(4) The standards set out in subsection (3) shall be reviewed every three years and, if required, updated.”

[Lord Browne of Ladyton]

My Lords, Amendment 67ZA is in my name and that of my noble friend Lady Sherlock. It proposes the addition of a simple clause to the Bill which would require the provision of an independent annuity brokerage service or the offer of such a service to all members pending retirement. Later provisions set out how best practice should be defined and maintained in the brokerage service offered to the retiring member or to which he or she is directed; in other words, it calls for an independent brokerage service to assist people to annuitise at the point of retirement.

This is hardly a radical proposal. It is best practice. It is what many employers with DC pension schemes already offer. The ABI code of practice says that providers should tell people who are decumulating that they can shop around and transfer their funds to another provider and that they should seek advice before so doing. But that is not enough. As Dan Hyde, in an article in the Telegraph on 10 December last year, wrote:

“The process starts with a ‘wake-up’ pack sent to savers … in which pages of often unintelligible information, packaged in unhelpful ways, baffle even the well-informed”.

Of course, people can purchase their own independent financial advice but the majority do not retain or use independent financial advisers or accountants. Even a one-off appointment would be expensive, equivalent to a week’s take-home pay for workers on the average wage, even if they knew where to go.

The scandal of annuities is well known and widespread. When this amendment was debated in the House of Commons, Steve Webb, the Pensions Minister, used the same diversionary tactic as did the Minister, Mark Hoban, who responded to the later Westminster Hall debate on annuities. It is all very well to suggest that those reaching retirement age can do many things other than plan for an annuity, but it is insufficient to say that people should have many different opportunities and lots of different advice. The fact is that the variety in the kinds of annuity that are offered and the variety of deals available is considerable and an annuity is invariably the default position of most of those retiring. They need independent support at that time.

The need for that independent support at this point may be obvious but the reasons for it are worth repeating. The first is the complexity of choosing the right annuity option. Annuities are complex products and decumulation is a complex process. Comparison between providers is very difficult. I saw a recent quote for an annuity pot of only £30,000. In one short e-mail the following terms were contained: single life; level escalation; anticipated bonus rates and required smooth return rates, all without explanation. It offered four alternatives to a conventional lifetime quotation, annuity was described as income choice annuity or with-profit annuity, and out of nine total options the rates varied between £700 and £1,400, with most about £1,200. With this complexity no one should exercise a choice without independent support, so no wonder more than 50% of people—according to the Telegraph—go with their existing provider.

I understand that the first comparator website has been launched, and I suppose that is a step in the right direction, but Ros Altmann, the independent pensions consultant who gave evidence to the Commons committee, did not think that it was particularly simple. She said that it was disappointing and not easy to use. Annuities are complex products with multiple options and it may be that there never can be a simple comparison website. Does the Minister accept that annuities are complex and people need independent brokerage support at the point of decision-making? Does he accept that obtaining that support is beyond the grasp of most people, particularly those with no knowledge of investments? If he does accept that, how does he suggest that those who need that support can be guaranteed to get it?

The variety in the kinds of annuity that are offered and the deals that people can get is just bewildering. The NAPF and others have said that annuitising with some pensions scheme providers pays on average 20% less than shopping around. Ros Altmann said on “Newsnight” that if you had an annuity with the worst performers you would have to live until you were 100 to get back the money that you paid in. In effect, inertia or, alternatively, being overwhelmed by the complexity of making a choice, is exploited by pensions providers. Insurers are making excessive profits from purchasers failing to shop around. Inertia is a powerful force that results in excess profits for insurers. They penalise, not reward you, for loyalty. Perhaps it was that which drove the Pensions Minister, Steve Webb, to make his announcement on portable annuities last week—a Statement, by the way, that went down like a lead balloon in the industry. Well, it would, wouldn’t it?

The current system is a lovely little earner, as they say in my new adopted home in the East End of London. The FSCP report published in December made many points. To assist my analysis of it, I have drawn the following points from the report which states that the tactics used by insurance companies and brokers are “tantamount to burglary” of old age pensioners, and that it is nearly impossible for pensioners to know whether they are getting a good deal. Pensioners are hit by excessive profits and exploitative pricing. Insurance companies make 20 times more profits on annuities than on any other financial product. There are poor returns: on a pot of £100,000, Clerical Medical offered £4,664 per annum, while Reliance Mutual offered £6,111. Over their expected lifetime, the pensioners would have been just over £36,000 worse off with one rather than the other.

18:30

There are opaque charges. Brokers are incentivised to sell particular products. In some cases they make 6% or £12,000 on a pot of £200,000. There are sharp practices with brokers shopping around, resulting in a referral fee from each. Many have exploitative pricing: that is, they sold a product for a fit person when the individual was not fit, or an adviser neglected to tell them of other products such as income drawdown as the profit margins were slimmer.

Companies can make £35,000 profit on £100,000 in the pot over 25 years. That figure is denied by the ABI, despite the report. Importantly, it has not said what profit is made—presumably that information is known. We should also be aware that the Pensions Minister, Steve Webb, commissioned a review of annuities from the FCA. That is due to report in February. We welcome that. Never has a case for a review been better made than the FSCP report. People have gone without who have diligently saved throughout their working lives. They are being systematically burgled, to use the FSCP word, by a profit-hungry industry and its associated sales force. The issue has been comprehensively covered by the Telegraph but in its articles of 9, 10 and 13 December it also concluded that the complexity of the products, the sharp practices, excessive charges and profits, and incentivised sales forces all point to the need for independent brokerage service support.

In the Westminster Hall debate on annuities on 9 January, the Government fielded a Treasury Minister and the Opposition a shadow Pensions Minister—my honourable friend Gregg McClymont. That alone highlights another problem with annuities: policy in government is split, with regulation and policy lying mainly with the Chancellor. It is a tiny part of his remit and hardly the top priority when we face sorting out the aftermath of the financial crisis. Yet it was the Pensions Minister who announced the review of annuities.

If we do not sort out annuities, we will undermine auto-enrolment. Annuities are building up to be the next scandal and mis-selling crisis. The sector will not sort itself out. We need to strengthen the buyer side and Parliament needs to take action on behalf of savers. When the Minister has taken a week off after this Bill receives Royal Assent—as we all hope it will—I urge him to move on to annuities, wrestle the policy-making from the Treasury and sort out the annuity market. In the mean time, this amendment—if accepted—would provide people with access to an independent advice and annuity brokerage service on decumulation options. It would strengthen the buyer side.

Annuities are one area of pension policy where the buyer deals directly with the provider and makes choices. With independent support, those choices would be informed ones. Independent support would protect savers from making poor choices that could reduce their income by up to 20%. Also, it might help divert us away from the next financial mis-selling scandal, or at least protect Parliament from the criticism that it failed to act when presented with evidence of the need to do so.

The information I have laid before your Lordships’ Committee makes the case for the need to provide access to an independent annuity brokerage service to help people at the point of retirement to make wise choices. Already, 400,000 people each year annuitise. That number will escalate from 2020 onwards, when the impact of auto-enrolment starts to kick in. Annuity policy might yet be the next pension Bill before us and that would be the place to address unscrupulous practices and to make sure that the industry is fit for purpose and puts the interests of savers first. This element of independent support falls firmly within the remit of this Bill. I urge the Minister to accept the need for it now and in future. I beg to move.

[Lord Bates]

My Lords, this Government recognise the importance of supporting individuals in making decisions about their retirement income choices. These choices can be bewildering and the implications of choosing an unsuitable product can be devastating, as the noble Lord has very clearly set out for us in moving this amendment. That is why the Government continue to lead on and to support a whole range of initiatives aimed at driving up standards among providers, providing guidance to trustees and education to members. As well as the ABI code of conduct, we welcome the new Pensions Regulator guidance setting out expectations for what trustees should provide for their members. In addition, the Money Advice Service is further developing its support for those approaching retirement to help them engage with how their personal situation relates to products and services which might be appropriate to their needs.

However, we need to understand whether this activity is making a significant difference in terms of value to the consumer. The Government will therefore be assessing the ABI evaluation of the code of conduct planned for later this year, and the Pensions Regulator will be assessing the impact of the new guidance this summer. We will also be looking at other indicators to assess the extent of change in the market.

Wider regulatory activity includes the Financial Conduct Authority’s thematic review of annuities and consideration of a market study. The review will assess the extent of detriment to consumers of not shopping around—the numbers presented this afternoon have been quite startling and stark—and will consider other indicators of risk, such as insurers’ retention rates and whether profits in the market are high or unreasonably high. The FCA will report later this quarter. In addition, Her Majesty’s Treasury and the Department for Work and Pensions are currently reviewing the broad range of available research and statistics on decumulation to explore the impacts and interactions between market and consumer behaviour and government policy.

Our concern about the noble Lord’s amendment is that, while rightly highlighting a key issue, it would increase the risks for consumers and place additional burdens on employers. I will deal first with the risk for consumers. By sending all members to an annuity broker, we would effectively be pushing them away from regulated advice routes, as brokers, unless they are also FCA-regulated advisers, are not required to ensure that the product is suitable for the consumer. At this point, it is worth saying that the range of options available to somebody facing retirement are bewildering but are also many: there is not just the open market option but whether they should be retiring at all or whether they should be using the flexibility that is available, whether they should be drawing down on a pension pot rather than actually purchasing a new version of it, and what type of annuity—

[Baroness Hollis of Heigham (Lab)]

That is very helpful from the Minister but, if he is going to do that, he is going to have to look at the artificially high base of alternative income—the £20,000 a year you have to have before you are allowed to enter into these arrangements, which was based on not being a charge to public funds but which is unreasonably high. I fully support the Minister’s argument but it follows that he must actually look at his minimum alternative income requirement.

[Lord Bates]

Those points about alternative income requirement are correct but there are a number of reasons, not just those, as to why annuity rates are historically low, to do with interest rate levels.

[Baroness Hollis of Heigham]

The Minister may not have understood my point. He was, quite sensibly, making the point—I entirely agree with it—that people should be able to consider alternatives to annuity arrangements, such as draw-down and the like. All I am saying is that to do that, and not to have to cash in, you have to have, under Treasury rules, a minimum of £20,000 in alternative regular income. That is on the grounds that you need to protect people against falling into a charge on public funds if they exhaust their private savings. That figure seems to be artificially high and the Minister will need to look at that again.

[Lord Bates]

Okay, I have the right answer now: £20,000 is needed for flexible draw-down but not for capped draw-down or trivial commutation of benefits. There are different elements of it. My point, from which I have probably strayed into a trap—I should have stuck to the script—was that there is a range of choices, not simply the annuity rate which people face. That is why it is vital that all members engage early. That is the reason for the wake-up programme which is now being organised, to encourage people to engage with what they should be considering later on.

Also, making brokers the first port of call for all would create a captive market for one part of the industry, without effectively adding to consumer protections. Another risk to consumers is that they could fail to engage with options other than annuities that are more appropriate to them.

The noble Lord’s amendment suggests that a brokerage service would have to provide information on alternative at-retirement services, but it has to be recognised that brokers are not impartial. They make their money if the member buys an annuity, but not if they choose to draw down or defer, or to commute. While it is right that schemes should play a central role in informing consumers of their options, we would be wary of making this part of the qualifying criteria for automatic enrolment. The duty to enrol into a qualifying scheme does, of course, fall on the employer, and so to require them to take this step would be an unwelcome, additional burden.

I make it clear that we are committed to ensuring that consumers have the information they need to make good choices and that the annuities market works effectively for consumers and so, in this respect, we welcome the debate. The noble Lord, Lord Browne, has perhaps chided my honourable friend Steve Webb for raising this matter on annuities but, in many ways, he was doing just what the noble Lord is doing: saying that this is an area which needs to be discussed and debated. In many ways, this debate enables us to do that, but so do the reviews which are taking place and to which I have alluded in my response. I trust that, as part of that, the noble Lord will feel able to withdraw his amendment.

[The Lord Bishop of Chester]

My Lords, briefly, I listened to the Minister with great interest. I regard the amendment as important because, in a sense, the proof of the pudding is in the eating; it is when you are taking the benefits of the saving.

The Minister’s reply, it seems to me, says that in addition to all the complexities which the noble Lord, Lord Browne, set out, there is actually a whole load of other complexities about whether you should be having an annuity at all. My question is simply as follows. Until now, when we have often had final-salary schemes around, these decisions have been largely managed. However, we are increasingly moving into a position where most people will be on money-purchase schemes, and this will become normal; we will have to engage with these issues. Given the complexities which the Minister has so helpfully set out, is the Government’s view that the obligation to work this out is on the consumer—the person taking the pension—with some information provided somewhere, or is the obligation on the pension provider to provide information which covers all these options? Where does the responsibility primarily lie to advise the person at the point of retirement? I thought it was not quite clear enough as to where that lies in what the Minister said.

[Baroness Hollis of Heigham]

I will ask another question associated directly with that. To what extent does the Minister expect the Money Advice Service to take on some of this responsibility, given the slightly bumpy ride it has had so far? Or do the Government—and here I declare an interest—expect an organisation like the Pensions Advisory Service to take on some of this responsibility? It has to be free, independent, impartial and professional. Those are the only two organisations of which I am aware which might fit that role at the moment.

[Lord Bates]

I am grateful for the interventions of the right reverend Prelate and the noble Baroness. The Money Advice Service and the Pensions Advisory Service are, of course, important. However, the argument we are having at present is about saying that individuals need to focus on this issue. It is their responsibility. It is vital to them. That is what the debates about transfers and auto-enrolment are trying to do.

However, we are wary of putting the responsibility for providing information to members solely in the hands of annuity brokers. It is better to drive up standards by ensuring that all the players in the annuity market—providers, schemes, trustees and consumers—are engaged. That is why the Government have led in support of a number of different initiatives to address this important issue and will continue to challenge the industry if there is no significant improvement.

18:29

[Lord Browne of Ladyton]

My Lords, I am grateful to the Minister for his response. I am disappointed, although not surprised, that his speaking notes sought to deploy what I would call a diversionary tactic in addressing the issue that this amendment seeks to address, and that clearly concerns a number of Members of this Committee. I am grateful to my noble friend Lady Hollis for her intervention and for the detail that she extracted from the Minister. I am also grateful for the intervention of the right reverend Prelate the Bishop of Chester, who encapsulated in a couple of sentences the fact that the Minister had compounded the complexity and the difficulty of the challenge facing those approaching retirement in such pension schemes, rather than giving them any comfort.

Of course, we must all accept what the Minister says about the variety of choices facing those who reach this point before or at the same time as they engage with the issue of annuity. However, the fact is that the level of understanding of the vast majority of those retiring is such that significant numbers—400,000 a year—are entering into annuities. They are taking out these complex insurance policies at the point of retirement and the results that they are achieving, even within the annuities themselves, suggest that they are not making the best choices for their own futures. This amendment seeks, within the confines of this Bill and in the context of other work that must be done in relation to annuities, to provide at least a step in the right direction now, demonstrating that Parliament understands and engages with this issue and wishes to prevent it from becoming the next mis-selling scandal of the financial services industry.

With respect to the Minister, it is no answer to say that, of course, the answers can be bewildering but that these same people should engage with a whole other set of bewildering choices in order to avoid the bewildering nature of the choices in relation to annuities. That is hardly a way to move forward. This is a relatively simple initiative. It is not perfect but it seeks, within the body of the clause as drafted, to address the very issue that was the target of the Minister’s principal criticism. It seeks to establish a method of ensuring that best practice is adopted by those brokerage services and gives the regulator a role in defining what best practice is. Surely this is acceptable, if only as a place marker while we go on to deal with the much more difficult issues that have been revealed, through the reports and the information that I have shared, and that the Minister knows exist in the annuities market. There is something fundamentally wrong with the market and it is driven by exactly the same motives as we have engaged with in other parts of the private pensions industry and in our debates in this Committee.

I understand why the Minister gives this disappointing reply to this amendment. I understand why his Government are reluctant at this point to engage with this initiative. However, I am determined that, at some stage, your Lordships’ House will have an opportunity to consider whether or not this is something that it wishes to engage with. I predict with some confidence that this matter will come back on Report but, given where we are in these proceedings, I will look forward to the debate on this issue in the Chamber and to discovering how much those who hear that debate will be reassured when the Minister or others put forward the arguments that we have heard this afternoon. At this stage, I beg leave to withdraw the amendment.

Amendment 67ZA withdrawn.

Amendments 67ZB and 67ZC not moved.

Amendment 67ZD

Moved by

[Baroness Sherlock]

67ZD: After Clause 47, insert the following new Clause—
“National Employment Savings Trust transfers
(1) In relation to NEST, the Government must by 30 August 2014 notify the European Commission that it wishes to lift the ban on transfers and the contribution cap.
(2) The Secretary of State must make a statement to Parliament within 14 days of the Government notifying the European Commission in accordance with subsection (1).”

[Baroness Sherlock]

My Lords, the amendment in my name and that of my noble friend Lord Browne would require the Government to lift the restrictions on the National Employment Savings Trust, or NEST, on transfers made before 30 August 2014, and to notify the European Commission that they wish to lift the ban on the transfers and the contribution cap. Following this, and within 14 days of the notification, the Government would be required to make a Statement to Parliament.

The Government’s decision to legislate now but not to lift the restrictions on NEST until 2017, and to refuse to lift the ban on transfers in and out until pot follows member commences, is cause for real concern. Crucially, it cannot be in the public interest for the Government to proceed in such a way. Incidentally, I am sure that the Minister has noted the recommendation from the Work and Pensions Select Committee that the restrictions be lifted without delay.

I agree that there was a good case for having restrictions before it was clear how the market would progress, but these restrictions are no longer justified. The auto-enrolment market is now well under way and NEST has not taken all the business, which had once been a concern among some. Indeed, the restrictions have meant that NEST has been able to get less of that low and medium-earning segment than it otherwise would have done, which will contribute to the increase in the number of small dormant pots.

While the contribution limit will be lifted from 2017 by legislation, the restriction on individual transfers in and out of NEST will be left to coincide with the beginning of pot follows member. Whether the income cap is such a problem up to 2017, the continuing ban on transfers in and out will be. The DWP’s own research found that more than 80% of employers want one provider. However, the ban means that any employer who is thinking about using NEST but currently has a pension scheme of any type will be discouraged from using NEST because they cannot transfer in the pension assets in their current scheme. The Government are encouraging employers to use NEST but, by refusing to lift the ban on transfers in and out right away, they are discouraging those employers who currently have a scheme elsewhere. In this way, NEST is being disadvantaged against many of its market competitors.

Our amendment would enable employers who currently have an existing pension scheme to take their employees with their existing savings into NEST. While there remains a ban on transfers in and out, those employers cannot use NEST, or can use it only by leaving any existing pension pots in a stranded place, with a different scheme. Has the Minister considered that aspect of the Government’s decision?

It appears that what the Government are actually doing is ensuring that the restrictions on NEST remain until every employer has staged. By the time the NEST restrictions are lifted, auto-enrolment will be complete. There are a number of significant problems with the Government’s position. First, as the pensions industry acknowledges, NEST provides best-practice standards, which has obliged the insurance companies to improve their standards. Yet NEST is disadvantaged in competing for many of the low and medium-earning savers for whom it is designed. That may well result in customer detriment for many of those workers. Secondly, the Government’s proposals fail the public interest test. If large numbers of low and medium-earning employees cannot use NEST, it is thereby being prevented from delivering its public interest obligation. Thirdly, restricting NEST impacts on its financial position and makes it harder to pay back the state aid earlier and thereby allow it to reduce its charges even further. This again undermines NEST’s public interest obligation and its mission to deliver a low-charge, high-governance pension proposition. Finally, the rest of the industry is reported in the pensions press as increasingly not having the capacity or, possibly, desire to cope with all the employers who are still to stage in. Having had, it is said, the advantage of the NEST restrictions in place while larger employers move in, the rest of the industry is perhaps less interested in the smaller end of the market.

I trust that the Minister will be able to explain why the Government have so far refused to lift the restrictions. However, whatever has been said in the past, I urge the Minister to accept this amendment; but if he cannot do so today, I hope that he will take it away and reconsider before Report the strong case for these restrictions to be lifted—not in a few years’ time but now, before auto- enrolment is complete. I beg to move.

[Lord Bates]

My Lords, I thank the noble Baroness, Lady Sherlock, for giving me the opportunity to update the Committee on all things NEST.

As noble Lords know, the National Employment Savings Trust was established to support automatic enrolment, providing access to a quality, low-cost scheme for a target market of low-to-moderate earners and smaller employers. We are now just over one year into automatic enrolment and NEST has around 800,000 members and 2,500 participating employers. Opt-out rates are low, with only 8% of individuals enrolled into NEST choosing not to save for their retirement. NEST is already very successfully doing what it is there for—supporting automatic enrolment.

However, we are approaching a peak in the staging profile. Between April and July this year, 27,000 medium-sized employers will start to enrol their workers, and from April 2015 more than 1 million small employers will do the same. We anticipate around 65% of these small and medium employers will use NEST. By the end of staging we expect NEST to have admitted around 750,000 employers and to be providing a pension saving vehicle for between 2 million and 4 million members.

This implementation challenge is what we need NEST to focus on. We need to ensure that the millions of people currently not saving sufficiently for retirement are provided with an opportunity to do so, and that NEST plays its part in starting to make pension saving the norm rather than the exception. For this reason, during the implementation of automatic enrolment, it is critical that NEST focuses on the key task of getting employers and workers on board without distraction. That is why we announced that we will be lifting the annual contribution limit and transfer restrictions currently placed on NEST by April 2017, when implementation for all existing employers is complete.

I am pleased to advise the Committee that, following an invitation from the European Commission, the Government submitted a formal notification earlier this month of their plans to lift these two constraints. The Commission will provide its response in due course. Once this has been received, the Government intend to consult on draft regulations and bring forward secondary legislation later this year to lift the constraints in 2017.

These regulations will provide certainty that beyond 2017 NEST will be on a similar footing to other providers and its members in the wider pensions market. It will enable NEST to support the successful implementation of automatic enrolment but will send a clear message to employers that these constraints will not have any bearing on them in the longer term, helping them to make an informed decision about automatic enrolment scheme choice for their members.

The Government are committed to ensuring that the introduction of automatic enrolment is a success. Effective implementation is important for building and maintaining consumer confidence in the reforms. Removing the annual contribution limit and transfer restrictions by April 2017 is the right approach.

The noble Baroness asked if the ban on transfers stopped employers from choosing NEST. NEST already has 800,000 members and 2,500 participating employers. Given that the overwhelming majority of employers that have staged so far are large employers, the evidence suggests that the constraints have not unduly deterred employers from choosing NEST.

This is an operational capacity issue for NEST. The restrictions on transfers in and out of NEST were designed to enable NEST to focus on its primary objective of supporting the introduction of automatic enrolment. Between April and July this year, an anticipated 10,000 to 15,000 medium-sized employers will start to use NEST to meet their automatic enrolment duty. It will not stop there, with more than 1 million small employers starting to enrol their workers from 2015.

I hope that those comments and updates, and the responses to the questions that the noble Baroness rightly raised, will enable the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I was not going to intervene in this debate but I must challenge something the Minister said. It is as though the ban on transfers and the contribution cap were originally put in place because otherwise there would be a distraction from the fundamental purpose of NEST. That was absolutely not the position. There was a lot of detailed discussion. My noble friend Lady Drake would have been involved in that.

When the legislation was introduced, the imperative was to try to get a consensus of employers, trade unions and the providers, to make them feel comfortable with auto-enrolment. That certainly means that the Government of the day conceded things to get that consensus, so that the thing could move forward. However, those restrictions were not put in place because NEST would be distracted from the very important task that it was given without them.

19:00

[Baroness Hollis of Heigham]

I support my noble friend, as that is precisely my recollection too. During a series of meetings with the organisations, the temporary cap came up because of the fear among pension providers that they would lose significant sums of money they had under management and the associated fees. The sole reason for doing it at the time was to get consensus to get it off the ground. Distraction was not a word that was ever uttered, and I must have been in about three years’ worth of those negotiations.

[Lord Bates]

These recollections will be there. I take it that it was in the mind of the Government that NEST had a huge task to focus on in actually attracting people who had never saved for their retirement before to start saving. That was a major responsibility, and issues were debated around that time relating to the effect that NEST’s creation would have on the market. Certain things were considered. It would be wrong to say that it was the only thing that was considered in terms of restrictions and the need to focus, but it was certainly one of the things which should have been focused on.

[Baroness Hollis of Heigham]

Does the Minister have any evidence that NEST—its chair, chief executive or board members—wanted this limit?

[Lord Bates]

I do not have any information to hand on that. However, we have got the point that I was perhaps overegging this by saying it was the only thing, and I need to recognise that other factors were perhaps considered when it came to putting this restriction in place. There was no sinister purpose, it was simply to say that there was a huge task to be undertaken and to ensure that NEST’s systems and operations could actually handle this. We do not want to put excessive burdens on NEST so that it fails when so many are dependent on its success.

[Baroness Drake]

Will the Minister also accept that volumes are critical to the success of NEST and to its charges, and that there is a fine balance between accommodating the concerns of other operators in the industry and not maintaining constraints so long that it undermines the efficiency of the NEST project as a whole?

[Lord Bates]

The noble Baroness makes a important point in relation to this and I would not dissent from it. NEST has a vital role to play and we want it to be a success. However, it is new, and a new system is coming online, so this ought to be done through learning from experience in a gradual and incremental way rather than as a big bang, of the sort which has had its problems in the past.

[Baroness Sherlock]

My Lords, I thank all my noble friends who have contributed to the debate and am grateful to the Minister for his graciousness in revising his position. It is quite possible that my noble friends are in a better position to decide what the Labour Government intended by these measures than he perhaps is, despite his knowledge and his current position, since they were involved in shaping it.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, I think confusion may have arisen between the discussions that the previous Labour Government had on this and the discussions that we had in Committee on the previous Pensions Bill, which introduced NEST, or at least some revisions to it. I shall check the Hansard record but I distinctly remember discussing this point with the noble Lord, Lord McKenzie, and making an astonishingly similar argument about the importance of making sure that NEST got its primary role right before we moved on to other aspects and transfers. I shall look forward to writing him a letter—I hope—pointing him to the exchange that we had three years ago.

[Lord McKenzie of Luton]

I look forward to the letter and its contents in due course. We were relaying the origins of NEST in the first place. These issues—the restrictions—were not intended by the then Government that introduced it to avoid NEST being distracted.

[Baroness Sherlock]

I thank my noble friend for that. First, I am disappointed that the Government decided to go ahead and stick with their current position. I would have liked the House to have the opportunity to discuss this further, as I do not think the Minister took on seriously the arguments made from this side. There was no reference at all to the question of scale. If the reports one hears from the industry are correct, it is possible that some of the big players may, this year or next, shut their doors to new members. We should do everything possible to enable NEST to build an appropriate level of scale and to enable it—far from distracting itself—to do precisely what it was set up for: to fulfil its public service obligation by delivering a high-governance, low-charge offer to those who can benefit from it.

The Minister made reference to employer choice but of course, by definition, the constraints actually reduce employer choice. Employers who want to go into it are unable to because the restrictions remain in place. I am disappointed that, despite the pressure from this side of the House, the Government have not revised their position. However, given that we are in Grand Committee and I can do nothing else, I beg leave to withdraw the amendment.

Amendment 67ZD withdrawn.

Schedule 19: Pension Protection Fund: increased compensation cap for long service

Amendments 67A and 67B

Moved by

[Lord Bates]

67A: Schedule 19, page 99, leave out lines 6 to 10

67B: Schedule 19, page 101, line 18, at end insert—
“Part 4Transitional provision: schemes undergoing assessment or winding up on the commencement dateSchemes undergoing assessment on the commencement date15 (1) This paragraph applies in relation to an eligible scheme that is undergoing assessment on the commencement date.
Continue to use the old cap as the basis of assessment(2) For the purposes of sections 127(2)(a) and 128(2)(a) of the Pensions Act 2004, ignore any effect that this Schedule has on the compensation which would be payable if the Board assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of that Act.Going forwards, pay pensions on the basis of the new cap
(3) For the purposes of section 138(2) of the Pensions Act 2004 take into account any effect that this Schedule has on the compensation which would be payable if the Board assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of that Act on the assessment date.
Schemes that begin winding up before the commencement date16 (1) This paragraph applies in relation to an eligible scheme that is being wound up if the winding up began (or is treated as having begun) before the commencement date.
(2) For the purposes of section 73 and 73A of the Pensions Act 1995, ignore any effect that this Schedule  has on the compensation which would be payable if the Board assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of the Pensions Act 2004.Going forwards, pay pensions on the basis of the new cap during assessment
(3) If for any period the scheme is being wound up and is also undergoing assessment (“the overlap period”), sub-paragraph (4) applies.
(4) For the purposes of section 73A of the Pensions Act 1995 as it applies in relation to the overlap period, take into account any effect that this Schedule has on the compensation which would be payable if the Board assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of the Pensions Act 2004.
Meaning of “undergoing assessment”17 For the purposes of this Part of this Schedule an eligible scheme is “undergoing assessment” if an assessment period has begun in relation to the scheme but has not yet ended.
Meaning of “eligible scheme”18 Section 126(4) of the Pensions Act 2004 (list of provisions in relation to which regulations may provide that a scheme remains an “eligible scheme”) is to be treated as including a reference to this Part of this Schedule.
“Part 5GeneralInterpretation19 In this Schedule “the commencement date” means the date on which it comes fully into force.
20 Other expressions used in this Schedule have the same meaning as in Part 2 of the Pensions Act 2004.
Further transitional provision may be made by order21 The inclusion of Parts 3 and 4 of this Schedule does not prevent transitional provision being made by order under section 51(7).”

Amendments 67A and 67B agreed.

Schedule 19, as amended, agreed.

Clause 48 agreed.

Clause 49: Regulations and orders

Amendment 68

Moved by

[Lord Bates]

68: Clause 49, page 24, line 32, leave out paragraph (a) and insert—
“(a) regulations under section 3, 17, 18(3) or (5), 19, 20, 29, 31 or 33,”

[Lord Bates]

My Lords, in moving Amendment 68, I will also speak to the other amendments in this group. Government Amendments 68 and 69 respond to recommendations of the Delegated Powers and Regulatory Reform Committee. They provide that regulations made under certain powers in the Bill would be subject to the affirmative resolution procedure. I am grateful to the Committee for its consideration of the powers in the Bill and subsequent report.

As I do not wish to detain noble Lords for too long, I thought it would be helpful to briefly outline the regulation-making powers affected by the government amendments. They would provide that the regulations made under the following clauses would be affirmative: Clause 17, which provides for regulations to prescribe the rate at which deferral increments will be calculated for the single-tier pension; Clause 18(3), which provides for regulations to modify the amount of state pension to be used when calculating the deferral increase due where a person has been resident overseas during their period of deferral; Clauses 19 and 31, which provide that regulations may be made to disqualify a prisoner from being paid a single-tier pension or bereavement support payment; Clause 20, which provides for regulations to exclude people who are not ordinarily resident in Great Britain or a specified territory from entitlement to the annual uprates of the single-tier pension; and Clause 33, which provides for regulations to prohibit the offering of incentives with the intention of inducing a member of a defined benefit pension scheme to agree to a transfer of their rights to another pension scheme or arrangement.

Turning now to the other amendments in this group, Amendment 68ZA would make regulations under Clause 17(5) affirmative. As I have already said, Amendment 68 provides for regulations under Clause 17 to be affirmative so this amendment is not necessary. Amendment 68B would make regulations under Clause 42 affirmative. Clause 42 provides for regulations to be made to enable the recovery of Pension Protection Fund levies for past periods. This is a technical area relating to ensuring compliance with EU law on state aid, following a decision by the European Commission and a subsequent ruling of the General Court in respect of the BT pension scheme. This found that partial exemption from the PPF levies due to the existence of a Crown guarantee constituted unlawful state aid. The Government understand that BT has appealed the ruling of the General Court to the European Court of Justice.

Regulations were made in 2010, following the Commission’s decision, to ensure payment of the levies going forward. Clause 42 simply provides for regulations to allow recovery of outstanding levies relating to the period from 2005-06 until 2010, when the regulations took effect. In agreement with the Commission, an escrow account was set up pending the final legal outcome and already holds the maximum amount of risk-based pension protection levy that could be due, plus applicable recovery interest. The Government are not aware of any other scheme in the same position as BT, so any regulations would have limited application.

Given the limited scope of this power and the opportunity to scrutinise the Government’s intentions during the passage of the Bill, we consider the negative procedure appropriate in this instance. Any regulations made under this power would simply ensure that the prompt payment to the PPF of the levies for past periods is possible should BT’s final legal challenge not succeed. This will ensure that the UK is in compliance with state aid law and so avoid possible fines. I therefore ask noble Lords not to press their amendments. I beg to move.

[The Deputy Chairman of Committees (Baroness Harris of Richmond) (LD)]

My Lords, if Amendment 68 is agreed to, I cannot call Amendment 68ZA by reason of pre-emption.

[Lord Browne of Ladyton]

My Lords, I speak to government Amendments 68 and 69, and to Amendment 68ZA, for what that is now worth, and Amendment 68ZB in the name of my noble friend Lady Sherlock and myself. As the Minister pointed out, Amendment 68ZA is now unnecessary in the light of government Amendment 68.

We welcome the government amendments in this group. As the Minister explained, they have been tabled in response to some of the recommendations made by the DPRRC. I am pleased to see that the Government have come to accept the DPRRC’s recommendation that Clause 17 powers relating to the effect of pensioners postponing or suspending state pensions should be affirmative; that was the purpose of our Amendment 68ZA.

Amendment 68ZB is purely a probing amendment, and has been remarkably successful in drawing from the Minister an extensive explanation of the regulation-making power under Clause 42, and why the Government felt that it was appropriate that it should proceed by the negative resolution procedure. I am extremely grateful to the Minister for that detailed explanation and, in the light of his full explanation, which is now on the record, I will not press that amendment.

[Lord Bates]

I am grateful.

Amendment 68 agreed.

Amendments 68ZA to 68B not moved.

Amendments 69 to 71

Moved by

[Lord Bates]

69: Clause 49, page 24, line 33, leave out “or 20”

70: Clause 49, page 24, line 38, after “paragraph” insert “1 or”

71: Clause 49, page 25, line 5, after “51(1)” insert “, (6A)”

Amendments 69 to 71 agreed.

Clause 49, as amended, agreed.

Clause 50 agreed.

Clause 51: Commencement

Amendments 72 to 73

Moved by

[Lord Bates]

72: Clause 51, page 25, line 20, leave out subsection (2)

72A: Clause 51, page 25, line 22, leave out subsection (3) and insert—
“(3) The following come into force on the day on which this Act is passed—
(a) section 28;(b) section (Pension Protection Fund: compensation cap to apply separately to certain benefits);(c) this Part.”

73: Clause 51, page 25, line 36, at end insert—
“(6A) Section (Public service pension schemes: transitional arrangements) comes into force on such day or days as the Treasury may by order appoint.
(6B) An order under subsection (1) or (6A) may appoint different days for different purposes.”

Amendments 72 to 73 agreed.

Clause 51, as amended, agreed.

Clause 52 agreed.

Bill reported with amendments.

Committee adjourned at 7.15 pm.

House of Lords

Monday 20th January 2014 Lords Chamber

Monday, 20 January 2014.

14:30

Prayers—read by the Lord Bishop of Ripon and Leeds.

Girls’ Education Challenge

Monday 20th January 2014 Lords Chamber

Question

14:37

Asked by

[Baroness Hodgson of Abinger]

To ask Her Majesty’s Government what responses they have received to the Girls’ Education Challenge, to expand education opportunities to marginalised girls, from non-governmental organisations, charities and the private sector.

[Baroness Northover (LD)]

My Lords, in 2011, DfID established the Girls’ Education Challenge, the world’s largest global fund dedicated to girls’ education. This will reach up to 1 million of the world’s poorest girls to ensure that they receive a good quality education in order to transform their future. The initiative has been enthusiastically received by NGOs, charities and the private sector alike.

[Baroness Hodgson of Abinger (Con)]

My Lords, I congratulate Her Majesty’s Government on all that they are achieving with the Girls’ Education Challenge. I know that the Government recognise how critical it is to keep girls at school. Will the Minister tell us what progress has been made to retain girls in secondary schools so that they can go on to complete their education? How does the Girls’ Education Challenge particularly address the obstacles of keeping girls safe on their way to and from school, as sexual violence and forced child marriage both cause girls to fall out of education?

[Baroness Northover]

I congratulate my noble friend on her first Question in the House. She is absolutely right: educating girls is one of the best investments to reduce poverty. As many noble Lords know, educating beyond primary level, which is what she is flagging here, improves a girl’s life chances and delays early motherhood so that she is more likely to have healthy, better nourished children. In fact, ensuring that girls have between seven and 10 years’ education has a decisive influence over whether they can choose whom they marry. The Girls’ Education Challenge is concentrating particularly on supporting girls to progress through secondary school. My noble friend is absolutely right: ensuring that girls are safe on their way to school and at school is extremely important, but this is being addressed.

[Baroness Kinnock of Holyhead (Lab)]

My Lords, does the Minister share my concern that DfID’s business case for the Girls’ Education Challenge fund actually fails to list tackling violence against girls as one of its critical success criteria? Given that millions of girls are sexually assaulted at or on their way to school, does she agree that tackling gender-based violence and the need for social norm change should be priorities and should surely be included in the interventions currently taking place under the GEC fund?

[Baroness Northover]

The noble Baroness is right that combating violence against girls, as I have just addressed, is extremely important. It is no use trying to encourage girls to come to school if, on the way, they are attacked or will be attacked within the school. As the noble Baroness knows, dealing with this is a high priority right across DfID’s work, including in its education programmes.

[Baroness Hussein-Ece (LD)]

My Lords, my noble friend will be aware of the particular challenges in Afghanistan, which is part of this programme. After the withdrawal planned for later this year, what steps will be taken to ensure that education for girls is maintained at the level it is currently at and to ensure that it continues?

[Baroness Northover]

When troops are drawn back from Afghanistan, as my noble friend will know, DfID’s commitment will be maintained because we are well aware that a more peaceful future is likely to be secured through the development of Afghanistan. Engaging girls and women is absolutely vital to that, and education is all part of it.

[Baroness Howarth of Breckland (CB)]

My Lords, education for disabled young people is even more difficult in areas of extreme poverty. Is there any focus in this programme on disabled girls? I declare an interest as a trustee of Livability, which works in Asia with disabled young girls.

[Baroness Northover]

The noble Baroness may like to know that my honourable friend Lynne Featherstone has a particular focus on assisting those with disabilities in developing countries. The projects being taken forward at the moment are in Somalia, Ethiopia, Kenya, Uganda, Afghanistan and Sierra Leone. There is great determination to make sure that schooling is inclusive, whether it is for able-bodied or disabled children.

[Baroness Armstrong of Hill Top (Lab)]

My Lords, I am sure the Minister recognises that even at primary level it is frequently difficult to keep young girls in school, partly because poverty means that they are needed at home. What will the Government be doing to make sure that this issue is really addressed in the post-2015 agenda and that we do not assume that, because it has been part of a millennium development goal so far, everything is okay? The reality is that, unless the quality of the education is really good, the family loses faith in the worth of continuing to send a young girl to school.

[Baroness Northover]

The noble Baroness is right, and that is one of the lessons from the MDGs. Looking forward beyond 2015, it is not just a case of getting children into school but of making sure that they stay in school. DfID built into its programmes consideration of the results—that is, ensuring that children stay in education and that they learn while they are there, and that teachers and educational programmes are in place. One reason for there being a focus on secondary education is that children are required to have gone through primary education.

[Baroness Jenkin of Kennington (Con)]

My Lords, will my noble friend join me in welcoming to this House, for its First Reading today, the International Development (Gender Equality) Bill and in wishing it a safe and speedy passage?

[Baroness Northover]

My noble friend’s timing is extremely good because, as she says, the Bill has its First Reading here today, and I welcome its arrival. As she and noble Lords will know, DfID already puts girls and women front and centre, and this Bill, which I am sure will have all-party support, will ensure that that continues to happen. It will ensure, for example, that the 2006 international development Act is amended so that that commitment is duly reported to Parliament. I think that this Bill has more cross-party support than some.

[Lord Collins of Highbury (Lab)]

My Lords, I also congratulate Ministers, but how is DfID monitoring these research phases of the projects and when are they likely to be completed?

[Baroness Northover]

DfID constantly monitors its programmes, including these. As I mentioned before, it is looking for results to be secured, which, as I said, means making sure that there is high-quality education and that children attend all the way through so that they reach the next stage.

[Baroness Nicholson of Winterbourne (LD)]

My Lords, is the noble Baroness aware that in Afghanistan girls are not allowed to know their father—their basic heritage? Given that deliberate depth of ignorance in the female sex in Afghanistan, and since the UK will have no locus following our withdrawal, how does the noble Baroness feel that we can influence such a tragic and miserable situation through educational means?

[Baroness Northover]

My noble friend is right that there are many challenges in Afghanistan; but one of the encouraging things over the past few years has been the extension of the education of girls and women and their absolute determination that that is going to continue. That will help to underpin what DfID is doing in this area.

Gibraltar

Monday 20th January 2014 Lords Chamber

Question

14:45

Asked by

[Lord Hoyle]

To ask Her Majesty’s Government what response they have received from the Government of Spain about incursions by Spanish vessels into Gibraltar’s territorial waters and delays at the frontier.

[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)]

My Lords, we have raised our concerns about incursions with the Spanish Government. Their response is that the waters were not ceded to the UK in the Treaty of Utrecht. We remain confident that the waters are British, as sovereignty flows from land. We have also raised concerns about the additional border checks. Spain maintains that the checks are necessary to prevent smuggling, while HMG considers them to be disproportionate, politically motivated and therefore unlawful under EU law.

[Lord Hoyle (Lab)]

First, I must declare an interest as a freeman of Gibraltar, a title of which I am very proud. When did we last see the Spanish ambassador, what assurances did we get—from the Minister’s reply, it sounds as though they were negative—and, as we are members of the European Union, can we ask it for help and assistance in requesting Spain to stop the incursion into British territorial waters and to stop the unnecessary hold-ups at the frontier?

[Baroness Warsi]

In terms of contact, the Spanish ambassador was summoned back in August, the Minister for Europe spoke to the Spanish Minister for Europe, the Foreign Secretary spoke to the Spanish Foreign Minister and the Deputy Prime Minister spoke to the Spanish Deputy Prime Minister. In September, the Prime Minister spoke to the Spanish Prime Minister at the G20 summit. In November, the Spanish ambassador was resummoned to the FCO. The Prime Minister also spoke to President Barroso in the margins of the December European Council.

[Lord Howe of Aberavon (Con)]

My Lords, the Question put by the noble Lord, Lord Hoyle, is entirely the most important in this context. Is the Minister aware of the observations by the UK Overseas Territories Conservation Forum—a body with which I have not been very familiar—which has come to the conclusion that policy issues relating to Gibraltar are relevant, but not strongly relevant, to numerous UK Government ministries and departments, ranging from two sections of the Foreign Office to the Department for Environment, Food and Rural Affairs? The forum’s conclusion is that,

“it seems likely that it is Gibraltar’s misfortune to”,

run the risk of falling “between the slats”.

[Baroness Warsi]

My Lords, there are a number of issues that are of course competences for the Government of Gibraltar; it is important that the United Kingdom Government ensures that they become involved only in those issues that are competences as far as the United Kingdom Government are concerned. I was not entirely clear as to the specific question that my noble and learned friend asked, but it may well be that I can go back through Hansard and then write to him in detail. However, our strategy at this stage is very clear: to de-escalate the situation and to try to resolve these matters through diplomatic and political routes.

[Lord Anderson of Swansea (Lab)]

My Lords, the sea incursions are clearly very reckless—

[Lord Pearson of Rannoch (UKIP)]

My Lords—

[The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford) (Con)]

My Lords, as the noble Lord, Lord Anderson, is on his feet, perhaps we can hear briefly from him and then hear from the noble Lord, Lord Pearson.

[Lord Anderson of Swansea]

I will repeat: the sea incursions are clearly reckless and the border delays are highly damaging to the economy of Gibraltar. In October and November, the peak period, visitors to Gibraltar were down by 44%. Should not we urge the Spanish Government to respond to the recommendations of the European Commission—which we can do as we are now, and will remain, a member of the European Union—and should not the Spanish Government be told that these provocations will not help, because there is overwhelming support among all parties for listening to the Government and people of Gibraltar before there is any change in Gibraltar’s status?

[Baroness Warsi]

The noble Lord is right that the incursions have been steadily increasing: in 2011, there were about 23 incursions; in 2012, they went up to 228; and in 2013 they went up to 509. The good news is that there has been a welcome reduction since December of last year, so this may mean that there is a slight change in attitude. We have been asking for the ad hoc talks to resume; we have reiterated to the Spanish Government the Foreign Secretary’s proposal of ad hoc talks, which he made in April 2012, involving all the relevant parties.

[Lord Pearson of Rannoch]

My Lords, is it not Spain’s unfortunate domestic situation, brought about by her membership of the euro, which encourages her to look outwards and behave badly over Gibraltar? Is the result not yet another example of how useless the EU and our membership of it have become?

[Baroness Warsi]

My Lords, I think that these matters are much more complex than that.

[Lord Chidgey (LD)]

Is it not the case that there has been not only a 44% reduction in visitors to Gibraltar but a 26% reduction in the number of non-Gibraltarian cars visiting Gibraltar? With 10,000 Spanish workers’ jobs dependent on a growing economy in Gibraltar, is not the use of aggressive tactics at the border to make life more difficult actually damaging the Spanish economy, which is already in a parlous state?

[Baroness Warsi]

I completely agree with my noble friend. The border delays are impacting on the economies on both sides.

[Lord Foulkes of Cumnock (Lab)]

My Lords, when these meetings took place—the Minister gave a list of all of them—did our representatives point out to the representatives of the Government of Spain that Spain has two enclaves in Morocco, in Ceuta and Melilla? That therefore shows their hypocrisy on this kind of issue. What kind of replies do they get from the Government of Spain in relation to that?

[Baroness Warsi]

These discussions are always about trying to resolve matters, not trying to make them worse. It would not be appropriate for me to go into the details of those discussions but, needless to say, we are robust in making the views of the people of Gibraltar known to the Government of Spain.

[Lord Bach (Lab)]

My Lords, can the noble Baroness confirm that no Foreign and Commonwealth Office Minister has visited Gibraltar since the election of a new Government and Chief Minister in 2011? Is that not slightly surprising and remarkable, given the increased tension in Gibraltar since that time? What plans are there for a visit by an FCO Minister in the near future?

[Baroness Warsi]

I do not have details of visits in my brief, but I will certainly write to the noble Lord to say whether there have been any and if any are planned.

Housing: Underoccupancy Charge

Monday 20th January 2014 Lords Chamber

Question

Asked by

[Baroness Hollis of Heigham]

To ask Her Majesty’s Government what plans they have to revise their underoccupancy charge so that, as in the private rented sector from 2008, it applies only to new tenants.

14:53

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, as restrictions on entitlement to housing benefit based on accommodation size have been in place in the private rented sector since 1989, the local housing allowance introduced in April 2008 could be phased in. We have no plans to make similar arrangements for the removal of the spare room subsidy, which has already been applied, as it delivers a consistent approach to the treatment of housing benefit claimants across both the private and social rented sectors.

[Baroness Hollis of Heigham (Lab)]

My Lords, the sectors are very different. The private rented sector seeks to make profit out of people’s housing benefit. That does not apply to social housing. Social tenants hit by the bedroom tax, through no fault of their own, are now trapped. They are unable to move to smaller social housing as it does not exist. They are unable to move to private housing because private landlords are rejecting or evicting them. They are unable to get discretionary housing payments because most are refused. Debts are mounting and lives are being destroyed. Will the Government please at least apply the bedroom tax only to new tenants who can cope with the new rules, as in 2008, perhaps over a transitional period until we have enough new housing to meet housing need?

[Lord Freud]

My Lords, the number of transfers into one-bedroom social rented accommodation in the past year is running at 108,000. There are more people in the private rented sector, not fewer, and DHPs are—if anything—underspent. Our indications are that they will be underspent. I am pleased to say that in Norwich, with which I know the noble Baroness is very closely associated, the spend was a little higher: £166,000 in the six months, against the allocation of £288,000. I am puzzled that Norwich has not put in a bid for additional funding. I urge it to do so because it has until 3 February to do it.

[Lord Dholakia (LD)]

My Lords, will my noble friend indicate what discussions are taking place with local authorities to ensure that they and the public are aware of the discretionary housing payments?

[Lord Freud]

My Lords, we have a range of meetings and interactions with local authorities. In particular, at the moment we now have a £20 million discretionary fund on which they can bid. I am hoping to get as much of that money to them as possible.

[Lord Jenkin of Roding (Con)]

My Lords, the House is becoming very well aware that the party opposite does not approve of the removal of the spare bedroom subsidy. Could the Minister confirm that if the policy were reversed, it might cost as much as £1 billion over the next two years? Would the Opposition not be a little more convincing if they could give us some idea of how they would replace that?

[Lord Freud]

My Lords, this is a substantial saving, as my noble friend says. Our central estimate is that we will save £500 million a year on this programme, which makes it an important contributor to the Government’s deficit plan. If the Opposition maintain their policy, they need to look at how to find that money back. Not only that, they will run the risk of having to have a similar policy in the private rented sector.

[Lord Best (CB)]

My Lords, has the Minister had a chance to read the report from the Defra Select Committee, chaired by Anne McIntosh MP in the other place? It recommends that rural communities should be exempt from the bedroom tax because it is so difficult for people in rural areas to move down to smaller premises. Staying put means they can be paying £25 a week that they were not paying before, creating a great deal of hardship. Has the Minister had a chance to read that report and react to it?

[Lord Freud]

My Lords, I have looked very closely at the issue of rural communities. That was why, this year, we put in an extra £5 million a year to handle the subsidy arrangements, which buys out a substantial proportion of the cost of this policy.

[The Lord Bishop of Ripon and Leeds]

My Lords, what flexibility is there for housing authorities in the implementation of the underoccupancy charge in circumstances such as when a child dies and the house thereby becomes underoccupied?

[Lord Freud]

The basic principle here is that when a child dies or there is a death, there is a 12-month run-on so that tenants remain entitled to that room for that full year. However, the underpinning support for making sure that these cases of hardship are managed is clearly the discretionary housing fund, which is running at £180 million this year and will be at £165 million next year.

[Baroness Sherlock (Lab)]

My Lords, the Minister has failed to address the core point made by my noble friend Lady Hollis and the noble Lord, Lord Best: why are the Government penalising people already in social housing, who took out their contracts when the current system was in place and before the bedroom tax came in? Why could they not protect people, as this House asked them to do during the passage of the Welfare Reform Act? If all else fails, will he join us in our costed commitment to abolish the bedroom tax?

[Lord Freud]

My Lords, the costings of the Labour Party in this area are fairly extreme because it seems to have used the same money many times over. This is a savings measure introduced in the emergency Budget, which applies to the existing case load and gives 33 months’ notice. The comparison is with the LHA changes introduced at the same time, for which there was less notice: 21 to 33 months. We have put in as support the discretionary housing payment system, as opposed to transitional protection.

Taxation: Personal Thresholds

Monday 20th January 2014 Lords Chamber

Question

15:01

Asked by

[Baroness Eaton]

To ask Her Majesty’s Government how many people on the lowest incomes have been lifted out of income tax by the rise in personal tax thresholds since 2010.

[Lord Newby (LD)]

My Lords, by 2013-14, 2.4 million low-income individuals have been taken out of income tax altogether as a result of this Government’s increases to the personal allowance since 2010. This number will increase to 2.7 million once the personal allowance reaches £10,000 in April 2014.

[Baroness Eaton (Con)]

I thank the Minister for that Answer. The significant changes to the personal allowance mean that someone working full time on the minimum wage has seen their income tax bill more than halved under this Government. Does he agree that this is the most effective way to support those on low and middle incomes because it enables them to keep more of the money they earn?

[Lord Newby]

My Lords, I do agree. The effect of what we have done is that by 2014-15 there will be a £705 cash benefit to low-income households, which even in real terms is well over £500. This has made a material difference to the income of people in those categories and is much to be welcomed.

[Baroness Lister of Burtersett (Lab)]

My Lords, the Resolution Foundation has shown that in future the 3 million taxpayers on universal credit will receive only about one-third of what other taxpayers receive from an increase in tax thresholds, and the 5 million low-paid workers below the tax threshold of course receive nothing. Does the Minister agree that this is a singularly ill targeted policy for helping those on the lowest incomes, and will he consider alternative, more progressive policies instead?

[Lord Newby]

No, I simply do not agree with the noble Baroness. The Government are considering a number of measures which will help people on low incomes, of which a potentially significant increase in the minimum wage is perhaps the most significant.

[Lord Sharkey (LD)]

My Lords, now that our economy is growing again, can the Minister say what more the Government can do to help those who need it most, in particular the long-term youth unemployed?

[Lord Newby]

My Lords, the most important thing the Government can do as the economy grows is to ensure that the macroeconomic framework is conducive to greater growth. There has been a 300,000 fall in the claimant count within the past year, so that is the single biggest thing that the Government can do to promote the continued reduction in unemployment and long-term unemployment. Youth unemployment has been falling now for five quarters. It is not falling fast enough but a raft of measures, including improved vocational education and an expansion of the apprenticeship scheme, have been designed specifically to tackle that long-standing issue.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that one of the best ways of helping people on the minimum wage to improve their income would be to raise the threshold for national insurance and consider merging national insurance and income tax? That would help employers and those on the lowest pay.

[Lord Newby]

My Lords, the Government have looked at merging national insurance and income tax. It is one of those ideas that is perennially discussed but every time the Government look at it they back off because it is extremely difficult to achieve. The problem with what the noble Lord’s suggests is principally the cost. However, I would remind him that the Government are introducing in the National Insurance Contributions Bill a tax-free national insurance allowance of £2,000 which will benefit every firm but particularly small firms. The Federation of Small Businesses has said that the single biggest consequence of that change will be increased employment.

[Lord Davies of Oldham (Lab)]

My Lords, the noble Lord deserves an easy ride today given his other responsibilities as Liberal Chief Whip, so I will ask him a very straightforward question. Does he agree with Citizens Advice that, for many low-income families in work, any gains they make from this change to the personal allowance are swamped by the Government’s other changes to tax and benefit, and that working families are £1,600 each year worse off since this Government came to power?

[Lord Newby]

My Lords, we can improve the status and income of poorer families by having a robustly growing economy and an increase in average earnings and household earnings. This is now under way. Our job is to make sure that we continue it.

[Lord McKenzie of Luton (Lab)]

My Lords, the Minister will be aware that the Government have adopted the policy of raising the qualifying earnings threshold for auto-enrolment in line with the personal income tax threshold rather than changes in the value of earnings. This denies lower-paid workers, mainly women, the benefit of an employer pensions contribution and of course saves the Treasury the cost of tax relief. How many low-paid workers is it estimated will have lost out because of this approach during this Parliament?

[Lord Newby]

My Lords, I will have to write to the noble Lord with the answer to that question. However, I am sure he will agree that the raft of measures that the Government are taking on pension reform will have as one of their signal benefits that many women who have lost out on pensions in the past will gain from adequate pensions in the future.

Citizenship (Armed Forces) Bill

Monday 20th January 2014 Lords Chamber

First Reading

15:07

The Bill was brought from the Commons, read a first time and ordered to be printed.

International Development (Gender Equality) Bill

Monday 20th January 2014 Lords Chamber

First Reading

15:07

The Bill was brought from the Commons.

[Baroness Anelay of St Johns (Con)]

My Lords, I beg to move that this Bill be now read a first time.

[Lord Foulkes of Cumnock (Lab)]

I wonder whether the Chief Whip can explain how this Bill is going to be considered in Committee and on Report when every Friday has been hijacked by the Government for the European Union (Referendum) Bill.

[Baroness Anelay of St Johns]

My Lords, the Companion says that First Readings are not a matter for debate. On the matter that the noble Lord raised, he referred to the hijacking of the Bill. The Government have not hijacked it. It is a Private Member’s Bill. The hijacking has been carried out by those, including the noble Lord, who have tabled an excessive number of amendments.

Bill read a first time and ordered to be printed.

Anti-social Behaviour, Crime and Policing Bill

Monday 20th January 2014 Lords Chamber

Report (3rd Day)

03:08

Amendment 92

Moved by

[Lord Harris of Haringey)]

92: Before Clause 111, insert the following new Clause—
“Crime and disorder reduction: development control
(1) The Secretary of State shall designate a body representative of chief officers of police for the purposes of this section.
(2) A body designated under this section shall publish guidelines that specify for a particular type of development the measures that should be included in that development to promote—
(a) crime and disorder reduction, and(b) the prevention of anti-social behaviour.(3) Guidelines under this section shall only be produced following consultation with organisations that represent—
(a) local authorities, and(b) persons engaged in the design and construction of developments requiring planning permission.(4) A planning authority may, in respect of any application that it receives for planning permission, specify as a condition for the approval of that planning permission that the development concerned must follow guidelines published under this section.
(5) A planning authority may only specify a condition under subsection (4) if it is satisfied that to do so would promote—
(a) crime and disorder reduction, or(b) the prevention of anti-social behaviour.”

[Lord Harris of Haringey (Lab)]

My Lords, this is the same amendment I moved at Committee stage. I will therefore rehearse the arguments for it only briefly but also, I hope, respond to the points that were made against it in Committee.

The purpose of the Government’s Bill that we are considering—I am sure the Minister will have told us this many times—is all about reducing crime and anti-social behaviour. Indeed, as we know, overall crime has declined in the past 15 years or so, and the trend in burglary is particularly marked. Yet, unmentioned in the Bill, the Government are seeking to undermine the progress that has been made. During the past two decades, new developments, including homes—both new build and refurbished—schools, play areas, hospitals and many others, have increasingly been informed by and have adopted the principles of Secured by Design.

What has been achieved under this initiative carried out under the auspices of the Association of Chief Police Officers? First, Secured by Design developments— that is, those which use products and materials that it has approved—are half as likely to be burgled, and show a reduction of 25% in criminal damage. Secondly, the additional cost of using Secured by Design standards in the average home has worked out at only £170 per dwelling. In one year alone, some 700,000 burglaries could be thwarted if appropriate security devices were installed, representing an annual saving of more than £1.97 billion. Indeed, the Association of British Insurers has estimated that the Secured by Design standards across the UK would bring more than £3.2 billion-worth of savings to the economy over 20 years. Householders who are not offered security recommendations after a burglary are 69% more likely to suffer a repeat incident than those who are offered advice.

This is a success story that is widely copied internationally. It is the subject of many academic studies testifying to its efficacy and it was the subject of much support from all corners of the House when I raised it in Committee. Why, then, if it ain’t broke, are the Government taking it to pieces anyway? The Department for Communities and Local Government issued a consultation document in the depths of last summer, seeking views on a recent review of building regulations and housing standards. The proposals that it put out to consultation were for a two-tiered standard for security—a basic minimum level that would be generally required and a so-called enhanced standard. The basic standard is demonstrably inadequate and has been shown to have little security benefit. Specifying stronger locks is not much of a deterrent if the door is so flimsy that it could be kicked in with one firm kick.

The requirement for the lock itself, on the basic standard recommended by the Government, is based on a 26 year-old standard. It does not even require the British Standards kitemark lock. Instead, it requires a lock with only 1,000 key variations, vulnerable to the most basic forms of attack. Even the British Standards kitemark standard, which protects against drilling and cutting—I believe that these are the technical terms involved—is having to be revised upwards to allow for two increasingly prevalent forms of attack: lock snapping and lock bumping. For those who are not familiar with these techniques, I am told that there is a handy YouTube video that tells the aspiring burglar how to do it. The Government are therefore recommending a basic standard of security that does not even meet the British Standard, even though the British Standard needs to be revised because of standard attacks that are made on locks in this country.

In Committee, the Minister made much of what a step forward it was that this proposed basic security standard would now be a core requirement. It is not much of useful core requirement if the standard is totally inadequate. In 1999 and 2006, research studies compared burglaries on estates using the security standard for locks contained in the Minister’s core standard with those using Secured by Design locks. The latter suffered 70% less crime. The Government’s core standard is woefully inadequate.

What about the so-called enhanced standard that would be available in certain circumstances? Even this would be lower than the existing Secured by Design standards. However, it could be required by a local authority only where what is described as a “compelling case” exists for this higher standard to be the norm. To make this compelling case, a local authority will have to demonstrate that the development will be subject to an elevated rate of burglary and that there will be a higher than normal impact of burglary on the tenants. It goes without saying that this test is almost impossible to pass in respect of a new development, and the test has to be applied site by site in a way that is likely to produce confusion and added uncertainty for developers, who will not know when they submit a proposal whether the authority will attempt to apply the enhanced standard.

15:15

What is more, as I understand it, housing associations will be precluded from using this enhanced standard. As I have already said, this enhanced standard will not be as beneficial as the proven Secured by Design guidelines. It will not be permitted for local authorities to require those proven Secured by Design standards, and to apply even the enhanced standards they will have to go through a complicated process to demonstrate the compelling case required by DCLG, with all the implicit threats of action that that entails.

In fact, on Tuesday night when we last considered the Bill, the Minister spoke movingly of the Government’s commitment to localism. Here the Government are implementing a policy that is the antithesis of localism. They are preventing local authorities from deciding to use enhanced security standards—those that are recommended by our police service. The antithesis of localism: centrally driven dumbing down of standards. What is more, it is putting communities and householders at risk. It puts at risk the progress made over the past 20 years in reducing crime, especially burglary.

The Minister in Committee put forward a number of arguments that said this amendment was not necessary. He argued that there was no need to give the police a statutory duty to advise on security standards because they do this already. However, this amendment is not about giving police the power, but about giving local authorities the option to accept and act on that advice. Therefore, I am afraid the Minister misunderstood the purpose of the amendment. In Committee, the Minister argued that local authorities have powers already—as though this was a substitute—to consider the location and layout of sites. Nobody is arguing that they do not. The issue is whether they will have the power to prescribe adequate security standards to protect the residents in those locations and on those sites.

The Minister also told us that the intention of the enhanced standard was to mirror those of Secured by Design—except that the enhanced standard does not do so. In a recent meeting with Secured by Design, officials—indeed, Ministers—conceded that it was a lower standard but said that there was nothing they could do about it. Therefore, it is simply untrue for us to be told that the enhanced standard will mirror the Secured by Design standards.

In any case, access to the enhanced standard would be permitted only where there was a suitable evidence of need. Why does that requirement have to be prescribed centrally? Again, it is the antithesis of localism. Surely each local authority should be allowed to decide the standards it thinks are appropriate for its area, and if it wants to accept the advice of Secured by Design or any other recommendation put forward by the police, it can choose either to do so or not to do so. Surely that is what localism should be about and what the Government ought to be committed to.

This has all been put forward as a simplification of the planning process, with the argument that somehow Secured by Design standards have been the cause of stalled developments. What evidence is there that this has happened? None. Local authorities should be able to choose the level of security standards that they consider appropriate for the communities they represent. What is the problem that Minsters think they are going to solve by preventing that local democratic discretion?

As I said, last Tuesday the Minister told us eloquently about this Government’s commitment to localism, but that is what the amendment is about: a commitment to localism. The Bill risks the progress that has been made over the past two decades in designing out crime, reducing burglary and making anti-social behaviour harder being put into reverse. It is an act of vandalism—anti-social behaviour of the worst sort. It risks adding to the cost of the criminal justice system. Indeed, if we throw away the advantage that designing out crime has given us, how will our communities cope in future with a diminished police force and neighbourhood policing no more than a distant memory, while the threat of crime rises again?

Who benefits from that short-sighted policy? Only the developers, who will see an increase in their profits—and, of course, burglars. Who loses? The residents of developments that will suffer higher levels of burglary, increased vandalism and more anti-social behaviour. It is for them that I have tabled the amendment. It requires the Home Secretary to ask ACPO or a successor body to draw up Secured by Design guidelines. It requires those guidelines to be produced following appropriate consultation, and it gives local planning authorities the option of making following those guidelines a condition of any planning permission they make.

It is a localist power. It is a permissive power. The amendment gives the Government the opportunity to put prevention first. Surely, protecting people from crime is an investment: better than the spiralling cost of enforcement and better than waiting for unproven measures envisaged under the Bill. It allows the Government to put localism first—ostensibly one of their policy objectives. If locally elected councillors choose to prioritise Secured by Design, they can. If they choose not to, that, too, is their prerogative. If local people want higher security standards, they will elect local councillors accordingly.

The amendment is about localism, crime prevention and better security for communities. I beg to move.

[Lord Blair of Boughton (CB)]

I support the noble Lord, Lord Harris, on the amendment, and declare an interest as one of the patrons of Neighbourhood Watch and Home Watch. I think that most of your Lordships will be aware of Neighbourhood Watch. It is a group of citizens who are concerned enough to have asked their chief executive to contact me to raise this matter. In other words, Neighbourhood Watch thinks that this is a pretty bad idea. That is quite important.

As a police chief, I spent a lot of hours standing next to Ministers of both parties supporting Secured by Design, so it seems odd that the Home Office now does not want to support it. I put it to the Minister that this has got caught up in the understandable concern about how ACPO itself set up a company to deliver Secured by Design. The purpose of the noble Lord’s amendment is that it will be a successor body to ACPO that will be involved in this area of policy, so I do not think that that issue arises any longer.

I said in Committee that as I understand it, or, rather, as Neighbourhood Watch understands it, the way in which the decision between ordinary and enhanced protection will be developed by a local authority is by crime mapping. The amendment is about new developments. New developments on brown or green sites will, of course, have no history of crime. Therefore, even if they are in a very difficult area, they will not get enhanced protection.

If ever I have seen a case of spoiling a ship for a ha’porth of tar, this is it. The difference in cost is £170. If noble Lords compare that to the number of burglaries that will happen as a result of the Bill, the House may choose to support the noble Lord’s amendment.

[Lord Condon (CB)]

My Lords, I declare my registered interest in policing. I support the amendment moved by the noble Lord, Lord Harris of Haringey, broadly for the reasons that he set out, reinforced by my noble friend Lord Blair.

We have 30 years of academic underpinning for this theory. It started with notions of defensible space by Oscar Newman. That was reinforced 10 years later by Wilson and Kelling, with their broken windows theory of maintaining property at the highest standards to prevent crime, and so on.

We have 20 years’ pragmatic experience of how Secured by Design has dramatically helped to reduce crime and in particular burglary and made neighbourhoods safer. In the ongoing environment of economic challenge to policing, I think the Secured by Design mark and all that it stands for as well as all the experience we have built up remain very valuable. Sadly, I fear it would be a step backwards if we are not allowed to bring forward this amendment successfully in the terms that the noble Lord, Lord Harris of Haringey, has set out. I hope the Government will find that they are able to give some way on this, because the Secured by Design legacy is a very important one.

[Baroness Howarth of Breckland (CB)]

My Lords, I shall speak briefly in support of this amendment and make three points. First, during my life, I have worked in some of London’s most insecure areas and seen insecure estates in the rest of the country. In north Brent and Brixton, crime was rife and burglary, in particular, was at a very high level. On a huge estate—I will not name it, because it has improved so much and I do not want to give it another bad name—I saw design improvements which removed some of the interconnecting corridors and looked at locks, considering the way in which the whole design process was put together so that it reduced crime substantially. If we start with design and local authorities have the option of putting design in place, we will ensure from the beginning that we do not create new estates where problems begin and residents suffer great dismay.

My second point is the localism argument, which has already been made very successfully. The third point is that anything that prevents burglary anywhere must be supported. Like other speakers, I do not understand how it is possible to assess where burglary is going to take place before an estate has gone up. In any case, people should be protected equally. Anyone who knows people who have been victims of burglaries, particularly some of the most vulnerable, will know that we should do everything in our power to prevent the emotional trauma—it is almost like rape—that they feel when they go into their homes and find tremendous damage. It is not just that things have been stolen; it is the feeling of intrusion into their lives.

There are very good reasons to support this amendment. The technical reasons have been put clearly by the noble Lord who moved the amendment and other speakers, and I support it on those grounds.

[Baroness Hamwee (LD)]

My Lords, I have been enthusiastic about designing in security for as long as I have had any involvement in planning, not just for the protection of property, but for the protection of people.

Two things confuse me about the amendment. One is that the debate, both on the last occasion and to a large extent today, seems to be about products and materials. I have always thought that designing in security starts with things such as defensible space, mentioned by the noble Lord, Lord Condon, and lighting, sight lines and corridors, mentioned by the noble Baroness. I am puzzled why so much of the debate has been about the strength of locks and window locks which, if they are considered anywhere, seem to be more a matter of building control than development control of the planning area.

Like many other noble Lords, I am instinctively against topdown impositions of requirements which should come about bottom up, organically, by local authorities, police and others working in partnership. The noble Lord, Lord Harris, talked about localism and I of course support that, but I would like to ask the Minister some questions relating to this. Perhaps he can explain to the House, and flesh out a little, the extent to which the security issues which we have been discussing can be taken into account in the refusal or imposition of conditions on planning consent currently made by a planning authority. Are there material considerations? I am asking whether the planning authority can currently specify as a condition the sort of security issues that we are all concerned about.

What the amendment proposes is, in a sense, statutory guidelines that would be discretionary in their application. That takes me to the second area where I confess to being a bit puzzled. I am unclear what precludes a local authority drawing up guidelines without having legislation requiring the guidelines to be there and available for the local authority to adopt at its discretion. Do we actually need something in an Act of Parliament which says, “Let’s do some work on something very sensible, but we are not even going to require it to be implemented”?

15:30

[Lord Rosser (Lab)]

My Lords, my noble friend Lord Harris of Haringey raised this issue in Committee, when he said that his amendment was to try to get clarity as to why the Government were seeking to make this change and to do something which was potentially so retrograde. My noble friends Lord Harris of Haringey and Lady Smith of Basildon both gave specific figures on the savings and reductions in burglary offences that had accrued, or were expected to accrue, when appropriate security devices are installed where new developments have been informed by, or have adopted, the principles of Secured by Design. My noble friend Lord Harris repeated some of those statistics today.

In his response, the Minister said that a consultation under the auspices of the Department for Communities and Local Government had taken place, which concluded, if memory serves me right, on 27 October last year, and that the Government were considering their response. The consultation document from the DCLG suggested a two-tier standard of security: a basic minimum level that would be generally required and a so-called enhanced standard. However, as has already been said, even the “enhanced” standard would be lower than the existing Secured by Design standards, and even then it could be required by local authorities only where what is described as a “compelling” case exists for the higher standard to be the norm.

In Committee—perhaps it will be different today—the Minister was unable to say whether we would know the outcome of the consultation by the time the Bill reached Report or Third Reading. Neither was he able to say why local authorities would not even be able to go to the higher, so-called enhanced standard or give an assurance that local authorities would be able to choose their standard, and not be obliged to follow either the basic or “enhanced” standard. Nor was he able to say that the Government would provide an opportunity for Parliament to intervene before any changes in the standards are made.

As my noble friend Lord Harris has said, the Secured by Design initiative is about reducing the incidence of crime. The Government’s proposals, which have been the subject of consultation, appear to go in the opposite direction. We have heard no convincing arguments from the Minister as to why there should be a change and nothing from him to indicate that the Government’s proposals are in any way evidence-based, particularly when it comes to the impact on the level of burglaries. We will certainly support this amendment if it is put to a vote.

[The Earl of Lytton (CB)]

My Lords, before the noble Lord sits down, would he not agree with me that the amendment would confer a particular status on Secured by Design or whatever body or organisation is in its lieu and that to do so in this particular context would create a quite curious structure? It is almost like an organisation that is operating on a statutory basis.

Secondly, would the noble Lord not agree with me that the police, knowledgeable though they are, are not the sole providers of intelligence on designing out criminal activity? There are many other bodies and professions which might legitimately be considered for this—the British Standards Institution would be one.

Thirdly, would the noble Lord not agree with me that the fact that there may be shortcomings in the specification of security, equipment and methodologies is not necessarily a reason for conferring a monopoly of this sort on this particular body?

[Lord Rosser]

I simply ask the noble Earl if he would agree with me that what is being proposed appears to put in jeopardy an arrangement, guidelines, and standards—Secured by Design—that on the basis of the figures we have heard, have had a considerable positive impact on the level of burglaries. It appears to me that the noble Earl is prepared to go along with a change that appears to put in jeopardy real progress that has been made through this initiative in bringing down the level of burglaries. That is a question that he should be asking himself rather than the questions that he has chosen to ask me.

[The Earl of Lytton]

My Lords, I am a victim of burglary myself, so I understand what it is about. It seems to me odd that the noble Lord feels that the proposals in the amendment are the unique and sole means of achieving what is required. With all the product availability and consultancy that there is, I do not believe that it is necessarily the case. I am particularly not sure that it is right that such an organisation should be given a statutory status and elevated position. It is, after all, a commercial operation. Would the noble Lord not agree with that?

[Lord Rosser]

I am not sure that the noble Earl and I should be having too lengthy a dialogue on this matter. I am not sure whether I got a very clear answer from him as to whether he accepted that what the Government are proposing may well put in jeopardy a very successful initiative, which over a period of years has had a very positive impact on the level of burglaries.

[The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)]

My Lords, with this amendment, the noble Lord, Lord Harris, has brought back the issue of the important role that design has to play in preventing crime and anti-social behaviour. It is important to stress that the Government recognise the importance of design in crime prevention. Nothing in the current proposals is designed to weaken that. I hope that the noble Baroness, Lady Howarth of Breckland, will accept that.

Before I respond in detail to the noble Lord’s amendment, I should like to emphasise that the housing standards review, which is the project under consultation at the moment and at the centre of the noble Lord’s concerns, was not initiated to cut standards irrespective of impact or to agree to a lowest common denominator approach. I cannot emphasise that enough. Its clear objective was to review a number of the voluntary standards—there are a number of voluntary standards—most frequently called up by local authorities. The aim was to identify opportunities for simplification, clarification and, if appropriate, those standards that are so important that they justify inclusion in a possible national standard or building regulations, which is a situation that may not always exist at present.

We are entirely supportive of the police continuing to advise local planning authorities on the layout of new development. We are all, I think, also in agreement that it is important to ensure that the police can continue to contribute their intelligence on crime to the development and implementation of standards. There will be no diminution of the role of the police in that respect. The new clause that the noble Lord proposes would place a mandatory duty on a body representing chief officers of police to publish guidelines on designing out crime that local planning authorities may then require builders to follow as a condition of granting planning permission.

As the noble Lord will be aware, the Government have spent considerable time tidying up the policing landscape to create a set of bodies with a clearly defined purpose. The Association of Chief Police Officers fulfilled an important role as the professional voice of the police service for many years, but as policing is changing, so too must ACPO. Many former functions of ACPO have transferred to the College of Policing and, in the light of the Association of Police and Crime Commissioners’ review of ACPO, there will be further consideration of the future delivery of some additional national functions. I am not persuaded that it would be right to pre-empt those considerations by designating a new or existing body, as the noble Lord is proposing today.

Many different expert groups have a role to play in the design, building and construction of the places where we live and work. Although I recognise that the noble Lord’s intention is to ensure that guidelines are drawn up in an open and transparent way in discussion with experts, I believe it should be left to the police and others to decide on the most appropriate groups to consult according to subject area. As a matter of good design, technical building standards and standards for the design and layout of the wider built environment are often considered together. That is indeed the approach taken by Secured by Design. However, in regulatory terms, the former are the domain of building regulations while the latter are matters for planning. Of course, the role of planning and building regulations needs to be understood in the broader context of crime overall, and on that matter I should like to offer some points of clarification.

When last we discussed these matters, the noble Lord set out a range of figures to exemplify the importance of security standards in new homes. While I have no wish to extend the debate unnecessarily as these figures have become a matter of public record, I think it is only right that we ensure that they are placed in context. The noble Lord, Lord Harris, suggested that if appropriate measures were installed some 700,000 burglaries could be prevented each year saving nearly £2 billion. According to the latest crime survey estimates, not only is this more than the total number of burglaries in England and Wales in 2012-13, it reflects burglaries in both old and new housing. The housing standards review sets out standards only for new development, not existing homes. Furthermore, the housing standards review does not propose stopping bodies such as Secured by Design bringing their own standards to the market for developers to use on a voluntary basis.

In relation to the question asked by my noble friend Lady Hamwee, local authorities are currently able to impose requirements on new development in relation to security, including adopting the principles of standards such as Secured by Design. Such standards may be delivered as a condition of planning permission, provided that the condition is necessary, relevant to planning and to the development to be permitted, enforceable, precise and reasonable in other respects—in other words, fitting the considerations that planning permission requires.

15:45

Local authorities will be able to continue to seek the advice of suitably qualified advisers on designing out crime in the layout of new developments. The noble Earl, Lord Lytton, is right to point out that a large number of professionals are able to give advice in this area. As a result of the advice given, the benefits associated with those measures are unlikely to be adversely affected. I mention this because, as with all matters, there is an issue of proportionality. Without in any way underestimating the impact of burglary on households, we should guard against overstating the potential impact of the proposals within the housing standards review. The noble Lord’s amendment suggests that a designated body of police develop guidance following consultation with local authorities, builders and developers. As I have already said, it is clear that the police should have a role in gathering intelligence and advising on standards, but while the police are experts in security, the Government are better placed to use the evidence that we are gathering in formulating standards for use either at a local or national level.

The issues are complex, which is why, both during the consultation period and during this further period of consideration, the Department for Communities and Local Government continues to work closely with the police and industry partners to review the evidence base. Indeed, Ministers met ACPO only last week. I am not, therefore, persuaded that at this time we should pre-empt ongoing work and mandate the police to produce guidance and prescribe both how it is developed and used. Such a course of action would be premature. I respectfully ask the noble Lord to withdraw his amendment.

[Lord Harris of Haringey]

My Lords, I am grateful to the noble Lords, Lord Blair of Boughton and Lord Condon, and the noble Baroness, Lady Howarth, for their support for this amendment. It is also heartening to hear that neighbourhood watch schemes around the country believe that this approach is the right one. I am also aware that quite a number of senior local authority figures of all parties have expressed support for the principle.

I am also grateful to the noble Baroness, Lady Hamwee, for her support for the principles behind this. Quite properly, she said that Secured by Design guidelines include such issues as defensible space, lighting, sightlines and so on and she asked about the focus on locks. The reason for the focus on locks and such practical, physical measures in the course of this debate is that that is the area where the DCLG consultation, which includes the building regulations, is designed to weaken the autonomy of local authorities to decide what they think are the most appropriate standards in their areas. This is the reverse of being top-down; it is the Government who are imposing these changes top-down and preventing individual local authorities making their choices.

I have to say that I was puzzled by the Minister’s assurance that planning law does allow these things to be included in planning approvals. My understanding, as a local authority member for 26 years, is that planning approvals may include advice but only certain things can be included as mandatory as part of planning approvals. This would not be permitted under planning law to be one of those mandatory guidelines.

The noble Earl, Lord Lytton, seemed to think that this was some back-door way of giving statutory status to a bunch of senior police officers. I have to say that I do not think that is the purpose of it. The formulation,

“The Secretary of State shall designate a body representative of”,

is quite widely used in legislation to permit, without recognising a particular body, the use of a body which is broadly representative as being able to put forward a view. It is a standard approach. He also seemed concerned that the list of the organisations that should be consulted, given in proposed new subsection (3), was not sufficient. I would be happy to accept that it would be possible to amend it further to include that.

The Minister seems to be encouraging me to bring the amendment forward again in a slightly different form. If he is saying that the amendment would be acceptable if, instead of referring to,

“a body representative of chief officers of police”,

it said, “the College of Policing”, I am quite happy to bring this forward on another occasion. Is that what he is suggesting?

[Lord Taylor of Holbeach]

It is not what I am suggesting. I just pointed out to noble Lords what the noble Lord’s amendment said.

[Lord Harris of Haringey]

In that case, the points about the College of Policing were clearly rather academic.

The purpose of this amendment is to give local authorities the flexibility to set higher design standards, if that is what they want to do. The Minister has said that nothing the Government are doing is intended to weaken the security standards and that the housing standards review was not intended to bring about the lowest common denominator, but that is what it is doing, in practice. He talked about supporting the police in advising on a layout of a development, but this is not just about the layout of a development—it is about the security measures physically built into the development, which I do not believe can be part of a planning approval at present.

The Minister told us at length about the importance of tidying up the policing landscape, but that, frankly, is irrelevant. There will still be chief officers of police, unless there is some hidden agenda for the Government.

[The Earl of Lytton]

I apologise to the noble Lord for interrupting his flow. The Minister pointed out the difference in approach between planning and building regulations. We have heard, for instance, that certain things may not apply to social housing providers of one sort or another. Building regulations do not necessarily fall automatically within the purview of a local authority; they can be outsourced. Therefore, you can have any number of commercial companies who can provide the building control facility. The NHBC, for instance, is actually a certification process set up by—

[Lord Ahmad of Wimbledon (Con)]

I remind the noble Earl that we are at Report, and it is normal convention after the Minister just to hear from the mover of the amendment, unless there was a specific point of elucidation or clarification to be made. I feel that the noble Earl may be going into a more detailed exposition.

[Lord Harris of Haringey]

My Lords, I am sorry that the noble Earl has had the reprimand from the Front Bench. I was enjoying the to and fro, and would happily have answered him in detail. Of course other bodies are involved, but this enables the local authority, the elected local body, to have choice and impose when appropriate the standards that it thinks are appropriate at local level. That is what will be precluded by the Government’s approach.

The Minister talked about this proposal applying only to new developments. The point is, over time, all developments would be covered by these arrangements. That is how you get to the figures in terms of burglaries that one might be talking about. He said that it does not stop Secured by Design from bringing standards to the marketplace. But the problem is that he would not be able to require something if, at local level, local authorities thought that it was necessary. Planning law simply does not allow this to happen. I am afraid that somewhere, lost between the Department for Communities and Local Government and the Home Office, a very important principle has been destroyed—the principle that local councillors should be able to set a higher standard for security if they think that their local residents need it and crime prevention is necessary in that way.

For that reason, I wish to test the opinion of the House.

15:54

Division 1

Ayes: 179

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Labour: 136
Crossbench: 29
Independent: 4
Green Party: 1
Ulster Unionist Party: 1
Plaid Cymru: 1

Noes: 230

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Conservative: 135
Liberal Democrat: 64
Crossbench: 23
Bishops: 2
UK Independence Party: 2
Independent: 1

16:07

Amendment 92A

Moved by

[Baroness Smith of Basildon (Lab)]

92A: Before Clause 111, insert the following new Clause—
“Long-term police authorisation requiring independent approval
(1) The Regulation of Investigatory Powers Act 2000 is amended as follows.
(2) After section 32A (authorisations requiring judicial approval) insert—
“32AA Long-term police authorisations requiring independent approval
(1) This section applies where a relevant person has granted a long-term authorisation under section 29.
(2) The authorisation is not to take effect until such time (if any) as the relevant independent body has made an order approving the grant of the authorisation.
(3) The relevant independent body may give approval under this section to the granting of an authorisation under section 29 if, and only if, the relevant independent body is satisfied that—
(a) at the time of the grant—(i) there were reasonable grounds for believing that the requirements of section 29(2), and any requirements imposed by virtue of section 29(7)(b) are satisfied in relation to that authorisation, and(ii) the relevant conditions were satisfied in relation to that authorisation, and(b) at the time when the relevant independent body is considering the matter, there remain reasonable grounds for believing that the requirements of section 29(2), and any requirements imposed by virtue of section 29(7)(b) are satisfied in relation to that authorisation.(4) For the purposes of subsection (3), the relevant conditions in relation to a grant by an individual holding an office, rank or position in a relevant law enforcement agency are that—
(a) the individual was a designated person for the purposes of section 29,(b) the grant of an authorisation was not in breach of any prohibition imposed by virtue of section 29(7)(a) or any restriction imposed by virtue of section 30(3), and (c) any other conditions that may be provided for by the Secretary of State were satisfied.(5) In this section—
“relevant law enforcement authority” means—
(a) a police force in the United Kingdom, and(b) the National Crime Agency;“relevant judicial authority” means—
(a) in relation to England and Wales, the High Court of Justice in England and Wales,(b) in relation to Scotland, the Court of Session, and(c) in relation to Northern Ireland, the High Court of Justice in Northern Ireland;“relevant person” means—
(a) an individual holding an office, rank or position in a police force in the United Kingdom, and(b) an individual holding an office, rank or position in the National Crime Agency.(6) In this section—
“relevant independent body” must be defined by the Home Secretary in a motion passed by both Houses of Parliament before this section is enacted;
“long-term” must be defined by the Home Secretary in a motion passed by both Houses of Parliament before this section is enacted.””

[Baroness Smith of Basildon (Lab)]

My Lords, Amendment 92A, in the name of my noble friend Lord Rosser and myself, would make provision on “Long-term police authorisations requiring independent approval”—in other words, police authorisation for covert or undercover operations. The Minister knows of our concerns and interest in this issue, as we flagged it up at Second Reading and my noble friend Lord Rosser proposed a very similar amendment in Committee as well. I know that the Minister agrees with us that meaningful action has to be taken to address how covert police operations are authorised and managed, but it seems to us that the Bill provides the ideal opportunity to address the issue, given that it is the Government’s flagship Bill on crime and policing.

I welcome the Government’s recognition that there is an issue here. In his letter to my noble friend Lord Rosser on 21 December, the Minister outlines the powers that the Government are taking and have taken already, so the Government recognise that changes have to be made. I welcome those changes and do not decry them, but they do not go far enough in addressing the seriousness of the problem to provide the degree of oversight and monitoring that we feel is necessary. I do not think that it is enough to give guarantees or assurances if people are to have confidence that such operations are properly authorised and monitored when they are ongoing. I shall come on to explain the differences that we have.

I reiterate the point made by my noble friend Lord Rosser in Committee that we support undercover policing and recognise that it is essential in dealing with organised crime and terrorism. We recognise the dedication and bravery of those officers who undertake this work, but we can only repeat that such operations must be subject to the highest of ethical and operational standards. That is essential both for their operational effectiveness and for public confidence, which is why we place such store on getting accountability absolutely right in this area.

My noble friend gave two examples in Committee that drive home how those changes must be made and why action must be taken to address the problem that any suspected criminality must be dealt with proportionately and not in excess of what is required. I do not want to repeat what was said in Committee, but I shall outline those two cases briefly.

The first case is that of Mark Kennedy, known in his undercover name as Mark “Flash” Stone, who as a police officer infiltrated left-wing protest groups over a period of seven years. These groups were involved in lawful demonstrations—there is no evidence that they were involved in crime. In that role, he had relationships with women in the protest movement and travelled to eco protests across Europe.

When HMIC reviewed Mark Kennedy’s activities and those of other undercover officers, it stated that his actions led to the collapse of a trial of environmental protestors. The report said that he defied management instructions, but it was never clear what those management instructions were. Indeed, he took the view that his superiors knew what his activities were, so there seems to be a lack of clarification on whether his actions were authorised or whether he just thought that somebody knew about them so it was okay to behave in the way that he did. The HMIC report also suggested that an independent body should be required to authorise such undercover operations, as he had been inadequately supervised and the oversight had to be strengthened.

In such cases, we question not only the ethics of Mr Kennedy and others, but the proportionality of their actions and their cost. I do not know whether there has ever been an assessment of the costs involved in such cases, but clearly neither the costs nor the methods—the ethics—could be justified.

The other case referred to by my noble friend Lord Rosser involved the noble Baroness, Lady Lawrence of Clarendon, who is now a Member of your Lordships’ House. After her son was murdered in a racist attack, Peter Francis, who was then an undercover police officer and a member of the highly controversial special demonstrations squad, was part of an operation—Peter Francis said—to spy on and attempt to smear the Lawrence family. Those actions in all cases are totally unacceptable.

I also refer noble Lords to a book by Rob Evans and Paul Lewis, The True Story of Britain’s Secret Police, which illustrates the extent of the problems. There have been a number of cases in which women were conned by these men—seven police officers, acting under cover—into believing that they were having a genuine relationship. They had sexual relationships that in a number of cases led to children being born. It appears that those men, who had been acting under cover, shed their responsibility to their children as easily and as quickly as they shed their undercover identities.

I know that the Government have brought forward secondary legislation to deal with the issue through an order, which Damian Green in the other place said would enhance oversight. However, I have two concerns. First, I do not think that secondary legislation gives this House the opportunity fully to examine the proposals before it. It would have been helpful to have included any such proposals in the Bill, as we could then have had the opportunity to fully discuss whether the measures were appropriate. I think that the Government’s proposals go a long way towards dealing with the problem, so I welcome them, but they do not go far enough. We are not convinced that the Surveillance Commissioners are really the appropriate body to provide independent oversight.

16:16

The amendment would also leave open the period of time involved. We envisage that any operation of three months—or possibly six months, but certainly much less than the 12 months proposed by the Government—should be subject to independent oversight. To say that the only operations that could be subject to or require independent oversight and authorisation would be those lasting more than 12 months seems to us to be completely inadequate. A lot can happen in those 12 months. In the least case those involved could have formed relationships and had a child, given what has happened in the past. We propose a much shorter period, of possibly three or six months, to be decided by both Houses.

We believe that this amendment would protect the integrity of the investigation. It would avoid the problems that we have had in other cases, which have fallen because the integrity of the evidence has been compromised. The amendment would also protect the integrity of the officers because, if operations are checked after three or six months—I am relaxed on that; I would prefer three months, but six is not impossible—that will offer protection to the officers involved, in that the required checks and balances, the monitoring and the reporting back, will have taken place. That would provide for genuine oversight and accountability.

The Government have admitted there is a problem and have sought to address it, but they really have not done so adequately. I hope that the noble Lord can look at the measures we are proposing. I hope that he will also accept that the issue is better dealt with in this Bill rather than in secondary legislation, which the Government have brought forward and took effect on 1 January, as we feel that does not seriously address our very real and grave concerns over how to deal with this problem.

[Lord Condon (CB)]

My Lords, I refer your Lordships to my registered interest in policing. I should also add that I was Metropolitan Police Commissioner for seven years and that embraced the time of the allegations the noble Baroness, Lady Smith, has referred to in relation to the noble Baroness, Lady Lawrence.

I have enormous sympathy for the reasons why the noble Baroness, Lady Smith, has moved this amendment. Clearly, change is needed and the balance has to be redrawn between the need for undercover policing to provide protection for the wider community and the avoidance of the abuses that have clearly taken place in the past.

As the noble Baroness, Lady Smith, has raised the issue of the noble Baroness, Lady Lawrence, perhaps I can place on record—fully aware of the consequences if I were to mislead your Lordships’ House—that at no time during my time as commissioner did I approve, authorise, acquiesce or have any knowledge of, or give any encouragement to, any of the actions suggested by Peter Francis in his book. Investigations are currently under way to try to establish the truth of all those matters. If I, as commissioner for seven years, had no knowledge of the sort of allegations that have been made by Peter Francis in his book—assuming that he has made those allegations on, hopefully, the basis of some element of truth—that shows that there is a need for reform and for much closer scrutiny of these operations. I am now in my 15th year of retirement so I am long past knowing what the current environment is like, but I still sense an enormous need and momentum for change, which is shared by the Government and the Opposition.

So, although I have enormous sympathy for the amendment moved by the noble Baroness, Lady Smith, I look to the Minister to say how the Government are responding to these issues. I sense that the Government are well and truly on this case, so I will listen to the Minister’s response before I make a judgment about whether or not I am able to support the amendment.

[Lord Hope of Craighead (CB)]

My Lords, I wish to raise a point on the wording of the amendment. Three definitions are set out in subsection (5), one of which is “relevant judicial authority”. I have no complaint about the definition itself, but I cannot find anywhere in the proposed new clause where that phrase is used and is in need of definition. I may be wrong. Obviously, this comes after a section where independent approval may be needed, but I would like to be persuaded that the definition in the subsection is relevant to the clause we are being invited to approve.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, although I have not been involved in these cases, I have been involved in the examination of these kinds of cases when I was a member of a police authority in London for 12 years and I still sit on the police committee at City Hall.

Something like the amendment is absolutely necessary because, putting aside the civil rights, human rights and civil liberties of the women and the people involved in the environmental movement whose lives have been trespassed upon for no information and without subsequent charges against them—these were innocent women who were trespassed against—you have to think about the civil liberties and human rights of the police officers involved. Again and again, officers were embedded within environmental groups for long periods of time. It was not like getting into a drug cartel or organised crime of some kind; this was a quite different kind of policing. The police officers have suffered quite deeply afterwards. It is very easy when you are embedded for three months or six months to get to like the people you are working with and to understand what their motivation is, and many officers have come out of this quite damaged and unable to work any further.

There is also an argument about the cost of the court cases in which some of these police officers were involved—they went to court and were charged as protestors and were either convicted or not convicted—because those cases are now being overturned. Two cases will be coming up in the next two weeks in London on this issue. It is costing us a fortune and justice is not being done. We need an independent way of judging and assessing whether or not this kind of action is necessary. It is time that the Metropolitan Police understood how important this is and I hope that the Government will approve the amendment.

[Baroness Hamwee (LD)]

My Lords, we had the opportunity to consider the Regulation of Investigatory Powers (Covert Human Intelligence Sources: Relevant Sources) Order 2013, which the Minister sent round after the previous debate and is now in force, as I understand it. Any of us could have prayed against it.

We need to understand as a House that we are not at the point in the development of this—“work” seems to be the wrong term—matter that one might think from looking at the amendment. That is not to say that I do not have sympathy with the amendment. One of the times when I was most shocked at work since becoming a Member of your Lordships’ House was on hearing recordings of the testimonies of women, and their families, who have been affected by activities under CHISRS. I remember the family of one woman saying, “We treated this man as our prospective son-in-law; we welcomed him into our family”. It was very moving.

That causes me to say that what matters more than anything—although I do not know how you deal with it other than by putting formal technical oversight in place—is a change in practice and culture. The police need to take that matter on board but you cannot write that into legislation in that way.

The 12-month period for approval before review is required seems on the long side and I look forward to the Minister explaining it to the House. As I say, we should have questioned some time ago—I am as much at fault as anyone—why 12 months was chosen, rather than six months or even three months.

[Lord Taylor of Holbeach]

My Lords, this has been a worthwhile debate, although we have discussed this matter before. As the noble Lords know, the statutory instrument has come into effect, so we are in a different regulatory regime from the one we were in when we discussed this in Committee. In no way do the Government endorse activities to which the attention of the House has been drawn in the speeches of noble Lords. I am grateful to the noble Baroness for tabling the amendment. I agree that covert techniques are sometimes necessary to protect the public from harm or to prevent or detect crime. I think all noble Lords will accept that. These techniques need, however, to be closely supervised and constantly reassessed to ensure that they are justified.

Undercover deployments are authorised under the Regulation of Investigatory Powers Act 2000. RIPA provides a strong set of safeguards. As I said in Committee, we have recently brought forward secondary legislation, further enhancing this oversight of undercover deployments by law enforcement agencies. The Regulation of Investigatory Powers (Covert Human Intelligence Sources: Relevant Sources) Order 2013 came into effect on 1 January 2014.

I was a little concerned that, in our debate last time, the noble Lord, Lord Rosser, might not have been aware of this order, so, following the debate in Committee, I wrote on 21 December 2013 to draw it to his attention and to that of the noble Baroness. As a negative instrument, there was the normal opportunity for the Opposition or any noble Lord to pray against the order, perhaps on the ground that its provisions fell short of what was needed. Unfortunately, however, it is a matter of record that no such step was taken. The order, which has now been in force for some three weeks, provides a number of additional safeguards to ensure that the technique is used only when it is just to do so. I will give some examples of what I mean.

First, law enforcement agencies must notify the Office of Surveillance Commissioners, all retired senior judges, of all undercover deployment by law enforcement officers. Secondly, an authorisation can be renewed beyond 12 months only with the prior approval of a surveillance commissioner, who, I remind your Lordships, is someone who has held senior judicial office. It may be that the original deployment is not authorised for 12 months. Thereafter, if it is to be renewed at 12 months, a surveillance commissioner will be required to pre-approve all renewals for long-term deployments every 12 months.

In addition, we have increased the rank of authorising officer. Deployments of undercover law enforcement officers now need to be authorised at assistant chief constable level or equivalent. Any deployments lasting longer than 12 months will be authorised by a chief constable or equivalent as well as by a surveillance commissioner. The seniority of those who are now required to authorise these deployments is an indication of how seriously the Government take proper oversight of undercover law enforcement activity. I hope I can reassure my noble friend Lady Hamwee that all authorisations are notified to the commissioners at the outset. They monitor the cases during their normal inspections. Each case is approved specifically after that 12-month interval. It reflects the existing legislation and implements the HMIC recommendation to increase oversight of long-term deployments. As I have said, deployments can be for shorter terms, but they still have to be notified to surveillance commissioners.

We believe that the new arrangements will create a regime that contains considerable safeguards while not hampering operational effectiveness. We should allow them to bed down and be given a chance to prove themselves. We will of course keep them under review. Given these recent changes, I do not believe that this amendment, well intentioned as it is, is required. I therefore invite the noble Baroness to withdraw it.

16:30

[Baroness Smith of Basildon]

Perhaps I should explain to the noble Baroness and the Minister why we did not pray against the order when it was laid. The order made changes that improved the position and it would have been rather churlish for us to say at that time, “We’re going to pray against this because it doesn’t go far enough”. The order has improved the position, but I have a serious issue with the 12-month period. I know that the Minister said that we should give the new regulations, which came into force on 1 January, the opportunity to bed down, but why not get it right first time? This legislation provides us with the opportunity to do so. I agree entirely with the noble Lord, Lord Condon, that it is about getting the balance right. A 12-month undercover operation is a long undercover operation. If there is no independent monitoring and approval before that 12-month period comes to end, a lot can happen. This amendment is about the integrity of the operation concerned and ensuring that nothing is going wrong. As the noble Baroness, Lady Jones, said, if the integrity of an operation is compromised, it can mean that a court case fails. We have seen that in other cases involving long-term covert operations. That is a very serious matter. Further, those who have been undercover have thought that activities were authorised when they had not been explicitly authorised. It goes back to authorisation by commission or omission—it seems to have been authorisation by omission in the cases of some undercover operators.

I take the point that the order represents an improvement, but the fact that 12 months can elapse before any further oversight or independent monitoring take place represents a serious error. For that reason, I hope that the Minister will understand why I feel the need to test the will of the House on this issue.

16:33

Division 2

Ayes: 165

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Labour: 132
Crossbench: 22
Independent: 3
Green Party: 1
Bishops: 1
Plaid Cymru: 1

Noes: 241

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Conservative: 145
Liberal Democrat: 65
Crossbench: 23
Bishops: 1
Ulster Unionist Party: 1
UK Independence Party: 1
Independent: 1

16:45

Clause 128: Appointment of chief officers of police

Amendment 92B

Moved by

[Lord Blair of Boughton]

92B: Clause 128, page 99, line 27, at end insert “subject to the successful completion of developed (or equivalent) security vetting”

[Lord Blair of Boughton]

My Lords, I rise to speak to Amendment 92B but I will also address a different and very important matter which has arisen in recent correspondence with the Minister about this amendment. I have given notice to the Minister that I believe the matter may need to be discussed on Third Reading, which is why I am raising it now.

I turn first to the amendment. Noble Lords may recall that a longer amendment to this clause, then Clause 126, in the names of the noble Lord, Lord Condon, the noble Baroness, Lady Manningham-Buller, and myself, was discussed on 4 December last year. The noble Lord, Lord Condon, and I now return to the same issue in a much more restricted but still very significant way. The issue needs a certain amount of explanation and, as it is concerned with national security, it is not trivial. It is concerned to ensure that no one can be appointed to the post of Commissioner of Police for the Metropolis without being subjected to developed or equivalent security vetting. Its context is the whole of Clause 128, which, like its predecessor, deals with a complete innovation for British policing—the appointment of suitably qualified police chiefs from abroad to senior posts in policing in England and Wales.

I repeat what I said on the last occasion, that neither the noble Lord, Lord Condon, who will speak later, nor I have any objections in principle to the appointment of senior officers from abroad, notably those from Commonwealth countries, to UK police positions. To object would be hypocritical in that senior UK officers have reasonably often and recently commanded police forces in Commonwealth countries including Australia. However, we are concerned about the Met Commissioner.

Our original amendment arose because, however well meant, the measure appeared to raise a serious concern when it was applied to three very senior Metropolitan Police posts, namely those of the commissioner, the deputy commissioner and the assistant commissioner specialist operations, who are all deeply embedded in the national security structure of the United Kingdom. We therefore sought an explanation from the Minister of how this could occur when these postholders need to be security cleared to a very high level, known as developed vetting, a process difficult to achieve when it involves a foreign national.

I think that the Minister will recall that an interesting and at times somewhat unusual debate followed. The principal development was that in winding up he produced one surprise and one promise. The surprise was that the then Clause 126 referred only to the commissioner and to provincial chief constables but not to other metropolitan ranks, however senior. The promise was about vetting, the subject of today’s amendment. The Minister said:

“I reassure noble Lords that, whatever nationality restrictions are imposed, no appointment would be made by this or any future Home Secretary that would put national security at risk. We would always expect the successful candidate to undergo the appropriate vetting procedures. If an applicant cannot be vetted, they will not be appointed”.—[Official Report, 4/12/14; col. 328.]

The Minister agreed to write to me so I did not press the amendment but reserved the right to return to the matter at Report; and he did indeed write to me on 23 December, copying the letter to a number of other interested Members of your Lordships’ House. The letter absolutely confirmed what he had said in the debate about vetting in these terms:

“Turning to the substance of your concerns, as I indicated in the debate, there is no legal requirement for the Commissioner of the MPS or the chief constables of police forces outside London to be British citizens. However, we would always expect successful candidates to undergo the appropriate vetting procedures. There is no provision in legislation to say when this should be subject to developed vetting. A decision is made … on the type of information an individual will have access to. We would expect the Commissioner and chief constables to undergo developed vetting”.

As that is fairly clear, and given that the Minister indicated both on the Floor of the House and in correspondence that a successful conclusion to the developed vetting process would be required for such an appointment to the post of commissioner, I might be forgiven for hoping that the Minister would accept this amendment today. But no—he wrote to me last Friday to say that he would not. He will speak for himself, but he seems to have given three reasons. First, it would be inappropriate to have developed vetting on the face of the Bill in case the scheme should be renamed or its criteria changed. Secondly, he does not think it appropriate to single out the commissioner’s post alone for such a measure. Thirdly, he does not believe that primary legislation is where a level of vetting should be set out. I hope he will think that that is a fair summary of his position.

I believe that the Minister’s first objection is already covered by the amendment’s being drawn slightly wider to refer to “developed (or equivalent) … vetting”, to take into account a future change in nomenclature or, as I will come to shortly, a reliance on foreign vetting by certain friendly powers.

On the Minister’s second and third objections, this clause as a whole represents an entirely new departure for UK policing. In itself that is fine, but within this legislation sits one position of a different order to the rest, and the noble Lord, Lord Condon, and I believe that that needs to be recognised in the Bill. The commissioner’s responsibilities are of a completely different category to those of other chief constables. He or she sits close to the very heart of the UK’s national security apparatus. Appointed by Her Majesty the Queen, he or she is in overall charge of all national counterterrorism police activity. He or she sits in the Cabinet Office briefing room during national emergencies and has direct personal responsibility for the protection of the Queen, the Royal Family, the Prime Minister, other senior Ministers and some ambassadors to the UK.

When I first raised this matter with the Minister he remarked that no one had previously exposed concern about security issues—which, put another way round, means that the Home Office had not considered the difference between the duties of this postholder and those of other chief constables. I believe that not only consideration but action is necessary. If legislation allowing this post to be held by a foreign national is to be passed then surely the law should require—and it should be firmly in the Bill—that such an appointment should be subject to the very vetting which the Minister says it will.

I turn more briefly to my second point, which refers to something that may have to be addressed at Third Reading. The noble Lord’s same letter of 23 December contained another surprise, albeit one to which he had referred briefly but had not been able to confirm during the previous debate. The letter stated that there is,

“currently no requirement for candidates for appointment as Deputy or Assistant Commissioner to have served as a constable in the UK, so the changes made by clause 126 are not relevant so far as those posts are concerned”.

That was very surprising indeed to the four Members of your Lordships’ House who have been Metropolitan Police Commissioners and who were present at the debate on 4 December, and it is very surprising now. The deputy commissioner, also appointed by Her Majesty the Queen, is—as the phrase has it—a heartbeat away from being the commissioner, and has the same powers and responsibilities in the absence of the commissioner. But it gets worse. I have spoken to the current commissioner, Sir Bernard Hogan-Howe, and it appears that this situation now pertains to all of the 35 or 40 chief officers of the Metropolitan Police, of commander and deputy assistant commissioner rank as well as those more senior. None of them has to have any previous police experience. Both Sir Bernard and the president of the Association of Chief Police Officers, Sir Hugh Orde, regard this situation as totally untenable, as do I.

Senior police positions are not that different from any other significant professional position. If you, like me, would prefer the pilot of your aircraft or the brain surgeon to whom you have been referred to have some relevant experience, then perhaps you will understand why I have written to the Minister to ask him to do three things—to arrange for his officials to discover whether this position exists in law, not only in the Metropolitan Police but also to assistant and deputy chief constables outside London; to consult the Home Secretary and the Mayor of London; and to bring to the House a suitable new clause to rectify this anomaly at Third Reading. I have taken the liberty of suggesting to him a form of wording for a short new clause to address this.

It is not clear when the requirement to have served as a police officer beforehand ceased to be necessary for an appointment as a chief officer, but it has never been so important before. The replacement of police authorities by police and crime commissioners outside London and by the mayor’s office for policing in the capital has placed enormous patronage in the hands of individual politicians and the commanding officer, whom they appoint and can dismiss. I hope that the Minister will agree to the proposal to rectify this at Third Reading when he replies.

Returning now to the amendment, I should point out that this whole proposal is widely regarded within the police service as having been concerned with the desire in some quarters to appoint the widely respected former commissioner of the New York Police Department, Bill Bratton, as the Met Commissioner. Wherever that desire may have come from, it has been frustrated as he has just been reappointed to the NYPD and is no longer available. However, Bill Bratton, as I will make clear, is still relevant.

I said earlier that I would mention foreign vetting. In closing, perhaps I may offer one further piece of advice to the Minister. In his letter to me of 23 December he suggested that foreign vetting might be an alternative to developed vetting. He said:

“There is no bar to foreign citizens undergoing developed vetting, nor is there a requirement to have a British parent, but a 10 year residency is usually required.

The UK Government has a reciprocal agreement with Governments of some EU and NATO countries whereby we would recognise their vetting as being an equivalent to ours. Decisions will need to be made on a case by case basis”.

I am not so sure. If “case by case” includes Bill Bratton, I would advise the Minister not to rely on his example. After he was forced to resign from the NYPD in the 1990s, he was appointed chief of the Los Angeles police department. Shortly after his arrival, Bill Bratton appointed a Mr John Miller as his chief officer in charge of counterterrorism. To say the least, this was an unusual appointment—although only the kind of one that, unless we change things right across the command ranks of the Met, might happen here—in that John Miller’s previous role had been as head of press and public relations for the NYPD. Before that he had been a senior journalist with ABC News and was very well known for being the last American journalist to interview Osama bin Laden in 1998. In his new post in Los Angeles, it was necessary for Mr Miller to be vetted by the US authorities. When I visited John in his office in Los Angeles there was a prominent photograph on his wall of him with Osama bin Laden, taken during that interview. John told me that the photograph had been there when he had been visited by the FBI vetting officers to consider his suitability for such an important counterterrorism post. They had not asked about the photograph. His appointment was, however, approved. The moral of this story is that it may not be wise to rely on foreign vetting as an alternative to this amendment.

I hope the Minister will recognise that the amendment is designed to enshrine in law exactly what he has said on the Floor of this House and in correspondence. I hope he sees how important the issue is and that he will now accept the amendment. I beg to move.

17:00

[Lord Marlesford (Con)]

The noble Lord made an important point about it never having been the practice that somebody could be commissioner or hold a similar post without having been a police constable. Presumably when Lord Trenchard, formerly Marshal of the Royal Air Force, was appointed Commissioner of the Metropolitan Police, he had not had previous police experience.

[Lord Blair of Boughton]

The noble Lord makes a good point. It was only in the 1970s that the first commissioner who had been a police officer was appointed. Perhaps I should have said that in the past 45 years there has not been one. I certainly accept that the great and the good took those positions in earlier periods.

[Lord Condon]

My Lords, I added my name to the amendment broadly for the reasons that my noble friend Lord Blair set out. This issue is beginning to feel unnecessarily adversarial, and I do not think it needs to be. I hope that we will move rapidly to agreement. I certainly have no wish to block the appointment of an appropriate man or woman with experience in a foreign police force to the post of commissioner.

My point throughout has been only to draw to attention to the fact that, having been a chief constable and the commissioner, I know that in relation to national security and to the protection of Her Majesty, the line of succession and senior politicians, the posts are of a totally different magnitude. The commissioner holds a unique position at the centre of national security issues and in the protection of the monarch. My desire throughout has been simply to draw attention to that distinction and to ensure that if an overseas officer or someone with overseas police experience is appointed to the commissioner’s post in future, we will have taken due cognisance of the difference, the importance and the significance of the security roles et cetera.

I am sure that the Minister and his ministerial colleagues are well aware of the issue now and are seeking to find a form of words that will bring this matter to a satisfactory conclusion. I hope that it will not be necessary to go to a Division on this issue. If it were, I would probably feel the need to support my noble friend Lord Blair, but I hope that the Minister will say enough to reassure me.

[Lord Hope of Craighead (CB)]

My Lords, the Minister may recall that on a previous occasion, when this matter came up in relation to Clause 126, I spoke very briefly in support of the amendment that was then being proposed. The reason I spoke was because two Members of this House, who are not present this evening, made speeches which—to put it as gently as I can—cast doubt on the confidence one should have in the police. I got to my feet not because I agreed with them but because it seemed to me that there was an underlying issue that ought to be mentioned. It is public confidence. It may well be that, because of the very high profile of the posts we are talking about, particularly the post of commissioner, public confidence will be of the greatest importance. For that reason, which I hope the Minister will recall was discussed last time, I will make the same point again, this time in relation to this much more focused and, I hope, more helpful amendment.

[Baroness Smith of Basildon]

My Lords, I am sure that the Minister did not think I would pass up this opportunity. This is an interesting amendment. I was quite surprised to hear the noble Lord, Lord Blair, say that the Minister was going to resist the amendment, because when I read it, especially after our previous debate, I assumed, possibly wrongly, that it reflected what the Minister had said in previous debates and therefore set out the position for clarity in the Bill. Clearly, nobody in your Lordships’ House has criticised in any way the possibility of a police officer from overseas, suitably qualified, becoming a chief constable or the Commissioner of the Metropolitan Police. That is not at issue.

What is at issue is that they should be subject to the same conditions and rules as any member of the UK police force. I am surprised if the Minister does not think that there should be an explanation or guarantee of some form of appropriate security vetting, in the same place as the Bill says that a police officer from an approved overseas police force can be appointed. The change is being made in the Bill; I would have thought, therefore, that any qualification to that change should also be made in the Bill.

I entirely agree with the comments of the noble Lord, Lord Condon, and I hope that the Minister will be able to give some reassurance on this, and will take it away and come back at Third Reading with something that is appropriate and addresses the concerns that have been expressed. I do not think that it is unreasonable. The noble and learned Lord, Lord Hope, made a very strong point about public confidence. It serves public confidence well to understand that if a police officer comes from overseas, particularly in the role of commissioner, which is a counterterrorism role unlike any other chief constable role in the entire country, they will be subject to the same kind and level of vetting as any police officer taking the job from within the UK.

I hope that there has been some misunderstanding or error in the report that the Minister intends to resist the amendment. He has his piece of paper there; I hope it does not say that. I hope he will want to think again and come back. I think that he will have got a sense from your Lordships’ House that there is widespread support for what seems to be a very moderate clarification, and I hope that he can accept it.

[Lord Taylor of Holbeach]

My Lords, this has been a useful debate. I see this as an area of principle. I somewhat regret that the noble Lord, Lord Blair, addressed the issue ad hominem; I think that that was a little unnecessary. The Government take this matter seriously—and take his amendment seriously, too. As I said when responding to similar concerns in Committee, I agree that it is essential that those who are appointed as police officers undergo vetting appropriate to the role they are undertaking. I reinforce that view today. I am grateful to the noble Lord for reflecting on that debate and, in constructing his new amendment, taking the arguments I presented into consideration.

However, while vetting is vital, I do not believe that primary legislation is the place to set out the level of vetting. It is not the place where the level of vetting should be determined. Nor do I see the case for singling out just one chief officer post—namely that of Metropolitan Police Commissioner. As I said in Committee, no Home Secretary—also an appointee of Her Majesty—would make an appointment to the post of Metropolitan Police Commissioner that would put national security at risk. Furthermore, naming,

“developed (or equivalent) security vetting”,

as the requisite standard in primary legislation could be a hostage to fortune. Were the name or criteria for this type of vetting to change, this requirement could become outdated.

However, I have listened very carefully to the arguments that the noble Lord put forward, and there may be some merit in setting out vetting requirements in regulations. It is right for the College of Policing, as the body that sets the standards for policing, to take the lead role in considering whether to propose such regulations. As noble Lords will recall, Clause 111 makes statutory provision for its formal role in the preparation or approval of regulations. I will undertake to draw this matter to the attention of the college.

The noble Lord also highlighted the possibility that in a few years’ time we could find that all the chief officer equivalent posts in the Metropolitan Police, and indeed in other forces, could be filled by persons who have previously never served as a police officer in the UK. I have to say that such a possibility is, at best, theoretical, and I think that the noble Lord would admit that. Under the existing law, it could already be the case that every officer from commander through to deputy commissioner could be a person with no previous policing experience in the UK. That was not the case when the noble Lord, Lord Blair, was commissioner and, in practice, I see no possibility whatever of that happening in future.

We simply do not need legislation to preclude such a possibility. It has never been a legal requirement for the Deputy Commissioner of the Metropolitan Police or for deputy or assistant chief constables in other forces in England and Wales to have been a constable in the UK or a British national. As I indicated, these are not really matters for primary legislation; they are matters that the College of Policing may wish to advise on as matters for regulations—or they are matters that can be stipulated when a particular appointment is advertised. We remain of the view that an amendment to the Police Act 1996 is not required and, accordingly, I cannot undertake to bring forward a Third Reading amendment.

It will be for the Home Secretary to make decisions on the eligibility of applicants for appointment as Commissioner or Deputy Commissioner of the Metropolitan Police, and for the commissioner and chief constables in every other force to decide in relation to other senior posts. It is right that the Home Secretary and police chiefs should be trusted to decide who is best qualified and most appropriate to fill those roles. I cannot undertake to bring forward a Third Reading amendment on this issue, as I said.

I hope that the noble Lord, Lord Blair, will accept that the issues he has raised are not new. They would have arisen whether or not Clause 128 was in this Bill. He is right to raise these matters, but questions about the appropriate vetting of senior officers and about the relevant previous experience of such officers on appointment should not be a matter for primary legislation. However, I will draw this debate to the attention of the College of Policing. It may be that the college will come forward with regulations in future. Accordingly, I invite the noble Lord to withdraw his amendment.

[Lord Blair of Boughton]

My Lords, I thank all those who have spoken in this debate. I hope that the Minister did not think that I was being ad hominem about him as I certainly was not. In the circumstances of the Minister deciding to bring this to the attention of the College of Policing and asking it to consider what level of vetting should be required for the post of commissioner—if that is what he is saying—I shall, in a moment, ask leave to withdraw the amendment. However, I suggest to the Minister that the idea that a person could be appointed to a senior police position who has never previously been a police officer is pretty difficult to contemplate. I was never suggesting that all 35 would be like that as I cannot imagine anybody doing that. However, just the possibility that somebody who has never previously been a police officer could be appointed deputy chief constable seems to be a pretty odd state of affairs. Perhaps the Minister and I could talk about that outside the Chamber just to see whether that is not also something about which we could ask him specifically to ask the College of Policing. I beg leave to withdraw the amendment.

Amendment 92B withdrawn.

17:15

Amendment 93

Moved by

[Lord Marlesford]

93: After Clause 131, insert the following new Clause—
“Littering from vehiclesCivil penalty for littering from vehicles
(1) A littering contravention in relation to a vehicle occurs when a person inside the vehicle acts in contravention of section 87 of the Environmental Protection Act 1990 (offence of leaving litter).
(2) A civil enforcement officer may impose a civil penalty if a littering contravention under subsection (1) has taken place.
(3) The registered keeper of the vehicle shall for the purposes of section 87 of the Environmental Protection Act 1990 be treated as knowingly causing the littering contravention whether or not he gave any instruction for this to be done and shall be the recipient for a civil penalty under subsection (2).
(4) A civil penalty is not payable under this section by the owner of a vehicle if that vehicle is—
(a) a public service vehicle, within the meaning of the Public Passenger Vehicles Act 1981;(b) a hackney carriage licensed under the Town Police Clauses Act 1847 or the Metropolitan Public Carriage Act 1869;(c) a vehicle licensed under section 48 of the Local Government (Miscellaneous Provisions) Act 1976 (licensing of private hire vehicles);and the person acting in contravention under this section is a passenger in that vehicle.(5) The amount of a civil penalty under subsection (2) is to be specified in regulations.
(6) The procedure for imposing a civil penalty on a person and for recovery of costs is to be set out in regulations.
(7) The regulations must, in particular, require the responsible authority to give the person written notice specifying—
(a) the amount of the penalty,(b) the reasons for imposing it, and(c) the date by which and manner in which it is to be paid.(8) Regulations may—
(a) give a person on whom a civil penalty is imposed a right to appeal against the decision to an adjudicator;(b) specify the grounds on which a person may request an appeal;(c) specify the time within which a person must request an appeal;(d) make provision for and in connection with the appointment of adjudicators;(e) make further provision about appeals (including provision as to the powers available on an appeal).(9) The registered keeper of the vehicle for the purposes of this section shall be taken to be the person in whose name the vehicle was registered under the Vehicle Excise and Registration Act 1994 at the time of the contravention.
(10) A civil enforcement officer under this section must be—
(a) an individual employed by the responsible authority, or(b) where the authority has made arrangements with any person for the purposes of this section, an individual employed by that person to act as a civil enforcement officer.(11) A vehicle for the purposes of this section is a motor vehicle as defined in section 185(1) of the Road Traffic Act 1988.”

[Lord Marlesford (Con)]

My Lords, I am bringing back as Amendment 93 on littering from vehicles an amendment that we discussed in Committee. I remind your Lordships of the need for the amendment, which was discussed very fully in Committee. It is a sad fact that Britain is a particularly dirty country in terms of litter. Not only do we compare very unfavourably with most of our peer group in Europe, we sadly compare unfavourably with a number of other countries that are much less privileged than us but make much more effort to see that there is not litter. The contribution to litter by people throwing litter out of vehicles is a serious and significant part of the problem of littering.

The purpose of my amendment is to close a loophole. Although littering from vehicles is a criminal offence, nothing can be done under the present law unless it is possible to identify exactly who threw the litter out of the vehicle. I am trying to supplement that arrangement—not replace it—by saying that if litter is thrown from a vehicle, then the keeper of that vehicle should be subject to a civil penalty on rather the same basis as a keeper of an unwisely parked vehicle is subject to a fine of £80 or so and it is up to them whether they recover it from the person who was driving the vehicle. It is a civil offence intended as a deterrent.

This argument has been put forward for a very long while by CPRE—perhaps I should declare an interest as having once been the national chairman of CPRE for five years—and the Keep Britain Tidy group. They are both very keen on it. I introduced a Private Member’s Bill earlier this year for the same purpose. Both that Bill and my amendment in Committee received widespread support—virtually universal support—in the House from the Back Benches and from the noble Baroness on the Labour Front Bench, whom I would particularly like to thank. It is not a party-political matter in any sense. It is purely a matter of being able to do something that will actually resolve the situation.

Obviously, the amendment has been around a long time, but I know that there have been differing views inside Whitehall as to whether it should happen. There tends to be an inclination by civil servants in one department to take up a position and be reluctant, perhaps, to change their position. This sometimes causes a problem, with Ministers having either to overrule them or to accept their advice. Life is busy and there is often an inclination to have a quiet life. I am afraid that this is too important for Ministers to have a quiet life over it.

I have had very constructive and helpful discussions with the Minister on several occasions since Committee. I had a final and very useful discussion on Thursday last week, at which he advised me that the Government accepted the principle of what I wanted to do, but rather than accept the amendment as such—and I quite understand this, because it is late in the day to accept the amendment or amend the amendment—they wanted to do it by taking powers to make an order to achieve the objective. The Minister has indicated to me that he will be doing that at Third Reading. He will be introducing to the Bill powers to make an order that will enable the issuing of a civil penalty for littering from vehicles where it is not possible for there to be a prosecution.

I do not disagree at all that in general littering should be a criminal offence. There are some very serious examples of littering—for example, fly-tipping and things such as that. Therefore, I am not in any sense divided from the Government by this. All that did divide us, but I think no longer does, is that there should be a supplementary provision for civil penalties, which will provide a deterrent for people who at the moment feel that they can perfectly happily and safely chuck stuff out of vehicles without anybody being able to do anything about it.

I am very aware that having a power to make an order is not of itself enough. What is needed is to make the order. I hope that the Minister will be able to assure me that the Government will be on the lookout to ensure that there is no “Yes Minister” scenario to delay matters. I experienced this once before on an amendment that I put forward to introduce an electronic firearms register. It took a very long time but it went through and worked extremely well, I am glad to say. There are other examples. I remember being involved in the Private Member’s Bill on the Parliament Square issue. Again, an awful lot of arguments were put forward as to why it could not and should not be done, but I think that your Lordships realise how much better Parliament Square is now than it was before without in any way having reduced the facilities for lobbying, which we all support. However, that is a quite different matter. I hope that my noble friend will ensure that the order is in place at the very latest by May 2015, a date of some relevance on the political calendar.

Finally, I was lucky enough at one time to have as a political master someone from whom I learnt an enormous amount—Ernest Marples. He was a brilliant Minister but he always had a great adage: “It is not what you say that matters; it is what you do”. With that, I beg to move.

[Lord Sherbourne of Didsbury (Con)]

My Lords, I support the motive behind the amendment of my noble friend Lord Marlesford. I think that everyone agrees that litter is a scourge and that it is getting worse. Were it not for the street cleaners, who are the unsung heroes of our local communities, we would realise how terrible is the amount of litter that is thrown and discarded. It is partly a matter of disfiguring the environment but it also poses a potential serious danger to other drivers on roads. Therefore, I hope that the Minister will give a very sympathetic response to my noble friend’s amendment.

[Lord Deben (Con)]

My Lords, having fought some of the battle with my noble friend and neighbour on this matter, I just wish to commend to your Lordships the constant pressure that my noble friend has brought to bear on this simple issue.

I draw just one thing to the attention of the Minister, who I understand is going to be extremely helpful: this is a symbol of trying to do the things that everybody wants done. The most frustrating thing in life is that there are many things which everybody wants done but which the Government always find impossible to do. I am afraid that the phrase “Better not, Minister” is one of the most dangerous that civil servants tend to use. Often, one should say, “Better to do things, Minister”. It is better to try and better to see whether we can solve this problem rather than have constant debates of this kind.

Therefore, if, as it appears, the Minister is going to be accommodating, I am sure that he will be accommodating quickly. That will show my noble friend Lord Marlesford that his pressure for sensible, moderate and reasonable changes in the law has again been successful, and I hope that your Lordships’ House will congratulate him on it.

[Lord Cormack (Con)]

My Lords, as one who spoke at the Second Reading of my noble friend’s admirable Bill, I want to say how much we appreciate his persistence in good causes. He did a very splendid job for five years as chairman of the CPRE and when he gave up that particular job he did not give up the interests that went with it: keeping a cleaner, tidier and more beautiful Britain. Having been a constituency MP, I know that when people indiscriminately chuck things out of the windows of their cars, some of the loveliest reaches of the countryside can be truly defaced.

My noble friend had a brief word with me before this debate and I am delighted to hear that the Minister has been—not at all surprisingly—both engaged and helpful in this cause. I hope that at the end of this debate we will have the confirmation in Hansard of that helpfulness and can go forward, make those people who despoil our country guilty of what they do and ensure that they are suitably reprimanded.

[Lord Crickhowell (Con)]

My Lords, I spoke on the last occasion that my noble friend brought this matter forward and I am delighted at the outcome. I add only one thing. I do not often put down Parliamentary Questions these days, but if I do not see an order appearing, I will put down Parliamentary Questions and will do so, if necessary, with increasing frequency as that memorable date in May 2015 approaches.

[Baroness Smith of Basildon]

I rise briefly, having supported the noble Lord, Lord Marlesford, when he raised this issue in Committee and at Second Reading. He is wise not to rely on the Private Member’s Bill route at present, since we have a number of Fridays when we are discussing just one Bill, which crowds out every other Bill that noble Lords wish to bring forward. I agree with the noble Lord, Lord Deben, about “Better not, Minister”, or “Better, Minister”. I think that the phrase in the “Yes Minister” series—which I heard myself as a Minister—was, “That’s very courageous, Minister”, which, from civil servants, is not praise. I hope that the Minister has not had to be too courageous in accepting the principle behind this amendment.

I want to raise a couple of thoughts, because this is a big issue. The cost to councils is enormous. I come from a generation that came home from school or from shopping with our hands stuffed full of any litter we had had during the day. Sadly, that is not always the case now. Sometimes the methods used are not entirely appropriate, although the problem has to be dealt with.

I have one concern. As I understand it, the Minister will bring forward an order-making power at Third Reading, but I take the comments from noble Lords opposite that we need assurance that the order will not be delayed and will be fairly swift. We all know how long orders can take. Given that they are unamendable—though they have to be consulted on—it should not take too long. If the Minister can give assurances or any guidelines on the timescale in which he expects to bring the order forward, that would be helpful. Otherwise, I am delighted with the news that the Minister accepts the principle of this amendment.

[Lord Taylor of Holbeach]

My Lords, I have sat listening to noble Lords’ expectations thinking, “No pressure, then”, so I hope that I do not disappoint noble Lords. I am grateful to my noble friend for bringing forward his amendment. All noble Lords share his concern about littering; indeed, as all who have spoken in this debate have said, it is anti-social, causes a nuisance, is an eyesore for the communities in which we live and can cause harm to the environment and, potentially, other road users. It is unacceptable behaviour and should be treated as such.

My noble friend describes his amendment as a simple measure to “fix” a problem. I have not heard the words quoted by my noble friend Lord Deben—“Better not, Minister”—in all my time, albeit brief, in ministerial office, although he of course had a longer time in office and perhaps had to deal with slightly more weighty matters than I have. When my colleagues who work with me on this Bill talk to me, they demand not “courage” or sensitivity to other considerations that they do not believe to be justified; I find them remarkably supportive and they have been very supportive on this measure.

17:30

However, I think that my noble friend Lord Marlesford will accept that the problem is quite difficult to fix in legislative terms. The House will know that similar powers are being enacted through local legislation in London. This amendment would extend the application of the law to registered keepers of vehicles countrywide.

If my noble friend’s amendment were to proceed, it would be necessary to consider whether it would be a matter that is reserved to Westminster or one that is devolved. For example, the subject matter of the Road Traffic Act 1988 and other road traffic matters are reserved under the Scotland Act 1998, but responsibility for matters relating to the environment is generally devolved to all three of the UK’s devolved Administrations. We can already see some of the complexities that arise.

Our colleagues in Scotland, Wales and Northern Ireland should therefore have the opportunity to consider whether or how a civil penalties regime should apply to them, and how to deal with cross-border issues if they decide to take a different approach to that in England. Given that there is now insufficient time to secure any necessary legislative consent motion, my instinct is that any provision at this stage ought to be confined to England only.

Just as importantly, as it is currently drafted, the amendment does not actually replace the criminal offence of littering from vehicles with a civil offence, which I believe is my noble friend’s intention. Instead, it places an additional civil liability on the registered keeper, whether or not the actual litterer can be identified. If the litterer and the registered keeper are the same person, that individual could find him or herself facing both the criminal and civil sanctions for the same offence. That would raise some questions about which regime should take precedence. I do not seek to answer those questions in this debate, but I pose them as relevant to the complexity of the issue.

I think that the provisions would also benefit from setting out more clearly certain other matters relating to the civil penalties themselves, including how the income from penalty charges under this regime could be used. It would also be helpful to clarify the identity of the responsible authority referred to in subsection (7) of the proposed new clause, particularly since responsibility for keeping major highways such as motorways clear of litter and refuse rests with the Highways Agency rather than with local authorities.

None of these issues is insurmountable. What I can say to my noble friend is that the Government accept that councils may need the power to issue civil penalties to the registered keeper of a vehicle from which litter is thrown. Given that Third Reading is only a week away, there is now insufficient time to work up a detailed scheme. Indeed, I note that my noble friend’s amendments left issues in relation to appeals to secondary legislation. I do not believe that it would be sensible or appropriate to rush into detailed primary legislation on this issue without further consultation with local authorities and other interested parties.

What I would therefore like to propose is that, if my noble friend is willing to withdraw his amendment, I can undertake to bring forward a government amendment at Third Reading that would introduce a power for the Secretary of State to implement through regulations a new regime of civil penalties in respect of littering from vehicles. This approach will enable us to properly consider the issues I have just outlined as well as other details which it will be crucial to get right to ensure that the powers work as intended—I think that my noble friend would agree with me.

A number of noble Lords—the noble Baroness, Lady Smith, and my noble friends Lords Marlesford and Lord Crickhowell—mentioned that they wanted no unnecessary foot dragging. I note that point. I have no wish to be assailed by questions from my noble friend Lord Crickhowell for dilatoriness. Given the complexities, of which I have spoken, it is not possible to give a firm date at this stage. Should Parliament grant us the powers, I am sure that my noble friend will not let us forget that we have them. I would be happy to keep him informed periodically.

[Lord Crickhowell]

In the light of what my noble friend said about the devolved Governments, will he undertake to draw the attention of those Administrations to what has been said in this debate and the action that the Government are now taking so that there is some hope that similar action will effectively be taken in the devolved countries?

[Lord Taylor of Holbeach]

I recognise the fact that my noble friend lives outside England, so he has an interest in making sure that those of us in this country do not all drive across the border—

[Lord Crickhowell]

Five hundred yards outside England.

[Lord Taylor of Holbeach]

It is even more pertinent to the issue he raises. I will, indeed, draw to the attention of the devolved authorities what we propose when Parliament has approved the Third Reading amendment that we are tabling.

I shall conclude by saying that I and my ministerial colleagues share my noble friend’s abhorrence of roadside litter and his deep distaste at the behaviour of those who carelessly discard things from their vehicle. We have already discussed at length the kind of problems that can arise if the law on this subject is difficult to interpret or enforce. I am sure that my noble friend agrees that we need to ensure that we get the legal detail right. I hope that my noble friend will withdraw his amendment and allow us to bring forward an alternative that will meet all our aspirations.

[Lord Marlesford]

My Lords, I am obviously extremely grateful to my noble friend for what he said. I am well aware that it involved the political elite of the country in coming to this conclusion, and I much appreciate the fact that my right honourable friend the Home Secretary is also in support and, indeed, my right honourable friend the Environment Secretary was involved. The answer is that it is wonderful that we are about to make a great step forward. As to where it applies, I will happily buy England only so as not to delay it and, indeed, perhaps it could become a minor or major issue on the future of Scotland. They can discuss what part they will play. In the light of what my noble friend so graciously and kindly said, I have pleasure in withdrawing my amendment.

Amendment 93 withdrawn.

Clause 132: Information about guests at hotels believed to be used for child sexual exploitation

Amendment 93ZA

Moved by

[Lord Ahmad of Wimbledon]

93ZA: Clause 132, transpose Clause 132 to after Clause 106

[Lord Ahmad of Wimbledon]

My Lords, I can be brief with the government amendments in this group. The substantive one is Amendment 96AC, which implements a recommendation made by the Delegated Powers and Regulatory Reform Committee in respect of a delegated power in the Bill’s provisions on child sexual exploitation at hotels. The committee recommended that the regulation-making power in Clause 132 should be subject to the affirmative procedure, given that it confers a power for the police to gather information about hotel guests and that there is nothing in the Bill to restrict the use that may be made of information provided to the police.

This power is already limited to the information that can be readily obtained from guests and does not impose a requirement on guests to provide the information. However, we are happy to accept the point made by the committee and place an additional safeguard on this power. The amendment to Clause 167 therefore ensures that regulations specifying additional categories of information should indeed be subject to the affirmative procedure. The other amendments in this group simply transfer these provisions to Part 9 of the Bill, which is a more appropriate home for them than Part 11. I beg to move.

Amendment 93ZA agreed.

Clause 133: Appeals against notices under section 132

Amendment 93ZB

Moved by

[Lord Ahmad of Wimbledon]

93ZB: Clause 133, transpose Clause 133 to after Clause 106

Amendment 93ZB agreed.

Clause 134: Offences

Amendment 93ZC

Moved by

[Lord Ahmad of Wimbledon]

93ZC: Clause 134, transpose Clause 134 to after Clause 106

Amendment 93ZC agreed.

Clause 139: Port and border controls

Amendment 93ZD

Moved by

[Lord Taylor of Holbeach]

93ZD: Clause 139, page 107, line 22, leave out “which amends” and insert “amendments of or relating to”

[Lord Taylor of Holbeach]

My Lords, Schedule 7 to the Terrorism Act 2000 is an important part of the UK’s counterterrorism strategy. The amendments to that schedule in the Bill were made in line with our ongoing commitment to ensure that respect for individual freedoms is balanced against reducing the threat of terrorism to the public here and to British interests overseas. We understand, even from our recent debates, that there remain aspects where we could go further in reforming the operation of the powers in Schedule 7. Let me set out the basis for the Government’s amendments in this group and I will then respond to the amendments in the names of the noble Lord, Lord Pannick, and my noble friend Lord Avebury when winding up the debate.

Amendments 93F and 93G, which relate to England and Wales and to Scotland respectively, clarify how the right to consult a solicitor as soon as reasonably practicable, privately and at any time, may be exercised by a person detained under Schedule 7 to the 2000 Act. These amendments make clear that a detained person who exercises the right to consult a solicitor may not be questioned until they have consulted a solicitor or no longer wish to do so. This is an important clarification and will put beyond doubt that examining officers must not question a detained person who has requested to consult a solicitor.

In the distinct context of a person detained at a port, an airport or an international rail station, consultation with a solicitor will ordinarily be by telephone, video call, text message or e-mail. The amendments provide that an examining officer may question a detained person who wishes to consult a solicitor if the officer reasonably believes that postponing the questioning would be likely to prejudice determination of whether the detained person appears to be a person concerned with the commission, preparation or instigation of acts of terrorism. That is unlikely, other than in circumstances where a detained person insists on speaking with a particular solicitor who remains unavailable set against the statutory time limit for conducting the examination.

The amendments also clarify that a detained person is entitled to consult a solicitor in person. This is an entitlement, not an absolute right. Where a person is detained at a port, an airport or an international rail station there may not be suitable facilities available for a personal consultation. These places are not police stations. If a detained person wishes to consult a solicitor in person, the examining officer will have to have regard to the facilities available for a private consultation and the time it will take for a solicitor to arrive at the port and to access the secure area where the person is detained. Where escort officers are available, and without detracting from the policing of the port, the examining officer may decide to transfer the detained person to a police station to facilitate a consultation in person, although that will extend the duration of the person’s detention.

Similar provision is made to allow an examining officer to question a detained person who asks to consult a solicitor in person. This might occur where the detained person insists on speaking in person with a particular solicitor and the time it would take for the solicitor to arrive at the port or the police station would consume a substantial portion of the limited time available for the examination. In that instance the officer may require the consultation to take place by telephone.

17:45

I turn to Amendments 93J and 93N. These respond to a commitment I gave in Committee to further consider an amendment tabled by my noble friend Lord Lester of Herne Hill which sought to build on one of the key changes we are making in the Bill, namely the introduction of a statutory review of detention under Schedule 7 to the 2000 Act. On reflection, we agree with my noble friend that the periods for the new review of detention should be specified in primary legislation rather than in a code of practice. The amendments provide for a first review of detention by a review officer no less than one hour after the start of detention and for subsequent reviews at intervals of no more than two hours. However, the Government’s amendments in respect of the review of detention go further than that. We are providing not only a new statutory review of individuals’ detention under Schedule 7 but additional new safeguards to ensure that persons whose detention is subject to review will, for the first time, have a right to make representations about their detention and a right to be informed of any rights that they have not exercised. I beg to move.

[Lord Pannick (CB)]

My Lords, Amendments 93A to 93D are in my name and the names of the noble Lord, Lord Lester of Herne Hill, the noble Baroness, Lady Kennedy of The Shaws, and the noble and learned Lord, Lord Hope of Craighead. They concern the power to detain people at ports and airports and the power to copy and retain their personal electronic data, and propose that these powers should be exercisable only if the officer reasonably suspects that the person concerned is involved or has been involved in acts of terrorism. Your Lordships will know that the application of the existing powers is currently the subject of litigation in the David Miranda case concerning the detention of the partner of a journalist on the Guardian newspaper, but I do not want to address the circumstances of that case. I want to focus on the principles.

I have no quarrel with the Bill recognising that the power to stop, question and search at a port or airport should be exercisable whether or not there is any reasonable suspicion. However, I believe that the more intrusive powers of detention of persons and retention of their electronic data must be subject to greater safeguards. The Joint Committee on Human Rights has so recommended in its very helpful reports, most recently in its ninth report, published on 6 January. The Terrorism Act 2000, which Schedule 8 to this Bill would amend, allows for detention without any need for the officer to have any suspicion, reasonable or otherwise. The Bill would allow for detention for questioning for up to six hours—a very substantial interference, on any view, with individual liberty.

The independent reviewer of terrorism legislation, Mr David Anderson QC, has stated that there should be greater protection for individuals before they are detained or their electronic data are copied. In his evidence to the Joint Committee, at paragraph 28 of the ninth report, Mr Anderson said:

“It is hard to think of any other circumstances in which such a strong power may be exercised on a no-suspicion basis”.

Indeed, the Joint Committee noted that the Government were unable to give any other examples of such intrusive powers being exercisable without a requirement of some kind for suspicion.

Mr Anderson concluded that the threshold should be subjective suspicion on the part of a senior officer. The Government have not brought forward an amendment to introduce even that limited test, but, in any event, I do not think that such a control would be adequate in the context of the detention of persons and the copying and retention of personal electronic data. As the Joint Committee concluded, a subjective suspicion threshold is no safeguard whatever. Simply to require that an officer in fact suspects provides no independent scrutiny of the officer’s reasoning. The development of administrative law over the past 40 years confirms that subjectively worded powers are simply incompatible with effective legal control.

It is true that Mr Anderson was not persuaded that an objective test of reasonable suspicion was appropriate in this context. Mr Anderson’s concern is that this would impose too great an interference with policing powers, especially having regard to the difficulty in identifying wrongdoers and the appalling devastation that terrorists can cause. Despite the genuine respect which I have for Mr Anderson, I think his conclusions on this subject are wrong. The concerns to which Mr Anderson rightly draws attention—the difficulties of detection and appalling consequences of failing to identify wrongdoers—are well understood by the courts. Such factors would inevitably and properly be given great weight by the courts when deciding whether there was reasonable suspicion to justify the detention.

The noble and learned Lord, Lord Hope of Craighead, spoke for the Appellate Committee of this House in addressing what a reasonable suspicion test means in the case of O’Hara v the Chief Constable of the RUC, 1997 Appeal Cases at 286. That was a case concerned with the police power to arrest a person who the officer has reasonable grounds for suspecting to be a terrorist. The noble and learned Lord, Lord Hope, emphasised that such a test required the court only to assess the information in the mind of the arresting officer at the time, whether based on his own observations or what he had been told by others, and whether or not the information he had in his mind at the time later turned out to be false.

If it is truly the case that the detention is not reasonable on the basis of what was known to the officer at the time of the detention, having regard to the difficulties in identifying terrorism and the appalling consequences of letting a terrorist go through, then detention should simply not occur.

When this matter was discussed in Committee, the noble Baroness, Lady Smith of Basildon, speaking from the Opposition Front Bench, referred to the difficulty in finding an appropriate balance in this context. I recognise the difficulty, but the House needs to confront it. Without a reasonable suspicion test the powers conferred by the Bill involve no balance at all. The powers provide inadequate protection for the citizen, inadequate encouragement to officers to maintain high standards and inadequate assurance to the public to promote the support on which effective policing depends, especially when we all know that these powers are used against black and ethnic minority individuals to a disproportionate extent compared with their numbers in the population.

[Lord Lester of Herne Hill (LD)]

My Lords, when I was young at the Bar, there was a High Court judge who used to make a habit when he was giving judgment of simply saying, “I agree”. Having heard the noble Lord, Lord Pannick, I am tempted just to say, “I agree”. However, I wish to add a few points which he has not made and which it may be appropriate for me to make at this stage.

First, perhaps I may record, as a member of the Joint Committee on Human Rights, our misfortune at having lost the noble Lord, Lord Faulks, as a recent powerful and distinguished member, and the good fortune of the Government in having him—now in a sedentary position, unfortunately—on the Front Bench.

Secondly, the Joint Committee on Human Rights recorded in its earlier report its welcome of the government amendments that the Minister has described. I simply echo our appreciation of the amendments that are before us now.

Thirdly, I do not wish to say anything about the pending Miranda case but I do not see that its outcome will in any way affect the Government’s decision on whether to accept this amendment as it is not the function of the court in that case to decide on a future scheme that better protects liberty.

Fourthly, there is another case pending in the European Court of Human Rights—the case of Malik—to which the Joint Committee referred in paragraph 108 of its fourth report. What we are now saying today will be read by the Strasbourg court in disposing of that case. One of the reasons I am adding to the speech of the noble Lord, Lord Pannick, is that I hope that the way in which the Government and the Official Opposition reply to this will be helpful to the Strasbourg court.

In the Malik case, there is a root and branch attack on the compatibility of the schedule with the European Convention on Human Rights. The Joint Committee on Human Rights has said that it has little doubt that that challenge will fail. There is nothing inherently incompatible between the schedule and the European Convention on Human Rights. However, as many lawyers will remember, there have been a whole series of cases in Strasbourg with names such as Klass against Germany and Malone against the United Kingdom where the Strasbourg court has said that it is necessary that there are adequate safeguards against the abuse of powers, including police powers. This amendment addresses the need for more adequate safeguards.

My view is the same as that of the noble Lord, Lord Pannick—indeed, I look forward to the speeches of the noble Baroness, Lady Kennedy, and the noble and learned Lord, Lord Hope of Craighead—and probably all of us agree that there is a need for more effective safeguards against the possibility of abuse. An objective, reasonable standard seems to be the minimum that is now required. The Joint Committee has considered this twice—once in its original report and once in its most recent report—and came to the firm view that these safeguards are necessary. If the Government were to reject that opinion today, all I can say is that if I were in Strasbourg arguing for the Crown I would find myself in some difficulty because I am convinced that the Strasbourg court will scrutinise the reasons the Minister will give in deciding whether there are adequate safeguards. In other words, I think Mr Malik will lose but it would be a pyrrhic victory for the Government unless they were able to convince that court that there were adequate safeguards. I would rather avoid that today by putting the adequate safeguards into the Bill instead of waiting for another defeat in Strasbourg, in effect, and having to do it on a further occasion.

18:00

[Baroness Kennedy of The Shaws (Lab)]

My Lords, I, too, support the amendment. I have had reservations about the use of the power to stop and search without having reasonable suspicion. I think it lends itself to a certain amount of abuse and undermines relations with minority communities. I know this because of cases that I have done and I have heard this point expressed frequently by families in those minority communities.

The amendment raises the issue of stopping and searching and then going further. It involves more intrusive powers than simply stopping and searching. Often stopping and searching is used—I think the House should know this—as a way of recruiting informants. It does not very often produce a case against anybody but it provides opportunities for those involved in the security services to have a word with young men and to see whether they are likely to be of assistance and might be recruited as informants.

The concern that we have with this amendment is about the facility that is open to the powers that be at the airports and ports and wherever people are stopped to take computers and clone their contents. That should involve some reasonable suspicion before it is done. We should be able to move to that higher threshold of an officer being able to justify why that is being done. It would be very rare that it would be done without some explanation by an officer as to why they had made the decision to retain the content of mobile phones or whatever it is. This is another of those steps of intruding into the lives of citizens. We should be very anxious that this is not done without officers knowing that they will have to give some account of why they have sought to do this. That is not expecting too much of those who are at the borders and who are providing us with this kind of protection.

That is why the amendment has been put together. We are talking about the next stage. I do not believe officers usually move to that next stage without their having reasonable suspicion and without therefore being able to give an explanation as to why they need the extra powers that are involved in this new legislation.

[Lord Hope of Craighead]

My Lords, I put down my name in support of this amendment for the purpose of drawing attention to a case decided by the Supreme Court in October 2013. It was not mentioned or discussed in the report of the Joint Committee on Human Rights, but it has a bearing on this issue in connection with the amendment moved by my noble friend Lord Pannick. Before I do that, I should like to express my appreciation of the amendments tabled by the Minister in relation to the protection of people who are detained and also the timetable which is set out in the amendments.

I had occasion to look at this very closely in a case from Scotland following on a decision by the European Court of Human Rights in Strasbourg in a case called Salduz. It is clear that the amendments which the Minister has tabled are necessary in order to meet the requirements of the convention for the protection of people who are detained, in particular the right to consult a solicitor. I appreciate the careful way in which that problem has been addressed.

As for the timetable, it is appropriate that this should be in the Bill. In 1980 a provision was introduced in Scotland to give the police the power to detain somebody prior to arrest. In that provision, the timetable was set out. It had to be amended in the light of recent developments following the case of Salduz, but again the timetable was in the Bill. I believe that, for the protection of the subject, that is where it should be, so I welcome the way in which these amendments have been framed.

In the Supreme Court, the case R v Gul was concerned with the definition of terrorism, which is set out in Section 1 of the relevant Act, and the concerns expressed about the breadth of it. Terrorism, as defined in that, has a succession of various acts. People’s perception of what amounts to terrorism can vary according to what their perception is of what is going on and where these activities are being conducted. It is not necessary to discuss that issue today, but it has a bearing on what may be passing through the mind of the port officer who has the power to detain and on the need for some protection of the subject because of the way in which that power may be exercised.

I should declare an interest as I participated in that judgment and was particularly concerned about this issue in our discussions. At the end of the judgment, in paragraph 64, the Supreme Court noted that,

“under Schedule 7 to the 2000 Act the power to stop, question and detain in port and at borders is left to the examining officer. The power is not subject to any controls. Indeed, the officer is not even required to have grounds for suspecting”,

which is of course the whole point to which the amendment draws attention. Although the court went on to add that it was not concerned with that issue in that appeal, the last sentence of the judgment reads:

“Detention of the kind provided for in the schedule represents the possibility of serious invasions of personal liberty”.

It is worth bearing in mind in support of the point that has been made that that has been a concern expressed by the Supreme Court in addition to others.

The noble Lord, Lord Pannick, was kind enough to mention what I said in the case of O’Hara, which was the first judgment I ever delivered in this House many years ago. The test which I set out, and which has been recognised, is not particularly exacting. It is partly subjective and partly objective. The subjective part is important because it looks only to what the officer says was passing through his mind at the time. The objective part is that somebody else stands back, takes what was passing through the officer’s mind at the time he was exercising his judgment and asks the question “Did that justify what he did?” That was how the power given to the police was expressed. It does not set a particularly high standard, but it is a protection. It is that protection which is absent at the moment and which I respectfully suggest is in need of being written into the Bill to meet the concerns that have been expressed by various people, including the Supreme Court.

[Lord Lloyd of Berwick (CB)]

My Lords, perhaps I could just have a brief word on Amendments 93A and 93B. There has been much discussion over the years as to whether the right to stop under Schedule 7 should be available only on reasonable suspicion. I am glad that the amendment now before the House does not go that far. The arguments in favour of and against the power to stop without reasonable suspicion are all very well set out in the excellent recent report of David Anderson, the reviewer. Unfortunately, that particular question was not included in the public consultation which took place in 2011. My view has always been in favour of the power to stop without reasonable suspicion. There is no real analogy with the power to stop under Section 44 of the Terrorism Act. But the power to detain—that is, the power to detain under paragraph 6(1)(b)—seems to me altogether different.

By the time that power is exercised, the person in question will have been questioned for up to an hour. All the benefits of the power to stop without suspicion, which I strongly believe in, particularly the deterrent effect of that power, will by then have accrued. Moreover, the examining officer will have had ample time during that hour to explore whether there are grounds for reasonable suspicion. The balance of arguments seems therefore to shift decisively in favour of reasonable suspicion being the test at that stage. For that reason, I support the amendment.

Perhaps I may say in passing how glad I am that the maximum period of detention has been reduced from 24 hours, as it was when I was considering these matters many years ago, to the six hours which is now proposed. That seems to me altogether admirable, as are the other amendments put forward by the Government.

[Lord Avebury (LD)]

My Lords, I also want to add a word in support of the amendment which was moved so comprehensively and powerfully by the noble Lord, Lord Pannick. I am disappointed that the Minister has not had time to make any observations about the two cases that I cited at an earlier stage. The first was where a distinguished imam was stopped at Heathrow Airport, made to give a DNA sample and fingerprints and detained for some time. It took me 15 months to get the DNA sample removed and his name expunged from the records. The second case was of a gentleman who was stopped three times within the space of months, indicating, to my serious concern, that there must exist a blacklist of people who are to be stopped when they pass through airports or sea ports. That is a very serious development on which I had hoped the Minister would be able to make some observations by now.

Amendment 94ZA in my name would delete the whole of new paragraph 11A from Schedule 7 to the Terrorism Act. That paragraph covers the power to take possession of anything that is found when a person is examined or searched at a port of entry, including not only electronic materials but papers, photographs, videos or audio cassettes, and to keep a copy of that material for as long as it is considered necessary for the purpose of determining whether a person falls within Section 40(1)(b); that is, that he is or has been concerned in the commission, preparation or instigation of acts of terrorism. It is clear that the vast majority of people who are held at the ports of entry have nothing to do with terrorism whatever. When this matter was discussed on 11 December, the Minister quoted the observation of the independent reviewer of terrorism legislation that,

“‘it is of vital importance that the copying and retention of data from mobile phones and other devices should be provided for by a law that is clear, accessible and foreseeable’”.—[Official Report, 11/12/13; col. 813.]

However, that statement was not the whole story, as the Minister knows, and it was a little disingenuous of him to omit the rest of Mr Anderson’s comments in his evidence to the Home Affairs Select Committee on 20 November. He recommended that the power to copy and retain data from electronic devices should be exercisable only if a senior officer was satisfied that there were grounds for suspecting that the person appeared to be concerned in the commission, preparation or instigation of acts of terrorism. Mr Anderson went on to compare the indefinite retention of those data with the period of 48 hours that applies to the retention of documents copied under reasonable suspicion powers such as Section 43 of, and Schedule 5 to, the Terrorism Act 2000. He did say that electronic data can be held for very long periods under the management of police information regime, a practice that had recently been criticised by the courts and which is in marked contrast to the rules and guidance that exist under the Protection of Freedoms Act 2012. There should be some consistency between these different regimes while allowing a margin of appreciation in cases where there is a reasonable suspicion of terrorism.

18:15

The Minister should also note the assertion before the court in the Miranda case that the powers of copying and retention generally, and not just of electronic material, are disproportionate and incompatible with Articles 5,6,8 and 20 of the European Convention on Human Rights. I do not want to go into the Miranda case like other noble Lords who have spoken, but, last week, a delegation from the World Association of Newspapers and News Publishers visited the UK to look into, among other things, the implications for press freedom of the extraordinarily wide powers to seize and retain electronic material. The least that we should demand is that, as David Anderson finally recommends, the Government ensure that private electronic data gathered under Schedule 7 are subject to proper safeguards governing their retention and use, and that adequate safeguards are provided for legally privileged material, excluded material and special procedure material, on which he promises further observations after judgment is given in Mr Miranda’s case against the Metropolitan Police for misuse of Schedule 7 powers.

The Minister, my honourable friend Norman Baker, wrote in his letter of 11 November to the JCHR, responding to recommendation 36 of its report on this Bill, that the Government would consider the judgment of the court in the judicial review of David Miranda’s examination and the observations and recommendations of the independent reviewer on that examination, but I hope that, at the same time, he will also consider the recommendations already made by the independent reviewer as mentioned. I do not know what the timescale for this would be, but to give Ministers a chance to start their review with a blank sheet of paper, I commend this amendment deleting new paragraph 11A.

[Baroness Smith of Basildon]

My Lords, as always on such issues, these are interesting debates, and I always note that I am one of the few non-lawyers to speak in them. Like the noble and learned Lord, Lord Hope, I put on record my thanks to the Government for their letter of 15 January in which the Minister explained the changes that were being made to the Bill—it should be understood that your Lordships’ House welcomes those. We concur with the Minister’s judgment about the David Miranda case and we, too, await the judicial review and any report from David Anderson. It may be helpful if we have a discussion once we have received that report.

The amendments before us today highlight issues of concern not just in the law but in the way in which the law may be implemented. However, as I said in Committee, we also take note of the comments of David Anderson as independent reviewer and we are not persuaded to support these amendments tonight. We would support further consideration of Amendment 93B if there were any further incidences of improper detention of citizens from Northern Ireland, but that consideration needs to take the form of a proper consultation involving the Department of Justice for Northern Ireland, the Irish Government as well as the Police Service of Northern Ireland. The PSNI has the unique task of policing a land border with the Republic of Ireland and it rightly requires additional powers to enable it to reduce border crime and prevent dissident attacks. We therefore cannot support Amendment 93B.

There is more work to be done on some of these issues. We certainly want to return to the Miranda judgment when it comes out.

[Lord Lester of Herne Hill]

The noble Baroness has explained that the Opposition are not able to support the amendments, but she has not explained why. Could she tell the House why the Opposition do not consider that a standard of reasonableness, in view of the severity of the sanctions, is appropriate?

[Baroness Smith of Basildon]

My Lords, we have two reasons. First if the noble reads my comments in Committee, he will see that we gave further information on that. Secondly, we take the view as outlined by David Anderson in his report, and we think that was a reasonable position to take.

[Lord Taylor of Holbeach]

My Lords, the noble Lord, Lord Pannick, my noble friend Lord Lester, the noble and learned Lord, Lord Hope, and the noble Baroness, Lady Kennedy, have all made very valuable speeches on this issue, addressing the fundamental principle of Schedule 7 to the Terrorism Act 2000 through their amendments: when a person may be detained and when their personal electronic devices may be examined.

I preface my remarks by noting that we continue to await the judgment of the High Court in the judicial review proceedings brought by Mr David Miranda, following his examination under Schedule 7 in August last year. Although the independent reviewer of terrorism legislation, David Anderson QC, who has been referred to several times in the debate, has made some recommendations in relation to Schedule 7, we will not have the benefit of his report on the detention of Mr Miranda and any further recommendations he may make until after the judgment is handed down. Consequently, the debate on Schedule 7 will continue beyond our proceedings today and beyond this Bill. I am certain that we will return to these matters in detail in the future. I am grateful to the noble Baroness, Lady Smith, for agreeing to this approach and I commit to keeping her informed of the Government’s approach to the issue.

Let me address the amendments before the House. I begin with Amendment 93B, which provides that a person “may not be detained” for examination,

“unless the examining officer has reasonable grounds to suspect”,

that the person is concerned with,

“the commission, preparation or instigation of acts of terrorism”.

The powers in Schedule 7 to the 2000 Act are for the purpose of determining whether a person appears to be someone who is or has been concerned with the commission, preparation or instigation of acts of terrorism. This is an examination of whether they appear to be. As I explained in Committee, examinations are not simply about the police talking to people they know, or already suspect, are involved in terrorism. They are about talking to people travelling to and from places where terrorist activity is taking place or emerging, to determine whether those individuals appear to be involved in terrorism—whether that is because they are or have been involved, will become involved or are at risk, either knowingly or unknowingly, of becoming involved.

The Government maintain the view that introducing a reasonable suspicion test for the exercise of powers under Schedule 7, both to detain individuals and to search electronic devices, would undermine the capability of the police to determine whether individuals passing through ports, airports and international rail stations appear to be involved in terrorism. That view is shared, as some noble Lords have commented, by the independent reviewer of terrorism legislation, who explained to the Home Affairs Select Committee:

“My exposure at a variety of ports to the operational constraints under which ports officers operate inclines me, on balance, towards rejecting the reasonable suspicion standard as a condition for detention”.

Mr Anderson highlights:

“Terrorists pose risks on a different scale to most other criminals: they have shown themselves capable of causing death and destruction on a massive scale”.

He adds:

“Active terrorists are not numerous, and not easily identified as such”,

and that a port environment suspicion may be,

“harder to substantiate objectively in the absence of specific intelligence”.

Those are important words, setting the background to the Government’s consideration of these matters.

I note that the Joint Committee on Human Rights accepts that, “the concerns which underpin” the independent reviewer’s,

“rejection of a reasonable suspicion standard are entirely justifiable concerns”.

For his part, the independent reviewer has recommended that detention be permitted only, and continue only, when an officer is satisfied that there are grounds for suspecting that the person appears to be concerned with terrorism. In Mr Anderson’s view, this represents,

“the maximum safeguards consistent with the continued productive operation of these vital powers”.

There have been two or three references to the discriminatory effect of these powers on ethnicity. Perhaps I should tackle this one. As the independent reviewer of terrorism legislation said, if the powers are operated properly, the ethnic breakdown of those examined will correspond not with the ethnic breakdown of the general population or the travelling population, but with the ethnic breakdown of those involved with terrorism. I believe we have to accept that.

The Government welcome the debate to find an appropriate threshold for the exercise of powers to detain individuals, and to make and retain a copy of electronic data under Schedule 7. However, in the specific context of port and border controls to determine whether individuals appear to be concerned with terrorism, reasonable grounds for suspicion is not an appropriate threshold. Ensuring an appropriate threshold that is clear in its meaning and provides an effective safeguard in its distinct context is a matter the Government continue to reconsider. We shall reflect further on the recommendation that the independent reviewer has made. However I am not persuaded that it would be right to introduce a test of reasonable suspicion, as Amendment 93B seeks to do.

The effect of Amendments 93A, 93C and 93D would be to restrict the duty of a person being questioned under Schedule 7 to disclose anything in relation to data stored on a personal electronic device unless they are detained. They also restrict the power of an examining officer to search things in relation to data stored on personal electronic devices unless the person being questioned is detained. I have tried to reassure my noble friend Lord Avebury that the power to search for and examine property, including personal electronic devices, is an essential part of the Schedule 7 powers. The independent reviewer observed—I make no apology for quoting him again—that,

“the Schedule 7 evidence which has assisted in the conviction of terrorists … consists of physical possessions or the contents of mobile phones, laptops and pen drives”.

These amendments are intended to complement Amendment 93B and to require reasonable grounds for suspicion to delay a person and consequently to examine their personal electronic devices. I have set out the Government’s position on the reasonable suspicion threshold.

The independent reviewer has recommended that the power under new paragraph 11A to Schedule 7—to make and retain copies of data from personal electronic devices—be exercised only if a senior officer is satisfied that there are grounds for suspecting that the person is concerned with terrorism. As with the threshold for detention, the Government are considering additional safeguards for examination of personal electronic data. We shall reflect further on this, both on the independent reviewer’s recommendation and alternative enhanced safeguards—for example, to provide for a review officer to approve any decision to examine data.

18:30

I turn to Amendment 94ZA, in the name of my noble friend Lord Avebury. New paragraph 11A, by clarifying the law, meets a much needed requirement of the European Convention on Human Rights that interference with convention rights be in accordance with law that is adequately accessible and foreseeable. Amendment 94ZA would remove that clarification, leaving it to be set out only in a revised statutory code of practice for examining officers. It would not prevent the examination and detention of property under Schedule 7. The independent reviewer has reported that,

“it is of vital importance that the copying and retention of data from mobile phones and other devices should be provided for by a law that is clear, accessible and foreseeable, and that there should be sufficient safeguards and sufficient guidance to ensure that it is practised only when this is necessary in a democratic society”.

New paragraph 11A is integral to that. Deleting it would be a step backwards in providing for the protection from abuse of an individual’s rights.

As I said, we will continue to consider these issues in the light of the recommendations that the independent reviewer has made. Moreover, we still await judgment in the David Miranda judicial review and David Anderson’s report on Mr Miranda’s examination. Once these are available, we will naturally study them very carefully and decide how best to proceed. Should we conclude that further amendments to Schedule 7 to the 2000 Act are appropriate, we will seek to bring these forward as soon as parliamentary time allows, but that will necessarily be beyond the timetable for the remaining stages of the Bill.

I hope that noble Lords will understand that and support the Government’s approach. I hope that, on that basis, the noble Lord, Lord Pannick, and my noble friend Lord Avebury will be prepared to withdraw the amendment in the knowledge that the House will return to these matters in due course and that their points have been well made for the Government to consider.

[Lord Pannick (CB)]

I am grateful to all noble Lords who spoke in favour of Amendments 93A to 93D. I am disappointed that neither the Minister nor the noble Baroness, Lady Smith of Basildon, accepts that those intrusive powers should be controlled by a reasonable suspicion test. For my part, I see no good reason why other terrorism powers are so constrained but that there would be problems in dealing with the matter in this way for detention at a port or airport.

I should add that, as the noble Lord, Lord Lester of Herne Hill, suggested, for the law to continue to allow for detention without a requirement for reasonable justification will inevitably lead to condemnation in the Strasbourg court. The noble Lord, Lord Faulks, whose elevation to the Front Bench is welcomed on all sides of the House, will no doubt be able to give the Minister confidential legal advice on the matter.

However, as the Minister said, the House will inevitably be returning to these issues in the light of the Miranda judgment and Mr Anderson’s consequent report. I shall therefore, in due course, not move Amendment 93A.

Amendment 93ZD agreed.

Schedule 8: Port and border controls

Amendments 93A to 93D not moved.

Amendments 93E to 93N

Moved by

[Lord Taylor of Holbeach]

93E: Schedule 8, page 179, line 35, at end insert—
“( ) In paragraph 1(5) (definition of examining officer) for “paragraph” there is substituted “Schedule”.
( ) In paragraph 2(2)(d), the words “(within the meaning of that Schedule)” are omitted.”

93F: Schedule 8, page 179, line 38, at end insert—
“( ) After paragraph 7 there is inserted—
“7A (1) This paragraph applies where a person detained under Schedule 7 requests to consult a solicitor.
(2) The examining officer may not question the detained person under paragraph 2 or 3 of Schedule 7 until the person has consulted a solicitor (or no longer wishes to do so).
(3) Sub-paragraph (2) does not apply if the examining officer reasonably believes that postponing the questioning until then would be likely to prejudice determination of the relevant matters.
“(4) The powers given by paragraph 8 of Schedule 7 (search powers where a person is questioned under paragraph 2 of Schedule 7) may be used when questioning is postponed because of sub-paragraph (2).
(5) The detained person is entitled to consult a solicitor in person.
(6) Sub-paragraph (5) does not apply if the examining officer reasonably believes that the time it would take to consult a solicitor in person would be likely to prejudice determination of the relevant matters.
(7) In that case the examining officer may require any consultation to take place in another way.
(8) In this paragraph “the relevant matters” means the matters the examining officer seeks to determine under paragraph 2 or 3 of Schedule 7.””

93G: Schedule 8, page 180, line 5, at end insert—
“( ) After paragraph 16 there is inserted—
“16A (1) This paragraph applies where a person detained under Schedule 7 requests to consult a solicitor.
(2) The examining officer may not question the detained person under paragraph 2 or 3 of Schedule 7 until the person has consulted a solicitor (or no longer wishes to do so).
(3) Sub-paragraph (2) does not apply if the examining officer reasonably believes that postponing the questioning until then would be likely to prejudice determination of the relevant matters.
“(4) The powers given by paragraph 8 of Schedule 7 (search powers where a person is questioned under paragraph 2 of Schedule 7) may be used when questioning is postponed because of sub-paragraph (2).
(5) The detained person is entitled to consult a solicitor in person.
(6) Sub-paragraph (5) does not apply if the examining officer reasonably believes that the time it would take to consult a solicitor in person would be likely to prejudice determination of the relevant matters.
(7) In that case the examining officer may require any consultation to take place in another way.
(8) In this paragraph “the relevant matters” means the matters the examining officer seeks to determine under paragraph 2 or 3 of Schedule 7.””

93H: Schedule 8, page 180, line 9, at end insert—
“( ) in sub-paragraph (1), for “and” there is substituted “to”;”

93J: Schedule 8, page 180, leave out lines 34 to 39 and insert—
“General requirements20K (1) A person’s detention under Schedule 7 must be periodically reviewed by a review officer.
(2) The first review must be carried out before the end of the period of one hour beginning with the person’s detention under that Schedule.
(3) Subsequent reviews must be carried out at intervals of not more than two hours.”

93K: Schedule 8, page 181, line 8, leave out “paragraph” and insert “Part of this Schedule”

93L: Schedule 8, page 181, line 18, at end insert—
“( ) The Secretary of State must under paragraph 6 of Schedule 14 issue a code of practice about reviews under this Part of this Schedule.”

93M: Schedule 8, page 181, line 20, at end insert—
“Representations20L (1) Before determining whether to authorise a person’s continued detention, a review officer must give either of the following persons an opportunity to make representations about the detention—
(a) the detained person, or(b) a solicitor representing the detained person who is available at the time of the review.(2) Representations may be oral or written.
(3) A review officer may refuse to hear oral representations from the detained person if the officer considers that the detained person is unfit to make representations because of the detained person’s condition or behaviour.
Rights20M (1) Where a review officer authorises continued detention the officer must inform the detained person—
(a) of any of the detained person’s rights under paragraphs 6 and 7 which have not yet been exercised, and(b) if the exercise of any of those rights is being delayed in accordance with the provisions of paragraph 8, of the fact that it is being delayed.(2) Where a review of a person’s detention is being carried out at a time when the person’s exercise of a right under paragraph 6 or 7 is being delayed—
(a) the review officer must consider whether the reason or reasons for which the delay was authorised continue to subsist, and(b) if in the review officer’s opinion the reason or reasons have ceased to subsist, the review officer must inform the officer who authorised the delay of that opinion (unless the review officer was that officer).(3) In the application of this paragraph to Scotland, for the references to paragraphs 6, 7 and 8 substitute references to paragraph 16.
Record20N (1) A review officer carrying out a review must make a written record of the outcome of the review and of any of the following which apply—
(a) the fact that the officer is satisfied that continued detention is necessary for the purposes of exercising a power under paragraph 2 or 3 of Schedule 7,(b) the fact that the detained person has been informed as required under paragraph 20M(1),(c) the officer’s conclusion on the matter considered under paragraph 20M(2)(a), and(d) the fact that the officer has taken action under paragraph 20M(2)(b).(2) The review officer must inform the detained person whether the officer is authorising continued detention, and if so that the officer is satisfied that continued detention is necessary for the purposes of exercising a power under paragraph 2 or 3 of Schedule 7.
(3) Sub-paragraph (2) does not apply where the detained person is—
(a) incapable of understanding what is said,(b) violent or likely to become violent, or(c) in urgent need of medical attention.””

93N: Schedule 8, page 181, line 20, at end insert—
“Codes of practice(1) Schedule 14 to the Terrorism Act 2000 (exercise of powers—codes of practice etc) is amended as follows.
(2) In paragraph 1, after ““officer” means” there is inserted “(subject to paragraph 6A)”.
(3) After paragraph 6 there is inserted—
“6A In paragraphs 5 and 6, “officer” includes a constable, immigration officer or customs officer who—
(a) has functions under Schedule 7, or(b) has functions under Schedule 8 in relation to a person detained under Schedule 7,otherwise than as an examining officer.””

Amendments 93E to 93N agreed.

Clause 140: Inspection of Serious Fraud Office

Amendment 93P

Moved by

[Lord Ahmad of Wimbledon]

93P: Clause 140, page 107, line 26, leave out from “Service),” to end of line 31 and insert “after subsection (3) there is inserted—
“(3A) This section applies to the Serious Fraud Office as it applies to the Crown Prosecution Service.””

[Lord Ahmad of Wimbledon]

My Lords, this is simply a drafting amendment to take into account the formal abolition of the Revenue and Customs Prosecution Office, which has already been merged with the Crown Prosecution Service. I beg to move.

Amendment 93P agreed.

Amendment 93Q

Moved by

[Lord Ahmad of Wimbledon]

93Q: After Clause 140, insert the following new Clause—
“Jurisdiction of Investigatory Powers Tribunal over Surveillance Commissioners
(1) Section 91 of the Police Act 1997 (Surveillance Commissioners) is amended as follows.
(2) In subsection (10), for “sections 104 and 106” there is substituted “section 104”.
(3) After subsection (10) there is inserted—
“(11) Subsection (10) is not to be read as affecting the jurisdiction of the Tribunal conferred by section 65 of the Regulation of Investigatory Powers Act 2000 or section 23 of the Regulation of Investigatory Powers (Scotland) Act 2000.””

[Lord Ahmad of Wimbledon]

My Lords, this amendment simply clarifies the role of the Investigatory Powers Tribunal in considering complaints against decisions made against surveillance commissioners. The tribunal was established under the Regulation of Investigatory Powers Act 2000, commonly referred to as RIPA. When RIPA was introduced, Section 91(10) of the Police Act 1997 should have been amended to reflect the role of the Investigatory Powers Tribunal—the IPT—and its ability to consider complaints against the surveillance commissioners’ decision. It is believed that the lack of amendment at the time was an oversight.

The new clause is not intended to change the law in any way, but is rather a clarifying amendment reflecting the current state of the law. Given that the role of the IPT is clearly set out in both RIPA and the equivalent legislation in Scotland, the amendment is tabled solely to put the matter beyond any doubt. I beg to move.

Amendment 93Q agreed.

Amendment 93R

Moved by

[Lord Deben]

93R: After Clause 142, insert the following new Clause—
“Use of amplified noise equipment in vicinity of the Palace of Westminster
(1) The Police Reform and Social Responsibility Act 2011 is amended as follows.
(2) After section 142 there is inserted—
“142A Other controlled areas in vicinity of the Palace of Westminster
(1) For the purposes of this Part, the “Palace of Westminster controlled area” means the area of land in the City of Westminster that is comprised in—
(a) the highways in the postal district SW1 known as—(i) Bridge Street,(ii) St Margaret’s Street, and(iii) Abingdon Street,(b) so much of the highway in the postal district SW1 known as Great College Street as immediately adjoins Abingdon Street Garden, (c) Old Palace Yard,(d) Abingdon Street Garden (and its pathways), and(e) Victoria Tower Gardens.(2) In subsection (1)—
“Abingdon Street Garden” means the garden constructed on the sites of properties formerly known as 18 to 28 (both inclusive) Abingdon Street, London, SW1, together with the garden surrounding the adjoining Jewel Tower and the lawn surrounding the King George V Memorial;
“highway” has the same meaning as in the Highways Act 1980 (see section 328 of that Act);
“Old Palace Yard” includes the King George V Memorial.”
(3) In section 143 (prohibited activities in controlled area of Parliament Square)—
(a) in the title, at the end there is inserted “or in Palace of Westminster controlled area”, and(b) in subsection (2)(a) after “Parliament Square” there is inserted “or in the Palace of Westminster controlled area”.(4) In section 144 (directions under section 143: further provision), in subsection (5) after “Parliament Square” there is inserted “, or the Palace of Westminster controlled area,”.
(5) In section 145 (power to seize property)—
(a) in subsection (1) at the end there is inserted “in that area”,(b) after that subsection there is inserted—“(1A) A constable or authorised officer may seize and retain a prohibited item that is on any land in the Palace of Westminster controlled area if it appears to that constable or officer that the item is being, or has been, used in connection with the commission of an offence under section 143 in that area.”,
(c) in subsection (2) at the end there is inserted “in that area”,(d) after that subsection there is inserted—“(2A) A constable may seize and retain a prohibited item that is on any land outside of the Palace of Westminster controlled area if it appears to the constable that the item has been used in connection with the commission of an offence under section 143 in that area.”, and
(e) in subsection (8), for “subsections (1) and (2)” there is substituted “this section”.(6) In section 146 (power of court on conviction)—
(a) in subsection (1)(b) for “the controlled area of Parliament Square” there is substituted “a relevant area”,(b) in subsection (2) for “the controlled area of Parliament Square” there is substituted “a relevant area”, and(c) after that subsection there is inserted—“(2A) In this section “relevant area” means an area consisting of either or both of the following areas—
(a) the controlled area of Parliament Square, and(b) the Palace of Westminster controlled area.”(7) In section 147 (authorisation for operation of amplified noise equipment), in subsection (1)—
(a) after “Parliament Square” there is inserted “or the Palace of Westminster controlled area”, and(b) after “that land” there is inserted “(or any part of it)”.(8) In section 148 (meaning of “authorised officer” and “responsible authority”)—
(a) in subsection (2) after “Parliament Square” there is inserted “, or in relation to any land in the Palace of Westminster controlled area other than Royal Park land,”, and(b) after subsection (3) there is inserted—“(4) “Responsible authority”, in relation to any land in the Palace of Westminster controlled area, means—
(a) the Secretary of State, for any land comprised in Royal Park land;(b) Westminster City Council, for any other land.(5) In this section “Royal Park land” means any land of a description specified in Schedule 1 to the Royal Parks and Other Open Spaces Regulations 1997 (S.I. 1997/1639), as that Schedule has effect on the day on which the Anti-social Behaviour, Crime and Policing Act 2014 is passed.”
(9) In section 149 (effect of Part on byelaws), in subsection (3), after “Parliament Square” there is inserted “or the Palace of Westminster controlled area”.
(10) In the italic cross-heading before section 142, for “Garden and adjoining pavements” there is substituted “etc”.
(11) In the title of Part 3, for “Garden and surrounding area” there is substituted “etc”.”

[Lord Deben (Con)]

My Lords, this is an amendment which we discussed and withdrew at an earlier stage. It is what I might call a moderate amendment. It is an attempt to put right a problem of oversight rather than anything else. As was found earlier in the case of littering, your Lordships would be surprised at the complications which arise if you try to do what seemed to be a simple matter, which is to apply the rules that obtain in Parliament Square to the areas outside this House.

The reason for doing that was, first, that there is a real issue about the ability of those who have offices immediately opposite the King George statue when very loud amplification is used. Having raised the matter, I discovered that there was an even greater issue for those who were trying to have a service within Westminster Abbey. The sadness is that most of those who would be demonstrating would be very upset if they realised that their noise meant, for example, that the wedding day of someone who had looked forward to it, either in St Margaret’s or in Westminster Abbey, would be destroyed because it would be impossible to hear. A number of those who demonstrate have strong religious views themselves and would not want that.

Obviously, the best way in which one can avoid that is what might be called pre-notification. Indeed, that is to be encouraged, but we live in a democracy and it is right that people should protest. I would be the last person to seek to restrict protest wherever possible, because it is part of the whole fabric of a society in which human rights matter. Our debates on the Bill have been illuminated by lawyers and non-lawyers insisting that, however tough the threats to this country through terrorism may be, we must always be concerned to protect the rights of the individual.

This proposed new clause does not go very far: it simply extends the area covered by the present legislation, which has worked well. In preparing it we had discussions with various authorities which showed that, until now, the mechanisms by which the existing law has been enforced have been faulty. There have been difficulties in putting together the roles of the Royal Parks, which controls part of the area, and of Westminster City Council, the Metropolitan Police and the London Assembly, all of which have a say in this. It has therefore been very helpful to put the mechanisms on paper as we have before us today. I thank the Minister for the considerable efforts he has made to bring the various authorities together. We have concluded with those bodies that this is a sensible way forward.

There is a slight change from my original amendment in that Amendment 93R does not include putting up tents. This is because legislation already covers the only places where you could reasonably put up a tent; that is, the Acts and byelaws relating to the Royal Parks.

We have tried to make sure that we do not make anything onerous or push the matter any further than it need be. The amendment has the enthusiastic support of the dean of Westminster Abbey, and I think that most Members of this House have said that this is the proportionate way of proceeding. Some have wanted me to go further and have compulsory pre-advice when anyone was going to have a protest. There are temptations to do that, because it is a reasonable thing to ask for in most cases. But it is not always satisfactory and, in the end, I do not think that it is right to exclude the occasions when a gathering of people will grow and people will want to make a statement about something they feel strongly about.

This is the balance we need. It is a balance which has served the House of Commons perfectly well. This amendment merely ensures two things will happen in future. First, there will be every reason to give advice that a protest is to be held. That is good for sensible policing and providing information so that people know the law. There will also be every reason to stop what would otherwise happen, which is a migration of the kind of activity which has caused so much difficulty outside the House of Commons.

Your Lordships will see that a range of people supports this amendment. When we debated it before, it had widespread support. I have not yet been told of anyone who feels unhappy about it. I very much hope that your Lordships will agree that this is a sensible change supported by all those who have to implement the regulations. I beg to move.

18:44

[Lord Taylor of Holbeach]

My Lords, exceptionally, with the leave of the House, it might help if I speak at this early stage in the proceedings. I will explain the background to some of the discussions and reinforce the words of my noble friend Lord Deben in proposing his amendments. I will also set out the Government’s approach to the matter.

Following the debate in Committee, I met my noble friend Lord Deben, the Metropolitan Police, Westminster City Council, the Royal Parks and the receiver general of Westminster Abbey to discuss how we might more effectively address noise issues in the vicinity of the Palace of Westminster. The meeting confirmed the view I expressed in Committee, when we debated my noble friend’s amendments the first time, that there are already sufficient powers, including within existing Westminster City Council and Royal Parks byelaws, for the police, Westminster Council and the Royal Parks to deal with noise issues around the Palace of Westminster. From the Government’s perspective, the issue is not so much an absence powers, but the effective enforcement of the powers that are currently available.

It is true that there are some differences between the provisions that apply to Parliament Square under the Police Reform and Social Responsibility Act 2011, and those that apply to the area we are talking about here. For example, unlike the provisions of the 2011 Act, there is currently no pre-authorisation requirement for the use of amplified noise equipment in areas other than those covered by the Royal Parks Regulation. In addition, the offence under the 2011 Act attracts a higher maximum penalty of a £5,000 fine, compared with the Westminster City Council byelaws where the maximum fine is £500 and the Royal Parks byelaws where it is £200 or £1,000 depending on the offence. Your Lordships may take the view that a single set of harmonised controls in the vicinity of the Palace of Westminster might assist the enforcement agencies to deal with noise disruptions more effectively. However, the need for effective enforcement would remain.

Home Office officials and I would like to pay tribute to the public order team working on this issue. Home Office officials have worked with the Metropolitan Police, Westminster City Council and the Royal Parks to develop a robust enforcement plan for the current legislation. A joint protocol has been developed to deal with noise-related nuisance in the vicinity of Parliament. The key features of this protocol are that it sets out a clear process for dealing with noise issues around the Palace of Westminster; provides a single, adequately resourced contact number for complaints, which will be followed up; sets out a process for the police and Westminster City Council to liaise with protest organisers in advance and inform them of the legal position as regards the use of amplified noise equipment and their responsibilities; and sets out an agreed process for the police and Westminster City Council to work together to deal with noise issues arising from planned potential disruptive demonstrations. The enforcement agencies have also produced leaflets to ensure that people are aware of the legal position and their responsibility to minimise noise to allow others to carry on their normal business without serious disruption.

Earlier today, I met Deputy Assistant Commissioner de Brunner and Commander Dave Martin from the Metropolitan Police. They have assured me that the Palace of Westminster police will provide active support to Members of the House in dealing with noise issues. They have also assured me that the joint agency enforcement plan should effectively deal with noise issues in the vicinity of the House. We have agreed to review the situation in two months’ time to evaluate how the new enforcement plan is working.

As I have indicated, whatever the legislation in place, the key is effective enforcement. Noble Lords may consider that that objective would be better served by the adoption of these amendments. As for the Government, we have concluded that this is properly a matter for the House to determine and as such, if it came to a vote the Government will neither support nor oppose the amendments. My noble friend Lord Deben has made his case and no doubt others will want to contribute to this debate but, for once, I will not seek to be persuading noble Lords one way or the other.

[The Lord Bishop of Ripon and Leeds]

My Lords, I am very grateful to the noble Lord, Lord Deben, for the way in which he introduced this debate and to the Minister for those comments and his response. My colleague the right reverend Prelate the Bishop of Newcastle has added his name to this amendment, thereby expressing the concern of these Benches, in particular with regard to the work and worship at Westminster Abbey and St Margaret’s parish church. I am sorry that the right reverend Prelate the Bishop of Newcastle is unable to be with us today. However, it is a particular delight to welcome the very reverend Dean of Westminster, as he exercises his constitutional right to sit on the steps of the Throne of this House.

The Abbey has suffered, as the noble Lord, Lord Deben, was saying, as a result of what is often quite unintentional disturbance of its worship, and its role as a place of prayer and the worship of God. It is important to affirm absolutely both the right of protest, with the human rights which are involved in being able to protest, and, at the same time, the right and duty of the Abbey to maintain its pattern of prayer to God, particularly in view of the way in which it stands for the spiritual nature and concerns of this nation, and of our monarch and the Royal Family. Our daily prayers here with your Lordships stress particularly the needs of this realm and of the monarch. Westminster Abbey is a unique testimony to prayer for those needs, and there is a need at this point to ensure that the Abbey is able to fulfil that particular task which it has in the life of both the church and the nation. I support the amendment and am grateful to the Minister for his generous words about it.

[Baroness Berridge (Con)]

My Lords, I, too, support the amendment. Just hearing the outline of the different authorities involved when there are issues with protests outside the front of Parliament leads me to the view that without this amendment, enforcement has not perhaps been as easy as it could be. I take into account that Westminster Cathedral does not have this issue, merely by virtue of the fact that the Abbey and St Margaret’s are positioned outside Parliament.

We have done much hard work to ensure that the work of the House of Commons is not disturbed; we should afford the same privileges to the Abbey and St Margaret’s, which are in this unique position. Perhaps most persuasively, it is not just that there is worship there and wedding services. I am aware of this because I often cut through the Abbey’s yard. The young people being educated there and the people living there are, I am sure, also disturbed by the protests. This is a reasonable accommodation of the right to protest and the freedom of worship, while allowing people in their residential and educational roles to be uninhibited. I will be supporting the amendment.

[Lord Rosser]

The Minister has reminded us that when a very similar amendment was considered in Committee he, as the Minister, said that the issue was how the existing by-laws were enforced rather than that the existing powers were inadequate. It was in that context that he proposed holding the meeting to which he referred, and which has now been held. It would be of some interest if the Minister were in a position to tell us, in the light of that meeting, why on the face of it Westminster City Council and the police were not able to enforce the powers that he said were already there and were adequate to deal with the situation that we are addressing.

Presumably, Westminster City Council must have had something to say on that, as did the police, since they were present at the meeting which the Minister held. He said in Committee that he needed to satisfy himself that the existing provisions were not being enforced by the council and the police, so it would be helpful to know what those two bodies had to say when they were asked why the existing provisions were not being enforced.

I appreciate that the Minister has said that there are different penalties. He referred to penalties of £5,000 against the £500, I think, under the powers for Westminster City Council, and to differences over no pre-notification for noise. That does not fully explain why the existing by-laws were apparently not being enforced. It would be helpful if the Minister could comment on that.

Since the Minister said that it is his intention to leave it to the House, I would make just one other point. The Minister said in Committee—I use his own words—that we need to be,

“very careful about taking any action that may impact disproportionately on people’s right to protest and their freedom of speech”.—[Official Report, 25/11/13; col. 1215.]

How is the Minister satisfied that we are being careful about not taking any such action, since I assume that that matter will have been discussed at the meeting which was held and to which he referred?

[Lord Taylor of Holbeach]

I thank the noble Lord, Lord Rosser, for his general support for the steps that we have taken to try to resolve this issue. As I said, it is a matter for the House. The interests of those demonstrating are, I believe, best served by the facility of pre-booking a demonstration based on availability, which this protocol will provide for. It is not essential and there is no attempt to say that this will be the only way in which people can demonstrate. There is no imposition on people demonstrating, other than that they obey the requirements of the by-laws in respect of the noise made through amplified sound. This provision is made explicit by my noble friend Lord Deben’s amendment. Throughout, the right to demonstrate and to assemble has been seen as a key feature of what we consider to be proper here at this end of Parliament, as it is in respect of Parliament Square.

The noble Lord, Lord Rosser, also asked why the enforcement of noise by-laws has not been effective. The one thing which came out of our first, extremely productive, general meeting with everybody present was that people were in effect operating in their own little silos. If I explain that responsibility for the George V statue and the paved area in front of it lies with Westminster City Council while responsibility for the green part beyond it lies with the Royal Parks, your Lordships might understand that co-ordinating action was also difficult.

It was quite clear, too, that the police did not realise that one of the most frustrating elements was that those police serving the Palace’s interests were not engaged in any enforcement of noise requirements in respect of the area that we are talking about. The police recognised that while they had had a strong focus on provisions in Parliament Square, this area had not been considered by them to be an important priority.

The noble Lord, Lord Deben, was able through tabling his amendment at Committee to bring this to the attention not only of this House but also of the police and other authorities. As a result of that, the protocol, which I am certainly reassured will be an effective mechanism, provides an opportunity for safeguarding democratic rights and, at the same time, ensuring that enforcement can in fact occur. So I hope the noble Lord is satisfied.

19:00

[Lord Deben]

I thank the Minister for those comments. I hope very much that the House will agree that this is a sensible way forward. It has certainly already achieved a much better way of implementation. I hope therefore that we can go forward with this amendment.

Amendment 93R agreed.

Amendment 94

Moved by

[Baroness Henig]

94: After Clause 142, insert the following new Clause—
“Amendments to the licensing regime for private security businesses
(1) Sections 42 and 43 of, and Schedule 1 to, the Crime and Security Act 2010 are repealed.
(2) The Private Security Industry Act 2001 is amended as follows.
(3) After section 4 there is inserted—
“4A Requirement to license businesses undertaking work for or on behalf of public authorities
(1) It shall be an offence for a business to engage in any licensable conduct except under and in accordance with a license.
(2) A business engages in licensable conduct if it—
(a) is contracted with a public authority, or(b) seeks contracts with a public authority,to undertake any of the activities contained in Schedule 2, or acts as a sub-contractor to another business which meets the criteria in paragraph (b) or (c).(3) In this section—
“a business” is defined as any body corporate, Scottish partnership or unincorporated association;
“public authority” is any person certain whose functions are functions of a public nature.
(4) The Authority may publish, under section 7(1), different criteria for businesses as to those it applies to individuals.
(5) The Authority shall—
(a) publish a code of conduct for licensed businesses to which licensed businesses shall be expected to adhere;(b) publish a list of sanctions for non-adherence by a licensed business to the code produced under subsection (5)(a) which may include, but is not limited to, fines, suspension of licence, withdrawal of licence and criminal prosecution;(c) impose sanctions from the list prepared under subsection (5)(b) to any business it deems to have breached or failed to comply with the code produced under subsection (5)(a).” (4) In section 11 (appeals in licensing matters), in subsection (1)—
(a) at the end of paragraph (b), delete “or”, and (b) at the end of paragraph (c), insert “or(d) sanctions are imposed on a licensed business under section 4C(5)(c).”(5) After section 22 there is inserted—
“22A Information relating to license holders
(1) Information held by any person for the purposes of, or for any purpose connected with, the exercise of functions under this Act—
(a) may be supplied to any other person for use for any such purpose, and (b) may be supplied to any person having functions in relation to—for use for the purposes of, or for any purpose connected with, those functions.(i) the enforcement of any other enactment applying to the operations of a licensed person or licensed business,(ii) offences committed by any person in connection with or by reason of their doing work to which this Act applies,for use for the purposes of, or for any purpose connected with, those functions.(2) Information relating to the operations or licensing of a licensed person or licensed business which is held by any person for the purposes of, or for any purpose connected with, such functions as are mentioned in subsection (1)(b) may be supplied to any person having functions under this Act for the purposes of, or for any purpose connected with, the exercise of those functions.
(3) Information supplied under subsection (2) by or on behalf of the Commissioners of Inland Revenue or the Commissioners of Customs and Excise must not be supplied by the recipient to any other person without the consent of the Commissioners concerned.
(4) This section—
(a) has effect notwithstanding any restriction on the disclosure of information imposed by any enactment or rule of law, and(b) does not limit the circumstances in which information may be used or supplied apart from this section.(5) In this section “enactment” means and Act of Parliament, an Act of the Scottish Parliament or any Northern Ireland legislation or any instrument made under or having effect by virtue of an Act of Parliament, an Act of the Scottish Parliament or any Northern Ireland legislation.
(6) References in this section to a person having functions of any description include references to any person providing, or employed in the provision of, services for that person in connection with those functions.””

[Baroness Henig (Lab)]

My Lords, in moving this amendment, I draw attention to my interests in policing and private security as set out in the Register of Lords’ Interests.

The Minister will no doubt be pleased to hear that this amendment represents my final attempt to introduce business licensing of companies engaged in the private security sector within the framework of the Anti-social Behaviour, Crime and Policing Bill. As he will be aware, the Bill constrains the form in which my amendment can be framed. As I will explain, however, it is still my belief that the goal of business licensing of companies working in the private security sector can be achieved more effectively in this way than by the alternative routes the Government are proposing.

There is almost complete agreement across the industry, and certainly in the Home Office, that the licensing of individuals working in private security has had a beneficial effect in driving up standards and increasing public confidence. Regulation has been a force for good, as the industry has argued, by marginalising criminality and giving confidence to the purchasers of security and to the general public that they will be contracting with properly vetted and properly trained workforces.

This is increasingly important as private security firms take on more and more responsibility for safeguarding public space and looking after sensitive national infrastructure. For three years now the industry has been arguing for business licensing to build on what has been achieved in the past decade and to provide effective regulation of a sector that plays such a vital role—and a rapidly expanding one—working alongside the police, in counterterrorism activities, and with a wide range of public agencies.

The reason that no progress has been made since 2010 is clear. Within the Department for Business, Innovation and Skills and the Cabinet Office there is a determination—one might say almost an ideological fixation—that no new undue burdens should be placed on businesses, regardless of considerations of public safety and public confidence, and of the benefits of combating the criminality that still lurks in the industry. Any regulatory changes, they insist, must be proportionate and targeted; and this part of the Government has yet to be convinced that the benefits of business licensing of private security companies will outweigh the costs and that it is really necessary.

This, I believe, is why the Home Office is proposing two possible alternative routes for progress in this matter; both, in my view, profoundly unsatisfactory. The first suggestion of the Home Office is to introduce business licensing of private security companies through secondary legislation. The disadvantage of this approach is that it cannot be enforced by a range of appropriate and effective sanctions. Regulation without enforcement is worse than the existing situation, because it plays into the hands of the unscrupulous and the downright criminal, and penalises conscientious and law-abiding businesses. The essential feature of regulation is that it must be effective. The industry has legitimate concerns, and has made its view clear, that business licensing introduced through secondary legislation cannot be effectively enforced.

The second Home Office proposal is to find an MP who comes high up in the annual ballot for Private Members’ Bills in 2014 to agree to introduce business licensing by this route. The cynicism of this suggestion takes my breath away. How many Private Members’ Bills ever make it over the many hurdles put in their way to the statute book? Is this the way to engage with an important industry that turns over up to £6 billion annually? The Home Office must know that without government support this route is extremely unlikely to yield any concrete result, yet blithely suggests that this is a credible option owing to its own inability to overcome the objections of the Department for Business, Innovation and Skills and the Cabinet Office and bring in primary legislation.

This is the dilemma that my amendment is aimed at resolving. What it seeks to do is to license, in the first instance, companies with contracts, or that are seeking contracts, to work alongside or with public authorities. That would almost certainly include all approved contractor scheme companies, which covers around 70% of those working in the sector. My amendment backs this up with a full range of enforcement powers and the ability to exchange information about those companies licensed across government and public agencies. The remainder of companies working in the private security sector—almost certainly the smaller companies and the one-man businesses the Government are so concerned to protect—could then be dealt with in a few months’ time by a second set of provisions. Indeed, secondary legislation might well be utilised here. I ask the Minister: would secondary legislation be possible to complete this process? If not, a small targeted Bill in the next Session could easily be taken through to license those companies that did not come into this first tranche of my proposals.

I can see merits in this two-stage approach, but I am aware—and I have to say this—that some industry leaders are worried about it on the grounds that it adds a layer of complexity to an already complex set of industry regulations. But all private security industry leaders want an effective range of sanctions to underpin regulation, and they also all want the effective exchange of information, which will not be secured by the routes the Government currently have in mind. If the Minister could give an assurance that a second stage of business licensing to cover those companies not covered by this amendment will follow relatively quickly, this would achieve the goal of business licensing of the private security sector more effectively than the alternatives the Home Office is proposing. Therefore, I hope the Minister will accept that I am trying to be extremely helpful.

Finally, subsection (1) of the proposed new clause repeals the clauses that have been on the statute book since 2010 and that were brought in to deal with the licensing of wheel-clamping businesses. They were dealt with by the coalition Government in a different way. Since that time the provisions have remained on the statute book, giving the confusing impression that business licensing is already in train. For the sake of clarity, therefore, these provisions need to be repealed. I beg to move.

[Baroness Smith of Basildon]

My Lords, your Lordships’ House should be grateful to the noble Baroness, Lady Henig, not only for the expertise that she brings to this issue—and she declares her interests in that—but for her commitment in ensuring that we get some proper regulation of the private security industry. It is something that the public want and it is something that the industry itself is looking for. I would hope that the Minister would accept this or bring something back.

I would be surprised if the Government are at all reluctant to have such regulation, given that the groundwork has already been done. Back in 2010, during the public bodies review, the Government announced their intention to have a,

“phased transition to a new regulatory regime”.

The work has been done by many of those bodies involved in this sector. I am told by the International Professional Security Association that despite,

“positive engagements between all parties and three years of hard work on all sides we remain disappointed that there is still no primary legislative vehicle confirmed as the most appropriate means to reform the regulator, introduce a scale of proportionate enforcement sanctions and establish a working gateway for information sharing between the regulator and HMRC”.

As my noble friend Lady Henig explained, there is confusion about the measures taken in the Crime and Security Act, particularly around wheel clamping. People think there is regulation when there is not.

I was quite surprised to receive information from the Security Industry Authority showing how vast the private security industry is. The scale is changing rapidly. The Government have a responsibility, given that the level of state reliance on private security services is very high. The public rightly expect high standards, but they perhaps also expect that, if standards fall below the required standard or if something goes wrong, something can be done and action can be taken to deal with that.

If we look at the scope of the private security industry, most days Members of your Lordships’ House will see members of the private security industry if we go shopping, fly from an airport or use public transport. They also support police activity and guard elements of our national infrastructure. The private security is also involved in magistrates’ courts and prisoner transfers. The Security Industry Authority now licenses more than 330,000 individuals. That does not cover all those working in the industry, but that is still about twice the number of police officers in the UK. It is clearly an area where there has to be efficient and effective regulation.

We are seeing the public increasingly coming into contact with the private security industry. They have a right to expect high standards from the industry, but they also expect government to take some responsibility, particularly when the private security industry is carrying out government functions. I mentioned the transfer of prisoners, and custody is another example. The consequences of a mistake—and mistakes happen in any environment—can be extremely serious and extremely high profile. I urge the Minister to accept this amendment. I think my noble friend has given us an opportunity and a way forward, and the Minister and the Government should perhaps consider the mix of primary legislation followed by secondary legislation in order to give the same effect.

My noble friend is quite right to reject the route of a Private Member’s Bill. I know that practically the only Private Member’s Bill we will be discussing in your Lordships’ House in the next year will be the European Union (Referendum) Bill. There are more Fridays put aside for that than I have ever known in your Lordships’ House. I am an admirer of Private Members’ Bills. I got my own Private Member’s Bill on to the statute book back in 1998 in the other place, but I recognise how unusual that is, and it was not as detailed or as comprehensive as the legislation we need for this.

Clearly, legislation is essential. I think my noble friend Lady Henig has given the Minister an opportunity to take this away, look at it and see what can be done in primary legislation and what can be followed up in secondary legislation, unless the Government can come back with some way of doing this very quickly in primary legislation. I know the work has been done, but I have to say to the Minister that if something were to go wrong because of a failure of regulation, it would be dreadful when we have the opportunity here and now to do something about it.

19:15

[Lord Taylor of Holbeach]

My Lords, I join the noble Baroness, Lady Henig, in her tributes to the security industry and to the Security Industry Authority. As the noble Baroness, Lady Smith, said, the noble Baroness, Lady Henig, brings expertise of this industry, but she also brings enthusiasm for its development, and I pay tribute to her for that.

As I said when we debated this issue in Committee, the Government are committed to reforming how the private security industry is regulated. In the future, the Security Industry Authority will regulate businesses undertaking prescribed activities before they are able to work in the security sector. This is an important measure as it will provide the SIA with a more efficient and effective means for regulating the security sector, improving standards and, most importantly, providing better tools for combating organised and serious criminal behaviour at corporate level.

The Government’s proposals have received strong industry support. Indeed, they have been supported by the noble Baronesses, Lady Henig and Lady Smith, this evening. While significant parts of the reforms can be delivered through secondary legislation, other aspects require primary legislation. The secondary legislation will be introduced as soon as possible, and the remaining proposals will be further refined once that work has been completed.

While I agree with the noble Baroness’s desire to see reform in this area, I do not believe that the amendment she has proposed for debate this evening takes the right approach. The scope of this proposed business regulation would be significantly narrower than either of the current provisions which would be removed by her amendment. This would reduce protection of the public by preventing the regulation of security provided in the private sector and would also remove the potential to extend to businesses providing their own in-house security eligibility for membership of the successful approved contractor scheme, which has around 760 member businesses.

The new business regulation regime that we are developing is designed around the use of Section 17 of the Private Security Industry Act 2001, which was amended by Section 43 of the Policing and Crime Act 2010. Amendment 94 would remove Section 43 of the 2010 Act and, in so doing, prevent the introduction of business regulation as currently envisaged. It is not our intention to undo the work that has been done to date, including during the noble Baroness’s tenure as chair of the SIA, and therefore we intend to retain the ability to establish a mandatory business approval scheme under Section 17.

It is not desirable to have a narrower scheme focused only on those private security firms delivering under contract to the public sector, because the private sector clients of such companies have just as much need for the protection which the Government’s proposals would afford. In addition, the existing individual licensing regime does not exclude the private sector, and it is our intention to reduce burdens and costs on those individuals through the introduction of business regulation across the industry.

The amendment would also insert a new Section 22A into the Private Security Industry Act. As the noble Baroness has explained, the intention is to enable the sharing of information for any purpose connected with the Act. While I agree with the intention of enabling information sharing, this must be considered as part of the overall reforms we are taking forward to ensure any provisions achieve this intention. So while I have some sympathy with this element of the amendment, I do not believe that this is the right way to go about it.

In conclusion, while I fully share the noble Baroness’s desire to make progress with the reforms to the security industry regulatory regime, I hope that, on reflection, she will agree that her scheme is not the most appropriate way forward—it is only a partial scheme—and that, accordingly, she will be prepared to withdraw her amendment.

[Baroness Henig]

My Lords, I have listened carefully to what the Minister has said. The first point I want to make is that, clearly, the Minister and those of us who are arguing for this are not divided on the end. We share the same goals; we are divided on the means to achieve those goals. The thing that has worried me particularly is the speed, or rather the lack of speed, with which the Government are moving forward on this. We have waited since 2010; we are now into 2014. This was all supposed to have been completed, I remind the Minister, by the end of 2013. I remember that he gave a pledge that it would all be completed by the end of 2013. We are now in January 2014 and the Minister is still using phrases such as, “as soon as possible”, “once completed” and “we aim to do this”. He has to acknowledge that the speed has been somewhat less than he would have liked. We know where the problems lie but it is this lack of speed that motivated me to put the focus on moving with urgency. What is actually happening is that, because of the slowness and what appears to be lack of action by the Government, we are losing the support of the industry.

The Minister will be aware that industry leaders are becoming increasingly frustrated by the lack of progress. Their concern is that if this is introduced through secondary legislation the situation could even be worse for companies than it is at present, because of the difficulty of enforcement under secondary legislation. I am concerned not to lose the support of the industry. It is so unusual to have nearly all the leaders of a big industry such as the private security industry united in wanting business licensing of companies that I do not want to lose that momentum. That is one reason I have brought forward a series of amendments to try to focus attention on this issue, and to explain why the industry is so concerned about it and why we need business licensing. However, I have listened to what the Minister has said and in the light of that, all we can do is wait. If he is not prepared to bring something back at the next stage, all I can do is hope that the primary legislation to which he referred will be with us sooner rather than later. On that note. I beg leave to withdraw my amendment.

Amendment 94 withdrawn.

Schedule 9: Powers of community support officers

Amendment 94ZA not moved.

Amendment 94A

Moved by

[Lord Berkeley]

94A: Schedule 9, page 182, line 12, at end insert “or the driver of a vehicle”

[Lord Berkeley (Lab)]

My Lords, I shall also speak to Amendments 94B, 94C and 94D. These are basically probing amendments. I apologise for not bringing them forward in Committee, but I think that the Bill was changed in the other place to add these amendments. Some of the amendments that were brought in in the other place are very good, but I am concerned about the resulting balance between what PCSOs can do to cyclists and what they can do to motorists. I am sure the Minister will agree that there has to be some balance in what they can do and the way they go about it. I speak as a cyclist. I hope that I am a law-abiding cyclist. I am also secretary of the All-Party Group on Cycling.

In general, I welcome the ability of PCSOs to hand out fixed penalty notices. It is a good idea but if they can do it to cyclists, they should be able to do it to motorists as well. My amendments are, frankly, just examples, because when one digs into the legislation—the various pieces of primary legislation and the regulations—it is a bit of a can of worms, as I am sure the Minister will agree, and it has been like that for many years. I hope that we can, at least, have a little debate about this tonight and maybe see what happens after that.

I was particularly concerned when I discovered that the Metropolitan Police has been targeting cyclists in a really rather unpleasant way. There is a memo that one of my cycling colleagues has seen which gave Metropolitan Police officers a target of putting penalties on 10 cyclists each in London. That is a very bad way of going about it. Was there a similar target of 10 motorists? I do not know, but we can see where that goes. Amendment 94A would make offences under Section 35 of the Road Traffic Act 1988, which concerns failure to comply with a traffic direction, apply to motorists as well as cycle riders. The Bill says it should apply to cycle riders and I am suggesting that, if a PCSO is capable of stopping a cyclist, he should be able to stop the driver of a vehicle.

We must all accept that there are fewer policemen around now than there used to be and that PCSOs add to their presence in the streets and encourage cyclists and motorists to obey the law. This allows PCSOs to stop cyclists and, I hope, vehicles. I think it is mainly to do with a survey, which may be important. I do not think it is the most important thing we are talking about in the Bill but, clearly, if a cyclist needs to take part in a survey, he should stop and do so.

Amendment 94B is very much more important. This is to do with advanced stop lines. I fear that this needs a longer explanation. I thought for many years that the first advanced stop line that you come to is advisory, if there are two with a box in between, the box being for cyclists. I discover that it is not advisory; it has the same force of law for motorists as the second one does. I shall say a little more about that in a minute. There is also a rather odd piece of legislation about the box between the first and second advanced stop lines. There is often an entry for cyclists on the left of the box as they go into it. Apparently examples have come up in London when a cyclist wants to make use of the box—which, after all, is there to provide visibility for cyclists.

It has been the case for many years that visibility is the most important thing and lack of visibility has probably contributed to much of the sharp rise in cycling fatalities in London this year. A lot of good work has been done to try to make cyclists more visible, but one of the most important things is the box, whereby drivers can see the cyclist in the box. However, apparently there is an anomaly if one is at a stop line and a cyclist wants to turn right. Normally, the cyclist might have got into the right hand lane of the traffic before he reached the stop line, would then stop until the lights turned green, and then go forward and turn right when it was safe to do so. Apparently, the only legal way of entering this box is up that little lane on the left, which means that the cyclist has not crossed the full line—he crosses the dotted line to get into the box, then he has to go across one, two or occasionally three lanes of, one hopes, stopped traffic, to get into the right-hand side to turn right. I hope that I am not confusing your Lordships too much. It is a problem when cars do not stop at the first line. Then the cyclist wants to go further ahead to be seen, and then he is crossing the second line, maybe, and he gets stopped by the police and fined—and he will get stopped by the PCSOs in future.

19:30

I do not have a solution for this, and I am not sure that the Minister will have one. It is very complicated. But if PCSOs are going to stop and put a penalty on cyclists for making these manoeuvres that are, in theory, illegal, there must be a similar action by the PCSOs to take action against road vehicles. I have tried pretty hard to find out how many examples there are of police stopping and putting penalties on vehicles that have gone through the stop lines, but it is really very difficult to find the statistics. I have some only from London, but it may be worth rehearsing one or two of them.

In London, data are not collected centrally, but there has been an operation Safeway—why it is called that, heaven only knows—whereby 528 vehicles have been issued with fixed penalty notices for failing to comply with the automatic signals, and only 180 for failing to comply with the advanced stop line offence. When I cycle every day, probably at half the stop lines that I come to a vehicle has gone over it. It may be enforced, but it is nothing like enforced enough. If a PCSO is going to stop a cyclist going over one or other of these lines, I hope that they will be able to stop and put a penalty on a road vehicle, which has also done it—because it is the basis of safety.

I have a lot more statistics here, which are probably not relevant. I hope noble Lords have understood a little of what I have said and that the Minister can give me some comfort that both lines are subject to the same regulations and could be subject to fixed penalties, and that the cyclists will be treated in the same way—and that a little discretion will be used. I hope that discretion will be used before the police stop and put a penalty on a cyclist going across one line because he or she is trying to get ahead of the vehicles enough to be seen.

The next amendment, Amendment 94C—I shall be a little quicker—is to do with lighting. There are too many cyclists going around without lights at night. We all know that, and it is extremely dangerous. It is good when the police take action, and it must be good that PCSOs will be able to as well. The problem is that, when you dig down into the regulation, you find that all cycle pedals must have lights on them—or reflectors, front and back, of a sort of orange colour. But you also find that, although they have been in the construction and use regulations for about 20 years, roughly half the cycles in use in this country do not have such reflectors; the manufacturers are not complying with the regulations. I am not sure whose job it is to make manufacturers comply, but it will not be much good if half the cyclists in London are to be stopped and given a penalty for not having a reflector because they cannot buy a particular pedal that they need, which can take a reflector. Again, I do not have a solution to this but, if this is really to be part of the PCSOs’ role, I hope that the Government will also make sure that the manufacturing industry and the cycle trade take it into account and take it gently for the first few years.

On Amendment 94D, it would be a very great help if the PCSOs and some police forces were given some cycle training before they embarked on this extra work. This is not a way of teaching them to suck eggs, or anything like that. If you are in a situation where you are trying to control and regulate and ensure that cyclists are cycling safely and within the law, it is just as well that you know how to ride a bicycle. Similar comments could apply to police in cars who deal with motoring offences on the move; on the whole, they have the right training, I believe. Some of them do not have the right training in bicycles.

I was cycling up a cycle lane through Hyde Park a year or two ago, in the dark, and there was a car coming down the cycle lane. I stopped the car and asked them what they were doing because they were driving illegally down the cycle lane. Of course, in the car were two police officers, and I asked them why they were driving down the cycling lane. They said that they were on patrol and I said, “Yes, I know that, but can’t you patrol on bicycles? Is it too cold for you?”—because it was winter. They said, “No, it’s not to do with that. We have to have special training before we can patrol on bicycles, and we both failed the test”. I am not sure whether that is a good or a bad example, but it shows that there is a test to be done. Those police officers—and there are many more of them now—who patrol on bicycles do it very well. They are much less threatening than when you come across them in a car on a dark night. So the idea of PCSOs doing some training before they embark on bicycle regulations would be very helpful.

In conclusion, I shall be very interested to hear what the Minister says in his response. Perhaps we should meet about this before the next stage, or just reflect on it. I hope that he has taken into account some of the comments that I have made, particularly on the advanced stop line, which is a real safety issue. It could go wrong or it could be a great success. I beg to move.

[Lord Rosser]

The amendments proposed by my noble friend Lord Berkeley, which he says are probing amendments, seek to extend the powers available for designation to PCSOs. We debated the issue of the powers of PCSOs in Committee in the light of a government amendment extending their powers. It is hardly a surprise that we now have an amendment which, on the face of it, wants to go further.

In his response to the debate in Committee on 11 December, the Minister said that it was,

“right that the chief officers should have the freedom to take account of local circumstances and priorities when determining how their PCSOs are deployed”.—[Official Report, 11/12/13; col. 822.]

He also referred to a police and crime commissioner who had indicated a desire to see PCSOs tackling traffic offences. If the Minister accepts that my noble friend’s amendments on PCSOs’ powers go beyond those proposed in the Government’s amendments, agreed on 11 December 2013, but is not going to accept my noble friend’s amendments, can he say why, before Christmas, on 11 December 2013, he felt it right that the chief officers should have the freedom to take account of local circumstances and priorities when determining how their PCSOs are deployed but on 20 January, after Christmas, he does not?

[Lord Ahmad of Wimbledon]

My Lords, I thank the noble Lord, Lord Berkeley, for his amendments. I suppose there was a general answer when he was talking about dotted lines and straight lines. I was told from a very young age that whenever you crossed the line, it was not the right thing to do. That is something all should keep in perspective when looking at these issues. The noble Lord spoke to the subject in his amendments with a great deal of expertise and insight. I fully acknowledge his work as president of the Road Danger Reduction Forum and as vice-president of the Cycling Touring Club.

The noble Lord’s Amendment 94D would mandate that all PCSOs must undergo a cycle training course before a chief constable designates cycle-related powers. We recognise that, as a result of these changes, additional training will be required to ensure PCSOs have the right knowledge, skills and expertise to exercise these powers. We do not agree that this should be mandated specifically by Whitehall, but we are confident that the police and the College of Policing are best placed to deliver this. I will bring this to their attention. The noble Lord was speaking with insight and I am quite happy to facilitate a meeting with the Roads Minister to see how we could talk about these subjects in terms of their wider application. I think he would agree, from his personal experience as a cyclist—and an avid cyclist at that—that across Britain and in our cities as well we are going through an evolutionary change on cycling. There is a ready acceptance now that cycling is something that is to be encouraged as part of the transport mix. When you go to cities such as Cambridge, for example, you actually see how it operates more effectively than in other parts of Britain. We need to share good practice across the country.

I now turn to Amendment 94C regarding the updating of regulations. The Department for Transport has consulted on the simplification of the current regulations with groups including the police. Revising these will form part of their ongoing work on the red tape challenge. Granting PCSOs the power to enforce regulations on cycling without lights will have a real impact on improving the visibility of cyclists and will help prevent road traffic accidents. The noble Lord acknowledged this himself in speaking to his amendments. That is why we believe that delaying the introduction of this power until after the regulations are updated would not achieve our objective of improving the safety of cyclists and other road users as quickly as we want to. His point about the pedals on cycles is well made. I remember years ago passing the cycling proficiency test and there were certain things which were “dos” and “don’ts”. He is correct in saying that many cycles now in Britain do not have reflectors and there is a need for those regulations to be updated. His point of raising these issues with manufacturers is also well made and noted.

Amendments 94A and 94B seek to grant PCSOs the power to issue motorists with a fixed-penalty notice for failing to comply with traffic directions and for failing to comply with advance stop sign regulations. We recognise that PCSOs have a key part to play in tackling issues around road safety and have consulted with the police and other key stakeholders on this matter as part of our ongoing work to explore the development of the role and powers of PCSOs. I am grateful to the noble Lord for suggesting these further enhancements to PCSO powers and I will certainly take his suggestions away to consider them as part of the wider work on reviewing PCSO powers that is already taking place. However, we want to understand fully the implications for PCSOs, the police and the public and until we have completed that further work I think it would be premature to make these changes at this time. I am aware that there is some concern that our proposals will result in cyclists being picked on by PCSOs. Let me assure the noble Lord that that is clearly not our intention. The powers in the Bill are not new, as a police officer can already exercise them. Just as police officers use their discretion, we expect that PCSOs will also do so.

Perhaps I may pick up on a couple of points made by the noble Lord, Lord Rosser. Of course, the extension of these new powers is very much in the hands of the chief constable. PCSOs have 20 standard powers and another 22 discretionary powers. These changes bring a further 19 discretionary powers. It is really down to the chief constable to make the decision from an operational perspective as to what powers should be extended to PCSOs. We believe that is the right thing to do. We know that the public really value the role PCSOs play in tackling low-level crime and anti-social behaviour and we believe that this package of measures will ensure that they can continue to play a key part in providing the best service to the communities they serve. Given these reasons and, I hope, the assurances I have given to the noble Lord that we will continue to consider the points he has raised and the powers available to PCSOs, I hope the noble Lord will feel able to withdraw his amendment.

19:45

[Lord Berkeley]

I am grateful to my noble friend Lord Rosser for his support and to the Minister for his very helpful reply. I did not really expect the amendments to be accepted as they are today at this comparatively late stage. It is good that the Department for Transport is looking at these things and it would be useful to have a meeting with the Roads Minister. I hope that the Minister has an assurance from the Department for Transport that the amendments which were put in at a previous stage are also part of this integrated policy, because if not, there could be some trouble in the future. But I am sure he has and I am grateful for what he said. I beg leave to withdraw the amendment.

Amendment 94A withdrawn.

Amendments 94B to 94D not moved.

Clause 148: Appeals

Amendment 94DA

Moved by

[Lord Hodgson of Astley Abbotts]

94DA: Clause 148, page 112, line 36, leave out paragraphs (a) and (b)

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I will speak at the same time to Amendments 94DB to 94DF inclusive. These are all connected to Part 12 of the Bill concerning extradition.

I will briefly summarise what appears to be a slightly technical and arid set of amendments, but which would nevertheless have a very significant impact. They would restore to individuals arrested under an extradition warrant the automatic right of appeal which currently exists—an automatic right which the Government are proposing to remove under the terms of this Bill. Let me make it absolutely clear that these amendments do not somehow let individuals off the hook who are arrested under an extradition warrant. They merely preserve the right that those individuals enjoy at present. Noble Lords will probably be aware from the briefings they have received that these amendments are supported inter alia by Fair Trials International, of which I need to remind the House that I am a trustee, by Liberty and by Justice.

I will now set that summary in context. First, my particular concern is the impact of the Government’s proposal on those arrested under what is known as a Part 1 warrant—more familiarly, the European arrest warrant—because of the very short timetable of EAW proceedings. Secondly, I want to make it clear that this is not an attack on the EAW generally. The EAW has enabled many very nasty criminals—terrorists and the like—to be speedily brought back or sent back to face justice. That is as it should be. Thirdly, and quite understandably, this Government—and, indeed, the previous Government—focus on these very high-profile cases, but the vast majority of cases do not involve matters of high importance.

In the last year for which records are available, there were 1,438 arrests under the EAW and 1,057 surrenders. For the most part, these involve ordinary members of the public for whom this will be an entirely strange and unfamiliar process and one which they are not well equipped to challenge. Some of them will have been arrested for crimes which they did not commit. Therefore, it is on behalf of these people—Edmund Burke’s “little platoons”—that I have tabled these amendments and ask for the House’s support today.

I shall be fair to the Government and my noble friend on the Front Bench. The Government asked Sir Scott Baker to review the operation of this country’s extradition arrangements and they have implemented a great many of his recommendations. Further, as part of the Lisbon opt-out, opt-back-in procedure, the Government have indicated a number of further changes. For example, they expect much less use in future of the EAW for trivial crimes and that greater efforts will be made to ensure that cases are trial-ready before the surrendering of individuals takes place. Those are indeed welcome changes and I congratulate the Government on making them. However, while increasing these protections, the Government are proposing to remove one great protection—that of the automatic right of appeal.

I hope that the House will forgive me if I remind noble Lords of two particular aspects. The first, as regards the EAW, is just how compressed the process of surrender is. An arrest will be followed by a court hearing at Westminster magistrates’ court within 48 hours. The accused will be represented by a duty solicitor who may or may not know anything about extradition. Edward Grange, a specialist extradition solicitor, has explained:

“At present there are over 400 individual solicitors signed up to the extradition rota at Westminster Magistrates’ Court. The majority of individual solicitors have never had conduct of an extradition case before and yet these are the solicitors that are entrusted to provide appropriate advice and assistance to those arrested on extradition warrants. The Extradition Act 2003 is complex and the case law it has generated is vast”.

A further hearing after that initial hearing will follow within 21 days, so that in as little as 35 days a person can be on his way to another jurisdiction, many of which will be operating with entirely unfamiliar procedures and conducted in a language which the accused probably does not understand at all.

Further, it is worth while remembering that, if the person wishes to appeal, he has in any case to make that appeal within seven days. I ask noble Lords to imagine the case of an unsophisticated person remanded in prison. His first legal representative, it turns out, knows nothing about extradition, so he has to make a change. He has to gather evidence, probably from at least two jurisdictions, perhaps involving many people, and put all that together into a case, and he has to do so within seven days while he is confined to prison. So much for the specifics of the compression of the EAW procedure.

The second point is the catastrophic impact that extradition can have on an individual—on his family, on his home, on his employment and indeed on his whole life. I shall not weary the House today with quotations from people who have been involved in these cases, but the stories of how people’s lives have been turned upside down by mis-arrests and an inability to get the appropriate advice and help are truly horrifying. The step of a state arresting one of its own citizens and handing him or her over to another state to try is a very fundamental one. It needs to have a proper level of safeguards. That is why I have tabled these amendments today and why I think they are so important.

If I could look over the shoulder of my noble friend on the Front Bench and glance at his speaking notes, what do I think I would see there as the Government’s wish behind the policy of removing the automatic right of appeal? I think the first thing would be that they were doing so because Sir Scott Baker recommended its abolition due to what he saw as a large number of unmeritorious appeals. However, the world has moved on since Sit Scott Baker undertook his review. First, the safeguards introduced by the Government, as I referred to earlier, through their amendments to the 2003 Act will now give weight to arguments which may previously have been deemed to be without merit due to the lack of a legislative basis. Therefore, it is likely that these reforms will reduce the number of unmeritorious appeals reaching the High Court. Further, the Government have introduced a requirement in Clause 145 of this Bill for the National Crime Agency to review extradition requests and sift out cases where it is clear that a judge would be required to order a person’s discharge on the basis that extradition would be disproportionate. Taken together, those steps will certainly mean a substantial reduction in the number of EAW cases.

It is important to remember that, while Sir Scott Baker recommended that the automatic right of appeal should be removed, as a compensating factor he also recommended that the time in which an appeal could be launched should increase from seven to 14 days to match the period that exists for a Part 2 warrant. I tabled an amendment to that effect in Committee. Subsequent to that, and after discussions with my noble friend on the Front Bench, I reflected and concluded that the longer the appeal period, the more the well resourced “nasty” case could take advantage of these delays to frustrate the underlying purpose of the EAW. Therefore, I have not retabled that amendment, which we discussed in Committee on 11 December. Instead, I argue for the preservation of the status quo as regards appeal. I shall not try to pretend to the House that I understand the details of how the appeal process works but the groups with which I have consulted over this matter understand the details and have written to me to say:

“Our review of the judgments of the High Court in extradition appeals … demonstrates that judges are able to dispose of appeals based on weak arguments in an efficient manner which prevents significant court time from being spent on unsuccessful appeals”.

In conclusion, while I congratulate the Government on the changes and improvements they have made, I express sorrow and regret at their apparent determination to remove this important protection. I am convinced that British judges are quite capable of sorting the wheat from the chaff in appeal cases. Preserving the automatic right of appeal will undoubtedly help ordinary people inadvertently caught up in the machinations of the EAW. I believe that it is in the interests of justice that the automatic right of appeal should therefore be maintained. I beg to move.

[Baroness Hamwee]

My Lords, things can go wrong in the best of organisations and the most learned and expert of professions. To me, the right of appeal is fundamental and I support the noble Lord.

[Baroness Smith of Basildon]

My Lords, I listened carefully to the noble Lord, Lord Hodgson. I think that he has argued a powerful case this evening and I share his concerns. I am not convinced that the Government have made the case for removing the automatic right of appeal. Given the criticisms that the Government themselves have made of the European arrest warrant, I find it particularly surprising that they now seek to remove the automatic right to challenge such a warrant.

I can understand why the Government brought this forward in terms of the Baker review. However, we are talking about British citizens being extradited to face what I would hope would be justice in another country. I have looked at the same information as the noble Lord, Lord Hodgson, and the figure of 12% of appeals being successful is likely to change significantly. The Government have made other, welcome changes to ensure that cases without merit are more easily dismissed, and we would support those. I am not convinced that the information that Baker had to work with can now be viewed as a reliable indicator of the current number of unsuccessful appeals. As the noble Lord, Lord Hodgson, said, the world has moved on and the Government have made changes, and therefore the figures will have changed.

However, the court will still have to make a decision on whether to allow leave to appeal. I do not know whether the noble Lord can help me on that. Would it be a written or an oral process? That is not clarified in the legislation. Whatever the process, it is going to require a degree of judicial and administrative time, and that seems to me to eat into any cost savings. However, the impact assessment says that those savings will in any case be minimal, if there are any at all.

The other point that the noble Lord made was about the court’s discretion. An individual would have to be able to show that they had new evidence or a different legal analysis, or that the evidence that the judge relied on in making the original decision to extradite them was wrong or incorrectly interpreted. We have to accept that there can be mistakes. The noble Lord, Lord Hodgson, outlined the scenario of a duty solicitor. He or she would do their best for their client but they might only just have met the client and may not have all the information. It is a complex area of law and they may not be up to speed or have dealt with such cases before, so it is not impossible, although it is understandable, for mistakes to be made. It seems to me that in the very short time available for seeking permission to appeal, they would have to have almost the same information as they would need for an appeal, and that is quite an amount of detailed information. I wonder how somebody in those circumstances could provide all the information required in the time allowed.

20:00

It is in all our interest to ensure that the appeal process should never be used just to delay judicial process. However, we have to ensure that there is a process to provide for genuine errors. I mention specifically the Gary McKinnon case, which has caused all Governments a great deal of anguish and consideration. The evidence that ultimately ensured that he remained in the UK related to his mental health. That information would not have been easy to provide in the time allowed by the proposals being brought forward by the Government today. He would not have had an automatic right of appeal. Could he have got that evidence and presented a mental health report in time for a permissions hearing before the High Court? I am not convinced that he could. I think that the Government have not yet made the case in the light of other changes. I would also ask the noble Lord what impact he thinks the National Crime Agency’s sift of applications will have. That could have a significant effect on the number of cases.

I have one other point. I am not 100% clear that I have understood government Amendment 94DH correctly. My understanding is that the Government are choosing an option. The Minister wrote to us about this and I am grateful to him for doing so, but I want to clarify a couple of points. This is about the ratification of the European Convention on Extradition. The Government’s amendment allows the Government to hold or detain someone while the request to ignore the bar on a person being proceeded against for offences other than those listed in the extradition request—the rule of speciality—is being considered by the state that originally extradited the person. Those will be people who are already facing charges for extradition, and the Government are then seeking to charge them with offences beyond those for which they have been extradited and are awaiting permission to do that and want to hold them while they are waiting. I understand that. However, not all states are signed up to this; it is an optional measure. What are the reasons for opting in, and have the Government given any consideration to the impact on current or past cases? Does the Minister have any indication of the kind of offences that are being considered here and has any consideration been given to the length of time that the state would hold people while authorisation to ignore the role of speciality is being considered? That length of time could be quite significant in terms of justice for the person facing extradition and those seeking justice from them. Clarification in writing on those points would be helpful.

I have great sympathy and feel very supportive towards the comments of the noble Lord, Lord Hodgson. The Government have to make a case, which I am not convinced has been made yet.

[Lord Hope of Craighead]

My Lords, before the noble Baroness sits down, it might help if I were to say that my understanding is that applications for leave to appeal have to be in writing. The grounds for seeking leave have to be written out in the application, and usually these things are disposed of on paper, so it is essential for success to have the grounds properly stated on paper. One has to bear in mind—this may be the noble Baroness’s point—that these things will be put together by somebody who is in custody, within a very short time limit, who may find it difficult to get access to legal advice. Without expressing a view one way or the other, I suggest that the practicalities of this measure need to be very carefully considered against the position of the individual who is having to comply with what would be now required.

[Lord Taylor of Holbeach]

My Lords, I confirm that the process is a written one—the noble Baroness asked that specific question.

Perhaps it is best if I start with the government amendments in this group, which would insert two new clauses into the Bill. First, Amendment 94DG implements an optional provision in the Fourth Additional Protocol to the European Convention on Extradition—the ECE—which the Government intend to ratify shortly. The ECE governs extradition between the UK and members of the Council of Europe—other than EU member states—plus Israel, South Africa and the Republic of Korea. This provision concerns the issue of speciality, which is the bar on a person being proceeded against for offences committed prior to extradition other than those listed in the extradition request.

Among other things, the Fourth Additional Protocol provides an optional mechanism whereby states can restrict the personal freedom of a person while a request to waive the rule of speciality is being considered by the state that originally extradited the person. This is not something that is currently catered for in Sections 150 and 151A of the Extradition Act 2003, which deal with the speciality rule in these cases. Accordingly, Amendment 94DG makes the appropriate changes to the 2003 Act. A person may only be detained under this new provision where both states have made the relevant declaration under the ECE and that declaration is still in force, and certain specified conditions, as set out in the new clause, are met.

Perhaps I may elaborate on that point. Those conditions are as follows. First, the Home Secretary requests the state that extradited the person to waive the speciality rule. Such requests are predicated on the prosecuting authorities being satisfied that there is a case to answer and that prosecution for other offences would be in the public interest. Secondly, the requested state must be notified by the Secretary of State that she would wish the person to be detained while they consider the request to waive specialty. Thirdly, the requested state must explicitly acknowledge the notification. If the requested state objects to the detention request then that person may not be detained; or if detained, must be released. Finally, and assuming these criteria are met, any application to detain the person will be made by the prosecuting authorities to the courts in line with general criminal law procedures. The new provision allows for detention in these circumstances for a maximum period of 90 days.

We believe there will be only rare cases which fall into this category. However, in those rare cases, the ability of the prosecuting authorities to apply for the person to be remanded in custody could be crucial to safeguarding the public and effecting a successful prosecution.

Amendment 94DH replaces Section 142(2A) of the 2003 Act. Section 142 deals with the issue of European arrest warrants in the UK; that is, in cases where the UK is requesting the extradition of a person from another member state. In the case of people who have already been convicted of an offence and whose extradition is requested in order to be sentenced or to serve a sentence, one of the conditions for the issue of an EAW by a UK judge is that the person is “unlawfully at large”. In a recent case a judge refused to issue an EAW in respect of a person who was in prison in another member state on the basis that the person could not be said to be “unlawfully at large”. Following that, we have decided to amend the 2003 Act to make clear that it is no barrier to the issue of an EAW that the person is in prison in the requested state. Amendment 94DH will achieve that.

I turn to the amendments tabled by my noble friend Lord Hodgson of Astley Abbotts. Let me preface my comments on the detail of his amendments by reiterating that we welcome the constructive approach he has taken to the extradition provisions in the Bill, and I am pleased to say that there is a great deal of common ground between us. As my noble friend explained, Amendments 94DA to 94DF would remove the appeal filter introduced by Clause 148.

A key finding of Sir Scott Baker’s review of our extradition arrangements was that the success rate of appeals was extremely low—less than 13% in 2010. In other words, the court system is burdened by unmeritorious appeals which delay hearings for all appellants. The purpose of the appeal filter is to address this problem by making appeals subject to permission from the High Court. I understand the points that my noble friend makes, but I must stress again, as I did in Committee, that these provisions will not prevent anyone applying for permission to appeal. Once an application has been made, the High Court will decide which cases should proceed to a hearing. Each application will be considered by a High Court judge.

Finally, I wish to make two further comments with regard to two of the other extradition clauses in the Bill. The first relates to Clause 144. That clause inserts a new Section 12A into the 2003 Act which provides a bar to extradition in EAW cases—cases where the issuing state has not taken a decision to charge and a decision to try the person. I want to make clear that the purpose of and intention behind this clause is to ensure that the case is sufficiently well advanced in the issuing country. We want to ensure that ordinary mutual legal assistance arrangements are used fully and properly. It is not our intention that a parochial approach to this clause should be taken. As the Court of Appeal has said, the Extradition Act 2003 should be interpreted in a cosmopolitan sense and be mindful of the stages of criminal procedure in other member states which do not use the common law. It is important that there is a clear intention to bring the case to trial. An EAW must, after all, be issued only for the purposes of conducting a criminal prosecution, as Article 1 of the framework decision makes very clear. We want an EAW to be used only for its proper purpose.

Comments have been made about the timescale for appeals. Clause 148 sets out that the High Court must not refuse to entertain an application for leave to appeal by the requested person solely because it has been submitted outside the normal time period if the person did everything reasonably possible to ensure that the notice was given as soon as it could be. That is an important provision. It is also important to note that the seven and 14-day period relates to the notification of the intention to seek leave to appeal. I appreciate the concern that this is an insufficient period. However, it is also important to be clear that the onus should be on the person to ensure that as much as possible of the detail of why they believe they should not be extradited should be before the court as soon as possible. This would surely improve their chances of having the case discharged at an early stage by the district judge.

I would also like to clarify what the Minister for Policing, Criminal Justice and Victims said in the Commons Committee on 16 July last year in relation to dual criminality and Clause 152. He spoke about how this provision would work in practice in relation to an example about the offence of Holocaust denial. I want to ensure that there is absolute clarity on this point. Where an EAW was received for Holocaust denial allegedly committed in the UK, extradition would be barred for that conduct because it is not an offence here. However, extradition would be granted for such conduct committed in the issuing state, provided that the conduct is punishable in the issuing state with imprisonment or another form of detention for a term of three years, or a greater punishment, and of course that none of the bars in the Act apply so as to prevent extradition.

The noble Baroness asked a number of questions and I hope that I have answered some of them. Perhaps I may say particularly that the changes we are making will give people greater protections and improve the overall operation of the EAW, but that they will not impact on the number of unmeritorious appeals. It will be a matter for the courts how they operate the filter and decide whether to grant or refuse admission. On the impact of the NCA filter—proportionality—while the filter will leave the number of low-level cases that the courts will have to consider, we cannot say how it will impact on the number of cases that the court will consider. This will be dependent on the number of requests made by a state. I hope that I have been able to persuade my noble friend that our approach on extradition appeals is the right one and he should not press his amendments. As for the government amendments, I commend them to the House.

20:15

[Lord Hodgson of Astley Abbotts]

As ever, my noble friend is very courteous and extensive in his reply. I thank those who have spoken in support. The noble and learned Lord, Lord Hope of Craighead, made the point perfectly about the practicalities of doing something when you are in prison and doing so in a very limited timescale.

My noble friend, this evening and in our earlier discussions, placed great stress on the use of the word “reasonably”, and it is neither for me nor for various Members of the House to know how the judges will interpret “reasonably” when they come to consider this. I am sure the noble and learned Lord will have some views on that, but I will not take it any further tonight.

I thank my noble friend Lady Hamwee and the noble Baroness, Lady Smith of Basildon. I think the noble Baroness put her finger on it; we are in a changed situation now, and with great respect to my noble friend, he did tend to fall back on the clogging up argument. The reality is that the clogging up argument is yesterday’s argument. The Government have made some terrific changes, which I freely admit are going to make a great difference. It would be helpful if he could at some point let the House know the Home Office estimate of the impact of the new safeguards in reducing the number of EAWs to be issued and also, as the noble Baroness said, of the similar impact of the proportionality test that is going to be carried out the National Crime Agency, because I suspect that within the Home Office the number of EAWs will be reduced and therefore the number of unmeritorious appeals will be reduced greatly.

I conclude by saying that it is easy to think this is all very dry and dusty—but when you hear what people go through, it is not. Mr Andrew Symeou, speaking to the Home Affairs Committee last September, two years after he had been returned after a prolonged time held overseas, said:

“I have stories that you could not imagine. To be the youngest person in a foreign maximum security prison was traumatic. It changed my life in ways that I never thought it could. Even to this day I don’t feel like myself anymore. It should never have happened. I have lost too many years. All my friends are in full time employment and I am still trying to settle back into my life. I was a 19-year old student. I had never been in trouble with the law before. To show a British court this overwhelming evidence of my innocence and then to be extradited is crazy. I think it is quite simple: just don’t extradite people who are able to prove their innocence”.

It is on behalf of people like him that I am raising this issue tonight, but I do not intend to take it any further at this stage. I hope that my noble friend can give us some further and better particulars about the impact of the changes the Government are making. In the mean time I beg leave to withdraw the amendment.

Amendment 94DA withdrawn.

Amendments 94DB to 94DF not moved.

Amendments 94DG and 94DH

Moved by

[Lord Taylor of Holbeach]

94DG: After Clause 152, insert the following new Clause—
“Extradition to the United Kingdom to be sentenced or to serve a sentence
In section 142 of the Extradition Act 2003 (issue of Part 3 warrant), for subsection (2A) there is substituted—“(2A) The condition is that—
(a) the person has been convicted of an extradition offence by a court in the United Kingdom,(b) his extradition is sought for the purpose of his being sentenced for the offence or of his serving a sentence of imprisonment or another form of detention imposed in respect of the offence, and(c) either a domestic warrant has been issued in respect of the person or the person may be arrested without a warrant.””

94DH: After Clause 152, insert the following new Clause—
“Detention of extradited person for trial in England and Wales for other offences
(1) In sections 150 and 151A of the Extradition Act 2003 (dealing with extradited person for other offences), at the end of subsection (2) there is inserted—
“This is subject to section 151B.”
(2) After section 151A of that Act there is inserted—
“151B  Detention of person for trial in England and Wales for other offences
(1) Section 150 or 151A does not prevent a person in whose case that section applies from being detained with a view to trial in England and Wales for an offence if the conditions in subsection (2) are satisfied.
(2) The conditions are that—
(a) the United Kingdom and the territory from which the person was extradited have each made a declaration under Article 14(3) of the Extradition Convention, and the declarations are still in force;(b) the Secretary of State makes a request for the consent referred to in section 150(3)(c) or 151A(3)(c) in respect of the offence (“the consent request”);(c) the Secretary of State gives notification, which is explicitly acknowledged on behalf of the territory, of the date on which the detention is to begin (“the notified date”). (3) The Extradition Convention is the European Convention on Extradition done at Paris on 13 December 1957.
(4) This section applies only to detention during the period beginning with the notified date and ending with whichever of the following occurs first—
(a) if a notification of opposition to the detention is given on behalf of the territory, the date on which Secretary of State receives it;(b) the date on which the Secretary of State receives notification given on behalf of the territory as to whether the consent request is granted or refused;(c) the expiry of the period of 90 days beginning with the date on which the consent request is received.””

Amendments 94DG and 94DH agreed.

Consideration on Report adjourned.

Syrian Refugees

Monday 20th January 2014 Lords Chamber

Statement

20:20

[The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)]

My Lords, in response to an Urgent Notice Question in the House of Commons earlier today, my honourable friend Mr Mark Harper, the Minister, responded as follows:

“More than half the Syrian population of 9.3 million is in need of humanitarian assistance, and 2.3 million have been displaced from Syria into neighbouring countries. This is a crisis of international proportions and needs a commensurate response from the international community. The Government are proud to be playing their full part in that response and share the view of the UN Secretary-General that the priorities must be to, “assist the Syrian parties in ending the violence and achieving a comprehensive agreement for a political settlement”, and ending the suffering of the Syrian people.

No one should underestimate the difficulties ahead, but we are determined to strive for a peaceful settlement through the Geneva II process which starts later this week and is working towards the establishment of a Transitional Governing Body for Syria. We continue to believe that the best way to address the suffering of the Syrian people should be to provide humanitarian assistance to displaced people in partnership with neighbouring countries and UNHCR. Prior to last week the Government had provided £500 million for the Syrian relief effort already, of which £480 million has been allocated to partners in Syria and the region. It has already helped over 1 million people, for example almost 320,000 people are being provided with food assistance each month in Syria and neighbouring countries and over 244,000 people in Syria have been offered medical consultations. The Government are continually pressing for better access and protection for humanitarian convoys inside Syria so that aid can get to the millions in need inside the country. This represents the UK’s largest ever response to a humanitarian crisis.

We are leading the way in helping Syrians suffering from the humanitarian crisis. We contribute in several ways: as the second largest donor helping refugees in the region behind the United States of America and through consideration of Syrian asylum claims under our normal rules. In the year to September we recognised over 1,100 Syrian nationals as refugees. We are very aware that some, including the UNHCR, would like to see a more proactive programme of resettlement of refugees currently hosted by countries neighbouring Syria.

We have considered the options carefully and respect the views of those countries that favour a resettlement programme, but we maintain the view that our top priority should continue to be to provide humanitarian assistance to displaced people in the region in partnership with neighbouring countries, UNHCR and other UN and non-governmental partners. Most of those displaced want to return home as soon as it is safe to do so and protection in the region helps to afford them that hope.

Beyond immediate humanitarian assistance, our priority must be to help neighbouring countries provide sustainable protection in the region. Accordingly, this should be our focus rather than resettlement or providing humanitarian admission to displaced Syrians, initiatives which provide only very limited relief to the neighbouring countries and can only have a token impact on the huge and increasing volume of refugee numbers.

The UK can be proud of its contribution so far but there is still much to do. Last week the Secretary of State for International Development pledged a further £100 million in aid.

I recognise that this is a highly emotive issue and one that continues to require real action through high levels of international co-operation, both in the region and more widely. The UK has a proud tradition of providing protection to those in need and this Government are committed to continuing to play their full part in the international response to the humanitarian crisis in Syria”.

That concludes the Statement.

20:25

[Baroness Smith of Basildon (Lab)]

My Lords, I am grateful to the Minister for repeating the Answer to the Urgent Question. As he said, more than 2 million Syrian refugees, many of them children, have fled to neighbouring countries. Their situation is catastrophic and totally desperate.

We can take pride in the response of the British people, and the UK has rightly led the way in providing aid. However, we have now been asked by the United Nations to join its programme, together with 16 other countries so far, to help the most vulnerable refugees—those who struggle to survive in the camps. I am talking about abandoned children who have no other protection or support; torture victims; those in need of medical help; mothers and young children; and those who have been abused in the camps. We know that many women and young girls are at risk of sexual abuse and rape. So this is not about immigration policy or border control; it is about playing our part to provide sanctuary to the weakest and most vulnerable.

Charities such as Save the Children and Oxfam are calling on us to act alongside the 16 other countries that have offered places to the weakest refugees. So far the Government have refused to join, calling the programme “tokenistic”. Will the Government now urgently reconsider that decision? How many of the refugees at the greatest risk, who are fleeing murderous conflict and are in fear of their lives, will be offered a safe haven in the UK?

20:27

[Lord Taylor of Holbeach]

My Lords, I have made clear by repeating the Answer from my colleague Mark Harper that the Government’s policy is focused on providing aid where the problem exists—that is, within the camps and with displaced persons in the region. We are providing financial support and our aid programme is designed to help the most vulnerable, both in Syria and in neighbouring countries. For example, we are supporting the UNICEF programme providing psycho-social support, services and protection for some 15,000 of the most vulnerable children.

20:28

[Baroness Falkner of Margravine (LD)]

My Lords, does my noble friend agree that the only way to resolve this humanitarian catastrophe is to wish the political process that we are about to embark on success? Unless we conclude with that, it will be just a drop in the ocean.

As to asylum and the 1,100 people that the Minister mentioned—who were also mentioned by the Deputy Prime Minister a few days ago—will he tell the House whether Syrian students who might be resident at universities in the United Kingdom will be granted asylum, should they so apply, and whether family reunion policies would apply to them if they were successful?

[Lord Taylor of Holbeach]

My Lords, we have already in existence an immigration concession policy which we introduced in October 2012 for Syrian nationals who are already legally present in the UK. The concession was due to expire on 15 March 2013 but, given the continued instability in Syria, it was extended for a further year and is now due to expire on 28 February 2014. We are currently considering options to extend this concession further. We have not sent anyone who is in this country back to Syria.

On the question of reuniting refugees in the UK with their families, in line with our international obligations, family members of those granted refugee humanitarian protection status in the UK, including those from Syria, may apply for family reunion from outside the UK. However, we have no plans to allow Syrian nationals to enter the UK beyond the normal immigration channels at present.

[Lord Boateng (Lab)]

My Lords, the current regime, with its undoubted failings, at least has protected religious freedom in Syria. Those who seek to replace it seem to have no qualms about persecuting Christians and other religious minorities. What steps does Her Majesty’s Government propose to take in order to protect those who will never be able to return to Syria while those who persecute them exercise authority in that country? How does Her Majesty’s Government propose to ensure that religious freedom is seen as something that is of the utmost priority in the coming talks in Geneva?

[Lord Taylor of Holbeach]

The noble Lord rightly points to the need for a political solution because that is the long-term solution to all these difficulties. The catastrophic turn of events in Syria points to the need for finding a solution in which freedoms are established and people can enjoy freedom of expression and freedom of worship in ways that we would consider acceptable in this country. It can be achieved only through success at the conference, which I believe is on Wednesday. Let us wish the conference well.

[Baroness Berridge (Con)]

My Lords, I am grateful to the Minister for clarifying that 1,100 people have been granted refugee status, but I think it would be useful to have further clarification. How many of those people were already in this country when they applied for asylum, and how many have very dangerously made their way to our shores and claimed asylum? It seems that with the latter situation we are enabling some of the most able who can travel to come to our shores to get refugee status and not some of the most vulnerable, who have been processed by the United Nations and who are desperately in need of refugee status, to gain that status. Can the Minister reassure us that, post Geneva II, there will be a reconsideration of the Government’s policy, particularly in relation to our taking orphans from these camps who have no basis to go back to Syria, whatever the political settlement may look like?

[Lord Taylor of Holbeach]

I make no commitments on the latter point, and I cannot give a breakdown of the location of the asylum seekers—the 1,100 Syrian nationals—who have been successful in their applications. I know that 1,566 Syrians applied for asylum in the year ending September 2013, the latest data we have. The UK is the largest recipient of asylum seekers from Syria behind Germany and Sweden.

[Baroness Lister of Burtersett (Lab)]

My Lords, I welcome what the Government are doing, but I do not see that it is an either/or situation. I have not heard a clear reason why the Minister is resisting the plea made by a number of voluntary organisations in an open letter to the Prime Minister and the point made by my noble friend. Surely we could be doing something to open our doors to some very vulnerable people.

[Lord Taylor of Holbeach]

My Lords, we are not doing nothing. We are trying to work as best we can with other agencies. For example, the Home Office operates two resettlement programmes in partnership with the United Nations High Commissioner for Refugees. The main resettlement programme is Gateway. In agreement with UNHCR, refugees are resettled from a small number of targeted locations. Since the first arrivals in 2004, the UK has resettled more than 5,500 refugees under this programme. The programme for each year is agreed in advance with ministers.

[Baroness Williams of Crosby (LD)]

My Lords, the Syrian crisis is probably the most serious crisis that has confronted us for a very long time. Our allies around Syria—Turkey, Lebanon and other countries—are battling under the strain and beginning to break down under it. There is no doubt that the Government’s policy has been excellent in terms of financial aid and I give full credit to it, but I agree with the noble Baroness who has just spoken that the gesture of having some Syrian children and families here would be an example to the rest of the members of the United Nations. That example would come all the more from a country that has given moral leadership in terms of financial help. The Government need to take one more human step to show that they are willing to have a limited number of Syrian families in this country as an example to the rest of the European Union and the rest of the United Nations.

[Lord Taylor of Holbeach]

I have got the sentiment of a number of the questions asked here this evening and I know that a number of noble Lords wish that the Government would go further. However, the Government have considered this matter very carefully and respect the views of those who favour a co-ordinated response. We maintain the view that our top priority should continue to be to provide humanitarian assistance to displaced people in the region, in partnership with the neighbouring countries, the UNHRC and other UN and non-governmental partners. That is the focus of our policy commitment. As I have said, £500 million has already been committed and another £100 million was announced only the other day. That is £600 million in total invested in that programme. That is something that this country should be proud of.

[Lord Selkirk of Douglas (Con)]

My Lords—

[Baroness Anelay of St Johns (Con)]

With great respect to my noble friend, we have reached the 10-minute limit.

Costs in Criminal Cases (Legal Costs) (Exceptions) Regulations 2013

Monday 20th January 2014 Lords Chamber

Motion to Approve

20:37

Moved by

[Lord Faulks]

That the draft Regulations laid before the House on 25 November 2013 be approved.

Relevant documents: 15th Report from the Joint Committee on Statutory Instruments.

[The Minister of State, Ministry of Justice (Lord Faulks) (Con)]

My Lords, I shall speak also to the draft Civil Legal Aid (Merits Criteria) (Amendment) (No. 2) Regulations 2013.

The Costs in Criminal Cases (Legal Costs) (Exceptions) Regulations 2013 amend the Prosecution of Offences Act 1985 to provide that acquitted defendants who have been found to be ineligible for legal aid as a result of the new Crown Court financial eligibility threshold of £37,500 or more annual disposable household income can receive a payment from central funds in respect of their private defence costs.

The purpose of the regulations is to introduce an additional exception to Section 16A of the Prosecution of Offences Act 1985 and the general rule that a defendant’s costs order may not require payment out of central funds in respect of the accused’s legal costs. This amendment allows acquitted Crown Court defendants ineligible for legal aid as a result of the new threshold to apply for a defendant’s costs order and to receive a payment from central funds in respect of their private defence costs at legal aid rates. This is in line with the changes made in respect of acquitted defendants in the magistrates’ court which were approved by Parliament during the passage of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

The Prosecution of Offences Act 1985 makes a number of provisions in relation to costs in criminal cases, including in relation to defence costs. Section 16A, in relation to legal costs, provides certain exceptions to the general rule that a defendant’s costs order may not require the payment out of central funds of an amount in respect of the accused’s legal costs.

The draft instrument under consideration makes provision for an additional exception under Section 16A. It allows acquitted Crown Court defendants ineligible for legal aid as a result of the new threshold to receive a payment from central funds in respect of their legal costs. Such defendants would be reimbursed at the rates and scales set out by the Lord Chancellor in guidance, as provided for by Regulation 7(6) of the Costs in Criminal Cases (General) Regulations 1986.

The amendments introduced by this instrument are an important element of the introduction of a financial eligibility threshold in the Crown Court, to ensure that the wealthiest defendants would no longer automatically be provided with legal aid up front at public expense. The threshold has been set at a level where we believe the majority of defendants should be able to pay the defence costs of Crown Court cases privately, as set out in the Transforming Legal Aid: Next Steps response paper. There will, however, be a review mechanism to ensure that those individuals who really cannot pay their defence costs privately can be represented in court. This will be similar to the existing hardship scheme in the magistrates’ courts. As I outlined earlier, acquitted defendants, subject to your Lordships’ approval, will receive a payment from central funds at rates and scales set by the Lord Chancellor.

To conclude our proposals on criminal costs, the Government believe it is right to include an additional exception to allow acquitted Crown Court defendants ineligible for legal aid as a result of the new threshold to receive a payment from central funds in respect of their legal costs. Even though this will cost the public purse at a time of significant pressure on departmental budgets, it is a fair change to make given that such defendants will need to pay privately.

I now turn to the draft Civil Legal Aid (Merits Criteria) (Amendment) (No. 2) Regulations 2013, which amend the Civil Legal Aid (Merits Criteria) Regulations 2013. They amend the merits criteria that apply in applications for civil legal aid to prevent funding for cases assessed as having borderline prospects of success. It is important to note that this affects only certain applications for a specific form of service. The purpose of these regulations is to prevent cases assessed as having borderline prospects of success from receiving civil legal aid in the future.

In order to be funded, civil legal aid cases must pass the applicable merits test, as set out in the 2013 regulations. The aim of the test is to ensure that funding is targeted at the cases that most justify it. The prospects of success test is just one element of the overall merits criteria that civil legal aid cases are subject to, but it is an important element. Not all applications are subject to a prospects of success test. Only applications for full representation, a specific form of civil legal service, are directly subject to a prospects of success test. Therefore applications for legal help—the advice and assistance level of legal aid—and other types of service are not subject to this test. Also, there are certain categories of case, for example certain family and mental health cases, where the test does not apply. It is important to note that these cases are not affected by this instrument.

However, where the prospects of success test applies, its purpose is to ensure that taxpayers’ money is targeted at the cases that most justify it. It also ensures that weak cases are not funded. Currently, certain cases assessed as having borderline prospects of success can be funded in limited circumstances. The regulations that your Lordships are considering today will remove funding for cases assessed as having borderline prospects of success. I am aware that concerns have been raised about our policy on borderline cases. Let me deal with one or two of those. I recognise that there is some unease over the effect these regulations might have on the development of case law and the funding of so-called test cases or those with the potential to advance the common law. Legal aid cases have indeed led to the development of case law in the past, but that alone is not sufficient justification for legal aid to be granted in cases that do not have at least a 50% prospect of success. In addition, I do not think that our proposal will hinder or prevent the development of case law. The arguments are likely to be strong for such a development to be warranted.

20:45

Concern has also been expressed in response to our consultation about cases where a lack of evidence is available at the time that the prospect of success assessment is made. Again, I consider that some of those concerns may have been misplaced, and I hope that I can offer some assurance to the House on that point.

We are making no change to the availability of legal aid for cases where the prospects of success are categorised as being unclear. That is where a reliable estimate of prospects cannot be made, but where, in all the circumstances of the case, identifiable investigations could be carried out which will allow such an estimate to be made. The regulations will not alter the position of civil legal aid for unclear cases, so where it is currently available to allow investigations to be carried out, it will continue to be so. We consider this to be a reasoned and proportionate reform.

Our proposal to remove funding for cases with borderline prospects of success is the right thing to do. We estimate that the borderline proposal will save a modest sum: about £1 million annually. However, our motivation for the change concerning borderline cases is not simply to save money. We have been clear about this throughout. The value of our legal aid system cannot be calculated simply in pounds and pence. It is a vital plank of our justice system and goes to the heart of what a civilised society should stand for. I do not think that anyone in your Lordships’ House would disagree with that. For this reason, we need to target resources at the cases that really justify them and make sure that the system is fair for taxpayers, as well as those who need to use it. We believe that it is important that the public have real confidence in the scheme.

It cannot be justified that taxpayers’ hard-earned money should be spent on cases that a privately paying citizen of reasonable means would not take because the case is not strong enough. It cannot be right for the state to spend taxpayers’ hard-earned money on such cases. That is why we are making this change. I look forward to hearing the views of noble Lords on this important matter, but I trust that the House will agree with the Government. I commend the draft regulations to the House and I beg to move.

[Lord Bach (Lab)]

My Lords, I speak to my amendment to the second Motion that the Minister has just spoken to. My amendment would add,

“but that this House regrets that the draft Civil Legal Aid (Merits Criteria) (Amendment) (No. 2) Regulations 2013 exclude some people from legal aid where their case turns on a point of law”.

Before setting out my arguments—I hope reasonably briefly—I will start by warmly welcoming the Minister on behalf of the whole House, and congratulating him on his new position as Minister of State in the Ministry of Justice. It is an appointment widely welcomed by noble Lords around the House. He is a widely admired senior lawyer with great experience both in the courts and in this House, where he has taken an important role in our debates on all justice matters, not least the LASPO Act and the orders flowing from it.

He has also served on the Joint Committee on Human Rights and, just over a month ago, we remember his important speech in the debate instigated by the noble Lord, Lord Carlile, on very high-cost cases in criminal trials. I have two final points on that. Our welcome today is more than just the usual good manners of this House. It is a genuine welcome from all around the House to him in his important new responsibilities. Secondly, we wish him good luck and well in his new job.

This brings me, perhaps not before time, to my Motion. Many of us believe that the Minister has rather courageously taken on his new responsibilities at a time when his department, and particularly the Ministers in it, have tended to indulge in a series of attacks on many of the best and most important features of our legal system, in the field of civil and criminal law. The consequence of the removal of legal aid from social welfare law, the over-the-top attack on criminal fees, the proposals on judicial review, or the proposed residence test, has been to lessen the reputation of our legal system in a number of ways. Most importantly—I think this is felt around the House to a greater or lesser degree—these measures attack the overriding principle that all those who live under the rule of law should have at least some access to quality justice when they need it in the course of their lives.

Unfortunately, this order fits that pattern only too well. Since it was proposed in Transforming Legal Aid: Next Steps, it has been criticised almost universally and condemned by a very wide variety of expert opinion, from judges to practitioners to academic lawyers and, of course, by the Joint Committee on Human Rights itself. Alas, in spite of this hostility, the Government have decided to go on regardless, and this order will take effect in one week’s time on 27 January.

Why has there been this criticism? Apart from serious doubts about the Government’s assertion that it will affect 100 cases and save £1 million per year—the doubts are on the basis that the Government have provided no evidence at all for that conclusion—practitioners sensibly argue that both in terms of possible litigants in person and extra adjudication appeals that may be necessary if the order is implemented, the savings may be nonexistent.

The crucial reason that this is such a damaging step can be found in the measured words of this House’s Secondary Legislation Scrutiny Committee in its 21st report of Session 2013-14, which states that,

“the House may wish to consider whether it is appropriate to exclude someone from legal aid where the issue turns on a disputed point of law, circumstances in which the advice of a skilled lawyer is most necessary. The definition of ‘borderline’ has not changed from the previous Regulations but the use to which it is being put has. Previously dispute over law or expert evidence was grounds for including a weaker case in the scope of legal aid and enabling someone to obtain better advice, now such cases are to be excluded from support”.

Or, as the Bar Council put it in its submission:

“Removing funding of cases assessed as having a ‘borderline’ possibility of success will see funding removed for cases critical both to individuals and areas of public policy. Many important cases will have been assessed as borderline but nevertheless have gone on to win. Others will have been lost. That fact does not do any damage to public confidence in legal aid. Such cases will have ensured access to justice where something really important was at stake”.

Practitioners have included examples from many branches of civil law where, without the grant of legal aid, cases that have changed the common law would never even have been before the courts. Not only would injustice have been done to an individual citizen—not an unimportant consideration—but the law as it was thought to be would have remained frozen in time, even though it was decided it was wrong.

Many examples have been given. Bindmans, the leading solicitors, argued in its response to the consultation:

“‘Borderline cases’ often constitute seminal test cases in which the courts have clarified some of the most difficult issues, for example the right to die with dignity, the ban on gay people serving in the army, systemic abuse by armed forces, and whether soldiers serving overseas should be protected by the Human Rights Act”.

It went on:

“In a jurisdiction without a written Constitution or codified laws, and in which law is thus based on and developed through case law, such test cases are an essential part of the legal system”.

There are many examples; housing law is perhaps one of the best. There was a series of three successive cases, all financed by legal aid, which followed the vexed question of the balance and the legal conflicts between human rights, respect for a person’s home and the rights of property. I venture to think that there may be some noble and learned Lords in the Chamber this evening who will remember these cases quite intimately. These cases led in the end to the Supreme Court coming to a view in 2011, in the Manchester City Council v Pinnock case, which effectively changed the law.

This series of cases on a matter of great public importance was possible because of legal aid. I suggest that if these regulations had been in force then, it is unlikely that those cases, which have both clarified and moved the law on, would ever have reached the courts. As the organisation Justice has said, “borderline” does not mean without merit. These are not unclear cases which we are talking about, where further information is necessary before the success criteria of the means test can be determined. These are cases where there is a different legal opinion about issues of importance—and any legal system, I argue, that does not allow them to be determined is surely defective.

Richard Drabble QC, a practitioner of vast experience in this field—and who, significantly, has appeared for successive Administrations on the one side as well as for claimants on the other—argues strongly against this regulation. He points out that in the case of Anufrijeva against the Secretary of State, which was a benefits case, the result of which affected large numbers of claimants, the lower courts and the Department for Work and Pensions had become wedded to a view of law which the majority of the Lords—the Law Lords, he means—ultimately held to be constitutionally improper. He makes the point that not only did the Executive have the freedom to test the law, which they will of course continue to do under these regulations, but that surely so should claimants, too. He warns:

“The system will or may become institutionally ‘pro-executive’”.

In its response to this consultation, the Council of Her Majesty’s Circuit Judges stated its disagreement with the proposal in what I can only describe as broad terms. It stated:

“The regulations which the proposal would amend were made in 2013 after a consultation. We take the view that no compelling case has been made … to alter them now … We must express our great concern that access to justice will be denied to individuals who may well have a completely valid claim”.

It went on:

“The law would become fossilised if ‘borderline’ cases were not supported by public funds. The role of legal aid in past cases in refining and clarifying common law and statute should not be underestimated”.

I end by arguing that the case for this regulation has just not been made by the Government, whether on cost grounds on the one hand or grounds of principle and practicality on the other. The Government should have listened to the many serious and informed voices criticising this measure. Alas, up to now, they have refused; and continue to bring in measures that are gradually, step by step, tending to weaken our legal system. This measure, I believe, is one of them. That is why I thought it right to put down my amendment to the Motion, so that at least a debate can take place before the Government move forward.

21:00

[Lord Pannick (CB)]

My Lords, I add my welcome to the noble Lord, Lord Faulks, to the government team. He brings to this role expert legal knowledge, very considerable practical experience, excellent judgment and a concern to promote the values of the legal system, qualities that have not noticeably been displayed over the past three and half years by those responsible for making decisions in the Ministry of Justice. I hope that the Secretary of State will listen to the noble Lord’s advice and take advantage of the expert legal advice and assistance that he will be providing—indeed will be providing, as I understand it, in the best traditions of the Bar, on a pro bono basis.

I am very grateful to the noble Lord, Lord Bach, for promoting this debate. I share his concerns about the exclusion of borderline cases from the scope of legal aid. The concern I have is that many of the leading cases in which the law has been developed in the public interest over the past few years have involved claims which, because of the disputed legal principles, could not have been said to have a 50% chance of success. The noble Lord, Lord Bach, mentioned examples of such legal aid cases, including one in which I acted for the claimants. That was the case of Debbie Purdy, which was the subject of the last judgment of the Appellate Committee of your Lordships’ House before the creation of the Supreme Court in 2009. This was a case in which judgments were delivered by two noble and learned Lords in their places today: the noble and learned Lords, Lord Brown of Eaton-under-Heywood and Lord Hope of Craighead,

The Appellate Committee held that that the DPP had a duty to publish guidelines about the circumstances in which he would prosecute for assisting a suicide. Those guidelines have made a valuable contribution to justice in a difficult area of the law. It could not have sensibly been said that the claim brought by Debbie Purdy was other than borderline. Legal aid was accordingly granted under the law at the time. When these regulations are implemented, as I think they now are, legal aid will simply be unavailable for such a case.

For legal aid to be able to fund such cases serves the public interest. The Minister told the House today that the removal of borderline cases from the scope of legal aid will save £1 million a year. Such a modest saving cannot begin to justify the damage that this change will do to the ability to develop the common law. The Minister’s other point was that taxpayers’ money should not be spent on cases that a private-paying citizen of reasonable means would not wish to pursue. The defect in that reasoning is that a private-paying citizen may well wish to pursue a case that has only a 30% or 40% chance of success if it raises an issue of enormous importance to them.

There is a further point in answer to this defence of this change. It is a point that was made by Richard Drabble QC in his excellent response to the consultation on this issue. He pointed out that when the Government respond to judicial reviews in cases such as that of Debbie Purdy they do not simply ask themselves whether they have a 50% chance of success and, if not, decline to be represented in the court proceedings; the Government very properly take account of the importance and complexity of the case and often fund a defence even though their legal advisers cannot say that there is a 50% chance of success. These are not the cases mentioned by the noble Lord, Lord Faulks, where further investigation may provide an answer; they are cases where it is inherent in the nature of the case that they are borderline and you cannot say that there is a 50% chance of success.

Why should the legal aid scheme adopt a different and narrower approach to legal aid for claimants than the Government adopt for themselves in deciding when and how to resist judicial review claims? The Government’s reasoning leaves entirely out of account the nature of the cases that will now be excluded from legal aid and the public interest in ensuring that the law is determined and applied only after proper legal argument on both sides. For these reasons, I very much regret these amendment regulations and I hope that the Minister, if he is unable to say so today, will be able to advise the Secretary of State that further thought needs to be given to this important matter.

[Lord Carlile of Berriew (LD)]

My Lords, I join the noble Lords, Lord Bach and Lord Pannick, on two grounds. The first is the generous but completely justified welcome that has been given to the arrival of my noble friend Lord Faulks on the government Front Bench. Indeed, I am encouraged that he has a record of questioning the reduction of legal aid, particularly in criminal cases. I urge him to do another piece of pro bono work, a tutorial for his ministerial colleague in another place, Mr Shailesh Vara, on understanding simple statistics and understanding something about legal aid.

The second ground on which I agree entirely with those who have already spoken is in my support of the regret Motion introduced very clearly by the noble Lord, Lord Bach, and illustrated with customary cogency by the noble Lord, Lord Pannick. However, I want to turn to the criminal regulation. I do not support a criminal regulation that means that somebody who has perfectly reasonably obtained the advice of a good solicitor and senior counsel can only, without exception, recover costs at legal aid rates if he wins the case. It may be best if I give a real illustration.

A retired butcher of about 70 years old was charged with some very serious sexual offences, including rape, against a young girl of about 12 years old who was the daughter or granddaughter of a neighbour. He instructed a good solicitor. The good solicitor said to him that he could instruct counsel on legal aid but his preference would be to instruct more senior counsel, leading counsel, but that would not be covered by legal aid. Not surprisingly, the 70 year-old retired butcher asked for advice as to his prospects if he took either part of the respective advice. He was advised by the solicitor, perfectly reasonably, that his best prospects were to have the more experienced counsel from the very beginning, so leading counsel was instructed.

As it turned out, in the event, there were a number of complex legal points and some factual issues. After the matter was dealt with with a good deal of care by the solicitor and leading counsel, the case went to the Crown Court where it was dropped at the courtroom door. One of the reasons why it was dropped was that it transpired that he could not have committed one of the most important offences alleged against him because he was out of the country at the time, an issue which involved very complicated inquiry, including issues of the admissibility of evidence obtained from abroad. Thus, he avoided a trial and a potential sentence of upward of 10 years’ imprisonment and he was able to return to his family and home. He had paid for the advice by borrowing money from his grown-up children and by mortgaging his home.

Before your Lordships think about six-figure sums for the fees involved, they were nothing like so high. It was well understood by the solicitor, who drove a hard bargain, and by counsel, who knew perfectly well that their fees were subject to assessment if they were too high, that reasonable fees would have to be charged, and they were. Total costs in the case amounted to a middling five-figure sum. He applied for his costs before the Crown Court judge, before whom the case was dropped—accepting an acquittal, by the way—and the judge thought it entirely reasonable that he had obtained the advice of leading counsel and a good solicitor and he was awarded his costs out of central funds. What is unreasonable or unjust about that? He acted on legal advice, what he did was perfectly reasonable, a good result was obtained and the costs of a trial were avoided, which would probably have been higher than what was paid out of central funds to the solicitor and leading counsel.

What is proposed in criminal cases now is that someone in that position will be able to recover at best only a half, probably a third, of those costs. The retired butcher, therefore, having been acquitted in a prosecution brought unjustly, would have been some tens of thousands out of pocket. Do we really want to countenance a criminal justice system like that? I do not.

[Baroness Lister of Burtersett (Lab)]

My Lords, as a member of the Joint Committee on Human Rights and, I suspect, the only non-lawyer to take part in this debate, I thank my noble friend for moving the Motion of Regret. I shall make a couple of points based on the JCHR’s report—with which the Minister, as a former colleague on that committee, will of course be very familiar,. The Government’s gain is the JCHR’s loss. I shall spare him any further blushes. As has already been said, the Government estimate that about £1 million will be saved as a result of these changes. Such a small, or as the Minister called it, modest sum in public expenditure terms comes well within the margin of error, and indeed the JCHR questions the accuracy of this estimate. My noble friend suggests that there could be no saving at all.

Whatever the savings actually are, clearly they are very modest and we have to ask whether it is proportionate to put at risk the rights of access to the courts where human rights issues may well be at stake, as underlined by the Bar Council in its evidence to the JCHR. It said that of all the legal aid measures,

“this one is … likely to have the most immediate and adverse effect on human rights”.

It gave as examples the prospect of loss of one’s home or of one’s children being taken into the care system. These are very fundamental issues for ordinary citizens. ILPA has also raised its concerns to your Lordships, particularly with regard to asylum and immigration cases. It raised particular concerns about separated refugee children, and I would welcome an assurance from the Minister that that group will be protected.

21:14

Secondly, there is a threat to equality of arms—a point made very clearly by Richard Drabble QC. He has already been quoted, so I will not repeat what he said. The JCHR is clear that exceptional funding cannot be relied on to ensure access to justice in place of borderline legal aid funding, as has been argued by the Government, although I think that they have not been using that argument so much since the JCHR published its report. Again, ILPA wholeheartedly concurs with the JCHR analysis, saying that those lawyers who are prepared to do the risk work involved in applying for exceptional funding are increasingly disheartened by the soul-destroying work in spending many hours putting together a lengthy and detailed exceptional funding application and knowing that it has almost no prospects of success.

The Minister said that this was not so much about the money itself, but about being fair to taxpayers. The noble Lord, Lord Pannick, has already pretty much demolished the taxpayers argument, but I would add that a false divide is being created here between so-called taxpayers and others. People affected will also be taxpayers; they are paying indirect taxes, including council tax. What about fairness to them?

I cannot believe that the Minister’s heart is in this. I hope that he takes back to the ministry the arguments being put here. I have not yet heard one argument in support of these changes, although I suppose it may yet happen, but it does not look very likely. I hope that the Government will think again.

[Lord Woolf (CB)]

My Lords, we have heard powerful arguments advanced, and I shall try to avoid repeating those arguments. I commence by first thanking the noble Lord, Lord Bach, for bringing his Motion of Regret in respect of civil legal aid regulations. I strongly support those arguments. I also echo the support that has been given already to his remarks specifically in welcoming the noble Lord, Lord Faulks, to his new responsibilities. Those members of the judiciary on whose behalf I shall say a few words on this matter, because I think that they are particularly affected, would all welcome the fact that a leading counsel of his distinction is now a member of the government team dealing with justice matters—and they are justice matters that I want to speak about.

Our justice system is of course based on the common law. For many years I was a common law judge, who has a special responsibility that does not apply to the same extent to the civil legal system in clarifying and developing the law from which we all benefit. I differ from the Minister in his approach, which was ably addressed a few minutes ago by the noble Baroness, Lady Lister, in her useful remarks. The law is not there for one section of the community; it is there for us all. We all benefit from the protections that it provides and the setting that it provides for all our activities. The judiciary is concerned that all of the public should have access to justice. That must mean a justice system that is fit for the age in which we live and has developed in accordance with the way in which a common law system can develop, singularly because of the use of precedent, which is such an important part of our system. When the noble Lord, Lord Faulks, opened his case for approving these regulations, I was not clear whether he was saying that there would be any discretion to grant legal aid in the case of an issue which was obviously important for the courts to decide, but which would need the assistance of able counsel in order to decide the case. Sometimes that can be self-evident. The cases we are primarily talking about are dealing with points of law. In the case of points of law, it is particularly important that the courts should have the assistance of appropriate counsel to deal with the type of case before them.

In our system we now have a limited number of judicial assistants to help us in our work of doing justice, but they are very much a limited assistance. Our system does not compare with systems such as that in the United States, or even the system in Canada, because there they hear the appellate judges, who will normally have the responsibility of dealing with the developments in the law to which I have referred and are given much more assistance by very experienced young lawyers than is available in our courts.

Our courts depend on the judges themselves doing the research with the assistance of counsel. If they do not have before them counsel of the necessary ability to deal with this very small number of extremely difficult cases, the quality of those judgments will suffer. It is in that area that the quality of arms, to which reference has already been made, is of singular significance. I wonder, and doubt whether, the Government have appreciated—because of the justification which they have advanced for this change—the importance of the courts having the assistance of advocates of the ability needed to ensure that the arguments on both sides of a case are properly deployed when the case is one of those peculiarly difficult cases, so that it is impossible, perhaps on both sides, to say what the prospects of success are. These are therefore the cases which would very much come within the small group which these regulations could affect.

For that reason I ask the Minister, new to his responsibilities, at least to give the House an assurance that the matter will be considered from the point of view of the judiciary. If ways are not found to assist in this small number of cases, I have fear for the quality of justice in this country.

If a case is one where a lot of money is at stake, where large awards of damages will be available, then it is possible to come to arrangements whereby litigants can be spared the burden of carrying the weight of the costs involved in conducting the litigation themselves. Funders are available now. However, in the small group of cases about which we are talking no such funding is available. There is nothing which the funders would gain because there will be no judgment from which they can benefit at the end of the day.

In that situation, I say that one should look at the matter and ask oneself whether this is a case where the wrong target has been drawn in order to try to achieve noble objectives. If it has, it is very important, even though it is late in the day, that action is taken to ensure that the system of justice in this country does not suffer in consequence.

[Lord Phillips of Sudbury (LD)]

My Lords, I do not propose to go over the ground that has been so ably ploughed by the speakers thus far. I am afraid that I am not going to lend my noble friend the Minister any solace, because I fear that I, too, am strongly of the view that the measure that deals with borderline cases—the merits criteria statutory instrument—is flawed, and it is flawed in a profound cultural way. As others have rightly said, justice is not like most other forms of government expenditure; it goes to the very heart of our society.

As I said, I shall not replough old ground, although I should like to remind the House that in the consultation, which lasted for only two months, there were 16,000 written submissions, which is quite extraordinary. The vast majority of them were, as the noble Lord, Lord Bach, has already said, against these provisions. I simply want to quote paragraph 234 of the report of the Joint Committee on Human Rights issued on the 13th of last month. It is the seventh report of the Session and it deals with the matters that we are talking about tonight. In referring to the present situation—the status quo—it says:

“We were told by our witnesses that the Legal Aid Agency scrutinises the merits of borderline cases closely, and funds very few borderline cases, in effect exceptional cases”.

That is the point. Only 100 or so cases are involved, and I think that the sum of legal aid estimated to be at stake is around £1 million. Therefore, they are already exceptional cases and we must realise that they reverberate throughout the system. As the noble and learned Lord, Lord Woolf, has just reminded us, under the common law system of precedent, one of these cases can affect thousands of cases, which will not be brought as a result. Therefore, there is that to consider.

My other point is that the Joint Committee report is absolutely unequivocal about these borderline cases. It is worth reading—and I am sure that most noble Lords here tonight have read—the fourth chapter and the three conclusions at paragraphs 43 to 45 of the final recommendations and conclusions. I urge the Minister—perhaps he will refer to this in summing up—to give an undertaking to the House that the Government will not wait the three to five years allowed for under the LASPO Act for a review of the whole of that vital piece of legislation. However, if they persist in pushing forward with these measures—which I hope very much they will not—I hope that they will make a special case of borderline cases and review early the impact of what they are doing, not least in terms of access to justice and the cost of justice.

As the charity Justice, in its report on this matter, rightly pointed out, the cost to the Exchequer of depriving many of these borderline cases of legal support and the resulting wastage could far exceed the £1 million or so of savings that we are talking about here due to the length of cases, because there are so many more litigants in person, and so on. I hope that my noble friend may be able to say to the House tonight that there will be a special review of these borderline cases in the light of the criticisms made here and in the Joint Committee report and the criticisms made by many others.

21:30

[Lord Brown of Eaton-under-Heywood (Non-Afl)]

My Lords, I greatly welcome the noble Lord, Lord Faulks, to his new Front Bench role. I have long been among his many admirers on the Bench and have benefited over many years from his invariably helpful and thoughtful submissions. I have not always been able to accept them, and it is just possible that I will not feel able to accept them tonight in regard to these amendment regulations.

The regulations remove legal aid from borderline cases. Borderline cases are those where there are no further identifiable investigations able to be carried out, yet where it is still not clear that the prospects of success are better than 50:50, but nor is it clear that they are worse than 50:50. The reason that neither is clear is because there is a basic dispute as to the law, which has yet to be clarified or developed in this particular way, or as to the facts or expert evidence.

It is absolutely critical to recognise and bear in mind in the course of this short debate that under the existing funding scheme—the scheme it is now proposed to abolish—borderline cases are funded only if they are either of significant wider public importance or of overwhelming importance to the applicant. In other words, the cases to which it is now intended to deny future funding will be either those with implications for the relationship between the state and a substantial number of individuals, or those that impact on such fundamental interests as an individual’s life, liberty, health, housing or something of that character. Surely, these cases are ones that must therefore justify a broader merits test than the bald test simply of establishing that there is at least a 50:50 chance of success.

I suggest that they justify funding so that the critical, disputed question—whether that be of the law, fact or expert evidence—can be clarified. However, instead of that, under these amendment regulations, those cases are to be condemned, deemed to be cases where the prospects of success are “poor”, or less than 50:50.

When I spoke last July on the Motion moved by the noble Baroness, Lady Deech, to take note of the effect of a whole raft of proposed government cuts in legal aid funding—which included those we are now discussing—I urged the Government to take particular note, among the innumerable responses to consultation, almost all of which were opposed for a variety of reasons, of the consultation response prepared by ALBA, the Constitutional and Administrative Law Bar Association, of which I was once privileged to be president. ALBA’s arguments were and remain cogent and convincing, not least as to the borderline cases. Among the material that ALBA presents is a 2012 study by Doughty Street Chambers—chambers that are prominent and highly respected in the field of public law and from which the just retired Director of Public Prosecutions came—showing that in the three years until then, borderline cases had achieved a substantive benefit for the funded party in between 47% and 56% of those cases, which was an average of just over 50%. I repeat, those cases are by definition important cases that affect either the public at large or the vital interests of an individual. Therefore, they are not cases from which the Government should be withdrawing funding. The suggested savings are uncertain; the price of achieving them is altogether too high.

[Lord Hope of Craighead (CB)]

My Lords, I join everybody else in welcoming the noble Lord to his position on the Front Bench—a very public-spirited move on his part, I am sure, but immensely encouraging to others who deeply regret the fact that the Lord Chancellor can be chosen in a way that removes his presence from this House and in a way that does not require him to have had legal experience. We have suffered somewhat from the lack of the sort of experience that the noble Lord can fortunately bring. It is a significant step forward and to be immensely welcomed.

I also thank the noble Lord, Lord Bach, for his Motion of Regret, which gives us an opportunity to express our regrets at this measure. I spoke, as did the noble and learned Lord, Lord Brown, in July. One of the things I said was that I hoped we would not have a succession of Motions of Regret because I hoped that these things would come up in the form of public Bills that we could then debate in depth. Unfortunately, that has not happened so I am afraid that we will have a series of Motions of Regret, one after the other.

I shall try not to repeat what others have said but the first point on which I want to comment is the borderline test itself, particularly the use to which it has been put. I have a feeling that it has a sort of arithmetical sense to it. When one talks about a borderline case, people at conferences will ask: is it above or below 50%? That is fair enough; that is what the test really means. If it is 50%, it is on the borderline. However, the problem, as has been explained by so many others, is that these things do not measure themselves arithmetically.

That brings me to a series of questions about how this will work in practice. How will fairness be achieved up and down the country? I understand that decisions are taken by independent funding adjudicators who look at the papers. We are not dealing with a single individual—it is difficult enough for one person—but one can imagine a series of people in different offices applying their minds to this test. Is any guidance to be given on how to approach the question of arriving at the borderline? If there is to be guidance, will it be made public so that we can comment on it and make suggestions, particularly if the system is to be reviewed in the future? There is then the very important point made by the noble and learned Lord, Lord Woolf: will there be any element of discretion or shading in a situation where it is difficult to say that it is exactly at 50%? Can one, for example, have a margin of error in favour of granting legal aid, as against not doing so? It is that kind of guidance, if the Minister could explain it, that would help to flesh out how this will work in practice.

The problem with the test, as has been said already, is that it introduces an unequal playing field. The state on the one hand, with all its resources, is in a position to apply a different test on whether or not it wishes to contest the claim, whereas the individual is caught by this very exacting test. There is the vital point about the development of case law. I recall a series of cases, which have already been mentioned, but because I was involved I dare to mention them again. There was the case of Purdy, but it was preceded by that of Pretty, who is unfortunately no longer alive. That was the original assisted suicide case. It was a very difficult case in which to say that she had a 50% chance of success. In fact, she lost. She went to the Strasbourg court and lost there again, but the advantage of her case was that it helped us to begin to develop jurisprudence in this immensely difficult subject, which all Members of this House will have to discuss again before too long. It cleared a lot of the ground, which made it easier to grapple with the Purdy case when it came along.

Then there were the succession of cases, to which the noble Lord, Lord Bach, has referred, in the field of social housing, which were also very difficult to predict. I bear a personal responsibility for this because I sat with Lord Bingham and the noble and learned Lord, Lord Nicholls, and, I think, the noble and learned Lord, Lord Walker, all of whom took one view. Three judges went one way but I turned the case around. Three others followed me and we were a majority of four to three. Who could have predicted that? Everyone knows—this is a commonplace criticism of the Privy Council jurisdiction in the Caribbean—that you need to know who the judges are and the way cases vary. How can one predict when it depends so much on personalities in cases that are so narrowly balanced, as they so often are in the highest courts?

The last point to which I want to draw attention is one of the difficult areas of our law, which has been repeatedly commented on. What do you do as judges, particularly in the senior courts, when you are applying Section 2 of the Human Rights Act, which refers to having regard to decisions of the Strasbourg court? Some of us have been fairly inclined to follow Strasbourg; others have not, in particular the noble and learned Lord, Lord Judge, who asked the other day in a lecture why we should do that. He said we should take an independent view. Again, one will have to guess what the judges are going to do with that jurisdiction, whether there is to be any change and who will be sitting on the panel. One can predict, looking at the Supreme Court today, who will vote one way or the other. That makes this whole idea of the borderline test extremely difficult to accept unless there is to be some really rigorous guidance, which I hope the noble Lord may be able to comment and guide us on. I would respectfully support the Motion that the noble Lord, Lord Bach, has moved.

[Lord Beecham (Lab)]

My Lords, it gives me great pleasure to join with others of your Lordships in extending very warm congratulations to the Minister on his first experience at the Dispatch Box. Of course, he demonstrated the reasons for his appointment very fully. The noble Lord is an ornament to the legal profession, just as his brother is an ornament to literature. We look forward on this side to many useful jousts over the next few months before—perhaps—there is a change of Government.

The Minister, as the noble Lord, Lord Pannick, said, has undertaken to do this work without remuneration. That is a notable sacrifice on his part. Of course it is consistent with the Government’s policy of acquiring most lawyers to do legal aid work more or less pro bono. I hope that he does not expect too many to follow his example with enthusiasm. However, that is not what we are discussing tonight.

My Lords, these regulations are yet another example of this Government’s apparently incurable propensity to legislate in haste and amend at leisure. It was, appropriately, only on 1 April last year that the Civil Legal Aid (Merits Criteria) Regulations came into force, and after a period of gestation of almost exactly nine months the present amending regulations were laid.

Why was it, we are entitled to ask, that the Government overlooked the apparent necessity to change the arrangements for borderline cases and make them ineligible for legal aid? How did they fail to spot the tidal wave of such cases, amounting—according to the estimate they now give—to all of 100 cases a year? Or the soaring cost to the taxpayer, which equates to as much as just under 0.5% of the legal aid budget?

After all, the noble Lord reminded us that, in the words of his colleague Mr Vara to the Delegated Legislation Committee,

“the motivation for change concerning borderline cases is not simply to save money. The value of our legal aid system cannot just be calculated in pounds and pence. Legal aid is a vital plank of our justice system”.

What a comfort these sentiments must be to the hundreds of thousands of people a year now denied access to legal aid; to the vast majority of practitioners and expert witnesses who are seeing their modest incomes slashed and are turning to other work; to the law centres that have closed, or, like the one in Newcastle which I visited on Friday—the only law centre between Kirklees in the West Riding and the Scottish border—that no longer provide legal aid. The Newcastle centre, which once employed five solicitors and nine staff, is now reduced to one solicitor, one full-time employee and four part-time staff, offering advice only, and only in two areas of law.

21:45

The Minister, again repeating the words of his honourable friend in the House of Commons in a debate in the Delegated Legislation Committee, mentioned what I can only describe as the pretext for the Government’s belated change of position: the stated importance of the public having real confidence in the scheme. This was a reference of course to taxpayers’ hard-earned money being spent on cases that a private citizen with reasonable means would not wish to pursue because he would feel that the case is not strong enough and, therefore, that it cannot be right for the state to spend taxpayers’ hard-earned money on such cases. We have heard some rebuttals of that assumption tonight.

The noble Lord, Lord Carlile, suggested another thought to me about this in referring to criminal regulations. It struck me that, in the event that a private citizen used his reasonable means to pursue a civil claim and succeeded, he would of course obtain his costs, not on legal aid rates but on the ordinary rates. Therefore, a divergence would take place between the criminal case and the civil case, which I find difficult to understand.

However, the important point for the purpose of my noble friend’s amendment is that in neither the Minister’s speech tonight nor in his honourable friend’s evidence before the Delegated Legislation Committee was there any significant response to the Secondary Legislation Committee’s report which recognised, in its words, that the policy was to reduce the size of the legal aid bill. However, while expressing its understanding, it stated that “the premise of excluding weaker cases” raised, as we have heard, the question of the appropriateness of excluding access to legal aid where the issue turns on a disputed point of law. Hitherto, as the committee pointed out, dispute over law or expert evidence was grounds for including an apparently weaker case in the scope of legal aid.

As my noble friend Andy Slaughter pointed out—as have others of your Lordships tonight—there have been a number of borderline cases that have raised matters of great public interest and which would have been unlikely to qualify for legal aid under the proposed changes to the system. They range from the case of Smith and Others v The Ministry of Defence, the very high-profile case to which my noble friend referred, in which the Supreme Court eventually decided that the courts could adjudicate on whether the rights of soldiers in combat can, in certain circumstances, be the subject of a claim.

Interestingly, one of the claimants in that case was represented under a conditional fee agreement, where the insurer declined to support the application to proceed to the Supreme Court. The public interest, of course, was not a matter which engaged the interests of the insurers. However, as the noble and learned Lord, Lord Woolf, pointed out, the public interest is surely a key element. Public interest should surely also engage the interest of the Government and our legal system.

I wonder whether the Minister—although, in fairness to him, he has been in post only a short time—or anyone in the Justice Department has considered the eight cases cited in its response to the consultation—euphemistically entitled Transforming Legal Aid—by Bindmans, the leading firm of solicitors. These included two cases dealing with assisted suicide, of which we have heard tonight, one of which was raised in a debate in the Commons by Duncan Hames, a Conservative MP, with the Lord Chancellor—and not much of a reply was given to that. How many of the eight cases cited by Bindmans does the Minister or the department think would survive the new test?

What does the Minister make of another response to the original consultation—of course, there has not been a separate consultation on these particular regulations as they have merged—from Richard Drabble, the Treasury Counsel who was been quoted by my noble friend Lord Bach and others tonight? Mr Drabble regards the proposals as being of “genuine constitutional importance” because while, in the light of his experience,

“it is obvious that the Executive should be free to test the law by defending or appealing in important test cases … there is no reason for not applying the same approach to cases brought by claimants”.

This point was reiterated by my noble friend Lord Bach tonight.

Mr Drabble feared that the proposals threatened to produce a situation in which the Executive can always access the higher courts if the lower courts establish a proposition which they wish to challenge on appeal; claimants do not have the same ability. He concluded, tellingly—again in the words quoted by my noble friend—that,

“the system will or may become institutionally pro-executive”.

Is this not, in reality, one of the real, albeit unstated, reasons for the change these regulations effect?

Every one of the eight cases cited by Bindmans involves the Government, local government, the health service, the Director of Public Prosecutions or the courts, as do four housing cases referred to in the briefing by the Bar Council that many of your Lordships will have received.

Perhaps the Minister will refer to the process of appealing to the independent adjudicator against the refusal of legal aid on the basis that the applicant has failed the new test. However, given the record of such appeals in relation to the earlier changes wrought by the Government, that offers scant hope of success.

The noble Lord, Lord Phillips, anticipated to a degree some of the remarks I would have made in relation to reviewing the situation in a shorter period than would normally be the case. We are tonight unable to do more than express our regret and our concerns, widely shared as they are. Will the Minister undertake to report on the first year’s experience of the new regime so that Parliament can assess what effect it will have had on our justice system? Will he tell us not merely about the cost—relatively trivial though it is in relation to the total budget—but about the impact, not only, again, on individual claimants, but upon our system and upon the public interest, to which the proposals clearly run counter?

[Lord Phillips of Sudbury]

Did the noble Lord intend to let the Government off the hook when he said at the beginning of his speech that the cost of these cases was one-half of 1%? Lawyers are not good at maths, but I think I am right in saying that it is not 0.5 of a per cent; it is 0.005 of a per cent. It is a tiny sliver of £2 billion. I just wanted to help the noble Lord, Lord Beecham.

[Lord Beecham]

At this hour of the night, I am quite prepared to accept any correction of the arithmetic. The Government, of course, are never prepared to accept a correction of their arithmetic.

[Lord Faulks]

My Lords, I thank all noble Lords and noble and learned Lords for their very generous welcome to me. It is a daunting position to find yourself in. I know that, despite the generosity of the welcome, there will be no lack of rigour in the examination to which I am put as a representative of the Government and I look forward to receiving the many useful contributions characterised by those today, which, I am likely to be advised, will be forthcoming in the next weeks and months.

This debate has ranged far and wide, perhaps rather further than the strict terms of the two Motions envisaged. For example, there have been general laments about the Government’s approach to legal aid from the noble Lord, Lord Bach. There has been reference by the noble and learned Lord, Lord Hope, to the difficult interpretation of Section 2 of the Human Rights Act and by the noble and learned Lord, Lord Woolf, to the need for high-quality judicial assistance. All these are important points, but I hope that the House will forgive me if I do not deal with all those points but try to concentrate more specifically on the issues that concern these regulations.

One of the main themes of the debate was the fear that the lack of legal aid for these borderline cases will result in some form of ossification of the common law—that it will not develop in the absence of legal aid for such borderline cases. It is worth remembering that the common law develops in a number of different ways, sometimes with cases which one would not expect to result in a change in the law. The Government believe that prospect of success—the test that is applied—remains a useful and sound test and that a 50% prospect of success is a reasonable one and should not result in cases not being brought and the law not developing.

Individual cases were mentioned, including Pinnock, Smith v Ministry of Defence, Purdy, Pretty and Anufrijeva, to name but a few, all of which were important cases. Of course, the Government are not in a position to comment on individual cases, or precisely on the funding arrangements that may have existed in those cases. There may be other cases which have not resulted in success or in the development of the law. The Government remain doubtful that the change which these regulations will bring about will prevent cases being brought in areas where the law will develop and has developed. One of the ways in which the law has developed is through the Human Rights Act, and it shows little sign of standing still in that regard.

The noble Lord, Lord Bach, asked particularly about the impact on housing cases. I recognise the serious consequences that can ensue from housing cases—the potential for someone to lose their home. Indeed, there are all sorts of cases where there may be serious consequences. But there always has to be an assessment of the merits of a case—that has been well established in the granting of legal aid—and it has been a fundamental part of the scheme since its inception.

The noble Lord also questioned the accuracy of the savings which are put forward. The Government’s best estimate is £1 million. An impact assessment estimated that 100 fewer cases would be funded. As was made clear in the methodology, those were rounded figures. Further supporting data consisting of a breakdown by category of law have been included in the updated impact assessment published alongside the consultation response. While the estimate is based on 2011-12 data, I can assure the House that it is consistent with more recent data; that is, the data from 2012 and 2013. The noble Lord also made reference to the criticism of the regulation by the Secondary Legislation Scrutiny Committee.

The cases which may be included are those where there is a dispute over law or expert evidence. I mentioned that there may still be legal aid where it is as yet impossible to assess the prospect of success, but the Government have been frank that they consider it reasonable in principle that 50% should be the touchstone. We suggest to the House that it is a very reasonable and rather modest prospect of success when one bears in mind the sort of decisions that somebody paying privately might make in deciding whether to pursue litigation. Indeed, many would say that 50% was rather a modest prospect of success and very few privately paying citizens are much enthused or encouraged by the fact that their case raises an interesting point of law. They may well find that that is a less enticing prospect than the fact that they risk losing the case.

Several noble Lords made reference to the fact that there might be some form of inequality of arms because many of the cases were brought against government, either local government or government in one department or another. The Government’s position regarding litigation is that they take into account a broad range of factors when deciding whether to defend or appeal legal challenges, including the prospects of success and the potential costs versus benefits of that action. However, it would be simplistic to say that the Government simply took advantage, as it were, of their overall position in deciding their approach to litigation. It is already a principle of the current scheme that most cases, even those concerning issues of high importance, must have a reasonable prospect of success in order to warrant public funding, and there has to be an assessment of merits and a decision must be made.

22:00

The noble Baroness, Lady Lister, referred to what the Joint Committee on Human Rights said about exceptional funding. She effectively asked why this had not been factored into our impact assessment, relying on what was said in the Joint Committee. I regret to say that I think the Joint Committee on Human Rights was guilty of conflating issues here because exceptional funding is, or may be, permissible. I accept that that is a potentially different debate. The grant or otherwise of exceptional funding covers the question of scope, whereas the House is concerned this evening with the prospects of success—that is, whether they are borderline, 50% or, indeed, greater than that. Therefore, a case assessed as having borderline prospects of success will not receive exceptional funding because it will not come within the test.

The noble Baroness, Lady Lister, also asked about asylum-seeking children and I will attempt to deal with that. These changes will apply equally to asylum cases, including those of asylum-seeking children, assessed as having borderline prospects of success. However, I reassure the noble Baroness and the House that the Government recognise their responsibilities under Council directive 2005/85/EC on minimum standards on procedures in member states for granting and withdrawing refugee status, which requires the Government to provide legal assistance for those refused asylum. However Article 15(3)(d) of the directive makes it clear that this obligation extends only to those appeals that are “likely to succeed”. I hope that answers the point made by the noble Baroness.

My noble friend Lord Carlile referred to the vivid case of the butcher. I understand his concern and the points that he made. However, the Government’s position is that notwithstanding the fact—accepting the accuracy of the noble Lord’s account of that particular case—it is not right for the taxpayer to have to bear significantly greater costs for a privately paying defendant or appellant than for one who is legally aided. Although I am sure that the expensive lawyer in that case provided good value, in these austere times the Government take the view that it is not their responsibility to indemnify a defendant for a relatively expensive lawyer but rather to pay at legal aid rates. The rationale for this was approved by Parliament during the passage of the LASPO Bill in relation to magistrates’ courts and we ask the House to bear that in mind.

The noble Lord, Lord Phillips of Sudbury, asked whether the Government would commit to an early or special review of the policy in relation to borderline cases. I cannot commit to a specific or bespoke review of that matter but, as we said in the Explanatory Memorandum, the operation of and expenditure on legal aid is continually monitored by the Ministry of Justice. There will be a post-implementation review of LASPO between three and five years after implementation.

The noble and learned Lord, Lord Hope asked about the process for deciding whether a case was borderline. Of course, I accept that these things are never precise and that what is in someone’s view 50% may be in someone else’s view 60% or 40%.

However, the Legal Aid Agency relies on experienced lawyers to advise on these matters. If a claimant is refused civil legal aid funding for an in-scope case on the basis of a merits assessment, he will be entitled to appeal against that refusal to an independent funding adjudicator, who is a barrister or solicitor independent of the director of legal aid casework and whose decision on prospects of success then becomes binding on the director. I hope that that reassures the noble and learned Lord that there is a degree of independence and rigour about the process, which provides a safeguard against the possibility that a deserving case may not receive funding.

The noble Lord, Lord Beecham, effectively asked: why change so soon after implementation of LASPO? In the Government’s view, LASPO provided a set of badly needed reforms to the legal aid system, and focused on changes to scope. We took a fresh look at the system and reprioritised our limited resources against a set of principles. We did not make wholesale changes to the merits test under LASPO; nor are we planning to make wholesale changes to the merits test now. It might have been an option; it is not one that the Government took.

However, we think that it is right to make this change, on which we conducted a public consultation, to ensure that cases that do not have at least a 50% chance of success cannot be funded. We do not think that a reasonable person of average means would choose to litigate in such cases, where there is only a borderline prospect of success, and we do not think it is fair to expect taxpayers to fund such cases.

I hope that, when the House bears in mind the overall shape of the changes that the Government have had to make to legal aid, this will be seen as part of a consistent approach. It is, we submit, an approach that is principled and we respectfully ask the noble Lord not to press his Motion. I repeat my thanks for all the contributions made by noble Lords and will make sure that they are drawn to the attention of the Secretary of State.

Motion agreed.

Civil Legal Aid (Merits Criteria) (Amendment) (No. 2) Regulations 2013

Monday 20th January 2014 Lords Chamber

Motion to Approve

22:07

Moved by

[Lord Faulks]

That the draft Regulations laid before the House on 25 November 2013 be approved.

Relevant documents: 15th Report from the Joint Committee on Statutory Instruments, 21st Report from the Secondary Legislation Scrutiny Committee, 7th Report from the Joint Committee on Human Rights.

[The Minister of State, Ministry of Justice (Lord Faulks) (Con)]

My Lords, I have already spoken to the regulations, and I commend the regulations to the House.

Amendment to the Motion

Tabled by

[Lord Bach]

At end to insert “but that this House regrets that the draft Civil Legal Aid (Merits Criteria) (Amendment) (No. 2) Regulations 2013 exclude some people from legal aid where their case turns on a point of law”.

[Lord Bach]

My Lords, first, I thank the Minister for his response to the debate tonight. It had the great advantage of being clear, straightforward and answering many of the points that had been made in the debate. It was very refreshing to hear a Minister speaking in those terms. I thank him very much for that. I also thank all other noble and noble and learned Lords for their contributions and support for my Motion on this order. I am very grateful for what they had to say, but even more so for having stayed as late as they have on what is commonly called, as I understand it, Blue Monday, which is that day in the year when, following the Christmas and New Year excess, people are at their lowest and most depressed. So, although I was pleased by what the Minister had to say, it has not really moved me out of my Blue Monday feeling about this particular regulation. When he says that the Government have a consistent policy on legal aid reform, I say to him: I think that that is the problem. To be fair to the Minister, the regulation was brought forward by his department well before he took over his new position—which was, I believe, only a few hours ago. He can hardly be held to be completely at fault for it.

I agree with the noble Lord who said earlier that he did not feel that the Minister’s heart was absolutely in this. I think that that is probably true, in spite of the powerful arguments that he managed to employ in his final speech. On 11 December the Joint Committee made its view quite clear when it stated:

“In view of the significance of the cases likely to be affected by the proposal”—

because, after all, the Government had conceded that many of these cases deal with human rights issues—

“we recommend retaining the Legal Aid Agency’s discretion in these cases, or, if it must be changed, tightening the requirements rather than removing the possibility of such funding altogether”.

The Minister will remember those words. I hope that, even if the regulation cannot be changed, when he gets to his department tomorrow he will at least consider tightening the requirements rather than removing the possibility of such funding altogether.

In more general terms, I very much hope that, from now on, his right honourable friend the Lord Chancellor will have the good sense to listen to his advice on this and other matters that affect so much the course of justice in this country. I shall not move my amendment.

Motion agreed.

House adjourned 10.12 pm.