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Oral Answers to Questions
(10 years, 5 months ago)
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Mike Freer (Finchley and Golders Green) (Con)
1. What assessment he has made of the potential for international inward investment in Scotland after 2014.
The Secretary of State for Scotland (Mr Alistair Carmichael)
As part of the United Kingdom, Scotland has an impressive track record of attracting international inward investment, which recent figures have put at its highest level for 16 years. Scotland has strong potential to build on that record as part of the UK, the No. 1 location for Europe-bound foreign investment.
Mike Freer
Does my right hon. Friend agree that inward investment is boosted by Scotland being part of a single market and having a single currency?
Mr Carmichael
Indeed; I do agree with my hon. Friend. The people of Scotland very much understand that access to the pound sterling as our currency and access to that larger UK market benefit them, and they value them, especially the business community. We know that, because that is why the nationalists are constantly telling us that even in independence we would still be able to keep those things. They are wrong; it is cynical; and as we saw from yesterday’s poll, nobody is really being fooled by it.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
11. However, it is the case that inward investment is faltering. I have had experience after experience of talking to foreigners who are not investing in Scotland as a result of the uncertainties and the possible likely divorce. Are we not by far better off as a united kingdom than we would be with a separate Scotland?
Mr Carmichael
We are very much better off as a result of being part of the United Kingdom, and I long for the day when again Ministers here and in Edinburgh can all concentrate on doing their day job of working together to get the maximum benefit to Scotland and Scotland’s economy, and jobs for the people of Scotland that come from inward investment—instead of a referendum distraction.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
My right hon. Friend will be well aware that marine renewable energy presents a considerable opportunity for inward international investment as well as for export, based on the knowledge we have acquired. In that regard, it is vital that MeyGen’s project goes ahead. What discussions has he had with either the Department of Energy and Climate Change or the Crown Estate to enable that to happen?
Mr Carmichael
I have had a number of discussions, as I think my hon. Friend is aware, involving my colleagues in DECC and in the Crown Estate. I am very keen to ensure that no procedural difficulties will stand in the way of the development from MeyGen, which, as he and I both know, is a very exciting and potentially lucrative development for his area.
Angus Robertson (Moray) (SNP)
Inward investment into Scotland is at a 16-year high under a Scottish National party Government and in the run-up to an independence referendum. That contrasts with all the claims of doom and gloom from the Chancellor of the Exchequer. Given that the UK Government were spectacularly wrong in their claims on inward investment, why should anybody trust the myriad Westminster scare stories?
Mr Carmichael
I am delighted that the hon. Gentleman gives me the opportunity to remind the House that of the 111 inward investment projects that were successful in 2012-13, 84 were supported by UK Trade & Investment. That is the sort of heft that is given to Scottish business by being part of the United Kingdom; that is what he wants us to walk away from.
Angus Robertson
The UK Government have launched a confrontational approach to the European Union. The Prime Minister went to Brussels last week and was outvoted 26 to 2. If smaller countries have no say in the European Union, why is it that a Luxembourger is the new President of the European Commission—from a country smaller than the city of Glasgow?
Mr Carmichael
I will take absolutely no lectures from the Scottish nationalists on the subject of confrontational approaches. It really is a mark of the desperation of the position in which they find themselves that that is the best they can come up with.
Mrs Anne McGuire (Stirling) (Lab)
The Secretary of State commented on the Ernst and Young report, and it also identified that although investment was increasing, the number of jobs related to that inward investment was decreasing. I wonder what action the Minister can take, hopefully in co-operation with the Scottish Government, to ensure that there is greater correlation between investment and jobs created in Scotland.
Mr Carmichael
The right hon. Lady points to a direction in which sensible politics ought to go, and I would love to be working in that way with the Scottish Government. Unfortunately, however, it takes two to tango.
Ann McKechin (Glasgow North) (Lab)
2. What steps he is taking to incentivise employers in Scotland to pay the living wage.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
The Government support businesses that choose to pay the living wage, where it is affordable and does not cost jobs.
Ann McKechin
The Minister will be aware that many people in Scotland have started the holiday season and packed their bags, and many will be visiting the beautiful islands of Scotland, but last week the National Union of Rail, Maritime and Transport Workers reported that foreign-resident seafarers who are working on the ferries are being paid as little as £2.35 an hour. That is a disgrace to Scotland, and I urge the Minister to use his offices to work with the Scottish Government to persuade the ferry companies to pay not only the minimum wage but a living wage to every single one of their workers.
David Mundell
I most certainly take on board what the hon. Lady says and I will make representations in that regard. I am sure she welcomes the fact that earlier this month the UK Government published a list of employers who had not paid the minimum wage. Unfortunately, two of them were in Scotland.
Mike Crockart (Edinburgh West) (LD)
Mr Speaker, I know that you will be happy to hear that in May I employed an apprentice in business administration in my office and committed to paying her the living wage. Does the Minister agree with me that all MPs’ offices and Government Departments should set an example and move as quickly as possible to being accredited living wage employers?
David Mundell
The hon. Gentleman sets a good example, and certainly in apprenticeship schemes offered by Members of Parliament, I support the action he has taken.
Mr William Bain (Glasgow North East) (Lab)
14. Seven out of 10 young people in Scotland who are unemployed are applying for benefit for the second time. Is that not testament to the fact that there are simply not enough secure jobs for them that pay the living wage? Why will this Government and their equally bad counterparts in Edinburgh not use the public procurement powers available to them to ensure that every Scottish young person gets the living wage?
David Mundell
I would have thought that the hon. Gentleman would welcome the fact that the number of those in the 16 to 19-year-old category in Scotland who are out of work has fallen by 4,000. Work is the way out of poverty, and that is what this Government are encouraging.
Robert Halfon (Harlow) (Con)
Does my hon. Friend not agree that the best way to achieve the living wage in Scotland and elsewhere in the country is by continuing to take millions of low earners out of paying income tax altogether?
David Mundell
I absolutely agree. Tens of thousands of Scots have benefited from the fact that we have raised the personal allowance. Roughly two thirds of those on the minimum wage are now paying significantly less tax than they were when this Government came to power.
Mr Russell Brown (Dumfries and Galloway) (Lab)
I know the Minister recognises that payment of the living wage will ease the pressures of the cost of living that many households experience, but in view of his recent admission to the Scottish Parliament’s Welfare Reform Committee that his Government’s benefits sanctions and welfare reforms have contributed to the increase in the number of food bank users, will he now apologise?
David Mundell
What I think politicians should apologise for is making the poor and most vulnerable into political footballs. Poverty is a scourge in our country, not an opportunity for a press release.
Mr Speaker
Order. In case the House is not aware, I can inform colleagues that the House of Commons has received its accreditation from the Living Wage Foundation.
Pete Wishart (Perth and North Perthshire) (SNP)
3. What steps he is taking to inform the public about the Scottish independence referendum.
The Secretary of State for Scotland (Mr Alistair Carmichael)
To inform the debate, a variety of information, including a range of detailed analysis papers and a booklet for each household in Scotland, has been published. I have also participated in public debates and will continue to do so to set out the benefits of Scotland’s remaining in the United Kingdom.
Pete Wishart
For which we are eternally grateful, but is not the best way to inform people to debate? Instead, we have the leader of the no campaign, his right hon. Friend the Prime Minister, running a mile, feart to do just that? What about the substitute-designate? It will be a slaughter worse than the Bannockburn re-enactment if they put up the angry, agitated Alistair to debate with the First Minister. The Secretary of State himself could do it; he is good at this stuff—he could even take Rhona with him. But what we really need is the organ grinder, not one of the Alistair monkeys to debate with the First Minister.
Mr Carmichael
That was pitiful. I cannot believe it sounded good even when the hon. Gentleman rehearsed it in the mirror this morning. It is typical, though, of what we hear from the Scottish nationalists. They are desperate always to talk about how we will debate. They do that only because they want to avoid the actual debate, because they know that the force of argument is on the side of those of us who want to remain in the United Kingdom.
Iain Stewart (Milton Keynes South) (Con)
15. Will my right hon. Friend make sure that before 18 September the public have full information at their disposal about the significant extra powers for the Scottish Parliament for which this Parliament has already legislated? It is perfectly possible for Scotland to have more autonomy without ripping up our country.
Mr Carmichael
That is exactly the position. As of next year, as a result of the Scotland Act 2012, the Scottish Parliament will have control over stamp duty land tax and the landfill tax, it will have a borrowing power and, come 2016, it will have the power to set a Scottish rate of income tax. Those are significant tax-raising powers. I want to see us go further on that. Of course, that will require Scotland to decide to remain part of the United Kingdom.
Graeme Morrice (Livingston) (Lab)
Does the Secretary of State agree that third parties such as businesses and trade unions need to be able to make their voices heard in the referendum debate? Will he join me in condemning those people who continue to intimidate those who speak out against independence?
Mr Carmichael
I absolutely 100% and without any reservation condemn any intimidation, wherever it may appear. This is by a country mile the single most important issue that we, the people of Scotland, will ever have to resolve for ourselves. Nobody should feel that they are constrained in having their say or asking questions about what it would mean for them, their family or their business. Anybody who tries to silence people on the other side of the debate should be no part of it.
Sir Menzies Campbell (North East Fife) (LD)
Is not the role of our Government to provide answers to the questions that those arguing for independence refuse to provide—either because they do not know the answer or because they do not want us to know the answer?
Mr Carmichael
Indeed, that is the case. It has been remarkable that on every occasion when we could have been given hard facts and information by the Scottish Government throughout this exceptionally long campaign, we have instead been given opinion and assertion. People are not stupid, though. They draw their own conclusions from that, as was apparent from yesterday’s YouGov poll in The Times.
Margaret Curran (Glasgow East) (Lab)
This is the last Scottish questions before the referendum. People across Scotland know the magnitude of this decision and that if there is a yes vote, it is irreversible. That is why people need as much information as possible. Does the Secretary of State agree that when presented with the facts, most Scots do not want to turn their backs on the United Kingdom, and that a message of a strong Scotland with a strengthened Scottish Parliament is gaining support in every part of Scotland?
Mr Carmichael
The most important message that the people of Scotland have to get from any source is that the decision we make on 18 September is a decision from which there will be no going back. This has to be a once and for all decision. From that point of view I agree completely with the hon. Lady. Over the past 300 years, as part of the family of nations that is the United Kingdom, we have achieved a great deal of which we should be proud, and I and the people of Scotland do not want to walk away from that.
Margaret Curran
I thank the Secretary of State for that answer, which is particularly important this week, as we celebrate the naming of HMS Queen Elizabeth. Will he ensure that people across Scotland are informed about the value of such UK contracts to the shipbuilding industry in particular? Does he agree with the shop stewards at Rosyth and on the Clyde that the best way to protect the shipbuilding industry in Scotland is to say no thanks in September?
Mr Carmichael
I absolutely agree with the hon. Lady and with the shop stewards at Rosyth and on the Clyde, all of whom I have met on a number of occasions in recent weeks. They are clear and unambiguous about the message that the hon. Lady has just articulated. The House should remember that that is not the view of a politician; that is the view of trade unionists—people who are charged with protecting the best interests and the jobs of their members. If they thought for a second that independence would be good for their members and that it would help to protect their jobs, I have no doubt that the trade unions on the Clyde and at Rosyth would be supporting it. The fact that they are not tells us all we need to know.
Sir Gerald Howarth (Aldershot) (Con)
Will the Secretary of State ensure that Scottish voters understand that if they vote for Scotland to become a foreign country, they will lose the pound and all the stability and economic advantage that goes with it? Will he also make it clear that many of us in England—indeed, the vast majority—want Scotland to remain a vital and important part of our United Kingdom so that we can jointly share in our future prosperity?
Mr Carmichael
I agree with my hon. Friend that that is the view of most people in England, and in Wales and Northern Ireland. I look at how we have tackled the challenges we have faced over the past 300 years, and I see that over that time we have identified the problems and reached out from Scotland, to communities such as Liverpool, Newcastle, Manchester, Cardiff and Belfast, and tackled them by making common cause. That has worked for us, and I believe that it will continue to work for us.
Jim McGovern (Dundee West) (Lab)
4. What assessment his Department has made of the effect of the regional air connectivity fund on Scotland.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
The regional air connectivity fund was announced by the Chief Secretary to the Treasury last year and was doubled to £20 million in the Budget. It has already been successful in securing the air link between Dundee and London, a vital support for economic growth in the hon. Gentleman’s great city.
Jim McGovern
I thank the Minister for that answer. Some £2.8 million came from the UK Government to retain the air link between London and Dundee. Is that not just one more example, albeit a crucial one for Dundee, of why Scotland is stronger as part of the UK?
David Mundell
I absolutely agree. The air connectivity fund is a good example of the UK Government working to support economic development across all the nations and regions of our United Kingdom.
Mr Charles Kennedy (Ross, Skye and Lochaber) (LD)
May I ask the Minister, on behalf of my hon. Friend the Member for Argyll and Bute (Mr Reid) and myself—this is not just a parliamentary pincer movement; it is close to the Secretary of State’s heart, and I am assured that he does have a heart, at least on Wednesdays—about Islay airport and Broadford airport on the Isle of Skye? They could both benefit if that excellent scheme were extended in conjunction with the Scottish Government: in the case of Islay, because it lacks a public service obligation and wants more commercialism; and in the case of Broadford, by re-establishing passenger links. Will he give that his full support?
David Mundell
I will most certainly take on board what the right hon. Gentleman says on his behalf and that of his colleagues. I am sure that everybody would welcome the opportunity to fly over the sea to Skye.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
Does the Minister agree that those who are using that fund to fly from London to Dundee later this week in order to see the launch of the aircraft carrier will be able in two different ways to see the strength of the United Kingdom?
David Mundell
Absolutely. The hon. Gentleman will have heard the Secretary of State highlight the importance of the flotation of the aircraft carrier on Friday, which will be a very important moment not only for Scotland, but for our whole United Kingdom.
David Mowat (Warrington South) (Con)
5. What assessment he has made of the potential effect of Scottish independence on energy flows between Scotland and the rest of the UK.
The Secretary of State for Scotland (Mr Alistair Carmichael)
Scotland has a thriving energy sector which benefits from unrestricted access to the integrated Great Britain energy market. That supports jobs, keeps bills lower and spreads the substantial costs over 30 million households and businesses.
David Mowat
The Scottish Government have now decided to generate 100% of electricity from renewables by 2020. The implied subsidy for that is £4 billion a year, or £1,000 per voter a year. Has the Secretary of State had any discussions with the Scottish Government about who would pay for that in the event of independence?
Mr Carmichael
What I can tell my hon. Friend is that at the moment the cost of the subsidy required for the development of renewables is spread across the whole United Kingdom market. In an independent Scotland, that cost would have to be met by households in Scotland, which would mean a difference of between £38 and £189 in Scottish energy bills. We do exceptionally well from the subsidies that come to Scotland as part of the United Kingdom.
Fiona O'Donnell (East Lothian) (Lab)
Does the Secretary of State think there would be a market in the rest of the UK for expensive renewable energy from an independent Scotland, or is a single regulated energy market best for Scotland and best for the UK?
Mr Carmichael
The benefits and opportunities that come to generators of renewable energy in Scotland from being part of that single integrated market speak for themselves. The fact that we are being asked to leave that should be of concern to them.
Sheila Gilmore (Edinburgh East) (Lab)
6. What discussions he has had with his ministerial colleagues on the transition costs of an independent Scotland.
The Secretary of State for Scotland (Mr Alistair Carmichael)
I have regular discussions with ministerial colleagues, to ensure that people in Scotland have the full facts about the economic consequences of independence. The Scottish Government have repeatedly refused to publish their own workings. I call on them today to publish the work they have carried out.
Sheila Gilmore
I thank the Secretary of State for that reply. The Scottish Government’s own Finance Secretary calculated, in an internal memo, that the cost of setting up a new tax authority alone would be some £650 million. Is it not right that the Scottish Government should give that and other, similar information they have to the Scottish people before asking them to vote for a pig in a poke?
Mr Carmichael
It is worth reflecting that that figure is in the public domain only because the document was leaked. The truth of the matter is that, whenever there is any difficult news to be had, the Scottish Government will go to any lengths to suppress it, because, frankly, they are prepared to tell us anything that they think will make us more likely to vote for independence.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
13. With the renovation costs of the Westminster Parliament expected to be £400 million a year every year for 10 long years, Professor Patrick Dunleavy said yesterday at the London School of Economics that the set-up costs for an independent Scotland would be £200 million and not the £1.5 billion that is on the Treasury website. Will the Secretary of State see to it that that figure is corrected and that the Westminster Government apologises both to Professor Dunleavy, an expert in this area for 30 years, and to the people of Scotland for that error and misinformation? [Interruption.]
Mr Carmichael
The hon. Gentleman is out of date. I can tell him exactly what Professor Dunleavy said yesterday:
“Scotland’s voters can be relatively sure that total transition costs over a decade will lie in a restricted range, from 0.4 of one per cent of GDP (£600 million), up to a maximum of 1.1 per cent (£1,500 million). This is a step forward in debate”.
He was agreeing with Professor Iain McLean and said:
“I am grateful to Iain for helping to bring it out.”
The hon. Gentleman should also be grateful.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
7. What assessment he has made of the effects of the distribution of housing benefit in Scotland.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
In recent months, I have met every local authority in Scotland to discuss a wide range of issues, including housing benefit.
Mr McCann
A report by my trade union, the GMB, shows that huge sums of housing benefit are paid to company landlords in Scotland. Bearing in mind the Secretary of State’s earlier answer, will the Minister meet me to discuss how we can bring together the UK, Scottish and local governments to ensure that we get best value for housing benefit and that we can create new houses and new jobs, rather than fill the pockets of company landlords?
David Mundell
I would certainly be happy to meet the hon. Gentleman, with a view to convening such a meeting.
Mr Alan Reid (Argyll and Bute) (LD)
I want to thank the Government for recognising the extra costs of living in remote rural areas and giving councils such as Argyll and Bute extra money to give discretionary housing payments to their tenants. I hope the Government will continue to give extra money to such councils in future years.
David Mundell
The hon. Gentleman will know that I wrote to the Deputy First Minister of Scotland with an offer to executively devolve the power to Scottish Ministers to set the statutory cap on discretionary housing payments in Scotland. That offer has been accepted and we are working constructively with the Scottish Government to take it forward in relation not just to rural areas, but to all councils in Scotland.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Will the Minister intervene with the Department for Work and Pensions so that we can have a system where someone who is sanctioned and taken off benefits when they have an appeal does not lose their housing benefit until the appeal is heard? Once the appeal is heard, they get their money back, but they then have the problem of finding that they are in debt to the local council. Can we not have a system that is sensible and fair to people who are sanctioned by the DWP?
David Mundell
I certainly take note of what the hon. Gentleman says, and I would be happy to meet him to discuss it further.
Charlotte Leslie (Bristol North West) (Con)
Q1. If he will list his official engagements for Wednesday 2 July.
The Prime Minister (Mr David Cameron)
This morning, I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.
Charlotte Leslie
A key driver of our welcome economic growth has been investment in new commercial enterprises. Does my right hon. Friend agree that the speedy completion of the Sainsbury’s and Bristol Rovers deal is a key part of Britain’s fight back to prosperity not only in achieving a new stadium for the south-west, but in unleashing hundreds of jobs, affordable housing, business growth and rail infrastructure plans? Will he do all he can to hasten the completion of this Sainsbury’s deal, which is so vital for our economy?
The Prime Minister
Having visited my hon. Friend’s constituency recently, I know how passionately she feels about this important development. I know that she will be delighted that the judge in question has dismissed the judicial review. We can now hope that this paves the way for the supermarket and the stadium to be built, and I hope that Sainsbury’s will press ahead with that. Not only will this mean a new home for Bristol Rovers, but it will mean more jobs, more growth and better infrastructure for Bristol.
Edward Miliband (Doncaster North) (Lab)
It is four years since the Prime Minister announced his top-down NHS reorganisation. Can he tell us whether, since then, the number of people having to wait more than the guaranteed two months for cancer treatment has got better or worse?
The Prime Minister
The number of people being treated for cancer has gone up by 15%, and we are meeting the key waiting time targets, particularly the waiting time target for accident and emergency, which we met for April, even though the right hon. Gentleman had once again predicted a crisis.
Edward Miliband
That was a very specific question about cancer treatment: I asked whether things had got better or worse. After all, the Prime Minister did this big reorganisation and said things would get better. Macmillan Cancer Support warns that more lives are being put at risk. Cancer Research UK says,
“This isn’t just a missed target—some patients are being failed”.
The NHS has missed the target on access to cancer treatment for the first time ever. Is he really telling two of the most respected cancer charities that they are wrong about the target and that things are getting better, not worse?
The Prime Minister
What I am saying is that we introduced for the first time ever a cancer drugs fund, which is treating 50,000 people. That is what is happening. The number of people being treated for cancer is up 15%. This is all in stark contrast to Wales, where Labour is in charge—[Interruption.] Labour Members all shake their heads, but the fact is that Labour is in charge of the NHS in Wales, and it has not met a cancer target there since 2009.
Edward Miliband
Actually, the Prime Minister is wrong about that. In Wales, more patients start cancer treatment within 62 days than in England. We know why he wants to talk about Wales—because he cannot defend his record in England. Was it not interesting that, on the cancer treatment target, he could not pretend things were getting better, but he could not admit things are getting worse? Let us try him on another one: in the four years since his reorganisation, has the number of people waiting more than the guaranteed four hours in A and E got better or worse?
The Prime Minister
We have met our waiting time target for accident and emergency. Let me tell the right hon. Gentleman exactly how long people are waiting. When the shadow Secretary of State was Secretary of State for Health, the average waiting time was 77 minutes; under this Government, it is 30 minutes. That is what is happening under this Government.
Let me admit to a mistake, Mr Speaker. I have just said that Labour has not met a cancer treatment target in Wales since 2009. I am afraid I was wrong: it has not met a cancer treatment target in Wales since 2008. Of course, in Wales there is no cancer drugs fund; there has been an 8% cut to the budget; people are dying on waiting lists—and Labour is responsible.
The right hon. Gentleman asked me to defend my record over the past four years; I will. There are 7,000 more doctors, 4,000 more nurses, over 1,000 more midwives, and we are treating over 1 million more patients a year. Whereas the NHS under Labour had the disgrace of Mid Staffs, we can now see the NHS being properly invested in and properly improving.
Edward Miliband
I will tell the Prime Minister about our record on the NHS: the shortest waiting times ever, more doctors and nurses than ever before and the highest patient satisfaction ever. That is Labour’s record on the NHS. Now, it was a long time ago, but he did not answer the question. It was on a target that he set, on four-hour waits in A and E. Let me give him the figures for his target: before his reorganisation, the number of people waiting more than four hours was 353,000. After his reorganisation, that has risen to 939,000, an increase of 300%. Is that better or worse?
The Prime Minister
The average waiting time is down by more than half. That is better. But the right hon. Gentleman does not have to listen to me—he can listen to the shadow Health Secretary, who said that this is
“the best health service in the world.”
That is what he said. He was quoting the report from the Commonwealth Fund, which is an independent organisation. It ranked the United Kingdom—for the first time, and under this Government—as having the best health service anywhere in the world. It is better than in America, better than in Germany, better than in France, better than in Australia. [Interruption.] He says that is his record, but it has happened only under this Government, and I can tell him why. Mixed-sex wards have been virtually abolished. Infection rates have been halved. A million more patients have been treated. There is a cancer drugs fund for the first time ever. There are more doctors, more nurses, more midwives, more people being treated, and it is official: the best NHS in the world.
Edward Miliband
It is this party that created the NHS, and every time we have to save it from that lot opposite. Once again, the Prime Minister did not answer the question. More people are waiting more than four hours in A and E. What about those people whose condition is so serious that they need a bed in hospital? Can he tell us, since his reorganisation has the number of people waiting more than four hours on trolleys—something he said he would get rid of—got better or worse?
The Prime Minister
People are waiting less time to get into accident and emergency than they were under the last Labour Government. We remember what that Government gave us: the disgrace of Mid Staffordshire, for which they have never properly apologised. As for what they said about our plans, we have put £12.7 billion extra into the NHS and their view was that that was irresponsible. They oppose reform of the NHS, and we can see the effect in Wales: no reform, no money, longer waiting lists, no targets met and people dying on waiting lists. That is under a Labour Government.
Edward Miliband
The Prime Minister cannot answer any of the basic questions about his own targets in the NHS. I can tell him that the number of people waiting on trolleys for more than four hours has gone up from 61,000 to 167,000 on his watch. He promised that the reorganisation of the NHS would make things better, but it has made them worse: worse on access to cancer treatment, worse on A and E waits, worse on GP access. The NHS is getting worse on his watch, and there is only one person to blame: him.
The Prime Minister
If the right hon. Gentleman cannot do better than that, even on the NHS, he really is in trouble. Under this Government, millions more patients have been treated. There is a cancer drugs fund for the first time ever. Our health service is ranked officially the best in the world. We know what he would do, because we have heard from the director of policy, who said that no interesting ideas will emerge from Labour’s policy review—that is official—and his guru, Lord Glasman, has come out and said that he has “no vision.” Yesterday he misquoted statistics and got them completely wrong, and the managing director of the factory he was speaking in said that Labour’s policy would be a “bureaucratic nightmare”. I say to the people looking glum behind him, cheer up, folks—it’s only Wednesday.
Jake Berry (Rossendale and Darwen) (Con)
It is good to be back, Mr Speaker.
Cherylee Shennan, a 40-year-old mother, was murdered in Rossendale on 17 March by Paul O’Hara, who was out on licence after having murdered his former partner in 1998. The introduction of Clare’s law or the right to know whether one’s partner has a history of violence—Cherylee did know of her partner’s history of violence—must be backed up by support from the police and the probation service, so that people in such situations know of the dangers that they face and so that we do not see another tragedy like the death of Cherylee.
The Prime Minister
It is good to see my hon. Friend back in his place. He makes an important point. The introduction of Clare’s law has made a difference because it gives people the right to any information about the potential dangers from a partner. I am pleased that that has been rolled out across the country. He is absolutely right that we need to do more with the police, the probation service and the Prison Service to ensure that more warnings are given in more cases.
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
Q2. The Prime Minister will be aware of the housing crisis in London, but is he aware of the distinctive contribution of his colleague, the hon. Member for Newbury (Richard Benyon)? Through his £110 million family firm, he has bought up the New Era estate in Hackney. The firm intends to drive up—[Interruption.]
Mr Speaker
Order. The question will be heard. What people think of it is neither here nor there. This is supposed to be a bastion of free speech and the hon. Lady will be heard, however long it takes.
The Prime Minister
What I would say to the hon. Lady is that we all know that we need to see more houses being built. We have seen 41,000 affordable starts over the last year and more than a fifth of those have been in London. We need more house building and more houses being provided. We will then see more affordable rents in the social sector and in the private sector.
Mr John Baron (Basildon and Billericay) (Con)
Q3. One in three of our nuclear test veterans’ descendants has been born with a serious medical condition. Given that our cross-party campaign seeks recognition and not compensation, including an ex gratia payment by the Government into a charitable fund to help those in need, will the Prime Minister, following our last meeting in April, clear the logjam, recognise the veterans and finally resolve this shameful chapter in our nuclear history?
The Prime Minister
First, I pay tribute to my hon. Friend, who has campaigned consistently on this issue in the House and outside it. He and I have discussed the matter. I am happy to tell the House that the Government recognise and are extremely grateful to all the service personnel who participated in the nuclear testing programme. We should be in no doubt that their selfless contribution helped to equip the UK with the deterrent that it needs. Following our meeting, I asked my officials to look again at the specific points and arguments that he made. I will come back to him as soon as possible.
Andy McDonald (Middlesbrough) (Lab)
Last Saturday, I spoke to my 93-year-old constituent, Keith Ludrecius, who served as a merchant seaman throughout the second world war. He told me that he never thought he would live to see the day in this country when people who are in work still do not have enough money to live on. What does the Prime Minister have to say to Keith? Is it simply that this Tory Government make the rich richer and everyone else poorer, or is it just the inevitable consequence of his long-term economic con?
The Prime Minister
First, I am very proud to lead a Government who have increased the basic state pension by £15 a week, which will have helped his constituent. On how we help people in work, what we need to do is to create more jobs. We have seen 2 million more private sector jobs under this Government. The second thing that we need to do is to cut people’s taxes. Under this Government, people can earn more than £10,000 before they pay any income tax. That is at the heart of our long-term economic plan and it is working for Britain.
Robert Halfon (Harlow) (Con)
Q4. The world has seen the tragic and brutal murders of three Israeli youngsters, most probably by Hamas. Will my right hon. Friend give the Israeli Government every possible support at this time? Does he agree that, far from showing restraint, Israel must do everything possible to take out Hamas terrorist networks, and will he give the Israeli Government support in that?
The Prime Minister
What I say to my hon. Friend, who I know is passionate about these issues, and to everyone in the House, is that this was an absolutely appalling and inexcusable act of terror, and one can only imagine the effect on the families and friends of those poor teenagers, and what happened to them. It is very important that Britain will stand with Israel as it seeks to bring to justice those who are responsible. We also welcome the fact that President Abbas has firmly condemned the abduction and tried to help find those people. As my hon. Friend said, it is important that all security operations are conducted with care so that further escalation is avoided. The people responsible for this should be found and brought to justice.
Jack Dromey (Birmingham, Erdington) (Lab)
Q5. In 2011, the Prime Minister said that waiting lists “really matter”. Why, then, are nearly 3 million people on ever-lengthening waiting lists—the highest number for six years? What does he have to say to Katherine Sinclair, a constituent of mine, who has been waiting in pain for 33 weeks for a hip operation? Does not she “really matter”?
The Prime Minister
I say to the hon. Gentleman that he needs to look at the figures. The figures show that the numbers of people waiting longer than 18 weeks, 26 weeks and 52 weeks to start treatment—[Interruption.] The shadow Chancellor says they are getting worse, but they are lower today than they ever were when he was sitting in government—lower than at any time. We have the record from yesterday of the Leader of the Opposition using dodgy statistics. Yesterday he claimed that three quarters of the jobs in our country were created in London. That is totally wrong. Have we heard an apology? Have we heard a correction? Does he want to correct the record? He will do anything to talk down the British economy.
Andrew George (St Ives) (LD)
The Prime Minister is aware—I have raised this issue with him before—of my long-standing campaign for serious investment in rail services from Penzance, of the independent and Liberal Democrat Cornwall council proposal for a train upgrade and train care centre at Long Rock, and of my 3,000-name petition, which I recently delivered to this House in support of that campaign. Will he visit my constituency with his cheque book and a favourable announcement?
The Prime Minister
I intend to spend a lot of time in my hon. Friend’s constituency between now and the next election, and I believe I will be bringing all sorts of good news for the people of St Ives.
Ian Austin (Dudley North) (Lab)
Q6. Germany has three times as many apprentices as the UK, and the number of young apprentices has fallen. Long-term youth unemployment in Dudley is twice the national average, and we will attract secure and better-paid jobs only if we make education and skills our No. 1 priority. Will the Prime Minister make a start by ensuring that every public sector procurement contract provides apprenticeship places?
The Prime Minister
If the hon. Gentleman looks at the figures for Dudley North, he will find that the claimant count is down by 20% in the last year. He will find that the youth claimant count is down by 21%, and the long-term youth claimant count down by 28% in the last year. The fact is that in the west midlands things are getting better, with more people in work and more jobs being created. He should be celebrating Dudley rather than running it down.
Anne Marie Morris (Newton Abbot) (Con)
The Prime Minister will be aware of the tragic death of my three-year-old constituent Sam Morrish from sepsis while under NHS care. Sam was failed by his GPs, out-of-hours services, the hospital, the primary care trust and the ombudsman. This must not happen again. Will the Prime Minister ensure that the ombudsman’s recommendations are implemented in full and that the systems of review within the NHS, and by the ombudsman, are radically overhauled to deliver proper transparency and accountability in a timely way? That family waited two years for justice.
The Prime Minister
My hon. Friend is absolutely right to raise that tragic case, and all our thoughts should be with Sam’s parents, who I know have had a meeting with the Health Secretary. It is shocking and saddening, as she says, to see how a whole succession of health services failed that family, and anyone who has lost a child, and lost a child that young, knows how harrowing and how dreadful that experience is. She is absolutely right: we must learn the lessons from that case, and make sure they are acted on and that they cannot happen again. Last week we launched a major safety campaign to prevent those sorts of tragic and—sadly—avoidable deaths.
Kerry McCarthy (Bristol East) (Lab)
Q7. At the Tory billionaires’ summer ball, the Defence Secretary was sat with the lobbyist for the Government of Bahrain. Can the Prime Minister tell us whether they discussed the fact that Bahrain is still not regarded by the Foreign Office as a human rights country of concern?
The Prime Minister
What I think will be discussed is the fact that the Labour party just has to get one trade union to write one cheque for £14 million. When you look at the Labour party candidates and take out of the mix the fact that they have got son of Blair, son of Straw, son of Prescott, son of Dromey—when you take out the red princes—you will find that 80% of the candidates are union-sponsored. They have bought the candidates, they have bought the policy, they have bought the leader. We must never let them near the country.
Mr Brian Binley (Northampton South) (Con)
The number of NEETs in Northamptonshire has fallen from 4,580 in March 2012 to 2,645 now thanks to a joint project set up by the local enterprise partnership and the Northampton Alive organisation. Will the Prime Minister congratulate those responsible for that success, and urge more MPs to get involved with their local LEPs, thus recognising their great value if constituted correctly, led imaginatively and targeted wisely?
The Prime Minister
My hon. Friend is absolutely right. There is interest in this right across the House. All parties are now committed to making local enterprise partnerships work and to not going back to the old regional development agencies. It is important that LEPs are business-led and it is important they are strong in every part of the country. Members of Parliament can play a real role in encouraging prominent businessmen and businesswomen to get involved with LEPs and in making sure they deliver for local areas.
Jeremy Corbyn (Islington North) (Lab)
Q8. May I take the Prime Minister back to the question of the private rented sector in Britain? Across London, there are thousands and thousands of families—people in work and on benefits—who are frightened of rent increases, frightened of short-term tenancies and frightened of the consequences, for themselves and their children, of being evicted or forced to move out of the area in which they live. What is happening in central London is social cleansing, and it is coming to the rest of the country. Will he give me an assurance that, in addition to any regulation of the agencies, serious consideration will be given to the need to bring back rent control to protect people and ensure they have somewhere secure and decent to live?
The Prime Minister
Where I would agree with the hon. Gentleman is on the need for greater transparency in the work of letting agents in terms of fees. There is a need for alternative options, which we have put forward, for longer-term tenancies, but in the end we must allow customers to choose what they want. Where I part company with him is on the idea of introducing full-on rent controls. Every time they have been tried, wherever they have been tried in the world, they have failed. That is not just my view; it is also the view of Labour’s own shadow housing Minister, who is on the record as saying that she does not think rent controls will work in practice. Perhaps he might want to have a word with her before coming to me.
Sir Tony Baldry (Banbury) (Con)
Q9. In the ’83 general election, a 13-year-old boy delivered leaflets around my constituency pledging that Michael Foot would take Labour out of the European Union. Does my right hon. Friend find it strange that that same boy, now leader of the Labour party, is not willing either to support the renegotiation of Britain’s terms of membership of the European Union or to pledge to trust the people of Britain in a referendum on our membership of the European Union?
The Prime Minister
I have always thought it terribly unfair to hold against people things they might have done in their youth. If that was the right hon. Gentleman’s idea of fun as a 14-year-old, then, obviously, we have to make room for everybody. The point is this: it is in the interests of the British people to have a renegotiation. [Interruption.] What is my idea of fun? It is not hanging out with the shadow Chancellor—that is no idea of fun. I feel sorry for the Leader of the Opposition, because he has to hang out with him all the time. What a miserable existence it must be to have sitting next to you the person who wrecked the British economy, and to have to listen to him, day after day, as he says to the British people, “We’re the people who crashed the car, give us the keys back.”
Jim Sheridan (Paisley and Renfrewshire North) (Lab)
The uncertainty surrounding the future of Scotland and indeed the UK has resulted in many among the business community in Scotland withholding significant investments in that country. Does the Prime Minister therefore agree with me that there is a moral responsibility on employers to inform their employees about the consequences, if any, of the separation of Scotland from the UK so that they can make an informed choice prior to the referendum?
The Prime Minister
The hon. Gentleman makes a very important point—that a huge amount of pressure is being put on businesses by the Scottish Government with all sorts of threats and warnings against speaking out and saying what they believe is the truth. I come across business leader after business leader—large and small in Scotland—who wants to keep our United Kingdom together and thinks it would be crazy to have border controls, different currencies and split up our successful United Kingdom. Together with the hon. Gentleman, I urge them to speak out, talk with their work forces about the strength of our United Kingdom and then vote to keep it together.
Greg Mulholland (Leeds North West) (LD)
Q10. This weekend, the cities, towns and villages of Yorkshire will be alive to cries of “Allez, allez” as the world’s greatest annual sporting event passes through our county. Will the Prime Minister join in people’s enthusiasm for le grand départ this weekend, and does he agree that this is a wonderful way to build a legacy for cycling and encourage more people to “get on their bikes”?
The Prime Minister
I absolutely agree with my hon. Friend. It is brilliant that the Tour de France is starting in Yorkshire, and I think it will be a fantastic event for our country while also providing a great advertisement for Yorkshire and all that the county has to offer. I am greatly looking forward to going and seeing some of the race and some of the preparations. It is going to be a magnificent event, and I will do everything I can to promote it—apart from wearing lycra.
Susan Elan Jones (Clwyd South) (Lab)
Q11. Will the Prime Minister make it illegal for recruitment agencies to advertise overseas for jobs in this country, unless they advertise them locally, too—yes or no?
The Prime Minister
The short answer is yes. That is exactly what we are doing—saying that employment agencies cannot do that; they cannot purely advertise jobs abroad, and we are doing everything we can to stop that.
Mr Adrian Sanders (Torbay) (LD)
We have a £12 billion tourism deficit in this country—the deficit generated between people going overseas and people coming here. One reason for that is believed to be our high VAT rates on accommodation and attractions. Will the Prime Minister look at that and ensure that that is not what is driving up that deficit?
The Prime Minister
My hon. Friend is absolutely right to promote the south-west as a holiday destination. We should do everything we can to help. Obviously, the restoration of the transport links has been vital. It is difficult to have differential rates of VAT on some of these things, but everything we can do to promote the UK as a holiday destination—including, for instance, the brilliant fact that the Tour de France is coming here this weekend—we should do.
Jim Shannon (Strangford) (DUP)
Q12. Cancer Research UK has just launched its new strategy—a focus on tailoring treatment to individuals, which should prove more effective in combating cancer. How will the Prime Minister ensure that the NHS is in a position to enable access to radiotherapy and ensure that cancer drugs are available for all regions of the United Kingdom of Great Britain and Northern Ireland.
The Prime Minister
The cancer drugs fund has been a huge breakthrough not just in making available drugs but some important treatments, too. I hope that other parts of the United Kingdom will take up what we are doing with the cancer drugs fund. Another thing we can do is to make sure, by working with Genomics England, that we are sequencing genomes as fast as we can so that we can carry out the research necessary to see which cancer drugs will be effective on which patients in accordance with their DNA. This will be the modern way to do tailored medicine, and I am very pleased to say that Britain is well ahead of the pack when it comes to investing in our universities and science base as well as in our NHS.
Mark Pawsey (Rugby) (Con)
Q13. Jack Gayton and Hannah Fountaine are two young constituents who now own one of the 108 properties in Rugby bought as a result of this Government’s Help to Buy scheme. Does the Prime Minister agree that the fact that Jack and Hannah now enjoy their own home and have made a start on the housing ladder demonstrates this Government’s support for those who want to work hard and get on?
The Prime Minister
I join my hon. Friend in congratulating his constituents. The Help to Buy scheme is working to get people on to the housing ladder. It is enabling people who do not have rich parents, and who cannot afford a big deposit but can afford a mortgage, to go out and buy the flat or house that they want. We have seen 30,000 people taking advantage of the scheme already, and it has also helped to kick-start investment in housing and raise the level of housing starts in our country.
Mr Dennis Skinner (Bolsover) (Lab)
Q15. Is the Prime Minister aware that, as an out-patient, I have to visit a hospital on a regular basis, and hear from the front line about the problems in the health service? The nurses have lost a considerable amount of their real pay, and A and E services are bursting at the seams. Then there is the fact that nearly every hospital in Britain is running into financial difficulties. As a member of the Bullingdon club, is the Prime Minister proud to be surrounded by this wreckage? Remember, it is his legacy, not ours. Stop blaming the Opposition. Get it done, or get out.
The Prime Minister
I think the picture that the hon. Gentleman paints is completely wrong. Of course more people are going to A and E departments in our country—over a million more people—but we are meeting our targets, and waiting times are down by a half. The hon. Gentleman talks about nurses. There are 4,000 more nurses in our NHS than there were when I first stood at this Dispatch Box, and there are 7,000 more doctors.
What the hon. Gentleman ought to know is that we have cut the number of administrative staff, the bureaucrats with whom we were left by the Labour party. There are 19,000 fewer of those, which is why we are able to treat more patients with more clinical staff. That is a record of which we can all be proud.
Michael Ellis (Northampton North) (Con)
Q14. It is thanks to our long-term economic plan that £200 million has been allocated to fighting potholes, including £3.3 million for Northamptonshire, much of which will be used in my constituency. Does not that infrastructure investment show that it is only the Conservatives who have a plan that puts Britain on the road to recovery, whereas the Labour party would drive the country’s economy off a cliff?
The Prime Minister
I think my hon. Friend is fully justified in taking a lot of credit for the work that has been done on potholes. He has raised the issue in every forum, including the House, over and over again, which is partly why Northamptonshire received £3.3 million specifically to spend on repairing roads. He will be pleased to know that that is enough to fill in a staggering 62,000 potholes. This is important, because potholes damage people’s cars, motorbikes and cycles when they are on their way to work, and mending them is good for hard-working families.
Chris Ruane (Vale of Clwyd) (Lab)
Arthur Jones, a 73-year-old Army veteran from Denbigh in my constituency, went hill-walking in Crete. He has not been seen since 19 June, and his family are frantic with worry. Will the Prime Minister ensure that the Foreign and Commonwealth Office continues its excellent work, and co-operates with the Greek Government to ensure that Arthur is found?
The Prime Minister
I will certainly do everything I can to help the hon. Gentleman with his constituent. I will have discussions with the Foreign Office about all the consular assistance that is being given, and about anything else that it can do.
Bus Services for Beacon Heights (Walsall)
Valerie Vaz (Walsall South) (Lab)
The petition is from the residents of Beacon Heights park homes. A petition in similar terms has been signed by 65 people.
The petition states:
The Petition of a resident of Beacon Heights Park Homes Park,
Declares that following the removal of the 934 and 936 bus services from Beacon Road, Walsall after 7pm and on Sundays many elderly people who do not drive cannot access public transport at those times and further that the Petitioner calls for a bus service or minibus to be introduced to replace the 934 and 936 bus service.
The Petitioner therefore requests that the House of Commons urges the Government to take all possible steps to encourage Walsall Metropolitan Borough Council to consider the objections of the local residents.
And the Petitioners remain, etc.
[P001363]
Mr Speaker
It is a splendid thing when somebody who introduces a petition has a brother behind her in support.
NHS Service Provision in Middlesbrough South and East Cleveland
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
The petition states:
The Petition of residents of the United Kingdom,
Declares that the Petitioners object to the closure of the Park End Clinic, Skelton Medical Centre, and Skelton NHS walk-in centre; further that the Petitioners object to the proposed closure of minor injuries units at East Cleveland and Guisborough Hospitals; further that the Petitioners are concerned these reductions in provision of primary care services will increase demand on the Accident and Emergency Department at James Cook University Hospital; further that the Petitioners believe that Ministers in the Department of Health should meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these closures, and regret that Ministers have not committed to such a meeting.
The Petitioners therefore request that the House of Commons urges Ministers to meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these changes in service provision, and encourages NHS England and the South Tees NHS Clinical Commissioning Group to abandon these closures.
And the Petitioners remain, etc.
[P001364]
Points of Order
(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Andy Burnham (Leigh) (Lab)
On a point of order, Mr Speaker. Just now, during Prime Minister’s Question Time, the Prime Minister appeared to suggest that the number of people waiting longer than 18 weeks for an operation had gone down since his reorganisation. I have the figures here. In April 2010, 20,662 people waited longer than 18 weeks. In April 2014, the figure was 29,417. The number has gone up. Do you not think, Mr Speaker, that the Prime Minister might correct the record before he leaves the Chamber?
The Prime Minister (Mr David Cameron)
Further to that point of order, Mr Speaker. I can tell the House and the right hon. Gentleman that the numbers waiting longer than 18, 26 and 52 weeks to start treatment are lower than they were at any time under the last Government. Those are the facts. The Opposition were caught out with dodgy statistics yesterday, and I think that they have just done it again.
Ian Swales (Redcar) (LD)
On a point of order, Mr Speaker. In yesterday’s Finance Bill debate, the hon. Member for Birmingham, Ladywood (Shabana Mahmood) said that the tax gap was £32 billion when the previous Government left office and that it has now gone up to £35 billion. Official Her Majesty’s Revenue and Customs figures show the tax gap was actually £42 billion when Labour left office, so there has been a fall of £7 billion under this Government. I know the Opposition are keen to regain some financial credibility, so I hope the hon. Lady will correct the record and also find time to congratulate this Government on their progress in—
Mr Speaker
Order. May I just say to the hon. Gentleman—and I say it in a cordial spirit—that that was another action replay? We have now had two action replays today, and I must strongly counsel colleagues against raising as attempted, but actually bogus, points of order what are really political points. Otherwise this phenomenon will multiply over the next nine months or so, which is undesirable. The hon. Gentleman has made his point and it is on the record, and we will leave it there—and I am grateful for his nod of assent to my ruling.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
Further to that point of order, Mr Speaker—
Mr Speaker
There is no further to it, because the point has been made and I have left it there.
Angus Robertson (Moray) (SNP)
On a point of order, Mr Speaker. Tomorrow is the second anniversary of the tragic Tornado collision when two Tornadoes collided over the Moray firth and three service personnel lost their lives. Yesterday the Ministry of Defence accepted liability for the collision, but it has not updated the House or appropriate parliamentarians on the MOD’s responsibility or answered questions on the service inquiry report, which was published on Monday. The whole situation is frankly disgraceful. What is the best route to ensure that the MOD answers to the House, to explain its responsibilities and clarify its liability, and to say when a warning system will be installed in both Tornado and Typhoon aircraft?
Mr Speaker
The response to the hon. Gentleman is twofold. [Interruption.] Order. If a Minister wishes to catch my eye, he or she is perfectly entitled to do so, but the hon. Gentleman raised his point of order, at least ostensibly, with the Chair and therefore perhaps he will rest content with my answer, and the answer is, as I said, twofold. First, it is up to Ministers to decide whether they think an oral statement is required. Secondly, in the absence of an oral statement, it is perfectly open to the hon. Gentleman to seek a debate in this House on the Adjournment. To the best of my knowledge, the hon. Gentleman has not thus far done so, but he might find that he is successful if he does. We will leave that matter there for today.
Toby Perkins (Chesterfield) (Lab)
On a point of order, Mr Speaker. I have notified the Justice Secretary of my intention to raise this point of order. Yesterday in Justice questions he claimed that my allegations about the selection process for the south Yorkshire probation service were nonsense and that there was a carefully constructed process of selection and a proper appeal mechanism for those who were not selected. I have here a letter from Angela Tinker, the human resources systems manager at South Yorkshire Probation Trust, to my constituent, Gwen MacDonald, in which she says:
“There was a random selection process and employee numbers were used to select between NPS”—
national probation service—“and CRC”, or community rehabilitation companies. It continues:
“Employee numbers were drawn out of a hat”,
which confirms exactly the allegations I was making, and also that yesterday the Justice Secretary inadvertently misled the House. Can you, Mr Speaker, let us know how he might have the opportunity to set the record straight?
Mr Speaker
There are two points here. First, everybody takes responsibility for his or her utterances in this House. There is a formal means by which a Minister can correct the record, if he or she judges it necessary to do so, and that is through a statement to colleagues. Secondly—and I say this in all politeness to the hon. Gentleman, as I did to another Member—Members should not use the point of order procedure to continue debate. Although I am greatly flattered by the extent of the powers that hon. and right hon. Members think I enjoy, they sometimes have a somewhat exaggerated notion of what, in practice, I can be expected to achieve. The hon. Gentleman is, I am sure, now an increasingly experienced and discerning fellow. Judging by the broad smile on his face, he knows that he has had a go and he has got it on the record, and he can now go and enjoy his lunch, resting content. We will leave it there.
Mr Speaker
I hope it is a genuine one. I have known the hon. Gentleman for 25 years and I hope he is not going to let me down.
Conor Burns
We have indeed known one another for 25 years, Mr Speaker. As we were previously involved in politics together, we had a great reverence for this Chamber of Parliament and for hon. Members on all sides telling the truth to it on all occasions. You have correctly identified the mechanism that Ministers who have misled Parliament can use to rectify that. May I ask you what the correct mechanism is for other hon. Members who inadvertently, or deliberately, mislead Parliament?
Mr Speaker
The answer is that a Member can take the opportunity through an intervention or a speech, or through a personal statement, to correct the record if that Member judges it necessary to do so. But we have, in essence, a self-regulating procedure in the House, and the hon. Gentleman, as a keen student of procedure, will recognise the truth of what I have just said. We will leave it there for now, and I am grateful to the hon. Gentleman for not denting my confidence in his tendency to behave properly.
Bills Presented
Affordable Homes Bill
Presentation and First Reading (Standing Order N0. 57)
Andrew George, supported by Mr Nick Raynsford, Mr Charles Kennedy, Jeremy Lefroy, Caroline Lucas, Mr Clive Betts, Stephen Gilbert, Mr Mark Williams, Alison Seabeck, Mr Adrian Sanders, Valerie Vaz and Mr Grahame M. Morris, presented a Bill to make provision about the availability of affordable homes; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 5 September, and to be printed (Bill 13).
International Development (Official Development Assistance Target) Bill
Presentation and First Reading (Standing Order N0. 57)
Michael Moore, supported by Mr Andrew Mitchell, Annette Brooke, Mrs Anne McGuire, Alistair Burt, John Thurso, Mr Tom Clarke, Fiona Bruce, Roger Williams, Hugh Bayley, Jeremy Lefroy and Dr Julian Huppert, presented a Bill to make provision about the meeting by the United Kingdom of the target for official development assistance (ODA) to constitute 0.7 per cent of gross national income; to make provision for independent verification that ODA is spent efficiently and effectively; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 12 September, and to be printed (Bill 14 ).
European Union (Referendum) Bill
Presentation and First Reading (Standing Order N0. 57)
Robert Neill, supported by Sir Tony Baldry, Guto Bebb, Mr Graham Brady, Sir William Cash, Mr Nigel Dodds, Mr Stephen Dorrell, Jackie Doyle-Price, Dr Liam Fox, Zac Goldsmith, Sir Gerald Howarth and Sheryll Murray, presented a Bill to make provision for the holding of a referendum in the United Kingdom and Gibraltar on the United Kingdom’s membership of the European Union.
Bill read the First time; to be read a Second time on Friday 17 October, and to be printed (Bill 15).
Self-Build and Custom Housebuilding Bill
Presentation and First Reading (Standing Order N0. 57)
Jeremy Lefroy, on behalf of Mr Richard Bacon, supported by Nick Herbert, John Mann, John Pugh, Mr Angus Brendan MacNeil, Mr Nigel Evans, Sir Edward Leigh, Jim Fitzpatrick, David Morris, George Freeman, Mr Philip Hollobone and Mr Graham Allen, presented a Bill to place a duty on local authorities to keep a register of individuals and community groups who have expressed an interest in acquiring land to bring forward self-build and custom-build projects and to take account of and make provision for the interests of those on such registers in developing their housing initiatives and their local plans; to allow volume house builders to include self-build and custom-build projects as contributing towards their affordable housing obligations, when in partnership for this purpose with a Registered Social Landlord; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 24 October, and to be printed (Bill 16).
Health and Social Care (Safety and Quality) Bill
Presentation and First Reading (Standing Order N0. 57)
Jeremy Lefroy, supported by George Freeman, Sir William Cash, Ann Clwyd, Margot James, Sir Tony Cunningham, Dr Phillip Lee, Sir Malcolm Bruce, Fiona Bruce, Charlotte Leslie, Julian Sturdy and Andrew George, presented a Bill to make provision about the safety of health and social care services in England; to make provision about the integration of information relating to users of health and social care services in England; to make provision about the sharing of information relating to an individual for the purposes of providing that individual with health or social care services in England; to make provision for removing individuals convicted of certain offences from the registers kept by the regulatory bodies for health and social care professions; to make provision about the objectives of the regulatory bodies for health and social care professions and the Professional Standards Authority for Health and Social Care; to make provision about the disposal of cases concerning a person’s fitness to practise a health or social care profession; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 7 November, and to be printed (Bill 17) with explanatory notes (Bill 17-EN).
Mr Speaker
Gosh, the hon. Member for Stafford (Jeremy Lefroy) is a busy bee.
National Health Service (Amended Duties and Powers) Bill
Presentation and First Reading (Standing Order N0. 57)
Clive Efford, supported by Frank Dobson, Ms Karen Buck, Mr Andy Slaughter, Grahame M. Morris, Diana Johnson, Alison Seabeck, Shabana Mahmood, Steve Rotheram, John Healey, Mr Dennis Skinner and Angela Smith, presented a Bill to re-establish the Secretary of State’s legal duty to provide national health services in England; to amend the provisions of the Health and Social Care Act 2012 relating to Monitor; to repeal the regulations made under section 75 of that Act; to make other amendments to the provisions in that Act relating to competition and provision of private health services; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 21 November, and to be printed (Bill 18).
Tenancies (Reform) Bill
Presentation and First Reading (Standing Order N0. 57)
Sarah Teather, supported by Tessa Munt, Tim Farron, Sir Peter Bottomley, Bob Blackman, Mr Andrew Smith, Sir Andrew Stunell, John Healey, Jeremy Lefroy, Mr Philip Hollobone, Nicola Blackwood and Fiona Mactaggart, presented a Bill to protect tenants against retaliatory eviction; to amend the law on notices requiring possession relating to assured shorthold tenancies; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 28 November, and to be printed (Bill 19).
Control of Horses Bill
Presentation and First Reading (Standing Order N0. 57)
Julian Sturdy, supported by James Wharton, Mr Philip Hollobone, Mrs Cheryl Gillan, Neil Parish, Jeremy Lefroy, Andrew Percy, Mr Graham Stuart, Ian Swales, David Morris and Caroline Nokes, presented a Bill to make provision for the taking of action in relation to horses which are in public places; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 24 October, and to be printed (Bill 20).
Mr Speaker
Never was there a more appropriate linkage between name and title.
Local Government (Review of Decisions) Bill
Presentation and First Reading (Standing Order N0. 57)
Mr Mark Spencer, supported by Chris Heaton-Harris, Simon Kirby, Karl MᶜCartney, Stephen McPartland, Caroline Nokes, Heather Wheeler, John Stevenson and Jackie Doyle-Price, presented a Bill to make provision about the procedure for conducting investigations under Part 3 of the Local Government Act 1974; and to make provision for cases where an authority to which that Part applies takes a decision that affects the holding of an event for a reason relating to health or safety.
Bill read the First time; to be read a Second time on Friday 24 October, and to be printed (Bill 21) with explanatory notes (Bill 21-EN).
Off-Patent Drugs Bill
Presentation and First Reading (Standing Order N0. 57)
Robert Neill, on behalf of Jonathan Evans, supported by Annette Brooke, Sir Alan Meale, Dame Angela Watkinson, Dr Liam Fox, Robert Neill, John Healey, Glyn Davies, Dr Phillip Lee, Mr Elfyn Llwyd, Mr David Nuttall and Dr Sarah Wollaston, presented a Bill to require the Secretary of State to take steps to secure licences for off-patent drugs in new indications; to require the National Institute for Health and Care Excellence to conduct technology appraisals for off-patent drugs in new indications; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 7 November, and to be printed (Bill 22).
Zero Hours Contracts Bill
Presentation and First Reading (Standing Order N0. 57)
Ian Mearns, supported by Grahame M. Morris, Ian Lavery, Pat Glass, Steve Rotheram, Mrs Emma Lewell-Buck, Andy McDonald, Kelvin Hopkins, Katy Clark, John Cryer, Jim Sheridan, Mr Dennis Skinner and Mr Ronnie Campbell, presented a Bill to limit the use of zero-hours contracts; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 21 November, and to be printed (Bill 23).
Mr Speaker
We are grateful to you, Mr Campbell, for your sedentary interjection.
Low Pay Commission (National Minimum Wage) Bill
Presentation and First Reading (Standing Order N0. 57)
Dan Jarvis, supported by Margaret Beckett, Stephen Doughty, Jack Dromey, Julie Elliott, Lilian Greenwood, Mike Kane, Mrs Emma Lewell-Buck, Alison McGovern, Mr Jamie Reed, Mr Steve Reed and Alison Seabeck, presented a Bill to require the Secretary of State to set a target for the Low Pay Commission to increase the minimum wage during the term of a Parliament; to require the Low Pay Commission to write to the Secretary of State if this target cannot be met; to require the Secretary of State to ensure that the Low Pay Commission has the power to set up taskforces in certain sectors; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 28 November, and to be printed (Bill 24).
Local Government (Religious etc Observances) Bill
Presentation and First Reading (Standing Order N0. 57)
Jake Berry, supported by Mr Stewart Jackson, Mr Ben Wallace and Fiona Bruce, presented a Bill to make provision about the inclusion at local authority meetings of observances that are, and about powers of local authorities in relation to events that to any extent are, religious or related to a religious or philosophical belief.
Bill read the First time; to be read a Second time on Friday 21 November, and to be printed (Bill 25).
Household Safety (Carbon Monoxide Detectors) Bill
Presentation and First Reading (Standing Order N0. 57)
Andrew Bingham, supported by Tracey Crouch, Dr Philip Lee, Justin Tomlinson, Heather Wheeler, Stephen Phillips, Nick de Bois, Simon Hart, Pauline Latham, Caroline Nokes, Chris Heaton-Harris and Craig Whittaker, presented a Bill to introduce a requirement that a functioning carbon monoxide detector must be installed in all newly built and all rented residential properties; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 12 September, and to be printed (Bill 26).
Under-occupancy Penalty (Exemptions) Bill
Presentation and First Reading (Standing Order N0. 57)
Yvonne Fovargue, supported by Paul Blomfield, Nic Dakin, Steve Rotheram, Sheila Gilmore, Dan Jarvis, Jenny Chapman, Mrs Mary Glindon, Graham Jones, Rosie Cooper, John Healey and Mike Kane, presented a Bill to exempt social housing tenants who claim Disability Living Allowance or who have occupied a property for at least six months or who have not been offered alternative accommodation from the size criteria provisions of the Housing Benefit Regulations 2006, the Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 and the Universal Credit Regulations 2013; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 28 November, and to be printed (Bill 27).
Transparency and Accountability Bill
Presentation and First Reading (Standing Order N0. 57)
John Hemming presented a Bill to make provision regarding arrangements for children involved in court proceedings; to make provision about the transparency, administration and accountability of courts and case conferences; to require the Secretary of State to report to Parliament annually on the number of prisoners who have exceeded their tariff and have not been released because they do not admit guilt; to extend the Criminal Cases Review Commission’s powers to obtain information; to make provision about consumer complaints in markets for public services; to amend certain sections of the Freedom of Information Act 2000 relating to contracts; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 17 October, and to be printed (Bill 28) with explanatory notes (Bill 28-EN).
Control of Offshore Wind Turbines Bill
Presentation and First Reading (Standing Order N0. 57)
Mr Christopher Chope, supported by Conor Burns, Richard Drax, Mr Tobias Ellwood, Dr Julian Lewis, Mr Robert Syms, Mr Peter Bone, Sir Greg Knight and Mr Nigel Evans, presented a Bill to restrict the height, number, location and operation of wind turbines situated off shore within twenty miles of the coast; to restrict subsidies available for such turbines; to make provision regulating the length, location and environmental impact of cables connecting such turbines to the national grid; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 16 January 2015, and to be printed (Bill 29).
Responsible Parking (Scotland) Bill
Presentation and First Reading (Standing Order N0. 57)
Mark Lazarowicz, supported by Sheila Gilmore, Mike Crockart, Katy Clark, Dame Anne Begg and Dan Jarvis, presented a Bill to amend Schedule 5 to the Scotland Act 1998 to exclude from the reservations certain provisions relating to parking; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 5 September, and to be printed (Bill 30).
Health Service Commissioner for England (Complaint Handling) Bill
Presentation and First Reading (Standing Order N0. 57)
Mr David Davis, supported by Mr Dominic Raab, Dr Sarah Wollaston and Alan Johnson, presented a Bill to make provision about the handling of complaints by the Health Service Commissioner for England; to require the Commissioner to notify a complainant of the reason for the delay if the investigation of the complaint is not concluded within a 12 month period; to require the Commissioner to lay before Parliament an annual report giving details of how long investigations of complaints have taken to be concluded and progress towards meeting a target of concluding investigations within a 12 month period; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 5 September, and to be printed (Bill 31).
Pavement Parking Bill
Presentation and First Reading (Standing Order N0. 57)
Martin Horwood, supported by Mr Jim Cunningham, Tracey Crouch, Kate Green, Mr Elfyn Llwyd, Caroline Lucas, Roger Williams, Lisa Nandy, Richard Fuller, Mike Thornton, Henry Smith and Greg Mulholland, presented a Bill to make provision for the safety, convenience and free movement on pavements of disabled people, older people, people accompanying young children, and other pavement users; to clarify, strengthen and simplify the law relating to parking on pavements in England and Wales; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 12 September, and to be printed (Bill 32).
Finance Bill
(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
14:00 - The House divided: - Ayes: 241 / Noes: 295 - Question accordingly negatived.
15:47 - The House divided: - Ayes: 247 / Noes: 306 - Question accordingly negatived.
17:48 - The House divided: - Ayes: 301 / Noes: 7 - Question accordingly agreed to.
19:00 - The House divided: - Ayes: 289 / Noes: 228 - Question accordingly agreed to.
The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 9—Pension flexibility: Treasury analysis—
‘(1) The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, publish and lay before the House of Commons any analysis prepared by the Treasury prior to the publication of Budget 2014 relating to the impact of changes made by sections 39 to 43 of this Act to schedules 28 and 29 to the Finance Act 2004.
(2) The information published under subsection (1) must include—
(a) any assessment made of the impact of the provision for independent face to face guidance on the 2004 Act;
(b) the distributional impact, by income decile of the population, of changes made by sections 39 to 43 of this Act;
(c) a behavioural analysis; and
(d) the financial risk assessment.”
Government new schedule 5—Pension flexibility: further amendments.
Mr Gauke
New clause 13 and new schedule 5 make provision to ensure that individuals who wish to make use of the new pension flexibilities announced by the Government do not face detrimental tax consequences if they take their tax-free lump sum and then defer a decision on how to access the remainder of their pension savings.
On Budget day, the Government announced radical reforms that will enable people with defined contribution pension savings to have more choice and control over their pension wealth from next April. The greater choice and flexibility that these reforms will give pension savers have been widely welcomed. There has been broad consensus that individuals who have been responsible and saved for their future should be trusted to access their pension savings in the way that most suits them.
We announced a consultation on the detail of these longer-term proposals, which has now closed. We will publish a response in the near future, and legislation will be brought forward later this year to implement the necessary changes, but the Government wanted to make sure that people who are approaching retirement now would not miss out. As a first step, we introduced clauses 39 and 40 to ensure that individuals nearing retirement this year can benefit from a wider range of options before next April. We expect that this will enable around an extra 85,000 people to access their pension wealth as a lump sum this tax year. In addition, 400,000 people will have the option of receiving significantly greater withdrawals from their pension savings, but we did not want to stop there.
Usually people lose the advantages of a tax-free lump sum if they do not decide what to do with the rest of their pension savings within six months of taking the lump sum. On 27 March, the Government announced that those who had already taken a tax-free lump sum from their defined contribution pension savings, but had not yet secured their pension, would be given more time to decide what they wished to do with the rest of their retirement savings. We also did not think it would be fair to prevent people from taking their tax-free lump sum now simply because they wished to wait to access their pension savings more flexibly from next April, so the Government promised to introduce new provisions in the Bill to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next.
The provisions are technically quite detailed, but their purpose is not. Full pension flexibility for defined contribution savings will be introduced in April 2015, and until that happens we want people to be able to take their tax-free lump sum and to have until October 2015 to make their pension choices without tax consequences. The changes made in new clause 13 and new schedule 5 will enable people to take a tax-free lump sum and to wait until April 2015 to decide how they want to access their pension savings: by transferring the rest of their pension savings to another pension provider to enable them to access them more flexibly; by repaying the lump sum when the scheme that paid it will accept it in order to access the whole of their savings more flexibly; or by receiving the rest of the pension savings as a lump sum under the higher limits that clause 40 provides. Those changes also ensure that people who have the right to receive a tax-free lump sum at an earlier age, or of a larger amount than is normally allowed, can use the new flexibility and keep those rights.
New clause 13 and new schedule 5 help people who have worked hard to save into a pension, enabling them to take some of those savings tax-free now, and to take advantage of the new flexibilities for the rest of their pension savings.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I understand that the Minister is trying to introduce an element of fairness into the new arrangements while avoiding unintended consequences. Can he give us some assurances about the time scale for the rules being brought in, and tell us whether he has done additional work to ensure that there are no unintended consequences?
Mr Gauke
We have been engaged in a consultation process, which closed recently, and have engaged fully with all interested parties more generally on this policy. I will address some of these points when I respond to new clause 9, but we will respond shortly to the consultation, setting out the details of how the policy will be taken forward. This is an important matter, and it is important that we get things right. There are a number of aspects to it, and new clause 9 takes us into some of those aspects that, although perhaps not relevant to the Finance Bill, are of significance none the less. I can assure the House that there will be plenty of opportunities to debate the details, given that legislation on the subject will be introduced, as the hon. Lady knows full well.
Ian Swales (Redcar) (LD)
The Minister rightly says that on such policy matters, assessments are a normal part of Government practice. Will he confirm that the reviews will take account of any potential future cost to the public purse? For example, what if people have inadequate funds to cover their future care costs, as they have already spent their accumulated pensions, or if they have other recourse to the state because they have inadequate resources later in life?
Mr Gauke
During the assessment of the policy announced in the Budget, we considered all the various issues, including the consequences for the Exchequer in both the short and long term. We will say more about the specific interaction with social care and so on in the near future. I would make the point that the very people restricted by the old regime were the people who, over the course of their working lives, saved responsibly and ended up with a pension sum that demonstrated their prudent approach to saving. It is not unreasonable to believe that the vast majority of those people will continue to act prudently when given greater flexibility. As a matter of philosophy, both parties in the coalition Government share the view that when we can give more power and responsibility to people, we should do so.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
The Minister referred to the Budget and the documents published about this policy, but what was published was merely the estimated tax take for the Treasury. Nothing was published about the behavioural impact, the prospect of mis-selling or the interaction with social care. When I asked the Government via a freedom of information request to reveal the basis on which the policy was made, they refused to do so. Will we get more information as quickly possible about the basis on which the Government reached this policy position? The Minister is right, of course, that annuities need to be reformed, but the question is about the basis on which the policy was made.
Mr Gauke
On the question of social care, let me repeat the point that I just made: we will respond to the consultation in due course and set out our thinking on that point. As for the issue of mis-selling, we made it very clear on Budget day that it was important to have a guidance guarantee in place. We will set out details of how that will work in the near future, as the consultation period closed only relatively recently. It is important that we get that guidance guarantee right. That brings me to new clause 9.
New clause 9 would require the Chancellor to publish any analysis of the impact of changes made by clauses 39 to 43 of the Bill to schedules 28 and 29 of the Finance Act 2004. However, as I said in Committee, only clauses 39 and 40, which increase the amount that can be taken as a tax-free lump sum as a draw-down pension from 27 March 2014, make changes to schedules 28 and 29 of the 2004 Act.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Before the Minister fully leaves the point about how people might spend the lump sums, one concern that I have had is that people might be tempted to invest in property, for example, which could have the unintended consequence of boosting an already overheating housing market for the next generation. That is still prudent spending from those people’s point of view, but there could be unintended consequences for everyone else. I wonder to what extent that consideration featured in the Government’s thinking.
Mr Gauke
There are two points to make. First, we believe that individuals should be able to make their own choices. Of course, they should be provided with guidance, but essentially a system that relies on the state telling people precisely what their investment portfolio, as it were, should be is too restrictive, and does not perform the role that we should be performing. As for the systemic effect on the housing market, which was, I think, the hon. Lady’s central point, I do not think that our changes will have any such effect. Both the Governor of the Bank of England and the Chancellor of the Exchequer have made it clear that we need to ensure that we do not return to the bad old days and to the unsustainable housing market boom we saw some years ago. There are measures in place to reflect that, and we have the institutions in place to ensure that if there are problems they can be addressed quickly.
Gregg McClymont
I thank the Minister for giving way once again. Opposition Members become concerned—well, I certainly do—when Ministers refer to the state telling people what kind of investment portfolio to have. Most people have never invested in the way that that comment suggests. He is a well-intentioned and good Minister, but I become concerned when we think about investment for the majority of people in those terms. The fact is that on the day of the Budget the Chancellor said that there would be guaranteed advice, but that turned out not to be the case. It is now guidance, which is a very different thing. Unless we get that guidance absolutely right, there is a danger of the kind of mis-selling that Members on both sides will remember from the 1980s. It is crucial that we understand the way in which people tend to make decisions about these kinds of issues.
Mr Gauke
I agree that it is vital that we get the guidance right. I am sure the hon. Gentleman will understand that now is not the occasion for the Government to set out the details of how this will operate, but there will come a point when we will do that. There will be plenty of opportunity for the House to debate those matters. I have no doubt that he is looking forward to that opportunity and will scrutinise our policies on this matter with his customary vigour—[Interruption]—as indeed will the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). While it is very important to get the guidance right, we instinctively support giving people greater flexibility and freedom. Given the tone of the hon. Gentleman’s intervention, I am not sure that he is entirely comfortable with that.
Cathy Jamieson
I understand the point about the timing of the guidance, and I will discuss that in my speech. The Pensions Minister has said:
“Face-to-face, the Chancellor used that phrase, and we will honour that, of course. But if face-to-face means individuals sitting down for an hour with someone every-where in the country, that would be very, very expensive. Face-to-face could involve groups, for example; a lot of the conversation’s generic.”
Some people may have concerns about what is being referred to in terms of guidance. Will the Minister give us some further information at this stage?
Mr Gauke
The hon. Lady, perfectly understandably, is seeking more information at this point. I do not think I am being in any way unreasonable in saying that we will set out the details of this in the near future. We are working very closely with interested parties, whether the industry or consumer groups, to ensure that we get this right. We have set out the broad principles behind our guidance guarantee, and we believe that we can deliver something that provides the protection that all Members want.
James Duddridge (Rochford and Southend East) (Con)
I understand the need for a professional to offer guidance face to face and on a quality end-product. However, may I urge my hon. Friend to consider the use of the internet and technology to collect the basic information? It makes no sense for a qualified financial consultant to take one and a half to two hours to do a basic fact-find that is actually about data collection. It is much more efficient to do that on the internet and use the time spent face to face for guidance right at the end of the process.
Mr Gauke
I am grateful for my hon. Friend’s observation. Without getting too much into the details of what we will announce in due course, it is important to point out that there are various means and methods of delivering guidance and that different people will want different things. We have made it clear that face-to-face guidance will be available for those who want it.
Stewart Hosie (Dundee East) (SNP)
The Minister said that he is discussing this with the industry and other interested parties. I welcome that because, as he will be aware, on the announcement of this plan, the share price of many businesses in the life and pensions field dipped quite sharply with the market discounting what might happen in future. Will he confirm that he is paying attention to ensuring that the life and pensions sector is protected while offering flexibility to people who have saved?
Mr Gauke
The purpose of the reforms is to ensure that there is a savings and pensions environment that is good for those saving for their pension and those claiming on their pension. We believe that the reforms that we have set out will result in greater innovation in this area. We do not think that the purpose of the rules is to protect particular businesses. Nevertheless, the industry has responded well to our proposals. Many see this as an opportunity to improve the culture of saving and have engaged very constructively with the Government. I hope that that addresses the hon. Gentleman’s concerns.
Ian Swales
I recently met representatives of a major financial institution who rightly see the potential for new products following these changes. I am sure that innovative companies will come up with products that meet people’s needs. On advice, will the Minister assure us that the system will be transparent as regards how advisers are rewarded and that we will not get into a situation where overt or covert kick-backs from product providers are the main source of income for those providing the advice?
Mr Gauke
My hon. Friend is trying to draw me into the details of what we will say about how the guidance will operate. It is important that we have a system that is transparent and maintains the confidence of the general public, and that is at the heart of what we are trying to do.
Gregg McClymont
I will not try to draw the Minister into the details. He rightly refers to the instinct to give people more control over their own lives, and that is something we would all agree with. However, I urge him to read the debates involving a Tory Minister in his position in the 1980s who talked about the revolution in personal pensions using language very similar to that used by the Minister and, more exuberantly, by his colleagues about these reforms. He should compare that with what was said in the 1980s, which led to the mis-selling scandals and some of the loss of confidence in pensions. Greater control, yes, but let us also be aware of the lessons of history.
Mr Gauke
I take that point in the spirit in which it was offered. I maintain that it is right that we give people greater control and flexibility. This is about ensuring that individuals are in the best position to make the best decisions for them. Guidance is an important part of that, and, from day one, the Government have been very clear that that was the approach we wanted to take. I suspect that there is, at least at some level, a philosophical difference between Members on either side of the Chamber on this point. I do not think that a Labour Government would have brought forward these reforms, but I welcome any extent to which we can have a consensus.
Mr Campbell
The Minister will be aware that many people are glad that this Government have introduced greater control and flexibility, particularly in pensions. Given that the new individual savings account regime came into force yesterday, will he consider, at a very early stage, introducing flexibility to give people who are saving for their long-term future into retirement—whether through the new ISA or a pension—greater control, particularly as regards spouse-to-spouse transfers?
Mr Gauke
The hon. Gentleman raises an interesting point. Indeed, I have just signed off a parliamentary answer to one of his questions about this. If I recall correctly, I said that these regimes, in essence, work on an individual basis but matters can be kept under review. I will certainly take his comments as a representation for future reform in this area.
The clauses I have been talking about increase the amount that can be taken as a tax-free lump sum and as a drawdown pension from 27 March 2014. In addition, the Government’s new clauses and new schedule make changes to schedule 29. As I have explained before, on Budget day the Government published a tax information impact note entitled “Increasing pension flexibility”, which covered the impact of the changes set out in clauses 39 and 40. That impact note has been updated to reflect the changes made by new clause 13 and new schedule 5.
As I have previously said, the changes made by clauses 39 and 40 are likely to be of particular benefit to individuals with smaller pension wealth, including women. The same applies to the changes that would be made by new clause 13 and new schedule 5. That is set out in the tax information impact note that was published on 27 June.
I have already mentioned that the Government published a consultation, “Freedom and choice in pensions”, on the broader measures announced in the Budget. That document set out the rationale and the relevant analysis behind the Government’s proposals and invited comments on the expected impacts. The consultation will inform the final shape of the Government’s proposals, including the guidance guarantee. The Government will set out further details in their response to this consultation, which will be published shortly.
James Duddridge
I always find terms like “shortly” confusing. Is “shortly” in the next few weeks, in the next the few months or before the next general election? Perhaps, while not giving an exact date, my hon. Friend might hone it down a little finer than the very broad term “shortly.”
Mr Gauke
I used the word “shortly;” I could have said “in due course,” but I hope that my hon. Friend is more encouraged by “shortly.” He will just have to be a little more patient, but I can assure him that it will not be very long before he will be satisfied on those details.
Let me say a brief word about guidance, which I have touched on already. The Government believe that, as people have greater choice over retirement, they will need the right support and guidance to make the choice that is right for them, so we are working to ensure that everyone approaching retirement with a defined-contribution pension can receive impartial, face-to-face guidance on the choices available to them. However, the guidance guarantee is not a tax rule, so I hope that hon. Members will understand that although it is a very important part of the radical reforms that we are introducing from April 2015, it does not form part of the changes being discussed today.
The Government have already published information on the impact of clauses 39 and 40, as well as on new clause 13 and new schedule 5, and have consulted further on their broader proposals. New clause 9 is therefore unnecessary. Whether that is enough to persuade the hon. Member for Kilmarnock and Loudoun not to press her case, I somewhat doubt, and no doubt she will put it very reasonably, but I hope that she considers my response reasonable as well. Whether she considers it reasonable or not, that is my response.
The overall purpose of the changes that the Government are making today is to enable people who had recently taken the tax-free lump sum from their defined-contribution pension savings to use the new flexibility, while remaining in broadly the same tax position. I therefore hope that new clause 13 and new schedule 5 will be added to the Bill, and I request that new clause 9 is not pressed to a vote.
Cathy Jamieson
I want first to put something on the record. Earlier, the hon. Member for Redcar (Ian Swales) suggested that when the Labour Government left office the tax gap was £42 billion, but the most recent HMRC figures show that in 2009-10 it was £32 billion. I think that addresses the point that he raised yesterday with my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood).
To return to issues from today’s debate, as I observed in Committee, the amendment that we moved then and the discussion on it addressed some of the most important clauses in the Bill. The Minister suggested yesterday that I could make the most unreasonable things sound reasonable. I think that today he has done a reasonably good job of putting across the Government’s view. However, I would have to say at the outset that he has not said enough to convince me not to press our amendment—he still has time to say something during the debate—and I will explain why.
As I have said, the reforms provided for in these clauses are very important. Our primary concern in tabling new clause 9 and in pressing it is to ensure that those affected have the information that they need to make an informed choice, because that is very important indeed.
Gregg McClymont
On that point, my hon. Friend, as usual, is making an eloquent, precise case. There is an issue not just around informed choice, but around our ability to predict our own longevity; there are substantial issues. The evidence is that it is very difficult for us to predict our own longevity, both for obvious reasons and in terms of biases inherent in our human nature. Therefore, this is not just about choice—although we think that is important—but about how one makes such decisions on one’s own.
Cathy Jamieson
My hon. Friend makes an extremely important point. My understanding of the research is that, when asked to predict their longevity, people significantly underestimate it and do not always predict long enough into the future, particularly when anticipating their potential care needs or support needs. For understandable reasons, people do not want to think of those things during their earlier years, but increasingly they will have to do so.
I heard the Minister say that some of the issues that have to be dealt with, such as guidance and so on, do not form part of tax law. Of course he is correct on that, but there is an issue about a joined-up approach to government. Already we have concerns—I shall say more if time allows—about how all the Government’s policies on social care and some of the other economic issues that people have to think about will come together. It is important to ensure at every stage that there are no unintended consequences.
As the Minister accepted, we tabled our new clause, as always, in a spirit of being reasonable and sensible. Indeed, I was a wee bit excited when he seemed to suggest that some of the things we might be saying were worthy of further consideration. Of course, my excitement was short-lived, as he then said that he would not accept our new clause.
Quite simply, new clause 9 would require the Treasury, within six months of Royal Assent, to publish and lay before the House any analysis it prepared before the publication of Budget 2014 relating to the impact of the changes made in clauses 39 to 43 and the relevant schedules, and that the information published include any assessment made of the impact of the provisions for independent face-to-face guidance on the Finance Act 2004. That is important, because without it, as my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said in an attempt to elicit information, which has not so far been possible, it will be difficult to scrutinise provisions in a Bill that is to come in due course, shortly, when time permits—whichever one of the time scales so beloved of Ministers is utilised. The new clause also asks that we be provided with information on the distributional impact of the changes by income decile, a behavioural analysis and the financial risk assessment. As our new clause and the points I have made show, our concern about some of the reforms extends to the face-to-face guidance that the Government have committed to providing.
We discussed this issue extensively in Committee. I think Labour Members made a number of valid and reasonable points on the potential pitfalls for savers who have money at their disposal—those who, perhaps for the first time in their life, have a significant pot of money and have to make a decision. Lest anyone suggest that our concern is patronising or that we are somehow not trusting people to decide what to do with, essentially, their own money, let me say that it is important to understand that for many people, having significant pots of money at their disposal will be an entirely new experience at a time in their life when, as we have heard, they may not properly have predicted what resources they are going to need or their own longevity. It is therefore a bit disappointing that the Government have not been able to answer our questions. Looking back over the Hansard report of the Committee stage, I was struck by the amount of time we spent dealing with some of these questions and, unfortunately, not getting the answers from the Government. Some of the responses we got from Government Members were, I would say, misunderstandings if not misrepresentations of our own position, which led us to believe that the Government might simply not want to engage with those issues.
To ensure that the Government are held to account, we have set three tests for the pension reforms. The first is the advice test—ensuring that there is robust advice for people who are providing for their retirement and that measures are in place to deal with mis-selling. In Committee, I and others quoted a number of cases brought to us by financial advisers in our local areas and by constituents in which people had been given so-called advice—often, information provided by unregulated people—and had therefore made wrong choices, which cost them significant sums. We do not want that to happen again.
Gregg McClymont
On the question of guidance, the Pensions Minister’s comments about Lamborghinis were particularly unfortunate. Does my hon. Friend agree that the biggest danger is not that hard-working, sensible people will blow their own money, but that they will take it as cash and not invest it because they have no confidence in the financial services industry, so their money will not be working for them? Is not that as big a danger, if not a greater danger, than the Lamborghini sort of stuff the Pensions Minister raised?
Cathy Jamieson
If I did not know better, I would suspect my hon. Friend of having read my speech. I was just about to come to that very point. The infamous Lamborghini comment might have been made in jest, but that sort of joke is entirely lost on those who have already lost their savings because of poor or insufficient advice. My hon. Friend makes a very valid point indeed about people’s confidence in what they can do with their own resources. To an extent, the Government may have begun to acknowledge the need to expand the range of choices available and ensure that consumers have help to navigate those choices—I think that was the phrase used. That sounds pretty sensible and commendable, but we need to make sure that it actually happens.
The second test we have set is the fairness test—the new system has to be fair to those on low and middle incomes, which means they still should be able to access products that give them the certainty in retirement they want, and the billions we spend in pensions tax relief must not benefit only those at the very top. That is why we have called for restrictions on pensions tax relief for those earning more than £150,000 a year. The third test is the cost test: the Government have to ensure that the policy does not result in extra cost to the state. That point was made earlier, and I think the Minister, to his credit, understands that there is an issue with social care and pensioners having to fall back on means-tested benefits—housing benefit, for example—later in their life if they do not properly or sensibly manage their resources. As yet, however, the Government have not explained how all that will be joined up in policy terms. In our view, if the Government’s pensions reforms fail any of those tests, the negative impact on savers could be considerable.
In Committee, my hon. Friend the Member for Islwyn (Chris Evans) talked about protecting people from the “sharks in the market”. That brings us to the vexed question of guidance. Going back to the Chancellor’s no doubt innocent slip, there is a serious point to be made about definitions. When pressed subsequently, the Chancellor said:
“There is a technical distinction between advice and guidance. The budget document exists, I don’t get up and read it out because it contains all the technical details of the Budget and we publish it at the same moment. The speech needs to also communicate in English so people watching it can understand what is meant.”
I understand that, but as I emphasised strongly in Committee, there is a world of difference between advice and guidance in technical terms and in terms of legality. The Government need to deal with that.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I am listening carefully and trying to understand. Is the hon. Lady suggesting that the Government should be people’s financial adviser? I am not sure that is what the role of Government should be. I thought the reform was about opening up choices and making sure that people realise what steps they can take, not telling them what direction they should go in.
Cathy Jamieson
It is important that Government use language consistently and do not inadvertently mislead people about what they are going to get, whether it is guidance, advice or information, given face-to-face, over a telephone or through the internet.
The Red Book states:
“from April 2015, all individuals with defined contribution pension pots are offered free and impartial face-to-face guidance at the point of retirement”.
One might consider that a good and positive measure, but it raises some questions—questions that largely accord with the three tests we have set. First, there is a question about cost: the budget for guidance of just £20 million—£10 million each for 2015-16 and 2016-17—gives rise to some concern, as does its including no provision for this year. According to the tax impact and information note, the measures in the Bill will enable up to 400,000 people to draw down their pensions. I note that the Minister referred earlier to an updated tax impact and information note. Perhaps he can tell us whether he has revised any of those sets of numbers. We need to understand why nothing has been put aside for that free and impartial guidance in this financial year.
Gregg McClymont
Before my hon. Friend moves off the important topic of guidance, I am sure she will agree that the context to this is that the median pension pot is much smaller than many hon. Members imagine: it is well below £30,000 a year. Moving from guidance to advice potentially means that a significant proportion of a person’s pension pot is eaten up by the cost of advice. We should all bear that in mind during the debate.
Cathy Jamieson
Once again, my hon. Friend makes an important point and anticipates some of the things I want to mention before bringing my remarks to a close. I understand that in some instances pension pots are relatively small, and we do not want a scenario in which people find that a fairly high percentage of their pension pot must be spent on taking the advice to which he refers.
In that context, I would be particularly interested to know whether the Government have conducted any serious work on how and when savers will invest the money taken out of their pension pots, particularly when those pots are relatively small. Industry analysis from Australia, which has total flexibility at the de-accumulation stage, has found that over half of pension lump sums are spent on homes and cars.
Again, before people get excited and claim that I am somehow suggesting that people should not be in charge of their own money, let me make it clear that there is not necessarily anything wrong with that. For many people it might seem to be the reasonable thing to do. They might wish to pay off a mortgage or debt, buy the car they had not previously been able to afford, or make improvements to their home. Of course they ought to be able to make that choice, but they ought to be able to do so in the knowledge of what they might face in later years.
The potential impact of that change on the wider economy has already been mentioned, particularly in relation to the housing market. For example, what are the implications of people with substantial pension pots deciding to invest in property, particularly in the buy-to-let market? I also think that the Government must look at the impact on household savings ratios, given that the OBR has projected that they will fall from 5% in 2013 to just under 3% at the end of the forecast period. In the midst of any economic recovery that has been driven by consumer savings, any change in the way people choose to invest their savings and the consequent impact on the household savings ratio should be looked at very carefully.
In conclusion, I think that this is a crucial issue for thousands of people across the country. Many people do not think about pensions and long-term savings, and not because they have no interest in them or do not want to save, but because they are trying to manage their expenditure week by week and do not have the opportunity to look at the longer term. Everything we can do to encourage good-quality financial education is important, which is why we must get the guidance and advice absolutely correct. People also need to be confident that the information they get from the industry itself will be tailored and suitable for them.
Gregg McClymont
Perhaps this time I am not anticipating what my hon. Friend is about to say, as I think she is bringing her remarks to a close. It strikes me, having listened to the Government on this issue, that the employer is never mentioned. One arm of the Government is promoting workplace employer pensions, but what is the employer’s role in relation to greater flexibility and choice?
Cathy Jamieson
Once again, my hon. Friend makes a valid and important point. He is correct that I was about to conclude my remarks, so I will resist the temptation to go into great detail on that issue, other than to say—we raised this in Committee—that in some ways there seems to be no joined-up government here, with pensions sometimes seeming to be at odds with other aspects. Rather than all pulling together in the interests of the consumer, there could be tensions, which I think the Government should address.
As I have said, this is a crucial issue for thousands of people. We need to get it right. I am of course aware that there is further legislation coming down the line. However, given that the Minister indicated that at least some of our requests for information are reasonable and relevant to the matter being discussed, I hope that even at this late stage he will agree to our new clause, which we will want to press when the time comes.
James Duddridge
I find this issue rather exciting, although clearly the House does not, given how empty the Chamber is. The pension changes that the Government are bringing forward are absolutely essential and, I think, will transform the marketplace in the long term. However, I am concerned that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), having suffered the Finance Bill in Committee, seems to have spent the intervening time reading the Hansard reports of what we all said. Really, it is too much of a punishment to do that and then have to come back yesterday and today. Thankfully we will have Third Reading later this evening, if all goes well.
On new clause 13, my hon. Friend the Exchequer Secretary talked entirely about defined contribution schemes. When he winds up, perhaps he will update the House on what is happening with defined benefit schemes, or perhaps there are no transitional issues for defined benefit schemes in the new clause. I think it is entirely right to give people plenty of time to look at these issues, because a number of people were not expecting these changes and would not have predicted them, so they will need longer to consider their personal positions. As time goes on, I think that there will be less need for guidance and advice, whether provided by the state or privately, because people now going into defined contribution schemes will know what the options are likely to be when they come out. Indeed, five years from now it will be slightly more predictable. People should look at that years, rather than just a few months, before they retire. Of course, that is not possible immediately, given that these changes have only just come in.
Gregg McClymont
The hon. Gentleman will be aware that the other arm of the Government on this, the Pensions Minister, has developed a whole pensions policy based on the notion that inertia has to be harnessed for the public good, meaning that, as a rule, people are not aware of the complexities of pensions and there therefore needs to be a system in place so that those who do not exercise a choice still get a good outcome. Is the hon. Gentleman really that confident that we will very quickly reach a situation in which there will be informed consumers across the board who can make the kinds of investment decisions to which he is referring?
James Duddridge
I think that the default position will be that an annuity is purchased, rather than a lump sum being withdrawn. I think the hon. Gentleman is saying that that is the more cautious route, but I am concerned that it is not the right route for some people. Taking out a lump sum might make a lot more sense for them. However, it is an additional option. The guidance that the Government are offering is not perfect. In fact, perfect advice, if it is taken forward to a recommendation, is incredibly expensive.
Gregg McClymont
I thank the hon. Gentleman for that thoughtful response. I am not sure that the default position will be that someone is defaulted into an annuity. We need clarity on that as we discuss these clauses. I think that a choice will have to be exercised one way or another, but I might be wrong. Perhaps the Minister will provide clarity on that.
James Duddridge
The Minister, as ever, will provide clarity, and I will ensure that he has plenty of time to do so.
We need to look at these changes in the round and consider other changes being made, particularly the individual savings account legislation that is going through. In the longer term, I think that ISAs and pensions will be linked and that we will move towards the individual retirement accounts we see in America, but working more from the base of an ISA up to a pension, rather than a merging of the two or a dumbing down of pensions.
An earlier intervention referred to spouse-to-spouse transfers on ISAs, which I think are particularly relevant in relation to new clause 13 and defined contribution pensions, because some people will be taking larger sums of money out and investing them directly into an ISA with little awareness that it cannot then be transferred to their spouse. The earlier the Government look at making spouse-to-spouse transfers exempt for inheritance tax, the better, particularly during this early transition period. The Sunday Times and a number of other financial services campaigners are urging the Government to look at the issue of spouse-to-spouse transfer, but I have not heard it mentioned with regard to the release of lump sums and defined contribution lump sums. Through new clause 13 the Government are recognising that there are transitional issues, but the additional transitional issue relating to ISAs has not necessarily been covered.
I welcome the reduction from £20,000 to £12,000, which entrusts individuals to make decisions. Changes to trivial contributions are also very welcome, particularly as people move from employer to employer, building up large numbers of very small pots. It may not make financial sense to merge them, so it may be better to take them out of a pension tax wrapper and independently move them to an ISA.
On the issue of guidance, we should be open and honest that the Government cannot afford to provide full-blown advice and recommendation. It is very good of the Government to allocate a significant sum of money to pointing people in the right direction. If the average pot is £30,000, as we have heard, the thousands of pounds that full-blown advice and recommendation may cost would be totally disproportionate to the potential benefit.
It is good to get guidance, but I would exercise caution about what is best: face-to-face guidance is not always the best option. If I wanted to transfer money or enact a financial transaction, I would not want to sit down face to face with my bank manager. I would much prefer the tried and tested method of interacting with and getting advice and guidance through the internet, at least at an early stage. I would not want the Government spending all the money on face-to-face guidance. Guidance on the internet may well be better for an increasing number of people, including a mini fact find into which they put their basic information.
The change may be from face-to-face to face-to-faces. Financial services presentations can work face to face, but they can also work over the internet. Once people have completed an initial fact find or an overview of their financial position—they may want to use their lump sum to repay debt, for instance—they could be diverted to an individual webcast with the relevant financial guidance.
Gregg McClymont
I thank the hon. Gentleman, who is speaking from his experience of the sector, for giving way again. Would he care to comment on why the existing annuities market was not working? My understanding of the analysis is that the default position of individuals was simply to accept what they were offered and not to get involved in the type of process to which he refers. If that means that the annuities market was a failure because people were not getting value for money as a result of not shopping around, what confidence does he have that there will be an overnight revolution in people’s engagement with the type of guidance he suggests?
James Duddridge
The annuities market was not working effectively in a number of ways, but, in relation to the lump sum, it did not work for a lot of our constituents if they rationally expected a very low life expectancy. If they had been diagnosed with a particular illness, the question of what would happen to their money would cause them great stress. It is important, therefore, to enable them to release some of that pension money and put it into another instrument so that their family can share it or, indeed, so that they can enjoy it themselves in their final years. I understand there is a risk of people under-predicting their longevity, but the large number of people with a diagnosed illness would like to access that pot. That is a slightly extreme position, but it is at the other end of the scale.
Dr Whiteford
The hon. Gentleman is making a very good point about encouraging people to shop around, but is he aware that many parts of these islands do not have very good internet access, so putting all the eggs in that basket will not help many people who want pensions advice?
James Duddridge
I agree that we should not put all the eggs in one basket, but we certainly should not put none in the internet basket. It is a very useful provision and, as public and domestic access to broadband improves throughout the islands, I think that use of the internet will speed things up.
I find it odd that so much of our discussion about this Finance Bill, which is a Treasury matter, has been about pensions Bills. The hon. Member for Kilmarnock and Loudoun has prayed in aid the Pensions Minister’s submission to the Department for Work and Pensions. I wonder whether we conduct our debates on Finance Bills in the right way, structurally speaking, and whether other departmental Ministers should be involved, where relevant, alongside Treasury Ministers. Fundamentally, the report supported by Opposition Members almost amounts to a fundamental review of a number of issues in the pensions industry, which is clearly in the remit of the DWP, not the Treasury. I am not arguing that it is wrong or right; it is just that not all the key players are involved.
Dame Anne Begg (Aberdeen South) (Lab)
I have some sympathy with what the hon. Gentleman is saying about the fact that these pensions provisions are being handled by the Treasury. Does he agree that the two pensions Bills announced in the Queen’s speech appear to pull in different directions? One is about giving people more control over their money, while the other is about collective direct contribution schemes, which are the opposite of that. That could lead to a conflict, because two Departments are involved in developing the policy.
James Duddridge
I do not believe they are contradictory, because some people want to hand over that level of responsibility.
I know that other Members want to speak. I wanted to make a number of other points, but I will sit down and leave it at that in order to give the Minister a chance to respond.
Mr Gauke
Let me quickly try to address some of the points that have been raised, many of which related to guidance. As I said earlier, the issue features in Labour’s new clause 9, but it is not directly related to the Finance Bill. I will be as helpful as I can. On the question of whether guidance will only be face to face, the face-to-face offer will be available to those who need and want it. However, that is not to say that it will be the exclusive delivery channel. Not everyone will want face-to-face guidance, as my hon. Friend the Member for Rochford and Southend East (James Duddridge) has made clear. For many people, both now and in the future, other channels will better suit their needs. We are currently considering the appropriate range of options for delivery channels, to ensure that consumer needs are properly understood and met, building on the views and evidence received during the consultation. We have asked the Financial Conduct Authority, working closely with the Pensions Regulator, the Pensions Advisory Service, the Money Advice Service and consumer groups, to co-ordinate a set of clear and robust standards that the guidance will have to meet.
The point was made about costs and, in particular, the £20 million funding. It is important to realise that that is a development fund for the purpose of getting the initiative up and running; it is not to pay for the ongoing costs of the scheme. We will talk more about that later.
Sheila Gilmore (Edinburgh East) (Lab)
Does not that illustrate the need for gathering and publishing the information, as proposed by our new clause 9? We are constantly hearing new things, such as, “There will be more costs for guidance, but we don’t know what they are or what will happen.” If the information is going to be gathered anyway, as the Exchequer Secretary constantly assures us, why not publish it to make sure we get this right?
Mr Gauke
I do not know whether the hon. Lady was present earlier—[Interruption.] I am pleased that she was. She will have heard me say that we have consulted on this matter and will respond shortly. If I may provide a little more clarity, that will happen before the summer recess, so it is at that point that we will set out our proposals and, obviously, there will be an opportunity over the months ahead for the House to give them considerable scrutiny.
To address the particular point made by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about whether the numbers in the tax information and impact note have been changed, the answer is no. The TIIN has been amended to take account of the Government new clause and new schedule, but the impacts remain the same, so there is no fiscal cost. I hope that that clarification is helpful.
Lastly, to be clear about the guidance—we will get the full details on it—as we have said throughout, it will be impartial and will not include recommendations for specific products or providers. It will not be a sales process; it is important that the sales process is separate.
I hope that that information is helpful to the House. I hope that new clause 13 can be added to the Bill, and I advise my hon. Friends to oppose the Opposition’s new clause 9.
Question put and agreed to.
New clause 13 accordingly read a Second time, and added to the Bill.
“transitional 2013/14 lump sum | paragraph 11A of Schedule 29”. |
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I beg to move, That the clause be read a Second time.
New clause 10 takes us back to 2010 and the heady first few months of this Government. It takes us back to a time when the coalition, having inherited a growing economy from the Labour Government, choked that recovery off by adopting an anti-growth, short-termist, short-sighted approach to supporting business and jobs. As hon. Members will be aware, one of the Chancellor’s first moves in government was to announce in the June 2010 Budget that he was cutting Labour’s annual investment allowance. The new clause asks the Government to undertake a proper review of the impact on business investment of that terrible decision. We need to learn the lessons from that dreadful mistake.
Before we consider the new clause in more detail I want to remind hon. Members of the background to this important issue. The annual investment allowance was announced as part of the 2007 Budget by the former Chancellor of the Exchequer, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown). It was introduced as part of a package of reforms to enhance Britain’s international competitiveness, encourage investment and promote innovation and growth. The new allowance replaced first-year capital allowances and meant that from April 2008, under the Labour Government, businesses were able to offset up to 100% of expenditure on general plant and machinery in any given year against taxable profits, up to a limit of £50,000.
We recognised the value of this important allowance to companies up and down the country in supporting them to invest for the long term, and in helping them to create and safeguard jobs. That is why Labour took the decision to double it as part of a series of measures announced in the March 2010 Budget—in order to
“support start-ups and small and medium sized enterprises…to position the UK as a leading centre for research and innovation, and to ensure that the UK is equipped with skills for growth and the infrastructure it needs to be successful in a low-carbon economy.”
The March 2010 Red Book stated:
“In order to provide further cash flow support and an incentive to increase business investment, the Government will increase the threshold of the AIA to £100,000 for expenditure incurred from April 2010.”
That announcement was hugely welcome to businesses up and down the country.
Charlie Elphicke (Dover) (Con)
Will the hon. Lady say what the allowance is today—is it £100,000 or has it gone up?
Catherine McKinnell
We are still at 2010; we will get to the present day in due course, but the hon. Gentleman seems to miss the point somewhat. Obviously, the Conservative party would like to airbrush out the unpleasant blip in 2010, when it almost abolished the investment allowance, and all the impacts that flowed from that, which were evident from the fall in business investment. That is the point that our new clause reinforces. The decision taken at that time was terrible. I do not know what the thinking was behind it—whether it had been planned for a long time by the Conservatives while they were in opposition, or whether it was simply a case of spitefully thinking, “It’s a Labour policy, so we will reverse it”—but it had catastrophic implications. As the hon. Gentleman’s question indicates, they had to think again.
Sheila Gilmore
I am sure that my hon. Friend, like me, welcomes the Government’s conversion and the way in which they have changed their policy. However, it is reasonable for us to question why the original decision was taken.
Catherine McKinnell
We can only speculate on what on earth was going through the Chancellor’s mind when he slashed an incentive that was clearly supporting those businesses in the very manufacturing industries that he claims to champion in making long-term investments, and creating and safeguarding the jobs that we need so desperately.
Mr Gauke
This policy was part of a package that included a significant reduction in corporation tax rates, which more than offset any impact on investment from the changes to the annual investment allowance. The Labour party has made it clear that it would increase corporation tax. This week, it has set out its test, which is to have the lowest corporation tax rate in the G7. That would enable a future Labour Government to increase corporation tax to 26%. Will she rule out a Labour Government increasing corporation tax to 26%?
Catherine McKinnell
Once again, Conservative Members, and indeed the Minister, want to brush over this inconvenient part of their so-called plan. They clearly made a bad decision in 2010. The purpose of the new clause is to show that. If the reduction in the annual investment allowance was offset by the reduction in corporation tax, as the Minister argues, why did they revisit the decision and increase the allowance again? That would not have been necessary if their only plan for supporting business up and down the country, which was to reduce corporation tax, had been successful. We supported that plan, but it was not enough on its own to offset the damaging uncertainty created by slashing the annual investment allowance from £100,000 to £25,000 in one fell swoop.
Charlie Elphicke
Will the hon. Lady rule out an increase in corporation tax under the next Labour Government, should one ever be elected—yes or no?
Mr Geoffrey Robinson (Coventry North West) (Lab)
We are not discussing that.
Catherine McKinnell
My hon. Friend makes a fair point: that is not what we are discussing. However, I am interested to know whether the hon. Gentleman will rule out slashing the annual investment allowance with no notice if the Conservatives are re-elected in 2015. Will he confirm that—yes or no?
Charlie Elphicke
I hate to disappoint the hon. Lady, but I am not part of the Government. It is not for me, a Back Bencher, to rule anything in or out. I am proud that the Government have set the annual investment allowance at £250,000 and have massively reduced corporation tax. That is really great for business.
Catherine McKinnell
The hon. Gentleman is obviously not able to rule in or rule out any slashing of the annual investment allowance, but we have had so much chopping and changing that there is major uncertainty over whether the Chancellor and other Conservative Ministers have a sensible approach to investment. It is as though they do not understand that chopping and changing—slashing the annual investment allowance from £100,000 to £25,000 and then increasing it again—is the worst approach if we are trying to encourage business investment in this country. That is the kind of uncertainty that we have seen under this Government. Although the hon. Gentleman cannot rule anything in or out, I am interested to hear whether the Minister will rule out any further chopping or changing on this policy.
Gordon Birtwistle (Burnley) (LD)
I am in favour of capital allowances. I had an engineering company, and we believed that the Government should support successful engineering and manufacturing companies. Does the hon. Lady accept that a capital allowance of £50,000 on its own is not enough to encourage growth in the economy? Under the Labour Government, from 2007 onwards, GDP went down by 7% in the manufacturing sector, and probably by even more in some manufacturing sectors. I accept that we should have capital allowances, but they should be linked to other things. Does she agree with that?
Catherine McKinnell
That is very much the point that I was making and that we have made all along. We had a financial crisis in 2008, and the Labour Government did everything that could be done in those difficult times to support businesses in order to maintain investment levels, safeguard jobs and lay the foundations for the jobs of the future. That is why Labour decided to bring in the investment allowance, and then to double it in the Budget in March 2010. We knew that businesses needed certainty at that difficult time in the economic cycle to make investment decisions. That proved successful.
The U-turn by this Government was not quick enough. We called for it in every Finance Bill. Their eventual U-turn proved that the annual investment allowance was a successful policy, because they recognised that it needed to be reinstated. We have had these debates many times. We have supported the reductions in the corporation tax rate as part of a package of measures to support investment, jobs and growth. Unfortunately, the Government thought that corporation tax rates would do the job on their own. That is why they decided to slash the investment allowance, and to put all their eggs in one basket—the corporation tax basket. We have made it clear that we support a competitive rate within the G7 and the current rate, in order to provide the competitiveness that will create jobs and growth. The hon. Member for Burnley (Gordon Birtwistle) is right that that has to be part of a package of measures.
One key issue that businesses always raise is certainty. In chopping and changing this policy, the Government have undermined the certainty that is needed to give businesses the confidence to invest for the future.
Catherine McKinnell
I will give way again, but I hope that it is in order for the Minister to confirm that the Tory party will rule out any further chopping and changing on the annual investment allowance.
Mr Gauke
Our plans on the annual investment allowance are clear: this is a temporary increase until December 2015. If the hon. Lady disagrees with that and has a different policy, I would be grateful to hear what it is. She talks about certainty. She has repeated the position that her party has taken this week, which is that this country should have the lowest corporation tax rate in the G7. The second lowest corporation tax rate in the G7 is 26.5% in Canada. That would allow a future Labour Government to increase corporation tax not just from 20% to 21%, but up to 26%. Is that the policy of the Labour party?
Madam Deputy Speaker (Dame Dawn Primarolo)
Order. As interesting as some Members might find the debate on corporation tax and the future policy, that is not the subject of the new clause that we are discussing. Although the subject is linked to the question of allowances, it is not the substantive point. I would be grateful if Members addressed their remarks mainly to the new clause. They may use supporting arguments, but they must not allow those supporting arguments to become the only things that are debated.
Catherine McKinnell
Thank you, Madam Deputy Speaker, for your sage guidance. I agree that the Minister appears to be diverting the discussion away from the issue of concern: the Government’s approach to the annual investment allowance, which is the subject of the new clause. It calls for a review of the impact of the Government’s decisions on the allowance. He seems very reluctant to address that issue.
Mr Robinson
Strictly on the annual investment allowance, is my hon. Friend not absolutely on the button when she says that the question under discussion is not corporation tax or anything of the kind, but rather the AIA and the strictly temporary nature of the Government’s increase and extension of it? Will the Government commit to extending the AIA beyond the election, or is this just another election ploy?
Catherine McKinnell
My hon. Friend raises an important point, and that is the first time we have heard a Government Minister confirm that this is a temporary measure. I think that reinforces the argument in the new clause, which is that we should analyse the impact of the various changes to the AIA, year on year—it has gone up, down and all around—on businesses and their investment decisions. Hopefully, that will inform any decisions on the allowance, whether by a future Conservative Government or, as is more likely, a future Labour Government.
Charlie Elphicke
The temporary nature of the investment allowance is clearly set out in a press release issued on 1 January 2013, and I am staggered that the hon. Lady says this is the first time she knew about it. The Labour party ought to brief itself better than that.
Catherine McKinnell
Well, it simply reinforces the impression—in fact, the reality—that the Government are perfectly well disposed to chopping and changing their policy and approach to the annual investment allowance. That is the point we are trying to make, and the point behind the new clause. The Government should stop and take a look. I have heard from businesses that they would rather have no investment allowance than have chopping and changing of the AIA, because that can be destabilising for investment decisions. They would rather have a more stable approach to policy making than that being displayed by the Government.
Returning to the history of the investment allowance, the previous Labour Government doubled it, recognising its importance to giving businesses confidence to invest for the future, and to be supported within the tax system to make such decisions. What happened after it was doubled? We know that, in his infinite wisdom, the Chancellor decided as part of his emergency Budget—or so he called it—in June 2010, to announce to great fanfare that the annual investment allowance would be cut. However, it would not just be cut. At a time when the economy was growing after the financial crisis, the Chancellor decided that the best way to secure the recovery and back British businesses and jobs was to slash the annual investment allowance to just £25,000 from April 2012, as in the Finance Act 2011. He sought to reassure us that the impact of that reduction from £100,000 to £25,000 would be limited because:
“Over 95% of businesses will continue to have all their qualifying plant and machinery expenditure fully covered by this relief.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]
In other words, the Chancellor believed in June 2010 that only 5% of firms were receiving any benefit from the annual investment allowance. HMRC’s tax information note at the time stated:
“Over 95 per cent of businesses are expected to be unaffected as any qualifying capital expenditure will be fully covered by the new level of AIA (£25,000).”
It went on to clarify that
“between 100,000 and 200,000 businesses will have annual capital expenditure of over £25,000”.
Therefore, in the Chancellor’s terms, only 5% of businesses would have been affected by his decision to slash the allowance. In anyone else’s terms, however, that is somewhere between 100,000 and 200,000 firms. That is a significant number of businesses that are employing—or potentially employing—a significant number of people, while also indirectly supporting employment through their supply chains. That seems to ring true of the Government’s approach because when they speak about being pro-business, they seem to forget the many businesses out there that do not fit the Tory vision of what businesses are, and it seems that those 100,000 or 200,000 firms did not feature on the Chancellor’s radar.
Let us remind ourselves briefly of some of the views expressed at the time about the decision the Chancellor took. The independent Institute for Fiscal Studies commented that losers from the cut
“would be those firms with capital intensive operations—with long lasting equipment and machinery—that currently benefit most from the capital allowances. While this is likely to apply to more firms in the manufacturing and transport sectors, it may also be true for some capital intensive service sector firms.”
A senior economist at the manufacturers association, the Engineering Employers Federation, said that financing cuts to corporation tax by
“cuts to investment allowances will be a heavy price to pay, especially for smaller companies. It might be a positive signal for large companies, but not for their suppliers.”
In evidence to the Treasury Committee on the June 2010 Budget, John Whiting, then tax policy director at the Chartered Institute of Taxation and now director of the Office of Tax Simplification, expressed his concern that the measure would particularly hit medium-sized firms.
The June 2010 Budget cut the annual investment allowance to £25,000 from April 2012 on the grounds that, in the Chancellor’s view, only 5% of firms would be affected. We then had two autumn statements and two Budgets, at which we put these arguments to the Government, before the Chancellor announced in the autumn statement 2012, again to great fanfare, that he would “temporarily” increase the AIA—the one he had just cut to £25,000—to £250,000 from January 2013.
What happened to business investment between the June 2010 Budget and the 2012 autumn statement that drove the Chancellor to move from feeling perfectly comfortable in slashing the annual investment allowance, because more than 95% of businesses would be unaffected, to announcing in 2012 a significant increase in the AIA to £250,000? Let us cast our minds back to what the Chancellor said when he announced that decision in autumn 2012. He said he was increasing the annual investment allowance because:
“It is a huge boost to all those who run a business and who aspire to grow, expand and create jobs.”—[Official Report, 5 December 2012; Vol. 554, c. 881.]
What exactly does that say about the Chancellor’s cavalier approach back in 2010? Surely the complete opposite—[Interruption.] I see Government Members rolling their eyes, but unfortunately they need to face the truth.
Dr Thérèse Coffey
The hon. Lady is right—I should not roll my eyes; I should get up and engage in debate. We know about the note left by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne): “There is no money left”. Since then, the Office for National Statistics has confirmed that the recession was even deeper than expected. The Government made choices at the time, and there was a clear intention to start to reduce the rate of corporation tax in the grand fiscal regime. Nevertheless, there has certainly been a successful demonstration of industrial strategy, and many more millions of jobs are now being created. It is right that we put our backing behind reinvestment in capital allowances.
Catherine McKinnell
It is a little desperate to try to justify what is proven to have been a flawed decision-making process back in 2010. By the Chancellor’s own accounts, the measure was a huge blow to all those businesses that aspire to grow, invest for the long term and create jobs.
Sheila Gilmore
Does my hon. Friend agree that it seems odd to suggest that the chopping and changing was due to a sudden discovery that the economy was improving? The decision, in effect, to reintroduce the allowance was taken in 2012, when growth was extremely low. It would appear from these plans that, having declared an intention to increase the allowance briefly to £500,000 for one year only, it could drop down to £25,000 in January 2016. What kind of investment planning are companies able to do on that basis?
Catherine McKinnell
As ever, my hon. Friend makes an insightful intervention and raises the key question. The Government need to take a step back and look at the impact their decision-making is having on businesses and their ability to make the long-term decisions necessary to secure the jobs, economic growth and the rebalancing of the economy that we all wish to see.
The Chancellor and his Treasury Ministers cannot have it both ways: either the annual investment allowance supports growth and the creation of jobs or it does not. Labour welcomed the decision to increase the allowance from January 2013 to £250,000, because we know it is important to support business growth and to foster long-term investment. However, we are concerned—this is why we have tabled new clause 10—about the Chancellor’s erratic and, frankly, bizarre approach to this important issue. Slashing the allowance from £100,000 to £25,000 and then announcing that they would temporarily increase it to £250,000, all in the space of just two and a half years, does not, and did not, inspire confidence in the Government’s long-term approach and strategy for supporting growth and investment.
Gordon Birtwistle
As I said, I fully support any funding that goes into capital allowances, but we have to remember that in 2010 companies were not making much profit. They were mainly on their knees from the recession that had been created previously. Companies can only set their allowance against profit, so if they are not making a profit there is no allowance to claim. The Inland Revenue was probably right to say that only 5% of companies were taking it up, because we were coming out of recession. A lot more companies are now busy working hard and making a profit, so the capital allowance is more beneficial to them as they are getting it back against the tax that they are paying now that they were not paying in 2010.
Catherine McKinnell
I know the hon. Gentleman’s interest in this issue is sincere. The Treasury may or may not have been right in its assessment that only 5% of businesses would be affected, but that is still 100,000 to 200,000 businesses—not to mention the supply chain. The new clause seeks an assessment of the impact of the decision taken at the time. How much of an impact did it have?
The hon. Gentleman says that, as we come out of recession, some businesses will be making more profit and will therefore be able to make more use of the annual investment allowance. That was exactly the point of bringing in the allowance in 2010. We had been through a global financial crisis and we knew that many businesses would be very uneasy about making the sort of long-term financial investments, on which they would not see a return immediately, that are necessary to create jobs. The intention of introducing and doubling the allowance in 2010 was to give businesses the confidence to invest. We know that it was welcomed by business at the time and we know that this Government’s decision to slash it to £25,000 was abhorrent to many businesses, particularly in the manufacturing sector. They needed the support and confidence to make the investments that we need to start seeing the benefits of now.
Gordon Birtwistle
The hon. Lady is being very generous. Does she accept that if a company is not making a profit, it will not have the capital resources to purchase the assets against which they can get the capital allowance? What is the point of the Chancellor making it available if companies, which are coming out of recession and really struggling with cash flow, will not be able to find the cash to buy the assets to claim the allowance against? Surely it is better saving it until companies are beginning to make cash profits. They can then buy the assets to improve the profitability of the company and claim the asset back.
Catherine McKinnell
I think the hon. Gentleman is rather confused. The purpose of the allowance is to enable companies to invest and to take advantage of tax support. If they are not able to take advantage of the annual investment allowance, there is no cost to the taxpayer, so why chop and change the regime and create uncertainty? Businesses need, from one year to the next, to be able to project and say, “This year we cannot afford to make an investment, but next year we can afford to invest so much in plant and machinery and we will be able to offset so much of that against tax.” The Government, however, have been chopping and changing the allowance. Companies cannot make long-term investment decisions from one year to the next without knowing exactly what their tax position will be.
The hon. Gentleman is actually making a very good argument for new clause 10 and I will be very surprised if he does not support us in the Lobby this afternoon. He speculates on companies that may or may not be able to invest and take advantage of the annual investment allowance. Our new clause asks the Government to undertake a proper review of the impact of slashing the annual investment allowance and then increasing it on a temporary basis. Many businesses have said to me—I am sure they have said it to the hon. Gentleman—that it is that uncertainty that creates the difficult environment for businesses to invest. They do not know, from one year to the next, what any tax allowance might be. We want to get to the bottom of that, so the mistakes the Chancellor made in 2010 will not be repeated.
Andrew Gotch of the Chartered Institute of Taxation commented on the increase announced at the 2012 autumn statement:
“This is a very generous increase that will be warmly welcomed by many small businesses...However, we note that it is only a temporary increase. Business would really welcome some stability in this area. In recent years, the allowance has fallen from £100,000 to £25,000. Now it will rise to £250,000 before, apparently, coming back to £25,000. Businesses like certainty above everything and the chopping and changing of the AIA has been a problem”.
Hon. Members do not need to take it from me, but from a whole range of sources who have raised this as a concern. The Institute of Chartered Accountants in England and Wales welcomed the increase to the allowance, but said:
“We are less enthusiastic about the frequency of the change to this amount.”
Let me be clear, the Opposition welcomed the 2013 increase in the annual investment allowance to £250,000, but we share the very serious concerns about the extremely complex manner in which that was implemented. As hon. Members may be aware, many organisations and individual businesses raised concerns that the increase to £250,000 would run from January 2013 to January 2015, rather than over companies’ usual accounting periods, making it problematic for firms, particularly small ones, to administer. Indeed, as the Association of Taxation Technicians neatly put it at the time,
“the chopping and changing of capital allowances will lead to error, confusion and higher professional costs for small businesses.”
The Opposition also welcomed the Chancellor’s announcement in Budget 2014 to extend the period of the temporary increase to 31 December 2015, with the allowance being temporarily increased again to £500,000 from April 2014. The straight fact, however, is that the Chancellor and his Government have tied themselves in knots over this vital issue. Just last year, when we considered in Committee what is now the Finance Act 2013, the then Economic Secretary to the Treasury, the Secretary of State for Culture, Media and Sport, the right hon. Member for Bromsgrove (Sajid Javid), explained why the increase in the allowance to £250,000 from January 2013 would be a temporary measure only. He said:
“We recognise that the change follows quite soon after the decrease in the annual investment allowance to £25,000 that was announced in the June 2010 Budget and implemented in the Finance Act 2011, which took effect from April 2012. The Government’s central position has not changed and remains that, in general, a lower corporation tax rate with fewer reliefs and fewer allowances will provide the best incentives for business investment, with the fewest possible distortions. That is why we have announced a further reduction in the main rate of corporation tax, as we discussed earlier, from April 2015 and is also why the current 10-fold increase in the maximum annual investment allowance is time limited rather than permanent.”––[Official Report, Finance Public Bill Committee, 16 May 2013; c. 145.]
A matter of months later, at Budget 2014, the Chancellor decided to about-turn once again, and extended and temporarily increased the annual investment allowance further—before, presumably, he intended it to return to £25,000 from 1 January 2016. As the Chartered Institute of Taxation put it so well, the one thing businesses need most, particularly in challenging economic times, is certainty. They need long-term stability and predictability to give them the confidence to invest, to make plans for the future and to take on more staff. What they have got from this Government, however, is a continual chopping and changing, with U-turn after U-turn and what seems to be a complete lack of strategic thinking.
What we need to hear from the Minister today is confirmation that the Treasury and his Government have taken seriously the impact of their decisions on business confidence, investment and jobs. We need to know that they have learned from the Chancellor’s mistake back in 2010, and that they will properly review its impact to ensure that the same mistake is not made again.
What assessment has the Minister made of the number of businesses that were not able to grow after the annual investment allowance was slashed? How many jobs could have been created during the last three years of flatlining growth while we have undergone the slowest recovery for 100 years? How many households could have been better off as a consequence, but will find themselves worse off in 2015 than they were back in 2010? Let us not forget that in 2010, back when the Chancellor was slashing the annual investment allowance, he said that the economy would have grown by 9.25% by now. Instead, it has grown by just 4.6%—far slower than in the United States or Germany. Indeed, GDP growth this year is still expected to be lower than the Office for Budget Responsibility forecast in 2010.
On Monday, my right hon. Friend the shadow Chancellor made an important speech about Labour’s approach to developing a business tax system that promotes long-term investment, supports enterprise and innovation and, most importantly, provides a stable and predictable policy framework for business, which is founded on fairness. Yesterday, my right hon. Friend, the Leader of the Opposition set out how a future Labour Government will mend Britain’s fractured economy and develop a genuinely long-term approach to backing growth in every part of this country to ensure rising prosperity for all.
It is this long-term approach to growth and backing Britain’s business and jobs that has been so lacking from this Government, and nothing illustrates it better than their shambolic and chaotic approach to the annual investment allowance since 2010. For that reason, I urge hon. and right hon. Members to back new clause 10 this afternoon, to ensure that the Government understand the impact of the Chancellor’s dreadful decision making back in 2010, and that they do not make the same mistakes ever again.
Charlie Elphicke
This new clause highlights two problems relating to its proposers and their party. The first is that they are stuck in the past. They have talked about the past and completely failed to set out their case for the future and the kind of Britain they would like to create. They just want to talk about something that happened previously. This is another one of the instrumentalised nuggets of attack, policy and press strategies referred to by Labour’s head of policy.
Catherine McKinnell
Let me correct the hon. Gentleman. He seems not to have been paying attention to my final comments, which were very much about Labour’s strategy for boosting economic growth and sustaining long-term economic stability for the future. The purpose of new clause 10 is to reflect back on past mistakes, of which we believe the Government need to take account.
Charlie Elphicke
Let us be clear what we are talking about. Labour and the hon. Lady want to spend two hours of the time available to debate this Bill talking about a period of nine months that happened nearly two years ago. In 2008, Labour introduced the annual investment allowance—an interesting point to which I shall return. It was set first at £50,000; then raised to £100,000; in April 2012, it was reduced to £25,000, which lasted nine months until January 2013, when it went up to £250,000—a far greater amount than under the legacy left by Labour.
Charlie Elphicke
Let me develop my point, and I shall give way again in a few moments.
It is important and instructive that this Government have incentivised investment. What the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) did not develop during the debate is what underpins the whole issue of investment allowances and capital allowances. Why we need capital allowances takes us to the whole issue of business investment. The challenge we all face, and have done for a very long time, is the rising corporate cash balances—about £750 billion—and the desire of us all to see that money spent.
Let us look at the Government’s policy in this area. They initially announced a reduction to £25,000 from April 2012. The hon. Lady’s first argument was that that created some form of uncertainty. The traditional argument goes, “We need to give businesses time to plan ahead; otherwise, we create uncertainty.” Well, the reduction was part of the June 2010 Budget, and it was about two years after the policy was announced before it came into effect, so I do not think that the certainty argument succeeds. The Government increased the amount substantially after only a short period of time, highlighting their concern to ensure investment.
The second problem I have with the hon. Lady’s case is that it is high risk to consider a policy on setting an investment allowance or a capital allowance on its own, as the Minister argued in an intervention. It is instructive that when Labour introduced the investment allowance, they funded the initial £50,000 by reducing general capital allowances from 25% to 20%. All policies need to be seen in a package taken together; they cannot properly be considered and debated unless the other pieces in the jigsaw are taken into account.
Stewart Hosie
That argument is fine as far as it goes, but in the space of seven years, we went from the abolition of the industrial buildings allowance to having an annual investment allowance of £100,000, which was then reduced to £25,000 followed by the very welcome increase to £250,000 for two years—and then there was another change. Of course making that many changes in such a short period of time is going to have an impact on planning for investment. Surely the hon. Gentleman can understand that.
Charlie Elphicke
The hon. Gentleman reinforces my point, which is that under Labour there were substantial reductions and changes to capital allowances that were part of the 2008 package. As I said, the main rate of capital allowances was reduced from 25% to 20%, followed by the creation of what was effectively the old first-year allowance—initially at £50,000. A number of other changes went on in parallel, including the phased withdrawal of the industrial and agricultural buildings allowances—IBA and ABA. We need to look at all policies in context and think about what else was going on, and that includes the changes that the Government announced in the Budget of June 2010. No policy can be viewed in a vacuum.
Mr Robinson
I am very pleased to be able to contribute to a debate whose purpose we seem to lose sight of from time to time. The purpose of the new clause is to review the reforms of the annual investment allowance that have taken place since the Government came to power, and to see what lessons—in very simple terms—can be learnt from them. I do not see why the hon. Member for Redcar (Ian Swales) should not see fit to join us in the Lobby when we vote on the new clause, as I understand we shall do in due course.
No doubt the Exchequer Secretary will recall our Committee discussions in 2010, which were mentioned by the hon. Member for Dover (Charlie Elphicke). In 2010 we were discussing measures to be introduced in 2012, and while we considered that to be an appropriate period in which the Government could introduce the changes that they wanted to make, we strongly opposed those changes. I think that we were sensible to do so, and I think that we have been proved right.
It has proved to be a long road to Damascus for the Government. Many arguments can be made for a broadly neutral approach to taxation matters, and I believe that that is a long-standing aim of the Treasury. Indeed, we were very much on that tack ourselves when we came to office. However, the realities of government, and the realities of the Government’s own Budget of 2010, should have informed them that they could not be so purist in their theory as to ignore the fact that, during the five or so years to which the Budget looked ahead, they would require a massive increase in investment in order to sustain the increased levels of growth that they wanted and the whole country needed, and that to secure that increased investment it would be necessary, in turn, to generate a massive, unprecedented level of exports. We made that case ourselves, but it did not carry the day.
I believe that it was the then Exchequer Secretary who said, “We do not really see what is wrong with companies just investing their depreciation levels.” I pointed out to him that that would barely replace the assets in real terms, and that it was not the way in which to generate an increase in growth, far less the increase in productivity on which the exports could be based. Heaven knows, we need the productivity now more than ever, given that sterling is relatively high. In certain markets we are up against considerable competitive pressures, which we can only fight with real productivity, which is dependent on investment.
We made the case for some element of discrimination in relation to investment, and that remains the Labour party’s preference. While, as the hon. Member for Dover said, there may have been—and may still be, for all we know—massive cash hoards among the bigger companies in the economy, much of the investment that we need must come from the small and medium-sized enterprises, which I do not think are so rich in cash, especially the small-company element. Although the relatively small sum of £100,000 was not to be sneezed at, we welcome the Government’s conversion to £500,000. Why that is to last only until the election I cannot imagine, unless it is due to some very short-term electoral consideration on the Government’s part, which I do not think is realistic even in my wildest dreams. I am slightly reminded—although I must not digress—of our recent debate on the Office for Budget Responsibility, when, for purely party-political reasons, the Government refused to extend the OBR’s remit to an audit.
Be that as it may, we are discussing something else now, namely the fact that the Government will not tell us whether they will maintain the same level of AIA beyond the election—which ought to be possible—and for how long it could be maintained beyond the election. After all, the Government have plans. They have a forward look, and in that forward look must feature the proposed level of AIA. They might have to disentangle it from the accounts in due course, but a simple statement from the Exchequer Secretary would set a lot of minds at rest, and provide the element of forward certainty that is so important to small and medium-sized companies, whose investment programmes often run over several years. Smaller companies in particular may not be able to afford a massive investment all at once. As I am sure we shall hear later from the hon. Member for Dundee East (Stewart Hosie), one advantage of the annual investment allowance relates to the setting off of past losses against future profits, and there are other instances in which they can be most helpful. I will not go into them, however, because I know that the hon. Gentleman wants to do so.
Let me return to the question of why the Government’s approach is still so short-term. I must tell my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) that my only reservation about the review is that the Government have chopped and changed so much, so quickly and, in fact, so excessively over the past four years that I wonder whether anyone would get any meaningful information out of it. I fear not. However, we should be happy about the Government’s apparent damascene conversion. At least they have come round to the idea of annual investment allowances in principle, particularly for smaller companies.
Mr Robinson
I will in a moment.
We may well see some element of discrimination in favour of smaller companies in the pattern. We do not want too much discrimination, because it could lead to complication, but I nevertheless feel that the Government should be thinking along those lines, which they probably are. No doubt the Exchequer Secretary will tell us when he winds up the debate. However, at present we have a short-term view of what is essentially a long-term problem. It is not that the level of investment has fallen under this Government or the last Government, or that manufacturing has declined under this Government as a proportion of GDP—which it probably has not, because GDP has still not reached the level at which it stood back in 2007. Generally speaking, however, manufacturing has been on a long-term slide, arguably since 1870 and certainly from the 1960s onwards, irrespective of which party has been in power.
Mr Robinson
I will come to the hon. Gentleman, if he will just be patient.
Inherent in the problem is the disinclination of the British economy as a whole to invest. Germany can be taken as a paragon of virtue in this respect. The Germans save more than us, and they generally invest more. They have better plant and equipment and higher productivity. They invest more in plant and equipment, but also in industrial relations. Their industrial work force is better equipped technically, from the top to the bottom, and better equipped physically with modern plant and machinery and computers.
Why is that? No one knows. There is a deep-lying cultural factor. However, it seems to me that if we are to offset it, the more we can afford to encourage investment the better, as long as that is intelligently done. I think that the dangers of misapplication can be much exaggerated, and that the loss of potential output through increased productivity can be underestimated.
If the hon. Member for Redcar still wants me to give way to him, I will do so.
Ian Swales
I have enormous respect for the hon. Gentleman’s experience in this regard. He has spoken of the importance of long-term certainty. I struggled in vain to find in the major speech made by his leader yesterday any mention of this issue, or indeed any mention of manufacturing. I wonder what he is saying to businesses that may be concerned about the potential for a future Labour Government.
Mr Robinson
I wish I had not given way, because when I do we always get into this tiresome point. The Government seek to find refuge by going back nearly five years. The Minister has been at the Treasury for four and a half years now, and his party has been in government for that long. They own the situation now, although I know they do not want to, as all they want to do is airbrush the last four and a half years out of existence—they did that again today—and concentrate on where they are now as if they took power just six months ago. When we are having a narrow debate on the question of our having a review of a particular failed policy of the Government that is relevant to this issue, the hon. Gentleman wants to bring in the whole of Labour party policy. That is tiresome and irrelevant and a waste of this House’s time. I am sure that when the Minister replies to the debate, he will not get into that.
We are discussing a very important point. If there is genuine change introducing some element of discrimination in favour of investment for the reasons I have given, we will welcome that. Indeed, we welcome the commitment on £250,000 and £500,000. We will welcome it doubly if the Minister will extend that commitment beyond the election, to put it bluntly to him. I do not know what our policy on that will be—or whether we will go into such detail in the manifesto—but I will certainly support such a proposal, both in principle now and as party policy if it finds such favour. The Government, however, can do something about this now. Will the Minister tell us whether there is a change of policy and a change of principle on their part? If so, why will they not maintain the amount of the allowance and achieve the levels of investment, productivity and exports on which our future depends?
Gordon Birtwistle
As a business man, I had an engineering company that required a lot of investment. We had to invest heavily to ensure that we were competitive in the markets of the late 1990s and early 2000s. To me, the most important things for investment are confidence and cash. If companies have the confidence to invest, and the cash to invest from the profits they are making, they will invest. The capital allowances that the Government allow them to have against their profits is very helpful and it does persuade—it persuaded me on a number of occasions to buy some very expensive computer-controlled engineering machines. But when there is no confidence and when there is very little cash around, not many companies think about how much capital allowance they will get if they invest.
The country was in a mess in 2007. There was a reduction of over 7% in GDP in 2007-08, so nobody was confident enough to take the step to invest. The confidence had to be put back into the industries to persuade managing directors to invest. We know that billions of pounds were stored in banks waiting to be invested, but the confidence was not there to invest.
If Members look at Hansard, they will see that the Chancellor complimented me for putting pressure on him to bring back capital allowances, and my hon. Friend the Minister will remember the meetings I had when I was the Parliamentary Private Secretary to the Chief Secretary to the Treasury. At every meeting we had I was constantly on to him about the need to try to give confidence to companies, to persuade them to invest in the future of manufacturing in the UK. The answer came back, “There is no confidence at the moment, but we hope there will be soon, but we have all this money stashed away in banks, which is moderately safe.” It was not totally safe, because the banks were not out of the mess they were in, but companies felt it was safer there, rather than invested in capital plant in manufacturing industry.
Chris Williamson (Derby North) (Lab)
Will the hon. Gentleman touch on why he objects to the proposal of my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell)? I have not heard any criticism or, indeed, any reference to it so far.
Gordon Birtwistle
As I said to the shadow Minister, capital allowances are very close to my heart. I believe they are the way to go, but they have to be linked to other financial policies, which the Government have to put in place to work with them. Capital allowances on their own are no good. We must have other structures within the Government’s scheme of things to ensure companies have confidence. It is no good saying, “You can have a capital allowance against a new machine that you want to buy, but we are not prepared to give you the confidence to do that because we are going to increase our taxes so you aren’t going to make any money—so why would you really want to invest in the UK?” We need to create an environment whereby companies will say, “We’ll invest in the UK because the tax regime in the UK is good. We’ll invest in the UK because we feel that the training programmes in the UK will train our young people to do the jobs. We’ll invest in the UK because of the apprenticeship programme that is going ahead, and because we know we will have the future work force to deliver products that we will be able to sell around the world.”
Dr Whiteford
The hon. Gentleman is right to say people will make investment decisions on a range of issues, but does he agree that stability is a very important component of that?
Gordon Birtwistle
Absolutely: stability, confidence, cash, training programmes, and an economic strategy for the future are vital for companies to decide to invest.
I agree with, and certainly do not have any real objections to, the Opposition proposal, but it is not linked to anything. If the Labour party wants to put forward a new economic or industrial strategy that links to this, I would be the first to support it, but this is just one element of a major programme that needs to be put in place.
Ian Swales
I pay tribute to my hon. Friend’s experience on this issue, and his campaigning, which lay at the heart of the increase to £250,000. Does he agree that tax allowances alone do not prevent investment, and in fact capital allowances are a time-shift—in other words, one still gets the tax allowance, but one just gets it later?
Gordon Birtwistle
My hon. Friend is right. We must remember that claiming a capital allowance on a profit is time-lagged, because companies will have worked for a full year and will have produced products at, it is to be hoped, a profit, and it then takes a full year for the accountants to go through the profits, so that is two years from the start, and at the end of the second year the company knows from its audited accounts how much profit it has made and how much it can invest. This does not all happen on day one or even at the end of the trading year, because they do not know just how much can be offset against tax in respect of purchases using capital allowances.
My constituency has a high proportion of manufacturing, and unemployment has gone down from more than 10% to 4.7%. That is because we are manufacturers. We make things. We create the wealth for the country. One company in my constituency, Lupton and Place, was contemplating buying a new injection moulding machine—it makes aluminium castings for the automotive industry—and it thought about that for quite a long time. I had meetings with it to discuss various schemes that might assist it to do that, but no such scheme was available. However, as soon as we announced the new capital allowances, it immediately ordered the machine. It cost €400,000. It did not get the capital allowance against the whole lot, but it did get the capital allowance against £250,000, as the sum was at the time. Although there was some money that it did not get a capital allowance against, under our strategy it was able to write the rest of it off against depreciation of the machine over the next few years.
I accept the need for capital allowances, therefore, and I hope the Minister takes that back to the Chancellor, as I have done on many occasions, to ensure that companies keep investing in this country. However, the main factor before people invest in anything is confidence—confidence that the country is going forward, and that there is growth and companies can see profits coming. People are not going to invest anything in anything unless they get a return. Returns are important for shareholders, business owners and partners in business, and if there is not going to be a return on the investment, they are not going to invest. If the confidence to invest is there and the cash is there to support the purchase, either from their own resources or from banks to ensure that the investment is made, capital allowances will be a major player in the investments that take place. On their own, they are not enough; they need to go with an overall industrial strategy. I am pleased to say that I believe that is happening.
Mr Gauke
It is a pleasure to respond to this debate, and in particular to follow my hon. Friend the Member for Burnley (Gordon Birtwistle), who has been a great advocate for manufacturing industry over the years he has been in Parliament. He has provided a strong voice on the issue of capital allowances.
Labour’s new clause asks that the Chancellor review the impact on business investment of changes to the Capital Allowances Act 2001 made by the Finance Act 2011. The new clause is identical to the new clause 5 we opposed in Committee and we will be opposing this new clause for the same reasons. As set out in our corporate tax reform road map, the Government’s central objective is to secure a low corporation tax rate, with fewer reliefs and allowances. We remain of the view that that strategy provides the best incentives for business investment. As part of that approach we reduced the annual investment allowance to £25,000 a year in the Finance Act 2011, at the same time as we were setting out our plans to reduce corporation tax—we have extended those plans and as of next April our corporation tax rate will be 20%, the lowest in the G20.
Chris Williamson
The Minister is trying to set out the Government’s position, which he would assert is one of success. If their policies are really so effective, how does he explain the fact that we are living through the slowest economic recovery for more than 100 years?
Mr Gauke
If the hon. Gentleman wants to debate that, I am happy to do so. We faced a crisis in the eurozone and we had to deal with the impact of the financial crisis that occurred on the last Government’s watch. Clearly that had a considerable impact on the growth of the UK economy and the economies of other developed countries, but the reality is that our economy is now growing strongly, and we need to ensure that that continues to be the case. There are risks to a recovery, but if we are to compete and succeed, we need to ensure that we have a competitive tax system, the conditions for growth and credible fiscal plans, all of which this Government are delivering as part of our long-term economic plan.
Chris Williamson
The Minister has just asserted that the economy is growing strongly, but I am surprised by that. Will he help the House by comparing that “strong growth” with the growth that took place in the 1950s, 1960s, 1970s and even in the 1980s, at a time, before the regrettable election of Margaret Thatcher, when regulation was significantly greater than it is today and when trade unions were more numerous than they are now? How does this “strong growth” compare with what happened in the period I have just outlined?
Mr Gauke
It is a little difficult to compare a period in the 1980s before the election of Margaret Thatcher, given that she was elected in 1979. What I say to the hon. Gentleman is that we are forecast to have the fastest growth in the G7 this year. Clearly, Members on both sides of the House should welcome that, but we must not be complacent because we have further to go and we need to ensure that we stick to the plan to deliver that growth on a sustainable basis.
Stewart Hosie
The Minister has said he has plans for low corporation tax, and fewer reliefs and allowances—I understand the strategy. He will be aware that the argument is that it helps to establish profitable businesses but is less helpful to growing, investing businesses. Even if he was right, that would rather argue against the Government increasing the annual investment allowance to £250,000. Therefore, is the report envisaged in the new clause not precisely what is required to identify whether that allowance is at the correct level?
Mr Gauke
I am grateful to the hon. Gentleman for returning me to the subject matter before us, and no doubt you are, too, Madam Deputy Speaker.
The Office for Budget Responsibility forecast in the June 2010 Budget stated that the cuts in the corporation tax rate would more than offset the reduction in investment allowances such that the
“cost of capital for new investment is lower for all non-financial companies, and the rate of return from the existing capital stock is higher”.
That very important point could easily be missed from this debate. However, we also recognise that in the current economic climate, businesses face particular challenges. Having got the corporation tax rate down significantly, making a temporary boost to support and encourage increased investment was both appropriate and desirable. That is why we introduced a temporary generous increase in the annual investment allowance at the 2013 Budget, and we have gone on to double its generosity a year later.
Bob Stewart (Beckenham) (Con)
Would the Minister like corporation tax to come down below 20%, if possible? Is that ever envisaged?
Mr Gauke
My hon. Friend raises an interesting point, which I could spend some time discussing. Some challenges are involved in reducing corporation tax below 20% in terms of ensuring that such a tax cut is well focused in encouraging increased investment. He will be aware of some of the difficulties that occurred when the previous Government temporarily introduced a 0% corporation tax rate for smaller businesses; that resulted in quite a lot of tax-motivated incorporation. I will not detain the House for long on this point, so I will just say that some issues would need to be addressed in respect of that.
What would certainly be damaging would be to reverse the considerable progress we have made on reducing corporation tax. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) placed great emphasis on providing certainty for businesses, and I would agree on that, but what we have done in reducing the corporation tax rate from 28% to 21%, and then to 20% as of next April, has undoubtedly helped the UK’s competitiveness position. One could quote survey after survey demonstrating that the UK is now viewed much more favourably as a place in which to do business because of our corporate tax regime, and it would be damaging were we to reverse this. Labour is on the record as wanting to put corporation tax back up to 21%. That would be the first increase, as a revenue raiser, in corporation tax since the 1960s, and we have heard a significant hint this week that Labour may even increase it to 26%.
Catherine McKinnell
Once again, the Minister is trying to change the subject from the annual investment allowance to corporation tax. Given that he acknowledges the importance of certainty in this area and that a reduction of the AIA back down to £25,000 is already on the horizon, does he accept that it would be beneficial for the Government, for Members of this House and for members of the public to have an assessment of the impact of that slashing to £25,000 in 2010, in order to inform the Government’s decision making in the future?
Mr Gauke
That is the fourth opportunity the hon. Lady has had to provide some reassurance to businesses and investors looking to the UK as a place in which to do business that a future Labour Government, should that misfortune occur, would not increase corporation tax to 26%. That is the fourth time she has ducked that opportunity. Corporation tax is linked very heavily with the annual investment allowance; they are not separate issues. If our debate is about ensuring that we have certainty for investment in the UK, it is a very salient point.
Chris Williamson
I am interested in the Minister’s comments. Will he comment on the fact that corporation tax in the United States is up to 35%? Furthermore, does he believe that businesses have a responsibility to contribute to public services and infrastructure investment in our country? If we enter into this arms race and continue to reduce corporation tax, we end up in a situation where we either put the burden of funding our public services and infrastructure investment on ordinary taxpayers, or are forced to make even deeper cuts than we have seen under this Government over the past four years.
Mr Gauke
As always, the hon. Gentleman’s questions are interesting and could take me in a number of directions. Let me just say this: it is important that the United Kingdom has a competitive tax system. It is the case that corporation tax will continue to play an important part in our tax system, and it is important that it is properly enforced. Indeed, the UK is leading the way on international reform to ensure that we have an international tax system that takes a contribution from companies. In the end, however, it is always individuals who pay tax—whether it is the shareholder, consumer or employee. All tax is paid by people even if the cheque is written by the company.
Let me return to the measures that we have set out. The Office for Budget Responsibility has said that the measure to extend the AIA is expected to bring forward another £1 billion of business investment in the short and medium term. Although the Government rightly keep all tax policy under review, there is limited merit in conducting an evaluation in the way that the amendment suggests, and there are also a number of obstacles that make it impossible. Her Majesty’s Revenue and Customs will not have the relevant data to conduct such an evaluation for another year, and as the hon. Member for Coventry North West (Mr Robinson) said, it would be extremely difficult to isolate the impact of this change from the other factors influencing business investment, and from subsequent changes, in the ex-post data.
An important point was made by my hon. Friend the Member for Burnley (Gordon Birtwistle), who said that a number of factors are involved in business investment, not least confidence. As my hon. Friend the Member for Dover (Charlie Elphicke) pointed out, the AIA has been set at various levels over this period; identifying a direct link between the level of AIA and business investment is extremely difficult.
Dr Whiteford
The Minister is quite right to point out that there have been dramatic fluctuations in these types of allowances over a long period, but surely that emphasises the point about trying to get better at assessing their impact. If these allowances are a good thing at the moment, the Government might be well advised to consider bringing some stability to the system and committing to them over a slightly longer period.
Mr Gauke
The point I was making is that it was this Government who introduced a corporate tax road map in 2010. That road map has provided a great deal of certainty to businesses and set out our plans for corporation tax. Given that we have been able to make progress with corporation tax rates in the current circumstances, although businesses feel uncertain about the challenges that lie ahead, including the referendum in Scotland and the possibility that an anti-business Government might be elected at the next general election, it would be helpful to have an annual investment allowance in place.
Catherine McKinnell
The Minister seems to be completely obsessed with corporation tax. Whatever question is put to him about annual investment allowances, he responds with an answer on corporation tax. I wonder whether that reinforces our call for the Government to be forced to look at the issue of annual investment allowances—the chopping and changing of them, and the lack of certainty—so that they address AIA as a serious issue that concerns businesses up and down the country.
Mr Gauke
The hon. Lady does not seem to recognise that there is a link between the annual investment allowance and corporation tax; it is an allowance set off against corporation tax. The two are not separate subjects. Of course, if we are discussing certainty within our tax system, one has to look at the bigger picture, and this Government, through the corporate tax road map, have provided much greater certainty for businesses in this country. The biggest threat to the certainty of our tax system at the moment appears to be a Labour party that is at least considering increasing corporation tax to 26%, which would be a huge increase and deeply damaging for the UK’s competitiveness.
Chris Williamson
Let me return the Minister to the historical context. He keeps implying that a Labour Government would be anti-business, but I challenge him to compare the economic growth record of previous Labour Governments with that of this Conservative Government. I think he will find that the Labour record compares extremely favourably. The truth is that Labour Governments have invested in our economy; what we should be concerned with in this place is improving the living standards for the British people, and they have always achieved that.
Chris Williamson
The Minister seems to imply that the worldwide downturn—the economic recession that was a consequence of the banking crash—was the responsibility of the previous Labour Government. It is a ludicrous assertion. Surely he will accept that there was an international banking crash that led to the economic difficulties with which the Labour Government were faced in 2007.
Mr Gauke
Let me summarise the hon. Gentleman’s position: when the economy grows under a Labour Government, the Labour Government get the credit, but when it shrinks under a Labour Government, that is to do with international factors. At least we know where he stands.
We have heard a lot of criticism of the reduction in the annual investment allowance, and I have attempted to try to put that in the context of what we have generally done within our tax system. The impression given by the hon. Member for Newcastle upon Tyne North at all times was that it was a disastrous decision that resulted in business investment being slashed. I do not accept that position at all, and I have made it clear, by putting this in the context of what we are doing with corporation tax, that we are encouraging investment.
Just this week, the Labour party set out its plans for business tax. As far as I am aware, nothing was said in those plans about the annual investment allowance, or about extending the increase to £500,000 beyond December 2015. We heard a lot about an allowance for corporate equity, but I do not think that I heard anything at all from the Opposition on this subject. If it is so important to them, why do they not have a policy in this area? Indeed, at one point, it seemed to come as a surprise to the hon. Member for Newcastle upon Tyne North that this was a temporary measure, although subsequently in her speech it became clear that she was aware of that. What is Labour’s position? If Labour Members feel so strongly about this issue and it is a priority for them, why have they said nothing on the subject? On that point, I urge the House to reject new clause 10 if it is put to a vote.
Catherine McKinnell
It is absolutely clear that the Government have tied themselves in knots over the annual investment allowance. They have tried at every turn during this debate to change the subject, and not to deal with the catastrophic decision taken in Budget 2010 to slash the investment allowance from £100,000 to £25,000. That was followed by a welcome U-turn that moved it back up to £250,000, and now they have promised to double it to £500,000. I accept that it is a temporary measure, but the point that I was trying to make, which the Minister seems to have missed, is that the very fact that it is a temporary measure perpetuates the uncertainty, and we know, because businesses have told us, that that uncertainty undermines their confidence to invest.
The hon. Member for Burnley (Gordon Birtwistle) made a speech that I know was sincere, as he is aware of the importance of the manufacturing industry and of certainty in the tax landscape, particularly regarding the annual investment allowance, in enabling businesses to make investment decisions, to invest in plant and machinery, and to expand to create jobs for the future. However, I might also say that he made a typical Liberal Democrat speech, in that he sat on the fence and would not acknowledge that the Government need to take stock of the impact on investment decisions of chopping and changing this policy.
Ian Swales
I thank the hon. Lady for giving way, and she will be pleased to know that I will not sit on the fence on this issue. Investment decisions about plant and machinery are one-off decisions, and the annual investment allowance is only needed once for each investment decision. What we need is certainty around a specific decision, not long-term certainty.
Catherine McKinnell
That flies in the face of the advice given by the EEF, the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales, which all feel that the Government’s chopping and changing on this policy has been damaging to investment. Someone might want to make a decision to invest this year, next year, or the year after, but obviously if they do not know what the Government’s policy will be in 12 or 24 months’ time, they might well not have that confidence and not take that decision. The hon. Member for Burnley acknowledged that, but the hon. Member for Redcar (Ian Swales) seems to be completely at odds with what industry has been saying.
Mr Gauke
The hon. Lady says that her concern is that business will not know where it stands on the annual investment allowance when making decisions, but, much more importantly, if a business does not know whether the corporation tax rate will be 20%, 21% or 26%, that will surely have a much bigger effect on investment in this country. Can she provide some clarity on that?
Catherine McKinnell
I agree that business needs certainty about taxation to make investment decisions, and that is why we have committed to maintaining one of the most competitive tax rates in the G7, but today’s theme seems to be that the Government wish to talk only about corporation tax, and to airbrush out their catastrophic mistakes with the annual investment allowance. The hon. Member for Dover (Charlie Elphicke) made a valiant speech, but I felt it was dreadfully misguided. He was in quite a bit of trouble trying to defend the Government’s record in this respect, but frankly the decision making has been erratic and completely indefensible.
I pay tribute to my hon. Friend the Member for Coventry North West (Mr Robinson), who made a very thoughtful and considered speech in which he set in the historical pre-2010 context some of the rationale behind the Government’s decision making in this regard, but he also highlighted the irrational aspects.
Sheila Gilmore
Does my hon. Friend want to reflect on the suggestion made earlier that it did not really matter to people whether the investment allowance was clear? Surely, when putting forward a formal business plan, people are not necessarily just working on a year-to-year basis; they want to know what, if things go on as they are, they could do in a year’s time, two years’ time, or three years’ time.
Catherine McKinnell
My hon. Friend makes an absolutely valid point. Businesses do not work in electoral cycles or annual tax return cycles; they plan for the future. Businesses have told us how unhappy they have been with the chopping and changing of this policy.
I am very surprised that the hon. Member for Redcar takes such a strong stance in supporting what has clearly been a disastrous Government policy. I would have thought he would have liked to distance himself from it, but he has obviously tied himself to this mast, and I am disappointed that he will not come through the Lobby with us. We will push our new clause to a vote, because we believe that the Government need to take stock and learn from their mistakes, and that this has been an absolute disaster of a policy, in terms of the Chancellor’s indecision.
Question put, That the clause be read a Second time.
The Minister for Skills and Enterprise (Matthew Hancock)
On a point of order, Madam Deputy Speaker. Given that the Office for National Statistics has confirmed this afternoon that four fifths of new jobs have been created outside London, and given that the Leader of the Opposition may inadvertently have misled the House by saying that the number of people waiting more than four hours in A and E has risen by over 300% when this is not accurate, may I take your advice on how the Leader of the Opposition may be brought before the House to retract these inaccuracies and apologise?
Madam Deputy Speaker (Mrs Eleanor Laing)
No, the hon. Gentleman may not take my advice. It is not the position of the Chair to advise hon. Members, far less the Leader of the Opposition, on the content of their speeches, but the hon. Gentleman has put his facts on the record, and I am sure that they have been noted on both Front Benches.
Chris Leslie (Nottingham East) (Lab/Co-op)
Further to that point of order, Madam Deputy Speaker. Is there anything that you can do to stop these eager Front Benchers seeking Cabinet preferment in the forthcoming reshuffle from making spurious points of order, when what they should do with statistics is allow the Office for Budget Responsibility to audit these—
Madam Deputy Speaker
Order. The hon. Gentleman knows that that is not a point of order, nor could it be further to a point of order, as there was no point of order.
Ian Swales
On a point of order, Madam Deputy Speaker. I made a point of order earlier today regarding a figure used yesterday by the hon. Member for Birmingham, Ladywood (Shabana Mahmood). The 2010 figure that I gave was correct, but I am now aware that the hon. Lady was using a figure derived on a new basis, so the comparison that I drew was incorrect. I felt that that should be put on the record.
Madam Deputy Speaker
I am grateful to the hon. Gentleman—[Interruption.] Order. I am grateful to the hon. Gentleman. That is a point of order. He has put the record straight, and the House is grateful to him.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
On a point of order, Madam Deputy Speaker. Could you advise me, please, with reference to the inaccurate information that was given by the Prime Minister about waiting lists for A and E, and the fact that in 48 out of the past 52 weeks, A and E targets have been missed by this Government—
Madam Deputy Speaker
Order. I have already reminded the House that the content of Ministers’ speeches is not a matter for the Chair, and that is not a point of order.
New Clause 1
Oil contractor activities: ring-fence trade etc
‘Schedule (Oil contractors: ring-fence trade etc) contains provision about the corporation tax treatment of oil contractor activities.’—(Mr Gauke.)
Brought up, and read the First time.
Madam Deputy Speaker (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
Government new clause 2—Determination of beneficial entitlement for purposes of group relief.
Government new clause 3—General Block Exemption Regulation.
Government new clause 4—Co-operative societies etc.
Government new clause 5—Tax relief for theatrical production.
Government new clause 6—Exclusion of incentivised electricity or heat generation activities.
Government new schedule 1—Oil contractors: ring-fence trade etc.
Government new schedule 2—General Block Exemption Regulation.
Government new schedule 3—Taxation of co-operative societies etc.
Government new schedule 4—Tax relief for theatrical production.
Government amendments 42, 43, 5, 6, 1, 2, 4, 11 to 14, 7 to 10, 15 to 41, 3 and 44 to 66.
Mr Gauke
I will attempt to speak briefly to this long list of Government new clauses, new schedules and amendments, although I will respond later in the debate if any questions are raised.
New clause 1 and new schedule 1 make changes to provide a fair amount of taxation for activities carried out on the UK continental shelf in connection with the UK’s oil and gas resources. The Government are committed to maximising the benefits that the North sea can bring to the UK economy while ensuring that all companies benefiting from the UK’s natural resources, either directly or indirectly, pay their fair share of tax.
The UK is not currently receiving a fair amount of tax from companies that provide drilling rigs and accommodation vessels to the oil and gas industry. Many of those companies own their assets in lower tax jurisdictions overseas. Those assets are then leased to associated entities operating on the UK continental shelf through specialised leasing arrangements known as bareboat charters, giving rise to a large deductible leasing expense in the UK. That results in up to 90% of operating profit made in the UK being moved overseas.
This measure will cap the amount the UK base contractor can claim as a deductible expense for those leasing payments. It will ensure that companies pay a fair amount of tax for the activities they carry out in connection with the UK’s valuable natural resources.
New clause 2 makes changes to corporation tax group relief rules to remove an unintended restriction that has been identified in current anti-avoidance legislation. That legislation is well targeted and limits the opportunities for avoidance, for example through artificial groupings. However, the rules are triggered in limited circumstances where conditions are agreed or imposed on a group by the Government or a statutory body. That is clearly unintended.
The clause proposes a restricted amendment to section 169(2) of the Corporation Tax Act 2010 to exclude from the definition of “arrangements” situations where conditions are agreed or imposed by the Government. That will ensure that the anti-avoidance rules are more effectively targeted for the future and that companies involved in these specific commercial arrangements will have improved access to group relief. The amended rules will continue to ensure that they prevent manipulation of company control and group status and will continue to restrict access to group relief where appropriate. That will maintain the fairness and consistency of the tax system.
Government new clause 3 and amendments 42 and 43 make a number of changes to three capital allowances: enhanced capital allowances for zero-emission goods vehicles; enhanced capital allowances for enterprise zones; and business premises renovation allowances. All are state aids designed to comply with the general block exemption regulation. The existing regulation ended on 30 June and a new one took effect from 1 July. Although it is similar to its predecessor, the new regulation contains a number of differences that need to be reflected in those reliefs. The new clause and the amendments do that. Broadly, they ensure that various definitions found in those reliefs refer to the new general block exemption regulation.
In the case of enterprise zone allowances, it also excludes expenditure on energy generation, distribution or infrastructure, and broadband networks; restricts qualifying expenditure incurred by large companies in certain enterprise zones to new economic activities; and requires companies that make a production process more efficient to ensure that the qualifying expenditure exceeds by value at least three years’ depreciation of the machines being replaced.
New clause 4 and new schedule 3 make technical changes to the tax legislation applying to co-operative and community benefit societies, industrial and provident societies, European co-operative societies and credit unions to ensure that the definitions used in the legislation are clear, up to date and work as intended. There has been no policy change on the taxation of the various societies or the reliefs available to them, or indeed their members. There will be no effect on their tax position, but the changes we are making will ensure that the legislation is accurate and fully in accordance with the policy intention.
New clause 5 will introduce an additional corporate tax deduction and payable tax credit for theatre production costs. Production companies will be eligible for a payable tax credit worth up to 25% of qualifying expenditure for touring productions and 20% for all other productions. These provisions will be available from September for producers of a wide range of theatre and performance, supporting plays, musicals, dance, ballet, opera and circus.
Andrew Bingham (High Peak) (Con)
I welcome this particular measure, because the very well known Buxton opera house is in my constituency of High Peak and it hosts lots of touring theatrical companies. Offering different types of performances to the area engages people in going to the theatre and promotes the local economy, so the measure’s benefits will be broader than we may have thought at first.
Sir Peter Luff (Mid Worcestershire) (Con)
Circus is a performing art invented in the United Kingdom and it provides many children with their introduction to the performing arts and leads them to a love of theatre. May I therefore welcome my hon. Friend’s decision to include circuses in those areas covered by the tax relief in new clause 5? The travelling circus industry welcomes that decision, which is already leading directly to new investment in travelling circuses.
Mr Gauke
Again, I am delighted to hear that. My hon. Friend lobbied us and made representations on behalf of his constituents for the inclusion of circuses. As a consequence of the consultation process and listening to the points raised by my hon. Friend and others, I am delighted that circuses will benefit from this tax relief.
Debbie Abrahams
It is important to support this area, but would the Exchequer Secretary like to comment on the National Audit Office and Public Accounts Committee’s recent reports criticising the Government and Her Majesty’s Revenue and Customs for not properly monitoring the tax reliefs in this area?
Mr Gauke
The Government will respond formally to that, but I believe that well-designed, well-focused and targeted tax relief, which is what we have, can help the economy grow and help particular sectors. Indeed, I am delighted that two examples have just been provided to us. This Government have successfully lowered rates, including corporation tax, which we have debated this afternoon, and, if particular sectors can be supported by a well-targeted tax relief, we should do that. We believe that, overall, our tax system is working to enhance the UK’s competitiveness. This Government have a good record in the creative sector in particular, and I am delighted that, through new clause 5 and new schedule 4, that will continue.
New clause 6 amends the list of excluded activities in the tax-advantaged venture capital schemes—the seed enterprise investment scheme, the enterprise investment scheme and venture capital trust schemes—so that a company whose trade consists substantially of the generation of electricity or heat that attracts renewable obligation certificates or payments under the renewable heat incentive will no longer qualify for investment under those schemes, with limited exceptions.
As in the case with the feed-in-tariff exclusion, community interest companies, community benefit societies, co-operative societies and Northern Irish industrial and provident societies will not be affected by the restrictions. The exceptions for co-ops will also apply to European co-operative societies, in line with the changes being introduced as part of the “taxation of co-operative societies” amendment, which aims to align and update all references to industrial and provident societies across the Taxes Acts. The restriction will also not apply where the electricity is generated by anaerobic digestion or by hydropower, nor where heat is generated, or gas or fuel produced, by anaerobic digestion. The measure will apply in respect of both UK ROC and RHI schemes and overseas equivalents. It will make the tax-advantaged venture capital scheme better targeted and effective in supporting small and growing, higher-risk businesses.
Amendments 5 and 6 make technical changes to clause 73, which will restore sense and fairness to air passenger duty by reforming the destination banding and introducing a simple to understand two-band system. As the House will know, we have devolved the power to set rates on direct long-haul flights from Northern Ireland to the Northern Ireland Assembly, which set the rates at £0 in the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012. As the structure of the tax, including the number and composition of the destination bands, remains a matter for the UK—the Northern Ireland legislation refers to the UK legislation—the Northern Ireland Executive have asked us to make the consequential amendments needed to their legislation so that it aligns with the UK legislation.
Catherine McKinnell
I thank the Minister for introducing the 60 or so proposals that the Government have tabled for consideration at the end of proceedings on the Finance Bill. [Interruption.] I hear some tutting behind me. The House will be relieved to hear that although I have a number of questions they relate mainly to new clauses 1, 5 and 6, new schedule 4 and amendment 2.
I will start with new clause 1. It is important to take the opportunity to scrutinise what are fairly significant changes. They have been introduced by the Government at a fairly late stage in the Bill’s progress. Will the Minister comment on why that is the case? The measures were first announced in the autumn statement but the Government were still consulting on them some five months later while we were scrutinising the Bill clause by clause in Committee.
Perhaps the most controversial of the Government’s announcements on North sea oil and gas over the past year is contained in new clause 1 and new schedule 1, which make changes to the UK continental shelf oil and gas fiscal regime. As the Minister set out, they relate specifically to leasing arrangements between oil and gas contractors and oil and gas licence holders on the UK continental shelf—arrangements that are commonly known as bareboat chartering. Oil and gas service companies often lease drilling rigs, vessels and other equipment from overseas related parties on a bareboat basis—that is, without operating personnel—and the associated rental costs are claimed as a deduction against the UK profits of the service company when it uses the equipment to provide services to oil and gas licence holders on the UK continental shelf.
As the Red Book sets out,
“the government is concerned about the use of”
such leasing arrangements
“to move significant taxable profit outside the UK tax net”.
I would be interested to hear from the Minister what estimate his Department has made of the total taxable profit that has been moved outside the UK tax net as a result of these leasing arrangements. More importantly, what evidence does HMRC have that such profit shifting or transfer pricing is avoidance activity, as the Government seem to suggest?
Sir Malcolm Bruce (Gordon) (LD)
When the Minister is answering those questions, I wonder whether he will also say what impact the measures will have on drilling activity in the UK.
Catherine McKinnell
The right hon. Gentleman raises an important question. I hope that the Minister addresses it in his response. I will come on to that issue.
In May, a Reuters report on these measures suggested that HMRC had
“allowed an industry with annual revenues of 2 billion pounds to pay almost no corporation tax for two decades”.
It also suggested that such arrangements have allowed drilling operators in the North sea
“to operate almost tax free for 20 years or more”.
It would be useful to know why the Government are acting now on those arrangements. I hope that the Minister will elaborate on that.
The Chancellor made an announcement in last year’s autumn statement that appears to have come as a surprise to many. He proposed the introduction of a cap on the deduction that is available to UK service companies on bareboat charters from connected companies. He also announced plans to ring-fence profits from other business activities so that the taxable profit could not be reduced by other tax losses. It appears that, because of the considerable lack of consultation before those announcements were made, the Government have significantly altered the plans to take account of the views of the industry.
The final proposals that are before us today will introduce a cap on the amount that service companies can deduct from their taxable profits through such leasing arrangements. The leasing deduction will be limited broadly by reference to a cap of 7.5% on the original cost of the asset or equipment. The cap was originally set at 6.5% but has been changed following the extensive consultation with the industry. Again as a result of the consultation, the cap will apply only to drilling rigs and accommodation vessels, which are otherwise known as “flotels”.
Mr Mike Weir (Angus) (SNP)
I am listening carefully to what the hon. Lady is saying. Does she agree that, although the cap applies only to drilling rigs and accommodation vessels, drilling rigs are the crucial matter? There is a worldwide shortage of drilling rigs, so the cap might mean that they are used elsewhere, rather than in the North sea.
Catherine McKinnell
The hon. Gentleman raises an important point. Again, it would be helpful if the Minister addressed that concern in his response. I will come on to that matter a little later.
New schedule 1 introduces a new form of ring fence that is similar to that imposed in respect of ring fence corporation tax for companies that operate on the continental shelf. The ring fence will be applicable to the composite activity that is the subject of this measure. That means that, although profits within the ring fence will only be taxed at the standard corporation tax rates and not the higher rates that apply to oil and gas producers, it will no longer be possible to reduce those profits through other tax reliefs that are derived from activity outside the UK continental shelf.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
The hon. Lady is making an important point: maximising exploration is crucial to future revenues. Unless oil is produced out of the ground, we will not see any tax revenue.
Catherine McKinnell
That is an ambition that I believe the Chancellor has expressed himself. It is vital the Government get this right and that is why we are asking these questions today. I hope we will receive reassurance from the Minister.
Production fell by 38% between 2010 and 2013, which is the equivalent of 500 million fewer barrels of oil being produced. Critically low exploration has meant that 150 million fewer barrels of oil equivalent have been discovered in the past two years.
This clearly has wider implications for the UK’s oil and gas sector. As the hon. Gentleman points out, it also has serious implications for the Exchequer. Just yesterday, there was a report in the Financial Times highlighting the fact that North sea oil and gas tax receipts decreased by 60% in the past two years alone, and are now at their lowest level since 2004. Some of that can be accounted for by significant investment in the past few years—the fiscal regime was designed in such a way, under the previous Labour Government, to encourage such activity and therefore be less liable to tax—but these figures are still reflective of the wider issues facing our North sea oil and gas sector, as I outlined previously.
I want to draw the attention of the House to concerns, expressed by numerous tax specialists, that these measures represent the Government abandoning the application of the arm’s length principle in determining transfer pricing in the oil and gas sector. Just to explain the background, OECD member countries have agreed that to achieve a fair division of taxing profits, and to address international double taxation, transactions between connected parties—for example, intra-group companies—should be treated for tax purposes by reference to the amount of profit that would have arisen had the same transaction been executed by unconnected or independent parties. The arm’s length principle is enshrined in article 9 of the OECD model, treaty or convention.
The Government apparently support the arm’s length principle, but the Chartered Institute of Taxation has expressed concern that imposing such a cap, as new schedule 1 would provide for, calculated through a formula based on the original cost of the asset, effectively imposes a legislatively fixed benchmark price that overrides the arm’s length principle. An article for Tax Journal in February highlighted this issue and concluded:
“these measures are reflective of the Treasury’s willingness to introduce special measures where it perceives that the application of the arm’s length principle fails to determine an appropriate allocation of profits in cross-border transactions.”
Will the Minister say whether this reflects the Treasury’s willingness to intervene and override the arm’s length principle, where it deems the application of such to be inadequate? The main reason why the Government’s abandonment of the arm’s length principle is of such concern is the possibility that other countries may follow suit and introduce their own special measures; something that the OECD and its members, through the arm’s length principle, are at pains to prevent. It would be useful to hear from the Minister whether the Government have taken account of international reactions to these measures and their potential detrimental impact.
As the Minister well knows, and as we have put on the record in this House on countless occasions, the Opposition support the Government on any steps they take to tackle tax avoidance. However, a number of concerns remain as to how the Government have approached implementing these measures. We welcome the Government’s consultations with the industry, belated though they are, but I would be interested to hear from the Minister whether he and his officials believe that they have, in the final version of the Bill, fully addressed the concerns of industry. The feedback I have received from the industry suggests otherwise.
After the debacle of the autumn statement last year with regard to this unexpected announcement, it is important that Ministers finally, three years after they made the same mistake, learn the lessons of turning to the North sea oil and gas industry to plug holes in their books, and coming up with policy on the hoof. In 2011, we saw the detrimental impact such unilateral action can have, particularly in an increasingly marginal industry—that was, perhaps, reflected in the Financial Times report yesterday. We can only hope that the Government have fully considered the impact of the latest changes and properly accounted for them. Finally, the measures seem to diverge from the Government’s general approach to transfer pricing and the arm’s length principle, but I hope the Minister can provide clarification on that.
New clause 5 and new schedule 4 provide for further tax relief for the creative sector—based, of course, on the last Labour Government’s highly successful film tax relief. They introduce a tax relief for theatrical productions, and the relief will operate in almost exactly the same way as it does for high-end television and animation productions, but with one small difference. It allows qualifying companies engaged in theatrical productions to claim an additional deduction in computing their taxable profits. Where that additional deduction results in a loss, they have to surrender it for a payable tax credit. Both the additional deduction and payable credit are calculated on the basis of UK core expenditure capped at 80% of total core expenditure by the qualifying company.
The Minister set out the provisions in some detail, and they received some welcoming comments, particularly from Government Back Benchers, but I have a few queries about the new relief; I hope the Minister will be able to resolve any outstanding ones. The first relates to measures contained in new schedule 4, and it is important to ensure that the measure is not open to abuse. Such reliefs as these—or tax expenditures, to use Treasury-speak—well-intentioned though they are, have increasingly come in for criticism from the Public Accounts Committee and the National Audit Office. We have already discussed the number of both known and potentially unknown tax avoidance schemes generated around the reliefs and the subsequent criticism of them. I do not think it would be helpful to hold this discussion again here on the Floor of the House; Members will be able to read Hansard to see the extensive debates and discussions we had in the Public Bill Committee.
Following the consultation process, the Government appear to have taken on board the views of the Chartered Institute of Taxation, which suggested in its consultation submission that any evidence of abuse should be promptly identified and acted on by using the general anti-abuse rule. New schedule 4 provides for a general anti-abuse rule based on the GAAR, but the Chartered Institute of Taxation suggested that this tax relief should be properly monitored and reviewed by the Government. The Government’s consultation response suggests HMRC will “continue to monitor” for abuse, but can the Minister give a specific commitment in this respect?
Ian Swales
Does the hon. Lady join me in welcoming the fact that the arrangements in HMRC are to give specific permission on a production-by-production basis? I hope that HMRC will be staffed up accordingly, but that should avoid some of the abuses that took place under the previous film arrangements.
Catherine McKinnell
I hope that will happen and that HMRC will have the resources available to it, as we know that it has faced significant reductions in staffing. That does not necessarily mean that it will not be able to undertake the sort of monitoring we would like to see under the scheme, but it would be useful to hear from the Minister that HMRC has the resource, capacity and systems to ensure that this does not become just another vehicle for tax abuse.
Helen Goodman (Bishop Auckland) (Lab)
In the case of the film tax credits, the British Film Institute has a role in assessing whether the criteria are met, and it obviously has great expertise in that area. It would be helpful to know whether this work is going to be contracted out in any way or whether any particular expertise is needed by Revenue officials in doing this job.
Catherine McKinnell
My hon. Friend raises a very important point. I have not specifically considered it, but it fits well with some of the additional concerns put to me, which I am now putting to the Minister, about defining who should qualify for the relief and how it should be assessed by HMRC. It would be interesting to hear whether consideration has been given to using the expertise of outside bodies to ensure that HMRC gets its assessments right first time in administering this tax relief.
In the light of the National Audit Office’s recent report that HMRC monitors just 10% of its “tax expenditures”—there are more than 1,000—it would be reassuring if the Government committed themselves to reviewing the operation and take-up of this tax relief each year to ensure that HMRC is fully aware of how it is being used, and, more important, whether it is being abused.
David Mowat
Does the hon. Lady not think it right that we incentivise these renewables projects through contracts for difference and all the mechanisms the Department of Energy and Climate Change has brought forward rather than these sorts of EIS schemes? Therefore, it is rational to do what the Government have done, and that of itself should not make any difference to the propensity to go ahead with these things.
Catherine McKinnell
We would always hope that the Government would behave rationally in respect of these matters. I am pleased that the hon. Gentleman has absolute confidence in that, but I would be grateful if the Minister could provide some reassurance because the Government’s record on these issues has not always been entirely rational and I do not share the confidence of the hon. Member for Warrington South (David Mowat) in this regard.
On follower notices and accelerated payments, amendment 2 inserts subsection (8A), which provides that if a tribunal finds that a penalty should not have been charged because it was reasonable for the taxpayer to continue his dispute, the follower notice on which it was based remains valid, as does any accelerated payment notice or partner payment notice related to it. Concerns have been raised that if a penalty is cancelled on the grounds specified in clause 207, the validity of the follower notice—or related accelerated payment notice or partner payment notice—is not affected by the cancellation of the penalty. HMRC has confirmed that the intention is that if the penalty is cancelled on other grounds specified in subsection (2A), the follower notice, and any related accelerated payment notice or partner payment notice, would be cancelled. That is clearly the logical result of a successful appeal against the penalty. However, a few questions have been raised about this, so will the Minister say in what circumstances the grounds of appeal in clause 207(2A)(d) might be used, and why if successful, the FN and related APN or PPN would not be cancelled? When will guidance be published on this and the rest of the legislation on FNs and APNs, bearing in mind how important the guidance will be in helping taxpayers and their advisers to understand how this legislation is intended to operate? When will HMRC be publishing a list of the disclosure of tax avoidance schemes that will be issued with an APN, as we know that there is a lot of concern about the implementation of some of the Government’s proposed changes? On that very technical note, I conclude my queries to the Minister and I look forward to receiving reassurances from him in his response.
Christopher Pincher (Tamworth) (Con)
I welcome the chance to make a brief contribution to the debate on this group of amendments. It was a pleasure to serve on the Public Bill Committee with the Exchequer Secretary; it was certainly an educational experience for me. It was also a pleasure to serve with the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), although her professed determination to scrutinise the legislation line by line did at times make it feel as though she was scrutinising it word by word.
I should like to speak briefly to Government amendments 1 and 2, which affect clause 207, encompassing clauses 192 to 212. As the Minister and the shadow Minister have said, those provisions deal with follower notices and the accelerated payments regime. I was heartened to hear that the Minister is spelling out the ground rules for appeal in respect of follower notices, but he will know that there remains some residual concern, to say the least, about the retrospective nature of accelerated payment notices.
A number of people and their advisers have made what they believe to be a proper disclosure, particularly after the increase in the fine for non-disclosure from £5,000 to £1 million, erring on the side of caution and over-disclosing. They are concerned that they will now be caught up by that disclosure and will find themselves with retrospective tax liabilities, perhaps dating back to 2004. The Minister was good in Committee in making it clear that he would continue to consult the industry and taxpayers, because the original consultation was brief. I hope that he will do that, and will continue the dialogue with the industry and with taxpayers to ensure that nobody is caught up unfairly, having tried to do the right thing, by these proposals. I look forward to hearing him make the position clear in his remarks .
Stewart Hosie
I rise to speak against new clause 1 and the introduction of the bareboat chartering regime. I heard the Minister’s comment that this is about trying to get a fair tax return from this small but important sector. It tells us that at the moment it is paying about £200 million a year in tax and national insurance. At a yield of about £100 million, the tax return from this small sector will be increased by about 50%—that seems a substantial increase in a short period.
I would like to say that this bareboat chartering regime was a one-off stand-alone bad measure, but it does not stand in isolation. It is part of a pattern of ill-judged, disjointed and sclerotic decisions that this Government have taken, and it typifies their attitude to the North sea. Some years ago, we had the massive hike in North sea corporation tax supplementary charge, which absolutely stifled investment and brought it to a grinding halt. That led the Government, in panic, to make some kind of correction through the introduction of a large series of complicated new and enhanced field allowances.
Mr Weir
My hon. Friend makes a very good point. Given that the Government have so recently and so enthusiastically embraced the Wood review, does he not think that it is an odd measure to introduce, as it will hit the maximisation of the recovery of our oil and gas reserves?
Stewart Hosie
That is an extremely good point. It is not just the International Association of Drilling Contractors that has welcomed the Government’s approach to accepting the full recommendations of the Wood review, but the overall trade body, Oil and Gas UK. Indeed, the Scottish National party thinks that it is a good thing, too. Both the industry and the SNP have also welcomed some of the field allowances that the Government were forced to introduce, particularly the ultra-high-temperature, high-pressure field allowance for mixed gas and oil fields. That kind of measure is incredibly sensible, but as my hon. Friend says, and as Oil and Gas UK points out, there is huge disappointment that the Government are continuing with the bareboat charter measure. They believe that it is ill-conceived and should have been dropped in its entirety. The backdrop to its introduction is a period in which operating costs have increased sharply. Last year’s cost increases of more than 15% led to an all-time record high of almost £9 billion in costs. I understand that new developments in the North sea are facing similar cost pressures, so it is illogical to introduce this measure at this point, especially as drilling rigs and accommodation vessels alone are included in the scope of the legislation.
We are looking at a part of the sector where the return on capital is only 8% or 9%, and the cash break-even on a drilling rig or an accommodation platform is typically 15 years. These are large investments, with investors taking substantial long-term risks, and we cannot understand why the Government want to put that at risk at this particular point.
Stewart Hosie
Indeed; I recognise all those points, and the pressures that are being applied to finite and very mobile resources, such as rigs and accommodation vessels, but I will come back to some of that later.
This measure not only penalises the drilling and accommodation vessel sector, but potentially impacts on the entire £35 billion upstream oil and gas supply chain. Derek Henderson from Deloitte UK said:
“While it doesn’t affect operators directly, many expect that the costs will be passed on to them and could discourage drilling.”
That would impact on the entire support and supply chain that is dependent on drilling activities.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
On the point about making other jurisdictions more attractive, are the Government not actually helping Scotland’s competitors by ensuring that rigs, of which there is a shortage, go to more sympathetic jurisdictions?
Stewart Hosie
Indeed, and Malcolm Webb from Oil and Gas UK made a near-identical point when he said:
“It is perplexing…that the Government has chosen to proceed with the bareboat measure. This can only increase costs on the”
UK continental shelf. He also said:
“we fear that this move will drive drilling rigs, already in short supply, out of the UKCS.”
That would be a ridiculous thing to do.
What makes this measure all the more peculiar is that the bareboat charter arrangements are commercial arrangements that are widely used across a range of industries, and not just in the oil and gas sector. The arrangements we are talking about are used internationally, and have formed a consistent part of the UK continental shelf operation for 40 years. So why pick now to take an extra £500 million or £600 million out of the North sea over the next five years? The Treasury’s decision in the Budget to apply this measure only to the oil and gas industry, and only now, to a few specific vessel types, is utterly illogical.
I do not want to detain the House too long, so I think that the key thing to do is to consider the points that the International Association of Drilling Contractors makes about the measure. This is not a gentle criticism of a mildly inconvenient tax; it is an excoriating critique of what the UK Government have done. The association says:
“The measure is unfair and a unilateral deviation from international best practice…with no ability for contractors to reset prices,”
it
“amounts to retrospective and double taxation”,
and in a real and practical sense, it does. It says:
“The measure will depress economic activity. The…changes affect the cost base of the drilling industry”,
with all the impact that might have. It goes on:
“The measure targets a single, specialist sector for additional rent…Specialist international companies that have relocated”
to the UK “will be particularly hit”, when they and their investment should be welcomed instead.
The association argues:
“The government has manipulated the introduction of the measure to avoid proper scrutiny.”
In a particular criticism, it goes on to say:
“It is not appropriate for legislation as complex as this to be published in initial draft form”
on the day it was due to come into effect. That is a preposterous way for the UK Government to behave. The association continues:
“The consequences of the measure have not been properly assessed by HRMC”,
and it says that there are reports that up to £2 billion could be lost from the continental shelf. It also says:
“The measure is deliberately discriminatory...all vessels bar drilling rigs and accommodation units have been exempted for reasons that are far from clear.”
To put that another way, only two sorts of vessels remain included in the scope of the measure, which appears to be the usual sort of smash-and-grab cash raid that this Government make on the North sea.
There appear to be a great many reasons why the bareboat chartering regime is wrong. There appears to be an illogicality about the way it is being introduced, as well as a complete lack of transparency and time properly to assess the long-term impact, not just on drilling rigs and accommodation vessels, but on the entire supply chain. Little concern appears to have been felt about the consequential impact on growth and jobs in the sector and in the economy in general. That is quite a scathing set of criticisms to make of this Government, although it is not unique and could apply to any number of other things that they have done.
I look forward to hearing what the Minister has to say, but unless there is a very credible explanation of the amount of tax that he believes is lost, and of how the proposals will help, rather than having the consequences that I have described, I fear that we might divide on new clause 1.
Helen Goodman
I should like to speak to new clause 5 and new schedule 4 on the theatre tax relief and to set this in the context of the current state of British theatre.
The Government’s own documents point out that the film tax credit introduced by the previous Labour Government has been a significant success. In answer to written questions from my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), the Government have told us that the film tax credit has supported 1,200 films, provides 46,000 jobs, and has brought in £1 billion of investment. Obviously, therefore, a theatre tax relief is a good idea in principle, but it is worth considering whether the drafting of the new clause will achieve all the desired objectives. If it is not drafted sufficiently generously, the positive benefits to the theatre industry and to the British economy will not be achieved, but if it is drafted too loosely, it can become open to abuse. In either of those instances, we will have to come back and revisit the drafting, and the industry will face an unstable regime that is not helpful to its planning. In one respect, the drafting is a bit too loose and in another respect it might be a little too tight.
Sir Nick Harvey (North Devon) (LD)
I strongly support the hon. Lady’s thesis that it is essential to get the wording right. At the moment, there seems to be a practice on the part of HMRC investigators to assume that any investment—certainly by private individuals taking advantage of this facility—is, by definition, improper. There is far too much of an assumption that people are on the fiddle. I share her view that it is an entirely valid form of tax allowance and that it is important to get the definitions absolutely bang on the nail.
Helen Goodman
I am grateful to the hon. Gentleman. It is slightly unfortunate that the Government have brought the new clause and new schedule to the House now, because this is the only opportunity we are going to get to scrutinise this.
The object is obviously to support the development of British theatre and, in particular, to support touring. We have some of the best theatre in the world; we all know that. It all began with having the best playwright in the world. We have built on that over time, and our theatre is one of the major attractions for inward visitors and a major export industry. I point out to the Minister that we can draw a distinction—it is a little crude—between two parts of the current theatre industry. The commercial part is a series of chains of theatres producing successful, profitable plays that are often sold to New York and have very long runs, particularly in the west end of London.
If the sole benefit of the tax relief was to make those companies more profitable, that would be very nice for them, but it would not achieve what the Minister is aiming for—namely, to support the development of the industry. We therefore need to look at whether the relief supports the part of the theatre that is not always profitable and is supported by the public purse. That is why the question that my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) asked about whether the allowance will be claimable by companies that are charities is very pertinent. Large parts of the subsidised theatre sector, the Minister hopes, will be getting a tax subsidy instead of a public spending subsidy; I appreciate that that is his aim. However, that will not happen if their legal structure is not in line with what the Bill provides for. It is rather disappointing that we are being asked to agree this primary legislation when the guidelines on the definitions have not yet been published and so it has not yet been possible for them to be scrutinised by people in the industry who understand this very well.
Jenny Chapman (Darlington) (Lab)
My hon. Friend has spoken about how the changes might apply to the National Theatre. Is she intending to move on to talk about regional theatre and how those changes may or may not benefit somewhere such as the Darlington Civic Theatre?
Helen Goodman
I am, because I know that my hon. Friend has a keen interest in that, as do people up and down this country.
So we have had big cuts to the Arts Council. The Government have also imposed big cuts on local government, and from answers that I have received to freedom of information requests, we now know that on average local authorities are cutting their arts provision by even more—some 14%. So, given the estimates in the Red Book of the value of this tax relief rising from £5 million to £20 million per year, we can immediately see that it does not compensate for the reductions that have been experienced in public support.
My hon. Friend is right: there is a big issue about what is going on in the regions. The “Rebalancing our Cultural Capital” report suggested that the Government were supporting cultural institutions to the tune of 14 times as much per person in London as elsewhere, and that is not conscionable in the long term for this country. It is clearly because of that concern about regional imbalance that the Minister has decided to provide a slightly more generous relief for touring.
Simon Kirby (Brighton, Kemptown) (Con)
Will the hon. Lady be very clear: is she opposed to the cuts in the DCMS, and if so, would Labour reverse them?
Helen Goodman
I think it must be a matter of regret to everybody in the House that DCMS has taken 36% cuts. Of course, the question whether they can be restored is, as the hon. Gentleman knows, a completely separate one. I am just pointing out that the tax relief, if the legislation is properly drafted, will not cancel out the effect of those cuts. I am hoping that no one on the Government side is trying, through some sleight of hand, to give such an impression.
To return to the point that my hon. Friend the Member for Darlington (Jenny Chapman) raised, it is my understanding that in Darlington, the theatre is what is called a receiving house. That means that new plays are not being made in Darlington. Companies come on tour to Darlington and their productions are shown for several days. There are many very good producing houses in the regions as well; one good example would be the Nottingham Playhouse, where they make plays and tour them, and sometimes they tour them to London—they have just had something on at the Almeida.
A receiving house will not get the benefit of this tax relief; it is the producing company that gets the benefit. Of course, it may be that if they get the tax relief or the tax credit, they could offer the production to the receiving house for slightly less money, which might ease the situation in a place like Darlington, but there will not be a direct benefit, as I understand it.
My next question is whether the definition of touring is the right one and whether the measure will address the regional imbalance. As my hon. Friend the Member for Newcastle upon Tyne North pointed out, it is completely sensible to say that the extra relief is given if the play is taken to more than six places, but we must question whether 14 productions in two places is an appropriate definition of touring. Some of those who responded to the Government’s consultation said it would be a good idea to have a geographical definition of touring, and I do not understand why the Minister has not done that. I think he is risking some revenue leakage on this point. To give a concrete example, a play could be on on one side of Shaftesbury avenue for 14 nights, then move to the other side of Shaftesbury avenue for 15 or 25 nights and it would benefit, but the Government would not have achieved their policy objective of ensuring that the theatrical experience took in a new, wider audience.
I think there is a problem and I am disappointed by the way the Minister has drafted the provision; it is a weak spot. On the other hand, he might be being too restrictive in the number of production companies that can benefit, although we do not yet know how the guidelines will operate. In principle, of course it is a good idea to support British theatre. It is a great industry, we are very good at it and we have some of the best actors and theatre companies in the world, so in principle, it is a good idea to have a theatre tax relief, but I do have those two questions about those two parts of the new clause and the schedule.
Mr Aidan Burley (Cannock Chase) (Con)
I have a couple of questions for the Minister about the accelerated payment of tax and avoidance cases. I have written to him about this and received a letter from him, and also met him subsequently. Others have mentioned this issue, which has caused a lot of concern, especially within the accounting community. Many of my constituents who are accountants and who run businesses have written to me and met me to voice their concern about what they believe is retrospective legislation, with no right of independent appeal. I hope the Minister will be able to reassure my constituents and those of other Members.
The first question is about the oft-quoted 80% success rate in tax avoidance cases tried at court. The Minister has quoted that statistic, and HMRC has quoted similar figures, but we have yet to discover the source of that statistic, nor do we have a list of the cases on which it is based. Many of those who have contacted me feel that the figure is unsubstantiated. Will the Minister tell us the source of that 80% success rate statistic?
Secondly, there is a strong view that this law is being implemented retrospectively, with no right of independent appeal. I know the Minister has said it is not retrospective legislation, but he knows that that opinion is not shared by the accountancy profession, the legal profession, the CBI or even the Treasury Select Committee. Will he comment on that?
It is predicted that the legislation will result in some 150,000 redundancies, and the loss of future tax revenues from companies going to the wall, including some in my constituency, is estimated to be £50 billion, all to collect a mere £4 billion in unpaid revenues over the next five years. That seems to me to be a very bad bang for your buck. Does the Minister believe it is worth such loss and unemployment?
Mr Gauke
We have had, unsurprisingly, a wide ranging debate. I shall try to respond to the points raised by hon. Members in our debate, starting with those relating to new clause 1 and new schedule 1 on oil and gas. I outlined the measure in my opening remarks, and a number of questions have been raised. The question that gets to the heart of the matter concerns the impact on drilling activity and how that affects the UK’s competitiveness.
The Government’s support for the sector over the past few years through field allowances and decommissioning relief certainly has helped to encourage record levels of investment—£14.4 billion in 2013 alone—and supported the market for rigs in the UK continental shelf, where rates are driven by demand. Rig rates in the UK are among the highest globally, so we are not convinced that this measure will drive rigs from the UK continental shelf. In fact, recent press coverage indicates that rigs continue to be attracted to the UK continental shelf after the measure’s introduction.
In addition, the Government do not accept that they should seek to address the issue of rising costs by accepting an unfair tax system where a small group of companies are able to pay almost no UK tax. The new oil and gas authority which the Government announced as part of their implementation of Sir Ian Wood’s recommendations will aim to identify ways to ensure that Government and industry can work together to address cost escalation.
Stewart Hosie
That is a valid point to make, but having had the chartering regime in place in the North sea for 40 years, why introduce change now and why restrict it to rigs and accommodation vessels, affecting only one industry?
Mr Gauke
On the question why now, it is worth pointing out that following a refocusing of the UK corporation tax regime to a more territorial basis over recent years, and in view of increasing recognition, through the base erosion and profit shifting OECD initiative, that transfer pricing and other international rules do not always provide a fair or consistent outcome, the Government have decided that the need to protect the tax take from those who benefit indirectly from the exploitation of the UK’s natural resources requires domestic action now.
In addition, recent Government incentives have resulted in record investment in the UK continental shelf. It is right that action is taken to ensure a fair amount of tax from activities carried out in connection with the exploitation of the UK’s natural resources, and HMRC ensures that all businesses pay the tax due in accordance with the tax law.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I have a constituent who is on a ship that serves the North sea. He is the only member of the crew who has had his national insurance contributions changed in the last round. He is an electrical engineer. The mechanical engineer, the captain and the bosun are still on the old rate, but the electrical engineer is not. Can the Minister explain to me why an electrical engineer is being discriminated against on a North sea supply vessel?
Mr Gauke
The hon. Gentleman raises a somewhat different point from the one that I am addressing, but if he writes to me in respect of the individual case—[Interruption.] If he has already written to me, I am delighted to hear that. HMRC may be better placed to respond to the particular case, but we are taking action in respect of intermediaries to ensure that the national insurance contribution system works fairly. This is another area where we are making sure that businesses that benefit from our natural resources make a fair contribution in tax.
Simon Kirby
Is the Exchequer Secretary any clearer than I am about whether the Labour party will reverse the cuts to the Department for Media, Culture and Sport, because I am still not sure whether it intends to or not?
Mr Gauke
I am grateful to my hon. Friend for another example of Labour opposing yet another measure that this Government have taken to try to reduce the deficit. At least Labour Members did not make another spending pledge on this occasion, but we will, of course, continue to monitor their remarks very closely because they frequently do make spending pledges. [Interruption.] Perhaps the presence of the shadow Chief Secretary, the hon. Member for Nottingham East (Chris Leslie), has instilled some uncharacteristic discipline in Labour Front Benchers.
Let me turn to the question of why some circuses are excluded and some points of definition. With the exception of the named exclusions, other types of performing arts can benefit, provided that those giving the performance can demonstrate that they are wholly or mainly playing a role and that each performance is live and that the presentation of live performance is the main object, or one of the main objects, of the theatre production company’s activities. The Government believe that using that definition, which considers the nature of the performance, is more appropriate than listing types of performing arts. In cases where further clarity may be required, companies should seek professional advice or contact HMRC. On the subject of HMRC, I was asked about its resources. The House may be pleased to know that a specialist unit has been provided to assist businesses with making claims under this relief.
The definition of “touring” has been raised and whether more should be done in terms of relating it to geographical location. A production can qualify as “touring” if there is an intention to perform at six or more separate premises or to present 14 performances in two or more premises. The hon. Member for Bishop Auckland (Helen Goodman) is right to say that we considered alternative definitions of “touring,” including the use of geographical restrictions, but we believe that our definition provides a simple and effective way to support the range of types and sizes of tours that take place. That is why we have gone with that definition.
On the question whether this will cause a significant administrative burden for charities or not-for-profit theatre companies, minimising complexity and ensuring straightforward compliance was one of the central considerations in designing the relief. That is why we are basing it on the film tax relief model, which is also used successfully for other creative industry tax reliefs. We have worked closely with industry in determining the design of the relief, to ensure that it works for the industry, particularly the not-for-profit sector. Officials continue to engage with industry, including by attending events to help and advise in the run-up to companies starting to make claims in September. Ultimately, detailed guidance will be published on the HMRC website to ensure that companies and charities get the support they need.
Mark Field (Cities of London and Westminster) (Con)
Is it the Treasury’s intention, for the sake of simplicity and certainty, to ensure that the definition of “touring” is a nationwide one? In central London, which has a lot of theatres, it would be very easy to suggest that performing in only two or three theatres would not be a tour.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. It is not good for Members just to walk in and intervene, in fairness to those who have been here throughout. I know that the hon. Gentleman has a great interest in this issue, but may I ask Members to please not just walk in and intervene? I am sure, however, that the Exchequer Secretary would like to take the question on board, because it is such a good intervention.
Mr Gauke
I will do so, Mr Deputy Speaker, because my hon. Friend makes an interesting point. I have set out the definition of touring. We think that the right approach is to use that definition, for the sake of simplicity, rather than to try to come up with something more complicated.
A question was asked about how a business not subject to corporation tax can qualify for relief. The new relief is available only to companies subject to corporation tax: it is a corporation tax relief. As I have said, it is modelled on the successful reliefs that already exist for the creative sector, and it is designed to give the relief to producers while minimising the scope for abuse. The Government recognise that not-for-profit companies make up a valuable and substantial part of the theatre industry, and we are confident that the sector will be able to access the relief without significant additional administrative burdens. A concern was expressed about whether setting up a trading subsidiary is complicated for charities. As I have said, we have tried to minimise complexity, and we have based the relief on what is already in place. We believe that charities will get the support they need.
David Mowat
I have, indeed, been here all the time, Mr Deputy Speaker.
The hon. Member for Bishop Auckland (Helen Goodman) asked whether the relief will apply to blockbuster successes, such as “Les Misérables”, on which massive amounts of money are made. Indeed, the return on capital for such ventures is far higher than that for contractors in the North sea. Can the Minister give us any assurance that the relief will not be disproportionately skewed towards such companies?
Mr Gauke
The point is that the relief is designed to support the range of theatre productions across the UK, in both the subsidised and commercial sectors. We worked closely with the subsidised sector when developing the policy, and we are confident that it will benefit from the relief.
Let me turn to the points made about measures to deal with tax avoidance schemes, including the accelerated payments regime and follower notices. My hon. Friend the Member for Tamworth (Christopher Pincher) asked whether taxpayers who have not used a true tax avoidance scheme will be caught, perhaps with a precautionary notification having been made under the DOTAS regime. Any unintended consequences for compliant taxpayers will be minimal. Where the taxpayer has used a relief correctly, but a DOTAS disclosure has been triggered, there would not normally be any tax in dispute, and there will therefore be no accelerated payment. If a taxpayer has used a relief largely as intended, but some elements are disputed, then an accelerated payment—if one is required—would be confined to the disputed elements. Let me be clear that the accelerated payment is the amount of tax that the taxpayer can expect to pay if their avoidance fails, taking account of their overall tax position. It is not some arbitrary amount, as has been alleged by those who have tried to discredit the measure.
My hon. Friend asked whether the measure will be retrospective in effect, as did my hon. Friend the Member for Cannock Chase (Mr Burley). We had an extensive debate on that point in Committee, and the Committee reached a sensible conclusion, but let me set out the issue again. The measure is not retrospective. The rules about whether the taxpayer’s scheme does or does not work and about the amount of any tax liability will not be changed. The taxpayer would have already paid the money had they not entered an avoidance scheme. The taxpayer can continue to dispute the case, and will be paid back with interest should they win. We are not restricting people’s rights. Prudent taxpayers should recognise that tax avoidance carries a significant risk of not working and that the tax might become payable, so they should make plans for such an outcome.
Christopher Pincher
My hon. Friend is being very generous with his time. I am pleased that he has made the position clear. Will he also make it clear that he will continue the dialogue with the tax advice industry and with taxpayers who are concerned about the issue? The Treasury Committee has described the measure as a retrospective piece of legislation. I know that he has received representations from the noble Lord Flight, and I trust that he will also take those on board.
Mr Gauke
I have received a number of representations on the matter, but I have been clear as to why the Government do not consider the measure to be retrospective. It is right that in these circumstances the disputed tax should be held by the Revenue.
The hon. Member for Newcastle upon Tyne North asked about the grounds for a penalty appeal. We have introduced amendments to provide extra clarity on that. They separate cases in which the penalty is cancelled because the notice should not have been issued from those cases in which the notice was appropriate but the taxpayer has reasonable grounds to continue the dispute—for example, because they could reasonably argue that different grounds are relevant. Then it will be for the tribunal to decide. HMRC is on course to publish the guidance and the DOTAS list in time for Royal Assent.
To answer the question from my hon. Friend the Member for Cannock Chase about the follower notices, there is no appeal against the requirement to pay the accelerated payment. That would simply substitute one dispute over the substance of the scheme for another. HMRC is not making a decision about whether the avoidance scheme works, which would have full rights of appeal, and the rules do not change that situation; rather, the requirement imposed on the taxpayer relates solely to the timing of the payment. If payment of the tax is a problem because the taxpayer cannot afford the full amount immediately, HMRC will use its normal approaches, including appropriate payment arrangements.
The source for the HMRC success rate of 80% is the list of tribunal and court decisions. Those decisions are all published and people can read for themselves HMRC’s continued success in these cases.
The hon. Member for Newcastle upon Tyne North asked whether we are withdrawing support for investment in renewables. The change we are making is not an attack on renewables. It will simply end double subsidy of companies that are at lower risk because they will benefit from Department of Energy and Climate Change support, and will ensure that the venture capital schemes remain well targeted and operate in a fair and sustainable way. The Government continue to support the renewables sector more generally and have set out the amount of support we will allocate to low-carbon generation up to 2020-21, when it will reach £7.6 billion. The Government continue to offer generous incentives to the sector.
The hon. Lady asked whether funds already invested in renewable energy schemes will have to be returned to investors. I can reassure her that new clause 6 will have effect only for shares issued by companies on or after Royal Assent to the Bill. Existing schemes and investors will not be affected by the changes.
With those points of clarification, I hope the House will support the proposals.
Question put, That the clause be read a Second time.
“associated person (in Part 8ZA) | section 356LB” |
“contractor (in Part 8ZA) | section 356L(2)” |
“contractor’s ring fence profits (in Part 8ZA) | section 356LD” |
“exploration or exploitation activities (in Part 8ZA) | section 356L(4)” |
“lease (in Part 8ZA) | section 356LC” |
“oil contractor activities (in Part 8ZA) | section 356L(2)” |
“relevant asset (in Part 8ZA) | section 356LA” |
“relevant offshore area (in Part 8ZA) | section 356L(5)” |
“relevant offshore service (in Part 8ZA) | section 356L(3)” |
“commercial purpose condition (in Part 15C) | section 1217OB”; |
“company tax return (in Part 15C) | section 1217OA”; |
“core expenditure (in Part 15C) | section 1217GC”; |
“costs of a theatrical production (in Part 15C) | section 1217IC”; |
“EEA expenditure (in Part 15C) | section 1217GB”; |
“EEA expenditure condition (in Part 15C) | section 1217OB”; |
“income from a theatrical production (in Part 15C) | section 1217IC”; |
“production company (in Part 15C) | section 1217FC”; |
“qualifying expenditure (in Part 15C) | section 1217JA”; |
“the separate theatrical trade (in Part 15C) | section 1217OB”; |
“theatrical production (in Part 15C) | section 1217FA”. |
Mr Gauke
I beg to move, That the Bill be now read a Third time.
I will keep my remarks brief, but I would like to remind the House once more of the important provisions before us. Finance Bill 2014 delivers measures that will help British businesses invest and create jobs, help British households work and save, and help to ensure that everyone in Britain pays their fair share of tax. The Bill builds on the strong foundations that we have secured in the past four years, safeguarding our economic stability, creating a fairer more efficient and simpler tax system, and driving through reforms to unleash the private sector enterprise and ambition that is critical to our recovery.
Let me focus first on growth and competitiveness. When this Government took office, we inherited an economy in crisis. We have had to make some tough choices, but we have delivered our economic plan. As a result, the UK economy is finally getting back on track. The deficit is shrinking, employment is at record levels and the our economy grew faster than that of any other advanced economy over the past year. To support the recovery, it is vital that the UK tax system attracts investment to this country and does everything possible to ensure that UK businesses can compete in the global race. That is why, in the corporate tax road map in 2010, we set out our ambition to give the UK the most competitive tax regime in the G20.
In my conversations with financial directors and tax advisers I am told again and again of the importance of a low headline rate and the signal it sends. I am proud to say that, as a result of this Government’s actions, the main rate of corporation tax will fall to 20% by 2015-16—not only significantly lower than the uncompetitive rate of 28% we inherited from Labour, but the lowest of any major economy in the world. It is vital for our national interest that we continue to have that low competitive rate. Altogether, by 2016, our corporation tax cuts for small and large businesses will be saving businesses £9.5 billion every year. These reforms have been a central plank of the Government’s economic strategy, and that strategy is working.
Competitiveness is not just about the rate of corporation tax. That is why this Bill will raise the annual investment allowance to £500,000 with effect from April 2014 to December 2015. This doubles the amount of investment on which firms can get up-front tax relief. More than 4.9 million firms will benefit, the vast majority of which will be small and medium-sized enterprises.
The Bill will also reduce business and household energy costs by freezing the carbon price support rate to £18 in 2016-17. The Government have also committed to maintain the freeze until the end of the decade, which will save businesses £4 billion by 2018-19. The Bill includes measures to give targeted support to the innovative sectors that will drive growth in the 21st century. We will legislate further to increase the generosity of the research and development tax relief for small businesses, with an increased rate of support for loss makers of 14.5%. This demonstrates the Government’s commitment to supporting research-intensive SMEs and start-ups and could support up to £1 billion of investment over the next five years. We will support social enterprise with a 30% tax relief, unlocking up to £500 million in additional investment over the next five years, and we are making permanent our successful seed enterprise investment scheme to support investment in start-ups and early-stage firms. Let me mention again the new theatre tax relief, which we have just debated, that recognises the unique cultural value that the theatre sector brings to the whole of the UK.
With low corporation tax rates, support for innovation and help for small business, Finance Bill 2014 sends the clearest possible message that Britain is open to multinational companies, open to entrepreneurs, open to investors: Britain is open for business.
Let me deal with fairness. While the Bill supports businesses, it also provides for individuals and helps families with the cost of living. We are delivering our coalition commitment to raise the income tax personal allowance to £10,000 and we are going further to increase it to £10,500 in 2015-16. By April 2015, a typical basic rate taxpayer will be more than £500 better off than under the previous Government’s plans. Taken with previous increases, the Government will have lifted over 3.2 million people out of income tax altogether. That is real help for hard-working people.
The Finance Bill rewards those who want to save for the future. We recognise that people who rely on their savings income have seen low returns in recent years. From April 2015, the 10% starting rate of tax on savings will be abolished, and a 0% rate will be extended to the first £5,000 of savings income above the personal allowance. This will benefit 1.5 million people, over 1 million of whose total incomes will be below £15,500 a year. They will pay no tax on their savings income at all.
We are delivering our promise to recognise marriage in the tax system by introducing a new transferable tax allowance for married couples and civil partners, allowing spouses in households where neither partner is a higher or additional rate taxpayer and where one partner has not used up the full allowance, to pay tax on up to £1,050 less of their income from 2015-16.
Let me deal with some of the measures we are taking to tackle avoidance. The vast majority of individuals and businesses pay the tax that they owe, but there are some who continue to pursue unacceptable ways of reducing and delaying their tax bill. This Government are determined radically to reduce both the incentives and the opportunities for individuals and businesses to engage in abusive behaviour. This Government have taken unprecedented steps to tackle avoidance and abuse. Since 2010 we have legislated to close more than 40 tax avoidance loopholes, and we have made major strategic reforms such as introducing the United Kingdom’s first anti-abuse rule. As a result, the market for tax avoidance schemes is shrinking. The number of disclosures of tax avoidance schemes fell by nearly 50% between 2011-12 and 2012-13.
However, we are not complacent. That is why the Bill introduces a new requirement for users of avoidance schemes which have already been struck down by the courts, which fall within the scope of the DOTAS rules, or which are being counteracted by the general anti-abuse rule to pay the disputed tax up front. That will generate nearly £5 billion of revenue over the next five years, and ensures that those who knowingly enter avoidance schemes will not be able to hold on to the disputed tax. They will have to pay up front like most other taxpayers. We are also cracking down on high-risk promoters of tax avoidance schemes by imposing minimum standards of behaviour, supported by onerous information powers and stiff penalties for those who do not comply. Those measures demonstrate the Government’s continued commitment to swift, effective and targeted action to tackle avoidance and aggressive tax planning.
The Bill may be substantial, but it contains a number of provisions to clarify or simplify the tax system. It contains proposals to simplify the tax rules and administrative procedures for employee share schemes, and to merge the main and small-profits rates of corporation tax. Those changes will make it easier for small businesses to meet their tax obligations, and will give them greater certainty that their tax affairs are in order. The Bill also follows a longer, more thorough process of policy development. In December 2013 we published more than 300 pages in draft legislation for comment, and we received more than 300 responses, which have improved the final legislation.
The Bill once again delivers on the Government’s commitment to unprecedented levels of consultation and scrutiny in the development of new tax proposals. It has also undergone 31 hours of scrutiny in the Public Bill Committee. Let me take this opportunity to thank and pay tribute to the Members on both sides of the House who served tirelessly on the Committee, as I did not have a chance to put all my thanks on record at the end of the Committee stage.
I particularly thank the Whips: my hon. Friend the Member for Hastings and Rye (Amber Rudd) provided invaluable help, and I also thank the hon. Member for Scunthorpe (Nic Dakin). I thank my hon. Friend the Member for Gosport (Caroline Dinenage) for her assistance in ensuring that inspiration flowed readily. I thank the members of the Opposition Front-Bench team, who probed diligently. We did not necessarily agree, and Ministers certainly did not accede to any of their endless requests for reports and reviews, but they put their case in, for the most part, reasonable terms.
I thank the hon. Members for Birmingham, Ladywood (Shabana Mahmood), for Kilmarnock and Loudoun (Cathy Jamieson) and for Newcastle upon Tyne North (Catherine McKinnell)—not forgetting, of course, the hon. Member for Nottingham East (Chris Leslie), who at least was there at the beginning and is here at the end. That is half the skill of dealing with a Finance Bill, as far as I can see.
I thank the Financial Secretary to the Treasury and the Economic Secretary to the Treasury for their help in setting out the Government’s case. I also thank my hon. Friends on the Back Benches, whose contributions were generally both valuable and brief: I am grateful for that.
I fear that my time is almost up, Mr Deputy Speaker, so I shall draw my remarks to a close. The 2014 Finance Bill rewards hard work, and restores our private sector’s competitiveness. It encourages investment, tackles avoidance, and helps those on low incomes. This is a Bill that takes difficult steps but delivers real change, and I commend it to the House.
Chris Leslie
Now that we have reached the final stages of consideration of the Finance Bill, may I join the Minister in commending all hon. Members in all parts of the House who took part in the scrutiny, and in considering all the details? As he said, there were 31 hours of consideration of the Bill. I particularly pay tribute to my hon. Friends the Members for Kilmarnock and Loudoun (Cathy Jamieson), for Newcastle upon Tyne North (Catherine McKinnell), and for Birmingham, Ladywood (Shabana Mahmood). Let us be honest: they did the heavy lifting in Committee and on Report, as did—in an equal but perhaps less audible way—my hon. Friend the Member for Scunthorpe (Nic Dakin), the Opposition Whip, who made sure we kept to time and that everything was pursued diligently. Many hon. Members, certainly from the Opposition side of the Chamber, pushed Ministers and probed on specific matters of policy, and I grant that Ministers tried to address many of those points, though they were ably assisted, I suspect, by the officials from the Treasury, who also put a lot of work into these Finance Bills.
The Bill is long on clauses but short on ambition, I am afraid. I said on Second Reading that our goal was to try to improve the specifics. We have tried our best in a number of areas, but I fear we have not always succeeded in persuading Ministers to see the error of their ways. Let us consider some of these specifics, such as the crass and ill-timed tax cut for investment fund managers through the abolition of stamp duty reserve tax. At a time when so many people in this country are struggling with cuts to tax credits, such as the bedroom tax, and finding it difficult to make ends meet, the Government’s priority was to give that support and help first and foremost to those poor, hard-up investment fund managers. It is a badge of shame that that was their priority.
Chris Leslie
I do not know whether the hon. Gentleman is an investment fund manager who has done well out of this, but I will give way and find out.
Ian Swales
The hon. Gentleman is repeating something we have discussed over and over again. Does he not understand that the money from the change in stamp duty goes to the investment funds, not the manager, and that, in fact, millions of ordinary people up and down the country benefit from this change?
Chris Leslie
I am sure those investment fund managers have absolutely no interest in the abolition of SDRT in any way! I thought the hon. Gentleman was once a Liberal Democrat. Before the general election, the Liberal Democrats used to pretend they were in favour of standing up for the vast majority of people, against the vested interests in society who tend to look after their best interests, yet here he is again, voting for tax cuts for investment fund managers. This is a specific element of the Bill that we opposed. We tried to persuade the Government to drop that measure, but we were unsuccessful.
Mark Field
I feel I must stand up for investment fund managers, not least because their business brings significant amounts of money to the UK. I reiterate the sensible words of the hon. Member for Redcar (Ian Swales): ultimately it is all of us who are investors in such funds who will reap the benefits of ensuring that this business comes to these shores, rather than to many other globally competitive financial centres.
Chris Leslie
The hon. Gentleman represents very many of those investment fund managers. He is doing the job he was sent to do, but this is a matter of priorities, and I have to say that the Opposition just disagree. The Treasury has finite resources at its disposal, and at a time of pressures, cuts, and rises in tax—through VAT and in other ways—that hit the least well-off in society, I just disagree with Ministers and Members on the Government Benches that this should have been the priority.
There were other specific areas where we tried to persuade the Government to improve the Bill, such as the proposal to give shares to employees in exchange for employment rights. We believe that undermines what should be a healthy approach to employee share ownership, because it gives the sense that something is being taken away, and that there is a disadvantage. That point was voiced not just by Opposition Members, but by some Government Members. Again, however, we could not persuade the Government on that.
So many tax loopholes need to be addressed, and the Finance Bill should have been the opportunity to tackle some of them, not least the notorious quoted eurobond exemption, which is costing taxpayers hundreds of millions of pounds. Ministers ought to have had the courage to take on that issue. Some of the Bill’s proposals for pensions flexibility are sensible, but big questions remain about the advice we will be able to give retirees to make sure that they get the guidance they need, at that most crucial point in their financial lives, to make the right choice, if they are not purchasing an annuity. Ministers have not lived up to the challenge of ensuring that that guidance and advice is possible. In the debate, I heard that that guidance may currently equate to 15 minutes of face-to-face advice—perhaps I should say face-to-faces advice, because the Minister with responsibility for pensions is now saying, “We will give you some guidance, but it might be as part of a group of people.” The Government have to improve the legislation in this area.
The Bill contains a proposal for a married couples allowance. The Chief Secretary to the Treasury and, I suspect, the Chancellor personally disagree with it, but in a coalition they have to throw a bit of meat to the Back Benchers. The allowance discriminates between forms of partnership and does not help many married couples at all, as we see when we look at the total number who will benefit. If we have tax cuts to give, they should be given to as many people as possible.
Of course, we also tried to improve the specifics and dissuade the Government from continuing their tax cut for millionaires—the reduction from 50p to 45p in tax on earnings of more than £150,000. Again, that is a sign of their priorities: they stand up for those who already have significant wealth in society, but do not respond to the needs and requirements of the least well-off.
We tried our best to improve the Bill, but it missed a number of opportunities. Significant reforms should have been in it, but are conspicuous by their absence. Why did the Treasury not put the cost of living concerns front and centre in this legislation? I am not just talking about making sure that energy companies stop ripping off households up and down the country, or about passing on wholesale price reductions to ordinary households; the Bill should have contained, for example, steps towards a 10p starting rate of tax. There are a number of ways in which cost of living issues should have been far higher up in this legislation.
Mr Jim Cunningham (Coventry South) (Lab)
The Conservative Government of the early 1970s recognised that there was a cost of living problem in this country, and they gave a cost of living payment, through the wage packet, to the low-paid in industries.
Chris Leslie
One would have thought that by now Ministers would have twigged that for all the talk of growth and the recovery, their constituents, never mind ours, are not seeing the benefits in their daily lives. That should have been a focus in the Finance Bill. It should have focused more on housing, as we have a crisis in this country, whereby demand exceeds supply and we have the lowest level of house building since the 1920s. Yet Ministers seem intent on structuring a lopsided recovery in our housing market, failing to deliver the 200,000 properties a year we should be aiming towards by 2020. In addition, many tenants are being ripped off by lettings agencies in our private rented sector. We need reforms to deal with those sorts of things and the Budget ducked those issues, as did the Finance Bill.
The Bill could have dealt with some of the exploitative zero-hours contracts. It should have contained measures to help small and medium-sized enterprises with business rates, because many firms in our constituencies are finding it difficult to get by. We should make sure that we help them, not just with business rates but by making sure that the banks do their job and provide credit. Those are the sorts of reforms that would make a big difference, but again, they were not in this Finance Bill.
Mr Brooks Newmark (Braintree) (Con)
The hon. Gentleman should at least acknowledge that we dropped the small business rate by at least 1p, which has helped businesses. Will he guarantee before the House that he would not increase corporation tax should the country be unfortunate enough to see a Labour Government in power after 2015?
Chris Leslie
That is already on the record. Our view is that the proposed change in corporation tax from next April—from 21p to 20p—should not proceed. That help, instead of going to 2% of companies, should go to 98% of businesses, including the small and medium-sized companies that are the backbone of our economy and that form the bedrock of enterprise in this country. Funnelling that resource through business rates is our preferred choice, but we will set out all our plans in a manifesto, as I suspect the Minister will do as well. We had a debate on this matter earlier, in which we focused on annual investment allowances—the capital allowances for businesses. As we all know, the Minister cut that allowance to a very small level straight after the general election, causing great chaos for very many businesses. Amazingly, it is going up again, in time, coincidently, for the next general election. He revealed in the small print today that it is a temporary change, so the allowance will presumably go back down again.
Chris Leslie
I will give way to the Minister if he will tell us what that investment allowance will fall back down to in 2015. Will he tell us?
Mr Gauke
It is hardly in the small print. It was in the announcement that was made when we extended and increased the annual investment allowance until December 2015. After that, it is a rate of £25,000. That rate is in the public domain, and, presumably, it is the rate that the Opposition have as well.
As the hon. Gentleman did not quite respond to the question from my hon. Friend the Member for Braintree (Mr Newmark), let me ask it again. The Labour party has given a heavy hint this week that it could increase corporation tax up to 26%, as that would still be the lowest rate in the G7—that is the test that it has set itself. Will he provide some reassurance today that a Labour Government would not increase corporation tax to 26%?
Chris Leslie
We know the Minister’s game. He is again trying to scare firms and businesses with various suggestions on tax. We have made it very clear that we need to ensure that corporation tax levels remain at their most competitive among the G7. We will set out our tax plans in a manifesto, as the Minister will be required to do as well. If my hon. Friends think that VAT is due to stay at 20% under a Conservative Government, they should think again. I have heard that the Conservatives may wish to increase VAT to 21% or 22%. I will give way to the Minister if he can rule it out for us right now, here in the Chamber, that he does not have any plans to increase VAT in the next Parliament. Will he rule that out?
Mr Gauke
I will tell the hon. Gentleman what we can do: we can continue to reduce the deficit without increasing taxes. That is more than he can offer. Unlike his party, we have not given a heavy hint that the test based on the most competitive rate in the G7. Canada has a rate of 26.5%. If the Labour party imposed a rate of 26%, it raises the question of whether it would be complying with that commitment.
Chris Leslie
Let the record show that the Conservative Minister did not rule out increasing VAT to above 20%. It is telling that he gave a heavy hint that that remains open as an option. We can have these discussions and examine these particular issues, but I am looking at the missed opportunities—the things that should have been in the Finance Bill. We are now on its Third Reading, and it is time that Ministers realised that people from across the country are crying out for significant changes and improvements that will affect their lives.
I am thinking, for example, of the 5 million people in low pay and the incentives to deliver a living wage. That could have been part of the Finance Bill, but it is not. I am thinking of those families who are struggling with the high cost of child care, which is increasing at a rate higher than inflation. If only the Minister had designed his bank levy properly in the first place and collected the £2.5 billion that he promised the country, we could afford to move from 15 hours of free child care for working parents of three and four-year-olds to 25 hours. That is the sort of reform that could make a big and appreciable difference to the lives of working people up and down the country.
Mr Jim Cunningham
Once again, it comes back to helping families with the cost of living. The Government cut Sure Start, nursery places and so on. Although they boast that they expanded that provision, they did not—they cut it, although we do not have the exact figures. The situation is exacerbated for a lot of families by the bedroom tax, which is forcing people into more expensive accommodation and thereby driving rents up. There is also a lack of social house building in this country.
Chris Leslie
That is my point. The Press Gallery is not bursting at the seams because the Government do not want people to think about what could have been in the Finance Bill. That is not something they want to talk about. They want it to be a “steady as she goes” Finance Bill. They do not want to address the problems of the bedroom tax or to supply real help to the long-term unemployed through starter jobs to give them the opportunity to repair their CVs and get a foot on the ladder. Repeating the bankers bonus tax would have supplied the revenue for that. There are funded ways of doing those things; despite how Ministers seem to want to portray it, this is not about unfunded commitments or borrowing. There are clear, practical and well-costed ways of delivering real improvements to people’s lives, but Ministers refused to do them.
Why are Ministers missing the opportunity offered by this Bill? As far as they are concerned, everything is fine with the economy. It is all going perfectly well. That is their view, but I am afraid that we disagree on that point. As far as Ministers are concerned everything is fine with living standards, but the OBR has said that people will be worse off in real wage terms in 2015 than they were in 2010. Ministers think that everything is fine in the welfare system, but they do not realise that the welfare bill is rising because they are not tackling the root causes of welfare inflation, such as rising rents, long-term unemployment and the subsidies required for low wages. Those are the sorts of challenges that should have been covered in the Finance Bill but are not.
On the deficit and the national debt, Ministers think that everything is fine even though the past couple of months have seen the deficit rise. It is going in the wrong direction. They have added a third to the national debt, which is now at £1.2 trillion. If interest rates go up even by 25 basis points—0.25%—an extra £2 billion of public expenditure will be required to service the debt that they will be accumulating.
Ministers think that everything is fine with productivity, yet infrastructure output is down by 10% compared with in 2010. They think that everything is fine in the housing market, yet we can see by the lopsided nature of what is happening in the economy that there are real risks that mortgage rates might well rise prematurely because of how they have failed to recognise the need to match demand and supply more effectively. They might be satisfied with the state of the economy, but we are not.
Mr Cunningham
It is interesting that my hon. Friend has mentioned interest rates, because, one way or another, they are bound to go up over the next 12 to 18 months. That will have a major effect on negative equity for people who have bought their houses, but, more importantly, it can affect small businesses that want to borrow money and are not getting much help from the banks at the moment. The Government spend half their time blaming a Labour Government for the mess that the banks created. They have never attacked the bankers, who made the economic situation worse, not better. They are apologising for the bankers and blaming us.
Chris Leslie
Government Members and Ministers do not understand how important it is that we ensure that the recovery is sustained and sustainable. A premature rise in interest rates has considerable risks. Three quarters of credit and debt is floating, so if interest rates do rise prematurely, significant harm will come to many householders. Even a quarter point rise in interest rates will cost the typical householder £240 per year. [Interruption.] The hon. Member for Suffolk Coastal (Dr Coffey) may be relaxed, as the Chancellor is relaxed, about interest rates. The Chancellor says that he is not bothered—that he is relaxed about rising interest rates. Is the hon. Lady relaxed about rising interest rates? I will give way to her if she is.
Dr Thérèse Coffey
All I will say is thank God we have not had a Labour Government for the past four years, because I expect that interest rates would now be at 10% and people would be handing back their keys and hoping that the hon. Gentleman does not get into power next year.
Chris Leslie
I do not know what evidence the hon. Lady has for that spurious assertion.
We will see what happens in the coming months. We will make sure that mortgage customers in the hon. Lady’s constituency know that the increases in interest rates are partly related to the condition of the housing market, which is causing significant risk. The Governor of the Bank of England is trying to deal with this very lopsided situation. Of course, it is a matter for him to decide on. Government Members need to speak to the Chancellor to get him to pull his finger out on the housing market and make sure that this is pursued correctly. They do not understand why it is important for the recovery to be fair for all—to be something that everybody in every part of the country benefits from. The richest 1% having been doing especially well in the past year.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Just to be helpful, there are three more speakers to come. The debate that is ping-ponging across the Chamber is very interesting, but I would like to hear from Back Benchers as well.
Chris Leslie
You are completely right, Mr Deputy Speaker. We have had this debate going on throughout the day.
The Minister is a Member of Parliament for Hertfordshire. If his constituents find work in London, under one set of statistics the jobs are classified as located in London, but under the set of statistics he prefers, they are located in Hertfordshire and not London. We can talk about the methodology used in relation to these things.
Ultimately, this Finance Bill is not focused on the long-term best interests of this country. It is not a long-term Finance Bill for stability and for the vast majority of this country; it is a short-term Finance Bill from a part-time Chancellor who is more concerned about getting from here to election day than building a sustained recovery that is fair for all. The defining challenge of our times is to reconnect the wealth of our country with the ordinary finances of households up and down the country. I urge my hon. Friends to vote against the Finance Bill and to send this Bill and these Ministers back to the Treasury drawing board.
Mark Field
I am glad that I am looking more youthful and Conservative this afternoon, Mr Deputy Speaker.
This is a very good Bill containing much that I agree with. The Minister has rightly pointed out that it does some important things, particularly on something close to my heart—the theatre industry in my constituency—but also on technology, which is one of the big growth areas for the future prosperity of this country.
I want to talk about an ongoing concern of mine. The Minister will be aware of what I am about to say. Barely a fortnight ago, Her Majesty’s Revenue and Customs began writing to some 5.5 million taxpayers to confess that it had got things wrong. Errors in the pay-as-you-earn calculation had led the taxman to charge some 2 million fellow citizens too much tax and a further 3.5 million Britons had been assessed too leniently. That latter group now faces the prospect of several years of repayments. All this is in spite of expensive IT and personnel reforms that were meant to improve the system’s accuracy.
That news came at a time when the House was scrutinising this Finance Bill, which proposes bestowing ever more powers upon that organisation—in my view, an unjust reward for yet another year of error-strewn performance. Meanwhile, a consultation is now under way as to whether HMRC should be given direct access to UK citizens’ bank accounts so that it can claim from source any tax that it believes it is owed. I share the view of many people on the Government Benches who are concerned that this coalition Government are overseeing the transfer of very considerable powers to the state. I fear that a precedent will be set for a future Labour Government, which we all hope will not come any time soon. However, such a Government might well be minded to expand further the taxman’s remit.
Will the Minister reconsider the new accelerated payments regime that is proposed in the Bill—other Members have spoken on that in the past couple of days—about which I raised my own concerns at Second Reading? It is vital that the Treasury considers carefully the impact of granting such powers to an organisation that, I am afraid, has proven itself time and again to have incorrectly calculated tax on a grand scale.
Mr Gauke
Since 1944, there has been an end-of-year reconciliation under the PAYE system, because not all the information necessary to calculate the PAYE amount is available to HMRC during the year. To some extent, the PAYE amount is a provisional one, which is corrected at the end of the year. Notifying people at the end of the year quickly is not the system failing; that is how the PAYE system operates. It is not errors; that is the system.
Mark Field
I do appreciate that, but the Minister will also appreciate that trust in many institutions, whether Government, banks or this House, has been at an all-time low in recent decades. If we are going to pass on more powers to such institutions we—
Mark Field
If the hon. Lady will excuse me, I will make some progress, as there are other Members who want to speak.
We are now looking at drawing tax avoidance measures so widely. It has been common practice for investors to err on the side of caution and sign up, as the Minister knows, to the HMRC’s own disclosure of tax avoidance schemes—DOTAS—register. Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. The Government believe that that incentivises scheme promoters to sit back and delay resolution, so they propose extending the accelerated payments measure to existing DOTAS-registered schemes. That will mean that disputed tax is paid up front to the HMRC, and will be returned if a scheme is subsequently found to be legitimate.
I quite understand why the Minister has felt tempted to explore that route. There is, I understand, a desperate need for money to shore up the public finances, which are still far less rosy than any of us would wish, with a recovery that remains somewhat fragile. There is also, understandably and justifiably, a consciousness of the need to deal more quickly with the tens of thousands of outstanding mass-marketed avoidance cases that are currently clogging up the courts.
However, there is also a vital issue of principle at stake. The Government have been celebrating and espousing their reverence for the eight-centuries-old principles set out in Magna Carta. It was that charter that established the supremacy of the law by dictating that no Englishman could be punished without first going through the proper legal process. That set in train a constitutional revolution that has seen billions across the globe having their rights expanded and protected against an all-powerful state.
Yet at the same time, our Government are now overseeing the creation of a law that will permit HMRC to confiscate a citizen’s property before the courts have established who is legitimately entitled to it. The DOTAS register was a good idea. It was designed to promote openness and transparency in investors’ relations with the HMRC. It is now, in effect, introducing retrospective legislation, with DOTAS declaration being used as a stick with which to beat legitimate investors—those who had never planned on having the liquid assets to meet disputed liabilities.
No doubt the Government—any Government—feel they can railroad those proposals through on a wave of popular demand for new measures to tackle tax avoidance, but although I agree that we have to clamp down on illegitimate tax avoidance, I worry about the potentially very wide-ranging consequences, including the fundamental undermining of the Government’s overarching aim to make Britain a place that is open for business. I support many of the underlying measures in the Bill that are focused on that aim, but this measure expands a profoundly anti-Conservative notion of retrospective legislation. The Minister and I have both been shadow Ministers; we know the number of Finance Bills proposed by the erstwhile Labour Administration in the latter half of the last decade that we expressed concern about because they contained precisely this type of anti-avoidance legislation with retrospective elements. We have to recognise that considerable hardship is imposed on many of those who are affected by such provisions.
I addressed these issues in an article in The Daily Telegraph several months ago. I was and continue to be inundated with letters and e-mails from ordinary people across the country who are utterly dismayed that a Conservative-led Government would initiate such a change in law. Let me highlight some of their comments, so that the Minister is fully aware of the impact of the proposal. One correspondent advised me:
“If this goes through, HMRC will be able to demand immediate and upfront payment of the money it says I owe as a result of their changing the law retrospectively—but without me even being able to present any arguments to the tax courts in my defence. If this were to happen I would need to lose my home in order to pay the bill. It is a monstrous injustice.”
Another correspondent wrote:
“If one was to listen to the Government, it could easily be believed that users of the structures declared under the DOTAS are malicious, super rich individuals, out to escape payment of their ‘fair share’, in contrast to ‘honest taxpayers’. I have been an employee of a company that provided a remuneration structure duly registered under the DOTAS.
In the aftermath of the most severe economic crisis in generations, the IT industry, in which I work, got hit very hard. I have been subjected to rate cut after rate cut since 2009, and for me, nominal income is only going in one direction: down. Yet, if I listen to”
the Government,
“it sounds like complying with an ‘accelerated payment’ will be but a well-deserved inconvenience, forcing me maybe to sell one of my numerous yachts or…homes. I am shocked and appalled at the cynical discourse that consists of creating this false image. I personally feel deeply insulted…. I am not a rich person by any stretch of the imagination; my partner and I rent a one bedroom apartment, and we live modestly.”
What is slightly depressing is that this sort of scrutiny has not really happened. I well understand why the Labour Opposition feel they do not want to stand up for those individuals affected by the accelerated payments regime. I ask the Minister once again in the implementation of the Bill to consider an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal. I think there should also be a right to appeal against an accelerated payment on the ground that the money is not due, or that a follower notice or accelerated payment notice is not applicable.
Although the Government say the legislation is not retrospective, as it does not change an underlying tax liability, it will in fact apply with retrospective effect over the past 10 years to anyone who currently has an open appeal or inquiry. In my view, if the provision is to come into effect, it should be applied only in cases involving tax planning carried out after Royal Assent to this Finance Bill.
I am sorry if I sound a little churlish. The Minister is well aware, because we have discussed this privately as well as on the Floor of the House, that I think there is much that is good in the Bill, but it is right that these things are properly scrutinised and that scrutiny is ongoing. We are putting into place certain measures that I think set a potentially dangerous precedent and run counter to a principle that should be close to all our hearts: that the British tax system and the British economy should be open for business and open to the opportunities that we all want our constituents to benefit from as we move into a strong economic recovery in the years ahead.
Chris Evans (Islwyn) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Cities of London and Westminster (Mark Field), who always speaks with great expertise in his field. I served on the Bill Committee—I have not missed a Finance Bill Committee since I entered the House. On the first Committee on which I served in 2010 I was full of enthusiasm and, having listened to the Minister, I am still filled with that enthusiasm as he has negotiated a thousand different ways to say no. I pay tribute to all the Members who served on that Committee.
As we approach the general election, the public are crying out for help to ease their burdens as the economy belatedly shows some green shoots of recovery. People around their kitchen tables wondering how they will pay their bills, those in the workplace who are worried about their job security, and those running a small business will judge the Bill on three tests—are taxes fair for my family and myself, do business taxes encourage growth and are they fair, and how will pensions reform—
Mel Stride (Central Devon) (Con)
The hon. Gentleman mentions business taxes. The shadow Minister was repeatedly pressed to say whether business taxes might rise under the next Government. We know from what the Opposition have said that business taxes could rise to 26.5%, the level that they are at in Canada. Does the hon. Gentleman share my concern that that could be a major brake on business development in the future?
Chris Evans
Of course I share the hon. Gentleman’s concern. I shared the concern that the very first act in the very first Budget of this Government was to put VAT up to 20%, increasing the tax burden by 2.5% for businesses all over the country. That was not exactly pro-business, but I am not here to talk about what the Tory Government have done or not done.
Let us deal with facts. Working people have seen their wages fall by £1,600 a year on average under this Government. Real wages will have fallen by 5.6% by the end of the Parliament. People feel worse off. On growth—the one test that the Tories said they would achieve—after three years of a flatlining economy, we see the economy growing by only 4.6%. The Chancellor does not talk about his forecast that the economy would grow by 9.2% in 2010. Our present rate of growth is far slower than that of America at 6.6% or Germany at 5.7%. GDP growth this year is still expected to be lower than the independent Office for Budget Responsibility forecast in 2010.
On borrowing, on which the Conservatives attacked the Labour Government, the present Government promised to balance the books by 2015, but borrowing will be £75 billion that year. Over this Parliament borrowing is forecast to be £190 billion more than planned at the time of the first spending review. National debt as a percentage of GDP is not forecast to start falling until 2016-17, breaking one of the Government’s own fiscal rules.
All the headlines following the Budget were about pension reform. Yes, annuities need to be reformed, and I support increased flexibility for people in retirement and reform of the pension market so that people get a better deal. However, the Labour party has consistently called for reforms to the annuities market and a cap on pension fund charges over the past three years. The Government have failed to reform the private pensions market to stop people being ripped off and to create a system that savers can trust. The Government are failing to prevent savers from being ripped off by delaying bringing in a cap on charges. This is costing savers up to £230,000. The Government are failing to make tax relief on pensions fair, with 15% of all relief—£4 billion—going to the richest 1% of taxpayers.
When we talk about the reform of pension markets and the ending of annuities, I believe we should set three tests. The first is the advice test. Is there robust advice for people providing for their retirement, with measures to prevent mis-selling? Forget the patronising “buy a Lamborghini”. I do not believe the people of Britain are so naive as to go out and buy a Lamborghini. As a former financial adviser, I am talking about good advice. With the reform of the annuities market there will be new products—products that we have not thought of before, such as bonds, investment trusts and all sorts of vehicles that people can invest in. Those will be complicated and people will need advice, but that will not be achieved by 15 minutes of guidance, where advisers cannot sell.
The second test is fairness. The new system must be fair, with those on middle and low incomes still being able to access products that give them the certainty they want in retirement. The billions we spend on pension tax relief must not benefit only those at the very top.
The third test is cost. The Government should ensure that this does not result in extra costs to the state, either through social care or through pensioners falling back on means-tested benefits, such as housing benefit. The Treasury must publish an analysis of the risks it considers when costing this policy. I was deeply concerned when the Minister said this afternoon that this change, which is the biggest ever to the pensions market, is still to be worked out and that a consultation on advice is still running. For those facing this change, advice is vital.
I talked for little short of half an hour yesterday on the other major change introduced in the Bill: exchanging employment rights for company shares. I will try to break it down into two fundamental arguments. First, if an employer has an employee they are suspicious of, why would they give them shares in the company? Equally, if a company wants to trade shares for rights, does that mean it trusts the employee? Will they be hard-working and industrious for that company? Secondly, if a company is going to dismiss an employee, why would it give them shares in the company anyway? Surely share save schemes should be used to reward employees for hard, industrious work, but that is not happening. We still need reform.
We have talked about a report and analysis. Even though the statistics now show that after a 33-week consultation only five of the 200 companies that responded said that they were interested in taking up the scheme, the Government still say that it is far too early to even think about a report.
As we bring to a conclusion our consideration of the Finance Bill, which I am sure all of us who served on the Bill Committee are excited about, the one question we have to ask ourselves is this: is it fair to the people of Britain? Based on the statistics, it is not. I will therefore be joining my colleagues in the Lobby tonight and voting against the Bill.
Mr Brooks Newmark
(Braintree): It is always a privilege to follow the hon. Member for Islwyn (Chris Evans). I want to focus on one small aspect of the Bill, new clause 10, which I know Opposition Members hold dear to their hearts. A couple of years ago the Government extended the £25,000 rate tenfold to £250,000. I told the Chancellor that that was going down extremely well with small businesses and asked whether there was any chance that we could extend it a little longer. He said, “I can do better than that; I’ll double it again, to £500,000.” That takes in pretty much 99% of companies, which is a good thing.
For some reason, Labour wanted to enshrine in law the need to review the impact of the annual investment allowance, which I find peculiar. I do not think it is necessary at all. Governments review every year what is going on and whether tax cuts or increases work. I see no need to introduce that requirement into law.
However, I thought that it might be helpful for Opposition Members if I offered a quick review of what we have done for business. I have come up with 10 points. First, we have lowered corporation tax. Secondly, we have cut the business rate by extending the small business rate relief scheme. Thirdly, we have brought in electronic invoicing. Fourthly, we have raised the threshold for the enterprise investment scheme. Fifthly, we have introduced the seed enterprise investment scheme, helping small businesses get a kick start. Sixthly, we have brought in the employment allowance, saving businesses £2,000. Seventhly, we have cut national insurance contributions for under-21-year-olds, saving businesses £500 per young person they employ. Eighthly, we have introduced the Small Business, Enterprise and Employment Bill. Ninthly, we have frozen fuel duty, making it cheaper for people to go back and forth to work. Finally, we have improved the research and development relief for businesses. We have done a lot for businesses.
What has the impact been on businesses? The confidence index is at an all-time high. We have rebalanced the economy, with growth of 3% in construction, services and manufacturing. We do not need to enshrine in law the need to review the impact of the investment allowance on business, because actions speak louder than words. The Government’s long-term economic plan is working and Britain is back in business.
Business without Debate
Delegated Legislation
Petitions
Valerie Vaz (Walsall South) (Lab)
The petition is from the residents of Beacon Heights park homes. A petition in similar terms has been signed by 65 people.
The petition states:
The Petition of a resident of Beacon Heights Park Homes Park,
Declares that following the removal of the 934 and 936 bus services from Beacon Road, Walsall after 7pm and on Sundays many elderly people who do not drive cannot access public transport at those times and further that the Petitioner calls for a bus service or minibus to be introduced to replace the 934 and 936 bus service.
The Petitioner therefore requests that the House of Commons urges the Government to take all possible steps to encourage Walsall Metropolitan Borough Council to consider the objections of the local residents.
And the Petitioners remain, etc.
[P001363]
Mr Speaker
It is a splendid thing when somebody who introduces a petition has a brother behind her in support.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
The petition states:
The Petition of residents of the United Kingdom,
Declares that the Petitioners object to the closure of the Park End Clinic, Skelton Medical Centre, and Skelton NHS walk-in centre; further that the Petitioners object to the proposed closure of minor injuries units at East Cleveland and Guisborough Hospitals; further that the Petitioners are concerned these reductions in provision of primary care services will increase demand on the Accident and Emergency Department at James Cook University Hospital; further that the Petitioners believe that Ministers in the Department of Health should meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these closures, and regret that Ministers have not committed to such a meeting.
The Petitioners therefore request that the House of Commons urges Ministers to meet with the honourable Member for Middlesbrough South and East Cleveland to discuss these changes in service provision, and encourages NHS England and the South Tees NHS Clinical Commissioning Group to abandon these closures.
And the Petitioners remain, etc.
[P001364]
Nigeria (Abducted Girls)
(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gordon Brown (Kirkcaldy and Cowdenbeath) (Lab)
I am grateful to you, Mr Speaker, for permitting me to raise the desperate and continuing plight of more than 200 Nigerian girls who were abducted from school on 14 April and have been held in captivity for the past 80 days, with no sign of their imminent release. These wholly innocent young girls—Lugwa Abuga, Rhoda John, Comfort Amos, Maryamu Yakubu and 200 others—are now incarcerated in the forest areas of Borno state. Some have perhaps been dispersed across three other countries: Niger, Cameroon and Chad. Their physical and mental health is a worry for everyone.
We now know that the girls were kidnapped by the terrorist group, Boko Haram, whose name in Hausa means “western education is a sin”. They are being held hostage simply because they wanted an education. Their only crime in the eyes of Boko Haram is that they wanted to be at school. Eleven weeks in captivity will seem like an eternity for young, once-optimistic 14, 15 and 16-year-old girls, whose future was all ahead of them until that day.
I am sure that everybody in the Chamber would accept that such an outrage is every parent’s nightmare: your child leaves home and goes to school, but never comes home again; you wake up every morning not knowing whether your child is dead or alive, and spend every waking hour of the day not knowing whether your child is being molested, raped, trafficked or sold into slavery; and you have the terrible truth brought home to you that schools are no longer safe havens for your children, but theatres of war.
Boko Haram’s perversion of its faith is so profound that it is apparently unperturbed by practising violence against young girls, even rape that causes unwanted pregnancies—damage to young girls that will endure and be lifelong, and that cannot be wished away even if they are returned safely to their homes.
As we heard only a few minutes ago, in a Committee Room of the House of Commons, from Ngozi Okonjo-Iweala, Finance Minister and Co-ordinating Minister of the Economy—my grateful thanks to you, Mr Speaker, for chairing the event—across the country, tragedy is being piled on tragedy. There has been a series of attacks: a wave of bombings in Borno state yesterday; an explosion in a shopping mall in Abuja last week, which killed 24 people; a medical college raid last week in Kano, killing eight; a hotel bombing in Bauchi city, killing 10; and attacks on four churches, killing 24. Residents of remote villages in northern Nigeria are fearful of night raids and running short of food and supplies. They are fleeing to the mountain caves, or to bigger towns. With more than 1,000 reported abductions in the past year alone, and more than 5,000 deaths at the hands of Boko Haram in the past five years, the governor of Borno state, who has courageously spoken out, is warning that failure to help his embattled schools and families will spell disaster for the rule of law in the whole of Nigeria.
The 200 girls, whose faces and names are now known to the world, thanks to the efforts of the brave chairman of the Chibok community council, are not the only victims. There is another, less obvious, set of victims: the thousands of girls, and many boys, who can no longer go to school. Schools are closed in many parts of Borno state, and teachers are in fear of their lives. Education International, the global teachers’ union, which is well organised and engaged with this problem, has reported in the past few years on the murder of 171 teachers who were shot, usually in their own home and in front of their families, who were then kidnapped by gunmen. Their crime was to dare to teach girls at all. We therefore have another emergency in Nigeria: education in Borno state is coming to a standstill for fear of terrorists, and that demands an international and domestic response.
In the days immediately after the abduction, I and many others tried to secure international attention and the widest possible global support for the Nigerian girls. A month ago, an enormous wave of concern was expressed in every capital of the world. There was, as we know, a period of intense publicity, and a worldwide campaign to bring back our girls secured 1 million supporters, but once again the attention span of the world has proved limited, and interest has ebbed. Even when it was reported last week that another 90 children—60 girls and 30 boys—had been kidnapped, there was only a flicker of attention across the world.
Following the speech by Finance Minister Ngozi Okonjo-Iweala this evening, I wanted a debate before the summer recess—thanks to you it has happened, Mr Speaker—because it is time to wake up fully not just to the horror of what is happening, but to the ramifications for children, Nigeria and that part of Africa if nothing is done. A few terrorists can never be allowed at any time to blackmail a whole nation. We must do more to help the Nigerian Government back up the endeavours of President Goodluck Jonathan to secure the rescue of the girls and make inroads into the advances made by the terrorists.
I am here to thank the Government for what they have done so far, and for their moral, physical and military support to the Nigerian people. I know that the President of Nigeria wishes to give thanks for the offers of support from China, the United States, France and Israel, as well as Britain. I have met the President on three occasions recently, and he has sent an additional 5,000 troops to the Borno state and is ready to do more. As a result of his pleas to the international community, Nigeria, Benin, Cameroon, Chad, Niger, Britain and the US have already established an external intelligence response unit to share security information. While it is right to recognise that there has been a great deal of international support, it is also right to acknowledge that in its hour of need, Nigeria requires more helicopter support, more aircraft cover, and more surveillance equipment. I believe that we should also support President Jonathan’s call for a better co-ordinated system for sharing intelligence across borders, and for, if necessary, the use of special forces and law enforcement agencies to help Nigeria confront terrorism.
Jim Shannon (Strangford) (DUP)
I sought the right hon. Gentleman’s permission to intervene, and I thank him for bringing this matter to the House. The House is filled with Members who are equally concerned about this issue, and on behalf of the Church groups and my constituents, I want to share the right hon. Gentleman’s concerns publicly in the Chamber today. There has been an unwillingness, or perhaps the Nigerian Government have been unable, to respond in the way that we back home think they should. Is that because they are unable to seek the covert assistance that they need in order to ascertain where the schoolchildren are and bring them back? Does he feel that perhaps the covert assistant that this Government could offer is one way forward?
Mr Brown
I am grateful for the support of the Churches in the hon. Gentleman’s constituency and elsewhere. Support from around the world is giving succour and confidence to the Nigerian people. I met schoolchildren who have been writing letters to the Nigerian President in support of Nigeria’s efforts to try to capture the terrorists and release the girls. He is absolutely right that there is a real problem. If the girls have been dispersed to a number of different places, a rescue mission for one group would immediately put the other groups at risk. That is the dilemma that confronts the Nigerian Government, as I understand it. That is why they need additional support to monitor what is happening and, if it is necessary to intervene, the troops, security services and the air cover to do so.
There is a second thing that we can do to help. We cannot have safe schools if we do not have safe communities. In addition to the rising military and security presence in these towns, we need to allocate extra resources to reassure parents, teachers and children that they can go to school. The safe schools initiative, launched this afternoon in Britain by Finance Minister Ngozi Okonjo-Iweala, is a plan to rebuild the burnt-out schools that have been the casualties of terrorist incursions, starting with the Chibok school. Our promise must be that it will be rebuilt immediately and made safe, so that when the girls are returned to their homes, their school at Chibok is safe for them to learn in without fear. The worry for many in northern Nigeria is that their school will be the next to face a terrorist raid.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
I am very grateful to my right hon. Friend for securing such an excellent debate. Does he agree that in the north some of the problems arise from illiteracy, from the fact that people cannot find jobs, and from extreme poverty? Sadly, this is encouraging some people to move towards religious fundamentalism.
Mr Brown
I am grateful to my right hon. Friend. He has a very honourable record in fighting for the causes of poor people in Africa, Asia and every part of the world, and I want to acknowledge the work that he has done over many years. He is absolutely right. Ngozi, the Finance Minister, referred to that point only a few minutes ago. The Government of Nigeria have to do more—she says they will do more—to help young unemployed people to get work, and to enable young ambitious girls and boys to complete their education by having safe schools, and universities and colleges, to go to.
The whole world should help Nigeria in this emergency. It has to make its schools safer, so that there is confidence among pupils and families that children can go to school. That may mean better perimeter fencing, walls, lighting, and communication and security systems to keep people in touch. We have to reassure people that everything possible is being done, otherwise we will give a propaganda advantage to the terrorists.
The Safe Schools fund has already attracted $10 million from the Nigerian Government, $10 million from the business community, £1 million from the UK and $1.5 million from Norway. Money is coming from other countries in the EU, and there are promises from the United States of America. I hope that one outcome of the debate will be to convince the Government that it is worth providing more than £1 million. Without this initiative, many of the other measures in which we are engaged to help education in Nigeria cannot be successful.
The United Nations has just passed a Security Council resolution that says that schools should have the same legal protection in conflict areas as hospitals. The Global Coalition to Protect Education from Attack is calling on each nation to introduce and integrate guidelines into their military manuals’ rules of engagement and operational orders, so that schools have the chance of being safe havens, rather than being militarised. I hope the Government can encourage every Administration in Africa to do that.
As we heard this evening from Ngozi, and in speeches by the Secretary of State for International Development, the deputy leader of the Labour party and the Chair of the Select Committee on International Development, the kidnaps are part of a wider problem. In the last few weeks alone, we have seen reports of young girls raped and then murdered in India, and we have seen public outrage at the death sentence passed on a young Sudanese mother simply because a woman is considered to have no right to choose her own religion. Attention is now moving to Iraq, where extreme Islamists are fighting for demands that include changing the Iraqi constitution to legalise marriage for girls at the age of eight. This week and every week, around 200,000 school-age girls—some only 10, 11 or 12—are married off against their will because they have no rights that properly protect them. For many, child marriage will be preceded by genital mutilation—still to be successfully outlawed in many African countries.
A total of 7 million school-age children as young as eight or nine will be in full-time work, some of it slave labour in fields and in domestic service, and many will be trafficked into prostitution as part of a subterranean world of international trade in girl slave labour when they should be at school. As a result, 32 million school-age girls are not going to school today, or any other day. The basic right to be in education is denied to 500 million girls who will never complete their education.
Thus the abductions, the killings, the rapes, the mutilations, the trafficking, the exclusion from opportunity and the kidnaps are not isolated incidents, but part of a pattern whereby girls’ rights are not taken seriously enough in many countries, or indeed by the international community as a whole. The violation of girls’ rights is commonplace. In the end, in some countries, rights are only what the rulers decree, so that the opportunities for girls are no more than what a few patriarchs are prepared to bestow. Seventy years after the universal declaration of human rights, we are, in my view, in the midst of what I see as a great global civil rights struggle—a liberation struggle that has yet to establish, in every country of the world, every girl’s right to life, education and dignity. It is falling to girls themselves to lead the fight for rights, largely because of the failure of us as adults, who should be discharging our responsibility for and to them.
A few days ago, there was a youth takeover of the African Union in Addis Ababa; then 20 parliamentary takeovers by young people who occupied, with the permission of the parliamentarians, national assemblies in support of the Chibok girls. This was backed up by demonstrations in cities across the world, including in Rio, Lagos, Hanoi, Cairo and Islamabad. These young people still need the world to see their problem and their fight for what it is.
The bigger truth is that for years we have somehow assumed a clear, if often rocky, pathway towards human rights and universal education, but today in Pakistan the Council of Islamic Ideology is calling for all age limits on girl brides to be abolished; India has just passed up on yet another chance to outlaw child labour; countries all across Africa are failing to act on genital mutilation; and progress to get 58 million out-of-school children into school has stalled in recent years. We should not and must not stand by as many countries in the world lurch backwards when it comes to the imposition, preservation and upholding of girls’ rights.
In northern Nigeria today, we have on the one side terrorists, murderers, rapists and cowards hellbent on acts of depravity, and on the other side we have the defiant, relentless, brave beyond comprehension young people who are desperately fighting for a future but are too often oblivious to our attention. We must be clear that in the battle between the girls of the world and the backward-looking extremists, there will, in the end, be only one winner, but we should not have to wait another half-century with millions of lives ruined, millions of dreams destroyed, millions of hopes and aspirations crushed, for the world to deliver—as we must for the Nigerian girls, and for girls everywhere—the opportunities that should be and are every girl’s birthright.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
I am most grateful to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) for securing this evening’s important debate, which unites the House. I would like to take the opportunity to praise the right hon. Gentleman’s ongoing work as UN Special Envoy for Global Education to promote the vital importance of education. I pay tribute to the determination he has shown in helping Nigeria face the scourge of gender-based violence and terrorism. I am aware of the meeting that he had earlier—chaired by you, I believe, Mr Speaker—with the Nigerian Finance Minister, Ngozi Okonjo-Iweala, and my right hon. Friend the Secretary of State for International Development, among others.
I know that Members on both sides of the House will join me in utterly condemning the actions of Boko Haram. Its members prey on, and deliberately target, the weak, the innocent and the vulnerable. They have no regard for religion, ethnicity, gender or human life, and, as we have just heard, they are bringing untold misery to Nigerians and people throughout the region. The appalling Chibok abductions may have focused the attention of the world on Boko Haram’s activities, but that is, alas, just one example of the death and devastation that it is inflicting on northern Nigeria. It is 79 days since the abductions—79 days, and 219 schoolgirls are still missing; 79 days during which at least another 200 people, women, girls, boys and young men, have been abducted.
I commend the right hon. Member for Kirkcaldy and Cowdenbeath for his important work in spearheading the safe schools initiative, which was designed to protect children at school. In recognition of the vital work that it will undertake, and of the potential that education has to transform Nigeria and the lives of individual children, my right hon. Friend the Prime Minster announced on 17 May that the United Kingdom would contribute £1 million of support directly to the initiative. That will be in addition to existing commitments to support education throughout Nigeria.
As my right hon. Friend the Foreign Secretary said at the 12 June London Ministerial on security in Nigeria,
“We want to make sure that Boko Haram does not succeed in its twisted mission to deny education to girls.”
So—in addition to our support for the safe schools initiative, and in the first partnership of its kind in Nigeria—the Department for International Development and USAID will work to share resources and experiences to provide safe places in which children can learn. As a result, an additional 1 million children will receive a better education in northern Nigeria by 2020, and more than half of those children will be girls. During the current financial year, DFID will spend approximately £20 million on education projects in Nigeria. That is a signal of our determination to demonstrate that education is a right, not a privilege, and that it should be free from the fear of terrorism and abduction. Overall, we have seen a dramatic increase in DFID’s investment in education as a result of the steps that we have taken to meet our commitment of 0.7% of gross national income to international development.
The search for the schoolgirls—led by the Nigerian Government, but supported by the international community—continues. British experts are working in Nigeria alongside others from the United States, France, Canada and elsewhere to analyse and process the available intelligence and supply advice to the Nigerian authorities. We have provided, and will continue to provide, surveillance support. The resolve of the United Kingdom and the international community to continue the search and reunite the girls with their families remains unwavering. However, to ensure that the tragedy of Chibok cannot be repeated, we must end the scourge of Boko Haram.
Last week Abuja was shaken by another bomb attack, the third in as many months. More than 200 died in an attack in Jos on 20 May. A suicide bomber attacked a university in Kano on 23 June. Even those watching the World cup in public have been callously targeted and killed. Meanwhile, the murderous reported Boko Haram attacks in the north-east of Nigeria continue. The latest occurred yesterday: a car bomb attack in Maiduguri. More than 2,000 people are believed to have died at the hands of Boko Haram or others connected to them since the beginning of this year, including 59 boys who were murdered at the federal government college in February, when militants blocked the exits of a boys’ dormitory, set it on fire, and killed the boys who tried to escape the flames. Those left inside were burned alive.
The international community has mobilised to help Nigeria face this threat. Last week the UN listed Boko Haram leader Abubakar Shekau and the terrorist organisation Ansaru on the al-Qaeda sanctions list. This followed the listing of Boko Haram on 22 May. It is now an offence for any individual or entity to provide financial or material support to Ansaru, Shekau or Boko Haram, including the provision of arms or recruits.
These latest listings were among a series of commitments made at the London Ministerial to strengthen regional and international co-ordination, and reaffirm our commitment to the fight against Boko Haram. Nigeria and her neighbours Chad, Cameroon, Benin and Niger participated, with the US, France, Canada, the EU, and our international partners the UN and the African Union. Given the Chibok abductions, it was fitting that this ministerial was held in the margins of the summit to end sexual violence in conflict.
Nigeria and her neighbours agreed to establish a regional intelligence fusion unit to share and process intelligence. Chad, Cameroon, Nigeria and Niger will each contribute a battalion to the multinational joint taskforce and increase the frequency of simultaneous or co-ordinated border patrols. The UK, the US and France will between them provide support to the regional intelligence-sharing arrangement and training for the taskforce battalions, and we, the participants at the ministerial, were united in our agreement that any effective response must be fully in accordance with human rights.
British commitments, in addition to the pledge to bring a million more boys and girls into basic education in northern Nigeria by 2020 that I mentioned a few moments ago, include: significantly expanding our training and assistance to the Nigerian armed forces, particularly helping to train those units deployed on counter-insurgency operations, to strengthen their capacity to tackle Boko Haram; and support for the Nigerian presidential initiative for the north-east—PINE—supporting development and prosperity, including the provision of basic services and infrastructure to those communities most at risk.
I am sure the right hon. Gentleman, and indeed the whole House, will agree with me that the UK should be proud of its contribution to the fight against Boko Haram and in standing alongside Nigeria in the face of extremism and mindless violence. Our commitment, and that of the international community, to defeating Boko Haram, to ending the scourge of terrorism in Nigeria, to securing the safe return of the missing schoolgirls, to preventing sexual violence in conflict, and to the empowerment and education of women and girls was underlined last month at the ministerial meeting here in London.
In the wake of the heinous abduction of the Chibok schoolgirls, I am pleased that the countries of the region have all endorsed the ending sexual violence in conflict declaration. It underlines the importance of eliminating this horrific practice around the world, and the right hon. Gentleman will no doubt be supportive of the Prime Minister’s initiative to host a girls summit later this month. This will seek global commitment on issues the right hon. Gentleman raised in his speech this evening, such as early forced marriage and female genital mutilation.
I am most grateful to the right hon. Gentleman for keeping this issue very much in the thoughts of everyone in this House. I have discovered in my role as a Foreign Office Minister that events overtake events and it is too easy to forget those that matter. This is one that most surely does.
Question put and agreed to.
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Cross-border Rail Services in Wales
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Jessica Morden (Newport East) (Lab)
It is a pleasure to serve under your chairmanship, Mrs Riordan. I thank other hon. Members and hon. Friends from Wales for showing up, and I know that more hon. Members would be here if it were not for the fact that the Select Committee on Welsh Affairs is considering other business.
Transport debates, by their nature, can be extremely parochial, but I make no apology for introducing this debate on rail issues that affect my constituents, because those issues are a big concern for the commuters I represent. I will concentrate on overcrowding and problems with the franchise in my area, but other hon. Members might want to make more general remarks about the franchise, the electrification of the valleys lines and related funding issues.
Like many hon. Members, I receive a lot of complaints from constituents who are frustrated by the day-to-day problems they face when they commute or travel for leisure. My constituency is near the border, so many of my constituents travel to the south-west, Bristol and Bath and to London. The debate is born out of great frustration with train companies and train operators, which is felt by me, by the excellent Severn tunnel action group—I know I am biased, but I believe that it is the best rail users’ campaign group out there—and by their fellow rail campaigners in the next village, the Magor action group on rail. Our frustrations are overcrowding, lack of connecting services and lack of information on electrification. We need to ensure that those concerns are heard as we approach the renewal of the franchises. The debate is a chance to get some of that on record.
The Severn tunnel action group was set up after the last Greater Western franchise, because its members felt that cross-border services were poorly covered. They have campaigned tirelessly for the reinstatement and protection of services, and their aim is to develop Severn Tunnel Junction station, one of the stations in my constituency, to encourage more people on to rail from cars by providing better services. They are a constructive and positive lot who have a lot of rail expertise, but I sense real frustration with the lack of engagement by rail companies. I want to convey that to the Minister as we approach the new franchises.
The latest figures from the Office of Rail Regulation highlight the importance of cross-border journeys to all Welsh rail users, with around a third of the 27 million annual journeys crossing the Wales-England border. Many of those journeys are back and forth to and from the south-west and London. My constituents commute to cities such as Bristol, which offer big employment opportunities, so we need reliable and affordable public transport. However, all too often, people face an unenviable choice: pay the Severn bridge toll—which is too expensive and should be reduced, although that is a topic for another debate and I am sure we will return to it—or run the gauntlet of an often overcrowded and inconvenient train service. Unsurprisingly, given the cost of fuel and the fact that the Severn tolls are whacked up every year, people are increasingly opting for the train service.
Partly as a result of that, we have seen substantial growth in passenger numbers. The Welsh Affairs Committee report “Crossing the border: road and rail links between England and Wales”, which was completed a couple of years ago, picked up on that:
“Cross-border services have seen significant growth in passenger numbers in recent years, and it is expected that demand will further increase in the future. First Great Western said that its Cardiff to Bristol service had seen particularly high growth”.
According to the Office of Rail Regulation, the number of passengers going to and from Severn Tunnel Junction station has increased by 72% in the past seven years. That growth is partly caused by commuters, students and tourists connecting from places such as Chepstow and Lydney. Connections have increased by 192% over the same period. That is a huge growth in usage, and it increases every year.
At the Monmouthshire end of my constituency, there are several new housing developments and more are planned. The same is true of Chepstow and Gloucester. Many occupants of those new homes will commute to Bristol and other cities in England, and they will end up at Severn Tunnel Junction station to catch connecting trains, but the rail service has not kept up with demand. For many years, we have received complaints from commuters, but the service remains the same or even gets worse. The main reason I applied for the debate was frustration with the lack of response from First Great Western to the chronic overcrowding on our commuter routes to Bristol; demand for services to Bristol has greatly increased. In fairness to First Great Western, I should say that I have finally got a meeting with the company next Monday.
After having received many complaints, I recently went out with Severn tunnel action group members to survey users on those commuter trains, and I am in no doubt about how frustrated they are. One of my constituents calls the service “the sardine express”. Commuter trains are always overcrowded and, sadly, it is not uncommon for large numbers of passengers to be left on the station because there is no space in the carriages. The 07.55 First Great Western service has been recorded as leaving more than 30 passengers behind at Severn Tunnel Junction station. Some of those passengers have paid more than £1,500 for an annual season ticket, so it is easy to imagine their frustration and anger. I will share a few comments from commuters whom I surveyed:
“Members of my family catch the 07.55 train from this station as they commute to Bristol. For several months now, the train has been made up of only two coaches instead of what used to be five. We have experienced overcrowding, standing room only, people unable to board, etc, etc. I have written to First Great Western on more than one occasion to complain in the strongest terms, but no avail.”
Another said:
“I sometimes catch a train on the opposite platform and have counted some 100 or so persons waiting on the 07.55 to Bristol! When there are only two carriages, the train is full before it arrives at Severn Tunnel. Completely unacceptable, particularly considering the exorbitant ticket costs in this country.”
Another person recently reported that a passenger had fainted:
“FGW must be in breach of health and safety standards at the very least. Something must be done about this.”
Another commuter directly linked the situation to the effect of the Severn bridges:
“It’s all inefficient. I can’t jump into my car because of the Bridge Tax of £120 per month on the most expensive toll in the country. If I could drive instead I would in an instant. I’ve suffered the pain of these trains for only 12 months. There is no innovation, no new trains, no new operators and prices are set high.”
I have many more examples, but will end on this e-mail from a constituent:
“They just need an extra coach on each train—it’s not rocket science!”
Why is that so hard to deliver?
There is an obvious lack of rolling stock, which has led to a lack of carriages on peak services. There should be five carriages, as constituents have said, on the 07.55 train, but frequently there are three or sometimes even two. I understand that the train company has looked into hiring additional rolling stock to address the shortfall while some of its stock could be away for months on heavy overhaul, but that has not happened. We can only surmise that, as a private business, its financial model means that to do so would not be financially viable, so it has decided not to go ahead. Will the Minister take the matter up with First Great Western following the debate? Does he agree that it is not acceptable for the company to ignore the problem and to ignore complaints from commuters who have legitimate concerns about services they have paid for?
My second complaint is the perennial problem of poor connections, which was covered in the Welsh Affairs Committee report on cross-border transport a couple of years ago, but which has still not improved. Poor connections are not only a problem for those of us who live on the border; they have knock-on implications for those further into Wales. Commuters from Caldicot, Chepstow or Lydney may face a lengthy wait for a connecting service, and poor connections at peak commuting times are common. For instance, there are no trains from Caldicot between 7.40 am and 9.40 am, which is bad for people who are trying to get to work. Stations such as Caldicot have huge potential, particularly among people who want to use them for work, but we need a service that is fit for purpose. Lots of people want to use that service. What can the Minister and his Welsh counterparts do to ensure that the First Great Western service connects better with the Wales and borders franchise, which is up for renewal in 2018? Better connections is a constant grumble, and the matter has been raised by the Welsh Affairs Committee. We need action on better connecting services.
Albert Owen (Ynys Môn) (Lab)
I congratulate my hon. Friend on securing the debate and on the work on connectivity that she does on behalf of her constituents.
In the north, we now have better services; there has been huge investment on the west coast over many years, which has provided extra trains. Does my hon. Friend agree that the connectivity between the franchises must be looked at? In north Wales, both are coming up for renewal at a similar time. I am sure that the Minister is aware of that, and that forward planning is being done. Does my hon. Friend agree that there is a need for a direct link from Liverpool to Holyhead, which would bring Dublin and Liverpool closer together? We need to look at the big picture, and we have time to plan to do so before the franchises are renewed.
Jessica Morden
I thank my hon. Friend for his intervention. He is exactly right: with the franchises coming up for renewal, we must think strategically. The Government and the Welsh Government must work together for the good of the transport system. They must be constructive so that we can iron out some of the problems. I also agree with his point about the link between Liverpool and Holyhead.
We all support electrification and hope that we will benefit from it soon. As the Welsh Affairs Committee pointed out, it has been an example of good collaborative working and has demonstrated what can be achieved when the two Governments work together on transport—apart from the row over funding the valleys lines. For constituencies such as mine, which will suffer much, it would helpful if the Minister let us know early on what the disruption will be, when the work is to be carried out and what form it will take. We hear talk of the closure of some stations so that work can be carried out on the bridges, but the lack of concrete information is causing confusion. When can we let communities know what will be going on as a consequence of electrification? Staff in my office have asked for information and timetables, but so far we have heard nothing. If would be helpful to know when local commuters will be informed fully.
An example of the uncertainty caused is that commuters at Severn Tunnel Junction raised the issue of the safety of the passenger footbridge, which many rail users feel is unsafe. In fact, an Arriva fire inspector expressed concerns a few weeks ago and Network Rail was forced to do remedial work. If it is unsafe, it must be sorted out, but the latest letter we received from Network Rail—it has been a lengthy correspondence—said that the delay in sorting it out was due to the electrification plans. We have been chasing information about the bridge for some time, but the situation is now critical. The new bridge is funded under the Department for Transport’s Access for All scheme, but is clearly unsuitable as it is now. Will the Minister please intervene with Network Rail, because his Department is funding the improvements? We need action quickly.
I want to discuss the renewal of the Great Western franchise. We have all recently been asked to respond to the consultation on the franchise, which I have done. Rail groups in my constituency want to reiterate to the Minister that whoever is awarded the contract needs to meet commuter demands. In my area that would include a half-hourly or better train service from south Wales to Bristol Temple Meads and Bath; an additional hourly service from Ebbw Vale via Newport and Severn Tunnel Junction to Bristol Parkway, which would provide new journey-to-work opportunities to take advantage of the development and employment sites planned for the area around Bristol Parkway; a minimum of five coaches on the peak services from south Wales to Bristol; a commitment to ensure that train capacity is sufficient for future demand; and greater emphasis in the franchise on working in partnership on interchanges, and on rail companies working together on timetables.
Getting rail services right in my constituency is an important part of the effort to increase economic and employment opportunities, but we should also give commuters the service they deserve, given how much they pay for it. The debate is focused on getting the cross-border services right, but I should also mention the great work that the Welsh Government are doing on the metro system, which could be of great benefit to communities in my area, such as the people of Magor who are campaigning for a new station through the Magor action group on rail.
It is so important for constituencies such as mine that the two Governments work together on rail as we depend on a properly co-ordinated approach and properly thought out train services. I know that other Members will make more general points about other cross-border rail issues, but I am grateful to the Minister for listening to my speech and hope that he will address some of my specific concerns about the franchise.
Chris Ruane (Vale of Clwyd) (Lab)
At the risk of sounding like Monty Python’s “Four Yorkshiremen”, the first job I ever had, at the age of seven, was casing on Rhyl railway station with my older cousins. We would take a pram, and the trains would roll in, 10 to 14 carriages long, and disgorge their passengers. People did not have cars back in the 1960s—or not many working class people did—so they would place their cases on our prams and we would take them to the guesthouses, hotels and caravan parks in Rhyl and round about.
The train has been good to Rhyl and Prestatyn. The train arrived in Rhyl, my hometown, in 1849. I was recently talking to a 94-year-old local historian from Prestatyn, Fred Hobbs, who has researched the topic. He told me that when the train came to Prestatyn, it opened up the Welsh seaside towns to the industrialists and merchants of Manchester and Liverpool, who came and lived in Rhyl and Prestatyn and commuted to Liverpool and Manchester. They brought with them their wealth and investment, and our local towns prospered.
Rhyl was just a fishing village back in the 1840s, but it grew and grew: between 1849 and 1900, there were 900 hotels and guesthouses. The train brought great wealth to the town. The west ward of Rhyl was one of the richest wards in Wales because of the investment in hotels and guesthouses. Unfortunately, those ex-hotels and ex-guesthouses are responsible for the deprivation of seaside towns, as they have now been turned into houses of multiple occupation, but that is a discussion for another day.
The train has been good to the coastal towns of north Wales, and especially to Holyhead. The route planned in the 1840s went from London to Dublin, which was still part of the British empire in those days. It was a very important route. We want to ensure that the primacy of that route in the 19th century is re-established in the 21st century. The trains and transport links to north Wales brought wealth and investment right through the 20th century, up until the 1960s when I was casing to make a few bob on a Saturday morning. The downturn came to the north Wales coast in the 1970s, when people stopped coming to coastal towns for their traditional two-week bucket-and-spade holidays in a coastal town and chose to go elsewhere—to Spain and France. That left a big hole in the north Wales economy for a 40-year period, and we are only just beginning to put that right.
The challenge for the 21st century in north Wales is better connectivity between north Wales and the north-west of England. There are 650,000 people living in north Wales, and 6.5 million people live in the north-west—it is a huge population centre, and if a bit more of the area across the Pennines is included, it becomes even bigger. That was an opportunity in the past, it is an opportunity in the present and it is an opportunity for the future. We must improve train and transport connectivity.
Mark Tami (Alyn and Deeside) (Lab)
Does my hon. Friend agree that we must think about that now for the future? One problem is that rail has been something of an afterthought. Industry and a lot of other things have come, but the rail system is not up to the standard required to serve industry and the people of our area.
Chris Ruane
I agree with my hon. Friend to a certain degree, but he is no great user of the train, unlike me and my north Wales colleagues. I have witnessed a vast transformation from when I became an MP in 1997 and it took me four hours to arrive in London from Rhyl in my constituency. The trains then were grubby and had not been cleaned; there was chewing gum on the old and faded seats. Now, we have Pendolino and Voyager trains. There has been massive investment, for which I am grateful to Virgin and Arriva. There has been improvement, but I agree with my hon. Friend that we must not rest on our laurels.
Huge investment—something like £45 billion—is coming from HS2. I want to ensure that my area, the north Wales coast, gets its fair share of that investment—that we are electrified and our stations are improved. Big progress has been made: Chester, Flint and Prestatyn stations have been improved—a huge investment of £7 million was spent on Prestatyn. Last week Arriva, Network Rail and Denbighshire county council started a £2.5 million improvement programme for Rhyl railway station. Improvements have been made, but we must not rest on our laurels. We must push for further investment in our stations along the north Wales coast.
The big cities of Liverpool and Manchester were totally transformed under a Labour Government, and we did not make enough of that. Those cities were derelict and riot-strewn in the 1980s, and they are now vibrant communities. Manchester has one of the biggest student population bases in Europe, with 45,000 students. Liverpool is the same. Two principal airports serve north Wales, Liverpool and Manchester, and they have both grown exponentially over the past 10 years. They are the local airports for north Wales, and we need connectivity to them. It is difficult to get directly to those airports by train, so we need to consider a dedicated transport link from the north Wales coast to Liverpool and Manchester airports.
Liverpool and Manchester have huge population bases and huge research capacity at Manchester and Liverpool universities. We need to connect those universities with businesses in north Wales such as Airbus, the OpTIC incubation and research centre in St Asaph in my constituency and Bangor university. We need more co-operation, which would increase and improve if we had proper transport links. Connecting the science base of the north-west with the science base of north Wales would be helped tremendously by a proper transport system.
North Wales not only needs to be better connected with England; we need better connections inside Wales, including with the constituency of my hon. Friend the Member for Alyn and Deeside (Mark Tami) in north-east Wales. In 1998, the Labour Government made a £0.5 billion launch aid investment in Airbus, with the Welsh Government investing £25 million. That was a public-private partnership that produced one of the most expansive factories in western Europe. There are 6,000 engineering jobs at Airbus making the biggest wings in the whole world. We have to ensure that our population base in north Wales, especially in the bigger coastal towns that have large numbers of unemployed people, is better connected to the job opportunities at Airbus and the Deeside industrial estate in my hon. Friend’s constituency. Tens of thousands of jobs have been created and will be created, and they need to be made available to unemployed and underemployed people along the north Wales coast.
Ten years ago, the Department for Work and Pensions provided transport grants that helped people get to work. We should be drawing down grant money, European funding, DWP funding or Welsh Government funding to ensure that we have dedicated pull-in stations and dedicated trains early in the morning to take those workers to the huge factories in north-east Wales.
I will conclude on modal points, where trains connect with airports and hovercraft. I am probably one of only two MPs who can claim to have a constituency that has been, or will be, served by a hovercraft. The first passenger hovercraft service in the whole world was between Rhyl in my constituency and Wallasey. I mentioned that fact in a debate in this Chamber in December, and within three days, three hovercraft companies contacted me about restarting the service. The time taken to travel from Rhyl to Liverpool by train is one-and-a-half hours, possibly involving two changes. The time taken for a hovercraft connection to Liverpool would be 34 minutes. I would like to see people coming along the north Wales coast by rail, stopping at Rhyl railway station and getting on the hovercraft for a direct passage to Liverpool. The proposal is for a hover link that takes people from north Wales, through Rhyl, to Liverpool airport. That is a fantastic opportunity, but we need to ensure that we have the facilities to take people by rail, by car or by bus from Rhyl to Liverpool.
We are also blessed in Wales with a fine coastal path. We are the only country in the UK that has committed to, and delivered, a path along the whole coast. Walkers are coming to Wales, and in my constituency we are blessed with being at the northern end of the Offa’s Dyke footpath. We need to ensure that walkers can come to Rhyl or Prestatyn by train to do their rambling—I hope I am not rambling, but I intend to finish soon.
Chris Ruane
Yes, I am hovering about rambling. Thanks very much.
In Wales we are also blessed with fine cycleways, most of which are along the coast. The Sustrans bid for Big Lottery funding delivered a £4.5 million dedicated cycle bridge at Rhyl harbour. We need to make the most of the investments that have come to my town and north Wales by connecting them to rail users, which is a challenge for all of us. We have two well performing train companies. Virgin has massively improved the service over the past 14 or 15 years, and we north Wales Labour MPs campaigned to ensure that Virgin did not lose the franchise. We were highly concerned when it looked as if a second-rate company was going to take over the franchise, and I hope that Virgin continues to invest. Arriva Trains Wales is also investing heavily in north Wales, but we need to put pressure on the train companies to ensure that they deliver not for the past or for the present but for the future.
Ian Lucas (Wrexham) (Lab)
It is a pleasure to take part in this debate and to hear my hon. Friend the Member for Vale of Clwyd (Chris Ruane) tell us about Rhyl station. Big changes have happened in north Wales and in the rest of the country over the past 30 or 40 years. For the benefit of the Minister, it is important to appreciate that north-east Wales, and its economy, is among the most successful and progressive areas of the country. North-east Wales has world-beating companies in the aerospace, automotive and pharmaceutical sectors that compete internationally to secure jobs and high-quality investment for British industry. In a globalised economy, it is important that the world knows we have infrastructure that is competitive, enabling those businesses and people in north Wales to journey to north-west England and beyond.
There is good news for my constituency of Wrexham, because the Welsh Government are investing some £44 million in dualling the line between Wrexham and Chester. In the 1980s, the Conservative Government made the absurd decision to limit the infrastructure for rail services between the largest town in north Wales, Wrexham, and Chester, which therefore inhibited regular rail services. Ever since, we have been able to have only one train an hour between Wrexham and Chester. In fact, we re-established an hourly service only in 2007—the impact had been so negative that rail usage substantially diminished.
Since the reintroduction of hourly services in 2007, there has been a massive increase in the use of rail services, which I see every week when I travel to London. The economy of this important economic area has developed, Glyndwr university has been established and we have seen a large increase in rail usage.
It is important that we use this opportunity to introduce three trains an hour between Wrexham and Chester, which would provide a major boost to the local manufacturing and retail economies by increasing the connectivity between Wrexham and Chester. Businesses that operate on both sides of the border would benefit from access to new markets. Such investments are important, and there are massive further opportunities in the immediate area of north-east Wales.
Another cross-border line runs between Wrexham and Liverpool, and my hon. Friends from north Wales will forgive me for mentioning it again. It runs from Wrexham, the largest town in north Wales, by the Deeside industrial estate, which has businesses such as Toyota, and goes through the constituency of my hon. Friend the Member for Alyn and Deeside (Mark Tami), up through the Wirral, very close to the GM factory at Ellesmere Port, then up through to Birkenhead, and links in to Liverpool. The service is interrupted by a necessary change at the Bidston interchange. Direct access along that line would be a massive boost for north-east Wales, the Wirral and north-west England as a whole, so it is important that we consider looking at that line again and designing an improved infrastructure.
In my role as a shadow Foreign Affairs Minister, I visit other countries, particularly in the middle east and Africa, and it is striking to see the investment and support for infrastructure that our competitors are introducing to their economies. Those people are keen to secure the jobs that our own constituents have at the moment and that our young people wish to have in future, so we must focus on delivering improvements to our infrastructure. Although we have had some improvements, particularly on the longer journeys from north Wales to London, which my hon. Friend the Member for Vale of Clwyd mentioned, the connectivity between north-west England and north Wales is still limited and needs to be much better.
Focusing on the airports is massively important. The airports that serve north Wales are Manchester and Liverpool, but it is virtually impossible to travel to either by public transport. The region has an increasingly choked road system that was essentially designed in the 1970s and 1980s, and in substance has not changed since. It is absolutely imperative that we focus on delivering an improved public transport system to service the airports and to increase connectivity. If we do not do so, we will lose out in the longer term to our competitors.
For me the real frustration over the years has been the investment system, which is too centralised to be able to deliver local transport projects. I am pleased by the tone and content of the Adonis review, which was issued yesterday and talked about the importance of much more regional approaches to investment across England. The lesson also applies in Wales. We cannot have a top-down system only in Whitehall or Cardiff Bay—away from the localities that actually understand the need for local investment and how to facilitate it—determining investment in regional rail projects. That is one of the major reasons why our infrastructure system is so bad.
Contrast that with, for example, Frankfurt in Germany. On a recent visit, I saw the connectivity between the rail system and the airport system. The city is a major regional power player in Germany. There is a regionalised system of cities such as Hamburg, Munich and Berlin, which all contribute massively to their regional economies. The fact is that in the United Kingdom—this issue affects all our constituents—there is a massive focus on south-east England. The major transport infrastructure investments have gone to south-east England. That is unbalancing the economy throughout the country. It is a central issue not only for our constituents, but for the whole United Kingdom.
A tide is flowing in all political parties that recognises the importance of that issue. The practical impact of the policies we are pursuing is that we do not have the regional investment to facilitate projects that could create world class infrastructure. It is important that we have the capacity and the authority in north Wales to develop regional infrastructures. The development of lines such as Wrexham and Chester and Wrexham and Liverpool would facilitate investment in the rail system, which would support business and jobs in the local economy. Give us the responsibility, authority and power to make decisions, and we will continue to deliver a powerful economy in north-east Wales that will be able to compete in future.
Glyn Davies (Montgomeryshire) (Con)
Thank you, Mrs Riordan, for calling me to speak in an important debate on an important issue in mid-Wales. I, too, congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate. She spoke about services in south Wales and there have been contributions on north Wales, but I specifically want to talk about the services that serve not only my constituency of Montgomeryshire, but mid-Wales.
The line from Aberystwyth, on the extreme west coast of Wales, to London runs in two parts: from Aberystwyth to Birmingham, and the direct service from Shrewsbury to London. They overlap to some extent, but the two lines are particularly important for that rail journey. As other Members have said, the line is very important for the economy of mid-Wales. Perhaps more so than in other parts of Wales, the railway tackles the perception of remoteness, which has always been a negative factor in attracting business.
My purpose today is not to make demands of the Minister. I am highlighting the importance of both parts of the line, and I want to make certain that the long overdue good news that we have had about the intention to invest in both parts comes to fruition and is beneficial.
First, on the Aberystwyth to Birmingham line, I have been involved in the campaign for an upgrade for about 30 years, so I have a reasonable right to call this a long overdue investment. The first issue was upgrading the line with passing places to enable an hourly train service. There has been only a two-hourly service, which is hopelessly inadequate. The campaign started 20 or 30 years ago, and money has been invested. It has taken a long time, but we now have a commitment from Arriva Trains and the Welsh Government that an hourly service will be introduced. I think the various people associated with running the trains are now being trained. The service is due to run from May 2015, just in time to bring the newly elected Members in the general election of 2015 from mid-Wales to London.
The second part of the line is the Shrewsbury to Euston connection, which is hugely important to mid-Wales. People will be able to drive to Shrewsbury, park, and then catch the direct service to London. Having to change is incredibly inconvenient and it discourages people from using the line. I would prefer to use the train and not drive to London, but that is simply inconvenient for me. However, the hourly train service will change that.
Such a service used to run, but it was stopped. We had a promise that it would run when there was an agreement with FirstGroup to provide a west coast main line service. The franchise was let, but it was cancelled. Now, of course, there is an agreement with Virgin Trains that the line will run from December. Perhaps the Minister will confirm how often that train will run and at what times. It is hugely important that it runs at convenient times that enable people who wish to work in and travel to London to use it. Otherwise, we would deliver on a promise but not deliver on the actual need.
So, there are two aspects. One is the line within Wales, which we anticipate will come into effect in May next year. I very much hope that that is the case. There is no reason why it should not happen, but we must always be vigilant to ensure that it does. Secondly, the Minister here today has responsibility for the direct line from Shrewsbury to Euston, and I very much hope that that line comes to fruition later this year, with times and frequency that are convenient for the people of mid-Wales.
Nia Griffith (Llanelli) (Lab)
I congratulate my hon. Friend the Member for Newport East (Jessica Morden) on securing the debate, which is extremely important to all of us in Wales.
First, I will speak about the main line that goes from London to Fishguard, connecting to ships going over to Rosslare in Ireland. The line goes right through my constituency, passing through the stations of Llanelli, Burry Port and Kidwelly. It is absolutely vital that we are part of the trans-European network and that we have good connections on the line.
Recently, the Welsh Government made significant investment in the Loughor bridge, which has enabled it to take two-way traffic, but what grieves me is how few through trains we have. I hope that, with the new franchise, the fact that we have this new bridge will enable us to have much greater connectivity and far more through trains. To have only one train from west Wales up to London and only one from London to west Wales per day is not good enough, and even those trains go only as far as Carmarthen; they do not go right up to the Pembrokeshire coast.
The problem that that poses for people is the lack of connectivity. There is the inconvenience of having to change trains and the fact that, often, the trains run by First Great Western are late, so people end up having to wait at stations for long periods—usually Cardiff, Port Talbot or Swansea—because there is simply no way to get from west Wales to London without changing, except for two trains, one each way, per day.
Let me give an example. If I got the 5.25 am train from Llanelli to come up to London morning, I would hope that I could make a 10 am meeting in London by getting to London at 9 am. However, only recently I had the experience of sitting on that 5.25 am train, which had been five minutes late, and being told that we were waiting outside Port Talbot station to let the First Great Western train go through, so the very train that I needed to catch to get to London was passing by my window. My only option, therefore, is to get the 3.25 am train if I want to get to an early morning meeting in London, which is quite inconvenient.
Rail is also vital for freight. We have refineries in Milford Haven and obviously the steel industry also uses the railway line. Last winter, storm damage closed this line for three or four days. Mercifully, that was all the time it was closed for. However, there is significant risk of closure because the railway line follows the coastline, which is exposed to the elements, and it will need continuing investment. I stress that that needs to be UK Government investment, because this line connects London with Ireland.
I look forward to electrification and remind those present that the Labour Government had a commitment to electrify as far as Swansea. I am sure that my hon. Friend the Member for Swansea West (Geraint Davies) will speak at greater length about what has happened since then and about the uncertainty over electrification.
I understand fully why we are not going for bimodal trains—trains that can be both diesel and electric. They are heavier than other trains and any investment in them would be a major investment, for what I hope would be only the short term. I want electrification to come not only to Bristol, Cardiff and Swansea, but right through west Wales. However, there will be an issue when part of the line is electrified: when that happens, where will we change trains and how will that change work?
To my mind, addressing that issue will be crucial to keeping passengers loyal to the service, because if the process of electrification is messed up and we end up with yet another, perhaps inconvenient change—bearing in mind that we already have one change for west Wales—that will make things very difficult.
I would like there to be only one change—a change off the train from where the line has been electrified up to and on to another train to take people all the way to west Wales. Whether that happens to be at Swindon or at Bristol, there should be only one change so that we do not end up with people having to make two changes to reach west Wales.
The line that goes from Pembrokeshire up to Manchester Piccadilly can be a useful service if I am going to conference, but I do not meet many passengers who go all the way from Pembrokeshire to Manchester. The argument that the train will not stop in some local stations such as Kidwelly because it is trying to get from Pembrokeshire to Manchester as quickly as possible seems to be completely fallacious. If someone is going to spend six or seven hours on a train anyway, an extra 10 minutes is neither here nor there. The fact that this train is going through stations at a very low speed but does not always stop at them is extremely annoying. If it stopped just on request, that would be a help. The argument about not stopping is fallacious, and I understand that some towns on the English side of the border are also concerned about the fact that some of those trains do not stop at their station.
I reiterate the comments on overcrowding made by my hon. Friend the Member for Newport East. I have constituents who commute to Filton Abbey Wood and to Bristol, and they have to change and catch very overcrowded trains. If they cannot get on those trains, they are disadvantaged as they are unable to get connecting trains back to west Wales, so they are very concerned about overcrowding.
We need a much greater number of Sunday services, particularly in winter, when it is impossible to get from my constituency to important places such as Twickenham, where rugby matches happen. People cannot get there on a Sunday, and I am sure the Minister understands the importance of such sporting events. Not to be able to get from west Wales to London on a Sunday in time to get to a match is obviously very much a disadvantage nowadays, when people do so much on a Sunday, from shopping to—of course—going away on holiday.
That brings me to the issue of the train that, last year, got stuck in remotest Wiltshire for six hours. It was a First Great Western train coming from the west country, but it could equally well have been a train from west Wales. I wrote to the Minister asking what lessons had been learned from that case, or perhaps I put down a parliamentary question, but it was too early to get a response because a report on the case had not been produced by that time. I hope that that report has now been produced; I could not understand how that case happened. We all allow for First Great Western trains being at least an hour late, if not two or three hours late, but when people are going away on holiday they do not allow time for a train to be six hours late. People were kept on that train without adequate water for all that time.
I understand that it was not necessarily possible to get a bus up to where the train had stopped, but it would have been possible to get other trains along the track, which would either have allowed passengers to be decanted and taken on or allowed water to be taken to the passengers. A six-hour delay is completely unacceptable, and I hope that steps have been taken so that my constituents do not have to face such a situation if they are going away and hoping to get to Heathrow airport or are going to London for any other reason this summer.
I will make one last point that may not seem terribly relevant to this cross-border debate, but is terribly relevant if people have to change trains: on Cardiff station and on Port Talbot station, it is impossible to get into a ladies toilet cubicle with a very large suitcase, probably because the cubicles are made to a specific design that came from one book. I would suggest that some quite large or portly women might find it difficult to get themselves into those cubicles. Of course, it becomes necessary for people to use the cubicles if they have to change trains, and for some passengers—in particular, some older passengers—using toilets on trains is quite difficult.
Will the Minister take note of the fact that, whenever stations are being redesigned, consideration should be given to that issue, so that we do not end up with the situation we used to have in Paddington, whereby people had not only to go down stairs, but get their suitcases over a turnstile before they could get to a cubicle. That has now been put right, and people can use the disabled toilet on the platform. Nevertheless, those issues need to be taken into consideration.
Geraint Davies (Swansea West) (Lab/Co-op)
I noticed an advert in London the other day that mentioned a Virgin train from London to Manchester costing just £19 and taking two hours and nine minutes, a train from London to Birmingham taking one hour and 24 minutes and costing £7.50 and, of course, one from London to Swansea that takes three hours and costs £78.
The Government have decided to invest more than £40 billion in High Speed 2. There is an issue about geographical equity in economic development, and we need to think about that. Some £5,000 per head is spent in London, versus £500 elsewhere. It is important to people from Wales—certainly, those from south Wales—to link up to the city regions in south Wales, which are also networked into the city regions in the south-west. As it happens, my father was the head of economic development in the Welsh Office many years ago—Rhodri Morgan used to work for him, interestingly enough—when a study was done showing that, in respect of the invoice network, the economy of south Wales was linked more to the south-west than to north Wales. Clearly, infrastructure investment in rail and road connectivity should follow that.
There has been talk about HS2 connecting to north Wales, but KPMG has suggested that it will be different in south Wales and that we in Swansea, for example, will be losing some £16 million a year and Cardiff will lose £70 million a year. There is a case for a Barnett consequential of approaching £2 billion to help connectivity to south Wales.
I appreciate that the Minister will mention electrification, and I was pleased that the Prime Minister promised to electrify the railway from Paddington to Swansea, but I should like some clarification on that, because there is a bit of a spat going on with the Welsh Government. It now seems that the Government are saying that they will electrify as far as Cardiff and then from Bridgend to Swansea, but not from Cardiff to Bridgend. The issue is who pays for the electrification of the valleys lines. In my mind, the bit that runs from Cardiff to Bridgend, which is not the valleys, does not seem to be involved in this spat and should be paid for by the Prime Minister’s undertaking. Although we welcome electrification, we will be worse off downstream in inward investment, as I have already said.
My focus is on acknowledging that we should be making connections between the economic clusters in, for example, Neath-Port Talbot, Swansea and Lllanelli, and Cardiff and the valleys, so that we can stimulate economic growth. My hon. Friend the Member for Newport East (Jessica Morden) mentioned tolls. Today is not the time to talk about tolls, but, again, that is a cost for south Wales that is not faced elsewhere.
We have a second-class service. In that regard, hon. Members have mentioned the frequency of trains, which is arguably equivalent to train speeds. From Swansea, there are two trains an hour to London Paddington, one at 28 minutes past the hour and one at five minutes to the hour, and people have to change at Cardiff from one of those trains. However, on the way back, at various times, particularly in the afternoon, there is only one train an hour. An inward investor thinking of investing, and going back and forth between Swansea and London, might have to wait nearly an hour at Paddington before getting a train, and they will then spend three hours on the train—a total of four hours. I urge the Minister to work with the Welsh Government on train timetabling. For example, in the other direction—I do not mean to be too parochial—people get the Manchester Piccadilly train one way, get off at Cardiff and then pick up another train and go on. On the way back, why can they not get the Cardiff train, then pick up the Manchester Piccadilly train or even a Bath train?
Hon. Members mentioned connectivity with Manchester. Looking at traffic flows, the economic network is, as I mentioned earlier, with the south-west, not with Manchester. It would be better to have much better, regular connectivity between Swansea and Bath and the south-west than connectivity with Manchester. Traffic flow and volume make the economic case for frequency and connectivities. I appreciate that it would involve working with the Welsh Government to get the train timetabling right. That is a simple thing that could be done within the next weeks, and overnight we could end up with an assurance of having two trains an hour from Paddington to Swansea. That would make a big difference to me when talking to inward investors who might want to go to Swansea bay city region.
There has been talk about nationalising Arriva Trains and about public ownership of various franchises. The Minister knows that the east coast main line is in public control and we are saving something like £700 million a year. It is worth looking at such cases around Britain. I understand that in Wales, we are spending some £170 million a year of taxpayers’ money on Arriva Trains. Again, the Welsh Government should look at that, not for the sake of it, but to deliver best value for money for the taxpayer.
I appreciate that Deutsche Bahn, the biggest railway company in Europe, has command over our freight system and, with a turnover of £39 billion, has the economic muscle to make the investment. I am particularly interested in investment in the south Wales rail network to make it part of the transnational transport network acknowledged by Europe. As Members will know, South Wales is not on the map of strategic European rail routes that people are willing to invest in; the connectivity just goes up the spine of England, not to south Wales, and one reason is that the criteria for such investment include core ports and airports.
In respect of the Silk report, there is a case for nationalisation of ports in Wales, in particular—the Minister may think this is an ideological point—so that Swansea port and the port at Port Talbot would be regarded as one port. Then we could increase the amount of freight to that port, triggering a process to make it a core port and in turn triggering its becoming part of the transnational rail network. That in turn would trigger European funding to provide connectivity that would then extend, transnationally, over to Ireland. My hon. Friend the Member for Llanelli (Nia Griffith) made those points.
The trouble is that, if the only way to get rail investment is on the basis of its being demand-led as opposed to supply-led, we will always have a problem in Wales. The reality of the economics of transport is that, when a rail or tube link, or whatever, is provided, more people use it and more people buy houses, so house prices increase and there is more economic activity. To a certain extent, we have to lead with greater frequency and greater investment, and I certainly want to see that.
I am asking the Minister about extra investment in Wales, so that we get our fair share; about the frequency of trains; about whether he has a balanced view of whether the public or the private sector should run particular train franchises; and about whether he is willing for the public sector to bid in, as with the east coast main line. That would, of course, be a question for the Welsh Government.
In passing, let me mention some other rail projects. We should look more imaginatively at opportunities for some trains to go directly to Swansea from Cardiff without stopping, or from Cardiff to Port Talbot Parkway, with a light rail route going all the way through to the Mumbles.
The Minister may or may not know about the conversations about the Swansea tidal lagoon. I saw a presentation recently about it—three new lagoons would be provided, stretching across Swansea bay city region, but not the whole way across. It would not go as far as Swansea bay itself, so as not to distort the view towards the Mumbles. There would be a reconfiguration of the road and rail networks and a visitor centre that would generate, in the view of the plan’s originator, some 3 million visitors a year.
Will the Minister explain whether the planning regime is merely some sort of incremental process of upgrading, extending or reducing existing networks, or whether it is part of a more creative vision of economic development, which perhaps embraces a vision of Swansea—the area I represent—as not only an economic and academic hub, with its universities and traditional industry, but a quality tourist destination, building on the city of culture bid, Dylan Thomas and so on? That vision is of a place in a global marketplace, in which increasing numbers of people from China, India, Russia and Brazil want to go to English-speaking non-sun cultural destinations. How should that infrastructure be planned? How should we provide multi-modal connectivity with road, rail and the development of Cardiff airport to ensure that that vision works in a holistic way, rather than keeping an incremental, slightly pedestrian approach to transport planning?
Lilian Greenwood (Nottingham South) (Lab)
It is always a pleasure to serve under your chairmanship, Mrs Riordan. I begin by congratulating my hon. Friend the Member for Newport East (Jessica Morden) on securing this important debate. Indeed, I thank all my hon. Friends for their contributions. Clearly, the transport infrastructure linking Wales and England is of great importance. In many ways the debate represents a continuation of the ongoing parliamentary scrutiny of cross-border transport links. It follows the publication of the Welsh Affairs Committee’s 2012 report on cross-border road and rail connections, which was debated in Westminster Hall in February and the Westminster Hall debate in November on transport infrastructure in north Wales, which was ably led by my hon. Friend the Member for Alyn and Deeside (Mark Tami).
My hon. Friend the Member for Newport East set out the real challenges for her constituents, including those who commute over the border. She spoke about the difficulties of aligning timetables so that connections can be made, and the overcrowding that some passengers still experience. I am familiar with some of those services, because the CrossCountry trains from Cardiff terminate in my constituency at Nottingham station. I have a sense of how overcrowded those trains can be. Clearly, however, there are significant issues with some First Great Western services in her constituency. It is clear from her contribution that more needs to be done, and it is important that the Department look closely at the rolling stock issues that she raised, which are giving rise to that overcrowding.
A similar message may well apply to all rail services in Wales and cross-border services. In the past 20 years, passenger numbers in Wales have more than doubled, and the increase in the number of people travelling between Wales and England has been almost as impressive. As my hon. Friends the Members for Vale of Clwyd (Chris Ruane) and for Wrexham (Ian Lucas) said—in fact, I think everybody has said this—it is vital that people in Wales can connect to airports and the jobs and educational opportunities available in places such as Manchester and Liverpool. Similarly, good connections are needed in south Wales to Bristol, Bath and other places in the south-west. The Welsh Assembly Government have successfully opened the Ebbw Vale line, where passenger numbers have exceeded all expectations, and there was the welcome news in April that hourly peak services will be funded between Aberystwyth and Shrewsbury, starting next year. The hon. Member for Montgomeryshire (Glyn Davies), who is no longer in his place, noted that that would be just in time to carry newly elected Labour MPs. The internal devolution within Network Rail is an important step towards achieving a more cost-efficient railway that is more responsive to local issues. My hon. Friend the Member for Wrexham described the welcome investment in the Wrexham-Chester line, and we have also seen funding committed for greatly improved cross-border inter-city services through investment in electrification and the new intercity express programme trains.
There are, however, real obstacles to overcome. The cuts of the Beeching era, a long time ago now, still cast a long shadow. The Heart of Wales line only narrowly evaded closure. It is well known that a rail journey from south Wales to the north is by necessity a cross-border trip, as passengers must travel into England first. As we have heard, there have been problems with timetabling onward connections. Given the number of services that cross the border at some point on their journey, there is a continuing need for close co-operation between Governments and transport authorities. One cross-border operator was lost in 2011, when Wrexham & Shropshire failed. Passengers as well as some of the excellent local rail user groups that have been mentioned hope that existing services can be improved across Wales. I know from colleagues that it can sometimes cause frustration if we talk about north and south Wales in isolation, but it is important that future service specifications take into account the needs of passengers in mid-Wales and west Wales. My hon. Friend the Member for Llanelli (Nia Griffith) described some of the frustrations facing her and her constituents and touched on issues to do with freight operations.
Welsh Ministers have spoken of their desire to play an active role in shaping service priorities after the Wales & Border franchise expires in 2018, and the National Assembly for Wales will be entitled to act as co-signatory under the Railways Act 2005. However, in their submission to the Silk commission of March last year the Government said that the Department for Transport
“is in discussion with the Welsh Government to assess the feasibility of devolving franchise responsibilities, the financial and legal requirements of doing so and how the UK Government’s interests in services affecting locations in England could be protected.”
Will the Minister update the House on any progress arising from those discussions? What form does he envisage that devolution taking, and would he compare the models under discussion to the control that the Scottish Government exercise over the ScotRail franchise? What proposals has he put forward for managing risk, and what protections would be in place for English customers whose services are provided by Arriva Trains Wales? His answers will be of keen interest to passengers and transport planners on both sides of the border.
Further discussions have so far yielded more heat than light from the Westminster Government, and I hope that the Minister will provide some illumination. In the official response to the Welsh Affairs Committee’s 2012 report, the Government said that they would
“work with the Welsh Government to explore how Wales can get the most out of the new national high speed rail network.”
My hon. Friend the Member for Swansea West (Geraint Davies) spoke about maximising Wales’s benefits from investment. Will the Minister update us on that work? We have heard Members speak about how High Speed 2 will bring direct benefits to Wales and its cross-border services—in particular, I have in mind the contributions of my hon. Friend the Member for Clwyd South (Susan Elan Jones)—but can we expect to see a strategy document from the Government? In the same official response, the Government stated:
“The UK Government will continue to work with the Welsh Government and train operators to identify cases where the frequency of cross-border rail services could be increased, without the need for additional public subsidy.”
Will the Minister tell us what progress has been made in that area? The Welsh Government have committed to funding hourly peak services from Aberystwyth to Shrewsbury in 2015, but have any additional cross-border services been identified by the UK Government since that commitment was made last May?
On transport investment, it is certainly true that the Welsh Administration have looked at additional projects, but it must be recognised that they are doing so in an extremely challenging climate. The Tory-led Westminster Government have cut the Welsh capital budget by almost a third, which has constrained the ability of Welsh Ministers to deliver important investment projects, and it is difficult to resist the conclusion that those restraints are holding back growth. My hon. Friend the Member for Wrexham described the importance of improving transport infrastructure to support economic regeneration, and the strong desire for more local decision making, closer to those who understand the population’s needs, is well known.
Notwithstanding the improvements that have already been secured, we believe that the Government’s proposals for devolution, as set out in the Wales Bill, do not go far enough. In particular, Ministers have not explained why Wales must have a borrowing cap that is more constrained, on a like-for-like basis, than that of Scotland. The Silk commission concluded that the Welsh Government should have
“the capacity to borrow for capital investment on a prudent basis subject to limits agreed with HM Treasury.”
That investment could well be in public transport schemes, such as the rapid transit proposals for Cardiff mentioned today which have secured additional funding. Such projects could attract investment to deprived areas and deliver much needed skilled jobs, but the allocation of that funding should be decided by Welsh Ministers and the Welsh National Assembly. Long-term funding settlements could deliver the certainty needed to keep costs low and to ensure that projects are actually delivered, as would the political stability that would be established were the Welsh Government’s powers moved from a conferred to a reserved basis, as my colleagues in the shadow Wales team have set out.
That desire for stability contrasts with the reality under this Government. Electrification of the great western main line is a case in point. Despite the previous Labour Government committing to the project in 2009, it was paused after May 2010. We then faced a drawn-out process by which the plans were slowly reconfirmed. Electrification to Newbury was announced in November 2009, but the project’s extension to Cardiff was not announced until March 2011. Ministers said then that the line to Swansea would not be electrified, as originally planned. A year later and in the face of public pressure, however, they agreed that the route to Swansea would be electrified after all. In other words, thanks to the Government’s prevarication, a project initially announced in July 2009 was not confirmed until three years later. Following the delay in bringing forward that investment, will the Minister offer an assurance that the reported hold-ups in the initial works elsewhere on the line will not cause the timetable for electrification to Wales to slip? I hope that he will also assure my hon. Friends the Members for Swansea West and for Llanelli about future services and connections.
Similarly, the Government’s position on valley lines electrification has also changed somewhat. Ministers need to demonstrate that they are working in a spirit of constructive collaboration with their counterparts in Cardiff, and I hope that the Minister will provide an update on progress in the talks between the two Governments and answers to the questions posed by my hon. Friends.
Finally, I have a technical question for the Minister. Level 2 European rail traffic management system technology—ERTMS—has been trialled on the Cambrian line, but teething problems have been reported. What conclusions have been drawn from the trial? Is ERTMS fully operational again on the line following the extreme weather damage in January and the reopening of the line to Harlech in May?
In conclusion, the railways helped to forge the industrial strength of both England and Wales. As my hon. Friend the Member for Vale of Clwyd described in interesting terms, the tourism industry in Welsh seaside towns depended on the development of the railways—and obviously provided employment for young boys in Rhyl. From the world’s first passenger rail services on the Swansea and Mumbles railway to Brunel’s Severn tunnel, Wales has a railway heritage to be proud of. Cross-border services make a vital contribution to the modern economy of Wales and those of its neighbouring English city regions. It is clear from today’s debate that hon. Members of all parties want to see those services improved.
The Parliamentary Under-Secretary of State for Transport (Stephen Hammond)
It is a pleasure to serve under your chairmanship, Mrs Riordan. Today’s debate has shown the importance of transport and the rail industry to economic growth and the lives and livelihood of so many people across the country. I congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate.
Many of the questions that hon. Members have posed this morning reflect the challenges of success. Since the Conservative Government took the decision to privatise the railways back in 1993, the number of people using the railways has doubled. The hon. Lady raised issues of great importance to the economic development of both England and Wales. From her service as a member of the Select Committee on Welsh Affairs, she will know that cross-border links have been the subject of several inquiries, as have tolls on the Severn bridge, and I am grateful that she did not raise that matter today.
I will now address several of the points that hon. Members have raised during the debate. The hon. Member for Newport East asked some specific questions about her constituency, some of which I will answer in writing, if I may. On timetabling, however, franchise agreements require train operating companies to co-ordinate services, but that co-ordination clearly has not been as strong in certain areas as it might. There has been dialogue between the Severn tunnel action group, Arriva Trains Wales, Arriva and the Welsh Government, but I am disappointed that no sensible conclusion has been reached thus far. I urge the groups to continue to talk, because meeting the obligation is possible.
On connectivity, some of which is determined by constraints on the Cardiff to Cheltenham and Birmingham to Bristol routes, if there is a solution, which is possible, it will require some substantial work by Network Rail, the TOCs and the Welsh Government to investigate the options and then agree on one.
The hon. Lady also mentioned her constituents’ desire to be able to use the Bristol service to work there. Some substantial work has been done with local authorities in the west of England to fund additional services, including those to Portishead, which will introduce a metro service to the area. While that is of benefit to the Bristol area, as the hon. Lady is right to say, we are currently encouraging the Welsh Government and the West of England local enterprise partnership to talk to ensure greater connectivity between the two schemes, which would be of benefit to her constituents.
The hon. Member for Vale of Clwyd (Chris Ruane) spoke of his time as a casing boy, as I think he described it. Although probably not as glamorous as that of the hon. Gentleman, I too had a job on the railways and spent two rather hot summers as a carriage cleaner many years ago during my university career. He was right to mention the potential of connectivity to Airbus in Deeside to generate jobs, but that is unfortunately a matter for the Welsh Government, so I urge him to take the matter up with them to see whether it can be improved.
Chris Ruane
The Minister will recall that I said that the Department for Work and Pensions had grants available 10 years ago to improve transport from areas of high unemployment to areas of employment. Is that not another possible source of funding?
Stephen Hammond
Most issues concerning rail services wholly inside Wales are now a matter for the Welsh Government, which is the key point here.
The hon. Member for Alyn and Deeside (Mark Tami), who is no longer in his place, suggested that rail is an afterthought. That may or may not have been the case previously, but it is certainly not the case under this Government. Rail is at the heart of both our economic and transport strategies.
The hon. Member for Wrexham (Ian Lucas) referred to the scale of investment that he had seen elsewhere. The scale of investment proposed in the current control period between now and 2019 dwarfs any of the investment that he has seen in any other country, because £38 billion is being invested in this country’s rail system. On top of that, £30 billion is going towards the road system. He mentioned regional input, and we will soon be announcing local growth funds, into which local authorities will bid. We have also encouraged local authorities to come up with local rail projects, and there is also the local pinch point fund, so there is much local activity.
The hon. Gentleman also referred to the Wrexham to Bidston line, and I recognise and understand his desire for its electrification. At the moment, however, the aspiration should be to get a more frequent diesel service so that plans can move forward. The hon. Gentleman is right to have such hopes and I promise to work with him, because increasing frequency on that line would be of substantial benefit to his constituents.
My hon. Friend the Member for Montgomeryshire (Glyn Davies) spoke of his campaign for an hourly service from mid-Wales so that newly elected Conservative MPs can actually get to London, and I am delighted that that service is in place. He also asked about the new Virgin direct award deal and direct services from Shrewsbury to Euston. I confirm that he is absolutely right: there would be little point in putting in place a service that did not allow for economic growth and for easy movement from London to Shrewsbury, and the other way around, to do a day’s work. The first train in the morning leaves before 6.30 am, but gets into London by 9.15 am; the last train back in the evening leaves around 6.30 pm—I think at 6.32 pm—which gets someone back into Shrewsbury for 9 o’clock, allowing a full day’s work in London if necessary.
The hon. Member for Swansea West (Geraint Davies) made a number of points, some of which I will cover later in my speech. He talked a little about his aspiration for renationalisation of certain parts of the line. I am not entirely sure where that fits with the shadow Chancellor ruling it out on the television on Sunday. I am happy to reaffirm to him, however, that the Government’s view is that franchising, and the creation of partnerships between the public and private sectors, is the best way to get value for money and better services for the fare payer and the customer, as well as the taxpayer. That is clear.
Geraint Davies
What I was getting at was that the east coast main line is now in public ownership, or publicly run, and we are saving £700 million, so does the Minister have an open mind on individual franchises? There was a basis for competitive tendering to include the public sector, so that we got the best value for money. I am not talking about total nationalisation for the sake of it; I want best value for the taxpayer. Does he agree with that, or does he want to give money away willy-nilly to the private sector because he is the one that is ideologically driven, not me?
Stephen Hammond
I absolutely disagree. The east coast franchise, however, will be out of public hands and back into private hands as a result of the franchising. By the end of the year, we will have announced the winner of that competition.
The hon. Gentleman must have noted the Rail Delivery Group report that came out on Monday, which pointed out that, since privatisation, the level of private sector profits for the rail companies has fallen, while the premium going to the Government has risen by more than £400 million. The facts show not only that privatisation has seen a doubling of passenger numbers, but that franchising has benefited both passenger and taxpayer. He should agree that those facts bear out the point that the process is not ideologically based at all.
The hon. Member for Llanelli (Nia Griffith) talked about the Pembrokeshire to Manchester stopping service, but that is a matter for the Welsh Government, because the stops would be inside Wales. I am sure that the Welsh Government will read her comments, and I hope that they will take them on board. As hon. Members know, it is true that co-operation on and, where appropriate, co-ordination of transport matters between the Department for Transport and the Welsh Government is important to the success of cross-border links. Relationships have advanced significantly and co-operation under the joint parties agreement occurs regularly. The Welsh Government and the Department have a good working relationship. Officials can therefore provide Ministers with the best advice possible to deliver some of the aspirations that we are discussing.
Co-operation between the two Governments is clearly vital if we are to secure the best possible benefit from the record levels of investment now going into the rail network. The investment for 2014 to 2019 that I mentioned—the details were published in July 2012—is built around four priorities: further electrification; increased capacity and faster journey times between key cities; facilitating commuter travel between and into major urban areas; and improving the major railway links to ports and airports. More specifically in Wales, the strategy includes the £1.35 billion electrification of the Great Western main line between London and Cardiff, on which services are expected to be electric by late 2017, and the electrification of the valley lines, which is due to be completed by 2019. Furthermore, the UK Government are specifying and funding electrification of the line from Bridgend to Swansea, thereby completing the 47-mile main line electrification from Cardiff to Swansea.
Geraint Davies
Is there, therefore, an undertaking for the Government to finance it all the way from Paddington to Swansea? The Minister also seems to be suggesting the valley lines will be included, but is there now at least a commitment that the UK Government will pay from Paddington all the way through to Swansea? Is there clarification of who is paying for the valleys bit?
Stephen Hammond
As the hon. Gentleman knows, that discussion is ongoing. The Welsh Government have raised issues about the arrangement signed with my right hon. Friend the Member for Putney (Justine Greening), who was Secretary of State for Transport at the time.
Nia Griffith
Will the Minister flag up in all franchise discussions the issue of people having to change trains as the line is gradually electrified, so that we do not end up with more changes than necessary? We want one simple change, if necessary, in Swindon, Bristol or Cardiff, according to how far the electrification has gone, and then to go right through to west Wales.
Stephen Hammond
With regard to that and to First Great Western, we have undertaken a consultation this year about what the services might be and how they might be improved in the next direct award. I hear what the hon. Lady says, and I am keen not only to specify services that provide the best value and best opportunity for travellers, but to allow the privatised companies the best advantage to ensure that they can look at new services and new opportunities for new markets, using innovation within the franchise.
Other elements of our strategy will also be of benefit to Wales. The Heathrow western access scheme will reduce journey times between Cardiff and Heathrow airport by about 30 minutes from 2021. The UK Government have committed to the introduction of super-express trains on the Great Western main line by 2018, which will reduce the journey time between Cardiff and London from about 2 hours to 1 hour and 42 minutes. Crossrail will then speed up access between Paddington and central London from 2019, which will provide a fast, one-change journey from south Wales to the City of London, the docklands and beyond. Welsh stations will also share in the £100 million of station improvement funds and the £100 million of Access for All funds from 2014 to 2019. Overall, therefore, Wales stands to benefit directly and indirectly from almost £2 billion of investment in modernising the rail network.
Cross-border rail services between England and Wales are provided by four franchised train operators. The Department for Transport has a statutory obligation to consult Welsh Government Ministers before issuing any invitation to tender for a franchise agreement that includes cross-border services. As I said in response to a number of questions, where a service is provided wholly within Wales, the Welsh Government must be a signatory to the franchise.
The Arriva Trains Wales franchise is not due to expire until October 2018. The Welsh Government specify and fund services within Wales and across the border, and they carry out the day-to-day management of the franchise and have the powers to fund improvements. Train operators are of course free to run additional services if they consider that is the right thing to do. The Department is working with Arriva Trains Wales to provide additional cross-border services from December 2014.
On Silk and further devolution, which came up several times, the Government support the decision to devolve Welsh services in the Wales and Borders franchise to the Welsh Government. A joint agreement governs joint management of the existing franchise to 2018. In our evidence to part 2 of the Silk commission, the UK Government noted the strong case in favour of modifying the devolution boundary in respect of the Wales and Borders franchise. The Silk commission subsequently reported that further devolution of the rail network in Wales would be possible and desirable, although it would require close cross-border co-operation. Our response to Silk made it clear that recommendations that did not require primary legislation could be implemented early if we were satisfied that the case for change had been clearly made and there were support across Government for its implementation.
We recently held a consultation on the second direct award, and I recognise the concerns that have been expressed about the First Great Western franchise. That was why we carried out the public consultation, so that it could inform us of some of the concerns and issues so that they can be addressed when the award is made.
A number of Members raised the issue of the high-speed network. High Speed 2 will deliver significant benefits for Wales through the interchange at Old Oak Common and the improved journey times to London and the north via Birmingham and Crewe. It will also allow for greater commuter, freight and local services from the capacity released on the existing networks. Intercity express programme trains will also be coming to Wales from 2017—
Mrs Linda Riordan (in the Chair)
Order.
To allow the next debate to begin, I ask Members leaving the Chamber to do so quietly.
Rural Paper Industry
(10 years, 5 months ago)
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Mr Iain McKenzie (Inverclyde) (Lab)
It is a pleasure to serve under your chairmanship once again, Mrs Riordan. I thank the Minister for coming along to give his thoughts on the Government’s position on securing and enhancing our rural economy.
Creating business opportunities and increasing jobs rightly continues to be an important focus of this Parliament. There is no greater challenge than bringing jobs and business to all areas of the UK, be they rural or urban. My constituency has both rural and urban communities, and the more rural areas are growing. Although those communities can be sustained by people travelling to towns and cities for employment, for various reasons we still need to provide work for the rural population.
With that in mind, I recently visited a new business venture in my constituency called West Coast Woodfuels. The business, which was set up in the hills behind the village of Inverkip, uses sustainable forestry management to produce and supply wood chip for biomass energy. However, the sustainable forest maintained for that purpose relies on servicing a limited number of biomass customers. The plan was always to establish a green industry, acknowledging that the UK’s forest and timber industries are virtually carbon neutral.
Forestry management maintains vital investment in rural economies and plays an important role in the construction, renewable energy, paper and tourism sectors. Historically, forests were planted, maintained and harvested to provide wood and building materials, as well as tools and timber for industry. Britain saw a serious decline in its forested land in the 19th century, when deforestation occurred at an alarming rate to meet agricultural and industrial demands. The 19th century also saw wood pulp from trees gradually replace other sources of fibre used for paper making, such as straw, grasses and rags. Our history shows that the recovery from world war two did much to focus minds on the need to rebuild industries and the economy. As a result, forests were intensively harvested primarily for timber production.
Guy Opperman (Hexham) (Con)
I congratulate the hon. Gentleman on securing this important debate. I speak as the representative of the constituency with the largest forest in the United Kingdom—Kielder. Egger, in my constituency, has a cross-border interest in Barony, which is in Ayr, and in Hexham. As a supplier of wood chip, it is very dependent on the businesses the hon. Gentleman is talking about. Does he agree that this and future Governments must consider the commercial forests of the future so that we have an ongoing forestry ecosystem?
Mr McKenzie
The hon. Gentleman is absolutely spot on: forestry must be managed for the future, to provide not only raw materials but jobs and industry in the areas I am talking about.
The trend towards deforestation has now been arrested, but even though the UK has favourable growing conditions, only 12% of its land is forested, compared with 28% in France and 32% in Germany. Since the 1950s, increasing quantities of paper have been made from recycled sources, but the rest comes mainly from virgin wood fibre from coniferous trees grown in sustainably managed and certified forests. On the whole, that makes good economic and environmental sense in the densely populated but under-forested UK.
Of the timber extracted in the UK, less than 5% is used in paper and pulp production, compared with about 11% in other countries. That timber is lower-grade conifer logs and forest thinnings. Higher-grade timber is generally used by other industries, such as construction and furniture making.
Clearly, the paper industry depends on trees and needs new, thriving forests. It is very much in the industry’s interests for trees and forests to be used sustainably and to remain available as a raw material for future generations and as a source of future employment. The industry employs thousands of people across the UK and indirectly provides even more jobs in sectors such as publishing and packaging. That helps to generate wealth, and it creates jobs in predominantly rural areas, where it can be the only source of revenue for local populations.
In many ways, the pulp and paper industry is a business model of sustainability, and 2013 was relatively successful for it—more so than recent years. Increased consumer spending helped the packaging sector and other sectors. Looking to the recent past, we see that peak employment directly in the paper industry was reached in 1959, when it employed 100,000 people. By 1960, UK paper consumption exceeded 4 million tonnes per annum for the first time. However, by 1981, imports of paper and board exceeded UK production for the first time. Since then, this employment has declined, along with the number of mills. However, tonnages have continued to increase. By 2012, there were 53 mills in the UK, producing an estimated 4.4 million tonnes of paper and board.
Paper mills use recycled paper to produce 70% of the fibre for paper making in the UK. However, paper can be recycled only a set number of times—I am told the maximum is about seven. After that, the paper loses its fibre and is no longer useful for making good quality paper, so forestry still underpins the industry.
Virgin pulp comes from northern England, Scotland and abroad, and 5% of harvested UK timber is used in paper making. As I said, UK timber can also be used in biomass energy production, making biomass an ever-growing additional competitor of the paper industry for new wood, and suggesting that more forests are needed. Forests are a renewable, sustainable resource. They are carbon neutral, and they also create pleasant environments for leisure activities. In the UK, there is consensus that improved forest management would increase rural employment.
What, then, of the impact of recycling as we steadily improve our performance on our recycling targets up and down the country? Since the 1950s, UK paper makers have steadily increased their use of recovered paper, and nearly 70% of the fibres used to make paper in the UK now comes from paper that has been collected and recycled. As I said, however, there is a limit to the number of times paper can be recycled. There is also an ever-growing and fiercely competitive market for recycled paper, so new pulp needs to be sourced.
It is not only the paper industry that requires access to new pulp. The UK packaging manufacturing industry also requires it. It has annual sales of £11 billion and employs 85,000 people, and represents 3% of the UK’s manufacturing work force. It is a powerful addition to those demanding access to new sources.
I have visited a packaging firm in my constituency. McLaren Packaging, which produces packaging for more than 100 whisky products, has invested in cardboard tube manufacturing with great success. In fact, most of the whiskies that are on display in shops or exported will feature distinctive packaging from McLaren Packaging in Port Glasgow.
The cardboard packaging industry’s main product segment, however, is corrugated cardboard boxes, with additional cartons and cases. Such products are made of three layers of cardboard sheeting, with a corrugated sheet in the middle, making the box more durable than standard containers. Cardboard boxes have a wide variety of applications and are used to package many products across a range of sectors. Its customers include manufacturers, wholesalers, storage owners and retailers. In general, demand for cardboard boxes correlates with demand for consumer goods as greater manufacturing output triggers a greater need for packaging.
In my part of the UK, forestry is sometimes described as the secret industry. About 40,000 jobs would disappear from the area if there were no forests or forest industries. Every week, some 4,000 lorry loads of harvested wood are transported to mills for conversion into timber for house building, quality paper and many other essential products. After felling, more trees are planted and the cycle continues. That makes forestry truly sustainable. It promotes economic activity in rural areas in ways that protect and conserve the natural environment and wildlife. Forests also support a network of interdependent businesses, including those of forest owners and managers who produce wood while creating wildlife habitats and providing recreation facilities. There are forest nurseries, where young trees are grown. In addition, contractors harvest the wood, and hauliers transport it, and there are businesses that process wood, such as the paper industry.
The development of wood-processing industries really took off in the 1980s. That was when the forests created during the middle part of the 20th century began producing significant volumes of softwood. However, careful management of the forests can also produce the energy for manufacturing of paper through energy biomass. Thus there is a natural resource that can not only be transformed into a product but can fuel the manufacturing process to create the product. More than half the energy used in the EU paper industry now comes from biomass, and the UK paper industry is using biomass with increasing frequency. That means that more forests will be needed to provide adequate supplies for both energy biomass and other industries, such as paper. Creating a rural paper industry next to a forest would seem as natural and logical as it was in the past to match up a mill with a stream for hydro power.
The European pulp and paper industry is in many ways a business model of sustainability, and it is largely rural.
Guy Opperman
The industry experts to whom I have spoken on both sides of the border are opposed to Scottish independence and the impact that that would have on the businesses we are concerned about. Does the hon. Gentleman agree?
Mr McKenzie
I thank the hon. Gentleman for bringing in the Scottish question, which I think will come into just about every debate from now until September. Yes, clearly, as he pointed out, in the context of the industry, independence would create another problem for the population of Scotland.
A need has been identified for more forests in the UK, and it would seem that a clear start could be made by creating more forests in the rural north of Britain. Related manufacturing industries could then be attracted to forested rural areas, bringing even more jobs and business to areas of the UK where we can tap into a sustainable natural resource. The Confederation of Paper Industries, which has 68 member companies employing 25,000 people directly, tells us that there is a need for access to new sources of paper, to sustain demand and enable the industry to grow. Also, the paper industry is said to support a further 100,000 jobs indirectly. The turnover of CPI member companies is reported to be in the region of £6.5 billion. Competition for recycled paper and the limits on the number of times paper can be recycled mean that new sources are increasingly in demand. Great quantities of paper are never recycled—we need think only of the volume of paper being flushed away each day that will never be recycled.
Will new technologies ever truly replace paper? That idea is used as a counter-argument—against increasing the number of sources of new paper and pulp fibre. We strive for the paperless office, but we are miles away from achieving it. Merely looking around Parliament provides evidence of that. Paper and card will always be necessary for packaging. Paper is more environmentally undisruptive than plastic. Even paper for print and writing is unlikely to die out, despite e-books. Some 80% of social network users—diehard committed onliners—say they still require paper. Demand for paper and paper products can only increase. Even the mighty iPad requires packaging.
Rural and semi-rural areas can only benefit from sustainable management of their forests and attracting a paper industry with access to new material and an energy source. That would hopefully mean an increase in jobs, business and population for rural areas. Let’s try to see the wood from the trees.
The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)
I congratulate the hon. Member for Inverclyde (Mr McKenzie) on securing a debate on this important matter. As he said, the paper industry is an important one and always has been. The hon. Gentleman gave historical figures, and he might like to know that I was brought up in a paper mill village. Bullionfield paper mill in the village of Invergowrie supplied high-quality paper for more than 100 years, including, as I recall, paper for the Tokyo Olympics programmes.
The Government recognise the challenges facing all the energy-intensive sectors, including paper, and I welcome the industry’s positive recognition of Government support in its June 2014 review. That review commended the steps being taken by the Government to ease the direct and indirect costs that climate change policy places on the industry. Improving economic conditions have fed through, as the hon. Gentleman said, to a more successful year for most paper sectors. The data show that measures to help the paper industry have resulted in real growth in the sector. I want to comment specifically on what we are doing to help the paper industry with its energy costs and respond to what the hon. Gentleman said about the importance of job creation in rural areas. If there is time, perhaps I will give a little more detail on what we are doing to promote sustainable forestry.
The Government are increasingly concerned about the effects of high energy prices on the competitiveness of our energy-intensive industries, including paper. That is why we now make compensation payments for the indirect costs of the EU emissions trading system. We intend to make the first payments for the indirect costs of the carbon price floor this summer. Further measures were announced in the Budget: a cap of £18 per megawatt-hour on the carbon price support mechanism, which will benefit all sectors of the economy; and compensation for the costs of the renewables obligation and small-scale feed-in tariffs from 2016. That is the most significant policy cost affecting the price of electricity. The Chancellor also announced the continuation of the ETS and CPF compensation schemes until the end of 2020.
We have paid some £32 million in ETS compensation to 53 companies so far, across the UK, including £5 million to eight companies in Scotland, operating 17 sites between them. The paper industry shared £8 million between 28 companies, including three in Scotland: Ahlstrom Chirnside in the borders, UPM-Kymmene near Kilmarnock, and Tullis Russell paper makers, near Glenrothes. Those companies have been benefiting from the support that we are making available. I am pleased that paper, as an energy-intensive industry, is eligible for compensation across the whole spectrum of measures. The industry recognises that those Government support measures will save it up to £170 million over the coming years.
The hon. Gentleman said some important things about the role of the paper industry in helping to stimulate jobs in rural areas. That is a priority for the Government. We have introduced a range of policies and initiatives to promote growth in rural areas by helping to deliver new infrastructure, particularly broadband; by raising skill levels; and by supporting small and medium-sized enterprises. We are also trying specifically to support the rural economy by investing in rural tourism and supporting micro-enterprises. We have five pilot rural growth networks—not in Scotland but in Cumbria, in the north-east of England, and in the south of England—aimed at tackling specific barriers to growth in rural areas such as a shortage of work premises, slow internet connectivity and fragmented business networks. Those pilots are expected to create up to 3,000 jobs and support up to 700 new businesses. We want to share the lessons we learn from them with local authorities and local enterprise partnerships.
Tourism is an important driver of the rural economy. We must ensure that we are doing more to take advantage of the predicted growth in the tourism sector as a whole to ensure that the rural part of the tourism sector does not lose out. We are making funding grants available to tourism businesses to boost the rural economy through the rural economy growth review and rural broadband. We are also providing support for a high-quality tourism visitor economy through a £25 million package of support, including £6 million for partnership projects funded by the rural development programme.
I turn to the creation of sustainable forestry that can feed back into the industry. Forestry is a devolved matter, so any specific concerns the hon. Gentleman has relating to Scotland should be raised with the Scottish Government and Scottish Parliament. Throughout the United Kingdom, we are working to promote the future success of our woodlands by ensuring their sustainability. In January 2013, we set out our vision in a forestry and woodlands policy statement, which included our priorities for future policy implementation, focusing on protecting, improving and expanding public and private woodland, and recognising the multiple benefits that woodlands provide to the economy, to society and to the environment. Alongside that, we recognise that a strong timber industry helps to deliver the core objectives of protecting, improving and expanding woodland, and contributes to the growing strength of the rural economy.
Guy Opperman
We all agree that we need more forestry to cope with existing businesses and the enhanced and expanding subsidised biomass businesses. Post-world war one, we planted Kielder in my constituency specifically to accommodate the need for large forestry infrastructure. I am worried that the Government do not have the big project ideas for large forestry planting going forward. Will the Minister expand on that? It is very much what businesses that I speak to, including forestry businesses, are looking for a steer on.
Michael Fallon
My hon. Friend is right, and I will address the steps that the Government are taking.
The forestry industry makes a significant contribution. It provided some £230 million gross value added in the latest year for which figures are available, an increase of 52% over the two or three preceding years. We are committed to invigorating the woodland economy, bringing neglected woodland back into management and helping to create jobs and growth. We support and are encouraged by the new sector-led “Grown in Britain” initiative, which is creating increased market demand for British wood products. Although it was launched only in October 2013, it already has the support of 200 organisations, ranging from forestry suppliers, processors and product manufacturers to big-name high street retailers and UK construction firms.
“Grown in Britain” is driving a change in forestry that could see the management and new planting of woodland become more economically viable. Strengthening and expanding our forestry supply chains is not only creating new market opportunities but, crucially, creating an incentive for increased private investment in woodlands. We are working with “Grown in Britain” to pioneer ways of making it easier for businesses to direct their corporate responsibility investments into projects that improve the ecosystem services delivered by woodlands and result in more tree planting.
We are also making good progress in expanding the woodland cover across England. It is now as high as it has been since the 14th century. We want it to increase by planting the right trees in the right places for the right reasons. We also want more of our woodlands to be managed sustainably to maximise their public benefits. We estimate that if we work together with the sector, we could help to achieve 12% woodland cover by 2060, provided that private investment in woodland creation increases in line with our expectation.
We continue to do our bit in supporting woodland creation. The total area covered by the woodland creation grant in the year to March 2014 was 2,691 hectares, which is more than the seven-year rural development programme target of an average of 2,200 hectares a year. In this financial year, some £30 million of rural development programme funding is being invested, £24 million of it on management of the existing resource and £6 million for planting about 4 million trees on 2,000 hectares of new woodland.
Our woodland carbon code also provides a mechanism further to enhance private sector investor confidence in woodland creation projects for carbon benefits. More than 142 projects have sought certification to the code, representing more than 14,000 hectares of new woodland being planted that will sequester more than 5 million tonnes of carbon dioxide during its lifetime. That is a huge increase from the position a year ago and reflects the growing interest in domestic carbon emissions projects and the success of the woodland carbon code.
On improving woodland management, more than 50% of England’s woodlands are now managed under the UK forestry standard, which sets good practice guidelines for sustainable forest management. The UKFS is a world-class forestry standard administered by the Forestry Commission, and is the foundation for good forestry practice throughout the United Kingdom. It is therefore fundamental to the delivery of sustainable forest management. It provides a valuable toolkit for helping woodland owners to manage their woodlands productively and sustainably. Its application can lead not only to increased timber yields but to better flood risk management, the safeguarding of clean water supplies and the conservation and enhancement of biodiversity.
Our ambition is to increase the proportion of existing woodland under the UKFS. In our forestry and woodlands policy statement, we estimated that working effectively together with the sector could bring two thirds of woodlands into active management in the next five years, with the potential to reach some 80% if markets develop. Good progress is being made, and already the area of woodland under active management has increased from 52% three years ago to 55% in March this year. The key to bringing more woodland into such management is economic viability, and a range of measures are promoting sustainable woodland management, underpinned by the UKFS.
We are actively supporting the sector-led “Grown in Britain” initiative in its efforts to increase demand for and supply of British wood and wood products. Although still in its early stages, the initiative is beginning to make a difference. For example, to date some 19 major UK contractor group companies with a collective turnover of more than £24 billion have pledged to look into ways of procuring more British timber for their construction projects. Their buying power will help to stimulate demand for British wood products, which should lead to more woodland management and economically sustainable woodlands, and in turn to more private investment in woodlands, which we all want to see.
I am grateful to the hon. Member for Inverclyde for raising these important topics. The paper industry is important to us, and we recognise the challenges it faces and the high cost of the energy that it necessarily uses. I have outlined the measures we have taken to alleviate those costs. I have also explained how we see rural development as a major part of our economic recovery and our pilot work to improve the success rate of small businesses in rural areas. Finally, I have explained what the Government are doing to increase investment in private woodland and to drive up the proportion of woodland that is under active, sustainable management to increase the supply of timber to our own industries.
Disabled Students Allowance
(10 years, 5 months ago)
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Mr Jim Hood (in the Chair)
Before I call Dr Julian Huppert, I inform hon. Members that I already have 12 speakers on my list, plus the two Front Benchers, and I will be calling the Front Benchers at 20 minutes to 4. After Dr Huppert has made his speech, I will then work out a time limit and advise hon. Members of it. I hope that interventions, if they are taken, will be brief, and I may have to remind Members of that if they try to make speeches in their interventions.
Dr Julian Huppert (Cambridge) (LD)
It is a pleasure to serve under your chairmanship, Mr Hood. I will do my best to abbreviate my speech in deference to the large number of Members who have shown up. It is good to see everybody who has come here. We are united by a belief that everybody, regardless of who they are, should be able to aspire to go to university. Regardless of disability, whether it is physical or mental, visible or invisible, there should not be a barrier as a result of it. There have been improvements on widening participation. At the university of Cambridge, where I used to be and which I now have the pleasure to represent, in 2007, only 4% of students were disabled. That has gone up to 10% now, and it is a trend that we see across the country. Universities have worked very hard to try to get disabled applicants to apply, to support them and to get rid of barriers. As a former director of studies and supervisor, I have seen some of that work and engaged in some of it to try to support students.
We have to ensure that the progress continues, because there are challenges. In general, life costs more for people who are disabled, and the same applies to student life. The disabled students allowance is a lifeline for many students with disabilities. That is why I sought the debate and why I am pleased to have secured it, after having seen the Minister’s proposals and heard the concerns that many people have expressed to me.
Caroline Lucas (Brighton, Pavilion) (Green)
I congratulate the hon. Gentleman on securing this important debate. Does he share my alarm that that National Union of Students has said that as many as 55% of students with disabilities have seriously considered giving up their courses, many of them precisely because of financial concerns?
Dr Huppert
I do indeed share that concern—I will now take that point out of my speech—and the key point is that that number is significantly higher than it is for non-disabled students. I have been working with the National Union of Students, Anglia Ruskin university students’ union and Cambridge university students’ union on that. I want to draw Members’ attention to early-day motion 48, which was tabled by the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett). It is a pleasure to work with him on that—I am one of the co-sponsors—and we have now reached 99 signatures to that motion. I hope we can get over 100 today, because it shows that the issue matters to Members across parties.
In 2012-13, the payments helped 54,000 students up and down the country, doing so at a slightly lower cost than was necessary in 2011-12.
Mr Mark Williams (Ceredigion) (LD)
I congratulate my hon. Friend on securing the debate. He talks about “the country”, but has he considered the implications of the policy for students studying in Wales and in Scotland, where there is great concern about the Government’s proposals? Although the review is England-only, it has dire implications for Wales and Scotland.
Dr Huppert
My hon. Friend is absolutely right. I have mostly been focusing on the effects in England, and mostly on the effects in my constituency, but he is right that there are concerns about what might happen in Wales and Scotland. Of course, students study across the borders.
The support helps students with all sorts of equipment, such as computer software, but also with non-medical helpers, note-takers and all sorts of travel costs. It helps people to reach their potential, and it works. Figures from the Equality Challenge Unit report the year before last showed that disabled students who get the support are more likely to achieve a first or upper second-class degree than students who do not get that sort of help.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
Does the hon. Gentleman share my concern that although an equality analysis of the proposals has not yet been carried out, the Minister, in a letter I have just received, states that it is the detail of the implementation of the proposals that is yet to be decided?
Dr Huppert
The hon. Lady raises an absolutely reasonable concern, and I will, again, take that point out of my speech.
We should be able to help people, and there are so many advantages to attending university; as well as the human benefits, the economic benefits are clear. It boosts the national economy, and it boosts personal earnings by something in the order of £100,000 over a lifetime.
As the Minister said in a speech to the Higher Education Funding Council for England last year:
“Going to university increases the chances that you will vote and appears to make you more tolerant. It improves your life expectancy. You are less likely to be depressed, less likely to be obese and more likely to be healthy. These are benefits for individuals and for society.”
He went on to say that
“I said it would be a tragedy if anybody were put off from applying for university”
because of costs. That is what this modernisation could do; it could act against those excellent words from the Minister.
Dr Huppert
I will make some more progress.
Although the Minister will, I am sure, make it clear that the changes are not due to come in for another 18 months, and that current students will be protected for 2015-16, they are already having an effect. Paddy Turner, from the National Association of Disability Practitioners, said that his staff are already seeing prospective students who are rethinking 2015 entry applications because they are concerned about the changes. Open days are already under way. Many students are visiting universities to find out what will happen, and universities simply do not know what to say. The changes could mean that people are put off, or that they struggle when they get to university.
Jack Dromey (Birmingham, Erdington) (Lab)
Will the hon. Gentleman give way?
Dr Huppert
I would like to make some more progress, if I may.
I have spoken to many people about the issue. I pay tribute to the three unions—from Cambridge university, the National Union of Students, and particularly the union from Anglia Ruskin—that organised a fantastic event with a large number of people who have been supported by DSA. They spoke very movingly about the experiences that they have had. I was intending to say a bit more about individual cases, but in the interests of time I will not. However, I was struck by how many of the cases involved mental health issues rather than just the physical health issues that people so often think about. There were people with dyslexia who had not had the support that they needed. It was only quite late on that they discovered the help that was available. They would never have been supported otherwise; they would have never have been able to do what they wanted to do.
At Anglia Ruskin university, 1,800 students are eligible for DSA, so there are 1,800 stories of people being helped. There are similar numbers at the university of Cambridge. It has made a huge difference, but that is at risk, because universities are being expected to provide the support themselves. Where will they get the extra money? There is to be no additional funding—indeed, the right hon. Member for Sheffield, Brightside and Hillsborough has had that confirmed through a written question.
Mr Ben Bradshaw (Exeter) (Lab)
How far does the hon. Gentleman think that the reasons for this decision go back to the Government’s mismanagement of the student loan book and student finance as a whole?
Dr Huppert
That is a somewhat broader question. There have been issues with the student loan book dating back some 15 years, as I am sure the right hon. Gentleman will know. Rather than arguing about that broader debate—he will know that I am staunchly against the fee system that his Government set up, which is being expanded—we should fix the problem in question. I am always happy to discuss those issues with him, as he well knows.
We have heard concerns from the National Autistic Society about what support will be available for people who are on the autistic spectrum. How will they be able to hold universities to account?
Mr Robert Buckland (South Swindon) (Con)
I commend my hon. Friend for securing the debate. In the course of proceedings on the Children and Families Act 2014, there was much discussion about whether the duty in it should extend to higher education. We were assured that in light of the particular grants that are available, we need not worry. Does he agree that it may be necessary to reconsider extending the duty to higher education, to cover students between 19 and 25 years of age?
Dr Huppert
I agree completely. My hon. Friend makes an essential point. He is a dedicated campaigner on autism issues—and I will now remove page 12 of my speech.
What sort of support will there be? I have some sympathy for the Minister’s comments about the provision of basic computers. The world has changed since I was an undergraduate. Most people have a computer now, but a lot of the software that is needed simply will not run on a basic computer. What happens if people need software that is not compatible with the perfectly reasonable computer that they have? What about technical support—how would that work? What about support for scanners if optical character recognition is needed? What about training? There are many, many questions.
Dr Huppert
I will take an intervention from the hon. Member for Birmingham, Erdington (Jack Dromey), then I will continue.
Jack Dromey
I congratulate the hon. Gentleman on securing the debate. He is absolutely right about the importance of access for disabled people. Does he agree with the comments of the Muscular Dystrophy Campaign that young women such as Keisha Walker in my constituency—she is from a modest background, and no one in her family had ever gone to university before—simply could not have gone to university, stayed at university and become a success, as she is determined to do, without the help of DSA?
Dr Huppert
I agree completely. The Muscular Dystrophy Campaign’s trailblazers case studies have been incredibly powerful. I hope that the Minister has had a chance to look at them. I will not go through them in any detail, in the interests of time, but there are many of them.
Lucy Powell (Manchester Central) (Lab/Co-op)
Will the hon. Gentleman give way?
Dr Huppert
I will take these two interventions and then try to finish my speech. I will take the hon. Lady’s intervention first.
Lucy Powell
The hon. Gentleman has been very generous with his time. I agree entirely with his point about computer facilities. I met my constituent Suzannah last week. She suffers from autism and described to me exactly what the hon. Gentleman is saying, but she also said that the desire for students to use banks of computers is not appropriate for those with autism and other problems, who find public areas too distracting and too difficult to work in.
Dr Huppert
The hon. Lady is absolutely right. We need to tailor the support to the individual. What is suitable for people on the autistic spectrum can vary substantially, which is why they need assessment and the help that is right for them. For some people, a bank of computers will be perfectly fine; for others, it will not be.
Duncan Hames
I thank my hon. Friend for giving way and for securing this important debate. My constituent, a member of the British Assistive Technology Association, points out that whoever is providing the support, whether it is the Government or higher education institutions, it is vital that students have the support that they need to use the technology—hardware and software—as effectively as possible, to get the maximum benefit from it.
Dr Huppert
My hon. Friend is absolutely right. As it happens, my mother is registered blind and relies on assistive software. It takes a huge amount of support for her to be able to use it, and I often have to provide that support. My hon. Friend is absolutely right to raise the point about the need for that.
I will make further progress, because I understand that many hon. Members want to speak. The NUS has highlighted a number of specific concerns about how the system will work, and I would be interested in the Minister’s specific response. There is a risk that the reforms could deter institutions from actively recruiting disabled students, because if the institutions are responsible for paying the extra costs, there will be an incentive not to take people who will be a bit more expensive. Although universities have a duty to provide reasonable adjustments for their students, there is no clear definition of what “reasonable adjustments” mean and no funding available to provide them.
The NUS makes another point, which is about the routes of redress for disabled students when there is a problem. There is only a finite amount of time available to fix that. Who would provide advocacy—would it be the disability support office? It could cause huge internal tensions if one part of the university is having to fight another.
The Minister for Universities and Science (Mr David Willetts)
I am grateful to the hon. Gentleman for giving way; he is rattling through a lot of important points very quickly.
It is important to recognise that universities are of course under an equality duty. The House has voted under successive Governments to introduce that duty, and at no point has there been the suggestion that extra funding has to be given to a public or private body to enable it to discharge its equality duty. Fortunately, the resources available to universities for teaching are increasing from £7.9 billion at the beginning of this Parliament to £9.9 billion at the end of this Parliament. That is a result of the changes that the hon. Gentleman “steadfastly opposed”, to use his words. They are among the few major national institutions that are seeing increases in cash, and they have a clear equality duty. Along with the retention of DSA, does he not accept that we should expect them to discharge that duty?
Dr Huppert
The Minister makes a valid point about the total cash being spent on teaching. As he knows, my problem is with the method of payment rather than the existence of the extra money for teaching. We should be keeping DSA—he is right about that, and we will talk further—and universities should apply the equality duty, but there will still be pressures on them and there will still be changes. I look forward to his detailed answers to the concerns.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Will the hon. Gentleman give way on the Minister’s point?
Dr Huppert
No. I would like to make more progress.
Universities themselves are not content with what the Minister has been saying. I spoke to the head of the disability resource centre at the university of Cambridge, John Harding, who highlighted the fact that the real concern for higher education institutions, including Cambridge and all the Russell Group institutions, is the significant lack of clarity in the announcement and the complete lack of prior consultation. The Minister would have been better able to make his case had there been formal consultation and discussions. How will “complex” be defined? What is “the most specialist support”? There are many concerns about how this will work for people.
Dr Huppert
I will give way if there is time towards the end, but I know that many hon. Members want to speak.
Mental health problems are more common among students than the general population, and we must take action on that. Some 3,500 people applied for support last year citing mental health issues. It can help people to develop realistic study patterns and with organising their time and setting goals—things that are easy for some, but much harder for others. Students can require support from specialist autism mentors. It is unclear what band those would fall into and whether people would still be able to get support.
There are many concerns about how the new system will work. We know that people are likely to drop out if the cuts occur while they are at university. Randstad, an organisation that works with many institutions, surveyed students and found that more than one third would not have attended university without DSA and that about the same number would be more likely to drop out without it.
Dr Huppert
I will try to finish.
We have many problems, and the Open university is concerned. It has about 20,000 disabled students. Where will it get the funding to support them? The university of Cambridge has short, intense terms, which changes the nature of the help that is needed. DSA is tailored at the moment. I am sure that some universities will provide good support, but I fear that others will not.
Mr Willetts
There is no picking or choosing. Universities have an equality duty. They have more funding for teaching, and they also have more funding in relation to access agreements—more than £700 million. Under the hon. Gentleman’s approach, that funding might not exist. Does he accept that, in my letter to the Office for Fair Access on how universities discharge their access obligations, I specifically identified disabled students as one group to whom they had to reach out in access agreements, for which extra funding is available?
Dr Huppert
I do not have the Minister’s letter to hand, but I do not doubt the facts of what he says. However, there is a concern among higher education institutions, among students and among Members of this House—about 100 of them—that the system will not work and will result in a less even playing field and less of the support that people need. I therefore urge the Minister to rethink it some parts of it.
I have asked many questions—I realise that I have rushed through a number of them—that the Minister will have heard before in letters from me and from other right hon. and hon. Members and seen in comments from the National Union of Students and all sorts of other organisations. I hope that he will consider them and rethink the cuts, the way they are being made and the pace of them. I hope that he will then return with alternative proposals that achieve what we surely all want to see, which is that support is available and we do not leave people out as we are trying to develop them through the university system.
Mr Jim Hood (in the Chair)
Order. As I said earlier, there are 12 hon. Members on the list of speakers, and I would like to get through everyone, so I will begin with a four-minute limit on speeches. I may have to cut that down if there are too many interventions.
Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)
I congratulate the hon. Member for Cambridge (Dr Huppert) on obtaining the debate and on rushing through his speech, which I will also have to do. The sadness about this move is that it is clearly driven by the desire of the Department for Business, Innovation and Skills to cut £117 million from its budget. That is a tragedy for those who will be affected and a failure of Ministers, whom I like, to have fought the battle with the Treasury on this matter.
Let us be clear: the pre-consultation was non-existent. The review was not undertaken with or on behalf of those affected, those who support those affected or those who will have to pay out. It was not, in my view, honest, because the Government, during the passage of the Children and Families Act 2014, which has been referred to already, gave reassurances that there was no need to extend the Act’s requirements precisely because of DSA. Baroness Northover wrote to the Royal National Institute of Blind People and said that disabled students in the higher education sector are already successfully supported by institutions and directly by the Government through DSA. DSA is not means-tested, is awarded in addition to the standard package of support and does not have to be repaid. We should not seek to duplicate or replace the system. Either the Government meant it or they did not.
Kate Green
My right hon. Friend will be interested to know that it is not only in the context of the Children and Families Act that the Government said one thing before and are saying another now. In relation to the independent living fund, Ministers in the Department for Work and Pensions are citing DSA as an alternative source of support.
Mr Blunkett
And if we want another contradiction in relation to Government policy, I have to say to the Minister, who has always been extremely helpful and respectful to me, that it is not acceptable to use the argument that the universities have a lot of money and therefore can afford to replace DSA under the Equality Act 2010. If that were the case, the Department for Work and Pensions—God forbid it should hear this and do it—would remove the access to work requirements, on the grounds that quite a lot of individuals who receive the support could go to a potential or actual employer and say, “You have a lot of money swilling about with your shareholders. Why don’t you use some of that to fulfil the equalities requirements on you?” That would include public services. Please, please do not get the idea that universities have got money so it can be diverted from somewhere else and benevolently given to support students who have a right not to some sort of benevolent charity, but to be supported properly.
Stephen Lloyd (Eastbourne) (LD)
For profoundly deaf students, DSA pays for note-takers. Without a note-taker, how on earth would a profoundly deaf student be able to take notes during their lectures when they are at university?
Mr Blunkett
Absolutely, and that would entail employing someone, not simply diverting a bit of resource. My support systems, back in ’69 to ’72, were funded by the local authority; at the time, the local authority had a duty to support students under the grant system. Even though the local authority was helpful, however, I had to organise reading circles of volunteer students to assist me. That was a mutual arrangement and it was obviously socially responsible, but it should not have been necessary. Under the proposals, we will find ourselves going back to a bygone era where people have to plead for help rather than receiving it directly.
Mr Blunkett
I just want to make this point, because I think others want to speak. I emphasise what the hon. Member for Cambridge has already said. When it comes to taking a student in, the access provisions of universities and other higher education intuitions will always contain a subliminal question: can this student manage? That question was asked of me all those years ago. If the answer is, “Yes, if I have the support systems necessary: the equipment, the extra readers and other provision that other people will not need”; if the university thinks, “Is it worth it?”; and if the department thinks, “What imposition will this cause? Will resources be diverted from somewhere else? Will this responsibility be devolved to this department?”, there is a chance that that student will not be offered a place. If that were to be the case, I say to the Minister: be it on your conscience. Go back to the Treasury and say that the money in its existing budget should be retained. The rights and opportunities of individual students should be retained, and the Government should be ashamed of themselves if that does not happen.
Paul Maynard (Blackpool North and Cleveleys) (Con)
For the avoidance of any doubt, I will not take any interventions to ensure that as many people speak as possible. I am pleased to speak in the debate, because I am one of the few MPs who benefited from DSA, as a student in 1994. I had some problems and I had to use a computer for part of my course. I thought I would get a laptop, but when I went to my assessment, I was given a half-screen word processor. I say that not to underpin the point that we do not need laptops any more, but to agree with the Minister that we should not gold-plate the provision. The fund is limited, and we cannot write a blank cheque for it.
I accept that, after 25 years, we have to look again at disability living allowance in particular, and I accept that public bodies have to adhere to their duties under the Equality Act 2010. However, I have concerns about the detail of the proposals. The Minister is thoughtful, good and decent, and I urge him to listen carefully to what we have to say before he places his regulations before the House.
I will try not to repeat myself too much. The report from the Muscular Dystrophy Campaign’s trailblazers team, a key member of my all-party group on young disabled people, has been mentioned. That report stresses that DSA was the area of the university experience that worked best. What concerns me most is the language of written communications from the Minister. It may seem obvious, for example, to translate the language of disability from the 2010 Act into DSA, but there are real concerns that that leaves, for example, dyslexia, dyspraxia and dyscalculia outside the remit of DSA. Will the Minister guarantee that no disability that was previously covered by DSA will be left out under the new regime?
I am also worried about the laxity of some of the language, which has caused real concern among those with the most complex disabilities. If, for example, someone requires a non-medical helper to stay with them overnight, the language is not clear enough to give that person confidence that they will be covered under DSA. That is causing a lot of anxiety.
More widely—the hon. Member for Eastbourne (Stephen Lloyd) has mentioned note-takers—I am greatly worried by the idea that a course can be delivered in such a way as to allow the student to benefit from it without having to participate in the same way as the other students. I want students to be able to attend lectures, participate fully and enjoy full integration in student life. If one goal of DSA is to enable them to complete the course at the lowest possible cost, it will reduce the university experience almost to the level of a correspondence course. I am sure that that is not the Minister’s intention whatever, but that is where the language appears to be leading us.
I also stress my concerns about augmentative and assistive communications software. I urge the Minister to consult with the Communication Matters forum, which is the specialist in that regard. It is a fallacy to think that much of that technology can be used even on the most complex laptops, let alone on iPads. As technology, particularly AAC technology, advances ever faster, the computing technology required advances equally.
Finally, in the 30 seconds that remain, I draw the Minister’s attention to the document “Fulfilling Potential: making it happen”, published by the Department for Work and Pensions. Great strides have been made in increasing disabled students’ participation in higher education, but one key indicator measured in “Fulfilling Potential” is the number of students who abandon their course after one year. If that number goes up as a result of the changes, that will be a serious concern and we will need to look again at what we are doing. I urge the Minister to have regard to “Fulfilling Potential”. I will write to him with everything else that I wanted to say.
Mr Andrew Smith (Oxford East) (Lab)
It is a pleasure to follow the hon. Member for Blackpool North and Cleveleys (Paul Maynard). His powerful arguments and testimony, like those of my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), underline the argument made by the hon. Gentleman who represents the other place, the hon. Member for Cambridge (Dr Huppert). I agreed with everything he said in his opening speech.
I was particularly keen to take part in the debate because in our area we are lucky to have not only two great universities but ACE centre south—ACE stands for aids to communication and education—which has achieved great things working with students with severe communication disabilities and giving them a voice. Twenty years ago, many of them would have been locked in a world without communication and unable to go to school, let alone university. Now, however, some of the young people whom the centre has helped have got PhDs. Quite rightly, there was cross-party support to save the ACE centre when it had financial difficulties in 2012. We need a big cross-party effort to stave off the cuts to DSA. It is heartening to see so many Members present and to hear the arguments from both sides of the Chamber.
The cuts risk rolling back what has been achieved and blocking access to education for many disabled students from poorer backgrounds, in particular, including those who have dyslexia and other specific learning difficulties.
Yasmin Qureshi
Bolton university in my constituency is not rich and has 900 students who receive DSA. Imagine the impact of the proposals on those students and the university, which has not got the resources to look after them if they do not have enough money.
Mr Smith
My hon. Friend makes a very good point. As has been said, there is a real danger that the proposals will provide universities and other institutions with a perverse disincentive, with the best will in the world, to accommodate all the students that they would like, especially those who have the most severe disabilities. Like other hon. Members, I have been contacted by many students, academic support staff and lecturers who are appalled, as I am, by the proposed cuts. I recently had the pleasure of speaking to the disability officers of the two university student unions in my constituency. They brought powerful testimony of how students at both Oxford’s universities have benefited from DSA and are well on their way to building fulfilling careers. Their determination to help ensure that young people with disabilities have the same opportunities in future is inspiring. One of them told me:
“I pretty much failed the first year of my law degree due to my disability and not being fit to study. I couldn’t afford to buy any of the accessibility items I needed. DSA gave me a lifeline. With the specialist equipment including a specialist mouse bar, laptop, dictaphone, extra-large screen, specialist software, printing and book allowance and various other provisions, I was able to retake everything the following year and actually cope with the work load. Without DSA I wouldn’t be where I am now.”
Even under the current system, it is not easy to get support. One student in my constituency is having to get an unnecessary diagnosis of dyslexia because his diagnosis undertaken the previous year in the sixth form was not accepted by the DSA authorities. Since there is no clinical need for a new diagnosis, he is having to apply to the university hardship fund to pay for it privately.
For all its difficulties, DSA provides an essential lifeline for people with disabilities who without it would have to give up on their education and ambitions, or would not have been able to apply in the first place. Cutting it will make many disabled students’ lives much more difficult, but, worst of all, it will result in a country where people with disabilities begin to think that they cannot even aspire to higher education and must limit their ambitions. It will do incalculable damage to equality. I urge that the proposed cuts be abandoned.
Kate Green (Stretford and Urmston) (Lab)
I congratulate the hon. Member for Cambridge (Dr Huppert) on securing such an important debate. Since so many others wish to speak, I shall make only four points. I endorse the comments made by colleagues from all parties.
First, I want to repeat the point about how vague the specifications are for access to support. That is true for computers but also for accommodation. Will the Minister comment on the guidance in the Student Loans Company handbook in relation to the non-medical help manual? Are there any plans to revise the guidance on what makes someone eligible for the help outlined in bands 3 and 4?
Secondly, students need access to good quality advice, and not just in relation to the disabled students allowance. When this debate was announced and I posted on Twitter to say that it would be taking place, I was contacted by someone who told me that they had been told that they could not access DSA unless they were on employment and support allowance or in receipt of personal independence payments. That is clearly incorrect, but it suggests that someone in the university advice service is misinformed about eligibility and the welfare benefits system. What support is going to be given to university advice and welfare services to ensure that they are properly equipped to support students who might have an entitlement?
Thirdly, what will happen to students who begin a course in 2014 when the new provisions come into effect in 2015-16? Will they be able to maintain any support that they have been receiving ahead of the changes right through to the completion of their studies after 2015-16?
Finally, what assessment has the Minister made of the effect that the changes may have not only on disabled students’ access to university but on their choice of university? We already know that access is a key criterion for disabled students when they select a university, and these changes could further constrain choice by further restricting the courses that disabled students can consider if universities that offer their desired courses are not supportive with access and in facilitating their studies. Has the Minister paid any attention to the question of choice and the need to maximise access to not just any university but the university and course that would be right for the student? That should be disabled students’ driving criterion, not whether or not they get disabled student support.
Sarah Champion (Rotherham) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hood. I thank the hon. Member for Cambridge (Dr Huppert) for securing such an important and timely debate.
I begin by addressing the reality of what it means to be a disabled student. Despite living in what we assume is an open and inclusive society, disabled young people often face problems that do not make the headlines, and they start from a young age. We already know, for instance, that 27% of young disabled people aged 16 to 19 are not in any form of education, employment or training. By contrast, the same is true of only 9% of their non-disabled peers.
A Disability Rights Commission study found that 45% of disabled people said they had experienced problems at school as a consequence of their impairment. Further to that, 26% of disabled people have reported negative experiences in mainstream education, in part because of poor facilities and the negative attitudes of other people. In turn, it is hardly surprising that disabled adults are only half as likely to have formal qualifications as their non-disabled counterparts. All these issues arise prior to university. To redress these compound barriers, it becomes even more important that we make it as easy as possible for disabled students to make the transition to higher education.
Last year, the Muscular Dystrophy Campaign found that 40% of university inter-campus transport was inaccessible to disabled students. In addition, 30% of university social and leisure facilities were not accessible to disabled students. I find it surprising and saddening to hear that the Government plan to introduce changes to funding for disabled students that cut out all but the most severely disabled people. It strikes me as unfair for a number of reasons. There cannot be a sliding scale of equality: you are either equal, or you are not. Everyone should be treated equally and allowed access to the support and modifications that will enable them to flourish.
Cutting funding to disabled students with what the Government deem to be lesser support needs will mean that although some students are given support to access university on a level playing field, others will be denied access to equality of education.
Mrs Ellman
Does my hon. Friend share my concern that the Government have stated that they want to replace existing Government support to disabled students with support from local authorities? This is at a time when local authorities are under the hammer, particularly those in poorer areas such as Liverpool.
Sarah Champion
I completely agree with my hon. Friend. It seems that local authorities and the voluntary and charitable sector are meant to fill all the gaps created by this Government.
It is unfair and unreasonable to think that any person should be barred from furthering their education because of a disability. The Rotherham Disability Network has told me the same thing. Its chair said that the major impact of the funding cuts on disabled students in Rotherham is that the potential hardship caused by paying for modifications will mean that many families will have to decide whether they can afford to send their son or daughter to university at all. Many such students are from disadvantaged backgrounds, with the odds stacked against them in economic and disability terms. Unfortunately, the funding cuts will be make or break when it comes to deciding whether to go to university. Surely that is not fair.
Around 40,000 disabled people graduate each year, but levels of disabled students dropping out of university are high. I worry that that figure will become higher under these changes, resulting in a drop in the number of disabled graduates. Disabled students have enough barriers to face in getting to university in the first place; we should not be cutting the vital support they need to access university learning and services while they are there. That exemplifies why the amount of money given to students should be needs-based, rather than based on arbitrary caps associated with the Government.
Ultimately, there must be genuine equality between disabled and non-disabled students, and if funding to disabled students creates a high bill, it is a price we must pay for equality. More than that, it is a price we must pay for the economic viability of the country. I would much prefer a short-term financial intervention to enable disabled students to fulfil their potential and get a good job to their being stuck in a world of part-time, low-pay work for the rest of their life.
The Government must find some other way to fund this critical support. They certainly should not be penalising disabled students, so I urge them to reverse their decision.
Andy McDonald (Middlesbrough) (Lab)
It is a great pleasure to serve under your chairmanship, Mr Hood, and I thank the hon. Member for Cambridge (Dr Huppert) for securing the debate.
I start by saying to the Minister that it is reprehensible that we are here talking about a backwards step for disabled people’s access to education. I thought we were supposed to be in the business of making life better for people, not worse. It simply cannot be right for the Minister to abdicate his responsibility to universities and say, “You get on with it. It is your duty to provide access to education and observe the principles of the Equality Act.” Surely to goodness that responsibility rests with Government as well.
The National Union of Students has reported that 59% of disabled respondents to their “Pound in Your Pocket” survey are worried about not having enough money to meet the basic living expenses of university, while 55% are considering leaving their course. Putting another barrier in their way is certainly not going to help. Such financial challenges only add to the multitude of barriers already faced by disabled students. They are more likely to drop out than their non-disabled counterparts and less likely to be able to access postgraduate degrees. Disabled students also face reduced choice when deciding which university to attend. Many students take the opportunity to travel away from home, but for disabled students that might not be an option. Students with special care needs may require support from parents or assistants, and their choices are dictated by accessibility.
Receiving the disabled students allowance massively improves disabled students’ experience and success while in higher education. Research has shown that students receiving DSA are more likely to achieve the very highest degree classifications than those who do not. The decision to remove DSA funding for standard specification computers, software and associated instruments compromises disabled students’ ability to get ahead and make the very best of their time in university.
Mr Sheerman
Does my hon. Friend agree that the fundamental difference between us and the Minister is that he does not understand that the direct payment was the emancipation of disabled people, allowing them to see going to university as a right?
Andy McDonald
Absolutely. My hon. Friend makes a powerful point. That principle has been enshrined, and we should treasure it.
It is not good enough to suggest that everyone owns a laptop or that computers are now ubiquitous among students. They are not cheap, and it simply cannot be assumed that everyone from an area like mine has one. For those from a well-heeled background, where these things are easily provided, that is fair enough, but it is not the case for families from other backgrounds.
The changes to DSA also fail to recognise the needs of the up to 98% of disabled students who require specific software to help them with their studies. The Government have suggested that cheaper tablet and notebook devices might be suitable for disabled students, but such machines are simply not equipped with the power or memory to support specialised software alongside standard office and internet programs, as the hon. Member for Blackpool North and Cleveleys (Paul Maynard) so eloquently explained.
My second major concern is about moving responsibility for providing non-medical support from the Government to individual institutions. The reforms assume that disability is evenly distributed, but that is not the case. There are smaller institutions where disabled students make up a higher percentage of the total number. How will those institutions cope with the changes? Some higher education institutions might be deterred from actively recruiting disabled students, simply because of the cost if they attend. Indeed, Teesside university in my constituency has warned that it might cost up to half a million pounds to replace any funding elements that are withdrawn.
Universities currently have a duty to provide reasonable adjustments for their students, but they are largely undefined and open to interpretation. I am greatly concerned that if institutions are unable adequately to provide for disabled students, there will be limited means to raise the issue. Confusion and uncertainty will undoubtedly affect the level of applications from disabled people and the subsequent willingness of disabled people to seek the support they need to progress and attain qualifications.
Many disabled students in Middlesbrough would suffer as a result of the changes, and I recently met the NUS welfare officer at Teesside, who provided some key examples. A student in computing and digital forensics suffering from—I hope I pronounce this correctly—visual stress/Irlen syndrome required ClaroRead software and modified glasses to enable her to read without undue hindrance, but she would not have been able to purchase those essential tools without DSA. We can all cite many such examples, and they will be repeated all over the country, but I will bring my comments to a close. These individuals are not seeking to cheat the system or to get something for nothing; they simply want their right to succeed in education. The punitive changes to DSA will undoubtedly limit the ability of disabled students to fulfil their ambitions and their potential. It is simply incomprehensible that legislators in a wealthy, modern country are looking to withdraw support from those who require it simply to get an education.
Lilian Greenwood (Nottingham South) (Lab)
I congratulate the hon. Member for Cambridge (Dr Huppert) on securing this important debate, and it is good to see it so well supported. When the Universities Minister announced the Government’s proposed changes to DSA on 7 April, they came as a real shock to universities and students alike, and gave rise to a great many questions.
All of us here know the difference DSA can make to disabled students and to their ability to benefit from the opportunities offered by higher education. In that regard, a couple of students in my constituency have written to me. One says that they have just completed their BA in sociology, for which they have been awarded a first-class degree, and that they are going on to do a master’s degree next year. They add that
“quite honestly I could not have achieved this without support from disabled students allowance.”
Having a hearing and visual impairment, they feel that there are real challenges in studying for a degree and that DSA has been absolutely essential. In this student’s case, DSA provided funding for note-taking support in lectures; library browsing support; reader support, whereby a support worker could read aloud sections of written text; practical support with finding buildings on campus; assistance with paying for books, paper and printer ink; and assistive technology, including a laptop, a printer and magnification capacity. It is clear that all those things are necessary for someone to achieve such great results.
I had a further letter from a mathematics undergraduate at the university of Nottingham. They say they received a DSA-funded mentor, who not only helped them to undertake their work, but supported them with social situations—obviously, part of university is the opportunity to operate in a new environment. They say:
“Without my mentor my experience at university would have been very different and I fear I would have been overwhelmed with academic issues.”
They say they would not have had the opportunity to experience university in the same way as a non-disabled student might.
The Equality Challenge Unit showed us that disabled students who receive DSA do better than those who do not, and we should look at extending it, rather than reducing it. When the Minister made his statement to the House, he talked about modernising the system, the equality impact assessment and limiting the public funding available and making sure it was targeted at those most in need. That raises a number of questions, which he really must answer. How is the review being carried out and who will be properly consulted? When will the equality impact assessment be published and to what extent will its conclusions require changes to his proposals?
There is real concern about the funding for disabled student support and about potentially targeting it on those in most need. What happens to those who have minor or moderate needs, but for whom DSA is nevertheless important? As one of my hon. Friends said, there is also the impact on institutions, especially smaller ones and those with a disproportionate number of disabled students.
I am particularly concerned to raise one other issue. The university of Nottingham has told me that Student Finance England has jumped the gun, is assuming that DSA will be cut and has started implementing reforms—before we have even had a proper debate in the House. Will the Minister confirm that any changes will be properly consulted on and debated before they are implemented? Will he ensure that Student Finance England is made aware of the fact that its actions are unacceptable and have caused unnecessary panic and distress, as the university of Nottingham told me?
DSA is vital, and any revisions must be undertaken only with care and after proper consideration and debate. The Minister must listen and respond.
Nic Dakin (Scunthorpe) (Lab)
I congratulate the hon. Member for Cambridge (Dr Huppert) on securing the debate. It is clear from the comments made how strong feeling is on the issue—not only in the House, but outside.
I would like to quote my constituent, June Jacobs, who recently wrote to me:
“The allowance made a big difference to me and it saddens me to think that the next generation of students would not have access to funds that could make the difference between succeeding in their studies or not.”
With the word “succeeding”, she puts her finger on the issue before us. Succeeding is about aspiration and about enrolling on the course of our choice, remaining on it and achieving—it is about all that, and DSA has a track record of helping people to succeed.
From my experience as a principal of a sixth-form college, I know that the message DSA gave young people was about building aspiration and belief. It allowed them to believe in themselves and to believe that they would go forward. It also showed leadership by the Government on this crucial issue. That leadership helps to break down barriers and create access. As a result, DSA was, and is, transformative in people’s lives.
By going down the proposed route extremely hastily, the Government risk giving the wrong message. Indeed, as my hon. Friend the Member for Nottingham South (Lilian Greenwood) said, that message is already out there and causing damage, which will create more damage tomorrow. The proposals will constrain people’s aspirations and choices, which is really negative.
The Minister is a good Minister, and I hope he is listening, reflecting on the debate and trying to find ways, as my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) said, to take the battle back to the Treasury. We will be with him in that battle, because he needs to win it. As things are, the pain will far outweigh the gain, and that, in political terms, is the test.
We risk making a very bad decision very hastily. This process is happening too quickly for us to have proper consultation and to involve all those who need to be involved if we are to get this right and ensure that, if we go down a different route, the implementation of any proposals will protect the future.
Paul Blomfield (Sheffield Central) (Lab)
I join the congratulations to the hon. Member for Cambridge (Dr Huppert) on initiating the debate, which is important to me. I am delighted to represent more students than any other Member of the House—36,000 of them. Both Sheffield’s universities are in my constituency and I have met students from both to talk about their concerns, and mine, about the DSA proposals.
In a letter to Members of 3 June, to brief us in anticipation of the NUS lobby on the Friday of that week, the Minister described the changes as “measures to modernise” DSA. I would have thought better of him than that, because it is the sort of Orwellian doublespeak that makes people cynical about politics. This is not about modernisation, as he knows. It is about balancing the Department’s books on the back of disabled students, just as the Treasury sought to do with other vulnerable groups, with the attack on the student opportunity allocation earlier this year. He fought his corner then, and I hope he will do so in the present case.
In the letter, the Minister identified what he described as unsustainable growth in spending on DSA, with an increase over this Parliament of £37 million. That is a tiny proportion of his budget and just 6% of the £620 million growth in grants and loans to students in private colleges, which is partly policy design and partly a failure by his Department to maintain adequate controls over that budget line. The wrong people are paying for the consequences of those mistakes. The priorities are wrong, and those with disabilities are being punished for the black hole in the Minister’s budget.
Disabled students’ No. 1 priority in choosing a university is the access and support that they will have; that is more important to them than the choice of courses. They are more likely to drop out than non-disabled students. We can all throw statistics around, but I want to share a story about a university of Sheffield student union officer, Kat Chapman. She is dyslexic and recently finished her degree, with a high 2:1. She is delighted to be embarking on a master’s degree at Cambridge. She is the model for the sort of person we want to progress in universities: a woman and a scientist. She clearly said to me that her delight at going to Cambridge
“is overshadowed by the fear of not receiving the same help that I have done through my undergraduate degree.”
The Minister has said that universities should meet the cost of supporting students such as Kat, but will making disabled students more expensive for universities improve access to higher education? Of course not. Universities will fulfil their equality obligations, which the Minister talked about earlier, but that will happen at a cost if there is no funding. The universities that are the most inclusive will face the greatest costs.
The Minister said in a communication of 25 June that
“it is not the case that students with ‘mild’ dyslexia”—
such as Kat—
“will no longer receive DSA funding.”
An assessment of Kat’s needs would determine who pays. I ask him for clarity: which needs will the Government help to meet, and which will it be left to universities to meet? Will he think again about this foolish short-term policy and take the case to the Treasury?
Mrs Emma Lewell-Buck (South Shields) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hood. I thank the hon. Member for Cambridge (Dr Huppert) for obtaining the debate.
Many people already know that I have mild dyslexia and dyspraxia. I know that without the support that came from my university I would never have qualified as a social worker, and that is why the proposals concern me. From 2016, a person in my position may be denied the opportunities that allowed me to succeed academically.
According to the Minister, the Government propose to ensure that the limited public funding available for DSA is targeted in the best way, to achieve value for money, while ensuring that those who are most in need get the help they require. However, I am not convinced and the Government have not provided enough evidence to show that support for those with moderate needs will be maintained. There is still a threat that they will be locked out of higher education. That is a further blow to disabled students who are already suffering as a result of the Government’s trebling of tuition fees. A report by the National Union of Students found that 55% of disabled students have considered leaving their courses, compared with 35% of non-disabled students. I cannot imagine how the changes will encourage students to remain on their courses, or future students to enter higher education.
Universities have a duty not to discriminate against students with disabilities under the Equality Act 2010, passed by the previous Labour Government. It is of course right to expect higher education institutions to carry out those duties as my university did. However, the Government have been unable to explain how institutions are supposed to meet the duty under the reformed scheme. Their share of responsibility will greatly increase, but we do not know where they will find the resources to carry out that responsibility. We do not even know the effect that the proposals will have on the total DSA spend. It is worrying that the Government have rushed ahead without either conducting a full analysis of the impact or holding a public consultation, to ask institutions whether they will be able to cope with plugging the gaps left by DSA.
Even more worryingly, by giving institutions more responsibility for delivering specialist support, the Government will create a situation in which the most inclusive universities will be hit hardest. That could, as the National Association of Disability Practitioners pointed out, have perverse consequences: those universities might not be able to afford to be so inclusive, or they might be forced to make cuts in other areas.
Disabled people already face disadvantages in higher education. They are less likely to enrol and to study full time, and more likely to drop out before finishing their course. If that is the situation now, we can expect it to get worse once the Government’s DSA cuts take effect. Disabled people thinking about entering higher education today will have no idea what support to expect, or what the effect on their finances will be.
I feel lucky to have been supported with my dyslexia and dyspraxia. My condition is relatively mild, but the help that I received made a difference and helped to get me where I am today. I am concerned that people with mild conditions will be written off under the Government’s proposals and will never get the opportunities that I have been lucky enough to have.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member for Cambridge (Dr Huppert) on obtaining the debate.
I want first to say clearly that I am concerned about the cuts and the dramatic effect that they will have on the people who need the DSA the most. The hon. Member for Scunthorpe (Nic Dakin) talked about belief, hope, opportunity and ambition, and all those things will be hurt by the slashing of the grants.
Early-day motion 48 notes the NUS research finding that
“55 per cent of disabled students have already seriously considered leaving their course compared to 35 per cent of non-disabled respondents”,
with 54 per cent citing financial difficulties. Clearly, there is an issue. The reason I, a Northern Ireland Member, am speaking in the debate, is that the change will affect students from Northern Ireland who go across to universities on the mainland. The hon. Member for Ceredigion (Mr Williams) talked about Wales and Scotland, and there will be an effect for people from Northern Ireland as well. The change will affect us all.
I know from some of my constituents that the DSA helps with buying special equipment required for studying, non-medical helpers such as note-takers or readers, extra travel costs that disabled students may have and others costs for things such as tapes and Braille paper. Non-medical help such as that provided by note-takers is critical to disabled students. Some require their help throughout the semester; others need their assistance whenever they must go into hospital, which for some is a fact of life. Surely, the House recognises the importance of such helpers, particularly those who help when a student is in hospital.
I am sure that hon. Members have already looked through the background notes for the debate, which clearly explain who needs help: they include people with autism, people with sight or hearing issues and people with learning difficulties, of whom there are almost 22,000, as well as about 3,400 people with mental health issues, nearly 3,600 people with multiple disabilities and 540 people with wheelchair mobility. Clearly, complex health and physical needs must be addressed. People’s concern about the proposal is therefore understandable.
According to the Equality Challenge Unit, 71% of disabled graduates gained employment in 2012, compared with 42% of disabled non-graduates. Already a high number of disabled students consider leaving university because of high costs, and surely the figures are testament to the importance of providing disabled students with DSA, which enables them to pursue some of the ambition that we in this Chamber want to encourage.
If the change to DSA is pursued, there will be direct implications for people whom I and other hon. Members represent. We have heard about the cutting of DSA for dyslexic students, and the Minister has referred to those with complex needs or exceptional circumstances receiving DSA. I should like to know, for the life of me, exactly what that means, because I do not see that coming down to the people whose grants will be taken away from them.
The one issue that has perhaps not been hinted at is the bill for DSA. In 2011-12, the bill was £124 million for 53,000 undergraduates. The latest figures from the Student Loans Company, however, show that spending on DSA had reduced by almost £5 million in 2012-13, despite the number of claimants rising by almost 2,000. More seems to be being delivered with less money, so will the Minister say how his figures work out, given the reduction of almost £5 million and the almost 2,000 extra students? Why are we considering further cuts given some of the cuts that are happening already? In 2013, of the whole United Kingdom, Northern Ireland was hit hardest by the benefit cuts, with £750 million taken out of the economy. The case for the DSA proposal is not proven and is not acceptable. I strongly object to what is taking place.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Mr Hood, it is very kind of you to call me to speak briefly, even though I failed to tell you that I wanted to speak. I am conscious of that.
As the MP for Huddersfield, I represent Huddersfield university, which was the university of the year this year. The university has an amazing student body—including Coco Toma, the communications officer, and others—that constantly talks to me about how the proposals will affect disabled students. The empowerment and emancipation of students provided by this direct gift from the Government is wonderful. People know about DSA; they anticipate it; and it changes lives. I have talked to disabled students who say that, if they had the new system that the Minister will introduce, they would not have thought about going to university.
I know that the Minister will be embarrassed, but he and I get on very well. I think that he will change his mind. If he does not, this will be a big political issue at the general election. I hope that an incoming Labour Government will make it clear that we will change the proposal, because it is wrong.
I have great respect for the hon. Member for Cambridge (Dr Huppert), but disabled students are particularly double-whammied because the tremendous increase in student debt hits them more than anyone else. Disabled students have not forgotten the pledge or that the Liberal Democrats led us up the garden path. We all thought that they would never be in a coalition.
Mr Sheerman
No. The hon. Gentleman did not give way to me, so I will not give way to him. The fact of the matter is that some people in Cambridge tell me that, whatever he does, they will not forget the pledge. He might work hard for the disabled students allowance, but they will not forget the breaking of that pledge.
Mr Sheerman
No, I will not give way. The hon. Gentleman will get his come-uppance at the next election, and so will any Government who introduce this dreadful scheme.
Jason McCartney (Colne Valley) (Con)
Thank you for squeezing me in, Mr Hood. It is a pleasure to serve under your chairmanship, and it is a pleasure to follow my near neighbour, the hon. Member for Huddersfield (Mr Sheerman). Like him, I have engaged closely with the students union of my local university, the award-winning Huddersfield university. I thank Josh, the president of the Huddersfield students union, and Daniel, the democracy and campaigns officer, for coming down to brief me. I voted against the rise in tuition fees in December 2010 because I was concerned that students from low-income backgrounds would be put off applying to university. I did not go to university.
Dr Huppert
Like my hon. Friend, I voted against the rise in tuition fees. I am the first Member of Parliament for Cambridge to vote against a fee rise. When there was a Labour MP, she voted for a fee rise having promised to oppose it.
Jason McCartney
That is worth putting on the record.
I am concerned about the proposed changes—they are just proposed at this stage—because Josh and Daniel explained to me the implications, the worries about the cost of modifying laptops, and the importance of scribes and note takers. They talked about their first hand experience of students they study with who have dyspraxia and dyslexia. That is why I am here representing them today. They have questions about the complexity of different learning difficulties and how they would be categorised. There is also the cost of modifications to accommodation. Huddersfield university is investing hundreds of thousands of pounds in new accommodation, and there would be concerns about that, too. They told me that more than 700 students at Huddersfield university currently receive DSA, so it is close to people’s hearts in my part of the world.
I look forward to hearing from the Front Benchers, particularly the Minister, whether we will look again at the proposed changes. I encourage the Minister to engage with local students unions, to involve them in the process and to work hard so that every student, no matter what their economic background or disability, has a fantastic opportunity to engage in our world-class universities, particularly my wonderful, award-winning Huddersfield university.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
It is a great pleasure to serve under your chairmanship, Mr Hood. I add my congratulations to the hon. Member for Cambridge (Dr Huppert) on securing this debate.
I have a simple argument to put to the Minister: the proposals are flawed, they need to be dropped and they need to be dropped now. I agree with my hon. Friend the Member for Huddersfield (Mr Sheerman) that the Minister is a good Minister and a good man. He has been put in a difficult position, and I hope that in today’s excellent debate he sees a consensus that stretches across the House. We are here with him to help him win the argument and to put the proposals where they need to be, which is in the bin.
We have heard powerful arguments this afternoon about the success of DSA, how the proposed changes are slipshod and why it was wrong to develop these proposals not in the open but in secret. We have heard powerful arguments about why DSA is so successful. We do not give disabled students enough help to change their lives by going to university, and we have to hold on to that basic fact in this debate. I congratulate the National Union of Students on its work to expose how important DSA is to thousands of students. Some 60% of disabled students are terribly worried about the cost of living, which is a much higher proportion than for most students. More than half of disabled students have thought about dropping out of their course, which is a much higher proportion than for most students. That is why DSA is so important to students across the country.
Today’s debate has been particularly powerful. My hon. Friend the Member for South Shields (Mrs Lewell-Buck) told her own story, but we have also heard stories from my hon. Friends the Members for Birmingham, Erdington (Jack Dromey), for Middlesbrough (Andy McDonald), for Scunthorpe (Nic Dakin) and for Rotherham (Sarah Champion) and from my right hon. Friend the Member for Oxford East (Mr Smith) about people they represent who have serious worries. The National Union of Students has collected similar stories, such as the story of Lucia, who said that university “wasn’t easy.” She knows that
“without the validation and…support from DSA I wouldn’t have kept going… I certainly wouldn’t have been able to get my first class honours degree, and I would have been lucky to finish.”
There are stories such as Suzanna’s. She said:
“I get DSA for dyslexia. I expect I am one of those David Willetts would class as having ‘mild difficulties’. My study…advisor is a godsend.”
She now wants to finish neuroscience and cure Parkinson’s disease. She said:
“Without DSA I would probably still be a waitress. A bad waitress at that.”
There are stories like Charlotte’s. She said that when she was making her university choices the availability of DSA was key to her getting into university and changing her life. In the background briefing for this debate we have heard argument after argument for protecting, preserving and enhancing DSA.
The Campaign for Science and Engineering makes the interesting point that if we care about the supply line of science, technology, engineering and maths skills in our economy, we should care about the future of DSA:
“One of the most worrying developments for STEM is the removal of…‘higher specification and/or higher cost computers…because of the way in which a course is delivered’”.
CASE continues:
“DSA funding will… only be provided for ‘the most specialist non-medical help (NMH) support.’ The definition of… ‘specialist’ is not clear.”
Many hon. Members have made that point today. The proposal would damage the chances of people on STEM courses in particular, which is why the changes are such bad news. In this House we are always happy to hear the case for reform. When pressed by hon. Members at oral questions the other day, the Minister said that no student would be worse off. That is a very big promise. Let us be honest: most of us here would like to believe him, but when my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) tabled a parliamentary question to the Minister on 26 June about the extent to which DSA would be supported in future, answer came there none. The question was dodged, and that is why so many of us in this House have such serious concerns.
The Minister will no doubt want to remind us that the bill for DSA has gone up. That is true, but in the last year for which figures are available it has gone down by £5 million, while the number of disabled students who are supported has gone up, so each of them is actually getting much less. That is why we are so worried about a kind of carte blanche shunt of responsibilities to universities.
We have heard very clearly today the warnings from experienced people in this House about what happens when responsibility is shunted over. The hon. Member for Blackpool North and Cleveleys (Paul Maynard) put the case powerfully. There is too much ambiguity in an Act as high level as the Equality Act, important though that is. We should be honest about what is going on. This is a cost shunt to universities—let us call it what it is—but it is a cost shunt without any safeguards to go with it, and that is why so many of us are worried. I think the Minister will acknowledge that that is one heck of a gamble with the futures of disabled students in our country. It is certainly not a gamble that we want to see.
My hon. Friend the Member for Stretford and Urmston (Kate Green) made an important point when she underlined how the risk of a postcode lottery in the way disabled students are supported will mean that people’s choices will be damaged. They will not be able to pursue the choices that they want. As my hon. Friend the Member for Sheffield Central (Paul Blomfield) pointed out, it will be the most inclusive universities that are most damaged by the proposal. The worst-case scenario, we are told, is grim indeed.
I was concerned, as I know the Minister was, when I read the briefing from people who are expert in supporting disabled students, which stated that the worst-case scenario could see 60% to 70% of DSA eliminated. That is an enormous bill. The Minister accepts there is a problem with supporting disabled students at university, which is why he is not proposing the abolition of DSA. The fact that DSA is to continue is an acceptance of the principle that extra central Government support is needed.
We are not being told what the real objectives of the reform will look like. By how much does the Minister seek to cut the bill? How big will the cost shunt be? They are not the sort of questions we should be debating here this afternoon. We should have been debating them long ago—in January, February or March—before the ministerial statement appeared. Opposition Members are worried, as I am sure the hon. Member for Cambridge is too, that organisations such as the National Deaf Children’s Society felt they were not given a real chance to put their points of view in meetings that were simply cut short. That is not a standard of consultation that we are prepared to see, because the issue is simply too important.
If there is a need for modernisation, let us hear it. The Minister is a good man and a good Minister. He should be up front with us about how much he is seeking to save. He should be debating with us what extra safeguards need to be put in place to protect the rights and opportunities for disabled students in the years to come. The need is urgent. Lord Addington has told the other place that guidance for April is being drawn up. All of us wanted to be part of any changes that needed to be introduced. That is what we got when the DWP proposed to change the DLA and introduce the personal independence payment. It is the approach that we saw when the DWP wanted to introduce universal credit. Those were big and important changes, and Opposition Front Benchers were invited to the Department to discuss them. We may have disagreed with the conclusions, but at least we had the chance to flag up a few warnings, make a few suggestions and ensure that the debate was had in public, not in secret.
I think the Minister is a good man who will want to think again about the proposals. The debate should not have been today; it should have been in the early part of the year before the proposals were drawn up. If modernisation is needed, let us hear the arguments. If there are savings to be had, let us hear the targets, but we will not stand by while disabled students are given a bunch of proposals and told to like it or lump it. Disabled students demand and deserve much better than that.
The Minister for Universities and Science (Mr David Willetts)
It is a pleasure to respond to this important debate, and I congratulate the hon. Member for Cambridge (Dr Huppert) on securing it.
I want to make it absolutely clear that we are not abolishing DSA. Some Members who intervened have assumed it would disappear. It is a substantial item of spending now running at about £125 million, but we envisage that there will continue to be significant DSA in future. Several Members, particularly the hon. Member for Sheffield Central (Paul Blomfield), did not like my statement that we were modernising it, but let me explain briefly what modernisation means and why we are engaging with it.
The system of DSA has not changed significantly since it was introduced in 1974. Since then, there have been widespread technological changes, some of which have improved disabled people’s ability to access education through advances in IT, but some things that were previously available by special arrangement are now widespread. For example, many people have laptops or other forms of access to IT. So there have been advances in technology, which have spread across the country.
Let me tackle head-on another significant change that has happened: the spread of equality duties under the Disability Discrimination Act 1995 and the Equality Act 2010. The right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) was emphatic on that point. I have enormous respect for him and his work, but it is reasonable for us to say what is the right balance of responsibility between institutions’ legal obligations under the Acts and individual payments to students via the DSA. There may well be types of provision that are better and more efficiently delivered on an institutional basis via the universities’ obligation than via individual student support.
Perhaps as a lay person I can give a simple practical example. If a university has a library where people with disabilities find it hard to access material, it is a legitimate question to ask whether the DSA should provide for their costs to access the library or whether the library should be organised in such a way that every time someone comes in—
Mr Jim Hood (in the Chair)
Before I call the Minister, I remind right hon. and hon. Members that 15 minutes extra—the time taken for the Division—will be added to this debate. The debate that was supposed to start at 4 pm will start 15 minutes later.
Mr Willetts
I am not sure that this extra time will be as good as that in the Belgium versus United States match, but I will do my best. I welcome hon. Members who have come for the next debate and apologise to them.
I was starting to wind up the debate, explaining why it is legitimate to carry out the review and why the term “modernisation” is legitimate. One argument in that regard was about technical change. I was also saying that there is a genuine issue about obligations under the Equality Act, whereby universities have a duty to make reasonable adjustments for students who are disabled. We have to get the balance right between the institutional obligation on the university and personal financial support for the individual student. I was giving an example of how a library should function, saying that the obligation could be discharged by a library properly training its staff to help people with a range of disabilities. That may be a more effective way of delivering support for disabled people than individual disabled students turning up at the library with a personal assistant to help them. It is legitimate to try to get the individual versus institution balance reviewed in the light of the equalities duties.
The right hon. Member for Sheffield, Brightside and Hillsborough did not like the fact that I referred to the funding available for universities, but several hon. Members, beginning with my hon. Friend the Member for Cambridge but not only him, specifically asked, “How will universities pay, given that you are expecting them to discharge these institutional obligations?” There are two genuine points to be made in response, although more could be made.
First, with regard to the equalities duties that the House has introduced under successive Governments, by and large we do not say, “We therefore need an extra stream of funding for the NHS”, any more than we say that there should be extra public support for Marks & Spencer. Hon. Members should remember that, legally, universities are independent institutions outside the public sector. The general view across the House, when we have imposed equality duties, has been that that is just part of the proper functioning of an institution.
Secondly, it is fortunate that our universities are in a healthy financial position. I will not stray from the point, as happened in the argument a few minutes ago between the hon. Member for Huddersfield (Mr Sheerman) and my hon. Friend the Member for Cambridge, but the sums going to universities for teaching—the combination of the grant income and the fee income that they receive—is rising substantially as a result of the controversial changes that we introduced, going from £7.9 billion total income in 2011-12 to £9.9 billion in 2015-16.
To be frank with hon. Members who voted against the £9,000 fee—I suspect that the majority of those in this Chamber did so—it is inconceivable that universities would have enjoyed a £2 billion increase in teaching income in the life of this Parliament under any other model of financing universities, especially one that depended on public expenditure through grant. There is a genuine increase in their financial resource. Several hon. Members expressed concern that our proposal comes at a bad time, when universities have not got any money, but in fact they have had an increase in their cash resource.
Mr Byrne
I am grateful to the Minister for giving way with characteristic generosity. Can he help hon. Members? He has made an eloquent argument for the need to rebalance responsibilities between central Government and independent universities, saying that we need to do so because it is a long time since we have considered the matter. By how much is he seeking to reduce the DSA budget over the next financial year and the one after? He must know, because he has a list of specific measures.
Mr Willetts
I was going to get to that point in a moment. We are still consulting—it is a genuine consultation—so I cannot give the House a specific figure, because that will depend on a host of things, including exactly how the proposals are implemented and wider effects. However, it is a budget that has grown rapidly. Incidentally, the right hon. Gentleman said that that growth had stopped. There is always a difference between the provisional figures and the final outcome figures. My personal expectation is that the final outcome figures for the latest year should be higher than those for the previous year. It is not fair to compare final outcome figures with provisional figures. We will see. The budget has increased from about £88 million when we came to office to about £125 million now, so it is legitimate to look at it. However, we do not have a specific allocated figure.
Mr Willetts
I will give way briefly to the hon. Member for Huddersfield, but I have a lot of specific points to make, so after doing so I shall make progress.
Mr Sheerman
The Minister knows what I am going to say. He is looking through rose-tinted glasses at the future of finance in higher education, but it is not all as rosy as that. A vice-chancellor recently said to me, “The real worry that I have is that the whole HE system is based on a mountain of student debt.” That is our worry. It is not as rosy a picture as the Minister has painted.
Mr Willetts
That is a separate issue. The graduate repayment system is a fair, sustainable and viable way of financing our universities, and it would be a mistake to try to reverse that.
I turn to some of the specific issues that have been raised. Let me say clearly to right hon. and hon. Members that we will fund non-medical help that would not be a reasonable adjustment for higher education institutions to make. We will define the obligations of the institutions, and on top of that there will be support for non-medical help, which in certain situations will include support for students with specific learning difficulties, as well as other groups. Hon. Members mentioned IT, and we will make a contribution to the costs of higher-cost and higher-specification computers in certain circumstances if they are required purely because of the student’s disability. We will pay the extra costs that arise from those computers being required by students with a disability, rather than have a general payment for laptops when they are now widespread across society. We will also cover additional costs of specialist accommodation in exceptional circumstances.
Mr Andrew Smith
Have the Minister and the Government looked into the implications more widely, beyond higher education, of the Government making such a definition of what is a reasonable adjustment by universities? Is there not a real risk that others will cite that definition and say that anything that goes beyond it is not a reasonable adjustment for them, thereby denying disabled people in other areas too?
Mr Willetts
That will be the last intervention that I take, because time is tight.
We are consulting, and we will produce guidance that will help make the crucial distinction between what institutions can legitimately be expected to do and where individual funding is required.
We are talking about education, and I want to come back to that, because several Members raised the topic. It is a distinct responsibility. We are consulting, and we will continue to meet a whole range of groups representing disabled people. We have already discussed the policy changes with, for example, the National Union of Students, Universities UK and the Office for Fair Access, and there will be many further such meetings in the future.
Institutions will be expected to have reasonable adjustments in place by September 2015. We believe that the time scales provide sufficient time for us to work with institutions and stakeholders to ensure that changes are introduced effectively, but I understand that some institutions are concerned that they will be disproportionately affected due to their high numbers of disabled students. Several Members have made that point, which will be considered before guidance is issued to the sector in the autumn. The guidance will help institutions understand better the role that DSA will play, enabling them to consider the support they will need to provide. We will also provide regular updates for the HE sector over the coming months.
Student information and guidance, which will include information on DSA changes as well as on the wider student support package, will be available in September in the normal way. Once we conclude our consultation meetings, we will be in a position to issue draft guidance in early autumn on what DSA will cover. That guidance will benefit higher education institutions and assessment centres in particular. Stakeholders will have the chance to review it and ensure that it is sufficiently clear and understandable before it goes live. I undertake to lay the relevant regulations at that time, which will allow Members to see the regulations and the draft guidance in parallel. Before adopting either, the Government will continue to have due regard to the impact of the changes on the aims set out in the Equality Act 2010. We will publish our analysis on that at the same time.
A point was raised about existing students and DSA students beginning university in 2014-15. They will remain on the current arrangements in 2015-16. I have already announced that the maximum available DSA amounts will not be changing. We are not adopting a blunt approach to the provision of non-medical help. We realise that non-medical help will be the responsibility of higher education institutions, but we recognise that in certain areas, perhaps as a result of the impact or severity of a disability, DSA has an additional role to play once reasonable adjustment has been made. In the case of complex needs, we will assess the severity of the impact on the education of the student. It will not be a simple physical assessment of their disability; it will be an assessment of how the disability challenges they face affect their ability to benefit from higher education. That is the assessment that has to be made. We will focus on the educational impact and the severity of their educational needs. I would also like to—[Interruption.]
Mr Jim Hood (in the Chair)
Order. When the Chairman can hear conversations at the back of the room, someone is out of order. I urge Members to pay attention to the Minister’s contribution.
Mr Willetts
Thank you, Mr Hood. I was trying to go almost too fast, because there is so much material to cover. I was trying to clarify the issue of specific learning difficulties and dyslexia, which has arisen in the debate. My announcement used the term “complex needs”, and I wish to make it clear that DSA will support those for whom the impact on their higher education needs is most severe. That is the approach we propose to take.
We are in consultation on technology with groups such as the British Assistive Technology Association. I assure Members that the Government are committed to supporting disabled students in accessing higher education. Students are right to expect support from their higher education institution, and DSA has been available to complement that support for nearly 25 years. That is not changing. What is changing is the balance between the two types of support, and that balance should be struck in the light of the Equality Act 2010. I conclude by assuring Members that over the summer, the Government and officials will continue to develop thinking, engage on policy issues and consolidate our work. We will, of course, continue to consult and keep the House informed as our proposals develop.
Flooding (Somerset)
(10 years, 5 months ago)
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Mr David Heath (Somerton and Frome) (LD)
I am extremely pleased to have secured the debate, which will consider the aftermath of flooding in Somerset. I am delighted to be supported on this occasion by my hon. Friends the Members for Wells (Tessa Munt) and for Taunton Deane (Mr Browne) and the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger). We have been acting effectively as a team on the issue, and long may that continue.
I cannot honestly say that I have not had the opportunity to speak at length about flooding in Somerset on previous occasions. By my count, this is the 16th occasion this year when I have spoken on the subject. It has been a recurrent theme over my 18 years in Parliament, and sometimes I feel that I have spoken about little else. Looking back in Hansard the other day, I found that in March 2009, in a debate that I had introduced on the subject, I said:
“I am convinced that if we had proper dredging of some of our rivers and proper clearing of debris and strengthening of banks on some of the smaller tributary streams, it would make a substantial difference to the way in which we deal with these matters.”—[Official Report, 12 March 2009; Vol. 489, c. 553.]
I was right on that occasion, as were many, many local people, who had been saying the same things year in, year out for a long time. I had the opportunity to say some of those same things to the Minister’s predecessor, the hon. Member for Newbury (Richard Benyon), when he came down to see me in Langport in April 2012.
No one can honestly say that the flooding in Somerset this winter caught them by surprise; we knew it was going to happen. The good news is that, despite the reports about the conditions underfoot at Glastonbury festival last weekend, Somerset is now predominately dry. The floods have gone. We need to keep repeating that, because there are still people who ring up businesses in my constituency—I am sure it happens in my colleagues’ constituencies, too—saying, “Is Somerset open for business? Are you still under water?” No, we are not under water. Come and have a jolly good holiday in Somerset. It is a much better place to go than places that are further away. [Interruption.] No, I do not mean the Minister’s constituency. Somerset is a thoroughly good place to have a holiday.
Before I proceed to a catch-up on where we are, I repeat, as I have on many occasions, my thanks to everyone who was concerned during the flooding crisis with dealing with the conditions on the ground. People worked tirelessly, whether they were officers of the Environment Agency, the police, the fire brigade, council officers or volunteers. There were so many that it would be invidious to mention people by name, but they know how much their work was appreciated. I also thank those who helped in other ways, such as providing cattle fodder from the far ends of the country or providing cash to the appeals organised by the Somerset Community Foundation and others. We are deeply appreciative of that, as we are of the attention we were afforded for a few brief weeks by the Government.
The Prime Minister, the Deputy Prime Minister, the Secretary of State for Environment, Food and Rural Affairs, the Minister and many other members of the Government came down to see for themselves what the issues were. Were we lucky that we happened to have a few weeks before the Thames valley flooding to make our point? Yes, I suspect we were, but nevertheless, we did, and we appreciate the attention we were given.
Mr Jeremy Browne (Taunton Deane) (LD)
Will my hon. Friend expand on the point he just touched on? We all feel a genuine sense of gratitude that leading members of the Government—the Prime Minister, the Deputy Prime Minister and others—took such a close interest in the situation in Somerset, but surely the task now is to ensure that that interest is not passing and that the legacy of the attention afforded to our county is that we see over a period of years, not months, exactly the changes that were promised during those visits. That will ensure that the risk of floods is alleviated in the future.
Mr Heath
My hon. Friend is absolutely right, and that was why I called for today’s debate, which is perhaps unseasonable. Now is the time not only when work must happen in Somerset, which it is, but when decisions must be taken that will affect the situation for years to come. That is what I want the Minister to respond to.
I will briefly touch on the background, because we cannot escape the fact that elements of the Somerset flooding were avoidable. We expect flooding on the levels; it is a normal state of affairs. This occasion, however, was unprecedented due not only to the extreme weather conditions, but to now widely acknowledged policy mistakes. I have drawn attention to two glaring errors many times over the years, but they now have a common subscription. First, the landscape is artificial and does not maintain itself. Every drop of water that needs to be pumped away from the fields and the communities in the area must be pumped uphill into rivers that are higher than the surrounding landscape. People forget that and talk nonsense about natural drainage and flood plains when such drainage will never happen. The land is effectively reclaimed. It is land from the great mere of Somerset. Unless the water is pumped, drainage will not happen.
Secondly, an environmental heresy was allowed to develop for far too long at senior levels in the Environment Agency. It was assumed that the environmental benefit of the area was in the watercourses rather than in the land in between, which meant that what are essentially canals were being artificially preserved at the expense of the quite invaluable flora and fauna. I hope that that is now a thing of the past.
What is on the list of things to be done and how have we been managing? There have obviously been immediate acts of recovery and restitution. I understand that farm funding is considerably undersubscribed, but the Minister might be able to provide an up-to-date assessment of whether the funding has reached the farmers who need it. I also wish to add one caveat: we have not to date seen huge damage to orchards, but it is possible that it will appear later on. If we need to come back to the Department, I hope the Minister will be sympathetic if orchards have lost tree stock.
Dredging is now happening. There has been a lot of local cynicism as to whether it has been done sufficiently quickly and properly, and whether lip service has been paid, but I am satisfied that genuine dredging is taking place along the identified stretch. After a slow beginning, it is starting to catch up, and I think six crews are now at work. What a pity it is that we do not have the equipment that was given away or sold for peanuts many years ago. Nevertheless, the relevant area has been reconstituted and we have the hard-standings that enable the dredging machines to do their work. Will the Minister update us as to when he expects the initial tranche of dredging to be completed?
Increasing the capacity of watercourses will not satisfy local people, however. We accept the argument that increasing capacity is the most effective use of early funds, but I am conscious of the fact that the upper reaches of the Parrett were also severely flooded. Around Langport, Muchelney and Martock, there are bottlenecks that need addressing. Are we able to increase capacity under the bridge at Great Bow wharf at Langport? There are also plans to widen and deepen the Sowy diversion stream to provide extra capacity, which is a sensible idea that I would like to see happen, but it needs to be properly planned. We need to consider the potential consequences for other communities and reassure them that they will not be adversely affected by the Sowy being used to a greater extent. That issue would be particularly apparent at Beer Wall, which is where my constituency adjoins that of Bridgwater and West Somerset, and Aller Drove, which saw unprecedented flooding. Aller does not normally flood, but this time it did. I think that there was a miscalculation and that someone made a mistake in lowering the level of the river wall. Those calculations have to be right. As we use the Sowy, we must be sure that adverse effects are not happening elsewhere.
Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)
My hon. Friend is making some good points about the Sowy. The Minister is aware that part of the Sowy development must include the barrage or the sluice—whatever we want to call it—below Bridgwater, which would complement what my hon. Friend is discussing. Will the Minister also consider ensuring that the scheme goes into the autumn statement? We need money for the Sowy and for the barrage, but it can come only from central Government. Does my hon. Friend think that that may be a way forward?
Mr Heath
We are at one on the issue. This is the big ask. This is what we need from the Minister. I know that he will not answer today, because he is not in a position to do so, but this is the most important demand.
Purely local schemes to alleviate flooding are also needed. Thorney is a tiny village—a hamlet—that is now rather curiously described as two different places for the purposes of flooding, because it floods separately at two ends, so we now have Thorney north and south, or greater and lesser—I am not quite sure how to describe the two ends of the village. A bund of some kind—a way to stop the water coming in—would be effective, however. That is a relatively low-cost solution and one that is being considered. I want an assurance that it actually will be built to protect the people of Thorney.
Similarly, we need to look at Muchelney Ham, a small part of Muchelney that was subjected to flooding. We also need to examine the highways situation, where the county council will be taking the lead.
I think we all agree that it is extraordinary in this day and age to have a village such as Muchelney completely cut off for week after week. We must establish at least one way to get in and out. Feasibility studies are being carried out as to whether it should be the Drayton road or whether there is a better alternative, but something must be done to ensure that people can get in and out of the village.
Mr Browne
I am hugely sympathetic to the residents of Muchelney, but while my hon. Friend is on the topic of highways, will he also discuss what could be done to improve the resilience of the A361? It is a major trunk road that links Taunton, the county town of Somerset, to the main body of the county, including Street and Glastonbury, but its resilience is inadequate. There seem to be two tasks: keep the flood water down and try to ensure that the road is open for longer stretches of time during floods.
Mr Heath
I am grateful to my hon. Friend, because the next thing written on my piece of paper is “A361”. I do not like the idea of Taunton being cut off from civilisation and we need to do something about the A361, but the question is, what? I am not convinced that simply raising the level of the road along its entire length is the most sensible use of funds, but we need to do something in combination with the sluice, which I will come back to in a moment. We need to mobilise whatever funding is available—whether from Network Rail, which otherwise needs to do something about its track across the levels, or the roads agencies—and use it in the wisest way to ensure that the road is not closed again and that we all have easy access to the pub at Burrowbridge, which served as such a useful headquarters for the media during the flooding.
Are we going to see the replacement of the necessary pumping facilities? Some have already been done, but we brought in those massive pumps during the crisis and they were an extremely good thing. We need to ensure that they are available when we need them, and without having to ask, as we need a boat to be available when necessary. Such facilities need to be built.
That brings me to the two big ticket items. One is the Parrett sluice, which I agree entirely with, having looked into the matter. As the hon. Member for Bridgwater and West Somerset knows, I was initially sceptical as to whether the sluice would include improvement for my area—it clearly would for his—but I am now convinced that it would. Preventing the influx of water from the Bristol channel at high tide, thereby ensuring that we can drain away water from the upper reaches of the levels, is crucial. We need the Chancellor of the Exchequer to announce the funding in the autumn statement—no doubt about it, we need it there in black and white. When we have that, we will be satisfied that the Government are keeping their promises to the people of Somerset.
Tessa Munt (Wells) (LD)
While we are on the subject of sluices, will the Minister address the problem of Bleadon sluice, bearing in mind that we have all talked about how any approach has to be for the whole catchment area? My concern is with the Axe and Brue rivers; there is a need for dredging on the Brue, but my most important concern is the Axe, which drains out into the northern part of my patch and over towards Weston-super-Mare. Bleadon sluice was closed by the Environment Agency, which put a red notice on it in 2009. There has been a bundle going on—no one will take responsibility. I was told earlier this year that the sluice was going to be fixed at some point during the year, but we are a long way through it and nothing has happened. Will the Minister address that, since we are on the subject of sluices?
Mr Heath
My hon. Friend is absolutely right. We cannot divorce the issues of the Parrett and Tone from those of the Axe and Brue. That is why the next ask is equally important: setting up the Somerset rivers authority, to absorb the interests of the existing internal drainage boards and to create real capacity to manage our complex water systems appropriately and with the benefit of local knowledge. That will not happen unless we have a revenue stream to support it, which in turn will not happen unless the Department for Communities and Local Government realises that Somerset is an exception and does not fit its rules. The Department will have to give way to establish what is already the case in some parts of the east of England—a separate levy to fund the maintenance we know to be necessary. Again, that is an ask to which the answer must not be no, because otherwise we will not have done our job.
Will the Minister also update us about how the common agricultural policy reforms as implemented in England—the pillar two payments, in particular—will be used to encourage water retention, the sort of sustainable use of land that will reduce the amount of water entering the lower reaches of the levels at the right time? That is a key component, whether it involves reforestation or simple changes in land use, to enable us to hold more water at higher levels, releasing it slowly when it can get away.
We need a balance between the environment and the community, including the agricultural community. The environment of the levels is precious. I will not have it said that the environmental benefits of the levels do not matter, because the levels are irreplaceable—if we allow them to drown, they die. Therefore, it is in our interests as environmentalists, as well as representatives of our community, to ensure that the balance is created. As I have said often, flooding 3-feet deep for three weeks is fine. That is what we expect in Somerset; it is the levels way. Flooding 10-feet deep for 10 weeks is unacceptable; that is when people are in difficulties, businesses and communities die, and vegetation dies as well.
I hope that the Minister will give as many answers as he can. We will excuse things not having been completed by next winter, provided that we have clear intent that they are under way. After all the promises that we have been given and all the efforts made, however, we will not excuse things simply being said only for nothing to happen. We will have flooding again this winter—that is a fact—but if it is as bad as it was last winter and we can turn around and say, “The Government have failed to do all those things that they said they were going to do,” then, frankly, the Government will have to answer not only to the people in this Chamber, but to an awful lot of people in Somerset, who will be very angry indeed.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)
It is a pleasure to serve under your chairmanship, Mr Hood, and to have the opportunity to respond to the debate.
I hope to satisfy my hon. Friend the Member for Somerton and Frome (Mr Heath) with my response, as far as I can on the day. As he said, he has raised the issues consistently, since long before my time with this portfolio. More recently, we have had a number of opportunities for debate inside and outside Parliament. He has been entirely consistent, as have my other hon. Friends present today, and they have worked together as a team, along with our right hon. Friend the Member for Yeovil (Mr Laws), who has also raised the issues with me.
I have only a short time to respond, so I will not set out everything to do with the extreme weather that we experienced, although it is important to mention that the effects in Somerset were replicated in other parts of the country. Yesterday I was debating with right hon. and hon. Members from the Humber estuary. My hon. Friends here today will be delighted to know that those Members were only requesting £880 million for the schemes identified in that area. We are not short of positive ideas to deal with flooding around the country.
The specific issues affecting Somerset are not so much to do with the large numbers of properties flooded—as my hon. Friend the Member for Somerton and Frome said, in other areas a much larger number flooded—as with the volume of the water and its duration, producing the longer term economic impacts on the communities affected. There was in excess of 65 million cubic metres of floodwater, covering an area of 65 sq km. Exceptionally, that floodwater stayed on the levels for more than 12 weeks.
The Environment Agency did an excellent job in carrying out the single largest pumping operation ever undertaken in Somerset. As my hon. Friend said, the emergency services, the volunteers and all the other groups from local communities and from across the country who offered assistance did a magnificent job in some very difficult conditions. In addition to the 40 permanent pumps, the Environment Agency mobilised a further 24 temporary units, increasing the ability to pump by more than 150%, although there is an interaction between the tidal nature of the catchments and the ability to get the water out into the sea, which my hon. Friend considered when talking about the sluice. I want to make it clear that there are no plans to reduce the number of Environment Agency front-line flood and coastal risk management posts. That issue has been raised in the past.
On my first visit to the Somerset levels with my hon. Friend during the episodes of winter flooding there, the clear ask from the community was for dredging of the rivers. I came back to the Department determined that we should re-examine the case for doing so. The Secretary of State for Environment, Food and Rural Affairs followed up with a visit and asked all the local organisations to meet and to put an action plan together, with support from officials in the Environment Agency and DEFRA. That happened in a remarkably speedy six weeks. I chaired the first meeting and returned later to hear about some of the progress. We now have the action plan, whose delivery is crucial for the future of the levels.
Tessa Munt
It is a brief point. Will the Minister make absolutely certain that DEFRA officials stay engaged with the process, because an internal drainage board cannot do things on its own? It is crucial that DEFRA officials carry on working with the boards.
Dan Rogerson
DEFRA officials and indeed Ministers will remain involved. The Secretary of State was in the area again recently to look at progress. He has been appointed flood envoy for Somerset and Wiltshire by the Prime Minister, as I have for Cornwall. We maintain an interest in the delivery of the plan which, as my hon. Friend says, is crucial. Money has been made available from the Department for Transport, DEFRA and the Department for Communities and Local Government. For example, an additional £12.3 million from the Department for Transport has been made available to the county council to help roads recovery.
I want to pick up on some of the issues in the action plan and the progress that has been made against that plan. An important element is resilience, which is perhaps slightly more intangible than dredging and hard defences but is important. The Somerset civil contingencies partnership is providing a dedicated programme of targeted support to help people, farms, businesses and neighbourhoods to recover, including by accessing the support and advice that we have made available. They are working hard on plans to increase resilience in the future. As my hon. Friend the Member for Somerton and Frome said, flooding will happen again, so we must ensure that communities have what they need at their disposal. That is particularly so for people who have moved to the area and may not have been through this before, unlike the old hands who have and know about resilience and how to support one another.
Implementation of the action plan has started with the dredging of the Rivers Parrett and Tone. It started when the banks were stable and safe enough to support the weight of the heavy equipment, when local access permission had been sought and preparations made for receiving the excavated silt. The dredging is progressing well and is on target to be completed by the autumn. The plan is to dredge 8 km of river; so far 1.7 km has been completed and the number of gangs has increased from two to six.
Work is in hand to find alternative ways of getting water to flow from the Parrett catchment area by increasing the capacity of the River Sowy and the King’s Sedgemoor drain so that water can be pumped more easily and be diverted to Dunball where extra pumps are working. The footings have been made permanent so we can call on them if necessary. That will lower the levels in the River Parrett sufficiently to enable the pumping stations to be operated, helping to lower water levels on the moors around Langport, and to a lesser extent around West Sedgemoor, Curry moor and North moor.
The Environment Agency is currently scoping this work and hopes to appoint a consultant by the end of this month who will work with communities and professional partners to agree aims and to include them in the development of the options. By the autumn, the agency expects to have assessed a range of options to see what is feasible. Partnership funding will be needed to build the scheme. Further key action is the construction of a barrier or sluice to deal with the impact of a rise in sea level and to protect Bridgwater from flooding, and to look at future development.
On Friday 6 June, the Environment Agency, with Sedgemoor district council, organised a technical meeting to discuss various options for the type of barrier that could be used. The meeting was attended by 60 people who received presentations from experts from across the country who have been involved in the design of other flood defence barriers. The long-term vision for Bridgwater was also discussed. A group will review these options and compile a report by September. That report will contribute to an informed decision on the preferred option.
The Environment Agency estimates that it will be three to five years before construction starts and that it will take two years to complete notwithstanding discussions on funding, to which my hon. Friend is keen to draw attention. If we have a plan by September, that will allow serious consideration of the funding options.
Under the action plan, a new Somerset rivers board is being set up. It will have greater control of and responsibility for work to maintain water and flood risk management in the area. This work is being co-ordinated by Somerset county council, working closely with district councils, the Environment Agency, Natural England and the internal drainage boards, which do such crucial work not just in the Parrett and Tone catchment areas but the Axe and Brue areas.
The Somerset rivers board was discussed at an interim leaders implementation group meeting on 20 June. It was a positive meeting that acknowledged the need for compromises and urgency. The options under review include organisational structures, legislative requirements and funding models, all issues that will need to be discussed by local and national Government to ensure a sustainable model in the future. Proposals being considered include an appropriate catchment-wide funding mechanism to generate additional funds. These proposals will be discussed at the next leaders group meeting on 7 July. When proposals have been agreed, next steps will include consultation and engagement on them. In addition, work is under way to consider raising the road to Muchelney and building a ring-bank flood protection scheme for Thorney. My hon. Friend was keen to make the case for that.
We have made provision through funding such as the farming recovery fund, and 167 applications were received from Somerset by the 27 June deadline. That represents 44% of all the claims. It was available to other areas of the country that experienced winter flooding from early December 2013 to April 2014. The total value of claims from Somerset is over £1.5 million of the money that was made available. Repair and renew grant is also available, and householders and businesses may claim up to £5,000 to establish flood resilience measures on their property. Of the 283 properties that were flooded in Somerset, 219 were in the area covered by Sedgemoor district council. Other councils have also taken that option.
In the few seconds remaining, I should say that I greatly appreciate the leadership that has been shown in communities. This has helped to bridge the gap between local and national agencies. We will continue to focus on delivering the action plan. There are challenges ahead, but if we work together we can overcome them so that that resilient community has a better time in future.
VAT on e-books
(10 years, 5 months ago)
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Mr Tom Harris (Glasgow South) (Lab)
Through you, Mr Hood, I thank Mr Speaker for giving me the opportunity to raise this matter. I raised the subject under a Labour Government in the last Parliament, before the 2010 election. Sadly, many of my concerns have not receded. I welcome the Minister to her place.
It is not necessary to go into a long exposition about the importance of books or reading. We can take for granted the Minister’s agreement that encouragement to read books is a good thing, and that any Government, whatever their political colour, want to promote the reading and enjoyment of books.
I declare an interest at the outset in that I am an avid reader and, in the past four years, have become an avid reader of e-books downloaded to my Kindle or my iPad—my personal iPad mini, which I bought myself, not my publicly-funded iPad. I say that for the record lest the tiresome usual suspects see an opportunity to berate me for misuse of public funds.
My experience seems to be fairly familiar to other e-book readers. Purchasing an e-reader prompts the reader to buy more books than he or she did before. An additional benefit of e-readers is that I can now purchase books and store them unread on my Kindle instead of buying physical books and leaving them unread and gathering dust on my shelf.
Amazon states that UK users of the Kindle buy up to four times as many books as they did before they bought their Kindle. For those of us feeling the dreadful physical onslaught of the years, e-readers make print more accessible with adjustable font size and colour, and so encourage reading.
E-books offer greater consumer choice. I was delighted to discover that books by my favourite science fiction writer—the late, great Bob Shaw—which were out of print, are available again online to download. The renewed availability of previously out-of-print books from a huge range of authors has provided a much-needed revenue stream for publishers and authors, as well as offering readers greater choice.
E-books are a British success story and have helped to drive the recovery of the UK publishing industry since the financial crisis of 2008. Consumers in the UK are already the biggest e-commerce spenders in the world, and have been fastest in the EU to embrace e-books, partly because of the huge choice of English language books, partly because of competition and choice in e-book readers, and in large part because of the price competitiveness of e-books. That has brought big new opportunities to readers, writers and publishers.
Rapid year-on-year growth saw e-book sales in 2013 account for 21% of the value of the UK’s total book market, up from 8% in 2011. The Publishers Association reported that 29%, or about £1.5 billion, of UK publishing revenues in 2013 was derived from digital products. Amazon.co.uk’s Kindle e-books already outsell print books.
That is all good news, but the Minister will be aware that a change is coming that will have damaging consequences for all concerned, except the Treasury. For everyone else—authors, readers, publishers and online retailers—the consequences of the changes to be introduced in January, just six months from now, will reverse much of the good that the introduction of e-books has achieved in recent years.
Unlike printed books, which rightly attract a zero rate of VAT, e-books have the full rate of VAT added to their price. That is simply wrong, and I have thought so for several years. It is clearly unfair to recategorise a book as an electronic service, which is the justification for adding VAT, simply because it is downloaded rather than picked off a shelf. A book is a book is a book. The full UK rate of VAT is charged on any e-book sold in the UK, but that does not affect readers who buy a book from the Kindle store, because the VAT rate is that applying in Luxembourg, where Amazon is based.
From 1 January 2015, however, VAT will apply wherever the purchaser lives. For example, Donna Tartt’s “The Goldfinch”—which I would highly recommend to the Minister, although a drawback of e-books is that it is much harder for people to lend others their copy—which I purchased from Amazon a couple of weeks ago for £3.49, included a nominal VAT rate of about 3%. If we add an additional 20% to that cost, which is what I would have had to pay had I waited until next year to buy it, that will undoubtedly have the effect of discouraging many readers—not all, but many—from buying it.
The decision to buy a book is price-sensitive. Ofcom research shows that the willingness to pay for a single book download declines steadily as the proposed price of a book download increases. The average price that respondents were willing to pay was £3.74. About 42% of people were willing to buy an e-book at £5. Once VAT at 20% was added, bringing the cost up to £6, the proportion of consumers willing to buy it fell dramatically to 28%.
According to the Publishers Association, digital sales across all publishing increased in 2013 by 305% and digital revenues are now £509 million—or 15%—out of an overall book market of £3.4 billion. In fiction, e-books account for a third of all sales—that is £200 million —and for 7% of non-fiction sales.
But the association adds:
“These figures are likely to continue to increase, but at a slower rate of growth than in the earlier years of e-reading take-up, as the market matures... A further check on the growth of ebooks will come from the fact that they currently attract VAT (in the UK at the full rate of 20%). This is compared with the application of the zero rate of VAT on physical books—a long-standing feature of the UK’s tax regime—and is a reflection of the belief that the tax should not act as a disincentive to reading and learning. However, this important feature of the fiscal regime is absent for digital publications on which the full rate of VAT of 20% is applied. Research suggests that consumers are discouraged from buying ebooks by the VAT rate.”
The association continues:
“The European Commission Directorate-General for Taxation is conducting a full study of the whole of the VAT regime, and has identified ebooks as a particular focus of attention.
“We currently await a Communication from the Commission outlining its findings and recommendations—however, publication of this seems to be suffering from repeated delays. We believe that the UK Government should urge the European Commission to publish its findings following its study; and that the Commission should resolve to allow Member States to investigate applying lower rates of VAT on e-publications (books and academic journals). The UK should itself then undertake a similarly detailed study to analyse the impact of reducing the VAT rate on e-publications, with a view to reducing to the zero rate.”
E-books are a hugely important part of the UK publishing industry, which is itself a hugely important part of our creative industries, and in a week when the Government are pledging to help and support our creative industries, this debate has come at an appropriate time.
The UK is the largest e-book market in Europe, but the Society of Authors is concerned that publishers’ practices and the Government’s policies are creating barriers to growth and hindering development of the publishing industry. It told me this week:
“The largest barrier to growth for most authors is the difficulty of obtaining a proper return for their professional work. Authors’ incomes continue to be squeezed: fewer books are published and sold; advances and royalties have fallen while more unpaid work is expected of authors in marketing and publicising their work, including appearances and use of social media.
“Print books attract a zero rate of VAT, but their electronic equivalents attract a rate of 20 per cent in the UK. Other EU countries, such as France and Luxembourg, have unilaterally reduced the rate of VAT on ebooks. This means the UK will now be at a competitive disadvantage, as ebooks sold in the UK will be more expensive than those sold elsewhere. The result is often to drive down prices leading to a smaller net sum going to authors. Most of the major players in the ebook market are based abroad.
“Given the rapid pace of development in the ebook market, there is an urgent need for removing VAT on ebooks to avoid the UK slipping behind European competitors.”
There are those in the industry who welcome the change from charging VAT in the country where the e-book is sold to charging the consumer where he lives. As someone who has spoken in the Commons against Amazon and others for not living up to their moral obligations to pay tax, it is a change that I understand. However, this is not about Amazon or Kobo or any of the other e-book sellers avoiding tax. VAT on e-books is not paid by the seller; it is paid by us, the consumers. If the change goes ahead in January, while the Treasury sticks to its position of insisting that an e-book is not a book at all but the equivalent of a video game and is therefore subject to 20% VAT, the industry—the whole industry, not just those specifically involved in producing and selling e-books—will suffer, and suffer significantly.
The Government argues that their legal advice
“indicates there is no scope to change the VAT treatment of the sale of digital book… products under EU law.”—[Official Report, 14 May 2014; Vol. 580, c. 682W.]
I simply cannot accept that, because Luxembourg and France have already challenged it. They cut their rates for e-books to 3% and 5.5% respectively in 2012. There is no reason why the UK cannot follow suit. I certainly do not believe that Ministers in this Government, of all Governments, are reluctant to pick a fight with the European Commission.
Other European Governments have taken on the EU on this issue. Germany, Poland and Italy are all calling for reductions in the rate of VAT on e-books. Will the UK add its voice to that call? Even assuming that the Government stand by their legal advice, which has been published and publicised, will they add at least their voice to the calls on the European Commission for change?
Incidentally, the German coalition Government’s executive board decided in April to cut VAT on audio books to 7% from 19%. The German Ministry of Culture is also pushing at the EU level for the same 7% VAT rate to apply to e-books, in line with the rate for print books in Germany, so the decision, if made, would make e-books and print books equal as far as VAT is concerned.
A German Government spokesman said:
“Due to rapidly advancing digitisation”—
I do not know what the German for “digitisation” is, by the way, but I would be quite interested to find out—
“we insist on a rapid implementation of the agreed points. We want to make sure that print and electronic media and audio media are treated equally for tax.”
Well, hooray for the Germans.
In the House, we are only too aware of the need to nurture the next generation. As parents, we understand the importance of encouraging our children to read. My own children often borrow my Kindle to take to bed, although they have not yet mastered the art of charging the damn thing after they have used it—that may be further down the line. So, for a new generation who view CDs as a quaint old-fashioned way to buy music; who watch TV shows when it suits them, not when it suits the broadcasters; who download their video games, rather than queuing outside the shop; and who have a far greater number of distractions than any previous generation to prevent them from sitting down with a book, but who will, when choosing to read a book anyway, be more likely to buy it electronically, are we really saying that increasing the cost of that product by up to 20% can really be reconciled with an ambition to encourage the young to read literature?
Do the Government still accept that we should promote reading and literacy and do all in our power to widen reading and literacy? I know, of course, that the genuine answer from the Minister will be yes, but should we not therefore widen our support for print books to their digital equivalent? Are the Government willing to engage with the European Commission to hasten the completion of its impact study assessment of options to reform EU VAT rules, including those affecting VAT on e-books? Should the Government not be standing up to Europe and following the examples of France, Germany and Luxembourg by insisting on a substantially lower rate of VAT on e-books? This is one area where I would like to see a race to the bottom. I want the Government parties and my own party competing in the next few months leading up to the general election to see who can offer the lowest rate of VAT on e-books, because consumers, readers and authors, not politicians, would emerge the winners.
Lastly, and importantly, one activity I use my taxpayer-funded iPad for is reading newspapers, and I am a subscriber to the digital edition of The Times. I am delighted that, as revenue from journalism is increasingly scarce, newspapers have found a route to survive in the 21st century through digital subscriptions, but their route to survival is similarly under threat. This country removed taxation from newsprint more than 300 years ago—removing what was seen, rightly, as a tax on free speech. Now, however, the Treasury is stealthily reimposing it by requiring the 20% VAT levy for the proportion of every newspaper subscription that is digital. It was not this Government who introduced that, but the previous Government. This Government have merely continued it, and it is wrong.
As a former local newspaper journalist, I want a successful future for our local, as well as our national, press. When quality journalism by properly trained and professional staff is competing with numerous free sources, as well as so-called citizen journalists—well meaning amateurs with dubious qualification to write about their chosen field of interest—imposing an unnecessary 20% charge on newspapers is a serious blow to freedom of expression. That argument was first deployed, successfully, 300 years ago. It is no less relevant today. The Minister and her colleagues have an opportunity to be on the side of fairness, literacy, opportunity and culture. The question is whether her Treasury colleagues will allow her to grasp that opportunity.
The Economic Secretary to the Treasury (Andrea Leadsom)
It is a pleasure to speak under your chairmanship, Mr Hood. I congratulate the hon. Member for Glasgow South (Mr Harris) on securing a debate on this very important subject. I am aware that he has asked a number of questions on the issue recently. As he will be aware from the answers that he has received, I am filling in for my hon. Friend the Exchequer Secretary to the Treasury in Westminster Hall, as he is in the main Chamber leading on the Finance Bill. In his absence, I will do my best to answer some of the hon. Gentleman’s questions.
Of course, no one needs to be an expert on tax to recognise the importance of books. The hon. Gentleman is absolutely right—publishing is an industry in which the United Kingdom can boast to have always been, and to remain, one of the world’s leaders, be it because of Charles Dickens, Jane Austen or Agatha Christie. I understand that Barbara Cartland is one of our most lucrative book exports, but I am not personally so familiar with her novels.
Andrea Leadsom
I am sure that my hon. Friend will be delighted to have been name-checked. Her sales will no doubt rise dramatically as a result of that helpful intervention.
The Government also recognise the crucial role that reading can play in increasing literacy among our younger generations, which is important to their future success. I remember that my two sons were five and three when the first Harry Potter books by J. K. Rowling came out. We used to snuggle up together, and none of us wanted them to go to bed, because we just wanted to get on to the next bit. There is no doubt about the contribution of some of the great British children’s and adults’ literature. I include C. S. Lewis and some of the other great children’s authors among those who have helped to support and sustain literature and pleasure in reading among young people and adults. Our new national curriculum, which comes into force this September, is clear that all pupils must be encouraged to read widely, both for pleasure and for information. We absolutely recognise the important role that books have always played in this country and will continue to play.
On the issue of tax, I begin by reassuring the hon. Gentleman that the Government recognise the importance of the e-services market in the UK and that Ministers are taking a number of actions to support the digital economy. E-services are a growing part of our economy, and we expect them to generate significant tax revenues going forward.
On the specific issue of VAT, I should briefly explain that, as the hon. Gentleman pointed out himself, it is governed by EU law, and that reliefs from VAT are strictly limited under EU law. As hon. Members may know, when the UK joined the European Community in 1973, we successfully negotiated to keep our existing zero rate on items such as children’s clothing, most foods and physical books, newspapers and journals. Most other member states do not benefit from that derogation.
Mr Harris
I apologise for interrupting, but when the derogation was granted on our accession to the EU in 1973, there was no reference to physical books, because e-books did not exist at the time. There was a concession on books, and as that derogation stands, it could be extended to e-books, as e-books come under the definition of being a book.
Andrea Leadsom
Yes, I accept the hon. Gentleman’s point, and I will come on to it if he will bear with me.
EU VAT law allows member states to implement reduced rates of VAT of no less than 5% for certain goods and services, listed in annexe III of the VAT directive, at the discretion of member states. One of those reliefs relates to the supply of books on all physical means of support, newspapers and periodicals, other than material wholly or predominantly devoted to advertising. Although that may sound like it includes e-books, article 98(2) of the VAT directive specifically excludes electronically supplied services from the reduced rates in annexe III. That means that the UK charges the standard rate of VAT, 20%, on e-books and the zero rate of VAT on physical books.
As hon. Members will be aware, the UK’s e-books market is a growing one. Therefore, it is not clear that it is in need of a stimulus in the form of a reduced VAT rate. Between 2011 and 2012, e-book sales in the UK increased from £138 million to £261 million, so at a time when the Government are working to tackle the economy’s problems head-on and deliver a recovery that works for all, it is not clear that we should offer fiscal support for such a rapidly expanding industry.
Fiona Mactaggart (Slough) (Lab)
How many e-books are currently subject to UK rates of VAT and how many are subject to, for example, Luxembourg rates?
Andrea Leadsom
The hon. Lady will forgive me—I do not have those specific breakdowns to hand, but I will happily write to her on that point. I apologise for that.
Mr Harris
I am grateful to the Minister for giving way again. She has shown great patience, and I appreciate it. What she has just said, though, rather misses the point of my debate. No one is asking the Government to offer subsidies or favours to the e-book industry. What I am asking is that an impending charge that consumers in this country are not currently paying not be levied. She is right to say that the industry is doing well and growing. The problem is that people who buy books currently and pay 3% or 5% VAT will from 1 January pay 20%. We are not asking for any kind of subsidy from the Government; we are asking for the current situation to continue.
Andrea Leadsom
Again, I understand entirely the point of the hon. Gentleman’s debate. The issue is specifically that e-books are not counted as zero-rateable books from the point of view of the EU directive, so this is not an optional VAT charge. The EU directive requires us to treat e-books in that way, because they are treated as an electronic service. As the hon. Gentleman said at the start of his remarks, people can change the font; they can download e-books; they can switch from page to page without having to move pieces of paper, and so on. Therefore, they are deemed to be an electronic service and not the same as a physical book. The point that I am making is that our charging VAT on them is not optional.
Let me come on to the case of France and Luxembourg, about which the hon. Gentleman spoke, and in particular the difficult issue of books on Amazon. I am sure that, although he would support not paying VAT on e-books, he recognises that there has been an issue with big companies locating themselves in other places to take advantage of beneficial tax regimes that no doubt help their sales. As he pointed out, since 2011, France and Luxembourg have levied reduced rates of VAT—7% and 3% respectively—to bring them in line with their VAT rates on physical books. That is creating competitive distortions in relation to economic operators in other member states, and there has been pressure from the industry for the UK to reduce its VAT rate on e-books. The European Commission has begun European Court of Justice infraction proceedings against France and Luxembourg, and it has formally instructed them to apply their standard VAT rates to supplies of e-books. If the UK were to reduce the rate of VAT on e-books, it is extremely likely that we, too, would be infracted. I would be interested to know whether the hon. Gentleman thinks that we should seek to avoid infraction proceedings from the European Court of Justice or embrace them. We could be, unusually, on opposite sides of the argument on that point.
Mr Harris
I seem to remember being complimentary to the Minister when she spoke powerfully in favour of votes for prisoners in a debate on which we took the opposite points of view, and I believe that we are going to do the same again. I am more than relaxed about the UK being the target of court action by whichever European institution is relevant. I was relaxed about the idea when it came to votes for prisoners—we have to keep our position on that—and I see no difference, frankly, in this case. If the move would be good for the UK industry, we should stand up for that industry against interference by the EU.
Andrea Leadsom
I absolutely respect the hon. Gentleman’s position. Were we unilaterally to decide to change the VAT rate, we would, no doubt, be subject to ECJ infraction proceedings.
The other real issue is that a reduction in the rate of VAT on e-books would be likely to create border-line issues in the wider electronic services market, because problems of definition could lead to a widening of the relief through legal challenge and industry changes. That would put at risk serious amounts of revenue in the UK market, which is worth more than £2.5 billion.
I turn to the VAT changes that will be introduced in 2015. Currently, supplies of services, including electronically delivered services such as e-books, are taxed in the member states where the supplier is based at the VAT rate of that member state. Member states with lower VAT rates therefore have a competitive advantage, which encourages suppliers to locate there and sell to EU consumers, including the UK, at lower VAT rates. From 1 January, therefore, there will be a place of supply change, which will mean that e-books and other e-services will be taxed in the member state where the customer belongs at the VAT rate of that member state. That is designed to make competition fairer and to remove distortions.
Legal advice obtained by the Government indicates that there is no scope to change the VAT treatment of the sale of digital books and similar products under EU law. The Commission’s position is clear on the VAT rate of e-books: e-services attract a standard rate of VAT, because they are electronically supplied services. The UK’s rate is in line with EU law, and there is currently no intention to reduce the rate of VAT for e-books.
I am sorry to disappoint the hon. Gentleman by my reply, but I hope that he will be pleased to know that Ministers are focused on actions outside the VAT system to support the digital economy. In that area, we are making great efforts to encourage the digital economy. For example, in June 2013 the Government launched an information economy strategy, which includes positioning the UK strongly in the field of e-commerce by, among other things, improving digital skills across the population and creating the infrastructure to support innovation and growth.
Although I am sure that the hon. Gentleman is disappointed by my answer on VAT and e-books, I hope that he and other hon. Members are reassured that the Government support the sector and will continue to do so and that we are confident that the electronic services market will continue to grow and generate significant tax revenues.
Mr Jim Hood (in the Chair)
Order. The hon. Gentleman was able to intervene, but the Minister has sat down and the hon. Gentleman cannot make another speech.
Question put and agreed to.
Written Statements
(10 years, 5 months ago)
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Maths and English (Post-16 Education)
(10 years, 5 months ago)
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The Minister for Skills and Enterprise (Matthew Hancock)
I am today setting out the Government’s plans for strengthening English and maths in post-16 education, increasing uptake of reformed GCSEs in these subjects.
A total of 40% of pupils do not get GCSE grades A* to C in English and maths by age 16. Worse still, 90% of those who do not reach this basic standard by 16 do not achieve it by age 19. From August 2014 students who have not achieved a good pass in English and/or maths GCSE by age 16 must continue to work towards achieving these qualifications or an approved interim qualification as a “stepping stone” towards GCSE as a condition of student places being funded.
Reformed GCSEs in English and maths will be available for first teaching in schools from September 2015 with the first examinations being sat in summer 2017. These new GCSEs will both be more stretching at the top, and more practical than existing GCSEs.
These new GCSEs will then be introduced into post-16 education in phases between 2015 and 2020.
With effect from August 2015, we will amend the funding condition, so full-time students aged 16 to 19 with prior attainment of grade D in English and/or maths will take GCSE, rather than any other qualification in these subjects.
We will further revise the funding conditions relating to the teaching of the new GCSEs in English and maths to students aged 16 to 19 enrolling for full-time courses from August 2017. The final requirements will be set nearer the time, informed by the outcomes of Ofqual’s consultation on grading standards for the reformed GCSEs.
For many, reaching GCSE standard requires progressive stepping stones, for example through functional skills qualifications, and a curriculum that suits their needs. We will ensure that such stepping stones are available to support students en route to GCSE and that these are fit for purpose.
GCSE is also a valuable qualification for adults and the reformed GCSEs will assess many of the skills that employers tell the Government they need.
Our ambition is that, by 2020, adults aged 19 and over and apprentices of all ages studying English and maths will be working towards achievement of the reformed GCSEs, taking stepping-stone qualifications if necessary. Functional skills will continue to be part of apprenticeship completion requirements but we will work with apprenticeship providers to enable them to offer GCSEs to their apprentices.
We will launch a call for evidence, so that we can draw in advice from a wide range of stakeholders on how to reach this goal for young people, adults and in apprenticeships, and how far the new GCSEs meet the functional skill requirements of all adults and apprentices. In response to this call for evidence, we want stakeholders to advise us on how to ensure that all parts of the sector are ready to deliver against this new ambition.
We are also introducing high-quality new “core maths” qualifications—aimed at the 40% of young people who achieve a C or better at GCSE but do not take A-level maths. They will give some 200,000 students a year the opportunity to study maths in post-16 education, starting in 179 schools and colleges this autumn, before being rolled out nationally in 2015.
The majority of students who do not achieve A* to C GCSE English or maths at 16 go on to further education. As part of our plans to support these changes, we are publishing the FE work force strategy. This will set out the steps we are taking to improve the quantity and quality of teachers to support the delivery of maths and English; to increase business engagement in FE; to improve the quality of leadership and governance; and to enhance the use and effectiveness of technology to support teaching and learning.
We are announcing details of a new “golden hello” scheme for maths teachers recruited after April 2014, as part of a £30 million package to raise the quality of teaching in maths and English in FE. This includes bursaries to attract more graduate teachers and programmes to enhance the skills of existing maths and English teachers so they can teach GCSE. The Education and Training Foundation will play a lead role in implementing this strategy. This extra support for FE sits alongside incentives we have already announced to recruit high-quality maths teachers into schools, alongside significant investment in maths training and support for existing teachers.
From the beginning of academic year 2015-16, providers who teach English and maths GCSE to adults aged 19 and over outside apprenticeships will receive a higher rate of funding through the adult skills budget. In line with the policy outlined above, the Government will cease to fund level 2 qualifications and credit framework (QCF) English and maths qualifications from the same point, so that adults studying at level 2 will either take functional skills or GCSE.
These changes build on wider reforms under this Government to put academic and vocational education on an equal footing. We are reforming apprenticeships to put employers in the driving seat and make apprenticeships more rigorous and responsive to the needs of business. Our new technical awards are as rigorous and demanding as the new reformed GCSEs and will give 14 to 16-year-olds real-life skills in practical subjects. TechLevels for those aged 16 to 19 must be signed off by employers. Technical awards and TechLevels comprise a clear set of high-quality options for students wishing to follow a vocational route, and so help ensure all young people better get the chance to achieve their potential.
Double Taxation Agreement (Tajikistan)
(10 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
A double taxation agreement and protocol with Tajikistan was signed on 1 July 2014. The text of the agreement and protocol has been deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
Arms Embargo (Azerbaijan and Armenia)
(10 years, 5 months ago)
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The Minister for Europe (Mr David Lidington)
The UK regularly reviews export policy to embargoed destinations in the light of our international obligations and the situation on the ground, to ensure that implementation continues to be legally robust, diligent and consistent with the terms of the sanctions in place.
Following a thorough review of their procedures for processing export and trade licence applications to Armenia and Azerbaijan, the Government will continue to apply the Organisation for Security and Co-operation in Europe (OSCE) embargo to the supply of military list equipment to military, police and security forces and related governmental entities, where this equipment could be used in the Nagorno-Karabakh region, or on the land border between Azerbaijan and Armenia. For the supply of military list equipment which does not have the technical capacity to be used or modified for use in the Nagorno-Karabakh region or on the land border between Armenia and Azerbaijan, the Government will consider licence applications in line with the consolidated EU and national export licensing criteria. Supplies of military list equipment to other end-users; such as, humanitarian, peacekeeping, research or media organisations, will not be considered subject to the embargo, unless there is a clear risk of diversion to the armed forces, police or security forces of either state.
All export and trade licence applications for Armenia and Azerbaijan as elsewhere will be assessed on a case-by-case basis against the Consolidated EU and National Arms Export Licensing Criteria and we will not issue a licence where to do so would be inconsistent with the criteria.
The south Caucasus is an area of strategic importance to the UK. In partnership with Armenia and Azerbaijan the UK continues to work for peace, security and mutual understanding in the region. In the 2012-13 financial year, the UK funded £1.245 million worth of projects to promote peace between Azerbaijan and Armenia. On Nagorno-Karabakh we have funded a series of projects designed to strengthen the likelihood of a peaceful resolution of the conflict by working with civil society in Armenia, Azerbaijan and Nagorno-Karabakh.
We strongly support the work of the OSCE Minsk group to find a peaceful and lasting resolution to the Nagorno-Karabakh conflict. It is for this reason that the UK continues to adhere to the embargo on deliveries of military list equipment to forces engaged in combat in the Nagorno-Karabakh area in accordance with the precursor to the OSCE, the conference on Security and Co-operation in Europe’s declaration of 1992.
Local Government Pension Scheme
(10 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Justice (Jeremy Wright)
Tameside metropolitan borough council, the operator of the Greater Manchester pension fund, has asked that we provide a guarantee that the Department will meet employer or employee pension contributions for employees that were former probation trust employees who have been transferred or are recruited to community rehabilitation companies while in ownership of the Secretary of State. The guarantee will be limited to where a community rehabilitation company becomes insolvent. I can inform the House today that we will provide such a guarantee in respect of each community rehabilitation company and a parliamentary minute, which sets out the detail of the guarantee, has been laid in both Houses.
The provision of the guarantee ensures continued pension provision in the local government pension scheme for staff following the sale of shares in community rehabilitation companies as part of a public procurement exercise.
The provision of the guarantee is considered to be value for money for the taxpayer as it will avoid community rehabilitation companies having to obtain appropriate security in relation to their pension obligations which would have been funded by the Secretary of State. Further, in some cases the inability to obtain the appropriate security may have prevented some companies from participating in the tender process.
I have placed copies of the associated documents in the Libraries of both Houses.
Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
I remind your Lordships that in the event of a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division Bell.
Genuine Economic and Monetary Union (EUC Report)
(10 years, 5 months ago)
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Lord Harrison
That the Grand Committee takes note of the Report of the European Union Committee on Genuine Economic and Monetary Union and the implications for the UK (8th Report, Session 2013–14, HL Paper 134).
Lord Harrison (Lab)
My Lords, I am delighted to introduce this EU Committee report, ‘Genuine Economic and Monetary Union’ and the Implications for the UK. What is genuine economic and monetary union? In June 2012, the IMF revealed that there was a nearly €40-billion hole in the balance sheets of the Spanish banks and the spectre of contagion threatened to overwhelm the eurozone as a whole. European Union leaders recognised that urgent action was needed.
The result was a report written by the outstanding and now departing President of the European Council, Herman Van Rompuy, entitled Towards a Genuine Economic and Monetary Union. It envisaged a stable and prosperous EMU based on four essential building blocks. The first was an integrated financial framework, otherwise known as banking union. The second was an integrated budgetary framework. The third was an integrated economic policy framework. The final building block was ensuring democratic legitimacy and accountability. On the basis of this report, the Council invited the President of the Council, the Commission, the Eurogroup and the European Central Bank to prepare a specific and time-bound road map for the achievement of genuine economic and monetary union. The final report was published in December 2012, complementing the Commission’s own November 2012 blueprint for a deep and genuine economic and monetary union.
The Sub-Committee on Economic and Financial Affairs, which I chair, heard evidence on these proposals over several months, including on visits to Brussels, Berlin and Frankfurt, where we visited the European Central Bank and the Bundesbank. Our report was published in February. We are grateful to Professor Iain Begg of the London School of Economics, who acted as specialist adviser to the inquiry. I am also eternally grateful to Stuart Stoner, our outstanding clerk, and to Rose Crabtree, policy adviser for the report but a poacher turned gamekeeper who is now working for the PRA.
Our committee found that banking union was the most urgent of the four genuine economic and monetary union pillars. It was vital to tackling the effects of the financial crisis, securing the long-term stability of the eurozone and repairing the damage to the single market in financial services. For our December 2012 report on banking union, we consulted Michel Barnier, the appropriate commissioner, and Herman Van Rompuy. The report was with Chancellor George Osborne at the December Council.
Indeed, significant progress towards banking union has been made. A single supervisory mechanism has been agreed and will become operational under the European Central Bank this November. A single resolution mechanism has been agreed but, regrettably, only a partial banking union is in prospect. For the third leg of banking union, the single deposit insurance mechanism was quickly dropped because of political pressure. What is more, the final agreement on the single resolution mechanism that was reached shortly after our report was published remains sub-optimal.
Our concerns about the SRM focus on two issues in particular. First, the resolution mechanism itself—the process by which a failing bank would be dealt with—remains highly complex. Key players, including the Commission, the Council, the European Central Bank and national authorities, will all have a role to play. Indeed, it has been reported that more than 100 individuals and organisations might need to be involved in a resolution decision. Yet anyone with experience of these issues knows that bank resolution needs to be a quick and decisive process with the confidence of markets, investors and consumers. It is not to be undermined. I ask the Minister whether it is really credible to save a failing bank over a short weekend, before the markets open on a Monday morning, while consulting more than 100 other people or institutions.
Secondly, we were deeply concerned about the limited funds available to rescue failing institutions. The compromise agreement reached in the spring—by frontloading the mutualisation of funds and allowing the single resolution fund to borrow on the financial markets—was a step in the right direction. That is all helpful in avoiding the need for the taxpayer to pick up the bill. Yet even at its full strength of €55 billion, we fear that the resolution fund would be underpowered and ill equipped to deal with the scale of bank failures witnessed in recent years. In the committee’s view, direct recapitalisation of banks by the European stability mechanism was vital to break the vicious circle linking bank and sovereign debt. Again, perhaps the Minister can give us his view.
We also found that the second and third building blocks of genuine economic and monetary union—the proposals for an integrated budgetary and economic policy framework—were politically unrealistic at present. German concerns over moral hazard and the assumption of liability without effective controls mean that debt mutualisation remained highly contentious. That was not to say that these issues were not unimportant. A system of substantial fiscal transfers by a central budget is a characteristic of most currency unions and some degree of debt mutualisation may be inevitable if the single currency is to prosper. In the mean time, we warned that the imposition of so-called austerity policies could aggravate the problems facing weaker economies.
The fourth strand of genuine economic and monetary union—democratic accountability and legitimacy—is explored in the context of the recent report from the European Union Select Committee, chaired by the noble Lord, Lord Boswell of Aynho. On the role of national parliaments in the European Union, that report found that there was an asymmetry between the growing powers of institutions such as the Commission, the European Central Bank, the Eurogroup and the troika, and the ability of citizens to hold them to account for their actions. We found that a serious democratic deficit now exists, as the results of the recent European elections partly testify. While the European Parliament has a key role to play, we found that the principle of democratic accountability could be strengthened only if national parliaments also had an enhanced role and we were therefore extremely concerned at how little emphasis was placed on the role of national parliaments in the genuine and economic monetary union proposals. Incidentally, the ECB and the Eurogroup have clearly advanced as institutions within the European Union. I am pleased to say that our committee interviewed Dr Constâncio, vice-president of the ECB, in our investigation into the banking union report, and we recently visited the ECB and the Bundesbank.
Our report concluded by considering the implications of all this for the United Kingdom. The Government stressed that the United Kingdom’s role had not diminished and that it continued to play an integral role in the European Union, notwithstanding the fact that eurozone members are pursuing an increasingly integrationist agenda. However, the evidence to the committee heard in Brussels and Berlin tended to contradict that assertion. Responsibility for defending the UK interest lies not only, if principally, with the Government but with us as parliamentarians and, I might say, the City of London as the foremost European global financial centre. The European Union institutions have their own obligations to ensure that the United Kingdom’s concerns are not lightly dismissed, and noises off from Angela Merkel, Mark Rutte and Fredrik Reinfeldt hint that that might be recognised.
Our report concluded by observing that the eurozone remains on the road towards greater integration, and the implications of this for the United Kingdom are immense. A strong and prosperous eurozone is in the interests of all European Union members, as is a strong and engaged United Kingdom and a strong City of London. Achieving all those outcomes simultaneously will require close care and attention, together with good will, on all sides. When I talk of good will, the recent Juncker debacle did not help.
I point out that Mr Juncker was head of the Eurogroup—the group that together oversees the 18 members of the eurozone. One thing that I have tried to do as chair of this committee over the past four years is to support our Chancellor when he says that the welfare of the eurozone provides the opportunity for the United Kingdom’s economies to prosper. We have always been told by George Osborne that the European Union needs to integrate more closely and get on with the job of making sure that its members are working together. It is therefore incongruous to describe Mr Juncker as an integrationist when that is the very thing that we have asked the EU to do.
I also say to the Minister that, important though the position of the European Commission President is, others are important too. What plans do we have for the replacement of Herman Van Rompuy, who has played such a behind-the-scenes but effective role? What positions are we likely to get with Andrew Lansley, if he is indeed to be our United Kingdom Commissioner? Is there really any hope that we can get an economic role now that we are outside of the European Union? Cathy Ashton—my noble friend Lady Ashton—will possibly be replaced by Mr Sikorski, currently Foreign Minister of Poland. Although a former member of the Bullingdon Club at Oxford, he has said some choice things about the way that we, the British, have gone about these negotiations.
Sharon Bowles, whose praises must be sung as chair of the European Parliament committee on all these matters, is someone who we need here. She is coming before our committee on 22 July to give us help on, and her understanding of, the subject of our new report—financial structures within the European Union. However, we must be clear, too, about our reform of the European Union. That is unclear at the moment but so often is familiar to us. The single market was a creation of the European Union by a member of this House. Can we pursue that in financial regulation through the digital economy or services directive?
Finally, can we try a little harder to find friends other than “phoning a friend” with Angela Merkel? We need to spread much wider than that. We have already recognised the position of the United Kingdom, which is outside the euro, outside Schengen, outside the fiscal compact—I heard no one from the Government say that the Czech Republic is now a member of the fiscal compact, thereby isolating us even more—and, indeed, outside the very important European Semester.
The constant theme of my committee over the four years that I have had the honour of chairing it is that the best way of ensuring that the United Kingdom’s voice is heard within the European Union is to keep close to our partners and close friends in the European Union. We need man-to-man marking when we are engaging with the other 27 friends. We need to be friends on Facebook with the other 27 and not for ever threatening withdrawal as an instrument of European Union policy—a kind of foreign policy of coitus interruptus. We need to make the case for the European Union and the United Kingdom’s role within it with passion, persuasion and precision. We need to succeed in the European Union not secede from it.
Lord Lamont of Lerwick (Con)
My Lords, I am a bit of an interloper in this debate, not having been a member of the committee. I congratulate the committee on the report and congratulate the noble Lord, Lord Harrison, on having chaired the committee. The report is useful and interesting. For those of us who try to follow what is happening in the eurozone and the EU, it is a good volume to have telling us all about the things that are going on.
I do not wish to follow the noble Lord, Lord Harrison, in all the directions that he went down, least of all his remarks about the goings-on relating to the nomination of the President of the Commission. I said to him the other day that I had worked with Mr Juncker. Although I found Mr Juncker helpful during our negotiations, it was absolutely right to oppose his nomination because of the important principle of the power of the European Parliament, which was threatening to usurp the decision. Giving that power to the European Parliament was a significant transfer of sovereignty and for that reason I think that the Prime Minister’s tactics in handling the situation were 100% right.
The noble Lord has on various occasions bemoaned our loss of influence. I am always puzzled by the argument about the loss of influence. Of course, if you are not part of something, you do not have so much influence. We do not have a lot of influence on the Federal Reserve Board. If you are not part of something such as the ECB, you lose a bit of influence with it. Although nobody other than my noble friend Lord Dykes speaks in favour of joining the euro today, the implication is always that we ought to join the euro, which is a bad thing, in order to have a bit of influence. Influence is not by itself an objective of policy.
The substance of the report, genuine economic and monetary union, is a puzzling concept, as the noble Lord, Lord Harrison, said. At Maastricht, the aim was always, as the report notes on page 11, to have a centralised monetary union and a decentralised economic and fiscal policy—what the report calls an asymmetry. But during the Maastricht negotiations and talks relating to it, whenever this was raised and whenever one said that surely the logic of monetary union was that there ought to be fiscal transfers, one was told that this monetary union was different. It would work on an entirely different basis; it would be like the gold standard. The impartial discipline of gold and the impartial discipline of the modern version of gold—euro budget surpluses—would ensure that this monetary union would work.
The concept of debt mutualisation, which features a lot in the report, was explicitly ruled out. It was a cardinal principle at the time, very much on Germany’s understandable insistence, that there should be no bailout mechanism. Of course, when the euro got into trouble, we had a bailout of both Greece and Ireland, which Madame Lagarde pointed out was probably illegal under the treaty because the treaty specifically prevented bailouts.
As regards mutualisation, the committee refers to Germany having different priorities. That is one way of putting it, but it is perfectly understandable that Germany always was and always will be cautious about its own money being at risk to bail out other countries. Equally, it was always explicit that there should be no monetary financing of deficits.
The noble Lord, Lord Harrison, concentrated on banking union, which is fundamental to a currency union, the resolution mechanism, deposit insurance and supervision. He is right that the resolution mechanism is suboptimal. Perhaps it should be more centralised. On supervision, subsequent developments have moved more in the direction of the committee, with the ECB supervising more directly the larger banks and national supervisors supervising the smaller banks. Germany is described as reluctant on deposit insurance, but the reluctance is extremely understandable. On page 39 of the report, someone from Germany is quoted as asking why Germany should pay to bail out banks that Germany has not supervised. I regard that as a historical legacy, which is how the Germans regard it.
A key to the future of the euro will be the asset quality review and the stress tests of the banks, but we have been here before. When stress tests were carried out previously, we were told that the banks were all hunky-dory and financially sound. However, several banks that had passed the stress test, including in Spain and Italy, got into deep trouble. It is important that these stress tests should be much more rigorous and credible. The monetary transmission mechanism in the eurozone is not working well, particularly for small businesses.
A lot of the argument in the report is about breaking the link between sovereigns and the banks, but the two are bound to be linked, even with the nirvana of debt mutualisation. I think that “nirvana” is rather a good word to describe debt mutualisation. I looked up what it means. Hindus say that nirvana means blissful egolessness, which seems a good way to look at debt mutualisation.
You cannot abolish the financial danger just by mutualisation. The European stability mechanism has limited resources. It can gear itself up, but who are the guarantors? The second largest guarantor of the ESM after Germany is France, whose own finances are in difficulty. The third most important guarantor is Italy and the fourth is Spain. Therefore, countries in debt, with deep fiscal problems, are guaranteeing themselves. Of course, behind them stands the economic colossus of Germany, but not even Germany could bail out Spain and Italy if they got into trouble together.
We are told that all that has gone. Outright monetary transactions, which are described on page 30, have taken care of all that. I think that Enoch Powell once remarked that a politician’s words were his deeds. He might now say that a central banker’s words were his deeds, because by just uttering the magic words, “Whatever it takes”, Mr Draghi certainly calmed the markets. He did not actually buy any bonds, but the acute phase of the crisis happened and it calmed markets. But did it calm them too much? We are now in a situation where 10-year yields on Spanish and Irish debt are lower than those of the United States. Yet the report says that it is important that the markets should not misprice sovereign risk. It also raises the danger that calming the markets in this way means that the impetus has gone out of structural reform. As it says on page 13, the air has escaped the balloon.
Now we have had the new measures that Mr Draghi has announced, but I suggest that the words are again very important—not the measures but the words. The words that we ought to concentrate on are three particular series of words: “The decision is unanimous”; “We are not finished here”; and “within our mandate”. The impression was given that all the tensions with Germany over committing funds, over mutualisation and over monetary financing had been put aside and that the situation was solved.
The negative interest rate was the first measure. I doubt whether that will have a great effect on the eurozone. Banks hold only €120 billion at the central bank at the moment. A 10 basis point cut will give them a charge of €120 million. I doubt whether that will transform the situation. Then we were told that there would be purchases with asset-backed securities, but that market is not really developed in Europe at the moment. It will take a long time before such securities, in securitised form, are available for the central bank to buy.
Then there was the targeted long-term refinancing operation—the LTRO, €400 billion-worth. Again, the effectiveness of that, which is modelled on the Funding for Lending scheme, will depend very much on the health of the banks and the results of the stress tests. Italy, for example, has €160 billion-worth of non-performing loans, which is why it has to pay 1.2% more for deposits than Germany. I do not think that the LTRO will transform things by itself.
Perhaps the most significant thing was when Mr Draghi said that the bank would be ending the sterilisation of assets that were purchased in order to ease the monetary transmission mechanism. That is almost a little bit of QE. The road to Delhi begins with a single step. Perhaps that is the measure that the Germans should worry a little about, but it will take time before there is an assessment as to whether those asset purchases can take place. None of this will produce a transformation of monetary conditions; none of it will weaken the exchange rate.
What triggered all that was of course the very low inflation figures for the eurozone and for Germany in particular. Without the flexibility of the exchange rate, the lower Germany’s inflation rate is, the more other countries have to cut their costs, cut unit costs and cut price levels to become competitive. I agree that some remarkable changes have taken place, but that has to go on for a very long period. The level of total indebtedness is 133% of GDP in Italy, 175% in Greece and 130% in Portugal. With that constant pressure on the price level—some see it as deflation; the Germans just see it as the periphery becoming more competitive—the outlook for growth in the eurozone is dismal and looks likely to remain dismal for a very long time.
I have always been an opponent of the euro, but I have never, ever said that I thought that it would break up soon. I have always had great arguments with my noble friend Lord Hamilton of Epsom about that. Of course, surviving and working well in the interests of the citizens of Europe are completely different things. It may be that the euro is a bit like a shoe that does not fit a foot. You go on wearing the shoe. Gradually, your foot gets distorted and you suffer pain; eventually, it completely alters its shape and you can get the shoe on. Perhaps the euro is like that and perhaps it will work in 30 years’ time. However, even if it did work in 30 years’ time, that certainly would not mean that we were wrong not to join.
Lord Liddle (Lab)
My Lords, I congratulate my noble friend Lord Harrison on his committee’s excellent report. I have done that before but this is the first time that I am not doing so as Labour’s Europe spokesman. It is a great privilege to be able to address this body knowing that I am free to tell Labour what its policy ought to be rather than putting the best face on what its policy is, so I am looking forward to this speech. I should also say what a privilege it is to listen to the noble Lord, Lord Lamont. I do not agree with him on the euro but his reflections, as a former Chancellor, are extremely interesting and I would be the last person to argue that the euro does not still face difficult problems, which have to be resolved.
The euro’s future is of fundamental importance to Britain. In all the past arguments about whether we should join, the one where the pros have been conclusively proved right is that we in Britain cannot escape the consequences of the eurozone by being outside it. It has a material impact on our economy. We also have to be conscious of the fact that our circumstances might at some point in the future change. I am not arguing that there is any immediate prospect of our joining the single currency. I do not expect to see that for a very long time but Britain’s prospects could change, which might necessitate us joining the single currency.
The real danger for Britain is a repeat of what happened when we did not seize the initiative in Europe right at the start, in the 1950s. We have to be careful that a construction might be put in place that does not entirely suit our national interests. We saw that with the common agricultural policy, which led to the arguments about whether we should enter on the Tory terms in the 1970s and the renegotiation under Harold Wilson, which then led to Mrs Thatcher’s struggles for the British budget rebate, all of which poisoned our relations with our partners. We must try, as an insurance policy for Britain, to make sure that the development of the euro is one that suits us.
I want to stress the most important recommendation of this report and I am very disappointed by the Government’s reply. The recommendation is:
“The Government would be wise not to close the door on the possibility of participation in some elements of Banking Union in the future, and must stress the City of London’s strategic importance for the EU as a whole”.
I have no doubt that the Government will stress the City of London’s importance but if they want to influence the key ways in which the City’s future is determined, they must play a role in the banking union. Be in no doubt: the ECB will be the body that determines the rules by which financial markets work in Europe. It will be that body and the idea that, because we have some minority protections and a European Banking Authority we can sit back and relax, is for the birds.
What about the alliance of the euro-outs, which is supposed to protect our interests? Where are we with Mr Reinfeldt, after Mr Cameron’s ride in the boat with him? Is he not going down to defeat in the September election in Sweden anyway? As for the Poles, what are the prospects for Britain having any influence over Polish policy after what we now know of the expletive-laden remarks of their Foreign Secretary about his old Oxford friend, the Prime Minister? Can we really rely on Hungary and Mr Orbán when he is the man who plays footsie with Jobbik—the fascists in Hungary—who rigs the constitutional court in Hungary and who has passed laws that are offensive to press freedom in Hungary? Is that our only ally in Europe? Are we really proud of that? Do we think we can defend our interests on a crucial issue such as this simply by having an alliance with Hungary?
Lord Flight (Con)
Would the noble Lord not agree that the collaboration between the Bank of England and the ECB has been and remains substantial? Indeed, quite a lot of the ECB regulatory arrangements have been modelled on what has happened here. Whatever the constitutional position may be, the practical position is that the two work hand in hand.
Lord Liddle
I am very strongly in favour of practical co-operation between the Bank of England and the ECB but, fundamentally, it is politics that matters. It will not all be decided in an independent regulatory context. The politics will matter, and we are not well placed at the moment.
The banking union is a significant development. I am a bit more bullish about it than the committee. I think it is a glass half full, rather than a glass half empty. Some academics I greatly respect, who are experts in the field, such as the Peterson Institute’s Adam Posen and Nicolas Véron, believe that we should consider that to be a very significant development. That is why it is so important that we try, as far as we can, to get inside—beyond simply co-operation between the Bank of England and the ECB.
On the wider issue of genuine economic and monetary union, the British love playing this intellectual parlour game of what are the necessary conditions for monetary union to proceed. They never think about the United Kingdom itself: is it a satisfactory monetary union? Clearly, in the United Kingdom we have a London economy which is a tremendous success and something that we all admire, but an out-of-London economy that continues to struggle. We all know that if we imagine them as separate countries, the London pound would be far stronger than the out-of-London pound. The country functions only because of massive fiscal transfers from its richer parts to the poorer.
You can argue that those transfers are not there in the eurozone—of course, they are not, except for the structural funds—but one of the problems with our fiscal transfers in Britain is that they have been extremely opaque. They are about to become less opaque as we go for devo-max in Scotland. I forecast that we will have more political arguments about the functioning of the United Kingdom economy in the decades to come as we have arguments about whether the extent of the fiscal transfers from London and the south-east to the rest of England are sustainable in the long run.
I make that point because I think that the mistake in looking at EMU is to neglect the extent to which its survival has depended on political will. Eurosceptics in this country always underestimate the strength of that political will. An enormous number of things have been done, including the European stability mechanism, the six-pack and two-pack legislation, the fiscal treaty, the ECB supervisory powers and the banking union. A lot has been done; let us not underestimate it. At the moment, politics is making a big difference to the chances of the monetary union overcoming its problems. We are seeing less emphasis on austerity and more fiscal flexibility. In part, we saw that with Mr Juncker going around making sympathetic noises to the Italians and the Spaniards to get their support for his nomination as Commission President.
More fundamentally, there has been a shift in Germany as a result of the formation of the grand coalition, with the disappearance of the Free Democrats from the coalition and the presence of the Social Democrats. The German Vice-Chancellor, Sigmar Gabriel—a Social Democrat—has said that he believes that the south needs more fiscal space and more fiscal flexibility. What the Germans are trying to do, of course, is to link that flexibility to support for needed structural reform in the countries of the south. They are also doing something to rebalance the eurozone themselves, with policies such as the introduction of a minimum wage, which will boost spending power in Germany.
The one remarkable thing in the crisis is that, thankfully, unlike the 1930s—this is the huge historical difference from the 1930s—there has not been a political collapse and a reversion to dictatorship in any of the EU countries, despite the very brutal circumstances that they have had to face. Reforms have been made and democracy has just about survived.
We will need to see further developments before the euro is safe. German rebalancing will have to go further and they will have to be more flexible. We will have to see some debt forgiveness because as the noble Lord, Lord Lamont, said, it is difficult to see how those levels of debt are sustainable in the long run. We will have to see more of a European-led investment policy. That is one way of doing things in favour of growth but making them conditional on reform.
I see the eurozone rescue as an incomplete project but I think the politics are working in the right direction. The political will has been demonstrated. My fear is that as a Euro-out we are not really putting our minds to how we will retain influence over this construction in the years and decades ahead. This report has been an extremely valuable contribution to what is an extremely important issue for the future of the United Kingdom.
Lord Maclennan of Rogart (LD)
My Lords, I, too, begin by indicating the value of the report and the work of the committee chaired by the noble Lord, Lord Harrison. The report is a useful gathering together of evidence from experienced people. Its conclusions seem to me to merit our support.
A strong and prosperous Europe and a strong and prosperous eurozone are in the interests of all members of the European Union. It is necessary for the Government to indicate as clearly as they can how they would engage with the strengthening of the eurozone. The long-term goals of fiscal transfers and, possibly, debt mutualisation—they may be unrealisable in the short term—have been envisaged and mentioned in the report, but they are not seen as immediate solutions. However, there are ways in which we, as a country with an extraordinarily strong banking system in the City, could give further support to the recovery of the eurozone. To my mind, that would be to the benefit of the City and the country more generally.
One witness strikingly described the process as,
“the euro continuing as an injured patient with a massive sticking plaster in the form of bailouts”.
That was an entertaining image but there is a degree of truth in it. I hope that, in coming back into the discussions about the future of Europe, the Government will seek to engage with their partners in the eurozone and seek ways of assisting the process of banking union. I strongly agree with the report that supervision and becoming a lender of last resort are compatible. The structures of these different organisations are well set out in the report, which describes how they can be both separate and together in making their respective decisions.
The noble Lord, Lord Liddle, made an important remark about will. The will to sustain the eurozone probably was best expressed by the president of the bank, Mario Draghi. He said that the bank would do “whatever it takes” to save the euro. That certainly had an immediate effect of calming the markets. It also made other countries feel less excluded from the discussions and more able to put forward recommendations. The bank has acted wisely in a number of respects—for example, in purchasing sovereign bonds not directly from the sovereign states but on the open market. That has done quite a lot to stabilise the situation.
I hope that the Government will respond to the committee’s recommendation that it may be ill advised to assert that:
“Banking Union is the sole province of the single currency for all time”,
and that participation could mean,
“further promoting and shaping the Single Market in Financial Services and the UK’s position within it”.
At the beginning, a number of proposals were put forward on outright monetary transactions which do not seem to have yielded anything very noticeable as of yet. None the less, they are still an instrument that is perfectly sensible to use.
The single resolution mechanism, by which the predicaments of those who are extremely tested could be resolved, has not come forward sufficiently developed to be enlisted in the battle against the collapse of southern states. However, the UK Government should, I believe, shape their arguments in terms of ensuring the overall stability and efficiency of the EU markets. That practical reform would give the Government much more influence in the direction of the single market than the sort of postures taken over the past few weeks in respect of the nomination of the President of the Commission. Deposit insurance is another method of supporting the banking system that, as yet, has not come to fruition. None the less, it could be of assistance.
I hope that the Government will also do their best to assist the bank with its comprehensive assessments of the banking system, its supervisory risk assessment, its asset quality review and its stress tests. All of these seem sensible means of reassuring the banking system. We ourselves have not been immune from the troubles that have afflicted other countries.
Notice also has to be taken of the evidence that was given to the committee about the lack of sufficient fiscal backstops to plug any gaps in the bank balance sheets exposed by the review. I hope that that, again, will be something that we can open up and show that there is a will to help.
The report has been produced at a difficult time for the European Union. Although the process has not been completed, as outlined on different sides by the Commission, by the bank and by Governments, I none the less think that the report was very timely. It has given us guidance and indicators as to how to proceed. We want to hear from the Government about their willingness and commitment to strengthen the eurozone. Some of the Ministers who gave evidence recognised that that was necessary for British industry. When they talk about the objective of the single market, they are also speaking of the need for that. I hope that my noble friend Lord Newby will be able to give us some reassurances about the Government’s position and not simply cast discredit on the steps that have been taken.
Lord Jay of Ewelme (CB)
My Lords, I, too, congratulate the noble Lord, Lord Harrison, and the sub-committee on this report. As one would expect, it examines highly complex issues succinctly and clearly. I hope that, as another interloper in the debate, I shall be forgiven if I do not follow the noble Lord down all the burrows that he explored in his introduction.
I was British ambassador in Paris in the years leading up to the introduction of the euro in 1999. In those days, I had many conversations on EMU with some of the most acute monetary and financial minds around, some of whom, such as Jean-Claude Trichet, went on to play quite an important part in the evolution of the euro from its start. What was clear then—I was reminded of this recently when re-reading some of the notes that I had taken of those conversations—was that EMU was widely seen as an essentially political construct with real financial and economic risks, not least to France, which had managed its economy for the previous 10 years or so through, at least in part, a series of competitive devaluations. However, what was also clear was that there was an absolute determination to make EMU work and an absolute conviction that it would work. I entirely agree with the noble Lord, Lord Liddle, about the absolute political will that EMU, once started, would continue and would work.
One can argue that that approach to the formation of the euro was misguided, that it was risky and that it underestimated the difficulties that would come with a financial crisis. If the noble Lord, Lord Lawson, were still in his seat, I expect that he would be nodding at that. One can argue, too, that Britain was right not to take part, and I would argue that. However, particularly given the measures taken—for example, to shore up the Irish and Greek economies during the recent financial crisis—it would, in my view, be quite wrong to doubt the continuing political determination of the member states of the euro to make the euro work in the future.
I do not pretend for a moment that that would be easy, as the report makes clear. Sitting on various French company boards over the past few years, it has been brought home to me clearly the difficulty that France may have within the eurozone unless it takes the sorts of measures to raise its productivity—particularly vis-à-vis Germany—that its political tradition will make very hard to carry out. There will of course be difficulties for others, too—in particular, some of the newer European Union and euro members. However, as I say, it would be quite wrong to assume that because maintaining the eurozone will be difficult, it may fall apart. If that were to happen, it would be enormously damaging to our own economic interests and also, in my view, to the political cohesion of the European Union and of Europe, which is not a happy prospect in the centenary of 1914. So, again as the report makes clear, given the way in which our economy and financial system are so closely linked to the eurozone economies, our own interest must be for the eurozone to succeed and, crucially, to succeed within a European Union in which the single market remains intact and indeed is strengthened.
I have to say that some of us feared when the euro was introduced that one consequence of Britain’s non-participation—right though that was—would be a risk to the integrity of the single market as the inevitable integration within the eurozone happened over time. I think that time has probably borne that out. However, that merely strengthens the argument that the maintenance and strengthening of the single market, as well as a properly functioning eurozone, is a key British interest.
I am glad to see that Commissioner Barnier is reassuring about the importance of the single market in his letter responding to the committee’s report. However, that will require constant work and vigilance, and political nous. This will be, in part, a technical, a financial and a diplomatic negotiating task. It would be greatly helped if we made sure that we had in Brussels—in the Commission and elsewhere—more British people who really understood the British economic and financial system and the importance of a strong single market of all 28 member states. Will the Minister tell us what measures the Government are taking to strengthen the participation of British officials in the European institutions?
It will also, of course, depend on a strong, committed, influential British commissioner in Brussels. I was very glad to hear the noble Baroness, Lady Warsi, say in the Chamber earlier today that there was a strong list of candidates waiting in the wings. I look forward to them coming forward and one being chosen to fulfil those crucial functions.
The task is also, of course, a political one. As a Cross-Bencher, I wish to stay neutral on this point, so I would simply advise all Governments, before pursuing this rather delicate, difficult and sinuous task, to take advice from my noble friend Lord Kerr of Kinlochard.
As the report makes clear, the British interest requires a strong eurozone within a strengthened single market. That is in no way inconsistent with stronger British economic links with the emerging economies—with China, India, Brazil and Indonesia. It is perfectly possible, as Germany shows, to do both. There is no contradiction at all between those two. I believe it should be a fundamental British economic and foreign policy interest to work for a strong eurozone within a strong and strengthening single market. Could the Minister confirm that that is a goal, not just to be stated, but to be implemented?
The Earl of Caithness (Con)
My Lords, the fact that I am the sixth speaker yet only the first after the chairman to have served on the committee shows that, once again, the House of Lords produces high-quality, interesting reports, of which this is undoubtedly one. I pay tribute to the way in which the noble Lord, Lord Harrison, who introduced the debate so well, chaired our committee and to those who helped us to prepare the report, whom the noble Lord has also mentioned. We were extremely well served. It is one of the features of this House that we are well served and are able to provide reports that are read right across the EU.
What a joy to hear batsman number three, the noble Lord, Lord Liddle, coming in free from the shackles of the Opposition Front Bench. Perhaps he should never have gone there. It would have been much more interesting if he had not.
We have heard a little bit of criticism of the Government. We have heard it all before. I remember more than 20 years ago, when I was a Minister, being criticised because we were not participating enough in Europe. Nothing has changed. I think that behind the scenes we are probably participating as much as we ever did in Europe, although there is no need to be complacent. I agree with what the noble Lord, Lord Jay, says: the number of British people working in the important institutions and holding key jobs has declined. I hope that my noble friend will say something when he sums up on how that is going to be corrected.
Part of what we have achieved was revealed at the recent Council of Ministers meeting. Once you get away from the frothy headlines, which have already been discussed, you see that thanks to Britain the whole procedure of appointing the President is going to be reviewed for the first time ever. All 27 other Heads of Government have agreed expressly that they will address our concerns. It has been agreed that there are different paths of integration for different countries. Unless one takes a firm stand, one cannot shift the other Heads of Government in the way that Britain seems to have been able to in the recent past.
On the report, I agree with a lot of what has been said, but I want to focus on something that my noble friend Lord Lamont raised—the question of the single deposit insurance scheme. I was intrigued when it was first introduced by the Council President, Mr Van Rompuy, in June 2012. The banking union had three elements, one of which was the single deposit insurance scheme. That was included,
“to strengthen the credibility of the existing arrangements and serve as an important assurance that eligible deposits of all credit institutions are sufficiently insured”.
As we have heard, that was quickly watered down under political pressure—we set that out in paragraphs 104 to 113 of our report. In summary, that is because it is so contentious and requires all participating countries to pay into the system and to accept responsibility for any ensuing liabilities of the scheme, with the corollary that the fiscally stronger would be expected to shoulder some of the burden of the fiscally constrained.
As a result, the November 2012 Commission blueprint on deep and genuine economic and monetary union made no reference to a common scheme, instead stating that effective and solid national deposit guarantee schemes would put the banking sector back on a solid footing. The deposit guarantee schemes directive, which sought to strengthen these national schemes, was agreed in December last year.
Our witnesses were split as to the necessity of a common scheme. Some argued that it was necessary to prevent capital flight from troubled countries to those that were perceived to be safe. Others suggested that, while desirable, a common scheme was not necessary or could even add to the risk of moral hazard. The committee concluded unanimously that the common deposit guarantee scheme was necessary for banking union to succeed and for the eurozone to thrive. While recognising the extreme political reluctance to countenance such a significant move in the direction of debt mutualisation, the committee thought that it was an important step if the foundations of the single currency were to be reinforced.
Taken together with the flaws in the single resolution mechanism, which the noble Lord, Lord Harrison, mentioned, we concluded that notwithstanding the significant progress made so far—and it has been significant—only a partial banking union is in prospect. Consequently, the vicious circle linking bank and sovereign debt remains a threat. The whole purpose of the banking union proposal was to break that link, but it is still there.
In their response to the report, the Government agreed,
“that the common deposit insurance for those Member States participating in the Banking Union would lead to more effective and integrated financial regulation across the euro area. However, the Government will consider any formal proposals on this matter as they arise”.
I must say to my noble friend that I thought that that was a little parsimonious. Could he expand on that? Given its importance, it deserved a better response.
In its response, the Commission stated that,
“at this stage, it is not envisaged to set up a common European Deposit Guarantee Scheme (DGS) within the Banking Union. The funding of national DGSs should be improved by the Deposit Guarantee Schemes Directive that is about to be adopted by co-legislators”.
I referred to that. The Commission continued:
“Voluntary lending arrangements between adequately prefunded national schemes could strengthen the overall protection of depositors across the internal market, help tackle asymmetric banking shocks, and mitigate their cross-border spill-over effects. The Commission agrees with the need to take further steps to break the link between bank and sovereign debt, which includes the instrument of direct recapitalisation of banks by the European Stability Mechanism”.
It was also said that this was music for another day and some time into the future.
However, what remains is a problem. The question is whether the existing banking union will be robust enough in times of crisis. Time will tell, but it is at the very least a hostage to fortune. At the moment, we are in the lull before a storm that will be even greater and more destructive than the storm that we have just come out of.
Lord Desai (Lab)
My Lords, I, too, join all other speakers in congratulating my noble friend Lord Harrison and his committee on publishing an excellent report. I want to concentrate on an analysis of what has not happened and what has gone right in this economic and monetary union. Perhaps I should say that when a perfectly good phrase such as “economic and monetary union” acquires the adjective “genuine”, you really have to worry. What is that “genuine” going to do to me that did not happen before?
I recall that when we were discussing the Maastricht treaty in your Lordships’ House, it was quite clear—to me at least—that the single currency was a deflationary union. That became clear in the way that the duties of the central bank were described. Economists used to refer to inside and outside money and there was no outside money in this thing. The money could be generated only by private economic activity because Governments were not allowed to monetise debt. People who signed up to this were blinded by the reputation of the Bundesbank and the success of German economic policy, not realising that that was the result of lots and lots of hard work. They had a tough economic regime, which was never Keynesian. Germany never adopted a single Keynesian policy throughout its post-war development. Quite a lot of the rest of us have been relying on the state to print money here and there in one form or another, and bail us out.
Given that this was the difficulty, you almost have an economic and monetary union that is like the gold standard, but without any guarantee that gold will come in and out. Countries really have to deflate their internal domestic cost to keep pace with the most economically efficient country, which is Germany. Clearly, that has not happened and, as far as the eurozone is concerned, we will therefore be in a continuous deflationary position. I do not see any small way out from that. Where the problem with economic and monetary union arises is that the governance mechanism which is available is not adequate to the ambitious task that the programme has set itself. Again, economic and monetary union is probably feasible when you look at having an EU 12, or maybe an EU 15. With an EU 28, however, the governance mechanism is very slow moving and a lot of it requires consensus, which is difficult to establish within a system that has a great diversity of economic circumstances within its countries.
What we have therefore seen is that in a crisis such as we have just been through, the system has a certain ability to respond. Although we have had no agreement on Eurobonds being issued with debt mutualisation, we have a stability mechanism that has some ability to issue bonds. That came as a result of responding to a crisis and, after various acronyms such as EFSF, EFSM and so on, we finally have some small ability to issue bonds. Similarly, the European Central Bank—the one body in the economic and monetary union which does not have to rely on continuing negotiation and consensus— has been able to act quickly and innovatively. Indeed, the eurozone was saved solely by the ECB being able to act on its own without having to go to the Commission, the Parliament or the Council.
“Okay, whatever it takes”, are some of the most powerful words in the history of the economic and monetary union. As the noble Lord, Lord Lamont, said, once a banker has said that, he does not have to do anything. The fact that he gave a guarantee that he will do it calms the markets down and no one comes to borrow any money from him. In a sense, the European Central Bank has proved to be a pivotal institution to the economic and monetary union because it can speedily respond. I know that there are differences within the governing council of the ECB. The Germans, obviously, are constantly worried that the deflationary mechanism might be diluted. But it is remarkable that it has proved to be the most flexible and innovative institution.
However, we have a problem: the decision-making procedures between the Commission, the Council, the Parliament and so on are not fit for the purpose of achieving a harmonious economic and monetary union any time soon. We all know that we need a system of fiscal transfers but that will not be easy to achieve. It is not quite clear how one can aggregate the political will of the citizens apart from the political will of their Governments. One great problem of the system is that there is no direct involvement of the wider citizenry of Europe in the European political framework. They are engaged in their own national Parliaments and they elect European parliamentarians. I do not know who my MEPs are or how many there are. I consider myself a quite politically conscious person.
One thing that may have to be done in the long run is holding more direct elections of the more important positions, such as the European Commission President. We have just gone into battle about whether the Parliament or the Council has a right to elect. Obviously, the Parliament electing is a more democratic procedure than the European Heads of Government electing or negotiating over dinner. Again, it is not a transparent process. If, for example, the President has to compete in a Europe-wide election in which all the citizens vote, the whole process would have greater legitimacy than it has now.
We may not be able to construct a system of fiscal transfer yet but no one has proposed even a mild expansion of the budget. The European Union budget is one of the smallest budgets imaginable. I think it used to be 1.27% of European GDP but I think it has now gone down. Why does no one propose that it should be increased to 2%? That would allow a little fiscal room for transfer, which currently is not available. If we think of the United States and the full-blown federation, it took the US several decades, a civil war and a great depression before it became an integrated federal union with some fiscal transfers and so on.
It may be that the European Union is on the path, over the next 100 years, to achieving an economic and monetary union but it is not going about it in a fast way. For example, the conclusion of the four Presidents’ report in Box 1 says that the idea is to quickly implement the single market. In 1992, when I was young and innocent, I thought that the Cecchini report had told me that, if a single market was implemented, Europe would be richer by several million dollars. Here we are 22 years later, still talking about implementing the single market mechanism. So something is clearly wrong.
As and when we come to the next report of this brilliant committee, I think that we ought to find out whether we can learn anything from the history of the United States. It is the only comparable body where a federation was created from a diverse political union, albeit that it was a 13-member federation. I think that we have a lot to learn from the United States.
I want to make a final short comment on what my noble friend Lord Liddle said about the single currency that is the sterling area and why there are these problems of unevenness between the London pound and the other pound. If you think about it, the current dissatisfaction in Scotland is not about the currency; it is about fiscal transfers. The currency is all right; the disagreement is about whether the fiscal transfer system is adequate. We really ought to advise the European Union, “Whatever else you do, don’t devise a fiscal transfer system that eventually encourages people to leave the Union”.
Lord Dykes (LD)
My Lords, I share the gratitude expressed by previous speakers in the debate to the noble Lord, Lord Harrison, the chairman, and his colleagues on the economic sub-committee for a masterly report. I note in the second paragraph of the summary the very realistic description of the tensions within the eurozone, which have been referred to and which are still considerable.
Since the eurozone crisis of the three or four weakest members—it is basically a strong international currency with four or five weaker members struggling to get stronger—began to calm down in early 2010, I, like others, have noted that whenever disarray and nationalism have been replaced by the member states in the eurozone working closely together, the markets have usually reacted very positively, markedly, as we see nowadays, with resumed very moderate yields on 10-year and other bonds.
We need also to express admiration for the bravery of the authorities in the four or five weakest member states. I think of Ireland, Spain, Italy and, above all, Greece, where there were remarkable parliamentary votes, with big majorities, on the austerity programme and where the fascist party was kept at bay. I also include in that, in a different way, Cyprus, where there was an esoteric technical problem as well. The steadfast way in which these countries have gone about recovery, despite enormous social losses, has been very encouraging. They were treated in the British press—in the comics in Britain that masquerade as newspapers, with their anti-European outlook with the utmost scorn, at the very same time, ironically, that HMG were pursuing their own extremely rigid austerity programme.
Furthermore, was it not an extraordinary spectacle to witness the contrast between the US and the EU in their respective struggles for post-crisis control? In the US, the political crisis arose again because it could not increase its already massive and excessive federal debt of $17 trillion. In the eurozone, of course, the very reverse was the case, with attempts to reverse debt whenever possible. Although the liquidity increases achieved by the ECB programmes have unfortunately been modest in comparison with those of the US, and the ECB has not dealt with sovereign debt in the way that many had hoped, it has increased its resources to deal partly with future crises. However, it still has not secured enough power for the future for such operations. Mario Draghi, the quite remarkable former head of the Italian Treasury, has achieved a lot as ECB president with sheer will-power, as has been referred to by other speakers. His words of encouragement calmed the markets. The euro itself as an international currency is, as we see, physically forging ahead in the whole world—although less of course in Asia still.
However, we note that in a number of member states the role of lender of last resort is still denied psychologically to the ECB. Never, therefore, has the threat of continued and indeed worsening deflation been more evident. The old fears of historical inflation—mostly expressed in Germany—are in absolutely no danger of being realised again in the post-war period as far as anyone can ascertain with careful and meticulous analysis.
This fear towards countries that have been fighting hard to curb indebtedness, including France, where I live, goes even as far as rejecting the idea of communitarian sharing of debt burdens. This is surely yet again, alas, old-fashioned nationalism. If Europe wallows in nationalist struggles between member states—particularly the leading ones—the markets notice it at once and failure is almost guaranteed, just as when the global economy gives rise to protectionism and goes backwards in history.
Germany, after all, was responsible for some of the earlier problems when its own short-term public sector debts far exceeded the limits laid down in the pact. It was helped then by the rest of the Community, quite rightly, because of the enormous respect for the economic powerhouse that it had created and for its economic and financial leadership. What if, for example, in 10 years’ time that great country Germany were to suffer an unexpected sovereign debt crisis? I do not, of course, expect that, but I am convinced that, if so, the whole Union would back ECB intervention to save it. Presumably by then the ECB would have the necessary resources.
As time goes on and even the weakest eurozone members recover their strength—a remarkable exercise, particularly in Spain, for example—it is going to be necessary for the ECB to receive full powers of action as the authoritative central bank of the Union. This is very much what is already owed to the smaller and more recent member states, which joined in 2004 and afterwards. The Union cannot after all be run exclusively to appease the more traditional and backward members of the Bundesbank board, worthy though they may be. I am sure that Angela Merkel understands this, but of course she is surrounded by the Bild and the Axel Springer press and mainstream local public opinion in Germany. Therefore, I welcome, as I am sure others here today in this short debate will do, the exhortation in the fourth paragraph of the committee report summary that,
“some degree of debt mutualisation may be inevitable if the single currency is to prosper”.
I agree and perhaps it should be more than that.
If outsiders are able to perceive that the eurozone central banking authority is not plenipotentiary, including in debt management, the next crisis will not be fully resolved. The euro must be a long-term project to which all zone members are fully committed. The member states that have recently joined, such as Latvia and Slovenia, and the others waiting to join are owed nothing less. We must think about the smaller countries in the Union as well.
I commend particularly in this excellent report the warnings in paragraphs 197 and 198 on page 68 of the continuing and future dilemma that must eventually be resolved in what is a historic new control structure born out of a massive and greedy speculators’ crisis, which started in the USA. We need to remember that. The SSM and the SRM are still headachy problems that need full and extensive, not just partial, solutions.
In the final analysis, however, this is not just about the central banking architecture for a community or club of nations willing to show European solidarity, which the Prime Minister totally fails to comprehend. It is at the heart of the political union as well. This is a political project, too. The currency is as much international politics as it is just money and bonds. If ever the euro ceased to be, that would be the end of the most unique political project in world history—apart from perhaps the creation of the United Nations after the war. The monetary authorities of the People’s Republic of China were the first of the great third countries of the world to realise this twin characteristic, years ago. I remember being in Beijing when they started purchasing massive quantities of euros for their second stage reserves, when it first started.
All member states achieving the necessary fiscal discipline and restraint can benefit from the long-term plusses in the Germanic, strong currency system, which creates high currency strength and high savings and investment ratios and spreads worldwide confidence. Recent daily international interbank payment transaction figures are remarkable. They show the euro creeping towards the US dollar as the second reserve currency, with 32.5% of the world total of those daily transactions against 39.6% for the US dollar. The UK has just under 3% of the total and has of course devalued seven times since the war—three times by official action and four times in the marketplace.
Despite the crude nationalism here against the remarkable single currency, in a UK that is still fearful and traumatised after being driven out of the preliminary exchange rate mechanism in 1992—a very painful experience for my noble friend Lord Lamont—I still hope that, eventually, the UK will in the future find the courage to join. I do not expect my noble friend the Minister, when replying to this debate, to give a date for that yet, but I hope that it will not be too long in happening.
Lord Kerr of Kinlochard (CB)
My Lords, it was a pleasure to take part in the work that led to this report. It was very enjoyable, largely because of the exemplary patience displayed by our chairman, the noble Lord, Lord Harrison, which produced a unanimous report, and because of the diligence of our clerk, Mr Stoner, who is extremely good at marshalling our arguments with rigour and, sometimes, imagination.
I take two texts for my sermon—I have a Scottish Presbyterian background. My first text comes from the Book of Job—that is, the Treasury. The Government’s response to our report states that,
“the government is clear that we are not joining the Euro”.
Yes, I think we got that. It goes on:
“Therefore it is right that we have said from the outset that we will not take part in measures designed to support full economic and monetary union”.
Yes, we have got that. It goes on:
“The Government has been clear that it will not participate in the Banking Union”.
There is a false logic there. It is perfectly possible that the banking union—although the impetus for it arose from the crisis in the eurozone—could be a good thing, irrespective of whether one was a member of the eurozone. Indeed, I notice that, of all the non-eurozone member states who are negotiating the texts of banking union, only the British and the Swedes are negotiating not on the basis that they intend to join.
If I were to dare to part company with the noble Lord, Lord Lamont of Lerwick, I would say that there was a moment in his speech when I thought that he was slipping into the error of equating banking union with economic and monetary union. As he rightly pointed out, our report, although entitled Genuine Economic and Monetary Union, was largely about banking union, because that was the key subject on the agenda. I would argue that it is not necessarily the case that non-members of the eurozone should decide that they have no intention of becoming members of the banking union.
On that, I would say that the committee was in a state of intelligent schizophrenia. It is intelligent because it is an extremely intelligent committee; it is schizophrenic because we all agree—the Government are of the same view—that the creation of an effective banking union, reducing the risks of future crises and making them easier to manage when they arise, is a good thing. We all agree with that. We on the committee felt, however, that it was hard not to acknowledge that the UK’s non-participation in banking union could have a deleterious effect on the City of London’s position as the transaction capital of Europe and one of the great three global financial centres. We felt that it was possible, over time, that that position could be eroded by non-participation in the structures of banking union. That is the point brought out in the passage of the report cited by the noble Lord, Lord Liddle, where we state, at paragraph 227:
“The Government may be ill-advised to assert that Banking Union is the sole province of the single currency for all time. It would be wise not to close the door on the possibility of some level of participation in Banking Union in the future, in particular as a means of further promoting and shaping the Single Market in Financial Services and the UK’s position within it”.
That is my view. However, I recognise that I will not persuade Job in the Treasury of that today and, perhaps, not for some considerable time.
Lord Lamont of Lerwick
Does the noble Lord remember that the Book of Job says, I forget in which exact chapter:
“There is a path that no fowl knoweth, and which the eye of the vulture hath not seen”?
Lord Kerr of Kinlochard
I cannot say that I think of that every morning as I arrive, but I will bear the noble Lord’s words in mind.
I want to make five minor topical, practical points arising from the report. First, in strict logic, the position that the Government take up—that banking union is nothing to do with us but is a matter for eurozone countries—could mean that the Government do not object to the proposal, much discussed in Brussels at the moment, that the heavily overloaded Commission’s single market directorate-general should be split, with banking and financial legislation moving to the financial directorate-general, the primary concern of which is of course for the health of the euro, leaving the single market directorate-general handling the classic single market agenda. That would be disastrous, from a number of points of view, not least from the point of view of UK interests. The British Bankers’ Association states:
“It is of utmost importance to maintain the structure of the relevant Commission services dealing with financial services so that their work is permeated with the priority of preserving the single market focus. We suggest that the UK Government should proactively defend the unity of DG MARKT and oppose any plan to move financial services out of it. It would be a mistake to move the work e.g. to DG ECFIN which has quite different priorities”.
I strongly agree and I hope that the Minister will be able to reassure us that we shall—to the extent that our current influence allows—work to ensure that that does not happen.
In my view, it is highly desirable and important that the current head of the single market directorate-general, the most senior of that very small and dwindling band of British personnel in the Commission, should stay where he is. I strongly agree with what has been said already today about the need to reinforce that. Retaining the unicity of the director-general is much more important than who is the single market commissioner—the issue that dominates the headlines. What matters is that it is the director-general and that he covers all the work that is of interest to the City of London.
My second point is also quite topical. I hope that the Government will, to the extent that their current influence allows, seek to discourage a second suggestion much debated in Brussels now, which is that the next finance commissioner should also be the next president of the Eurogroup, replacing Mr Dijsselbloem, the Dutch Finance Minister, when his term ends next summer. Combining the two jobs would be a prescription for serious schizophrenia, with a real risk that eurozone concerns might override single market integrity. This is not a moot point in the US sense. In our report we use “moot point” in the British sense, which means it is a key issue. In America, a moot point is a point so boring and irrelevant that it is worth discussing only in a moot court—a fine example of the difference between the two languages, as is “tabled”. If we said that our report had been tabled, people in Congress would say, “Oh, bad luck”, because it means shelved in America.
The moot point is that we have seen two recent examples of just what I am worried about—eurozone concerns overriding single market integrity. In the Cyprus crisis, when the eurozone imposed capital controls, that was a fundamental strike—which may have been necessary in the crisis—against a fundamental principle of the single market. It affected non-eurozone citizens. A British citizen with money in Cyprus could not move his money because of capital controls introduced by the eurozone. The result was that the case was quite rightly taken by the British Government to the Court of Justice against the ECB for its attempt to argue that clearing systems trading euro-denominated paper must be within the eurozone. That, too, is a clear breach of the single market and I applaud the Government for contesting it. It would be dangerous to see the two jobs of presidency of the Eurogroup and finance commissioner in the Commission combined. That may be difficult to prevent, given diminished influence, but I urge the Government to have a go.
Lord Davies of Stamford (Lab)
Does the noble Lord agree that in a crisis—this is true whether supervision and regulation are done on a national basis or on the basis of the Union as a whole—the need to prevent the crisis and deal with it must override market rules? That has always been the case in this country and in the United States. It has always been the case in any country run by good governance rules.
Lord Kerr of Kinlochard
I hasten to add that I do not know the detail of what happened over that weekend when the capital controls were introduced. The noble Lord may be quite right. I merely say that there is a risk here: we see it in the case we are bringing in the court and saw it over the Cyprus capital controls.
The third point, about the European Parliament, is very topical. The committee was lucky enough to take evidence from Sharon Bowles, who chaired the relevant committee in the European Parliament. She did so extremely well and has now retired from the Parliament. There were two other senior British Members of the European Parliament on the committee. I do not know who will be on the reformed committee, but it is crucial in relation to financial legislation. The new chairman of the committee is a highly effective, intelligent Italian, but I do not know whether there will be British members. Presumably, we cannot look to UKIP to do any work and, given the sad fact that the Conservatives are not in the EPP family, I do not know whether there will be a Conservative on this committee. There were two Labour members on the outgoing committee—they were both extremely good but have retired. I hope that the parties will get together and, in the national interest and the interest of the City, will ensure that there are some people on that key committee who are aware of the importance of the City and the importance for the City’s health of good European legislation.
The fourth point is not quite so topical. I urge the Government to think very carefully about the implications of the change in Council voting weights which happens in four months’ time. The UK’s voting weight goes up from about 8% to about 12% but comparable increases for other large member states, such as Germany, France and Italy, mean that the eurozone will, for the first time, have a clear qualified majority. That is in the Council but also in the ESMA—the European Securities and Markets Authority—although not in the EBA because of the dual-majority system. That is rather fragile but, for as long as it lasts, this will not apply there.
The voting weight change in the Council reduces the viability of a purely defensive strategy of the kind that the United Kingdom has adopted on the banking union dossier. We have argued, as the Minister has, that our aim is to protect the interests of non-eurozone single market members, in particular the interests of the UK financial community. We have been doing that by objecting to various things and looking for support. We have often been able to obtain that support, but it will be more difficult in future. We will need to change our tone and our posture: we will need to be a little more proactive and a little more constructive. In particular, we should be trying to field City experts to advise our partners, in a non-polemical way, on how they can best, in their interests, keep their transactions capital—London—healthy and ensure that the EU remains in the big league, playing host to one of the big three global markets. The saga of our handling of the ludicrous financial transactions tax proposal shows that we are not very good at that. Recent events show us deliberately distancing ourselves and not being very good at adding up votes. That will prove even more unwise when the eurozone caucus has a qualified majority, as it will have from 1 November.
My last point is a more difficult one to put in the hard-edged way that I have tried to put the previous one. Networks of regulators and supervisors matter: informal contacts and knowing the guy at the other end of the telephone. In some ways, that matters a lot more than the formal. Informal contacts used to develop organically and naturally, but that is harder to do now. The Governor of the Bank of England naturally cannot be on a close terms with his fellow central bankers on the continent as were Gordon Richardson, Robin Leigh-Pemberton or Eddie George, who met them in meetings all the time, with so much of the central bank’s work being done on a eurozone basis. For example, the meeting this coming weekend sounds a very important one—but there will be no Brit in the room.
I agree with what the noble Lord, Lord Flight, said about the relationship between the Bank of England and the ECB being very good. I believe that it is, and that it is very important to go on ensuring that it is very good. As we staff new supervisory and regulatory structures in this country and they work out their modus operandi, we and they really should be aware, too, of the cardinal importance of informal co-operation and advice from and to concerned colleagues. Intelligent and well informed advice, privately conveyed but not in a hectoring tone or as if we knew better, will be well received. London’s expertise is still well recognised among the experts and such practical links will become even more important, the more we slide into self-isolation at the political level.
Lord Hamilton of Epsom (Con)
My Lords, I pay great tribute to our clerk, Stuart Stoner, who has been quite remarkable in the way that he has reconciled all our different views. I also pay great tribute to our chairman, the noble Lord, Lord Harrison, because while he and I do not really agree on Europe, he has managed to accommodate my views in the most agile way.
The noble Lord, Lord Liddle, raised the question of past Prime Ministers poisoning relations with Europe. I think he was referring mainly to Conservative ones and that my late friend Lady Thatcher was probably high in his mind. However, I remember that one of her great achievements was in the rebate of much of the money that we were sending to Europe. You could not have accused Prime Minister Blair of being anything other than a Euro-enthusiast. He did a deal where he gave back half of our rebate in return for the reform of the common agricultural policy. That policy spent 39% of the EU budget last year, so we got absolutely nothing in return. I found that this had slightly poisoned my view of the EU—not that it was not poisoned before—so this poison is going both ways. It is a bit paranoid to suggest that it is one-way traffic.
We have had economic and monetary union; we now have genuine economic and monetary union. I would argue that neither EMU nor GEMU are genuine. The problem with the single currency and the introduction of monetary union is that it was one part of a construct to lead Europe towards being federal. What was also critical within those building blocks would be to have a central elected Government, with the power to tax and transfer money from the rich to the poorer parts of the eurozone. You would also have to have a federal reserve bank as the bank of last resort, which would issue most of the debt for the eurozone. These were two drastic omissions in the construct of what was hoped to be a new European nation. If you leave those two bits out and merely have monetary union on its own, it is extremely vulnerable.
Let us face it: if the European Central Bank had been allowed—the noble Lord, Lord Desai, pointed out that it was the Germans who stopped this happening—the eurozone crisis would have been a fraction of what it actually was. Right from the beginning, the European Central Bank could have moved in to bail out banks and help nations, saving sovereign debt, rather than reaching this point where some of us wondered whether Greece was going to go completely bust and so forth. This crisis has been caused by the way that the whole thing was set up in the beginning.
Is anything going to change? Things are slightly changing in the European Central Bank but the democratic deficit is still there and will not get any better in the immediate future. There are in fact no plans to elect anybody; we have just appointed Mr Juncker and there was not an awful lot of democracy about that. So you have no democratic accountability and, to quote the noble Lord, Lord Desai, again, you have economic policies that may be leading towards deflation. We may be looking at a period of 10 years when there is no growth whatever, which is what the Japanese saw. If the eurozone does not grow, and we are starting with very high levels of unemployment, I do not think it is going to survive.
My noble friend Lord Lamont said that he has always had an argument with me about this. He thinks it is going to muddle its way through. Well, there are the economic problems and the stress tests coming up on the banks. Opinions differ on this. The noble Lord, Lord Davies, always says to me that the markets are buying banks all over Europe, so they do not think there is a liquidity problem with them. Well, the market has been wrong before. We will have to see.
Deflation and low growth are the real problems. I think that the next crisis for the eurozone is going to be not an economic crisis but a political crisis. We have just had the European elections which have demonstrated right across Europe, not just in the United Kingdom, growing Euroscepticism and disillusion about the way that Europe is operating. Just to show that they are completely unmoved by these results, they appoint Mr Juncker as President of the Commission, which demonstrates that this is business as usual, meaning, “We are not going to have our minds changed by electorates and people saying things. We are not going to change anything. We are going to carry on the way we always have”. Well, if it goes on like that, I can see growing political problems in the eurozone.
If it fails to grow and we do not see any economic growth, even if we do not see a period of deflation, all the economists agree with the noble Lord, Lord Desai, that we are going to see arthritic growth, but it is not going to be very great. We are starting with very high levels of unemployment, particularly youth unemployment, and that is not a position that you can sustain over a very long period. Let us face it; if it cannot deliver economically, what is the point of the eurozone? People will increasingly ask that question.
We have a referendum coming up in 2017. All my Eurofanatical friends in this House—I find I do not have many friends who really share my views—always say to me, “Don’t worry. The result of the referendum is going to be exactly the same as it was last time. Why should it be anything else? All the major parties will support staying in, trade unions will support staying in, and the CBI and everybody you can possibly think of”. Yes, but the last time we voted—indeed, I voted—to stay in the European Union, it was quite different. Britain was poverty stricken. We had appalling labour problems, and we looked across the channel at Europe which was prospering. The chances are that in 2017, those roles will be completely reversed. There will be a prospering United Kingdom and a strife-ridden, low growth, pretty appalling Europe exporting as many of its people as it possibly can. I gather that we are suffering from—or benefiting from, possibly—an enormous influx of Spaniards as we speak. More and more people are wanting to come to this country. Migration flows are causing an enormous problem. I think anybody who sits round and thinks that this eurozone is just going to float through all this without any problem has some very nasty shocks coming their way.
Lord Davies of Stamford
My Lords, I shall start with three introductory comments. First, like other noble Lords, I pay tribute to our excellent chairman who managed to guide us all, although we came from very different vantage points, to clear and decisive conclusions. There is not much point in having a parliamentary report that does not come to clear and decisive conclusions, but it is a very good thing to achieve. Secondly, I thank Stuart Stoner, our excellent clerk who has already rightly been paid tribute to by many noble Lords. Thirdly, I thank my colleagues on the committee, including the Eurosceptic Tories, with whom I always disagreed. We have had a very stimulating time and have all learnt a lot. It has certainly been great fun working with colleagues from all parties and perspectives in producing this report.
We have had some very interesting speeches from many noble Lords this afternoon. I thought my noble friend Lord Desai’s speech was particularly interesting. He raised a number of issues which I do not have time to go into now, but which need to be engaged with. I shall make one or two points on his comments on the need for stabilisation in the eurozone. I think he may be slightly overpessimistic because although I totally agree with him that it would very desirable if the European budget were increased to 2% of EU GDP—I will come on to that in a second—the European Union has found a way of getting much more stabilisation leverage out of the existing structural funds and cohesion budgets by the practice of front-end loading, which it has just adopted for the first time in this new seven-year framework period. It means that money allocated for seven years overall can be spent very largely and substantially in the next two or three years, when it is quite clear that there is going to be a lack of demand from other sources in the eurozone economy, so that is a very positive thing.
My noble friend Lord Desai might be slightly pessimistic in his comparison with the United States. The position is not entirely unfavourable to the EU. First, there is less scope in the United States for fiscal stabilisation at the level of individual states. All American states—possibly with the exception of one and therefore 49 American states—have a balanced budget law. Although the constraints in the Maastricht treaty for fiscal deficits by member states are considerable, you cannot go to more than 3% even in exceptional circumstances. That at least provides some scope.
Secondly, I think that I am right in saying that federal grants in aid in the United States, if you measure them in terms of the proportion of the percentage of per capita income of the beneficiary state, come out less. If I recall correctly, the greatest beneficiary in the United States of federal grants is Arkansas. The receipts are less on that basis than the receipts of structural funds and cohesion funds in the poorer member states in the EU. An element of automatic stability is already there. There should be more. I totally agree with my noble friend that it would be excellent to go to 2% of GDP.
I was very attracted by a suggestion that the committee came across—not just me—when we went to Berlin. A German economist suggested that an excellent way to increase the budget of the EU would be to transfer to the EU responsibility of unemployment funds. There would be an obvious element of automatic stabilisation which would be quite powerful. That suggestion, which is referred to in our report, needs to be taken further. I look forward to speaking to my noble friend about a number of those issues and I very much encourage him to continue to talk about them because he has set out an agenda which should be pursued very seriously.
I cannot resist responding to my old friends and sparring partners, the noble Lords, Lord Lamont and Lord Hamilton, who are particularly distinguished Eurosceptics. There are several blatant contradictions in what they are saying. They say that there is not enough democracy in the European Union and that the member states are not taking the recent European elections seriously enough. At the same time, almost in the same sentence, they say that it is quite wrong to take the European Parliament so seriously or to take democracy so seriously and that the European Parliament should not have anything to do with the choice of President of the Commission. You really cannot have it both ways. Either you think that the European Parliament is a legitimate, democratic voice, in which case it should be listened to and the changes in membership of that Parliament may be something that everyone should take on board. Alternatively, often you hear in other Eurosceptic rhetoric that it is not a democratic organisation at all and that its proceedings and membership should therefore be discarded from attention. You certainly cannot plead that it should be taken into account when you wish to do so.
I have exactly the same problem with the point made by the noble Lord, Lord Lamont, about fiscal integration. He complained that fiscal integration was not included with monetary integration at the time of the Maastricht treaty. I remember distinctly that at the time he opposed any suggestion that there should be any degree of fiscal integration. You cannot have it both ways. Either it is necessary or it is not necessary. You cannot logically complain at the absence of something and then complain a few moments later at its presence when it is delivered.
Lord Lamont of Lerwick
Of course you can. You can be against transferring fiscal authority out of the UK but say that the only way in which you can make a monetary union work is for you to transfer it out of your country to a central organisation. There is no contradiction in that whatever.
Lord Davies of Stamford
I am sorry, I take a different view. It seems very contradictory to me. Either you should not have fiscal integration or you should. It is very important that politicians are coherent about these things and I do not think that the Eurosceptics are coherent, not least on the matter of democracy in the EU.
Incidentally, my noble friend Lord Desai made the excellent suggestion that we should have an election for the President of the European Union. I have always been in favour of that, and I quite agree that the EU lacks democratic accountability. You hear all the time from Eurosceptics that the EU lacks democratic accountability, but the moment you suggest any measure at all, whatever it might be—changes at parliamentary level, say, or the direct election of the President—that would supply much greater accountability, they are always against it. Again, there is a blatant contradiction running through their views on the subject. I have to say that if you pursue politics on a contradictory basis like that, you do not do great credit either to your reputation for intellectual clarity or to the good faith of your arguments.
Lord Marlesford (Con)
Surely the noble Lord, Lord Davies, is wrong. The point that my noble friend Lord Lamont is making is that the eurozone requires integration. We did not join it because we were not prepared to take part in that integration. The European countries joined because they were prepared to integrate but then they did not actually do it. That is what all the problems were about.
Lord Davies of Stamford
I repeat that you cannot at the same time complain about something when it is absent and then complain when it is present; that does not make any sense to me at all. Equally, I do not think that I have heard any response to my points about democratic accountability. If there is a desire for more democratic accountability in the EU, which there is, and if it should be addressed, which in my view it should be, then you cannot turn down every possible proposal that is made in order to achieve that, which is what the Eurosceptics tend to do.
I think that our report makes three conclusions. The first is that the general direction of genuine monetary and economic union is probably right. We support it and think that it is a sensible thing for the eurozone to be engaged in. We feel that it should go further and be completed. We think that it is troubling that one or two elements of the agenda have not been implemented and will not be in the immediate future, notably the retail bank deposit insurance system that we have just referred to and which has been referred to several times today; we are broadly in favour of that and think that it is a very good scheme.
The second general conclusion is that this process is not without risks and costs for our country. That point is made very clearly in paragraphs 185 and 186 of our report, to which I draw the Committee’s attention. It is also made in another document, the British Bankers’ Association report, which we have obviously all been sent. I have been sent a copy, and it has already been referred to and quoted from. I shall quote from it in case some people here have not received it:
“EU, government and industry studies have shown that deepening the Single European Market offers a growth potential that is achievable without further increasing public debt … However, the understandable moves towards stronger Eurozone governance may make it more difficult for the UK financial sector to play a full role. For example, development of Eurozone caucusing, outside the EU-28 format, on matters that impact directly the Single Financial Market could, even unwittingly, damage its integrity”.
The document goes on to raise other risks, not just caucusing but the risk of the eurozone having a permanent president, the risk of the new configuration of the European Parliament being less likely to defend British interests—largely because the Conservative Party withdrew from the EPP, so that is entirely its fault—and other risks.
The fact is that the British public have been bamboozled, and this report goes some way towards redressing that and illuminating them, which is very necessary. They had been persuaded to believe that somehow we can have a half-in and half-out approach, with one foot on one side of the fence and one on the other in our relations with the EU at no cost, or that we can gain all the benefits from the EU without actually subscribing to all its programmes and disciplines. The sheer fact is that you can never do that in life, and you cannot do it in this case. Personally, I would prefer any measure of relationship with and access to the European single market and the EU than none. I am the sort of person who would always prefer half a loaf or even a quarter to no bread at all. However, I am very conscious that we are losing some portion of the loaf by the course that we are adopting. That comes out very clearly in the conclusions to the report, and we have fulfilled a useful function in writing it.
Lord Hamilton of Epsom
As the noble Lord, Lord Kerr, said, we are not part of the eurozone group, so are we not inevitably half in and half out, whether we want that or not?
Lord Davies of Stamford
As the noble Lord, Lord Kerr, said, as I shall say myself and, indeed, as the report states, we are not just out of EMU. We could not join EMU if we wanted to because we do not qualify under the fiscal provisions. Our fiscal deficit is excessively high—more than twice the level required the last time I looked at the figures. We cannot join anyway; we just have to face that.
Quite apart from that fact, it is true that the public in this country have been poisoned against the whole notion of EMU by a very effective press campaign, and it would be quite difficult to join EMU in the short term even if we qualified, which we do not. As we do not, it is a theoretical issue. Quite apart from that, we could, if we wished, join a banking union. We appear, for reasons which are unconvincing to me, to have decided not to join a banking union. As a result, we will find that we are not really, truly in the single market.
I put that the other day—this is a matter of public record because it was an open committee session—to the chairman of the Financial Reporting Council, Sir Win Bischoff. He agreed with me unequivocally that, as a result of what is happening, we will have a fragmented single market. We will have our own banking regulation based on our own bank regulation Bill. We have secured a derogation from the bank regulation directive, which I think is very undesirable. That means that, although there will be no fundamental differences in the way that banks are regulated in the eurozone and here, there will be small differences from time to time. There will be different responses because different people will be doing the regulating. There will be greater compliance costs. British banks such as HSBC and Barclays with major operations on the European continent will have to go through parallel procedures in different countries, whereas they could have just reported in one coherent way on a consolidated basis to one regulator, which would have been much more desirable.
More serious than that, there will be regulatory arbitrage, with distortions: people being tempted—no, being driven—to practise certain operations and activities in some markets merely because regulation there is slightly lighter than in other areas within the single market. That is not a single market at all. There will of course be a great lack of clarity and, therefore, investor and depositor confidence as a result of the confusion and complexity, which is, again, quite unnecessary.
It is a perfect example of how you can impose costs on yourself for no useful purpose. We all say that we want a single market. We are all in principle against regulatory arbitrage—all British Governments always have been—but we have deliberately created a fragmented structure which has higher costs and prevents a single market taking place. That really cannot make sense. It is about time that we realised that our policies—I say our policies; I mean the policies of the Government of the day, the coalition Government—contradict the national interest. Because we are not in the eurozone, we face the danger that problems may be created for us by the eurozone itself through its members caucusing for meetings of ECOFIN or other bodies due to the greater weight given to the eurozone organisations—a point made by the British Bankers’ Association. Not only may we be the victims of other people doing things that we do not like very much but we are creating problems for ourselves, which seems particularly irrational.
The report is a very useful piece of work and it deserves wide consideration. I hope that it may be the beginning of a reconsideration of the rationality of our policies in this area, because it is a great shame that for reasons of, I think, essentially party politics or emotion, we are often dysfunctional in our pursuit of the national interest.
Lord Davidson of Glen Clova (Lab)
My Lords, I join all noble Lords in congratulating my noble friend Lord Harrison on chairing the committee, which has produced a welcome assessment of this important and complex subject. The committee, composed of highly experienced and able members, offers views that no sensible Government can easily reject or ignore.
The UK’s engagement with the EU on this subject is of course important. It has potentially dramatic consequences for our globally significant financial sector. History teaches that financial regulation can have serious unforeseen consequences and effects on the sector and the economy. Therefore, this report’s contribution to understanding the implications for the UK of the EU institutions’ proposals is both useful and timely.
Today’s expert and sometimes lively debate, and the exchange that has proceeded, provides Her Majesty’s Government, I suggest, with quite a lot to think about. My noble friend Lord Liddle, unshackled, has also provided something substantial for Labour to consider in this area, paying due regard to his expertise and knowledge. No less, there is to consider the contribution of my noble friend Lord Desai and his view on EMU as a deflationary union, for the UK’s major trading partners are within the EMU. This obviously creates interesting and difficult questions for the future.
I also note the possibly critical view from the noble Lord, Lord Hamilton, of the future of the European Union, given its structure. These observations would be foolish to ignore. They are obviously not accepted by everybody but they should certainly not be treated lightly. My noble friend Lord Davies also made a very interesting point in relation to the warning that he offered between the UK’s regulation in banking and the European zone, and how government can impose costs in a dysfunctional way, as he put it. This is of course one of the problems that government in the UK have faced for quite some time.
We agree that banking union is vital to tackle the effects of the financial crisis, at least in the eurozone. We also agree with the committee that the current proposals fail to break the bank/sovereign debt nexus, as that was the principal rationale for the GEMU project. As the noble Earl, Lord Caithness, observed, that is quite significant. What the committee describes as “sub-optimal” about the SRM—leaving the fiscal backstop substantially in the hands of the individual member states, the resolution fund not being finalised until 2026 and, even then, with only limited, probably inadequate, funds, as my noble friend Lord Harrison observed—leaves the concern about the bank/sovereign debt nexus possibly reduced but certainly not removed. Certain member states in such circumstances will almost inevitably not resist the temptation to game the system, and that of course was the very behaviour that caused the problems of the last crisis.
One is therefore slightly surprised at Her Majesty’s Government’s somewhat reticent response to the report’s clear view that,
“what has been agreed is insufficient to break the vicious circle linking banking and sovereign debt”.
Are the Government of the view that this failing has been resolved or that it will be resolved in due course in negotiations on EMU, or is this simply an issue that HMG accept they cannot influence? Is the concern expressed to the committee by Mr Nigel Farage, MEP, and backed up by Professor Alexander, that certain ECB refinancing operations have perversely reinforced the bank/sovereign debt nexus a concern that HMG share, I assume, or are we simply to disregard what Mr Farage has identified?
The single supervisory mechanism agreement of 2013 is welcomed by the committee but with the caveat that the ECB being expected to supervise some 6,000 euro area banks is “unrealistic”. Even if the ECB is to be confined to larger banks only, as the noble Lord, Lord Lamont, points out, the Government’s assertion in response that the SSM,
“is critical to restoring market confidence”,
and that it,
“ensures that the Single Market of 28 countries is not harmed”,
may seem rather overoptimistic.
The Government expressly recognise that size is not important when it comes to monitoring risk. Economic historians might point out that the UK’s secondary banking crisis of 1973, which featured small banks, precipitated a major crisis. Do the Government not share the committee’s concern about the ECB’s capacity to supervise? Are they confident that the member states’ authorities will, throughout every member state of the eurozone, have the capacity to supervise themselves? Can an absence of ECB capacity to supervise really “ensure”, to use the Government’s word, that the single market is not harmed?
The whole project of the banking union seems to have the Government’s support, observing as they do,
“that the UK stands to benefit from greater financial and economic stability in the EU”,
that banking union provides. That recognition of the interlinked nature of banking is sound. Supranational structures for financial supervision and resolution are of course central to the project. It is correct to say that banking union is another step toward successful ever-closer union, one supposes. Is one nevertheless to assume that the Prime Minister’s oft-expressed but never really specified desire to reform some aspects of the EU would leave this area out of any of his proposed negotiations?
Is it correct that this step to ever closer union will proceed without the Government attempting to revisit the issue; without attempting to renegotiate? Some clarity from the Government on this important subject would be welcome. Perhaps answering the query of the noble Lord, Lord Kerr, as to the logic of keeping the UK out of the banking union, might also be interesting and informative.
Turning to the issue of integrated economic policy, I note that the committee expresses the view that debt utilisation,
“may be inevitable if the single currency is to prosper”,
and that it is “a logical development”. Do the Government agree? I ask because I confess that I was not able to detect the Government’s attitude from their response. I assume that they are not, as the noble Lord, Lord Dykes, put it, wallowing in nationalism on this particular point. It would be interesting if we could have clarity. This is particularly interesting given Germany’s resistance to implementing the concept. Do the Government share the German view? Are they simply unconcerned about the issue, or do they accept that any influence they might have on this issue is inevitably limited?
Influence has been the subject of one of two observations. The noble Lord, Lord Lamont, is sceptical about the utility of influence and there is something to be said for that. Per contra, however, my noble friend Lord Liddle, the noble Lord, Lord Maclennan, and the noble Lord, Lord Jay, from a different perspective, all stress that it is important. They were joined by the noble Earl, Lord Caithness. The noble Lord, Lord Kerr, pointed out the importance of influence and he should know. He also gave useful guidance as to where influence actually lies and how one can use that influence in a way that might possibly overcome the scepticism of the noble Lord, Lord Lamont, about the issue.
The noble Lord, Lord Hamilton, when he characterised the exchanges of poison, as it were, between the respective parties, made a useful point, possibly impliedly, that the diplomatic exchange between the UK and its EU partners could be improved substantially by toning down the rhetoric. Engagement, of course, is always helpful and positive engagement is even better.
As for the implications for the UK, the committee rightly recommends that HMG do not treat the banking union, as the noble Lord, Lord Kerr, quoted, as,
“the sole province of the single currency for all time”.
In trying to decipher the Government’s response, it is not entirely clear what position they now adopt. Clarification would be welcome.
Not unnaturally, the Government note the value of the City of London. Some of us might prefer that they also recognised the substantial contribution made to the UK’s financial sector by other parts of the United Kingdom—Leeds and Edinburgh spring to mind—but that is not my main point. The contribution of the City is substantial and is one of the truly global successful sectors of the UK economy. I am sure that the Minister will agree that government action or inaction can have significant effects on our global position. One notes that in the peroration to the government response they state that,
“a strong and engaged UK (and a strong City of London)”,
are in the interests of all EU members. We agree. It may be, however, that we differ over the meaning of an “engaged” UK. Again, positive engagement is what we would hope for. Where the Government state that the UK’s interests are,
“to be framed in terms of the overall stability and efficiency of EU markets”,
we are in accord. Where they state:
“The Government values the importance of the City of London in Europe”,
we again agree. Is one to assume that, from the point of view of maintaining the City’s global position, the Government are wholly convinced that the UK must remain in the EU? As one is sometimes unsure where they stand on this issue, might the Minister make it clear whether Her Majesty’s Government consider that the UK’s financial sector is strengthened by the UK’s membership of the EU?
I look forward to hearing the Minister’s replies to all these questions—or if not all, at least to some of them. In conclusion, I repeat our welcome of this careful and useful report. We trust that the Government will pay it due and proper attention.
Lord Newby (LD)
My Lords, I begin by thanking the committee for its work on this report and all noble Lords who have spoken in today’s debate. It has been like a high-level seminar on the subject rather than a usual parliamentary debate. Although I would love to think that students around the UK and Europe will read our debate today, I fear that it will not get the attention that it deserves. It is also quite a novelty when replying to a committee report to find that quite a lot of the speakers were not on the committee. Very often, one is faced with just the members of a committee, who have tendency to repeat what is in the report and basically say how clever they were in producing it in the first place, whereas in this case not only were they clever—naturally—but they managed to draw in star outside participants to the debate, which I for one have greatly enjoyed.
The Government have consistently said that they support closer integration in the euro area to make the single currency work. The Government agree that a stable euro area is in the interests of all EU members, not just those in the euro area but those outside it, including, of course, the UK.
The work towards creating a genuine economic and monetary union, which the European Council tasked Herman Van Rompuy to take forward in June 2012 at the height of the euro area crisis, is an important part of this process. As we have seen on banking union, the UK will fully engage in any and all discussions, as and when they are taken forward.
At the same time, the Government have been clear that we will not join the single currency and, as such, we will not be part of this closer integration. Our priority is therefore to ensure that the single market is fully protected and that measures remain voluntary for those outside the euro area. We agree with the report that this will require “continued vigilance” and we have been closely involved in the negotiations, particularly over banking union, to protect UK interests.
We also want to ensure that, as the euro area continues to integrate—
Lord Davies of Stamford
The Minister has said that the Government are opposed to our joining EMU or GEMU—we know about that—but will he explain why the Government appear to be against our joining the banking union alone?
Lord Newby
Yes, my Lords, I will come to that.
We also want to ensure that as the euro area continues to integrate, the EU continues to operate fairly for those who remain outside the euro area, whether by choice, like the UK, or because they have yet to meet the criteria to join, like some other euro-outs, although I take the point that we do not meet those criteria either at this point.
As the Chancellor and Germany’s Finance Minister Schäuble set out in their joint Financial Times op-ed piece in March, non-euro area countries must not be,
“at a systemic disadvantage in the EU”.
We must ensure that EU institutions continue to work in the interests of all member states and last week’s Council conclusions, agreed by heads of state and government, contain important text about the need to address UK concerns.
Lord Davies of Stamford
I apologise for interrupting the noble Lord a second time. He said that the Government feel it is important that non-euro area member states not be at any disadvantage in the single market as a result of not being part of the eurozone. Does he not accept that the burden of our report, and indeed of the BBA document which has been quoted extensively this afternoon, is that willy-nilly, whether we like it or not, we will be at some disadvantage—probably increasing disadvantage—by virtue of being outside the EMU or banking union entirely, and we cannot do anything about that if we are determined not to join those systems?
Lord Newby
I think that the noble Lord, Lord Lamont, explained at the start of his speech the trade-off between influence and being a member of the EMU. I will come to this later but, obviously, in certain respects, we are going to be outside the room by not being members of either the eurozone or the banking union. We have to work very hard to ensure that we maximise our influence in those areas, of which the single market is the most central, in which we have a common view with many, if not most, of our EU partners about the need to reform and the direction that reform should take.
I will attempt to deal with many of the questions that I was asked by individual noble Lords during the debate. The noble Lord, Lord Harrison, asked whether the single resolution mechanism was too complex and therefore would not be effective. By definition, all resolution processes are complicated but the role of the single resolution board is very strong. This may be a vain hope but, from our own experience, we hope that the plethora of legislation and new structures will reduce the likelihood of major crises of which we have been previously largely unaware emerging at great speed.
One of the problems in the UK when RBS had to be effectively nationalised over the weekend was that the storm arose with great speed. If you contrast that with the position of the Co-op Bank last autumn, when it faced major, potentially life-threatening problems, a resolution was undertaken, not formally using the legislative framework but largely using the mechanisms that were envisaged there, and with the Treasury and the Bank playing a major role over a number of months in getting the Co-operative Bank into a position where it was able to resolve its own problems.
The involvement of political bodies other than the single resolution board is inevitable because of the significance of the decisions that are taken and the fact that if major banks are in real difficulty—a weakness we have seen in the UK—there is a political component and you have to take that into account as you are taking decisions. We would hope that the scope of the decisions that have been left to the Council is very circumscribed and that most interventions, even involving the single resolution board, would not require going up to that level.
The second question that the noble Lord, Lord Harrison, raised was whether the resolution fund is too small. On its own, it demonstrably is, if there were a major simultaneous problem with a number of the largest eurozone banks. The key thing here is that it does not have to bear the whole brunt of the resolution process on its own. Arguably, it does not have to bear the main brunt of it. That is the whole point of the resolution recovery directive and the bail-in procedure. The fund is not capable on its own of solving a major crisis, but it is one of a number of tools and not necessarily the largest or most important.
The final question, I think, that the noble Lord, Lord Harrison, asked related to the replacement of senior positions in the EU. As he knows, over the coming weeks, the European Council President will be taking soundings on this and I am no more able to suggest whom we might put forward, than my noble friend was at Question Time today. The UK is fully engrossed in those negotiations with the aim of making sure that we have candidates who will be able to deliver on the priorities agreed by the heads of the European Council last week.
Among other things, the noble Lord, Lord Lamont, has introduced a definition of nirvana that means that I will never think of the concept in the same way again. He ended his speech by saying, I think, that his feet tended to have to accommodate themselves to the shape of the shoe. My experience and expectation is that my shoes will amend themselves slightly to take account of the shape of my foot. I think that that is a rather important distinction in the way that we view our involvement.
This brings me to one of the central points of discussion, which was the importance of political will in terms of the future of the euro. In certain respects, the euro has defied logic because of the strength of the political will supporting it. I strongly agreed with the noble Lords, Lord Liddle and Lord Jay, about that. Once the political elites of the major eurozone countries have made up their minds that this thing was going to continue, it was going to continue barring the most unforeseen disaster. Those who predicted its demise simply did not grasp a very straightforward political fact.
The noble Lords, Lord Liddle and Lord Maclennan, asked linked questions about how we could play as full a part as we can in both the banking union and the mechanics of the eurozone. Obviously, we have ruled out membership, so the question is the extent to which we can play a role. I thought that the point of the noble Lord, Lord Kerr, about the role of informed co-operation and advice was very important here. We have very good relations with the ECB at all technical levels and UK officials are playing, and will continue to play, a big role.
The noble Lord, Lord Kerr, developed the concept of playing a bigger role in the banking union by saying that there was no logical reason why we should not be in it while remaining out of the eurozone. I am sure that that is logically the case. Why has it not happened? There are a number of reasons. First, the banking union has flowed from the eurozone crisis. I think it is inconceivable that we would have had such a banking union if all had been well with the eurozone, so the two are inextricably linked. I would also be interested, as a newcomer to the theoretical concept, to know whether there has ever been a banking union with banks that had two different basic currencies, or several currencies, because presumably the Swedes and others might also join.
The noble Lord, Lord Jay, made an important point about having more British people involved—
Lord Kerr of Kinlochard
I do not quite follow the logic of the Minister’s answer to my point. Because something has emerged that is driven by a wish to support the eurozone, that does not necessarily mean that it is bad or something from which we should be determined to distance ourselves. I do not think that the point about currency is relevant to whether we should be in a single supervisory mechanism. The non-eurozone countries that are negotiating do not think it is, nor do I see why, logically, it should rule us out from being in a single resolution mechanism. I understand that a separate argument would apply in respect of resolution, which is that it means somebody pays. Resolution costs money. However, we are not into these kinds of arguments. I am not saying that we should join either the single supervision mechanism or the single resolution mechanism today; I am merely arguing that it annoys the foreigners when we take the blanket approach that this is nothing to do with us. That undercuts the role—which I am glad the Minister acknowledges is very important—of the City quietly advising the ECB, and on these new structures being developed on the continent, as to how the job is best done.
Lord Newby
I was simply trying to understand, partly for myself, why we have taken this view on the banking union. An element of it was a political view and an element of that was borne out of the way in which the banking union itself developed; namely from the eurozone, of which we are not a member. At some point, we may decide that we want to be a partial or full member of a banking union—although I suspect that point is some way away, whoever the Government are. While I am on the subject, the noble Lord, Lord Dykes, made a point about timescales. However, as he is not in his place, I will have to pass over it.
The noble Earl, Lord Caithness, asked about the common guarantee scheme. He said that the Government were being rather spartan in their response—which, indeed, we were. However, the reason for this is that any common deposit scheme would be for the eurozone rather than the UK. If the eurozone decides that it wants to go down that route, that is fine but we will not be playing any part in it.
The noble Lord, Lord Desai, pointed out that the eurozone operated on a sort of gold-standard basis by being a deflationary tool. The first example in recent times in Europe of real wages falling significantly was with the monetary union between West and East Germany. I would not say that Germany got a taste for it, but it got an understanding of how that could work. What has been surprising is the extent and speed to which Ireland, Spain, Italy and Greece have been able to adjust, in particular, real wages downwards in order to begin to make their economies more competitive within the eurozone. The noble Lord made another interesting point about how important the three words—“whatever it takes”—issued by the head of the ECB were. The fact that they were so effective says a lot for the credibility of the ECB because markets believed it, which is encouraging in terms of the strength of the ECB.
Along with other noble Lords, the noble Lord talked about the challenge of what used to be called—although I am not sure it has been today—the “democratic deficit”: the fact that there is a low engagement in European elections and a low understanding of many of the issues. A number of suggestions were made about how to deal with this, possibly by having more direct elections or voting for the President of the EU. I am possibly the only person in the Room who has gone on a demonstration carrying a placard in favour of direct elections for the European Parliament, which I did as a student. We had very high hopes for the European Parliament then, not just as a technical body in terms of scrutinising legislation, which, on balance, it does extremely well, but as a symbol of a uniting Europe, which I was all in favour of. We thought that having a Parliament elected by the peoples of Europe would bring that concept to life but it has not, so I am rather sceptical about whether we can solve that problem by more elections. I fear that we may have to rely more on the role of national Parliaments, which is the subject of another report by your Lordships’ committee.
The noble Lord, Lord Kerr, raised a number of extremely interesting points about the way that appointments might be made and how the directorates might change. I absolutely see the strength of his very important institutional points and will take them back to my colleagues in the Treasury, who are rather more closely involved in those negotiations than I am.
The noble Lord, Lord Davies, spoke about the threat to the single market in financial services of the banking union and about different legislative frameworks. In fact, what we have to a very large measure is that wherever you go across financial regulation, it is regulation under directives. Our own legislation is very much framed within the plethora of directives which I always think of Sharon Bowles presiding over. She has been the one person who has understood all this stuff. Although under a directive the way that we do something and the way that the European Central Bank does it may be slightly different, it is no more different in this area than in any other area of the single market, where we implement things by directive and the detail of the way it is done varies from country to country. I am not sure I share the noble Lord’s concern in that respect.
Lord Davies of Stamford
I am sorry to say I am not convinced by the Minister. We do, of course, have a derogation from the directive, as the Minister presumably knows.
Lord Newby
I remain of the view that the directive approach applies in financial services in the same way, broadly speaking, as it does in many other areas.
I am just about out of time but, briefly, the noble and learned Lord, Lord Davidson, made a point about whether the ECB had the ability to supervise. It has a big job on its hands and is taking on new responsibilities. As we have seen, getting the Bank of England fit for purpose has taken a lot of time and effort. Indeed, the only thing that will demonstrate whether it has succeeded is how it performs in a crisis. We hope it does not have to do that for some time but it is clearly taking on the job of supervising a very large number of banks, whether it is 250 or 6,000, or whatever it is. It is very big new job, and I wish it well in it.
I conclude by saying again how much I appreciate the work of the noble Lord, Lord Harrison, this committee and all speakers in today’s debate. It is clear that Europe will be at the centre of our political debate in the period ahead. That debate is often conducted in extremely depressing, ill informed and—to borrow a word from the noble Lord, Lord Hamilton—poisonous terms. During all this, I am sure that your Lordships’ European Union Committee will continue to be a voice of reason and common sense and that Governments of whatever persuasion will continue to value its reports. For my part, I look forward to participating in further debates upon them.
Lord Harrison
My Lords, with the passage of time all committee chairmen tend to fall into their anecdotage. However, before I tell my concluding anecdote, which I hope will sum up the tenor of the debate we have had, I will say that I will resist the opportunity to play footsie with the noble Lord, Lord Lamont, or indeed with the Minister who has replied. I will also resist the opportunity offered by the noble Lord, Lord Desai, to take some of my committee to the United States both for the purposes of literary examination and comparison with the regulatory structure there. To my noble friend Lord Liddle I say that despite all the quotations from the Book of Job I do not see myself as a man of constant sorrow; my job is to help the process of change with the committee that I have.
My anecdote is the following. Some 20 years ago I wrestled to the ground Pierre Moscovici, who was later to become the Finance Minister of the incoming French Government, for the purposes of leading the socialist group on the monetary sub-committee—I am very familiar with sub-committees. However, one dark afternoon in Brussels in the European Parliament we met Alexandre Lamfalussy, who was later to be president of the European Monetary Institute and the forerunner of Trichet, Duisenberg, Draghi and all the rest. I, in my pomp and circumstance, then wrote to the Wirral Globe, Cheshire Observer and Chester Chronicle that I had just elected Europe’s next bank manager. Some 20 years later, I think I was right, but no one was paying attention at the time other than my good local newspapers.
I tell that anecdote because the tenor of this debate has been that we have to be on our pins, toes and high heels to be able to speak with those who might be our friends and who might change things. I thought that view was best put by the noble Lord, Lord Kerr, when he talked about knowing the guy at the other end of the telephone. That is the job of UK Governments now and in the future for the purpose of defending UK interests. I say to the noble Lord, Lord Hamilton, that what united the committee across the political waves was the belief that that was and remains important, and that we will continue to pursue it in the future. I am happy to continue the seminar in the Peers’ guest room shortly afterwards, should any noble Lord need a glass of European wine, and I thank all noble Lords who have contributed.
Disabled Students
(10 years, 5 months ago)
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Lord Addington
To ask Her Majesty’s Government what plans they have to co-ordinate the assistance given to disabled students at school, in further and higher education, and in the world of work.
Lord Addington (LD)
My Lords, I thank those—we happy few—who have waited here. It is slightly later than normal. One should never underestimate the passions and the length of passion when it comes to Europe in this House.
This Question about the co-ordination given to disabled students throughout the educational process and into the world of work was inspired by changes to what, I think, had been a very comforting place to be in that process, for a disabled student—that is, in higher education. We had a system that seemed to provide just about everything needed and it was changed—or threatened with change—by a Written Ministerial Statement on 7 April. Everything is up for grabs. What particularly attracted my attention was that those with specific learning difficulties were mentioned twice. That was the only disability group that was.
As I have put on record before, specific learning difficulties is usually shorthand for dyslexia. I have been told by interventions from Ministers that it is now thought to include other groups as well, such as those with dyscalculia, dyspraxia and so on. It gets mentioned because it is thought to be an area where the amount of money spent is excessive, primarily because we are given a standard computer when going through the education process. I say “we”, though of course this system started in 1990 and I missed it, in my higher education experience, by a couple of years. The computer was something that was taken as an example of waste. I will come back to this, but that inspired me to look at the entire system.
The system had to be looked at as we had just been through the Children and Families Act. Both school education and further education are now covered under a unified system, up to the age of 25. However, because the disabled students’ allowance was in existence, we did not really look at that. There was an assurance given to us at the time, both informally and, I think, formally, that we did not need to look at it.
So what has happened when it comes to school and further education? For the first time, the education system has a duty to go out and identify those with special educational needs—to find them, not have them brought to you—and not have people struggling. The system is supposed to find them, find out what is the matter and give them the help required. This is a massive cultural shift—a far bigger cultural shift than, I think, many people realised at the time. It means that there is a duty not to say, “Oh, little Johnny”—or little Jane—“is not succeeding”. Rather, there is a duty to identify why. This would have been much easier if there was a duty for all teachers to be better trained to identify the more hidden disabilities. I try to get away from this cliché of my own, but special educational needs runs on something that I have always referred to as “reverse battlefield medicine”. The most severe cases are dealt with first, usually because they can be spotted. I hope those listening can identify the difference between a disability that leads to an educational need as opposed to a special educational need—that is somebody who has a need resulting from being in a wheelchair as opposed to someone who has autism, dyslexia or is deaf. Those conditions, if they are obvious, get dealt with pretty quickly. The legislation now says, “We should try to get these people to achieve”. So we now have a situation in which all this is going on, and we have established that this system does not change at further education.
My history in your Lordships’ House follows me throughout this debate. We managed to deal with apprenticeships. It had been decided, wrongly, by the Department for Business, Innovation and Skills, that they were not covered by the Equality Act. It became apparent, and it was confirmed that they were covered. Dyslexics had been prevented from taking the English requirements with any chance of succeeding, but the process was changed and now you have to give assistive technology. I have just heard from the British Dyslexia Association that that has been challenged by one or two of the exam boards because it is regarded as giving some form of unfair support. I do so hope that the noble Baroness will be shoving her thumb into that eye very quickly, because my fingers are getting a little bit too dirty from doing that. I hope that this will be done quickly.
Having had the situation where we are working towards taking exams and we are providing support, we go to the DSA. Did the DSA provide a lot of support? Yes. Did it provide some that I felt might have been wasteful in certain cases? Yes. Did it become slightly too bureaucratic? Yes. I have heard of cases of people with mental health problems who have been refused it because they did not have the documentation, despite the fact that they had documentation saying that they had mental health problems. Often you have to be assessed again to get this assistance, despite the fact that you are statemented, under the old system, or have a plan, under the new one, and have received support so far through the system because of your condition. These assessments are extremely expensive—they cost hundreds of pounds if not thousands—and put pressure on certain student categories. If we are to have reform in this area, I hope my noble friend will be able to say that this will be looked at, and that further unnecessary assessment on entrance will be dealt with.
If this is the system that we are working towards, do we have a working practice that will allow for the growth of independence throughout the system? If you start by being identified as having learning problems in the classroom, you expect to get a great deal of support as a small child starting this process. A standard part of the educational experience for many people is the enhancement of independent working and independent training—with guidance, but that decreases. One of the important things about the university system is that one works independently for oneself. Here we get to the nub of what I am trying to say. How are we ensuring that that growth of independence carries on? How are we making sure that we have a system that uses parts of all of this and combines them to ensure that the candidates can get through the process themselves?
I am a convert to, and a great advocate of, using assistive technology, particularly in the case of dyslexics. There are others outside here who will say that other disability groups will not benefit as much, but I suspect that all can benefit to a degree. I also know that no one person in any one of these spectrum organisations is identical to the next, so there must be a degree of working together. However, the idea that the assistive technology that allows me to send any notes that I have sent to any person in this room, by dictating into a microphone attached to my computer, which is running a bit of software, would not be beneficial to someone who is a recognised dyslexic and will be dyslexic throughout their life, and that they will not be supported when they are taking their GCSEs, is ridiculous. Later, they may have to take an exam using an amanuensis or a computer, so why can they not have access to it earlier? Why are we not encouraging them to maximise the benefits of this technology earlier?
We then come to the process that is identified and used within the independent sector quite frequently, a process that is now made available as standard to people who get on to the DSA. This point is twice picked out in the statement made on 7 April, which says, “We will not provide you with the standard computer, and the software will now be provided by the higher education institute”. This is a huge cultural shift. Why has this been decided? Because everyone has a computer. However, let us put it like this: everyone has access to computing technology at some level. Whether you have a computer that is powerful enough to run the software properly is another matter, and that is the vital point. Other forms of software for the blind or hearing impaired also require a basic level of capacity to run the software, to allow the user to have the independence that has been denied by a disability plus their social background. That disability will have been identified throughout the education system, and in future will be identified earlier and in greater numbers, so the user will have a background knowledge that can prepare them to work independently. Why is this decision not coming to the fore? Why are we not doing something about it? If you deny students this technology, you are making the problem greater.
Having heard that I have a lot of time, I have now taken too much time. I leave the Government with one question: if we can provide a computer for roughly £300, and the software might cost us the same again, why are we not concentrating on that? We are providing non-medical support in terms of hours provided. In 1990, dyslexics probably needed someone to dictate their essays to, but they do not now.
The figures I have for that range between £50 and £65 an hour. They are offering 30 hours a week. How many properly equipped computers can you get for a person in their third year—who has, presumably, already been trained in how to use it properly and given a skill that they will need in later life to be able to function in most office environments? Why are we not looking at that as a structure and a way forward?
I finish by saying that when we say “complex”, a term mentioned in the statement, I always took that to refer to multiple needs, not severity. That language has already been challenged, but that led people into a spin. Unless the Government can start to address those questions in a way that the sector understands, they will get into more trouble here. There are savings to be made. We can modernise and bring the system up to date. Please, streamline it and make sure that people get the support that they need to function, not an idea taken from an imperfect understanding.
Baroness Uddin (Non-Afl)
My Lords, I begin by commending the noble Lord, Lord Addington, on his consistence and persistence in support of these matters, and apologise to him for not having made the list—I just missed the deadline, so I am very pleased that I am able to speak in the gap.
In the context of today’s debate, we must put individuals at the heart of reform. Indeed, the Government have themselves acknowledged the need to do better when it comes to disabled people. Only last March, legislation was passed to improve the co-ordination of services offered to those with special educational needs, via the Children and Families Act. Just two months later, the Care Act became law, seeking to personalise care and put recipients at the heart of the system within integrated care services.
The intention is noble; the reality is, too often, a disgrace. As with the reform of so many public services—to the NHS, to higher education, to the justice system—the Government have used much-needed public service reforms as an opportunity to withdraw funding entitlements to many who relied on them to live a life with dignity. In a growing number of instances, entitlements have been restricted to all but the most severe cases. Most recently, the Minister for Universities and Science announced what he described as the modernisation of the DSA. In this case, modernisation would appear to amount to the removal of allowances from all but those with “complex” learning difficulties— passing the buck to universities, whose assistance to students will be discretionary as long as they do not infringe the Equality Act.
I am not opposed to reform per se. Indeed, the fact that public expenditure on the DSA has risen in all but the past year suggests that there may be a case for reviewing the criteria for entitlement, but the hasty withdrawal of entitlement without consultation is dangerous, particularly when you are dealing with a category of people who already face hurdles to participating in education, employment and society as a whole.
Let us take those with autism spectrum disorder. According to government sources, more than half a million people in England have autism, but only 0.2% of undergraduates studying for their first degree are declared as autistic. Employment outcomes are almost as bad.
There is a suggestion that, henceforth, medical advice will be required to explain how a student’s disability will affect their ability to study on their chosen course. That risks becoming a classic case of clumsy guidance failing to take into account the spectrum of conditions and the nuances of humanity. Let us take the young man with autism who, even under the present system, was recently refused DSA on the ground that he had not provided recent medical evidence about how his condition would affect his chosen course. Despite providing copies of his original diagnosis, statement of special educational needs and individual education plan from his college, he was told that a medical report conducted after the age of 16 was required. Put aside the fact that that requirement would appear to run contrary to the 2014-15 guidance, which states that medical evidence need state only the nature of the disability and, ideally, explain its impact. As is the case with many disabilities, such as autism, there is no medical involvement following a diagnosis where the condition is developmental, not physical. Can the Minister clarify what forms of evidence will be required from individuals with autism when they come to apply for a disabled students allowance in September and who will undertake those applications? The cuts to DSA should not proceed until we are sure that they will not harm access to higher education and jobs for those thousands who have benefited and are likely to benefit.
Finally, in 1980, when my then five year-old was entering the special education system, I had the audacity to ask whether there was any special equipment which would help his learning disability. People were absolutely aghast that I would dare to ask such a question. Some of that experience remains for many parents. We are in an age when the medical and computer technologies are at the highest level and will get better. It just seems such a shame that we are not going to support all those who can benefit from them.
Baroness Jones of Whitchurch (Lab)
My Lords, I am very grateful to the noble Lord, Lord Addington, for tabling this Question for Short Debate and for raising a number of crucial issues about the lack of continuity as young disabled people progress through the education system and into the world of work. I am also grateful to him for prompting me to revisit some of the detailed work that we did on the Children and Families Bill and look again at its progress towards implementation. When I looked back at the Bill, I was reassured to see that it came out of our scrutiny process in much better shape, and with more clarity about rights and responsibilities, than when we started. In that case, it was a job well done. I agree with the noble Lord that if we get the implementation right, it will turn out to be a transformative Bill and make a big difference to the lives of many young people with disabilities and special educational needs for many years to come. The challenge for us at this stage is about implementation.
The theme quite rightly established in the Bill was the need to be proactive. There is the need to have joined-up provision and the need for agencies to talk to each other and take joint responsibility for services. This was encapsulated in the notion of the education, health and care plans. It would be interesting to have an update on the progress being made to establish these local joint mechanisms, which are needed to make the care plans a reality. Perhaps the Minister could update us about what is being put in place to monitor the rollout of the Act to ensure that it becomes a reality on the ground and, in particular, to look at what local authorities are doing to fulfil their obligations in this regard.
In the mean time, the noble Lord, Lord Addington, has identified some rather glaring gaps in our new model of information-sharing and joint working. It was interesting that in the initial response to the consultation on the code of practice, which we received a copy of and which was in the Library pack, the FE sector said that it was rather in the dark as to how the plans would affect it. I am not totally surprised about that because during the course of the Bill, I did not really get the sense that it was engaged in the debate or really understood what the implications for that sector would be. It is helpful that the code has now been redrafted to spell out the FE sector’s statutory duties more clearly. For example, there are the reciprocal duties to co-operate with local authorities on arrangements for all young people with SEN; to admit a young person if the institution is named in the education, health and care plan; and to provide the right support for students with SEN disabilities.
The list of types of support which should be provided and the access to funds are also spelt out. However, underpinning the code there is also an expectation that local authorities will provide top-up funding. It is clear that there is a potential pinch point for students caught in the middle of these funding negotiations. As all noble Lords will know, local authority funding is in a particular crisis at the moment. Can the Minister explain what rights young people have to be provided with that funding to ensure that they have the right facilities when they go into college and can make their college years a success?
The code also makes it clear that colleges should be involved in transition planning between school and college to ensure a successful transition into college life. However, underpinning that again, what guarantees do young people have that the assessments of their needs that were made during their school education will be carried automatically into their time at college? What is to stop an FE college asking for new assessments to be made—trying, if you like, to delay the inevitable or to put off its responsibilities? In addition, there is also all the extra bureaucracy and resources involved and, obviously, the extra upset that will be caused to young people, who feel that the original assessment that was made about them is now being challenged. Where, then, is that reassurance of continuity which was at the heart of the Act and can we be assured that that will follow through in the way the FE sector receives students?
Meanwhile, the noble Lord, Lord Addington, and the noble Baroness, Lady Uddin, quite rightly raised concerns around the changes to the disabled students’ allowance that were recently announced by the Universities Minister. That announcement goes completely against the spirit and intent of the Children and Families Act. By any measure, it is a blatant cost-cutting exercise because, as we know, it has been judged that it will result in potential cuts to DSA funding in the region of about 60%. One can see why it is attractive to the department at this stage. As a result, only those students with complex disabilities will receive support. Many students will lose access to vital equipment which helps with their day-to-day learning and will lose vital specialist support. I do not claim to understand completely all the technical challenges which the noble Lord raised this evening. They made sense when he was explaining it but I would not be able to repeat it all.
Lord Addington
If they made sense only when I was explaining them, I have failed.
Baroness Jones of Whitchurch
As I said, the noble Lord explained it very well and it made sense, but I obviously have a lot more to learn about the technical facilities that are out there and about how they can be embraced by people with disabilities. However, it is clear that unless the funding is there and the DSA takes account of those up-to-date technologies, we will have failed. The noble Lord made the point that students with dyslexia and dyspraxia, for example, are likely to be particularly badly affected. I also accept the point the noble Baroness raised about autism. Both of those areas are sometimes difficult to define.
One of the concerns about this is that students will undoubtedly be put off from applying to higher education, which of course used to be the case in the old days; they never went to higher education because they never felt that the support would be there. There is a danger that they will fall back on less appropriate post-school choices. The problem with that is that, if nothing else, it runs the risk of being even more expensive for the Government to support. We therefore have a challenge to ensure that every child gets the right to have the best education and the best outcomes that they will be able to succeed in.
Can the Minister explain what discussions took place between the Department of Education and BIS before the announcement was made? Does she accept that the cutbacks in DSA funding go against the whole principle of supportive and integrated progression in education for young people with SEN and disabilities? Are we sure that BIS understood all the good work that was done around the Children and Families Bill? Has it got the message and taken it on board in the way that it is beginning to review the DSA?
Finally, the support that young people receive from nought to 25 should mean a smooth transition into the world of work. We worked hard during the passage of the Children and Families Bill to put those mechanisms in place as well. Again, the noble Lord referred to better access to work placements and apprenticeships, on which we spent considerable time. However, since there are now worrying signs that Ministers in BIS have not bought into that agenda, can the Minister reassure us that that active liaison is taking place between the departments to make sure that, not just in the letter but in practice, funding and support will be made available to all young people so that they all have the best opportunities to make the best of their lives and to thrive and succeed at work? I look forward to her response.
Baroness Northover (LD)
My Lords, I start by thanking my noble friend Lord Addington for securing this important debate and for his, as ever, knowledgeable and passionate speech. I also thank the noble Baronesses, Lady Uddin and Lady Jones, for their contributions. I especially thank the noble Baroness, Lady Jones, for her kind words about the potentially transformative effect of the Children and Families Act, on which we both worked.
Our reforms for children and young people with SEN and disabilities are aimed to create a new system to support young people through school, further education and training and focus much more strongly on independent living and helping them to find paid employment. My noble friend Lord Addington is absolutely right to focus on that. The reforms are aimed to create a more streamlined and transparent system at school, which provides support tailored to individual needs and does not require endless reassessment—which noble Lords mentioned.
I am personally grateful to my noble friend Lord Addington, whose help with my own then teenage dyslexic son opened his eyes to what was possible through assistive technology. I have to say that I was a form of assistive technology, finding myself reading my son’s economics textbook to him. I would read a chunk; he explained it to me; and I trust that we both benefited—I certainly did. I did object that economists were taking for granted the way that people acted. I certainly identify with the noble Baroness, Lady Uddin, about the battles that one used to have—I hope, now, less so—to gain support for children with particular needs.
Lord Addington
I interrupt my noble friend merely to say that I had forgotten to declare my interests. I hope that my noble friend will forgive me if I do that now.
Baroness Northover
I am sure that those are taken as read.
I say to the noble Baroness, Lady Jones, that we agree that it is vital that education, health and care plans are based on a co-ordinated assessment process in which professionals from across agencies work closely together, so that families do not have to repeat their stories and support can be provided promptly. I hope that she will be reassured that the pathfinder programme has demonstrated strong progress and that the pathfinder champions are sharing what they have learnt about effective approaches in every region as all areas prepare for implementation of the reforms from 1 September. The noble Baroness is absolutely right: the key thing is how it is implemented, and we will keep a very close watch on that.
From year 9, annual reviews of education, health and care plans, EHC plans, must focus on preparing for adulthood, enabling that transition, setting out clear plans that enable young people to move into higher education and work. The draft code of practice also sets out the new legal duties of further education colleges, including how they identify SEN and provide support. We know that work can transform lives by giving people an income and, above all, a sense of purpose and value. It enables them to become as independent as possible, both economically and socially. For that reason, we have introduced supported internship and traineeship study programmes specifically designed to support young people into work.
I assure my noble friend Lord Addington that the Children and Families Act requires services to work together to support children and young people with disabilities. As I said, the pathfinder work is encouraging. The DWP’s access to work fund has been extended to support internships and traineeships, and its Disability Confident campaign encourages organisations to employ people with disabilities. More widely, the cross-government disability strategy, Fulfilling Potential, was developed jointly with people with disabilities so that they can better reflect what is important in their lives to enable them to live independently in accessible and inclusive communities.
During the passage of the Act, my noble friend Lord Addington raised important concerns about the availability of reasonable adjustments in apprenticeships. As a result, the skills funding statement now contains a clear reminder that the Equality Act requires training providers “to make reasonable adjustments”. The Act, which raises the bar on previous legislation by clearly setting out the rights and protections for groups risking discrimination, also applies to employers, requiring them to make reasonable adjustments for employees.
Encouraged by my noble friend, without actually poking people in the eye, the Government also made a commitment to support disabled apprentices who were unable to pass key skills in English and maths but completed all other aspects of their apprenticeship. These individuals can now take the relevant functional skills qualification and, if successful, can apply for their apprenticeship certificate. The National Institute of Adult Continuing Education has recently launched an online toolkit to help people with disabilities to access apprenticeships and to help employers gain access to skilled and dedicated workers.
Noble Lords have spoken about the need for young people in higher education to get the right support. Securing a place at university is a fantastic achievement for any young person, which improves their employment prospects. We are right to have high aspirations for young people with disabilities, as the noble Baroness, Lady Jones, made very clear. I assure my noble friends that, as the draft code of practice states, local authorities should plan a smooth transition to higher education before ceasing an EHC plan. Once a higher education institution place has been confirmed, the local authority must pass the EHC plan to the institution at the earliest opportunity.
My noble friend Lord Addington and the noble Baroness, Lady Jones, spoke about repeat assessments and transition. In the present system, a young person with a statement moving to college would need to have an entirely new and separate learning disability assessment, which carries none of the protections of a statement. As noble Lords know, that would change with our reforms and young people will be able to keep their EHC plan in college. Local authorities will be required to review an education, health and care plan at least annually. The year 9 review will look forward to the young person’s transition to adulthood, including further education, and each review thereafter will build on that. Our plan is that there will be much greater consistency and better transitions.
A college can ask for a reassessment but the local authority does not have to undertake one if one has been made in the past six months or it does not believe that it is necessary. I say to the noble Baroness, Lady Jones, that the local authority will set out what the colleges are expected to provide from their funds. Local authorities will top up funds for individual students who require them so that they get the support that they need. Decisions will be made on a case-by-case basis and we will keep a very close eye on how this is working.
Once a student with disabilities has joined a higher education institution, regardless of whether they previously had an EHC plan, they can seek support through the services provided by the higher education institution under its duties under the Equality Act, and through a DSA needs assessment. A comprehensive DSA needs report should include discussion with the student, the strategies that have been used in the past and the strategies that are being recommended for DSA funding. I assure my noble friend Lord Addington that although the student may provide evidence of the support that they received from their school, they are not required to as the needs of all people with disabilities can change, as he indicated, over time.
Disabled students’ allowances are being changed, as noble Lords have noted. Once a disabled student has joined an HEI, a range of support is available through the HEI’s duties to make reasonable adjustments under the Equality Act and DSAs. That will not change but the balance of support in future will. We must ensure that the HEIs fulfil their duties under the Equality Act, which, perhaps I may remind noble Lords, improved things for those with disabilities. We must make sure that all public institutions fulfil their responsibilities, which includes higher education institutions.
Baroness Northover (LD)
I would like to be able to answer but I am right up against time. If I have not answered adequately, I can write or we can discuss matters afterwards.
There are key changes proposed to the DSA. It will no longer be available to fund standard computers, but DSA funding will still be provided towards higher-cost computers required due to a disability. It is worth remembering that these days most students, if not all, will be buying their own computers. This is a change from when we were at university. The key thing here is to support students for whom a standard computer will not suffice, in the way that my noble friend Lord Addington indicated, and the difference in cost will be covered.
Where HEIs provide specialist accommodation for students with disabilities, that cost should not be passed on to the student. The DSA funding will no longer be available to these students because there should be no extra cost to the student.
Students with dyslexia will continue to be supported through HEIs’ reasonable adjustments and DSA. HEIs should consider how to support these students better to reduce reliance on DSA. HEIs should consider how they meet a variety of non-medical health needs—for example, note-taking and library support—to reduce reliance on DSA.
DSA will be available for more specialist support—for example, sign language interpreters—and we are consulting on the fine detail of the division of responsibilities. All institutions will now be expected to provide the same high level of support for students with disabilities. The detail of what support will be funded through DSA will be provided in guidance this autumn.
With regard to co-ordination between BIS and DSA, my honourable friend Matthew Hancock has a joint position between the two. However, as I say, it is surely right that all public institutions in the UK recognise their duties under the Equality Act, which raised the bar for how those with disabilities should be treated, and we need to ensure that they recognise that. My right honourable friend David Willetts is responding to a debate in the other place today on this very subject, and I know that he will mention the wide range of groups with which BIS has been in discussion, as it will be over the next few months before the guidance is issued.
The application process for DSA will remain the same. Students will continue to have a comprehensive DSA study needs assessment to explore the impact of their disability on their ability to access learning. That is the key thing.
In conclusion, the changes that we are making through the Children and Families Act, coupled with the practical measures that we are taking across government to improve support for young people with disabilities and those with SEN, should make a real difference to the life chances of some of our most vulnerable young people. We as a Government remain committed to removing barriers, thereby enabling people with disabilities to fulfil their potential and play a full role in society.
House of Lords
Sri Lanka
(10 years, 5 months ago)
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Lord Sheikh
To ask Her Majesty’s Government what assessment they have made of the current action to resolve the dispute between the government of Sri Lanka and the Tamil community.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)
My Lords, we consistently urge the Sri Lankan Government to make progress on reconciliation and a political settlement between communities. We note that the 2013 Northern Provincial Council elections established a new Chief Minister for the heavily populated Tamil region. The Sri Lankan Government must ensure that all provincial councils can carry out their roles effectively. We encourage Sri Lanka to engage with the UN internal investigation into alleged violations of international law as a contribution to reconciliation.
Lord Sheikh (Con)
My Lords, I thank my noble friend for that Answer. What is Her Majesty’s Government’s assessment of the positive actions taken by the Sri Lankan Government in implementing the recommendations of the Lessons Learnt and Reconciliation Commission, particularly in regard to demining, the resettlement and rehabilitation of Tamils, infrastructure development and steps taken to improve the education and health of people in Northern and Eastern Provinces? As Sri Lanka and the United Kingdom are founder members of the Commonwealth, will Her Majesty’s Government help in utilising the framework of the Commonwealth to establish a domestic truth and reconciliation commission to address the alleged human rights violations in the country?
Baroness Warsi
I thank my noble friend for his question. Of course, we have welcomed progress made, including on infrastructure development and demining, but we remain concerned that the Sri Lankan Government’s national plan of action to implement the recommendations only partially covered the full range of recommendations and that, in turn, action taken by the Sri Lankan Government only partially corresponds to some of those recommendations. We agree with the UN High Commissioner for Human Rights that the Sri Lankan Government have not established a credible independent domestic investigation into allegations of violations of international law on both sides of the military conflict, and that this is fundamentally a question of political will. This is despite the UK and others calling for such an investigation since 2009. As a result, the UN Human Rights Council has passed a resolution that establishes an international investigation, which we strongly support.
Lord Bach (Lab)
My Lords, the setting up of the United Nations investigative team is very good, if rather belated, news. However, there are reports that the Sri Lankan Government are refusing to co-operate with the investigation. Will the Minister comment on that? The recent deaths of three Sri Lankan Muslims and one Tamil at the hands of the Buddhist nationalist group Bodu Bala Sena is a worrying development. What representations are Her Majesty’s Government making to the Sri Lankan Government about this particular outrage?
Baroness Warsi
We have encouraged the Sri Lankan Government to co-operate with the UN human rights commissioner’s international investigation, and we have seen some of the statements that have come out of Sri Lanka which suggest that the position is otherwise. However, we believe that the UN’s independent investigation has a strong team. As the noble Lord will be aware, people such as Martti Ahtisaari, Silvia Cartwright and Asma Jahangir—the phenomenal human rights campaigner in Pakistan—have been appointed to this investigating committee. We hope that, despite the Sri Lankan Government’s not co-operating, the committee will produce a good and strong international investigation. As for the recent tensions, of course we are concerned about the actions of Bodu Bala Sena. Our representatives at the British High Commission in Sri Lanka met with the group last year to raise our concerns in relation to the anti-Muslim violence. But they have met also, in relation to other minorities, with the Sri Lankan Government.
Lord Hannay of Chiswick (CB)
Will the Minister, who has just brought the attention of the House to the very high-level names who have been put in charge of this inquiry, agree that our Government should make clear to the Sri Lankan Government that their refusal to deal with this inquiry is not acceptable; that the people who have now been appointed to it are very objective and very experienced people; and that we hope that they will reconsider their position? Is that point being made clear?
Baroness Warsi
We will continue to make that point throughout the investigation. It is in Sri Lanka’s interests to co-operate fully. The reason we find ourselves in this position is that the internal investigations did not do what they said they would do. This is an opportunity for Sri Lanka to truly meet its commitment to reconciliation.
Lord Wills (Lab)
My Lords, in justifying the Government’s attendance at the Commonwealth Heads of Government Meeting last November in Colombo, the noble Baroness said:
“We will deliver an incredibly tough message to the Sri Lankan Government that they need to make concrete progress on human rights, reconciliation and political settlement”.—[Official Report, 22/10/13; col. 888.]
In view of the lack of progress that has just been noted on all sides of the House, does the noble Baroness think that, with hindsight, an even tougher message might have been delivered if the Government had not turned up at that Commonwealth Heads of Government Meeting, and there might have been more progress?
Baroness Warsi
I have a lot of respect for the noble Lord, but I fundamentally disagree with everything he said. It was right for the Prime Minister to attend the Commonwealth Heads of Government Meeting. It was right to make those tough messages be heard in-country in Sri Lanka. It was right for the Prime Minister to visit regions in Sri Lanka and make his point. It was right that, because of that visit, we built the international momentum which resulted in the Human Rights Council resolution.
Baroness Brinton (LD)
My Lords, may I return to the violence in Aluthgama? I am very grateful for my noble friend’s earlier answer, but I wonder if there has been any progress on arrests for this particularly horrible violence—which resulted not just in three dead and 80 injured but in a mosque and virtually every property of Muslims in that town being torched. While it is good that President Rajapaksa has promised to rebuild damaged property with his support, I think that the community would much prefer to hear that the perpetrators have been caught and what the Government will do to prevent such violence in the future.
Baroness Warsi
I note what the noble Baroness says. The violence in Aluthgama and Beruwala was deeply concerning, and she is right: there were not only fatalities but a huge amount of further damage. Of course we welcome the Sri Lankan Government’s assurances that they will investigate the attacks and prosecute those responsible. I am not sure what the latest situation is, but if there is any up-to-date information, I will certainly write to her.
Lord Naseby (Con)
My Lords, I declare an interest as chairman of the All-Party Group on Sri Lanka. Does my noble friend recognise that the imposition by the United Nations of an inquiry on a sovereign state—an imposition engineered by the US and supported by the UK—would not be likely to be well received in any country, particularly a country which has a democratically elected Government across all the ethnic groups? The vast majority of Sri Lankans supported the defeat of the Tamil Tigers. I urge my noble friend to think again and to encourage her Government to push the Sri Lankans on a one-to-one basis and to set aside a forced inquiry from the UN.
Baroness Warsi
I hear what my noble friend says, but this conflict ended in May 2009, which is more than five years ago. The internal inquiry reported in March 2011. The Sri Lankans have had enough time to deal with this matter if they had showed the political will internally to do so. They have not dealt with it, which is why we have taken this matter to the international forum.
Benefit Cap
(10 years, 5 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
Jobcentre Plus worked with potentially capped claimants from April 2012. By November the next year, 19,000 claimants in potentially capped and capped households moved into work, although we do not know to what extent those were additional moves or normal claimant churn. Since the cap was live, more than 5,700 households—around 40% of those who were capped but are no longer capped—are now exempt from the cap due to moving into work and claiming working tax credits.
Lord Fink (Con)
My Lords, I thank my noble friend the Minister for that comprehensive Answer, but will he confirm—
Lord Freud
There are two ways in which the cap works to incentivise people to go to work. One is that people who qualify for working tax credit are exempt from it, but there is another way, in that anyone doing even small amounts of work will be capped by a lesser amount because it serves to reduce the level of the cap and effectively allows them to keep their earnings. Clearly, one always has to be very careful to distinguish causation from correlation, but in a survey conducted by MORI a quarter of capped claimants said that they had looked for work because of the cap and 45% said that they would look for work in the next 12 months because of it.
Lord German (LD)
My Lords, the dignity of work is probably the best way in which people can escape from the cap. However, the figures to which my noble friend has just referred indicate only a trend in the direction of travel. From the figures which the DWP is now collecting, will the Minister have formed a view by the end of this coming recess as to the whole period? Will he know many people have moved into work and whether the trend that we have seen in the initial figures has been carried through, so that we can say that this initiative has really borne fruit into work?
Lord Freud
The cap is doing quite a lot of things. It has an influence on the people who are capped but it also sends out a message. The total number of people who have been capped at one time or another stands at just over 42,000; the current number is just over 27,000. A substantial proportion of those who have moved out of the cap, which they might do for various reasons, have gone into work and taken working tax credit. Others will have taken advantage of the effect that I have just referred to, whereby doing even small amounts of work reduces their cap.
Lord Foulkes of Cumnock (Lab)
Would the Minister contemplate for a while how people struggling to survive on benefits will view an aggressive Question being asked by someone who donated £2.62 million to the Conservative Party?
Lord Freud
Well, my Lords, my job at the Dispatch Box is to answer questions from all Peers. I hope that I have established a track record in answering questions with as much properly sourced information as I possibly can.
Baroness Wheatcroft (Con)
Very often, those who are out of work are suffering from other problems as well, often drink or drug addiction or a very poor education. Can the Minister say what is being done to help with those issues?
Lord Freud
One of the things that we are doing is reforming the whole of the welfare system in order to find out the barriers to going to work that people have and helping to address them. In the particular case of the introduction of the benefit cap, we had an enormous initiative to work with those individuals through Jobcentre Plus. We wrote to them, talked to them and provided intensive employment support. We worked with local authorities to help them with budgeting, housing and childcare. In this particular case we worked hard, and that seems to be an effective set of interventions.
Baroness Sherlock (Lab)
My Lords, how much has been spent on discretionary housing payments to those affected by the benefit cap and what impact has that had on the planned savings from the policy? So, for 2013-14, how much was spent on discretionary payments, to what extent has that reduced the savings for central government and what impact has it had on local government?
Lord Freud
The department pays out a lump sum of discretionary housing payments that local authorities apply to the various policies that they are tackling. There is a specific amount, £110 million, that goes to this particular policy although actually, when you look at the analysis of how local authorities attribute the spend, it is rather less than the amount attributed to the benefit cap. The total AME savings set against that are £225 million. As I said, the importance of this policy is that it sends out a message about the direction of travel, which is that the way to get people out of poverty so that they have proper support is to get them into work.
Baroness Farrington of Ribbleton (Lab)
My Lords, the Minister complimented himself on always trying to answer the question. Of those people that he has referred to, how many of them have gone into full-time employment on a living wage? Will the Minister, who has refused to consider studying those people who go to food banks to survive, have a meeting with the right reverend Prelates, who know more than he does because of their involvement in food banks, about the very people that he is not counting?
Lord Freud
My Lords, we do not collect information on the living wage within the working tax credits. We have a policy in universal credit to ensure that people have enough to live on however much they work, which is a transformation. I am pleased to say that I am in regular dialogue with the Archbishop on this matter, particularly with regard to the initiative that he is running, and which we are talking to him about, of supporting the credit union movement.
Syria: Sexual Violence
(10 years, 5 months ago)
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Baroness Jenkin of Kennington
To ask Her Majesty’s Government what is their assessment of the alleged sexual violence crimes committed against Syrian civilians in Syria.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)
My Lords, as reported by the UN commission of inquiry and others, rape, sexual violence and sexual torture have been carried out by regime forces against men, women and children as part of a widespread and systematic attack on the civilian population. We are deeply and increasingly concerned about sexual exploitation of displaced people. The UK is committed to supporting victims of these crimes, as well as supporting efforts to document sexual violence and other atrocities.
Baroness Jenkin of Kennington (Con)
My Lords, I thank my noble friend for the Answer. Would she join me in congratulating the Foreign Office and particularly the Foreign Secretary—so ably assisted by Angelina Jolie—on the success of the recent global summit on sexual violence in conflict, which has done so much to raise the profile of these dreadful crimes? Would she also confirm that the Foreign Office, DfID and the international community will do what they can to collect evidence and testimony from the surviving victims of sexual violence in the conflict so that, when this terrible war finally ends, the perpetrators can be prosecuted and brought to justice?
Baroness Warsi
I will join her—and I am sure the whole House will join me—in congratulating the Foreign Secretary on an incredibly successful summit on ending sexual violence in conflict. Those taking part came from 155 countries and included 1,700 delegates, 79 Ministers, victims’ groups, NGOs and international organisations. On the documentation and collection of evidence of sexual violence, my noble friend will be pleased to note that some of the projects we are funding in Syria are around the documentation and collection of evidence, so that those who commit these crimes will one day be brought to justice.
Lord Sharkey (LD)
My Lords, all crimes of sexual violence in conflict need to be within reach of international law, but the recent global summit that has just been referred to notes that the exercise of universal jurisdiction for crimes currently applies only to international conflicts. What steps can the Government take to extend this universal jurisdiction to the type of conflict we now see in Syria, Iraq and far too many other places?
Baroness Warsi
My noble friend makes an important point and I will certainly take it back. He will accept that this is a journey; these challenges have been with us for many decades, if not longer. One of the main purposes of the summit was to agree an international protocol on the documentation of sexual violence in conflict, to build political momentum, to fund more groups dealing with survivors and to encourage individual countries to develop country plans so they can take responsibility for these crimes within their own states. However, I will certainly take back the further idea given by my noble friend.
Baroness Uddin (Non-Afl)
My Lords, what specific support is being provided by registered NGOs currently working in Syria? The Minister mentioned some general points about the recent summit. Would she agree that it was regrettable to just highlight the problem of sexual violence in conflict and not also put forward ideas about how to address and support the women who have been raped before, including the 300,000 women—I spoke about them on a previous occasion—who were raped in Bangladesh? When will they get justice?
Baroness Warsi
I can give the noble Baroness details of the specific projects she asks about. Two projects are being funded to improve the capacity to document crimes of sexual violence. We are also giving cash assistance to help female refugees in Jordan and providing livelihood support to women so they can earn for themselves and not be placed in vulnerable situations. We are providing reproductive health services and financial support to vulnerable Syrian women who are thought to be at risk of being coerced into marriage, to help reduce their risk of exploitation. We are taking a whole series of measures, but I go back to the point that the summit was also about giving survivors an opportunity to be heard and to deal with the culture of silence that has existed around the issue. That in itself was incredibly important. A range of work has been developed from the summit around making sure we have the action in place to stop this heinous crime.
The Lord Bishop of Oxford
My Lords, given that discussion of sexual violence is always a very sensitive subject in any culture, will the Minister give assurance that the Preventing Sexual Violence Initiative team that is working in Syria will draw in responsible, enlightened religious leaders to combat the stigma that is so often associated with these awful crimes? This can prevent the kind of recriminations and rejection by communities and families that can result from them.
Baroness Warsi
The right reverend Prelate makes an incredibly important point. Faith as part of the solution to dealing with sexual violence was an important element of the summit, and we hosted two very successful fringe events. One involved a coalition mainly of church leaders, called We Will Speak Out. The other was at ministerial level where we hosted Sheikh Bin Bayyah, the Archbishop of Canterbury and the Archbishop of Westminster, Cardinal Vincent Nichols, and discussed the way in which we can get faith communities to be the first point of support in both providing protection and changing the culture that perpetuates the culture of impunity.
Baroness Kinnock of Holyhead (Lab)
My Lords, what was the Government’s response to the call from the United Nations for a further 100,000 resettlement places for the victims of the terrible turmoil she described in Syria? When the UK has promised to prioritise help for survivors of torture and victims of violence, is the Minister satisfied with the fact that as of 24 June only 50 refugees have arrived in the UK?
Baroness Warsi
My Lords, the noble Baroness makes an incredibly important point. The instinct of any of us when we hear these individuals’ stories is to provide a place of shelter, but I think the noble Baroness will acknowledge that since 6.4 million people have been internally displaced and 2.8 million are now refugees in neighbouring countries, there is no way that we could resettle all of them. We must make sure that we work with the most vulnerable and provide a settlement opportunity for them. First and foremost, politicians must continue to work for a political solution, because it cannot be that these people remain displaced and it must be that one day they are allowed to return to their own homes.
European Commission: Portfolios
(10 years, 5 months ago)
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Baroness Morgan of Ely
To ask Her Majesty’s Government, following the nomination of Jean-Claude Juncker as President of the European Commission, which portfolio they are seeking to secure for their nominee as Commissioner.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, Commission portfolios will be allocated by the Commission President designate to those persons nominated by member states and agreed by common accord in the Council. This will happen after the confirmation of the Commission President designate by the European Parliament. The Government are interested in an economic portfolio.
Baroness Morgan of Ely (Lab)
My Lords, after the Prime Minister’s abject failure in stopping Juncker becoming the European Commission President, will the Minister explain whether the Prime Minister has a better negotiating strategy in mind to secure a decent and substantial portfolio for the British nominee as commissioner? Will the Minister give an assurance that both Houses of Parliament will have the opportunity to question the nominee before the European Parliament has an opportunity to do so?
Baroness Warsi
I think the noble Baroness will have to accept that the UK took a principled stance on an incredibly important matter. It was the right of the European Council to nominate the President of the Commission. All three main political parties, including her party and, indeed, its leadership, supported the Prime Minister’s position, and it was right that the Prime Minister stood up for the principle of the European Council retaining its treaty-given role.
In relation to appearances before the UK Parliament, of course parliamentary committees are free to invite whomsoever they choose to give evidence before them, including the UK Commissioner and other Commissioners. It would be for them to respond to those invitations.
Baroness Falkner of Margravine (LD)
Given what my noble friend said about the importance of an economic portfolio, does she agree that the important thing for the Prime Minister to do is to find someone who is a heavy-weight, has good judgment and substance, irrespective of whether he or she is from Parliament or from outside of Parliament, and that he must particularly put aside considerations about by-elections and other partisan matters because, if Britain needs a strong batter for the internal market or trade, this is the time that it needs it?
Baroness Warsi
Where there are so many issues at stake, it is important that we nominate a strong candidate. My noble friend will be delighted to know that the Prime Minister has a strong line-up of strong candidates.
Lord Kinnock (Lab)
Is the Minister aware that, while a member state Government may certainly express enthusiasm for the appointment of one their nationals to a particular Commission post, the reality is that each Commissioner has a treaty obligation to,
“solemnly undertake”—
Lord Kinnock
Yes, it is because I want to be accurate, which may be a virtue not universal on the other side of the House. The commissioner has a treaty obligation to,
“solemnly undertake … in the performance of my tasks, neither to seek nor to take instructions from any Government or from any other institution, body, office or entity … I formally note the undertaking of each Member State to respect this principle and not to seek to influence Members of the Commission in the performance of their tasks”.
Since it is clear that no partisan advantage can be gained or allowed from a particular Commission portfolio, will the Government stop trying to give the impression to the British public that there is such a means available to Her Majesty’s Government?
Baroness Warsi
The noble Lord gives important advice, and I am sure that he gave similar advice to Prime Ministers when Labour was in power, when it nominated Commissioners and made sure that they did not have any form of partisan interest when they went to the European Union. He can rest assured that whichever Commissioner goes on behalf of the coalition Government will act in the same incredibly impeccable manner that Commissioners have in the past.
Lord Tebbit (Con)
My Lords, will my noble friend remind the House of the oath which is taken by a privy counsellor, that he or she will always uphold the interests of Her Majesty against all foreign interests? Will she not agree that, unfortunately, it would be quite wrong to appoint a privy counsellor to a job where he would have to swear the exact opposite, as the noble Lord, Lord Kinnock, has just described?
Baroness Warsi
Because I am a privy counsellor and have sworn that oath, I have to be incredibly careful as to how I answer that question. Fundamentally, it is because of the great expertise in this House that I love being here.
Lord Low of Dalston (CB)
My Lords, can the noble Baroness say whether she thinks it would be useful for Prime Ministers to receive training in recruitment, diplomacy and negotiation skills?
Baroness Warsi
I understand the point that the noble Lord is trying to make. However, we all have to accept that the Prime Minister stood up for UK interests and was responsive to what we all heard—or should have heard—at the recent European elections, which is that the people of the European Union, across the European Union, want change.
Lord Clinton-Davis (Lab)
Would it not be appropriate for the Prime Minister to be rather less abrasive and rather more constructive as regards the EU institutions? Insults get us nowhere at all, particularly when significant jobs are being sought for incumbent or future Commissioners. Is that not the most important issue facing the Government at the moment?
Baroness Warsi
The Prime Minister has a good record of delivering for the United Kingdom, whether on the Budget, on Ukraine or on red tape. We can be confident that he is the right Prime Minister, delivering for Britain at the right time.
Banking Act 2009 (Banking Group Companies) Order 2014
(10 years, 5 months ago)
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Lord Newby
That the draft orders and regulations laid before the House on 5 and 9 June be approved.
Relevant document: 2nd Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.
Health Care and Associated Professions (Indemnity Arrangements) Order 2014
Baroness Jolly
That the draft order laid before the House on 6 May be approved.
Relevant document: 1st Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.
Anonymous Registration (Northern Ireland) (No. 2) Order 2014
(10 years, 5 months ago)
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Baroness Randerson
That the draft orders and regulations laid before the House on 4 June be approved.
Relevant document: 2nd Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.
Serious Crime Bill [HL]
(10 years, 5 months ago)
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Baroness Smith of Basildon (Lab)
I shall also speak to Clause 2 stand part and Amendment 8, which says that there should be a consultation on whether the court can require full disclosure from a suspect of his or her assets and liabilities. Amendment 13, to Clause 11, provides the court with the power when making a restraint order to require the defendant to provide specific information, particularly concerning his and any third-party interests in property. Amendment 14, also to Clause 11, has a similar intent.
As I said at Second Reading, we support many of the measures in the Bill because they address the issues that we agree should be addressed. The role of this Committee is now to examine whether the proposals brought forward in the Bill fully address the problems that have arisen and become evident, or if more can be done to tackle the specific problem of improving enforcement. As I said then, nothing brings the law into disrepute more than poor enforcement of a law. I know that the Minister agrees with me on that point.
It is relevant here to say something about the background and to set the clauses and amendments in context. In 2002, the then Labour Government introduced the Proceeds of Crime Act with new powers for the police, prosecutors and courts to freeze and confiscate the assets of criminals. It was innovative and ground-breaking, providing a wide range of civil and criminal recovery methods, but the use of the legislation and the changes over time have revealed its limitations. Improvements can be made.
The National Audit Office has issued a highly critical report on confiscation orders. It found that only 26p in every £100 of criminal profits was ever confiscated and that the total amount of outstanding debt on confiscation orders is £1.46 billion, a shocking level. In addition, the cost of recovering these ill gotten gains is very high. The estimate from the National Audit Office is that investigation, prosecution and enforcement costs 76p in every pound collected. The value to the Government is just £31 million and just 2% of offenders paid in full. The amount collected and the number of confiscation orders and restraint orders has fallen in recent years, as identified by the National Audit Office report. There is now a seriously worrying trend with the number of orders falling and the outstanding amount of debt increasing. It is clear that some criminals are running rings around the system and making a mockery of what we want to see, which is that crime does not pay.
Another factor in addressing the issue is the age of austerity, although I dislike the phrase. Police and prosecutors are finding it tough. They are having difficulties with resources and need to make greater use of the proceeds of crime as a source of income. We need to examine the reasons why the system has become so ineffective. The reasons are varied—there is no one particular reason—but it is clear that the evidential threshold for freezing a suspect’s assets is very high; criminals often move their money overseas; confiscation orders can be an afterthought; and the penalties for non-payments are not enough of a deterrent. It is also clear that there is a lack of leadership and a lack of strong incentives for the agencies involved in applying for and enforcing confiscation orders.
Are the measures proposed adequate and the best we can do to address this problem or can we be more effective? We have tabled a number of amendments to address these issues. The reason for tabling clause stand part debates—as the Minister knows, since I discussed this with him—is to allow for a slightly wider debate. We consider that there is room for improvement in the Bill and the Minister may be able to provide the reassurances we seek. This first group of amendments regards third-party claims. I stress that they are all probing amendments. As I say, although we have tabled clause stand part debates, we are clearly not opposed to Clauses 1 and 2. If the Bill goes far enough on third-party claims, will the Government go far enough to ensure early disclosure? There are three further amendments on the same theme, but slightly different. I hope that through these amendments we can probe the issue in debate and get a response from the Minister on the substance and ideas, rather than on the specific wording. We are not wedded to any particular form of words—it is the issues that we would like to discuss further.
Lord Phillips of Sudbury (LD)
My Lords, may I ask the noble Baroness whether subsection (2) of the proposed new clause will be adequate to force the person concerned to reveal assets owned by a company that they own? Today, the classic way of avoiding liabilities is to have a series of companies that own each other, and I am anxious in case the wording would not require the person who is required to give information to provide information on all the companies in a string of corporations.
Baroness Smith of Basildon
I am not sure which amendment the noble Lord is referring to.
Lord Phillips of Sudbury
I beg the noble Baroness’s pardon. I am referring to Amendment 8, which would insert the proposed new clause entitled, “Restraint order: determination of extent of defendant’s property”. I mentioned in particular proposed new subsection (2), which would require the suspect to disclose,
“the full extent and location of his or her assets and liabilities”.
I am concerned that that would require someone to disclose only the fact that they have, for example, a company in the Netherlands Antilles, but not the fact that that company is owned by another company, and so on.
Baroness Smith of Basildon
My understanding is that it would require that information, because it asks for,
“his or her assets and liabilities”.
However, if there is any deficiency in the wording I would be happy to see an amendment tabled to make that point even clearer.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)
My Lords, I was expecting that we might have a longer debate on this issue—but it is good to see that there is much agreement about the need to strengthen the effectiveness of the Proceeds of Crime Act. It is good that the noble Baroness, Lady Smith of Basildon, shares the Government’s views on that necessity, and I welcome her speech.
As we have heard, Clauses 1 and 2, and Amendments 8, 13 and 14, all deal with the determination by a court of the extent of a defendant’s interest in named property. By extension, the provisions also deal with any third-party interests in the relevant property. The Serious and Organised Crime Strategy sets out a number of proposals to strengthen the Proceeds of Crime Act by, among other things, ensuring that criminal assets cannot be hidden with spouses, associates or other third parties.
Confiscation orders are the principal method used by law enforcement agencies for the recovery of the proceeds of crime. It is open to the defendant to pay off the order from whatever assets he or she has available. A confiscation order specifies the amount to be paid; it does not itemise particular assets that are to be forfeited. Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders. These claims also reduce the amount of money available for recovery, as the noble Baroness said. Of course, some of these claims may be perfectly legitimate but others will be spurious, designed simply to frustrate the confiscation process.
To tackle such abuses, which were clearly described by the noble Baroness, Lady Smith, and to help speed up the confiscation process, Clause 1 confers on the court a power to make a determination as to the extent of the defendant’s interest in particular property at the confiscation hearing. Currently, any claims on property are dealt with at the enforcement stage, which can complicate, lengthen and impede the confiscation process. Clause 2 augments the provisions in Clause 1 by introducing a requirement, as part of the confiscation process, for the prosecutor and defendant to detail any known third-party interest in property associated with the defendant in their statement of information and provision of information respectively.
Amendments 8, 13 and 14, tabled by the noble Baroness, seek to bring the determination of third-party interests forward in time even further to the commencement of a criminal investigation or to the point at which a restraint order is made. The amendments also seek to impose on the defendant the obligation to disclose the extent and location of their assets and any third-party interests in those assets. Under Amendment 8, a failure fully to comply would be a criminal offence.
To protect legitimate third-party interests, the provisions in the Bill afford third parties who have, or may have, an interest in the property the right to make representations to the court about the extent of their interest. The right to make representations also extends to the defendant. This will allow the court to consider the evidence presented, assess its credibility and come to a decision.
There are currently no express provisions for the court to deal with any third-party interests in any of the property that the court takes into account when determining the amount of a confiscation order. The legislation does, however, make provision for third parties to make representations where they have been affected by a restraint order. Third parties also have the right to make representations when an enforcement receiver is appointed by the court. Enabling a court to make a determination on a defendant’s interest in property at the earlier confiscation stage will strengthen the operation of the asset recovery process by closing loopholes in the Act that allow third parties to delay the confiscation process.
We do not consider that it is appropriate to bring the determination of third-party interests back to the restraint stage or, indeed, earlier, as is proposed in the noble Baroness’s amendments. Not all defendants will be made subject to a restraint order. For example, where a defendant owns only a house in the UK, it may not be cost-effective to apply for a restraint order when it can take time to sell a house. The relevant law enforcement agency would be made aware of any attempt to sell the property without the need for a restraint order.
Moreover, not all restraint orders lead to confiscation orders. If the subject of a restraint order is not convicted, the restraint order will be discharged. In such cases, it would be a wasteful use of limited judicial and prosecutorial resources to require the court to make a determination as to third-party interests in restrained property. It is for these reasons that the Bill provides for third-party claims to be considered at the confiscation hearing stage.
None the less, third parties may have an interest in restrained assets, and in such cases it would be appropriate for the court to be able to assess such claims—for example, if a third party contests a restraint order on the grounds that it is freezing property wholly owned by that person rather than by the defendant. Therefore, on the face of it Amendment 13 might be beneficial, in that it would confer a power for the court to order the defendant to provide information at any time under a restraint order.
Specifically, the court would be able to require the defendant to provide details of any third-party interests in property. However, this power is already available to the court under the existing restraint order provisions. The court can make any order it believes is appropriate to ensure that a restraint order is effective. This would include a power to order the defendant to provide information, including information concerning his or her and any third-party interest in property. It can be done at restraint order stage. Where a restraint order is not in place, a defendant can be made subject to the provisions of a disclosure order under the investigation powers that are in Part 8 of POCA. Such an order can be made at the start of a confiscation investigation and compel a defendant to answer questions or disclose information specified in the notice.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for his explanation. However, I will also say that I am disappointed. I have sat in his place, albeit in the other place, and I know that he will have a folder that contains my amendments with bold print at the bottom that says “Resist”. We have all been there. However I had hoped that with this Bill, where there is such a large amount of agreement between us on the objectives that we seek, there might be a little chink that would allow the Minister to open the door a little and say that this is something that we can look at and discuss. These amendments are not proposed in order to oppose what the Minister has said, as I have made clear. I do not doubt that the proposals before us in the Bill are better than the current situation; they improve on it. But are they the best that we can do?
I will withdraw my amendments today, but I ask the Minister to reflect further. His impact assessment refers to the delay in the process of identifying third-party claims as one of the reasons that some criminals are able to maximise, shall we say, the assets that they can hold onto. I hope that between now and Report the Minister and his officials will reflect further on the points that I have made today and understand why I proposed them, which was merely and only to seek to do things, not just better, but as best we can.
Baroness Hamwee (LD)
My Lords, I am opposing the Question that this clause stand part of the Bill simply to probe. I hope that nothing I say will take the Minister by surprise. I would like to use this opportunity to thank him and his officials for the factsheets that we have had and, in particular, for the Keeling schedules. I discovered that in my pile of copies of statutes, I had a copy of the Proceeds of Crime Act 2002. I then rapidly discovered how out of date that print was, so the material that we have been sent is very useful indeed.
This debate is closely tied to the previous one—still on third parties’ interests. Clause 4 is about receivers, and proposes an addition to the Proceeds of Crime Act involving proposed new Section 10A of that Act, which is inserted by Clause 1 on determining the extent of an interest in property. Essentially, the purpose of this stand part debate is to ask who deals with what, and when. How would all this operate? Who determines whether and when there has been no,
“reasonable opportunity to make representations”,
or whether there would be,
“a serious risk of injustice”?
I am of course quoting from proposed new Section 51(8B) —whereas proposed new Section 10A(1) in Clause 1 provides that the court, not the receiver, determines the extend of a defendant’s interest,
“if it thinks it appropriate to do so”.
My request, therefore, to the Minister is simply for him to explain the procedure.
Lord Taylor of Holbeach
My Lords, it was kind of my noble friend Lady Hamwee to thank those who are supporting me at official level in the Bill; I am supported by a very fine team, and I am grateful. I am also grateful for the fact that a number of noble Lords have taken time to talk to me about the Bill. That has helped us all to get an understanding of a complex measure. Those Keeling measures are needed in order to have the faintest idea about what is going on. Noble Lords will therefore understand the complexity of the matter and why the excellence of my officials is important to me.
Clause 4 deals with the circumstances in which an individual affected by a determination of interest may make representations to the court appointing an enforcement receiver. A court can confer certain powers on an enforcement receiver, including the power to realise property. This power is accompanied by a requirement to allow persons with an interest in the property a reasonable opportunity to make representations to the court.
As we discussed in the previous debate, the basic principle is that an appeal against a Section 10A determination as to the extent of the defendant’s interest in a property will be permitted only where the person was not given an opportunity to make representation to the judge who made the determination, or there is a serious risk of injustice. In cases where there is no receiver, the Court of Appeal will hear the appeal in the normal way. In cases where the court appoints a receiver, however, it is not bound by the determination and can hear representations. It is in effect hearing an appeal.
As interested third parties will generally have had an opportunity to make representations to the court prior to it making a determination of interest in property, the changes made by Clause 4 limit to certain circumstances the right of such parties to make further representations to the court appointing the receiver. As I have explained, it is not a right of appeal at large and does not allow representations to be made that are inconsistent with a determination, except under the two circumstances I described: first, when the affected party was not given a reasonable opportunity to make representations to the Crown Court before it made its determination; and, secondly, where the court considers that the determination would result in a serious risk of injustice to the person. These two circumstances mirror those in Clause 3, which set out the grounds under which the Court of Appeal may hear an appeal against a Section 10A determination.
So that we are in no doubt as to what it means, the “serious risk of injustice” will include an instance where an innocent third party with no links to criminality has an interest in a house that is to be sold to satisfy a confiscation order against a defendant. The innocent third party may have been out of the country when the determination was made and, consequently, had not received notification of the hearing. By contrast, it would not include instances where there has been an inconvenience to a third party—for example, if they had to move out of rented accommodation that was to be sold to satisfy a confiscation order. A serious injustice is not anticipated to be such a rare instance that it would be considered to be an exceptional circumstance. It will be a matter for judicial discretion, based on the facts of the individual case.
The clause enables an interested third party to make representations where their interest in the property came to light only after the Crown Court had made its original determination. Subject to the court’s consideration of any such representations, and to the outcome of any appeal, a determination made by the court is binding on the receiver. As I have said, in cases where there is no receiver appointed, any appeal will be dealt with by the Court of Appeal. This represents an equitable balance between the effective enforcement of confiscation orders and the important rights of third parties. On that basis, I beg to move that Clause 4 stand part of the Bill.
Baroness Hamwee
My Lords, that is very helpful. I commented to my noble friend when we discussed Part 1 that flow-charts might be quite useful. As he has described the sequence of events, it occurs to me that flow charts or some sort of fairly straightforward step-by-step explanation would be particularly helpful to third parties who get caught up in these proceedings. A defendant will be likely to have legal representation and advisers who can assist with what happens at what stage. A third party may suddenly find that he or she is affected and they ought to be able to find out what steps are available to make representations and how they should be made, without necessarily having to go to the expense of instructing lawyers themselves.
The right thing to do would be to make this user-friendly to people, about whom we should not assume any degree of guilt or their being reprehensible at all. I just use this opportunity to air that thought and of course I am not going to resist Clause 4.
Baroness Hamwee
Baroness Hamwee
My Lords, the first amendment is an amendment to Clause 5, which will introduce a new Section 11 to POCA. The proposed new Section 11(8) provides for the prosecutor to have an opportunity to make representations regarding the time for payment. Clearly, the defendant must have an opportunity as well. I tabled the amendment simply to ask my noble friend whether he can explain when that opportunity would be, and whether he can say whether proposed new Section 11(8) concerns the prosecutor’s response to the defendant’s representations, which are covered elsewhere—in existing legislation if not in the Bill. I beg to move.
Baroness Williams of Trafford (Con)
My Lords, Clause 5 includes provisions designed to minimise delays in the confiscation process. This is achieved by amending Section 11 of POCA to make it crystal clear that the full amount that is ordered to be paid by the court must be paid on the day on which the order is made, unless the court is satisfied that the defendant is unable to do so, for example, because they need time to realise their property.
The maximum additional time allowed for a defendant to pay their confiscation orders has been reduced from 12 months to six. There will also be a further restriction on the length of an extension of the time to pay limiting it to more than is necessary, for example, to realise funds from a specific asset.
My noble friend has indicated that this amendment is designed to tease out whether the defendant has a right to make representations to the court about the time for payment. She has rightly pointed out the fact that the proposed new Section 11(8) expressly confers on the prosecutor the right to make representations, but no such express right is conferred on the defendant.
I can assure my noble friend that the defendant will indeed be able to make representations to the court. However, in view of the way in which the process will operate, it is not necessary to provide for this in the legislation. As I have explained, the default position is that a confiscation order will be payable on the day that it is made. This is the current position. We do not believe that it is impractical. Certainly, for lower value orders, there is no reason why the defendant cannot visit the fines officer and discharge the confiscation order before leaving the court.
The court will not be expected to allow additional time for payment on its own motion. In practice, the court will only be in the position to consider making an order under proposed new Section 11(2) of POCA to extend the time given to the defendant to pay their order if the defendant has made representations to the effect that they need more time to pay their order or part of it. This will be done as part of the confiscation hearing.
Similarly, under proposed new Section 11(4) of POCA, it will be for the defendant to make an application to the court to extend the period allowed for payment. It is implicit in making such an application that the defendant will set out his or her arguments for being afforded more time to pay the confiscation order. New Section 11(8) is intended to ensure that the prosecutor has the right to respond to the case made by the defendant. Having heard the explanation, I trust that my noble friend will agree that the amendment is unnecessary.
Baroness Hamwee
My Lords, the noble Baroness will know that I was concerned about the very tight provisions of new Section 11. She has explained that the defendant will have an opportunity to make representations at the time. That is reassuring, because it is almost never possible to realise an asset on the day that an order is made and it is often not even possible to transfer money immediately. What she has said about the processes is helpful and I am grateful to her for her explanation of proposed new Section 11(8). I beg leave to withdraw the amendment.
Lord Rosser
“(4A) In considering whether to make a compliance order the court must, in particular, consider whether any restriction or prohibition on the selling of property subject to the confiscation order and located overseas ought to be imposed for the purpose mentioned in subsection (2).
(4B) The court may attach penalties to a failure to comply with provisions made pursuant to subsection (4A).”
Lord Rosser (Lab)
The three amendments in this group are concerned with recovering money from overseas or in response to such requests from overseas jurisdictions. Many investigations into stolen assets parked in this country do not get off the ground because the Home Office routinely fails to respond, or is unable to respond, to requests for help from other countries. The Home Office has shown in Parliamentary Answers that, despite UK courts freezing more than £200 million at the request of overseas jurisdictions, not a single penny of this has been repatriated to the country asking for the money. Since 2010, it seems that only two bilateral agreements have been signed with overseas jurisdictions to ensure co-operation on mutual legal assistance.
Last year, the former head of the UK financial intelligence unit—part of the National Crime Agency—indicated that when an investigation was initiated from the victim country, and moneys were suspected to be in the UK, the request went out through all the proper channels but there was no great keenness to comply, as there was a mindset that we could just be giving ourselves a headache. Assuming that is a fair analysis, such an approach does not help foster greater reciprocity at international level and cannot help us in securing co-operation when we want it from overseas jurisdictions. The Minister may well contest this analysis, since it suggests there are somewhat different reasons for the problem from those given in the Government’s impact assessment.
It would be helpful if the Minister could provide information on the number of asset recovery requests received from foreign authorities over the past three years, how many have been referred to investigative bodies and how many cases are pending. The World Bank estimates that, each year, developing nations lose between $20 billion and $40 billion through corruption. Between 1994 and 2009 only $5 billion of stolen assets were recovered globally—which is apparently less than 2% of the lowest estimate of the amount stolen, according to an analysis by the World Bank and the United Nations Office on Drugs and Crime.
Amendment 22 in this group requires the Secretary of State to set up,
“an independent review of the effectiveness”,
of our mutual legal assistance arrangements,
“with overseas jurisdictions in cases concerning the proceeds of crime”,
since the figures that are available, the comments made by people who have been on the inside and, indeed, the rather different causes of the problem that are set out in the Government’s impact assessment all strongly suggest that everything is not well. Criminals here also seek to hide their ill gotten gains overseas, and a significant proportion of unpaid Serious Fraud Office confiscation orders are thought to relate to funds located overseas. Criminals put their assets where the UK authorities find it hardest to recover them, which usually means a jurisdiction with which we have no standing mutual co-operation arrangements. Even where this is not the case, without mutual recognition of confiscation orders in the jurisdiction where the assets have been hidden, those charged with enforcing the orders effectively have to relitigate the issue abroad, which can be hard, slow and not very effective.
In Clause 7, proposed new Section 13A provides that in every confiscation case the court will be required to consider making an order to ensure that a confiscation order is paid. In particular, it will have to consider placing a “restriction or prohibition” on the defendant’s overseas travel to prevent that defendant travelling abroad to dispose of his or her assets. Perhaps we ought to consider going further. At the moment, there is nothing the courts can do about people who sell overseas property funded through proceeds of crime because it is in another jurisdiction. We consider that a court should be in a position to fine or jail someone, possibly by making it a contempt of court, if he disposes of property based overseas that is subject to a freezing or confiscation order. Amendment 2 provides for Clause 7, on compliance orders, to be amended to that effect.
We also consider that there should be a consultation on introducing a legal obligation to repatriate liquid assets that are subject to a restraining or confiscation order and which appear to have been moved overseas. Amendment 21 in this group provides for a consultation along these lines. I hope the Minister will be able to give a helpful response to the amendments in this group, since we are at one in seeking to make sure that crime does not pay.
Lord Taylor of Holbeach
My Lords, Amendment 2 relates to compliance orders. Under the provisions in Clause 7, the court will be required to consider making, in every confiscation case, any order it considers appropriate to ensure that a confiscation order is paid. Under the new order, the court will be able to impose any restrictions, prohibitions or requirements it believes appropriate to ensure that a defendant pays a confiscation order and that the order is effective. A compliance order will normally be made at the time that a confiscation order is granted. If the court determines that a compliance order is not necessary at that confiscation hearing, the prosecutor will be able to apply for an order any time afterwards as long as the confiscation order remains unpaid. This type of order is not new to the Proceeds of Crime Act 2002, as the Act already confers on the Crown Court the power to make any,
“such order as it believes is appropriate for the purpose of ensuring that the restraint order is effective”.
Amendment 2 would require the court to consider attaching to a compliance order a restriction on selling overseas property that is the subject of a confiscation order. It is, however, already possible to impose such a restriction as part of a restraint order, as the noble Lord will understand from what I have just said. A restraint order can be obtained at a significantly earlier stage in an investigation—for example, before the defendant has been charged. Such a restriction may also be added to a compliance order where there is no restraint order in place. As such, it is not necessary to make express provision for the court to consider such restrictions or prohibitions. The court already has that discretion. It is worth adding that, once a confiscation order has been made, it may be necessary to sell property to enable the order to be paid off. In high-value cases, this may fall to a court-appointed receiver. In addition, not all defendants will have assets overseas so it would not be necessary to require the court to consider imposing such a restriction in every case.
Amendment 21 seeks to confer on the court, when making a restraint or confiscation order, a power to require the defendant to repatriate liquid assets held abroad back to the UK. The Proceeds of Crime Act already allows the court to make any order that,
“it believes is appropriate for the purpose of ensuring that the restraint order is effective”,
as I have already said. That could include, for example, a requirement for liquid assets to be returned to the UK. Breach of the terms of a restraint order, including selling property that is frozen under the terms of the order, will be a contempt of court and, as such, punishable by a term of imprisonment of up to two years.
Finally, Amendment 22 calls for a review of mutual legal assistance. The movement of money and assets quickly across borders means that it is essential that the UK seeks the assistance of its international counterparts so that it can quickly freeze and recover the proceeds of crime, and it can likewise assist jurisdictions that ask the UK for assistance. Historically, international co-operation on asset recovery has been poor, as the noble Lord, Lord Rosser, said. We depend on other countries to enforce our orders on our behalf, but these orders may not be given priority. Some countries are witting or unwitting safe havens for criminal assets.
Lord Rosser
I thank the Minister for his reply on this group of amendments. As I understand it, the Minister was saying that, as far as Amendments 2 and 21 are concerned, the current legislation already gives the power to do what is set out in those amendments—at least, I think that was the thrust of the Minister’s reply. Obviously, at least if I have understood the essence of his reply, I just wish to leave the matter in the context that clearly I will wish to read in Hansard the details of the Minister’s response.
On his response to the last issue, on mutual legal assistance, I am sure that the Minister will understand if I say that I will want to read it, since he gave some statistics and information on the current situation. I shall read that with interest when Hansard appears.
Lord Taylor of Holbeach
The noble Lord asked me some questions about numbers, which I did not have to hand in my papers. I am willing to see whether I can find further information which I can give him, because I agree that it is an area where a modest improvement in performance could lead to considerable improvement in the amount of money that we recover.
Lord Rosser
I am grateful to the Minister for those comments. I suppose that part of the reason for my saying that I would want to see the detail of the figures that he gave was to see whether he had in fact responded to the questions that I asked, but if he, too, is going to look at that, and if there are parts to which he did not respond on which he will write to me, I will be grateful. In view of that, I beg leave to withdraw the amendment.
Lord Harris of Haringey
“13C Application of assets arising from the proceeds of crime to investigating, prosecuting or enforcement authorities
Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be applied equally to the investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”
Lord Harris of Haringey (Lab)
My Lords, aren’t we doing well? When was the last time that we got through the first seven clauses of a Home Office Bill within an hour of starting Committee stage? The Minister must be doing something right on this occasion.
However, I will try to improve our batting average now. At Second Reading, I declared my interest as chair of the National Trading Standards Board. In that capacity, I was invited four months ago by Yeading Junior School to attend an assembly that was based around lesson plans which had been funded by the Proceeds of Crime Act. The lesson plans were produced by the Illegal Money Lending Team for England, based in Birmingham, which my board funds. They were designed to teach junior school children how to use their money, how to save, how they should avoid debt and, above all, how they and their families should avoid loan sharks.
The Minister’s right honourable friend the Secretary of State for Education, with whom I know his department has a continuing feud, would no doubt be delighted to discover that those nine and 10 year-olds put on a play that included a section on avoiding loan sharks conducted entirely in Latin—which is not something that I thought many children in the London Borough of Hillingdon were used to speaking. None the less, it was an interesting performance; it was not, I hasten to add, a core part of the lesson plans produced by the Illegal Money Lending Team.
The point about the initiative was that it inspired young children to learn about the dangers of them and their families being ensnared by loan sharks. The funding for it had been provided by POCA moneys taken from loan sharks who had been convicted in the courts. It is an example of some of the community work that the Illegal Money Lending Team supports through funds confiscated from loan sharks, but it also demonstrates the value that can be gained from the Proceeds of Crime Act 2002.
It is clearly a valuable and important mechanism, and I think that all noble Lords who have spoken in Committee today share a desire to see it strengthened. It is good, because it hits criminals where it hurts most: in their pocket. They are often less concerned about the formal penalties that they might incur than the fact that their ill gotten gains will be taken from them.
The Minister has told us how the Bill will make it more difficult for criminals to evade confiscation. That is all to the good and welcome—although, as we have heard, there are possibilities for making the provisions stronger and no doubt we will continue to pursue them as the Bill proceeds. This amendment would ensure that a greater share of the assets recovered from offenders was reinvested in the communities and neighbourhoods affected by their criminal activities and that those funds should be put towards preventing crime and addressing its consequences.
At Second Reading the Minister said that there would be a review of ARIS, which on this occasion is the asset recovery incentive scheme rather than a foreign terrorist organisation with a similar name,
“to ensure that it works to support front-line agencies”.—[Official Report, 16/6/14; col. 697.]
When the Minister responds, I hope that we will have some clarification from the Government about the terms of the review and whether they will consider placing ARIS on a formal legislative basis and allow local authorities in particular—although the same arguments apply to the police—in their role both as investigating authorities but also as prosecuting authorities to receive a greater share of the proceeds of crime. The most likely use of these funds is that they would be applied within local government to funding accredited financial investigators in trading standards and community crime prevention projects. They could also support community crime prevention projects that had proved very successful.
The amendment would place ARIS on a formal legislative basis and would allow local authorities in their roles as both investigating and often prosecuting authorities to receive potentially more than 50% in the division of the proceeds of crime, which could then be applied to crime prevention. The most common use of the incentive payments that local authorities receive is to fund the posts of accredited financial investigators. The reason that these are important is that they make a very significant contribution to the work of trading standards. They enhance investigations by providing intelligence support. They undertake the money-laundering investigations and ensure that the proceeds of crime are recovered through confiscation and cash forfeiture.
There are a number of examples of the positive work that accredited financial investigators do. This includes dealing with landlords who have illegally converted properties into houses of multiple occupancy and then rented them to vulnerable members of the community. I believe that the London Borough of Hounslow prosecuted a case such as this in 2010, which resulted in a confiscation order of £180,000. There are also examples where one of these accredited financial investigators has had an essential role in identifying the victims, resulting in them being compensated. What often happens in these cases is that a lot of material is seized but it requires detailed financial investigation to track down where the moneys have come from and who has actually been defrauded by the fraudsters concerned. A major case was undertaken by Cambridgeshire County Council involving rogue traders, which resulted in the successful prosecution of 15 defendants, who between them received combined prison sentences of 40 years and were served with a £250,000 compensation order—all of which was then paid to the victims who had been defrauded of their life savings.
The reason why the incentivisation scheme is so important—here I am talking about local authorities but exactly the same arguments apply to the police—is that it enables them to fund the specialist resource to pursue some of the financial aspects. It means that the financial investigation can be integrated into the rest of the investigation right at the beginning. That is much more cost-effective than pursuing it at the end of the investigation to see whether assets can be saved. It also means that there is much more depth in the investigation that takes place. It is important to see if the provisions can be strengthened in that way.
The London Borough of Enfield has used the money that it has obtained from the Prevention of Crime Act scheme since 2011 to fund a specific post. That has had a series of impacts: it has allowed it to undertake the first prosecution nationally for money laundering against an illegal poker den, where the defendant was sentenced to 15 months, and to provide financial evidence in a case against a trader convicted of operating a fraudulent HGV training school, resulting in a 44-month conviction following a month-long trial. There is a series of examples of where the presence right at the beginning of an accredited financial investigator has enabled the local authority to pursue the case in much more depth and enable it to go forward.
Lord Deben (Con)
My Lords, I will insert a single sentence here, although it may be rather a long one. I am afraid that my noble friend may have great difficulty in doing what the noble Lord suggests because he will come into conflict with a deep and entirely erroneous Treasury view about hypothecation. For all my political life, I have fought the battle for hypothecation, which is the only way we will get people to accept a whole range of things in future.
It was extremely successfully done on the landfill tax, but the money was then stolen by the incoming Government, who did not understand. The Treasury had hated it in the first place; it had been forced through by the then Chancellor of the Exchequer, my right honourable friend Kenneth Clarke. Immediately after he went, the Treasury mandarins got the money back again because they do not like someone else deciding how the money shall be spent. I beg my noble friend to stand firm against that wholly unacceptable attitude.
The Pope was right, in the 1920s, when he talked about subsidiarity being the basis of democracy. He was, of course, attacking fascism and communism. I am afraid that bureaucratism is just as damaging in always trying to concentrate decisions about how money shall be spent in the hands of the Treasury. I think that the more people who make decisions about how it shall be spent, the more we will be able to make democracy work. Obviously, there have to be restrictions and some overall view, but I hope that my noble friend will take this opportunity to fight like a tiger for an essential part of any sensible democracy: hypothecation. Hypothecation should be a tick rather than a cross when something such as this is put forward.
Baroness Hamwee
My Lords, I wonder whether Hansard will be able to resist its usual refusal to let us put lots of “ands” and “buts” in very long sentences.
I have been trying to think of something to say in Latin to the noble Lord, but my A-level Latin is too long ago for me to be able to do it. However, he is probably asking your Lordships the sort of question to which we should answer yes. I remember that from the very early days of my Latin education.
I am certainly on the yes part of the spectrum of answers to this, in principle. I think a large part of the problem is what I unkindly call “turf wars” between the MoJ and the Home Office about who should have the money when the proceeds are recovered. I realise it is more complicated than that.
On the wording of the amendment, I wonder whether it is possible to identify the communities and neighbourhoods affected in an effective and straightforward manner, if at all. For instance, on the proceeds of crime of someone high up in an organised crime organisation dealing with drugs, can you pin down the communities and neighbourhoods affected in the way suggested? I am very attracted to money going towards crime prevention and assisting those who are affected by crime, but I am just not quite sure about this provision. However, the questions the noble Lord asked the Minister about ARIS and the wider questions about how the proceeds of crime when recovered are applied are very important.
Lord Phillips of Sudbury
My Lords, on the face of it, this is a beguiling amendment, not least because of the way the noble Lord, Lord Harris of Haringey, moved it by giving an example of helping a primary school understand a bit more about the way our complicated world works. There is no one in this House who defers more than me to the need for this country and this Parliament to help our citizens have a better idea of what it is to be a citizen in our barbarically complicated society.
I concur with my noble friend Lady Hamwee, and I think there is perhaps another problem with the wording of the amendment in that it simply talks about,
“reinvestment in the communities and neighbourhoods affected”,
which seems as wide as the Atlantic Ocean and gives no reinvestment guidance about what, why or wherefore.
I have a deeper problem with the amendment. We heard the noble Lord, Lord Rosser, give the example of $20 billion to $40 billion that should be recovered from frauds in developing countries and is not. We heard other examples from my noble friend Lord Taylor of Holbeach of the abject failure of our current laws to achieve their purpose. I am not in favour of doing anything to diminish the resources available to the prosecutorial authorities for seeking to make more as regards compliance with the manifold laws we already have. It is a sort of scandal that we go on passing law after law with the most perfect of purposes, but then fail utterly to give those charged with implementing those laws the wherewithal to do that.
My noble friend Lord Taylor of Holbeach talked with some satisfaction of six advisers. I have to tell him that when you are up against the big, bad guys, a team of six will look rather small, and he is talking about six to cover the whole landscape. Therefore my reservation about the amendment is simply that if its effect is to reduce at all the current grotesquely inadequate resources that go toward compliance, I am afraid that I am not for it.
Lord Bourne of Aberystwyth (Con)
My Lords, I, too, will speak, albeit briefly, with some words of caution about this amendment. I do not think anybody could resist the seductive arguments put forward by the noble Lord, Lord Harris of Haringey, on the need to fund programmes. However, at present the asset recovery incentivisation scheme allows agencies to get back 50% of what they recover from the Home Office. That scheme is flexible in its application, and allows the money to be spent to drive up asset recovery and, where appropriate—those words are important—to fund local crime-fighting priorities for the benefit of the community. I know that the intention of the noble Lord was entirely benevolent and helpful; his example of Latin-teaching in Hillingdon as a sort of cheerleader for the Secretary of State for Education demonstrated that. However, the words “where appropriate” are extremely important.
If one looks at the wording of the noble Lord’s amendment, it is prescriptive. It provides for a three-way split of the proceeds for reinvestment in the communities and neighbourhoods affected by the relevant criminal action. There are no ifs, no buts, and no discretion. Sometimes that would work, and sometimes not. My noble friend Lady Hamwee referred to a situation relating to drugs where it would not. However, that is also true, in spades, of something like insider dealing. That is and should be a crime, but there is no classic victim in the personal sense. The victim, if anything, is the Stock Exchange or the City of London. Under this amendment, we might find that the noble Lord is funding the livery companies or Mansion House. I am sure that he does not intend that, but there is a danger with the way in which the amendment is phrased.
Therefore I have great sympathy with what he seeks to do. However, given that a review is being conducted at the moment, the appropriate thing is to wait to see what that review throws up. I also look forward to hearing what the Minister says about that review. Then would be the time to look at this to see how we can get more money used in crime-fighting rather than by means of something as prescriptive as is the wording of this amendment, which has no discretion at all.
Baroness Smith of Basildon
My Lords, I have noticed, in debates on Home Office legislation, that my noble friend Lord Harris of Haringey seems to attract adjectives. In the previous Bill we looked at he was described by the Minister as being “mischievous”, and today the noble Lord, Lord Phillips, described him as “beguiling” and the noble Lord, Lord Bourne, described him as “seductive”. I dread to think where we will go as the debate continues.
The issues the noble Lord raises are interesting and go to the heart of transparency on this issue, which is about how we want to engage the public and for them to understand what happens to money brought in by the Government. The noble Lord, Lord Deben, made an interesting point on hypothecation, which comes down to trust. The public want to know not just where their taxes go but what happens to money that is brought into the Government.
I was struck by my noble friend Lord Harris’s examples from the education sector. I was not aware of those examples; I do not know whether the Minister was aware before taking the Bill forward. If neither he nor I were aware, were his officials aware? Who does know what happens? This amendment does us a great service, serving to remind us that we have a duty to make this clear to the public. If we are trying to engage them in support of legislation that involves confiscation, fines, et cetera, there is an obligation on Governments and on Parliament to ensure that the public are aware of where that money goes. I hope that the Minister will take some of those comments on board and that it is something that we can return to, in terms of a wider public understanding of what happens to the money and how it is used for the public benefit. That comes to the heart of the points made by the noble Lord, Lord Deben, and by the amendment of my noble friend Lord Harris of Haringey.
Lord Taylor of Holbeach
I have been trying to think of a nice adjective to describe the noble Lord, Lord Harris of Haringey. I know that he did not really like me calling him mischievous. However, this amendment has been very worth while because it has enabled the House to discuss this matter. The noble Baroness is absolutely right; along with other noble Lords, I was not particularly aware of the working of this mechanism, so it has been useful to have this debate. The description the noble Lord, Lord Harris, gave of how the system works is absolutely right; it is dealt with under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme.
The objective of the scheme is to provide law enforcement agencies with incentives to boost asset recovery as a contribution to reducing crime and delivering justice by giving them a direct stake in the proceeds they generate from that work. The speech by the noble Lord, Lord Deben, was very useful; I do not care whether his sentences are short or long, they are of high value. It was an extremely interesting contribution, as were the contributions of all noble Lords, including that of my noble friend Lord Phillips of Sudbury. They were very much to the point, because making the most of the potential of this money is really important. The scheme is a non-statutory mechanism which has advantages for returning to law enforcement, prosecution agencies and the courts a proportion of the assets they recover. Public bodies with the functions of an investigator, a prosecutor or an enforcement authority can use the powers within POCA to recover criminal assets and can become part of the scheme thereby.
It is also important to remember that the scheme does not just apply to money recovered under confiscation orders but also, as the noble Lord demonstrated, to assets recovered through the other routes to recover assets provided for in the Proceeds of Crime Act, such as the seizure and forfeiture of cash, the civil recovery scheme and the taxation of criminal proceeds. Under the existing scheme, for assets recovered by means of a confiscation order, the Home Office retains 50% of the recovery receipts and returns the remainder to investigation agencies, which receive an 18.75% share of the receipts, prosecution agencies, which also receive an 18.75% share of the receipts, and enforcement agencies—in most cases this is the Courts Service—which receive a 12.5% share of the receipts. For cases where cash has been forfeited under the cash seizure powers in the Proceeds of Crime Act, the Home Office retains 50% of the receipts and the investigative agency—in the majority of cases this is the police, but it is not always so—retains the other 50%.
The use to which each agency decides to put the money received under the scheme is a matter for that agency. Because amounts received through asset recovery are unpredictable, and given that it depends on the nature of the cases dealt with by each agency each year, we have not laid down any specific guidance on the use of such money. However, we have previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance. I sense that noble Lords would feel that that is the right thing to do. The noble Baroness, Lady Smith, made clear her support for the needs for resources to drive up performance. My noble friend Lord Phillips of Sudbury felt that that was a primary objective for this money. But also, when appropriate, it can fund local crime-fighting priorities on behalf of the benefit of the community.
The Home Office has monitored the scheme annually since its inception. The results of that monitoring show that more than 90% of money distributed through the scheme is reinvested in asset recovery work, such as the recruitment of financial investigators. If we get more money, we will be able to have more investigators—and I think that everybody can see that this vicious circle could be a virtuous circle, if we implement it correctly. As the noble Lord, Lord Harris, said, these investigators carry out the recovery work, and there is a balance that can be spent on police operations and community projects. Some examples of the community work that has been paid for include alcohol awareness and crime reduction projects, mentoring programmes and assistance for elderly and vulnerable people. The noble Lord, Lord Harris, gave a classic example of community work in the confiscation of money. His own field case, which he also mentioned, is a very good example.
Over the past three years, more than £238 million has been returned to front-line agencies. However, we believe that the proposed changes that are being made in the Bill will ensure that agencies are able to apply for and enforce more orders more successfully. This in turn should lead to more funds being received by front-line agencies through the scheme. The share of the money that is retained by the Home Office forms part of the department’s core budget line and, as such, is put towards the delivery of front-line services through mechanisms such as police grant.
One key objective of the Government’s criminal finances improvement plan, which was published on 19 June, is to ensure that the Asset Recovery Incentivisation Scheme works effectively for front-line agencies. It is with that in mind that the review has been set up, and we intend to complete it by the end of the year. I hope that it will please noble Lords to note that the emerging findings from the review will be presented to the board in September, so if this Bill takes its normal course we should be able to update the House on Report on how that review is going.
The noble Lord asked about the terms of the review. The whole purpose is to investigate the process and see how we can make it better. It is being developed with the aim of ensuring that the scheme works effectively for all agencies charged with asset recovery responsibilities. All will be involved. For example, the Local Government Association will be a consultee within the process, with anyone else who is currently involved in the asset recovery process.
I was asked—or rather, challenged, “Is it appropriate to leave an organisation for distributing money on this non-statutory basis, or should we consider a statutory alternative?.” I think that the debate has shown that there are ways of making the process work well without a statutory basis. But of course, that is the sort of thing that any review should properly consider.
I hope that the noble Lord, Lord Harris, will be generous and withdraw his amendment. We in our turn are grateful to him for giving us the opportunity of describing the working of ARIS, and the review that we have in mind.
Lord Harris of Haringey
I am grateful to the Minister for that response. I am also grateful to the other noble Lords who have contributed to this short debate, especially the noble Lord, Lord Deben, for his comments on hypothecation. I have always appreciated—although this may be a difficult thing for someone with his religious commitment to hear—that he is something of a heretic in such matters. His is a heresy that I share, in terms of making things happen, and in the belief that a bit of hypothecation can sometimes mean that we achieve results all over the place.
Some of the points that have been made require a moment’s clarification. I do not think that the identification of neighbourhoods, which the noble Baroness, Lady Hamwee, mentioned, is necessarily a problem. As the Minister has made clear, 90% of the money distributed through the incentivisation scheme is ploughed back into financial investigators; the noble Lord, Lord Phillips, also made that point. Only a small proportion goes beyond there, and the authorities concerned, whether they are local authorities or the police, make good use of it. I was involved with the board of the Safer London Foundation, which made very good use of the Proceeds of Crime Act moneys that the police received, in connection with local community projects around London. The authorities concerned spend a great deal of time in deciding what is and is not an appropriate use of those resources.
The important point behind the amendment is the need to think carefully about how we maximise the money recovered, and I hope the review will do that. I know that the Minister is part of a wing of the Government that is committed to the reduction of taxes, but in this context there is, essentially, a 50% tax, because the money goes into either the Home Office or the Treasury, depending on the precise route—although I rather suspect that the Home Office does not “feel” the money that comes back to it, because it all disappears into the Treasury and goes through into the main funding of the Home Office.
If 50% of the money is retained by the Home Office or the Treasury, there may be little incentive for the agencies concerned to pursue complicated financial investigations that are not essential to achieving a conviction but are additional to achieving a conviction. If the proportion distributed through the incentivisation scheme were higher, substantially more money might be recovered, because people would be incentivised, and would say, “This really is worth investing those resources in”. The Home Office and the Treasury might then find that they got more resources rather than less. I hope that the review will consider these issues, and I look forward to hearing—perhaps by Report—about its developing findings. On that basis I am happy to beg leave to withdraw the amendment.
“Confiscation orders: consultation
(1) The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders.
(2) A consultation under subsection (1) must, in particular, seek views on the following matters—
(a) whether the court, when making a confiscation order, should be able to compel a suspect to return to the United Kingdom any realisable liquid assets overseas;(b) whether to provide the court with the power to fine or imprison a defendant who sells property subject to a confiscation;(c) whether to provide the court with the power, when making an order, to require the defendant to disclose any interests, including third party interests, in realisable property.(3) The Secretary of State must report to both Houses of Parliament on the outcome of the consultation under subsection (1) no later than 31 December 2014.”
Baroness Smith of Basildon
My Lords, in moving Amendment 4, I wish to speak also to Amendments 9, 11 and 12. Amendments 4 and 9 are similar: both require a consultation on ways to strengthen confiscation orders and restraint orders respectively. Amendment 11 addresses the disposal of assets. At present, one of the conditions of obtaining a restraint order is for the prosecution to show that there is a real risk that the defendant will dissipate his or her assets. These amendments would remove this requirement. As regards Amendment 12, although restraint orders are ex parte, many defendants then appeal against the orders and incur significant defence costs. If they win the appeal, their costs are reimbursed by the state. However, these can be high and can act as a disincentive for prosecutors to get a restraint order in the first place. Our amendments propose that any costs recoverable by the defendant would have to be capped at legal aid rates. These amendments seek to strengthen the confiscation and restraint orders. All these issues are linked. Indeed, I think that all the issues we are debating today around the proceeds of crime are linked, but this matter is at the very core of the process.
In its report, the National Audit Office said that the confiscation of criminal assets is “just not working at the moment”. Amyas Morse, the head of the National Audit Office, also said that,
“The use of confiscation orders to deny criminals the proceeds of their crimes is not proving to be value for money … nor … a credible deterrent to crime”.
That is a pretty sorry state of affairs and one which this Bill and the debates we are having in your Lordships’ House should seek to address. Whatever the reasons for that situation, those criticisms place a duty on your Lordships’ House to address the problem, to see whether legislative changes are needed and to question whether the law as it stands is being effectively and properly enforced, as the noble Lord, Lord Phillips, who is no longer in his place, said a moment ago. When criminals get to keep £99.74 in every £100, there is clearly a significant problem and it is right that this should be addressed and we support the Government on that.
In 2012-13, 6,392 confiscation orders were made, seeking the return of £318 million from a total pot, as it were, of £1.6 billion that had been illegally acquired. Eventually, only about £133 million was recovered and, although there are still some outstanding debts, the amount recovered will not rise significantly above that figure. I am curious and concerned about that issue. I hope that the Minister will comment on that and give an assurance that this issue has not been deprioritised by the Government. I hope that the Minister will also comment on the reasons why we have seen a slight reduction in the number of confiscation orders, which compounds the problem of getting money off the criminals once the orders have been issued. As I said, in 2012-13, only 6,392 orders were made, down slightly from 6,431, whereas we might have expected to see an increase in that figure.
However, this is not about just the number of orders; the most crucial point is compliance with the orders. I welcome the fact that there are now moves afoot to remedy this situation, close some of the loopholes and strengthen compliance with confiscation orders. However, I made a similar point in the earlier debate on third-party claims—namely, given the scale of the problem we are facing, can we not think bigger about this and try to do better? In our previous debate, the Minister said that the situation had improved. However, I put it to him that, if we are looking to improve matters, we should do the best we can, seek to be as strong as we can and close any loopholes.
I wish to address a number of issues. The first is the time limits for payments. The Proceeds of Crime Act currently provides that a confiscation order is payable immediately upon the making of the order unless a defendant can show that there are exceptional circumstances why this should not be the case, in which case they are given up to 12 months to pay, as we heard earlier. We recently highlighted the problems with this blanket approach. Some assets—this was referred to in an earlier debate and the Minister reaffirmed this—for example, money in bank accounts, are much easier to realise than other assets, which simply increases the likelihood of the defendant distributing or hiding their assets.
We are grateful to the Government for taking those points on board and for proposing action on this matter. Clause 5 now makes it clear that the full amount ordered to be paid must be paid on the day on which the order is made unless the court is satisfied that the defendant is unable to do so and includes a restriction on the circumstances under which an extension can be granted. That is welcome and there was a helpful explanation on that earlier. We also welcome the fact that Clause 7 requires the court to consider making an order that it considers appropriate to ensure that the confiscation order is paid. As discussed earlier, this includes placing a ban on overseas travel.
However, we want to probe other ways in which confiscation orders can be strengthened. Our amendment calls for a consultation on this. I hope that the noble Lord will be more sympathetic towards our proposals, given that we are proposing consultation. The areas that we would like to look at concern whether the court should be able to compel a suspect to return to the UK any realisable asset that is located overseas, to jail or fine someone who sells property that is subject to a confiscation order or to require a defendant to disclose any interests in property. Of course some of this touches on issues that have already been discussed. We would also welcome discussions on other ways to improve the orders; the noble Lord, Lord Phillips, earlier raised the issue of an individual’s assets being owned by a company that owns a company that owns a company, so that they are hidden in a labyrinth of financial dealings.
One way of strengthening the system generally is to strengthen restraint orders. The effect of a restraint or freezing order is to freeze the assets of a defendant, so preventing them from dissipating all or some of their assets before a confiscation order is made. Investigators and prosecutors agree that this is the most critical stage of the process. Early freezing of assets, at the outset of an investigation, minimises the risk that assets will be dissipated or disposed of. However, according to the National Audit Office, the number of restraint orders secured by prosecutors is falling sharply. I quote from the NAO report:
“Only 1,368 restraint orders were imposed in 2012-13, down 27 per cent from 1,878 in 2010-11. Many stakeholders believe opportunities for successful restraints are being missed and that the Crown Prosecution Service is too cautious in applying for restraint orders”.
The report also outlines that:
“Throughout the criminal justice system there is insufficient awareness of proceeds of crime and its potential impact. Within law enforcement and prosecution agencies, few officers and staff have good understanding about proceeds of crime legislation. In many cases effective powers, such as restraint orders, are applied late or not used at all, and specialist financial investigators are introduced to cases when audit trails have already run cold”.
Given that such orders can be applied for as soon as a criminal investigation is started, that would seem to address the problem. However, the current test is too high, because it must be shown that there is reasonable cause to believe that a defendant has benefited from his or her criminal conduct and that there is a risk that assets may be dissipated. Earlier this year, we called for the threshold needed to gain a restraint order to be lowered, with the onus to be placed on the suspect to show why assets should not be restrained, rather than on the investigating agency.
We therefore welcome the fact that Clause 11 reduces the test from “reasonable cause to believe” to “reasonable grounds to suspect” that a defendant has benefited from their criminality, which aligns it with the test for an arrest under the Police and Criminal Evidence Act 1984. The Bill also provides that a restraint order can be kept in place against a defendant for a reasonable period between the quashing of a conviction and the start of the proceedings for a retrial, and it closes the loophole that the restraint order is removed while the retrial proceedings are commenced, during which time the defendant’s assets are at risk of being dissipated.
However, the amendment that we have tabled today goes further than this, as we think that it should be up to the defendant, not the prosecution, to establish that there is no risk of dissipation. Alison Saunders from the CPS referred to this in her evidence to the Public Accounts Committee, saying that it was,
“quite a high test to look at”.
Another issue, of course, is the cost to the CPS. One of the key things raised to us by practitioners is that when an application is unsuccessful—particularly on appeal, as the original is often ex parte—the prosecution is liable for the legal costs of the defendant. Given that the CPS is undergoing cuts of 27% to its budget during the course of this Parliament, prosecutors understandably want to minimise the risk of expensive failure. Alison Saunders alluded to this also in her evidence. We have therefore tabled other amendments that do the same thing. Because they are probing amendments, we are not wedded to the wording but the intent is to try to tackle the disincentive. We are suggesting that a defendant should be able to recover costs only at a legal aid rate. It may be that that is covered by the LASPO Act but we wanted to raise this issue because it has often been raised with us. We are aware that there is a problem, and there is a way of dealing with this. Of course, there is unfairness in requiring an individual who has succeeded in setting aside a restraint order to pay his or her costs, but the alternative is to put all the cost risk on to the prosecutor. Capping costs at legal aid levels, as happens in other cases, could help lessen the disincentive to tackling large-scale restraint orders.
It would be helpful if the Minister could give a view on that. I hope that he will not just refer to his notes and resist the amendments because the whole purpose of Committee—I hope he understands the tone with which we have approached this—is not just to do better but to do the best we can. If he cannot accept these amendments, I hope that he will take them away and perhaps discuss this issue further with us, so we do not continue a situation in which we are unable to get at assets because they have been taken out of the country or removed and defendants do not come forward to say what their assets are. There is a way to deal with this and I hope the Minister can respond positively to these amendments. I beg to move.
Lord Dear (CB)
My Lords, I rise to re-emphasise the wording of subsection (1) of the amendment:
“The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders”.
For many years, and bearing in mind my previous service in the police and my contact with it since, I have been concerned that the prosecution authorities generally do not pursue property that is the subject of crime nearly as rigorously as they should. That has gone on for years, although all the agencies concerned will deny it. It is a fact, however. I could produce evidence from recent personal experience but will not weary the Committee with that, other than to say that the police have always been, and still are, judged on reducing crime and gaining convictions. The CPS is also judged on its ability to gain convictions. It is not judged, by and large, on its ability to chase back money and other property.
I simply endorse the main thrust of subsection (1) of the amendment. There must be ways in which the efficiency of those two organisations can be enhanced, not by rewarding them—although rewards are involved, I suppose, particularly in the reapplication of assets that we have been discussing—but simply by recognising that efficiency is not just detecting crime or getting convictions but also recovering property and money. When all is said and done, in the upper echelons of crime, in particular, the criminals are in it for the money. If the money is not chased, it is eventually there for them to use later when they come out of prison, or when they have paid off the fine or whatever else. This is a plea to underline the wording of subsection (1) of the amendment, which I endorse.
Lord Taylor of Holbeach
My Lords, this has been a short but very useful debate. I am pleased that the noble Baroness has reiterated that her objective in tabling these amendments has been to seek ways in which we can improve the effectiveness of recovery and confiscation of money. The noble Lord, Lord Dear, graphically described how important that is. It is perhaps true that there has been little focus by those who should be undertaking this task. There are two reasons why this mission is important: first, because money has frequently been taken from society and should be returned to it; and, secondly, if this money remains in the hands of criminals they will have every incentive to carry on with criminality as a way of life, and all the costs that it brings. That lies behind where we are on this. All these amendments are concerned with improving effectiveness, and I think that the whole Committee would support that notion. In dealing with these amendments I hope to show that the measures proposed in the Bill will address the issues that the noble Baroness raised. I am grateful to her for bringing them forward. Indeed, it is quite proper that we should consider their effectiveness.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for taking the time to address, in order, the points I made—and perhaps some that I did not make. I think I was very clear that the initial restraint order hearing is ex parte. That is not what I was suggesting in terms of costs; it was the appeal, which can involve significant costs. Again, with regard to the test for restraint orders—“reasonable grounds to suspect” rather than “reasonable cause to believe”—I suggested that we were quite happy and supportive of the Minister in that. That is a later amendment, in the name of the noble Baroness, Lady Hamwee.
I will read Hansard carefully and look again at what the Minister said. I am disappointed that he seemed to be saying that he will not consider our amendments, other than the final one on capping, not because they are not worthwhile and not worth pursuing but because the Government are making improvements to the legislation. As the noble Lord, Lord Dear, said—I hope he will forgive me for saying that he speaks from experience on these matters; from the right end of the law, not the wrong end of the law, I hasten to add—there are cases where the law has not been enforced as effectively as we would like. The consultation the Minister spoke of—he rejected our suggestion of having further consultation on this issue—would help draw out some of the issues that the noble Lord, Lord Dear, and I addressed.
I repeat that we are not suggesting for one second that what the Government are proposing in the Bill does not improve the position. We are just saying that we think consideration should be given to improving it further—we could do better. We should do the best we can, not just aim for an improvement. It would be disappointing if the Minister was to leave this debate without thinking that he could reflect on the points we had made, to make the Bill as tight as it can be and ensure that those who gain from criminal activities are not allowed to keep as much of their ill gotten gains as they are at present.
I listened carefully to what the Minister said. I did not quite understand how some of it addressed the points I had raised. I will read Hansard carefully and make a decision on whether or not we wish to bring some of these matters back on Report for further consideration by your Lordships’ House. For now, I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, this is a short point because it is just a short question. Amendment 5 is to Clause 8 and Amendment 26 is to Clause 28—the equivalent Northern Ireland provision. Amendment 5 seeks to leave out new Section 25A(2)(a) of POCA, which allows the court to discharge an order in the case of a deceased defendant where,
“it is not possible to recover anything from the estate”.
My question is: is this not covered by new Section 25A(2)(b), which says that a discharge could be made where it is not,
“reasonable to make any attempt … to recover anything”?
It seems to me that if it is not possible to make an attempt, it certainly would not be reasonable. That is my question. I beg to move.
Baroness Williams of Trafford
My Lords, Clause 8 deals with the discharge of certain unpaid confiscation orders and applications to vary unpaid orders down in value. Despite the best efforts of law enforcement agencies, some confiscation orders are uncollectable and sit on the books of Her Majesty’s Courts and Tribunals Service, accruing interest at 8% a year.
Clause 8 provides that the court will be able to write off unpaid confiscation orders where the defendant has died and it is not possible or reasonable to seek payment of the order from the defendant’s estate: where, for example, there are no assets remaining in the estate. Clause 28 makes the same provision for Northern Ireland.
In Clauses 8 and 28 there are two cases where orders may be written off: first, where it is impossible to get any money out of the estate; and, secondly, where it is not reasonable to make any attempt or further attempt to get money out of the estate.
These amendments suggest removing the case for discharging orders where it is impossible to get any money at all out of the estate. My noble friend has indicated these amendments are essentially designed to probe what would be covered by a first set of circumstances for discharging an order that is not covered by a second set of circumstances.
My noble friend is correct to say that there is certainly a significant degree of overlap between the two. If there are no assets of any note in the estate, it would not be reasonable to make an attempt to recover moneys owing to discharge a confiscation order. Equally, it would not be possible to recover anything from the estate.
That said, I believe it is helpful to retain both cases. The first case where it is impossible to get any money at all out of the estate could be said to be a subset of the second case, where it is not reasonable to make any attempt or further attempt. However, there may be circumstances not covered by the second case. It is important that this clause should encompass all possible scenarios to ensure uncollectible orders may be discharged.
I hope that, in light of that explanation, my noble friend will be content to withdraw her amendment.
Baroness Hamwee
My Lords, I am not sure that I do understand that it would ever be reasonable to make an attempt to recover something where it is not possible to recover it. I am not going to make a fuss about it. However, when I hear about 8% a year, I think I need to review my investment strategy. I beg leave to withdraw the amendment.
Lord Rosser
Lord Rosser
Under the Proceeds of Crime Act 2002, a default sentence of imprisonment can be imposed against a defendant if a confiscation order remains unpaid past its due date. Of course, as we know, this Bill increases the maximum default sentences where the confiscation order is for more than £500,000. Those increases are from five years to seven years for orders of more than £500,000 but no more than £1 million, and from 10 years to 14 years for orders of more than £1 million. The Bill also ends the automatic release at the halfway point of a default sentence for confiscation orders of more than £10 million.
These changes are being put forward by the Government because of the significant number of higher-value confiscation orders that go unpaid. Some would say that that is putting it far too mildly, because the amount collected by the police and the volume of the confiscation orders have fallen, yet there are still some £1.5 billion of outstanding orders because assets have been hidden. They have been moved away overseas, or they have been reduced by third-party claims. Only 18% of confiscation orders worth more than £1 million are recovered. A National Audit Office report has indicated that just 26p of every £100 of profit a criminal makes is confiscated. On top of this, the costs of recovering proceeds of crime are high, since investigation, prosecution and enforcement costs come to 76p out of every £1 collected.
In light of this, it is not clear why the Government are proposing only that automatic release at the halfway point of a default sentence should cease in respect of confiscation orders of more than £10 million. The Government’s own fact sheet on the Bill says that it is the higher-value orders that go unpaid. It is the Government who are proposing that orders in excess of £1 million should potentially attract the new maximum default sentence of 14 years. Having said that, since 1987 confiscation orders of £1 million or more have constituted well under 1% of such orders imposed by the courts.
The Government clearly believe that more time in prison for non-payment of a confiscation order is justified and will have some impact, since it is proposing, as I said, that the default sentences should be increased from five years to seven years for orders of more than £500,000 and up to £1 million and from 10 years to 14 years for orders of more than £1 million.
The current maximum default sentence is 10 years, which in practice means release on a tag at three years and without a tag at five years. Increasing the maximum for orders of more than £1 million from 10 years to 14 years will probably have some impact. It seems unlikely, however, that less than another 18 months at maximum in prison before being released on a tag will produce a significant shift in the attitude toward payment of a confiscation order of criminals with just under £10 million hidden away.
The National Audit Office found that in 2012 only 2% of offenders paid in full once the default sentence was imposed. The NAO also found that there are currently 11 criminals who still have not paid their confiscation orders, which remain due to the Serious Fraud Office after they have served their default sentence. Criminals should not be able to gain by not paying back money obtained through their criminal activities by choosing to go to prison in the knowledge that the time they spend in prison will be cut short.
The National Audit Office report pointed out that the current system does not work when it said:
“The main sanctions for not paying orders, default prison sentences of up to 10 years and additional 8% interest on the amount owed, do not work”.
The Bill itself suggests a degree of uncertainty over the £10 million threshold for the ending of automatic release at the halfway point of a default sentence, since there is provision for a power to lower this £10 million threshold through secondary legislation. A further order-making power also allows for minimum default sentences to be introduced in the future—a point on which I will comment later.
So what is the Government’s argument for saying that £10 million is the right figure rather than either of the figures of £1 million or £500,000 in our two amendments—or, indeed, any other figure? The £1 million is in effect the figure at which the Government are proposing that a maximum default sentence of 14 years rather than 10 years should apply.
The Government’s impact assessment indicates that no longer having release at the halfway point of a default sentence for confiscation orders of more than £10 million would result in an increase in the prison population that would be minimal. I think the figure is 20, but it is minimal. What the impact assessment does not tell us is the projected increase in the size of the prison population if the figure were £1 million or £500,000 rather than the £10 million provided for in these two amendments. Indeed, it does not give us the figures for any other amount or what the impact would be on the prison population if early release in this situation were ended altogether.
No doubt the Minister will provide this figure in his reply or subsequently, particularly if a reason for the Government not wanting to see the figure lowered to £1 million or less is the impact this might have on the size of the prison population. I make two points on that issue. First, the Government have told us that their reforms of probation and the probation service will result in a reduction in reoffending, particularly among those serving sentences of 12 months or less, and thus a reduction in the prison population. Will the Minister say if this Government’s anticipated reduction would offset any increase arising from ending automatic release at the halfway point of a default sentence for confiscation orders of £500,000 or more, or £1 million or more?
Secondly, I ask the Minister if he believes that the prospect, with no automatic release at the halfway point, of having to serve up to 14 years in prison for not paying more than £500,000 or more than £1 million ordered by a court under a confiscation order of ill gotten criminal gains secured at someone else’s expense or at the expense of large numbers of people would in fact greatly enhance the likelihood of co-operation being forthcoming to secure the necessary assets. If he believes that, would that not only reduce the number of criminals preferring to serve their prison sentence rather than hand over their ill gotten gains but provide some additional income from which the cost of any resultant increase in the size of the prison population could be paid if that should prove to be the outcome?
Our view is that criminals who do not meet the requirements of a default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. In these two probing amendments, however, we suggest only the lowering of the threshold to £1 million or £500,000, because we want to find out at this stage why the Government believe that a threshold of £10 million is appropriate for the ending of automatic release at the halfway point of a default sentence.
Lord Taylor of Holbeach
My Lords, as we have already said today, under this Government around £746 million of criminal assets have been seized under POCA, which is more than ever before. Around 60% of confiscation orders for sums up to £500,000 are discharged within six months, but it is clear that we need to do more to ensure that confiscation orders, particularly the higher-value orders, are robustly enforced. That is what lies behind the measure that the amendments seek to address.
A key mechanism in POCA for incentivising prompt payment of confiscation orders is the availability of default prison sentences where somebody fails to pay. It is clear that for lower-value orders default sentences have the desired effect, with nearly 90% of orders under £1,000 being discharged. But at the other end of the spectrum, just over 18% of orders over £1 million are settled in full. There is anecdotal evidence that serious and organised criminals would rather spend a few extra years in prison in the knowledge that they can enjoy the fruits of their crimes when they come out. It is clear that we need to provide further incentives to persuade these hardened offenders to pay up. It is with that in mind that we are legislating. Clause 10 accordingly increases the length of default sentences for higher-value orders. For orders between £500,000 and £1 million, the maximum sentence is increased from five to seven years, while for orders over £1 million the maximum sentence will increase from 10 to 14 years.
In addition to increasing the maximum default sentences for higher-value orders, we have looked again at the early release arrangements. Current provisions allow for automatic release at the halfway point of a default sentence. Early release reinforces the view of certain offenders that a default sentence is worth serving in order to retain criminally acquired assets—I think that the noble Lord, Lord Rosser, made the same assessment when introducing his amendments. Unconditionally releasing offenders at the halfway point of their default sentence seriously impairs the intended deterrent effect of the default sentence, particularly for the highest-value orders. So this clause will also end automatic early release for those serving a default sentence for failing to pay an order valued at over £10 million. The combined effect of these changes will mean that, in such a case, an offender will serve up to 14 years in prison rather than five years, as now. This is a significant increase which will make offenders think long and hard about serving the time rather than paying their confiscation order.
The noble Lord quite rightly asked why we set the threshold for ending early release at £10 million and not, let us say, at £1 million or £500,000, as Amendments 6 and 7 propose, or indeed at any other level. What is the rationale behind the Government’s decision? As I have said, evidence suggests—I have given figures earlier—that the existing default sentences do not have sufficient deterrent effect for the highest-value orders. We have therefore focused the changes made by Clause 10 on the upper end of the scale.
As a responsible Government, and as the noble Lord will know, we are committed to eradicating the deficit which we inherited from the previous Administration. We naturally took into account the potential cost of changes to the default sentencing arrangements. As we have set out in the financial effects section of the Explanatory Notes, the combined cost of the changes made by Clause 10, all other things being equal, is £1.78 million, or 60 prison places, by 2033. Ten of those extra prison places are attributable to the ending of early release for default sentences for confiscation orders of more than £10 million. The cost of these provisions should not be viewed in isolation. Elsewhere in the Bill, the new participation offence will cost some £6.6 million, including some 45 additional prison places.
I was intrigued by the arguments put forward by the noble Lord, Lord Rosser. He seems to have reined in the Opposition’s ambitions, because the proposals put forward by the shadow Home Secretary and shadow Attorney-General as recently as May stated:
“Labour would end early release for criminals serving default sentences who refuse to pay”.
I wonder whether the noble Lord can tell us what the cost of such a proposal would be. If not, I can tell him. Again, if there was no change in offender behaviour, such a policy would require an additional 900 prison places, at a cost of some £25 million per annum by 2033, although the great majority of those costs would kick in by 2020. This of course assumes that the capacity will be available within current prison facilities. However, given the impact of this proposal, it is likely that further facilities will need to be provided, which will result in a considerably higher total cost. It is therefore reasonable to ask the noble Lord where the money would be found to fund the proposals as set down in his amendments.
We have made a judgment. Our view is that the changes made by Clause 10 represent a well judged package. It is our expectation that the increases in default sentences and the ending of early release will lead to a change in offender behaviour. Faced with 14 years in prison, rather than five as now, we believe that an offender with a confiscation order of more than £10 million will not be so ready to serve the time rather than pay up. Fourteen years is a long time in prison.
However, it would be prudent to test that proposition before we go further. That is why the clause contains two order-making powers. The first will enable us to change the structure of default sentences, including by further increasing maximum sentences and introducing minimum sentences. The second delegated power will enable us to lower the £10 million threshold for ending early release. We will keep the changes made by Clause 10 under close review, and if they are having the desired effect then we will not hesitate to exercise these order-making powers.
The noble Lord, Lord Rosser, asked whether the Government had considered alternatives to the £10 million threshold. The answer to that is yes. I do not propose to get into a debate about whether we considered this threshold or that. Suffice it to say that Ministers considered a range of options and came down in favour of the proposition in Clause 10. I can tell the noble Lord that we estimate that the cost of ending early release for orders of £500,000 and over would be approximately 180 prison places, costing an estimated £5 million per annum by 2033. Ending early release for orders worth £1 million and over would lead to an increase in the prison population of approximately 70 places by 2033, costing an estimated £2 million.
The Government have considered this carefully and concluded that it would not be appropriate to lower the threshold for ending automatic early release until it was proven that it resulted in improved payment and was an effective deterrent, and that it was affordable to do so. We therefore believe that the provisions in Clause 10 are the appropriate way forward, while building in flexibility for the future.
The noble Lord, Lord Rosser, asked about the Government’s attitude to the conclusion of the Delegated Powers Committee that it would be inappropriate to introduce minimum default sentences through secondary legislation. We are considering carefully the points made by the committee about this order-making power, and in doing so we will want to take into account the points that the noble Lord made in today’s debate. Accordingly, I cannot take up the noble Lord’s suggestion that I respond to the report today, but I can undertake to reply to the Delegated Powers Committee report in advance of the Bill’s Report stage in the autumn.
In view of that commitment and the fact that I have valued the opportunity to explain the way in which the Government arrived at our judgment to introduce the measures in Clause 10, I hope that the noble Lord will withdraw his amendment.
Lord Rosser
I thank the Minister for his reply and for giving the information about the projected increase in the size of the prison population if the figure were £1 million or £500,000, and indeed what the increase would be if there were no threshold figure at all.
If the Minister thinks there has been a change in our policy, I shall put his mind at rest. I shall requote to him what I said in my contribution: our view is that criminals who do not meet the requirements of the default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. That is our approach. I said it in my contribution. I also made it clear that our two amendments are probing amendments to find out why the Government believe that the threshold of £10 million is appropriate.
We shall consider what the Minister has said, but I think that with regard to the £1 million threshold he said that the figure was 70 additional places at a cost of £2 million; I think he said that for the £500,000 threshold the figure was 180 additional places at a cost of £5 million; and for no threshold the figure was 900 prison places at, I think he said, the cost of £25 million. I just want to ensure that I have understood correctly what he said.
Lord Taylor of Holbeach
I would like to reassure the noble Lord. I emphasise that I said that 10 of these extra places would be attributable to the ending of early release from default sentences for confiscation orders over £10 million. I actually said that as part of my presentation to the noble Lord.
Lord Rosser
But I think I am right in saying that the impact assessment assumes no change in the behaviour of the criminals concerned. I think, and perhaps the Minister will confirm this, that the figures he has given of an increase of, respectively, 70, 180 or 900 places and increased costs as a result also assume no change in criminal behaviour, and therefore no more money coming back in as a result of the ending of automatic release at the halfway point of a default sentence. A lot of people would find that an extremely unlikely assumption on which to base the impact assessment and the Minister’s figures.
However, I will leave it at that. I thank the Minister for the information and for his comment that we will have the Government’s response to the Delegated Powers Committee before Report. I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, this amendment is to Clause 11, while Amendment 27 is an equivalent amendment to the equivalent Northern Ireland provision, Clause 13(1). The Minister has already referred to the change from “reasonable cause to believe” to “reasonable grounds to suspect” in the context of the exercise of restraint order powers. The question, obviously, is designed to explore why there is a lower hurdle when we are talking about investigation only, not proceedings.
I appreciate that the later part of Clause 11 requires reporting by the court, although the court can decide not to require it, and that proceedings have to be started within a reasonable time. I am assuming, but perhaps the Minister can confirm this, that a defendant can apply for the restraint to be lifted on the basis that reasonable time has passed and there are no proceedings, and that “reasonable time” is assessed on a case-by-case basis and is not a fixed period. However, it occurs to me that the provision might be giving rise to additional litigation because there are uncertainties around this.
Temporary asset freezing—which is what this is, essentially—could be for quite a long time. We are talking about someone who is not a convicted criminal and may not yet even be a defendant. There could be an impact on that person’s dependants and their business. It is, therefore, a serious matter and I look forward to an explanation of why the Government have chosen to lower the hurdle and the protections that will be in place. I beg to move.
Lord Taylor of Holbeach
My Lords, I am pleased that my noble friend Lady Hamwee has raised these issues. We do not take the impact of restraint orders lightly and we fully understand her points. However, these orders effectively freeze property to prevent it being dissipated before a confiscation order is made. This is important in effective use of the Proceeds of Crime Act. The property is then available to sell, which helps to satisfy a confiscation order which may subsequently be made.
The intention of the Proceeds of Crime Act was to introduce the ability to obtain a restraint order as early as possible in the investigation to remove any possibility that a criminal will become aware, as a result of the investigation, that their assets are at risk and so move or hide them. We have been discussing this for much of the afternoon. Restraint orders are, therefore, available from the earliest stages of a criminal investigation. As I have already said, and as my noble friend is aware, the current test for obtaining a restraint order in all circumstances is that there is a “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct. This is a proportionate test in circumstances where a defendant has been charged and is being prosecuted. In this case there will be available evidence to meet the test of “belief”.
However, the operational experience of our criminal justice colleagues in relation to this issue has shown that, at the early stage of an investigation, it is very hard to prove belief. The reality is that at that stage of an investigation there may be limited evidence, simply because the investigation has not yet had time to gather it. It is notable—as the noble Baroness, Lady Smith, has said—that the number of restraint orders has fallen since 2010-11, despite the Government’s push for more asset recovery action. The number of restraint orders obtained had been increasing and reached a peak of nearly 2,000 in 2010-11 but has dropped every year since then, with fewer than 1,400 restraint orders being made last year.
Delaying the obtaining of a restraint order until there is sufficient evidence to meet the “reasonable cause to believe” test can provide suspected offenders with an opportunity to dissipate or hide their assets to protect them from seizure. The amendment we are making to POCA in the Bill therefore revises the test for restraint in the earliest stages to “reasonable grounds to suspect”—I emphasise “suspect”—that the alleged offender has benefited from his criminal conduct. It is also of note that the amendments include a requirement for the judge making the restraint order to set a date for the matter to be returned to the court so that it can consider whether sufficient progress has been made with the investigation or give reasons for not arranging such a hearing. This reflects current practice of the court when it makes a restraint order in the absence of the person who will be the subject of the order. Making the practice mandatory will ensure appropriate judicial oversight of restraint orders made during a criminal investigation.
It is important that the Committee understands that Clauses 11 and 31 are not breaking new legal ground. “Suspicion”, as opposed to ‘belief’, is a test in other similar matters. Within POCA itself, a judge has to be satisfied that there are reasonable grounds for suspecting that a defendant has benefited from their criminality in order to issue a production order. Also, under the Police and Criminal Evidence Act 1984, a police officer may arrest without a warrant anyone whom he or she has “reasonable grounds for suspecting” has committed an offence. So, at the early stages of a criminal investigation, it is appropriate that the court uses the threshold of suspicion, rather than belief. We think that this is a direct parallel supporting the amendment we are seeking to make in Clause 11.
This was one of the issues considered by the Joint Committee which undertook pre-legislative scrutiny of the Modern Slavery Bill. In its report, the Joint Committee made the following comment:
“It is imperative that law enforcement authorities should be able to freeze relevant assets at the earliest possible stage in an investigation, and rarely, if ever, more than 24 hours after arrest. We therefore strongly recommend that the test for obtaining a restraint order be amended to make it less stringent. We note that the Government has already committed to reducing the test from ‘reasonable cause to believe’ to ‘reasonable suspicion’. We approve of this formulation.”
I hope the Committee will do so too.
My noble friend Lady Hamwee asked what would happen if a defendant were able to make an application to a court to lift a restraint order. A court may discharge a restraint order, on application, where the investigation has not progressed to its satisfaction. That freedom is available to a defendant, who may also apply to the court to vary a restraint order. It must do so if the investigation has not progressed satisfactorily. I hope that noble Lords will be happy with my explanation and that my noble friend will be content to withdraw her amendment, in the light of my comments.
Baroness Hamwee
My Lords, I am glad to hear about the judicial discretion which might be applied. I would like to think that the reduction in the number of restraint orders or applications for them is because of a problem with the legislation and not something inherent in the new arrangements with, for instance, those concerned not directing their minds to the lower test. That can always be an issue and changing the test does not change it. I am, of course, happy to beg leave to withdraw the amendment.
“( ) In section 47B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.”
Baroness Williams of Trafford
My Lords, Clause 13 deals with the search and seizure powers available to appropriate officers under Sections 47A to 47S of the Proceeds of Crime Act. Sections 47A to 47S, which were inserted into POCA by the Policing and Crime Act 2009, provide for search and seizure powers, in England and Wales, to prevent the dissipation of realisable property that may be used to satisfy a confiscation order. These powers will, once commenced later this year, be available to law enforcement officers, such as the police and National Crime Agency officers. The power to seize property is currently subject to the same test as for the making of a restraint order. The existing test is that there is reasonable cause to believe that the person has benefited from conduct constituting the offence.
As we have already debated, Clause 11 is designed to enable assets to be restrained more quickly and earlier in investigations. It does this by lowering the test for the grant of a restraint order from the court having “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct to the court having “reasonable grounds to suspect” that the alleged offender has benefited from his criminal conduct.
To exercise certain powers and investigative tools at the early stages of an investigation, the officer and the court have to be satisfied only to the threshold of suspicion, rather than of belief. For example, in order to obtain a production order under POCA, reasonable grounds for suspecting have to be shown, and under the Police and Criminal Evidence Act 1984, a police officer may arrest without a warrant anyone whom he has reasonable grounds for suspecting of committing an offence.
It therefore follows that the legal test for exercising search and seizure powers, which will enable law enforcement agencies to identify and protect assets through search and seizure for a future confiscation order, should complement that of a restraint order. Indeed, it is already the case that the reasonable grounds for suspecting test applies to certain of the powers in Sections 47A to 47S. For example, this lower test already applies to the power to search premises in Section 47D of POCA.
Amendment 17 therefore brings the test for the seizure of property in Section 47B into line with the change we are making in relation to restraint orders; namely, reducing the legal test to “reasonable grounds to suspect”. Amendments 25 and 28 insert a new clause into Chapters 2 and 3 of Part 1. These new clauses simply replicate for Scotland and Northern Ireland the provisions in Clause 13, as amended by Amendment 16. I beg to move.
“(5B) In the case of money held in an account not maintained by the person against whom the confiscation order is made, a magistrates’ court—
(a) may make an order under subsection (5) only if the extent of the person’s interest in the money has been determined under section 10A, and(b) must have regard to that determination in deciding what is the appropriate order to make.””
Baroness Williams of Trafford
My Lords, as we have debated, Clauses 1 to 4 include provisions designed to ensure that criminal assets cannot be hidden with spouses, associates or other third parties. This is achieved under Clause 1 by enabling a court to make a determination as to the extent of the defendant’s interest in property. Any such determination will be made by the court at a confiscation hearing. This determination may include money held in a bank or building society account.
Section 67 of POCA currently enables a magistrates’ court to order a bank or building society to pay over money to satisfy a confiscation order. This provision needs to be able to work in conjunction with Clauses 1 to 4 when the court makes a determination that the defendant has an interest in a bank account that is, for example, held by a third party, such as a company owned by the defendant.
Amendment 18 accordingly amends Section 67 of POCA so as to reflect the court’s new power to make a determination as to a defendant’s interest in property. The amendment provides for a magistrates’ court to order payment of funds held in a bank account that is not in the name of the defendant towards the satisfaction of the defendant’s confiscation order, in accordance with the court’s determination of the defendant’s interest in that account. This will enable funds held in a bank account to be confiscated rapidly where the account is not held in the name of the defendant. Any third parties affected would have the opportunity to make representations before such a determination was made. Only accounts subject to a determination by the court at the confiscation hearing will be affected by this amendment.
Amendment 29 makes a similar change to the Northern Ireland provision in Clause 33. I aim to bring forward on Report a new clause which will replicate for Scotland Clause 14 in its amended form. I beg to move.
Baroness Hamwee
Baroness Hamwee
Amendment 19 would remove paragraph (b) of new subsection (7A) in Section 67 of POCA. Amendment 20 would make an order under this new subsection (7B) an affirmative order. Having had the benefit of a discussion with the Minister, I know what is meant by the phrases,
“money that is represented by”,
and “may be obtained from” as distinct from money actually obtained from. It was an interesting discussion, but it would useful to have the information on the record.
On the order which is required, what is proposed by the Government is quite significant, and it seems to me that an affirmative order would be more appropriate in this case. I beg to move.
Lord Taylor of Holbeach
My Lords, Clause 14 amends Section 67 of the Proceeds of Crime Act with a view to speeding up the confiscation of funds held in bank accounts. In addition, the clause enables, through secondary legislation, the powers in Section 67 to be updated to include other realisable cash-like financial products, such as share accounts and pension accounts that may be held by banks or other financial institutions.
Currently, seizure powers under Section 67 of POCA apply only to money in its traditional form held in an account with a bank or building society. Money can also take the form of, or be represented by, innovative financial products. This includes digital currencies whereby the user obtains goods or services by virtual means rather than a physical or electronic exchange of funds.
Currently, it is not possible to realise such instruments for the purposes of seizure under Section 67 of POCA. The extension of powers to encompass other financial products may require modifications to Section 67 to provide for such financial instruments or products to be converted into cash. The new subsection (7B) of Section 67, inserted by Clause 14(3), provides the power to make such modifications.
Clause 14(3) also applies to money that may be obtained from a financial product that is something other than a standard current or savings account. I shall give examples of this, and I am grateful to my noble friend for giving us the chance to put this on the record. An example of such a product would be a pension plan that has yet to mature but will pay an annuity and a lump sum on retirement. Other examples could include a share account or a virtual currency such as Bitcoin. Essentially, therefore, the clause provides for the capture and realisation of instruments with an economic value. I hope that that explains to my noble friend the use of the term “represented by” a financial instrument or product in Clause 14(3).
By virtue of Clause 14(5) an order made under new Section 67(7A) of POCA will be subject to the affirmative procedure. New Section 67(7B) simply amplifies the scope of the order-making power in new Section 67(7A)—it is not a second free-standing order-making power. I hope that I have made that clear. Accordingly, it is not necessary to refer to new Section 67(7B) in Clause 14(5). That being the case, I hope that my noble friend will agree that her amendment is, strictly speaking, unnecessary. However, it has served a useful purpose in that I have been able to explain the purpose of the provisions in Clause 14. In the light of that explanation, I hope that my noble friend will be content to withdraw her amendment.
Baroness Hamwee
My Lords, I am afraid that it occurred to me only while I listened to my noble friend’s explanation that I have not pursued the issue, where it is digital currency or an annuity under a pension plan, of how that will be assessed in cash terms at the point when the cash needs to be calculated. I assume that that must be somewhere else in the legislation—probably in existing legislation. However, that is an issue. We heard recently about how bitcoins are fluctuating in value. Therefore the point at which the calculation is made is very important. Also, we all know that there are issues around the value of an annuity. Therefore I realise, listening to my noble friend, that there is a lot more to this to be thought about than I am afraid I had thought about. Of course, I will beg leave to withdraw the amendment at this point, but—
Lord Taylor of Holbeach
I will willingly write to my noble friend. I am not in a position to be able to tell her the process of valuation of those things from the Dispatch Box today, but I am sure that it would be of interest to the House to know how those valuations occur. I do not suppose that that is the only circumstance in which those things have to be valued.
Baroness Hamwee
My Lords, I am grateful for that; I did not seek to put my noble friend on the spot today. However, as I said, there is a lot more to that than might appear in the Bill. I beg leave to withdraw the amendment.
“Restitution order and victim surcharge
(1) In section 97 of the Proceeds of Crime Act 2002 (effect of order on court’s other powers), in subsection (3)(a), at the end insert “, a restitution order or a victim surcharge under section 253F(2) of the Procedure Act”.
(2) After that section insert—
“97A Application of receipts: restitution order and victim surcharge
(1) Subsection (2) applies if—
(a) a court makes a confiscation order and a relevant order against the same person in the same proceedings, and(b) the court believes that the person will not have sufficient means to satisfy both orders in full.(2) In such a case the court must direct that so much of the amount payable under the relevant order as it specifies is to be paid out of any sums recovered under the confiscation order.
(3) Subsection (4) applies if—
(a) a court makes a confiscation order, a compensation order under section 249 of the Procedure Act and a relevant order against the same person in the same proceedings, and(b) the court believes that the person will not have sufficient means to satisfy all the orders in full. (4) In such a case the court must direct that so much of the compensation, and so much of the amount payable under the relevant order, as it specifies is to be paid out of any sums recovered under the confiscation order.
(5) The amount a court specifies under subsection (2) or (4) must be the amount the court believes will not be recoverable because of the insufficiency of the person’s means.
(6) Where the amount a court specifies in a direction under subsection (4) is sufficient to satisfy in full the compensation, the direction must provide for the compensation to be so satisfied before payment of the amount payable under the relevant order.
(7) Where the amount a court specifies in a direction under subsection (4) is not sufficient to satisfy in full the compensation, the direction must provide for the compensation to be satisfied to the extent of the amount specified in the direction.
(8) In this section, “relevant order” means—
(a) a restitution order, or(b) a victim surcharge under section 253F(2) of the Procedure Act.(9) In this Part, “restitution order” is to be construed in accordance with section 253A(2) of the Procedure Act.””
Baroness Williams of Trafford
My Lords, the new clause proposed by Amendment 23 makes equivalent provision for Scotland to that contained in Clause 6 as regards England and Wales. It provides for the money collected under a confiscation order to be diverted to pay other financial penalties imposed by the court where the accused has insufficient means to meet all the financial penalties imposed on him or her.
The proposed new clause ensures that where the court imposes a confiscation order alongside a compensatory financial penalty, those compensatory penalties can be paid from money collected under the confiscation order where the accused does not have sufficient means to satisfy all the orders in full. The new clause caters for the situation where the court has imposed a confiscation order alongside either the victim surcharge or a restitution order. It also caters for the situation where a confiscation order is imposed alongside a compensation order and either the victim surcharge or a restitution order. The victim surcharge and restitution orders are financial penalties which can be imposed by the court under the Criminal Procedure (Scotland) Act 1995.
Baroness Williams of Trafford
My Lords, the intention behind Clause 15 is to provide that the serving of a default sentence in Scotland for failure to pay a confiscation order does not discharge the outstanding debt. In making such provision, the clause brings the position in Scotland into line with that in England and Wales. Paragraph (a) of the clause achieves this intended outcome by amending Section 118 of POCA to disapply the relevant provision in the Criminal Procedure (Scotland) Act 1995, which relates to fine enforcement.
Paragraph (b) of Clause 15 makes a consequential amendment to POCA to modify the application of Section 224 of the Criminal Procedure (Scotland) Act 1995. That section requires warrants of imprisonment for non-payment of a fine to specify the date for the discharge of the liability to pay the fine—in practice once the default sentence has been served—notwithstanding the fact that it has not been paid. The effect of paragraph (b) is that that requirement will no longer operate where an administrator is appointed in relation to the confiscation order in respect of which the default sentence was served.
However, on further examination, the Scottish Government have concluded that Section 224 should be disapplied entirely. As currently drafted, the clause would result in some individuals still having their confiscation order discharged once they have served a default sentence, which is not the outcome the Scottish Government are seeking to achieve. I beg to move.
Lord Taylor of Holbeach
“Conditions for exercise of search and seizure powers
(1) In section 127B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.
(2) In section 127G of that Act (“appropriate approval”), before paragraph (b) of subsection (3) insert—
“(ab) in relation to the exercise of a power by a National Crime Agency officer, the Director General of the National Crime Agency or any other National Crime Agency officer authorised by the Director General (whether generally or specifically) for this purpose,”.”
Lord Taylor of Holbeach
“Conditions for exercise of search and seizure powers
(1) In section 195B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.
(2) In section 195G of that Act (“appropriate approval”), before paragraph (b) of subsection (3) insert—
“(ab) in relation to the exercise of a power by a National Crime Agency officer, the Director General of the National Crime Agency or any other National Crime Agency officer authorised by the Director General (whether generally or specifically) for this purpose,”.”
Lord Taylor of Holbeach
“(5B) In the case of money held in an account not maintained by the person against whom the confiscation order is made, a magistrates’ court—
(a) may make an order under subsection (5) only if the extent of the person’s interest in the money has been determined under section 160A, and(b) must have regard to that determination in deciding what is the appropriate order to make.”
Arrangement of Business
Baroness Anelay of St Johns (Con)
My Lords, we have reached an unusual moment, as those taking part in the Bill proceedings this afternoon have been so succinct in their presentations and their responses that we have already reached the Question for Short Debate. Participants would normally expect that we would not begin this business until 7.30 pm. We have made strenuous efforts to contact those involved, and I see that the shadow Minister is in his place very promptly, and that the Minister is here as well. However, I regret to say that my latest understanding is that the owner of the Question for Short Debate, my noble friend Lord Ribeiro, is stuck on an Underground train. Despite my looking round rather nervously to either side, I still do not see any sign of him.
It is a most unusual circumstance but I cannot adjourn the House pending an arrival, simply because we cannot predict when that might be. If we had information about an arrival we might do so, with the agreement of the House, but I am not in a position to ask the House to do that. Therefore, with great apologies to those who are expecting to take part in the Question for Short Debate, it will not take place today. It will have to be—ah, my noble friend arrives. Phew and double phew! My noble friend Lord Ribeiro is clearly a Peer who is going to go far. The Question for Short Debate will now go ahead. As it is last business, it will have an hour and a half, not just an hour. This has no impact for the Minister, whose time remains at 12 minutes. The time limit for all other participants becomes 10 minutes.
World Health Organisation
Lord Ribeiro
To ask Her Majesty’s Government whether they will support the strengthening of emergency and essential surgical care and anaesthesia by the World Health Organisation to reduce the global burden of disease.
Lord Ribeiro (Con)
My Lords, I thank the Leader for making the allowance for me to get in and start this debate. I shall open by quoting from a paper in Lancet Global Health in 2014 from the surgical departments of Massachusetts General Hospital, Boston Children’s Hospital and Stanford University, California. It states:
“Global health efforts, guided in part by the Millennium Development Goals (MDGs) have focused mainly on the prevention and treatment of malnutrition, obstetric disorders, and communicable diseases. With the exception of a few surgical procedures—eg, caesarean delivery and male circumcision”—
the latter because it reduces the transmission of communicable diseases—
“surgical interventions have been largely ignored”.
The purpose of this debate is to raise awareness of the value of surgery as a means of delivering effective public health.
In 2010, road traffic accidents accounted for 75.5 million disability-adjusted life years, or DALYs, up by 20 million since 1990. Cancer is on the increase, as are other non-communicable diseases, as life expectancies in developing countries increase with the reduction of HIV/AIDS and deaths from malaria and other infectious diseases. The perception of surgery as an expensive intervention may itself be a barrier to its acceptance as a means of reducing the global burden of disease. There is good evidence from Professor Haile Debas and others that surgical conditions, especially trauma and injury, obstructed labour and congenital anomalies such as club feet and cleft palate are all public health problems. Yet attitudes to surgery—that it is only affordable for the rich in developing countries and lower-income countries—mean that it does not appear on the public health radar for the poor.
Let me give some facts. I thank the Library for its excellent briefing documents, which I hope all noble Lords have received. There are 234 million surgical operations performed globally every year, but the poorest one-third of the world population receive 3.5% of all surgical operations. Approximately 2 billion people have no access to surgical facilities, and this is a global crisis. In high-volume countries—the haves—we have more than 14 operating rooms or theatres per 100,000 of population. In sub-Saharan Africa there are fewer than two operating rooms per 100,000 of population. Globally, 77,000 operating theatres have no pulse oximeters to diagnose hypoxia, or low oxygen levels, during surgery. Here I declare an interest as the patron of Lifebox, a charity which delivers pulse oximeters globally. In all, this amounts to more than 30 million operations worldwide without basic safe monitoring. It takes us back to the old days, when one felt the pulse and estimated the condition of the patient purely on feel.
In 2012 the noble Lord, Lord McColl, and I hosted a meeting of surgeons determined to bring these concerns to a wider audience. We and others cofounded an organisation called the International Collaboration for Essential Surgery, or ICES. The concept is not new and it has been debated for more than 40 years, but the problem is becoming acute in developing countries as more of them suffer a brain drain of their doctors and highly qualified nurses. The definition of essential surgery is the provision of basic intervention which will prevent premature death and long-term disability. Evidence suggests that there are 15 basic surgical interventions which will deal with approximately 80% of basic surgical need and the commonest urgent pathology in a community, particularly in rural areas where doctors are scarce.
Because of the loss of traditionally trained surgeons, who migrate to the private sector in cities, work for NGOs or emigrate to other countries, we need to train up a new cadre of non-physician clinicians, or NPCs. In 1963 Tanzania started to train NPCs, commonly known then as barefoot doctors, as the idea came from China. Malawi’s first medical school began by training clinical officers to carry out general surgery, obstetrical procedures and others in 1980. Similar programmes have developed in Niger, Zaire, Burkina Faso, Ethiopia, Senegal, Somalia and South Sudan. I believe that this paradigm shift is happening right across most of sub-Saharan Africa; it is just that the rest of the world needs to recognise it and catch up with what is happening. There are currently some 47 sub-Saharan countries using non-physician clinicians or clinical officers.
As chairman and vice-chairman of the All-Party Parliamentary Group on Global Health, the noble Lord, Lord Crisp, and I wrote to DfID, pointing out the benefits of surgery in the public health arena. We posed two simple questions. How will DfID raise the profile of essential surgery as a public health priority, and how will the department help to frame surgery as a crucial and affordable public health intervention? The response was both disappointing and bland and suggested to me that the department’s focus remained on communicable diseases and the well-being of mothers and children. I am not saying that that is not an important priority, but that appeared to be its continuing stance. However, let us contrast that with the way in which the Department of Health and the then Chief Medical Officer, Sir Liam Donaldson, promoted the surgical checklist as part of the patient safety agenda in developing countries. This is now a must-do exercise in all NHS hospitals in the UK, and is gaining traction in sub-Saharan African countries.
The World Health Organisation initiative is making a difference not only in this context in terms of patient safety but in other areas as well. The WHO pulse oximetry project, to which I referred earlier, run by Lifebox, is a case in point. Similarly, the WHO global initiative for emergency essential surgical care and guidance for essential trauma care is also something that is developing apace. I noticed the criticism of DfID by the House of Commons International Development Committee in March, when it accused DfID of,
“raiding bilateral development programmes in low income countries”,
to,
“support disasters in middle income countries”.
It noted that,
“expenditure on low-income countries is … significantly lower than in 2010-11”,
and suggested that,
“DFID staff spend less time writing the perfect business case and more”,
time on the ground.
The International Collaboration for Essential Surgery, or ICES, has produced a powerful film entitled “The Right to Heal”, which was shown here in Parliament. This film identifies seven conditions which cause the vast majority of preventable surgical deaths and disability. They are quite simple; they are hernia, club foot, cleft palate, injury, cataracts, appendicitis and obstructed labour—which inevitably, in very young girls with underdeveloped pelvises, can go on to cause urethral fistulae. Surgery can relieve the suffering from many of these common conditions and return people to normal lives.
Will the Government support the resolution on emergency care, agreed by the 67th World Health Assembly, attended by 42 countries, including the United Kingdom, to be submitted at the 2015 assembly meeting? Secondly, the post-2015 sustainable development goals present an opportunity for the Government and DfID to support the role of surgery as a public health measure. Will they commit to doing so? Thirdly, will DfID examine the extent to which global surgery represents a component of its programme and expertise? What assurances can DfID give that it will review the development goals in respect of surgery and anaesthesia post-2015, when the millennium development goals end? Finally, I hope that the Government will make strong representation after this debate at the 13th working group of the UN sustainable development goals on 14 to 18 July, as this is a member state.
Baroness Brinton (LD)
My Lords, I declare an interest as a past trustee of CBM UK, of which I am a current patron. I thank the noble Lord, Lord Ribeiro, for initiating this debate, which will cover a very great area of experience and expertise. Having listened to the noble Lord, I am even more aware of my extensive ignorance in this area, so I hope that he will allow me to focus on just one thing that he mentioned. I want to talk about a multi-partner club-foot initiative which started in Africa, and in which CBM has been involved over the past decade. It acts as a model for surgeons and aid agencies working together in the future.
CBM is an overseas disability charity, founded more than 100 years ago, which has worked in Malawi for many years. For some reason, Malawi has the highest incidence of club-foot in the world, and CBM has worked for a long time with local hospitals, the Global Clubfoot Initiative and, more recently, the Royal College of Surgeons on supporting young patients born with this disability. This work typifies the hope that my noble friend expresses in the title of this debate.
Steve Mannion, a consultant surgeon in the NHS and senior lecturer on surgery, is the orthopaedic adviser to CBM. All orthopods know that treatment for club-foot should be started early; diagnosis at birth is ideal, rather than later in life, especially for cases that require surgery. He used the Ponseti treatment, which is a physiotherapy technique not well known but which has become the gold standard in the last decade, mainly because of this innovative work. It can be provided effectively and economically. The club-foot medical community also wanted to manage the care of others who had not been treated as young children, and for whom the damage to their feet, legs and ligaments would take longer to treat. The noble Lord, Lord Winston, who cannot be in his place this evening, filmed this project in Malawi in 2008.
The Ponseti method uses corrective manipulation and then keeping the patient in a plaster case. In most cases, this will avoid surgery. The surgeons have also found a cost-effective method of producing the Steenbeck foot abduction brace, which young patients have to wear full time for two to three months, and then at night for two to four years, to ensure that the foot grows into the correct position. The NHS version of this brace is a bit like Ford motor cars—you can get them in one colour only. It is effective, expensive and dull. This surgeon, working with local craftsmen in Malawi, developed a brighter and much cheaper arrangement, which he brought back with him to the UK and which, if my memory serves me right, cost around one-fifth of the UK equivalent. Suddenly, UK parents were asking for it in preference to the NHS version. So here is an assistive technology product from the developing world, saving the NHS money—good news. For £12 million, the cost of one advanced surgical robot in the UK, one-quarter of a million children can be treated and taught to walk.
The work in Malawi progressed well. Diagnoses were made early, but Steve Mannion told me four or five years ago that Malawi Ministers had expressed real concern to him that there were more Malawian doctors in Manchester than there were in Malawi and, helpful as medical aid and support was, there was a serious brain-drain problem. This is where the Royal College of Surgeons comes in. It has developed a local project training surgeons in-country under their own auspices, so there is no need to leave their home to learn the leading techniques. It has worked well. The Royal College of Surgeons developed this further and hosted an international conference on global surgical frontiers in January 2012, bringing together surgeons and aid organisations. The editorial in the Lancet on 21 January 2012 says:
“The greatest burden of surgically treatable diseases falls on people in developing countries, but the poorest third of people receive only 35% of operations and have the lowest numbers of surgeons per head of population. These statistics, combined with the emphasis on reducing global deaths from infectious diseases, make surgery feel like a neglected specialty in the current global health arena. But, as the conference showed, reducing the disparities in surgery between developed and developing countries will take a massive, coordinated, worldwide effort”.
Some 30 months on from that conference, orthopaedic surgeons such as Steve Mannion and the Royal College of Surgeons are training large numbers of local surgeons and physiotherapists in club-foot and other techniques, with the College of Surgeons of East, Central and Southern Africa, and now elsewhere in the world. As the Lancet says:
“The move away from the paternalistic approach of parachuting in Western surgeons on brief missions and towards teaching skills to local surgeons needs to continue, although the need for skilled surgeons to take part in sustainable programmes is still great. Coordination needs to exist between surgical institutions in developing and developed countries so that skills taught are appropriate to requirements. In addition, coordination between and within countries needs to increase to ensure that qualifications have no borders … It is also essential that efforts continue to plug the brain-drain from developing countries”.
The treatment of club-foot is life-changing for patients. Disabled children are often at the back of the queue for medical support and education, and as they grow up they are the last to get employment opportunities in their communities. This simple surgical and non-surgical intervention and treatment is not only benefiting thousands of children across Africa, in Laos, in Papua New Guinea and in other countries; it is providing local craftsmen with work—and local surgeons are being trained in world-leading surgical and physiotherapy techniques. Perhaps most importantly, it is changing the centuries-old view of the West parachuting experts in to solve problems. The surgeons from the UK say that they are learning as much from their colleagues in-country as they are teaching them.
To conclude, I have one simple question to ask my noble friend the Minister. What can the Government, both in DfID and in the Department of Health, do to ensure the dissemination of successful projects like this, and to encourage more in the future?
Baroness Chalker of Wallasey (Con)
My Lords, I begin by apologising—particularly to my noble friend Lord Ribeiro—for my lateness, which was caused by inattention to the annunciator screen. I also make the declaration that I am president of the Chalker Foundation for Africa, and we assist in the training of basic medical workers in Africa for Africa. That is often assisted, as my noble friend Lady Brinton said, by teaching skills in Africa. That may be done by people from other countries, but increasingly Africans are teaching Africans, which is a very worthwhile advance.
I wish to concentrate on two aspects of the need for surgery across the developing world. I support all the comments that I heard my noble friend Lord Ribeiro make, and thank him for initiating this debate. The two aspects that I am most concerned with are fistula repair—which is essential for maternal health, under millennium development goal 5—and cleft palate and lip surgery.
We all know that fistula is an abnormal channel or passageway in females, usually caused by the lack of prenatal and obstetric care, as well as by poverty, malnutrition, early marriage and childbirth, harmful sexual practices and violence, and a lack of quality and accessible maternal care and healthcare. There are also traditional practices like encouraging women to drink water to aid a baby’s birth. That does not help: it increases the risk of fistula, because a full bladder during childbirth is a bad thing. As was said earlier, obstructed labour and obstetric fistula cause 8% of maternal deaths worldwide, but a much higher percentage in the developing world—and it is clear from the statistics on very hard and prolonged labour that about 80% of the problems result from that cause.
I have mentioned many times in this House the fact that the problems are also caused by poverty: the distance that people must travel and the uncomfortable travelling conditions; the lack of nutritious food and the cost of care; and the lack of access to healthcare, particularly in rural areas, which are most deprived in terms of transport. Above all, there is the lack of trained midwives and doctors. We also know that, as my noble friend said, malnutrition causes stunted growth in mothers, which makes giving birth much more difficult.
About 63% of those on a Nigerian fistula programme needed surgery. About 37% had, fortunately, had access to a catheterisation programme within 75 days of the birth—but that can be implemented only where people have been trained to do it, and in rural areas that is just not going to happen.
There are also cases in which a caesarean operation is critical, when a surgeon can see that there is likely to be a real problem. But how can we possibly take that on board when we are not preventing the problems in the first place? That, too, needs the sort of surgery that my noble friend spoke about. The advantage of a caesarean section, if it can be done, is that it can prevent fistulas recurring in later births. But the cost is somewhere around $300, and the aftercare may be as much as $150. It is vital that that surgery be available, and I commend the work of the Addis fistula hospital, and the surgery carried out by Marion Sims, and by Reg and Catherine Hamlin. That is the largest fistula repair centre in the world. We now also have the Niger Danja centre, operated by the Worldwide Fistula Fund.
I now turn to the need for surgery for cleft lip and palate. In the developed world, although the causes are mainly unknown, a cleft lip is usually detected between the fourth and seventh week of pregnancy, and a cleft palate between the sixth and ninth week. It is highly unlikely that that will be diagnosed in developing countries, and so the surgery needs to be done in the first few months of the life of the child. I have been much impressed by the fundraising done by the Smile Foundation, which, through its donations to hospitals and its support of doctors, is carrying out a large number of operations every year, which can prevent children being disfigured for the rest of their lives.
That is why I wanted to speak in support of my noble friend in this debate. I believe that it would be right for DfID to support the role of surgery as a public health measure. There are some occasions when it actually happens, but it happens by default, not because we have made it happen by our policy decision. I also believe that, as my noble friend said, we need to find a way to review the development goals in respect of surgery post-2015. I am pleased to have been able to contribute a little in this debate. These areas of work are absolutely vital, alongside treatment for club foot and the many other surgical procedures that can make all the difference between a mere existence for somebody, and a real life.
Lord Crisp (CB)
I, too, congratulate the noble Lord on securing this debate, on his excellent speech, which laid out the issues extremely well, and on continuing to keep this issue live. He is right to choose this moment to seek to use the United Kingdom’s enormous prestige and influence in the world of international development to press the point home even further.
The noble Lord described the problem well, and I shall pick up some of his points. First, there are just 15 interventions that will, between them, cater for about 80% of surgical need. That relates to the other point that he and the noble Baroness, Lady Brinton, made: the fact that those interventions need not be carried out by surgeons who are physicians. They can be done by non-physician surgeons—and we now have the evidence about where that can work and where it cannot work. I declare an interest as chair of Sightsavers, which works on avoidable blindness and in preventing blindness. In Africa almost all cataract surgery is done by nurses with additional training, and it is done to the same standards and with the same outcomes. As has already been said, we have seen that pattern in other disciplines too.
I also totally agree with both the noble Lord and the noble Baroness that this is a two-way street. We can learn, and some of the things that are happening in Africa can be imported back to the UK; indeed, the Ponseti technique can be reimported back to the UK. The noble Lord made the further point that seven conditions which can be prevented by surgical intervention amount to almost all the medical conditions that need to be tackled to prevent disability and death. We know what to do—that is the simple point here.
This problem is becoming more visible. The noble Lord and his noble friend Lord McColl have pressed for measures to resolve it, as have others around the world, and the issue is now on the agenda of the World Health Organisation. It has been picked up by the Lancet Commission on Global Surgery, and there is a real opportunity here for the UK to take a lead on this issue on a practical level and in policy. Sometimes just pushing the policy is fine but offering practical support is also important. Indeed, the UK is already doing that but it could do more. Noble Lords may not be surprised to hear me talk specifically about partnerships in this regard—that is, partnerships between UK organisations and African organisations or, indeed, Asian organisations. The All-Party Parliamentary Group on Global Health, which I co-chair, recently produced a report entitled Improving Health at Home and Abroad, which argued strongly that if our doctors, nurses, managers and others spent some time working in Africa they would learn new skills, abilities and flexibility which they could reimport to this country, thus providing scope to improve health at home and abroad at the same time, which would be fantastic.
I wish to reinforce that concept with some related points. It has been stressed that the brain drain is very important, but even more important is the need to offer people education and training. The UK has a fantastic tradition of education and training in health which we can offer to others and thus put it to more effective use. Put simply, if every African who acquired some medical or nursing training before they emigrated went home, it would deal with about 10% of the problem. Therefore, a big increase in training is needed.
I congratulate DfID on extending the partnership scheme and hope that it will continue to extend that scheme, as one would expect. However, it is not just a question of our people working and training in Africa and people from Africa coming here; British surgeons have been innovative in this field. I think of people the noble Lord, Lord Ribeiro, will know such as Bob Lane, a retired surgeon, who has developed a programme to enable doctors to deal safely with a few general surgical procedures—I hope the doctors present will forgive me for describing those procedures in non-technical terms—and one can train trainers to deliver that programme in a relatively short time. This is a real gift to the world. I also think of people such as Professor Chris Lavy, professor of trauma at Oxford University, who has trained orthopaedic clinical officers in Malawi. Therefore, we have a lot to offer in terms of training.
Getting from where Africa is today to where it needs to be cannot be achieved in the short term by training alone. A lot of young doctors take a year out of their training but many of them go to Australia and other places where they are not necessarily needed. I hope that we can find a way to encourage more of them to work in rural African hospitals when they have received enough training in the UK to enable them to provide general medical services and undertake general surgery. There is an organisation based in South Africa called Africa Health Placements and, if a doctor wants to work in Africa, that organisation will find him or her a placement. It is a not-for-profit job agency, as it were. The young doctor from the UK—it could, of course, be an older doctor—will receive a wage paid by the South African Government, which is enough to live on while they are there, and return to the UK at a later stage.
I think that Africa Health Placements is on the verge of persuading the Americans that if a young doctor takes up a placement in Africa for a year at the end of their training in America, they should get some money taken off their student loan. I ask the Government to consider that initiative. That is a very neat, interesting and relatively cheap way to incentivise people to work as surgeons or doctors in rural hospitals which lack such personnel. As I say, they are paid by the South African Government, the Zambian Government, or whichever Government are involved.
That measure is significant but not as significant as some of our other development initiatives. I merely ask the Government to consider that, in the short term at least, by which I mean 10 or 15 years, there will be a need for more non-African doctors in Africa. There is also a need for some doctors from other countries to come to this country to acquire more specialist training. There is a programme, which I believe is called the international medical training scheme, and I hope that the Minister will comment on it, or write to me on the numbers that are involved. Therefore, we can offer practical measures and we should make the most of them because they are impressive. Indeed, the UK is already doing a great deal in this regard, but it could do more.
However, we also need to introduce measures at the policy level. I echo what the noble Lord, Lord Ribeiro, said about the Government’s commitment to the resolution that he mentioned. I congratulate the Government on their disability-inclusive programme in international development. What better way is there for the Government to signal that they have such a programme than to do something which prevents disability? It is very much of a piece with the great announcement the Government made on that last week.
What are the Government doing to promote partnerships? Given that I suspect that the noble Baroness who will reply to the debate will speak from a Department of Health perspective as well as from a government perspective, what is being done to encourage the NHS to be more active in this field, as this issue is about improving health at home as well as abroad? Will the Government allow me to bring personnel from Africa Health Placements to meet government officials to consider ways in which we can persuade more of our young doctors to work in Africa? Will the noble Baroness write to me or let me know how many people are involved in the international medical training placement scheme?
Lord McColl of Dulwich (Con)
My Lords, I thank the noble Lord, Lord Ribeiro, for initiating this debate on a subject which I have always thought is of great importance. I ought to declare an interest because over the past 40 years I have worked in about 14 African countries doing operations, teaching various surgical techniques and helping to enhance surgical care and anaesthesia in realistic ways that they wanted and which were within their financial means.
I always tried to emphasise that organisations should be sustainable, especially in the sense that those they trained would not promptly emigrate to more lucrative climes. Some while ago, I was asked to devise the curricula for two medical schools in Libya, one in Tripoli and the other in Benghazi. I inquired whether they would like a system tailor-made for Libya or whether they just wanted to copy the West. Of course, they said that they wanted something tailor-made for Libya, which was very welcome. I took a team from Guy’s Hospital—there were about five or six of us—to help them to devise suitable curricula. When we presented it to the deans, the first question they asked was, “Will this be recognised by London University?”, and, of course, it would not, so it was rejected and they reverted to the usual western pattern. Needless to say, on graduation many of the students from those medical schools promptly emigrated.
People were very suspicious of me going to such a place as Libya. Indeed, the then Prime Minister, Margaret Thatcher, asked me, “Where have you been recently?”. When I replied that I had been to Libya, she retorted, “You what”?, so it was not a very popular thing to do. People became even more suspicious when I had to operate on Gaddafi’s father. It was the middle of the night. He was 103; I know that they are all 103 out there, but this chap looked much older than that to me, like a dried-up old prune out of the desert. At the end of the operation, we were standing around the old man’s bed, watching the pulse meter; it would go fairly regularly and then stop so that there would be a gap, and then another gap. I thought that this would be the moment where the pulse stops and the dictator takes his gun out and shoots the doctor—although I thought he would probably shoot the anaesthetist first. Gaddafi asked me, “How is my father?”. I said, “I have good news for you; your father is indestructible”. He laughed, and everyone relaxed. In any case, I have always liked to live dangerously.
Our next project was for people dying of AIDS in Uganda. We went out to set up a hospice at the invitation of President Museveni, because he had been impressed with the one that we had set up in Hackney for people dying of AIDS. The wonderful Minister for Overseas Development, Lynda Chalker as she was then, gave us enormous support to do this. We set up this hospice six miles outside Kampala on the road to Entebbe. As you all know, my noble friend Lady Chalker is much admired and respected in Africa; they always take her advice. She advised us not to have any in-patient beds. I think she must have known that the word “clinician” is derived from a Greek word meaning “bed”—that is why doctors are so obsessed with beds; clinicians are bed people. She advised us instead to concentrate on out-patient treatment. She said we ought to become a teaching centre for the whole of Africa, teaching people how to look after those who are dying at home. How wise she was. I returned to this hospice in Uganda recently and I was delighted to find that it was running extremely well, and run entirely by Ugandans, apart from one lady who was a Scot; she was the finance adviser. By the way, the word “economy” is from the Greek and implies housewifery, which is why ladies are the ones who understand finance.
The next project that I got involved with was a charity called Bridge2Aid in Tanzania. This is an amazing charity that has trained more than 300 emergency dental technicians. They are trained in two weeks to take teeth out; you may think that that is not adequate, but when we were medical students we only had three lectures on how to take teeth out, so in Tanzania they go a bit further. They become expert at taking out teeth and therefore relieve a great deal of dental pain and dental sepsis, which can kill. We give them a pressure cooker and a paraffin lamp to sterilise the instruments. Of course their skills are not recognised abroad so they do not emigrate. This is rather reminiscent of President Nyerere’s barefoot doctor scheme, mentioned by the noble Lord, Lord Ribeiro.
Of course I have been associated with Mercy Ships for many years. We concentrate on teaching the local people various operations and anaesthetic techniques. It has been very encouraging to see how they flourish. On board we had an American eye surgeon, Glenn Strauss, a wonderful trainer who trained a Togolese surgeon to do cataracts. Within a week or two, the surgeon had done 30 cataracts beautifully. That surgeon then taught the next Togolese surgeon, who happened to be his professor. The professor became expert in that, and in turn taught the next one. So we ended up with three competent eye surgeons doing cataract operations in Togo, one in the north, one in the south and one in between. They come back for a refresher course every so often.
I want to tell your Lordships about Gary Parker, an American who trained in north Wales at a very good maxillofacial hospital for about five years. He came to work on Mercy Ships for two months, just to see what it was like, and he liked it so much that he decided to stay a bit longer—24 years longer. He must be the most experienced maxillofacial surgeon in the world and he has trained so many Africans in these techniques.
I ought to mention a most outstanding president in Africa, Ellen Johnson Sirleaf in Liberia. She is one of the best presidents out there and the first lady president. She is an economist, she is tough, and she is doing an extremely good job.
For seven years one of our anaesthetists on board has been doing a great job running courses for anaesthetic providers. In the past two years we have been very fortunate in having on board the consultant anaesthetist Dr Michelle White, who gave up a hard-won consultant post in Bristol to work on the ship for three years. She has been invaluable not only in looking after patients and children but also in teaching. She has made an amazing sacrifice. It is so heartening to see such dedication to help developing countries to improve their healthcare and produce something that will last.
Lord Hunt of Kings Heath (Lab)
My Lords, it is a great pleasure to take part in this debate. The noble Lord, Lord Ribeiro, has raised some very interesting questions on health in a global context, on which I hope that we will get some helpful responses from the Government tonight.
His argument essentially is that surgical interventions —focused, as the noble Lord, Lord Crisp, reminded us, on 15 common interventions—can play a very positive role in improving global public health. I thought that the argument was very persuasive and, as I said, I hope that the Government will respond. The comparison of access to surgery in the richest and poorest nations was striking. When we come to the core question of whether surgery is perceived by DfID as a public health measure, we must bear in mind this obvious inequality between the richest and poorest nations.
I would like to ask the Minister whether she accepts that surgery can relieve many of the most important health conditions that millions of people suffer from globally. It is very important that we get an affirmative response on that.
The comment made by the noble Baroness, Lady Brinton, using club foot as an example, was very striking. The example that she gave from Malawi seemed to be absolutely life-changing and very persuasive.
Of course the noble Baroness, Lady Chalker, speaks from great experience and is much admired in your Lordships’ House as well as internationally. She spoke of some of the major challenges in Africa regarding childbirth, including, as she clearly said, the need for surgery, and in particular of the problems in rural areas. She also mentioned issues arising with cleft palate: the challenge of early diagnosis and the problem of the availability of surgery. Again, it would be interesting to know whether that is a point that is recognised in DfID’s development plans for the future.
As ever, it is a great pleasure to hear the noble Lord, Lord McColl, whose personal contribution is remarkable. Politically correct perhaps he is not, but we are always entertained by his contributions. He mentioned the example of helping with the curriculum in a developing country, which, because it would not then be recognised by western universities and health systems, did not prove to be acceptable to the country itself.
It brings us to the difficult problems of both the emigration of doctors from developing countries and the fact that many students from other countries who come to the UK and other developed countries do not want to return. This brain drain is very worrying indeed. Can the Minister confirm whether it is government policy firmly to discourage such a brain drain? I would also like to ask her, given the example of the programmes training surgeons in the home country, whether the Government support that and will endeavour to give further support to bodies such as the Royal College of Surgeons in future.
The noble Lord, Lord Ribeiro, also raised questions about DfID’s priorities for low-income countries. He suggested that in terms of budgetary expenditure, middle-income countries—if I can call them that—were gaining at the expense of the poorest countries because of natural disasters. It would be good if the noble Baroness could confirm that.
The noble Lord, Lord Crisp, said that the issue was becoming more visible internationally, and mentioned the Lancet Commission on Global Surgery. I thought that one of his most telling comments was on the advantage of partnerships in which the NHS is a full partner but where it is acknowledged that enabling NHS staff to go abroad for a certain time and then come back to the UK can be a real advantage to the NHS. I am sure that that is right. My question to the noble Baroness is the one that the noble Lord raised. Inevitably at the moment, the NHS is under great pressure—and I know from my experience that when an NHS trust is under pressure, it worries about losing staff abroad. That applies to the services as well. Is there work to be done to help the NHS to recognise that there could be great benefits from encouraging young staff in particular to take advantage of these programmes? I doubt whether the noble Lord will get an answer to the question on whether student loans can be discounted, but it would be interesting to know whether the Government were at least prepared to talk to the noble Lord, as he suggested.
We come now to the crunch question. Do the Government accept that surgery has a key role to play in improving health globally, and, as the noble Lord, Lord Ribeiro, said, will they support surgery as a public health matter? That is a very important question. I yield to nobody in my admiration for public health doctors—indeed, I stand here as president of the Royal Society for Public Health—but beloved though public health doctors are, I sometimes think that the only interventions that they are concerned with are those that have absolutely nothing to do with medicine. This is because in the developing world inevitably they think about sanitation, access to water and all those sorts of things, which is entirely understandable. However, it is a question of global equality, too; and the evidence is that medical intervention, medicines and surgery can have a huge, positive impact on individuals. For that reason—the noble Lord’s point was persuasive—these should be regarded as public health measures and are as deserving of DfID’s support as what might be considered as the more traditional public health approach.
Baroness Jolly (LD)
My Lords, I am grateful to my noble friend Lord Ribeiro for raising this important issue and for his thoughtful and incisive comments based on years of commitment and experience. He and I went to Zambia two years ago in the summer, so I have seen him in an area in which he is hugely expert asking extremely pertinent questions of the Minister for Health, on the one hand, and the sister in charge of a hospital in the bush, on the other. I also pay tribute to the work of the noble Lord, Lord Crisp, and the All-Party Parliamentary Group on Global Health. We have heard the personal and local experience of my noble friends Lady Chalker and Lord McColl. As the noble Lord, Lord Hunt, said, this debate has been totally fascinating, and I hope that I can get through my speech and answer all noble Lords’ questions.
The noble Lord, Lord Crisp, and my noble friend Lord Ribeiro, through their work, have highlighted the importance of surgery across the whole world, and indeed it is a key part of disease prevention and treatment, and a public health good. We welcome the All-Party Parliamentary Group on Global Health’s recent activity to highlight this issue, including the film “The Right to Heal”.
We very much support the strengthening of emergency and essential surgical care and anaesthesia in developing countries as a component of universal health coverage, and see it as an issue of great importance. To answer a question of the noble Lord, Lord Hunt, on whether surgery can relieve many of those conditions, yes, indeed—we heard many examples in this debate, including treatment of cataracts, cleft palate and fistula.
The UK supports further consideration by the WHO executive board in January—I say that in response to my noble friend Lord Ribeiro’s first question. Action must be taken to help prevent avoidable death and disability as a result of surgery. Indeed, surgically treatable diseases are among the top 15 causes of disability worldwide. Speakers today have highlighted different examples of the appalling statistics and human suffering resulting from poor training and procedures. This position can be changed by working together. The WHO process is an important part of this work and will help commit the international community to making greater progress in raising awareness, improving data and monitoring, and increasing global collaboration on this issue.
The Government aim to improve the provision of basic health services for the poorest by strengthening health systems. Surgery is a key aspect of health service provision and is addressed in this context: the UK is supporting efforts in developing countries to increase the skills and availability of health workers, and to expand access to essential medicines and equipment. Increasing coverage, access and quality will strengthen health services in addressing all health problems, including those requiring surgical treatment.
In answer to my noble friend Lord Ribeiro’s question on DfID raising the profile of surgery, and the question of the noble Lord, Lord Crisp, on partnerships, we have a number of programmes that specifically improve access to surgical services. The UK is supporting partnerships between the UK and developing countries to improve health services in those countries through sharing skills and capacity development, and bringing benefits back to the UK through volunteer NHS staff returning with stronger skills—I underline the point made by the noble Lord, Lord Hunt—that can be useful when they come home. The health partnership scheme is supporting a range of programmes to achieve better outcomes following anaesthesia and surgery, such as supporting training for healthcare workers in surgical and theatre nursing skills in eight countries in Africa. By June 2014, the scheme had trained 26,600 overseas healthcare workers, and UK health professionals had spent 31,000 days volunteering overseas.
The noble Lord, Lord Crisp, inquired whether the Government would consider welcoming Africa Health Placements. The Government’s “Health is Global” strategy includes work on health system strengthening. Officials work with many organisations and will be happy to meet Africa Health Placements. Other work being undertaken includes the provision of and training in obstetric services, including the availability and quality of caesarean sections and episiotomy, where necessary, and eye surgery. In humanitarian contexts, we also support the UK International Emergency Trauma Register of deployable specialist staff—primarily from the NHS—and a deployable surgical field hospital.
I want to pay tribute to the royal colleges and others for the work they undertake in this area, and the Association of Surgeons of Great Britain and Ireland, which is a member organisation of the International Collaboration for Essential Surgery. Governments, health professionals and the voluntary sector all have a role to play. An organisation that is trying to tackle the basic issues around lack of anaesthetist skills in many countries is Lifebox, mentioned by my noble friend Lord Ribeiro. Its purpose is to provide equipment and support services in low resource and lower-middle-income countries at no or reduced costs. UK hospitals, universities, health and international development third-sector organisations have well established and expanding relationships with healthcare institutions in lower and middle-income countries. These range from: training and capacity building for staff; providing practical skills; continuing professional development; supporting improvements within developing-country organisations; facilitating research; and, indeed, curriculum development. Those are all in line with points raised by many noble Lords.
In response to my noble friend Lord McColl, regarding the funding of Mercy Ships, I can say that DfID has indeed funded mercy ships in the past but currently is not so doing. The noble Lord, Lord Hunt, inquired about the brain drain. The Government are committed to the World Health Organisation code on ethical recruitment of health workers, which is designed to prevent brain drain from countries with a shortage of healthcare professionals.
British health volunteers have a key role to play in improving health in other countries, as highlighted by the all-party group last July in its report Improving Health at Home and Abroad. The noble Lord, Lord Crisp, will be interested to know that the Department of Health and the Department for International Development will shortly publish an updated framework for voluntary engagement in global health by the UK health sector, which will seek to bring greater clarity as to how these activities can contribute, in a sustainable way, to building capacity in low and middle-income countries. It also outlines the benefits and opportunities for UK employers, professional associations and, indeed, individual health workers in the UK.
The medical training initiative accommodates overseas postgraduate medical specialists to train in the UK for up to two years. Participants can return to their home country and apply the skills and knowledge developed during their time in the UK. I think the noble Lord, Lord Crisp, inquired about this; I am happy to give noble Lords figures in a letter.
I would finally like to focus on some priorities for the Government that are linked to this topic. First, as part of any progress in surgical interventions, if basic surgery is to have any chance of widespread continued success, I stress the importance of the need for access to and rational use of antibiotics. This has not been mentioned this evening, but it really is critical. It links to the work that the UK, along with international partners, is leading on tackling antimicrobial resistance, which is one of the biggest global health challenges facing us today. The World Health Assembly recently committed to developing a global action plan. As part of this wider effort, the Prime Minister has today launched an international commission to identify what action may be taken by the global community.
Secondly, we recognise that the rates of maternal and newborn mortality remain unacceptably high and further action is needed. The UK Government have made commitments to save the lives of 50,000 women in pregnancy and childbirth and 250,000 newborn lives. They also support the WHO and UNICEF global action plan, Every Newborn: An Action Plan to End Preventable Deaths, which was launched in Johannesburg this week. The links between newborn and maternal survival and access to quality surgery are clear. It is estimated that one in three pregnant women needs some intervention during birth and between 5% and 15% require a caesarean section. Improving the quality of maternal and newborn care is one of the strategic objectives of the action plan.
Finally, another area where the UK is working, both at home and abroad, is in eliminating female genital mutilation and supporting women and girls affected by this practice. The recent adoption of a WHO resolution on violence against women is a welcome development. Through our work on FGM and reproductive and maternal health, we are also working to prevent and manage obstetric fistula—a hole in the birth canal—which WHO estimates affects between 50,000 to 100,000 women worldwide each year.
All this links to our work towards a health goal in the post-2015 framework. The UK wants to ensure it includes commitments on key areas such as: newborn and maternal health; ensuring access to essential medicines; and universal health coverage—all issues identified in the course of the debate, and all linked to access to quality surgery and anaesthesia. We have been involved in these discussions through the High-level Panel of Eminent Persons on the Post-2015 Development Agenda, which was co-chaired by our Prime Minister, and remain involved through the deliberations of the open working group.
I am grateful for the opportunity to focus on these issues through the debate and will keep noble Lords updated on further discussions by WHO’s executive board. By taking action now at a global level, and by all sectors working together, we can truly make a difference to lives and tackle avoidable mortality and disability.
I will take what time I have left to pick up on a few points that came towards the end of the speech. My noble friend Lady Brinton asked about DfID and the Department of Health supporting successful projects, such as the one she outlined. Working with NGOs and civil society forms an integral part of the Government’s approach to reducing poverty. We will be happy to provide information on funding for NGOs and civil society organisations in a written reply.
My noble friend Lord Ribeiro asked about a stand-alone target on surgery. I hate to disappoint him, but the Government are not in favour of a stand-alone target on surgery in a post-2015 framework. Rather, we think it is more helpful to measure health outcomes, such as reductions in mortality. Surgery may be required in some cases to achieve those, but we also support the inclusion of a target on universal health coverage, which will help to expand the availability of essential health services.
I will write to all noble Lords who have taken part in the debate to answer unanswered questions, but I will also try to arrange a meeting with the relevant Minister to take up these points further.