House of Commons

Tuesday 2nd September 2014 Commons Chamber

Tuesday 2 September 2014

The House met at half-past Eleven o’clock

Prayers

Tuesday 2nd September 2014 Commons Chamber

[Mr Speaker in the Chair]

Business before Questions

Transport for London Bill [Lords] (By Order)

Buckinghamshire County Council (Filming on Highways) Bill [Lords] (By Order)

Second Readings opposed and deferred until Tuesday 9 September at Four o’clock (Standing Order No. 20).

Oral Answers to Questions

Tuesday 2nd September 2014 Commons Chamber

The Chancellor of the Exchequer was asked—

[Fiona Bruce (Congleton) (Con)]

1. What progress he has made on his long-term economic plan.

[Graham Evans (Weaver Vale) (Con)]

14. What progress he has made on his long-term economic plan.

[The Chancellor of the Exchequer (Mr George Osborne)]

The Government’s long-term economic plan is working, and the International Monetary Fund expects the United Kingdom to grow faster than any other G7 country this year. But the job is not yet done; there are growing risks abroad from a disappointingly weak eurozone and persistent risks at home from Opposition Members who would abandon the long-term plan and return Britain to the economic mess they left it in.

[Fiona Bruce]

I welcome the statistics out today on the Government’s flagship Help to Buy scheme. It is helping those families it was designed for: those buying a house worth less than the national average—overwhelmingly, these are people outside London and the south-east. The policy is boosting aspiration and helping hard-working families on to the housing ladder. So will my right hon. Friend confirm that he will not listen to the Labour party, which has opposed the policy, and will instead continue with Help to Buy as part of our long-term economic plan to deliver greater economic security and a brighter future for our country?

[Mr Osborne]

My hon. Friend is absolutely right about that. We heard lots of scare stories from the Opposition about how this scheme would be used only in central London and the like. The fact is that today’s figures show that almost 50,000 people have been helped by Help to Buy, and that 80% of those have been helped outside London and the south-east of England. In her own council area, more than 300 families have been helped. Members of Parliament from west Yorkshire would like to note that Leeds is the No.1 location for people using Help to Buy. The scheme is working, it is about backing aspiration and it is about helping people get on in life.

[Graham Evans]

Businesses and families across my constituency will all benefit from recent investments in the Halton curve railway, the Mersey gateway bridge and the Hartree centre for supercomputing in Daresbury. I urge my right hon. Friend the Chancellor to continue the important work he is doing as part of the long-term economic plan to build the northern powerhouse, which will continue to create jobs and economic security in Weaver Vale and across the north of England.

[Mr Osborne]

Of course, I want Weaver Vale and Cheshire to be part of that northern powerhouse, and may I commend my hon. Friend for the campaigns he has fought to get the second Mersey crossing, the Halton curve and the investment in Daresbury? Those are things that Labour MPs, including the one who used to represent his seat, campaigned for for years and got nothing from a Labour Government. We now have a Conservative MP delivering for his constituents under a Conservative Chancellor.

[Ian Lucas (Wrexham) (Lab)]

In 2010, the Chancellor said that he would eliminate the deficit by 2015. Why has he failed?

[Mr Osborne]

For the reasons that I have set out before—with the slower growth in Europe. This is extraordinary: all we get at Treasury questions and generally from the Labour party are requests for more spending and more borrowing, but now Labour Members seem to be complaining that we have not cut enough. Over the summer, we did our sums, we added up their summer spending spree and we found there had been £21 billion of Labour spending commitments in the past five or six weeks alone. That is another reminder of why it cannot be trusted with the British economy again.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

New research by the Inequality Briefing highlights the fact that nine of the 10 poorest regions in northern Europe are in the UK—these include the ones I represent in west Wales. The UK is also home to the richest region in northern Europe: inner London. What has happened to the long-term plan to geographically rebalance the UK economy?

[Mr Osborne]

The first thing I would say to the hon. Gentleman is that of course we need to tackle long-standing regional disparities in our country, and we are putting investment into Wales, including transport and infrastructure investment, to try to lift the economic performance of Wales. The broader point I make is that we need to bring the economic geography of our country closer together. That is an argument I have made about the north of England. The gap between the regions grew under the last Labour Government. By making the long-term investment under our long-term plan we hope to reduce the disparities under this Government.

[Mr Andrew Tyrie (Chichester) (Con)]

The crucial task now is to develop a long-term supply side reform agenda. Does the Chancellor agree that at the heart of that must be policies to release the energies of millions of small businesses and sole traders up and down the country? With that in mind, will he examine the policies of both the Institute for Fiscal Studies and the Mirrlees review, which in different ways have proposed to reduce the burden of national insurance contributions when that is affordable? Is that not an essential part of Britain’s long-term recovery?

[Mr Osborne]

I agree with the sentiment that my hon. Friend expresses that we want to make it easier to employ people. I would argue that the reductions that we have already made in national insurance on coming into office and the provision of an employment allowance, which has been enormously popular among smaller businesses, and next year’s move to remove under 21-year-olds from the jobs tax are all steps we are taking to support the creation of jobs in the economy. Of course, the Labour party would like to put up the jobs tax, but that would be deeply counter-productive and put people out of work.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Does the Chancellor find it a cause for concern that the Bank of England has halved its forecast for wage growth for the rest of this year?

[Mr Osborne]

Of course one of the challenges across the western world has been wage growth. The shadow Chancellor put it very well in an interview he gave last week. He said:

“I think that the fact that you had the massive…financial crisis which happened on our watch meant people saw their living standards hit.”

There is an admission of where the source of the problem is, and the solution is to grow our economy, create jobs and help people get on in life, and that is what we are doing.

[Chris Leslie]

I am not sure whether I detected any concern from the Chancellor. But if he is concerned about this issue, why is it that under his plans it is always those with the lowest incomes, those in the poorest areas and those who are most vulnerable in society who end up being hit hardest by these measures? Will he now prioritise action to ensure that we have proper enforcement of a decent minimum wage, end those exploitative zero-hours contracts and promote some incentives to have a living wage?

[Mr Osborne]

We are introducing new measures to strengthen enforcement of the minimum wage and to ensure that there is not an abuse of zero-hours contracts. Might I add that for 13 years the Labour party had the opportunity to introduce those measures and it did not? The record under this Government, despite the incredibly difficult economic inheritance, is that child poverty is down by 300,000 and inequality is lower than it was on average under the previous Labour Government, so we are proceeding to deal with the enormous problems that we inherited in a way that is consistent and fair.

[Kevin Brennan (Cardiff West) (Lab)]

2. If he will take steps to allow the Office for Budget Responsibility to audit the spending plans of political parties.

[The Financial Secretary to the Treasury (Mr David Gauke)]

Autumn statement 2013 announced that, as required by legislation, the OBR is launching an external review of its publications over the course of 2014. The external review team will publish its independent report tomorrow. Following the outcome of that review, the Government will hold their own review of the OBR at the start of the next Parliament.

[Kevin Brennan]

That was very interesting but it had nothing to do with the question. The figure of £21 billion that the Chancellor mentioned in his answer to question 1 will presumably be sent now by the Minister to the OBR to be checked as to whether it is factually correct, or is the figure a political smear, as usual from the Chancellor, that he is not prepared to stand up by sending it for scrutiny to the OBR—yes or no?

[Mr Gauke]

Much of that £21 billion figure is based on the Labour party’s own announcements. I do not know why the hon. Gentleman is complaining about that. If the Labour party wants to have credibility on fiscal policy, perhaps it should stop making so many announcements of spending splurges. Our view is that the OBR is in its infancy. We want the organisation to succeed and therefore do not want to draw it into party political matters.

[David T. C. Davies (Monmouth) (Con)]

If the OBR ever does decide to look at the Labour party’s figures, perhaps it will be able to explain how it is possible for the Labour party to be able to call for reductions in borrowing and in the deficit while making all sorts of promises to spend billions of pounds that it simply does not have. Does it not show that the Labour Members are as incoherent on economics as they were when they lost the last general election?

[Mr Gauke]

My hon. Friend is absolutely right. The OBR is a very successful organisation that has achieved a lot, but trying to explain the fiscal policy of the Labour party is something that would currently be beyond it.

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

Why are the Financial Secretary, the Chancellor and the whole Treasury scared of having such an audit? It is the most appropriate thing for the OBR to do. The OBR is one of their better creations; we have complimented them on it and supported it all the way. Perhaps we should have set it up ourselves but we have got it now. I will tell the Minister why they will not arrange for such an audit. It is because they are frit. The whole Government know that the OBR would endorse and give a clear bill of health to our plans.

[Mr Gauke]

My memory is that the Labour party did not support the OBR all the way. There is a debate to be had about the future of the organisation, but we do believe that, in its infancy, an organisation of this sort needs to be secure. That argument was used by the Labour party when the relevant Bill was passed in the House of Lords.

[Stephen Hammond (Wimbledon) (Con)]

Does my hon. Friend agree that, rather than trying to untangle the mess of the current spending plans, the OBR’s time might be better used looking at the spending plans of the Labour party when it was in government so that the public have a verified and independent record of the mess it left before the next general election?

[Mr Gauke]

I am grateful to my hon. Friend for that suggestion, but I think the record is fairly clear whether the OBR looks at it or not. The previous Government left our public finances in a desperate mess and we are continuing to recover from that mess.

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

As well as auditing manifestos, we propose that the OBR should be tasked with monitoring and reporting on the Government’s progress on child poverty, including the impact of Budget decisions. Why will not the Government task the OBR with taking on this role? Is it because the Institute for Fiscal Studies predicts that by 2020 almost 1 million more children will be living in relative poverty and almost 1.4 million in absolute poverty?

[Mr Gauke]

Every week, another new task comes from the Labour party for the OBR. Child poverty is down by 300,000. That is the record and those are the numbers that have been produced. We believe that the OBR has had a very good start as an organisation. We value it and believe that it has an important future, and we will not jeopardise it by letting Labour use it for party political games.

[Robert Flello (Stoke-on-Trent South) (Lab)]

3. What recent assessment he has made of the effect of his fiscal policies on the level of child poverty.

[The Exchequer Secretary to the Treasury (Priti Patel)]

The Government are protecting vulnerable groups while taking action to tackle the record deficit we inherited. Work remains the best route out of poverty and the Budget took action to support families and to make the tax and welfare system fairer, further increasing the income tax personal allowance to £10,500 in 2015-16, which will take 3.2 million people on low incomes out of tax altogether.

[Robert Flello]

I was amazed by the answer given by the Minister’s colleague to the previous question, so perhaps I will try her on the same point. Are she and her colleague in the least bit troubled by the fact that the IFS forecasts that child poverty will rise by 400,000 during this Parliament?

[Priti Patel]

The hon. Gentleman will know that the Government are committed to ending child poverty by 2020. Under this Government, as my right hon. Friend the Chancellor has already said, child poverty has fallen by more than 300,000 since 2010. The best route out of poverty is work and I am sure that the hon. Gentleman will support that route.

[Charlie Elphicke (Dover) (Con)]

I congratulate the Minister on her debut at the Dispatch Box. She has referred to child poverty falling under this Government. Will she confirm that it rose under the previous Labour Government in the previous Parliament?

[Priti Patel]

I thank my hon. Friend for his warm remarks. He is absolutely right. It is this Government who have gone out of their way to focus on a child poverty strategy, reducing the numbers, and that is something of which we are proud.

[Helen Goodman (Bishop Auckland) (Lab)]

16. The Government’s own figures show that the number of children in poverty in absolute terms after housing costs increased by half a million between 2010 and 2013. Why does the burden of fiscal adjustment fall on the most vulnerable?

[Priti Patel]

I think it is worth my reiterating that relative child poverty has fallen under this Government by 300,000 since 2010. It is quite clear what the IFS has said about the greatest and deepest recession we have had thus far and that work is the best route out of poverty. I have said it already and I will repeat it: work is the best route out of poverty. This Government are supporting hard-working families across the country and getting them out of poverty.

[Sarah Champion (Rotherham) (Lab)]

18. Unfortunately, the Minister’s comments bear no relationship to Rotherham, where almost a third of children are living in poverty. On a related topic, may I ask whether the Chancellor would listen to requests for additional funding for child protection in Rotherham and around the country?

[Priti Patel]

I thank the hon. Lady for her comments and we will look at all places and all situations. I reiterate that this Government are committed to helping all families that are having difficult times. Child poverty has come down and, of course, work is the best route to get families out of poverty. I am happy to discuss with her the specific issue of child poverty in her constituency

[Mr Simon Burns (Chelmsford) (Con)]

5. What assessment he has made of the effect of freezing fuel duty on the price of petrol.

[The Exchequer Secretary to the Treasury (Priti Patel)]

Autumn statement 2013 confirmed that fuel duty will be frozen for the remainder of this Parliament. As a result of this Government’s very clear actions, average pump prices are currently 16 pence per litre lower than they would have been if the Government had implemented the previous Government’s fuel duty escalator, and will be nearly 20 pence per litre lower by the end of this Parliament.

[Mr Burns]

May I congratulate my fellow Essex MP on her well-deserved promotion to the Treasury? Will she update the House on the use of the tax system to reduce the instability for motorists and outline the help that has been provided for them during what was the most horrendous recession caused by the Labour party?

[Priti Patel]

I thank my right hon. Friend for his warm and generous remarks. He knows that the Government are committed to supporting motorists. We are the Government who abolished the previous Government’s fuel duty escalator, cut fuel duty by 1 pence per litre and scrapped the four increases that had been planned over the Parliament. By the end of this Parliament, fuel duty will have been frozen for nearly four and a half years—the longest duty freeze in over 20 years—which I know that my right hon. Friend and, of course, the good people of Chelmsford will warmly welcome.

[Mr David Hanson (Delyn) (Lab)]

Could the Minister tell the House how much per litre VAT has added to the price of petrol?

[Priti Patel]

Simple answer: a lot less than it would have been under Labour.

[Stuart Andrew (Pudsey) (Con)]

6. What recent estimate he has made of the level of employment.

[The Chancellor of the Exchequer (Mr George Osborne)]

There are a record number of people in work, and 1.8 million jobs have been created since 2010. We are also seeing the largest fall in youth unemployment on record. But too many people remain without a job, which is why we are determined to achieve full employment by helping businesses to take on new staff, and reforming welfare so that it always pays to work.

[Stuart Andrew]

Unemployment continues to fall across Leeds, and in my constituency it has fallen by 39% to 1.8%. That is providing families with the stability and security of a regular pay packet. But is my right hon. Friend aware that of the 2 million jobs created, more than three quarters have been in full-time employment, and does not that show that the long-term economic plan of this Government is building a healthier and stronger economy?

[Mr Osborne]

My hon. Friend is absolutely right. I remember visiting with him Hainsworth & Sons, a textile company in his constituency, which is now exporting to China. In his constituency, as in others, we have seen a dramatic fall in unemployment. Unemployment is down 31% in the last year; youth unemployment has fallen too. Many of those jobs are in full-time employment, as he says, but of course we are also supporting those in self-employment.

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

Of all those jobs created, many are part time, and part-time jobs for people who are looking for full-time employment—over a quarter of a million people are involved there. What is the Chancellor doing to increase the opportunities for full-time employment in this country?

[Mr Osborne]

What the hon. Gentleman says is not a clear statement of the facts, because actually, full-time employment accounts for three quarters of all the new jobs created since 2010. Of course there are those who want part-time employment, but for those in part-time employment who want full-time employment, the answer is to continue to support the economy, to do the difficult things necessary on the public finances to inspire confidence in that economy, and not to have disastrous things like a jobs tax rise, which would make it more difficult for those people to get full-time work.

[Greg Mulholland (Leeds North West) (LD)]

Key to a long-term employment plan is the wonderful apprenticeship scheme. The new scheme was launched by the Business Secretary in Leeds. We have seen the creation of 2,000 apprenticeships since 2010. Will my right hon. Friend also welcome the fact that now, finally, Leeds city council is talking about a university technical college? Considering that there is a spare Leeds city council site, does he not think it is time that Leeds city council got on and built one?

[Mr Osborne]

I very much agree with my hon. Friend. The university technical colleges have been a real boost to technical education in our education system, and I know that there are ambitious proposals in Leeds. Indeed, I think, from memory, that one has just been given the go-ahead in Leeds. But I would also say that the apprenticeship scheme has been very successful. Working with myself and the Business Secretary, more than 2 million apprenticeships have been provided. We want to see more of those provided, so that young people have the skills to take the opportunities that the economy is now providing them.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Does the Chancellor regret that under his watch the number of young people staying on jobseeker’s allowance for more than 12 months has risen by more than 46%? Is it not now time for Labour’s compulsory jobs guarantee to ensure that young people are not left behind?

[Mr Osborne]

Interestingly, a lot of Labour MPs have regularly asked about long-term youth unemployment during Treasury questions over the past couple of years. I bring that up because the hon. Lady asks about this, but long-term youth unemployment is now lower than it was when this Government came to office. We heard a lot of complaints about long-term youth unemployment over the past two years, so let us have some Labour Members congratulating the Government now.

[Steve Brine (Winchester) (Con)]

7. What measures he has introduced to reduce the level of tax paid by households.

[The Chief Secretary to the Treasury (Danny Alexander)]

The Government have done a vast amount to reduce the tax burden on working people. By the end of this Parliament, without the Government’s changes to the tax system, 3.2 million low-paid individuals whom we have lifted out of income tax would still have been paying income tax, it would have cost the typical motorist £10 more to fill up their petrol tank following the rise that the previous Government planned would take place yesterday, and the council tax bill for a family in a band D property could have been up to £1,100 more. This is all part of our long-term plan to build a stronger economy in a fairer society.

[Steve Brine]

Around 40,000 people in my constituency will benefit from the Government’s decision to raise the tax limit. That helps those on low and middle incomes to keep more of the money they earn in their pocket each month, which shows the Government’s good values in action. Will my right hon. Friend confirm how much more someone in my constituency on the minimum wage will save as a result of our actions?

[Danny Alexander]

My hon. Friend is absolutely right to stress the importance of lifting the income tax personal allowance, which was a Liberal Democrat manifesto commitment for working people in this country. A full-time worker on the minimum wage will pay three quarters less income tax than they would have done in 2010. A typical basic rate taxpayer will save £800 in cash terms in the next financial year.

[Helen Jones (Warrington North) (Lab)]

If the Chief Secretary believes in reducing taxation on working families, will he explain why those on universal credit will be subject to a 76% marginal deduction rate on extra earnings? Why do the Government believe that wealthy people have to be incentivised by a tax cut, but the poorest people need to be incentivised by a huge tax rate?

[Danny Alexander]

The hon. Lady deliberately ignores the fact that many people faced marginal deduction rates of more than 100% under the previous Labour Government. It is precisely because we want every single person in this country to know that they will be better off in work than on benefits that we are introducing universal credit, and she should support it as strongly as I do.

[Philip Davies (Shipley) (Con)]

The National Institute of Economic and Social Research has shown that a 3p cut in fuel duty would generate 70,000 new jobs, stimulate GDP by 0.2% and help to reduce inflation. The Centre for Economics and Business Research says that a cut would be even more beneficial to the economy and would be self-financing. Do the Government accept that a cut in fuel duty would be self-financing and provide a boost to the economy?

[Danny Alexander]

I am grateful to my hon. Friend for drawing attention to that study, which I have discussed with the FairFuelUK campaign, although I was slightly discomforted when it said it thought that the only two politicians it had met who understood the issue were myself and Nigel Farage—that was probably a surprise to both of us. The Treasury has published its own analysis on fuel duty reductions, which shows the economic benefits that they can bring.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

Given the importance of accurately calculating the tax yield from households and businesses, and that of ensuring that both pay their fair share of tax, will the Chief Secretary tell us when, following the letter from the head of the UK Statistics Authority, the Chancellor will correct the record and apologise for giving the House incorrect figures that inflated the success of his tax avoidance programme?

[Danny Alexander]

The hon. Lady should celebrate our tax avoidance programme because it ensures that people who avoided paying tax under the previous Labour Government now pay tax under this coalition Government. She should welcome the fact that the programme is bringing in £7 billion more than was the case under the previous Government, not criticise it.

[Angie Bray (Ealing Central and Acton) (Con)]

8. What fiscal steps he is taking to help businesses to invest and export.

[The Financial Secretary to the Treasury (Mr David Gauke)]

The Government are actively supporting the export and investment aspirations of British businesses. To ensure that companies have access to world leading export finance, Budget 2014 announced that Export Finance’s direct lending facility will be doubled to £3 billion and the rate of interest cut by a third to the lowest level allowed by international agreements. UK Trade & Investment is on track to help 50,000 companies export by 2015, double the number supported in 2010, and to encourage investment, the Government have cut the main rate of corporation tax to 21% and will reduce it further to 20% in April 2015.

[Angie Bray]

I have a successful small company in my constituency that sells skin care products across the world, and most recently, to China, but it would appear that the Chinese Government are insisting that online customers in China can purchase only up to $100-worth of product at any time unless they turn themselves into a registered business. Surely that must be against World Trade Organisation rules, so will my hon. Friend will look into it as a matter of urgency?

[Mr Gauke]

My hon. Friend is a doughty champion for her constituents and businesses located in her constituency. She raises an important point and I will make sure that both our embassy in China and the Department for Business, Innovation and Skills are aware of her concerns. The Government recognise the importance of trade with China and we want to do everything that we can to bring down barriers to enable as much trade as possible.

[Sammy Wilson (East Antrim) (DUP)]

During the past week, two reports have shown that export growth is down because of external factors such as slow growth in the eurozone, sanctions against Russia and the strength of the pound, and at the same time lending by banks to small businesses this year has fallen by £1,200 million, affecting their investment plans. Is there not a real danger that future growth will now be dependent on unsustainable consumer borrowing? What can the Government do, first to force banks to lend money to small businesses, and secondly to make known to small businesses the plethora of initiatives that have been taken to encourage exports?

[Mr Gauke]

The hon. Gentleman is right to raise the fact that there are external pressures here, but there are steps that the Government can take, and, as he touches upon, we have taken a number of measures to help with exports. Whether that is support for UK Trade & Investment or new financing facilities, the Government are determined to do everything to help those businesses to export to overseas markets.

[Christopher Pincher (Tamworth) (Con)]

21. Does my hon. Friend agree that the extension of the runway at Birmingham airport, allowing long-haul flights now to fly direct to China, is another example of how the Government’s long-term economic plan to build a stronger and healthier economy in the west midlands will allow business men to travel there and do better business with China?

[Mr Gauke]

My hon. Friend makes an excellent point and that is one important example of the 2,000 infrastructure projects delivered by the Government.

[Ms Margaret Ritchie (South Down) (SDLP)]

The removal of the aggregates levy credit scheme in Northern Ireland has severely hit the construction industry. I was pleased to hear that the European Commission had ruled that the scheme was legal and will not be seeking back payments. What will the Minister do to reinstate the levy to help local businesses grow and create employment?

[Mr Gauke]

The hon. Lady raises an important point and I hope that we can say more about the steps that we can take to help businesses in Northern Ireland in particular that have been affected by this issue.

[Nick Smith (Blaenau Gwent) (Lab)]

9. What recent representations he has made to institutions of the EU on the cap on bank bonuses.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

The Government are challenging the bank bonus cap provisions under EU capital requirements directive IV. We think that those rules will undermine the progress that we have made to make sure that bankers’ pay is aligned with long-term performance and that there are no rewards for failure or wrongdoing.

[Nick Smith]

The Chancellor was much too complacent earlier. Youth unemployment in Blaenau Gwent is still way too high. Why do the Government refuse to repeat the tax on bank bonuses? That could fund guaranteed jobs for young people throughout the UK.

[Andrea Leadsom]

As the hon. Gentleman will know, the Government have instead introduced a permanent bank levy on bankers’ balance sheets, which, according to the Office for Budget Responsibility, will raise £8 billion during the life of this Parliament, and up to £18 billion by 2018-19, so they are paying a fair share towards our economic recovery.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

10. What recent estimate he has made of the difference between the rate of inflation and the rate of growth in average earnings since May 2010.

[The Exchequer Secretary to the Treasury (Priti Patel)]

We recognise that times have been tough for hard-working people. However, the Government have taken decisive action in getting more people into work than ever before—cutting taxes for hard-working families through increases in personal allowances, freezing council tax and fuel duty, cutting energy bills, and providing tax-free child care up to £2,000.

[Chi Onwurah]

In July the Chancellor came to Newcastle to announce that the economy was back on track. Office for National Statistics figures show that the real value of average wages in the north-east has fallen by £1,811 per year since this Government came into power. Is that what he means by “on track”—falling wages for working people and tax cuts for millionaires?

[Priti Patel]

The hon. Lady will know that our economy is recovering from the deepest debt-fuelled recession in living memory. The Institute for Fiscal Studies has made it clear that there have been very significant falls in real earnings as a direct but delayed response to the 2008 recession. In the light of this honest assessment, she will know that the only way to raise living standards in a sustainable way is to tackle the country’s economic problems head on.

[Sir Tony Baldry (Banbury) (Con)]

20. Does my hon. Friend agree that one of the best indications of the rate of growth is the increase in jobs, and that with over 1.8 million more jobs now in the economy than over the past four years, more women in work than ever before, and youth unemployment falling dramatically, that all indicates that our long-term economic plan is working and that as regards the economic policies of the Opposition, the wheel may be turning but the hamster is dead?

[Priti Patel]

My right hon. Friend is absolutely right. He has made the case very clearly that there are strong economic indicators out there that are testament to the Government’s long-term economic plan. Quite frankly, this country is going forwards, not backwards.

[Kate Green (Stretford and Urmston) (Lab)]

According to the most recent Office for National Statistics figures, child poverty in lone parent families where the parent is working full-time has risen from 17% to 22%. What are the Government doing to help those families to beat the rising cost of living?

[Priti Patel]

I re-emphasise the point that I made earlier: child poverty under this Government is down by 300,000. Inequality is being tackled very effectively by this Government through what we are doing to raise living standards and tackle the country’s economic problems head on.

[Mr Philip Hollobone (Kettering) (Con)]

Will my hon. Friend remind the House of the amount by which personal tax-free allowances have been increased since 2010 to help protect household budgets in an era of sluggish wage growth?

[Priti Patel]

As my hon. Friend will know, we have increased tax allowances by thousands of pounds to the new figure of £10,500, which will take an extra 3.2 million people out of tax.

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

11. What estimate he has made of the number of new businesses set up in Milton Keynes in the last year.

[The Financial Secretary to the Treasury (Mr David Gauke)]

The latest data indicate that 2,200 new businesses were set up in Milton Keynes in the year to July 2014.

[Iain Stewart]

I am grateful for that answer. Does my hon. Friend agree that more new business start-ups are vital to secure our economic recovery? Is he aware that this Friday my hon. Friend the Member for Milton Keynes North (Mark Lancaster) and I are hosting a business start-up event to give budding entrepreneurs access to the support and advice they need to get their businesses going?

[Mr Gauke]

I entirely agree that business start-ups are very important. I certainly was aware of the event at the national rail centre in Milton Keynes between 4 o’clock and 7 o’clock on Friday afternoon. I also note that unemployment in my hon. Friend’s constituency has gone down by 42% since the last election, which suggests that start-ups are thriving in Milton Keynes.

[Simon Kirby (Brighton, Kemptown) (Con)]

rose—

[Mr Dennis Skinner (Bolsover) (Lab)]

rose—

[Mr Speaker]

Order. It is a pretty considerable distance from Milton Keynes to Brighton, and indeed, for that matter, to Bolsover. The question was narrowly constrained, so we will move on.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

12. What fiscal steps he has taken to reduce the cost of living for those on the lowest incomes.

[The Chief Secretary to the Treasury (Danny Alexander)]

As I said earlier, the coalition Government have taken decisive action to support families on low incomes, particularly by increasing the personal allowance next year to £10,500—a key Liberal Democrat manifesto commitment. I also mention the hugely successful introduction today of universal free school meals for infant school pupils, which, as well as enhancing educational performance, is worth £400 per child in terms of the costs of paying for those meals.

[Annette Brooke]

I thank the Chief Secretary for his answer. Does he agree that the Liberal Democrats have been a driving force in this Government for helping people on low incomes through the increase in personal tax allowance, and that the implementation of the universal free school meals for infant schools this week is further evidence of the Liberal Democrats really helping hard-working people on low incomes?

[Danny Alexander]

It will come as no surprise to the House that I wholeheartedly agree with my right hon. Friend. She is absolutely right to say that certain measures would not have happened without the role played by the Liberal Democrats in this Government. The lifting of the income tax personal allowance and the introduction of free school meals for infant pupils are just two of many ways in which our party has contributed to this Government to ensure that we are helping and that this country has a stronger economy and a fairer society where everyone can get on in life. That must be the right objective.

[Mr Dennis Skinner (Bolsover) (Lab)]

In the last 10 minutes we have heard that jobs are very good—part-time, no doubt—and business start-ups are supposed to be very good. If all this is true, why are all these Tory MPs jumping ship?

[Danny Alexander]

I could not possibly comment. They have to make their own career choices. In terms of the hon. Gentleman’s own constituents, in the past four years the claimant count is down by 40.7%, which means that there are more job opportunities in his constituency than there have been for very many years.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

13. What recent assessment he has made of the level of bank lending to businesses since May 2010.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

Net bank lending to business in the UK fell sharply following the financial crisis. The Government have acted decisively to stimulate lending, introducing schemes such as funding for lending and the British business bank. Against that backdrop, the picture has now begun to improve and the most recent figures from the Bank of England show that gross lending to small businesses has increased steadily since 2012.

[Mike Kane]

Those were not the figures released last week, which show that net lending to small businesses in Britain fell by £435 million between April and June. That followed a decline of £720 million in the first quarter. Two years on, has not the funding for lending scheme failed Britain’s small businesses?

[Andrea Leadsom]

No. The hon. Gentleman is completely wrong. The funding for lending scheme has undoubtedly made more credit available than would otherwise have been the case. As I have said, gross lending to businesses has improved and the Federation of Small Businesses has said that the outlook for small and medium-sized enterprises is now better than it has been before. I remind the hon. Gentleman that the peak-to-trough drop in GDP between 2008 and 2009 was 7.2%. That is the cause of the disastrous drop in the availability of bank funding to businesses in this country.

[Simon Kirby (Brighton, Kemptown) (Con)]

Bank lending is particularly important for new businesses. Will my hon. Friend join me in congratulating the record number of business start-ups—a staggering 1,965—in Brighton and Hove last year?

[Andrea Leadsom]

I am grateful to my hon. Friend for his announcement of what is going on in his constituency. It is fantastic news that so many new businesses are starting up. As we know, that is creating millions of new private sector jobs, and that, of course, is the way for our economy to recover.

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

19. I hate to contradict the Minister, but Ministers from the Department for Business, Innovation and Skills tell me that they do not think that banks are lending to small business. Could the Minister do even more—I know the Chancellor has done something on this—to encourage crowdfunding as a method of getting more money to start-ups countrywide?

[Andrea Leadsom]

The hon. Gentleman is quite right: more needs to be done. The problem is not solved. This Government are doing a great number of things to try to help facilitate not only bank lending, but crowdfunding and peer-to-peer lending. We are putting crowdfunding possibilities into individual savings accounts, as the Chancellor announced at Budget time. We are also taking great steps to improve the availability of new challenger banks, to ensure that banks provide postcode-level lending data so that new challengers can look for new opportunities and to ensure that banks share credit histories via credit reference agencies. All those measures are being taken to try to improve the availability of funding to small businesses. There is certainly more to be done and I would be happy to hear any ideas the hon. Gentleman has.

[Sir Peter Luff (Mid Worcestershire) (Con)]

15. What estimate he has made of the potential effect of a rise in national insurance on employment rates and take-home pay.

[The Financial Secretary to the Treasury (Mr David Gauke)]

This Government inherited plans to increase the employer’s national insurance contributions rate by 1%. We largely reversed the negative effect of that by raising the employer threshold by £21 a week above indexation. We have also introduced the employment allowance. From April 2015, we will abolish employer’s national insurance contributions for under 21-year-olds, helping to support jobs for almost 1.5 million young people currently in employment.

[Sir Peter Luff]

It cannot be said too often: higher national insurance is a tax on pay and a tax on jobs. My hon. Friend will therefore understand my delight when the Government introduced the £2,000 employment allowance—he referred to it in his answer—which will help new businesses in particular to create new jobs. May I tempt my hon. Friend to say what further measures the Government plan to take to reduce the tax burdens on businesses and so increase employment in this country?

[Mr Gauke]

As I mentioned earlier, we have the removal of national insurance contributions for under-21s next year. I entirely agree with my hon. Friend about the impact of higher employer’s national insurance contributions, and I have to say that one of the risks that the economy faces is a future Labour Government putting up employer’s national insurance contributions.

[Mr Robin Walker (Worcester) (Con)]

17. What assessment he has made of the effect of freezing fuel duty on the price of petrol.

[The Exchequer Secretary to the Treasury (Priti Patel)]

I refer my hon. Friend to the response I gave earlier.

[Mr Walker]

I congratulate my hon. Friend on taking her well-earned place on the Front Bench. May I tell her that my constituents and, indeed, many businesses in Worcester have fed back how pleased they are that we have kept the fuel duty freeze in place and rejected calls from the Labour party to restore its fuel duty escalator? Will she remind the House what the cost would be to those people and businesses if we had gone along with the previous Government’s plans?

[Priti Patel]

I thank my hon. Friend for his warm welcome and kind remarks. This Government scrapped the previous Government’s fuel duty escalator, which would have increased fuel duty by 1p per litre above inflation from 2011 to 2014. Were it not for this Government’s very clear actions on fuel duty since 2011, current pump prices would be 16p per litre higher and would be nearly 20p per litre higher by the end of this Parliament. I know that my hon. Friend’s constituents and businesses in Worcester will support the clear action that this Government have taken.

[Guy Opperman (Hexham) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr George Osborne)]

The core purpose of the Treasury is to ensure the stability and prosperity of the economy. That is delivered by our long-term plan. I can tell the House that the plan will be further expanded in the autumn statement, which I will deliver on Wednesday 3 December.

[Guy Opperman]

I thank the Chancellor for that answer. This summer, the Labour party set out a summer spending plan of some £21 billion of extra spending a year. I suggest this further debt will make our constituents wonder whether it has actually learned anything from bankrupting this country under Blair and his successors. Has my right hon. Friend assessed the impact on the public finances of such a disastrous decision?

[Mr Osborne]

My hon. Friend is right, of course. The Treasury’s own independent analysis of the Labour party’s approach to public spending shows that it could borrow over £166 billion more in the next Parliament. Labour Members have started to contribute to that with a £21 billion shopping list this summer. Perhaps the shadow Chancellor can get up and explain how he is going to pay for it.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

Let me start by welcoming the Exchequer Secretary to her new post on the Front Bench, and by saying to the Chancellor, “Don’t worry—I’m not going to press you on my ice bucket challenge to you today.”

Let me instead ask the Chancellor about another highly topical economic issue, particularly among his Back Benchers. Before the last election, he told the Centre for European Reform that he was a “pro-European”. This week, The Times is reporting that the new chapter in his biography says that the Chancellor has gone cold on Europe—an “unmistakable hardening”—and is now pondering exit. I suspect we may know the answer, but let me ask the Chancellor: what has changed?

[Mr Osborne]

First, I thank the right hon. Gentleman for nominating me for the ice bucket challenge. I would rather make the extra donation to charity and pour the cold water over his economic policies. When it comes to reading biographies, we do not need a biography to know his life story: he was put in charge of the British economy, and he wrecked it.

On Europe, our position is the one that I think is shared by the majority of the British people, which is that we seek a renegotiation of Britain’s terms of membership of the European Union, and that we will then put that to the British people in a referendum. Why does the right hon. Gentleman not get up and commit the Labour party to letting the people have a say?

[Ed Balls]

The Chancellor cannot even convince his own Back Benchers of his policy on Europe, let alone anybody else. Let me tell the House what the president of the CBI said last week. He said that the Government’s policy on Europe

“has already, and is increasingly, causing real concern for business regarding their future investment”.

Yet the Chancellor is flirting with exit. We know what has changed: Boris Johnson has said that he is returning to Westminster and that he is flirting with exit, and—surprise, surprise—the Chancellor is too. Let me ask the Chancellor this. I want reform in Europe but, like the CBI, I am determined to put the national economic interest first. Surely the Chancellor should put his leadership ambitions aside and put the national economic interest first too.

[Mr Osborne]

We put the national economic interest first by fixing the mess that the shadow Chancellor left the British economy in. I have been doing some research on what he has been up to over the summer. I read an article in the Express & Star called, “Out and about with Labour’s Ed Balls”, about when he went canvassing last week. It says:

“as we walk down Essex Drive to another house (there’s no-one in), a group of boys on their bikes look over”.

They say, “Oh look, it’s Gordon Brown.” Even they can spot more borrowing and more debt—it is Gordon Brown all over again.

[Mr Marcus Jones (Nuneaton) (Con)]

T2. Some Members of the House predicted that the Government’s deficit reduction strategy would result in the number of jobs lost in the public sector far outweighing the number of jobs created in the private sector. Will my right hon. Friend tell us who was right and whether that prediction was accurate?

[Mr Osborne]

That prediction, like all the Opposition’s predictions, was completely wrong. For every job that has been lost in the public sector because of the necessary and difficult decisions that we have had to take to reduce the 11% budget deficit, more than five jobs have been created in the private sector. That is testimony not only to the strength of the Government’s economic plan, but to the ingenuity of British business in creating such opportunities.

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

T4. The Chief Secretary has been keen to trumpet free school meals for six, seven and eight-year-olds. However, this week in Hackney, many of the 47% of children who are living in poverty will turn up at school not having had a square meal for six weeks. They will be fed by the free breakfast clubs that are supported by head teachers and charities. Is it not time that the Government woke up to the reality of poverty? The parents of those children can get only low-paid, part-time work if they are lucky. Is it not time that the Government took action to tackle child poverty?

[The Chief Secretary to the Treasury (Danny Alexander)]

The hon. Lady is right to highlight the seriousness of these issues. However, as has been said in this question session, the statistics show that child poverty in this country has come down and is coming down under the coalition Government. It is precisely because of these issues that we are introducing the policy of universal free school meals. The evidence shows that it increases take-up among low-income families, who do not always take up free school meals, and ensures that children get a square meal at school each day. I hope that she will join me in welcoming that.

[Nicola Blackwood (Oxford West and Abingdon) (Con)]

T3. The appalling congestion in Abingdon makes life miserable for families and commuters and inhibits local economic growth. With 600 new and needed houses planned on Dunmore road, will the Chancellor meet met to discuss why investing in a diamond junction on Lodge hill on the A34 is the answer not only to making that development sustainable, but to unlocking growth in the wider region?

[Mr Osborne]

Of course, I would be happy to meet my hon. Friend to discuss improvements on the A34. We are making an enormous number of improvements to the UK road system and spending more on transport and road improvement than the previous Government. We are also investing in science, and I remember making a useful visit with my hon. Friend to her constituency to see the results of the money that we have contributed to Begbroke science park. I will certainly have a meeting with her about the A34.

[Grahame M. Morris (Easington) (Lab)]

T6. We know from survey evidence that more than half of the licensees who are tied to large pub companies earn less than £10,000 a year. Does the Chancellor support the save the pub group’s call for a market rent-only option to ensure that tied licensees can earn a fair living and play their part in contributing to the local and national economy?

[Mr Osborne]

I am perfectly willing to consider representations, but the Government have set out legislation to deliver a fairer deal for pub tenants—something for which Members have been calling for many, many years. I hope that it commands his support.

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

T5. Will my right hon. Friend comment on the astonishing claim by the Scottish Government that they would default on their share of the UK’s debt if they did not achieve a currency union with the rest of the United Kingdom if—heaven forbid—independence was to happen?

[Danny Alexander]

The Scottish Government’s plan to renege on Scotland’s share of the debt in the event of independence is simply not credible because of the catastrophic effect it would have on the people of Scotland. Mortgage rates would go up, credit cards and bills would go up, and the Scottish Government would have to resort to the bond market’s equivalent of Wonga to raise money to pay for public services in Scotland. To default on the debt would be to punish every Scot for Alex Salmond’s failure to think through his currency plan B properly.

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

T8. Since the Government updated the law in April, thousands of construction workers such as my constituent, Ron Boyle, are facing a new form of exploitation. Forced to register with sham umbrella payroll companies, they lose hundreds of pounds a month in bogus fees, and pay national insurance contributions that ought to be the responsibility of their employers. Will the Minister assure me that that loophole will be closed quickly, so that workers such as Mr Boyle are not continually conned out of a fair wage?

[The Financial Secretary to the Treasury (Mr David Gauke)]

I am grateful for that question, and we all sympathise with some of the difficulties that people have faced. It is fair to say that this Government are closing the loopholes in that area, dealing with intermediaries, and reforming the construction industry scheme to ensure that people who are employed have the full employment rights that they deserve.

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

T7. Is the Chancellor aware that unemployment in my constituency has fallen by nearly 700 since July last year, thus giving new hope to many families? Will he tell the House how the UK’s job creation record compares with other G20 countries?

[Mr Osborne]

The answer is that it compares very well. There has been a much faster rate of job creation in the United Kingdom than in the rest of Europe, for example, which I suggest is because we have instilled confidence in our ability to pay our way in the world through our difficult but necessary deficit reduction plan. We have helped businesses to employ extra people through the employment allowance and other tax changes, and we have created a more entrepreneurial economy, so that people who were out of work when this Government came to office got a chance of being in work, with all the security and opportunity that brings.

[Stephen Timms (East Ham) (Lab)]

May I press the Chancellor on the deficit? The central objective of his plan when he launched it was to eradicate the deficit in this Parliament, but he now estimates that he will only halve it. Why has the plan fallen so far short of that central objective?

[Mr Osborne]

This has been the subject of much discussion across the Dispatch Box, and I have pointed out that while this Government have been in office we have had the near collapse of the eurozone economy on our doorstep—[Interruption.] The shadow Chancellor chuckles. Perhaps he should chuckle at the fact that the British economy is performing more strongly than any other major advanced economy in the world. He predicted that the deficit would go up, but it has come down; he predicted that millions of people would be unemployed, yet millions of jobs have been created. This summer, Labour Members set out £21 billion of more spending commitments, so the deficit would go up if they ever got the chance of office again.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

I thank my right hon. Friend for reminding the House that the autumn statement will be on 3 December. May I urge him to ensure that there will be investment in our roads and railways in the south-west, so that we have trains that get into Plymouth before 9 o’clock in the morning, and more three-hour train journeys to and from London?

[Mr Osborne]

The autumn statement will be an opportunity to set out further improvements to infrastructure in the south-west, and the services, roads and railways that support Plymouth. My hon. Friend has been a doughty champion for that city and delivered huge investment to it, which was never forthcoming before. I assure him that we are looking at specific transport improvements to connect better the whole of the south-west with the rest of the United Kingdom.

[Mr Jim Cunningham (Coventry South) (Lab)]

Many local authorities are struggling to implement the Government’s policy on free school meals—for example, Coventry has to find something like an additional £1 million. What are the Government going to do about that?

[Danny Alexander]

The Government have made available funding to pay for the implementation of free school meals for infants and to enable additional capital investment in kitchens and the like in schools. The reports from around the country are that implementation is going successfully and that this policy will benefit thousands of children and their families.

[Ian Swales (Redcar) (LD)]

Does the Chief Secretary share my surprise that the yes campaign in Scotland says that its economy would be stronger alone, yet it does not want the freedom to have its own currency and set its own interest rates?

[Danny Alexander]

I do share my hon. Friend’s concerns. As he knows, a currency union is not going to happen because it would expose the rest of the UK to economic risks that it could not control and leave Scotland unable to control its economy in the face of huge risks and uncertainty. An effective currency union needs a fiscal union and a political union, yet that is what the nationalist campaign wants to dissolve. The only way for Scotland to keep the pound as it is now is to remain part of the UK, and that is what I believe my fellow countrymen will vote for on 18 September.

[Kelvin Hopkins (Luton North) (Lab)]

Britain has an enormous trade deficit, especially with the EU, which is clear evidence of a misaligned exchange rate, and UK manufacturing is again suffering as the euro has depreciated relative to sterling. When is the Chancellor going to take the exchange rate seriously?

[Mr Osborne]

I follow the practice that previous holders of this job have followed over the past 20 years, which is not to comment on the exchange rate, but as I said in my response to the first question in this session, the weakness in the eurozone is an emerging risk to the UK economy and something to which we need to be alert.

[Nigel Adams (Selby and Ainsty) (Con)]

Constituents of mine have been targeted by phone fraudsters calling them at home pretending to be from their bank, and several have had their bank accounts emptied, leaving them devastated. Will the Minister meet me and other hon. Members whose constituents might have been affected to discuss a way forward to ensure that banks have in place proper, robust security measures to prevent that from happening again?

[The Economic Secretary to the Treasury (Andrea Leadsom)]

Yes, I would be happy to meet my hon. Friend to discuss that issue. I have been made aware of such cases. Of course, banks try to ensure that they have robust processes in place, but if anything else can be done, we are happy to look at it.

[Julie Hilling (Bolton West) (Lab)]

We now know that the Chancellor has had a letter from the head of the UK Statistics Authority, so when will he correct the record and apologise for giving the House—obviously inadvertently—incorrect information which inflated the success of his tax avoidance programme?

[Mr Osborne]

The Government, including me, did inadvertently give the wrong information, but the explanation provided by the permanent secretary at the HMRC was accepted by the Chair of the Public Accounts Committee, the right hon. Member for Barking (Margaret Hodge), as a fair explanation of what happened.

[Duncan Hames (Chippenham) (LD)]

The Treasury’s infrastructure fund is paying for increased transport capacity in enterprise zones, through roads and rail services, unlocking large new housing developments. Is the Chief Secretary prepared to use the fund also to pay for the internet and communications infrastructure that those homes and businesses will desperately need?

[Danny Alexander]

The support we are offering to enterprise zones includes access to high-speed broadband, and my hon. Friend will also know that a significant part of our infrastructure plan is precisely to invest in and ensure that high-speed broadband is available in the vast majority of homes in this country. That is certainly something we will turn our minds to again in the autumn statement.

Petition

Tuesday 2nd September 2014 Commons Chamber

David Morris (Morecambe and Lunesdale) (Con)

- Hansard - - Excerpts

I am pleased to be able to present this petition on behalf of more than 100 people who live in Bare in Morecambe. The campaign has been spearheaded by Judith Fletcher, who has organised all of her neighbours to sign the petition. I have had the pleasure of meeting a large number of them to discuss the traffic problems in the area.

The petitioners started their campaign in the light of a recent housing development on the site of the former Broadway hotel in Morecambe. The development means that traffic is predicted to rise in the area and will create strain on an already busy junction on Marine Road East and Broadway. The petitioners are concerned for the safety of pedestrians and motorists using this area and would like to see a roundabout at the junction and more pedestrian crossings to allow residents to cross safely. At a meeting last week, the petitioners told me of several near misses in the area and I do not think that we should wait for a casualty before enacting these measures.

I therefore urge the House to support my call on Lancashire county council to act and introduce some traffic calming measures in this area.

Following is the full text of the petition:

[The Petition of members of the community in Morecambe,

Declares that the Petitioners believe that there should be traffic calming measures introduced at the junction between Broadway and Marine Road East in Morecambe as the junction is dangerous and further that the Petitioners believe that this should be in the form of a roundabout.

The Petitioners therefore request that the House of Commons urges the Government to encourage Lancashire County Council to take steps to support the residents in Morecambe and to ensure traffic calming measures are introduced at the junction between Broadway and Marine Road East.

And the Petitioners remain, etc.]

[P001384]

Child Sex Abuse (Rotherham)

Tuesday 2nd September 2014 Commons Chamber

12:33

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

(Urgent Question): To ask the Home Secretary if she will make a statement on child sex abuse in the light of the Alexis Jay report in Rotherham.

[The Secretary of State for the Home Department (Mrs Theresa May)]

Professor Alexis Jay’s report into child sexual exploitation in Rotherham between 1997 and 2013 is a terrible account of the appalling failures by Rotherham council, the police and other agencies to protect vulnerable children. What happened was a complete dereliction of duty. The report makes for shocking reading: 1,400 children—on a conservative estimate—were sexually exploited, raped by multiple perpetrators, trafficked to other towns and cities, abducted, beaten and intimidated. Like the rest of the House, I was appalled to read about these victims and the horrific experiences to which they were subjected. Many have also suffered the injustice of seeing their cries for help ignored and the perpetrators not yet brought to justice. There can be no excuse for that.

Last week, I spoke to the chief constable of South Yorkshire police to receive an update on the live investigations into child sexual exploitation in south Yorkshire and the force’s plans to ensure that victims and witnesses receive the highest levels of care and support. It would not be appropriate for me to discuss ongoing investigations in detail, but I can tell the House that there are currently a number of investigations covering several hundred victims in south Yorkshire. We must ensure that these perpetrators are brought to justice.

Rotherham is just the latest in a line of harrowing revelations about the sexual abuse of children. It is because of cases such as these that we are establishing an independent panel inquiry to look into the way state and non-state institutions have treated child sexual exploitation. Later this afternoon, I am meeting Professor Jay to discuss her report and make sure that her findings and all the lessons of Rotherham feed properly into the work of the panel inquiry. That inquiry will, of course, take time to investigate the historic failings of state and non-state institutions, but we will not delay in taking action now to protect children who are at risk of sexual exploitation. All local authorities, working with other public bodies such as the police and health and children’s services, have a responsibility to keep our children safe.

This report raises a number of issues that will need immediate action from Rotherham in particular. National Government must also, and will, assist. That is why I will chair meetings with other Ministers, including my right hon. Friends the Secretaries of State for Education and for Communities and Local Government to look at what happened in Rotherham. We will consider the findings of Professor Jay’s report and consider what the state at every level should do to prevent this appalling situation from happening again. The meeting will build on the existing work of the Home Office-led national group to tackle sexual violence against children and vulnerable people, which is bringing the full range of agencies working in this area together to better identify those at risk and create a victim-focused culture within the police, health and children’s services.

The issues raised in Professor Jay’s report are ones that have been running through the work of the national group. It has already taken a number of practical steps that will help to tackle failures such as those found by Professor Jay in Rotherham. For example, we have published new guidance for the police and Crown prosecutors on investigating and prosecuting cases of child sexual abuse, which moves the focus of investigations away from testing the credibility of victims on to the credibility of the allegation. We have given the police new powers to request information from hotels suspected of being used as locations for child sexual abuse, and powers to close premises where child sexual offences have been or are likely to be committed, and I am grateful to my hon. Friend the Member for Keighley (Kris Hopkins) for his campaigning work in this area. We have provided training for private security workers to spot signs of child sexual exploitation. We have piloted pre-trial video cross-examination for vulnerable witnesses, ensuring that the process of giving evidence is less traumatic, and we published a new victims’ code in December last year. We will do more.

Professionals tell us, and Professor Jay’s report suggests, that co-located teams involving the police, children’s services, health services and others are a successful model for mitigating the risk of children slipping through the safeguarding net. We will therefore consider how best to support that work. Effective multi-agency safeguarding work will help to identify and support those at risk of sexual abuse and to bring offenders to justice.

My right hon. Friend the Secretary of State for Communities and Local Government shares my concerns over the failings by Rotherham council that have been identified. This includes the inadequate scrutiny by councillors, institutionalised political correctness, the covering up of information and the failure to take action against gross misconduct. My right hon. Friend is minded to use his powers under the Local Government Act 1999 to commission an independent inspection of the council’s compliance with its best-value duty, with a particular focus on its corporate governance and service arrangements. In parallel, he is considering the implications of the report’s findings for all local authorities in England.

My right hon. Friend the Secretary of State for Education has already discussed these issues with the chief social worker and is looking at how better to support victims and children at risk. The Department of Education will consider the skills required by social workers and others to intervene effectively with those at risk of abuse and ensure that existing skills development work specifically addresses support for children who are at risk of sexual exploitation.

The Department of Health-led work into the mental health and well-being of children and young people will include a specific focus on the mental health and psychological well-being of victims of sexual violence and abuse, and consider the particular needs of those subject to exploitation.

I am clear that cultural concerns—both the fear of being seen as racist and the disdainful attitude to some of our most vulnerable children—must never stand in the way of child protection. We know that child sexual exploitation happens in all communities. There is no excuse for it in any of them and there is never any excuse for failing to bring the perpetrators to justice. The abuse of children is a particularly vile crime and one that the Government are determined to stop. We have made significant strides since 2010. We have important work under way but we will learn the lessons from Professor Jay’s report to ensure that we are doing all we can to safeguard children and to prosecute the people behind these disgusting crimes.

[Yvette Cooper]

In Rotherham 1,400 children were groomed, raped and exploited; 1,400 lives were devastated by abuse. Criminals, rapists and traffickers have got away with it and may be harming other children now. The council, social services, the police—people supposed to protect our children—failed time and again to keep them safe. Alexis Jay’s report is damning. It is never an excuse to turn a blind eye to evidence of children being abused. It is never an excuse that vulnerable girls may have consented to their own abuse. It is never an excuse to use race and ethnicity or community relations as an excuse not to investigate and punish sex offenders. That is why the Government need to act.

First, what is being done to ensure that the victims get the support and help that they need now? Secondly, what is being done to catch and prosecute those who committed the dreadful crimes? The Home Secretary will know that there is considerable concern that South Yorkshire police do not have the capacity to pursue both historic investigations and current child protection. What is she doing to ensure that all forces have the resources they need and give child exploitation and protection the priority they deserve?

Thirdly, what is being done to investigate the failings in the police force at the time? The Jay report found:

“the attitude of the Police at that time seemed to be that they were all ‘undesirables’ and the young women were not worthy of police protection.”

The chief constable is right to agree to an independent investigation of South Yorkshire police, which we called for, but can the Home Secretary tell the House why that is not being supervised by the Independent Police Complaints Commission?

Fourthly, what is being done on accountability? The leader of the council has rightly stood down. The Labour party has started further disciplinary action against individual councillors, but is the Home Secretary concerned that the police and crime commissioner has not stood down and that there appears to be nothing in the legislation to hold him to account? Will she say what the Government can do to ensure that appropriate disciplinary action is taken against individuals involved? What is being done to find out what other institutions, including the Home Office, were informed?

Where is the overarching inquiry? It is two years since we called for it. It is two months since the Home Secretary agreed to it, but we still have no chair and no terms of reference, despite the seriousness of the issue. This is not just about Rotherham. If we look at Oxfordshire, Rochdale, the abuse by Savile ignored or covered up in the BBC and the health service, north Wales care homes, and allegations around Westminster and Whitehall, we see that this is about every town and city in the country. It is about every community. Time and again, it is the same problems: children not being listened to, victims treated as though they were responsible for the crimes committed against them, and institutions that just looked the other way.

This is not just historic; it is happening today. That is why we need the overarching inquiry urgently in place. But we also need to go further. Child protection has rightly been strengthened over many decades but it has not yet gone far enough. I agree with the Home Secretary that action is needed by different Government Departments and different councils, agencies and police forces across the country, but I also call on her to consider changing the law because we need mandatory reporting to underpin a culture change, so that no one ever feels that they can just turn a blind eye or walk away when children are at risk. That means that Parliament and Government cannot turn a blind eye, too, and that is why all of us need to act.

[Mrs May]

The shadow Home Secretary has raised a number of points. The last point was about mandatory reporting. I recognise that this is an issue that has been raised, and we are looking at it, but it is important in doing so that we properly look at the evidence of whether it is effective in protecting children. In some other countries, with mandatory reporting the number of reports goes up significantly, but many of those reports are not justified, and that diminishes the ability to deal with the serious reports and protect children. So it is a very complex issue. It is a serious question, and we need to look carefully at countries such as Australia and the United States, where there is mixed evidence of its effectiveness in improving the ability to deal with these issues.

The right hon. Lady asked about Home Office involvement. A report into child prostitution was funded by the Home Office and conducted by the university of Luton, which is now part of the university of Bedfordshire. As I understand it, the researchers were not employed by the Home Office, although the Home Office was providing funding. Since the connection first came up, the Home Office has been looking at the files to ascertain exactly what happened, and many Members will have heard the researcher herself being quoted on television and radio broadcasts in relation not only to her experience at Rotherham but the suggestion that she did inform the Home Office. The Home Office is looking into that internally. When that work has been completed, Richard Whittam and Peter Wanless—who have already been in the Home Office looking at the process of how what was called the Dickens dossier and the files on that were dealt with—will be looking at that process to make sure that it has been conducted absolutely properly.

The right hon. Lady asked about the overarching inquiry. As Members will be aware, I made an appointment for the chairmanship of the inquiry, but the noble Baroness Butler-Sloss felt that she should withdraw from that. I hope we will soon be in a position to announce the chairman of the inquiry, but we have been taking our time because of the concern expressed about ensuring that the individual who does the job is somebody whom people throughout the communities concerned can have confidence in. We have been deliberately taking our time to ensure that we get the right chairman, and in due course the right panel, to deal with this inquiry.

The right hon. Lady asked what was being done in terms of investigations. I indicated in my statement that I have spoken to the chief constable of South Yorkshire Police, which has a number of ongoing investigations. I have talked to him about resources and the impact on the force, and he is able to support the work currently being done. As he has announced, he will be bringing in another, independent force to look at these issues and whether further action needs to be taken as a result of what the police did over the period of time covered by the Jay report.

In relation to the question of the police and crime commissioner, I have to say this to the right hon. Lady. She made some points that were an attempt to raise political issues around the police and crime commissioner. [Interruption.] If hon. Members will just calm down, I will respond to the point the right hon. Lady made. The police and crime commissioner is an elected individual, accountable to the electorate in the ballot box. That was the point of setting up the police and crime commissioner —that they are accountable to the electorate in the ballot box—but I would also make this point to the right hon. Lady: the Labour party chose the Labour councillor who was responsible for children’s services in Rotherham, and who had stood down in 2010 following the failings there, to be their candidate for PCC. So I suggest that they think carefully before starting to raise that particular issue.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

We have institutionalised racism, and we now appear to have problems arising from an institutionalised fear of accusations of racism, whether in education in Birmingham or in safeguarding in Rotherham and elsewhere. What can be done to ensure that effective action is taken to ensure that children are protected, regardless of the community in which wrong is found?

[Mrs May]

I thank my hon. Friend for raising that issue. We have to send a very clear message to everyone involved in the protection of children that there can be no excuse for failing to protect them or failing to bring perpetrators to justice. We need to send a clear message that it is completely and utterly unacceptable for children not to be protected as a result of a fear that stating particular communities were involved in a particular activity could lead to accusations of racism. We also need to deal with the cultural problem that lay behind what happened in Rotherham. Frankly, it was a culture that failed to believe young girls because of the background and the families that they came from. More than that, according to Professor Jay’s report, it was as though people felt that this was the sort of thing that happened to girls from those sorts of backgrounds. That is appalling and we must reject that view across the House and send that message loud and clear.

[Sarah Champion (Rotherham) (Lab)]

I am exceptionally angry on so many levels. I am angry that the people paid to take care of those children let them down so appallingly. I am angry that the abusers are still out on the streets. And I am most angry that at least 1,400 young people have not got the justice or the support that they deserve. Will the Home Secretary work with me to ensure that the necessary resources are in place so that they can get the resolution that they so desperately need?

[Mrs May]

Yes. I commend the hon. Lady for the careful and thoughtful way in which she has responded to this appalling report and these appalling revelations. We will certainly work with her. As I have said, I have already spoken to the chief constable of South Yorkshire police about the ongoing investigations there. Sadly, we must recognise that similar investigations are also taking place in other parts of the country. We are beginning to unveil the extent of the problem across the country, and in so doing we can now start to get to grips with it.

[Tim Loughton (East Worthing and Shoreham) (Con)]

The scale of the revelations in Rotherham was truly shocking but, alas, came as little surprise to those of us who have been railing against institutionalised political correctness, as the Home Secretary put it, for so long. More Rotherhams will come to light, which is why the Government put in place the child sexual exploitation action plan in November 2011 to co-ordinate activities to intervene and prevent. Will she update the House on the progress of that co-ordinated action plan? In particular, will she tell us whether anyone is monitoring the plan to ensure that every local safeguarding children board in the country—well beyond Rotherham—has a fit-for-purpose action plan to intervene, prevent and prosecute in every part of the country?

[Mrs May]

The Secretary of State for Education has been looking into the local safeguarding board plans across the country, and it is true to say that they are of variable quality. One of the pieces of work that we will be discussing in the ministerial team—I know that my right hon. Friend is already considering it—is how we can raise the quality of those plans. This is not just about the quality of the plans, however; we need to ensure that something happens behind them. It is all very well putting words on a piece of paper, but it is essential that work is then done to put them into practice.

[Kevin Barron (Rother Valley) (Lab)]

I welcome many of the things that the Home Secretary has said. Over a decade ago, I met one of the victims, Emma Jackson, and her parents. They were concerned about the inactivity of the investigation being carried out by South Yorkshire police into what I believed to be an horrendous crime. At that time, South Yorkshire police refused to meet me and the family together, although I did have meetings with them. I am not one who wants to direct the police and tell them what they should be doing on a day-to-day basis—that is not a matter for politicians—but I had deep concerns then, and they have remained with me ever since. South Yorkshire police have said this morning, six days after the announcement, that they are going to hold an independent inquiry into these historical cases. Will the Home Secretary support that inquiry and ensure that it is properly resourced?

[Mrs May]

I absolutely understand the frustration and anger that the right hon. Gentleman feels about the attitude that was taken by South Yorkshire police. I think that his view is shared across the Chamber. South Yorkshire police are bringing in another police force to conduct that independent investigation. They have been discussing it with Her Majesty’s inspectorate of constabulary to establish who it would be appropriate to bring in, and the Home Office is being sighted on that. We want to ensure that the inquiry is done properly, and that if further action needs to be taken as a result, it should be taken.

[John Hemming (Birmingham, Yardley) (LD)]

The Jay report confirmed that some girls who had been taken into care for their own protection actually received worse protection in care. The independent reviewing officer, whose job is to protect children in care, is an employee of the same local authority and therefore not independent. Will the Government consider backing my private Member’s Bill, which seeks to establish a remedy for children in care so that they can be protected from maltreatment in the care system?

[Mrs May]

My hon. Friend makes an interesting point and, if I may, I will take it away and discuss it with the Secretary of State for Communities and Local Government. It is bad enough when agencies such as the council and the police fail to take seriously the concerns of young people, but it is even more concerning when those young people are in the care of the local authority itself and have become the victims of these crimes as a result of dereliction of duty. I will take my hon. Friend’s point away.

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

The scale and brutality of the sexual exploitation revealed in the Jay report have shocked and shamed our whole town. Does the Home Secretary agree that those who knew about that terrible abuse but did not do their job by protecting those children or prosecuting the offenders must now be called to account? The Labour council leader has rightly resigned, and the Labour party is taking further tough steps today to get to the bottom of what has happened. Does the right hon. Lady agree that the council and the police must now do the same? She has rightly said that this is not just about Rotherham, so will she ensure that the shocking conclusions of the Jay report are used as the basis for her overarching inquiry, when she eventually launches it?

[Mrs May]

It is absolutely clear that there are serious questions to be asked of all those involved who failed to take the action that they should have. The right hon. Gentleman talks about individuals in the police force and others being brought to account. I believe that the current chief constable of South Yorkshire is appearing in front of the Home Affairs Select Committee this afternoon, and I am sure that questions will be asked about the processes that the police force is following, including the independent investigation, which could of course lead to action being taken against individuals. I decided last week that I needed to meet Professor Alexis Jay to talk to her about her report, precisely so that we can ensure that her findings can be taken into the work of the panel inquiry. The original focus was on historical allegations, but we need to ensure that action is taken now, alongside any work that the inquiry is doing.

[Mr Andrew Lansley (South Cambridgeshire) (Con)]

Among the many shocking aspects of this case, one of the most shocking was to hear a victim of the abuse saying that she could still see her abusers walking free on the streets of Rotherham. In my right hon. Friend’s discussions with the chief constable, did she make it clear how important it was that the investigations of these crimes should be undertaken actively, successfully and rapidly? In that context, we have to ask whether South Yorkshire police carry the capability and the confidence to undertake all those investigations in the given time frame to achieve the success that they should achieve. Did she make it clear in her discussions that it might be preferable for additional resources to be given to South Yorkshire police to enable them to undertake those investigations?

[Mrs May]

In my discussions with the chief constable, we discussed the investigations that are currently in hand in South Yorkshire, as well as the resource requirements involved. We also discussed the need to ensure that the work that the police are now doing with the council involved better cohesion to ensure that the victims are being properly supported. My right hon. Friend is absolutely right to suggest that it is terrible enough to be subjected to these kinds of abuse, but that to see the abusers walking free and no one taking any action is absolutely appalling. I believe that South Yorkshire police are now working on investigations to ensure that the perpetrators can be brought to justice.

[Keith Vaz (Leicester East) (Lab)]

There is rare unanimity between the Front Benchers about the seriousness of this situation. As the Home Secretary says, the chief constable of South Yorkshire will be appearing before the Home Affairs Committee this afternoon. I have spoken this morning to Commissioner Wright, and he will be appearing before us next week. Last June, the Committee published a report on Rochdale and Rotherham, and child grooming nationally, making 130 recommendations. One was specifically about getting an Ofsted investigation by last December and a second was about collating good practice. Can the Home Secretary assure the House that that has now been done? Although it was the Committee that urged her to pause before she announced her panel and the name of her chairperson, the length of pause is slightly longer than we anticipated. We would hope that she has that name and panel in place as soon as possible. I know that she has been careful, and I appreciate that, but the time is right for us to have that name.

[Mrs May]

The right hon. Gentleman raised specific issues about the recommendations his Committee made when it looked into Rochdale and Rotherham. I understand from my right hon. Friend the Secretary of State for Education that Ofsted will be going in again to look at these issues, and that is important. Obviously, some of the findings that have been developed in previous reports of that sort have gone into the work the national group has been undertaking. It is chaired by my right hon. Friend the Minister for Crime Prevention.

[Margot James (Stourbridge) (Con)]

The understandable focus on the gross dereliction of duty by Rotherham council and South Yorkshire police should not detract from the need to bring the full force of the law against the perpetrators of these wicked and organised crimes. Could my right hon. Friend give any more details about the criminal investigations that she said were under way?

[Mrs May]

I have to ask my hon. Friend for her forbearance because it is not possible for me really to talk about ongoing police investigations—I am sure she will recognise the difficulty involved. Suffice it to say that a number of investigations are being undertaken by South Yorkshire police, and obviously the clear intent is to bring the perpetrators to justice.

[Kate Hoey (Vauxhall) (Lab)]

This shocking report should unite all of us in this House, all political parties and all communities to see what we can do to make sure these things never happen again. Just at this moment a little boy is sitting in a prison in Spain, a very long way away from his parents. Will the Home Secretary make it clear that the Crown Prosecution Service will be asked to rescind the legal document, because it is shocking that this is happening now? Whatever the original reasons, it should not be happening now, and this document should be rescinded and the family allowed to be together.

[Mr Speaker]

The hon. Lady has shoehorned that matter into this urgent question. It is not relevant to the question, but it is of great interest to the House and we look forward to a pithy reply from the Home Secretary.

[Mrs May]

I hope the hon. Lady and others in the Chamber will be reassured to know that I understand that the CPS is indeed reviewing this issue as we speak. I am not able to give her an answer on what the CPS is doing, but it is doing it as we speak.

[Sir Gerald Howarth (Aldershot) (Con)]

It is clear that the lives of 1,400 very vulnerable young people in Rotherham have been devastated, in large part by a wicked culture of political correctness, assiduously promoted over decades by the Labour party, as public officials denounced as racist people like their colleague—our colleague—Ann Cryer, who sought to tell the truth. May I encourage my right hon. Friend to be vigorous in her campaign to end this culture, so that in future people can speak the truth without fear of losing their jobs or, worse still, being sent on an Orwellian diversity course?

[Mrs May]

I have already made the point, as my hon. Friend has, that cultural concerns can never be an excuse for failing to bring the perpetrators of these appalling crimes to justice. I commend the work done by the former Member of this House Ann Cryer, who did stand up on a number of issues, often in the face of her own party, and raised issues of very real concern. But the message from the whole House is very clear today: cultural concerns cannot get in the way of dealing with the perpetrators of these appalling crimes.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

As the Home Secretary will accept, I am very glad that my Front-Bench team has taken the steps it has on this matter, because the historical fact is that it is children and communities such as these that the Labour party was set up to protect. That is why it is important that we have taken the steps we have. I am afraid I do not accept that political correctness alone is responsible for those girls being abused. In the end, people at the top of the local state in Rotherham thought those girls were worthless and did not care enough to read the reports, to go to the seminars and to act. It is long past time that the Government looked at the employment arrangements for heads of social services, because all the way back to Victoria Climbié and the Laming report there has been a concern that terrible things happen to children and the most senior people paid to protect them do not seem to pay any price and, worse, go on to other senior jobs.

[Mrs May]

The hon. Lady has raised a number of issues of concern generally in relation to these matters. I absolutely agree with the first point she made, which I have alluded to in my statement and in my replies: what underlay this was a feeling that somehow it did not matter and that because of where these girls came from—in some cases it was boys, but in the overwhelming number of cases it was girls—nobody needed to do anything about it. That is absolutely appalling, and we must reject that culture and do everything we can to make sure it no longer exists.

[Mr Andrew Robathan (South Leicestershire) (Con)]

Let me take my right hon. Friend back to the issue of the 2003 report presented to the Home Office, as she has direct responsibility for the Department. The shadow Home Secretary talked about people turning a blind eye, suppressing and ignoring the report. The allegations made yesterday and today on the BBC were very distressing, so could the Home Secretary please publish what she finds out about all that, without an overarching inquiry and without a freedom of information report? She needs to publish details of what happened in the Home Office in 2003 and who was responsible, and hold to account the officials, or indeed Ministers, who were responsible at the time.

[Mrs May]

I am certainly prepared to make sure that the results of the work that we do in the Home Office, which is then looked at by Richard Whittam and Peter Wanless, to ascertain what happened in the Home Office is made available to Members of this House. As I indicated, this was a Home Office-funded piece of work. The report that came to the Home Office did not include, at the second stage, Rotherham. That appears to be because of the actions taken within Rotherham in relation to the researcher. We are doing everything we can to get to the bottom of this and find out exactly what was known and by whom, and what actions were taken.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

This is not the first time this House and this country have been horrified at the revelations about our absolute failure as a nation to protect our children. I commend the Home Secretary for putting her finger on what is central to this: the idea that there are certain sections of our society, and in particular their children, who are worthless, who are useless and for whom there should be no care whatsoever. This is a national, not exclusively a local, disgrace. I very much welcome her argument that this crosses all areas of government and is not the responsibility of one Department or indeed one local authority, but I hope there will be sufficient financial resources to ensure that those who have suffered so much in the past are actively helped to make lives for themselves in the future; that those who should be brought to account are brought to account; and, most important, that never again do this House and this country have to learn that such things are happening on our streets to our children.

[Mrs May]

There is absolute agreement across the House that we need to look at what has happened and learn the lessons, so that we can ensure that behaviour in the future is different and that people, particularly children, are given the protection that they need.

[Sir William Cash (Stone) (Con)]

The Home Secretary has given a good account of what the Government are proposing. She mentioned ministerial meetings. Will she take regard of what Margaret Oliver said on the “Today” programme, which is that she believed that this problem existed at the “very top”? Given the fact that criminal offences may be involved—including that of aiding and abetting, which has been engaged in by people at very senior levels—is it not appropriate for the Attorney-General to attend those ministerial meetings to give advice, because there will be some very deep inquiries about some apparently very important people?

[Mrs May]

My hon. Friend makes an interesting point. Obviously, a number of investigations are taking place to identify whether action needs to be taken against individuals who were involved in these matters. As I bring Ministers together to look at these issues, I will ensure that, where necessary, we take the best legal advice.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

The Home Secretary has already said that we are starting to unveil the extent of the problem of child abuse across the country, and it is right that other towns and cities take a look at their child protection. Will she assure the House today that she will get the overarching child abuse inquiry going soon—that is a strong feeling across the House—and underline her commitment to start to bring the perpetrators to justice right across the country, as well as in Rotherham? That is a really important message to send out to the police and the Crown Prosecution Service.

[Mrs May]

Yes, it is, and I expect to be able to progress the overarching inquiry within a relatively short time scale. We now have a different approach being taken by police forces across the country. For example, Thames Valley police, who have been conducting further investigations, have made a number of arrests today. They have already had the case in Oxford. There have been a number of arrests in Buckinghamshire and elsewhere, which shows that these abuses are ongoing across the country. The Government and this House are sending out a very clear message that perpetrators must be brought to justice and that the abuses should be investigated properly.

[Simon Wright (Norwich South) (LD)]

Ofsted has announced an early inspection of Rotherham’s safeguarding and child protection functions. Given that a series of external reports over a 15-year period have been conducted, what intervention will the Government consider to ensure that any ongoing issues identified by this Ofsted inspection will be robustly and swiftly addressed?

[Mrs May]

I can assure my hon. Friend that the Secretary of State for Education is looking very carefully at the matter. She has already met the chief social worker and others to discuss the lessons that need to be learned. We will of course look very carefully at any proposals that come out from the Ofsted review. I have also mentioned the action that my right hon. Friend the Secretary of State for Communities and Local Government is minded to take to be able to go into Rotherham to ensure that it conducts its responsibilities properly.

[Meg Munn (Sheffield, Heeley) (Lab/Co-op)]

Earlier this year, the Children’s Commissioner produced a report that said that it is difficult for children to tell about their experience of abuse. It is often in their difficult behaviour that problems are identified. What we find in many of our schools is that the focus solely on academic achievement means that many children with these problems are either pushed out of the school or not listened to. Will the Home Secretary and her ministerial colleagues take this opportunity to ensure that, alongside a perfectly proper focus on children’s education achievements, difficult behaviour by children in schools is properly looked into, that the trust that is needed for them to be able to talk about their experiences is developed and that children who are exhibiting difficult behaviours are not ignored?

[Mrs May]

The hon. Lady makes a valid point. Very often, difficult behaviour by children masks these sorts of abuses that may be taking place, which can be in the form of this sort of sexual exploitation, abuse at home or domestic violence that is being seen within the home. Much work is being done in relation to the children’s mental health and the support that they need. Work is also being carried out to help professionals better identify the issues underlying the behaviour of the children, so that they do not simply look at the superficial issue of the behaviour that is being exhibited.

[Damian Green (Ashford) (Con)]

One of the useful steps taken in recent years to fight this terrible abuse is the setting up of the National Group on Sexual Violence against Children and Vulnerable People, which, for the first time, brings together Departments across Whitehall, as well as other non-governmental bodies. We should add to the list of failures that have been identified by various Members across the House the failure of Departments to co-ordinate themselves properly at a national level. Will my right hon. Friend tell the House what current work the group is doing that will lead to a better response in future?

[Mrs May]

May I thank and commend my right hon. Friend for the work that he did when he chaired the national group and for work that he did with internet service providers in relation to abusive images of children on the internet, which can fuel interest and action in these areas? My hon. Friend the Minister for Crime Prevention will bring the national group together very soon, and it will consider the report of Alexis Jay to see whether it needs to do any further work to ensure proper co-ordination. My right hon. Friend is absolutely right in what he says: bringing together Departments to address these issues may sound simple, but it is crucial if we are to deal with these issues.

[Sammy Wilson (East Antrim) (DUP)]

The Secretary of State is right that the perpetrators must be hunted down and brought to justice. Does she also agree that officials who failed to do their duty must not be allowed to get off scot-free? It does not matter whether we are talking about the police who failed to uphold the law and let rapists walk free, councillors who put community relations above the interests of vulnerable children or council officials who deliberately destroyed evidence to hide the trail of betrayal. Does she not agree that, far too often in the past, people have either been moved aside, promoted or given pay-offs and that only rubs salt into the wounds?

[Mrs May]

The hon. Gentleman makes a valid point. When people see somebody who has failed in their duty simply moving away to a similar job in another authority or another police force and nothing is done about it, then that does add insult to the original injury.

[Mr Philip Hollobone (Kettering) (Con)]

Following on from the question from the hon. Member for East Antrim (Sammy Wilson), it seems to me that this report is highlighting institutional failure but the lack of local accountability of senior councillors who are meant to be exhibiting political leadership is true not just of Rotherham but of lots of major local authorities. Those officials are too far removed from the public they are meant to serve. No one asks the right questions, and it takes a major report to shine the torch under the covers to get to the dirt beneath. What can we do to change that culture in local government in which not enough questions are being asked at the right time of the people who are paid very large amounts of money through allowances or salaries supposedly to make the right decisions?

[Mrs May]

My right hon. Friend the Secretary of State for Communities and Local Government is considering the lessons that may need to be learned across the board for local authorities as a result of this report. Of course my hon. Friend makes a valid point. What matters is that those who are elected representatives ask the right questions and are prepared to pursue their concerns and not simply to allow them to be allayed in unsatisfactory ways. We all have a responsibility for encouraging those who are councillors or elected representatives—Members of Parliament as well—to ask the questions and to push, so that when we are concerned about failure to take action, we highlight that and make sure that something happens.

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

May I say to the Home Secretary that it is very easy to respond in the wrong way when one of these crises arises? I hope that we will learn from some of the rather speedy reactions to the case of Baby Peter some years ago. I feel very guilty about the revelations in Rotherham. I was Chair of the Select Committee on Children, Schools and Families—we had responsibilities across the board and not just in education—and early on in my chairmanship, we discovered in an inquiry into looked-after children that gangs up and down the country were systematically preying on young girls in care. We knew about that and we did not do enough about it. Members of this House—many of us—knew what was going on. I had a debate in Westminster Hall in January 2009 on child prostitution and the gangs up and down the country who were taking girls away and trafficking them across the country. A lot of us knew, but we did not work hard enough. Ann Cryer did. A group of us did something about runaway children and the fact that the police, social services and children’s services were not joined up enough.

Let me say one last thing. It is easy to blame particular services. I do not think political correctness was the only issue. Of course, it played a part, but when I went and visited police officers, I often heard that this was too difficult; the girls would not give evidence, and if police needed to track and to have sophisticated operations, it was too expensive. Please, let us hesitate and listen to people such as Professor Eileen Munro. Let us get the right answers, not the wrong ones.

[Mrs May]

The hon. Gentleman’s point about ensuring that we do not have a knee-jerk reaction and that anything that is put in place will genuinely deal with the problems that we have identified is valid. His other point about the coming together and working together of different services and agencies, and the fact that very often people slip between nets of different agencies, is also very valid. That is why the multi-agency safeguarding hubs are so important. All the evidence shows that if we bring agencies together, we get a much better result than if they just act independently.

[Nicola Blackwood (Oxford West and Abingdon) (Con)]

Professor Jay’s report has shocked the nation and we have rightly heard many calls for prosecutions, but that relies on a criminal justice process that protects victims from the kind of intimidation and disbelief that seems to have been endemic in Rotherham. The Government’s pilot on pre-recorded evidence is a vital tool for protecting very vulnerable witnesses from being re-traumatised in the court process and for increasing the chances of prosecutions. Will the Home Secretary press for an urgent national roll-out of the provisions, as that will make a material difference to the policing and prosecution of this vile crime?

[Mrs May]

My hon. Friend is absolutely right, and I commend her for the work she did following the revelations in Oxford to help us to change the legislation to strengthen the ability to deal with such issues. My right hon. Friend the Minister for Policing, Criminal Justice and Victims is waiting for the full evaluation of the pilot. We would want to be able to roll it out, but it is right that we should look to ensure that we do that in the right way. We need to learn the lessons from the pilot.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Many of the men who perpetrated these crimes did so not just for their perverse gratification but for the commercial benefits. We must recognise the pattern in so many cases, which is that the grooming of the most vulnerable leads to child sexual exploitation then commercial sexual exploitation. May I urge the Home Secretary and the whole House to examine the relationship between prostitution and the current law on it and child sexual exploitation, with a view to reducing demand for the sale of sexual services? That might lead to cultural change and allow these girls to be heard.

[Mrs May]

I fully accept the hon. Gentleman’s point about how this can lead to commercial exploitation and we should not lose sight of that fact. This case is part of a wider issue in that sense, and, of course, the report commissioned in 2001-02 considered child prostitution, so we must remember, as he says, that this is sometimes not just about personal gratification but about commercial exploitation.

[David T. C. Davies (Monmouth) (Con)]

Although nobody wants to say so, the reality is that the vast majority of men who have been involved in this have all come from one ethnic background—they are of Pakistani origin. Nobody is suggesting that anything more than a minority within that community have, frankly, a barbaric view towards women, but some clearly have. Does the Home Secretary accept that it is more than a coincidence that so many have come from this background, that we must be able to say so without fear of being branded a racist and that something needs to be done to change cultural attitudes among certain people in the community?

[Mrs May]

Obviously, that was the case as regards the people identified in the Rotherham case, but I will say to my hon. Friend and all Members that sexual exploitation of children takes place across all communities. We need to recognise that and not simply think that it is a problem for one particular community. When certain communities are involved, we should not allow cultural concerns to get in the way of protecting children and bringing perpetrators to justice.

[Several hon. Members]

rose—

[Mr Speaker]

Order. These are very important and solemn matters, fully worthy of the full-length Government statement that I had originally been advised that there would be yesterday or today. I am sensitive to the interests of the House and keen to accommodate colleagues, but some premium on brevity from Back and Front Benchers alike would now assist.

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

Although we urge on the Home Secretary the need to get the overarching review under way—the names and all that—we already have Professor Jay’s report. We can learn from the dreadful experience of Daniel Pelka in Coventry, of which the Home Secretary is aware, and we had a report on that. We are not short of reports or action plans for local safeguarding boards, but what we need is a clearer sense of responsibility. That was the lesson, as I understood it, from Coventry. Three major Departments are involved, which have been represented at this urgent question today, but what is lacking is a clear sense of responsibility. Once that is all brought together, what do we do about it? What action do we take? Do we intervene or do we not? That sense of responsibility must somehow be clearly established locally.

[Mrs May]

The hon. Gentleman makes a valid point. We can have all the reports, and perhaps more, and all the action plans we want, but what matters is not whether we have something written on paper but what people are actually doing and, in particular, what people who have responsibility for the protection of children are doing in their day-to-day jobs. That is partly about the cultural issue of ensuring that people understand that this matters and that nobody should be written off.

[Steve Baker (Wycombe) (Con)]

Earlier, my right hon. Friend mentioned arrests made today—once again, by Thames Valley police—across Buckinghamshire. Does she agree that we can have much more confidence locally in our police than might be suggested by the situation in Rotherham? Since she is aware that trials have collapsed, will she agree that there is a real problem in that vulnerable witnesses sometimes face a succession of aggressive barristers? Will she take steps to ensure that that problem is addressed?

[Mrs May]

The whole question of vulnerable witnesses and how they can be supported to ensure that they can give the evidence that is essential to bring prosecutions has already been considered by the Ministry of Justice and the Home Office. The national group chaired by the Minister for Crime Prevention is looking again at the issue.

[Lisa Nandy (Wigan) (Lab)]

Months ago, I wrote to the Home Secretary asking for the terms of reference of the overarching inquiry and, in particular, to ensure whether it would be capable of shining a spotlight on abuse wherever it had occurred, including in this place. Seven weeks later, I had a response that said that the terms of reference would be published when they were agreed. We have just heard that the protection of vulnerable witnesses has stalled and we know that the inquiry still has no chair. I still have absolutely no idea whether the inquiry will have a remit to consider this House or elsewhere. The Secretary of State says that the perpetrators will be brought to justice, but what will she say to those brave young people in Rotherham, Rochdale, Keighley, Oxfordshire and around the country whose perpetrators have not been brought to justice and who look at this House and see that, decades on, other people still have not got justice for the abuse they suffered?

[Mrs May]

I recognise that, and that is one reason we are setting up the overarching inquiry to consider the historic allegations, to learn the lessons and to ensure that we can ensure for the future that people are brought to justice. The hon. Lady said that the protection of witnesses has stalled, but it has not. Action has already been taken to support vulnerable witnesses and we are looking to see whether anything more needs to be done. This is an ongoing process, not something that happens once, is all done and that is it. We need constantly to look to see whether there is more we can do to ensure that victims feel able to come forward. I hope that by our shining a spotlight on all this victims will feel better able to come forward and that they will be believed, but we need to ensure that, when they do, they are.

[Alistair Burt (North East Bedfordshire) (Con)]

May I ask my right hon. Friend a question about the width of the inquiry and its relevance to present-day abuse? Will she ensure that the inquiry covers the issue of definition of incidents, particularly in family cases or suspected family abuse cases? I understand that there is a difference between how cases alleged to be neglect are dealt with, as opposed to cases of abuse, in that the one is genuinely more difficult than the other; once a case is labelled as abuse, there is a series of consequences that are more difficult and more expensive. There is anecdotal evidence that some cases have been wrongly marked up because it prevents work from needing to be done after. Will my right hon. Friend ensure that the inquiry looks at that, to ensure that we do not have under-reporting, and that in years to come we do not unearth another scandal in which abuse has been inadvertently hidden?

[Mrs May]

My right hon. Friend makes a very important point. That issue needs to be looked at. I do not know whether it is appropriate for it to be looked at as part of the overarching inquiry, or perhaps as part of the work that is being done more immediately, particularly by my right hon. Friend the Secretary of State for Communities and Local Government.

My right hon. Friend raises an important point about how local authorities define incidents. As he says, certain definitions lead to certain actions, and the definition must not be driven by an expectation of what sort of action people feel they can take; it must be driven by the reality of what is happening.

[Bill Esterson (Sefton Central) (Lab)]

Many of the victims were, or had been, in care. The Education Committee visited children’s homes with sex offenders living nearby. It also met care leavers who lived in very poor-quality accommodation and feared for their personal safety. The time is long overdue to prioritise the needs of children in care and care leavers—the most vulnerable groups of children in this country—so will the Home Secretary ensure that colleagues across Government make sure that children in care and care leavers receive the long-term support, quality of care and accommodation that they need, including measures to ensure that they do not become the victims of sexual exploitation?

[Mrs May]

As I said in answer to an earlier question, the whole question of how we have looked after, or often failed to look after, children who are in care is shameful for this country and shameful for Governments of all sorts over the years, so that area needs to be looked at properly. The ability for children in care to be taken away and abused and sexually exploited is something that we should be absolutely ashamed of.

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

The Home Secretary is absolutely right to say that this is not about the right resources; it is about the lack of the right leadership in the local agencies. May I therefore ask her, given this challenge, what confidence can local women and local families have that South Yorkshire police now has that leadership?

[Mrs May]

Obviously, some of the officers in South Yorkshire police today were not in post at the time of some of the situations, although the report did cover the period up to 2013, which is very recent. However, the chief constable of South Yorkshire is absolutely clear about the importance of ensuring that the force is dealing with these issues properly, and is giving that very clear message to people in the South Yorkshire force area. However, for everybody the proof will be in the actions that South Yorkshire police take, and that is why I have already had a conversation with him about what they will be doing.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

The people of south Yorkshire are expressing an unprecedented anger at what has happened to those young girls. Indeed, in my time as an elected representative I have never seen anything quite like it. The least they expect is that the individuals who let those young girls down are held to account. So what support can the Government practically give to the process of holding those individuals to account, especially given that one of them is now resident in Australia and discharging a very senior post in child protection over there?

[Mrs May]

That is one of the issues. Obviously, there are different processes that take place, depending on whether the individuals are council officials or members of the police. As I have said, South Yorkshire police are bringing another police force in to look at the whole question of how, from their point of view, the situation was managed. We will be discussing the issue of council officials with my right hon. Friend the Secretary of State for Communities and Local Government as he looks at the implications across local authorities.

[James Morris (Halesowen and Rowley Regis) (Con)]

One of the most devastating aspects of this case is the impact on the long-term mental health of the victims. Will the Home Secretary say a little more about what resources have been made available to ensure that the victims get the long-term help they need to cope with the catastrophe that has befallen them?

[Mrs May]

This is an important aspect. The Department of Health is considering the mental health needs of those who have been the victim of sexual exploitation of this type, and what action is necessary. I believe that that has also been looked at in a very real sense in terms of the Rotherham experience, but it is being looked at by the Department more widely.

[Ann Coffey (Stockport) (Lab)]

Child sexual exploitation takes many forms and mostly involves single offenders, but if we are to learn from what happened in Derby, Rotherham, Telford, Rochdale, Oxford and Stockport to prevent the horrific rape and sexual abuse by groups of men from happening to other children, we need to be better able to identify not only the children at risk, but the men who are likely to become perpetrators of this crime. Does the Home Secretary think that the overarching inquiry should be looking at the attitudes and behaviours of offenders as well as the national groups, so that we can learn from that and are better able to protect communities from child sexual exploitation and work with all communities?

[Mrs May]

The hon. Lady raises an important aspect. I would point out that in one of the very early cases in which perpetrators were brought to justice, that success was the result of a very good piece of work done on that occasion by Derbyshire police—I think in Operation Retriever. The overarching inquiry was set up with a prime purpose of looking at the historic incidents and allegations and the lessons that needed to be learned from those, and whether more needed to be done now to ensure that horrific crimes of that type were not being perpetrated today. I will be talking to Professor Jay about how the Rotherham report work can feed into that inquiry, but I think that is where the focus must be—to ensure that state and non-state institutions are behaving in a way that ensures that these things cannot happen in the first place, and when they do, are taken seriously and dealt with properly.

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

It beggars belief to many across Yorkshire that Rotherham council today retains responsibility for children’s services. I urge my right hon. Friend, at ministerial meetings, to look carefully at stripping the council of children’s services, as we have done in Doncaster, Slough and, previously, Hackney. I also urge her to look at the role of legal officers within the CPS, who in this report, like the police, did nothing near what they could have done to help victims.

[Mrs May]

As I said, my right hon. Friend the Secretary of State for Communities and Local Government is minded to commission an independent inspection of Rotherham council, with a particular focus on its corporate governance and service arrangements, and obviously, as was indicated earlier, Ofsted will be going into Rotherham again to look at the areas for which it has responsibility. Following those inspections, decisions will need to be taken about the future responsibility for these issues.

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

When the Home Secretary meets Professor Jay, will she probe her further on what she knows about the raid on the offices of the youth organisation Risky Business? We need to know who authorised that raid, what happened to all the files that were taken and whether it was a deliberate attempt by people in senior positions to tamper with or destroy evidence.

[Mrs May]

The hon. Gentleman asks a very good question. What is interesting, in looking at the report, is that Risky Business does seem to be one part of the organisations actually doing good work. Indeed, Professor Jay raises a question towards the end of the report about whether, given that the work of Risky Business has now been incorporated, as I understand it, into the council’s work, it can be as effective in that environment. I would expect that what is known about the incident that the hon. Gentleman refers to is in the report, but certainly I will be discussing with Professor Jay anything that needs to be learned about those sorts of actions.

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

My hon. Friend the Member for Monmouth (David T. C. Davies) quite tactfully pointed out that the vast majority of the perpetrators of these crimes are Pakistani, Muslim men, so is it any surprise to my right hon. Friend that they might feel emboldened to prey upon vulnerable people in the wider community when for too long a blind eye has been turned to their behaviour towards their own vulnerable young ladies—I am talking about female genital mutilation?

[Mrs May]

I repeat the point that I made in reply to my hon. Friend the Member for Monmouth (David T. C. Davies): of course in this case, as in some others, the majority of the perpetrators come from that particular community, but we see child sexual exploitation across all communities. There is a question about the extent of hidden abuse and sexual exploitation within communities that is not revealed even by the work of Professor Jay. We should encourage the victims of not only child sexual exploitation and child abuse, but domestic violence, to come forward so that those issues can be properly dealt with.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Shockingly, sexually exploited children in Rotherham were labelled as prostitutes by those to whom they turned for help. I think that that shaped the response, because the word “prostitute” suggests consent and volition. What is the Home Secretary’s response to the call on the Government from the children’s charity Barnardo’s to remove the term “child prostitution” from the Sexual Offences Act 2003 at the earliest opportunity?

[Mrs May]

My right hon. Friend the Minister for Crime Prevention has looked at the issue—I think that the national group has considered it—and is sympathetic to the principle behind that point, but considerations of international law make it a more complex issue than it might at first seem.

[Nigel Adams (Selby and Ainsty) (Con)]

The industrial scale of the child sexual exploitation in Rotherham has cast a dark cloud over that part of south Yorkshire. The former Member for Rotherham has said that he “could have done more”, but as a “Guardian reading liberal lefty”, to use his words, he did nothing. That admission is bad enough, but Mr MacShane has also said that he thought there was a culture of not wanting to “rock the multicultural community”. If Mr MacShane is to be believed, what does my right hon. Friend plan to do to ensure that turning a blind eye to such appalling crimes because of political correctness never happens again?

[Mrs May]

We need to be clear in all our interactions with anyone involved in anything like this, and in the messages we send from the House and the Government, that there can be no excuse for allowing the perpetrators of such appalling crimes to escape justice. Cultural considerations cannot be an excuse for allowing perpetrators to escape justice but, as I said, there are two issues here, and while it is important to consider the one that my hon. Friend raises, underlying that is a question of the culture within the agencies with regard to the sort of families these girls came from and whether they were to be believed, and that is the culture we also need to break.

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

My hon. Friend the Member for Coventry North West (Mr Robinson) rightly highlighted the lack of a sense of responsibility among many of the agencies that were working together. However, even if we can restore a sense of responsibility, we will need to ensure that there are proper information and data flows. Given the fragmentation of our secondary schooling system, will she talk to the Department for Education about ensuring that whatever school structure is in place—a free school, an academy or whatever—local authorities will have all data available and may then freely share them with all other agencies?

[Mrs May]

We would all agree about the importance of sharing information appropriately among the various agencies to pick up any children who are vulnerable or might be sexually exploited so that the relevant people are aware of that information and therefore take action.

[Chris Heaton-Harris (Daventry) (Con)]

Given the activity—or, indeed, the lack of activity—of Shaun Wright, the police and crime commissioner for South Yorkshire, does the Home Secretary believe that there is now a reason to introduce a system of recall for PCCs?

[Mrs May]

I have been clear publicly about what I think Shaun Wright should do, but we set up police and crime commissioners with accountability to the electorate. I remind the House that, prior to PCCs, we had police authorities that had no accountability to anyone.

[Chris Evans (Islwyn) (Lab/Co-op)]

One of the most shameful aspects of the report is the fact that victims were not believed because they were not seen as significant enough, and that they were labelled as prostitutes although they were the victims of vile abuse. What guarantee can the Home Secretary give that if, God forbid, there is a further abuse scandal in another village, town or county of this country and the victims have the courage to come forward, they will be believed and their allegations will be properly investigated?

[Mrs May]

I have mentioned that cultural issue several times today. The CPS has issued new guidance and new guidance is being issued for the police. The guidance sets out that this is not about where people think a victim has come from or their believability. The message that is clearly being given is that a victim’s allegation needs to be investigated properly. I would say to any victim, “Please come forward and bring any evidence and allegations you have to the police so that they can be investigated.”

[Mark Pawsey (Rugby) (Con)]

The Jay report identifies many serious management and procedural failures in Rotherham council, many of which went unchallenged for many years. What steps can the Government take to bring about changes to procedures and culture in local authorities that will last for ever?

[Mrs May]

Part of the purpose of bringing together the group of myself and the Secretaries of State for Communities and Local Government and for Education is to determine what we need to do to ensure that such matters are dealt with properly in the future. The Secretary of State for Communities and Local Government is looking not just at action in relation to Rotherham, but more widely across local authorities at what lessons need to be learned following the report.

[Jenny Chapman (Darlington) (Lab)]

Will the right hon. Lady ensure that one of the reviews looks carefully at the role of lead member for children’s services? As someone who used to hold such a job, I can tell her that its extremely onerous responsibilities should often keep any post holder awake at night, but I am afraid that many people who hold that post have a poor understanding of their role and no training whatsoever in fulfilling it. We are learning from Rotherham what can go wrong without someone who is championing the needs of local children in vulnerable situations.

[Mrs May]

The hon. Lady raises an important point. Some people will come to such positions of responsibility with a background of previous work that gives them greater understanding, but others will have no background in the area. I would say to anyone in such a role of responsibility, “You must be prepared to ask the questions, and if you have any concerns, you must actually pursue them.” Although there is undoubtedly more to it than this, we saw in Rotherham that people allowed themselves to be told an answer that appeared to deal with an issue and then felt that their conscience could be salved because they were given such an answer, rather than saying, “You know what? I don’t think I believe you—that’s not good enough.”

[Greg Mulholland (Leeds North West) (LD)]

This was a grotesque failure by the relevant authorities, but it was also a triumph for investigative journalism, so I pay particular tribute to Andrew Norfolk for his amazing work over the years in The Times. However, it should not take an investigative journalist to expose such a scandal, so what can the Home Secretary do to ensure that the police, local authorities and charities involved with looked-after children act properly on suspicions so that things are fully investigated?

[Mrs May]

The hon. Gentleman is right to praise the work of Andrew Norfolk in The Times on a subject that he has been highlighting and campaigning on for some time. The Government can work to ensure that the training and guidance given to those in positions of responsibility is such that they should take the right sort of action, but all Members have a responsibility to ensure that we give the clear message to local authorities and police forces that such issues need to be taken seriously, investigated and dealt with properly, and that they cannot be swept under the carpet.

[John Mann (Bassetlaw) (Lab)]

A significant number of unprosecuted child rape cases of white working-class girls and indeed some boys of my constituents sat with three separate police forces, and that does not include South Yorkshire. Will the Home Secretary ensure that the Department of Health brings out, as a matter of extreme urgency, guidance on mental health support that is sent across the country? Will she speak to the Ministry of Justice to ensure that a specialist Crown prosecutor sits in on each investigative police operation, because decisions on my constituents have been made without reference to the Crown Prosecution Service, and, as I say, not a single one of them has been prosecuted?

[Mrs May]

The Department of Health is looking at the whole question of mental health and psychological well-being of the victims of sexual violence and abuse, particularly considering the needs of those who are subject to exploitation. I was surprised to hear the hon. Gentleman’s suggestion that decisions were being taken without any reference to the CPS, because in any case such as this I would have expected advice to be sought from the CPS about the ability to take a case to court. I would be interested to know of the specific examples that he can point to in relation to that.

[David Rutley (Macclesfield) (Con)]

Grooming online is a particular challenge in the disgusting practice of child sexual exploitation. What steps are the Government taking better to protect more children online regardless of background?

[Mrs May]

One of the aspects of the work that is done that I have not mentioned so far this afternoon is that of the Child Exploitation and Online Protection Centre, now under the National Crime Agency, which is about not just protecting children and catching perpetrators who are grooming children online, but education and trying to ensure that youngsters themselves are better able to recognise what is happening to them and better able to take action.

[Helen Jones (Warrington North) (Lab)]

Among the many appalling things that happened in Rotherham, which have been replicated elsewhere, were the decisions by some councillors and officers to view themselves as there to protect the institution rather than people, and the blaming of vulnerable young girls for their own abuse—I think it was in Rochdale where they were said to be making “lifestyle choices”. Will the Home Secretary ensure that each local authority reviews its procedures for dealing with grooming cases, including how it deals with children in care, how it gets young people to recognise abuse, and the training of its social workers and all those involved in corporate parenting, which is one of the most important duties of a council? Does she accept that it is not only the job of Ministers to ensure that that is done, but the responsibility of every Member of the House to make sure it is done in their own area?

[Mrs May]

The hon. Lady has raised precisely those issues that the work that I will be doing with the Secretaries of State for Education and for Communities and Local Government will be addressing. I have already said that action will be taken to look at the lessons that need to be learned by local authorities. Discussions have been held with the chief social worker about the whole question of social services skills and the training that is necessary for people to be able to identify these issues, but she makes an important point: as Members of Parliament we all have a responsibility for ensuring that these matters are being dealt with properly in our own areas.

[Duncan Hames (Chippenham) (LD)]

Professor Jay’s report described the collective failures of political and officer leadership as blatant. The youth workers and front-line social workers who raised the alarm will be disgusted by the fact that their bosses who ignored them—some of them paid more than Ministers—escaped disciplinary action. How can we ensure that the reliance of council cabinet members on senior council staff does not lead to one rule for those at the top and one for everyone else?

[Mrs May]

My hon. Friend raises a very important point, to which there is no single answer. It is the responsibility of us all to make sure that those in such positions understand their responsibilities and duties to protect people—in this case children, rather than, as the hon. Member for Warrington North (Helen Jones) has just mentioned, an institution.

[Jim Shannon (Strangford) (DUP)]

Institutionalised child sexual abuse in Rotherham has disturbed us all greatly: 1,400 young boys and girls were violently abused. There has been institutionalised child sexual abuse across the United Kingdom, in particular in the 1970s at the Kincora boys’ home in Belfast. At that time, politicians, social services, police and shadowy groups were involved. Will the Secretary of State confirm that the national inquiry will address the depraved and wicked sexual abuse of children that took place in Kincora boys’ home in Belfast?

[Mrs May]

I have had a preliminary discussion with the First Minister about the abuse that has taken place over a number of years in Northern Ireland and I will be looking further into the relationship between the inquiry that we are setting up and the work that has already been started and done in various ways in Northern Ireland on these issues. Looking into that is on my agenda.

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

The Home Secretary may be interested to know that the chief executive and the executive director of children’s services in Rotherham are coming before the Communities and Local Government Committee next week. It is right that officers as well as politicians in Rotherham are held accountable for what happened.

Professor Jay specifically mentioned in her report several independent investigations and inspections of Rotherham children’s services over the years, a number of which were carried out by Ofsted. Virtually all of them offered general reassurance about what was happening in children’s services, and prior to 2009 talked about improvements. How can we be certain that Ofsted has the skills and abilities to conduct a much better inspection next time?

[Mrs May]

The Secretary of State for Education is looking at the whole question of making sure that inspections at local authority level are aware of the issues that they need to be looking at and deal with those issues properly.

Point of Order

Tuesday 2nd September 2014 Commons Chamber

13:57

[Michael Fabricant (Lichfield) (Con)]

On a point of order, Mr Deputy Speaker. I wanted to raise a number of questions today regarding the appointment of Carol Mills and, in particular, the consultants, Saxton Bampfylde. These questions need to be addressed to Mr Speaker, who I see has scurried off. I am just wondering whether that was always planned or whether perhaps he was avoiding such questions.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I can reassure the hon. Gentleman that I was meant to take the Chair earlier and that when I took over Mr Speaker had been in the Chair for longer than expected. The hon. Gentleman has made his point, but it is not a matter for the Chair. I reassure the House that Mr Speaker does not scurry away.

[Mr Simon Burns (Chelmsford) (Con)]

Further to that point of order, Mr Deputy Speaker. As Mr Speaker cannot be here, because, as you have just explained, he has other engagements that demand his presence, would you be able to find out some information for us, which would be extremely helpful? Is the status of the letter that Mr Speaker sent to No. 10 Downing street with his recommendation that Ms Mills should be appointed—

[Mr Deputy Speaker]

Order. I can save the right hon. Gentleman any further effort. That is not a matter for the Chair. The right hon. Gentleman is a very able Member of the House and will be able to pursue it in other ways.

[Mr Burns]

rose—

[Mr Deputy Speaker]

I have given a ruling in both cases. This is not a matter for the Chair.

[Mr Burns]

May I seek a point of information, Mr Deputy Speaker?

[Mr Deputy Speaker]

You may seek a point of information, just to test my patience.

[Mr Burns]

The last thing I want to do, Mr Deputy Speaker, is to test you or your patience, but I would like some elaboration. Given that it was Mr Speaker who wrote to the Prime Minister with the recommendation of the panel or the commission as to who should be appointed to the job, how can it not come within the rules of points of order to seek information from Mr Speaker about the status of the letter and whether it can be withdrawn from No. 10 while the pause goes on? If it cannot be withdrawn, it rather suggests that the pause is not very sincere or meaningful.

[Mr Deputy Speaker]

I am sure that everything in this House is sincere and meaningful, but it is a matter for the chair of the commission. It is not a matter for me in this Chair at this moment.

Business of the House Commission

Tuesday 2nd September 2014 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

14:00

[Mr Peter Bone (Wellingborough) (Con)]

I beg to move,

That leave be given to bring in a Bill to create a Business of the House Commission to regulate the timetabling of business in the House of Commons; and for connected purposes.

The House of Commons’ historical functions were to vote money for Governments to spend and to scrutinise laws. It now barely bothers with the first and does the second extremely badly. There was a time when legislation that had been formulated after months of civil service and ministerial deliberation was sent to the House of Commons, which would pore over it, shape it, send it back, get it back, look at it again, and improve it some more. Bill by bill, clause by clause, line by line—every piece of legislation would be put under intense scrutiny. Is it legally sound? Will it be effective? Is it worth the cost?

Let us compare that with what happens today. Let me take Members on the journey of a piece of legislation as it passes through the modern House of Commons. It is likely to have been dreamt up on the sofa at No. 10. A Bill gets drafted and is sent to the House for a couple of hours of routine debate among a few MPs. Then the bell rings, the whip gets cracked, and suddenly, out of nowhere, all these other MPs turn up to vote. More often than not, they do not even know what they are voting for. The Bill limps through, then it goes to the Public Bill Committee. The Committee’s duty is to look at the details clause by clause, but it is packed full of people that the Whips have put there, so—surprise, surprise—the Government rarely lose a vote on any of the individual points of detailed scrutiny. Then it is back to the House to do it all again—debate, bell, and then vote to wave the legislation through.

Every Bill now has a programme motion setting out how much time can be spent scrutinising and debating each part. These are automatic guillotines, and the time allowed for scrutiny is set in advance before anyone can see whether a particular issue is contentious or complex. Watching a Minister in the Commons drawing out one point for an hour to fill the time to an audience of dozing Back Benchers—this is not accountability. How is it that the mother of all Parliaments turned itself into such a pliant child?

“If we’re serious about redistributing power from the powerful to the powerless, it's time to strengthen parliament so it can properly hold the government to account on behalf of voters. The House of Commons should have more control over its own timetable, so there is time for proper scrutiny and debate.”

Those are not my words but those of my right hon. Friend the Member for Witney (Mr Cameron), the Prime Minister, when he was Leader of the Opposition in 2009. As usual, the Prime Minister was correct—absolutely spot on. All I am doing today is helping the Prime Minister in his quest to fix broken politics.

This coalition started its life with a clear mandate and a mission to reform Parliament and restore faith in politics. Accountability is the cornerstone of our democracy—accountability to the people and accountability to the representatives they have chosen to voice their concerns. Thank goodness the coalition promised to put an end to the tyranny. The coalition agreement clearly stated the parliamentary reform that would occur. Equally, it was very clear on the timetables for that reform. I quote:

“We will bring forward the proposals of the Wright Committee for reform to the House of Commons in full—starting with the proposed committee for management of backbench business. A House Business Committee, to consider government business, will be established by the third year of the Parliament.”

That is a clear mandate and a clear deadline—a deadline that has long since passed—to bring forward legislation to create a business of the House committee. As we approach the election, Government and Opposition Whips alike are blocking such a committee.

It was not just the coalition agreement that promised reform. The Conservative manifesto, “Invitation to Join the Government of Britain”, stated the need for reform of the House of Commons to make it more accountable and to allow MPs the time to scrutinise law effectively. The Liberal Democrats, in their snappy manifesto called “Change that Works for You”, clearly stated that they would give Parliament control over its own agenda so that all Bills leaving the House of Commons would be fully debated. I could not agree more with the Deputy Prime Minister on that point. This is certainly change that would work for me. Even Labour, which was then in government, pledged to strengthen the power of Parliament to hold the Executive to account and to give a stronger voice to Back Benchers. You can imagine my confusion, Mr Deputy Speaker, when I asked the newly appointed Leader of the House when he planned to introduce a business of the House committee and he responded that due to the absence of consensus there were no plans to do so.

Could there be a stronger mandate for a business of the House commission? All three major political parties in Parliament support such a reform, the Prime Minister has spoken out in support of increasing Parliament’s power so that we are not at the mercy of the Executive, and it is even in that hallowed document, the coalition’s programme for government. They all agree that there should be a business of the House commission. One would say there is total consensus; the only objection seems to be coming from the three Whips Offices. May I suggest that that is no serious objection at all? I would also suggest that when the three Whips Offices agree on something, that is never in Parliament’s interest and it is further evidence of why we need such a commission.

Currently, the Executive timetable all business except on the 13 Fridays when private Members’ Bills are discussed and the 27 days when the Backbench Business Committee decides on the business. Parliament itself should decide how much time is allocated for Bills. Not having enough time to examine legislation thoroughly as it passes through the Commons completely devalues the democratic process, as it undercuts the power of MPs to make representations on their constituents’ behalf. Time and again, amendments to Bills on Report are not debated because there is simply not enough time. Routinely, Third Readings last just an hour. One of the most striking examples of that was when an amendment extending restrictions on the free movement of Romanians and Bulgarians, signed by very many MPs, was not reached because of the timetabling and the programme motion. Though the country wanted it to be debated, the Executive did not, so they arranged it so that Parliament could not discuss it. That is just not democracy.

The business of the House commission would be composed of Back-Bench parliamentarians, not Whips or Ministers. The workings of the commission would be quite straightforward. The commission would sit on a Monday and hear from the Government their proposed timetable for the following week. It would also hear from shadow Ministers and other Members of Parliament who would propose alterations to that timetable if they so wished. The commission would deliberate and announce its business on a Thursday, and that would then be subject to a formal vote. The commission would be chaired by an elected Leader of the House, who would be elected by the whole House and responsible for the running of parliamentary business. He or she would not be a member of the Government or a member of the shadow Government. The Backbench Business Committee would keep its allocated days, as would private Members’ Bills, and the rest of the time would be run by the business of the House commission.

Such a commission would have been incredibly useful this summer, when there has been so much debate about whether or not the crises in Gaza, Ukraine, Iraq and Syria warranted the recall of Parliament. At the moment, the decision on whether Parliament is recalled lies in the first instance with the head of the Executive, the Prime Minister. It should be for Parliament to decide when it sits, and a business of the House commission would have decided this summer whether to recall Parliament following the numerous international crises. Surely it is far better for a commission of parliamentarians to decide whether Parliament should be recalled than the Government, who may not want their decisions scrutinised.

A business of the House commission would make for a far more democratic system of decision making, ensuring that time is allocated fairly to restore the mother of Parliaments to a strong and flourishing democracy fit for the people of Britain.

Question put and agreed to.

Ordered,

That Mr Peter Bone, Bob Blackman, Mr Frank Field, Steve Baker, Kate Hoey, Mr Graham Allen, Mr Graham Brady, Mr John Redwood, Philip Davies, Mr Christopher Chope, Mr Philip Hollobone and Mr David Davis present the Bill.

Mr Peter Bone accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 5 December and to be printed (Bill 85).

Pension Schemes Bill

Tuesday 2nd September 2014 Commons Chamber

Second Reading

14:11

[The Minister for Pensions (Steve Webb)]

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

It gives me great pleasure to move this Bill, alongside my right hon. Friend the Secretary of State for Work and Pensions and my hon. Friend the Financial Secretary to the Treasury, as the latest measure in our groundbreaking pension reforms. In the run-up to the Queen’s Speech, there was some suggestion that the Government had run out of steam. Indeed, the phrase was coined that this was a zombie Parliament. I have to say that, with not one but two items of pensions legislation in the Queen’s Speech—the Pension Schemes Bill and its sister Bill, the pensions tax Bill—we will be very busy over the remaining months of this Parliament taking the pensions system to a far better place. I can assure the House that there are no zombies at the Department for Work and Pensions.

The Pension Schemes Bill will improve the system in two ways: it will give people much greater flexibility on how and when they access their savings, and it will enable innovation in the pensions industry, to better meet the needs of businesses and individuals.

Before I run through the principal features of the Bill, I want to set out the context of the pensions reform that we have undertaken as a coalition Government in these past four years, because it is not possible to have an effective pensions system without an effective foundation. That is why the Pensions Act 2014, which introduces the new state pension, is so vital. A single, simple, decent pension, getting the vast majority of people clear of means-testing, provides a firm foundation for retirement saving. The reform was long overdue and it will transform the pensions landscape of this country.

The second crucial measure is the introduction of the triple lock, ensuring that for both today’s and tomorrow’s pensioners the long-term, decades-long decline in the value of the basic state pension has been halted. Under this coalition Government, the state pension is now a bigger share of the national average wage than at any stage in the past 20 years—a record of which we can all be proud. At current inflation rates, though new figures are due out shortly, we would anticipate that the triple lock will bite again this year, providing further protection to the nation’s pensioners.

Having established a firm and decent state pension foundation, the next stage in our reforms was to ensure mass membership of workplace pensions—again reversing decades of decline. I was delighted, therefore, that the most recent statistics showed that, for the first time in decades, we have significantly reversed the fall in membership of workplace pension schemes. The successful introduction of automatic enrolment, filling the many gaps in the policy left to us by the previous Government, has now seen 4 million people successfully enrolled into workplace pensions, with more being added with every passing week.

[Richard Fuller (Bedford) (Con)]

The Minister is rightly saying that this Bill is part of a series of measures the Government have undertaken to increase pensions for people. Is the number of people in the auto-enrolment process higher or lower than expected?

[Steve Webb]

I am grateful to my hon. Friend for that question. The number is substantially higher. I had to apologise to the Select Committee in oral evidence recently that we had grossly underestimated the success of our policy. We had thought that the staying-in rates for workplace pensions might be as high as two thirds, but in reality the number of people who, having been automatically enrolled, are staying in is touching nine tenths. Even so, with each passing month, as new figures come out, the sceptics keep saying, “Oh, as we get to smaller firms, the opt-out rates will shoot up,” but we are certainly seeing no evidence of that so far. I think there is a sense that people knew that they needed a pension and knew the value of an employer contribution and tax relief, and when we remove the barriers for them they are delighted to accept it.

[Dame Anne Begg (Aberdeen South) (Lab)]

May I be very clear that both the Select Committee and the Opposition welcome auto-enrolment and are very glad that it has been so successful, because one of the good things the coalition Government did was carry on the policy legislated for by the previous Labour Government? Perhaps some credit should be paid to them.

[Steve Webb]

The hon. Lady will be aware that there was a decade between the first stirrings of the Turner report and the implementation of automatic enrolment. She will also be aware that there is a risk—this is an important point and although I would not accuse the hon. Lady of doing this, perhaps it is relevant to her more partisan colleagues—of rewriting history on this issue. Had we implemented automatic enrolment as envisaged by the Opposition, it would have crashed and burned. Let me explain why I say that, because it is very important.

Had we auto-enrolled people into schemes without any prospect of a charge cap, they could have been exposed to something the Opposition call rip-off pension charges. When in government, the Opposition proposed no consumer protection on charges. Secondly, they would have auto-enrolled people the second their earnings were a pound above the threshold, so people would have been enrolled into pension schemes into which literally pennies were being put by employers and employees. That would have created derision and undermined auto-enrolment. Thirdly and crucially, auto-enrolment was envisaged without any reform of the state pension, so we would have had a state pension of about £5,000 a year and a means test of about £7,000 a year. Therefore, the first £2,000 a year of private saving would have been largely clawed back by means- testing. There would have been stories in the press of mis-selling and of people saying, “Why did I bother saving for a small pension?” I still remember a national newspaper journalist telling me that only when we reformed the state pension did we remove the fundamental objection to auto-enrolment for people on a low wage.

We would, therefore, have had rip-off charges, nugatory amounts going in and means-testing of savings; if we had not addressed those things, auto-enrolment would have failed. I believe that the coalition made that policy work and were right to do so.

As well as making sure that we have mass membership of workplace pensions, we have had to address a number of other crucial issues, including, as I have mentioned, scheme quality and ensuring that people do not face excessive charges. From next April, default funds for auto-enrolment schemes will be capped at 0.75%. Certain forms of charges over the coming years will be banned altogether. The so-called active member discounts, which mysteriously increase charges when someone is no longer an active member of a pension scheme, and commission charges and consultancy charges are all banned by this coalition Government. We are putting in place new measures to ensure quality governance of schemes—not just trust-based schemes but contract-based ones—with independent governance committees acting in the members’ interests for the first time.

This is a huge, positive agenda, but there are two big areas where further work is needed. The first is the move from defined benefit to defined contribution—a long-term, decades-long trend transferring risk from being wholly on the employer to being wholly on the individual. We remain concerned that that transference of risk causes problems for individuals and that we need to enable, encourage and foster risk-sharing models, and that is what this Bill does.

Secondly, what happens at the end? What happens when someone has accumulated a pension pot? What can they do with it? Again, the previous Government failed to address the fact that, all too often, people with a pension pot defaulted into an annuity with the provider they had already saved with and did not get the best value for money—they made a once-in-a-lifetime retirement choice that all too often resulted in poor value for money. That is why the Chancellor’s groundbreaking Budget announcements, which the Opposition are still fundamentally ambivalent about at best, were so important. They gave people freedom and choice in what to do when they have accumulated a pension pot. This Bill and the amendments that will follow provide for guaranteed independent guidance for people making those choices, which is something that far too many people do not have at present.

[Kelvin Hopkins (Luton North) (Lab)]

The Minister talks about poor value for money, but essentially is the problem not the private pensions market? A universal state scheme would be incredibly efficient, give much better value for money and could be underwritten by Government. Such a system would make it possible to have defined benefits as well as defined contributions, and would be infinitely better for everyone involved.

[Steve Webb]

I always enjoy it when the hon. Gentleman intervenes to make that point. In a sense, he has been consistent: he simply thinks that we should tax people more to pay higher state pensions. That is an entirely credible left-wing position. It is not his party’s position.

Sharing future state pension rights between the state and the market is sensible risk sharing, which is relevant to the Bill, for the following practical reason. Although the hon. Gentleman may live in a world where Government promises are immutable, and where someone who is 25 is told by the Government, “Don’t worry: I will tax you a lot more to jack up the state pension, and in 40 years it will all be fine because you’ll get a fat state pension”, Governments—obviously not the present one—do rip up pension promises.

I do not think that individual citizens should rely wholly on something that is unfunded. That is what it would be, because such people are essentially hoping that their children and grandchildren will pay them a generous pension. However, by the time those people are pensioners, there will of course be many times more pensioners and many times—relatively—fewer workers. That is a very insecure basis on which to base retirement income.

We are making sure that there is a single, simple, decent state floor—to that extent, I agree with the hon. Gentleman—built on by the ownership of capital assets, an employer contribution, tax relief from the public purse and individual contributions invested in the productive wealth of the economy, so that as the economy grows pension wealth grows. There is therefore a capital right as well as a pension promise from the state, which is how I would want to share my risks.

[Kelvin Hopkins]

I would like the opportunity to answer every point made by the Minister, but let me ask him one simple question. If the economy gets into very serious trouble and the private pensions market gets into a real financial crisis, as happened with the banks in 2008, what will happen then, without Government underwriting?

[Steve Webb]

But the idea that if the economy does very badly tax-funded pensions are secure is implausible. If the economy does badly, public expenditure on benefits must rise, tax receipts will fall, the deficit will rise and the ability of the public purse to pay the generous state pensions wanted by the hon. Gentleman will fall. We need a strong economy come what may, and a strong economy will generate the money for state pensions and for private pensions.

[Crispin Blunt (Reigate) (Con)]

I represent a significant number of providers in my constituency, including Legal and General, Partnership and Just Retirement, while Fidelity is also in this market to a degree. I am very concerned about the levy that is coming in to pay for the guidance, and about the difference between the £20 million that the Government have set aside to begin funding the guidance and the reality of what realistic guidance actually requires. If the Minister or I wanted an evaluation of our pensions for the purposes of a court—for divorce, for example—the amount of work required would cost about £2,000. There are 500,000 people waiting for and needing guidance. It will be £1 billion—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman might be better off making his point in two interventions, because otherwise he will have made his speech, and I am sure that the Minister will not remember it all.

[Steve Webb]

Let me make a start, and I will then be happy to give way again. To be clear, the £20 million is not an estimate of the annual recurring cost of providing guidance; it is a one-off, seedcorn, getting-the-thing-going fund. For example, if we need to set up websites, produce literature and create infrastructure, the £20 million will enable us to do so. That may involve organisations such as the Pensions Advisory Service and the Money Advice Service, and it may involve Government spending. The first point is that it is about getting things going; it is not our estimate of the recurring cost of guidance.

The second point is that there is clearly a world of difference between a guidance conversion to get people to base camp—enabling them to understand concepts and helping them to know where to go for further information and advice—and a sophisticated, individualised, tailored piece of independent financial advice recommending products. There is a whole spectrum, and the guidance is very much at not the “cheap”, which is the wrong word, but the budget end of that scale.

I assure my hon. Friend that we do not envisage a levy on the financial services industry to pay for full-blown, regulated, independent, tailored financial advice. The guidance will not be like that, but it will certainly be cost-efficient. Although we will honour the Chancellor’s pledge for face-to-face guidance when people want it, we anticipate that many people will want telephone conversations, websites and all the rest of it, much of which is substantially cheaper than the very expensive sort of advice he mentioned.

[Crispin Blunt]

I will take advantage of your invitation, Mr Deputy Speaker. I am not suggesting anything other than that the guidance is incredibly important—frankly, it needs to be closer to advice than guidance in its scale if it is to ensure that people are properly equipped to make such very difficult and complex choices—but I am concerned by the suggestion that the levy will be directed at firms that will benefit, whereas we want a competitive market which highly entrepreneurial firms that can put together new products will enter to win business from people who have left their money sitting or have not moved it, and who take annuities from existing providers and the rest. There is a dichotomy there.

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

Will my hon. Friend give way? [Laughter.]

[Steve Webb]

I do not think that my hon. Friend can intervene on an intervention, but I will give way to him in a moment if he so wishes.

I agree with my hon. Friend the Member for Reigate (Crispin Blunt) that we want to see innovation. The industry is talking about a decade of innovation, so although this system will be up and running next April, it is widely assumed that the market will develop and new markets will indeed be brought forward. I have seen no evidence that the envisaged level of levy will hamper entry into the market. As he well knows, the financial services industry is a big industry, and this is a huge opportunity. We are also talking about the auto-enrolment of between 8 million and 9 million new pension savers. These are huge additional sources of revenue for the pensions industry. Relative to that, the scale of the levy for the guidance is modest, so I think that I can reassure him about that issue of scale.



To move on to the substance of the Bill, I will make my remarks in two sections: the first on the pension schemes and the defined-ambition proposition, and the second on freedom and choice in pensions.

First, what is defined ambition? Essentially, it is a radical reshaping of pensions legislation to ensure that it remains relevant for future generations, and to reflect, recognise and, to quote the coalition agreement, “reinvigorate” innovation in consumer-focused product design in either shared-risk or, as we are calling them, defined-ambition pensions.

The Bill will introduce three categories of pension scheme based on the type of promise that they provide to savers during the saving phase about the benefits that will be available to people on retirement, including a new defined-ambition or shared-risk category of pension scheme. The Bill will enable collective benefits to operate in the UK, as they do successfully in many other countries. We have very much tried to focus on pension members’ experience of what their scheme offers. The new Bill will apply and refocus existing legislation in relation to the new terms.

The first category is for salary-related pension schemes—for example, traditional final or average-salary schemes—where the pension is specified in relation to the person’s salary. They have been in decline since the 1970s, and the majority of them are now closed to new members. They are often known as defined-benefit pension schemes, in which the employer bears the risks of longevity, investment returns and inflation.

The switch has been to the other extreme—schemes commonly known as defined-contribution or, more technically, money purchase schemes. The number of defined-contribution schemes established per year has generally increased since 2007, with 1,060 new schemes in 2013. Membership of such schemes increased by 15% to 2.7 million in 2013.

As you can clearly see, Mr Deputy Speaker, we have a binary model: people get either a money purchase or a non-money purchase benefit. Although both types of pension will be the right product for many people, is it right that the only future for pensions that is encouraged by our legislation is one in which either the individual consumer or the employer takes on all the risk? We do not believe so. Many employers have found the increasing costs of longevity and investment risk too heavy to bear, but if defined-contribution schemes are the only alternative, outcomes for savers will be less certain and more volatile than for earlier generations, making it much harder for future generations of savers to plan for later life.

Consumer trust in the pensions industry is low. As I have said, we can protect people against the risks of high charges or poor governance, but our research has shown time and again that many individuals want more stability and certainty. They want to know something about what their savings will give them and have some protection from the worst vagaries of the market. That is why the Bill provides new definitions for private pensions, including the new defined-ambition category of pension scheme, and for collective benefits.

The new shared-risk definition describes a middle ground between the more polarised money purchase and non-money purchase definitions. It will create a distinctive space to encourage innovation in pension design, and it will provide more certainty for individuals than defined-contribution schemes by sharing risks among employers, employees and third parties.

The collective benefit definition will enable a new form of risk pooling among scheme members that is able to provide greater stability in outcomes for members. Collective pension schemes are often recognised internationally as high quality, and it is only right that the United Kingdom should have access to pensions viewed as being among the world’s best. We also have the advantage of providing protections at the outset that address issues to which the more mature schemes overseas are now turning their attention.

We have engaged extensively with stakeholders across the pensions industry and found that there is an appetite for legislation that allows greater risk sharing and risk pooling. There are employers who will welcome the greater flexibility to create pension schemes that suit the needs of their work force. Pension providers want the flexibility to design and offer pensions that provide greater certainty. Individuals value the option to have greater certainty than that provided by DC pension schemes, as well as the greater stability that collective schemes may provide.

I am pleased to share with the House the warm welcome that the proposals have had. Age UK says that it

“welcomes the overall intention of the Bill”.

The National Association of Pension Funds says that it has

“long supported enabling greater risk-sharing in pensions arrangements”

and welcomes the creation of a framework that enables greater innovation and risk sharing. The TUC says that it has long supported collective pensions

“as a means of improving the income available to workers in retirement. The legislation will bring the UK into line with countries such as the Netherlands, Denmark and Canada where such schemes already operate.”

I welcome the fact that the Opposition have sort of, vaguely-ish welcomed our proposals. The more stability and consistency we have on pensions, the better, because pensions are not just for Christmas but are a long-term business. The fact that there is a degree of common ground in this area is entirely welcome.

[Guy Opperman (Hexham) (Con)]

On behalf of my constituents in Northumberland, I wholeheartedly welcome this reform, which has been massively welcomed by those who currently have a pension. However, how will the Government ensure that most small and medium-sized enterprises offer defined-ambition pensions? There is a degree of concern, which is legitimately held, that the safer defined-contribution pensions, in which there is little or no risk, will continue to be offered, thereby reducing the impact of the defined-ambition pension. What are the incentives?

[Steve Webb]

I am grateful to my hon. Friend for raising that important point about the potential market and demand for such schemes. We have undertaken research not only among consumers but among employers. We have found that about a quarter of employers say that they would be interested in providing shared-risk schemes and that another quarter are waiting to see. To be honest, if I were surveyed at this point, I would probably be in the waiting-to-see quarter because the legislation is yet to go through and the regulations that this framework Bill provides for have yet to be tabled. Understandably, firms are not queuing up to declare for this form of pension provision.

On the whole, such schemes are unlikely to be provided by SMEs. In general, we anticipate that just as with final salary and DB pensions, it is larger employers who will tend to go for shared-risk schemes—not exclusively, but largely. The reason is that, beyond the bare legal minimum of auto-enrolment, providing a workplace pension is not a legal requirement but an option. It tends to be larger employers who see pension provision as part of a package, perhaps including a company car or a workplace crèche, and who offer additional benefits. A risk-sharing scheme is, to my mind, a fringe benefit. However, it is a very valuable benefit where the employer says, “I want to do more for my employees than the legal minimum.”

My hon. Friend the Member for Hexham (Guy Opperman) asked what the incentive is. Although the best pension schemes may have gone, the best employers have not. There are therefore good employers out there who want to do more than the bare legal minimum. They will find that their employees want a pension scheme that reduces the risks and uncertainties of this very uncertain world. They will therefore find that this is an attractive part of their package.

Once the schemes are up and running, small employers may well choose to join them. We will probably need scale before we get to that stage. I am guessing that larger employers will use them first, but once there is the infrastructure—a regulatory regime or governance regime—one can imagine a scenario in which smaller employers would join.

[Nigel Mills (Amber Valley) (Con)]

The Minister has just mentioned the regulatory regime. Has he given any thought to how we will regulate the new defined-ambition, shared-risk schemes? Presumably, if a defined-contribution scheme adds a small promise, it will trip over into being a defined-ambition scheme. The regulation would therefore move from the Financial Conduct Authority to the Pensions Regulator, and it could drop back again. Does it not look as though we need one pensions regulator to make it all make sense?

[Steve Webb]

I am grateful to my hon. Friend. That is an issue that the Work and Pensions Committee, of which he is a member, has raised in relation to the appropriate regulatory regime. It is fair to say that in drawing up the regulations and guidance for the Bill, the number of times we have had to ask ourselves which regulator it is that does which bit and to ensure that what the FCA does mirrors what the Pensions Regulator does has added to the complexity of the process. When I gave evidence to the Select Committee a little while ago, I said that this was not the time to start reforming the regulators. That remains my view. My hon. Friend will be aware that the FCA has only just been created out of the ashes of the Financial Services Authority. This precise point is not the right time for yet another regulatory reform. However, the experience of the last 12 months has made me more sympathetic to the view that the eventual destination might well be a single regulator.

My hon. Friend also raises the regulation of DA and collective DC schemes. It is clear that what we need is good governance. Arguably, one of the problems of the Dutch experience, as it has been described to us, is that the schemes were described as DB to the members and DC to the employers. One of those two descriptions was not true. We have to ensure that we have good governance and transparent communication. Because of issues of intergenerational fairness and so on, the rules of the scheme—who gets what when things go wrong and who benefits when things go well—have to be transparent. We therefore need a clear, although not excessive, regulatory framework.

What I have described so far is the Pension Schemes Bill as we originally envisaged it, which deals with risk sharing. Obviously, that is the fruit of several years’ worth of consultation papers and extensive engagement with stakeholders in the pensions industry. I would like to place on the record my appreciation to the many working groups that the Department has run, including the defined ambition working groups of Andrew Vaughn of the Association of Consulting Actuaries, and to all the experts who have given their time to help us draw up the various models. We are very grateful to them.

The second half of the Bill relates to the Chancellor’s freedom and choice in pensions agenda. It may be that other right hon. and hon. Members regularly have people walk up to them in the street, shake their hand and thank them for Government policy. It has been a relatively novel experience for me, but I have genuinely had people walk up to me, shake my hand and thank me for this policy because it gives them back control over their own money. It says not that the Government know best but that the individual, with the right support and guidance, should be in the best place to make their own choices about their own money. The Government are committed to giving people freedom and choice in how they use their pension savings.

Budget 2014 announced radical new flexibilities in how and when people may access their pension arrangements. We undertook a 13-week consultation, and the response to it was published in July. Draft tax clauses for technical comment were published in August. The momentum is gathering. This Bill, along with the taxation of pensions Bill, will mean that from April 2015, individuals from the age of 55 will be able to access pensions flexibility if they wish to, subject to their marginal rate of income tax, rather than the current 55% tax charge.

This Bill will make the required changes to pensions legislation, including a guidance guarantee. That means that everyone with a defined-contribution pension arrangement will be offered free, impartial guidance so that they are clear about the range of options available to them on retirement. There will also be a duty on providers and schemes to ensure that they make people aware of their right to guidance and signpost them to this service.

The taxation of pensions Bill will legislate for the required tax regime changes. The Government will continue to allow members of private sector DB schemes the freedom to transfer to other types of scheme. In the majority of cases, it will continue to be in the best interests of the individual to remain in their DB scheme. That is why two additional safeguards will be introduced to protect individuals and schemes. First, there will be a new requirement for individuals transferring out of a DB scheme to take advice—with a capital A—from a financial adviser before a transfer can be accepted. Secondly, there will be new guidance for trustees of defined-benefit schemes on using their existing powers to delay transfer payments and taking account of scheme funding levels when deciding transfer values. To protect the Exchequer and taxpayers, however, transfers will not, other than in very limited circumstances, be allowed from unfunded public service DB schemes to schemes with DC arrangements.

I want to pick up on two final issues that relate to how the freedom will work in practice. The first was raised in oral questions yesterday and relates to the position of schemes with exit fees. The uncharitable side of me would say that one or two of my answers yesterday were misrepresented in the Twittersphere, as I think it is called. The charitable side of me would say that my comments were misunderstood. Let me be absolutely clear about where we stand on schemes with exit fees.

First, despite Opposition attempts to hype this up and overstate the case, the number of schemes with exit fees is very much in the minority. In other words, our 2013 pensions and charges landscape survey found that more than five in six trust-based schemes, and nine out of 10 employers with contract-based schemes, had no exit fees. We must therefore be clear that exit fees are exceptional.

Secondly—I am generally talking about legacy schemes here—we are already considering charges, and a legacy audit is being undertaken of old and high-charging schemes. That is due to report by December and will provide additional information about existing fees. At the moment, we do not have full information with which to form policy, but the Government are working with the pensions industry to understand how common exit fees are, how large they are, and the terms under which they operate. Crucially, once the evidence is clearer, the Government will be able to decide whether additional measures are required to protect savers. At the moment we are gathering information, but we are determined to ensure that savers are protected. I hope that is helpful.

The compatibility of the two halves of the Bill has been mentioned. On the one hand we are giving people freedom and flexibility, and on the other we are bringing forward a framework within which people might be members of a pension scheme all their life, through working age and well into retirement. We must obviously ensure that those two things gel, and I assure the House that they do.

All our reforms are about putting the saver first and addressing people’s desire for greater certainty about income in both the savings and the pay-out phase—the accumulation and decumulation phase. In a defined ambition scheme, more than one type of benefit arrangement is likely to make up the overall pension pot or income stream. We expect people with defined contribution arrangements within a defined ambition scheme to be able to access those arrangements in line with new budget flexibilities. Members of DC schemes that offer collective benefits will be able to cash out their collective benefits if they so choose. If they remain within the scheme, it is likely that they will receive a pension income for life, since that is how we envisage collective benefits being set up. People will not have to make decisions on how to access their savings; decisions on how to pay out scheme benefits will be made by scheme fiduciaries.

These schemes will offer an option—that is the crucial point: the freedom and choice agenda—for those who wish the scheme to pay them a pension income for life. Either way, the individual will have choice over what to do with their savings. Together with the amendments that will follow shortly, the Bill will set out a legislative framework that will mean greater choice and flexibility for future private pensions, tailored to the needs of employers and individual savers.

This Parliament has seen little short of a pensions revolution: radical state pension reform providing a firm foundation; mass membership of workplace pensions through the effective implementation of automatic enrolment; quality standard charge caps; and a war on rip-off pension charges. Now in this Bill there are two new strands to our reforms: enabling and facilitating risk-sharing pension models rather than the extremes of risk that would otherwise be the case, and new freedoms for individuals to know best what to do with their money. At the end of this Parliament, we will truly have transformed the pensions landscape. That is a record of which this coalition Government can be proud, and I commend the Bill to the House.

14:43

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

It was striking to hear the Minister refer to a “revolution” and a “war”—not terms one usually associates with Liberal politicians. Clearly, the excitement of pensions has overwhelmed his Liberal temper.

This is the third pensions Bill of this Parliament, and I note that the Minister spent the first 15 minutes of his half-hour speech talking about the first and second pensions Bills, and the fourth one still to come. There is no doubt that much has changed in the pensions landscape, but let me first pick up the Minister on some of the things that he suggested. He painted a picture of a pension policy—a revolution, indeed—that is coherent in every respect and said that the first pensions Bill begat the second, the second begat the third, and of course the fourth is still to come. There is, however, another way to look at aspects of the Government’s pension policy, and I ask the Minister to reflect on these points.

The Minister referred to auto-enrolment. As is characteristic of him, he took all the credit, leaving aside the fact that—as was pointed out by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), the Chair of the Work and Pensions Committee—auto-enrolment emerged out of the Turner commission and the consensus built by the last Labour Government, and was rightly taken on by the Pensions Minister. Leaving aside that lack of generosity in the Minister’s reflections on auto-enrolment, there is a more fundamental point. The Turner consensus, which the Labour Government built and the Minister has continued, operated on the assumption of pensions being complex, long-term and difficult to navigate for anyone other than a financial professional. That necessitated a default-based approach whereby individuals employed without a pension were defaulted into a pension scheme. They did not exercise a choice to go into a pension scheme; they were defaulted into a good pension.

That was the Turner commission’s judgment and the consensus taken on by the last Labour Government, and indeed the Minister. However, the Government’s policy on budget reforms is predicated on a different approach and the assumption that at the point of retirement, when individuals come to turn their pension pot into an income—the whole point of a pension is to get as great a pension income as possible—they will be able to navigate that jungle of financial products successfully and maximise their retirement income. There is surely a tension between those two aspects of pension policy, and the Government’s approach to building up a pension pot and to turning a pension pot into retirement income.

That tension must be reflected on by the House, not because the Government’s policy for retirement income stage is necessarily wrong, but because there is a tension between the two poles of policy. If auto-enrolment policy was correct to assume that individuals need to be guided, helped and encouraged into better pension decisions, why do we no longer think that is the case at retirement? That is absent from the Government’s pension policy. The Minister would have us believe that everything fits together neatly, but it does not in that regard.

[David Mowat (Warrington South) (Con)]

The shadow Minister’s point would be stronger if in the past when people purchased annuities that had been done with the correct annuities and financial advice being given. We know, however, that 80% of people were buying the wrong annuities. At least in the model now coming in, there will be some compulsory advice, which is a step forward from what existed previously.

[Gregg McClymont]

The hon. Gentleman is a doughty fighter for better pensions and I respect that, but I ask him to reflect on what he has just said. The annuities market was broken because people did not shop around. They found annuities confusing and complex, and they defaulted into the option offered by their insurance company. Why do we think that that behaviour will suddenly change in a system that continues to be predicated on individuals making a choice?

[Guy Opperman]

rose—

[Gregg McClymont]

I will give way to the hon. Gentleman in a moment. Let me make the point again in case it has been misunderstood by Government Members. The annuities market was broken because individuals did not exercise choice effectively. Why do the Government believe that individuals will now exercise choice effectively in a complicated marketplace? That is presumably why the Government put such emphasis on the guidance guarantee. They are right to do that because if this scheme is to work effectively, guidance must be of the highest quality. The hon. Member for Warrington South (David Mowat) mentioned advice, but this is not advice; it is guidance. There is a significant difference and the Government must reflect on that.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

rose—

[Gregg McClymont]

I will give way to the hon. Member for Hexham (Guy Opperman) and then to the Secretary of State.

[Guy Opperman]

I am grateful to the hon. Gentleman for allowing me to intervene before the Secretary of State, but he is dancing on the head of a pin because he has not indicated whether he approves or disapproves of this measure, which I take implies implicit approval. Does he agree with my constituent whom I met barely a month ago and who said:

“I am delighted with these reforms. It’s my money. I saved it. Why do I have to give it away in annuities and charges for low returns?”

[Gregg McClymont]

I will come back to the hon. Gentleman’s point after letting the Secretary of State come in.

[Mr Duncan Smith]

I have become a little confused about the Opposition’s position, so perhaps the hon. Gentleman could clear something up. I was listening carefully to what he said. There was confusion when the Budget announcement was made, but finally the shadow Secretary of State said the Opposition supported the proposal. From what the shadow Minister has said today, however, it sounds like they do not support it and now neither support nor oppose it. Will he clarify their position? Do they support the idea of people choosing what to do with their own money when they come to buy their annuity?

[Gregg McClymont]

Given that Labour in opposition led the way in calling for reform of the annuities market, we welcome greater flexibility. However, because the Government have not yet introduced legislation, we do not know what the guidance guarantee will amount to, so surely any sensible Opposition doing their job would probe the Government on these points. That seems to be our constitutional role.

The constituent of the hon. Member for Hexham (Guy Opperman) is right that the annuities market did not work. I am asking the hon. Gentleman, who unfairly accuses me of dancing on the head of a pin, and others to reflect on the following point: if the annuities market did not work because individuals did not exercise the open market choices they were offered, how can we expect these reforms to be more successful, if the guidance is not cast iron of the highest quality and as expansive as possible? He looks puzzled, but it is a straightforward point, and it goes to the heart of the tension in the Government’s pensions policy. The building up of pension pots is based on a default opt-in, with choice exercised only if an individual chooses to opt out of the pension scheme the Government have put them in; yet it is suddenly suggested that, on retirement, individuals alone can get best value for money in what is a complex market known for mis-selling.

[Several hon. Members]

rose—

[Gregg McClymont]

I will make a little more progress and then let in hon. Members from all parts of the Government Benches.

The Minister glosses over the tension in Government policy, suggesting that everything is coherent, but I strongly believe that that is not the case. He spent 15 minutes talking about things other than this pensions Bill, in which, more widely, the Government are attempting—we welcome the attempt, not least because we have been arguing for it—to pool and share risk long term across generations. In doing so, they are reflecting a developing political consensus around the importance of sharing risk as widely as possible in the pension sphere. The corollary is that the bigger the pension scheme—appropriately governed—the greater the returns to scheme members. Put simply, the bigger the pension scheme—appropriately governed to share risk as widely as possible—the larger the pensions for people in those schemes. I think that there is a developing consensus that that is a good thing, and in so far as it promotes collective defined contributions, the Bill is welcome.

[Steve Webb]

Will the hon. Gentleman clarify the evolution of the Opposition’s thinking? In government, six months before the last general election, the Labour DWP produced a report rejecting CDCs. When did they change their mind?

[Gregg McClymont]

I would like to take all the credit, of course— having not been in the previous Parliament—but in my opinion and that of the Opposition Front-Bench team, there is a very good case for encouraging collective provision. Politics involves evolution. I am kinder at times than the Minister, so I will not give him chapter and verse about how he has chased our tail on pensions policy, but whatever the origins of the policy, surely the point is to get the best possible outcomes.

The Minister alluded to other parts of the pension scheme in the Bill. Its provisions reflect the knock-on consequences of the flexibilities at retirement announced by the Government, evidenced by the fact that this is being shared between the Treasury and the DWP. It redefines the type of workplace schemes that can be set up so that a third form of scheme—neither DB nor individual DC—can be created. It also prevents the transfer out of most public service defined-benefits schemes, except to other DB schemes, which makes sense given the basis on which these Treasury-funded schemes proceed.

Currently, on the insolvency of an employer, the Pensions Regulator can employ an independent trustee from a register that it maintains. Conversely, when it uses its general powers of appointment to replace a trustee found not to be fit and proper, it does so using flexible procurement panels. The Government’s response allows the alignment of both procedures on the second, which seems to make sense. And of course the Bill will allow the Secretary of State to make payments into the Remploy pension scheme. These are all sensible policies supported by the Opposition.

The principal case for the Bill, however, as the Minister set out, is the recognition of the case for collective pension saving. There appears to be some appetite among the public for this kind of risk sharing. Research undertaken recently by the Institute for Public Policy Research suggested as much when it found that collective pensions were the most popular option across different income levels, life stages and ages. That makes sense given that pensions are a form of collective insurance against poverty and indignity in old age. On that basis, the debate that the Bill generates is welcome.

The Minister described how the pensions landscape had changed. DB is no longer as popular as it once was; employers do not want to take on the risks of defined-benefits schemes; and increasingly we live in a world of individual defined contribution, where the risk is entirely on the individual saver and depends on the performance of the stock market. As he suggested, finding a way to share risk is a good thing, but let me point out several aspects on which the Bill is silent—aspects that are central if collective pensions are to succeed.

The first aspect—as far as I am aware, the Minister was silent on this—is the awareness that cross-generational collective pensions can, in extreme circumstances, involve a reduction in pensions in payment. This is not something that the UK is culturally and historically attuned to. In a cross-generational collective pension fund, the smoothing of risk and reward between different generations can mean, in extreme circumstances, that the pensions being paid to pensioners are cut. That is something with which our politics is not familiar and an important point about defined-contribution collective pensions that has to be considered.

The second important point is that governance is even more important in collective pension schemes of this kind than it is in other forms of pension. Managing a rolling pension fund—one that brings together the savings of teenagers, pensioners and every generation in between and that demands that each cohort is treated equally—requires substantial technical expertise. The prize, if a fund is managed correctly, can be bigger pensions, but that demands governance of the highest quality, yet the Bill is silent on governance. The Minister mentioned it in the round, but he did not talk about the governance that he wishes to see or that, more importantly, the Bill puts in place for these pension schemes. And the Bill is silent despite the Government saying in their response to the consultation document, “Reshaping workplace pensions for future generations”:

“Collective schemes are complex and can be opaque… This necessitates strong standards of communication and governance. We intend collective schemes to be overseen by experienced fiduciaries acting on behalf of members, taking decisions at scheme level and removing the need for individuals to make difficult choices over fund allocations and retirement income products”—

not a philosophy the Government are adopting at the point of retirement via their Budget reforms. What has happened to their intention that governance be undertaken by experienced fiduciaries?

I am reminded of the fankle that the Government have got themselves into over the governance of individual defined-contribution pensions. I will not give chapter and verse now, because it would not be appropriate, but the independent governance committees that the Government intend to set up for individual defined-contribution pensions—the Minister referred to them—are neither independent, nor governance. They will be in the hands of the insurance company. The mistake that the Government appear to have made over individual defined-contribution pensions, they are now making with respect to collective defined-contribution pensions.

There is nothing in the Bill about the standards of governance that CDC pension schemes will have to meet. Everything is left to secondary legislation. I say to the Secretary of State and the Minister—who asked about the attitude of the Opposition—that so much of pensions legislation under this Government has been left to secondary legislation, making it difficult for the whole House accurately to understand the consequences and outcomes of any one pension Bill or policy.

As regards collective pensions and the second aspect of the Government’s silence—on governance—the Opposition believe that the Government should follow our lead and require the schemes to have trustees and to be based on a legal duty to prioritise the interests of savers above all others. Failure to require all schemes to have trustees—this is crucial—means that some collective DC schemes will be run by trustees and others by private firms seeking to maximise their short-term returns. That is surely not in the spirit of the collective pensions on which the Minister wishes to build. Given the complexity of managing collective, inter-generational, risk-sharing pension schemes, the highest level of governance is critical, and I urge the Government to say explicitly—either today or as the Bill goes forward—what the governance criteria and rules will be.

Beyond governance, a third crucial aspect of collective pensions remains unexamined by the Bill. The Government have left entirely to secondary legislation the question of what kind of collective pensions they wish to promote. The Minister suggests that collective DC is one sort of pension scheme, but it is not: there are different forms of collective defined contribution, so clarity about which form the Government wish to see would be useful for all parties as we examine the proposals.

Broadly, there are two kinds of collective pensions that the Government might wish to promote. One is a form of collective DC that sets a target income for each saver and a probability of the target income being met on retirement—a 95% probability, say, of that target being realised. This form of collective DC demands significant assets in reserve so as to make the probability realistic. Given the substantial assets that any scheme would need to materialise, that is what we might call a heavy form of collective DC pensions.

There is also, however, a lighter form of collective DC, which is more intra-generational than inter-generational—involving risk sharing among a particular cohort rather than between generations. That lighter form of DC collective pensions is also to be welcomed, as it would bring the advantage of scaling and pooling within a generation. Fundamentally, too—I am not sure the Minister mentioned this—the great advantage of collective pensions is that they avoid the real difficulty of having to make the decision on the spot on retirement for the rest of one’s retirement. That does not happen under either the heavier or lighter form of collective DC, as a form of draw-down applies. The pension fund never ends; it continues, so a form of draw-down is possible. As I said, an on-the-spot, once-in-a-lifetime decision about retirement income might apply under the Bill.

The Government have not stated which form of collective DC they wish to see materialise from the Bill. As with governance, the Bill is entirely silent on those points. Everything is left to secondary legislation once again, and I see a pattern when it comes to pensions legislation under this Government. They bring forward a Second Reading, take a Bill into Committee and then leave so much of the fundamental detail to subsequent secondary legislation. I am not sure that that is a sensible way to proceed if we want to make substantial and good legislation. Those are some of the issues on which I would like to gain further clarity from the Government.

The Minister spent some time talking about the budget reforms, and we have heard contributions and interventions from Front Benchers about them. The Government are silent on the issues of flexibility and the interaction with auto-enrolment pension saving. They claim that all those aspects fit together very well, but I have suggested that there is a fundamental difference in approach in the spheres of building up the pension pot, auto-enrolment and turning the pension pot into retirement income.

The three tests that the Opposition have set for these reforms are sensible. We must know first what the guidance guarantee amounts to—a fundamental point on which we still have no clarity. We expect perhaps an amendment or amendments to provide clarity on the guidance guarantee. We should remember that the Chancellor promised advice, not guidance, in his Budget statement. There is a fundamental difference between the two, and the Minister subsequently clarified that guidance rather than financial advice will be provided. We await with bated breath the details of the guidance guarantee. Without top-quality guidance, the potential for successful flexibilities will be much reduced.

Secondly, we need to know how the budget reforms will impact on the pension pots and retirement income of low and middle earners. That is important. One of the weaknesses of individual DC, from which the Minister is trying to move way, is that 10 years from any individual’s retirement, the pension fund has to move assets into low-yielding bonds to avoid any risks so close to the retirement age. There is less risk, but less return. The danger of the Government’s flexibility provisions on retirement is the interaction with pension fund asset management. It now becomes the norm that individuals will cash in their pension pot at 55, 56 or 57, which means that at the age of 45, 46 or 47 the pension fund will have to move into low-risk, low-yielding assets, reducing the pension pot when cashed in on retirement.

[Nigel Mills]

I understand the hon. Gentleman’s point, but is there not a reverse problem when someone wants to keep their pension savings pot until long after the normal retirement age, so they would not want to move over to low-risk returns at 55 but leave it until 65 or later? The position is more complex than the hon. Gentleman suggests.

[Gregg McClymont]

I am rarely accused of making pensions less complex, so I shall take the hon. Gentleman’s comment as a compliment. I take his point, however; there are lots of unanswered questions about how income draw-down will work. The potential impact of the reforms on the asset management of individuals’ pension pots is crucial.

Thirdly, the interaction of the budget reforms with social care, for example, is an important issue. How do the Government view the position on the ability of local authorities, for example, to say that a pension pot is a realisable asset that can be brought inside the capital disregard for social care and other benefits? That is a significant question to which we still have no answers. The Opposition have lots of opinions, as the Minister says, but if the Government take so long to explain how any of their policies will work, it is no wonder that we spend a lot of time asking questions.

I have highlighted important issues and pointed to substantial unanswered questions about governance, about how the reforms will interact with the budget flexibilities and, more widely, about how a Government committed to automatic enrolment of individuals into pension saving can be equally committed to an individually focused policy for turning pension pots into retirement income.

Let me make some final observations. The Minister did not mention the National Employment Savings Trust and that is no surprise, because he has promised that the restrictions on NEST will be lifted, but since July 2013 we have heard nothing on when they will disappear. That is important because, if we are thinking about collective defined-contribution pensions, NEST is a trusted pension provider backed by the Government that could offer such pensions. In doing so, just as it has in the auto-enrolment sphere, it could constrain the pensions industry and drive up standards and quality, so that the products that the Minister, I and everyone would like to see delivered are delivered by the industry. Therefore, the restrictions on NEST are a problem. The Minister has indicated that he will lift them. Can we have some clarity on when they will be lifted, especially since they pertain to the Bill’s objectives?

More narrowly, technical drafting may prevent someone from transferring their pension pot to a CDC scheme unless they were an “earner” and their current employer was an employer in relation to the CDC scheme. I know it is a technical issue, but there would appear to be no good reason why a workplace CDC scheme should not be able to take in pots from any source if the person willing to transfer in thinks that they receive a good valuation for their contribution. For longevity risk, investment risk and lower costs reasons, an individual may prefer a steady income from CDC instead of draw-down or annuity.

More widely, the Bill contains no measures that will help to promote the scale which most independent observers believe is necessary for CDC pensions, and workplace pensions in general, to be as efficient as possible. The Opposition have long argued for measures to promote scale and we would like to see such measures in the Bill. The House of Commons briefing note on the Bill states on page 1:

“certain conditions such as large scale and strong governance, appear necessary for it”—

that is, CDC—

“to operate successfully.”

The Bill promises, offers and evidences neither. The Government have work to do to make the Bill as substantial as it should be in contributing to the developing consensus that collective-scale pensions are better. We welcome the Government’s approach while reserving our right as the Opposition to continue to press them, even when the Front-Bench team do not like it, on the lack of detail therein.

15:12

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

I paraphrase the Minister when I say that it is probably fair to say that like holy matrimony pensions reform is probably best entered into—or not entered into—advisedly, soberly and discreetly. For good reason the final year of a Parliament is often not the best time to embark on radical reform in the sector. It simply becomes all too easy for political adversaries wilfully to misrepresent some far-reaching proposals. Yet there is no disguising that the notion of pensioners being able to unlock their life savings during an uncertain retirement is a revolutionary change, and one I support.

As deficit reduction remains more straightforward to explain than achieve, these pension reforms also allow for some considerable fiscal loosening. Once implemented the proposals will release a vast dollop of cash for those over the age of 55 to pump into the economy, rather than being forced to buy an annuity at a woefully uncompetitive rate. Make no mistake—this is not an unintended consequence of the proposals. The Red Book to last spring’s Budget made it clear that the reforms anticipate a boost to aggregate pensioners’ spending to the tune of £320 million in 2015-16, rising to over £1 billion in 2018-19.

[Guy Opperman]

Is it not fundamental that, given the failures of annuities, the Government provide extra flexibility? Fundamentally, they are doing one thing: trusting people with their own money.

[Mark Field]

I confess that I wholeheartedly support the Treasury’s belief in the principle of freedom to which my hon. Friend refers. It is right that we as Conservatives trust those who have worked hard and saved throughout their adult life to make their own decisions on their savings. Nevertheless, we must accept that the generous tax relief that attaches to private pension savings has always been predicated on the basis that, by providing for their old age, pension savers will not be a drain on the state. It will become ever more difficult to justify reliefs at the generous levels we have all been used to over the past few decades if the compulsion that goes with annuities or restrictions on access to savings is consigned to history.

I am also pleased that the coalition has consulted a little more widely on these plans, albeit somewhat belatedly. One hopes that some technical issues will be ironed out, but I wanted at this stage to make some more general observations. The Government have been commendably vigorous in reforming the pensions system since 2010. As the Minister pointed out, we are already on the third pensions Bill and he already has another in his sights. Eligibility for a state pension will only kick in at a later age. That has to be the right move forward. The earnings-related element of the pension has been abolished. We now have a system of automatic enrolment for employees. Many of these reforms have been undertaken for one simple reason: we could not go on as we had. Our understanding of retirement has changed beyond all recognition and comprehension since the state pension was introduced in 1909. Life expectancy then was lower, so there was no point in continuing the pretence that the state could adequately sustain decent incomes for generations that will now live for 20 or 30 years after retirement.

If the emphasis is now firmly on self-reliance and the ever greater involvement of private providers, the most crucial ingredient will be trust. If the law is essentially to compel citizens via auto-enrolment to hand over an unspent surplus of their hard-earned cash to what they may regard as the unqualified or incompetent, there is little incentive for anyone to save. Central to addressing all this must be a pensions industry in which there is universal public confidence and which willingly recognises a collective responsibility. As we know, we are a hell of a long way from that point. The regulator, encouraged by the Government, now needs urgently to engender a culture among the major institutions in the sector akin to that prevailing among the leading banks during the 1970s.

[Ian Swales (Redcar) (LD)]

Does the hon. Gentleman share my concern that the move to individualism will potentially shoot away the concept behind annuities, which effectively provide group insurance for life expectancy? Therefore, is he concerned about annuities having a bad name? Will the industry get its act together to provide the right kind of insurance products to substitute for annuities?

[Mark Field]

I do share some of those concerns. I agreed to a certain extent with the Opposition spokesman’s points about the tension that exists. There is a tension, perhaps an understandable tension, between the drive towards individualism, which as a Conservative I support, and elements of the collective nature of pensions that have hitherto been in place.

Unfortunately it is clear that confidence in the pensions industry has not recovered after the debacle of Equitable Life, with investment in a residential property seen as the more reliable bet to all too many of those planning their retirement. That applies to virtually everyone of my generation and I suspect to many younger voters, too.

If we are to reduce reliance on the state, we might also reflect on the sobering fact that, earlier this year, the Financial Conduct Authority found the average pension pot to be a mere £17,700. For all the promotion of pensions, no amount of legislation will overcome the fact that far too many of our fellow countrymen are too poor to save adequately for their retirement. I fear that will only become truer for younger generations who find an ever-increasing portion of salary dedicated to servicing high rents or mortgages based on inflated house prices.

I should like to touch on coherence across Government pensions policy, which was referred to earlier by the Opposition. On the one hand, the Government are trying to create a new regime which places much greater trust in the individual to manage their own retirement funds, yet on the other their new system of automatic enrolment for employees suggests they have limited faith—let us put it that way—that people will take sufficient responsibility for saving in the years preceding their retirement. Similarly, while there is an implicit understanding that the state will no longer be able to provide citizens with adequate incomes in retirement, the Government have made a costly commitment to the so-called “triple lock” which guarantees that the state pension will increase in line with wages, prices or 2.5%, whichever happens in any one year to be highest.

In short, the messages to the electorate on pensions remain mixed to the point of confusion. I am not being critical of the Government in this regard, because this is a very complicated area and there are those almost inherent tensions in the pensions system which have been referred to earlier, but it would be helpful if the Minister restated in his winding-up speech the basic principles that underpin Government thinking in this vital area.

As I have suggested, as a Conservative I instinctively welcome the notion that people who have saved and planned their finances carefully should be free to spend their retirement funds as they see fit. It is exciting to see the Treasury and the DWP inject the principles of trust and self-responsibility back into the heart of Government policy. Nevertheless, it would also be wise for the Government to examine whether such policies alleviate or potentially increase the burden on the state.

In this regard, I ask the Minister what examination he has conducted into the system in Australia. Some 20 years ago, the Government there made similar decisions to those now being made here on annuities. However, I understand that the Australian Government are now considering reversing that decision after their Murray review, examining their financial system, found that roughly half of those retiring take money out as a lump sum with a quarter of that group exhausting their funds by the age of 70. In addition, many had got themselves into debt in the years preceding retirement in anticipation of using the lump sum on retirement to pay off those accumulated debts, rather than using it for living expenses in retirement. What safeguards do we have in place to avoid such an undesirable outcome?

Turning to guidance, I have received constituency representations from an industry specialist who is concerned that the new pensions “guidance guarantee” has the potential to create widespread confusion among consumers and damage to regulated financial advisers. The Treasury has announced that under the new regime everyone will be provided with free guidance from bodies such as the Pensions Advisory Service and the Money Advice Service. The cost of this will apparently be borne by a levy on regulated firms. Not only will the new levy add cost to the operations of independent financial advisers, but they will essentially be funding a service that stands to undermine their own offering since many customers will now take the view that it is not worth paying for that independent advice. This in itself is not a problem for the consumer. However, financial advisers currently already operate in a very strict regulatory environment, whereas the guidance guarantee will set out generic options, such as whether an individual should consider an annuity or income drawdown, rather than specific recommendations. There is a danger, therefore, that many pensioners will see broad guidance as an inexpensive substitute for tailored, quality advice. My correspondent therefore recommends either that the Government’s delivery partners remove any suggestion that they will be providing advice rather than simply general guidance, or else that policy is delivered through regulated, private sector firms, perhaps through a voucher system, which would offer consumers the kind of helpful, impartial and personalised advice that they need.

Finally, I should like to say a few words on unintended consequences. It has been clear for some time that the annuity system was not designed to fund the kind of long retirements we have seen as a result of improved life expectancies. However, there are implications for the health of the wider economy if we turn our backs on annuities in ever greater numbers. The vast majority of annuity money is invested in bonds, a crucial source of alternative finance for businesses beyond the traditional banking system. This helps spread risk in the system by ensuring that problems in the banking system, such as those we saw emerge in 2008, do not completely turn off the tap of finance to the wider economy. Currently, those saving in defined-contribution pension schemes buy approximately £11 billion of annuities per annum, with around £7 billion flowing to firms through corporate bond purchases as a result. What consideration has the Minister given to a collapse in such purchases should there be a sudden drop in the sale of annuities, which might well happen as a result of these changes? While I expect this will be offset in part by a fresh flow of money from those pensioners who decide to reinvest their lump sums, this cannot be guaranteed and, as I have suggested, my fear is that, without sufficient trust in the markets, property and the rental income received from it will prove a very attractive destination for this cash. An unbalancing of the property market as a result would not be a desirable outcome of these changes.

While I should appreciate the Minister’s response to all the issues I have raised today, I would like to finish my contribution by reiterating my admiration for the boldness of the coalition in trying to tackle a pensions system that clearly is not functioning well for the majority of our fellow Britons.

15:25

[Dame Anne Begg (Aberdeen South) (Lab)]

It is a pleasure to follow the hon. Member for Cities of London and Westminster (Mark Field). A number of the companies that would be affected by these reforms are in his constituency.

One of the issues around pensions is complexity. The coalition Government, following on from what Labour had started with the Turner consensus, were beginning to simplify things and make them more understandable and to make pensions something that younger people talked about, as well as people who had already reached pension age and therefore had a direct interest in the money they were receiving each week or month. However, my concern about the more recent proposed changes both in the Budget proposals and this Bill is that they are adding more complexity back into the system and making it even more confusing for consumers. While it may on the surface be a great thing that there is going to be pension liberalisation and that people will not automatically have to buy an annuity, there are also certain risks in that.

The hon. Member for Cities of London and Westminster mentioned some of the concerns, as did the shadow Minister. If people found pensions too confusing and did not always know with surety that they were buying the best product, how will making even more products available and taking away some of the constraints on what they can choose make things easier for them? There are fairly major dangers of mis-selling and of products being offered that are not fit for purpose unless the governance is right and the regulation is correct. That is a very real fear, and I certainly have that fear about the changes that would allow people to access their pension pot more easily at an earlier age without putting any constraints on how it might be invested. The hon. Gentleman made the point that, in building up that pot, most have enjoyed tax relief on their subscriptions, and the understanding was that that tax relief was to encourage them to make sure they had retirement savings. However, if they turn their retirement savings into just savings, why would those savings get an extra allowance in the form of tax relief? Future Governments might be tempted to look at that whole area of tax relief.

The Minister said that we had a binary model at the moment, and he is absolutely right. We have either defined-contributions schemes or defined-benefits schemes. The Bill will introduce an extra layer. If we ask people whether they would like to share the risk, they will say yes. Even companies might think it a good idea, but it is open to question whether companies will take advantage of the provisions in the Bill to set up a defined-ambition scheme. The Minister said that there was an appetite for this kind of reform, but I am not so sure that people are clamouring at his door—or at anyone else’s—saying that they are desperate to have collective, defined-contribution schemes. I concede that, from a consumer point of view, the members might want such schemes, but it will be the employers, not the members, who will be setting up the pension funds and schemes.

The Minister admitted earlier that it was unlikely that those affected by the legislation would be small and medium-sized enterprises, and that it was more likely to affect bigger companies. We know, however, from the roll-out of auto-enrolment that most of the bigger companies are already enrolled in the auto-enrolment scheme, and that the SMEs have still to enrol. They are the ones that have more choice, because they are having to set up the scheme from scratch. Perhaps this legislation has come a bit too late for the people who wanted to take advantage of this offer. I am still puzzled as to who the Minister envisages taking advantage of it. Perhaps he will tell us when he winds up the debate.

I am still not 100% sure how all this will fit in with auto-enrolment. I am still unclear as to how it will work in practice. I also do not understand how, in a scheme with collective risk, we can work out what people would get if they wanted to take their pension pot with them under the liberalisation arrangements. I am not clear how the two would fit together, although I have raised these matters with the Minister in the past.

There is an inherent tension between the different parts of the pensions system, and it has been introduced by the Government, even though they were on the right track and things were going quite well. The Minister was quite dismissive when I suggested he pay tribute to the last Government for accepting the Turner recommendations and for legislating for auto-enrolment. He suggested that that had not been good enough and that his Government had done all sorts of other things, but what we did was part of the process. He said that there had been no reform of the state pension, even though that had been part of the Turner proposals that the last Government were introducing, but who can say what another Labour Government might have done?

Other matters that the Minister mentioned had been recommended by the Select Committee. I would love to take credit for those recommendations on behalf of the Committee, and I would like to think that they have had some influence on the Minister, particularly with regard to protecting consumers from high costs and charges. I hope that any other Government would have made a similarly sensible decision, so let us not suggest that only the coalition could possibly have introduced such measures, given that they did not fit in with the consensus that had been built up. So far, so good: things were getting simpler and easier to understand, but the proposals in the Budget threw everything up into the air again.

It was interesting to hear what the Minister said about the need for a single regulator. The Select Committee has made that proposal on a number of occasions. The Minister’s admission that he is coming round to that view, and that he had not wanted to introduce the proposal because the Government had only just set up the Financial Conduct Authority, suggests that the last reform of the regulator was perhaps a bit botched. As a result, we cannot get what we need—namely, a separate regulator. There is absolutely no doubt that if we go ahead with defined-ambition schemes and collective defined-contributions schemes, it will be imperative that people know who is regulating which bits of their pension. This is an incredibly complex area, but it is important for people to know who they can complain to.

Governance will be an important matter, and I, too, was dismayed to discover that there were no details of it in the Bill. My hon. Friend the shadow Minister said that those details would be introduced through secondary legislation. Governance is important in all pension schemes, but it is even more important in this instance. The fact that there are no details for Parliament to scrutinise is particularly worrying.

Another matter that I find particularly worrying is the absence from the Bill of information on the guidance guarantee. I had expected such details to be in the Bill by now but they are not, which worries me even more because the Government are obviously still working them out. My concern is about this coming later in amendments. We are already on Second Reading and I worry whether it will be worked out properly by the time the Bill goes into Committee for proper scrutiny. I wonder what the difficulties are—I suspect there are a lot, as a result.

As a result of all that, the Bill is vague, in an area that does not need to be or should not be vague—it is too important for that. Although the principle of defined ambition or collective defined contribution schemes is a good one, and I think we would all welcome the sharing of risk, it is hard to see who is going to be supplying these products and who will sign up to them, because at the moment it is much easier for people to understand the binary model, of which the Minister was critical.

I received a communication from the Law Society of Scotland, which has some concerns and questions about the Bill. I wonder whether I might mention them now, so that by the time the Minister sums up he might have some replies. I do not know how difficult the questions are but I will go through them, as the LSS has obviously sought clarification on certain points. Is it the intention that shared-risk schemes will cover existing schemes or only new ones? That should be an easy enough question for the Minister to answer. The definition of a pensions promise in the context of shared-risk schemes refers to factors “other than longevity”, so does that mean that these promises with an element of longevity are exempt, or does the promise have to be entirely based on longevity? Guaranteed annuity options or rates are based on longevity but also on factors such as long-term gilt yields. Is it the intention that the annuity quotes are included under the definition of a pensions promise? The definition of shared-risk schemes talks about promises made

“at a time before the benefit comes into payment”.

Does “come into payment” mean when an annuity is set up or when the first payment is made? Would third party promises include an arrangement whereby the insurer, as opposed to the scheme, made the promise? If the LSS is asking those questions, I suspect they may be ones that others also want answered.

Most of the briefings we received from various organisations and companies were generally supportive of the principle of defined ambition, but we all accepted and agreed on the principle of universal credit, and look where that has got us. The Government should not necessarily say, “Oh well, everybody supports it in principle, so everything is all right.” It is part of the role of a Select Committee to look at this. I know the Minister will be appearing before us at some point—perhaps he does not know this yet—certainly before November, to talk about the progress on auto-enrolment. One key thing for both the Government and the Select Committee is the success of auto-enrolment; it has to succeed simply because it is too big and too important for it not to do so. At that time I hope he will be able to answer some of the questions I have raised about the interplay between auto-enrolment, defined ambition and the changes introduced by the Treasury on pensions liberalisation, as well as the other questions we will have. I look forward to the Minister’s appearance before us in due course.

15:38

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate and welcome the many positive measures in the Bill, which will substantially improve the pensions landscape in the UK—not before time, perhaps. I wish to touch on the two main areas that the debate is focused on: the introduction of the defined-ambition or shared-risk scheme, and the move to get flexibility at retirement age and the guidance that that involves.

We should pay tribute to the Minister for the fact that we have defined ambition in a piece of legislation; it has been almost a one-man dream for most of this Parliament, and perhaps we all thought it would not quite make it, but here it is in the Bill. If I appear generous in my praise for my coalition colleague, let me say that it was a brave thing for any politician to try to define a promise. We have all struggled with this: when is a promise not a promise? We know now that a promise is not a promise when it is an ambition. I think we were tortuously trying to work out in this Bill how to say what constitutes a complete pension promise and where something is not quite a promise but an aspiration, a hint, a suggestion or something more than a hope. I think that the Bill’s definition just about gets there, but I am not totally sure, without trying to work it through in various scenarios, that I can work out when a full pensions promise perhaps becomes a partial promise. That goes to the nub of the matter.

When we try to get into the detail of how we regulate these things and move them forward, we find how much of a promise or how much certainty or expectation can be created to allow one of these schemes to become a shared-risk scheme rather than a defined-benefits scheme or something that is no more meaningful than an existing defined-contributions scheme. Working out exactly what a good employer who is trying to be generous and helpful to their staff can say without falling foul of some of these rules will be hard. I assume that what we are trying to do is to say that under a defined-benefits scheme, if a person finishes their role on £30,000 a year, they will get a £20,000 a year pension. That is clearly a defined benefit. I suspect that what we are trying to say under defined ambition is that if a person finishes their role on £30,000 a year, and investment returns and longevity are just about what we expect, we think that we will be able to give them £20,000 a year. But if those assumptions are a bit out, we might have to put in a bit more money ourselves and they will get £18,000 rather £20,000. I suspect that that is the sort of promise we are trying to achieve with a shared-risk scheme.

It is not clear exactly how we can set the parameters. For example, when can £20,000 become £10,000? If there is a higher investment return, contributions can be reduced and we may still think that we can get £20,000. I think that we will just end up dropping back into regulatory uncertainty and all the issues that we have had on defined-benefits schemes. A lot of work needs to be done to get these schemes out in the market. We need to understand exactly how much risk the employer is running and how much certainty the individual gets; otherwise we are left with the difficult situation the Minister alluded to, where one side thinks it is an actual promise and the other side thinks it is a kind of hope. It probably means that whoever regulates these new shared-risk schemes will have an incredibly important role. In some ways, it will be even more difficult for trustees to administer defined-benefits schemes. I sense we will need a very competent and focused regulator looking at these things.

As I said in my intervention, it is a little difficult to see where the line will be drawn between defined benefit and defined ambition and between defined ambition, defined contributions plus and pure defined contributions. I suspect that before these things get into full speed, we will need one regulator doing all those things. If a scheme makes a bit of a promise and then withdraws it, does it drop out from being a defined ambition and become something else?

[Ian Swales]

My hon. Friend raises some excellent points. He does not specifically mention governance, which could make the thing slightly more complex because there is a third leg to the stool between the employer and employee. The explanatory notes talk about comparisons with schemes in other countries and use the expression “when governed appropriately” when talking about what schemes can provide. Has he any comments about the governance situation?

[Nigel Mills]

Yes. I have not been totally clear. I was alluding to the fact that these schemes will be even harder for trustees. I meant the trustees who try to govern these schemes. If we have a scheme that is giving a clear promise, we can create a set of assumptions. We will know how much funding we will need on top of our investment returns and longevity predictions. We will at least have some fixed parameters, so we can then define the contributions. If we even vary what we are promising to pay, we would have to take a really educated decision and say, “Shall we vary the promise down from £20,000 to £18,000, put up the contributions or a bit of both? Will it all be all right again in five years?” That will become quite difficult for trustees, and we will then really need the regulator to be able to check that trustees are capable and competent at dealing with shifting sands in these calculations.

[Steve Webb]

I did not respond properly to the hon. Gentleman when he intervened on me on this matter. Broadly speaking, it would not change which regulator was involved if there was or was not a bit of a promise. The Pensions Regulator deals with occupational workplace defined-benefits and defined-contributions pensions. The Financial Conduct Authority deals with group personal pensions and similar. Essentially, that is the division rather than whether there is or is not a promise.

[Nigel Mills]

That is a helpful clarification, but we have still had the bizarre situation in which the Pensions Regulator is responsible for auto-enrolment even though most of the schemes into which people are enrolled are not regulated by the Pensions Regulator. I sense that we are introducing further uncertainty into what schemes there are and people need to understand exactly what is going on.

Trying to create a new form of pension that can try to stop the bleed away from defined benefits is the right direction in which to travel. If we are to have a credible pensions industry, we need to ensure that people can have certainty or at least confidence that if they keep paying into their pension funds with their employers at the rate that they are they will have some idea what they will get rather than a vague hope that they might at some point get something suitable. That is the thing that does most discredit to the pensions industry. People end up getting so much less than they thought they would, despite what they thought they were paying and would be entitled to, that they decide the whole thing is not worth doing at all.

That question takes us to a fundamental part of pensions policy. We are spending a lot of taxpayers’ money on tax relief for pensions and if we end up with just a glorified savings vehicle with no direct link to pensions, we must wonder whether we will be distorting the investment market quite horribly. We need a clear and confident link, so that people know that the money they are putting away is meant to get a retirement income that they are happy with and is not just a super-glorified pre-tax income ISA, which I fear we might be drifting towards.

The Work and Pensions Committee considered the principle of collective schemes briefly in our inquiry on a pension governance a couple of years ago. The idea that we can somehow share risk between the generations, smoothing things out so that if there is a market crash just before someone expects to retire they do not suddenly have their pension income destroyed in a way that they cannot possibly recover from—clearly, that can be smoothed out by reducing the risk profile of investments, as is done now—looks to be a perfectly sensible and attractive way forward. I am a little intrigued about how we can go from having none of those schemes to having them in place, having enough people in them and having enough confidence that people will continue to join them to ensure that the intergenerational thing can work. Some European countries have had such schemes for 60 years and we can see how they work, but the question is how we go from zero to having three generations of people without the first lot thinking that they are taking all the risk for no advantage, although perhaps if their grandchildren join it might all be okay. I am sure that the industry will work out how to devise schemes in a way that will get people involved.

Let me turn to greater flexibility in the pension world. I can see that if we say that we do not think people are sufficiently engaged with pensions to join a scheme we must ask how we can be confident that they are sufficiently engaged to make even more difficult choices when they retire about what they want to do. There is a big difference. I might not be too bothered about pensions when I am 30, as I might have more pressing things to think about such as buying a house, paying for my children or sorting out other stuff, but perhaps when I am closer to retirement age and thinking about what my income will be in six months’ time, a year’s time or perhaps even a little further away, I will probably be much more engaged in the best choices for me and will perhaps be more inclined to go out and look at the various options.

One issue that we have had until this point has been that the option has been to have some kind of annuity that is lower than I would like. If I try to shop around, I find differing levels of things I do not like. That is not a great motivation to go shopping. If I know that I am not going to want to buy any of the things I am offered but I have to, I might as well just default to the first thing I get. There does not seem to be any advantage to shopping around.

[Dame Anne Begg]

Does the hon. Gentleman agree that often when there is too much choice people are paralysed and end up grabbing at the first thing that comes along rather than the thing which is best?

[Nigel Mills]

Yes. Some data suggest that the optimum number of choices is four. If there are 20 choices in a mobile phone shop, people walk out without buying one. If there are not enough, they do not ever have a phone. We need enough choice to see a difference, but not so much that we are completely baffled by our options.

I think that we are hoping that the market will innovate certain things that will mean it will not be a choice of annuity into which we will opt for life that will give the same amount for the rest of our lives or some kind of draw-down in which we keep spending our pots and hoping that they will last. I suspect that we will end up with people taking some kind of fixed guaranteed income, so that no matter how long they live they will have the quality of life that they want, but they might be able to choose to use some of the rest of their money to fund travelling in early retirement, paying off the mortgage or doing something for their children or grandchildren. Perhaps we could have an annuity that varies, which is higher at the start, dips and then goes up at the end when people need care fees.

I think that we are hoping that most people with a small or medium pension pot will not be faced with a blizzard of hugely complicated financial products, but that there will be options that they can match to their personal choice for their retirement. That is where high-level guidance is important.

People need to understand that there are different things out there for them to look at. I suggest that they do not just immediately accept the annuity offer that their pension provider makes. They should at least think about what would suit their lifestyle, what their existing financial position is and what they and their spouse want to do. That is where guidance is very important. It is very different from financial advice, which might be, “Take out this annuity with this provider, on these terms.” I suspect there is no way to get such specific guidance, and we should never want such specific guidance. That would be a horribly expensive programme, which would only be appropriate for a relatively small band of people.

Those who retire with huge pension pots should already be taking such advice and can afford to pay for it. Those with small and medium pots will not have that advice and, I suspect, in many cases will not need to spend thousands of pounds getting advice; it would not be a worthwhile use of their money. It is people in the band in the middle who perhaps could really benefit from expensive financial advice. How we get that guidance to work, and when people receive that guidance, is very important.

I think that we shall see a move away from retirement at one’s 66th birthday, or another fixed date. People may gradually step down to working four, then three days a week. They will have small amounts of income coming in from different sources. Lifestyles will vary, and they will start varying, perhaps, in people’s mid-50s. Some people will work full time right into their 70s. Possibly, they will not want advice at the age of 65 and a half or 66; they will need to think, “Do I want my pension fund to start de-risking my investments now, at age 55, or would I rather they did that for part of my pension fund, so that I know that I will get something when I am 66 but I will keep some higher-risk investments to get a higher yield for a few more years?” When we make that guidance available, and when people can choose to receive it, will be a key aspect; otherwise, people will end up in a default fund that does not suit what they plan to do with their own hard-saved income.

It is clear that the change is a very positive step in the right direction. If people are responsible enough to save for their retirement, I cannot see them frittering the money away on the proverbial Lamborghini when they hit 66. This flexibility will give people the chance to have the retirement that they want without being ripped off by the annuity market.

Some of us had wrestled with the question of how we could fix the broken annuity market. I had come up with the suggestion of splitting the pension fund industry and the annuity market, which did not meet with much approval in the industry. But what the Government have done is far more radical. An annuity may be the right thing for many, many people; but for many, it will not. Now there will be no compulsion or expectation for people to take out an annuity when they hit retirement age. That has to be the right answer, and I fully welcome the Bill.

15:53

[Mr Peter Hain (Neath) (Lab)]

In noting the interesting points that the hon. Member for Amber Valley (Nigel Mills) raised, I particularly commend his colleague, the hon. Member for Cities of London and Westminster (Mark Field), for drawing to the attention of the House the fact that the average pension pot is just £17,700. That is a miserably small amount, and underlines the dire predicament that far too many pensioners face, and which the Bill does nothing significant to address.

The hon. Member for Amber Valley makes interesting points, and some valid points, about lifestyle changes as people get older, but they apply in the main to professionals and middle-class people. For a lot of working-class people who have worked in manual, low-paid service jobs for most of their lives, those choices do not exist in the same kind of way; I caution the hon. Gentleman about that.

I commend my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) for his expertise and very authoritative critique of the Bill, which I guess he will follow through in Committee.

The Government are introducing in this Bill the biggest reform to pension tax rules in nearly a century. Of course citizens, especially those with small pension pots, welcome the choice to take lump sums that may be more beneficial to them—by, for example, enabling them to pay off a mortgage or loan, or fund social care support—rather than eking out a living on what, for far too many, will be very small monthly payments. The kind of annuities that most people have are not inflation-indexed, so their value erodes every year. Most neither cover a partner nor offer protection against illness or infirmity. Most do not allow people to leave a legacy if they die young; nor do they let them benefit from good future investment returns or rising interest rates. For all those reasons, there has been widespread public frustration about the inflexibility of annuities, especially in the past few years of low interest rates and because, as people live longer, a retirement can be as long as 20 or 30 years. To buy an annuity 30 years ahead when savings could continue to accrue as investments makes less sense than previously.

So far, so good, as far as the Bill is concerned, but there are massive dangers as a result of destroying good annuities, which has been going on for a few decades and is bequeathing a real nightmare that the Government’s policies are nowhere near capable of addressing, let alone preventing. A rapidly ageing population is dumping a huge additional burden on the young, many of whom are leaving university with already massive debts thanks to the Government’s dysfunctional policies. Now they will be saddled with subsidising through their future taxes older people who are being encouraged to live for today, not to protect themselves for tomorrow. My right hon. Friend the shadow Chancellor was right to voice fears in March that widening choice away from annuities could mean individuals spending all their savings within a few years of retirement and then becoming dependent on the welfare state, at a significant cost to taxpayers. There is a serious prospect that pensioners who cash in their lump sums could be plunged into poverty, leaving future taxpayers to grapple with the consequences.

It is therefore incredibly important that pension reform is not carried out in isolation, although the Bill risks doing that, because it is one of many ways, albeit not the only one, in which we can give peace of mind to people planning for or approaching retirement. It is imperative that reform happens in the context of a comprehensive policy for retirement and ageing in the UK, especially with regard to health and social care for the elderly, on which my right hon. Friend the shadow Health Secretary has rightly insisted that we need whole-person care in what amounts to a national care service to complement the national health service. Mainly because of their obsession with cutting public spending, the Government continue to fail abysmally to face up to this huge challenge and duck the reality that there will have to be much more significant public support to deal with this urgent social need. They continue to pass the buck to future Governments and taxpayers, and to ensure that there is a future in which infirm and frail elderly citizens and their families see their savings and inheritances disappear as they are engulfed by horrendous care costs.

Our changing demographic profile means that baby boomers—people such as me who were born between 1945 and 1965—will form the big bulge in the active ageing category. That change presents immense problems, not least in preparing for the future. Ironically, as our society gets older, pensions should increasingly become a young person’s issue, because the ratio of workers to pensioners has started to tip towards crisis levels. In the next 50 years or so, the number of people over pension age will increase by more than half, and there will be only two people working for every one person in retirement, compared with four working people for every retired person today. A hundred years ago, there were 10 working people for every one person in retirement.

I remember only too well having to confront that serious situation when I was appointed Secretary of State for Work and Pensions in 2007. The cost implications for future generations of such increasing longevity are deeply alarming. People are expected to be active for longer in retirement and need the resources to fund that. I welcomed the Government’s delivery, through the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2013, of measures that I introduced through the Pensions Act 2008, but I see no sign at all that they have any intention of taking the necessary decisive action to ensure that most people get decent pensions, whether private or public. They are certainly not doing that through the Bill. The decline in private sector occupational pension provision since the late 1960s is serious and, in the face of increasing costs, employers have been abandoning their defined-benefits—that is, final-salary—schemes, whose active membership numbers have fallen from 8 million in 1967, to 5 million in the 1980s and 1990s, to fewer than 3.5 million today.

There is a chronic problem of under-saving, with perhaps as many as 7 million people not saving enough to fulfil their aspirations in retirement, and some low earners not saving at all. The Bill does not tackle the problem, meaning a chasm will grow between the income that they need and what they actually receive in retirement. There are many reasons for people not saving. Many on low incomes or with broken working patterns do not have access to a workplace scheme. Some will be put off by the complexity of pensions while others will simply live for today. Others will lack confidence in pensions. The Bill does nothing to address that.

Of those of working age, around three quarters say that they will need more than the state pension to live on, yet only around 40% of those who have not yet retired are saving into a private pension; 60% are not. We must get to the point at which saving becomes the norm and a savings culture is embedded in society in general and in the young in particular. In that respect I welcome the Government’s decision to raise the level for tax-free ISAs and premium bonds, but such initiatives deal only with the tip of an iceberg; the Bill does absolutely nothing to deal with it.

Sixteen per cent—one in six—of 20 to 24-year-olds are saving for a pension, compared with about half of those aged over 35. Less than half of moderate to low earners with incomes from £5,000 to £35,000 are saving towards a pension, compared with three quarters of those earning more than £35,000. The requirement for automatic enrolment into a qualifying pension scheme introduces for the first time a bias towards saving, which is welcome. Evidence suggests that automatic enrolment is one of the most effective ways to combat people’s tendency not to act when faced with difficult financial decisions. It also has the greatest impact among groups where participation rates are the lowest. On the other hand, nobody should pretend that most such schemes will deliver the kind of living standards in retirement that people today expect. Most will not—and the Bill does not.

The plight of those who lost their pensions because of the collapse of their occupational pension schemes was both a national scandal and a personal tragedy for all the individuals concerned. Through the Pension Protection Fund, the previous Labour Government legislated to ensure that such a scandal could not be repeated in future: it safeguards more than 10 million people in eligible defined-benefits occupational pension schemes throughout the UK. We also established a more powerful Pensions Regulator. I was able to deliver late in 2007, through the financial assistance scheme, a fair and just settlement for 140,000 people who were robbed of their occupational pensions as a result of employer insolvency before the Pension Protection Fund was created. All those affected received 80% of their expected core pension.

When Labour came to government, many women were prevented from building a state pension entitlement in their own right. Our Labour Government made significant headway, legislating for a simpler, fairer and more generous state pension system, so that about 75% of women who retired in 2010 received a full basic state pension like men. As a result, by 2025 more than 95% of men and women will retire with a full basic state pension. This Government have also made improvements, but there are still anomalies they have not resolved, especially for women today in their late 50s. The Bill does not address that and there is no sign that it will do so.

In 1997, carers were similarly mistreated by a system predicated on a 19th-century view of working lives and social relationships; millions were without access to occupational pensions; and the mis-selling of private pensions, overseen by the previous Conservative Government, was a national scandal. Meanwhile, the exceptional equity returns of the 1980s and 1990s allowed many defined-benefits schemes to ignore the rapid rise in the underlying cost of their pension promises.

That was compounded by botched policy such as the minimum funding requirement introduced by the current Leader of the House, then the Minister responsible, which failed to encourage employers to fund their pension schemes properly. In the 1980s and 1990s, many firms, despite rising liabilities, took the decision to take contributions holidays, believing that a bullish equity market would be a long-term trend. The Conservative Government believed that too—indeed, they encouraged it, as demonstrated by Nigel Lawson’s decision effectively to cap pension fund surpluses in 1986. As the Pensions Commission noted:

“The deep dip in contributions seen in the period 1988-91...almost certainly reflects the impact of this policy.”

[Mr Brian Binley (Northampton South) (Con)]

I am listening with interest, as I always do, to the experienced right hon. Gentleman. I understand many of the points he is making, and, as a pensioner myself, I have some sympathy with them. However, I wonder whether he has sympathy with me, in that when he paints a picture of all that has gone wrong, would he include in that picture the work done by the former Chancellor of the Exchequer who later became Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), in taxing the private sector pension schemes almost to the point of destruction? Does he agree in retrospect that that was not the cleverest move?

[Mr Hain]

I have great respect for the hon. Gentleman despite our big political differences. I anticipated this question, he might be intrigued to know, and I looked into it. In fact, he is entirely wrong and that Tory charge is entirely misplaced. Let me explain why. The stock market fall reduced the basic market value of pension scheme assets by some £250 billion between 1999 and 2002. The effect of the package of tax changes for which he and the Conservatives seek to pin the blame on our Government and Chancellor was entirely marginal. The problems that occurred in the new century were due to the stock market downturn, not the tax change, which was minuscule compared with pension fund turnover. Let me remind him that in 2007 the respected and extremely independently minded economics commentator Anatole Kaletsky wrote in The Times:

“How could the removal”—

by the Chancellor, that is—

“of a £5 billion annual subsidy suddenly reduce a pensions industry with more than £1,000 billion in assets from the ‘healthiest in the world’ to one that was nearly bankrupt? The answer is that it couldn’t and it didn’t.”

That rather puts into perspective the hon. Gentleman’s impudent and irrational question.

It was no Tory utopia in pension holidays in the 1980s; it was a Tory fool’s paradise, with the Government behaving irresponsibly, recklessly and complacently in encouraging employer pension holidays. I quote from the 2004 Pensions Commission report:

“When the fool’s paradise came to an end...companies adjusted rapidly, closing”

defined-benefits

“schemes to new members. A reduction in the generosity of the DB pensions promises which existed by the mid-1990s was inevitable.”

So the Tory party bears a heavy responsibility for the closure of defined-benefits schemes and the shift towards defined contribution, and this Bill nowhere near compensates for that.

To be fair, though, this was not a UK-only phenomenon, and certainly not one brought about by changes made by the previous Labour Government—very far from it. Accelerated further by record demographic changes, it was a worldwide phenomenon—a product of the neo-liberal orthodoxy gripping Governments from the era of Margaret Thatcher and Ronald Reagan. Sadly, this Government remain in the grip of that, and the Minister’s former Liberal party colleague, John Maynard Keynes, would be turning in his grave to see a Liberal Democrat participating in it. In the US, for example, the number of defined-benefit schemes halved in less than 30 years, while defined-contribution schemes tripled. Australia, also worshipping neoliberalism, saw an 80% reduction in the number of workers covered by defined-benefit schemes from the 1980s.

Whereas this Bill does very little, if anything at all, to tackle pensioner poverty, Labour led the way in responding to the challenges that our pension system faces. First, we tackled pensioner poverty. In 1997, some 2.7 million pensioners were living in poverty, many facing the indignity of living on as little as £69 a week, as I am sure you will recall, Mr Deputy Speaker.

Thanks to the pension credit, winter fuel payments and a 9% real-terms increase in the basic state pension, we lifted more than 2 million pensioners out of absolute poverty. The measures in the Pensions Act 2008 took protection even further, with a new settlement for women and carers and a restoration of the earnings link that had been removed by the Conservatives in 1980.

We also took decisive action to tackle the loss of confidence in the private pensions market. One reason for that loss of confidence was the pensions mis-selling scandal that our previous Labour Government inherited. In 1997, less than 2% of pensions mis-selling cases had been satisfactorily resolved; by the end of 2002, under Labour, more than 99% of consumers with mis-selling claims had been compensated, with total compensation reaching £11 billion. That £11 billion was the bill for Tory incompetence and Tory injustice over pensions mis-selling.

I make these points because they are an essential background to this Bill, whose implementation will itself raise important problems. A key one is that people might spend all their pension savings at the point of retirement, dooming themselves to poverty later in life. Having saved into a pension fund, received tax relief for many years and reached retirement with a pot of money, they might be tempted to just blow the lot all at once—perhaps on the Minister’s Lamborghini—meaning they would never have the benefit of extra income as they get older. If that happens, the tax relief they received will not have funded a pension; the employer contributions they may have received along the way will just end up funding immediate consumption, rather than providing a long-term income.

We know that some people will do that; we do not know how many and we hope that the number will be relatively low. The Government assume that very few will do so, but a survey by the respected pensions expert Ros Altmann—whom the Government appointed in July as their business champion for older workers—suggests that currently about 7% say they would spend it all. The truth is that it is impossible to accurately predict this. I expect that people with small sums would be most likely to spend the whole lot, but that the tax system itself will act as a disincentive to others to take the money and run. However, if too many people do it—the rising cost of living will put pressure on them to do so—there will be increasing numbers in poverty in future, which will also be a drag on the whole economy as the baby boomers get older and have less and less money to spend.

The new flat-rate state pension mitigates some of the risk of people falling back on the state having spent all their pension savings, but there will still be about 20% of pensioners on means-tested benefits even after the new system starts. That is partly because many people will not receive the full state pension during the early years, and also because there are other means-tested benefits aside from pension credit. Those who do not own their own home would still be potentially entitled to means-tested benefits in retirement, via council tax benefit and, of course, housing benefit.

People might try to game the system by taking all their pension money and then recycling it into a new pension fund, getting more tax-free cash and another lot of tax relief. That would be of most benefit to those who are reasonably well off with high incomes in later life, and it could be costly in terms of extra Exchequer spending on tax relief.

The new system could cause great confusion for people. These points have been made by Members who have spoken before me. If people are suddenly faced with new choices at retirement, they may not know what to do and end up at the mercy of pushy salesmen selling unsuitable products. In the old system, people pretty much had to buy an annuity unless they had substantial amounts of pension savings—perhaps £100,000 or more, but certainly at least £50,000. That meant there was no choice to be made, and there was no guarantee of receiving a secure income for life: the annuity may have given people very little, it might have been the wrong type of annuity for them and usually had no inflation protection. That was partly because insurers did not treat customers fairly and were left to regulate themselves, without having to offer suitable products or good value, but with the chance of taking about 2% of each customer’s pension fund without their realising.

Few dispute that the old system clearly did not work for customers, and the Financial Conduct Authority and the Financial Services Consumer Panel uncovered some disgraceful practices that were very detrimental to consumers. I recognise the Minister’s sincerity in seeking to address some of those problems.

Annuities were not value for money. In fact, someone retiring last week with savings of £100,000 and the intention of buying a pension annuity that kept pace with inflation could expect to be paid only about £3,600 annually. Assuming they are 65 years old, they will need to live to the age of 93 to get their money back; 15 years ago, they would have received much more.

That was partly a market issue, and it should perhaps have been possible to reform the market without the draconian retreat from annuities that this Government are proposing in the Bill. Would it not have been possible to insist that insurers were obliged to treat customers fairly by ensuring that they would be liable if they did not carry out suitability checks to identify which type of annuity was best and if they did not offer a good rate? Would it not have been possible to reform the way annuities worked, and to allow more but not complete freedom?

What protections will be built into the new system to ensure that unsophisticated consumers are not left at the mercy of product providers offering poor product choices or higher risk products that people do not understand and on which they will end up losing significant sums? The FCA needs to be on top of that right from the start. Judging by past form, can we be confident of that? I have very serious doubts.

What will the Government do to ensure that people are given proper, impartial and professional help before they make their retirement decisions? Half an hour of free guidance will not be enough. Such guidance must be delivered by those who are qualified and can be relied on to ensure that people ask the right questions before they buy a product or make a decision that, for lots of them, will be a life-changing one.

Ideally, guidance to help people to make a financial plan should start to be given well before retirement. We have underestimated the complexity and confusion that people face compared with what was faced by their predecessors, who were simply in an annuity scheme that came and went with their working life. Although it might be hard for the very young to take such advice on board, would it not still be worth expanding some of the guidance for potential savers?

If the guidance is delivered by product providers, they are liable to entice their customers into poorer-value products. Experience shows that they will do whatever they can to try to keep customers’ money, or to give them poor value and make extra profit. The annuity market has worked poorly for years, with rising profits to insurers and reducing value for customers, who ultimately are pensioners. What will the Government do to ensure that the new products developed finally offer good value, and that charges are fair and terms reasonable? The Bill does not adequately address those questions.

Will the Government ensure that people get signposted to full advice as well as just guidance? In the new, more complex world, a much wider array of choices will be on offer and people need to understand them all. They also need to understand the tax implications of cashing in their pension fund, so the guidance must make that clear.

Why did the Government not consult on these radical measures before introducing them as a bombshell earlier this year? My view is that if they had done so, the industry lobby would have been so fierce that their introduction would have become too difficult. Only shock therapy will really wake up the industry.

Now that all or a substantial part of a person’s savings can be taken out on the day of retirement, a pension plan is more like a golden handshake for leaving work. Let us say that a person reaches their late 80s and finds that they are fast running out of money. Where is their safety net, except to fall back on the welfare state, which is certainly not the Chancellor’s favoured outcome, even for those already in desperate need? Choice is good but structured choice is better, especially when the issue at stake is people’s hard-earned futures.

We need a pension system that works not for the market, but for pensioners and taxpayers. According to the RSA, most people want to

“give their money away to someone whom they can trust will use it wisely to generate an income when they retire”.

We need a comprehensive private pension system. That is not something that exists in the UK, but it must exist in the future. That point is not addressed seriously by the Bill or any of the Government’s policies.

There has been a lot of talk about the Dutch model of mega-funds. In Holland and Denmark, people put money aside each year and receive a pension in retirement. That seems simple and it is. However, if a typical British pensioner and their Dutch counterpart each had the same amount saved, had the same life expectancy and retired on the same day, the pension that the Dutch saver received would be 50% higher than that of the British pensioner—that is half as much again. With the same amount of money saved, there is a huge increase in peace of mind and quality of life.

The Pension Schemes Bill will enable employers to offer collective defined-contribution schemes—versions of mega-funds—at their discretion, but few employers have expressed enthusiasm. According to the Minister, CDC schemes offer higher and more stable returns by pooling risk. Employees will all pay into one common pot, instead of braving market risks on their own, so that years where losses occur can be offset by those that see a profit.

The Government are right to legislate to permit collective defined-contribution pensions, but I urge Ministers not to over-hype the benefits. In principle, such schemes ought to be better for employers than traditional final salary schemes and better for workers than traditional defined-contribution schemes. In practice, they still suffer from market and actuarial risks. Ros Altmann points out that lower earners might subsidise higher earners and that younger members might subsidise older members. The new pension freedom provided for in the Bill to take most, if not all, of the pension pot in a lump sum might also mean that people will prefer pure defined-contribution schemes that they can access in retirement if they wish to, because collective defined-contribution schemes usually mean that people cannot just take the cash, which might well make them less attractive to members.

My challenge to the Minister is, rather than leaving the private pension system to market providers and their whims, to build a new system that works—a system with longevity that savers will understand and find confidence in. A lack of confidence in the Government’s approach to pensions is something that I imagine savers and I share.

There seems to be some ideological confusion within the Government about the structure of pension reform. On the one hand, the Bill allows pensioners to withdraw their savings in a lump sum at retirement, doing away with annuities, which may be flawed, but which are important for older people and especially for vulnerable people who need to ensure a continuous income stream. On the other hand, the Minister has championed the idea of allowing employers to offer Dutch-inspired collective defined-contribution schemes. It is the individual versus the collective—which is it? The two ideas are not entirely incompatible, but they are far from ideological bedfellows. The Chancellor’s plan has serious appeal to providers of pension products, who until now have been limited to annuities, but who will now diversify and probably profit hugely from the move, as they usually do, at the expense of pensioners. It would be interesting to know whether the Chancellor consulted his City friends ahead of the policy announcement.

As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East argued, the biggest long-term issue with the end of compulsory annuitisation is efficiency. The returns for savers will be lower because pension funds will have to assume that an individual will exit the scheme at 55 and, 10 years before that exit date, will have to move the individual’s pension savings into low-risk, low-return assets—that is, bonds—to ensure that there is no possibility of a reduction in the size of the pension pot in the run-up to exit. That is known as a lifestyling investment strategy and it is standard.

Before the taxation of pensions Bill, the fundamental critique of individual DC pensions was that they prevented savers from getting the higher returns that come from pooled investment, where greater risks for greater rewards can be taken because there are enough assets to hedge against those risks. The Government now risk making the problem even worse by ensuring that the shift to low-risk, low-return assets takes place even earlier in the pensions savings cycle, at age 45 rather than 55 as now. While the Chancellor’s right hand further fragments and individualises pensions, the pensions Minister’s left hand legislates for collective defined-contribution pensions. Why should any employer move to that collective system when they can see the Treasury going down precisely the opposite route? I doubt, sadly, whether many will do so.

There are other issues such as the nature and provider of financial guidance, who foots the bill for it, and the impact on eligibility for means-tested benefits and social care. The issue of efficiency, however, is fundamental: greater freedom might come at the expense of bigger pension pots.

In conclusion, I have considerable concerns about the Bill, and do not think the Government are doing anything like enough to face up to the time bomb of our ageing society, and the required pensions and social care needed to underpin the new life rapidly overtaking us. The whole Government philosophy of leaving private pensions to the market, and saying to the citizens, “You are on your own”, has failed abysmally in the past, just as—sadly—I believe it will fail abysmally in the future, at terrible cost to us all.

16:26

[John Hemming (Birmingham, Yardley) (LD)]

I start with an apology to the House because I had to attend two Committees earlier so could not attend most of this debate. I refer Members to my declaration in the Register of Members’ Financial Interests. My company, John Hemming & Company Systems, provides software to financial services organisations, including those running pension schemes.

Essentially, we are discussing how we can give people security with the tax advantage of payments into pensions from employers over the years, so that they can retire in reasonable comfort and expect a good outcome. The difficulty with anything is always who underwrites the outcomes, and we have obviously had difficulties with defined-benefits schemes. Those have been difficult to maintain because of the swing that can occur with the finances; hence employers have lost enthusiasm globally for that. With technological changes and the fact that the employment market has been different, it has been possible to attract employees without necessarily offering them defined-benefits pensions. That is why it has tended to happen across the world; it is not necessarily because of the different political structures of different countries. The idea that this is an ideological solution is not true; it is a technological solution, and many of the economic shifts we have seen are technological rather than ideological. That has driven a lot of things in the employment market, which has gone on to drive issues in the pension market.

The right hon. Member for Neath (Mr Hain) said that had the industry got wind of such shifts, it would have lobbied like billy-oh to stop them happening. I would have thought that that was because the industry did not think that such things were in its interests, and not because they were not in the interests of pensioners. I find it rather strange that the argument that the annuities industry hates such measures is also an argument that they are bad for people who are now no longer trapped having to buy annuities. We have actuarial problems and the difficulty of managing risk. As somebody who buys and sells shares and bonds and so on, I deal with such things from time to time on my account or those of other people. It is a complex area, and there are issues of how cost-efficiently it can be managed for small schemes. Larger schemes generally get a better result because the people managing them are able to do so more effectively. There is a inherent difficulty, however, which are that these areas are complex and will need guidance.

What I look for from the Financial Conduct Authority and such bodies is that they hunt out on a day-to-day basis the people who are offering bad advice. There are obviously boiler shop operations that have gone on for years, with people saying, “Here is a Canadian share. It is a $5 dollar share, but to you $4.75”. As soon as we hear that we know it is a boiler shop operation. That is not proper share trading; it is just trying to con people into buying something that is basically useless on the assumption that there is a lot of money to be made. Even wealthy people can be trapped by that, as Bernie Madoff showed when he made off with lots of people’s money.

Unquestionably, there are those difficulties, and I worry sometimes that the regulatory process adds a lot of complication, rather than hunting out people who are basically committing fraud on a day-to-day basis. There are a few people whose business model is to con people, and there are good examples of Ponzi schemes throughout the world. These schemes will never go away because some people will always be persuaded to misuse their finances; the challenge for the regulatory authorities is to look for them, stop them operating on a large scale and offer sufficient guidance so that people understand that if it seems too good to be true, it probably is—that is always a good lesson.

There are things the Government can do that are already being done in some areas—for example, websites saying, “Slot in these figures, see what happens, work it all out and see the long-term consequences.” That could be done on an objective, trusted basis, giving people the information to make their own decisions. People retire in different circumstances: some will have a mortgage they want to get rid of, which would give them greater stability and make it much easier for them to manage things on a day-to-day basis. Having the flexibility to draw a large sum of money out of their pension fund at the start to pay down certain things would be a great advantage compared with being trapped in a particular scheme. I have encountered retired people who are in a financial mess, with debts in one place and assets in another, and they cannot handle it. We cannot design a system for people who are all the same because people are not all the same—they and their circumstances vary greatly in many different ways—so introducing a flexible system is a positive way forward. For that reason, I was pleased to hear this announcement.

There will always be priorities, and unquestionably we need to keep an eye on charges. Members like the right hon. Member for Neath believe the industry really does not want this flexibility because of the impact on its bottom line, but, at the end of the day, the money has to come from somewhere. The money invested comes out in dividends, charges, payments to pensions and that sort of stuff—no magic money can be created in the process—and if less money goes in charges to the industry, more money goes to people getting pensions, which has to be a positive thing.

I am pleased to support the Government’s proposals to introduce flexibility and move forward on what people accept is a damaged annuity market. Obviously, there is market risk, and interest rates have fallen so low that annuity rates are much lower too, which is depressing for people locked into a situation where they are forced to accept something that everyone says in the long term is of low value. I think, therefore, that the Government have got this right, and the Opposition, in criticising them, are getting it wrong, and I will support the Government on Second Reading.

16:32

[Mr Mark Hoban (Fareham) (Con)]

I apologise to my right hon. Friend the Minister for missing some of his speech and to the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) for missing his. I had hoped to be here for both, but owing to the length of the urgent question and another engagement outside the House, I could not be. Nevertheless, I am delighted to be here in time to make a contribution.

On the Government’s legacy, as my right hon. Friend said, our pension reforms have been one of our key acts in government. We have done a huge amount to reform the pensions system we inherited and to implement auto-enrolment. The Chair of the Work and Pensions Select Committee, the hon. Member for Aberdeen South (Dame Anne Begg), gives the previous Government credit for auto-enrolment, but my right hon. Friend was right to talk about the practical changes we have made to make it work. He also made the powerful and important point that the take-up rate for smaller businesses during roll-out has exceeded expectations. A lot of people expected the rate to fall, but it should now be recognised that many people currently not saving for retirement see auto-enrolment as a key way of protecting themselves and their families in retirement.

The changes that my right hon. Friend the Chancellor announced in the Budget to give people control over their pension pots in retirement are also important and fit in with other reforms, such as raising the state retirement age, introducing the triple lock and uprating the state pension. We provided a state pension that is both fair and affordable in the long term. We made a change to pension tax relief, too, ensuring that it is both fair and affordable as well. The cumulative effect of those reforms is to ensure that people will save more towards their retirement, that more people will indeed save for it and that they will be rewarded for doing so. We are treating those who retire as grown-ups, able to manage their own money.

The work we have done so far is important, but I do not think the job is done. That is why the Bill is so important. We know that under defined-benefits schemes, those who worked knew that every year of their employment helped to build up a guaranteed pension income—a fraction of their final salary—thus providing certainty. In building up that guaranteed income, once the employee had made a contribution, the cost of providing the guarantee rested with the employer. If the investment return fell, the employers had to increase their contributions; if employees and pensions lived longer, the cost of the changes were again borne by the employer. In a way, of course, that guarantee sowed the seeds of the decline of defined-benefits contribution schemes, as it became increasingly expensive to provide that guarantee to employees. That accounts for the decline in DB schemes over a number of decades.

Under a defined-contributions scheme, it is of course the employee who bears the longevity risks in building up the pension pot. It is the employee who bears the investment risk, too. Certainty in retirement in return for a fixed contribution by the employee has been replaced by uncertainty, the cost of which is borne by employees.

The impact of the switch from DB to DC would have been mitigated if contribution rates had remained unchanged, but the impact of the transfer of risk has been compounded by the reduction in the level of contributions. The most recent Office for National Statistics figures I have seen show that the total contribution rate for DB schemes is 19.2%. The rate for DC schemes is under half that, at 9.4%. What does that mean in practice? As the Department’s own figures show, 11 million people between the age of 22 and state pension age will not save enough to deliver an adequate replacement income in retirement. Employees have thus seen a reduction in contributions to their pension schemes; they bear risks previously borne by their employer; and they bear uncertainty about the income they will enjoy in retirement.

Where does this Bill fit into that picture? Defined ambition can, through guarantees, help to provide greater certainty in retirement. I think the second area where these schemes can have merit is in maximising the return on pension contributions for members. The collective nature of defined-ambition schemes creates economies of scale on the costs of running a pension scheme, which should help to improve the overall returns for employees. Furthermore, the open-ended nature of a collective scheme can change the investment strategy of a fund. For an individual scheme, as the employee moves towards retirement, the fund’s objectives move from seeking capital growth towards locking in gains already made, providing greater certainty about the size of the member’s pension pot. An open-ended scheme and particularly a collective scheme should shift the investment strategy towards capital growth and away from simply locking in growth—a point to which I shall return in a minute.

The second area where defined ambition will help is through the use of guarantees to deliver more certain outcomes for employees. As I said, one of the merits of DB schemes for employees is that they guarantee an income. Depending on the scheme, people will know after a year’s service that they will have “banked” an 80th or a 60th or a 40th of a year’s salary or the salary on retirement. With a DC scheme, all people know, in effect, is that they have made contributions of X and made net investment gains of Y; and while the pensions statement will project a monthly income in retirement, it will be based on how much more they will contribute, the investment gains between now and retirement and the annuity rates at the point of retirement. The only thing known for certain about that projection is that it will be wrong.

The contrast between DC and DB schemes is stark; the question is whether we can bridge the gap between the certainty of DB and the uncertainty of DC. The Government’s vision of DA or shared-risk schemes is, to quote the Government response to the consultation,

“to secure a guarantee on the income that will be received in retirement, that builds up gradually during the savings period”.

There is a great deal of merit in that. The employee has visibility and certainty of income in retirement. That is one of the great assets of DB schemes. That helps people to see how much they will have in retirement and, crucially, helps them plan for retirement. However, the crucial distinction is that, in defined-ambition schemes, the employer’s contribution is fixed. Therefore, if the income is guaranteed, the cost of that guarantee must be borne by the scheme members.

I would like to understand a bit more what the Financial Secretary expects those guarantees to look like and how he expects them to be financed. What proportion of the pension does he expect to be guaranteed? Presumably, in the same way that insurance companies have to provide solvency reserves for the guarantees that they issue, defined-ambition schemes will need to provide reserves to fund the guarantees.

I think it will be the case that the higher the guaranteed element, the greater the shift in asset allocation away from risk seeking and capital growth towards capital protection—in effect the challenge facing individual DC schemes but on a collective basis. Who will design the rules for determining the reserves to be held against the guarantees? Will it be the Pensions Regulator or the Prudential Regulation Authority? Will it depend on whether the scheme is trust or contract-based?

I believe that these measures create opportunities for a new model of pension scheme. That model will smooth some of the rough edges of the transition from DB to DC schemes. It should help to reduce the risk for employees. However, it is not without its challenges. For it to work effectively, schemes will need to reach a critical mass in terms of membership to enable the economies of scale to work their way through and to ensure that there is a sufficient flow of people coming into and out of the scheme—that there are new members and those new members balance the number of members ceasing to be active members. The formula that drives the payouts from the scheme will need to be carefully thought through to ensure intergenerational fairness, so that younger members are not subsidising pensioners.

In the Netherlands, schemes have been established on a sectoral basis reflecting the social model there. That helps to deliver the critical mass needed for the schemes to obtain economies of scale and smooth investment returns. How does my right hon. Friend the Minister think schemes in the UK will achieve that scale? Does he envisage that schemes will be built on a sectoral basis, or does he envisage some master scheme being set up that will be open to all businesses?

[Steve Webb]

I am enjoying my hon. Friend’s characteristically well-informed speech. To reassure him on industry schemes, when we visited the Netherlands to look at how the system is run there, we came across the Dutch tulip growers scheme. I can reassure him that we do not have such narrow definitions in mind.

[Mr Hoban]

I am not sure that tulips and the Netherlands are necessarily an appropriate model. One of the earliest financial crashes was in the price of tulip bulbs, so it may not be a model to follow. However, the point about sectoral and non-sectoral schemes is important. Other countries have had success where they have had a social model—a relationship between employers and employees—that we do not necessarily see in the UK. There will be questions about how to encourage more employers to come together to create these schemes. Perhaps there is a role for insurers in that regard.

Although these schemes aim to boost returns and offset some of the impact of under-saving, we need to do more to help people save more towards retirement. Auto-enrolment will help to ensure that more people are saving, but as I pointed out earlier, the DWP’s figures estimated that some 11 million people would not save enough to meet the recommended replacement income for retirement. If we look at contribution rates to pension schemes in other countries, we will see that the 8% auto-enrolment rate lags behind the rate in other countries that have established innovative pension schemes. In Australia, the contribution rate to the Super scheme is heading towards 12%, and in the Netherlands—the Minister mentioned the Netherlands, so I feel at liberty to talk about it—the contribution rate to the scheme is over 20%, which is significantly higher. We have some way to go before we match those contribution levels.

I think it would be wrong to contemplate increasing contribution rates before the roll-out of auto-enrolment has been completed, but we should not ignore the fact that people are not saving enough towards their retirement and we need to find ways to help people to build higher contributions. There are ways in which we can do that. We have not done enough to draw on the insights from behavioural economics and initiatives such as Save More Tomorrow, which has been adopted in some parts of the United States, which encourage people to increase their contribution rates when their pay rises, making a commitment today to secure increased contributions in the future. I think we can look at the way in which fiscal incentives encourage those on low incomes to save more towards their retirement, and I certainly think we can support people to make better choices on retirement. That is a significant area that we need to focus on, and it is the last point I want to touch on in my speech.

As I said at the start, we have introduced a series of radical reforms to the pensions system over the past four and a half years. However, to make the most of the freedoms that we need, we must make sure people have the necessary support to make the right choices both when they are building up their pension pot and when they choose to use it. That is why I am very supportive of the guidance guarantee. I know the Government are going to introduce amendments to this Bill, either in Committee or on Report, to introduce the guidance guarantee, and it is an important part of the package of legislation, but we must also think about how we can encourage the industry to go further to provide better guidance both before the point of retirement and afterwards. The decisions we make at the point of retirement are ones we would want to come to as individuals to revisit later on.

We need to find a service that will help those who feel they cannot afford independent financial advice without crowding out independent financial advisers, and we need to give people support to think about draw-down, annuities and the other products that are out there, to help them maximise their income over their retirement, and also to think, while they are saving, about what sort of lifestyle they want in retirement. Too often, people do not think about what they aspire to in retirement. They tend to shape their retirement around how much they have saved, rather than thinking before they retire, “This is what I would like to do. These are the holidays I’d like to have. This is the sort of lifestyle I’d like.” We need to give people more support in that regard.

I also believe we should be harnessing technology to draw together details of people’s savings—not just their pensions, but their individual savings accounts and bank savings—to end the complicating fragmentation of data. That should encourage people to look at the totality of their financial assets and use that information to engage with their retirement planning.

[Nigel Mills]

The one asset my hon. Friend did not mention is the house a person owns, which I suspect people will, as years go on, increasingly have to consider using for their own retirement, rather than passing that on to their children, as perhaps we all hope to do at the moment.

[Mr Hoban]

My hon. Friend makes an important point and he is right to pick up on that omission. When we think about retirement, we should be thinking not just about pensions, but about a person’s income in retirement. Some of that will take the form of state pension; some will be interest on savings accounts; and some may come through work—depending on what age we retire at, and how we phase in our retirement. Certainly housing is a valuable asset, too, and very good work is being done by a number of organisations to look at how housing can be used, but we are still some way off having something that people will recognise as a good way to use their housing assets. As I say that, I feel a letter coming on from my former colleague Nigel Lawson on this point, but there is more work to be done in respect of how people view housing as an asset and how they can utilise that asset in retirement to supplement their income. We need to build out from the guidance guarantee, and more work will need to be done on that in the coming months.

I want to mention a point that has been raised with me and that I will probably talk about in more detail when the complementary tax Bill to this comes through later in the year: we must think about what sort of outcomes we expect people to see in retirement. My right hon. Friend the Minister for Pensions referred to a decade of innovation, but he will recollect that when we introduced reforms to liberalise the open market option, and to make that more of the default, there were some unforeseen challenges from that, and we have seen some of the consequences and the report published by the Financial Services Consumer Panel. I do think there is a responsibility on industry, the Government and the regulator to do some thinking about what good looks like under the new reforms and how we can help shape that post-retirement market. That would form an important part of the work.

I commend the Government on this comprehensive package of pension reforms. They will form a key part of our legacy, and they are an important way of expressing what we have achieved as a Government in setting down long-term foundations to help people to take more responsibility for their savings in retirement, to help them to save more in their retirement and to give them the freedom and choice that they need in their retirement. The Bill is part of that package, and I look forward to seeing how the schemes develop to help to provide people with more certainty in regard to their future pension incomes, when all they have seen up to now is increased uncertainty.

16:50

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

It is a pleasure to wind up this relatively short but interesting and important debate. Despite points of difference and disagreement, it has provided some thoughtful and wide-ranging speeches from both sides of the House, proving that it is quality, not quantity, that counts. Two excellent examples were provided by my hon. Friend the Member for Aberdeen South (Dame Anne Begg) and my right hon. Friend the Member for Neath (Mr Hain).

My hon. Friend the Member for Aberdeen South made an important point about complexity and expressed her fear that increasing complexity as a result of the Government’s changes to pensions might hamper efforts to get younger people to engage with their pensions. She also rightly highlighted the increased risk of mis-selling that could result from any such complexity. I shall come back to that issue later. She also highlighted the importance of governance in relation to the collective defined-contributions schemes that are being introduced by the Bill. She was right to say that there was no obvious reason to omit those governance arrangements from the Bill and to leave them instead to be dealt with in secondary legislation. It is difficult to understand why the Bill is vague on that point, and I hope that the Financial Secretary to the Treasury will be able to illuminate the House further on that when he responds to the debate.

My right hon. Friend the Member for Neath, who is not in his place at the moment, made a powerful contribution to the debate, in which he set out the challenges posed by a rapidly ageing population. They are one reason why so much attention has been focused on pension arrangements. He also noted the challenges posed by the greater need for adult social care that results from a rapidly ageing population, the interplay between those changes, and the increasing burden on the present younger generation and future generations. He talked about our expectation of what those burdens would be like in the coming years. He was right to give us an historical perspective, particularly in relation to mis-selling during the years before 1997.

Pensions are an important issue for people. They worry about their retirement and their personal social care needs, and about whether they will be able to cope with those needs as and when they arise. They also worry about whether they will be able to leave anything behind for their children. As people live longer, it is more important than ever that they should make the best possible choices for themselves. As legislators, politicians need to ensure that the range of options available to people and the breadth of the arrangements they can make for their retirement are fit for purpose, especially as we are all living much longer. That poses great challenges for us all.

In that context, the Bill’s establishment of collective defined-contributions schemes—CDC schemes—is a welcome step in increasing the range of options available to people as they plan for their retirement. We will therefore not oppose the Bill on Second Reading, although there are areas in which we might seek to extend or strengthen it in Committee or on Report.

As I said, we support CDCs in principle. In sharing risk, they have the potential to give people a more adequate and reliable retirement income than individual defined-contributions schemes, because, unlike those schemes, CDCs can pool risk across and between generations. Given the difficulties and anxiety that many people feel about their living standards at the moment, we want to support working people who are struggling to set money aside for the future. We need to ensure that they have access to pension schemes that they can trust to give good value for money and a decent income in retirement.

CDCs are also well supported by the public. Research by the Institute for Public Policy Research carried out at the end of 2013 found that there was strong public support for a collective pension. It was the most popular of the options the IPPR tested and it appealed across those with different income levels, life stages and ages. If CDCs are to be well taken up and succeed, strong governance arrangements clearly need to be in place—that point was made by my hon. Friend the Member for Aberdeen South. As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, the Bill is currently silent on governance arrangements for CDCs. The highest standards of governance are needed for schemes that are even more opaque than defined-contributions schemes because they have to manage pooled assets and conduct smoothing.

The silence in the Bill occurs despite the Government’s consultation “Reshaping workplace pensions for future generations”, which stated:

“Collective schemes are complex and can be opaque—because of the indirect relationship between contributions and benefits. This necessitates strong standards of communication and governance. We intend collective schemes to be overseen by experienced fiduciaries acting on behalf of members, taking decisions at scheme level and removing the need for individuals to make difficult choices over fund allocations and retirement income products.”

Failure to require all schemes to have trustees means that we will potentially have some CDCs run by trustees and others offered by private firms that seek to maximise their short-term returns.

The Minister will know that we have consistently argued that all workplace pension schemes must be run by trustees and have a legal duty to prioritise savers’ interests. Governance arrangements remain an issue for other defined-contributions schemes, which make up the majority of what is available. The Government could have taken more steps in the Bill to strengthen the governance of those schemes. The Government have declined to impose trustee boards, but have instead opted to require independent governance committees. We are concerned that they will be neither independent, nor governing in nature. In any event, IGCs contain serious conflicts of interest, so we will argue in Committee that the Government should instead follow Labour’s lead and require all pension schemes to have trustees and a legal duty to prioritise the interests of savers above all others.

Another issue discussed in the debate, which the Opposition will continue to press the Government on in Committee, is scale. The issue was raised by one Government Member and the Minister did engage with it when the point was made about whether small and medium-sized enterprises might be able to introduce CDCs or whether this would be the preserve of larger employers. He rightly said that it was going to depend primarily on scale and how popular these schemes end up being. The Bill, however, contains no measures that will help promote the scale which most independent observers believe is necessary for CDCs, and workplace pensions in general, to do the best they can for employees. We have long argued that measures to promote scale are vital to ensure the best possible outcomes for savers. So the Government could, for example, require that automatic transfers default into aggregators and the criteria necessary for qualifying as an aggregator should include scale. One or more of those schemes which met the qualifying criteria to be aggregators under our approach may then opt to be a CDC pension scheme.

As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East noted, the House of Commons briefing note on the Bill also says that

“certain conditions, such as large scale and strong governance, appear necessary for—

CDCs—

“to operate successfully.”

Three-quarters of respondents to the consultation prior to the Bill thought that Government intervention would be needed to create the scale necessary for schemes to offer guarantees. We will look in detail at issues around scale and governance when the Bill is considered in Committee.

We will also look at the National Employment Savings Trust, which is a trusted body for providing workplace pension schemes. It could potentially offer retirement income products or CDC and in doing so help constrain the industry and ensure that it provides decent products to all savers. However, to do so most efficiently, it would need to have its restrictions lifted. As was mentioned earlier, the Government said in July 2013 that they would legislate to lift the restrictions as soon as possible, but they have not yet done so. It would be helpful if the Minister told us whether that is something that will be taken forward by the Government, and when it will be discussed in Committee.

The second part of the debate dealt with the new arrangements around flexibility. As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East stated at the outset, we have supported greater flexibility in relation to pension arrangements, but we have set out three tests for the new flexibility. First, is there robust advice for people who are saving for their retirement? Secondly, is the system fair to those on middle and lower incomes who want a secure retirement income? Thirdly, are the Government sure that the changes will not result in extra costs to the state either through social care or by increasing housing benefit bills?

In relation to the first test, the expectation is that the Government will propose an amendment to the draft Bill around the guidance guarantee. As it has not yet been published, it is not clear whether it will be robust enough. It would be helpful if the Minister gave additional information to the House now so that we are not waiting until the Bill reaches Committee before we know what is happening about guidance.

As many Members noted, guidance will have to be well thought through and reflect the practical steps that people take as they move towards retirement. To be effective in practice, guidance will need to include a discussion of the effects of drawdown on the individual’s tax situation. It will also need to explain the consequences of decisions regarding the different forms of saving on the extent to which local authorities can seek to recover sums for long-term care. The Government’s response to the consultation “Freedom and Choice in Pensions” indicates that drawdown is likely to be treated similarly to annuities in that income and not capital is assessed. Again, that is something that we will have to look at and examine further in Committee.

Some specific questions arise as well. For example, if guidance is a single event, how will it assist an individual seeking the necessary later event, perhaps 20 years later, of switching from a drawdown product to an annuity? Draw-down products are likely to be insufficient on their own for savers and individuals will need to insure against longevity risk to ensure that they do not run out of money during their retirement. Will there be a requirement for products to include a regular review of when the optimal moment for switching to an annuity should occur?

We have had a number of debates, both on the Floor of the House and in Committee, around the issue of advice and guidance and the very clear difference that there is between the two. There is a fear among many Members across the House that guidance on pension changes alone might not be enough to help people make the best possible choice. Ultimately, the course that the Government choose will have to be carefully scrutinised and reviewed. As I have said, this matter is of great interest to Members on both sides of the House.

[Mr Hoban]

Will the hon. Lady make her position clear? Is she saying that what should be offered to every person retiring is regulated advice?

[Shabana Mahmood]

No, we have not called for regulated advice, but I am sure that the hon. Gentleman will agree that these are big decisions for people. We must ensure that what the Government envisage will be up to the job of ensuring that they have all the information they need before then to make the best possible choice. As I have said, we have had a number of debates on this subject and the Government have given us some idea of the guidance they envisage, but I think we will have to return to these issues in Committee to ensure that that guidance is as robust as it can possibly be.

[Mr Hoban]

I am grateful to the hon. Lady for giving way, as she is being very generous. If she does not want to see regulated advice given, what is she looking for?

[Shabana Mahmood]

To the extent that we have this debate about advice and guidance, I am sure that the hon. Gentleman will recall that it was the Chancellor who said in his Budget speech that advice would be provided to people about making their decisions. We then moved quickly into the world of guidance and the two are, as I am sure the hon. Gentleman will acknowledge, very different. That is why we are concerned that the guidance on offer will not be quite as good as we might expect if advice were on offer. That is why it will be important that Members on both sides of the House stress test the final package that the Government come up with.

The TUC has rightly questioned whether guidance on its own is sufficient. It states:

“Independent guidance is clearly better than that provided by company sales teams, but half an hour of the best possible advice will not equip people for what could be thirty years of managing their pension pot… Expecting the market to deliver retirement income solutions that work for the great majority is unrealistic. The annuities market was broken, but what we need is the same careful consideration of policy, consumer preference and evidence that led to pensions auto-enrolment.”

It is clear that a number of very complex factors will play against each other, with some inherent tensions that were noted by Members on both sides of the House in their speeches. It is important that we stress test the measures properly in Committee.

The Bill introduces a number of measures that we support, and as I have highlighted, there are some issues on which we think that the Bill could be strengthened. We look forward to picking up those issues with the Minister in Committee.

17:04

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to respond to this Second Reading debate. As we have heard, it has perhaps been shorter than it might have been, but none the less I thank all those who have contributed to it from the Back Benches: my hon. Friend the Member for Cities of London and Westminster (Mark Field), the hon. Member for Aberdeen South (Dame Anne Begg), who is the Chair of the Select Committee, my hon. Friend the Member for Amber Valley (Nigel Mills), the right hon. Member for Neath (Mr Hain), my hon. Friend the Member for Birmingham, Yardley (John Hemming) and my hon. Friend the Member for Fareham (Mr Hoban), who takes a very close interest in these matters. By and large it has been a thoughtful and constructive debate and the most heated areas of controversy have been when we have considered the pensions records of previous Governments.

I reiterate the points made by my hon. Friend the Member for Fareham and my right hon. Friend the Minister for Pensions about this Government’s proud record on pension reform. We have implemented the triple lock, which has meant that pensions are uprated by earnings, prices or 2.5%, whichever is highest. That means that the full rate of the basic state pension is £440 a year higher in 2014-15 than if it had been uprated by earnings since the start of this Parliament. We have introduced auto-enrolment. I acknowledge the point that has been made that the previous Government intended to introduce it in the end, but as my right hon. Friend the Minister for Pensions set out, we as a Government have taken a number of steps to make the policy workable and successful. The number of those who will benefit and who are benefiting from that is considerable. The introduction of the single-tier pension has made our state pension simpler and clearer. The single-tier pension has enabled us to go forward with some of the reforms that we are discussing today which will allow greater pension flexibility.

The debate today and the debate on the Bill has essentially focused on two areas: first, defined ambition in terms of risk sharing, and secondly, pensions flexibility —particularly, in the context of the Bill, on issues related to the guidance guarantee. Let me turn first to the case for defined ambition, which, as we have heard, is to find a middle way—greater flexibility within our pension system, which has traditionally been somewhat binary, with defined-contributions schemes and defined-benefits schemes but nothing really in between. The Bill redefines the framework to recognise explicitly the middle ground and encourage provision of shared-risk pensions where risks are shared more equitably between employers and employees. Let me respond to the various points and questions that have been raised in respect of that area.

My hon. Friend the Member for Fareham asked to what extent and how defined-ambition schemes are guaranteed. The Bill does not prescribe benefit design and that is intentional. Our consultation presented a number of ways in which that could be done and our measure is intended to encourage a variety of designs. So there is no one set answer; indeed, one could argue that that is the point. In response to my hon. Friend’s question about guarantees and the cost to the individual, it is not always the case that the member bears the cost of the guarantee. Some employers may choose to stand behind the promise. Capital requirements and scheme funding requirements already apply to pension vehicles and will continue to apply to schemes called defined ambition in respect of the promises.

A number of contributors to the debate, including the shadow Pensions Minister, asked to what extent there is an indication that there is employer interest in defined ambition. DWP research found that more than a quarter of employers are already interested in offering a pension involving greater risk sharing between members and employers. Over half of employers—52%—said that they would like to set up a scheme where the employer pays fixed contributions and where there is more certainty for the employee, such as DC plus. The response to our “Reshaping workplace pensions for future generations” consultation also demonstrated a strong desire from unions for collective models.

In terms of that demand, the DWP has had discussions with interested employers, but I am sure the House will understand that employers will want to see the detail and communicate with their work force. We do not want to pre-empt those processes, but we believe that the addition of a defined ambition of risk sharing to our pension framework is advantageous.

On inter-generational risk sharing and whether a risk transfer is desirable, we do not want to disallow all inter-generational risk sharing within schemes offering collective benefits, but we want to ensure that it is open and transparent. That is a lesson that we have learned from the way in which such schemes have operated in other jurisdictions.

On governance of collective defined-ambition schemes, we will use governance powers from the Pensions Act 2014 and make regulations using those powers. On issues around making decisions about retirement income in collectives, we want to create innovation. We do not want to constrain or prevent part of the market, and insurance firms or schemes that are not occupational schemes, from offering such scheme. Of course it would always be a fiduciary making a decision about the retirement income, but the measures in the Bill provide for requirements around the specific features of collectives.

We heard questions about collective investment strategies and the risk of an over-cautious strategy, so it is worth highlighting the example of a New Brunswick scheme that is required to operate with a 97.5% probability that base benefits will not reduce. The scheme has 40% investment in assets and 20% investment in real estate and other assets, so the probability requirement has not led to an over-cautious investment strategy.

The hon. Member for Aberdeen South cited several questions that have been raised by the Law Society of Scotland. Shared-risk schemes will cover existing and new schemes. If a scheme shares longevity risk, it will be a defined-ambition scheme. She asked about the definition of a promise made during the savings period, as well as whether a promise made at

“times before the benefit comes into payment”

relates to when the annuity is set up or the repayment is made. The intention is that a promise made at a time before the benefit comes into payment describes a promise made by a scheme during the savings phase, rather than a separate promise made at retirement. She also asked whether a third-party promise would include an arrangement whereby the promise is made by an insurer, rather than the scheme, and the answer is yes. If she wishes to raise further queries on behalf of the Law Society of Scotland, we will be happy to respond to them.

Let me turn to the freedoms that the Chancellor set out in the Budget, which will be implemented by this Bill and the pensions taxation Bill that I am sure we all look forward to debating in the not-too-distant future. Although Labour Members appeared to reserve their judgment about whether they support the policy, the tone of the contributions of Labour Front and Back Benchers suggested that they were far from enthusiastic about the reforms announced in the Budget, to put it mildly. This was not just the questioning and scrutiny that any Opposition would undertake; it seemed to me that, philosophically, the Labour party was uncomfortable with the reforms.

The shadow Pensions Minister asked whether flexibility and guidance would address inertia in the annuities market, but prior to the Budget announcements, consumers were not incentivised to shop around for annuities. They will have more options and more reasons to engage with the market as a result of greater flexibility, and access to impartial, good-quality guidance will be key to having better informed and more empowered consumers. They will be equipped to look for products that work for them, and the decumulation market, including the annuities market, will be incentivised to respond to the demands of more empowered consumers and will have the freedom to do so.

It is sometimes said that people simply will not be able to make good choices, but leaving aside concerns that that view is somewhat patronising, I argue that the existing system restricts choice at the point of retirement, and the Government do not believe that that is right. The Government recognise that with more choices at retirement, consumers’ decisions will become more complex, so we have introduced the guidance guarantee to help consumers to understand their options.

The shadow Pensions Minister referred to the apparent contradiction between auto-enrolment, which is predicated on inertia, and the Turner proposals and giving greater choice to savers. It is always right that people save and that we put in place a regime that encourages saving, but when savers reach retirement it is right that they have the opportunity to engage and have a full range of choices available to them. We believe that it is sensible to set out the detailed technical requirements in secondary legislation, which will allow time for consultation and to respond to evolving risks in the market.

The right hon. Member for Neath said that flexibility will result in people spending all their money at once, which is risky, but those people who have worked hard all their lives should be free to decide how to use their savings. At present the system allows those with the smallest and largest pension pots complete flexibility, but restricts those in the middle of the distribution who have worked hard and saved all their lives. The Government do not dictate how people spend their other money, so why should they do so for pension savings? However, we recognise that people do need support in making these decisions and that is why we are introducing the guidance guarantee.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Many of the large number of people in the middle, as the Minister puts it, will be looking forward to retiring in 2015 and 2016. How clear is he that they understand the implications that will face them in six or seven months’ time that did not face previous generations?

[Mr Gauke]

That is why we are bringing in the guidance guarantee. That is why we want to ensure that people can make informed decisions. That is what drives everything we are doing here and that will be an important part of the Bill. My hon. Friend the Member for Cities of London and Westminster asked whether the guidance would undermine or replace financial advice. The Government intend that the guidance will be a critical first step for consumers at the point of retirement. It will be designed to help consumers navigate the options available and it is not intended to replicate the services of professional financial advisers. The Government expect that many consumers will go on to seek further advice and will ensure that the guidance equips consumers to choose the advisory service that suits their needs.

The guidance service will not stray into areas such as specific product or provider recommendations, which would be better handled by an authorised independent financial adviser. Guidance will signpost consumers to other sources of guidance and advice as appropriate, including professional financial advice. The Government expect that many consumers will go on to seek further advice and will ensure that the guidance equips consumers to choose the advisory service that suits their needs.

The Government believe that it is right that those firms that are likely to benefit from better informed consumers who are more confident about engaging with the financial services industry should help to fund the service. The FCA has proposed that advisers should be included in the cohort of firms paying the guidance levy, as they stand to gain from the better informed consumers who understand how regulated advice can help and protect them in their retirement needs. It is also worth pointing out that the FCA has committed to a proportionate approach. The levy will reflect the size of the firm and the nature and extent of its business.

My hon. Friend the Member for Cities of London and Westminster asked about the Australians’ system and to what extent they were looking to reverse their move to end the obligation to annuitise. The interim report from the Murray review suggests that a variety of different policy options should be considered to improve the Australian retirement income system. These options include maintaining the current system where individuals have access to their pension savings as they wish but with improved provision of financial advice and removal of impediments to product development. As for whether annuities are dead under the new regime, we do not believe so. The Government are clear that annuities will remain the right choice for many at some point during their retirement and believe that many people will still value the security of an annuity.

The right hon. Member for Neath asked how the FCA will protect consumers through regulation. The FCA has a statutory objective to protect consumers. It requires pension companies to comply with its rules and principles, including the principle of treating customers fairly. In creating the FCA, the Government gave it new powers in relation to financial products that it can use to restrict features or products or to prescribe how products must be sold.

I was asked whether the guidance will ensure that people understand the tax implications of flexibility. Guidance will cover the tax implications of accessing pensions in different ways in retirement. This is covered in the standards for guidance on which the FCA is currently consulting. As for whether the guidance will be delivered by qualified people, the FCA is currently consulting on the standards that providers of guidance will need to meet, one of which is that they are suitably trained and qualified.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) and the right hon. Member for Neath asked about flexibility increasing welfare and social care spending. We do not expect the impact to be significant in the context of the steps that this Government have taken to improve the sustainability of pensions spending. For example, regarding the changes to the state pension age and reforms to public service pensions, the estimated net impact of the Government’s key pension policy is a saving of about £17 billion in 2030 in today’s terms.

My hon. Friend the Member for Cities of London and Westminster asked me to explain the principles behind the Government’s pension reforms. We are putting the interests of savers first, but we also believe that people should be free to make their own choice about how to use their savings. Individuals who have worked hard and saved responsibly throughout their adult lives should be trusted to make their own decisions with their pension savings. The reforms announced in the Budget will deliver this, and it is an important part of the Bill. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Pension Schemes Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Pension Schemes Bill:

Committal

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

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 6 November 2014.

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

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

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

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Dr Thérèse Coffey.)

Question agreed to.

Pension Schemes Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Pension Schemes Bill, it is expedient to authorise the payment out of money provided by Parliament of:

(1) any expenditure incurred under or by virtue of the Act by a Minister of the Crown;

and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Dr Thérèse Coffey.)

Question agreed to.

Pension Schemes Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Pension Schemes Bill, it is expedient to authorise:

(1) the imposition of charges for the purpose of meeting expenses incurred by–

(a) persons involved in giving pensions guidance, and

(b) persons having oversight of the giving of pensions guidance; and

(2) the payment of sums into the Consolidated Fund.—(Dr Thérèse Coffey.)

Question agreed to.

Business without Debate

Tuesday 2nd September 2014 Commons Chamber

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Copyright

That the draft Copyright and Rights in Performances (Extended Collective Licensing) Regulations 2014, which were laid before this House on 23 June, be approved.—(Dr Thérèse Coffey.)

Question agreed to.

Traffic calming measures on Broadway in Morecambe

Tuesday 2nd September 2014 Commons Chamber

17:29

[David Morris (Morecambe and Lunesdale) (Con)]

I am pleased to be able to present this petition on behalf of more than 100 people who live in Bare in Morecambe. The campaign has been spearheaded by Judith Fletcher, who has organised all of her neighbours to sign the petition. I have had the pleasure of meeting a large number of them to discuss the traffic problems in the area.

The petitioners started their campaign in the light of a recent housing development on the site of the former Broadway hotel in Morecambe. The development means that traffic is predicted to rise in the area and will create strain on an already busy junction on Marine Road East and Broadway. The petitioners are concerned for the safety of pedestrians and motorists using this area and would like to see a roundabout at the junction and more pedestrian crossings to allow residents to cross safely. At a meeting last week, the petitioners told me of several near misses in the area and I do not think that we should wait for a casualty before enacting these measures.

I therefore urge the House to support my call on Lancashire county council to act and introduce some traffic calming measures in this area.

Following is the full text of the petition:

[The Petition of members of the community in Morecambe,

Declares that the Petitioners believe that there should be traffic calming measures introduced at the junction between Broadway and Marine Road East in Morecambe as the junction is dangerous and further that the Petitioners believe that this should be in the form of a roundabout.

The Petitioners therefore request that the House of Commons urges the Government to encourage Lancashire County Council to take steps to support the residents in Morecambe and to ensure traffic calming measures are introduced at the junction between Broadway and Marine Road East.

And the Petitioners remain, etc.]

[P001384]

Coventry City Football Club

Tuesday 2nd September 2014 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Dr Thérèse Coffey.)

17:30

[Mr Jim Cunningham (Coventry South) (Lab)]

May I first take the opportunity to thank Mr Speaker for granting me this debate? I also thank the hon. Member for Folkestone and Hythe (Damian Collins), who has been very helpful over a long period and has made some very interesting proposals to reform the Football League. In fact, he has proposed a Bill and I thank him again for allowing me to put my name on it. I also thank my right hon. Friend the Member for Coventry North East (Mr Ainsworth), who, like the hon. Member for Folkestone and Hythe, has been pushing for some changes to the practices of the Football League, particularly in relation to Coventry City football club. Both of them deserve a little recognition for the work they have done in this area.

My aim in this debate is to raise two key points. The first is the latest situation with Coventry City football club, and the second is what the story has shown us about the future of football governance and the need for urgent reform.

Two weeks ago saw a major development in the saga of Coventry City football club, with the announcement that the club is finally to return to Coventry after a year at Northampton. It follows a decision by the Football League that the club should pay Arena Coventry Limited, the stadium owners, just over £470,000. The club and ACL have agreed a two-year deal, which can be extended until 2018. Coventry will play their first game back at the Ricoh this week and I offer them my best wishes. Obviously, we want Coventry to win, to say the least.

We are all very pleased that the club is coming home. It is good news and nobody wants to be a killjoy. The supporters in the city are obviously very happy about the situation. I thank all those who played a part in making the breakthrough happen. However, in my opinion there is a distinct danger that, because Coventry City have finally returned to the Ricoh, it will be thought that it is a case of problem solved, but that is not true at all: it is only a short-term solution. The past few years have shone a harsh light on the realities of football in this country and exposed many problems. Although the most immediate problem has been resolved, we must not disregard the deeper, underlying problems that have been exposed.

Let us be clear: Coventry City football club should never have been moved to Northampton in the first place. That the Football League allowed it to happen was disgraceful and demonstrates that it is simply not fit for purpose.

The first criticism is that Sisu Capital Ltd and, subsequently, Otium Entertainment Group have prompted doubts that they are fit to own or run a football club. They have clearly not acted in the best interests of the club and have had a total disregard for the supporters, the wider supply chain in Coventry and, of course, the people of Coventry itself. In my opinion, they wanted to bankrupt the Ricoh from the start, and even went to the lengths of seeking judicial review when they were unsuccessful and the Ricoh had survived as a result. They could not care less about the club itself, and see it purely as some sort of cash cow. How can we feel confident that the same thing will not happen again in two years’ time, or even sooner, if the agreement breaks down for some reason? Therefore, although I am happy to see the club return, let us remember that we are not seeing a demonstration of good will and responsibility.

My second main criticism concerns the role of the Football League in this saga. I believe that it has simply not shown leadership and has not proved an effective governing body. It has finally taken notice and told the club to pay back some—not all, of course—of the money owed. Where was the Football League a year ago, when negotiations were at a standstill? Where was it when Sisu stopped paying rent? Where was it when Sisu called for judicial review, saying the council had acted unlawfully by keeping the Ricoh afloat? It was only in June that the judge threw the case out, and Sisu said that the ruling “removed any prospect” of its long-term return to the stadium.

The Football League has been conspicuous by its absence throughout. It can take little credit for intervening at this late stage. Its chief executive, Shaun Harvey, has made an incredible statement:

“When The Football League Board gave its consent to Coventry City playing its matches in Northampton, it did so with this outcome in mind.”

He went on:

“While we understand that the Board’s decision led to a significant amount of dissatisfaction amongst Coventry supporters, we would not be where we are today without it. On this basis alone, this very difficult decision has now been justified.”

I find that astonishing. How can the move to Northampton have been the reason for the return to Coventry? It is as though he is claiming that the Football League had some sort of master plan all along and knew from the start that this would happen, which I find very hard to believe. Quite simply, the Football League has not shown any leadership on this issue and has waited an unacceptably long time before intervening. This situation could have been dealt with years ago before it ever reached such a conflict.

Several problems therefore need to be addressed. The Select Committee on Culture, Media and Sport published a report back in 2011 that outlined some of the reforms that are needed. I will not go into them in detail, as we have raised them on many occasions, but I want to give an idea of the sort of reforms that I believe are needed to protect clubs such as Coventry in the future.

First, we need reform of the Football Association, the leagues and their structures. For example, we do not believe that the current board membership is conducive to a democratic and well-functioning system. Secondly, we need an independent regulatory body with a licensing system that will ensure clubs live within their means and protect their long-term futures, avoiding short-termism and speculative spending. Supporters Direct have been making strong proposals in this area, and they are well worth considering.

Thirdly, we need to abolish the football creditors rule. We have already discussed it at length in the House. It is indefensible: if a club goes bust through irresponsibility, only the interests of players and other clubs are protected, not those of local businesses or the taxman. This is outrageous, and it encourages recklessness. Fourthly, we need to make drastic changes regarding club ownership. It is almost comical how weak the fit and proper person test is. We need a far higher and more consistent bar.

Fifthly, I am very keen to make it easier for supporters groups to establish trusts and to encourage supporter ownership. I am open to considering incentives for supporters groups to run a club and to reinvest profits back into the club. I would mention Supporters Direct’s call for a community-owned sports club scheme, creating a special status and incentives for clubs owned by their fans. The proposal is very much worth the Minister’s attention. Those are just a few of the reforms that might help to prevent what has happened in Coventry from happening again, and that might help to re-establish the central importance of supporters in football.

We cannot keep seeing such disputes and disasters again and again. Coventry is not an isolated case. We could discuss Brighton, Wimbledon or Portsmouth, to name a few. Owners are changing the identities of clubs such as Cardiff City and Hull City on a personal whim. Nearly 100 times, clubs have collapsed because of overspending and bad management. The Football League is not up to the tasks of governing, ensuring that there is proper management and ensuring the future of clubs.

What action might the Government consider taking? The Select Committee report was clear that the Football Association was in need of urgent reform. The Committee urged the industry to take the opportunity to reform itself and said that, if it did not, there should be legislation. The football authorities made proposals for reform, but they simply did not address the key problems. The then Minister for Sport, the right hon. Member for Faversham and Mid Kent (Sir Hugh Robertson), wrote to the Committee agreeing with its recommendations and describing them as “much needed”. He continued:

“I have already been given drafting authority by the Parliamentary Counsel, and my officials have started working up a draft Bill and supporting documentation, should football fail to deliver. This Bill will reflect the conclusions of your report.”

I therefore want to ask the Minister at what point the Government changed their mind. Why has there been such a U-turn? There was hope that the Government might take on board the reforms that were suggested by the Select Committee, but that hope has dwindled. Finally, I ask the Minister whether there is any hope for legislation in this Parliament or in the future.

17:41

[Damian Collins (Folkestone and Hythe) (Con)]

I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing this debate. I thank him for giving me notice of it and asking whether I would like to participate, which I am pleased to do. All the Coventry MPs have been fantastic local champions of their football club in its plight. My hon. Friend the Member for Nuneaton (Mr Jones), who is a Coventry fan, is in his place and has also taken a strong interest in the matter. I will not seek to add anything to their local knowledge and expertise but will speak of my grave concerns about the governance of football in this country.

Coventry City is one of the worst examples of poor governance in football. It is right that the House should look at what has happened to Coventry City and resolve that it should never be allowed to happen again to Coventry or to any other football club. Very strong lessons have been learned. The hon. Member for Coventry South was absolutely right when he said that there is currently nothing to prevent what Coventry has been through from happening again either to that club or any other club.

The Culture, Media and Sport Committee looked at the ownership model under Sisu in its inquiry three years ago, when I was a Committee member. I was shocked at the time. We considered the case of Leeds United. I remember asking the chief executive of Leeds United whether he knew who owned Leeds United and he said he did not. He is now the chief executive of the Football League. The Football League did not require the public disclosure of the ultimate beneficial owners of a football club at that time and it does not do so now. It requires private disclosure, but not public disclosure. The Football League admitted during that inquiry that it has no resources to investigate properly who is the ultimate owner of a club. It largely has to take it on face value that the owner is who the club says it is.

There are many good reasons why we might want to know who owns a football club. We might want to know what other interests they have in the game or what other business interests they have in this country or around the world that might prejudice their ownership of the club. We have seen examples of very poor ownership at other clubs, including in the west midlands. In particular, the chief executive of Birmingham City was found guilty of money laundering in Hong Kong. He had to withdraw from running the club, but his son is still able to. There is no restriction on that. I know that a lot of Leeds fans are pleased to see anyone inject money back into their club, but should someone with fraud convictions in another country be allowed to take over the club? The Football League seemingly has no powers to intervene or else has a grave reluctance to do so.

The first lesson is that opaque ownership structures such as the Sisu model, where the investors sit behind a public face and no one knows who they are or what their real motivation or interest is, should never be allowed in British football. Fans should always have the right to know who owns their club, what their other interests are and what financial stake they have in the club and the facilities that the club shares. I do not think there has ever been an example of a club with that sort of opaque ownership model that has done well. The hon. Gentleman said he was concerned that the owners sought to strip the assets of the club and run it into the ground. Well, we may not know their motivation, but that is what happened and that is what it looks like. We are therefore right to be fearful and concerned about those ownership models.

The hon. Gentleman also touched on the fit and proper person test, which must be applied much more rigorously. He mentioned my private Member’s Bill in which I proposed giving the FA discretionary powers to oversee the regulation of that test. I think the FA should have subjective power to intervene and say, “We don’t believe that the owners of this club are upholding or intend to uphold the letter and spirit of the rules of the game.” I do not believe that would create a separate model just for football; in many ways it would follow the Broadcasting Act 1990, and there is an existing power for Ofcom regarding broadcasters in this country. Ofcom has a subjective power to interpret that Act and say whether it believes that an organisation holding a UK broadcasting licence is fit and proper to hold that licence and likely to live within the spirit and letter of the broadcasting code. I do not see why the Football Association could not be given the same power so that it could intervene when it feared that someone about to acquire a club might not be a fit and proper person or, as in the case of Sisu and Coventry, where a club was being run so badly that it was against the interests of the game for owners to be allowed to continue to do so.

I completely agree with the hon. Gentleman that the way the Football League allowed Coventry City to be moved to Northampton was against the interests of the club and its fans. We must consider why that decision was made so easily, and why there was no intervention sooner.

The hon. Gentleman rightly touched on the football creditors rule, which I have long campaigned against. The Select Committee recommended its abolition, and Ministers have stood at the Dispatch Box in this Chamber and Westminster Hall and said that it has had its day and should go. During the Committee’s inquiry, the then chairman of the Football League said that there was no moral justification for the creditors rule, and the Coventry case is a good example of the problems it creates. The rule means that as long as football clubs pay their football debts in full when they go into administration, they can get away with paying as little as 1p in the pound or even less to other creditors, and local businesses lose out. Those local businesses will get nothing whereas a football club that is owed transfer fees, or a player, will see every penny they are owed. There can be no moral justification for that. Everyone should be in the same boat when a club gets into difficulty.

The Coventry case is a good example of that, and the hon. Gentleman was right to ask, “What is to say that Coventry won’t be in this position again in two years’ time?” The club could get into financial difficulty, turn to the stadium and say, “We owe you lots of money but we’re not going to pay you”. It could go into administration under the rules of the Football League and get away with paying virtually nothing back to the ground and other debtors they may have in the city. As long as it meets its football debts it can just carry on, and nothing can stop that happening. That is morally wrong and should not be allowed. The local community and businesses that support their club deserve decent recompense in such situations, as that would stop irresponsible behaviour.

Getting rid of the creditors rule will create a more responsible attitude between clubs. If a clubs gets into a position where another club owes it money, it will think about whether that club can afford to pay it back. It may want more disclosure about the finances of that club before entering into a financial relationship that might put it at risk, just as other businesses would do when trading with each other. In getting rid of the creditors rule, we are not looking to impose new draconian laws that deal with football club insolvency; we wish to abolish a loophole that football exploits for its own interests—I do not believe it is in the long-term financial interest of the game for clubs to be allowed to do that. Getting rid of the rule would help the Coventry case and be good for football in the long term.

Other hon. Members wish to speak in the debate, so I will draw my remarks to a close. Local Coventry newspapers have done an excellent job in promoting this case, and I have been happy to talk to them over the past couple of years. After a recent interview with the Coventry Telegraph, the owners of Coventry City said that I was wrong in my assertions and that they would be happy to discuss them with me, but I have received no direct offer from the club for that discussion. I would be happy to discuss the issue, however, once they conduct their affairs not behind closed doors but in public. I would welcome and invite Coventry MPs to join me at that meeting, and the Coventry Telegraph and fans’ groups and anyone else who wants to come along. Let us have that discussion in the open. If the club thinks we are wrong in our assertions about the way Coventry City has been run into the ground, let us have that meeting in public and discuss the matter in detail. Under Sisu’s management Coventry City football club has been a disgrace, and that must never be allowed to happen again.

17:49

[Mr Bob Ainsworth (Coventry North East) (Lab)]

I thank my hon. Friend the Member for Coventry South (Mr Cunningham) for securing this debate. I think that he and I would be agreeable to the kind of proposal that the hon. Member for Folkestone and Hythe (Damian Collins) made: to use him as part of a cross-party assault on what has gone on in Coventry, which is an indication of the wider and very dangerous disease that exists within our national game.

It is good news, of course, that the Sky Blues are playing in Coventry again. It would be amusing if it was not so offensive to see the Football League clamouring to take some credit for that decision. It has shamelessly sought to do so, but it deserves no credit whatsoever for the fact that Coventry City are coming back to play in the city of Coventry. The people who deserve the credit are many, but the Football League is not among them, I am afraid. The fans have to be congratulated, having organised a pretty effective boycott of the alternative home venue. They have attended away matches, but starved the club of attendance and support at Northampton, and they have done so in a fairly effective way. They must be congratulated for organising that boycott. Many different organisations, the Sky Blue Trust among them, have come together to help the boycott, but the fans in general deserve our congratulations on the campaign they have kept up most effectively.

The people of Coventry in general deserve congratulations and credit for the fact that the football club is coming back to the city, because they have never, with very few exceptions, been conned by the spin and the lies put out by the football club’s owners, Sisu Capital, about what it has been doing and why it has been doing it. The people of Coventry have seen through this pretty clearly, and it has been impossible, despite strenuous efforts and all kinds of expertise being employed, for the football club’s owners to get a grip on public opinion locally. It has singularly failed in that regard. In itself, that is indicative of the kind of people they are and the problems they bring on themselves.

Generally speaking, football clubs are fairly well-supported organisations, whereas local authorities and councils are not usually that well thought of, but I have to say that the council has not come under any real pressure as a result of this dispute, because the people of Coventry have seen through the nonsense and the spin they have been subjected to.

[Mr Jim Cunningham]

As the House and most politicians will appreciate, this shows the level of support that the people of Coventry, particularly the fans, gave. Tell me where it is possible to get 8,000 people demonstrating in a city on such an issue. It is utterly amazing to see 8,000 fans demonstrating. Not only that; there were thousands of them doing it week after week. I therefore agree with my right hon. Friend that if anybody pushed for this, it was the fans and the people of Coventry. We agree 100% on that.

[Mr Ainsworth]

I think that they have been the main agents of this partial victory.

Other people who deserve congratulations include the Higgs Charity, which has an interest in the stadium and has been steadfast in the face of intimidation and attempts to distress and bully it. I have got evidence that the Football League effectively joined in that bullying. This local children’s charity has stood fast and refused to get out of the way of Ms Joy Seppala’s ambition to get the Ricoh Arena on the cheap. That was its only crime—it stood in the way of that ambition to gain control of the stadium on the cheap, for next to nothing. We have seen a well-funded Cayman Islands hedge fund seek to take on, intimidate and distress both the trustees and a well-thought-of local children’s charity to achieve its ends, and it has failed to do so. All strength to their elbow for the tenacity shown in resisting that pressure!

Coventry city council, too, should be congratulated. Labour and Conservative councillors have stood together, and I have been able to detect no politicking. Nobody has been point scoring. The entire council—the Labour majority and the Conservative minority—has stood shoulder to shoulder to resist this attempt to gain control of the city’s asset provided for by the taxpayer at great expense. Officers of the council, some of whom have been traduced by this appalling organisation, were congratulated on their work by the High Court judges in their judgments in complete condemnation of what the football club had done. The councillors have done a tremendous job and the council deserves to be congratulated.

Local journalists should be congratulated, too. The hon. Member for Folkestone and Hythe (Damian Collins) talked about the Coventry Telegraph. It has a first-class local journalist, Simon Gilbert, who has brought straight, unbiased reporting to this issue, which has done great credit to him personally, to his newspaper and to journalism in general. He should be congratulated on his in-depth reporting over a long period.

[Damian Collins]

I, too, would like to pay tribute to Simon Gilbert’s work on this story. Does the right hon. Gentleman agree that because of how insolvency law works with football clubs, in such a case, where there is a financial dispute between a club and a non-football organisation, all the power lies with the football club, which can threaten administration, knowing that the other body is likely to get virtually none of its money back?

[Mr Ainsworth]

I was coming on to that. The hon. Gentleman clearly has more expertise on football governance than I have; I come at this issue from a Coventry point of view. The hon. Gentleman is absolutely right. The football club creditors rule cannot be justified in moral terms; it does not apply in any other area of business, where following administration, creditors get treated in a proper fashion—but not in football. People are there to be ripped off by a system that was set up to protect the game. It really needs to be looked at further.

Some credit is due, too, to Mr David Conn of The Guardian, who fearlessly reported what was going on in Coventry and got threatened with legal action for his troubles. He was totally and fully vindicated in the subsequent High Court judgment, which made exactly the same claims as he had made in his reporting—that the fans and the Sky Blue Trust had been threatened with legal action by the club’s owners simply for providing a link to The Guardian article. That shows the kind of people we have had to deal with—people who have threatened their own fans with legal action for providing a link to a national newspaper.

One of my worries is that David Conn has been the only national journalist to look at this issue and to seek to expose what is an absolute scandal. In 2014, an offshore hedge fund has sought to attack the taxpayers of Coventry and gain control of an asset, attacking a local children’s charity in the process. So where were the rest of the media? Why have they not been as probing and as fearless as Mr Conn? We have had good local newspaper reporting, as the hon. Member for Folkestone and Hythe said, but we could have done with more from the national media to sort the problem out. What has happened in Coventry is indicative of a malaise in the game, as has been said repeatedly.

We must congratulate the two High Court judges, who made devastating comments about the club’s owners, Sisu, in their judgments. Coventry City are now playing back in Coventry. Ms Joy Seppala, the chief executive officer, said that she would never return to the Ricoh arena unless she owned it lock, stock and barrel. Well, she is back and she does not. She said she does not negotiate but tells people what she needs. As soon as the second High Court judgment was delivered, her right-hand man, Mr Fisher, was saying, “Let’s negotiate.” Therefore, there have been some U-turns and progress, but it has been off the back off some stern British justice that has seen through what has been going on.

Therefore, those are the people who deserve the credit for Coventry City coming back. I congratulate them. It is a good day. However, I want to give a warning, as my hon. Friend the Member for Coventry South did, against thinking that that is the end of it and this is victory. I do not think that it is.

Sadly for the people of Coventry—I am not just talking about the fans; I represent not the fans, but a third of the city; my hon. Friend represents another third and the hon. Member for Nuneaton (Mr Jones), who is sitting opposite, represents an adjacent constituency —the Ricoh Arena will never be able to reach its full potential, which is massive. It is on the Coventry to Nuneaton railway line. It is on the motorway network. It is a fantastic arena in the poorest part of the city capable of huge regeneration. That is the only thing that justified the taxpayer investment in that facility in the first place. However, it will never be able to reach its full potential until there are football club owners or partners in the stadium who are interested in creating value.

That is the thing that some people have not been able to understand. The owners of Coventry City football club have not been interested in creating value. They have destroyed the football club not through incompetence but through their deliberate actions. Their interest has been in destroying value to get their hands on the asset at a knockdown price. That is the problem, which is still there, because those owners are still there. I do not believe that they have changed and will now become partners in the local economy, working with the city council and other partners to create a good sporting culture and economic regeneration in my constituency. I do not believe they are that kind of people.

That brings me to the points that the hon. Member for Folkestone and Hythe made so well. What is it that brings that kind of owner to our national game? I have not been a football fan for many years. I used to be when I was younger but the money interest put me off hugely. Mostly these owners are flamboyant, rather extraordinary people—we see them at other clubs—with rather dodgy backgrounds. There are many of them. Up and down the country, there are many examples of the kind of owner who has been attracted to the game. The Coventry City owners are different. This is a hard and ruthless hedge fund operation prepared to destroy a children’s charity to make money. Something wrong in our national game attracts that kind of person. I think that it is the football creditors rule and the total lack of governance. I do not believe that the Football League genuinely acts as a governing body looking after the interests of the game, the fans and the British people at large. It is effectively a self-interested club for owners. The new chief executive officer of the Football League put his own club, Leeds United, into administration twice while he was there.

This is a malaise, and it is important. I am not making a party political point because we were in government for 13 years and we did nothing about this. The present Administration have been in power for almost an entire term and they have not done anything either, and it is not easy because football is glamorous, powerful and moneyed and it is hard for politicians to say, “Wait a minute, there’s something deeply wrong here,” but if we do not do so, then we saw what happened in banking. I am not suggesting that what will happen in football will be as economically disastrous as what happened within British banking, but in some respects it is more important, because this is not just economically important; it is culturally important as well.

After the World cup we are seeing the Americans getting into football in a bigger way than ever before, and there is a huge upsurge in football interest in China, too. Our national game has huge potential for this country if it is properly run and therefore can be properly exploited to project our national culture, our national identity and our national interests, but it cannot do that if it is not properly governed, and Government really must grapple with this.

18:06

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mrs Helen Grant)]

I thank the hon. Member for Coventry South (Mr Cunningham) for securing this important debate, and I thank him and others for the valuable contributions they have made this afternoon.

As I have said before, the preservation of football clubs up and down the country remains a matter of great importance to me and to the Government. We debated this issue last October in my first few weeks—days, even—as the new Minister for sport. Since then, the Football League and I have maintained a close interest in the resolution of this unfortunate dispute involving Coventry City football club and the return of Coventry to the city. Football clubs remain a very valuable part of local communities, and every care should be taken by all owners and stakeholders to protect their long-term financial futures.

It has therefore been very sad to see Coventry City football club beset by serious financial trouble in recent years. I know the Football League appreciates that its initial decision to allow Coventry City to temporarily relocate to Northampton was not a popular one with Coventry supporters. Although understandably difficult for supporters to accept, the temporary tenancy at Northampton Town’s Sixfields stadium was deemed to be necessary by the Football League to ensure that Coventry could continue to take its rightful place in the football league in the short term.

Allowing the club to play in Northampton has at least ensured that Coventry was capable of playing its home matches in the league while all parties maintained their efforts to resolve the ongoing disputes. The recent case of Rotherham United demonstrates that the continuation of a club’s presence in the football league at another stadium can be a positive step towards a long-term solution. I am therefore delighted to hear today that the club and stadium owners have agreed terms to get Coventry back playing within the city this season—imminently, in fact—at its home ground.

I pay tribute to the hon. Member for Coventry South, the right hon. Member for Coventry North East (Mr Ainsworth), my right hon. and learned Friend the Member for Kenilworth and Southam (Jeremy Wright), my hon. Friends the Members for Nuneaton (Mr Jones) and for Folkestone and Hythe (Damian Collins) and others who have worked tirelessly with loyal supporters. I shall think of them all when Coventry plays Gillingham at the Ricoh Arena this weekend: it will be a special evening indeed.

There is a great deal of focus on the amount of money in the top tiers of football, but I recognise that many clubs competing in the lower divisions operate on a very different scale. Coventry’s problems are rooted in several years of financial issues that unfortunately are ongoing.

The evidence given to the Culture, Media and Sport Committee by the Football League’s chairman acknowledged that debt is the

“single biggest problem for football.”

I share his belief that if football clubs ensure that their debt is genuinely sustainable, transparency of ownership, supporter buy-in and co-operative ownership will be much easier to deliver.

I share the frustrations of supporters and hon. Members at the football authorities’ slow progress in implementing some of the long promised and much needed reforms to the game, a key part of which is improved supporter engagement at club level.

The football authorities must find ways to improve supporter engagement beyond the customer relationship and recognise supporters as an integral part of clubs’ success. That is why my Department is working very hard on Supporters Direct’s proposal for an expert group on the barriers to supporter ownership in football. We hope to launch the group in the near future. It will include representatives from across football, relevant professional experts and representatives from a variety of supporter-owned clubs and supporters trusts. I am pleased that the proposal retains support across football’s authorities, demonstrating a critical continuing commitment to supporter engagement within the sport.

Supporter representatives on boards and better engagement could and will in many cases lead to fans being better informed about a club’s activities, such as its financial standing and the identity of its owners, and to their being genuinely consulted, as they should be, as part of the club’s decision-making process on matters of real importance, whether financial or cultural. I look forward to the expert group’s recommendations on how more help can be offered to supporters now and in the future.

Having said all that, I must acknowledge the progress made by the football authorities in introducing new rules in recent years, such as a strengthening of the owners and directors test, which has been mentioned and about which I shall say a little more in a moment, as well as a new means and abilities test that requires proof of funds from prospective new owners, an early warning system with Her Majesty’s Revenue and Customs on tax returns, transfer embargoes, salary caps and the adoption of financial fair play principles across the 92 professional clubs.

Club insolvency has been declining, but it has remained a common problem in recent years. At the same time, TV revenues and match attendances are as high as ever. The implementation of financial fair play principles should lead to responsible spending by clubs and, as a result, I hope, fewer incidents of club insolvency at the top of the pyramid. The strong intention is that the financial fair play regulations will remove the need for football to rely so heavily on the football creditors rule in club insolvencies.

The football creditors rule has been mentioned by all hon. Members who have spoken.

Governance has also been mentioned by many hon. Members. The hon. Member for Coventry South queried whether the Government were doing a U-turn on their governance plans and I assure him that we are certainly not doing that. Governance is essential; it is the foundation of everything and of all good structures. Without decent governance a structure has no chance of surviving; there will be no chance of there being the strength to support a massive structure. It is very important to me personally. I want the football authorities to do what they need to do. A start has been made: there are smaller boards; there is a new licensing system to deal with financial matters; and various changes have been made on supporter engagement, with the introduction of supporter liaison officers. But I want much, much more to be done. I have regular meetings with the football authorities, and I will continue to raise these issues as a matter of urgency, saying that we need to see progress. If progress is not made, we of course have the option of legislation—we always have that option.

[Mr Jim Cunningham]

I do not doubt the sincerity of what the Minister has said, but this has been going on for a number of years. Has she set a deadline? A number of organisations are looking at football in general terms, but does she have a deadline when she will say, “Look, we have not seen enough progress, so we are going to do something about it”? Across the House, we all think that something has to happen. This is not a reflection on the Minister, because she has not been in her post for very long, but we are reaching the point where a deadline needs to be set, in order to get some real action from the Football League.

[Mrs Grant]

I have robust and candid conversations with the football authorities. I agree that we need to see some more progress. Some has been made, but we need more. I will be meeting them on Friday, and I will certainly relay to them what has come out of this debate and the crucial need for us to start to see further progress on a number of matters.

The issue of ownership was raised by all hon. Members in the debate and, in particular, by my hon. Friend the Member for Folkestone and Hythe. Again, I reassure him that the football authorities really do take club ownership very seriously, which is why the owners and directors test applies to all clubs in the Premier League, Football League and Football Conference, and in the three leagues below.

[Damian Collins]

Will the Minister give way?

[Mrs Grant]

I will, but if my hon. Friend will just let me finish my point, he may find that it deals with the issue he is raising. Given what he and others have said today, and what I have heard—I have been listening very carefully indeed—I am happy to discuss with the authorities on Friday, and at subsequent meetings, whether they could make any improvements to the owners and directors test, or any other test that might help to deal with this situation.

[Damian Collins]

I am glad to note what my hon. Friend has just said. My concern, and that of other Members, is that the test, as it stands, is totally inadequate. If anything, the recent case at Leeds United demonstrates that the Football League does not have the legal power to apply the test as it might wish. If it sees someone from overseas coming in, as in the case of Mr Cellino, with a fraud conviction which happens to be spent, the Football League is subject to a legal challenge to try to prevent that person from taking over the club. I wonder whether there has to be some sort of statutory underpinning of the fit and proper person test to allow the Football Association or the Football League to enforce it properly.

[Mrs Grant]

I agree that certain improvements—further improvements—may need to be made to the test. We are in a better place than we were before it was strengthened, but I still have some concerns. As I said to my hon. Friend, I am happy to raise all these issues with the football authorities to see what further improvements can be made. The football creditors rule was raised again by most hon. Members, and I have touched on that. I have to say at this stage that there is no plan to legislate on that rule. The industry is trying to make changes from within. The proper implementation of the financial fair play rules should hopefully make dependency on the football creditors rule much less likely and reduce it considerably. Those were, I think, the main issues that were raised by hon. Members.

I just want to pick up one point in relation to the Football League, which has come in for a bit of criticism today. I recall Members talking about lack of leadership and the fact that it could have done more. Having looked at this situation carefully and worked with the League closely since being appointed the Minister for Sport, I think it has had to make a difficult decision in difficult circumstances. It came up with a sustainable solution, with the fans, MPs and journalists, which has allowed this great club still to be in the League. It will be back at home very shortly, hopefully focusing on football and continuing to do very well.

In conclusion, now that the differences have hopefully been resolved for the good of the club, the loyal fans and the wider local community, I am delighted that Coventry City football club may return to the city and have the chance to concentrate on football matters and their position in the League, which is important to their fans.

The Government’s strong expectation, guided by the Select Committee’s recommendations, is that the football authorities will continue to make progress in making the necessary changes and reforms. I will raise these issues with them on every occasion that I meet them in bilateral meetings at the Department for Culture, Media and Sport. My Department will also continue its ongoing dialogue with the football authorities to ensure that the support for clubs continues and that progress on governance reforms is maintained.

In the meantime, I wish the Sky Blues the best of luck for the season ahead, and I look forward to their first fixture playing back in Coventry very soon.

Question put and agreed to.

18:22

House adjourned.