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.